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, 1998
[ ] 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)
385 Country Club Drive
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, 1998 3
Consolidated Condensed Statements of Operations for the Three 4
Months Ended and July 31, 1998 and 1997
Consolidated Statements of Cash Flows for the Three Months 5
Ended July 31, 1998 and 1997
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan
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 7/31/98
(Unaudited)
<S> <C>
Cash $ 251,143
Accounts and notes receivable 5,969,006
Land contracts receivable, net 362,368
Real estate held for development and sale 21,659,154
Other property, plant and equipment, net 440,490
Other assets 27,090
__________
TOTAL ASSETS $ 28,709,251
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable & other liabilities $ 1,509,748
Income taxes payable 3,750,009
Debt (including accrued interest) 15,902,136
Deferred liabilities 543,355
Deferred income taxes 2,381,565
Deferred income 914,163
__________
TOTAL LIABILITIES $ 25,000,976
STOCKHOLDERS' EQUITY
Common stock - $.10 par value;
authorized 6,000,000 shares;
887,412 shares issued and outstanding $ 88,741
Additional paid-in capital 1,942,998
Retained earnings 1,676,536
__________
TOTAL STOCKHOLDERS' EQUITY $ 3,708,275
__________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,709,251
==========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
7/31/98 7/31/97
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES:
Net sales of land $6,662,637 $4,123,503
Interest income 59,304 148,123
Commission income 82,676 43,398
Other revenues 1,500 1,500
__________ _________
Total Revenues 6,806,117 4,316,524
COST AND EXPENSES:
Cost of land sold 5,579,931 2,737,304
Commissions and selling expenses 393,366 447,572
Interest expense 50,075 161,097
Depreciation 18,373 19,440
Property taxes 59,309 49,057
General and administrative costs 238,134 234,222
_________ _________
TOTAL COST AND EXPENSES 6,339,188 3,648,693
EARNINGS BEFORE INCOME TAXES 466,929 667,831
Income tax 186,772 251,305
_________ _________
NET INCOME $ 280,157 $ 416,526
========= =========
EARNINGS PER SHARE
(basic and diluted) $ .32 $ .47
========= =========
Weighted average number of
common shares 887,412 887,412
DIVIDENDS PER SHARE NONE NONE
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION> Three Months Ended
7/31/98 7/31/97
-------- -------
(Unaudited) (Unaudited)
<S> <C> <C>
NET CASH FROM OPERATING ACTIVITIES: $ 9,933 $ 431,812
___________ __________
CASH FLOWS FROM INVESTING ACTIVITIES: -0- -0-
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 2,055,981 10,946,077
Principal payments on debt (2,160,959) (11,266,080)
___________ ___________
Net used in financing activities (104,978) (320,003)
___________ ___________
NET CHANGE IN CASH (114,911) 111,809
CASH - Beginning of period 366,054 269,194
___________ ___________
CASH - End of period $ 251,143 $ 381,003
=========== ===========
Supplemental Information
Cash Paid: Interest, net of amounts capitalized was $58,429 and $5,769 for
fiscal 1999 and 1998, respectively.
Income taxes were $100,000 and $50,000 in fiscal 1999 and
1998, respectively.
The accompanying notes are an integral part of these consolidated financial
Statements.
</TABLE>
PART I. KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JULY 31, 1998
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, 1998.
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 acquire the 551,321 shares
of common stock in the Company held by J.T. Williams, Jr., the Company's former
Chairman of the Board and Chief Executive Officer, and the cancellation of his
option to purchase an additional 100,000 shares of common stock through the
transfer of certain of its assets and liabilities. 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, subject
to certain mortgages and other liabilities. The agreement provided that
subject to shareholder approval, the redemption would 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 approved the
redemption, and the transaction closed on November 16, 1996. The historical
cost basis of approximately $17,191,000 of the net assets transferred has been
reflected as retired treasury stock in the accompanying balance sheet and
statement of changes in stockholders' equity. 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 for the year ended April 30. 1997.
NOTE 3 Earnings per share
Effective April 30, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("FAS 128") which replaces
the presentation of primary earnings per share with basic earnings per share
and which requires dual presentation of basic and diluted earnings per share
on the Consolidated Statements of Operations. FAS 128 requires restatement of
all prior-period earnings per share data presented. Basic net earnings per
share is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the period, and diluted net earnings
per share includes the effect of unexercised stock options using the treasury
stock method. The treasury stock method assumes that common stock was
purchased at the average market price during the period. Because there were
no stock options outstanding for the years July 31, 1998 and 1997, both basic
and diluted earnings per share were the same.
NOTE 4 Financing
The Company obtained additional credit facilities during the three month period
ending July 31, 1998. The facility of approximately $2.8 million is being
used for the development 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 1/2 points.
In May 1998, the Company borrowed $1,588,900 from a new lender of which the
Company used $1 million to reduce debt and used $588,900 to pay development
cost. In addition, the Company had available $1,273,440 to draw from the new
lender for additional development cost. The agreement provides for interest
to be paid at the bank's prime rates plus 1.0% per annum, and matures on
May 18, 2000. The loan is collateralized by a first mortgage on 62.9 acres.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales of land increased $2.5 million (61.58%) during the current three
month period when compared to the same period a year ago. The primary reason
for the increase was the sale of approximately $4.4 million to Proactive
Technologies, Inc. This sale was consummated pursuant to a settlement
agreement entered into in January 1998 after the Company had made demand on
Proactive Technologies, Inc. to pay notes which were in default.
Cost of land sold, as a percentage of net sales of land, was 83.75% for the
current three month period. This was a result of the $4.4 million dollar sale
to Proactive Technologies, Inc. at a price slightly above book value. The
Company anticipates cost of lots sold as a percentage of land sales during the
remainder of the year to be relatively consistent with the prior year.
Interest income decreased $88,819 during the current three month period when
compared to the same period a year ago, primarily due to the Company not
recognizing accrued but unpaid interest on the $3.4 million receivable from
International Realty Development Partners, LTD., L.L.C. which filed for
Chapter 11 Bankruptcy in March 1998.
Commission income increased $39,278 in the current three month period as
compared to the same period a year ago. Additionally, commission and selling
expenses decreased $54,206 in the current three month period. These overall
changes resulted from the Company's change in its method of marketing homes in
its Georgia developments in the first quarter of fiscal 1999. At this time,
the Company is using Company-employed salespersons rather than independent
brokers used last year.
Interest expense, when compared to the same period a year ago, decreased
approximately $111,000 for the current three month period. This decrease is
due to the capitalization of a portion of the interest expense incurred by the
Company, in accordance with Financial Accounting Standard 34, and a reduction
of Company debt in the current year by approximately $5.5 million.
General and administrative expenses remained constant in the current three
month period when compared to the same period a year ago.
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, 1998 the Company had available lines of credit of
approximately $1.4 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.
In May 1998, the Company borrowed $1,588,900 from a new lender of which the
Company used $1 million to reduce debt and $588,900 to pay development costs.
In addition, the Company had available $1,273,440 to draw from the new lender
for additional development cost. The agreement provides for interest to be
paid at the bank's prime rates plus 1.0% per annum, and matures on May 18,
2000. The loan is collateralized by a first mortgage on 62.9 acres.
In addition, the Company has other debt maturing in the amount of
approximately $13.5 million in fiscal 1999 and $2.4 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.
Other
The company is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations, and has
preliminarily determined that any cost, problems or uncertainties associated
with the potential consequences of the Year 2000 issues will not have a
material impact on its future operations or financial condition.
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 14, 1998 /s/ David K. Williams
_________________________
DAVID K. WILLIAMS
President & CEO
EXHIBIT INDEX
Exhibit No. Description Page No.
----------- ----------- --------
27 Financial Data Schedule 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JUL-31-1998
<CASH> 251,143
<SECURITIES> 0
<RECEIVABLES> 5,969,007
<ALLOWANCES> 0
<INVENTORY> 21,659,153
<CURRENT-ASSETS> 28,268,761
<PP&E> 1,040,367
<DEPRECIATION> 599,877
<TOTAL-ASSETS> 28,709,251
<CURRENT-LIABILITIES> 5,259,757
<BONDS> 19,741,219
<COMMON> 88,741
0
0
<OTHER-SE> 3,619,534
<TOTAL-LIABILITY-AND-EQUITY> 28,709,251
<SALES> 6,662,637
<TOTAL-REVENUES> 6,806,117
<CGS> 5,579,931
<TOTAL-COSTS> 6,339,188
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,075
<INCOME-PRETAX> 466,929
<INCOME-TAX> 186,772
<INCOME-CONTINUING> 280,157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 280,157
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
