-----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, G72AeNaZL4zMdmHn984MOdzD48oipFwNggUIZCZi8FQzntaaxxKfRbxsxYSH3sgo 1mT88wEJCAgH8cgXa5WOiQ== /in/edgar/work/20000602/0000915350-00-000008/0000915350-00-000008.txt : 20000919 0000915350-00-000008.hdr.sgml : 20000919 ACCESSION NUMBER: 0000915350-00-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000602 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORECAST GROUP LP CENTRAL INDEX KEY: 0000915350 STANDARD INDUSTRIAL CLASSIFICATION: [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: 648224 BUSINESS ADDRESS: STREET 1: 10670 CIVIC CENTER DR CITY: RANCHO CUCAMONGA STATE: CA ZIP: 91730 BUSINESS PHONE: 9099877788 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE CIMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended April 30, 2000 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) 987-7788 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 June 2, 2000. At June 2, 2000, Forecast "Registered Tradename" Capital Corporation had 2,500 shares of Common stock outstanding. THE FORECAST GROUP "Registered Tradename", L.P. CONSOLIDATED BALANCE SHEETS (Amount's in 000's) April 30, 2000 October 31, 1999 (Unaudited) -------------- --------------- Assets: - ------- Cash and Cash Equivalents $21,238 $22,594 Accounts Receivable 996 4,298 Accounts and Notes Receivable, Related Parties 13,580 6,905 Real Estate Inventory 132,672 110,800 Property and Equipment, Net 436 551 Other Assets 1,434 1,770 -------- ------- Total Assets $170,356 $146,918 ======== ======== Liabilities & Partners' Equity: - ------------------------------- Accounts Payable $16,970 $25,455 Accrued Expenses 5,252 4,007 Notes Payable: Senior Notes at 11 3/8% due December 2000 19,700 19,700 Collateralized by Real Estate Inventory 64,972 40,932 Other Notes Payable 3,755 4,106 -------- ------- Total Notes Payable 88,427 64,738 -------- ------- Total Liabilities $110,649 $94,200 Partners' Equity 59,707 53,018 Less: Capital Note Receivable From Partner - (300) ------- ------- Net Partners' Equity 59,707 52,718 ------- ------- Total Liabilities & Partners' Equity $170,356 $146,918 ======== ========
[FN] See notes to consolidated financial statements. THE FORECAST GROUP "Registered Tradename", L.P. CONSOLIDATED STATEMENTS OF INCOME AND PARTNERS' EQUITY FOR THE SIX AND THREE MONTHS ENDED APRIL 30, 2000 AND 1999 (Unaudited) (Amount's in 000's) Six Months Three Months Ended Ended April 30, April 30, --------------- ---------------- 2000 1999 2000 1999 --------------- ----------------- Homebuilding Revenues $130,086 $103,966 $69,045 $65,802 Cost of Homes Sold 103,692 85,225 54,910 54,323 -------- -------- ------- ------- Gross Profit 26,394 18,741 14,135 11,479 -------- -------- ------- ------- Land Sale Revenues - 7,343 - 75 Cost of Land Sold - 7,781 - 67 -------- -------- ------- ------- Income/(Loss) on Land Sales - (438) - 8 -------- -------- ------- ------- Operating Expenses: - ------------------- Selling & Marketing Exp. 7,999 7,307 4,165 4,260 General & Admin. Exp. 9,259 6,677 5,085 3,540 Other Operating Costs 1,342 146 68 77 ----- ------ ----- ----- Total Operating Exp. 18,600 14,130 9,318 7,877 ------ ------ ----- ----- Operating Income 7,794 4,173 4,817 3,610 Other Income (Expenses): - ------------------------ Interest Income 482 341 299 251 Interest Expense - (9) - - Other Income and Exp, net 438 1,042 256 356 ----- ----- ---- --- Total Other Income (Expenses) 920 1,374 555 607 ------ ------ ------ ------ Net Income $8,714 $5,547 $5,372 $4,217 ====== ====== ====== ====== Partners' Equity at Beginning of Period $53,018 $31,443 $54,335 $32,773 Capital Distribution (2,025) - - - Net Income this Period 8,714 5,547 5,372 4,217 ------- ------- ------- ------- 59,707 36,990 59,707 36,990 Less: Capital Note Rec. From Partner - (300) - (300) ------- ------- ------ ------- Net Partners' Equity At End of Period $59,707 $36,690 $59,707 $36,690 ======= ======= ======= =======
[FN] See notes to consolidated financial statements. THE FORECAST GROUP "Registered Tradename", L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999 (Unaudited) (Amount's in 000's) For the Six Months Ended April 30, ----------------------- 2000 1999 ----------------------- Operating Activities: - --------------------- Net Income $8,714 $5,547 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Depreciation on Property and Equipment 142 190 Loss on Sale of Property and Equip. 1 - Loss on Land Sale - 438 Other Operating Costs 1,342 146 Equity Income of Unconsolidated Joint Venture 202 203 Decrease/(Increase) in Accounts Rec. 3,302 (486) Increase in Real Estate Inventory (23,214) (45,194) Decrease/(Increase) in Other Assets 12 (1,643) Decrease/(Increase) in Accounts Payable and Accrued Expenses (7,240) 8,849 ------- ------- Net Cash Used For Operating Activities (16,739) (31,950) ------- ------- Investing Activities: - --------------------- Contribution to Joint Venture (5) (7) Distribution from Joint Venture 127 464 Additions to Property and Equipment (28) (207) ---- --- Net Cash Provided by Investing Activities 94 250 ---- --- Financing Activities: - --------------------- Capital Distributions (2,025) - Decrease in Capital Note Receivable from Partner 300 - (Increase)/Decrease in Accounts and Notes Receivable, Related Parties (6,675) 2,408 Proceeds from Notes Payable, Collateralized by Real Estate 103,504 103,306 Proceeds from Notes Payable, Other 156 166 Principal Payments on Notes Payable, Collateralized by Real Estate (79,465) (72,267) Principal Payments on Notes Payable, Other (506) (533) ------ ------ Net Cash Provided By Financing Activities 15,289 33,080 ------ ------ Increase(Decrease)in Cash and Cash Equivalents (1,356) 1,380 Cash and Cash Equivalents at Beginning of Period 22,594 16,193 ------ ------ Cash and Cash Equivalents at End of Period $21,238 $17,573 ======= =======
[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, 1999 (File No. 33-72106) as filed with the Securities and Exchange Commission. The results of operations for the six months ended April 30, 2000 do not necessarily indicate the results that can be expected for the full fiscal year. The results of operations for the six months ended April 30, 2000, 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, 1999 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 and federal fund 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: (Amount's in 000's) April 30, 2000 --------------------------- Real Estate Inventory Notes Payable --------------------------- Land Held for Development $10,354 $ - Residential Projects in Process 118,083 64,972 Model Homes 4,235 - -------- ------- Total $132,672 $64,972 ======== ======= October 31, 1999 ---------------------------- Real Estate Inventory Notes Payable ---------------------------- Land Held for Development $9,000 $ - Residential Projects in Process 100,720 40,932 Model Homes 1,080 - -------- ------ Total $110,800 $40,932 ======== =======
3. Interest The following summarizes the components of interest incurred, capitalized, expensed and paid: (Amount's in 000's) For the For the Six Months Three Months Ended Ended April 30, April 30, -------------- ------------ 2000 1999 2000 1999 -------------- ------------ Interest incurred and Capitalized $5,250 $4,731 $2,832 $2,540 Interest incurred and expensed - 9 - - ------ ----- ------ ----- Total Interest Incurred $5,250 $4,740 $2,832 $2,540 ====== ====== ====== ===== Capitalized interest amortized to cost of homes sold $3,556 $2,935 $1,752 $1,789 Interest paid $5,250 $4,752 $2,272 $1,999
4. Transactions With Affiliates From time to time, the Trust and/or Mr. Previti have guaranteed indebtedness of the Company in order to enable the Company to obtain financing on more favorable terms than would otherwise be available. There can be no assurances that the Trust and/or Mr. Previti will continue to provide such guarantees in the future. As of April 30, 2000 a management fee receivable of $530,000 was owed to the Company, from an affiliated entity in which Mr. Previti owns a 50% interest, for development related rights and services associated with certain real property in Southern California. Another management fee receivable of $14,000 is due the Company, from an affiliated entity in which Mr. Previti owns an 87.5% interest, for development related rights and services associated with certain real property in Arizona. During the six months ended April 30, 2000, distributions to partners totaled $2.0 million, of which $300,000 was paid to Forecast Homes Inc. Forecast Homes, Inc. then paid off its capital note payable to the Company. 5. Receivables From Affiliates During the six months ended April 30, 2000, accounts and notes receivable from related parties increased $6.7 million. The increase primarily results from the Company making five new loans to related parties. The first is a $1,100,000 note receivable from an affiliated entity in which Mr. Previti is a 50% owner. This note is due December 31, 2000, bears interest at 10% interest and is secured by a deed of trust with assignments of rents. The second and third loans are each represented by a $400,000 note receivable from the same affiliated entity as the first note. Both of these notes are due December 31, 2000, bear interest at 10% and are secured by deeds of trust. All three of these notes are secured by real property located in Vacaville, California. The fourth loan is a $3,700,000 note receivable from another affiliated entity in which Mr. Previti is a 50% owner. This note is due December 31, 2000, bears interest at 10% and is secured by a deed of trust against real property located in Rancho Cucamonga. The fifth loan is a $500,000 unsecured, note receivable from an affiliated entity in which Mr. Previti is a 100% owner. This note is due December 31, 2000 and bears interest at 10%. 6. 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. At April 30, 2000, there remain Senior Notes, with a face value of $19,700,000, that are held in the names of investors other than the Company. The notes are joint and several senior obligations of the Company and Forecast "Registered Tradename" Capital Corporation ("Capital"), with interest only payments due semi-annually on June 15 and December 15 of each year. The notes are senior unsecured obligations of the Company and rank parsi passu in right of payment with all senior indebtedness of the Company. The Indenture governing the Senior Notes permits the Company to incur up to $15 million in recourse debt, in addition to the original $50 million of Senior Notes, and to incur additional recourse debt beyond this $15 million limitation if the Company maintains certain debt-to-equity and debt coverage ratios. As of April 30, 2000, the Company met both its debt-to-equity and debt coverage ratio tests. The Company is not precluded from incurring additional debt on a non-recourse debt basis, without regard to any interest or debt coverage ratios. Despite this present ability to incur additional recourse debt, there is no assurance that the Company will continue to meet these ratio tests, and if not, that Mr. Previti and/or the Trust will be willing to guarantee such indebtedness. The Company believes that through cashflow from operations and secured borrowings, sufficient funds will be available for paying off the Senior Notes on December 15, 2000. During the next few months, the Company will determine the repayment sources and plans for the actual retirement of those notes. 7. Real Estate Held for Development and Sale In accordance with FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (Statement 121), when events or circumstances indicate that an impairment to 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 future undiscounted cash flows, excluding interest charges, 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. On an ongoing basis, management analyzes future undiscounted cash flows for all real estate projects where impairment indicators are present. Based upon such analysis, no provision for impairment loss was recorded for the six months ended April 30, 2000 or 1999. FORECAST "Registered Tradename" CAPITAL CORPORATION BALANCE SHEETS April 30, October 31, 2000 1999 (unaudited) --------- ------- Assets: - ------- Cash $500 $800 ---- ---- Total Assets $500 $800 ==== ==== Liabilities & Shareholders' - -------------------------- Deficit: - -------------------------- Accounts Payable $300 $300 Accounts Payable, Related Parties 7,200 6,400 ------ ------ Total Liabilities $7,500 $6,700 ------ ------ Common Stock, $1.00 par value: Authorized 10,000 shares Issued and Outstanding 2,500 shares 2,500 2,500 Accumulated Deficit (9,500) (8,400) ------ ------- Total Shareholders' Deficit (7,000) (5,900) ------ ------- Total Liabilities & Shareholders' Deficit $500 $800 ====== ======
[FN] See notes to financial statements. FORECAST "Registered Tradename" CAPITAL CORPORATION STATEMENTS OF OPERATIONS AND SHAREHOLDERS' DEFICIT FOR THE SIX AND THREE MONTHS ENDED APRIL 30, 2000 AND 1999 (Unaudited) Six Months Three Months Ended Ended April 30, April 30, -------------- ---------------- 2000 1999 2000 1999 -------------- ---------------- General & Admin Exp. $300 $500 $300 $500 Income Tax Expense 800 800 800 800 ----- ------ ------ ------ Net Loss ($1,100) ($1,300) ($1,100) ($1,300) ====== ====== ====== ====== Shareholders' Equity at Beginning of Period ($5,900) ($4,600) ($5,900) (4,600) Net Loss this Period (1,100) (1,300) (1,100) (1,300) ------ ----- ----- ----- Shareholders' Equity at End of Period ($7,000) ($5,900) ($7,000) ($5,900) ====== ====== ====== ======
[FN] See notes to financial statements. FORECAST "Registered Tradename" CAPITAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation Forecast "Registered Tradename" Capital Corporation (the "Company") was incorporated in California on September 20, 1993, and was formed solely for the purpose of serving as an Issuer of the Senior Notes for The Forecast Group "Registered Tradename", L.P. The authorized capital stock of the Company consists of 10,000 shares of common stock with a par value of $1.00 per share. 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 Company is financially dependent on The Forecast Group "Registered Tradename", L.P. to fund its continuing operations. 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, 1999 (File No. 33-72106) as filed with the Securities and Exchange Commission. The results of operations for the six months ended April 30, 2000 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 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. This table excludes land sales revenue and cost of land sold. Percent of Percent of Housing Sales Housing Sales For the For the Six Months Ended Six Months Ended April 30, April 30, --------------- ----------------- 2000 1999 2000 1999 --------------- ----------------- Homebuilding Revenues 100.0% 100.0% 100.0% 100.0% Cost of Homes Sold 79.7% 82.0% 79.5% 82.6% ------- ---- ----- ----- Gross Profit 20.3% 18.0% 20.5% 17.4% Operating Expenses: - ------------------- Selling & Marketing Exp. 6.1% 7.0% 6.0% 6.5% General & Admin Exp. 7.1% 6.4% 7.4% 5.4% Other Operating Costs 1.0% 0.1% 0.1% 0.1% ------ ---- ---- ---- Total Operating Exp. 14.2% 13.5% 13.5% 12.0% Operating Income 6.1% 4.5% 7.0% 5.4% ===== ===== ===== ==== Number of homes closed 664 611 357 376 Number of homes sold 800 882 470 535 Number of homes in backlog 382 504 Aggregate value of backlog (in millions) $76.4 $89.9 ===== =====
Results of Operations For the Six Months ended April 30, 2000 and April 30, 1999 Housing revenues of $130.1 million, set a Company record for the period ending April 30, 2000, representing an increase of $26.1 million or 25.1% from the six months ended April 30, 1999. The revenues for the six months ending April 30, 2000 represent 664 closings, an increase of 53 closings or 8.7% over the six months ending April 30, 1999. The increase reflects the continued strengthening of the California housing market which resulted in an increased absorption rates and overall sales in the Company's California submarkets. Sales for the six months were 800 versus 882 a year ago. Prior year number of homes sold are higher than the current year number due to the inclusion of 161 sales from our Arizona Division, which sold the majority of its remaining lots in the Phoenix marketplace, to a national homebuilder, in the fourth quarter of the Company's 1999 fiscal year. Excluding the 161 Arizona sales, the Company increased sales 10.9% as compared to a year ago. The average sales price of the homes closed during the six months ended April 30, 2000 was $195,913 as compared to $170,157 for the same period a year ago, representing an increase of 15.1%. The increase in average sales price is due primarily to the continued strengthening of the California housing market, and a greater number of closings in communities with higher sales prices as compared to the prior comparable period. Gross profit from housing sales was $26.4 million for the six months ended April 30, 2000, representing an increase of $7.7 million, or 40.8%, from the six months ended April 30, 1999. During the same six month period, gross profit per home increased to $39,750, from $30,673, representing a 29.6% increase over the comparable period in 1999. Gross profit margin for the six months ended April 30, 2000 rose to 20.3% versus 18.0% for the same period one year earlier. The increase in gross profit per home was primarily attributable to the continued strengthening of the California market, while the increase in gross profit and gross margin was due primarily to a higher concentration of sales in our higher sales priced communities in the Northern California Division. During the six months ended April 30, 1999, the Company sold five parcels of land, which resulted in a net loss of $438,000. No land was sold in the comparable six month period of 2000. For the six months ended April 30, 2000, the Company's interest incurred increased 10.7% as compared to the six months ended April 30, 1999. This increase is a result of increased construction volume based upon new land acquisitions. The Company's interest amortized to cost of homes sold (as a percentage of revenue) decreased to 2.7%, for the six months ended April 30, 2000, from 2.8% for the same period a year ago. This decrease is directly attributable to the Company's record level of closings experienced in the first six months of fiscal year 2000, which produced increased rates of capital turnover, thereby resulting in lower capitalized interest costs. The lower interest costs, as a percentage of revenue, may not be sustainable due to the expectation of the continued increase of the prime rate. Selling and marketing expenses increased by $692,000 or 9.5% during the six months ended April 30, 2000, as compared to the six months ended April 30, 1999. This increase is directly attributable to the higher volume of closings during the period. Selling and marketing, as a percentage of revenue, decreased to 6.1% from 7.0% for the comparable period in 1999. This decrease, as a percentage of revenue, is attributable to both the higher closing volume and higher average sales prices. General and administrative expenses increased $2.6 million during the six months ended April 30, 2000 as compared to the six months ended April 30, 1999. The $2.6 million increase is attributable to an increase in the number of employees of the Company which was necessary to facilitate the Company's continued expansion and active investigation of new land acquisition opportunities, and an increase in the bonuses paid to the Company's employees due to the record profits realized in the six months ended April 30, 2000. General and administrative expenses, as a percentage of revenue increased to 7.1% for the six months ended April 30, 2000 from 6.4%, as compared to the comparable period a year ago. Other operating costs increased $1.2 million during the six months ended April 30, 2000 as compared to the six months ended April 30, 1999, due to the expensing of carrying costs of one community in Fontana that had been held for future development. Net income was $8.7 million during the six months ended April 30, 2000, as compared to a net income of $5.5 million for the six months ended April 30, 1999. Net income, as a percentage of revenue, increased 26.4%, to 6.7% as compared to 5.3% a year ago. This increase was primarily attributable to increased closings and the overall continuing improvement of market conditions in those areas in which the Company operates. During the six months ended April 30, 2000, distributions to partners totaled $2.0 million, of which $300,000 was to Forecast Homes Inc., which it used to pay off its capital note payable to the Company. Results of Operations For the Three Months ended April 30, 2000 and April 30, 1999 For the second consecutive fiscal quarter, housing revenues set a record, which for the three months ended April 30, 2000 was $69.0 million, or an increase of $3.2 million or 4.9% from the three months ended April 30, 1999. The revenues for the three months ending April 30, 2000, represent 357 closings, which was a decrease of 19 closings, or 5.1%, over the three months ending April 30, 1999. Excluding the 33 closings the Company realized in Arizona for the three months ended April 30, 1999, the Company realized a 4.1% increase in the number of closings for the three months ended April 30, 2000. The increase reflects the continued strengthening California housing market which resulted in increased absorption rates and overall sales in the Company's California submarkets. Sales for the current quarter were 470 compared to 535 a year ago. Prior year number of homes sold are higher than the current year number due to the inclusion of 104 sales in the Arizona Division, which sold the majority of its remaining lots in the Phoenix marketplace, to a national homebuilder, in the fourth quarter of the Company's 1999 fiscal year. Excluding the sales in Arizona, the Company realized a 9.0% increase in sales for the three months ended April 30, 2000. The average sales price of the homes closed, during the three months ended April 30, 2000, was $193,403, as compared to $175,005 for the same period a year ago, representing an increase of 10.5%. The sustained average sales price was possible due to the continued number of closings in communities with higher sales prices in both three month periods. Gross profit from housing sales was $14.1 million for the three months ended April 30, 2000, representing an increase of $2.7 million, or 23.1%, from the three months ended April 30, 1999. During the same three month period, gross profit per home increased to $39,594, from $30,529, representing a 30.0% increase over the comparable period in 1999. Gross profit margin for the three months ended April 30, 2000 rose to 20.5% versus 17.4% for the same period one year earlier. The increase in gross profit per home was primarily attributable to the continued strengthening of the California market, while the increase in gross profit and gross margin was due primarily to a higher concentration of sales in our higher sales priced communities in the Northern California Division. During the three months ended April 30, 1999, the Company sold a parcel of land, which resulted in a gain of $8,000. No land was sold in the comparable three month period of 2000. For the three months ended April 30, 2000, the Company's interest incurred increased 11.5% as compared to the three months ended April 30, 1999. This increase is a result of increased construction volume based upon new land acquisitions. The Company's interest amortized to cost of homes sold (as a percentage of revenue) decreased to 2.5%, for the three months ended April 30, 2000, from 2.7% for the same period a year ago. This decrease is directly attributable to the Company's higher level of closings experienced in the second quarter of fiscal year 2000, which produced increased rates of capital turnover, thereby resulting in lower capitalized interest costs. The lower interest costs, as a percentage of revenues, may not be sustainable due to the expectation of the continued increase of the prime rate. Selling and marketing expenses decreased by $95,000 or 2.2% during the three months ended April 30, 2000, as compared to the three months ended April 30, 1999. This decrease is directly attributable to the higher volume of closings during the period and the reduction in sales incentives needed to achieve desirable absorption rates. Selling and marketing, as a percentage of revenue, decreased to 6.0% from 6.5% for the comparable period in 1999. This decrease, as a percentage of revenue, is attributable to both the higher closing volume and higher average sales prices. General and administrative expenses increased $1.5 million during the three months ended April 30, 2000 as compared to the three months ended April 30, 1999. The $1.5 million increase is attributable to an increase in the number of employees of the Company which was necessary to facilitate the Company's continued expansion and active investigation of new land acquisition opportunities, and an increase in the bonuses paid to the Company's employees due to the record profits realized in the three months ended April 30, 2000. General and administrative expenses, as a percentage of revenue, increased to 7.4% for the three months ended April 30, 2000 from 5.4%, as compared to the comparable period a year ago. Other operating costs decreased $9,000 during the three months ended April 30, 2000, as compared to the three months ended April 30, 1999. Net income was $5.4 million during the three months ended April 30, 2000, as compared to a net income of $4.2 million for the three months ended April 30, 1999. Net income, as a percentage of revenue, increased 21.9%, to 7.8%, as compared to 6.4% a year ago. This increase was primarily attributable to increased closings and the continuing overall improvement of market conditions in those areas in which the Company operates. During the three months ended April 30, 2000, distributions to partners totaled $2.0 million, of which $300,000 was to Forecast Homes Inc., which it used to pay off its capital note payable to the Company. 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 cash flow from operations, secured borrowings from commercial banks, financial institutions and private investors and with unsecured borrowings in the capital markets. The Company's financing needs depend primarily upon sales volume, asset turnover and land acquisition. When liquidating inventory through home closings, the Company generates cash. When building inventory, the Company uses substantial amounts of cash obtained through borrowings and cashflow from operations. The Company has had adequate liquidity throughout its operating history, despite recessionary periods, and historically the Company's liquidity needs have been met through the use of cash provided by a combination of closings and financing activities. At certain times during the past few years the Company has repurchased portions of its outstanding 11 3/8% Senior Notes due 2000, on the open market, at prices below par. The Company subsequently retired such repurchased 11 3/8% Senior Notes, reporting the resultant income as an extraordinary gain in the Company's consolidated financial statements. At times, these debt repurchases were utilized to cure certain unsatisfied minimum net worth covenant requirements in the Indenture for the 11 3/8% Senior Notes. At April 30, 2000, the Company had commitments for $107.6 million under several revolving credit facilities with commercial banks and financial institutions, of which $58.5 million was outstanding. In addition, at April 30, 2000, the Company had community specific facilities capable of providing aggregate fundings of $7.8 million, of which $4.9 million was outstanding. Borrowings under the credit facilities are secured by liens on specific real property owned by the Company, and carry varying levels of recourse against the Company. The Company also utilizes unsecured borrowing lines from time-to time to meet its operational needs and objectives. The unsecured borrowing lines have commitments of $3.6 million, of which $1.6 was outstanding as of April 30, 2000. On April 30, 2000, the aggregate outstanding principal balance under all of the Company's credit facilities was $65.0 million and the recourse to the Company from those borrowings was 20.4% of the total outstanding sums, or $13.2 million. To date, the Company has been able to obtain acceptable land acquisition and construction financing. Consistent with an industry trend, certain lenders require increased amounts of cash invested in a project by borrowers in connection with both new loans and the extension of existing loans. The Company currently intends to continue utilizing conventional bank financing for land acquisition and construction financing, and use its own cash to fund that portion of the total project costs and acquisition costs its Lenders require be supplied (in form of equity) in order to obtain construction or land acquisition financing. At times, in the past, the Company has failed to meet the debt-to equity and debt coverage ratios that are set forth in the Indenture governing the 11 3/8% Senior Notes, thereby resulting in the Company being restricted in its ability to incur certain levels of recourse indebtedness. In the past, to overcome the limitation and assist the Company in meeting its liquidity needs, Mr. Previti and/or the Previti Family Trust has guaranteed a portion of the Company's indebtedness. As of April 30, 2000, the Company met both its debt-to-equity and debt coverage ratio tests, thereby providing the Company with the flexibility to incur more than $15 million of recourse debt, had it been necessary. Despite this present ability to incur additional recourse debt, there is no assurance that the Company will continue to meet these ratio tests, and if not, that Mr. Previti and/or the Trust will be willing to guarantee such indebtedness. The Company considers its current relationship with its lenders to be good. In February 1994, the Company issued $50 million in Senior Notes through a public debt offering. As of April 30, 2000, the Company had repurchased and retired a total of $23,400,000 of the Senior Notes, with the remaining $26,600,000 having not been retired, (including $6,900,000 which were repurchased and are being held on margin in the Company's name). The notes are due in December 2000, with interest at the rate of 11 3/8% per annum payable semi-annually on June 15 and December 15 of each year. The Company believes that through cashflow from operations and secured borrowings, sufficient funds will be available for paying off the Senior Notes on December 15, 2000. During the next few months, the Company will determine the repayment sources and plans for the actual retirement of those notes. The Indenture governing the Senior Notes requires the Company to maintain a minimum net worth of $25 million. As of April 30, 2000 the Company was in compliance with the net worth provisions of the Indenture. There can be no assurance that the impact of market conditions affecting the demand for homes or the availability of debt financing will not adversely affect the Company's future needs for capital. However, the Company expects that available capital resources will be sufficient to meet its normal operating requirements over the near term. Impact of Year 2000 In prior years, the Company discussed the nature and progress of its plans to become Year 2000 ready. In late 1999, the Company completed its remediation and testing of systems. As a result of those planning and implementation efforts, the Company has not experienced any significant disruption in mission critical information technology and non-information technology systems and believes those systems successfully responded to the Year 2000 date change. In addition, the Company did not have significant expenses during 1999 in connection with remediating its systems, and the Company is not aware of any material problems resulting from Year 2000 issues, whether with its products, its internal systems, or the products and services of third parties. The Company will continue to monitor its mission critical computer applications and those of its suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. PART II. OTHER INFORMATION Item 1. Legal Proceedings ----------------- (a) None Item 2. Changes in Securities --------------------- (a) None Item 3. Defaults upon Senior Securities ------------------------------- (a) None 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 June 2, 2000 By: /s/ James P. Previti - ------------ -------------------------- Date James P. Previti President By: /s/ Richard B. Munkvold ---------------------------- Richard B. Munkvold Senior Vice President - Financial Operations Principal Accounting Officer By: FORECAST "Registered Tradename" CAPITAL CORPORATION June 2, 2000 By: /s/ James P. Previti - -------------- --------------------------- Date James P. Previti President By: /s/ Richard B. Munkvold ---------------------------- Richard B. Munkvold Senior Vice President - Financial Operations Principal Accounting Officer EX-27 2 0002.txt
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