SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996
Commission File Number: 0-19989
FM Properties Inc.
Incorporated in Delaware 72-1211572
(IRS Employer Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
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
On June 30, 1996, there were issued and outstanding 14,285,770 shares
of the registrant's Common Stock, par value $0.01 per share.
1
FM PROPERTIES INC.
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Operations 3
Statements of Cash Flow 4
Notes to Financial Statements 5
Remarks 6
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 7
Signature 9
Exhibit Index E-1
2
FM PROPERTIES INC.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FM PROPERTIES INC.
CONDENSED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1996 1995
---------- ----------
(In Thousands)
ASSETS
Current assets:
Accounts receivable and other $ 38 $ 298
Income tax receivable 2,740 2,693
Amounts receivable from the
Partnership 1,642 1,505
---------- ----------
Total current assets 4,420 4,496
Investment in the Partnership
(Note 1) 56,095 56,401
---------- ----------
Total assets $ 60,515 $ 60,897
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 1,386 $ 1,374
Stockholders' equity 59,129 59,523
---------- ----------
Total liabilities and stockholders'
equity $ 60,515 $ 60,897
========== ==========
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(In Thousands, Except Per Share Amounts)
Income (loss) from
the Partnership
(Note 1) $ 559 $ (127) $ (306) $ (2,258)
General and
administrative
expenses (59) (784) (88) (1,494)
---------- ---------- ---------- ----------
Operating income
(loss) 500 (911) (394) (3,752)
Other income, net - 23 - 24
---------- ---------- ---------- ----------
Income (loss)
before income
taxes 500 (888) (394) (3,728)
Income taxes - - - -
---------- ---------- ---------- ----------
Net income (loss) $ 500 $ (888) $ (394) $ (3,728)
========== ========== ========== ==========
Net income (loss)
per share $.03 $(.06) $(.03) $(.26)
==== ===== ===== =====
Average shares
outstanding 14,394 14,286 14,368 14,286
====== ====== ====== ======
The accompanying notes are an integral part of these financial
statements.
3
FM PROPERTIES INC.
STATEMENTS OF CASH FLOW
(Unaudited)
Six Months Ended
June 30,
------------------------
1996 1995
---------- ----------
(In Thousands)
Cash flow from operating activities:
Net loss $ (394) $ (3,728)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Excess of equity in losses of the
Partnership over distributions
received 306 2,258
Decrease in working capital 88 1,645
---------- ----------
Net cash provided by operating
activities - 175
Cash flow from investing activities - -
Cash flow from financing activities:
Repayment of debt - (175)
---------- ----------
Net cash used in financing
activities - (175)
---------- ----------
Net decrease in cash and
cash equivalents - -
Cash and cash equivalents at
beginning of year - -
---------- ----------
Cash and cash equivalents at
end of period $ - $ -
========== ==========
The accompanying notes are an integral part of these financial
statements.
4
FM PROPERTIES INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
FM Properties Inc. (FMPO) operates through its 99.8 percent interest
in FM Properties Operating Co. (the Partnership), with 0.2 percent
owned by the Managing General Partner, Freeport-McMoRan Inc. (FTX).
FTX and Freeport-McMoRan Copper & Gold Inc. (FCX) guarantee the
Partnership's debt. During 1996, following discussions with the staff
of the Securities and Exchange Commission, FMPO determined that,
because of the rights that FTX retains in connection with its
guarantee of the Partnership's debt, it would be more appropriate to
reflect its interest in the Partnership under the equity basis of
accounting (prior year consolidated financial information has been
restated to reflect this presentation). However, if the guarantees
are eliminated, FMPO will have the authority to remove FTX as the
Managing General Partner and FTX's rights with respect to the
Partnership and FMPO would be eliminated. FMPO has no significant
operations or source of funds other than its interest in the
Partnership. The Partnership's financial statements follow:
BALANCE SHEETS
June 30, December 31,
1996 1995
---------- ----------
ASSETS (In Thousands)
Current assets:
Cash and cash equivalents $ 1,811 $ 2,282
Accounts receivable and other 4,750 4,318
---------- ----------
Total current assets 6,561 6,600
Real estate and facilities, net 152,302 180,040
Other assets 7,372 5,165
---------- ----------
Total assets $ 166,235 $ 191,805
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued
liabilities $ 4,026 $ 8,100
Amounts due to FMPO 1,642 1,505
Current portion of long-term debt 99,093 -
---------- ----------
Total current liabilities 104,761 9,605
Long-term debt - 121,294
Other liabilities 5,266 4,392
Partners' capital 56,208 56,514
---------- ----------
Total liabilities and partners'
capital $ 166,235 $ 191,805
========== ==========
STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(In Thousands)
Revenues $ 23,764 $ 12,003 $ 37,593 $ 16,385
Costs and expenses:
Cost of sales 21,445 11,172 34,758 17,043
General and
administrative
expenses 616 845 1,223 1,315
---------- ---------- ---------- ----------
Total costs and
expenses 22,061 12,017 35,981 18,358
---------- ---------- ---------- ----------
Operating income
(loss) 1,703 (14) 1,612 (1,973)
Interest expense,
net (1,158) (83) (1,892) (266)
Other income
(expense), net 14 (30) (26) (19)
---------- ---------- ---------- ----------
Net income (loss) $ 559 $ (127) $ (306) $ (2,258)
========== ========== ========== ==========
STATEMENTS OF CASH FLOW
Six Months Ended
June 30,
-----------------------
1996 1995
---------- ----------
(In Thousands)
Cash flow from operating activities:
Net loss $ (306) $ (2,258)
Adjustments to reconcile loss to net
cash provided by operating
activities:
Cost of real estate sales and
depreciation and amortization 32,283 13,645
(Increase) decrease in working
capital:
Accounts receivable and other (2,168) 1,192
Accounts payable and accrued
liabilities (3,063) (1,770)
Other (841) 332
---------- ----------
Net cash provided by operating
activities 25,905 11,141
---------- ----------
Cash flow from investing activities:
Real estate and facilities (a) (4,175) (12,611)
---------- ----------
Net cash used in investing
activities (4,175) (12,611)
---------- ----------
Cash flow from financing activities:
Proceeds from debt 1,000 8,000
Repayment of debt (23,201) (6,638)
---------- ----------
Net cash provided by (used in)
financing activities (22,201) 1,362
---------- ----------
Net decrease in cash and cash
equivalents (471) (108)
Cash and cash equivalents at
beginning of year 2,282 1,200
---------- ----------
Cash and cash equivalents at
end of period $ 1,811 $ 1,092
========== ==========
a. Includes capitalized interest of $2.3 million in the 1996 period
and $6.2 million in the 1995 period.
--------------------
Remarks
The information furnished herein should be read in conjunction with
FMPO's financial statements contained in its 1995 Annual Report to
stockholders included in its Annual Report on Form 10-K.
The information furnished herein reflects all adjustments which are,
in the opinion of management, necessary for a fair statement of the
results for the period. All such adjustments are, in the opinion of
management, of a normal recurring nature.
6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
OVERVIEW
FM Properties Inc. (FMPO) operates through its 99.8 percent ownership
of FM Properties Operating Co. (the Partnership), with 0.2 percent
owned by the Managing General Partner, Freeport-McMoRan Inc. (FTX).
FTX and Freeport-McMoRan Copper & Gold Inc. (FCX) guarantee the
Partnership's debt. During 1996, following discussions with the staff
of the Securities and Exchange Commission, FMPO determined that,
because of the rights that FTX retains in connection with its
guarantee of the Partnership's debt, it would be more appropriate to
reflect its interest in the Partnership under the equity basis of
accounting (prior year consolidated financial information has been
restated to reflect this presentation). However, if the guarantees
are eliminated, FMPO will have the authority to remove FTX as the
Managing General Partner and FTX's rights with respect to the
Partnership an FMPO would be eliminated.
During the second quarter of 1996, the Partnership continued to
capitalize on the enhanced sales opportunities at its Austin, Texas
property holdings brought about by the positive legislative and
judicial developments which occurred during 1995 (discussed in FMPO's
1995 Annual Report to Stockholders). FMPO's second-quarter 1996
revenues from the Partnership's Austin area properties totaled $10.6
million, including the sale of an 80 acre undeveloped tract within the
Barton Creek Development for $2.9 million, its second sale under the
Water Quality Protection Zone legislation enacted in late 1995.
FMPO's Austin area activity also included a $3.7 million sale of the
remaining inventory of developed and undeveloped real estate within
the Lakeside development, which included a marina, 77 developed lots
and 239 acres of undeveloped property. Additional tracts within the
Barton Creek Development are currently under contract and are
scheduled to close during the second half of 1996. The sale of
undeveloped tracts to sub-developers is an integral part of FMPO's
business strategy for the Barton Creek Development. These
transactions provide funds to reduce debt, lower future carrying and
development costs and establish values for the Partnership's remaining
properties within Barton Creek.
The State Court of Appeals in Austin recently overturned the
favorable District Court ruling which invalidated the "SOS" ordinance
in Austin; however, the appeals court did uphold the lower court's
favorable holding with respect to the interpretation of certain
grandfather rights for platted land. This decision is not expected to
adversely affect any of the Partnership's property holdings since the
city of Austin's regulatory authority was superseded for the
Partnership's properties by legislation passed in the state
legislature during 1995. A decision will be made in the near future
with respect to an appeal on the case.
The Partnership's intensified marketing efforts at its Dallas,
Houston and San Antonio properties resulted in higher second-quarter
1996 sales from these areas compared to the 1995 period. Second-
quarter 1996 revenues include the sale of three separate 19 acre
tracts, located in the Dallas area, for a total of $6.9 million. In
addition to increasing sales over the 1995 period, the marketing
efforts have generated sales contracts which are scheduled to close
throughout the remainder of 1996.
Additionally, opportunities for significant transactions
involving the Partnership's properties may arise. In the past,
permitting and development uncertainties caused valuation assessment
obstacles that kept FMPO from successfully completing negotiations
involving significant transactions. However, as the Partnership
experiences success in establishing values for its properties, FMPO
can expect opportunities to consider significant transactions
involving its properties.
RESULTS OF OPERATIONS
Second Quarter Six Months
------------------------ -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(In Thousands)
Income (loss) from
the Partnership $ 559 $ (127) $ (306) $ (2,258)
Operating income
(loss) 500 (911) (394) (3,752)
Net income (loss) 500 (888) (394) (3,728)
7
FMPO has no significant operations or source of funds other than
its interest in the Partnership. Accordingly, the following
discussion and analysis addresses the results of operations and the
capital resources and liquidity of the Partnership. The
Partnership's summary operating results follow:
Second Quarter Six Months
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(In Thousands)
Revenues:
Developed
properties $8,010 $7,566 $12,287 $ 11,404
Undeveloped
properties
and other 15,754 4,437 25,306 4,981
------ ------ ------ -------
Total revenues 23,764 12,003 37,593 16,385
Operating income
(loss) 1,703 (14) 1,612 (1,973)
Net income (loss) 559 (127) (306) (2,258)
Revenues from developed properties represented the sale of 206
and 282 single-family homesites during the second-quarter and six-
month periods of 1996, respectively, compared with the sale of 152 and
242 single-family homesites during the 1995 periods. Revenues from
undeveloped properties for the second-quarter and six-month periods of
1996 represented the sale of 447 and 603 undeveloped acres,
respectively, compared with the sale of 196 and 202 undeveloped acres
for the year-ago periods.
General and administrative expenses of the Partnership, combined
with those incurred by FMPO, were reduced to $0.7 million and $1.3
million for the second-quarter and six-month periods of 1996,
respectively, compared with $1.6 million and $2.8 million for the 1995
periods, continuing to reflect the benefit of steps taken in the third
quarter of 1995 to reduce costs.
Interest expense for the second-quarter and six-month 1996
periods increased because of reduced capitalized interest resulting
from FMPO's success in selling tracts without incurring further
development costs, partially offset by lower average debt levels and
interest rates.
FMPO's current business strategy includes the sale of larger
undeveloped tracts of land. These transactions by their nature can
cause significant variations in FMPO's revenues and operating income
during a particular accounting period. As a result, significant
fluctuations in FMPO's future operating results can be expected in any
given quarter which may cause future operating losses to be incurred.
Consequently, past operating results are not necessarily indicative of
trends in profitability.
CAPITAL RESOURCES AND LIQUIDITY
During the first six months of 1996, the Partnership generated
operating cash flow of $25.9 million which, after funding capital
expenditures, enabled FMPO to reduce the Partnership's debt from the
beginning of the year by $22.2 million to $99.1 million. The
Partnership has the potential to achieve further significant debt
reductions prior to its 1997 principal payment requirements ($29.1
million due February 1997 and $70.0 million due June 1997). These
reductions are dependent on the future cash flow from the
Partnership's assets and the ability to negotiate significant sales of
assets, which are subject to numerous economic and other factors,
including factors beyond FMPO's control. There can be no assurance
that the Partnership will generate cash flow or obtain funds
sufficient to make required interest and principal payments.
FMPO continues to seek a permanent financial restructuring, which
may include issuing new debt or equity investments, and believes that
the ongoing reduction of the Partnership's debt will significantly
improve its alternatives. An objective in arranging new financing for
FMPO will be to eliminate the guarantees of its debt by FTX and FCX.
These debt guarantees were extended in connection with the extension
of the Partnership's debt maturities achieved during late 1995. While
FMPO believes any new financing will be beneficial to the long-term
interests of its shareholders, an elimination of the guarantees would
be expected to increase financing costs significantly. The extent of
any refinancing, including any need to sell properties in connection
therewith, will determine the future net cash flow available to FMPO
to recover its investment in real estate assets.
----------------------------
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
8
SIGNATURE
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.
FM PROPERTIES INC.
By: /s/ William J. Blackwell
-----------------------------
William J. Blackwell
Vice President and Controller
(authorized signatory and
Principal Accounting Officer)
Date: May 21, 1997
9
FM PROPERTIES INC.
EXHIBIT INDEX
-------------
Sequentially
Numbered
Number Description Page
- ------ ----------- ----
27.1 Financial Data Schedule
10
5
0000885508
FM PROPERTIES INC.
1,000
6-MOS 6-MOS
DEC-31-1996 DEC-31-1995
JUN-30-1996 JUN-30-1995
0 0
0 0
0 0
0 0
0 0
4,420 1,487
0 0
0 0
60,515 56,225
0 0
0 0
0 0
0 0
143 143
58,986 55,499
60,515 56,225
0 0
0 0
0 0
0 0
0 0
0 0
0 0
(394) (3,728)
0 0
(394) (3,728)
0 0
0 0
0 0
(394) (3,728)
(.03) (.26)
0 0
