-----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, NJNsQ6uTrSm2y+MwwN+VOSCwcy6Vg0mV+yec5IrMGatNiUa+K51TEujl7g6rYaN2 CXIADj2ADk26VptSp6uaHA== 0000915350-97-000008.txt : 19970918 0000915350-97-000008.hdr.sgml : 19970918 ACCESSION NUMBER: 0000915350-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19970912 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORECAST GROUP LP CENTRAL INDEX KEY: 0000915350 STANDARD INDUSTRIAL CLASSIFICATION: GEN BUILDING CONTRACTORS - RESIDENTIAL BUILDINGS [1520] IRS NUMBER: 330582072 STATE OF INCORPORATION: CA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-72106 FILM NUMBER: 97679389 BUSINESS ADDRESS: STREET 1: 10670 CIVIC CENTER DR CITY: RANCHO CUCAMONGA STATE: CA ZIP: 91730 BUSINESS PHONE: 9099877788 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR5(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended July 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OR 1934 For the transition period from N/A Commission File Number 33-72106 THE FORECAST GROUP "Registered Tradename", L.P. FORECAST "Registered Tradename" CAPITAL CORPORATION (Exact Name of Registrant as specified in its charter) California 33-0582072 California 33-0582077 (State of Organization) (IRS Employer Identification Number) 10670 Civic Center Drive, Rancho Cucamonga, California 91730 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code:(909) 9877788 Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered 11 3/8% Senior Notes Due 2000 None Securities Registered Pursuant to Section 12(g) of the Act: None Indicated by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO___ There was no voting stock held by non-affiliates of the Registrant at September 12, 1997. At September 12, 1997, Forecast "Registered Tradename"" Capital Corporation had 2,500 shares of Common stock outstanding. THE FORECAST GROUP "Registered Tradename", L.P. CONSOLIDATED BALANCE SHEETS (Amounts in 000's) July 31,1997 October 31, 1996 (unaudited) ------------ -------------- Assets: - ------- Cash and Cash Equivalents $11,425 $12,350 Accounts Receivable 708 466 Accounts and Notes Receivable, Related Parties 4,131 5,239 Real Estate Inventory 69,083 80,760 Property and Equipment, Net 1,018 1,171 Other Assets 1,794 2,200 ------- -------- Total Assets $88,159 $102,186 ======= ======== Liabilities & Partners' Equity: - ------------------------------- Accounts Payable $13,071 $11,443 Accrued Expenses 1,518 3,624 Notes Payable: Senior Notes at 11 3/8% due December 2000 29,075 34,475 Collateralized by Real Estate Inventory 23,567 25,720 ------- ------- Total Notes Payable 52,642 60,195 ------- ------- Total Liabilities 67,231 75,262 Partners' Equity 21,692 27,688 Less: Capital Notes Receivable from Partners (764) (764) ------- -------- Net Partners' Equity 20,928 26,924 ------- -------- Total Liabilities & Partners' Equity $88,159 $102,186 ======= ========
[FN] See notes to consolidated financial statements. THE FORECAST GROUP "Registered Tradename", L.P. CONSOLIDATED STATEMENTS OF OPERATIONS AND PARTNERS' EQUITY FOR THE NINE AND THREE MONTHS ENDED JULY 31, 1997 AND 1996 (Unaudited) (Amount in 000's) Nine Months Ended Three Months Ended July 31 July 31, ----------------- ------------------ 1997 1996 1997 1996 ------- ------- ------- ------- Homebuilding Revenues $95,481 $97,006 $41,750 $38,903 Cost of Homes Sold 81,028 80,623 35,492 32,308 ------ ------ ------- ----- Gross Profit 14,453 16,383 6,258 6,595 ------- ----- ------- ------ Operating Expenses: - -------------------- Selling & Marketing EX. 10,267 10,382 3,730 3,802 General & Admin. Ex. 5,588 5,291 1,850 1,866 Non-Cash Charge for Impairment of Real Estate Inventory 6,635 - - - Loss on Abandoned Land Options - 3 - 3 ------ ------- ------ ----- Total Operating Ex. 22,490 15,676 5,580 5,671 ------ ------- ------ ----- Operating Income (Loss) (8,037) 707 678 924 Other Income (Expenses): - ------------------------ Interest Income 279 187 83 56 Other Income and Ex. 128 66 45 (49) ------ ------ ----- ----- Total Other Income (Expenses) 407 253 128 7 ------ ------ ----- ----- Income (Loss) before Extraordinary Gain (7,630) 960 806 931 Extraordinary Gain on Extinguishment of Senior Notes 1,634 1,876 - - ------ ------ ------ ----- Net Income (Loss) ($5,996) $2,836 $806 $931 ------ ------ ------ ----- Partners' Equity at Beginning Of Period $27,688 $23,998 20,886 $25,903 Capital Contribution/ (Distribution) - ($200) - ($200) Net Income(Loss) this Period (5,996) 2,836 806 931 ------ ------ ------ ------ Subtotal 21,692 26,634 21,692 26,634 Less: Capital Notes Receivable from Partners (764) (764) (764) (764) ------ ------ ------ ------- Net Partners' Equity at End of Period $20,928 $25,870 $20,928 $25,870 ======= ======= ======= =======
[FN] See notes to consolidated financial statements. THE FORECAST GROUP "Registered Tradename" L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996 (Unaudited) (AMOUNT IN 000's) 1997 1996 ----- ----- Operating Activities: - --------------------- Net Income (Loss) ($5,996) $2,836 Adjustments to Reconcile Net Income (Loss) to Net Cash Generated from (Used for) Operating Activities Non-Cash Charge for Impairment of Real Estate Inventory 6,635 - Extraordinary Gain on Extinguishment of Senior Notes (1,634) (1,876) Depreciation and Amortization on Property and Equipment 222 202 Loss (Gain) on Sale of Property and Equipment - 5 Decrease (Increase) in Accounts Receivable (242) 54 Decrease (Increase) in Real Estate Inventory 5,042 (3,175) Decrease (Increase) in Other Assets 252 (505) Increase (Decrease) in Accounts Payable and Accrued Expenses (478) 1,304 ------ ------ Net Cash Generated from(Used for) Operating Activities 3,801 (1,155) ------ ------ Investing Activities: - --------------------- Additions to Property and Equipment (69) (154) Proceeds from sale of property and equipment - 3 ------ ------ Net Cash Generated from(Used for) Investing Activities (69) (151) ------ ------ Financing Activities: - --------------------- Retirement of Senior Notes at 11 3/8% due December 2000 (3,612) (3,251) Decrease(Increase)in Accounts and Notes Receivable, Related Parties 1,108 (1,958) Proceeds from Notes Payable 49,377 51,932 Proceeds from Notes Payable, Other 1,700 2,221 Principal Payments on Notes Payable (51,530) (46,527) Principal Payments on Notes Payable (1,700) (2,221) ------ ------- Net Cash Generated from(Used for) Financing Activities (4,657) 196 ------ ------ Increase (Decrease) in Cash and Cash Equivalents (925) (1,110) Cash and Cash Equivalents at Beginning of Period 12,350 8,090 ------ ------ Cash and Cash Equivalents at End of Period $11,425 $6,980 ====== ======
[FN] See notes to consolidated financial statements. THE FORECAST GROUP "Registered Tradename", L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related disclosures contained in the Form 10-K for the year ended October 31, 1996 (File No. 33-72106) as filed with the Securities and Exchange Commission. The results of operations for the nine months ended July 31, 1997 do not necessarily indicate the results that can be expected for the full fiscal year. The results of operations for the nine months ended July 31, 1997, and this Form 10-Q, also may be interpreted as, or actually contain, "forward looking" information, as that term is defined by the Securities and Exchange Commission. To the extent such forward looking information is contained in this filing, the company intends to use these disclosures to take advantage of the "Safe Harbor" provisions set out in the rules and regulations of the Securities and Exchange Commission, and thus strongly recommends that prior to making an investment decision a prospective investor should carefully consider the factors mentioned in Form 10-K for the year ended October 31, 1996 in relation to that "forward looking" information, as well as other financial and business information that may be available from a variety of sources regarding the home building industry as a whole, including, but not limited to: - - Changes in national economic conditions such as interest rates, consumer confidence and job loss or formation statistics - - Change in economic conditions in the markets in which the Company operates - - Fluctuations in mortgage interest rates - - Cost increases resulting from adverse weather conditions, shortages of labor and/or construction materials - Changes in governmental regulations which may delay new home development or impose additional costs or fees. 2. Real Estate Held for Development and Sale and Related Notes Payable Real estate held for development and sale and related notes payable consist of the following: (Amounts in 000's) July 31, 1997 --------------------------- Real Estate Notes Payable Inventory ----------- ------------- Land Held for Development $15,341 $0 Residential Projects in Process 47,294 19,156 Model Homes 6,448,00 4,411 ---------- ---------- Total $69,083 $23,567 ========== ========== October 31, 1996 --------------------------- Real Estate Notes Payable Inventory ----------- ------------- Land Held for Development $15,067 $0 Residential Projects in Process 57,442 20,449 Model Homes 8,251 5,271 ----------- ------------ Total $80,760 $25,720 =========== ============
3. Interest Expense The following summarizes the components of interest expense incurred, capitalized, expensed and paid: (Amount in 000's) For the Nine Months For the Three Months Ended Ended July 31, July 31, ------------------ ------------------- 1997 1996 1997 1996 ------------------- ------------------ Interest incurred and Capitalized $5,393 $5,591 $1,709 $1,831 Capitalized interest amortized to cost of homes sold $6,183 $4,802 $2,821 $1,977 Interest paid $6,488 $6,798 $2,575 $2,829
4. Transactions With Affiliates In December of 1994, Mr. Previti did, on his own account, purchase $550,000 of the Company's Senior Notes at a favorable discount from their face value. In January 1995, the Board of Directors of Forecast "Registered Tradename" Homes, Inc., resolved that it would be in the Company's best long-term interests to seek the assistance of Mr. James Previti, the Company's President and Chief Executive Officer, in acquiring the Company's Senior Notes on the open market, if he could acquire them at a favorable discount from their stated face value. At the same time, the Board of Directors agreed that the Company would repurchase the notes from Mr. Previti at his cost basis, plus interest, at such time as the Company had sufficient financial resources. Acting upon this authorization, Mr. Previti did acquire another $19,800,000 of Senior Notes of which $14,950,000 were repurchased and retired prior to October 31, 1996. In January 1997, Mr. Previti assigned his interest in the aggregate remaining $5,400,000 of Senior Notes to the Company, in exchange for the Company's assumption of margin debt of $1,700,000 owing by Mr. Previti, and forgiveness of two notes held by and owing to the Company in the total amount of $1,699,000 that were secured by Mr. Previti's interest in the Senior Notes. This transaction resulted in the Company repaying the margin debt of $1,700,000, plus accrued interest, which created an extraordinary gain of $1,634,000 in the first quarter of fiscal 1997. The Company believes that the transactions discussed above were on terms at least as favorable to the Company as a comparable transaction made on an arms length basis between unaffiliated parties. 5. 11 3/8% Senior Notes Due December 2000 In February 1994, the Company issued $50,000,000 in 11 3/8% Senior Notes through a public debt offering. The notes are joint and several obligations of the Company and Forecast "Registered Tradename" Capital Corporation, with interest only payments due semi-annually on June 15 and December 15 of each year. The notes are unsecured obligations of the Company and rank pari passu in right of payment with all senior indebtedness of the Company. As of July 31, 1997, the Company had retired a total of $20,925,000 of the Senior Notes, leaving $29,075,000 of Senior Notes still outstanding. The Indenture governing the Senior Notes requires the Company to maintain a minimum net worth of $25 million. If the Company's net worth at the end of any two consecutive fiscal quarters (the last day of such second consecutive fiscal quarter being referred to as the "Trigger Date") is less than $25 million , then the Company is required to make an offer to all Senior Note holders to acquire, on a pro rata basis, Senior Notes in the aggregate principal amount of $5 million (the "Net Worth Offer") at a purchase price equal to 100% of the principal amount thereof, plus accrued interest to the date of repurchase. Notwithstanding this requirement, to offer to and then repurchase Senior Notes, the Indenture allows the Company to credit against the Net Worth Offer, the principal amount of any Senior Notes acquired by the Company prior to the Trigger Date, through repurchase or optional redemption. The Company may not, however, use any specific Senior Note repurchase in any more than one Net Worth Offer. In no event shall the failure to meet the minimum net worth requirement at the end of any fiscal quarter be counted toward the making of more than one Net Worth Offer. For the fiscal quarters ended October 31, 1995 and January 31, 1996, the Company was not in compliance with the minimum net worth requirement. Therefore, under the terms of the Company's Indenture, January 31, 1996 became a Trigger Date for the Company, requiring a Net Worth Offer. However, despite this event, the Company had already repurchased or redeemed a sufficient amount of Senior Notes to meet any repurchase obligations resulting from the first Trigger Date. From April 30, 1996 through January 30, 1997, the Company's net worth was again above the $25 million threshold, thereby preventing the occurrence of a second Trigger Date. As a result of the company's decision to record a non-cash charge for the impairment of real estate inventory at the end of the first quarter of 1997, for the fiscal quarters ended January 31, 1997, April 30, 1997 and July 31, 1997, the Company was again not in compliance with the minimum net worth requirement, which resulted in the occurrence of a Trigger Date on April 30, 1997. Notwithstanding the occurrence of this Trigger Date, the company's acquisition and retirement of over $15 million in Senior Notes not previously used in a Net Worth Offer, once again prevented the need to make a Net Worth Offer. Using the to date amount of retired Senior Notes, management believes it can prevent the occurrence of any Net Worth Offer up through October 30, 1998. 6. Real Estate Held for Development and Sale In March 1995, The Financial Accounting Standards Board (FASB) issued Statement No. 121, "Accounting for the Impairment of LongLived Assets and for Long-Lived Assets to Be Disposed Of" (Statement 121). Under Statement 121, when events or circumstances indicate that an impairment to an assets to be held and used might exist, the expected future undiscounted cash flows from the affected asset or group of assets must be estimated and compared to the carrying value of the asset or group of assets. If the sum of the estimated undiscounted cash flows is less than the carrying value of the assets, an impairment loss must be recorded. The impairment loss is measured by comparing the estimated fair value of the assets with their carrying amount. Statement 121 also requires that long-lived assets that are held for disposal be reported at the lower of the assets' carrying amount or fair value less costs of disposal. Management performs regular evaluations of its real estate inventory and analyzes future undiscounted cash flows for all real estate projects where impairment indicators are present. The evaluations consider the competitive nature of homebuilding operations in the Company's principal markets, including changes in sales prices, increases in sales incentives and future costs of development and holding costs during development based on current absorption estimates. Based on these evaluations, a non-cash charge for the impairment of certain real estate assets amounting to $6,635,000 was recorded in the three months ending January 31, 1997. FORECAST "Registered Tradename" CAPITAL CORPORATION BALANCE SHEET July 31, 1997 October 31, 1996 (unaudited) ------------- ----------------- ------------ ---------------- Assets: - ------- Cash $500 $300 ----------- -------------- Total Assets $500 $300 =========== =============== Liabilities & Shareholders' Deficit: - --------------------------- Accounts Payable $400 $400 Accounts Payable, Related Parties 3,300 2,300 ----------- -------------- Total Liabilities 3,700 2,700 Common Stock, $1.00 par value: Authorized 10,000 shares Issued and Outstanding 2,500 shares 2,500 2,500 Accumulated Deficit (5,700) (4,900) ----------- ------------- Total Shareholders' Deficit (3,200) (2,400) ----------- ------------- Total Liabilities & Shareholders' Deficit $500 $300 ========== =============
[FN] See notes to consolidated financial statements. FORECAST "Registered Tradename" CAPITAL CORPORATION STATEMENTS OF OPERATIONS AND SHAREHOLDERS' EQUITY FOR THE NINE AND THREE MONTHS ENDED JULY 31, 1997 AND 1996 (Unaudited) Nine Months Ended Three Months Ended July 31, July 31, ----------------- ----------------- 1997 1996 1997 1996 ----------------- ---------------- General & Admin. Ex. $0 $700 $0 $700 Income Tax Expense 800 800 0 0 ------ ------- ------- ------- Net Income (Loss) $800) ($1,500) $0 ($700) ====== ======= ======= ====== Shareholders' Equity at Beginning of Period (2,400) (600) (3,200) (1,400) Net Income(Loss) this Period (800) (1,500) 0 (700) ------ ------- ------- ------- Shareholders' Equity at End of Period ($3,200) ($2,100) ($3,200) ($2,100) ======== ======= ======= =======
[FN] See notes to consolidated financial statements. FORECAST "Registered Tradename" CAPITAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation Forecast "Registered Tradename" Capital Corporation was incorporated in California on September 20, 1993. The Company is a wholly-owned subsidiary of The Forecast Group "Registered Tradename" L.P., a California limited partnership that is engaged in the residential real estate development business. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related disclosures contained in the Form 10K for the year ended October 31, 1996 (File No. 33-72106) as filed with the Securities and Exchange Commission. The results of operations for the nine months ended July 31, 1997 do not necessarily indicate the results that can be expected for the full fiscal year. 2. Income Taxes The Company is a "C" Corporation for federal and state income tax reporting purposes and accounts for income taxes in accordance with Financial Accounting Standards Board Statement No.109 "Accounting for Income Taxes". THE FORECAST GROUP "Registered Tradename", L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Part I. Item 2. Results of Operations - --------------------- The following table sets forth, for the period indicated, certain income statement items as percentages of total home building sales and certain other data: Percent of Percent of Housing Sales Housing Sales For the Nine For the Three Months Ended Months Ended July 31, July 31, ------------------ ------------------ 1997 1996 1997 1996 ------------------- ------------------ Homebuilding Revenues 100.00% 100.00% 100.00% 100.00% Cost of Homes Sold 84.86% 83.11% 85.01% 83.05% ------- ------- ------- ------- Gross Profit 15.14% 16.89% 14.99% 6.95% Operating Expenses: Selling & Marketing Expense 10.75% 10.70% 8.93% 9.77% General & Admin. Expense 5.85% 5.45% 4.43% 4.80% Non-Cash Charge for Impairment of Real Estate Inventory 6.95% 0.00% 0.00% 0.00% Loss on Abandoned Land Options 0.00% 0.00% 0.00% 0.00% ------ ------ ------ ------ Total Operating Ex. 23.55% 16.16% 13.37% 14.58% Operating Income (Loss) (8.42%) 0.73% 1.62% 2.38% Number of homes closed 657 701 288 276 Number of homes sold 719 751 300 247 Number of homes in backlog 227 248 Aggregate value of backlog in millions $34,186 $33,707 ======== ========
Results of Operations for the Three Months ended July 31, 1997 and July 31, 1996 Housing revenues for the three months ended July 31, 1997 were $41.8 million, representing an increase of $2.8 million or 7.3% from the three months ended July 31, 1996. The revenues in fiscal 1997 represent 288 closings, an increase of 4.4% from the three months ended July 31, 1996. This increase in revenues is also attributable to a 2.9% increase in the average sales price for the same period a year ago. In addition, the Company had new home sales, net of cancellations, of 300 homes for the three months ended July 31, 1997, representing an increase of 21.5% from the comparable prior year period, and a 1.4% increase in the aggregate value of homes in backlog as of July 31, 1997 as compared to July 31, 1996. Gross profit from housing sales were $6.3 million for the three months ended July 31, 1997, a decrease of $337,000, or 5.1%, from the three months ended July 31, 1996. The decrease in gross profit margin is attributable to increasing warranty reserves during the quarter, mainly in the Arizona Division, and amortizing a higher percentage of capitalized interest when comparing period to period. Selling and marketing expenses decreased by $72,000 or 1.9% during the three months ended July 31, 1997, as compared to the three months ended July 31, 1996. This decrease is attributable to the Company being able to reduce the level of incentives it had to offer to its homebuyers without adversely affecting its historical sales absorption rates. General and administrative expenses decreased $16,000 or 0.9% during the three months ended July 31, 1997, as compared to the three months ended July 31, 1996. This reduction is primarily attributable to Senior Management's restructuring of the division level reporting and responsibility lines, which resulted in greater efficiencies at all division levels. Income before extraordinary gain was $806,000 during the three months ended July 31, 1997, representing a decrease of $125,000 as compared to the three months ended July 31, 1996. This decrease is attributable to an increase in warranty costs and capitalized interest amortized through the cost of sales. Results of Operations for the Nine Months ended July 31, 1997 and July 31, 1996 Housing revenues for the nine months ended July 31, 1997 were $95.5 million, representing a decrease of $1.5 million or 1.6% from the nine months ended July 31, 1996. The decrease in revenue is a result of a 6.3% decrease in closings from the comparable prior year period. The decrease in closings is attributable to the delay in opening new communities in Northern California and fewer homes in backlog in the Company's Phoenix and Southern California markets. In addition, the Company had new home sales, net of cancellations, of 719 homes for the nine months ended July 31, 1997, a decrease of 4.3% from the comparable prior year period. This reduction in sales is also attributable primarily to the delay in opening new communities. Gross profit from housing sales were $14.5 million for the nine months ended July 31, 1997, which represents a decrease of $1.9 million or 11.8%, from the nine months ended July 31, 1996. This decrease is primarily as a result of the decreased number of home closings in this reporting period as compared to the comparable prior year period and an increase in warranty reserves during the current fiscal year, primarily in the Arizona Division. Allowing for the warranty adjustment, gross profit margin per unit is still slightly lower for this reporting period, due to amortizing a higher percentage of capitalized interest when comparing period to period. Selling and marketing expenses for the nine months ended July 31, 1997 were $10.3 million, reflecting a decrease of $115,000 or 1.1% from the nine months ended July 31, 1996. The decrease is primarily attributable to a decrease in house closings over the entire nine month period ending July 31, 1997. General and administrative expenses were $5.6 million for the nine months ended July 31, 1997, an increase of $297,000 or 5.6% from the nine months ended July 31, 1996, resulting from a onetime extraordinary cost incurred in the Company's first fiscal quarter of 1997. Senior Management continually analyzes the general and administrative costs and has recently restructured the division level reporting and responsibility lines, which has resulted in greater efficiencies at all division levels. Loss before extraordinary gain was $7.6 million for the nine months ended July 31, 1997, as compared to $960,000 of income before extraordinary gain for the nine months ended July 31, 1996. The decrease in income is primarily attributable to the Company evaluating it's inventory in relation to future undiscounted cash flows and recording a non-cash charge of $6,635,000 during the first fiscal quarter of 1997. Liquidity and Capital Resources The residential real estate development business is inherently capital intensive. Significant cash expenditures are typically needed to acquire and develop land, construct homes and establish marketing programs for lengthy periods of time in advance of revenue realization. The Company generally finances its operations with secured borrowings from commercial banks, financial institutions and private investors, unsecured borrowings in the public market, and with available cash flow from operations. At July 31, 1997, the Company had commitments for $53.2 million under several revolving credit facilities with commercial banks and financial institutions, of which $16.3 million was outstanding. In addition, at July 31, 1997, the Company had community specific facilities capable of providing aggregate fundings of $3.8 million, against which $2.8 million was outstanding at that time. The Company also benefits from a line of credit which is secured by some of its model homes for an amount not to exceed $5.8 million of which $4.4 million was outstanding as of July 31, 1997. Borrowings under the credit facilities are secured by liens on specific real property owned by the Company, and carry limited recourse against the Company. As a result, on July 31, 1997, the aggregate outstanding principal balance under the Company's credit facilities was $23.6 million and the recourse to the Company from those borrowings was $4.7 million. Cash and cash equivalents at July 31, 1997, were abnormally high as a direct result of the Company's aggressive land acquisition program, which itself is designed to support the Company's plan of controlled expansion and growth. For the nine months ended July 31, 1997, the Company's interest incurred and capitalized decreased 3.5% as compared to the nine months ended July 31, 1996. This decrease represents the continual negotiations with lenders to reduce financing rates, which will enable the Company to improve gross margins in future reporting periods. PART II. OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- (a) None Item 2. Changes in Securities - ------------------------------ (a) None Item 3. Defaults upon Senior Securities - ---------------------------------------- (a) Refer to note 5 of Notes to Consolidated Financial Statements. ------------------------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) None Item 5. Other Information ----------------- (a) None Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) There are no exhibits attached to this report. (b) The Company did not file any reports on Form 8-K during the period. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE FORECAST GROUP "Registered Tradename", L.P. ---------------------------------------------- By: FORECAST "Registered Tradename" HOMES, INC. ----------------------------------------------- A California Corporation its General Partner September 12, 1997 By: /s/ James P. Previti - ------------------ -------------------- Date James P. Previti President By: /s/ Larry R. Day ---------------- Larry R. Day Principal Accounting Officer By: FORECAST "Registered Tradename" CAPITAL CORPORATION ------------------------------------------------------ September 12, 1997 By: /s/ James P. Previti - ------------------ -------------------- Date James P. Previti President By: /s/ Larry R. Day ---------------- Larry R. Day Principal Accounting Officer EX-27 2
5 9-MOS OCT-31-1997 JUL-31-1997 11425000 0 4839000 0 69083000 88159000 1018000 222000 88159000 67231000 29075000 0 0 0 0 88159000 95481000 95481000 81028000 96883000 (407000) (6635000) 0 (7630000) (7630000) (7630000) 0 1634000 0 (5996000) 0 0
-----END PRIVACY-ENHANCED MESSAGE-----