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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended April 30, 1998
Commission file number 0-10146
ABRAMS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-0522129
------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1945 The Exchange, Suite 300, Atlanta, GA 30339
----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 953-0304
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
Title of each class: which registered:
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $1.00 Par Value 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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _____
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES
OF THE REGISTRANT AS OF JUNE 15, 1998, WAS $10,949,258. SEE PART III. THE
NUMBER OF SHARES OF COMMON STOCK OF THE REGISTRANT OUTSTANDING AS OF JUNE 15,
1998, WAS 2,936,356.
DOCUMENTS INCORPORATED BY REFERENCE
THE INFORMATION CALLED FOR BY PART III (ITEMS 10, 11, AND 12) IS
INCORPORATED HEREIN BY REFERENCE TO THE REGISTRANT'S DEFINITIVE PROXY
STATEMENT FOR THE 1998 ANNUAL MEETING OF SHAREHOLDERS WHICH IS TO BE FILED
PURSUANT TO REGULATION 14A.
PART I
ITEM 1. BUSINESS.
Abrams Industries, Inc. engages in (i) construction of retail and
commercial projects; (ii) manufacturing store fixtures, bank fixtures and
display units for retail outlets; and (iii) asset management and development
of income-producing properties, including acquisition, investment, management
and sale.
The Company was organized under Delaware law in 1960 to succeed to
the business of A. R. Abrams, Inc., which was founded in 1925 by Alfred R.
Abrams as a sole proprietorship. In 1984, the Company changed its state of
incorporation from Delaware to Georgia. As used herein, the term "Company"
refers to Abrams Industries, Inc. and its subsidiaries and predecessors,
unless the context indicates otherwise.
Financial information by industry segment is set forth in Note 12 to
the Consolidated Financial Statements of the Company.
CONSTRUCTION SEGMENT
The Company, through its wholly-owned subsidiary, Abrams
Construction, Inc., has engaged in the construction business since 1925.
Although the Company does work throughout much of the United States, it
concentrates its activities principally in the South. Construction activities
consist primarily of new construction, expansion, and remodeling of retail
store buildings, warehouses, banks, and shopping centers.
Construction contracts are obtained by competitive bid and by
negotiation. Generally, purchasing of materials and services for the
Company's construction operations is done on a project-by-project basis.
MANUFACTURING SEGMENT
The Company, through its wholly-owned subsidiary, Abrams Fixture
Corporation, has engaged in manufacturing and selling store fixtures since
1946, and has been designing and producing point-of-purchase and other
displays since 1975. The Company engineers and fabricates displays, check-out
counters, cabinets, tables and other store fixtures of wood, metal and
plastic laminate for sale primarily to several of the larger national retail
store chains. Substantially all of the store fixtures are fabricated to meet
the customer's requirements for type, size, shape and color and are generally
produced against specific orders. The Company also produces custom-designed
point-of-purchase display units which are sold to carpet and wallcovering
manufacturers, distributors, and retailers.
In 1997, the Company began manufacturing and installing custom
designed bank fixtures, including structural wall and ceiling components, for
branch banks in supermarkets throughout the United States.
The Company maintains raw material inventories of items such as
lumber, plywood, metals, particle board, laminates, and hardware. In the
opinion of management, the raw materials and supplies utilized by this
Segment of the Company are available from numerous sources.
REAL ESTATE SEGMENT
The Company, through its wholly-owned subsidiary, Abrams Properties,
Inc., has engaged in real estate development and asset management activities
since 1960. These activities have involved primarily the development and
management of shopping centers in the Southeast and Midwest. Selection of
target markets; evaluation and acquisition of sites; marketing to prospective
tenants; negotiation of tenant leases; securing construction and permanent
financing; contracting for design and construction; management of
construction; expansion, renovation and re-tenanting of properties;
maintenance of buildings and grounds of owned and leased properties; and
marketing and sale of properties to investors are all part of the Company's
asset management and development activities. In 1998, the Company also
invested in existing income-producing properties, including office and
retail, and developed an industrial facility in order to diversify the
Company's real estate portfolio.
The Company currently owns and manages seven shopping centers, all of
which are held as long-term investments. Six of the centers were developed by
the Company, and one was purchased. See "ITEM 2. PROPERTIES - Owned Shopping
Centers". The Company is also lessee and manager of nine Company-developed
shopping centers which were sold and leased back by the Company. See "ITEM 2.
PROPERTIES - Leaseback Shopping Centers". Kmart Corporation is an anchor
tenant in most of the Company's shopping centers. The Company also owns two
office properties. See "ITEM 2. PROPERTIES - Office Buildings".
The Company, with the collective efforts of all of its segments, has
recently completed the development and construction of a state-of-the-art
facility for the Manufacturing Segment. This facility is owned by the Real
Estate Segment and leased to the Manufacturing Segment. See "ITEM 2.
PROPERTIES".
EMPLOYEES AND EMPLOYEE RELATIONS
At April 30, 1998, the Company employed 173 salaried employees and
112 hourly employees. The hourly employees at Abrams Fixture Corporation are
represented by one union. In June 1996, the Company and the union signed a
three-year agreement concerning wages and benefits. The Company has no other
union agreements. On its construction jobs, the Company utilizes local labor
whenever practicable, paying the prevailing wage scale. The Company believes
that its relations with its employees are good.
SEASONAL NATURE OF BUSINESS
The Company's business historically has been slightly seasonal, with
the Construction Segment being affected by weather conditions. The Company
limits this exposure by operating in several regions of the country, with
operations primarily in the southern United States where favorable weather
conditions prevail for most of the year. The business of the Real Estate
Segment and Manufacturing Segment is generally not seasonal.
COMPETITION
The businesses of the Company are highly competitive. In its
construction work and store fixture and display manufacturing businesses, the
Company competes with a large number of national and local construction
companies and fixture manufacturers and suppliers, many of which have greater
financial resources than the Company. The Company also competes with smaller
specialized companies. The real estate development and asset management areas
are also extremely competitive, with numerous companies competing for
available financing, properties, tenants and investors.
PRINCIPAL CUSTOMERS
During fiscal 1998, the Company derived approximately 61%
($109,312,000) of its consolidated revenues from direct transactions with The
Home Depot, Inc. These revenues resulted principally from construction
activities and sales of manufactured store fixtures. See Note 12 to the
Consolidated Financial Statements of the Company. No other single customer
accounted for 10% or more of the Company's consolidated revenues during the
year.
BACKLOG
The following table indicates the backlog of contracts, orders and
expected rentals for the next twelve months by industry segment:
April 30, April 30,
1998 1997
------------------------------------------------------------
Construction $50,880,000 $40,862,000
Manufacturing 4,603,000 8,632,000
Real Estate 9,928,000 11,677,000
------------------------------------------------------------
Total Backlog $65,411,000 $61,171,000
=============================================================
The Company estimates that most of the backlog at April 30, 1998,
will be completed prior to April 30, 1999. No assurance can be given as to
future backlog levels or whether the Company will realize earnings from the
revenues resulting from the backlog at April 30, 1998.
REGULATION
The Company is subject to the authority of various state and local
regulatory agencies concerned with the licensing of contractors, but it has
experienced no material difficulty in complying with such requirements. The
Company is also subject to local zoning regulations and building codes in
performing its construction and real estate activities. Management believes
that it is in substantial compliance with all such governmental regulations.
Management believes that compliance with federal, state and local provisions
which have been enacted or adopted for regulating the discharge of materials
into the environment does not have a material effect upon the capital
expenditures, earnings and competitive position of the Company.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of the Company are as follows:
Name and Age Positions with the Company Officer Since
- ------------ ---------------------------- -------------
Joseph H. Rubin (55) A Director of the Company since 1983, he has been 1979
Chief Executive Officer since August 1997. From
August 1995 to May 1998 he served as President and
Chief Operating Officer. Prior to August 1995,
he served as Executive Vice President, Chief Financial
Officer and Secretary of the Company.
Alan R. Abrams (43) A Director of the Company since 1992, he has been President 1988
and Chief Operating Officer since May 1998. He served as
Executive Vice President of the Company from August 1997
to May 1998. From 1994 to May 1998, he served as President
and Chief Executive Officer of Abrams Properties, Inc. Prior
to that he served as Vice President of Abrams Properties, Inc.
J. Andrew Abrams (38) A Director of the Company since 1992, he has been Executive 1988
Vice President since August 1997. He also has served as Chief
Executive Officer of Abrams Fixture Corporation since July 1997.
From 1994 to July 1997, he served as Vice President of Abrams
Fixture Corporation. Prior to that he served as Vice President
of Abrams Properties, Inc.
B. Michael Merritt (48) President, Abrams Construction, Inc. since May 1995. Prior to 1986
that he served as Executive Vice President of Abrams
Construction, Inc.
Richard V. Priegel (45) President, Abrams Fixture Corporation since 1990 and Chief 1988
Operating Officer, Abrams Fixture Corporation since 1997.
Prior to 1990, he served as Executive Vice President and Chief
Financial Officer of Abrams Fixture Corporation.
Melinda S. Garrett (42) Chief Financial Officer since February 1997. She also has 1990
served Abrams Properties, Inc. as Chief Financial Officer
since May 1998, Vice President since 1993 and Treasurer since
1990.
Gerald T. Anderson, II (35) President and Chief Executive Officer, Abrams Properties, Inc. 1995
since May 1998. Prior to that he served as Executive Vice
President and Vice President of Abrams Properties, Inc.
Before joining Abrams Properties, Inc. in 1995, he was employed
for four years by JDN Realty Corporation as Vice
President/Development Leasing.
Executive Officers of the Company are elected by the Board of
Directors of the Company or the Board of Directors of the respective
subsidiary to serve at the pleasure of the Board. Bernard W. Abrams, a member
of the Board of Directors, and Edward M. Abrams, Chairman of the Board, are
brothers. Alan R. Abrams and J. Andrew Abrams are sons of Edward M. Abrams
and nephews of Bernard W. Abrams. There are no other family relationships
between any Executive Officer or Director and any other Executive Officer or
Director of the Company.
ITEM 2. PROPERTIES.
In October 1997, the Company purchased its corporate headquarters
building, which contains approximately 66,000 square feet of office space.
The building is located in the North X Northwest Office Park, 1945 The
Exchange, in suburban Atlanta, Georgia. The Company's Real Estate Segment and
Construction Segment are also located in this building. In addition to the
26,600 square feet of offices occupied by the Abrams entities, another 31,100
square feet is leased to unrelated tenants, and the remaining 8,200 square
feet is available for lease.
During the summer of 1998, the Manufacturing Segment relocated its
wood manufacturing and warehousing and metal fabrication facilities to a
250,000 square foot facility, owned by the Company, located in Lithia
Springs, Georgia, a suburb of Atlanta. The Company also owns its two
previously used manufacturing facilities, which are located near downtown
Atlanta. The former wood manufacturing facility, which contains approximately
255,000 square feet of light industrial, warehouse and office space, is
currently for sale. The 104,000 square foot former metal fabrication and
warehousing facility will continue to be used by the Company for warehouse
space.
In addition, the Company owns, or has an interest in, the following
properties as of April 30, 1998:
OWNED SHOPPING CENTERS
The Company, through its Real Estate Segment, owns six shopping
centers which it developed and one which it purchased. The following chart
provides relevant information relating to the owned shopping centers:
Principal
Amount of
Leasable Mortgage Debt
Square Rental Cash Mortgage Outstanding
Feet In Year(s) Income: Flow: Payments: As Of April 30,
Location Acres Building(s) Completed 1998 1998 1998 1998
- -----------------------------------------------------------------------------------------------------------------------------------
1100 W. Argyle Street 10.5 110,046 1972, 1997 $ 422,101 $ 391,886 $ 361,114 $ 3,402,393
Jackson, MI
- -----------------------------------------------------------------------------------------------------------------------------------
44-56 Bullsboro Drive 16.3 174,059 1974, 1987, 872,563 865,940 668,016 5,461,376
Newnan, GA 1989
- -----------------------------------------------------------------------------------------------------------------------------------
1075 W. Jackson Street 7.3 92,120 1980, 1992 474,824 430,954 405,842 3,213,631
Morton, IL
- -----------------------------------------------------------------------------------------------------------------------------------
2500 Airport Thruway 8.0 87,543 1980, 1988 441,286 401,870 391,954 2,805,786
Columbus, GA
- -----------------------------------------------------------------------------------------------------------------------------------
1500 Placida Road 28.7 213,739 1990 1,642,685 1,627,156 1,352,167 12,844,212
Englewood, FL
- -----------------------------------------------------------------------------------------------------------------------------------
15201 N. Cleveland 72.3 293,801 1993, 1996 2,161,488 1,922,363 1,562,071 14,086,592
North Fort Myers, FL
- -----------------------------------------------------------------------------------------------------------------------------------
5700 Harrison Avenue 10.8 86,396 1982 78,144 37,042 --- ---
Cincinnati, OH
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flow is defined as net operating income before the
following: depreciation, amortization of loan and lease costs,
interest and principal payments on mortgage notes.
Includes principal and interest, but excludes mortgage
refinancings, if any, and costs associated therewith.
Exculpatory provisions limit the Company's liability to the
respective mortgaged properties, except for the North Fort Myers,
Florida loan which has been guaranteed by Abrams Properties, Inc.
See Notes 7 and 8 to the Consolidated Financial Statements of the
Company.
Land is leased, not owned.
The Columbus, Georgia center is owned by Abrams-Columbus Limited
Partnership, in which Abrams Properties, Inc. serves as general partner
and owns an 80% interest.
Property was acquired in 1998. There is no debt on the property.
The two centers located in Morton, Illinois, and Columbus, Georgia,
are leased exclusively to Kmart. The Columbus, Georgia Kmart lease expires in
2008 and has ten five-year renewal options and the Morton, Illinois Kmart
lease expires in 2016 and has eight five-year renewal options. Anchor lease
terms for the centers not leased exclusively to Kmart are shown in the table
below.
Lease Options
Anchor Square Expiration To
Location Tenant Footage Date Renew
- -------------------------------------------------------------------------------------------------------------------------------
Jackson, MI Big Lots 26,022 2007 2 for 5 years each
Kroger 63,024 2021 6 for 5 years each
- -------------------------------------------------------------------------------------------------------------------------------
Newnan, GA Goody's 24,986 1998 None
Kmart 82,779 2017 10 for 5 years each
Kroger 49,319 2012 6 for 5 years each
- --------------------------------------------------------------------------------------------------------------------------------
Englewood, FL Beall's 31,255 2006 4 for 5 years each
Kmart 86,479 2015 10 for 5 years each
Publix 48,555 2010 4 for 5 years each
Walgreens 13,500 2040 None
- --------------------------------------------------------------------------------------------------------------------------------
North Fort Myers, FL AMC 54,805 2016 4 for 5 years each
Beall's 35,600 2009 9 for 5 years each
Food Lion 33,000 2013 4 for 5 years each
Jo-Ann Fabrics 16,000 2003 3 for 5 years each
Kmart 107,806 2018 10 for 5 years each
- --------------------------------------------------------------------------------------------------------------------------------
Cincinnati, OH Kroger 42,456 2000 4 For 5 years each
- --------------------------------------------------------------------------------------------------------------------------------
Tenant currently has "tenancy at will".
Tenant may terminate its lease with six months notice at five
year intervals beginning in 2010.
With the exception of the Kmart lease in Columbus, Georgia, all of
the anchor tenant and most of the small shop leases provide for contingent
rentals if sales exceed specified amounts. Most major tenants have rights to
offset those contingent rentals against certain annual operating expenses
paid by them. In 1998, the Company received $117,015 in contingent rentals,
net of offsets, which amounts are included in the aggregate rentals set forth
above.
Typically, tenants are responsible for their pro rata share of ad
valorem taxes, insurance and common area maintenance (subject to the right of
offset discussed above). Kmart has complete maintenance responsibility for
the Morton, Illinois and Columbus, Georgia centers.
LEASEBACK SHOPPING CENTERS
The Company, through its Real Estate Segment, is lessee of nine
shopping centers which it developed, sold and leased back under leases
expiring from years 2001 to 2014. The nine centers are subleased by the
Company to Kmart Corporation for periods corresponding to the Company's
leases. The Kmart subleases provide for contingent rentals if sales exceed
specified amounts, and contain ten five-year renewal options, except
Jacksonville, Florida, which has eight five-year renewal options. The
Company's leases with the fee owners contain renewal options coextensive with
Kmart's renewal options. Kmart is responsible for insurance and ad valorem
taxes, but has the right to offset against contingent rentals any such taxes
paid in excess of specified amounts. In 1998, the Company received $77,930 in
contingent rentals, net of offsets, which amounts are included in the
aggregate annual rentals set forth below. The Company has responsibility for
structural and roof maintenance of the buildings. The Company also has
responsibility for parking lots and driveways, except routine upkeep, which
is the responsibility of the tenant, Kmart. The Company's leases contain
exculpatory provisions which limit the Company's liability to its interest in
the respective subleases.
The following chart provides certain information relating to the
leaseback shopping centers:
- -----------------------------------------------------------------------------------------------------------------------------
Square Rental Rent
Feet In Year(s) Income Expense
Location Acres Building(s) Completed 1998 1998
- ----------------------------------------------------------------------------------------------------------------------------
Bayonet Point, FL 10.8 109,340 1976, 1994 $363,614 $269,568
- ----------------------------------------------------------------------------------------------------------------------------
Orange Park, FL 9.4 84,180 1976 264,000 226,796
- ----------------------------------------------------------------------------------------------------------------------------
Davenport, IA 10.0 84,180 1977 279,624 209,724
- ----------------------------------------------------------------------------------------------------------------------------
Minneapolis, MN 7.1 84,180 1978 342,920 230,570
- ----------------------------------------------------------------------------------------------------------------------------
West St. Paul, MN 10.0 84,180 1978 298,465 229,630
- ----------------------------------------------------------------------------------------------------------------------------
Ft. Smith, AR 9.2 106,141 1979, 1994 255,350 223,195
- ----------------------------------------------------------------------------------------------------------------------------
Jacksonville, FL 11.6 97,032 1979 303,419 258,858
- ----------------------------------------------------------------------------------------------------------------------------
Louisville, KY 9.3 72,897 1979 290,000 251,279
- ----------------------------------------------------------------------------------------------------------------------------
Richfield, MN 5.7 74,217 1979 300,274 241,904
============================================================================================================================
OFFICE BUILDINGS
The Company, through its Real Estate Segment, owns two office
properties: the corporate headquarters building discussed above and an office
park in northwest suburban Atlanta, Georgia. Both were acquired in fiscal
year 1998. The following chart provides pertinent information relating to the
office buildings:
Principal
Amount of
Leasable Mortgage Debt
Square Rental Cash Mortgage Outstanding
Feet In Year(s) Income Flow Payments As Of April 30,
Location Acres Building(s) Completed 1998 1998 1998 1998
- --------------------------------------------------------------------------------------------------------------------------------
1945 The Exchange 3.12 65,946 1974, 1997 $420,321 $108,428 $188,663 $4,793,583
Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------------------
1501-1523 Johnson Ferry Road 8.82 121,476 1980,1985 918,453 651,754 264,487 6,460,231
Marietta, GA
- --------------------------------------------------------------------------------------------------------------------------------
Cash flow is defined as net operating income before the
following: depreciation, amortization of loan and lease costs,
interest and principal payments on mortgage notes.
Corporate headquarters building of which the Parent Company and
the Construction Segment and Real Estate Segment occupy approximately
27,000 square feet. Rental income and cash flow includes intercompany
market rent of $287,814 paid by the Parent Company and the Construction
and Real Estate Segments. The building is in its initial lease-up phase.
As of April 30, 1998, the building is approximately 88% leased.
LAND HELD FOR FUTURE DEVELOPMENT OR SALE
The Company, through its Real Estate Segment, owns or has an interest
in the following undeveloped land held for future development or sale:
Year Intended
Location Acres Acquired Use
- -------------------------------------------------------------------------------------------------------------------------------
W. Argyle Street 0.9 1972 One outlot or retail shops
Jackson, MI
- -------------------------------------------------------------------------------------------------------------------------------
Kimberly Road & Fairmont Street 6.0 1977 Outlot, plus food store and/or retail shops
Davenport, IA
- -------------------------------------------------------------------------------------------------------------------------------
Dixie Highway 4.7 1979 Food store and/or retail shops
Louisville, KY
- -------------------------------------------------------------------------------------------------------------------------------
West 15th Street 1.4 1979 Two outlots
Washington, NC
- -------------------------------------------------------------------------------------------------------------------------------
Mundy Mill Road 4.8 1987 Retail shops and/or four outlots
Oakwood, GA
- -------------------------------------------------------------------------------------------------------------------------------
North Cleveland Avenue 12.4 1993 Six outlots, anchor pads and retail shops
North Fort Myers, FL
- -------------------------------------------------------------------------------------------------------------------------------
"Outlot" as used herein refers to a small parcel of land reserved
from the original shopping center parcel and is generally sold for,
leased for, or developed as, a fast-food operation, bank or similar use.
Originally part of Jackson, Michigan shopping center. Redeveloped
into separate outlot in 1996.
Leased under leases terminating in years 2005 and 2010 with a
right to extend for three additional five-year periods. Both outlots are
sub-leased for terms coextensive with the Company's lease.
There is no mortgage debt on any of the above properties, except for
the North Fort Myers, Florida retail shop land. See Note 8 to the
Consolidated Financial Statements of the Company. The Company will either
develop the properties described above or will hold them for sale or lease to
others.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to, nor is any of its properties the
subject of, any material pending legal proceedings, other than ordinary
routine proceedings incidental to the business of the Company. To the
knowledge of the management of the Company, there are no material legal
proceedings contemplated or threatened against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
DIVIDENDS PAID
CLOSING MARKET PRICES PER SHARE
------------------------------------------------------------------------------------------------
FISCAL | FISCAL | FISCAL FISCAL
1998 | 1997 | 1998 1997
---------------------------|--------------------------------------|-----------------------------
HIGH LOW | HIGH LOW |
TRADE TRADE | TRADE TRADE |
---------------------------|--------------------------------------|-----------------------------
| |
First Quarter $7.875 $5.000 | $4.125 $3.250 | $.070 $.015
Second Quarter 7.625 5.375 | 4.625 3.438 | .040 .015
Third Quarter 8.406 6.000 | 5.250 4.250 | .040 .020
Fourth Quarter 8.813 6.500 | 5.500 4.750 | .040 .020
---------------------------|--------------------------------------|-----------------------------
The common stock of Abrams Industries, Inc. is traded
over-the-counter in the NASDAQ National Market System (Symbol: ABRI). The
approximate number of holders of common stock was 500 (including shareholders
of record and shares held in street name) at May 31, 1998.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data for the
Company and should be read in conjunction with the consolidated financial
statements and notes thereto.
1998 1997 1996 1995 1994
---------------------------------------------------------------------------------
Consolidated Revenues $178,590,842 $136,123,601 $134,299,240 $122,608,682 $123,602,954
Net Earnings (Loss) $ 2,999,478 $ 2,391,398 $ (304,188) $ (331,019) $ 1,359,408
Net Earnings (Loss) Per Share* $ 1.02 $ .81 $ (.10) $ (.11) $ .46
Shares Outstanding at Year-End 2,936,356 2,938,356 2,970,856 2,993,540 2,993,540
Cash Dividends Paid Per Share $ .19 $ .07 $ .105 $ .12 $ .11
Shareholders' Equity $ 24,535,863 $ 22,125,214 $ 20,152,376 $ 20,872,035 $ 21,562,279
Shareholders' Equity Per Share* $ 8.36 $ 7.53 $ 6.78 $ 6.97 $ 7.20
Working Capital $ 15,283,031 $ 13,075,119 $ 10,417,697 $ 11,447,872 $ 9,445,073
Depreciation and Amortization Expense $ 2,853,634 $ 3,401,334 $ 3,242,738 $ 3,078,878 $ 2,787,078
Total Assets $121,309,444 $ 91,499,438 $ 90,635,098 $ 88,576,745 $ 92,732,567
Income-Producing Property Under
Development, Income-Producing
Properties and Property, Plant and
Equipment, net $ 67,119,159 $ 45,028,355 $ 54,493,842 $ 55,065,157 $ 56,787,858
Long-Term Debt $ 62,938,807 $ 41,118,885 $ 51,202,536 $ 51,580,229 $ 52,637,298
Return on Average Shareholders' Equity 12.9% 11.3% (1.5%) (1.6%) 6.5%
1993 1992 1991 1990 1989 1988
-----------------------------------------------------------------------------------------
Consolidated Revenues $82,878,911 $ 83,818,090 $ 78,020,796 $54,887,568 $50,331,871 $51,032,736
Net Earnings (Loss) $ 1,710,381 $ 1,021,303 $ 1,027,373 $ 1,534,063 $ 1,435,567 $ 1,082,883
Net Earnings (Loss) Per Share* $ .57 $ .34 $ .34 $ .51 $ .48 $ .36
Shares Outstanding at Year-End 2,977,540 2,977,540 2,977,540 2,994,039 2,978,039 1,787,000
Cash Dividends Paid Per Share $ .11 $ .20 $ .20 $ .20 $ .18 $ .14
Shareholders' Equity $20,484,880 $ 19,102,028 $ 18,676,233 $18,304,102 $17,310,146 $16,402,538
Shareholders' Equity Per Share* $ 6.84 $ 6.38 $ 6.24 $ 6.11 $ 5.78 $ 5.48
Working Capital $ 8,030,898 $ 2,783,427 $ 3,140,650 $21,575,826 $18,830,026 $12,955,259
Depreciation and Amortization Expense $ 2,162,472 $ 2,106,703 $ 1,938,687 $ 1,707,985 $ 1,668,105 $ 1,491,401
Total Assets $90,537,249 $ 78,260,810 $ 76,606,498 $64,047,108 $56,318,968 $51,178,946
Income-Producing Property Under
Development, Income-Producing
Properties and Property, Plant and
Equipment, net $64,340,348 $ 52,976,540 $49,999,625 $22,797,353 $24,088,285 $21,069,833
Long-Term Debt $55,197,178 $ 41,513,804 $39,104,720 $29,955,918 $30,071,322 $23,337,984
Return on Average Shareholders' Equity 8.6% 5.4% 5.6% 8.6% 8.5% 6.7%
*Adjusted to reflect stock dividends and stock splits.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED APRIL 30, 1998, 1997
AND 1996.
RESULTS OF OPERATIONS
REVENUES
Revenues for 1998 were $178,590,842, compared to $136,123,601 and
$134,299,240 for 1997 and 1996, respectively. This represents an increase in
Revenues of 31% and 33% from those of 1997 and 1996, respectively. Revenues
include Interest income of $684,270, $452,992 and $462,858 for 1998, 1997 and
1996, respectively, and Other income of $124,357, $46,262 and $173,577 for
1998, 1997 and 1996, respectively. The figures in Chart A below do not
include Interest income, Other income or Intersegment revenues. When more
than one segment is involved, Revenues are reported by the segment that sells
the product or service to an unaffiliated purchaser.
REVENUE SUMMARY BY SEGMENT
(Dollars in Thousands)
CHART A
Years Ended Increase Years Ended Increase
April 30, (Decrease) April 30, (Decrease)
-------------------------------------------------- ------------------------------------------
1998 1997 Amount Percent 1998 1996 Amount Percent
--------------------------------------------------- ------------------------------------------
Construction $141,453 $ 97,977 $43,476 44 $141,453 $107,495 $33,958 32
Manufacturing 14,970 16,662 (1,692) (10) 14,970 14,999 (29) --
Real Estate 21,359 20,985 374 2 21,359 11,169 10,190 91
--------------------------------------------------- ----------------------------------------
Total $177,782 $135,624 $42,158 31 $177,782 $133,663 $44,119 33
=================================================== =========================================
NOTES:
The increase in 1998 from those in 1997 and 1996 is attributable
to an increase in the level of activity in the construction of new buildings
for an existing customer and revenue recognized from new customers. The
amounts reported exclude $5,026,181 in 1998 related to construction of the
new facility for the Manufacturing Segment, and $345,000 in 1997 and $792,000
in 1996 related to construction work at two shopping centers for the Real
Estate Segment.
The decrease in 1998 from that in 1997 is attributable to a
postponement of a major order from an existing customer. The order is now
expected in 1999. The 1998 amounts reported exclude $181,003 related to
manufactured items supplied to one of the Construction Segment's customers.
Rental revenues for 1998 were $11,334,000, compared to
$11,771,000 in 1997 and $11,169,000 in 1996. Revenues from sales of real
estate amounted to $10,025,000 in 1998, $9,215,000 in 1997, and $-0- in 1996.
The 1998 real estate sales include sales of a shopping center in Oakwood,
Georgia, freestanding Kmarts in Tifton, Georgia, and Newark, Ohio, and an
outparcel in North Fort Myers, Florida. The 1997 real estate sales include
outparcel sales in Englewood, Florida, and Oakwood, Georgia, and freestanding
Kmarts in Niles, Michigan, Shawnee, Oklahoma, and Warner Robins, Georgia.
COSTS: APPLICABLE TO SEGMENT REVENUES
As a percentage of total Segment Revenues (See Chart A), the
applicable total Segment Costs (See Chart B) of $155,520,419 for 1998,
$115,412,086 for 1997, and $119,775,802 for 1996 were 87%, 85% and 90%,
respectively.
COSTS: APPLICABLE TO REVENUES SUMMARY BY SEGMENT
(Dollars in Thousands)
CHART B
Percent of
Segment Revenues
Years Ended For Years Ended
April 30, April 30,
-------------------------------------- ---------------------------------------
1998 1997 1996 1998 1997 1996
-------------------------------------- ---------------------------------------
Construction $133,430 $ 91,638 $101,894 94 94 95
Manufacturing 10,547 10,412 11,587 70 62 77
Real Estate 11,543 13,362 6,295 54 64 56
--------------------------------------
Total $155,520 $115,412 $119,776 87 85 90
======================================
NOTES:
The increase in the percentage in 1998 as compared to 1997 is
attributable to the product mix of fixtures sold and the installation of
fixtures. The installation of fixtures is a new line of business that the
Company is offering to better service its customers and does not command the
same profit margin as does manufacturing fixtures. The decrease in the dollar
amount and percentage in 1998 as compared to 1996 is a result of
"re-engineering" efforts that have focused on cost control.
The decrease in the dollar amount and percentage in 1998 as
compared to 1997 is attributable to a 1997 provision for impairment loss of
$2,750,000 to reduce the net carrying value of the North Fort Myers, Florida
shopping center to estimated fair value. There was no impairment loss
provision in 1998 or 1996. See Note 5 to the Consolidated Financial
Statements for further discussion.
SELLING, SHIPPING, GENERAL AND ADMINISTRATIVE EXPENSES
For the years 1998, 1997 and 1996, Selling, shipping, general and
administrative expenses (See Chart C) were $13,571,655, $12,084,015 and
$10,273,008, respectively. As a percentage of Consolidated Revenues, these
expenses were 8% for 1998, 9% for 1997 and 8% for 1996. In reviewing Chart C,
the reader should recognize that the volume of revenues generally will affect
these amounts and percentages. The percentages in Chart C are based on
expenses as they relate to segment revenues in Chart A, with the exception
that Parent expenses and total expenses relate to Consolidated Revenues.
SELLING, SHIPPING, GENERAL AND ADMINISTRATIVE EXPENSES SUMMARY BY SEGMENT
(Dollars in Thousands)
CHART C
Percent of
Segment Revenues
Years Ended For Years Ended
April 30, April 30,
------------------------------------------ -----------------------------------
1998 1997 1996 1998 1997 1996
------------------------------------------ -----------------------------------
Construction $ 4,525 $ 3,386 $ 2,952 3 3 3
Manufacturing 3,941 4,470 3,454 26 27 23
Real Estate 2,500 1,905 1,628 12 9 15
Parent 2,606 2,323 2,239 2 2 2
------------------------------------------
Total $13,572 $12,084 $10,273 8 9 8
==========================================
NOTES:
On a dollar basis comparison, the higher expenses in 1998 as
compared to 1997 and 1996 stemmed from increased incentive-based compensation
expenses which were a result of increased Segment profits.
The decrease in the dollar amount and percentage of expenses in
1998 as compared to 1997 is a result of a decrease in personnel costs, which
was partially offset by an increase in engineering and design expenses and an
increase in prototype expenditures. The increase in the dollar amount and
percentage of expenses in 1998 as compared to 1996 is a result of an increase
in compensation expense due to increased profits and an increase in
engineering and prototype costs.
The increase in the dollar amount of expenses in 1998 as compared
to 1997 and 1996 is attributable to increased employee compensation expenses
which were a result of increased Segment profits.
INTEREST COSTS
The majority of interest costs expensed of $4,666,290, $4,779,102 and
$4,717,618 in 1998, 1997 and 1996, respectively, are related to debt on real
estate and utilization of lines of credit. Interest costs of $112,000,
$25,000 and $70,000, relating to properties under development in 1998, 1997
and 1996, respectively, were capitalized.
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION
Income-producing property increased by $13,938,133 in fiscal year
ending April 30, 1998, primarily as a result of the purchases of: (1) an
approximately 66,000 square foot, four-story office building located in
suburban Atlanta, Georgia, which the Parent Company partially occupies with
the Construction Segment and the Real Estate Segment; (2) an approximately
121,000 square foot, twelve building office park located in Marietta,
Georgia; and (3) an 86,000 square foot shopping center anchored by Kroger and
located in Cincinnati, Ohio. These purchases were partially offset by the
sale of the Tifton, Georgia Kmart for $1,012,121 in cash plus the repayment
of the outstanding mortgage of $675,879. This sale was structured as a
tax-deferred, like-kind exchange pursuant to Internal Revenue Code Section
1031, which allows a deferral of the tax gain if the Company utilizes the
proceeds of the sale to purchase other real estate within 180 days of the
sale. The Company has recognized a gain on the sale of this property for
financial statement purposes. The proceeds of this sale, in conjunction with
the proceeds from the tax-deferred exchange transactions from prior year
sales of properties in Niles, Michigan, Shawnee, Oklahoma, and Warner Robins,
Georgia, were used to purchase the above Income-producing properties.
Management believes that it has fully complied with the provisions of
Internal Revenue Code Section 1031 and thus will defer most of the tax gain
on these sales.
Property held for sale decreased by $4,886,209 in 1998 primarily as a
result of the sales of three properties: (1) a shopping center in Oakwood,
Georgia, which was sold for $1,607,752 in cash plus the assumption of the
$4,468,899 mortgage loan; (2) a freestanding Kmart in Newark, Ohio, which was
sold for $225,000 in cash plus the assumption of the $1,265,000 mortgage loan
and (3) an outparcel in North Fort Myers, Florida, which was sold for
$770,000 in cash. The first two sales were also structured as tax-deferred,
like-kind exchanges pursuant to Internal Revenue Code Section 1031. All of
the properties were sold at gains. As of April 30, 1998, the only Property
held for sale was the Company's former wood manufacturing facility in
Atlanta, Georgia, which is currently being marketed and is expected to be
sold at a gain. The mortgage debt associated with the facility has been
reclassified as short-term.
Property, plant and equipment increased by $8,152,671 during the
fiscal year, primarily as a result of the construction of the Manufacturing
Segment's new facility. As of April 30, 1998, the capitalized costs of the
project to date were $7,855,561, which includes the land and building
construction expenditures. The land was purchased with funds received from
the tax-deferred exchanges previously discussed. The facility was completed
in early summer 1998 and is now fully operational. For further information
related to the financing of this property, see "LIQUIDITY AND CAPITAL
RESOURCES".
LIQUIDITY AND CAPITAL RESOURCES
Except for certain real estate construction loans and occasional
short-term operating loans, the Company normally has been able to finance its
working capital needs through funds generated internally. If adequate funds
are not generated through normal operations, the Company has available bank
lines of credit. The Company also has developed relationships with various
banks which management believes could be sources for other short-term and
long-term financing, if required. Working capital increased to $15,283,031 at
the end of 1998, from $13,075,119 and $10,417,697 at the end of 1997 and
1996, respectively. In 1998, operating activities provided cash of
$5,954,188; investing activities used cash of $21,037,561, primarily for
additions to Income-producing properties; and financing activities provided
cash of $20,712,793.
In April 1992, the Company secured a construction loan for the North
Fort Myers, Florida development from SunTrust Bank, Atlanta. The loan was
amended in April 1994, August 1995, March 1996, July 1997 and March 1998. The
primary term of the construction financing was five years, and the loan has
been extended to June 1999, in accordance with the loan agreement. The loan
carries a floating interest rate of prime plus 3/8%. The maximum amount to be
funded will be determined by a formula based on future development.
In August 1997, the Company refinanced the $2,100,000 construction
loan on its Jackson, Michigan shopping center with a permanent loan of
$3,500,000. The permanent loan has a term of 22 years and bears interest at 8
5/8%. The loan required the establishment of a $500,000 letter of credit at
closing which is to be used to pay down the loan in August 1998 if certain
leasing requirements are not attained.
In October 1997, the Company entered into an acquisition and
construction loan with SunTrust Bank, Atlanta, to fund the purchase and
renovations of the corporate headquarters office building in Atlanta,
Georgia. The maximum amount of the loan is $5,200,000, and the loan is due in
October 1999. The Company has the option of paying interest at the prime rate
or based on the Eurodollar rate plus 2.0%, which may be locked in for one,
two, three, or six month periods at the Company's discretion.
In November 1997, the Company closed on the $11,000,000, twenty-one
year bond financing for the construction of its new manufacturing facility.
The bonds bear interest at prevailing market rates, reset weekly. In an
effort to minimize exposure to interest rate fluctuations in connection with
the bonds, the Company entered into two separate interest rate swap
agreements with SunTrust Bank, Atlanta, in February 1998. The first swap
agreement terminates in February 2001. The notional amount reduces annually
from $5,500,000 at inception to $5,300,000 at the expiration of the
agreement. The agreement calls for the Company to make fixed rate payments to
SunTrust of 5.57% per annum of the notional amount, in exchange for SunTrust
making floating rate payments based on the 30-day Non-financial AA Commercial
Paper rate. The second interest rate swap agreement terminates in February
2003. The notional amount reduces annually from $5,500,000 at inception to
$5,057,500 at the expiration of the agreement. The remaining terms of the
second agreement are identical to the terms of the first except the fixed
rate payment is 5.67% per annum. The notional amounts of the swap agreements
are set to match the outstanding principal amount of the bonds. The swap
floating rates are reset weekly, and the Company settles with the
counterparty monthly. The Company expects the counterparty to the agreements
to abide by the terms of the agreements.
In December 1997, the Company obtained a $6,480,000 permanent loan on
the office park in Marietta, Georgia. The property was originally purchased
in October 1997 with a portion of the proceeds from the tax-deferred exchange
transactions previously discussed and draws on the bank lines of credit,
which have been repaid. The loan bears interest at 7.41% per annum, and the
final payment of the loan is due in January 2008.
During the coming fiscal year, the Company plans to obtain financing
on the Cincinnati, Ohio shopping center purchased in February 1998. As of
April 30, 1998, there was no debt on this property. Management expects the
proceeds from the financing will be used to fund future purchases of
income-producing properties.
At April 30, 1998, the Company had unsecured committed lines of
credit totaling $7,000,000, of which $6,500,000 was available and $500,000
was reserved for the letter of credit issued for the Jackson, Michigan loan
discussed above. The Company also had a committed line of credit totaling
$2,500,000, secured by the Manufacturing Segment's inventory and receivables,
of which none was outstanding.
EFFECTS OF INFLATION ON REVENUES AND OPERATING PROFITS
The effects of inflation upon the Company's operating results are
varied. Inflation in the current year has been modest and has had minimal
effect on the Company. The Construction Segment subcontracts most of its work
at fixed prices, which normally will help that segment protect its profit
margin percentage.
In the Manufacturing Segment, the raw material prices were stable.
In the Real Estate Segment, many of the leases are long-term (over 20
years) with fixed rents except for contingent rent provisions by which the
Company may earn additional rent as a result of increases in tenants' sales.
The contingent rent provisions, however, permit the tenants in most cases, to
offset against contingent rents any increases in ad valorem taxes over a
specified amount. If inflation were to rise, ad valorem taxes would probably
increase which, in turn, would cause a decrease in the contingent rents.
Furthermore, the Company has certain repair obligations and the costs of
repairs increase with inflation.
Inflation causes a rise in interest rates, which has a positive
effect on investment income, but has a negative effect on profit margins
because of the increased costs of production. Overall, inflation will tend to
limit the Company's markets and, in turn, will reduce revenues as well as
operating profits.
YEAR 2000
Management has undertaken a program to prepare the Company's
financial and operating computer systems and ancillary applications for the
year 2000. All necessary software modifications are expected to occur in a
timely manner at a cost which is not expected to be material.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report 27
Consolidated Balance Sheets - April 30, 1998 and 1997 28
Consolidated Statements of Operations - For the years ended April 30, 1998, 1997 and 1996 29
Consolidated Statements of Shareholders' Equity - For the years ended April 30, 1998, 1997 and 1996 30
Consolidated Statements of Cash Flows - For the years ended April 30, 1998, 1997 and 1996 31
Notes to Consolidated Financial Statements - April 30, 1998, 1997 and 1996 32
Schedules:
SCHEDULE NUMBER
---------------
II Valuation and Qualifying Accounts 43
III Real Estate and Accumulated Depreciation 44
/TABLE
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Abrams Industries, Inc.:
We have audited the consolidated financial statements of Abrams
Industries, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Abrams Industries, Inc. and subsidiaries as of April 30, 1998 and 1997, and
the results of their operations and cash flows for each of the years in the
three-year period ended April 30, 1998, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
/s/ KPMG Peat Marwick LLP
June 12, 1998
Atlanta, Georgia
CONSOLIDATED BALANCE SHEETS
April 30,
---------------------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash of $4,860,226
and $609,629 in 1998 and 1997, respectively $ 13,240,471 $ 7,611,051
Receivables:
Trade notes and accounts, net 1,996,831 3,512,652
Contracts, net, including retained amounts of
$5,480,974 in 1998 and $4,057,528 in 1997 (note 3) 19,148,413 15,402,509
Inventories, net (note 2) 1,495,063 1,557,964
Costs and earnings in excess of billings (note 3) 5,637,599 2,785,340
Property held for sale (note 4) 1,691,764 6,577,973
Deferred income taxes (note 9) 848,939 682,321
Other 614,244 467,733
- --------------------------------------------------------------------------------------------------------------------------------
Total current assets 44,673,324 38,597,543
- --------------------------------------------------------------------------------------------------------------------------------
INCOME-PRODUCING PROPERTIES, net (notes 5, 7 and 8) 57,262,540 43,324,407
PROPERTY, PLANT AND EQUIPMENT, NET (notes 6 and 8) 9,856,619 1,703,948
OTHER ASSETS:
Land held for future development or sale 4,237,845 3,889,361
Notes receivable 415,538 515,832
Cash surrender value of officers life insurance 1,282,790 1,021,481
Deferred loan costs, net 814,405 531,812
Other 2,766,383 1,915,054
- --------------------------------------------------------------------------------------------------------------------------------
$ 121,309,444 $91,499,438
================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade and subcontractors payables, including
retained amounts of $3,797,162 in 1998 and
$1,904,080 in 1997 $ 19,445,101 $10,385,079
Accrued expenses 3,664,863 3,438,412
Billings in excess of costs and earnings (note 3) 1,369,148 1,148,665
Accrued cash and deferred profit-sharing (note 10) 3,325,048 3,130,097
Current maturities of long-term debt (notes 7 and 8) 1,586,133 7,420,171
- --------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 29,390,293 25,522,424
- --------------------------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES (note 9) 3,018,429 1,884,453
OTHER LIABILITIES 1,426,052 848,462
MORTGAGE NOTES PAYABLE, less current maturities (note 7) 33,433,945 24,919,282
OTHER LONG-TERM DEBT, less current maturities (notes 7 and 8) 29,504,862 16,199,603
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 96,773,581 69,374,224
- --------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (notes 4, 5, 7, and 8)
SHAREHOLDERS' EQUITY (note 10):
Common stock, $1 par value; authorized 5,000,000 shares;
3,014,039 issued and 2,936,356 outstanding in 1998;
3,010,039 issued and 2,938,356 outstanding in 1997 3,014,039 3,010,039
Additional paid-in capital 2,019,690 2,012,190
Retained earnings 19,914,685 17,473,536
- ---------------------------------------------------------------------------------------------------------------------------------
Total paid-in capital and retained earnings 24,948,414 22,495,765
Less treasury stock, 77,683 and 71,683 shares in 1998
and 1997, respectively 412,551 370,551
- ---------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 24,535,863 22,125,214
- ---------------------------------------------------------------------------------------------------------------------------------
$ 121,309,444 $91,499,438
=================================================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended April 30,
-----------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
REVENUES:
Construction $141,453,025 $97,976,902 $ 107,494,271
Manufacturing 14,970,261 16,661,798 14,999,240
Rental income 11,334,278 11,770,889 11,169,294
Real estate sales 10,024,651 9,214,758 ---
Interest 684,270 452,992 462,858
Other 124,357 46,262 173,577
- ----------------------------------------------------------------------------------------------------------------
178,590,842 136,123,601 134,299,240
- ----------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Applicable to revenues:
Construction 133,430,395 91,637,636 101,893,350
Manufacturing 10,547,381 10,412,263 11,587,307
Rental property operating expenses,
exclusive of interest 6,385,181 6,526,306 6,295,145
Cost of real estate sold 5,157,462 4,085,881 ---
Provision for impairment on income-producing
property (note 5) --- 2,750,000 ---
- ---------------------------------------------------------------------------------------------------------------
155,520,419 115,412,086 119,775,802
- ---------------------------------------------------------------------------------------------------------------
Selling, shipping, general and administrative 13,571,655 12,084,015 10,273,008
Interest costs incurred, less interest capitalized of
$112,000, $25,000, and $70,000 in 1998, 1997 and
1996, respectively 4,666,290 4,779,102 4,717,618
- ---------------------------------------------------------------------------------------------------------------
173,758,364 132,275,203 134,766,428
- ---------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 4,832,478 3,848,398 (467,188)
- ---------------------------------------------------------------------------------------------------------------
INCOME TAXES EXPENSE (BENEFIT) (note 9):
Current 865,642 968,782 117,820
Deferred 967,358 488,218 (280,820)
- ---------------------------------------------------------------------------------------------------------------
1,833,000 1,457,000 (163,000)
- ---------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 2,999,478 $2,391,398 $ (304,188)
===============================================================================================================
NET EARNINGS (LOSS) PER SHARE (note 11):
Basic $ 1.02 $ .81 $ (.10)
- ---------------------------------------------------------------------------------------------------------------
Diluted $ 1.02 $ .80 $ (.10)
===============================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock Additional
---------------------- Paid-In Retained Treasury
Shares Amount Capital Earnings Stock Total
- ---------------------------------------------------------------------------------------------------------------------------
BALANCES at April 30, 1995 3,010,039 $3,010,039 $2,012,190 $ 15,906,239 $ (56,433) $ 20,872,035
Net loss --- --- --- (304,188) --- (304,188)
Cash dividends declared -
$.105 per share --- --- --- (312,603) --- (312,603)
Acquisition of 22,684 shares
of treasury stock --- --- --- --- (102,868) (102,868)
- ----------------------------------------------------------------------------------------------------------------------------
BALANCES at April 30, 1996 3,010,039 3,010,039 2,012,190 15,289,448 (159,301) 20,152,376
Net earnings --- --- --- 2,391,398 --- 2,391,398
Cash dividends declared -
$.07 per share --- --- --- (207,310) --- (207,310)
Acquisition of 32,500 shares
of treasury stock --- --- --- --- (211,250) (211,250)
- -----------------------------------------------------------------------------------------------------------------------------
BALANCES at April 30, 1997 3,010,039 3,010,039 2,012,190 17,473,536 (370,551) 22,125,214
Net earnings --- --- --- 2,999,478 --- 2,999,478
Cash dividends declared -
$.19 per share --- --- --- (558,329) --- (558,329)
Exercise of stock options 4,000 4,000 7,500 --- --- 11,500
Acquisition of 6,000 shares
of treasury stock --- --- --- --- (42,000) (42,000)
- ----------------------------------------------------------------------------------------------------------------------------
BALANCES at April 30, 1998 3,014,039 $3,014,039 $2,019,690 $19,914,685 $ (412,551) $ 24,535,863
============================================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended April 30,
-------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings (loss) $ 2,999,478 $ 2,391,398 $ (304,188)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 2,853,634 3,401,334 3,242,738
Deferred tax expense (benefit) 967,358 488,218 (280,820)
Gain on sales of real estate (4,867,189) (5,128,877) ---
Provision for impairment on income-producing property --- 2,750,000 ---
Decrease (increase) in assets:
Receivables, net (2,230,083) (2,840,330) (5,392,110)
Inventories, net 62,901 118,577 979,365
Costs and earnings in excess of billings (2,852,259) 73,049 (1,289,544)
Other current assets (146,511) (83,441) 3,787
Other assets (1,112,638) (790,074) (430,375)
Increase (decrease) in liabilities:
Trade and subcontractors payable 9,060,022 (861,657) 3,387,122
Accrued expenses 226,451 1,542,646 (71,722)
Accrued cash and deferred profit-sharing 194,951 1,512,165 124,451
Billings in excess of costs and earnings 220,483 366,847 281,350
Other liabilities 577,590 309,199 (46,520)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 5,954,188 3,249,054 203,534
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of real estate 3,818,393 1,496,831 ---
Additions to income-producing properties (16,045,209) (5,205,926) ---
Additions to property, plant and equipment, net (8,911,039) (622,667) (2,363,431)
Repayments received on notes receivable 100,294 108,815 159,276
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (21,037,561) (4,222,947) (2,204,155)
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Debt proceeds 32,145,583 5,061,143 6,419,282
Debt repayments (10,425,800) (1,486,522) (6,821,440)
Additions to deferred loan costs (418,161) (23,570) ---
Cash dividends (558,329) (207,310) (312,603)
Repurchases of common stock (42,000) (211,250) (102,868)
Proceeds from exercise of stock options 11,500 --- ---
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 20,712,793 3,132,491 (817,629)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 5,629,420 2,158,598 (2,818,250)
Cash and cash equivalents at beginning of year 7,611,051 5,452,453 8,270,703
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $13,240,471 $ 7,611,051 $ 5,452,453
=============================================================================================================================
Supplemental disclosure of noncash financing activities:
Assumption of mortgage loans by purchasers in
conjunction with sale of income-producing properties $ 5,733,899 $ 7,723,758 $ ---
Supplemental schedule of cash flow information:
Interest paid, net of amounts capitalized $ 4,817,206 $ 4,829,201 $ 4,699,374
Income taxes paid $ 726,733 $ 382,873 $ 107,653
=============================================================================================================================
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1998, 1997, AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of
Abrams Industries, Inc., its wholly-owned subsidiaries and its 80%
investment in Abrams-Columbus Limited Partnership (the "Company"). All
significant intercompany balances, transactions and profits have been
eliminated in consolidation. Revenues and costs are reported by the
segment which sells the product or service to an unaffiliated purchaser.
(b) INCOME RECOGNITION
Construction revenues and costs are reported on the
percentage-of-completion method, using costs incurred to date in
relation to estimated total costs of the contracts to measure the stage
of completion. The cumulative effects of changes in estimated total
contract costs and revenues are recorded in the period in which the
facts requiring the revisions become known. At the time it is determined
that a contract will result in a loss, the entire estimated loss is
recorded.
Revenues from the sales of real estate are recognized at the time
of closing. When a portion or unit of a development property is sold, a
proportionate share of the projected total cost of the development is
charged to cost of sales. Costs of sales related to real estate are
based on the specific property sold.
Revenues from the sale of manufactured goods are recognized on the
date products are shipped to the customer for sales, other than "bill
and hold" sales. Revenues from "bill and hold" sales, on which delivery
is delayed at the customer's explicit request, are recognized when
conditions for such revenues are met; principally, the completed product
is ready for delivery and transfer of both title and risk of ownership
has passed to the buyer.
(c) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include money market funds and other
financial instruments. For purposes of the statements of cash flows, the
Company considers all highly liquid debt instruments with maturities of
three months or less to be cash equivalents.
In 1998, restricted cash includes proceeds from the issuance of
industrial development revenue bonds. The proceeds of these bonds are
restricted for use in constructing and equipping the Company's new
manufacturing facility. In 1997, restricted cash includes amounts held
for the payment of outstanding bonds and proceeds from the sale of real
estate. Restricted cash from real estate sales was held in escrow by a
qualified intermediary in order to complete tax-deferred exchanges in
accordance with Section 1031 of the Internal Revenue Code.
(d) INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) or market. To reflect the inventory at the lower of cost or
market, valuation reserves are established. Management periodically
evaluates the adequacy of reserves based on aging, sales and other
relevant factors.
(e) PROPERTY HELD FOR SALE
Property held for sale is expected to be sold in the near term and
is carried at the lower of cost or fair value less costs to sell.
Depreciation and amortization are suspended during the sale period
except for manufacturing facilities that are in operation.
(f) INCOME-PRODUCING PROPERTIES AND PROPERTY, PLANT AND EQUIPMENT
Income-producing properties are stated at the lower of cost or fair
value and are depreciated for financial reporting purposes using the
straight-line method over the estimated useful lives of the properties
and related assets.
Property, plant, and equipment is recorded at cost and is
depreciated for financial reporting purposes using the straight-line
method over the estimated useful lives of the assets. Significant
additions which extend asset lives are capitalized. Normal maintenance
and repair costs are expensed as incurred.
Interest and other carrying costs related to assets under
construction are capitalized. Costs of planning, development and
construction are also capitalized. Capitalization of interest and other
carrying costs is discontinued when a project is substantially completed
or if active development ceases.
The Company reviews income-producing properties and property,
plant, and equipment for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of the asset to future net cash
flows expected to be generated by the asset. If an asset is considered
to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the asset exceeds the asset's
fair value.
(g) LAND HELD FOR FUTURE DEVELOPMENT OR SALE
Land held for future development or sale is carried at the lower of
cost or fair value less costs to sell.
(h) DEFERRED LOAN COSTS
Costs incurred to obtain loans have been deferred and are being
amortized over the terms of the related loans.
(i) INCOME TAXES
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred
tax assets and liabilities is recognized in income in the period that
includes the enactment date.
(j) EARNINGS PER SHARE
On April 30, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share.
SFAS No. 128 supersedes APB Opinion No. 15, Earnings Per Share, and
specifies the computation, presentation, and disclosure requirements for
earnings per share ("EPS"). SFAS No. 128 replaces the presentation of
primary EPS and fully diluted EPS with a presentation of basic EPS and
diluted EPS, respectively. SFAS No. 128 also requires dual presentation
of basic and diluted EPS on the face of the income statement for all
entities with complex capital structures. Prior period EPS data has been
restated to conform with SFAS No. 128.
(k) FAIR VALUE OF FINANCIAL INSTRUMENTS
Management believes that the carrying amounts of cash and cash
equivalents, receivables, other assets, accounts payable, accrued
expenses and current portions of debt instruments are reasonable
approximations of their fair value because of the short maturity of
these instruments.
The fair value of the Company's noncurrent portions of debt
instruments is estimated by discounting the future cash flows of each
instrument at rates currently offered to the Company for similar debt
instruments of comparable maturities by the Company's bankers. Based on
this valuation methodology, management believes that the carrying amount
of the noncurrent portions of debt instruments is a reasonable
estimation of their fair value.
(l) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(m) STOCK OPTIONS
The Company accounted for its stock option plan in accordance with
the provisions of Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees ("APB Opinion 25"), and related
interpretations. As such, compensation expense was recorded only to the
extent that the market price of the underlying stock at the date of
grant exceeded the exercise price. In October 1995, SFAS No. 123,
Accounting for Stock-Based Compensation, was issued. SFAS 123 allows
entities to apply the provisions of APB Opinion 25 for recognizing
stock-based compensation expense in the basic financial statements.
Companies not following the fair value based method are required to
provide expanded disclosures in the footnotes. The Company elected to
continue to apply the provisions of APB Opinion 25 and, to the extent
material, followed the disclosure provisions of SFAS 123.
(n) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 130, Reporting Comprehensive Income. This statement
establishes standards for reporting and displaying comprehensive income
and its components in a full set of general purpose financial
statements. SFAS No. 130 requires all items that are required to be
recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed in equal
prominence with the other financial statements. The term "comprehensive
income" is used in the statement to describe the total of all components
of comprehensive income including net income. "Other comprehensive
income" refers to revenues, expenses, gains, and losses that are
included in comprehensive income but excluded from earnings under
current accounting standards. SFAS No. 130 is effective for financial
statements for years beginning after December 15, 1997. The Company will
adopt SFAS No. 130 effective May 1, 1998.
In June 1997, the FASB issued SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. This statement
establishes standards for the way public business enterprises are to
report information about operating segments in annual financial
statements and requires those enterprises to report selected information
about operating segments using the "management approach" concept. It
also establishes standards for related disclosures about products and
services, geographic areas, and major customers. SFAS No. 131 supersedes
SFAS No. 14, Financial Reporting for Segments of a Business Enterprise,
but retains the requirement to report information about major customers.
SFAS No. 131 is effective for financial statements for periods beginning
after December 15, 1997. The Company will adopt SFAS No. 131 effective
May 1, 1998.
(o) RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 and 1996
consolidated financial statements to conform with classifications
adopted in 1998.
(2) INVENTORIES
The balances of major classes of inventory, net of their related
valuation reserves, at April 30 were as follows:
1998 1997
--------------------------------
Finished goods $ 787,520 $ 939,784
Work-in-progress 219,802 110,119
Raw materials 487,741 508,061
--------------------------------
$ 1,495,063 $1,557,964
================================
(3) CONTRACTS IN PROGRESS
Assets and liabilities related to contracts in progress,
including contracts receivable, are included in current assets and
current liabilities as they will be liquidated in the normal course of
contract completion, which is expected to occur within one year. Amounts
billed and costs recognized on contracts in progress at April 30 were:
1998 1997
--------------------------------
Costs and earnings in excess of billings:
Accumulated costs and earnings $48,672,342 $24,480,989
Amounts billed 43,034,743 21,695,649
--------------------------------
$ 5,637,599 $ 2,785,340
================================
Billings in excess of costs and earnings:
Amounts billed $27,774,973 $29,161,445
Accumulated costs and earnings 26,405,825 28,012,780
--------------------------------
$ 1,369,148 $ 1,148,665
================================
(4) PROPERTY HELD FOR SALE
As of April 30, 1997, the Company had entered into a contract to
sell a parcel of undeveloped land in North Fort Myers, Florida for a sales
price of $770,000. This sale closed in May 1997 and resulted in a gain. In
March 1997, the Company entered into a contract to sell a property in Newark,
Ohio, tenanted by Kmart Corporation. The contract amount was $225,000 in cash
plus assumption by the purchaser of the mortgage which had a balance of
$1,310,000 as of April 30, 1997. This sale closed in fiscal 1998 resulting in
a gain. In August 1997, the Company closed the sale of a shopping center in
Oakwood, Georgia. The sale resulted in a gain. The sales described above,
with the exception of the sale of undeveloped land in North Fort Myers,
Florida, were structured as tax-deferred, like-kind exchanges pursuant to
Internal Revenue Code Section 1031 (note 5).
In addition, during fiscal 1997, the Company began actively
marketing for sale its former wood manufacturing facility in Atlanta,
Georgia. The Manufacturing Segment moved into a new manufacturing facility in
fiscal year 1999. The Company anticipates the former wood manufacturing
facility will be sold at a gain. In anticipation of the sale of the four
aforementioned properties during fiscal 1998, the Company classified the
carrying amounts of these properties as property held for sale in the
accompanying April 30, 1997 consolidated balance sheet. As of April 30, 1998,
only the Company's manufacturing facility is classified as property held for
sale. All of these properties are included in the Real Estate Segment except
for the manufacturing facility which is included in the Manufacturing
Segment.
The results of operations for the year ended April 30, 1997, for
the properties in the Real Estate Segment that were held for sale are
summarized below:
Revenues $1,054,182
Operating expenses, including depreciation and interest 869,463
Results of operations ---------
$ 184,719
=========
The results of operations for the manufacturing segment are
summarized in note 12.
(5) INCOME-PRODUCING PROPERTIES
Income-producing properties and their estimated useful lives at
April 30 were as follows:
Estimated useful lives 1998 1997
---------------------------------------------------------------
Land $16,580,806 $12,604,290
Buildings and improvements 7-39 years 55,472,762 45,161,119
-------------------------------------
72,053,568 57,765,409
Less - accumulated depreciation
and amortization 14,791,028 14,441,002
-------------------------------------
$57,262,540 $ 43,324,407
=====================================
During the fourth quarter of fiscal year 1997, management received
market information which it believed indicated that the carrying value of its
shopping center in North Fort Myers, Florida, had been impaired. Management
completed a recoverability review of the carrying value of the shopping
center based upon an estimate of undiscounted future cash flows expected to
result from its use and eventual disposition. As of April 30, 1997,
management concluded that the sum of the undiscounted future cash flows
estimated to be generated by the shopping center is less than the carrying
value and, as a result, the Company recorded a provision for impairment of
$2,750,000 which reduced the shopping center's carrying value to its
estimated fair value. The estimated fair value was determined by using market
value studies compiled by two independent commercial real estate brokerage
firms. This shopping center is classified as an income-producing property in
the accompanying April 30, 1998 and 1997 consolidated balance sheets and is
included in the Real Estate Segment.
During 1998, the Company sold income-producing properties located
in Oakwood, Georgia, Newark, Ohio, and Tifton, Georgia, and recognized gains
for financial statement purposes. During fiscal year 1997, income-producing
properties located in Shawnee, Oklahoma, Warner Robins, Georgia, and Niles,
Michigan, also were sold for gains. These sales transactions were structured
as tax-deferred, like-kind exchanges pursuant to Internal Revenue Code
Section 1031, which allows a deferral of the tax gain if the Company utilizes
proceeds of the sale to purchase other real estate within 180 days of sale.
(6) PROPERTY, PLANT, AND EQUIPMENT
The major components of property, plant, and equipment and their
estimated useful lives at April 30 were as follows:
Estimated useful lives 1998 1997
-------------------------------------------------------
Land $ 92,226 $ 92,226
Buildings and improvements 3-31.5 years 1,729,884 1,513,989
Machinery and equipment 3-10 years 5,684,239 5,322,714
----------------------------
7,506,349 6,928,929
Less - accumulated depreciation 5,505,291 5,224,981
----------------------------
2,001,058 1,703,948
New manufacturing facility
under construction 7,855,561 ---
----------------------------
$9,856,619 $1,703,948
============================
(7) MORTGAGE NOTES PAYABLE AND LEASES
The Company owns rental property consisting of seven shopping
centers, an office building, and an office park, all of which, with the
exception of one of the shopping centers, are pledged as collateral on
related mortgage notes payable. It is also lessee of nine shopping centers
under leaseback arrangements expiring from 2001 to 2014. Each debt instrument
and leaseback arrangement contains an exculpatory provision limiting the
Company's liability to its interest in the mortgaged property or lease,
except for a construction mortgage loan secured by a shopping center in North
Fort Myers, Florida, and a note payable to a bank secured by an office building
in Atlanta, Georgia, both of which are guaranteed by a subsidiary of the
Company (note 8).
All of the leaseback centers are leased to the Kmart Corporation,
and Kmart is a tenant in five of the seven owned shopping centers. The owned
shopping centers are leased for periods expiring from fiscal years 1999 to
2040, while leases on the owned office properties expire from fiscal years
1999 to 2003. Leases on the leaseback centers correspond to the leaseback
periods. All leases are operating leases. The shopping center leases
typically require that the tenant make fixed rental payments over a 5- to
25-year period and provide for renewal options and for contingent rentals if
the tenants' sales volumes exceed predetermined amounts. In most cases, the
shopping center leases provide that the tenant bear the cost of insurance,
repairs, maintenance and taxes. Base rental revenue received from owned
shopping centers and office properties in 1998, 1997, and 1996 was
approximately $7,708,000, $7,829,000, and $7,116,000, respectively. Base
rental revenue received from leaseback centers in 1998, 1997, and 1996 was
approximately $2,620,000, $2,694,000, and $2,917,000, respectively.
Contingent rental revenue received on all centers in 1998, 1997, and 1996 was
approximately $195,000, $164,000, and $171,000, respectively.
Approximate future minimum annual rental to be received from all
rental properties are as follows:
Owned Leaseback
---------------------------------------
Years ending April 30, Rental receipts
---------------------------------------------------------------------------------------
1999 $ 5,602,000 $ 2,620,000
2000 5,340,000 2,620,000
2001 5,216,000 2,620,000
2002 5,073,000 2,138,000
2003 4,998,000 1,911,000
2004 and thereafter 59,521,000 4,875,000
---------------------------------------------------------------------------------------
$85,750,000 $ 16,784,000
=======================================================================================
The Company leases office space from one of its subsidiaries. In
accordance with the noncancelable leases, the subsidiary will receive
approximately $1,985,000 in rental payments from the Company over the term of
the leases. These rental receipts have been reflected in the future minimum
rental receipts from owned properties.
The expected future minimum principal and interest payments on
mortgage notes payable on the owned rental properties and the future minimum
rentals to be paid on leaseback centers are as follows:
Owned Rental Properties
Mortgage Payments Leaseback
--------------------------------- Centers
Years ending April 30, Principal Interest Rental Payments
--------------------------------------------------------------------------------------------------------
1999 $ 753,684 $ 3,003,153 $ 2,136,000
2000 822,663 2,934,178 2,136,000
2001 898,091 2,858,714 2,136,000
2002 13,178,058 2,878,307 1,719,000
2003 861,854 1,542,848 1,536,000
2004 and thereafter 17,673,279 8,900,032 4,137,000
------------------------------------------------------------------------------------------------------
$34,187,629 $ 22,117,232 $ 13,800,000
======================================================================================================
The mortgage notes payable are due at various dates between April 1,
2002, and September 1, 2019, and bear interest at rates ranging from 7.25% to
9.75%, with a weighted average rate of 8.0% at April 30, 1998.
(8) OTHER LONG-TERM DEBT AND CREDIT FACILITIES
Other long-term debt at April 30 was as follows:
1998 1997
-----------------------------------
Industrial development revenue bonds with a variable
interest rate, repricing on a weekly basis, based on rates
available for debt instruments of a similar nature and
comparable terms (5.75% at April 30, 1998); requires
monthly interest only payments until November 1, 1998,
thereafter interest and bond sinking fund payments
required monthly; matures on November 1, 2018;
secured by irrevocable letter of credit $11,000,000 $ ---
Note payable to bank with variable interest rate of LIBOR
plus 2% (7.625% at April 30, 1998); requires monthly
interest only payments with principal due October 2,
1999; secured by income-producing property; guaranteed
by a subsidiary of the Company 4,793,583 ---
Industrial development bond bearing interest at 79% of
prime rate (6.72% at April 30, 1998), requires quarterly
installments of $57,143 principal plus interest, final
payment due March 1, 2000; secured by real property 457,136 685,708
Construction mortgage loan bearing interest at the prime rate plus
3/8% (8.875% at April 30, 1998); and interest
monthly principal payments of $87,729 required
with principal due June 30, 1999; secured by income-
producing property and assignment of leases and
rents; guaranteed by a subsidiary of the Company 9,231,297 9,454,624
Amendment to construction mortgage loan shown above
permitting borrowings of up to $4,942,419; bearing
interest at the prime rate plus 3/8% (8.875% at April 30,
1998); monthly principal and interest payments of $42,113
required with principal due June 30, 1999; secured by
income-producing property and assignment of leases
and rents; guaranteed by a subsidiary of the Company 4,855,295 4,920,425
Construction mortgage loan permitting borrowings of
up to $2,100,000; with principal due and paid August 15, 1997 --- 2,100,000
-----------------------------------
Total other long-term debt 30,337,311 17,160,757
Less current maturities 832,449 961,154
-----------------------------------
Total other long-term debt, excluding
current maturities $29,504,862 $16,199,603
===================================
(8) OTHER LONG-TERM DEBT AND CREDIT FACILITIES (CONTINUED)
The future minimum principal payments due on long-term debt are as
follows:
Years ending April 30,
---------------------------------------------------
1999 $ 603,313
2000 19,027,862
2001 221,136
2002 242,500
2003 267,500
2004 and thereafter 9,975,000
---------------------------------------------------
$ 30,337,311
===================================================
The outstanding principal balance of $457,136 on the industrial
development bond payable has been included in the current maturities of
long-term debt as the former wood manufacturing facility securing this bond
is included in property held for sale in the accompanying consolidated
balance sheet at April 30, 1998 (note 4).
At April 30, 1998, the Company had commitments from a bank for
unsecured lines of credit totaling $6,000,000, of which $5,500,00 was
available. The remaining $500,000 was restricted as it secures a letter of
credit described below. These lines of credit, which expire during fiscal
year 1999, bear interest at the prime rate (8.50% at April 30, 1998) and have
a 3/8% commitment fee on the unused portion. In addition, the Company had a
commitment, which expires during fiscal year 1999, for an unsecured $1,000,000
line of credit from a bank, of which none was outstanding at April 30, 1998.
This line of credit bears interest at the prime rate or at LIBOR plus 2.7%
(8.325% at April 30, 1998) and has a 3/8% commitment fee on the unused
portion. The Company also had a committed line of credit, which expires
during fiscal year 1999, totalling $2,500,000, secured by the Manufacturing
Segment's inventory and receivables, of which none was outstanding at April
30, 1998. The secured line of credit bears interest at the prime rate or at
LIBOR plus 2.7% and has a 3/10% commitment fee on the unused portion.
The Company entered into two interest rate swap agreements related
to the $11 million industrial development revenue bonds shown above. The
first interest rate swap agreement was effective February 4, 1998, and
terminates February 1, 2001. The notional amount reduces annually from $5.5
million, at the effective date, to $5.3 million prior to expiration of the
agreement. The agreement requires the Company to pay a fixed rate of 5.57% in
exchange for floating rate payments based on the 30-day Non-financial AA
Commercial Paper rate (5.53% at April 30, 1998).
The second interest rate swap agreement was effective February 4,
1998, and terminates February 1, 2003. The notional amount reduces annually
from $5.5 million, at the effective date, to $5,057,500 prior to the
expiration of the agreement. The interest rate terms of the second agreement
are identical to the terms of the first except that the fixed interest rate
paid by the Company is 5.67%. The notional amounts of the swap agreements are
set to match the outstanding principal amounts of the bonds. The swap
floating rates are reset weekly, and the Company settles with the counter
party monthly.
In connection with the issuance of the industrial development
revenue bonds, the Company was required to obtain an irrevocable letter of
credit in the amount of $11,162,740. The letter of credit was issued
November 12, 1997, and expires on November 15, 2002. The letter of credit
can be extended for three additional five-year terms. The letter of credit
is guaranteed by the Company and a subsidiary of the Company. The letter of
credit contains covenants that require the maintenance of certain financial
ratios. The Company is in compliance with all covenants or has obtained waivers
in cases of non-compliance.
In addition, in conjunction with the origination of a mortgage on
an income-producing property, the Company obtained an irrevocable, standby
letter of credit in the amount of $500,000. The letter of credit was issued
on July 30, 1997, and expires on November 30, 1998. The mortgage lender is
allowed to draw on the letter in order to paydown the related mortgage loan
if certain leasing requirements are not met by August 15, 1998. The letter of
credit is secured by a portion of a bank line of credit.
(9) INCOME TAXES
Income tax expense(benefit) consists of:
Current Deferred Total
----------------------------------------------
Year ended April 30, 1998:
U.S. federal $ 712,383 $ 843,817 $ 1,556,200
State and local 153,259 123,541 276,800
----------------------------------------------
$ 865,642 $ 967,358 $ 1,833,000
==============================================
Year ended April 30, 1997:
U.S. federal $ 908,173 $ 436,827 $ 1,345,000
State and local 60,609 51,391 112,000
----------------------------------------------
$ 968,782 $ 488,218 $ 1,457,000
==============================================
Year ended April 30, 1996:
U.S. federal $ 104,271 $ (248,526) $ (144,255)
State and local 13,549 (32,294) (18,745)
-----------------------------------------------
$ 117,820 $ (280,820) $ (163,000)
===============================================
Income tax expense (benefit) was $1,833,000, $1,457,000, and
$(163,000) for the years ended April 30, 1998, 1997, and 1996, respectively,
and differed from the amounts computed by applying the U.S. federal income
tax rate of 34 percent to pretax income from continuing operations as a
result of the following:
1998 1997 1996
----------------------------------------------
Computed "expected" tax expense (benefit) $ 1,643,043 $ 1,308,455 $ (158,802)
Increase in income taxes resulting from:
State and local income taxes, net
of federal income tax benefit 182,688 73,920 (12,372)
Other, net 7,269 74,625 8,174
----------------------------------------------
$ 1,833,000 $ 1,457,000 $ (163,000)
==============================================
/TABLE
(9) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities
at April 30, 1998 and 1997 are presented below:
1998 1997
----------------------------
Deferred tax assets:
Inventories, primarily because of additional costs capitalized
for tax purposes and the allowance for decline in
net realizable value $ 203,760 $ 261,841
Items not currently deductible for tax purposes:
Provision for impairment on income-producing property 1,026,816 1,036,175
Accrued directors' fees 343,907 235,386
Compensated absences 170,450 120,451
Other accrued expenses 756,094 444,354
Other 523,592 503,372
-----------------------------
Total gross deferred tax assets 3,024,619 2,601,579
=============================
Deferred tax liabilities:
Properties, plant and equipment, principally because of
differences in depreciation and capitalized interest 1,567,009 1,720,215
Gain on real estate sales; proceeds from which were used in
tax deferred like-kind exchanges 3,469,700 1,885,351
Profit related to installment sale 124,572 151,575
Other 32,828 46,570
-----------------------------
Total gross deferred tax liabilities 5,194,109 3,803,711
-----------------------------
Net deferred tax liability $ 2,169,490 $ 1,202,132
=============================
The valuation allowance was $0 at April 30, 1998 and 1997.
(10) STOCK OPTION PLAN AND DEFERRED PROFIT-SHARING PLAN
The Company adopted a Key Employee Incentive Stock Option Plan
which expired in May 1996 and which provided that stock options could have
been awarded to officers and key employees with exercise prices no less than
the fair market value of the common stock at the date of grant. Information
relating to the Company's stock option plan, as adjusted for stock dividends,
is summarized as follows:
1998 1997 1996
---------------------------------------
Options outstanding at beginning of year 17,666 17,666 24,332
Options granted --- --- ---
Options canceled 13,666 --- (6,666)
Options exercised 4,000 --- ---
---------------------------------------
Options outstanding at end of year --- 17,666 17,666
=======================================
Option prices per share:
Options granted during the year $ --- $ --- $ ---
Options canceled $2.875-4.50 $ --- $3.75
Options exercised $2.875 $ --- $ ---
Options outstanding at end of year $ --- $2.875-4.50 $2.875-4.50
=========================================
As of April 30, 1998, there were no stock options outstanding.
The Company has a deferred Profit-Sharing Plan ("Plan") which
covers substantially all of its employees. Funded employer contributions to
the Plan for 1998, 1997 and 1996 were approximately $843,000, $1,032,000, and
$502,000, respectively. The net assets in the Plan, which is administered by
an independent trustee, were approximately $18,962,000, $14,304,000, and
$14,122,000 at April 30, 1998, 1997, and 1996, respectively.
(11) NET EARNINGS PER SHARE
The following tables set forth the computations of basic and
diluted net earnings per common share.
For the year ended April 30, 1998
-----------------------------------------
Earnings Shares Per share
(numerator) (denominator) amount
-----------------------------------------
Basic EPS - earnings available to
common shareholders $ 2,999,478 2,937,712 $ 1.02
Effect of dilutive securities - outstanding =========
stock options --- 3,851
--------------------------
Diluted EPS - earnings available to common
shareholders plus assumed conversions $ 2,999,478 2,941,563 $ 1.02
========================== =========
For the year ended April 30, 1997
-----------------------------------------
Earnings Shares Per share
(numerator) (denominator) amount
-----------------------------------------
Basic EPS - earnings available to
common shareholders $ 2,391,398 2,971,442 $ 0.81
Effect of dilutive securities - outstanding =========
stock options --- 2,129
--------------------------
Diluted EPS - earnings available to common
shareholders plus assumed conversions $ 2,391,398 2,973,571 $ 0.80
========================== ==========
For the year ended April 30, 1996
-----------------------------------------
Earnings Shares Per share
(numerator) (denominator) amount
-----------------------------------------
Basic EPS - earnings available to
common shareholders $(304,188) 2,980,611 $ (0.10)
Effect of dilutive securities - outstanding ===========
stock options --- 3,379
--------------------------
Diluted EPS - earnings available to common
shareholders plus assumed conversions $(304,188) 2,983,990 $ (0.10)
=========================== ===========
(12) SEGMENT REPORTING
The Company operates in three industry segments: Construction,
Manufacturing and Real Estate.
The Construction Segment provides construction services for
commercial and industrial projects. The Manufacturing Segment produces store
fixtures for retail outlets, display fixtures for point-of-sale merchandising
and other products. The Real Estate Segment develops or acquires
income-producing properties for investment. The Company usually provides
property management for the properties after development or acquisition.
Total revenue by industry segment includes both revenues from
unaffiliated customers, as reported in the Company's consolidated statements
of operations, and intersegment revenues, which are generally at prices
negotiated between segments.
Identifiable assets are those that are used in the Company's
operations in each segment, including receivables due from other segments.
The parent company's identifiable assets are primarily cash and cash
equivalents, cash surrender value of life insurance, and receivables.
The Company had revenues from The Home Depot, Inc., primarily
representing revenues in the construction segment, aggregating 61%, 51%, and
48% of consolidated revenues in 1998, 1997 and 1996, respectively. Revenues
from Baby Superstore, Inc., primarily representing revenues in the
construction segment, constituted 18% of consolidated revenues in 1996.
Operating earnings (loss) is total revenue less operating expenses,
including depreciation and interest. Selling, shipping, general and
administrative and interest costs, deducted in the computation of operating
earnings (loss) of each segment, represent the actual costs incurred by that
segment. Allocated parent expenses and income taxes have not been deducted.
(12) SEGMENT REPORTING (CONTINUED)
Construction Manufacturing Real Estate Parent Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------------
1998
Revenues from unaffiliated customers $141,453,025 $14,970,261 $21,358,929 $ --- $ --- $177,782,215
Interest and other income 139,672 42,389 522,468 207,999 (103,901) 808,627
Intersegment revenue 5,026,181 181,003 200,615 --- (5,407,799) ---
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenue $146,618,878 $15,193,653 $22,082,012 $ 207,999 $ (5,511,700) $178,590,842
==================================================================================================================================
Operating earnings (loss) $ 3,506,217 $ 459,468 $ 2,882,496 $(2,580,307) $ 564,604 $ 4,832,478
==================================================================================================================================
Identifiable assets $ 30,834,340 $ 8,185,294 $83,017,169 $ 9,470,541 $(10,197,900) $121,309,444
==================================================================================================================================
Depreciation and amortization $ 276,259 $ 586,629 $ 2,029,121 $ 28,825 $ (67,200) $ 2,853,634
==================================================================================================================================
Capital expenditures $ 771,808 $ 81,164 $24,021,793 $ 81,483 $ --- $ 24,956,248
==================================================================================================================================
1997
Revenues from unaffiliated customers $ 97,976,902 $16,661,798 $20,985,647 $ --- $ --- $135,624,347
Interest and other income 138,096 41,460 146,512 257,519 (84,333) 499,254
Intersegment revenue 345,048 --- --- 300,000 (645,048) ----
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenue $ 98,460,046 $16,703,258 $21,132,159 $ 557,519 $ (729,381) $136,123,601
==================================================================================================================================
Operating earnings (loss) $ 3,088,094 $ 1,749,033 $ 1,003,370 $(1,778,337) $ (213,762) $ 3,848,398
==================================================================================================================================
Identifiable assets $ 19,582,800 $10,300,421 $59,833,984 $ 8,692,770 $ (6,910,537) $ 91,499,438
==================================================================================================================================
Depreciation and amortization $ 226,929 $ 600,628 $ 2,633,151 $ 25,382 $ (84,756) $ 3,401,334
==================================================================================================================================
Capital expenditures $ 176,539 $ 467,771 $ 5,184,283 $ --- $ --- $ 5,828,593
==================================================================================================================================
1996
Revenues from unaffiliated customers $107,494,271 $14,999,240 $11,169,294 $ --- $ --- $133,662,805
Interest and other income 150,851 9,118 304,121 349,039 (176,694) 636,435
Intersegment revenue 792,213 --- --- 523,040 (1,315,253) ---
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenue $108,437,335 $15,008,358 $11,473,415 $ 872,079 $ (1,491,947) $134,299,240
==================================================================================================================================
Operating earnings (loss) $ 2,806,030 $ (160,226) $(1,261,552) $(1,428,578) $ (422,862) $ (467,188)
==================================================================================================================================
Identifiable assets $19,083,228 $ 7,717,186 $61,428,250 $ 7,464,995 $ (5,058,561) $ 90,635,098
==================================================================================================================================
Depreciation and amortization $ 198,390 $ 586,497 $ 2,519,163 $ 23,444 $ (84,756) $ 3,242,738
==================================================================================================================================
Capital expenditures $ 172,112 $ 94,498 $ 2,024,365 $ 72,456 $ --- $ 2,363,431
==================================================================================================================================
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Additions
-----------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Accounts Deductions of Year
- --------------------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended
April 30, 1998 $ 65,584 $ 90,496 $ --- $ 21,210 $134,870
- --------------------------------------------------------------------------------------------------------------------------------
Year ended
April 30, 1997 $ 57,541 $117,426 $ --- $ 109,383 $ 65,584
- --------------------------------------------------------------------------------------------------------------------------------
Year ended
April 30, 1996 $100,189 $107,837 $ --- $ 150,485 $ 57,541
================================================================================================================================
INVENTORY RESERVES
Year ended
April 30, 1998 $374,447 $147,564 $ --- $ 204,370 $317,641
- --------------------------------------------------------------------------------------------------------------------------------
Year ended
April 30, 1997 $757,896 $203,561 $ --- $ 587,010 $374,447
- --------------------------------------------------------------------------------------------------------------------------------
Year ended
April 30, 1996 $773,455 $160,000 $ --- $ 175,559 $757,896
================================================================================================================================
Allowance for doubtful accounts deductions resulted from the subsequent
write-off and/or recovery of the related receivable.
Inventory reserve deductions resulted from the subsequent sale and/or
write-off of the related inventory.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
APRIL 30, 1998
Costs
Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- --------------- --------
Building
and
Description Encumbrances Land Improvements Improvements Land
- ---------------------------------------------------------------------------------------------------------------------- --------
INCOME-PRODUCING PROPERTIES (2):
Shopping Center - Jackson, MI $ 3,402,393 $ 401,195 $ 1,788,183 $ 1,167,902 $ 453,293
Shopping Center - Newnan, GA 5,461,376 696,829 5,291,120 258,136 696,829
Kmart - Morton, IL 3,213,631 18,005 2,767,765 (220,638) 18,005
Kmart - Columbus, GA 2,805,786 11,710 2,356,920 10,078 11,710
Shopping Center - Englewood, FL 12,844,212 6,072,805 8,823,506 (80,073) 6,072,805
Shopping Center - N. Fort Myers, FL 14,086,592 5,940,143 11,290,778 3,164,530 5,218,754
Leaseback Shopping Center - Davenport, IA --- --- 2,150 193,261 ---
Leaseback Shopping Center - Jacksonville, FL --- --- 42,151 --- ---
Leaseback Shopping Center - Orange Park, FL --- --- 127,487 35,731 ---
Leaseback Shopping Center - W. St. Paul, MN --- --- --- 86,983 ---
Leaseback Shopping Center - Bayonet Point, FL --- --- --- 9,384 ---
Leaseback Shopping Center - Minneapolis, MN --- --- --- 7,391 ---
Office Building - Atlanta, GA 4,793,583 660,000 4,338,102 465,484 660,000
Office Park - Marietta, GA 6,460,231 1,750,000 6,417,275 54,628 1,750,000
Shopping Center - Cincinnati, OH --- 1,699,410 617,102 --- 1,699,410
- ------------------------------------------------------------------------------------------------------------------------------------
53,067,804 17,250,097 43,862,539 5,152,797 16,580,806
- ------------------------------------------------------------------------------------------------------------------------------------
LAND HELD FOR FUTURE DEVELOPMENT
OR SALE:
Davenport, IA --- 183,572 --- --- 183,572
Louisville, KY --- 80,011 --- --- 80,011
Oakwood, GA --- 234,089 --- 543,330 777,419
North Fort Myers, FL --- 2,760,187 --- 345,325 3,105,512
Jackson, MI --- --- --- 74,687 74,687
- ------------------------------------------------------------------------------------------------------------------------------------
--- 3,257,859 --- 963,342 4,221,201
- ------------------------------------------------------------------------------------------------------------------------------------
$53,067,804 $20,507,956 $43,862,539 $ 6,116,139 $20,802,007
====================================================================================================================================
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
APRIL 30, 1998 (CONTINUED)
Gross Amounts at Which Life on Which
Carried at Close of Year Depreciation
---------------------------------- In Latest
Building Net Earnings
and Capitalized Accumulated Date(s) of Date Statement
Improvements Interest Total Depreciation Construction Acquired is Computed
-------------------------------------------------------------------------------------
INCOME-PRODUCING PROPERTIES:
Shopping Center - Jackson, MI $ 2,956,085 $ 89,866 $ 3,499,244 $ 1,908,897 1972, 1996 -- 39 years
Shopping Center - Newnan, GA 5,549,256 311,528 6,557,613 2,943,581 1974,1987,1989 -- 31.5 years
Kmart - Morton, IL 2,547,127 -- 2,565,132 1,992,837 1980, 1992 -- 25 years
Kmart - Columbus, GA 2,366,998 238,970 2,617,678 1,828,566 1980, 1988 -- 25 years
Shopping Center - Englewood, FL 8,743,433 1,346,273 16,162,511 2,682,130 1990 -- 32 years
Shopping Center - N. Fort Myers, FL 14,455,308 4,470,789 24,144,851 3,084,893 1993, 1996 -- 31.5 years
Leaseback Shopping Center - Davenport, IA 195,411 -- 195,411 66,503 1995 -- 7 years
Leaseback Shopping Center - Jacksonville, FL 42,151 -- 42,151 9,273 1994 -- 25 years
Leaseback Shopping Center - Orange Park, FL 163,218 -- 163,218 77,700 1995 -- 7 years
Leaseback Shopping Center - W. St. Paul, MN 86,983 -- 86,983 19,641 1996 -- 8 years
Leaseback Shopping Center - Bayonet Point, FL 9,384 -- 9,384 -- 1997 -- --
Leaseback Shopping Center - Minneapolis, MN 7,391 -- 7,391 289 1997 -- 15 years
Office Building - Atlanta, GA 4,803,586 -- 5,463,586 90,130 1974, 1997 1997 39 years
Office Park - Marietta, GA 6,471,903 -- 8,221,903 83,951 1980,1985 1997 39 years
Shopping Center - Cincinnati, OH 617,102 -- 2,316,512 2,637 1982 1998 39 years
------------------------------------------------
49,015,336 6,457,426 72,053,568 14,791,028
------------------------------------------------
LAND HELD FOR FUTURE DEVELOPMENT
OR SALE:
Davenport, IA -- -- 183,572 -- -- 1977 --
Louisville, KY -- -- 80,011 -- -- 1979 --
Oakwood, GA -- 16,644 794,063 -- -- 1987 --
North Fort Myers, FL -- -- 3,105,512 -- -- 1994 --
Jackson, MI -- -- 74,687 -- -- 1997 --
------------------------------------------------
-- 16,644 4,237,845 --
------------------------------------------------
$49,015,336 $6,474,070 $76,291,413 $14,791,028
=================================================
NOTE: Reconciliations of total real estate carrying value and
accumulated depreciation for the three years ended April 30, 1998, are as
follows:
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
APRIL 30, 1998 (CONTINUED)
Real Estate Accumulated Depreciation
---------------------------------------- ------------------------------------------
1998 1997 1996 1998 1997 1996
---------------------------------------- ------------------------------------------
BALANCE AT BEGINNING OF YEAR $69,380,403 $75,750,977 $73,767,825 $17,462,301 $20,108,134 $18,033,487
---------------------------------------- ------------------------------------------
ADDITIONS DURING YEAR
Additions 16,803,252 4,771,612 1,983,152 --- --- ---
Depreciation --- --- --- 1,800,747 2,102,932 2,074,647
---------------------------------------- ------------------------------------------
16,803,252 4,771,612 1,983,152 1,800,747 2,102,932 2,074,647
---------------------------------------- ------------------------------------------
DEDUCTIONS DURING YEAR
Accumulated depreciation on
properties sold --- --- --- 4,472,020 4,748,765 ---
Carrying value of real estate
sold and retirements 9,892,242 8,392,186 --- --- --- ---
Provision for impairment on income-
producing property --- 2,750,000 --- --- --- ---
---------------------------------------- ------------------------------------------
9,892,242 11,142,186 --- 4,472,020 4,748,765 ---
---------------------------------------- ------------------------------------------
BALANCE AT CLOSE OF YEAR $76,291,413 $69,380,403 $75,750,977 $14,791,028 $17,462,301 $20,108,134
======================================== ==========================================
NOTES:
The aggregated cost for land and building and improvements for federal
income tax purposes at April 30, 1998 is $66,147,436.
The former wood manufacturing facility, which is classified as property
held for sale in the April 30, 1998 and 1997 consolidated balance sheets
included herein, is not included in this schedule as
it is not part of the Company's real estate operations.
Primarily represents additions to a shopping center development in North
Fort Myers, Florida, and a shopping center in Jackson, Michigan.
Primarily represents the acquisition of and improvements to an office
building in Atlanta, Georgia, and the acquisitions of an office park in
Marietta, Georgia, and a shopping center in Cincinnati, Ohio.
Primarily represents sales of three freestanding Kmarts in Niles,
Michigan, Warner Robins, Georgia, and Shawnee, Oklahoma.
Represents a provision for impairment which was recorded to reduce the
carrying value of a shopping center in North Fort Myers, Florida, to its
estimated fair value.
Primarily represents sales of two freestanding Kmarts in Newark, Ohio,
and Tifton, Georgia, and a shopping center located in Oakwood, Georgia.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEMS 10-13.
The information contained under the headings "Nomination and Election
of Directors," "Principal Holders of the Company's Securities" and
"Compensation of Executive Officers and Directors" in the Company's
definitive proxy materials for its 1998 Annual Meeting of Shareholders, filed
with the Securities and Exchange Commission contemporaneously herewith, is
incorporated herein by reference.
For purposes of determining the aggregate market value of the
Company's voting stock held by nonaffiliates, shares held directly or
indirectly by all Directors and Executive Officers of the Company have been
excluded. The exclusion of such shares is not intended to, and shall not,
constitute a determination as to which persons or entities may be
"affiliates" of the Company as defined by the Securities and Exchange
Commission.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Annual
Report on Form 10-K:
1. Financial Statements:
Independent Auditor's Report
Consolidated Balance Sheets at April 30, 1998 and 1997
Consolidated Statement of Operations for the Years Ended April 30,
1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the Years
Ended April 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended April 30,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
Schedule III - Real Estate and Accumulated Depreciation
3. Exhibits:
Exhibit No.
3a. Articles of Incorporation (1)
3b. Restated Bylaws (2), Amendment to Bylaws
10a. Project Financing Agreement by and among Development
Authority of Fulton County, Abrams Fixture Corporation,
and SunTrust Bank, dated as of June 3, 1985 (3)
10b. Abrams Industries, Inc. 1986 Key Employee Incentive
Stock Option Plan (4), as amended by Amendment No. 1 to
Abrams Industries, Inc. 1986 Key Employee Stock Option Plan,
dated May 24, 1988#
10c. Directors' Deferred Compensation Plan (5)#
10d. Edward M. Abrams Split Dollar Life Insurance Agreement
dated July 29, 1991 (6)#
10e. Joseph H. Rubin Split Dollar Life Insurance Agreement
dated August 27, 1991 (6)#
10f. Bernard W. Abrams Split Dollar Life Insurance Agreement
dated July 16, 1993 (7)#
10g. Bernard W. Abrams Employment Agreement dated August 23,
1995 (8)#
13. Annual Report to Shareholders for the fiscal year ended
April 30, 1998
21. List of the Company's Subsidiaries (9)
27. Financial Data Schedule
99. Proxy Statement for 1998 Annual Meeting of Shareholders
Explanation of Exhibits
(1) These exhibits are incorporated by reference to the
Company's Form 10-K for the year ended April 30, 1985.
(2) This exhibit is incorporated by reference to the Company's
Form 10-K for the year ended April 30, 1997.
(3) This exhibit is incorporated by reference to the Company's
Form 10-Q for the quarter ended July 31, 1985.
(4) This exhibit is incorporated by reference to the Company's
Form 10-K for the year ended April 30, 1986.
(5) This exhibit is incorporated by reference to the Company's
Form 10-K for the year ended April 30, 1991.
(6) These exhibits are incorporated by reference to the
Company's Form 10-K for the year ended April 30, 1993.
(7) This exhibit is incorporated by reference to the Company's
Form 10-K for the year ended April 30, 1994.
(8) This exhibit is incorporated by reference to the Company's
Form 10-Q for the quarter ended October 31, 1995.
(9) This exhibit is incorporated by reference to the Company's
Form 10-K for the year ended April 30, 1996.
# Management compensatory plans or arrangement.
(b) Reports on Form 8-K: None filed during the fourth quarter of
fiscal 1998.
(c) The Company hereby files as exhibits to this Annual Report on
Form 10-K the exhibits set forth in Item 14(a)3 hereof.
(d) The Company hereby files as financial statement schedules to
this Annual Report on Form 10-K the financial statement
schedules set forth in Item 14(a)2 hereof.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ABRAMS INDUSTRIES, INC.
Dated: July 15, 1998 By: /s/ Joseph H. Rubin
Joseph H. Rubin
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: July 15, 1998 /s/ Edward M. Abrams
Edward M. Abrams
Chairman of the Board of Directors
Dated: July 15, 1998 /s/ Joseph H. Rubin
Joseph H. Rubin
Director, Chief Executive Officer
Dated: July 15, 1998 /s/ Bernard W. Abrams
Bernard W. Abrams
Director, Chairman Emeritus of the
Executive Committee
Dated: July 15, 1998 /s/ Alan R. Abrams
Alan R. Abrams
Director, President and Chief
Operating Officer
Dated: July 15, 1998 /s/ J. Andrew Abrams
J. Andrew Abrams
Director, Executive Vice President
Dated: July 15, 1998 /s/ Paula Lawton Bevington
Paula Lawton Bevington
Director
Dated: July 15, 1998 /s/ Donald W. MacLeod
Donald W. MacLeod
Director
Dated: July 15, 1998 /s/ Anthony Montag
Anthony Montag
Director
Dated: July 15, 1998 /s/ Felker W. Ward, Jr.
Felker W. Ward, Jr.
Director
Dated: July 15, 1998 /s/ Melinda S. Garrett
Melinda S. Garrett
Chief Financial Officer and
Chief Accounting Officer
Exhibit Index
--------------
Exhibit 3b. Restated Bylaws, Amendments to Bylaws
Exhibit 13 Annual Report to Shareholders for the fiscal year ended
April 30, 1998
Exhibit 27 Financial Data Schedule (for SEC use only)
Exhibit 99 Proxy Statement