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 July 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
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements (Unaudited):
Consolidated Condensed Balance Sheet as of July 31, 1996 3
Consolidated Condensed Statements of Operations for the 4
Three Months Ended July 31, 1996 and 1995
Consolidated Statements of Cash Flows for the Three Months 5
Ended July 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
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<CAPTION>
ASSETS 7/31/96
(Unaudited)
<S> <C>
Cash $ 462,956
Cash in improvement trust funds 165,234
Accounts and notes receivable 7,462,848
Land contracts receivable 668,107
Less: Allowance for uncollectibles (152,795)
Investments in joint ventures 609,081
Real estate held for development and sale 31,123,674
Property under contract for sale 353,258
Other property, plant and equipment 19,565,426
Less: Allowance for depreciation (3,703,329)
Other assets 241,380
__________
TOTAL ASSETS $ 56,795,840
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable & other accrued expenses $ 3,747,305
Income taxes payable 1,554,689
Accrued interest 481,810
Customers' deposits 1,509,312
Debt 22,398,096
Deferred improvement revenue 815,329
Deferred income taxes 5,240,003
Deferred profit 1,697,167
__________
TOTAL LIABILITIES $ 16,938,299
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 12,362,242
__________
TOTAL STOCKHOLDERS' EQUITY 19,352,129
__________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 56,795,840
==========
See Notes to Consolidated Condensed Financial Statements
</TABLE>
Page Three of Twelve
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
7/31/96 7/31/95
(Unaudited) (Unaudited)
<S> <C> <C>
INCOME:
Net sales of land $ 2,793,984 $ 878,440
Sales of residential
construction 155,000 -
Interest income 146,381 177,026
Commission income 54,171 47,830
Revenues from operating golf
and country club and inn 970,041 866,890
Income from joint ventures 76,862 1,729
Other revenues 21,016 83,503
__________ _________
Total 4,217,455 2,055,418
EXPENSES:
Cost of land sold 1,873,560 602,466
Cost of residential
construction 178,954 -
Commissions and selling
expenses 274,457 223,493
Operating costs of golf
and country club and inn 988,992 779,460
Interest expense 125,534 81,519
Depreciation 210,974 182,491
Property taxes 56,823 81,910
General & administrative costs 300,456 433,925
Other Cost & Expenses - 21,746
_________ _________
TOTAL EXPENSES 4,009,750 2,407,010
NET INCOME (LOSS) BEFORE INCOME TAXES 207,705 (351,592)
Income tax provision (benefit) 78,160 (133,590)
_________ _________
NET INCOME (LOSS) $ 129,546 $ (218,002)
========== ==========
NET INCOME (LOSS) PER SHARE $ .09 $ (0.15)
========== ==========
DIVIDENDS PER SHARE NONE NONE
<FN>
See Notes to Consolidated Condensed Financial Statements
</TABLE>
Page Four of Twelve
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION> Three Months Ended
7/31/96 7/31/95
<S> <C>(Unaudited) <C>(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 129,546 (218,002)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 210,974 182,491
Changes in operating assets in liabilities:
Accounts and notes receivable 132,607 117,329
Residential construction in process 158,305 1,500
Real estate held for development
and sale 2,197,903 (384,756)
Other assets 504 49,692
Accounts payable (1,571,018) 20,657
Interest payable 33,846 172,933
Deferred income (182,250) (190,985)
Income taxes payable (251,840) (133,590)
Other liabilities (9,425) 38,431
Income from joint venture (76,862) (1,729)
__________ __________
Net cash from operating activities: 772,290 (346,029)
___________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,746,652) (4,873)
Distributions from (investment in) joint ventures (456,114) 18,407
___________ ___________
Net cash from investing activities (3,202,765) 13,534
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 5,657,730 526,746
Principal payments on debt (2,924,446) (612,871)
____________ ___________
Net cash from financing activities 2,733,284 (86,125)
___________ ___________
NET DECREASE IN CASH 302,809 (418,620)
CASH - Beginning of period 160,147 507,277
___________ ___________
CASH - End of period $ 462,956 $ 88,657
=========== ===========
Supplemental Information
Cash Paid: Interest paid was $91,687 and $349,669 for fiscal 1997 and 1996,
respectively.
Income tax was $330,000 in 1996.
See Notes to Consolidated Condensed Financial Statements
</TABLE>
Page Five of Twelve
PART I. KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JULY 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. For further information, refer to the complete
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10KSB for the year ended April 30, 1996.
NOTE 2. Debt
On June 18, 1996 the Company borrowed $3 million from a bank to finance
the completion of construction and furnishing of a 60 room Inn located
on the Company's Georgia property.
NOTE 3. 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 4. 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 July 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 bear interest at 7% and 10% per annum.
The remaining $700,000 of the sale is scheduled to be closed during the
remainder of fiscal 1997, for cash. The $9.2 million of debt assumed was
paid in full by July 31, 1996. At July 31, 1996 there remains approximately
$1.6 million of gross profit to be recognized over the next 3 years as the
cash is collected.
Page Six of Twelve
NOTE 5. Subsequent Event
On August 1, 1996, the Company entered into an agreement pursuant to which it
will transfer certain of its assets, comprised principally of the Eagle's
Landing Golf Course and Country Club, the Inn at Eagle's Landing, approximately
$2 million cash and approximately 250 acres of commercial and industrial real
estate, subject to certain liabilities, to a newly-formed wholly owned
subsidiary of the Company ("NewSub"), and the subsequent transfer of all of
the outstanding capital stock of NewSub to J.T. Williams, Jr., the Company's
Chairman of the Board and Chief Executive Officer, in exchange for 551,321
shares of Common Stock owned by Mr. Williams and the cancellation of his
option to purchase an additional 100,000 shares of Common Stock. The
Company's obligations under the agreement are subject to the approval of the
transaction by the holders of a majority of the outstanding common stock,
other than shares held by J. T. Williams, Jr.. The agreemeent is being
submitted to the shareholders of the Company for approval at the Company's
annual meeting, which is schedueled to be held on September 30, 1996.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales of land increased approximately $1.9 million (318%) during the
current three month period compared to the same period a year ago. The
primary reason for the increase for the current three months was a result
of increased bulk land sales in the Company's Georgia operations to various
unrelated purchasers.
Cost of land sold, as a percentage of net sales of land, remained relatively
consistent with 67.1% for the current three month period compared to 68.6% for
the same period a year ago.
Interest income decreased approximately $31,000 during the current three
month period compared to the same period a year ago, primarily due to a
decrease in the interest on notes receivable from the sale of substantially
all the Florida assets. As the principal is repaid, the related interest
income is reduced.
Sale of residential construction and cost of residential construction were
$155,000 and $178,954 respectively for the current quarter compared to no
activity the same quarter a year ago. During the current quarter, the Company
sold the last home constructed by the Company. The Company currently has no
intention of engaging in residential construction in its Georgia operations.
Commission income increased $6,340 in the current quarter 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. Correspondingly, the
commissions and sales expenses increased $50,964 in the current quarter for
the same reason.
Page Seven of Twelve
Income from joint venture increased approximately $75,000 in the current
quarter due to increase in residential lot sales in the Florida joint venture.
General and administrative expenses decreased $133,120 in the current quarter
due primarily to a prior year contribution to the Company's profit sharing plan
with no corresponding contribution this year, and a reduction in salary and
employee benefits in the current year.
The operating statements for the current three months are not necessarily
indicative of the results expected for the year.
Liquidity and Capital Resources
The Company finances its operations with operating cash flow and bank
borrowings. On July 31, 1996 the Company had available lines of credit
of approximately $95,000 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 June 18, 1996 the Company borrowed $3 million from a bank to finance
the completion of construction and furnishing of a 60 room Inn located on
the Company's Georgia property.
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
July 31, 1996 was $6.2 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 property
and certain contracts receivable. Upon the sale of collateralized property,
release prices, which vary with the development, are applied against the loan
balance owed to the bank. The Company historically secures development loans
from other lenders in an amount sufficient to pay the release price and all
development costs, which are ultimately satisfied with proceeds from the
sale of the properties. 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. Based upon the
Company's relationship with its lender, management believes this debt will be
extended, as it has been in the past.
In addition, the Company has other debt maturing in the amount of approxi-
mately $3.2 million in fiscal 1997 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.
Page Eight of Twelve
PART II - OTHER INFORMATION
ITEM 5.
OTHER INFORMATION
On August 1, 1996, the Company entered into an agreement pursuant to which it
will transfer certain of its assets, comprised principally of the Eagle's
Landing Golf Course and Country Club, the Inn at Eagle's Landing, approximately
$2 million cash and approximately 250 acres of commercial and industrial real
estate, subject to certain liabilities, to a newly-formed wholly owned
subsidiary of the Company ("NewSub"), and the subsequent transfer of all of
the outstanding capital stock of NewSub to J.T. Williams, Jr., the Company's
Chairman of the Board and Chief Executive Officer, in exchange for 551,321
shares of Common Stock owned by Mr. Williams and the cancellation of his
option to purchase an additional 100,000 shares of Common Stock. The
Company's obligations under the agreement are subject to the approval of the
transaction by the holders of a majority of the outstanding common stock,
other than shares held by J. T. Williams, Jr.. The agreemeent is being
submitted to the shareholders of the Company for approval at the Company's
annual meeting, which is scheduled to be held on September 30, 1996.
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
Page Nine of Twelve
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
EXHIBIT INDEX
Exhibit No. Description Page No.
27 Financial Data Schedule 11
Page Eleven of Twelve
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 628,190
<SECURITIES> 0
<RECEIVABLES> 8,130,955
<ALLOWANCES> 152,795
<INVENTORY> 31,476,932
<CURRENT-ASSETS> 40,324,662
<PP&E> 19,565,426
<DEPRECIATION> 3,703,329
<TOTAL-ASSETS> 56,795,840
<CURRENT-LIABILITIES> 5,783,804
<BONDS> 31,659,906
<COMMON> 143,873
0
0
<OTHER-SE> 19,208,256
<TOTAL-LIABILITY-AND-EQUITY> 56,795,840
<SALES> 3,973,196
<TOTAL-REVENUES> 4,217,455
<CGS> 3,315,963
<TOTAL-COSTS> 773,947
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125,534
<INCOME-PRETAX> 207,705
<INCOME-TAX> 78,160
<INCOME-CONTINUING> 129,546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
