-----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, T3k3melZzgbKHt/IDjZcfDMIUX8djA1yIuyw8x1uHk/CWgyUM6HTIfkk4Lv5Dfzs nTe4Bk7/Sainefd+SbNuzw== 0000055742-98-000009.txt : 19980318 0000055742-98-000009.hdr.sgml : 19980318 ACCESSION NUMBER: 0000055742-98-000009 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980317 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: 98567225 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 January 31, 1998 [ ] 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 January 31, 1998 3 Consolidated Condensed Statements of Operations for the Nine 4 Months Ended January 31, 1998 and 1997 Consolidated Statements of Cash Flows for the Nine Months 5 Ended January 31, 1998 and 1997 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 1/31/98 (Unaudited) Cash $ 261,897 Accounts and notes receivable 6,666,200 Land contracts receivable, net 557,428 Real estate held for development and sale 25,395,125 Property under contract for sale 141,196 Other property, plant and equipment, net 485,393 Other assets 3,410 __________ TOTAL ASSETS $ 33,510,649 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable & other liabilities $ 1,885,629 Income taxes payable 2,197,718 Mortgages & notes payable 21,372,079 Deferred liabilities 116,000 Deferred income taxes 3,313,236 Deferred profit 1,089,050 __________ TOTAL LIABILITIES $ 29,973,712 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 1,505,198 __________ TOTAL STOCKHOLDERS' EQUITY $ 3,536,937 __________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 33,510,649 ========== See Notes to Consolidated Condensed Financial Statements
Page 3 KILLEARN PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended 1/31/98 1/31/97 1/31/98 1/31/97 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INCOME: Net sales of land $2,743,524 $3,202,738 $11,266,734 $8,798,425 Sales of residential construction - - - 155,000 Interest income 180,120 137,071 429,705 448,787 Commission income - 62,004 58,383 127,569 Income from joint ventures - - - 55,232 Other revenues 40,651 18,161 111,618 51,138 __________ _________ ___________ __________ Total $2,964,295 $3,419,974 $11,866,440 $9,636,151 EXPENSES: Cost of land sold 1,980,380 1,864,202 $ 8,377,252 $5,355,698 Cost of residential construction - - - 179,879 Commissions and selling expenses 373,118 332,496 1,331,345 1,143,752 Interest expense 162,109 143,848 396,478 413,530 Depreciation 19,444 25,862 58,328 82,807 Property taxes 122,430 67,343 287,075 146,544 General & administrative costs 257,302 340,744 758,796 1,033,752 __________ __________ ___________ __________ TOTAL EXPENSES $2,914,783 $2,774,495 $11,209,274 $8,355,962 Net income before income taxes 49,512 645,479 657,166 1,280,189 Income tax provision (18,631) (242,894) (247,291) (486,088) __________ __________ ___________ __________ NET INCOME $ 30,881 $ 402,585 $ 409,875 $ 794,101 ========== ========== =========== ========== NET INCOME PER SHARE $ .03 $ .45 $ .46 $ .89 ========== ========== =========== ========== 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
Nine Months Ended 1/31/98 1/31/97 -------- -------- (Unaudited) (Unaudited) NET CASH FROM OPERATING ACTIVITIES: 2,326,764 (2,626,336) ___________ __________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (3,654) (52,171) Distributions from joint ventures 50,000 129,927 ___________ __________ Net cash from investing activities 46,346 77,756 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from loans 16,962,631 9,569,345 Principal payments on debt (19,343,038) (7,057,756) ___________ __________ Net cash from financing activities ( 2,380,407) 2,511,589 ___________ __________ NET DECREASE IN CASH ( 7,297) (36,991) CASH - Beginning of period 269,194 160,147 ___________ __________ CASH - End of period $ 261,897 $ 123,156 =========== ========== Supplemental Information Cash Paid: Interest paid was $1,659,119 and 1,479,702 for fiscal 1997 and 1998, respectively. Income taxes paid were $983,207 and 1,181,492 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 JANUARY 31, 1998 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 nine month period ending January 31, 1998. One such facility of approximately $2.4 million is being used for the acquisition of a First Mortgage on approximately 1,000 acres of land in Henry County, Georgia. The principal amount of this loan has been reduced to $441,000.00 by January 31, 1998. 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. The Company modified its loan agreement with Killearn, Inc. The modification provided additional borrowing of approximately $1.2 million dollars, for a total outstanding principal balance at January 31, 1998 of $3,320,085.02. The maturity date was extended to December 31, 1999. J.T. Williams, a director of the company, is also the President of Killearn, Inc. Likewise, David K. Williams, the Company's President and Director is also a Director and shareholder of Killearn, Inc. 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 decreased approximately $459,214 (14%) during the current three month period and increased $2.4 million (24%) during the current nine month period compared to the same period a year ago. The primary reason for the decrease in the current quarter was a reduction in bulk sales from the prior year. The primary reason for the increase in the current nine month period 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, as reported in the first quarter of the current year. Page 7 Cost of land sold, as a percentage of net sales of land, was 72% for the current three month period compared to 55% for the same period a year ago. Cost of land sold for the current nine month period increased to 71% compared to 56% 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. The Company's current sales policy provides for increased retail sales and less bulk sales at discounted prices in the future. Interest income increased approximately $43,049 during the current three month period and decreased marginally during the current nine month period compared to the same periods a year ago. The current quarter increase was due to the purchase of a $3.4 million dollar first mortgage on property located in Henry County, Georgia. Commission income decreased approximately $62,004 in the current three month period and $69,186 in the current nine month period compared to the same periods a year ago. Additionally, commission and selling expenses decreased approximately $12,378 in the current three month period and increased $134,593 in the current nine month period due to increased net land sales. These overall changes resulted from the Company's sales program that encouraged homebuilders in the Company's Communities to sell their homes through brokers other than the Company. This sales program has been discontinued. Interest expense, when compared to the same period a year ago, increased approximately $18,261 for the current three month period and $17,052 for the current nine month period. This increase is due to certain interest expense incurred by the Company not being eligible for capitalization in accordance with Financial Accounting Standard 34. General and administrative expenses decreased approximately $83,442 in the current three month period and $224,956 in the current nine 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 January 31, 1998 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. Page 8 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. In addition, the Company has other debt maturing in the amount of approximately $1.5 million in fiscal 1998 and $19.3 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. Recent Developments The Company entered into an agreement on February 2, 1998 whereby the Company deeded three parcels of land and three joint venture properties to Proactive Technologies, Inc. ("Proactive"). Proactive was a major shareholder of the Company, and Proactive's Chairman and President was the Chairman and President of the Company until recently. The Company had made demand on Proactive Technologies, Inc. to pay three notes which were in default totaling $4.9 million, including past due interest through December 31, 1997. Under the agreement, Proactive Technologies paid approximately $1.5 million to reduce the Company's debt. The Company agreed to extend until December 31, 1999 the due date on approximately $3 million balance of Proactive Technologies debt, which will bear interest at 10% per annum, payable quarterly. The Company also sold to Proactive three parcels of land and its interest in three joint ventures for $4.4 million, which is slightly higher than the book value of these assets. Proactive Technologies will assume the outstanding bank debt secured by these assets, together with all contracts and other obligations related to these projects incurred after December 31, 1997, the result of which significantly improved the Company's liquidity by reducing its debt by approximately $5.9 million. 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 NONE Page 9 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 The Company filed Form 8-K for Change in Control of Registrant and Disposition of Assets on February 2, 1998. 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: March 17, 1998 /s/ David K. Williams _________________________ DAVID K. WILLIAMS President Page 10 EXHIBIT INDEX Exhibit No. Description Page No. ----------- ----------- -------- 27 Financial Data Schedule 12 EX-27 2
5 9-MOS APR-30-1998 JAN-31-1998 261,897 0 6,666,200 313,882 25,536,321 33,025,256 1,067,377 581,984 33,510,649 4,083,347 24,801,313 88,741 0 0 3,448,196 33,510,649 11,266,734 11,866,440 8,377,252 11,209,274 0 0 396,478 657,166 247,291 409,875 0 0 0 409,875 .46 .46
-----END PRIVACY-ENHANCED MESSAGE-----