SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (FEE REQUIRED)
For the fiscal year ended April 30, 1995
Commission File Number 1-6762
KILLEARN PROPERTIES, INC.
(Exact name of Small business issuer in its charter)
Florida 59-1095497
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
100 Eagle's Landing Way
Stockbridge, GA 30281 30281
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 404-389-2020
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: Name of Each Exchange on
Common Stock which Registered:
($.10 Par Value) American Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the Issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the
past 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 ______
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. ( X )
Revenues for the fiscal year ended April 30, 1995 were $17,895,966.
As of July 24, 1995, the aggregate market value of the voting stock held by
non-affiliates of the Issuer was approximately $3,442,134. This is based upon
a closing market price of $4.6875 per share of common stock, as reported on
the American Stock Exchange - composite transaction tape.
The number of shares outstanding of the registrant's common stock as of
July 20, 1995 was 1,438,733.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Issuer's 1995 Annual Report to Shareholders (Parts I and II)
Portions of the Issuer's Proxy Statement in connection with its 1995 Annual
Meeting of Shareholders (Part III)
Exhibit Index at Page 11 and 12.
<PAGE>
PART I
ITEM I. BUSINESS
Killearn Properties, Inc. (the "Company") was organized as a Florida
corporation in 1964. The Company is engaged primarily in the development of
planned communities (see "ITEM 1 BUSINESS -Land Development," below) in
the vicinity of Henry County, Georgia (see "ITEM 2. PROPERTIES," below). The
Company's principal executive offices are located 100 Eagle's Landing Way,
Stockbridge, GA 30281, (404)389-2020.
Henry County, Georgia
In April 1986, the Company purchased approximately 2,600 acres of
property, known as the Eagle's Landing (see ITEM 2 "PROPERTIES," below),
which is located in Henry County, Georgia. During fiscal 1987, the Company
purchased 217 additional acres and obtained options to purchase 45 additional
acres. Henry County is an attractive location for industrial, commercial and
residential development due to its close proximity to the Atlanta
International Airport and downtown Atlanta. The property is on an I-75
interchange.
Henry County is a part of the metropolitan Atlanta area. Its principal
cities are McDonough and Stockbridge. A portion of the property is within the
City of Stockbridge. It is estimated that Henry County, at present, has a
population of approximately 80,000 persons and is projected to reach a
population of approximately 111,200 persons by the year 2000.
The greatest influence on the economy of Henry County is the service
industry, followed by manufacturing, retail and trade administration.
The Recent Sale of Tallahassee, Florida Assets
During fiscal 1994 and the first quarter of fiscal 1995, the Company sold
substantially all of its Tallahassee properties to an unrelated third party.
See Item 2 "Properties" Item 6 "Management's Discussion and Analysis and
Plan of Operations" and Note 14 to Consolidated Financial Statements. Prior
to the sale, the Company had developed communities in Tallahassee for thirty
years.
On April 30, 1995, the Company had approximately 35 fully developed lots
remaining to be sold in Tallahassee, Florida. It is anticipated these lots
will be sold in fiscal 1996. The Company and a former stockholder participate
in a joint venture for the development and sale of approximately 190 acres of
land in one of the Company's subdivisions.
Land Development
Historically, the Company has acquired large areas of unimproved real
estate, and has subdivided, developed and then resold the developed real
estate in smaller parcels to individuals and builders. Following the
acquisition of a large area of unimproved real estate, the Company retains a
landscape architect who, together with personnel of the Company, prepare a
master land use plan for the entire subdivision. The subdivision is platted
and divided into units and the units are further divided into lots.
After securing the necessary zoning and other applicable regulatory
approvals from local, state and Federal authorities, the Company commences the
development of the subdivision by developing one or more units located within
each such unit or units.
In units where lots are sold the Company generally makes provision for
water lines, storm drainage, underground or overhead electrical service, tele-
phone lines and paved streets. (See "ITEM I. BUSINESS - Liability for
Improvements," below.) In all units where lots are sold by the Company,
arrangements are made with appropriate governmental agencies and utility com-
panies for police and fire protection and for electricity, telephone and water
service.
The Company believes it is the largest land developer in Henry County,
Georgia. At April 30, 1995, the Company had in Henry County approximately 274
platted lots available for immediate sale and approximately 1,511 acres of
undeveloped land available for immediate or future development. In addition,
the Company has a country club and golf course which were developed in prior
years. The property remaining is presently zoned approximately 24% for
industrial uses, 57% for residential uses and 19% for commercial and
otheruses. The Company intends to develop and divide into lots its Henry
County property and sell certain parcels to other developers, as development
continues.
Prior to the sale of substantially all of its Tallahassee properties, the
Company believes that it was the largest land developer in Leon County,
Florida.
The management of the Company believes that, if the Company does not
acquire any additional real estate and if the Company makes no bulk
dispositions of real estate, the Company's present inventory of land is
sufficient, at present levels of land sales, for at least ten years of
operation.
Liability for Improvements
The Company is obligated to complete the improvements to each partially
developed lot sold by it on a specified date not later than one year from the
date of sale of each such lot.
Pursuant to an agreement with the Leon County Commission and the Division
of Florida Land Sales, the Company maintains an improvement trust fund as
partial assurance to provide funds to complete improvements to its Florida
properties. The cash balance of this improvement trust fund at April 30,
1995 was $158,931.
The total cost to complete the improvements to units from which sales of
partially developed lots have been made is estimated to be approximately
$285,000 at April 30, 1995, all of which are expected to be made in fiscal
1996.
The Company is obligated to provide sewer in specified areas of its
Florida Development which it previously owned and sold at to other developers
for investment and resale. The estimated cost to the Company is $400,000, all
of which is expected to be paid in fiscal 1996.
Residential Construction
In September 1983, the Company began constructing homes in certain of its
subdivisions. During fiscal 1992, the Company discontinued the direct
construction of homes in Henry County which it had begun in March 1990.
During fiscal 1994 the Company discontinued the construction of homes in Leon
County. Most of the homes constructed in Leon County have been in the $50,000
to $212,000 price range, with several in excess of $400,000. At April 30,
1995, two houses built by the Company remained to be sold.
Sales and Marketing
At present, the Company's sales force consists of 6 full-time
salespersons. These salespersons are compensated by the Company on a salary
plus commission or commission-only basis. Lots are sold by the Company
primarily to builders and to persons who presently reside or who plan to
reside in the Company's developments. The Company no longer maintains a sales
force in Leon County.
The Company sells fully developed lots, or lots which will be developed
within one year, pursuant to installment sales contracts which generally have
provided for a relatively small down payment and monthly installments
including interest at rates ranging from 8% to 12% per annum, over periods
which range from one to three years.
Sales of lots to builders and sales of commercial tracts are made by
the Company primarily for cash. Sales of constructed homes are made for cash.
(See notes 1, 2 and 4 of Notes to Consolidated Financial Statements of the
Company.)
Employees
At April 30, 1995, the Company had approximately 117 employees at its
Henry County development, including salespersons. The Company no longer has
any employees in Florida. The management of the Company believes that its
relationship with its employees is good.
Competition
The land development industry in the State of Georgia is highly
competitive. Land development firms located in all geographic areas of
Georgia, many of which possess greater sales and financial resources than the
Company, compete to attract local residents, retired persons, and other
persons who are relocating. The Company competes with such firms on the basis
of a number of interrelated factors, including reputation, location, design,
quality and price. Individual resales of residential units and lots provide
additional competition.
The Company believes that it is the largest land developer in Henry
County, but it competes with larger developers in the metropolitan Atlanta
area, as well as with smaller developers.
Regulation
As a land developer, the Company is subject to environmental, building,
zoning and real estate sales regulation by, among others, local zoning and
planning authorities, the Division of Georgia Land Sales and various state and
federal environmental protection agencies.
All of the necessary local, state and Federal regulatory approvals for the
development of its presently active subdivision projects in Henry County,
Georgia have been secured by the Company. Additional permits and approvals
may be required as new subdivisions are constructed; however, the Company does
not anticipate any difficulty in securing such permits and approvals. (See
"ITEM 2 PROPERTIES", below.)
The Company's management is not presently aware of any anticipated
revocation or amendment of any of its regulatory approvals. However, in the
event that any regulatory approvals presently secured by the Company are
revoked or materially altered, the business of the Company could be adversely
affected.
Economic Conditions
The Company's business, as well as the real estate industry in general, is
affected by a number of economic factors, including interest rates, inflation
and the availability of oil and other energy sources. Interest rates affect
both the cost to individuals and builders of purchasing homes and lots from
the Company and the carrying costs of undeveloped land. During the past
fiscal year, interest rates on residential mortgage loans increased. In the
past, the Company has increased the price of lots offered for sale to offset
increased inflation. Such increases reduce the number of persons who are able
to afford the lots and homes offered by the Company. If interest rates and
inflation increase substantially, the real estate and construction industries
would be adversely affected and the Company's ability to sell its real estate
could be significantly adversely affected.
ITEM 2. PROPERTIES
The Company's principal subdivisions are as follows:
Eagle's Landing (formerly known as Atlanta Tech Center)
Eagle's Landing comprises approximately 3,000 acres in Henry County,
Georgia, and is approximately 23 miles south of downtown Atlanta and 15 miles
south of the Atlanta International Airport.
This "mixed use" development is presently zoned to allow development in
the categories of office, industrial, retail, multi-family residential,
single-family residential, lodging, schools, municipal services, religious
institutions, parks and recreation, golf course, open space and lakes. The
community is planned around the Company's Eagle's Landing golf course and
country club.
At April 30, 1995, approximately 583 residential lots and 355 acres of
other property had been sold by the Company. Approximately 274 platted
residential lots remained to be sold and approximately 1,511 acres of other
property remained to be platted and/or sold. In addition, the Company had
approximately 232 acres which will be used for road right-of-way, utility
easements and green areas. At April 30, 1995, approximately 449 houses had
been constructed and 84 houses were under construction by other builders.
Tallahassee Properties
The Company developed two major subdivisions in northeast Tallahassee,
Florida. During fiscal 1994 and the first quarter of fiscal 1995,
substantially all of the company's remaining Tallahassee properties were sold
to an unrelated third party see Item 6 "Management's Discussion and Analysis
and Plan of Operations" and Note 14 to Consolidated Financial Statements.
At April 30, 1995, the Company owned 25 platted lots and 7 acres in
Killearn Estates, a mixed used development in northeast Tallahassee. All of
the properties are expected to be sold within fiscal 1996.
The Company also owns, at April 30, 1995, 4 lots in Killearn Lakes
Plantation, a mixed used development in northeast Tallahassee. It is
anticipated that these properties will be sold in fiscal 1996.
The Company is also a joint venture partner in the development of
approximately 192 acres of land located within the Killearn Estates
subdivision. Under the joint venture agreement, the Company will develop,
sell and finance the project and will receive its normal sales commissions
plus one-half of the profits from the development and sale of the project.
(See Note 3 of Notes to Consolidated Financial Statements.)
Encumbrances
Substantially all of the land owned by the Company in the above-described
subdivisions serves as collateral for the indebtedness of the Company. (See
notes 6 and 14 of Notes to Consolidated Financial Statements.)
ITEM 3. LEGAL PROCEEDINGS
See Note 12 of Notes to Consolidated Financial Statements included
elsewhere herein for a description of certain legal proceedings concluded
during fiscal 1994.
The Company is a party, both as a plaintiff and as defendant to certain
other legal proceedings, in the ordiniary course of business. In the opinion
of the management of, and general counsel to the Company, none of these
proceedings, alone or in the aggregate, should have a material adverse effect
upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted by the Company to a vote of its security holders
during the fourth quarter of fiscal 1995.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Certain of the information required by this Item 5 is contained on Page 14
of the Company's 1995 Annual Report to Shareholders and is incorporated herein
by this reference.
As of July 20, 1995 there were approximately 600 shareholders of record of
the Company's Common Stock, excluding security position listings.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The information required by this Item 6 is contained on Page 13-14 of the
Company's 1995 Annual Report to Shareholders and is incorporated herein by
this reference.
ITEM 7. FINANCIAL STATEMENTS
The information required by this Item 7 is contained on Pages 3 - 12 and
15 of the Company's 1995 Annual Report to Shareholders and is incorporated
herein by this reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER
Executive Officers of the Company
Information with respect to the Company's executive officers as of April
30, 1995 is as follows:
Position
Name Age Position Held Since
J. T. Williams, Jr. 62 President and Chairman of the Board 1970
David K. Williams 35 Executive Vice-President 1994
and Secretary
All executive officers of the Company serve at the pleasure of the
Company's Board of Directors, with the exception of J. T. Williams, Jr., who
is employed by the Company pursuant to an employment agreement.
J. T. Williams, Jr. has been employed by the Company in various
executive capacities since 1964 and has been President of the Company since
September 1970. Mr. Williams is a certified public accountant.
David K. Williams has been Executive Vice President of the Company since
May 23, 1994. Mr. Williams has been employed by the Company since June 1983.
He served as Vice President of Construction and Development from January 1987
until June, 1989 and as President of Florida Operations from June 1989 until
1994. Mr. Williams is the son of J. T. Williams, Jr.
The information required by this Item 9 concerning the Directors of the
Company will be contained in the Company's 1995 Definitive Proxy materials to
be filed with the Securities and Exchange Commission and is incorporated
herein by this reference.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item 10 will be contained in the
Company's 1995 definitive proxy material to be filed with the Securities and
Exchange Commission and is incorporated herein by this reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 11 will be contained in the
Company's 1995 definitive proxy material to be filed with the Securities and
Exchange Commission and is incorporated herein by this reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 12 will be contained in the
Company's 1995 definitive proxy material to be filed with the Securities and
Exchange Commission and is incorporated herein by this reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on
Form 10-KSB:
1. Financial Statements. The following financial statements have been filed
as a part of this report; each of them has been incorporated herein by
reference to the Company's 1995 Annual Report to Shareholders ("AR"):
(1) Report of Independent Certified Public Accountants -- AR, p. 15
(2) Consolidated Balance Sheets of the Company as of April 30, 1995 AR,
p. 4 - 5
(3) Consolidated Statements of Earnings for the fiscal years ended April
30, 1995 and 1994 -- AR, p. 3
(4) Consolidated Statements of Changes in Stockholders' Equity for the
fiscal years ended April 30, 1995 and 1994 -- AR, p. 6
(5) Consolidated Statements of Cash Flows for the fiscal years ended
April 30, 1995 and 1994 -- AR, p. 7
(6) Notes to Consolidated Financial Statements -- AR, pp. 8 - 12
2. Exhibits.
See Exhibit Index, below.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of fiscal
1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Issuer has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
KILLEARN PROPERTIES, INC.
Date: By:__________________________
J. T. Williams, Jr.,
Chairman of the Board and
President
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Issuer and in the capacities and on the date indicated.
Date: _____________________________
J. T. WILLIAMS, Jr., Chairman of
the Board and President
Date: _____________________________
NAN BOYNTON, Director
Date: _____________________________
THE HON. DON FUQUA, Director
Date: _____________________________
THE HON. MALLORY E. HORNE, Director
Date: _____________________________
MELVIN L. POPE, JR., Director
Date: _____________________________
PETER REDMON, Director
Date: _____________________________
DAVID K. WILLIAMS, Director and
Executive Vice President
(Principal Financial and Accounting
Officer)
<PAGE>
To the Board of Directors and Stockholders
Killearn Properties, Inc.
We have audited the consolidated balance sheet of Killearn Properties, Inc. and
subsidiaries as of April 30, 1995, and the related consolidated statements of
earnings, changes in stockholders' equity, and cash flows for the years ended
April 30, 1995 and 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Killearn Properties, Inc. and subsidiaries at April 30, 1995 and the
consolidated results of their operations and their cash flows for the years
ended April 30, 1995 and 1994, in conformity with generally accepted
accounting principles.
As discussed in notes 1 and 8 to the Consolidated Financial Statements, the
Company changed its method of accounting for income taxes in 1994 to adopt
the provisions of the Financial Accounting Standards Board's Statment of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Atlanta, Georgia BDO Seidman
June 30, 1995
<PAGE>
EXHIBIT INDEX
Page No. or Incorporated
by Reference to the
Exhibit Number Description Document Listed Below
(3) Articles of Incorporation 1981 Form 10-K
as amended and Bylaws of
the Company
(10.1) Executive Compenation Plan and Arrangements
(10.1) (a) Employee Profit Sharing Plan 1974 Form 10-K
(10.1) (b) Employment Agreement 1982 Form 10-K
dated as of July 7, 1982
by and between the Company
and J. T. Williams, Jr.
(10.1) (c) Modification of Employment 1992 Form 10-K
Agreement by and between the
Company and J. T. Williams, Jr.,
dated April 24, 1992.
(10.1) (d) 1992 Incentive Stock Option Plan 1994 Form 10-K
for Employees
(10.2) Real Estate Contract between Report on Form 8-K
Sam L. Rudd, J. T. Williams, Jr., dated May 8, 1986
Leon Developers, Inc., Atlanta (Event of April 24,
Tech Center, Inc. and Killearn 1986) (1986 Form 8-K)
Properties, Inc. and Addendums
thereto.
(10.3) Promissory notes dated May 1, 1992 Form 10-K
1991 from the Company to J. T.
Williams, Jr.
(10.4) Agreement to Purchase and Sell Report on Form 8-K
between the Company and Capital dated November 22,1993
First, Inc.
(10.5) Loan Agreement dated June 26, 1992 Form 10-K
1992 between Prime Bank, FSB and
Killearn Properties, Inc. of Ga
(10.6) Loan Modification dated April 29, 1994 Form 10-K
1994 between Barnett Bank of
Tallahassee and Killearn
Properties, Inc.
(10.7) Loan Agreement dated June 7, 1994 Form 10-K
1994 between Bank of Spalding
County and Killearn Properties,
Inc.
(10.8) Loan Agreement dated April 26, Page xxx
1995 between Bank of Spalding
County and Killearn Properties,
Inc.
(10.9) Loan Agreement dated July 15, 1994 Form 10-K
1994 between People's First
Financial Savings and Loan and
Killearn Properties, Inc.
(10.10) Loan Modification dated July 19, 1994 Form 10-K
1994 between First Union Bank of
Georgia and Killearn Properties,
Inc.
(10.11) Loan Agreement dated July 19, 1994 Form 10-K
1994 between First Union Bank
of Georgia and Killearn Properties,
Inc. for $5,000,000.
(10.12) Loan Agreement dated July 19, 1994 Form 10-K
1994 between First Union Bank
of Georgia and Killearn Properties,
Inc. for $7,000,000.
(13) Annual Report to Shareholders 1994 Form 10-K
for the fiscal year ended
April 30, 1995
(22) Subsidiaries of the Company Page xxx
(23) Consent of Independent Certified Page xxx
Public Accountants
<PAGE>
ANNUAL REPORT LETTER TO SHAREHOLDERS
During fiscal 1995, the Company had a pre-tax profit of $1,001,434
compared to $278,322 for fiscal 1994. Total revenues were $17,895,966 for
the current fiscal year compared to $17,820,853 for the prior fiscal year.
Perhaps the most significant events occurring during the past year were
the following:
1. Under a contract to sell substantially all of the Company's assets
in Florida, the Company closed on approximately $20 million during the current
year. The Company is to receive deferred payments of a substantial portion of
the purchase price over the next 5 fiscal years so that the income of such
sale will be reported over that time. As a result of this sale, the Company
has been able to reduce substantially its debt and anticipates this will
continue.
2. In the Company's Atlanta operations, the project has matured to the
point that industrial and commercial development has begun to have a
substantial impact. During the current year, the Company sold some property
for the construction of a 715,000 square foot Kelly-Springfield Tire Company
distribution center and entered into a joint venture development with a third
party developer to construct facilities for Publix Supermarkets and Dunlop
Tire Company.
3. The Company's Eagle's Landing community, in its Atlanta project,
continues to be recognized as one of the premiere communities in Atlanta.
During the past year the Company completed development of residential units in
the higher-priced luxury golf course community, the medium-priced single
family community, and in a lower-priced single family community, which
enhanced sales from the Atlanta project during fiscal 1995.
The Company continues to be concerned about the overall national economy
and the effect the national deficit may have upon residential mortgage
interest rates; however, we remain confident of the long-range future of
the Company, due to our outstanding inventory and our capacity to develop it
to its potential.
Sincerely,
J. T. Williams, Jr.
Chairman
<PAGE>
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
Year Ended April 30
1995 1994
<S> <C> <C>
Revenues
Sales of lots $6,600,313 $4,519,064
Other land sales - note 14 7,006,448 5,010,494
Less:
Estimated uncollectible sales (18,390) (53,529)
Net sales of lots and land 13,588,371 9,476,029
Sales of residential construction 189,500 1,345,150
Commission income 411,878 915,504
Revenues from operating golf and country clubs 3,018,539 4,741,139
Interest income 517,109 705,549
Income from joint venture - note 3 86,732 388,249
Other income 83,837 249,233
Total Revenues 17,895,966 17,820,853
Costs and expenses:
Cost of lots sold 4,002,362 2,604,243
Cost of other land sold 5,000,543 3,350,182
Cost of residential construction sold 242,854 1,227,502
Commissions and selling expenses 1,398,405 1,726,367
Operating costs of golf and country clubs 3,085,860 4,537,906
Interest expense - note 11 611,149 1,173,694
Depreciation 681,194 918,402
Property taxes - note 11 246,695 433,806
Litigation settlement and expenses - note 12 192,732 81,039
General and administrative expenses - note 9 1,432,738 1,489,390
Total costs and expenses 16,894,532 17,542,531
Earnings before income taxes and cumulative
effect of change in accounting principle 1,001,434 278,322
Income taxes - note 8 380,504 96,279
Earnings before cumulative effect of change in
accounting principle 620,930 182,043
Cumulative effect, at May 1, 1993, of change
in accounting for income taxes - note 8 105,000
Net Earnings $620,930 $ 287,043
Earnings per share before cumulative
change in accounting principle .43 .13
Cumulative effect of change in
accounting principle 0 .07
Earnings per share - note 13 $ .43 $ .20
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
April 30, 1995
<S> <C>
ASSETS (Note 6)
Cash (including restricted cash of $37,000) $ 507,277
Cash in improvement trust funds - note 7 158,931
Accounts receivable 498,882
Notes receivable - note 14 7,536,873
Land contracts receivable - notes 2 and 6:
Retail 431,297
Other 372,841
Total Receivables 8,839,893
Less: Allowance for uncollectibles (277,527)
Net receivables 8,562,366
Investment in joint ventures - note 3 383,172
Residential real estate held for sale 696,104
Real estate held for development and sale,
at cost - notes 4,6,7 and 12:
Land developed and under development 33,279,192
Real estate under contract for sale 115,687
33,394,879
Property under contract for sale - 664,096
- notes 6 and 14
Property and equipment, at cost - note 6:
Golf course 1,660,931
Buildings 8,482,956
Machinery, equipment and vehicles 2,565,049
Furniture and fixtures 216,109
Total property and equipment 12,925,045
Less: Allowance for depreciation (2,921,656)
Property and equipment - net 10,003,389
Utility deposits 22,000
Other assets 269,984
Total Assets $ 54,662,198
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
Liabilities:
Accounts payable and other accrued expenses $3,704,068
Income taxes payable 367,622
Accrued interest 221,613
Customers' deposits - note 5 1,268,832
Debt (including current maturities of $13,464,004)
- notes 6 and 14 20,072,988
Deferred income - notes 3, 7 & 14 5,151,536
Deferred income taxes - note 8 5,896,310
Total Liabilities 36,682,969
Commitments and contingencies - notes 7, 9 and 12
Stockholders' equity - notes 9, and 10:
Common stock-$.10 par value-
authorized 6,000,000 shares,
1,438,733 shares issued and outstanding $143,874
Additional paid-in capital 6,846,014
Retained earnings 10,989,341
Total stockholders' equity 17,979,229
Total Liabilities and Stockholders' Equity $ 54,662,198
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
Year Ended April 30
1995 1994
<CAPTION>
<S> <C> <C>
Common stock:
Balance at beginning of year $ 143,874 $ 150,937
Retirement of treasury stock 0 (7,063)
Balance at end of year 143,874 143,874
Additional paid-in capital:
Balance at beginning of year 6,846,014 7,089,890
Retirement of treasury stock 0 (243,876)
Balance at end of year 6,846,014 6,846,014
Retained earnings:
Balance at beginning of year 10,368,411 10,081,368
Net earnings 620,930 287,043
Balance at end of year 10,989,341 10,368,411
Treasury Stock:
Balance at beginning of year 0 (250,939)
Retirement of treasury stock 0 250,939
Balance at end of year 0 0
Total stockholders' equity $ 17,979,229 $17,358,299
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended April 30
<CAPTION> 1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 620,930 $ 287,043
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 681,194 918,402
Gain on disposition of assets (45,715) (80,812)
Decrease in accounts receivable 478,489 269,011
(Increase) decrease in notes receivable (7,068,130) 272,820
(Decrease) increase in deferred income 4,249,593 (107,490)
Decrease (increase) in residential
construction in process 226,906 (1,606,056)
Increase in real estate held for
development and sale (9,920,626) (5,743,049)
Decrease (increase) in utility deposits 66,485 (57,859)
Net changes in other assets (101,162) 238,148
(Decrease) increase in accounts payable 441,495 (215,511)
Increase in income taxes payable
and deferred 307,545 (8,721)
Decrease in customers' deposits (74,716) (24,475)
Increase in deferred improvement revenue 674,464 18,758
Net changes in other liabilities (279,529) (72,218)
Income from joint ventures (86,732) (388,249)
Decrease in residential construction
in process, real estate held for
development and sale, and property
under contract for sale resulting
from the sale of such properties 15,945,233 8,293,553
Net cash provided by operating activities 6,115,724 1,993,295
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment,
net of non-cash transactions (126,430) (319,908)
Investment in joint ventures (91,084) 1,158,890
Proceeds from sale of fixed assets 59,029 158,708
Net cash provided by (used in) investing
activities (158,485) 997,690
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 9,214,032 6,299,459
Principal payments on debt (15,191,521) (9,395,602)
Net cash used in financing activities (5,977,489) (3,096,143)
NET DECREASE IN CASH (20,250) (105,158)
CASH - Beginning of year 527,527 632,685
CASH - End of year $ 507,277 $ 527,527
</TABLE>
<PAGE>
Supplemental Information
Cash paid:
Interest, net of amounts capitalized, was $738,183 and $1,245,912 in 1995
and 1994 respectively.
Income taxes were $30,000 and $0 in 1995 and 1994 respectively.
Supplemental Schedule of Non-Cash Investing and Financing Activities, which are
not reflected above:
Capital lease obligations of $0 in 1995 and $184,609 in 1994 were incurred when
the Company entered into leases for new equipment.
During fiscal 1995, $7,592,343 in debt was assumed by the purchaser in a land
sale transaction, of which $6,450,853 was outstanding at April 30, 1995.
See accompanying notes to consolidated financial statements.
<PAGE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Two Year Period Ended April 30, 1995
Note 1 - Summary of Significant Accounting Policies
(a) Consolidation
The consolidated financial statements include the accounts of Killearn
Properties, Inc. and its wholly-owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated.
(b) Lot Sales
The Company sells fully developed and partially developed homesites in
Leon County, Florida and Henry County, Georgia to builders and individuals
under contracts, which generally provide for small down payments and monthly
installments. Profit from lot sales is recorded on the full accrual,
percentage of completion, or cost recovery method depending upon the terms of
the sale. On sales to builders, a small down payment is made at the time of
sale and a total of 20% to 100% is required at the time the builder receives a
deed and gives the Company a mortgage securing the balance due. Sales
prices are discounted to produce a minimum yield on the contract balance over
its life. The amount of revenue recognized at the time a sale is recognized
is measured by the relationship of costs already incurred to total estimated
costs to be incurred. If certain improvements are incomplete, the portion of
revenue related to costs not yet incurred is recognized as the costs are
incurred.
Until the required down payment percentage (generally 10% for
individuals and 20% to 100% for builders) and other accounting criteria are
met, all collections, including interest, are recorded as deposits,
commissions paid to salesmen, if any, are deferred, and the related land cost
is segregated in inventory. Once the required down payment has been received,
a sale is recognized, previously deferred commissions are charged to expense,
the related land costs and any improvements are charged to the cost of sales,
the interest portion of the deposit is recorded as income and the balance
reduces the principal amount due from the purchaser.
Upon cancellation of a contract, the difference between the unpaid
contract receivable balance and the cost of the related land is charged to the
allowance for uncollectible contracts. When a contract cancels before
qualifying as a sale, deferred selling costs are charged to expense and
deposits forfeited are credited to income.
The amount of the provision for uncollectible sales is based on the
Company's contract receivable cancellation history. For purposes of
evaluating the adequacy of the allowance for uncollectibles, the Company
considers the contract uncollectible if the number of payments received during
the fiscal year is less than those reflected in the following delinquency
periods in relation to April 30:
Minimum Number
Percent of Contract Delinquency of Payments
Price Collected Period Received
Less than 25% 90 days 9
25% but
less than 50% 120 days 8
50% and over 150 days 7
Additionally, the allowance includes a provision relating to all other
receivables where management believes collection is doubtful.
(c) Other Land Sales
Sales of bulk land tracts are accounted for in accordance with
Statement of Financial Accounting Standard (SFAS) No. 66. Under the
Statement, the buyer's commitment must meet certain minimum requirements as to
initial and continuing investment (generally 10% to 25%) before revenue and
profit are recognized. As appropriate, some sales are accounted for on the
installment basis.
(d) Golf and Country Clubs
The Company recognizes revenues from its golf and country clubs when
services are performed. Initiation fees are recorded as revenue to the extent
they are non-refundable, otherwise, the refundable portion of the initiation
fee is recorded as a liability. Recurring membership dues are recognized
during the period earned.
(e) Development Cost Estimates
The estimated costs of improving land for drainage, roads and utilities
are based upon engineering studies made in accordance with generally accepted
cost estimating practices, including provision for anticipated inflation.
(f) Interest and Property Taxes
The Company capitalizes interest and real estate taxes on land
undergoing development activity.
(g) Depreciation
Provision for depreciation is made primarily on the straight-line
method over the estimated useful lives of the related assets, as follows:
Years
Buildings 10-40
Machinery, equipment
and vehicles 5-10
Furniture and fixtures 5-10
Golf course improvements 15
Expenditures for repairs and maintenance are charged to expense as
incurred. Additions, improvements, and major renewals are capitalized. Upon
the sale or retirement of properties, the cost of the assets and accumulated
depreciation and amortization are removed from the accounts, and any resulting
gains or losses are included in income.
(h) Investment in Joint Ventures
The Company accounts for its investment in joint ventures under the
equity method. The joint ventures' revenue recognition policies are the same
as the Company's.
(i) Income Taxes
The Company adopted SFAS No. 109 "Accounting for Income Taxes" in
fiscal year 1994, and has reported the cumulative effect of the change in the
method of accounting for income taxes as of May 1, 1993, in fiscal 1994
Consolidated Statement of Earnings.
Deferred income taxes are recognized for the tax consequences of
temporary differences between the financial reporting basis and the tax basis
of the Company's assets and liabilities. Valuation allowances are established
when necessary to reduce a deferred tax asset to the amount expected to be
realized. Income tax expense is the tax payable for the period, and the
change during the period, in deferred tax assets and liabilities.
j) Residential Construction
Residential construction in process consists of single-family and
multi-family housing units. Amounts capitalized are valued at the lower of
cost (land, construction costs and interest during the construction period) or
net realizable value. The Company recognizes sales of these units only upon
closing.
(k) Earnings Per Share
The weighted average number of shares outstanding is adjusted to
recognize the dilutive effect, if any, of outstanding stock options in
calculating earnings per share.
(l) New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued SFAS No. 114
relating to the accounting for the impairment of loans by creditors. The
Company adopted the standard at the beginning of fiscal year 1995. Presently,
given the relatively low level of delinquencies and foreclosures experienced
by the Company, the adoption of SFAS No. 114 by the Company will not have a
material effect on its financial statements.
Note 2 - Land Contracts Receivable
At April 30, 1995, land contracts receivable were generally due over
periods which range from one to three years and provide for stated interest
ranging from 8% to 12% per annum. The weighted average stated interest rate of
retail land contracts receivable was 10.20% at April 30, 1995. Scheduled
principal collections of retail contracts receivable at April 30, 1995 are as
follows:
1996 $230,633
1997 194,717
1998 5,947
$431,297
Note 3 - Investment in Joint Ventures
The Company continued operation in the Florida Joint Venture ((A)
below) and initiated two new Joint Ventures for construction and lease of
buildings for tenants in Georgia, described below:
(A) In 1980, the Company and a former stockholder entered into a
development agreement for approximately 190 acres of land in one of the
Company's subdivisions. The land (which was purchased by the former
stockholder from the Company in 1980) is being developed, marketed and sold to
the public by the Company. A portion of the Company's profit on the sale of
the land totalling $55,232 has been deferred and is included in deferred
profit in the accompanying financial statements. Upon the sale of land within
this project, the Company receives its normal sales brokerage commission plus
one-half of the profits from the development of the project. The Company
periodically advances funds to the Venture. Advances to the Venture are
evidenced by notes receiveable, which bear interest at 1.5% above the prime
rate payable quarterly with the principal balance due as funds are available.
At April 30, 1995, there were no outstanding advances. The amount of
consolidated retained earnings represented by the Company's investment in the
undistributed earnings of the joint venture was $85,391 at April 30, 1995.
Condensed financial information of the Venture as of April 30, 1995 is
as follows:
Assets
Cash $ 114,115
Land 851,863
Other assets 55,332
Total $1,021,310
Liabilities and Partners' Capital
Accounts payable $ 2,481
Other liabilities 12,375
Partners' capital 1,006,454
Total $1,021,310
Results of Operations for the Year Ended April 30
1995 1994
Sales $ 542,515 $ 1,993,844
Cost of sales (328,479) (1,163,143)
Other income 27,289 47,658
Other expenses (67,861) (212,324)
Net earnings $ 173,464 $ 666,035
(B) In the current fiscal year, the Company entered into a Joint Venture
agreement with an independent third party. The Company sold 7.7 acres for
$307,976 to the Joint Venture, of which $154,502 was received in cash and
$153,474 as a contribution to the Joint Venture, to construct and lease a
168,000 sq. foot distribution center, which is 100% leased to an independent
tenant for 10 years. The distribution center was completed and in use by June
1995. The Company's carrying value of its investment in the Joint Venture is
$281,902, which represents its unrecovered historical cost and cash
contributed. The Company will receive one-half of the profit of the Joint
Venture. The Joint Venture had no impact on retained earnings due to the
capitalization of all cost during the current fiscal year.
Condensed financial information of the Joint Venture as of April 30,
1995 is as follows:
Assets
Cash $ 1,125
Land 309,112
Improvements 3,343,883
Total $3,654,120
Liabilities and Partners' Capital
Accounts payable $324,930
Other liabilities 2,855,278
Partners' capital 473,912
Total $ 3,654,120
(C) In the current fiscal year the Company entered into a second Joint
Venture with the same independent third party, as discussed in (B) above. The
Company sold 9.67 acres for $967,000 to the Joint Venture, of which $587,000
was received in cash and $380,000 as a contribution to the Joint Venture, to
construct and lease 66,981 sq. feet of retail space. The Joint Venture has
leased 47,955 sq. feet to the anchor grocery store tenant for 20 years. The
improvements are estimated to be completed during the last quarter of fiscal
1996. The Company's carrying value of its investment in the Joint Venture is
$15,736, which represents its unrecovered historical cost. The Company will
receive one-half of the profits of the Joint Venture. The Joint Venture had
no impact on retained earnings due to the capitalization of all cost during
current fiscal year.
Condensed financial information of the Joint Venture as of April 30,
1995 is as follows:
Assets
Cash $ 2,287
Land 967,000
Improvements 601,885
Other assets 5,697
Total $1,576,869
Liabilities and Partners' Capital
Accounts payable $231,946
Other liabilities 963,192
Partners' capital 381,731
Total $1,576,869
Note 4 - Real Estate Held for Development and Sale
Information with respect to real estate held for development and sale
at April 30, 1995 is as follows:
Land developed and under development:
Land fully developed $ 6,704,581
Land under development 26,574,611
$33,279,192
Real estate under contract for sale:
Lot sales $ 43,754
Other land sales 71,933
$ 115,687
Included in land under development are portions of the properties
undergoing development activity which have not reached the stage at which they
can be offered for sale.
Note 5 - Customers' Deposits
At April 30, 1995, contracts relating to real estate under contract
for sale have not yet been recorded as sales. Receipts on these contracts,
including interest, are included in customers' deposits.
Lot Sales
Contract Amounts $ 277,040
Receipts 22,846
At April 30, 1995, customers' deposits also consisted of amounts received
for refundable country club initiation fees of $1,156,689 and deposits on
contracts being negotiated and other miscellaneous deposits of $89,297.
Note 6- Debt
At April 30, 1995, the Company had various note agreements with financial
institutions and individuals. These note agreements are summarized as follows:
Note payable to a Bank (A) $ 12,656,609
Note payable to a Bank (B) -
Note payable to a Stockholder (C) 601,939
Note payable to a Bank (D) 4,153,913
Other notes payable (E) 2,660,527
$ 20,072,988
(A) On July 19, 1994, the Company modified its loan agreement with a Bank,
involving its Georgia operations. The modified agreement effectively changes
the one loan of $13,500,000 into three separate loans totaling $13,500,000.
One loan, for $5,000,000 is collateralized by a first mortgage on a golf
course and country club. The terms of the note call for monthly payments
totaling $250,000 per year, with the remaining balance due June 10, 1997.
The other two loans, for $7,000,000 and $1,500,000 are collateralized by
first mortgages on substantially all of the undeveloped land in the
Company's Georgia project and certain contracts receivable. Upon the sale
of secured property, the net proceeds are applied against the two
loan balances. 90% of the first $1,000,000 is applied against the $1,500,000
loan, which is a revolving loan, and the percentage increases by 10% for each
$1,000,000. The remaining amount is applied against the $7,000,000 loan. As
secured properties are developed by the Company, the Company can release
secured property by paying a lesser amount. The Company has been able to
secure development loans from other lenders in an amount sufficient to pay the
release price and all development costs. The modified current agreement
provides for interest on all loans to be paid at the Bank's prime rate + 2%.
The bank's prime rate at April 30, 1995 was 9%. The balance on these two
loans expire on September 10, 1995, when the remaining balance becomes due
upon demand. Management of the Company anticipates the terms to be extended
on or before September 10, 1995.
(B) On July 20, 1994, the Company modified its agreement with a bank,
involving its Florida operations. The balance due the bank was $7.6 million
on the date of the modification. The modification provides for semi-annual
principal payments of $1 million, with the remaining balance due June 30,
1997. It also provides for quarterly interest payments at the bank's prime
rate plus 1%. The bank's prime rate at April 30, 1995 was 9%. The loan is
collateralized by substantially all the land sold in the sale of the Florida
assets (see note 14), including the golf course and related country club. The
loan was assumed by the Purchaser in the sale, but the Company remains liable
as guarantor of the debt. The balance due at April 30, 1995 was $6.5 million.
(C) On April 24, 1986, Killearn Properties, Inc. of Ga., a wholly-owned
subsidiary of the Company, purchased approximately 2,600 acres of real estate
in Henry County, Georgia from two individuals. One of the individuals was an
unrelated third party. The other individual is the President of the Company.
In connection with this purchase, the Company gave a note to the related party
in the approximate amount of $1,764,000 (bearing interest at 10% per annum) .
The Company made principal payments and incurred interest expense to the
related party during each of the two years ended April 30, as follows:
Year Principal Interest
1995 $187,617 $74,982
1994 196,826 73,674
(D) The Company normally borrows its development loans for its Georgia
properties from a bank. The balance of such loans at April 30, 1994 was $1.7
million and at April 30, 1995 was $4.2 million. The terms of such loans
require interest at the bank's prime plus 1.5% or 2%. The bank's prime rate
on April 30, 1995 was 9%. The principal reduction of these loans is from lot
release prices which vary with the development. Normally, the loan is due one
year from the date of the loan and is extended for one year, if necessary.
(E) The Company has other notes payable, which are due in various
installments through 2001 and bear interest at 5.25% to 12.5% at April 30,
1995.
Maturities of debt outstanding at April 30, 1995 follow:
Years of Maturity Amount
1996 $ 13,464,004
1997 310,485
1998 5,148,467
1999 131,033
2000 169,972
Thereafter 849,027
$ 20,072,988
Substantially all of the Company's assets are mortgaged or pledged as
collateral for its indebtedness.
Most of the agreements with the lenders provide that the Company will
not declare or pay cash dividends to its stockholders.
Note 7 - Liability for Improvements
On partially developed lots, the Company is obligated to complete the
land improvements on various specified dates.
A portion of the funds received from the sale of partially developed
lots is required to be deposited in improvement trust funds and may only be
used for completing the improvements on these lots. Under the agreement with
the Leon County Commission and the Division of Florida Land Sales, a monthly
deposit is required to be made to the fund in the amount of 16% of related
principal collections. The cash balance in the fund at April 30, 1995 was
$158,931.
The total cost to complete the improvements to tracts from which sales
have been made is estimated to be $285,609 at April 30, 1995, which pertains
to lots and land previously sold. The Company has deferred recognition of
$158,931 of revenue from the sale of lots and land for the uncompleted
improvements which are included in the accompanying consolidated balance
sheets in deferred income.
The Company is required to provide improvements in settlement of
litigation (see note # 12) regarding future Government permits for assets sold
in its Florida sale. The estimated $400,000 for these improvements is
included in deferred income.
Anticipated expenditures for land improvements to complete all of the
areas from which sales have been made through April 30, 1995 are expected to
be incurred in the year ending April 30, 1996. These anticipated expenditures
do not include any future expenditures on new communities or areas in existing
communities which have not yet been offered for sale.
Note 8 - Income Taxes
Effective May 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method, as required by
SFAS No. 109, "Accounting for Income Taxes". As permitted under the new
standard, prior years' financial statements have not been restated.
At April 30, 1995 and April 30, 1994, the Company had net operating
loss carryforwards for federal income tax purposes of $0 and $416,000,
respectively. In addition, the Company had net operating loss carryforwards
for state income tax purposes of $8,416,792 and $9,847,375 at April 30, 1995
and April 30, 1994, respectively. The state net operating loss carryforwards
expire in years 2002 through 2009. The Company has recorded a deferred tax
liability for the expected reversal of the taxable temporary differences. For
financial reporting purposes, a valuation allowance has not been recognized to
offset the deferred tax asset related to the net operating loss carryforwards.
The provision for income taxes consists of the following:
1995 1994
Income taxes:
Current $ 440,581 $(157,910)
Deferred (60,077) 254,189
Total provision $ 380,504 $96,279
Significant components of the Company's deferred tax liability as of
April 30, 1995 and April 30, 1994 are as follows:
Tax effect of
Net Operating Loss
Carryforwards $(505,007) $(732,283)
Taxable Temporary Differences:
Differences in the timing
of Profit Recognition of Sale
of Real Estate 239,734 476,978
Differences in Bases of Land 6,424,494 6,755,873
Depreciation 527,886 353,503
Deferred Compensation (646,245) (675,239)
Other (144,552) (222,445)
Net Deferred Tax Liability 5,896,310 5,956,387
In accordance with SFAS No. 109, management has evaluated the
recoverability of the net operating losses and has not recorded a valuation
allowance to offset the deferred tax asset. At April 30, 1995 and April 30,
1994, the Company had taxable temporary differences which management believes
will provide sufficient future taxable income to realize the net operating
losses, since it is more likely than not that the asset will be realized.
Deferred tax expense results from timing differences in the recognition
of certain items for tax and financial reporting purposes.
The difference between the actual income tax expense and the amount
computed by applying the current federal income tax rate to earnings before
income taxes for the years ended April 30, 1995 and 1994 is attributable to
state income taxes net of the federal benefit.
Note 9 - Employee Benefit Plans
During Fiscal 1994, the Company adopted a 401(k) Retirement Plan for
employees to make voluntary contributions with discretionary contributions by
the Company. Contributions by the Company for the years ended April 30, 1995
and 1994 were $52,873 and $75,332, respectively.
The Company has a defined contribution employee profit-sharing plan
(covering all full-time employees) which provides for discretionary
contributions by the Company based on its consolidated net earnings.
The Company contributed $7,043 for the year ended April 30, 1995 and made no
contribution for the year ended April 30, 1994.
On June 21, 1982, the Board of Directors entered into a long-term
employment agreement (Agreement) with the President of the Company. On April
24, 1992, the Board extended the Agreement for an additional 5 years. The
Agreement calls for salary payments totalling approximately $170,000 per year
plus bonuses not to exceed $80,000 per year, adjusted annually for increases
or decreases in the Consumer Price Index. Subsequent to retirement, the
President is to receive retirement income (as defined), adjusted annually for
cost of living changes, for the remainder of his life with a guarantee of ten
years of such retirement income.
The Company accounts for the accumulated post-retirement obligation
related to the Agreement in accordance with FASB's SFAS No. 87, "Employers'
Accounting for Pensions". The Company, includes the effect of changes in the
benefit payment, estimated life expectancy, and changes in the liability
settlement rate as required by Statement No. 87. The unfunded accumulated
retirement obligation was $1,605,226 and $1,570,226 at April 30, 1995 and
1994.
Pension cost for the years ended April 30, 1995 and 1994 consisted of
the following:
1995 1994
Interest cost $ 127,502 $ 117,360
(Gains) losses (92,502) (67,907)
Net pension cost $35,000 $49,453
The weighted average assumed discount rate used to measure the
accumulated post retirement obligation was 8.12% and 8.08% for the years ended
April 30, 1995 and 1994, respectively.
The Board also agreed to a retirement plan for three key employees of
the Company. The required payments to the employees are being funded by the
purchase of insurance.
Note 10 - Stock Options
The Company has a Stock Option Plan which provided for issuance of
shares to employees at prices not less than the fair market value on dates of
grant (not less than 110% of fair market value for options granted to persons
owning 10% or more of the Company's common stock).
The Company has granted 25,000 stock options to certain employees at an
exercise price of $5.125 per share, all of which remain outstanding. There
were no stock options exercised or granted under the plan for years ended
April 30, 1995 and 1994.
On April 24, 1992, the Board of Directors issued a five year non
-qualified option to the President of the Company to purchase 100,000 shares
of the Company's stock for $3.60, which was 10% above the market value on such
date.
Note 11 - Capitalized Interest and Property Taxes
The amounts of interest and property taxes capitalized during the two
years ended April 30 were as follows:
1995 1994
Interest $1,796,806 $1,653,723
Property taxes 202,517 199,989
Note 12 - Commitments and Contingencies
In August, 1993, the First District Court of Appeals, in Florida, issued
a Final Order in the Company's lawsuit with the Department of Community
Affairs, State of Florida, regarding most of the Company's undeveloped
property in Florida. Among other things, the court ruled that sanitary sewer
had to be extended to some properties that had been sold and developed by
other developers. The estimated cost is $400,000, which is included in
reserve for future development.
The Company is a party to certain other legal proceedings, in the
ordinary course of business. In the opinion of management, none of these
proceedings should have a material adverse effect upon the Company.
The Company remains obligated on two notes that were assumed by an
unrelated purchaser referred to in Note 14 below. The balance of such debt at
April 30, 1995 was $7.1 million.
Note 13 - Earnings Per Share
Earnings per share are calculated based on 1,438,733 weighted average
shares of stock outstanding for the years ended April 30, 1995 and 1994.
Note 14 - Sale of Florida Properties
On November 14, 1993, the Company entered into two agreements to sell
substantially all of its Florida assets to an unrelated purchaser for
approximately $25.7 million. During the Company's fiscal 1994, approximately
$4.1 million of the sale closed, with the purchaser assuming debt of the
Company of approximately $1.6 million and paying approximately $2.5 million in
cash. In fiscal 1995, primarily on July 20, 1994, approximately $20.5 million
of the sale closed, with the purchaser assuming approximately $7.6 million of
the Company's debt, on which the Company remains liable; issuing notes to the
Company, secured by a second mortgage on most of the assets purchased,
totaling approximately $8.1 million; and paying approximately $4.8 million in
cash. The notes are payable over the next 4.5 years and most of the notes
bear interest at 7% and 10% per annum. The amount due the Company at April
30, 1995 was $7.4 million. The remaining $1 million of the sale is scheduled
to be closed during the remainder of fiscal 1996, for cash. The Company's
cost of the assets sold, and to be sold, is approximately $18.9 million. The
resulting gross profit is expected to be reported by the Company on the
installment method over 5 fiscal years, beginning with fiscal 1994.
During fiscal 1995, the Company recognized $1.2 million gross profit
and deferred $4.2 million of profit.
The Company's second mortgage is subordinate to a first mortgage, which
the Company has guaranteed payment, referred to above. This first mortgage
balance at April 30, 1995 is $6.5 million, compared to $7.6 million at closing
of the sale on July 20, 1994. The first mortgage provides for semi-annual
principal payments of $1 million and quarterly interest payments at the rate
of Bank prime rate plus 1%. The Bank's prime rate at April 30, 1995 was 9.0%.
The loan is collateralized by virtually all land sold in the sale of Florida
assets, including all related land and golf course and related country club.
The loan Agreement expires June 30, 1997, when the balance becomes due.
<PAGE>
MANAGEMENT ANALYSIS AND SUMMARY OF OPERATIONS
Liquidity and Capital Resources _
The Company has generated positive cash flow from operations of $6.1
million and $2 million, in fiscal 1995 and 1994, respectively, which was used
for debt service and land improvements. The Company expects this trend of
positive cash flow from operations to continue.
On July 19, 1994, the Company modified its loan agreement with a bank,
involving its Georgia operations. The modified agreement effectively divided
the existing $13.5 million loan into three loans totalling $13.5 million. One
of the loans, for $1.5 million, is a revolving loan. The modified credit
agreement provides for interest to be paid at the bank's prime rate plus 2%.
The loans are collateralized by first mortgages on substantially all of the
undeveloped land in the Company's Georgia project, a golf course and country
club and certain contracts receivable. Upon the sale of collateralized
property, all of the net proceeds are applied against the loan balances owed
to the bank. At the present time, 70% of the proceeds is applied to the
revolving loan and 30% is applied to the $7 million loan. The amount of such
reduction of the revolving loan is then available as a loan to the Company.
When secured properties are developed by the Company, the Company can obtain a
release of such property by paying a lesser amount. The Company has been able
to secure development loans from other lenders in an amount sufficient to pay
the release price and all development costs. The $1.5 million revolving
credit loan and the $7 million term loan expire on September 10, 1995, when
the remaining balance becomes due on demand. The principal of the remaining
$5 million loan is payable at the rate of $250,000 per year with a maturity of
June 10, 1997. The failure of this lender to extend the Company's loans, or
the failure of the Company to obtain replacement financing, could have a
material adverse affect on the Company's financial condition. Management
knows of no reason the debt will not be extended, as it has been in the past.
On July 20, 1994, the Company modified its loan agreement with a bank,
involving its Florida operations. The balance due the bank at April 30, 1995
was approximately $6.5 million of which approximately $350,000 is due in the
fiscal year ending 1996. Thereafter, $2 million per year is due until
maturity on June 30, 1997. This loan was assumed by the purchaser of
substantially all of the Company's Florida properties in July, 1994, but the
Company remains liable for this indebtedness as a guarantor.
During the next fiscal year, the Company has other debt maturing in
the amount of approximately $5.4 million and $310,000 the following fiscal
year. The Company normally borrows its development loans for its Georgia
properties from a bank. The balance due under development loans from one such
bank at April 30, 1995 totalled $4.2 million and is payable from lot releases.
The loan agreement terminates during fiscal 1996. The Company anticipates
that such debt will be paid through its normal operations, an extension of
debt, or new borrowings on the same collateral. During the past fiscal year,
the Company reduced its debt by approximately $21.6 million and had new
Borrowings totalling approximately $9.2 million. The Company continues to
seek lines of credit to satisfy these new borrowings.
On November 14, 1993, the Company entered into agreements to sell
substantially all of its Florida assets for $25.7 million. During fiscal
1994, $4.1 million of the sale closed with the Purchaser assuming debt of the
Company of $1.6 million and paying $2.5 million in cash. During fiscal 1995,
$20.5 million of the sale closed with the Purchaser assuming $7.6 million of
the Company's debt; issuing notes to the Company, totalling $8.1 million and
paying $4.8 million is cash. The notes are payable over the next 4 1/2 years.
The remaining $1 million of the sale is scheduled to close during fiscal 1996,
for cash. The $7.6 million debt assumed on July 20, 1994, is the balance of
the debt remaining on the loan referred to above, which had a balance of $6.5
million at April 30, 1995 (See note 14 of the Notes to Consolidated Financial
Statements.)
During fiscal year 1996, the Company anticipates completing
improvements of partially developed lots and tracts at a cost estimated to be
$285,000 and improving the undeveloped land at a cost of approximately $2
million. The Company anticipates financing these improvements through: (1)
funds generated in the normal course of the Company's business; (2)
utilization of existing lines of credit; and (3) securing additional lines of
credit. The Company continues to have bank relationships that have indicated
their willingness to make additional development loans so the Company can
complete the development of its properties. The Company anticipates that
these sources will be sufficient to meet the needs of the Company during
fiscal 1996. At April 30, 1995, the Company had available lines of credit
totalling $490,000 with its lenders. Such lines of credit will be drawn as
needed for the development of the Company's property and operational expenses.
Results of Operations - During fiscal 1995, lot sales increased $2.1
million (46.1%) while other land sales increased $2 million (40.0%) over
fiscal 1994. The increase in lot sales was primarily the result of the
Company's development of new residential units in its Georgia project. The
increase in the other land sales was primarily the result of part of the sale
to the purchaser of substantially all of the Florida assets.
Fiscal 1995 sales of residential construction decreased 85.9% over
fiscal 1994, as a result of the Company discontinuing its residential
construction operations in its Florida project during fiscal 1994.
Operating revenues from golf and country clubs decreased $1.7 million
for fiscal 1995 over fiscal 1994. The decrease in fiscal 1995 was a result of
the sale of the operations of the golf course and country club in Florida on
December 31, 1993. The operating costs of golf and country clubs (as a
percentage of revenues) were 95.7% and 102.2% for fiscal years 1994 and 1995
respectively. The higher percentage of costs are to be expected in the
opening years of golf courses and their related facilities. The Company
expects the operating costs of its remaining golf course and country club
could exceed operating revenues for the next several years. The Company
believes that these properties enhance the value of its other properties.
Cost of lots sold as a percentage of lot sales was 60.6% and 57.6% in
fiscal 1995 and 1994 respectively. In prior years such percentage was lower
due primarily to the Company's use of third parties utility contracts in its
Florida projects to provide utilities for those developments, as opposed to
normal utility costs in its Georgia operations. Cost of other land sales as a
percentage of other land sales was 71% and 67% in fiscal 1995 and 1994,
respectively.
Commissions and selling expenses (net of commission income) as a
percentage of net sales of lots, land and residential construction (excluding
improvement revenue) decreased to 7.2% during fiscal 1995 compared to 7.5% in
fiscal 1994. This decrease was primarily the result of the bulk sale of the
Florida properties, which required a lower than normal commission and selling
expense. Depreciation decreased 25.8% in fiscal 1995 over fiscal 1994. This
decrease was the result of the sale of the Company's Florida golf and country
club during fiscal 1994.
General and administrative expenses as a percentage of total revenues
were 8.0% and 8.4% in fiscal 1995 and 1994, respectively.
The FASB has issued SFAS No. 114 relating to the accounting for the
impairment of loans by creditors. The Company adopted the standard at the
beginning of fiscal year 1995. As a result of the relatively low level of
delinquencies and foreclosures experienced by the Company, the adoption of
SFAS No. 114 by the Company did not have a material effect on its financial
statements.
Inflation - The effect of inflation was negligible in fiscal 1995 and
1994. If inflation and interest costs return to their previously higher
levels, it may have a material adverse effect upon the real estate and
construction industries and could significantly and adversely affect the
Company's ability to sell its real estate.
Market Prices of Common Stock _ The shares of the Company have been
traded on the American Stock Exchange since September 17, 1980. Quarterly
closing sales prices for the fiscal years ended April 30, 1995 and 1994 were
as follows:
Quarter of 1995 1994
Fiscal Year High Low High Low
First 4 7/8 4 1/4 4 2 7/8
Second 6 4 1/2 5 3/8 3 5/8
Third 4 7/8 4 1/8 5 1/2 3 5/8
Fourth 6 3/8 4 1/8 5 4 1/2
The Company has never declared nor paid dividends.
<PAGE>
CORPORATE DIRECTORY
Board of Directors
J.T. Williams, Jr. Chairman and President
Nan Boynton Private Investments
Don Fuqua Association Executive and Former Member of Congress
Mallory E. Horne Attorney-At-Law
Melvin L. Pope, Jr. Insurance Executive
Peter Redmon Manufacturing Executive
David K. Williams Executive Vice President
Officers
J. T. Williams, Jr. President
David K. Williams Executive Vice President and Secretary
Transfer Agent
Mellon Financial Services
Pittsburgh, PA
General Counsel
Mallory E. Horne
Tallahassee, Florida
Independent Certified Public Accountants
BDO Seidman
Atlanta, GA
<PAGE>
To the Board of Directors and Stockholders
Killearn Properties, Inc.
We have audited the consolidated balance sheet of Killearn Properties, Inc. and
subsidiaries as of April 30, 1995, and the related consolidated statements of
earnings, changes in stockholders' equity, and cash flows for the years ended
April 30, 1995 and 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Killearn
Properties, Inc. and subsidiaries at April 30, 1995 and the results of their
operations and their cash flows for the years ended April 30, 1995 and 1994,
in conformity with generally accepted accounting principles.
As discussed in notes 1 and 8 to the Consolidated Financial Statements, the
Company changed its method of accounting for income taxes in 1994 to adopt
the provisions of the Financial Accounting Standards Board's Statment of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Atlanta, Georgia BDO Seidman
June 30, 1995
A COPY OF THE COMPANY'S 10-KSB REPORT AS FILED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WILL BE SENT TO SHAREHOLDERS WITHOUT CHARGE
UPON WRITTEN REQUEST TO THE COMPANY'S CORPORATE OFFICE:100 EAGLE'S LANDING
WAY, STOCKBRIDGE, GEORGIA 30281
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-END> APR-30-1995
<CASH> 666,208
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<RECEIVABLES> 8,839,893
<ALLOWANCES> 277,527
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<CURRENT-ASSETS> 44,658,809
<PP&E> 12,925,045
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<BONDS> 27,238,130
<COMMON> 143,874
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<OTHER-SE> 17,835,355
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<SALES> 17,208,288
<TOTAL-REVENUES> 17,895,966
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