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 January 31, 1995
[ ] 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 (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
(404)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
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:
1,438,733
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
INDEX
Part I.
Consolidated Condensed Financial Statements (Unaudited):
Consolidated Condensed Balance Sheet January 31, 1995 3
Consolidated Condensed Statements of Income for the 4-5
Three Months and Nine Months Ended January 31, 1995
and 1994
Consolidated Statement of Cash Flows for the Nine Months 6-7
Ended January 31, 1995 and 1994
Notes to Consolidated Condensed Financial Statements 8-9
Management's Discussion and Analysis of Financial Condition 10-11
and Results of Operations
Part II
Other Information 12
Signatures 12
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
1/31/95
(unaudited)*
Cash $ 97,221
Cash in improvement trust 157,660
Accounts and notes receivable 8,346,354
(Notes 2 and 5)
Land contracts receivable 2,151,411
Less: Allowance for uncollectibles (366,333)
Income tax refund due 72,958
Investment in joint venture 972,402
Residential real estate held for sale 730,782
Real estate held for development and sale 33,130,357
Property under contract for sale 821,866
Other property , plant and equipment 13,016,252
Less: Allowance for depreciation (2,920,375)
Utility deposit 23,404
Other assets 195,183
_____________
$56,429,142
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable & other accrued expenses $ 3,038,181
Income taxes payable 692,522
Accrued interest 315,135
Customers' deposits 1,275,438
Debt - note 3 20,339,466
Reserve for future development 1,568,266
Deferred income taxes 5,798,463
Deferred profit - note 5 5,087,038
__________
TOTAL LIABILITIES 38,114,509
STOCKHOLDERS' EQUITY
Common stock - par value $.10 a share
authorized 6,000,000 shares; issued
1,438,733 shares 143,873
Additional paid-in capital 6,846,014
Retained earnings 11,324,746
TOTAL STOCKHOLDERS' EQUITY 18,314,633
______________
$56,429,142
==============
<FN>
*Subject to year-end audit adjustments
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
Unaudited* Unaudited* Unaudited* Unaudited
1/31/95 1/31/94 1/31/95 1/31/94
Income:
Net sales of land $ 3,652,889 4,540,566 12,252,352 7,430,297
Sales of residential
construction 189,500 363,384 189,500 1,345,150
Interest income 111,057 38,384 466,186 203,961
Commission income 80,649 181,606 356,845 710,507
Revenues from operating golf
and country club 753,911 1,157,840 2,276,068 4,088,766
Income from joint venture 21,037 0 54,993 0
Other revenues 18,679 104,524 68,477 341,809
__________ _________ __________ __________
Total 4,827,722 6,386,304 15,664,421 14,120,490
Expenses
Cost of land sold 2,452,786 3,204,861 8,033,222 4,691,990
Cost of residential
construction 217,558 329,845 217,558 1,218,224
Commissions and selling
expenses 382,652 459,266 1,171,872 1,318,667
Operating costs of golf
and country clubs 800,617 1,042,917 2,335,980 3,734,650
Interest expense 65,567 166,958 442,766 463,889
Depreciation 170,805 219,128 511,292 744,865
Property taxes 63,576 61,417 205,838 295,698
General & Administration Exp. 289,350 445,084 1,097,037 1,284,580
_________ _________ __________ __________
Total Expenses 4,442,911 5,929,476 14,015,565 13,752,563
Income before income taxes,
cumulative effect of change in
accounting principle 384,811 456,828 1,648,856 367,927
Income tax provision 186,904 179,800 692,521 146,200
_________ _________ __________ _________
197,907 277,028 956,335 221,727
Cumulative effect of
change in accounting principle -0- -0- -0- (105,000)
__________ __________ __________ _________
Net income $ 197,907 277,028 956,335 326,727
========== ========== =========== ==========
Income per share
before cumulative
effect of change in
accounting principle 0.14 0.19 0.66 0.15
Cumulative effect of change
in accounting principle 0.00 0.00 0.00 0.07
Net income per share $ 0.14 0.19 0.66 0.22
(Note 4) ========== ========== ========= ==========
Dividends per share NONE NONE NONE NONE
<FN>
*Subject to year-end audit adjustments.
See notes to Consolidated Condensed Financial Statements
KILLEARN PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
Unaudited* Unaudited*
1/31/95 1/31/94
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 956,335 $ 326,727
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 511,292 744,865
(Increase) decrease in accounts and notes
receivable (6,973,199) 442,376
Decrease (increase) in residential construction
in process 192,227 (1,392,231)
Increase in real estate held for develop-
ment and sale (8,688,118) (4,464,686)
Decrease in other assets 109,812 66,647
Decrease in accounts payable (209,390) (382,243)
Decrease in interest payable (186,008) (381,346)
Increase in customer's deposits 35,709 86,182
Increase in reserve for future development 1,393,703 0
Increase in deferred income 5,031,806 49,302
Increase in income taxes payable 534,597 41,200
Decrease in other liabilities (101,502) (48,812)
Income from joint venture (54,993) (228,000)
Decrease in residential construction in process
and real estate held for development and sale
resulting from the sale of such properties 5,543,636 6,769,776
Decrease in property under contract for sale 14,468,227 -0-
____________ ____________
Net cash provided by operating activities: 12,564,134 1,629,757
____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - net (120,522) 125,038
Investment in joint ventures (712,054) 1,420,103
___________ ___________
Net cash (used in) provided by investing (832,576) 1,545,141
activities ___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 6,746,363 4,320,529
Principal payments on debt (18,908,227) ( 7,802,215)
___________ ____________
Net cash used in financing activities (12,161,864) ( 3,481,686)
___________ ___________
NET DECREASE IN CASH (430,306) (306,788)
CASH - Beginning of period 527,527 632,685
____________ ____________
CASH - End of period $ 97,221 325,897
============ ============
<FN>
Supplemental Information to Consolidated Statements of Cash Flow
Cash Paid: Interest of $1,736,791 and $2,535,608 for the nine months
ended 1995 and 1994, respectively. Income tax of $30,000 in fiscal 1995.
Capital lease obligations of $124,530 in 1994 was incurred
when the Company entered into leases for new equipment.
A house was purchased by the assumption of a mortgage in the amount of
$240,894 for fiscal 1994.
PART I. FINANCIAL INFORMATION
Notes to Consolidated Condensed Financial Statements
January 31, 1995
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 conformity with generally accepted accounting principles.
The information furnished reflects all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the interim period
covered, including appropriate estimated provision for bonus and profit sharing
arrangements normally determined or settled at year end.
NOTE 2. Accounting Change
During the first quarter of fiscal 1995, the Company adopted Statement of
Financial Accounting Standards No. 114, "Accounting for Creditors for
Impairment of a Loan" ("SFAS No. 114"), as required by such Statement.
Given the relatively low level of delinquencies and foreclosures experienced
by the Company, the adoption of SFAS No. 114 by the Company did not have a
material effect on its financial statements.
Note 3. Debt
Interest rates on mortgages and notes payable ranged from 5.25% to 12.5%
at 1/31/95. The aggregate maturities of long-term debt are as follows:
For the Year Ended
January 31
1996 13,465,717
1997 320,269
1998 5,370,799
1999 170,989
2000 171,833
Thereafter 839,859
$ 20,339,466
Substantially all of the Company's assets are mortgaged or pledged as
collateral for its indebtedness.
Further information with respect to debt follows:
Notes payable secured by contracts receivable and real estate
Credit lines - prime plus 1% to prime plus
3% payable to financial institutions,
secured by contracts receivable and
real estate $18,691,953
Note 3. Debt (con't)
5.25% to 12% payable to individuals and
financial institutions, secured by
contracts receivable and real estate $ 1,565,568
Other notes payable - 5.56% to 11.5%
due in various installments
through 2001 81,945
$20,339,466
The Company capitalized $475,810 and $1,350,352 in interest for the three and
nine month period ended January 31, 1995, in connection with the development
of the Company's real estate projects.
Note 4. Earnings Per Share
Primary and fully diluted earnings per share are calculated based on the
following number of weighted average shares of stock outstanding including
stock options as common stock equivalents. The number of shares outstanding
for all periods presented was 1,438,733.
Note 5 - Sale of Florida Assets
On November 14, 1993, the Company entered into two agreements to sell
substantially all of its Florida assets to an unrelated purchaser for
approximately $25.5 million. During fiscal 1994, approximately $4.1 million
of the sale closed, with the purchaser assuming debt of the Company of approx-
imately $1.6 million and paying approximately $2.5 million in cash. In the
nine months ended January 31, 1995, approximately $20.1 million of the sale
closed, with the purchaser assuming approximately $6.9 million of the
Company's debt, on which the Company remains liable; issuing notes to the
Company, secured by second mortgage on most of the assets purchased,
totalling approximately $7.6 million; and paying approximately $5.6 million
in cash, of which $4.8 million was used to reduce the Company's debt. The
notes are payable over the next 4 years and most of the notes bear interest
at 7% to 10% per annum. The remaining $1.3 million of the sale is scheduled
to be closed during the remainder of fiscal 1995 and 1996, for cash. At
January 31, 1995 there remains approximately $4.7 million of gross profit to
be reported over the next 4 years as the cash is collected.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations -
Net sales of land decreased approximately $888,000 (19.5%) during the current
three month period and increased $4,822,000 (64.9%) during the current nine
month period compared to the same periods a year ago. The decrease in the
current quarter was due primarily to a bulk sale a year ago of all of the
developed lots in the Killearn Lakes Development of the Company. The primary
reason for the increase for the current nine month period was a result of the
Company selling substantially all of the remaining Florida assets in July, 1994.
Cost of land sold, as a percentage of net sales of land, decreased to 67.2%
for the current three month period from 70.6% for the three months a year
ago. The cost of land sold for the current nine month period increased to
65.0% compared to 63.1% a year ago. The decrease for the current three months
was a result primarily of the bulk sale last year in Florida, which was sold
at a discounted volume price.
Sale of residential construction decreased 47.9% during the current quarter
compared to the same period a year ago and decreased 85.9% for the current nine
months compared to the same period a year ago. Corresponding decreases also
were realized in the cost of residential construction. All of the decreases
were the result of the Company discontinuing its residential construction
activities in fiscal 1994.
Commission income, as well as commissions and selling expenses decreased for
the current three months and the current nine months compared to the same
period a year ago due primarily to the sale of substantially all of the
Company's Florida assets.
Interest income increased approximately $72,600 during the current three months
compared to the same period a year ago and increased approximately $262,200 for
the current nine months compared to the same period a year ago. Both of the
increases were a result of the sale of substantially all the Florida assets.
The Company is reporting interest on such sale as the money is received.
Since the company is reporting interest income on such sale when received, and
payments are due every six months, then the amount of interest income related
to the sale is expected to vary from quarter to quarter. Revenues from
operating the golf and country club decreased 34.9% in the current quarter
compared to the same quarter a year ago and 44.3% for the current nine months
compared to the same period a year ago, primarily due to the sale of the
Company's Florida club operations in fiscal 1994.
Depreciation expense decreased 22.1% during the current quarter compared to the
same period a year ago and 31.4% in the current nine month periood compared to
the same quarter a year ago. The decrease is due to the sale of the Company's
Florida club operations in Fiscal 1994.
General and Administrative expenses decreased approximately $200,000 in the
current three months and in the current nine months compared to the same period
a year ago due primarily to the sale of substantially all of the Company's
Florida assets during the past year.
The operating statement for the current nine months is not necessarily indica-
tive of results expected for the year.
FINANCIAL CONDITION AND LIQUIDITY
At January 31,1995, the Company had available lines of credit totaling approxi-
mately $386,647 with its lenders. Such lines of credit may be drawn as needed
for the development of the Company's property and other working capital for
Corporate needs. The Company continues to look for other sources of lines of
credit and financing alternatives.
On July 19, 1994, the Company modified its loan agreement with a bank, in-
volving its Georgia operations. The modified agreement effectively divided the
prior $13.5 million loan into three loans totaling $13.5 million. One of the
loans, for $1.5 million is a revolving loan. The modified credit agreement
provides for interest to be paid at the bank's prime rate plus 2%. The loans
are collateralized by first mortgages on substantially all the undeveloped
land in the Company's Georgia project, a golf course and country club and
certain contracts receivable. Upon the sale of collateralized property, all
of the net proceeds are applied against the loan balances owed to the bank.
90% of the first $1 million is applied to the revolving loan. 80% of the
next $1 million is applied against the revolving loan. The amount of such
reduction is then available as a loan to the Company. When secured properties
are developed by the Company, the Company can obtain a release of such property
by paying a lesser amount. The Company has been able to secure development
loans from other lenders in an amount sufficient to pay the release price and
all development costs. The $1.5 million revolving credit loan expires on June
10, 1995, when the remaining balance becomes due on demand. The failure of
this lender to extend the Company's loans, or the failure of the Company to
obtain replacement financing, could have a material adverse affect on the
Company's financial condition. Management knows of no reason the debt will not
be extended, as it has been in the past.
On July 20, 1994, the Company modified its loan agreement with a bank, in-
volving its Florida operations. The balance due the bank at April 30, 1994
was approximately $11.6 million of which approximately $4.4 million is due in
the fiscal year ending 1995. Thereafter, $2 million per year is due until
maturity on June 30, 1997. The purchaser of the Florida assets assumed this
loan. (See note 5 to the Consolidated Condensed Financial Statements.)
In addition, in the next fiscal year, the Company has other debt maturing in
fiscal 1995 and 1996 in the amount of approximately $3,900,000 and $900,000,
respectively. The Company anticipates that such debt will be paid through cash
flow from its normal operations.
On November 14, 1993, the Company entered into agreements to sell substantially
all of its Florida assets for $25.5 million. During the nine months ended
January 31, 1995, $20.1 million of the sale closed with the Purchaser assuming
$6.9 million of the Company's debt; issuing notes to the Company, totaling
$7.6 million and paying $5.6 million in cash. The notes are payable over the
next four years. The $6.9 million of debt assumed is the balance of the debt
remaining on the loan (relating to the Company's Florida operations) referred
to above, which had a balance of $11.6 million at April 30, 1994.
There were no other material changes in the Company's financial condition from
April 30, 1994 to January 31, 1995.
PART II - OTHER INFORMATION
None
SIGNATURES
Pursuant to the requirement 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.
KILLEARN PROPERTIES, INC.
(Registrant)
Date:_____________________________ ______________________________
J. T. Williams, Jr.
President
Date:_____________________________ ______________________________
David K. Williams
Chief Financial Officer