-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NK45P15+s87ryrXzXaLSNlzDtQbgLGWxErOC4pfVVnk+D0yepv7qi6HIAg2TfChT GTaFo9x6QbJtdNH3udlp2g== 0000055742-97-000016.txt : 19971216 0000055742-97-000016.hdr.sgml : 19971216 ACCESSION NUMBER: 0000055742-97-000016 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19971215 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KILLEARN PROPERTIES INC CENTRAL INDEX KEY: 0000055742 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 591095497 STATE OF INCORPORATION: FL FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-06762 FILM NUMBER: 97738372 BUSINESS ADDRESS: STREET 1: 100 EAGLES LANDING WAY CITY: STOCKBRIDGE STATE: GA ZIP: 30281 BUSINESS PHONE: 4043892020 MAIL ADDRESS: STREET 1: 100 EAGLES LANDING WAY CITY: STOCKBRIDGE STATE: GA ZIP: 30281 FORMER COMPANY: FORMER CONFORMED NAME: KILLEARN ESTATES INC DATE OF NAME CHANGE: 19730911 10QSB 1 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 October 31, 1997 [ ] 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) 100 Eagle's Landing Way 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. Page 1 KILLEARN PROPERTIES, INC. AND SUBSIDIARIES INDEX Part I. Financial Information Item 1. Consolidated Condensed Financial Statements (Unaudited): Consolidated Condensed Balance Sheet as of October 31, 1997 3 Consolidated Condensed Statements of Operations for the Six 4 Months Ended and October 31, 1997 and 1996 Consolidated Statements of Cash Flows for the Six Months 5 Ended October 31, 1997 and 1996 Notes to Consolidated Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 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 9 Signatures 10 Exhibit Index 11 Page 2 PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS KILLEARN PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET
ASSETS 10/31/97 (Unaudited) Cash $ 52,804 Accounts and notes receivable 5,824,684 Land contracts receivable, net 554,334 Real estate held for development and sale 25,140,164 Property under contract for sale 141,196 Other property, plant and equipment, net 504,837 Other assets 1,162,251 __________ TOTAL ASSETS $ 33,380,269 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable & other liabilities $ 2,677,356 Income taxes payable 2,121,308 Mortgages & notes payable 20,047,362 Deferred improvement revenue 13,125 Deferred income taxes 3,313,236 Deferred profit 1,704,278 __________ TOTAL LIABILITIES $ 29,876,664 STOCKHOLDERS' EQUITY Common stock - par value $.10 per share; authorized 6,000,000 shares; issued 887,412 shares $ 88,741 Additional paid-in capital 1,942,998 Retained earnings 1,471,866 __________ TOTAL STOCKHOLDERS' EQUITY $ 3,503,605 __________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 33,380,269 ========== See Notes to Consolidated Condensed Financial Statements
Page 3 KILLEARN PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended 10/31/97 10/31/96 10/31/97 10/31/96 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INCOME: Net sales of land $4,399,707 $2,801,702 $8,523,210 $5,595,686 Sales of residential construction - - - 155,000 Interest income 101,462 165,335 249,585 311,716 Commission income 39,737 11,395 83,135 65,566 Income from joint ventures - 55,232 - 55,232 Other revenues 69,467 11,961 70,967 32,977 __________ _________ __________ __________ Total 4,610,374 3,045,625 $8,926,898 $6,216,177 EXPENSES: Cost of land sold 3,659,568 1,617,936 $6,396,872 $3,491,496 Cost of residential construction - 925 - 179,879 Commissions and selling expenses 535,407 416,089 982,979 811,256 Interest expense 73,272 146,238 234,369 269,682 Depreciation 19,444 25,862 38,884 56,945 Property taxes 115,588 47,430 164,645 79,201 General & administrative costs 267,272 392,553 501,494 693,008 _________ _________ __________ __________ TOTAL EXPENSES 4,670,551 2,647,033 $8,319,243 $5,581,467 Net income before income taxes (60,177) 398,592 607,655 634,710 Income tax provision (22,645) 154,343 228,660 243,195 _________ _________ __________ __________ NET INCOME $ (37,533) $ 244,249 $ 378,995 $ 391,515 ========== ========== ========== ========== NET INCOME PER SHARE $ (.04) $ .28 $ .43 $ .44 ========== ========== ========== ========== Weighted average shares outstanding 887,412 887,412 887,412 887,412 See Notes to Consolidated Condensed Financial Statements
Page 4 KILLEARN PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended 10/31/97 10/31/96 -------- -------- (Unaudited) (Unaudited) NET CASH FROM OPERATING ACTIVITIES: (361,734) (679,203) ___________ __________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (3,654) (50,040) Distributions from joint ventures 50,000 129,927 ___________ __________ Net cash from investing activities 46,346 79,887 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from loans 14,439,750 5,803,968 Principal payments on debt (14,340,752) (5,043,734) ___________ __________ Net cash from financing activities 98,998 760,234 ___________ __________ NET DECREASE IN CASH 216,390 160,918 CASH - Beginning of period 269,194 160,147 ___________ __________ CASH - End of period $ 52,804 $ 321,065 =========== ========== Supplemental Information Cash Paid: Interest paid was $1,039,627 and $629,181.45 for fiscal 1997 and 1998, respectively. Income taxes paid were $683,207 and $750,000 in fiscal 1997 and 1998, respectively. See Notes to Consolidated Condensed Financial Statements
Page 5 PART I. KILLEARN PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OCTOBER 31, 1997 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, 1997. 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 transfer certain of its assets and liabilities to J.T. Williams, Jr., the Company's former Chairman of the Board and Chief Executive Officer, in exchange for the 551,321 shares of common stock he held in the Company and the cancellation of his option to purchase an additional 100,000 shares of common stock. 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, and certain mortgages and other liabilities, as more fully described in the Company's proxy statement filed on August 26, 1996 Such transfer, once approved, was agreed to 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 (excluding J.T. Williams, Jr.) voted on and approved the transfer agreement, and the transfer closed on November 16, 1996. The net assets transferred had a historical cost basis of approximately $17,136,000 which has been reflected as a reduction to shareholders' equity in the accompanying balance sheet. 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. Page 6 NOTE 3 Earnings per share Earnings per share reflect the weighted average shares outstanding during each of the periods presented as reflected on the face of the income statement. As discussed in Note 2, the Company entered into an agreement to transfer certain net assets in exchange for 551,321 shares and the cancellation of an option to purchase 100,000 shares of the Company's common stock. Based on the effective date of that agreement, earnings per share are computed based on the number of shares outstanding during the period as if such shares were transferred on the effective date. NOTE 4 Financing The Company obtained various additional credit facilities during the six month period ending October 31, 1997. Two such facilities of approximately $2.5 million and $1.8 million are being used for the acquisition and development of 93 acres and 124 acres, respectively, 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 1/4 percent. Additionally, on July 10, 1997, the Company modified its loan agreement with a bank involving its Georgia operations. The agreement provides for interest to be paid at the bank's prime rate plus 1.25% per annum, and matures on July 9, 1998. The loan is collateralized by first mortgages on substantially all the undeveloped land in the Company's Georgia property. Upon the sale of collateralized property, release prices, which vary with the development, are applied against the loan balance owed to the bank. The Company historically secures development loans from other lenders in an amount sufficient to pay the release price and all development costs, which are ultimately satisfied with proceeds from the sale of the properties. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales of land increased approximately $1.6 million (57%) during the current three month period and $2.9 million (52%) during the current six month period compared to the same period a year ago. The primary reason for the increase was a result of the Company's increase in commercial and bulk sales and the recognition of income related to the sale of substantially all of the Company's Florida assets in November 1993. Cost of land sold, as a percentage of net sales of land, was 83% for the current three month period compared to 58% for the same period a year ago. Cost of land sold for the current six month period increased to 75% compared to 62% for the same period a year ago. These decreases in gross margins are due to the sales at discounted prices made in the current year on the commercial and bulk sales of land. Page 7 Interest income decreased approximately $63,873 during the current three month period and $62,131 during the current six month period compared to the same periods a year ago primarily due to a decrease in the interest on notes receivable from the November, 1993 sale of substantially all the Company's Florida assets. As the principal is repaid, the related interest income is reduced. Commission income increased approximately $28,342 in the current three month period and $17,569 in the current six month period compared to the same periods a year ago. Additionally, commission and selling expenses increased approximately $119,318 in the current three month period and $171,723 in the current six month period. These overall changes resulted from the Company's increase in net sales of Land. Interest expense, when compared to the same period a year ago, decreased approximately $72,966 for the current three month period and $35,313 for the current six month period. This decrease is due to certain interest expense incurred by the Company being eligible for capitalization in accordance with Financial Accounting Standard 34. General and administrative expenses decreased approximately $125,281 in the current three month period and $191,514 in the current six month period when compared to the same periods a year ago. This decrease is due to reduction of life insurance premiums and salary to the Company's former Chief Executive Officer and other employees as a result of the transaction described in Note 2 to the Company's financial statements. 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 October 31, 1997 the Company had available lines of credit of approximately $1.5 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. On July 10, 1997, the Company modified its loan agreement with a bank involving its Georgia operations. The agreement provides for interest to be paid at the bank's prime rate plus 1.25% per annum, and matures on July 9, 1998. The loan is collateralized by first mortgages on substantially all the undeveloped land in the Company's Georgia property. Upon the sale of collateralized property, release prices, which vary with the development, are applied against the loan balance owed to the bank. The Company historically secures development loans from other lenders in an amount sufficient to pay the release price and all development costs, which are ultimately satisfied with proceeds from the sale of the properties. Page 8 In addition, the Company has other debt maturing in the amount of approximately $11.5 million in fiscal 1998 and $3.6 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. The Company currently has Notes Receivable due from Proactive Technologies, Inc., delinquent in the amount of $313,000.59 in interest and $550,000.00 in principal at October 31, 1997. An additional principal payment from Proactive of $1.8 million is due December 31, 1997, as well as additional interest payments. If these funds are not received, the Company may be required to seek alternative means of financing to meet its working capital and liquidity requirements, including seeking additional bank lines of credit, or the sale of equity or debt securities. 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 The Company announced on or about December 3, 1997 that it had received a merger offer from its largest shareholder, Proactive Technologies, Inc., to purchase all remaining shares of common stock outstanding not currently held by Proactive for $9.00 per share in cash, subject to its obtaining financing, negotiation of a definitive agreement and certain other conditions. Proactive currently owns or controls 45% (404,396) of the outstanding common stock of the Company. To review the merger proposal, a special committee of Killearn directors has been named, which includes all four non-Proactive affiliated directors. The Company has a total of seven directors of which three are affiliated with Proactive. The special committee has asked Proactive to demonstrate its ability to obtain the necessary financing on or before December 31, 1997. If the Board approves the offer and a definitive agreement is executed, the proposed merger will be submitted to the Company's shareholders for their approval. There is no assurance the proposed merger will be approved by the Board nor the shareholders. 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 Page 9 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: December 15, 1997 /s/ David K. Williams _________________________ DAVID K. WILLIAMS Chief Financial Officer President Page 10 EXHIBIT INDEX Exhibit No. Description Page No. ----------- ----------- -------- 27 Financial Data Schedule 12 EX-27 2
5 6-MOS APR-30-1998 OCT-31-1997 52,804 0 5,824,684 322,654 25,281,360 32,875,432 1,067,377 562,541 33,380,269 4,798,664 25,078,001 88,741 0 0 3,414,864 33,380,269 8,523,210 8,926,898 6,396,872 8,319,244 0 0 234,369 607,653 228,660 381,993 0 0 0 381,993 .43 .43
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