FORM 10-Q SECURITIES AND EXCHANGE COMMISSION 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 January 31, 2001 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. ----------------------------------------------- (Exact Name of Registrant as specified in its charter) California 33-0582072 ---------- ---------- (State of Organization) (IRS EmployerIdentification 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 ------------------- ----------------------------------------- None 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 March 16, 2001. THE FORECAST GROUP "Registered Tradename", L.P. CONSOLIDATED BALANCE SHEETS (Amounts in 000's) January 31, 2001 October 31, 2000 (Unaudited) ---------------- --------------- Assets: ------- Cash and Cash Equivalents $23,962 $26,607 Accounts Receivable 1,264 809 Accounts and Notes Receivable, Related Parties 14,449 14,149 Real Estate Inventory 171,533 142,768 Property and Equipment, Net 425 435 Other Assets 1,380 1,565 -------- --------- Total Assets $213,013 $186,333 ======== ========= Liabilities & Partners' Equity: ------------------------------ Accounts Payable $31,030 $31,382 Accrued Expenses 5,862 6,498 Notes Payable: Senior Notes at 11 3/8% due December 2000 - 19,700 Collateralized by Real Estate Inventory 79,716 44,028 Unsecured 6,920 - Other Notes Payable - 3,525 ------- ------- Total Notes Payable 86,636 67,253 ------- ------- Total Liabilities $123,528 $105,133 Partners' Equity 89,485 81,200 -------- -------- Total Liabilities & Partners' Equity $213,013 $186,333 ======== ========

[FN] See notes to consolidated financial statements. THE FORECAST GROUP "Registered Tradename, L.P. CONSOLIDATED STATEMENTS OF INCOME AND PARTNERS' EQUITY FOR THE THREE MONTHS ENDED JANUARY 31, 2001 AND 2000 (Unaudited) (Amounts in 000's) Three Months Ended January 31, ------------------ 2001 2000 ------------------ Homebuilding Revenues $82,471 $61,041 Cost of Homes Sold 63,819 48,782 ------- ------- Gross Profit 18,652 12,259 ------- ------- Land/Lot Sale Revenues 2,524 - Cost of Land/Lot Sold 2,911 - ------- ------- Loss on Land/Lot Sales (387) - ------- ------- Operating Expenses: ------------------- Selling & Marketing Expenses 3,919 3,834 General & Admin. Expenses 5,785 4,174 Other Operating Costs 10 1,274 ----- ----- Total Operating Expenses 9,714 9,282 ----- ----- Operating Income 8,551 2,977 Other Income ------------ Interest Income 264 183 Other Income and Expenses, net 335 182 ---- ---- Total Other Income 599 365 ------ ------ Net Income $9,150 $3,342 ====== ====== Partners' Equity at Beginning of Period $81,200 $53,018 Capital Distribution (865) (2,025) Net Income this Period 9,150 3,342 ------- ------- Net Partners' Equity at End of Period $89,485 $54,335 ======= =======

[FN] See notes to consolidated financial statements. THE FORECAST GROUP "Registered Tradename, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JANUARY 31, 2001 AND 2000 (Unaudited) (Amounts in 000's) For the Three Months Ended January 31, --------------------------- 2001 2000 --------------------------- Operating Activities: --------------------- Net Income $9,150 $3,342 Adjustments to Reconcile Net Income to Net Cash Used for Operating Activities Depreciation on Property and Equipment 64 75 Loss on Sale of Property and Equipment - 1 Loss on Land/Lot Sales 387 - Other Operating Costs 10 1,274 Equity Income of Unconsolidated Joint Venture 191 101 (Increase)/Decrease in Accounts Rec. (455) 2,988 Increase in Real Estate Inventory (29,162) (12,558) Increase in Other Assets (231) (52) Increase in Accounts Payable and Accrued Expenses (988) (8,178) Decrease in Other Liabilities - (514) ------- ------ Net Cash Used for Operating Activities (21,034) (13,521) ------- ------ Investing Activities: --------------------- Distribution from Joint Venture 225 127 Additions to Property and Equipment (54) 16 ----- ----- Net Cash Provided by Investing Activities 171 143 ----- ----- Financing Activities: --------------------- Capital Distributions (865) (2,025) Decrease in Capital Note Receivable from Partner - 300 Increase in Accounts and Notes Receivable, Related Parties (300) (1,942) Proceeds from Notes Payable, Collateralized by Real Estate 90,119 57,691 Proceeds from Notes Payable, Unsecured 6,587 - Proceeds from Notes Payable, Other 3,769 80 Principal Payments on Notes Payable, Senior Notes (19,700) - Principal Payments on Notes Payable, Collateralized by Real Estate (52,198) (37,504) Principal Payments on Notes Payable, Unsecured (1,900) - Principal Payments on Notes Payable, Other (7,294) (506) ------ ----- Net Cash Provided by Financing Activities 18,218 16,094 ------ ------ (Decrease)/Increase in Cash and Cash Equivalents (2,645) 2,716 Cash and Cash Equivalents at Beginning of Period 26,607 22,594 ------- ------ Cash and Cash Equivalents at End of Period $23,962 $25,310 ======= =======

[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, 2000 (File No. 33-72106) as filed with the Securities and Exchange Commission. The results of operations for the three months ended January 31, 2001, do not necessarily indicate the results that can be expected for the full fiscal year. The results of operations for the three months ended January 31, 2001, 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 the Form 10-K for the year ended October 31, 2000 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 - Changes in economic conditions in the markets in which the Company operates - Fluctuations in mortgage and federal funds 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) January 31, 2001 ------------------------------ Real Estate Inventory Notes Payable ------------------------------ Land Held for Development $1,198 $- Residential Projects in Process 163,097 79,716 Model Homes 7,238 - -------- -------- Total $171,533 $79,716 ======== ======== October 31, 2000 ----------------------------- Real Estate Notes Payable Inventory ----------------------------- Land Held for Development $3,232 $- Residential Projects in Process 132,961 44,028 Model Homes 6,575 - -------- ------- Total $142,768 $44,028 ======== =======

3. Interest The following summarizes the components of interest incurred, capitalized, expensed and paid: (Amounts in 000's) For The Three Months Ended January 31, ------------------ 2001 2000 ------------------ Interest incurred and capitalized $2,656 $2,418 Interest incurred and expensed - - ------ ------ Total Interest Incurred $2,656 $2,418 ====== ====== Capitalized interest amortized to cost of homes sold $2,028 $1,804 Interest paid $3,509 $2,978

4. Transactions With Affiliates During the three months ended January 31, 2001, the Company sold land in Bullhead, Arizona to an affiliated entity in which Mr. Previti is the 100% owner for a sales price of $1,713,361. The Company received cash payments of $400,000 and an unsecured note of $1,313,000. No gain or loss was recognized on the sale. 5. Receivables From Affiliates During the three months ended January 31, 2001, accounts and notes receivable from related parties increased $300,000. The increase primarily relates to the addition of a $387,000 receivable from an affiliated entity in which Mr. Previti is the 100% owner, related to costs incurred by the Company, on behalf of the affiliate, for certain development activities on real property in Northern California. In addition, the Company received an unsecured note receivable of $1,313,000 related to the sale of land to an affiliated entity in which Mr. Previti is the 100% owner. These increases in receivables from affiliates were offset by $1,500,000 of payments received. 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. On December 13, 2000, the Company retired the remaining outstanding $19,700,000 of Senior Notes held in the names of investors other than the Company. 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 three months ended January 31, 2001 or 2000. 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. This table excludes land/lot sales revenue and cost of land/lot sold. Percent of Housing Sales For the Three Months Ended January 31, --------------------------- 2001 2000 --------------------------- Homebuilding Revenues 100.0% 100.0% Cost of Homes Sold 77.4% 79.9% ------ ------ Gross Profit 22.6% 20.1% Operating Expenses: ------------------- Selling & Marketing Expenses 4.8% 6.3% General & Admin. Expenses 7.0% 6.8% Other Operating Costs 0.0% 2.1% ---- ---- Total Operating Expenses 11.8% 15.2% Operating Income 10.8% 4.9% ==== ==== Number of homes closed 374 307 Number of homes sold 437 330 Number of homes in backlog 443 269 Aggregate value of backlog (in millions) $97.7 $52.0 ===== =====

Results of Operations --------------------- For the Three Months ended January 31, 2001 and January 31, 2000 Housing revenues of $82.5 million set a first fiscal quarter Company record. This result represents an increase of $21.4 million or 35.1% from the three months ended January 31, 2000. The revenues for the three months ending January 31, 2001 represent a record of 374 closings, an increase of 67 closings or 21.8% over the three months ending January 31, 2000. The increase reflects the continued strength of the California housing market which resulted in increased absorption rates and overall sales for the Company in its California submarkets. Sales for the three months were 437 units, representing an increase of 32.4% from the three months ended January 31, 2000. The average sales price of the homes closed during the three months ended January 31, 2001, was $220,511 as compared to $198,831 for the same period a year ago, representing an increase of 10.9%. The increase in average sales price is due primarily to increasing prices in high demand communities and a shift in closings towards higher priced communities. The sales and closings achieved in the first quarter ending January 31, 2001, set company records despite weather related challenges that were overcome. Gross profit from housing sales was $18.7 million for the three months ended January 31, 2001, representing an increase of $6.4 million, or 52.1%, from the three months ended January 31, 2000. During the same three month period, gross profit per home increased to $49,872, from $39,932, representing a 24.9% increase over the comparable period in 2000. Gross profit margin for the three months ended January 31, 2001 rose to 22.6% versus 20.1% for the same period one year earlier. The increase in gross profit and gross margin was due primarily to the continued strength of the California market and increasing sales prices while maintaining construction costs at level amounts. During the three months ended January 31, 2001, the Company sold two lots in Phoenix, Arizona, 28 lots in Perris, California and one parcel of land located in Bullhead, Arizona, which resulted in a net loss of $387,000. There were no land sales in the comparable three month period of 2000. The Company's interest amortized to cost of homes sold (as a percentage of revenue) decreased to 2.5%, for the three months ended January 31, 2001, from 3.0% for the same period a year ago. This decrease is directly attributable to the Company's record level of closings experienced in the first three months of fiscal year 2001, which produced increased rates of capital turnover, thereby resulting in lower capitalized interest costs. In addition, the Company continuously evaluates the cost of capital charged by each of its' lenders and manages its' debt level relating to those lenders. Selling and marketing expenses decreased by $85,000 or 2.2% during the three months ended January 31, 2001, as compared to the three months ended January 31, 2000. Selling and marketing, as a percentage of revenue, decreased to 4.8% from 6.3% for the comparable period in 2000. This decrease, as a percentage of revenue, is attributable to the higher closing volume, higher average sales prices, and lower incentives required to achieve the desired sales absorptions. General and administrative expenses increased 0.2% as a percentage of revenue, to 7.0% for the three months ended January 31, 2001 as compared to the three months ended January 31, 2000. The 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 in order to achieve the Company's Three-Year Business Plan and an increase in the bonuses paid to the Company's employees due to the record profits realized in the three months ended January 31, 2001. Other operating costs for the three months ended January 31, 2001 were $10,000, as compared to $1,274,000 for the three months ended January 31, 2000. The other operating costs of $1,274,000 during the three months ended January 31, 2000, was due to the expensing of carrying costs of one community in Fontana that had been held for future development. The Company has begun developing the Fontana community and anticipates its first deliveries in the second fiscal quarter of 2001. Net income increased 173% to $9.1 million during the three months ended January 31, 2001, as compared to a net income of $3.3 million for the three months ended January 31, 2000. Net income, as a percentage of revenue, increased to 11.1% as compared to 5.5% a year ago. This increase was primarily attributable to increased closings and the overall improvement of market conditions in those areas in which the Company operates. During the three months ended January 31, 2001, distributions to partners totaled $865,000. For the three months ended January 31, 2000, distributions to partners totaled $2.0 million, of which $300,000 was to Forecast Homes Inc., who then paid off its 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. In February 1994, the Company issued $50 million 11 3/8% Senior Notes due in 2000 through a public debt offering. At certain times during the past few years the Company has repurchased portions of its outstanding 11 3/8% Senior Notes due in 2000, on the open market and subsequently retired such repurchased 11 3/8% Senior Notes. As of January 31, 2001, the Company had paid off and retired the remaining outstanding Senior Notes. At January 31, 2001, the Company had commitments for $121.7 million under several revolving credit facilities with commercial banks and financial institutions, of which $78.5 million was outstanding. In addition, at January 31, 2001, the Company had community specific facilities capable of providing aggregate fundings of $1.2 million, of which $1.2 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 $6.9 million, of which $6.9 was outstanding as of January 31, 2001. On January 31, 2001, the aggregate outstanding principal balance under all of the Company's credit facilities was $86.6 million and the recourse to the Company from those borrowings was 34% of the total outstanding sums, or $29.4 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. 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 in the form of retained earnings and debt financing will be sufficient to meet its normal operating requirements over the near term. PART II. OTHER INFORMATION Item 1. Legal Proceedings ----------------- (a) None Item 2. Changes in Securities --------------------- (a) Paid in full on December 13, 2000 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 March 16, 2001 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

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