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, 1997
[ ] 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: 887,412.
Transitional Small Business Disclosure Format: No [X].
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, 1997 3
Consolidated Condensed Statements of Operations for the Three 4
Months Ended and July 31, 1997 and 1996
Consolidated Statements of Cash Flows for the Three Months 5
Ended July 31, 1997 and 1996
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
Part II Other Information
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
Exhibit Index 11
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<CAPTION>
ASSETS 7/31/97
(Unaudited)
<S> <C>
Cash $ 381,003
Accounts and notes receivable 5,926,128
Land contracts receivable, net 420,654
Real estate held for development and sale 25,434,265
Property under contract for sale 141,196
Other property, plant and equipment, net 520,630
Other assets 18,131
__________
TOTAL ASSETS $ 32,842,007
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable & other liabilities $ 2,106,148
Income taxes payable 2,840,652
Mortgages & notes payable 19,628,361
Deferred improvement revenue 200,475
Deferred income taxes 3,313,236
Deferred profit 1,209,547
__________
TOTAL LIABILITIES $ 29,298,419
STOCKHOLDERS' EQUITY
Common stock - par value $.10 per share;
authorized 6,000,000 shares; issued
887,412 shares $ 88,741
Additional paid-in capital 1,942,998
Retained earnings 1,511,849
__________
TOTAL STOCKHOLDERS' EQUITY $ 3,543,589
__________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,842,007
==========
See Notes to Consolidated Condensed Financial Statements
</TABLE>
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
7/31/97 7/31/96
(Unaudited) (Unaudited)
<S> <C> <C>
INCOME:
Net sales of land $4,123,503 $2,793,984
Sales of residential construction - 155,000
Interest income 148,123 146,381
Commission income 43,398 54,171
Other revenues 1,500 21,016
__________ _________
Total 4,316,524 3,170,552
EXPENSES:
Cost of land sold 2,737,304 1,873,560
Cost of residential construction - 178,954
Commissions and selling expenses 447,572 395,167
Interest expense 161,097 123,444
Depreciation 19,440 31,083
Property taxes 49,057 31,771
General & administrative costs 234,223 300,455
_________ _________
TOTAL EXPENSES 3,648,693 2,934,434
NET INCOME BEFORE INCOME TAXES 667,831 236,118
Income tax provision 251,305 78,160
_________ _________
NET INCOME $ 416,526 $ 157,958
========== ==========
NET INCOME (LOSS) PER SHARE $ .47 $ .18
========== ==========
Weighted average shares outstanding 887,412 887,412
DIVIDENDS PER SHARE NONE NONE
<FN>
See Notes to Consolidated Condensed Financial Statements
</TABLE>
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION> Three Months Ended
7/31/97 7/31/96
-------- --------
<S> <C>(Unaudited)<C>(Unaudited)
NET CASH FROM OPERATING ACTIVITIES: 431,812 562,445
___________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash from investing activities - -
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 10,946,077 2,518,080
Principal payments on debt (11,266,080) (2,883,865)
___________ ___________
Net cash from financing activities (320,003) (365,785)
___________ ___________
NET INCREASE IN CASH 111,809 196,660
CASH - Beginning of period 269,194 186,994
___________ ___________
CASH - End of period $ 381,003 $ 383,654
=========== ===========
Supplemental Information
Cash Paid: Interest paid was $5,769 and $91,687 for fiscal 1998 and
1997, respectively.
Income taxes paid were $50,000 and $330,000 in fiscal 1998 and
1997, respectively.
See Notes to Consolidated Condensed Financial Statements
</TABLE>
PART I. KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JULY 31, 1997
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 for 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 10-KSB for the year ended April 30, 1997.
NOTE 2. Transfer of Assets
On August 1, 1996, the Company entered into an agreement, subject to
shareholder approval, pursuant to which it agreed to transfer certain
of its assets and liabilities to J.T. Williams, Jr., the Company's former
Chairman of the Board and Chief Executive Officer, in exchange for the
551,321 shares of common stock he held in the Company and the cancellation
of his option to purchase an additional 100,000 shares of common stock.
The net assets identified in the agreement consisted principally of the
Eagle's Landing Golf Course and Country Club, the Inn at Eagle's Landing,
a note for approximately $2 million and approximately 250 acres of commercial
and industrial real estate, and certain mortgages and other liabilities, as
more fully described in the Company's proxy statement filed on August 26,
1996 Such transfer, once approved, was agreed to be effective as of May 1,
1996. Accordingly, the net cash flows related to the transferred assets
from the effective date (May 1, 1996) until the closing date would be
transferred to or funded by J.T. Williams, Jr.
On September 30, 1996, the shareholders of the Company (excluding J.T.
Williams, Jr.) voted on and approved the transfer agreement, and the transfer
closed on November 16, 1996. The net assets transferred had a historical cost
basis of approximately $17,136,000 which has been reflected as a reduction to
shareholders' equity in the accompanying balance sheet. The net operating
results of the transferred assets have been removed from the statement of
operations retroactively to the effective date and have not been considered in
the determination of net income of the Company.
NOTE 3 Earnings per share
Earnings per share reflect the weighted average shares outstanding during each
of the periods presented as reflected on the face of the income statement. As
discussed in Note 2, the Company entered into an agreement to transfer certain
net assets in exchange for 551,321 shares and the cancellation of an option to
purchase 100,000 shares of the the Company's common stock. Based on the
effective date of that agreement, earnings per share are computed based on the
number of shares outstanding during the period as if such shares were
transferred on the effective date.
NOTE 4 Financing
The Company obtained various additional credit facilities during the three
month period ending July 31, 1997. One such facility of approximately $2.5
million is being used for the acquisition and development of 93 acres of land
in the Henry County area. Additional borrowings were for the financing of
development costs under various development loans. These loans generally
mature as the related lots are sold and bear interest rates at prime rate plus
1 to 1 1/4 points.
Additionally, on July 10, 1997, the Company modified its loan agreement with a
bank involving its Georgia operations. The agreement provides for interest to
be paid at the bank's prime rate plus 1.25% per annum, and matures on
July 9, 1998. The loan is collateralized by first mortgages on
substantially all the undeveloped land in the Company's Georgia property.
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.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales of land increased approximately $1,329,519 (67.76%) during the
current three month period when compared to the same period a year ago. The
primary reason for the increase was a result of the Company initiating a
modified sales program intended to expand its marketing efforts, and the
recognition of income in the Florida operations related to
the sale of substantially all of the Florida assets in November 1993. During
the second quarter of fiscal 1996, the Company began utilizing independent
brokers, rather than Company employed salespersons, to market its property,
which has resulted in increased sales.
Cost of land sold, as a percentage of net sales of land, was 66.38% for the
current three month period which was relatively consistent with the prior year
percentage of 67.1%.
Interest income increased approximately $1,700 during the current three month
period when compared to the same period a year ago
Commission income decreased approximately $11,000 in the current three month
period compared to the same period a year ago. Additionally, the
commission and selling expenses increased approximately $52,400 in the current
three month period. These overall changes resulted from the Company's
change in its method of marketing homes in some of the Georgia developments in
the second quarter of fiscal 1996 in net sales. At that time, the Company
began using independent brokers rather than Company-employed salespersons.
Interest expense, when compared to the same period a year ago, increased
approximately $38,000 for the current three month period. This increase is
due to some interest expense incurred by the Company no longer being
eligible for capitalization in accordance with Financial Accounting
Standard 34.
General and administrative expenses decreased approximately $66,000 in the
current three month period when compared to the same period a year ago. This
decrease is due to reduction of life insurance benefits and salaries to the
Company's former Chief Executive Officer and other employees as a result of
the transaction described in Note 2 to the Company's financial statements.
The operating statements for the current three month period 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, 1997 the Company had available lines of credit of
approximately $1.7 million 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
when the need for additional financing arise.
On July 10, 1997, the Company modified its loan agreement with a bank
involving its Georgia operations. The agreement provides for interest to be
paid at the bank's prime rate plus 1.25% per annum, and matures on July 9,
1998. The loan is collateralized by first mortgages on substantially all the
undeveloped land in the Company's Georgia property. 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.
In addition, the Company has other debt maturing in the amount of approxi-
mately $11.5 million in fiscal 1998 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.
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
NONE
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5.
OTHER INFORMATION
NONE
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: September __, 1997 /s/ David K. Williams
_________________________
DAVID K. WILLIAMS
Chief Financial Officer
Vice President
EXHIBIT INDEX
Exhibit No. Description Page No.
----------- ----------- --------
27 Financial Data Schedule 12
10
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JUL-31-1997
<CASH> 381,003
<SECURITIES> 0
<RECEIVABLES> 5,926,128
<ALLOWANCES> 0
<INVENTORY> 25,575,461
<CURRENT-ASSETS> 32,321,377
<PP&E> 1,063,727
<DEPRECIATION> 543,097
<TOTAL-ASSETS> 32,842,007
<CURRENT-LIABILITIES> 4,946,801
<BONDS> 24,351,618
<COMMON> 88,741
0
0
<OTHER-SE> 3,454,588
<TOTAL-LIABILITY-AND-EQUITY> 32,842,007
<SALES> 4,123,503
<TOTAL-REVENUES> 4,316,524
<CGS> 2,737,304
<TOTAL-COSTS> 3,648,693
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 161,097
<INCOME-PRETAX> 667,831
<INCOME-TAX> 251,305
<INCOME-CONTINUING> 416,526
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 416,526
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
