SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
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[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 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: (864) 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 June 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 June 30, 1999
Form 10-QSB Index
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Balance Sheet at June 30, 1999 ......................... 1
Unaudited Statements of Income and Undistributed
Earnings for the Three Months and Six Months Ended
June 30, 1999 and 1998 ............................................ 2
Unaudited Statements of Cash Flows for the Six
Months Ended June 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)
June 30, 1999
Assets
- ------
Real estate investments, at cost:
Rental property, net of accumulated depreciation $8,886,544
Timberlands 24,864
---------
Total real estate investments 8,911,408
Other assets:
Cash 312,689
Rent receivable 7,910
Note receivable 208,750
Deferred loan expense, net of accumulated amortization 19,122
---------
Total other assets 548,471
---------
Total assets $9,459,879
=========
Liabilities and Shareholders' Equity
- ------------------------------------
Liabilities:
Mortgage notes payable $6,239,000
Accounts payable and accrued expenses 106,442
Deferred revenue 142,620
Income taxes payable 2,000
---------
6,490,062
Shareholders' equity:
Shares of beneficial interest, $1 par value; 5,000,000 shares
authorized; 1,770,006 shares issued and outstanding 1,770,006
Capital surplus 498,734
Undistributed earnings 701,077
---------
Total shareholders' equity 2,969,817
---------
Total liabilities and shareholders' equity $9,459,879
=========
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Income and Undistributed Earnings
For the Three and Six Months Ended June 30, 1999 and 1998
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------ ------ ------ ------
Income:
Rental income $421,018 $383,617 $883,602 $779,722
Other income 4,943 6,034 9,802 11,680
------- ------- ------- -------
Total income 425,961 389,651 893,404 791,402
Expenses:
Depreciation and amortization 70,725 83,472 141,450 148,976
Interest 89,819 108,880 226,384 235,247
Repairs and maintenance 18,112 22,081 34,199 32,905
Property taxes 45,422 39,355 90,844 78,707
General and administrative 58,556 43,101 101,067 90,351
------- ------- ------- -------
Total expenses 282,634 296,889 593,944 586,186
Income from operations
before income taxes 143,327 92,762 299,460 205,216
Gain on sale of real estate 2,343 2,143 4,687 4,285
------- ------- ------- -------
Income before income taxes 145,670 94,905 304,147 209,501
Income tax expense (1,000) (1,000) (2,000) (2,000)
------- ------- ------- -------
Net income 144,670 93,905 302,147 207,501
Undistributed earnings, beginning 644,914 591,748 487,437 478,152
Dividends paid 88,507 70,025 88,507 70,025
------- ------- ------- -------
Undistributed earnings, ending $701,077 $615,628 $701,077 $615,628
======= ======= ======= =======
Basic earnings per share of
beneficial interest $.08 $.05 $.17 $.12
==== ==== ==== ====
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Cash Flows
For the Three Months Ended June 30, 1999 and 1998
Six Months Ended
June 30,
1999 1998
(unaudited)
Cash flows from operating activities: ------ ------
Net income $302,147 $207,501
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 139,081 128,265
Amortization of deferred expenses 2,369 20,711
Gain on sale of real estate (4,687) (4,285)
(Increase) decrease in:
Rent receivable 24,380 16,258
Deferred loan expense - (15,955)
Increase (decrease) in:
Accounts payable and accrued expenses (32,754) (20,016)
Income taxes payable 2,000 2,000
------- -------
Net cash provided by operating activities 432,536 334,479
Cash flows from investing activities:
Property additions and improvements (5,130) (1,615)
Collections of mortgage note receivable 6,738 36,453
------- -------
Net cash provided by (used in) investing activities 1,608 34,838
Cash flows from financing activities:
Payments on mortgage notes and demand note payable (117,000) (5,486,470)
Borrowings on mortgage note payable - 5,500,000
Payment of dividends (305,333) (292,250)
------- -------
Net cash used in financing activities (422,333) (278,720)
------- -------
Increase (decrease) in cash 11,811 90,597
Cash at beginning of period 300,878 68,524
------- -------
Cash at end of period $ 312,689 $ 159,121
======= =======
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PALMETTO REAL ESTATE TRUST
Notes to Financial Statements
June 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 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 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 six months ended June 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 - Six months ended June 30, 1999 compared to
three months ended June 30, 1998.
Net income for the six months ended June 30, 1999 increased
approximately 46% 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.
Expenses related to real estate held for rental increased during the
second quarter of 1999 compared to the second quarter of 1998 as a
result of acquiring new property during the fourth quarter of 1998.
Included in general and administrative expenses for the six months
ended June 30, 1999 was $13,000 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 Palmetto
Real Estate Trust is a party or to which any of its property is the
subject.
Item 2. Changes in Securities
---------------------
There have been no changes in securities during the reporting period.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Annual Meeting of Stockholders of the Trust ("Meeting") was held
on June 3, 1999. The results of the vote on the matters presented at
the Meeting were as follows:
1. The following individuals were elected as trustees, each for a
one-year term:
Vote For Vote Against Abstain
--------- ------------ -------
James A Boling 1,286,803 -0- -0-
William J. Ables 1,286,803 -0- -0-
S. Hunter Howard, Sr. 1,286,803 -0- -0-
Melvin K. Younts 1,286,803 -0- -0-
S. Hunter Howard, Jr. 1,286,803 -0- -0-
Billy B. Huskey 1,286,803 -0- -0-
R. Riggie Ridgeway 1,286,803 -0- -0-
C. Laney Younts 1,286,803 -0- -0-
2. Ratification of the appointment of Crisp Hughes Evans LLP as the
Trust's independent audit firm was approved by stockholders by
the following vote:
For 1,286,803 Against -0- Abstain -0-
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. Exhibit Description 27 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
August 5, 1999 By: /s/ Bill Franks
- -------------- ----------------
Date Bill Franks
Property Manager
(Principal Financial and Accounting Officer)
August 5, 1999 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> JUN-30-1999
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