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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, 2002

Commission file number 0-10146

ABRAMS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (770) 953-0304

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

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       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 14, 2002, was $7,250,362. See Part III. The number of shares of Common Stock of the registrant outstanding as of June 14, 2002, was 2,909,079.

DOCUMENTS INCORPORATED BY REFERENCE

The information called for by Part III (Items 10, 11, 12, and 13) is incorporated herein by reference to the registrant’s definitive proxy statement for the 2002 Annual Meeting of Shareholders which is to be filed pursuant to Regulation 14A.

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PART I

ITEM 1   BUSINESS

Abrams Industries, Inc. engages in (i) construction of retail and commercial projects; (ii) investment in income-producing properties, including acquisition, development, re-development and sale; and (iii) energy management. As used herein, the term “Company” refers to Abrams Industries, Inc. and its subsidiaries and predecessors, unless the context indicates otherwise, and the term “Parent” or “Parent Company” refers solely to Abrams Industries, Inc. Prior to fiscal year 2001, the Company engaged in the asset and property management of properties in which it had an ownership or leasehold interest.

         In May 2001, the Company created a third operating segment by acquiring the operating assets of another company. Abrams Power, Inc., through its subsidiary, Servidyne Systems, LLC, offers its U.S. and international institutional customers an array of state-of-the-art strategies to reduce energy consumption, labor, equipment maintenance, and capital costs in commercial buildings, using a comprehensive approach that combines its suite of specialized services, sophisticated energy efficiency products and engineering services.

         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.

         Financial information for the operating segments is set forth in Note 14 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 southern and midwestern states. Construction activities consist primarily of new construction, expansion, and remodeling of retail store buildings, banks, shopping centers, warehouses, distribution centers, and other commercial buildings.

         Construction contracts are obtained by competitive bid and by negotiation. Generally, the Company purchases materials and services for its construction operations on a project-by-project basis.

         REAL ESTATE SEGMENT

The Company, through its wholly owned subsidiary, Abrams Properties, Inc., has engaged in real estate activities since 1960. Historically, these activities involved the acquisition, development, redevelopment, leasing, management, ownership, and sale of shopping centers, industrial facilities, and office buildings in the Southeast and Midwest. During fiscal 2001, the Company outsourced to third parties the asset and property management functions related to its real estate portfolio.

         The Company currently owns six shopping centers, four that the Company developed and two that it acquired. In June 2002, the Company sold its shopping center located in Englewood, Florida. This center was classified as Property held for sale as of April 30, 2002. See Notes 5 and 19 to the Consolidated Financial Statements of the Company. The remaining centers are held as long-term investments. See “ITEM 2. PROPERTIES — Owned Shopping Centers.” The Company is also currently lessee and sublessor of seven Company-developed shopping centers that were sold, leased back by the Company, and subleased to Kmart. See “ITEM 2. PROPERTIES — Leaseback Shopping Centers.” During fiscal 2002, pursuant to its filing for protection under Chapter 11 of the U.S. Bankruptcy Code, Kmart terminated its subleases for another two of the Company’s leasebacks. The Company subsequently terminated its leasehold interests in these two properties. See “ITEM 2. PROPERTIES.” The Company also owns a vacant former metal manufacturing facility located in Atlanta, Georgia, and two office properties. See “ITEM 2. PROPERTIES — Office Buildings.”

         ENERGY MANAGEMENT SEGMENT

In fiscal 2002, the Company began operations of a new segment, Energy Management, through its wholly owned subsidiary, Abrams Power, Inc. On May 9, 2001, the Company purchased substantially all of the assets of Servidyne Systems, Inc., an energy engineering and energy management company.

         The primary focus for the business is the continental United States, although the Company does perform services for some international customers. The Company assists its customers in reducing energy consumption and operating costs of commercial buildings by providing: (1) engineering services; (2) equipment maintenance and labor productivity management; and (3) utility cost management. Energy engineering contracts are primarily obtained through negotiations, but may also be obtained through competitive bids on larger proposals.

         EMPLOYEES AND EMPLOYEE RELATIONS

At April 30, 2002, the Company employed 89 salaried employees and 3 hourly employees. 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 somewhat seasonal, with the Construction Segment affected by weather conditions and its retail customers’ store opening schedules. The Company’s exposure to weather conditions is limited to some extent by operating in several regions of the country, with substantial operations in the southern United States where favorable weather conditions prevail for most of the year. Generally, fewer retailers open stores in the winter months, and new store construction usually is scheduled to be completed prior to the winter season. The businesses of the Real Estate and Energy Management Segments are generally less seasonal.

         COMPETITION

The businesses of the Company are highly competitive. In the Construction Segment, the Company competes with a large number of national and local construction companies, many of which have greater financial resources than the Company or proprietary customer relationships. The Real Estate Segment also operates in a competitive environment, with numerous parties competing for available financing, properties, tenants and investors. The Energy Management Segment’s competition is widespread and ranges from multinational to local small businesses.

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         PRINCIPAL CUSTOMERS

During fiscal 2002, the Company derived approximately 56% ($65,821,944) of its Consolidated revenues from continuing operations from direct transactions with The Home Depot, Inc. and approximately 18% ($21,461,660) from direct transactions with Academy Sports & Outdoors. These revenues resulted principally from construction activities. See Note 14 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.

         Kmart is an anchor tenant in three of the Company’s six owned shopping centers and in seven leaseback locations. Of the approximately $13.2 million in rental revenues earned by the Real Estate Segment in fiscal 2002, approximately $4.9 million was attributable to Kmart Corporation, including approximately $523,000 from the Kmart store located in the Company’s shopping center in Englewood, Florida, which was sold in June 2002, and approximately $466,000 from the two leaseback locations that were terminated during 2002. See Note 18 to the Consolidated Financial Statements of the Company.

         BACKLOG

The following table indicates the backlog of contracts, expected rentals and real estate sales for the next twelve months by industry segment:

(1)		See Note 1 to Chart A under “ITEM 7. RESULTS OF OPERATIONS” concerning the decrease in backlog of Construction contracts.
(2)		Included in the backlog of Real Estate-rental income at April 30, 2001, is rent of approximately $1,715,000 from the shopping center in Englewood, Florida, which was sold in June 2002, and approximately $552,000 related to the two Kmart leaseback subleases that were terminated during fiscal 2002. See “ITEM 2. PROPERTIES.” The backlog of Real Estate-sales for 2002 represents the contract to sell the Englewood shopping center. The sale closed in June 2002.
(3)		Any Energy Management contracts that can be cancelled with less than one year’s notice are not included in backlog. As of April 30, 2002, such contracts total $1,136,000 in potential revenue over the next twelve months, assuming cancellation provisions are not invoked.

         The Company estimates that most of the backlog at April 30, 2002, will be completed prior to April 30, 2003. No assurance can be given as to future backlog levels or whether the Company will realize earnings from revenues resulting from the backlog at April 30, 2002.

         REGULATION

The Company is subject to the authority of various federal, state and local regulatory agencies concerned with its construction operations, including among others, the Occupational Health and Safety Administration and the Environmental Protection Agency. 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 as of April 30, 2002, were as follows:

         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. Alan R. Abrams and J. Andrew Abrams are brothers, and are the sons of Edward M. Abrams, a member of the Board of Directors and Chairman of the Executive Committee of the Board of Directors. David L. Abrams, a member of the Board of Directors, is first cousin to Alan R. Abrams and J. Andrew Abrams, and nephew to Edward M. Abrams. There are no other family relationships between any Executive Officer or Director and any other Executive Officer or Director of the Company.

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ITEM 2   PROPERTIES

The Company, through its Real Estate Segment, owns 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 Parent Company, Real Estate Segment, and Construction Segment are located in this building. In addition to the 23,750 square feet of offices occupied by Abrams entities, another 37,863 square feet is leased to unrelated tenants, and 4,267 square feet is currently available for lease.

         In fiscal 2000, the Company sold its shopping center located in Newnan, Georgia. The 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. The Company subsequently acquired a shopping center in Jacksonville, Florida, as the replacement property. See “ITEM 7. LIQUIDITY AND CAPITAL RESOURCES” for discussion regarding the transactions.

         The Company received notice in fiscal 2000 from the Georgia State Properties Commission that the Georgia World Congress Center Authority had made the determination to acquire the Company’s former wood manufacturing facility in Atlanta, Georgia. A Special Master appointed by the court awarded the Company $4.5 million for the property, which amount was paid to the Company. Both the State and the Company appealed the award amount. At April 30, 2001, the deferred pre-tax gain of approximately $2.8 million related to the sale of the facility was included in Net liabilities of discontinued operations. In October 2001, a settlement was reached and the Company recognized Earnings from discontinued operations, net of taxes, of approximately $1.7 million on the transaction.

         In April 2000, the Company’s former manufacturing plant located in Lithia Springs, Georgia, which was developed and owned by the Real Estate Segment, was sold at a gain. The Company continues to own a vacant former metal manufacturing facility located in Atlanta, Georgia.

         In May 2001, the Company, through its Energy Management Segment, assumed a lease for 7,418 square feet of office space located at 1350 Spring Street, NW, in midtown Atlanta, Georgia, as part of its acquisition of the assets of Servidyne Systems, Inc.

         In January 2002, Kmart Corporation filed for protection under Chapter 11 of the U.S. Bankruptcy Code. At that time, four of the Company’s seven owned retail properties contained stores leased to Kmart, two of which were freestanding stores. In June 2002, the Company sold at a gain its Englewood shopping center, which is co-anchored by Kmart. See Note 19 to the Consolidated Financial Statements. The remaining three Kmart locations owned by the Company are currently open and operating. Seven freestanding Kmart stores that the Company developed, sold, leased back, and then subleased to Kmart, are currently open and operating. Kmart, pursuant to its rights under Chapter 11, terminated its subleases of the Company’s two former leaseback properties in Louisville, Kentucky, and West St. Paul, Minnesota, and the Company subsequently terminated its leasehold interests for both properties.

         In March 2002, Kmart published a list of stores that it would close. None of the open stores leased or subleased to Kmart by the Company was on the list. The Bankruptcy Court has not provided the Company any further information as to whether any additional Kmart stores might be closed or which leases will be rejected or affirmed. Prior to publishing its store-closing list, Kmart contacted the Company to request a reduction in rent for one leaseback location. The Company denied the request, Kmart has continued to pay full rent, and the store remains open. This location generated approximately $46,000 in pre-tax earnings in fiscal 2002, and the Company has no capitalized costs related to this location. In April 2002, Kmart exercised a five-year option to extend its sublease on another one of the Company’s leaseback locations. This location produced approximately $26,000 in pre- tax earnings in fiscal 2002.

         The Company owns, or has an interest in, the following properties:

         OWNED SHOPPING CENTERS

As of April 30, 2002, the Company’s Real Estate Segment owned five shopping centers that it developed and two that it acquired. The following chart provides relevant information relating to the owned shopping centers:

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(1)		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 or other debt.
(2)		Includes principal and interest.
(3)		Exculpatory provisions limit the Company’s liability for repayment to the respective mortgaged properties, except for the loan in North Ft. Myers, Florida, which has been guaranteed by Abrams Properties, Inc. See Notes 8 and 9 to the Consolidated Financial Statements of the Company.
(4)		Land is leased, not owned.
(5)		The center in Columbus, Georgia, is owned by Abrams-Columbus Limited Partnership, in which Abrams Properties, Inc. serves as general partner and owns an 80% interest.
(6)		Property was sold in June 2002 at a gain.
(7)		Originally completed by others in 1982.
(8)		Originally completed by others in 1985.

         The two centers located in Morton, Illinois, and Columbus, Georgia, are leased exclusively to Kmart. The Kmart lease in Columbus, Georgia, expires in 2008 and has ten five-year renewal options, and the Kmart lease in Morton, Illinois, expires in 2016 and has eight five-year renewal options. Anchor lease terms for other centers are shown in the following table:

(1)		A tenant is considered to be an “Anchor Tenant” if it leases 12,000 square feet or more of space, and has an initial lease term in excess of five years.
(2)		Tenant has vacated the premises, but remains responsible for lease payments until the expiration date.

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         With the exception of the Kmart lease in Columbus, Georgia, and the Harbor Freight Tools lease in Cincinnati, Ohio, all of the anchor tenant and many of the small shop leases provide for contingent rentals if sales exceed specified amounts. In fiscal 2002, the Company received $78,808 in contingent rentals, net of offsets, which amounts are included in the aggregate rentals set forth above. The Company also is owed $61,140 in additional contingent rent in relation to the Kmart in Morton, Illinois. Kmart is treating this amount as a pre-bankruptcy petition amount and has therefore not made payment. The Company is making a claim for payment to the Bankruptcy Court, and has set up a reserve for the entire disputed amount as of April 30, 2002.

         Typically, tenants are responsible for their pro rata share of ad valorem taxes, insurance and common area maintenance (subject to the right of offset mentioned above). Kmart has total maintenance responsibility for the centers in Morton, Illinois, and Columbus, Georgia.

         LEASEBACK SHOPPING CENTERS

The Company, through its Real Estate Segment, has a leasehold interest in seven shopping centers that it developed, sold, and leased back under leases expiring from years 2003 to 2014. The centers are subleased by the Company to Kmart Corporation, and the Company has the ability to lease the properties for periods corresponding with the Kmart subleases. (See previous discussion regarding Kmart in this “ITEM 2.” above.) 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 and Davenport, Iowa, which has nine five-year renewal options remaining after Kmart exercised one five-year option in fiscal 2002. 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 fiscal 2002, the Company received $95,495 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 subtenant, Kmart. The Company’s leases contain exculpatory provisions, which limit the Company’s liability for payment to its interest in the respective leases.

         The following chart provides certain information relating to the leaseback shopping centers:

         OFFICE BUILDINGS

The Company, through its Real Estate Segment, owns two office properties: the corporate headquarters building located at 1945 The Exchange, Atlanta, Georgia, and an office park in northwest suburban Atlanta, Georgia. The following chart provides pertinent information relating to the office buildings:

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(1)		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 and other debt.
(2)		Includes principal and interest.
(3)		Corporate headquarters building of which the Parent Company, Real Estate Segment, and Construction Segment occupy approximately 23,750 square feet. Rental income and cash flow includes intercompany rent at market rates of $461,818 paid by the Parent Company and the Construction Segment. Abrams Properties, Inc. guaranteed the debt outstanding at April 30, 2002. See “ITEM 7. LIQUIDITY AND CAPITAL RESOURCES” for additional discussion regarding new financing. Originally constructed by others in 1974 and acquired and re-developed by the Company in 1997.
(4)		The Company, through a subsidiary of its Real Estate Segment, is the lessee of 10,661 square feet of space under a master lease agreement to satisfy a condition required by the lender. Rental income and cash flow include intercompany rent at market rates of $233,833 paid by the Real Estate Segment. Originally completed by others in 1980 and 1985.

         LAND LEASED OR HELD FOR FUTURE DEVELOPMENT OR SALE

The Company, through its Real Estate Segment, owns or has an interest in the following land leased or held for future development or sale:

(1)		“Outlot” as used herein refers to a small parcel of land reserved from the shopping center parcel and is generally sold for, leased for, or developed as a fast-food operation, bank or similar use.
(2)		Leased under leases terminating in years 2005 and 2010 with a right to extend for three additional five-year periods. Both outlots are subleased for terms coextensive with the Company’s lease.
(3)		One outlot, not included above, was sold at a gain during fiscal 2002.

         There is no debt on any of the above properties, except for the North Ft. Myers, Florida, anchor pad and retail shop land. See Note 9 to the Consolidated Financial Statements of the Company. The Company will either develop the properties described above or will continue to hold them for sale or lease to others.

ITEM 3   LEGAL PROCEEDINGS

The Company is not a party to, nor is any of its property the subject of, any pending legal proceedings which are likely, in the opinion of management, to have a material, adverse effect on the Company’s operations or financial condition.

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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PART II

ITEM 5   MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The common stock of Abrams Industries, Inc. is traded on the NASDAQ National Market System (Symbol: ABRI). The approximate number of holders of common stock was 455 (including shareholders of record and shares held in street name) at May 31, 2002.

         The information contained under the heading “Equity Compensation Plan” in the Company’s definitive proxy materials for its 2002 Annual Meeting of Shareholders will be filed with the Securities and Exchange Commission under a separate filing, and is hereby incorporated by reference.

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 the notes thereto:

(1)		Includes continuing operations, discontinued operations, and extraordinary item, if any.
(2)		Does not include Property held for sale or Real estate held for future development or sale.

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         RESULTS OF OPERATIONS

REVENUES
Revenues from continuing operations for 2002 were $117,597,687 compared to $154,606,987 and $174,579,492 for 2001 and 2000, respectively. This represents decreases in Revenues of 24% in 2002 and 12% in 2001. Revenues include Interest income of $181,255, $480,771, and $372,524, for 2002, 2001, and 2000, respectively, and Other income of $90,418, $51,030, and $73,882, for 2002, 2001, and 2000, respectively. The figures in Chart A below, however, 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.

REVENUES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT

CHART A
(Dollars in Thousands)

NOTES:

(1)		The decrease in revenue in 2002 from that in 2001 was primarily attributable to a reduction in the number of construction jobs available in a very competitive marketplace, which is a result of a marked deceleration in capital spending by retail companies. In such an environment, management elected to reduce revenue volume rather than pursuing certain jobs at prices that offered unacceptable levels of potential profitability. The Company anticipates this trend will continue in the short-term. During fiscal 2002, however, several new institutional customers awarded jobs to the Construction Segment, as the Company continues its efforts to expand and diversify its customer base.
(2)		Rental revenues for 2002 were $13,178,263, compared to $12,956,875 in 2001 and $12,551,729 in 2000. Rental revenues exclude $461,818 in 2002, $388,960 in 2001, and $1,527,856 in 2000 received from the Company’s other segments. Revenues from sales of real estate were $465,000 in 2002, from the sale of an outlot in North Ft. Myers, Florida, and $17,665,456 in 2000, from the sales of the Company’s shopping center in Newnan, Georgia, and the Company’s manufacturing facility in Lithia Springs, Georgia. There were no sales of real estate in 2001. The Company reviews its real estate portfolio on an ongoing basis, and places a property on the market for sale when it believes it is in its best interests to do so. In addition, a property may be marketed in one fiscal year, but a potential sale may not close until a subsequent year, due to market conditions or individually negotiated contract terms. Real estate sales, which may have a material impact on the Company’s net earnings, do not occur every year, and the Company cannot predict the timing of any such sales. Rental revenues in fiscal 2002 included $4,867,309, representing approximately 37% of total Rental revenues, attributable to Kmart Corporation. See “ITEM 2. PROPERTIES” for discussion of Kmart Corporation’s Chapter 11 bankruptcy filing.
(3)		The Energy Management Segment was formed in May 2001. See Note 16 to the Consolidated Financial Statements.

COST AND EXPENSES: APPLICABLE TO REVENUES
As a percentage of total Segment Revenues (See Chart A), the applicable total Segment Costs and Expenses (See Chart B) of $107,183,006 for 2002, $139,075,402 for 2001, and $155,731,989 for 2000, were 91%, 90%, and 89%, respectively.

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COSTS AND EXPENSES: APPLICABLE TO REVENUES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT

CHART B
(Dollars in Thousands)

NOTES:

(1)		The increase in the percentage of COSTS AND EXPENSES: Applicable to REVENUES from Continuing Operations for 2002 compared to 2001 is primarily attributable to an oversupply of contractors in our marketplace and the resulting competitive pressure on margins, which is a result of a significant decrease in demand due to the reduction in the number of available construction jobs because of ongoing weakness in capital spending in the retail industry. The Company also has exposure to increased costs for many reasons beyond its immediate control, including, but not limited to, unexpected costs, delays due to weather, or an individual customer’s scheduling adjustments. Therefore, the Company cannot predict whether or how long the percentages reflected above will continue at the current levels.
(2)		The increase in the dollar amount and percentage of COSTS AND EXPENSES: Applicable to REVENUES from Continuing Operations for 2002 compared to 2001 is primarily attributable to: (1) the cost of real estate sold in 2002; (2) management fees paid to an outside asset manager that only served for a partial year in 2001; and (3) depreciation expense on the Company’s North Ft. Myers shopping center, which was not depreciated during the fourth quarter 2001 as it was held for sale. During the fourth quarter 2002, the center was removed from the market and reclassified to Income-producing property, resulting in recapture of the depreciation not taken in fiscal 2001. The decrease in the dollar amount and percentage for 2001 compared to 2000 is primarily attributable to the cost of real estate sold in 2000.
(3)		The Energy Management Segment was formed in May 2001. See Note 16 to the Consolidated Financial Statements.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

For the years 2002, 2001, and 2000, Selling, general and administrative expenses (See Chart C) were $7,543,170, $9,860,037, and $9,597,295, respectively. As a percentage of Consolidated REVENUES from Continuing Operations, these expenses were 6% in each of the years. In reviewing Chart C, the reader should recognize that the volume of revenues generally would affect these amounts. 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, GENERAL AND ADMINISTRATIVE EXPENSES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT

CHART C
(Dollars in Thousands)

NOTES:

(1)		On a dollar basis comparison, the decrease in expenses in 2002 was primarily due to: (1) a decrease in incentive compensation costs, which are based on earnings; (2) a decrease in the number of personnel; and (3) the expense charge in 2001 for an allowance for doubtful accounts reserve related to a receivable from Montgomery Ward, which had filed for bankruptcy protection.
(2)		On a dollar basis comparison, the decrease in expenses in 2002 as compared to both 2001 and 2000 resulted primarily from a decrease in personnel costs in connection with the Company’s outsourcing of its asset management activities, which began in January 2001.
(3)		The Energy Management Segment was formed in May 2001. See Note 16 to the Consolidated Financial Statements.

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         INTEREST COSTS

Most of the Interest costs expensed of $4,396,729, $5,050,510, and $5,386,257, in 2002, 2001, and 2000, respectively, is related to debt on real estate. Interest costs decreased in 2002 primarily due to a decrease in interest rates on the Company’s variable rate debt. Interest costs decreased in 2001 primarily due to the sale by the Real Estate Segment of the manufacturing facility in Lithia Springs, Georgia, in fiscal 2000 when the Company discontinued its manufacturing operations. See “Discontinued Operations.” There was no capitalized interest in any of the years presented.

         FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION

Property held for sale increased by $12,502,037 in 2002, primarily due to the reclassification of the book value of the Company’s shopping center in Englewood, Florida, from Real estate held for future development or sale, as the property was under contract to be sold at April 30, 2002. The sale of this center was closed in June 2002. Income-producing properties increased by $17,833,226 in 2002, primarily due to the reclassification of the book value of the Company’s shopping center located in North Ft. Myers, Florida, from Real estate held for future development or sale, when the Company decided to suspend efforts to sell the center until overall market conditions improve. See “ITEM 2. PROPERTIES.”

         LIQUIDITY AND CAPITAL RESOURCES

Except for certain real estate construction loans and occasional short-term operating loans, the Company 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. See Note 9 to the Consolidated Financial Statements. Working capital was $10,028,188 at April 30, 2002, compared to $11,442,348 at April 30, 2001. Operating activities provided cash of $2,497,276. Investing activities used cash of $3,320,993, primarily for the acquisition of the assets of the new Energy Management Segment. Financing activities used cash of $2,713,828, primarily for scheduled debt repayments.

         In 1992, the Company secured a construction loan for the property in North Ft. Myers, Florida, from SunTrust Bank. The primary term of the construction financing was five years, and the loan most recently was extended to August 2003, in accordance with the loan agreement, as amended. The loan carries a floating interest rate of prime plus .375%. As of April 30, 2002, the principal amount outstanding was $12,319,969. The Company is currently seeking to refinance the debt on the property. Although the Company has regularly received extensions of the SunTrust loan, there can be no assurance it will be able to continue to do so; and, there can be no assurance that sufficient proceeds from any refinancing or sale of the property will be available to pay off the loan on or before its maturity.

         In 1997, the Company obtained a permanent mortgage loan of $3,500,000 on its shopping center in Jackson, Michigan. The loan had an original term of 22 years and bears interest at 8.625%. Certain provisions of the loan, as most recently amended in August 2001, require the establishment of a $500,000 letter of credit, which is to be used to pay down the loan in August 2002, if certain leasing requirements are not met. As these requirements had not yet been met as of April 30, 2002, the Company reclassified $500,000 to Current maturities of long-term debt from Mortgage notes payable, less current maturities.

         In 1999, in connection with the financing of the purchase of the Company’s shopping center in Jacksonville, Florida, the Company obtained a permanent mortgage loan in the amount of $9,500,000, which is secured by the center. The loan bears interest at 7.375% and is scheduled to be fully amortized over twenty years. The loan matures in 2019, but the lender may call the loan at any time after September 1, 2002. If the loan were called at any time after that date, the Company would have up to thirteen months to repay the principal amount of the loan without penalty. In conjunction with the loan, an Additional Interest Agreement was executed which entitles the lender to be paid additional interest equal to fifty percent of the quarterly net cash flow and fifty percent of the appreciation in the property upon sale or refinance. The liability related to the lender’s fifty percent share of the appreciation in the property was $2,384,945 at April 30, 2002.

         In fiscal 2000, the Company’s Board of Directors authorized the repurchase of up to 200,000 shares of Common Stock during the twelve-month period beginning February 25, 2000, and ending February 24, 2001. In 2001 and 2002, the Company’s Board authorized additional repurchases of up to 200,000 shares of Common Stock in each of the subsequent twelve-month periods, the latest to end on February 25, 2003. Any such purchases, if made, could be in the open market at prevailing prices or in privately negotiated transactions. During fiscal 2002, the Company repurchased a total of 44,524 shares at a cost of $171,073, of which 1,100 shares at a cost of $4,356 were bought subsequent to February 25, 2002, under the currently authorized plan. The Company financed the purchases with available cash and expects any future purchases would be made with available cash. The Company did not purchase any shares in the period between May 1, 2002, and June 30, 2002.

         In May 2001, the Company acquired substantially all of the assets of an energy management and engineering services company, Servidyne Systems, Inc., and some intellectual and other intangible property assets of its affiliated company, Servidyne, Incorporated. The Company used available cash to purchase the assets for approximately $3.1 million, including the costs associated with completing the transaction.

         In January 2002, Kmart Corporation filed for protection under Chapter 11 of the U.S. Bankruptcy Code. At that time, four of the Company’s seven owned retail properties contained stores leased to Kmart, two of which were freestanding stores. The Company sold at a gain its Englewood shopping center, which had a Kmart store, on June 28, 2002. See Note 19 to the Consolidated Financial Statements. The remaining three Kmart locations owned by the Company are currently open and operating. The Company’s seven freestanding leaseback Kmart stores are currently open and operating. Kmart, pursuant to its rights under Chapter 11, terminated its subleases to the Company’s two former leaseback properties in Louisville, Kentucky, and West St. Paul, Minnesota,

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and the Company subsequently terminated its leases for both properties.

         In March 2002, Kmart published a list of stores that it would close. None of the properties leased or subleased to Kmart by the Company was on the list. The Bankruptcy Court has not provided the Company any further information as to whether any additional Kmart stores might be closed or which leases will be rejected or affirmed. Kmart contacted the Company to request a reduction in rent for one leaseback location that is currently open. The Company denied the request, Kmart continues to pay full rent, and the store remains open.

         On June 28, 2002, the Company sold its shopping center located in Englewood, Florida, at a gain. The Company plans to use the excess cash remaining, after repaying the debt and selling expenses, for operating cash requirements, capital improvements to owned real estate, or to pursue investment in other growth opportunities.

         Excluding the Englewood shopping center rental revenues and the revenues from the two leaseback centers that were terminated, Kmart represented approximately $3.9 million of fiscal 2002 rental revenues.

         In July 2002, the Company refinanced the acquisition and construction loan on the corporate headquarters building in Atlanta, Georgia, which had a balance of $4,596,683 as of April 30, 2002. The new permanent loan, in the original principal amount of $4,900,000, bears interest at 7.75%, is due in ten years, and is to be amortized on a twenty-five year schedule. Proceeds from the new loan remaining after repayment of the original loan and refinancing costs are expected to be used for operating cash needs.

         EFFECTS OF INFLATION ON REVENUES AND OPERATING PROFITS

The effects of inflation upon the Company’s operating results are varied. Inflation in recent years 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 from any erosion due to inflation.

         In the Real Estate Segment, many of the anchor leases are long-term (original terms 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. In many cases, however, the contingent rent provisions permit the anchor tenant 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 as well, which, in turn, could cause a decrease in the contingent rents. Furthermore, the Company has certain repair obligations, and the costs of repairs increase with inflation.

         The Energy Management Segment generally has contracts that renew on an annual basis. At the time of renewal, contract fees may be adjusted, subject to customer approval. As inflation impacts the Company’s costs, primarily labor, the Company could seek a price increase for its contracts in order to protect its profit margin.

         Inflation causes interest rates to rise, which has a positive effect on investment income, but could have a negative effect on profit margins because of the increased costs of contracts and the increase in interest expense on variable rate loans. Overall, inflation could tend to limit the Company’s markets and, in turn, could reduce revenues as well as operating profits and earnings.

         CRITICAL ACCOUNTING POLICIES

A critical accounting policy is one which is both important to the portrayal of a Company’s financial position and results of operations, and requires the Company to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, the Company has made its best estimates and judgments regarding certain amounts included in the financials statements, giving due consideration to materiality. The application of these accounting policies involves the exercise of judgment and use of assumptions regarding future uncertainties, and as a result, actual results could differ from those estimates. Management believes that the Company’s most critical accounting policies are discussed and described in Note 2 to the Consolidated Financial Statements, which include:

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. All significant intercompany balances and transactions have been eliminated in consolidation.

Revenue recognition

Construction revenues 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.

         The Company leases space in its income-producing properties to tenants, and recognizes minimum base rentals as revenue on a straight-line basis over the lease terms. Tenants may also be required to pay additional rental amounts based on property operating expenses. In addition, certain tenants are required to pay incremental rental amounts based on store sales. These percentage rents are recognized only as earned.

         Revenues from the sale of real estate are recognized at the time of closing. Costs of sales related to real estate are based on the specific property sold. When a portion or unit of a development property is sold, a proportionate share of the total cost of the development is charged to cost of sales.

         Generally, revenues from the sale of manufactured goods were recognized on the date products were shipped to the customer. Revenues from certain sales, on which delivery was delayed at the customer’s explicit request, were recognized when conditions for revenue recognition were met.

         Energy management revenues primarily consist of services performed and product sales. Revenues are recognized as services are completed, and product sales are recognized when goods are shipped.

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Income-producing properties and property and equipment

Income-producing properties are stated at cost, and are depreciated for financial reporting purposes using the straight-line method over the estimated useful lives of the properties and related assets.

         Property 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 real estate assets under construction are capitalized. Costs of 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.

Impairment of long-lived assets and assets to be disposed of

The Company reviews its long-lived assets and certain intangible assets 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. Assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell. Depreciation is suspended during the marketing period.

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.

New accounting pronouncements

         During June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS 141, Business Combinations. Under the provisions of SFAS 141, all business combinations initiated after June 30, 2001, must be accounted for using the purchase method of accounting. The adoption of SFAS 141 did not have a material impact on the Company’s financial statements.

         Also during June 2001, the FASB issued SFAS 142, Goodwill and Other Intangible Assets. Under the provisions of SFAS 142, there will be no amortization of goodwill and other intangible assets that have indefinite useful lives. Instead, these assets must be tested for impairment annually and when events or changes in circumstances indicate that impairment may have occurred. The Company elected to adopt SFAS 142 as of May 1, 2001, and therefore goodwill and a trademark with an indefinite useful life acquired in the transaction described in Note 16 to the Consolidated Financial Statements have not been amortized.

         During August 2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144 supercedes FASB 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. In addition, SFAS 144 supercedes the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions for segments of a business to be disposed of. SFAS 144 addresses the treatment of assets held for sale or to be otherwise disposed of, the evaluation of impairment for long-lived assets, and the reporting of discontinued operations. The provisions of SFAS 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001. The adoption of SFAS 144 is not expected to have a significant impact on the Company’s financial position or cash flows; however, under SFAS 144, beginning May 1, 2002, the Company will report any gains or losses recognized on any sale of its income-producing real estate properties in discontinued operations, and the results of operations of an operating property classified as held for sale will be reported in discontinued operations.

         CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND RISKS

Certain statements contained or incorporated by reference in this Annual Report on Form 10-K, including without limitation, statements containing the words “believes,” “anticipates,” “expects,” and words of similar import, are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other matters which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or uncertainties expressed or implied by such forward-looking statements.

         Factors relating to general global, national, regional and local economic conditions, including international political stability, national security, employment levels, wage and salary levels, consumer confidence, availability of credit, taxation policies, interest rates, and inflation could negatively impact the Company’s customers, suppliers and sources of capital. Any significant negative impact on these parties could result in material adverse effects on the Company’s results of operations and financial condition.

         The Company is at risk for many other matters beyond its control. They include, but are not limited to: the impact of the Kmart Corporation bankruptcy on the Company’s rental revenues; co-tenancy provisions in other anchor leases; the Company’s ability to sell or refinance its real estate; the possibility of not achieving projected backlog revenues or not realizing earnings from such revenues; continuing competitive pressures on the availability and pricing of construction projects; changes in laws and regulations, including changes in accounting standards and generally accepted accounting principles; the timing and amount of earnings recognition related to the possible sale of real estate properties held for

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sale; delays in customer orders; the availability, timing and amount of possible refinancings related to real estate properties; the level and volatility of interest rates; the potential loss of a significant customer; and the deterioration in the financial stability of an anchor tenant, significant subcontractor or other significant customer.

         CONSIDERATION OF STRATEGIC ALTERNATIVES

The Company announced in the first quarter of fiscal 2000 that the Board of Directors had decided to investigate a wide range of possible strategic and financial alternatives available to maximize shareholder value. The investigation, which was completed in fiscal 2000, resulted in the discontinuance of the Company’s manufacturing operations. See “Discontinued Operations.”

         Also as a result of the investigation, the Company decided to outsource the asset and property management of the Company’s commercial real estate assets to third parties. During fiscal 2001, the asset management activities were outsourced to a company newly formed by former executives of the Real Estate Segment. The property management activities were also outsourced in fiscal 2001, primarily to independent, third-party managers. The Company plans to continue to own and invest in real estate.

         DISCONTINUED OPERATIONS

During the quarter ended January 31, 2000, the Board of Directors of the Company decided to discontinue the operations of its Manufacturing Segment. The financial statements reflect the operating results of this business as a discontinued operation, and prior year financial information has been appropriately restated. See Note 3 to the Consolidated Financial Statements. In fiscal 2000, the Company sold the Manufacturing Segment’s machinery, equipment, furniture, and raw materials inventory for $2.2 million.

         As of April 30, 2000, the Manufacturing Segment had ceased all operations and disposed of substantially all of its assets. As of April 30, 2001, the $2.76 million deferred gain from discontinued operations resulting from the eminent domain taking of the Company’s former manufacturing facility in Atlanta, Georgia, was included in Net liabilities of discontinued operations on the Consolidated Balance Sheet. The amount of the condemnation award was settled in October 2001, and Earnings from discontinued operations for 2002 represent the recognition of the deferred gain related to this transaction.

ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s major market risk exposure arises from changes in interest rates and its impact on variable rate debt instruments. In addition, the Company has interest rate risk associated with fixed rate debt. The Company’s objectives in interest rate risk management are to limit the negative impact of interest rates on earnings and cash flows and to lower overall borrowing costs. To achieve its objectives, the Company borrows at fixed rates when it believes it is in its best interests to do so, and may enter into derivative financial instruments, such as interest rate swaps and caps, in order to limit its exposure to interest rate fluctuations. The Company does not enter into derivative or interest rate transactions for speculative purposes. There were no derivative contracts in effect at April 30, 2001, or 2002.

         The following table summarizes information related to the Company’s market risk sensitive debt instruments as of April 30, 2002:

(1)		Amount for 2003 includes the approximate $12.2 million debt on the shopping center in Englewood, Florida, which was repaid when the center was sold in June 2002. Amount for 2004 includes approximately $6.95 million of debt on the shopping center in Jacksonville, Florida, which loan matures in 2019, but may be called at any time after September 2002, for repayment thirteen months after such call date. See “ITEM 7. LIQUIDITY AND CAPITAL RESOURCES.”
(2)		Interest on variable rate debt is based on the lender’s prime rate, prime rate plus .375%, or LIBOR plus 2%. Includes the approximate $4.6 million debt refinanced in July 2002 with $4.9 million debt, with a fixed rate of 7.75%.
(3)		See Note 9 to the Consolidated Financial Statements for rates on individual variable rate debt instruments.

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ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS