SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended October 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File Number: 0-20530
HILCOAST DEVELOPMENT CORP.
(Exact name of registrant as specified in its charter)
Delaware 65-0346040
(State of Incorporation) (I.R.S. Employer Identification No.)
19146 Lyons Road, Boca Raton, Florida 33434
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 407-487-9630
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of 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
HILCOAST DEVELOPMENT CORP. AND SUBSIDIARIES
PART I. Financial Information
Item 1. Financial Statements
The consolidated financial statements included herein have been
prepared by the registrant, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been consolidated or omitted pursuant to
such rules and regulations; however, the registrant believes that
the disclosures are adequate to make the information presented not
misleading. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and
the notes thereto included in the registrant's Annual Report on
Form 10-K for the fiscal year ended July 31, 1996.
The consolidated financial statements for the interim periods
included herein, which are unaudited, include, in the opinion of
management, all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position and
results of operations of the registrant for the periods presented.
The results of operations for the interim periods should not be
considered indicative of results to be expected for the full year.
HILCOAST DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
Oct.30, Jul.31,
ASSETS (Note 3) 1996 1996
----------------- ----------- ---------
(Unaudited) (Audited)
Cash:
Unrestricted $ 57 $ 21
Restricted 740 773
Inventories and properties held
for development and sale (Note 2) 29,428 30,234
Property and equipment, net of
accumulated depreciation 19,380 19,754
Prepayments and other assets 2,847 2,813
------- -------
$52,452 $53,595
======= =======
LIABILITIES
-----------
Borrowings (Note 3) $43,344 $45,348
Accounts payable, accruals and
other liabilities 4,802 3,993
Deposits, principally from customers 1,965 2,033
Deferred income taxes 430 386
------- -------
Total liabilities 50,541 51,760
------- -------
Contingencies (Note 5)
STOCKHOLDERS' EQUITY
--------------------
Common Stock; $.01 par; shares authorized
6,000,000; outstanding 2,362,320 24 24
Additional paid-in capital 2,481 2,481
Deficit (594) (670)
------- -------
Total stockholders' equity 1,911 1,835
------- -------
$52,452 $53,595
======= =======
See accompanying notes to consolidated financial statements.
HILCOAST DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
October 31,
--------------------
1996 1995
Revenues: --------- ---------
Sales:
Condominium apartments $ 8,529 $ 7,705
Land and other 40 114
Recreation and maintenance fees 2,179 1,999
Other (Note 4) 663 628
--------- ---------
11,411 10,446
Expenses: --------- ---------
Cost of sales:
Condominium apartments 6,934 6,792
Land and other 30 88
Operating costs 1,865 1,701
Interest:
Incurred 1,211 1,349
Capitalized (627) (772)
Depreciation 341 317
Selling and marketing 1,079 899
General and administrative 457 435
--------- ---------
11,290 10,809
--------- ---------
Income (loss) before income taxes 121 (363)
Income tax expense (benefit) 45 (137)
--------- ---------
Net income (loss) $ 76 ($226)
========= =========
Net income (loss) per common share:
Primary and fully diluted $ .03 ($.09)
========= =========
Average common shares considered
outstanding:
Primary and fully diluted 2,362,320 2,362,320
========= =========
See accompanying notes to consolidated financial statements.
HILCOAST DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)
(Unaudited)
Additional
Common Paid-In
Stock Capital Deficit
------ ---------- -------
Balance, July 31, 1996 $24 $2,481 ($670)
Net income for the quarter
ended October 31, 1996 - - 76
--- ------ ------
Balance, October 31, 1996 $24 $2,481 ($594)
=== ====== ======
See accompanying notes to consolidated statements.
HILCOAST DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
October 31,
------------------
1996 1995
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 76 ($ 226)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 341 317
Deferred income tax expense (benefit) 44 (141)
Changes in assets and liabilities:
Decrease in inventories and properties
held for development and sale 867 1,025
Decrease (increase) in restricted cash 33 (244)
Increase in prepayments and other assets (34) (31)
Increase in accounts payable, accruals
and other liabilities 809 143
(Decrease) increase in deposits (68) 203
------- -------
Net cash provided by operating activities 2,068 1,046
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (28) (150)
------- -------
Net cash used by investing activities (28) (150)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 3,805 6,133
Repayments on borrowings (5,809) (6,947)
------- -------
Net cash used by financing activities (2,004) (814)
------- -------
Net decrease in unrestricted cash during period 36 82
Unrestricted cash at beginning of period 21 46
------- -------
Unrestricted cash at end of period $ 57 $ 128
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $1,233 $1,352
======= =======
Income taxes $ - $ 94
======= =======
See accompanying notes to consolidated financial statements.
HILCOAST DEVELOPMENT CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BUSINESS
Hilcoast Development Corp. (the "Company") is engaged in the
design, development, construction, marketing and sale of
condominium apartments at Century Village at Pembroke Pines
("Century Village"), an adult condominium project in southeast
Florida, the operation of the recreation facilities located at the
project ("Recreation Facilities") and certain other real estate
related businesses.
The Company is also engaged in the development and sale of single
family homesites in a golf course community known as Glen Abbey in
Volusia County, Florida.
(2) INVENTORIES AND PROPERTIES HELD FOR DEVELOPMENT AND SALE
Inventories and properties held for development and sale consist of
the following (in thousands):
Oct. 31, July 31,
1996 1996
-------- --------
Century Village:
Land under development for
condominium buildings $10,189 $11,499
Condominium buildings completed
or under construction 14,575 14,197
Unamortized capitalized interest 1,917 1,972
------- -------
26,681 27,668
Land under development, Volusia
County, Florida (Glen Abbey),
including unamortized capital-
ized interest of $638 and $586 2,747 2,566
------- -------
$29,428 $30,234
======= =======
Substantially all inventories and properties held for development
and sale are pledged as collateral for indebtedness (Note 3).
(3) BORROWINGS
Borrowings, substantially consisting of mortgage notes col-lateralized by
all major assets of the Company, are summarized as follows (in thousands):
Oct. 31, July 31,
1996 1996
-------- --------
Mortgage notes payable to CV Reit,
Inc. ("CV Reit") (Note 3(a)):
Term Loan $25,000 $25,000
Lines of Credit 11,680 13,415
Preferred Stock Redemption Note 5,000 5,000
Land Acquisition Note 322 564
Glen Abbey Note 1,308 1,320
Other 34 49
------- -------
$43,344 $45,348
======= =======
(a) CV Reit
Term Loan/Lines of Credit
At October 31, 1996, the Company's borrowings from CV Reit
primarily consisted of a term loan (the "Term Loan") and $15
million revolving lines of credit (the "Lines of Credit"). The
Term Loan and $7.5 million of the Lines of Credit bear interest,
payable monthly, at prime (8.25% at October 31, 1996) plus 3%, but
in any event not less than 9% nor more than 11%, and mature on July
31, 1998, except as described below with respect to the conversion
of the Term Loan. The remaining $7.5 million of the Lines of
Credit bears interest, payable monthly, as follows: (i) $3 million
at prime plus 3%, with a floor of 11%, which matures on May 31,
1997; (ii) $2.5 million at 12.5% of which $2 million matures on
February 28, 1997 and $.5 million on May 31, 1997; and (iii) $2
million at 12% which matured on November 30, 1996. The Term Loan
and the Lines of Credit are collateralized by all major assets of
the Company. The amount of available funds under the Lines of
Credit is limited based upon available collateral, as defined.
Specific release prices, principally for the condominium apartments
at Century Village, are required to be applied as permanent
reductions of the Lines of Credit.
Upon the earlier to occur of delivery of the last unit at Century
Village or July 31, 1998, the Term Loan will be converted to a $25
million, 11%, 25 year self-amortizing loan providing for equal
monthly payments of principal and interest (the "Permanent Loan").
The Permanent Loan will be collateralized by a first mortgage on
the Recreation Facilities and may not be prepaid without incurring
a prepayment penalty equal to the greater of 5% of the amount
prepaid or an amount determined pursuant to a formula based upon
the yield of certain U.S. Treasury Issues.
Until the Permanent Loan is satisfied in full, the wholly-owned
subsidiary of the Company which owns the Recreation Facilities will
not be permitted to incur or guarantee additional debt financing,
except for that related to the operation of the Recreation
Facilities.
Other
Other borrowings consist of approximately $6.6 million in mortgage
notes, which bear interest, generally payable quarterly, at rates
ranging from 10% to 12% and which are collateralized by the
Recreation Facilities and certain land under development. These
notes mature principally during fiscal 1998 and include $1.6
million which requires principal payments based upon specific
release prices of condominium apartments or homesites delivered.
Letters of Credit
At October 31, 1996, there was approximately $65,000 outstanding in
letters of credit issued by CV Reit to municipalities in connection
with certain of the Company's development requirements at Century
Village. In addition, a $1.5 million letter of credit has been
issued by a bank for the benefit of the State of Florida,
guaranteed by CV Reit, which allows the Company to utilize up to
that amount of customer deposits previously required to be held in
restricted escrow account.
(b) Levy Note
The Company and H. Irwin Levy have entered into an unsecured
revolving credit agreement ("Levy Note") allowing the Company to
borrow up to $750,000 from Mr. Levy in the event the Company's
availability under the CV Reit Lines of Credit does not exceed
$50,000. The Levy Note bears interest, payable monthly, at prime
plus 1/2% and matures on May 1, 1997, as extended.
(4) OTHER REVENUES
Other revenues consist of the following (in thousands):
Three
Months Ended
October 31,
--------------
1996 1995
------ ------
Real estate brokerage $ 196 $ 227
Golf course operations 174 161
Title insurance agency 123 83
Social program activities 70 63
Consulting fees (a) 53 47
Other 47 47
------ ------
$ 663 $ 628
====== ======
________
(a) Principally in connection with a consulting and advisory
agreement under which the Company provides investment,
advisory, consulting and administrative services to CV Reit,
excluding matters related to the Company's indebtedness to CV
Reit. The agreement, which originally expired on July 31,
1994, has been extended to July 31, 1997, provides for payment
of monthly fees of $10,000 plus reimbursement of out of pocket
expenses, and may be terminated upon 180 days notice by the
Company and upon 30 days notice by CV Reit.
(5) CONTINGENCIES
See Part II, Item 1 for a discussion of the Company's legal
proceedings.
(6) PROPOSED MERGER
On August 9, 1996, the Company's Board of Directors received an
unsolicited proposal from H. Irwin Levy, the Company's Chairman of
the Board and Chief Executive Officer, contemplating a merger of
the Company and a newly formed acquisition company to be organized
by Mr. Levy, pursuant to which each of the Company's outstanding
shares of common stock would be converted into $6.00 in cash
("Merger Consideration"). A special independent committee of the
Board was appointed to consider the proposal and in connection
therewith, engaged Patricof & Co. Capital Corp. ("Patricof"), an
investment banking firm as its financial advisor.
On November 12, 1996, Patricof delivered its oral opinion to the
special committee and the Board to the effect that the Merger
Consideration is fair to the Company's public shareholders from a
financial point of view. On that date, the special committee and
Board approved the terms of the Merger Agreement and recommended
that the shareholders approve and adopt such agreement. The parties
have executed the Merger Agreement. The proposed merger is subject
to approval by the Company's shareholders and a number of other
material conditions, including compliance with all applicable
regulatory and governmental requirements. Accordingly, there can
be no assurance that the proposed merger will be consummated.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The Company's primary source of revenues is the design,
development, construction, marketing and sale of condominium
apartments at the Century Village at Pembroke Pines ("Century
Village"), an adult condominium project in southeast Florida, and
the operation of the recreation facilities located at the project
("Recreation Facilities"). Significant information pertaining to
deliveries of condominium apartments at Century Village is
presented below.
Deliveries - Three Months Ended October 31,
--------------------------------------------------
1996 1995
--------------------------------- ---------------------------------
Number Average Number Average
of Units Revenues Sales Gross of Units Revenues Sales Gross
Delivered (000's) Price Margin Delivered (000's) Price Margin
--------- -------- ------- ------ --------- ------- ------- ------
107 $8,529 $79,700 19% 100 $7,705 $77,100 12%
Revenues from sales of condominium apartments are recognized only
upon the closing (delivery) of the sales contract. Fluctuations in
average sales prices and gross margins at Century Village are
generally a function of the location of condominium buildings (e.g.
lakefront) and to a lesser extent, the mix of condominium
apartments within the building.
A comparison of the Company's inventories and backlog (under
contract for sale but not yet delivered) at Century Village
follows:
October 31, 1996 October 31, 1995
----------------------- -----------------------
Number of Number of
Condominium Apartments Condominium Apartments
----------------------- -----------------------
Completed Completed
or Under or Under
Construction Backlog Construction Backlog
------------ --------- ------------ ---------
Completed but not
yet delivered 106 66 59 20
Under construction 656 124 731 204
--- --- --- ---
762 190 790 224
=== === === ===
Aggregate sales
value (000's) $15,228 $17,013
Average sales price $80,100 $76,000
Results of Operations
For the three months ended October 31, 1996, the Company reported
net income of $76,000, on total revenues of $11.4 million, as
compared to a net loss of $226,000 on revenues of $10.4 million for
the corresponding period ended October 31, 1995. The increase in
net income was principally due to a 7% higher gross margin (sales
revenues less cost of sales, as a percentage of sales).
The increase in gross margin reflects higher average per unit sales
prices of $2,600, primarily attributable to the delivery of a
greater number of units located in lakefront buildings and lower
per unit land costs for certain units delivered. Based upon the
190 sales contracts in backlog for Century Village at October 31,
1996, a significant portion of which are expected to be delivered
within the next nine months, the Company anticipates a slight
increase in average per unit sales prices which is expected to be
substantially offset by an increase in the average per unit cost of
sales. Accordingly, the Company does not expect a significant
change in the gross margin for the remainder of fiscal 1997.
For the first quarter of fiscal 1997, the Company entered into 70
new sales contracts (net of cancellations) at Century Village with
an aggregate sales value of $5.4 million and an average sales price
of $77,600. During the corresponding period in fiscal 1996, there
were 105 new sales contracts with an aggregate sales value of $7.9
million and an average sales price of $75,400. Management believes
that the decline in the Company's sales activity is attributable to
a number of reasons which include an overall general decline in
sales orders in the residential real estate market and an increase
in the average prices of units being offered for sale at Century
Village. The Company cannot predict whether the decline in sales
activity will continue.
For the quarters ended October 31, 1996 and 1995, recreation and
maintenance fees were $2.2 million and $2 million, respectively,
consisting of $1.6 million and $1.4 million, respectively, of
revenues pursuant to long-term leases ("Recreation Leases") of the
Recreation Facilities with owners of 7,018 Century Village
condominium apartments delivered through October 31, 1996, and $.6
million of revenues during each quarter from master management
agreements under which the Company provides certain maintenance and
community services. These revenues will continue to increase
annually principally due to future deliveries of condominium
apartments and specified contractual increases in monthly fees in
accordance with the Recreation Leases. The Recreation Leases and
the master management agreements provide that increases and
decreases in operating costs are passed through to the unit owners,
subject to a guaranteed rate generally for three years.
Other revenues increased slightly during the quarter ended October
31, 1996 and principally consisted of revenues from the golf course
operations at Century Village, real estate brokerage commissions at
the four Century Village communities in southeast Florida, social
program activities at the Recreation Facilities and title insurance
agency services principally provided on sales at Century Village
(see Note 4 to Consolidated Financial Statements). Other revenues
are expected to increase during the second and third quarters of
fiscal 1997 due to increased use of the golf course and greater
participation in social activities during the winter season.
Operating costs for the three month periods ended October 31, 1996
and 1995 were $1.9 million and $1.7 million, respectively, and
consisted principally of costs incurred for the operation of the
Recreation Facilities, the master management agreements, and the
ancillary operations noted above. Operating cost increases, if
any, related to the Recreation Facilities and master management
agreements are passed through to unit owners at Century Village in
the form of increased recreation and maintenance fees, subject to
the aforementioned three year guarantee. The increase in operating
costs during the current quarter is primarily the result of the
opening of Club Health, a 12,000 square foot health club which is
part of the Recreation Facilities, in August 1996. Operating costs
are expected to increase during the second and third quarters of
fiscal 1997 due to increased seasonal activities.
Interest incurred for the quarters ended October 31, 1996 and 1995
was $1.2 million and $1.3 million, respectively. After deducting
interest capitalized principally to real estate inventories at
Century Village and Glen Abbey, net interest expense amounted to
$.6 million for each quarter.
During the quarters ended October 31, 1996 and 1995, selling and
marketing costs expensed amounted to approximately $1.1 million and
$.9 million, respectively. Selling and marketing costs incurred
are capitalized and amortized to expense as condominium apartments
are delivered at Century Village, based on the average capitalized
cost per apartment sold. Selling and marketing expense is expected
to fluctuate during the remainder of fiscal 1997 based on
fluctuations in the number of sales and deliveries.
General and administrative expenses consist primarily of corporate
overhead and administration of Century Village, and increased
slightly during the three months ended October 31, 1996. During
the three months ended October 31, 1996, the Company expensed
approximately $100,000 in professional fees in connection with the
proposed merger (see Note 6 to Consolidated Financial Statements)
which was partially offset by a significant reduction in legal fees
incurred in connection with certain litigation (see Part II, Item
1 - Legal Proceedings).
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended October 31, 1996, the Company generated
net cash flow from operating activities of $2.1 million, as
compared to $1 million during the corresponding period in 1995.
The primary source of cash flow was net reductions in real estate
inventories amounting to $.9 million and $1 million , respectively.
In addition, during 1996, there was a $.9 million increase in
accounts payable and accruals. As a result of the positive cash
flow from operations, for the three month periods ended in 1996 and
1995, the Company was able to reduce net borrowings by $2 million
and $.8 million, respectively. Although the Company has been
successful in generating positive cash flow from operating
activities, there is no assurance that the Company will be able to
achieve or sustain positive cash flow from operating activities in
the future.
The Company's borrowings at October 31, 1996 amounted to $43.3
million and were substantially due to CV Reit. See Note 3 to
Consolidated Financial Statements for a description of the
Company's borrowings. The amount due includes $25 million,
presently requiring monthly interest only payments but scheduled to
be converted by July 31, 1998 to an 11%, 25 year self-amortizing
loan providing for equal monthly payments of principal and
interest. Substantially all of the remaining indebtedness ($6.6
million, excluding the lines of credit - see below) matures in
fiscal 1998, including $1.6 million, which requires principal
payments based on specific release prices of condominium apartments
or homesites delivered. The Company's borrowings require interest
payments generally on a monthly basis.
The Company's cash flow from operations, net of its construction
and other operating requirements, has not been sufficient to
satisfy its payment obligations required under its borrowings.
Consequently, the Company has relied on borrowings under its lines
of credit from CV Reit (the "Lines of Credit" - see Note 3 to
Consolidated Financial Statements). At October 31, 1996,
availability under the Lines of Credit was $15 million, of which
$7.5 million matures during fiscal 1997 and $7.5 million matures in
fiscal 1998. The Company also has a revolving credit agreement
with H. Irwin Levy, Chairman of the Board and Chief Executive
Officer of the Company, under which the Company may borrow up to
$750,000 through May 1997 (the "Levy Note" - see Note 3(b) to
Consolidated Financial Statements). At October 31, 1996, the
outstanding balance of the Lines of Credit was $11.7 million and
there was no balance outstanding under the Levy Note. The Company
anticipates that funds generated in the ordinary course of business
and availability expected under the Lines of Credit and the Levy
Note will be sufficient to satisfy its cash flow needs.
The amount of available funds under the Lines of Credit is limited
based on available collateral, as defined. At October 31, 1996,
the available collateral exceeded the outstanding balance of the
Lines of Credit by approximately $5.1 million. The Company also is
restricted from incurring or guaranteeing additional debt financing
under certain circumstances (see Note 3 to Consolidated Financial
Statements). Substantially all the Company's assets are pledged as
collateral for the Company's borrowings.
The Company attempts to minimize its investment in inventory. In
addition to construction of condominium apartments at Century
Village and development of homesites at Glen Abbey, significant
capital outlays for amenities and infrastructure are required in
advance of deliveries of apartments and homesites. The Company has
no material commitments for capital expenditures other than those
incurred in connection with its development and construction
activities in the ordinary course of business at Century Village
and Glen Abbey. To complete Century Village, the Company will
incur costs in connection with the remaining 762 apartments to be
delivered, including the construction of the condominium buildings
and the remaining Recreation Facilities, and infrastructure
improvements, including the installation of water and sewer
service, drainage facilities, paving and grading, and landscaping.
Substantially all of the Recreation Facilities have already been
completed. At Glen Abbey, homesite improvements will include water
and sewer service, drainage facilities, and paving and grading.
The Company's current major business activities consist of
development and other real estate related activities principally at
Century Village. As of October 31, 1996, 90% of the planned
community had been delivered and 762 condominium apartments
remained to be constructed and/or delivered. If the Company engages
in future real estate development activities, it will require
outside financing which may or may not be available. In the event
the Company decides not to engage in any further real estate
development activities, its long-term revenues are anticipated to
be generated principally from net revenues derived under the long-term
Recreation Leases, net of the related debt service requirement, and
from earnings on funds expected to be available from deliveries of
Century Village condominium apartments. In that event, the Company
anticipates that its revenues will be sufficient to satisfy its cash
requirements. However, there is no assurance that revenues will be
sufficient for such purposes.
INFLATION
The Company, as well as the home building industry in general, may
be adversely affected during periods of high inflation, primarily
because of higher material, labor and financing costs. In
particular, interest rates on a significant portion of the
Company's borrowings are variable, subject to a floor of 9% and a
ceiling of 11%. Increases in the prime rate could result in
increased interest cost to the Company in addition to possible
reduced sales activity, potentially resulting in reduced
profitability. The Company may attempt to pass through to its
customers any increases in costs through increased selling prices.
However, this may not always be possible due to competitive factors
in the marketplace.
FORWARD LOOKING INFORMATION: CERTAIN CAUTIONARY STATEMENTS
Certain statements contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
elsewhere in this Form 10-Q, that are not related to historical
results, are forward looking statements. Actual results may differ
materially from those projected or implied in the forward looking
statements. Further, certain forward looking statements are based
upon assumptions of future events which may not prove to be
accurate. These forward looking statements involve risks and
uncertainties including but not limited to the Company's future
cash flows and liquidity, gross margins, revenues and expenses, the
effect of conditions in the residential real estate market and the
economy in general, the level and volatility of interest rates, as
well as certain other risks described in this report. Subsequent
written and oral forward looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in
their entirety by cautionary statements in this paragraph and
elsewhere described in this Form 10-Q.
PART II. Other Information
Item 1 - Legal Proceedings:
On September 16, 1993, the Company filed a Complaint in the Circuit
Court, Seventh Judicial Circuit, in and for Volusia County,
Florida, seeking unspecified damages against a utility company,
claiming inverse condemnation and trespass at the Company's Glen
Abbey project. On March 18, 1994, the Court granted a Motion for
Summary Judgment holding the defendant liable for trespass and
inverse condemnation. On April 5, 1995, the Court vacated the
Summary Judgment and in February 1996, the Court ruled that the
Company is not entitled to recovery under the theory of inverse
condemnation. The trespass claims, which include a claim for
damages caused by flooding, have not been tried and no trial date
has been set. The Company has appealed the Court's decision. If
the Appellate Court reverses the order, the inverse condemnation
damages claim would be remanded to the Circuit Court. The Company
also expects to pursue its trespass claims.
The Company is unable to predict the outcome of its appeal or the
amount of damages, if any, which may be awarded to the Company on
either the trespass or inverse condemnation claims. In addition,
any award of damages to the Company will be subject to appeal by
the defendant and, accordingly, there can be no assurance that the
Company will ultimately recover any damages.
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibits:
( 27) Financial Data Schedule
(b) Reports on Form 8-K:
The Company was not required to file Form 8-K
during the quarter for which this report is filed.
SIGNATURES
Pursuant to 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.
HILCOAST DEVELOPMENT CORP.
_____________________________
(Registrant)
December 13, 1996 /S/ JACK JAIVEN
_________________________________
Jack JAIVEN, Executive Vice
President and Principal Financial
and Accounting Officer
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<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 29,428
<CURRENT-ASSETS> 0
<PP&E> 25,385
<DEPRECIATION> (6,005)
<TOTAL-ASSETS> 52,452
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 24
<OTHER-SE> 2,481
<TOTAL-LIABILITY-AND-EQUITY> 52,452
<SALES> 8,529
<TOTAL-REVENUES> 11,411
<CGS> 6,934
<TOTAL-COSTS> 6,934
<OTHER-EXPENSES> 1,865
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 584
<INCOME-PRETAX> 121
<INCOME-TAX> 45
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76
<EPS-PRIMARY> $.03
<EPS-DILUTED> $.03
<FN>
<F1>Cash balance includes $740 of restricted cash.
</FN>
</TABLE>
