SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15[d] OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from to
Commission file number 1-6762
KILLEARN PROPERTIES, INC.
(Exact name of small business issuer as specified in its charter )
Florida 59-1095497
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Eagle's Landing Way
Stockbridge, GA 30281
(Address of principal executive offices)
Issuer's telephone number
(770)389-2020
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date: 1,438,733.
Transitional Small Business Disclosure Format: No [X].
Page One of Twelve
Exhibit Index on Page Eleven
<PAGE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements (Unaudited):
Consolidated Condensed Balance Sheet as of January 31, 1996 3
Consolidated Condensed Statements of Operations for the 4
Three Months and Nine Months Ended January 31, 1996 and 1995
Consolidated Statements of Cash Flows for the Nine Months 5
Ended January 31, 1996 and 1995
Notes to Consolidated Condensed Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial Condition 8 - 9
and Results of Operations
Part II Other Information
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
Exhibit Index 11
Page Two of Twelve
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<CAPTION>
ASSETS 1/31/96
(Unaudited)*
<S> <C>
Cash $ 29,013
Cash in improvement trust funds 162,974
Accounts and notes receivable 7,723,009
Land contracts receivable 450,072
Less: Allowance for uncollectibles (231,050)
Investments in joint ventures 264,220
Residential real estate held for sale 158,306
Real estate held for development and sale 34,581,169
Property under contract for sale 420,518
Other property, plant and equipment 12,992,468
Less: Allowance for depreciation (3,453,101)
Construction under development 1,521,825
Utility deposits 2,000
Other assets 189,179
__________
TOTAL ASSETS $ 54,810,602
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable & other accrued expenses $ 3,495,790
Income taxes payable 1,486,153
Accrued interest 219,004
Customers' deposits 1,409,894
Debt 21,019,767
Deferred improvement revenue 918,340
Deferred income taxes 5,363,795
Deferred profit 1,930,763
__________
TOTAL LIABILITIES $ 35,843,506
STOCKHOLDERS' EQUITY
Common stock - par value $.10 per share;
authorized 6,000,000 shares; issued
1,438,733 shares 143,873
Additional paid-in capital 6,846,014
Retained earnings 11,977,209
TOTAL STOCKHOLDERS' EQUITY 18,967,096
__________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 54,810,602
==========
*Subject to year-end audit adjustments
See Notes to Consolidated Condensed Financial Statements
</TABLE>
Page Three of Twelve
<PAGE>
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
1/31/96 1/31/95 1/31/96 1/31/95
(Unaudited)* (Unaudited)*(Unaudited)* (Unaudited)*
<S> <C> <C> <C> <C>
INCOME:
Net sales of land $ 3,389,837 $3,652,889 $12,566,137 $12,252,352
Sales of residential
construction 0 189,500 45,500 189,500
Interest income 92,448 111,057 542,785 466,186
Commission income 93,506 80,649 215,928 356,845
Revenues from operating golf
and country club 692,391 753,911 2,328,677 2,276,068
Income from joint ventures 10,980 21,037 541,350 54,993
Other revenues 85,370 18,679 83,885 68,477
__________ _________ __________ __________
Total 4,364,532 4,827,722 16,324,262 15,664,421
EXPENSES:
Cost of land sold 2,477,611 2,452,786 9,469,631 8,033,222
Cost of residential
construction 0 217,558 42,063 217,558
Commissions and selling
expenses 376,727 382,652 841,737 1,171,872
Operating costs of golf
and country clubs 708,196 800,617 2,212,540 2,335,980
Interest expense 65,253 65,567 220,002 442,766
Depreciation 182,785 170,805 548,378 511,292
Property taxes 89,560 63,576 224,690 205,838
General & administrative costs 402,678 289,350 1,181,338 1,097,037
_________ _________ __________ __________
TOTAL EXPENSES 4,302,810 4,442,911 14,740,379 14,015,565
NET INCOME BEFORE INCOME TAXES 61,722 384,811 1,583,883 1,648,856
Income tax provision 23,226 186,904 596,015 692,521
_________ _________ __________ _________
NET INCOME $ 38,496 $ 197,907 $ 987,868 $ 956,335
========== ========== ========== =========
NET INCOME PER SHARE $ .03 $ 0.14 $ 0.69 $ 0.66
========== ========== ========= ========
DIVIDENDS PER SHARE NONE NONE NONE NONE
<FN>
*Subject to year end audit adjustments
See Notes to Consolidated Condensed Financial Statements
</TABLE>
Page Four of Twelve
<PAGE>
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION> Nine Months Ended
1/31/96 1/31/95
<S> <C>(Unaudited)*<C>(Unaudited)*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 987,868 $ 956,335
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 548,378 511,292
Decrease/(Increase) in accounts and notes receivable 312,745 (6,973,199)
Decrease in residential construction in process 537,798 192,227
Increase in real estate held for development
and sale (5,818,213) (8,688,118)
Decrease in other assets 79,830 109,812
Decrease in accounts payable (208,278) (209,390)
Decrease in interest payable (2,609) (186,008)
Increase (decrease) in deferred income (2,374,063) 5,031,806
Increase in income taxes payable 586,015 534,597
Increase in other liabilities 212,693 1,327,910
Income from joint venture (541,350) (54,993)
Decrease in residential construction in process
and real estate held for development and sale
resulting from the sale of such properties 3,417,687 5,543,636
Decrease in property under contract for sale 243,578 14,468,227
___________ __________
Net cash (used in) provided by operating activities: (2,017,921) 12,564,134
___________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - net (67,423) (120,522)
Provided by (investment in) joint ventures 660,301 (712,054)
___________ ___________
Net cash provided by (used in) investing
activities 592,878 (832,576)
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 5,033,452 6,746,363
Principal payments on debt (4,086,673) (18,908,227)
____________ ___________
Net cash provided by (used in) financing
activities 946,779 (12,161,864)
___________ ___________
NET DECREASE IN CASH (478,264) (430,306)
CASH - Beginning of period 507,277 527,527
___________ ___________
CASH - End of period $ 29,013 $ 97,221
=========== ===========
Supplemental Information
Cash Paid: Interest paid was $1,574,914 and $1,736,791 for 1996 and 1995, respectively.
*Subject to year-end adjustments
See Notes to Consolidated Condensed Financial Statements
</TABLE>
Page Five of Twelve
<PAGE>
PART I. KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the instructions for Form 10-QSB
and, therefore, do not include all information and footnotes necessary
for a fair presentation of financial position, results of operations
and changes in financial position in conformity with generally accepted
accounting principles.
The information furnished reflects all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
interim period covered, including appropriate estimated provision for bonus
and profit sharing arrangements normally determined or settled at year end.
NOTE 2. Accounting Change
During the first quarter of fiscal 1995, the Company adopted Statement
of Financial Accounting Standards No. 114, "Accounting for Creditors
for Impairment of a Loan" ("SFAS No. 114"), as required by such Statement.
Given 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.
NOTE 3. Debt
Interest rates on mortgages and notes payable ranged from 0.00% to 11.5% at
January 31, 1996. The aggregate maturities of long-term debt are as follows:
For the Year Ended
January 31
1997 $12,279,109
1998 6,728,268
1999 1,389,011
2000 111,992
2001 113,840
Thereafter 397,547
___________
$21,019,767
===========
Substantially all of the Company's assets are mortgaged or pledged as
collateral for its indebtedness.
Further information with respect to debt follows:
Notes payable secured by contracts receivable and real estate
Credit lines - prime plus 1% to prime plus
2% payable to financial institutions,
secured by contracts receivable and
real estate $19,691,981
Page Six of Twelve
<PAGE>
NOTE 3. Debt (cont'd)
9.00% to 11.5% payable to individuals and
financial institutions, secured by
contracts receivable and real estate $ 1,235,327
Other notes payable - 0% to 11.5%
due in various installments
through 1997 92,459
___________
$21,019,767
===========
Interest expense for the three and nine months ended January 31, 1996
reflects a reduction of $427,715 and $1,357,134, respectively, for interest
capitalized in accordance with FASB 34.
NOTE 4. Earnings Per Share
Primary and fully diluted earnings per share are calculated based on the
following number of weighted average shares of stock outstanding including
stock options as common stock equivalent. The number of shares outstanding
for all periods presented was 1,438,733.
NOTE 5 - Sale of Florida Assets
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. As of January 31, 1996, approximately $25.0
million of the sale has closed, with the purchaser assuming debt of the
Company of approximately $9.2 million, paying approximately $7.7 million
in cash and issuing notes to the Company, secured by second mortgages on most
of the assets purchased, totalling approximately $8.1 million. The notes are
payable over the next 3 years, and most of the notes bear interest at 10% per
annum. The remaining $700,000 of the sale is scheduled to be closed during
the remainder of fiscal 1996, for cash. Of the $9.2 million of debt assumed,
at January 31, 1996 there remains approximately $593,000 due, on which the
Company remains secondarily liable. At January 31, 1996 there remains
approximately $1.9 million of gross profit to be recognized over the next
3 years as the cash is collected.
Page Seven of Twelve
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales of land decreased approximately $263,000 (7.2%) during the current
three month period and increased $314,000 (2.6%) during the current nine
month period compared to the same periods a year ago. The primary reason for
the decrease for the current three months was a result of the recognition
during the comparable period a year ago of $250,000 of income related to the
sale of substantially all of the Florida assets on November 14, 1993. The
sale of substantially all of the Florida assets also resulted in
significant decreases in both sales and cost of residential construction
during the current three and nine month periods. (See Note 5 to the
Consolidated Condensed Financial Statements.) In addition, income from
joint ventures decreased approximately $10,000 (47.8%) during the current
three month period and increased approximately $486,000 (884%) during the
current nine month period. The significant increase in the current nine
months was due primarily to the non-recurring sale of a joint venture for
$484,000 during the second quarter of fiscal 1996.
Cost of land sold, as a percentage of net sales of land, increased to 73.1%
for the current three month period compared to 67.1% for the same period a
year ago. Cost of land sold for the current nine month period increased
to 75.4% compared to 65.6% for the same period a year ago. The increase in
cost of land sold for the current three month period and, to a lesser extent,
nine month period resulted primarily from the volume discounted sales price
of the land which was sold in the prior year primarily in connection with the
Florida operations. In addition, in both the three months and nine months
ended January 31, 1996, more lots were sold in Georgia than in Florida. In
Georgia, utility costs to the Company are higher than such costs in Florida.
Interest income decreased approximately $19,000 during the current three
month period compared to the same period a year ago and increased approximately
$77,000 for the current nine month period compared to the same period a year
ago. The fluctuations relate primarily to the interest on notes receivable
from the sale of substantially all the Florida assets. The Company is
reporting interest income on such sale as money is received. The interest
from the sale is due every six months and, therefore, the interest income
from the sale varies on a quarter by quarter basis.
Commission income increased $13,000 in the current quarter and decreased
$141,000 for the current nine month period due to a change in the second
quarter of fiscal 1996 in the method of marketing the Company's homes in
some of the Company's Georgia developments by using independent brokers
rather than Company-employed salespersons.
Commissions and sales expenses decreased $5,900 in the current quarter
and $330,000 for the current nine month period due partially to the change in
marketing and due to the sale of substantially all the Florida assets a
year ago. (See Note 5 to the Consolidated Condensed Financial Statements.)
During August 1995, the Company entered into an agreement to sell its
Atlanta golf and country club buildings to an independent third party
under which the Company would retain ownership of the land and other
Page Eight of Twelve
<PAGE>
related assets surrounding the golf course. That contract was terminated
in November 1995 when the Company refused to extend the time to close. The
Company continues to discuss such sale with that party and certain others.
If a sale does close, future revenues and costs of operating the country
club will be significantly reduced, and certain debt encumbering the sold
property will be retired with the proceeds.
The operating statements for the current three months and nine months are
not necessarily indicative of the results expected for the year.
Liquidity and Capital Resources
The Company finances its operations with cash flow from operations and bank
borrowings. On January 31, 1996 the Company had available lines of credit
of approximately $187,000 which may be drawn as needed for the development
of the Company's property and other working capital needs. The Company
continues to look for additional sources of lines of credit and other
financing alternatives and believes that such sources are available on
acceptable terms should the need for additional financing arise.
On January 11, 1996, the Company modified its loan agreements with a bank
involving its Georgia operations. The modified agreement effectively
combined a $1.5 million revolving loan with a term loan with a balance of
$6.1 million. The outstanding principal amount of the modified loan at
January 31, 1996 was $7.6 million. The agreement provides for interest
to be paid at the bank's prime rate plus 1 1/2%, and extends the due
date to December 10, 1996. The loan is collateralized by first mortgages
on substantially all the undeveloped land in the Company's Georgia project
and certain contracts receivable. Upon the sale of collateralized property,
approximately 30% of the net proceeds are applied against the loan balances
owed to the bank. 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 failure of the bank to extend the Company's loan, or
the failure of the Company to obtain replacement financing, could have a
material adverse effect on the Company's financial condition. However,
management knows of no reason the loan will not be extended, as it has been
in the past, and if for any reason the loan is not extended, the Company
believes that replacement financing would be available on acceptable terms.
On July 20, 1994, the Company modified its loan agreement with a bank
involving its Florida operations. The balance due the bank at January 31,
1996 was approximately $593,000 which is due on June 30, 1997. The pur-
chaser of the Florida assets assumed this loan, and the Company remains
only secondarily liable. (See Note 5 to the Consolidated Condensed
Financial Statements.)
In addition, the Company has other debt maturing in the amount of approxi-
mately $930,000 in fiscal 1996 and $3.6 million in the following fiscal
year. The Company anticipates that these obligations will be paid with the
proceeds of land sales from normal operations, extension of debt or new
borrowings.
During the quarter ended January 31, 1996, the Company expended $850,000
for the construction of a 60 room inn adjoining its country club in
Atlanta. The Company expects to spend an additional $4.9 million on
Page Nine of Twelve
<PAGE>
such inn, including its furnishings, during the next two quarters. These
capital expenditures have been financed with working capital funds. In
the future it is expected that these capital expenditures will be fin-
anced with working capital funds and a first mortgage loan on the land
and improvements.
PART II - OTHER INFORMATION
ITEM 5.
OTHER INFORMATION
On March 15, 1996, the Company engaged Coopers & Lybrand L.L.P. as
independent accountants to audit the Company's financial statements
for the fiscal year ending April 30, 1996 and elected not to renew
the engagement of the Company's previous independent accountants,
BDO Seidman. No adverse opinions or disclaimers of opinion were
given by BDO Seidman during the fiscal years ended April 30, 1993,
1994, or 1995, nor were any of their opinions qualified as to
uncertainty, audit scope, or accounting principle, during the time
BDO Seidman was engaged. There was no disagreement of any
nature between the Company and BDO Seidman. This decision was approved
by the Company's Audit Committee and Board of Directors.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibit is being filed with this report:
Exhibit No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
KILLEARN PROPERTIES, INC.
(Registrant)
Date:_____________________________ _________________________________
J. T. Williams, Jr.
President
Date:_____________________________ ______________________________
David K. Williams
Chief Financial Officer
Page Ten of Twelve
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
27 Financial Data Schedule 12
Page Eleven of Twelve
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JAN-31-1996
<CASH> 191,987
<SECURITIES> 0
<RECEIVABLES> 8,173,081
<ALLOWANCES> 231,050
<INVENTORY> 35,159,193
<CURRENT-ASSETS> 43,294,011
<PP&E> 12,992,468
<DEPRECIATION> 3,453,101
<TOTAL-ASSETS> 53,810,602
<CURRENT-LIABILITIES> 5,200,947
<BONDS> 27,793,456
<COMMON> 143,873
0
0
<OTHER-SE> 18,823,223
<TOTAL-LIABILITY-AND-EQUITY> 54,810,602
<SALES> 15,697,592
<TOTAL-REVENUES> 16,324,262
<CGS> 12,565,971
<TOTAL-COSTS> 2,770,423
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 220,002
<INCOME-PRETAX> 1,583,883
<INCOME-TAX> 596,015
<INCOME-CONTINUING> 987,868
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 987,868
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
