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 SEPTEMBER 30, 1999.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR TRANSITION PERIOD FROM _______________ TO _______________.
Commission file number 0-179
PALMETTO REAL ESTATE TRUST
--------------------------
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0405064
- -------------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation of organization) Identification No.)
45 Liberty Lane
Greenville, SC 29607
- -------------- -----
(Address of principal (Zip Code)
executive offices)
Issuer's telephone number, including area code: (803) 233-6007
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) or the Securities Exchange Act of 1934 during
the preceding 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 [ ]
The number of shares outstanding of the Issuer's Shares of $1 Beneficial
Interest as of September 30, 1999 was 1,770,006.
Transitional Small Business Disclosure Format:
Yes [ ] No [ X ]
<PAGE>
PALMETTO REAL ESTATE TRUST
Quarterly Report on Form 10-QSB
For the Quarterly Period Ended September 30, 1999
Form 10-QSB Index
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Balance Sheet at September 30, 1999 ................ 1
Unaudited Statements of Income and Undistributed
Earnings for the Three Months and Nine Months
Ended September 30, 1999 and 1998 .......................... 2
Unaudited Statements of Cash Flows for the Nine
Months Ended September 30, 1999 and 1998 ................... 3
Notes to Unaudited Financial Statements ...................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 5
Part II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................. 6
Item 2. Changes in Securities ......................................... 6
Item 3. Defaults Upon Senior Securities ............................... 6
Item 4. Submission of Matters to a Vote of Security Holders ........... 6
Item 5. Other Information ............................................. 6
Item 6. Exhibits and Reports on Form 8-K .............................. 6
Signatures .................................................... 7
<PAGE>
PALMETTO REAL ESTATE TRUST
Balance Sheet
(unaudited)
September 30, 1999
Assets
- ------
Real estate investments, at cost:
Rental property, net of accumulated depreciation $ 8,817,003
Timberlands 24,864
----------
Total real estate investments 8,841,867
Other assets:
Cash 431,070
Rent receivable 7,500
Note receivable 205,266
Deferred loan expense, net of accumulated amortization 17,937
----------
Total assets $ 9,503,640
Liabilities and Shareholders' Equity
- ------------------------------------
Liabilities:
Mortgage notes payable $ 6,178,500
Accounts payable and accrued expenses 153,466
Deferred revenue 140,277
Income taxes payable 3,000
---------
6,475,243
Shareholders' equity:
Shares of beneficial interest, $1 stated value; 5,000,000
shares authorized; 1,770,006 shares issued and outstanding 1,770,006
Capital surplus 498,734
Undistributed earnings 759,657
---------
Total shareholders' equity 3,028,397
---------
Total liabilities and shareholders' equity $ 9,503,640
=========
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Income and Undistributed Earnings
(Unaudited)
For the Three Months and Nine Months Ended September 30, 1999 and 1998
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------ ------ ------ ------
Income:
Rental income $ 461,750 $ 393,984 $ 1,345,352 $ 1,173,706
Other income 5,627 5,010 15,429 16,690
------- ------- --------- ---------
Total income 467,377 398,994 1,360,781 1,190,396
------- ------- --------- ---------
Expenses:
Depreciation and amortization 70,725 64,991 212,177 213,967
Interest 129,415 107,838 355,797 343,085
Repairs and maintenance 18,404 11,110 52,603 44,015
Property taxes 45,422 39,353 136,266 118,060
General and administrative 39,974 36,145 141,041 126,496
------- ------- --------- ---------
Total expenses 303,940 259,437 897,884 845,623
------- ------- --------- ---------
Income from operations
before income taxes 163,437 139,557 462,897 344,773
Gain on sale of real estate 2,344 2,143 7,031 6,428
------- ------- -------- --------
Income before income taxes 165,781 141,700 469,928 351,201
Income tax expense (1,000) (1,000) (3,000) (3,000)
------- ------- -------- --------
Net income 164,781 141,700 466,928 348,201
Undistributed earnings,
beginning 701,077 615,628 487,437 478,152
Dividends paid 106,201 88,500 194,708 158,525
------- ------- -------- --------
Undistributed earnings,
ending $ 759,657 $ 667,828 $ 759,657 $ 667,828
======= ======= ======= =======
Basic earnings per share of
beneficial interest $ .09 $ .08 $ .26 $ .20
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Cash Flows
For the Nine Months Ended September 30, 1999 and 1998
Nine Months Ended
September 30,
1999 1998
------ ------
(unaudited)
Cash flows from operating activities:
Net income $ 466,928 $ 348,201
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 208,622 192,420
Amortization of deferred expenses 3,555 21,547
Gain on sale of real estate (7,031) (6,428)
(Increase) decrease in:
Rent receivable 24,790 25,530
Deferred loan expense - (15,955)
Increase (decrease) in:
Accounts payable and accrued expenses 14,270 21,325
Income taxes payable 3,000 3,000
------- -------
Net cash provided by operating activities 714,134 589,640
------- -------
Cash flows from investing activities:
Property additions and improvements (5,130) (1,615)
Collections of mortgage note receivable 10,222 39,638
------- -------
Net cash provided by investing activities 5,092 38,023
------- -------
Cash flows from financing activities
Payments on mortgage notes and demand note payable (177,500) (5,538,970)
Borrowings on mortgage note payable - 5,500,000
Payment of dividends (411,534) (380,750)
------- -------
Net cash used in financing activities (589,034) (419,720)
------- -------
Increase in cash 130,192 207,943
Cash at beginning of period 300,878 68,524
------- -------
Cash at end of period $ 431,070 $ 276,467
======= =======
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PALMETTO REAL ESTATE TRUST
Notes to Interim Financial Statements
September 30, 1999
(1) Basis of Presentation
The accompanying unaudited financial statements, which are for interim periods,
do not include all disclosures provided in the annual financial statements.
These unaudited interim financial statements should be read in conjunction with
the financial statements and the footnotes thereto contained in the Annual
Report on Form 10-KSB for the year ended December 31, 1998 of Palmetto Real
Estate Trust (the "Trust"), as filed with the Securities and Exchange
Commission.
(2) Interim Periods
In the opinion of the Trust, the accompanying unaudited interim financial
statements contain all adjustments (which are of a normal recurring nature)
necessary for a fair presentation of the financial statements. The results of
operations for the three and nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the full year.
4
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
----------------------------------------------------------------------
Financial Condition
There have been no significant changes in the Trust's liquidity or financial
condition since December 31, 1998 other than debt payments and dividend
payments. At present, there are no large capital expenditures planned that
would present a liquidity problem.
Results of Operations - Nine months ended September 30, 1999 compared to nine
months ended September 30, 1998.
Net income for the nine months ended September 30, 1999 increased approximately
34% as compared to the same period in 1998. Rental income increased due to
higher rental rates and the acquisition of new rental property in the fourth
quarter of 1998. In addition, the Trust received $17,500 from a settlement for
past due rents.
Expenses related to real estate held for rental increased during the third
quarter of 1999 compared to the third quarter of 1998 as a result of acquiring
new property during the fourth quarter of 1998. Included in general and
administrative expenses for the nine months ended September 30, 1999 was $18,000
for rent receivable, which management deemed uncollectible.
Year 2000 Compliance Issues
The Trust has established a plan to address Year 2000 issues. Successful
implementation of this plan will eliminate any extraordinary expenses related to
Year 2000 issue. The Trust has purchased software updates from its sole data
processing vendor which are Year 200 compliant. The Trust has a reasonable basis
to conclude that the Year 2000 issues will not materially affect future
financial results, or cause reported financial information not to be necessarily
indicative of future operating results or future financial condition.
5
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to its business, to which the Trust is
a party or to which any of its property is the subject.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
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. Exhibit 27.1 Financial Data Schedule
B. Reports on Form 8-K: None.
6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PALMETTO REAL ESTATE TRUST
11-1-99 By: /s/ Bill Franks
---------------- ---------------
Date Bill Franks
Property Manager
(Principal Financial and Accounting Officer)
11-1-99 By: /s/ James A. Boling
---------------- -------------------
Date James A. Boling
Chairman
(Principal Executive Officer)
7
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
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<CURRENT-LIABILITIES> 296743
<BONDS> 6178500
0
0
<COMMON> 1770006
<OTHER-SE> 1258391
<TOTAL-LIABILITY-AND-EQUITY> 9503640
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