SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
___ OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
___ TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 0-5556
CONSOLIDATED-TOMOKA LAND CO.
(Exact name of registrant as specified in its charter)
Florida 59-0483700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
149 South Ridgewood Avenue
Daytona Beach, Florida 32114
(Address of principal executive offices) (Zip Code)
(386) 255-7558
(Registrant's telephone number, including area code)
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 and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class of Common Stock Outstanding
November 1, 2001
$1.00 par value 5,615,579
1
CONSOLIDATED-TOMOKA LAND CO.
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets -
September 30, 2001 and December 31, 2000 3
Consolidated Condensed Statements of Income -
Three Months Ended and Nine Months Ended
September 30, 2001 and 2000 4
Consolidated Statement of Shareholders' Equity -
Nine Months Ended September 30, 2001 5
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 2001 and 2000 6
Notes to Consolidated Condensed Financial Statements 7-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-13
PART II -- OTHER INFORMATION 14
SIGNATURES 15
2
PART I -- FINANCIAL INFORMATION
CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2001 2000
------------ -----------
ASSETS
Cash $ 2,199,471 $12,909,722
Investment Securities 9,888,593 8,178,186
Notes Receivable 6,585,868 11,602,477
Real Estate Held for Development and Sale 9,423,525 9,767,635
Refundable Income Taxes 1,121,408 743,801
Other Assets 2,299,195 2,516,635
------------ ----------
31,518,060 45,718,456
------------ ----------
Property, Plant, and Equipment:
Land, Timber and Subsurface Interests 7,985,160 3,822,918
Golf Buildings, Improvements & Equipment 11,197,588 10,408,134
Income Properties Buildings & Improvements 12,839,245 3,994,685
Other Furnishings and Equipment 677,356 636,819
------------ ----------
Total Property, Plant & Equipment 32,699,349 18,862,556
Less Accumulated Depreciation and Amortization ( 1,761,496) ( 1,227,098)
------------ ----------
Net - Property, Plant & Equipment 30,937,853 17,635,458
------------ ----------
TOTAL ASSETS $ 62,455,913 $63,353,914
============ ==========
LIABILITIES
Accounts Payable $ 106,886 $ 220,515
Accrued Liabilities 5,602,105 4,561,561
Deferred Income Taxes 2,312,561 2,171,438
Notes Payable 9,508,734 9,845,827
------------ ----------
TOTAL LIABILITIES 17,530,286 16,799,341
------------ ----------
SHAREHOLDERS' EQUITY
Common Stock 5,615,579 5,584,684
Additional Paid in Capital 758,470 --
Retained Earnings 38,551,578 40,969,889
------------ ----------
TOTAL SHAREHOLDERS' EQUITY 44,925,627 46,554,573
------------ ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 62,455,913 $63,353,914
============ ==========
See accompanying Notes to Consolidated Condensed Financial Statements.
3
CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited) (Unaudited)
Quarter Ended Nine Months Ended
-------------------------- --------------------------
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Income
Real Estate Operations:
Sales and Other Income $ 1,724,155 $ 2,882,689 $ 6,666,578 $ 5,685,087
Costs and Other Expenses (2,009,651) (1,425,888) (5,894,499) ( 4,221,624)
------------ ----------- ----------- ------------
( 285,496) 1,456,801 772,079 1,463,463
------------ ----------- ----------- ------------
Profit on Sales of Undeveloped
Real Estate Interests 4,333 14,750 56,612 100,176
------------ ----------- ----------- ------------
Interest and Other Income 236,642 423,419 1,034,155 1,271,188
------------ ----------- ----------- ------------
( 44,521) 1,894,970 1,862,846 2,834,827
General and Administrative Expenses (2,135,284) ( 876,533) (4,037,896) (2,799,969)
Income (Loss) Before Income Taxes (2,179,805) 1,018,437 (2,175,050) 34,858
Income Taxes 803,011 1,124,811 801,229 1,488,503
------------ ----------- ----------- ------------
Net Income (Loss) $ (1,376,794) $ 2,143,248 $ (1,373,821) $ 1,523,361
============ =========== =========== ============
Per Share Information:
Basic and Diluted
Net Income (Loss) ($0.25) $0.37 ($0.25) $0.26
============ ============ ============ ============
Dividends $0.05 $0.05 $0.15 $0.15
============ ============ ============ ============
See accompanying Notes to Consolidated Condensed Financial Statements.
4
CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Additional
Common Paid in Retained
Stock Capital Earnings Total
--------- ---------- ---------- ----------
Balance, December 31, 2000 $5,584,684 -- $40,969,889 $46,554,573
Net Loss (1,373,821) (1,373,821)
Cash Dividends
($.15 per share) ( 836,869) ( 836,869)
Repurchase of 18,900 Shares ( 18,900) ( 207,621) ( 226,521)
Issuance of 49,795 Shares
Pursuant to the Exercise
of Stock Options 49,795 626,173 675,968
Tax Benefit of Stock Options
Exercised 132,297 132,297
--------- ---------- ---------- ----------
Balance, September 30, 2001 $5,615,579 $ 758,470 $38,551,578 $44,925,627
========= ========== ========== ==========
5
CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
----------------------------
September 30, September 30,
2001 2000
------------ ------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss $( 1,373,821) $ 1,523,361
Adjustments to Reconcile Net Income to Net Cash
Provided By (Used In) Operating Activities:
Depreciation and Amortization 536,967 199,155
Compensation Expense on Exercise of Stock Options 660,834 --
Tax Benefit of Stock Options Exercised 132,297 --
Loss on Sale of Property, Plant and Equipment -- 4,618
Decrease (Increase) in Assets:
Notes Receivable 5,016,609 399,544
Real Estate Held for Development and Sale 344,110 219,986
Deferred Income Taxes -- (1,500,000)
Refundable Income Taxes ( 377,607) ( 836,975)
Other Assets 217,440 ( 9,048)
(Decrease) Increase in Liabilities:
Accounts Payable ( 113,629) 39,367
Accrued Liabilities 1,040,544 1,113,645
Deferred Income Taxes 141,123 --
Income Taxes Payable -- ( 631,528)
------------ ------------
Net Cash Provided By Operating Activities 6,224,867 522,125
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Property, Plant, and Equipment (13,839,362) ( 2,437,217)
Net Increase in Investment Securities ( 1,710,407) ( 3,083,920)
------------ ------------
Net Cash Used In Investing Activities (15,549,769) ( 5,521,137)
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable 688,000 --
Payments on Notes Payable ( 1,025,093) ( 317,354)
Cash Proceeds from Exercise of Stock Options 15,134 --
Funds Used to Repurchase Common Stock ( 226,521) ( 8,035,641)
Dividends Paid ( 836,869) ( 903,916)
------------ ------------
Net Cash Used in Financing Activities ( 1,385,349) ( 9,256,911)
------------ ------------
Net Decrease In Cash (10,710,251) (14,255,923)
Cash, Beginning of Year 12,909,722 16,458,208
------------ ------------
Cash, End of Period $ 2,199,471 $ 2,202,285
============ ============
See accompanying Notes to Consolidated Condensed Financial Statements.
6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Principles of Interim Statements. The following
unaudited condensed financial statements have been
prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information
and note disclosures which are normally included in annual
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or
omitted pursuant to those rules and regulations. The
consolidated condensed financial statements reflect
all adjustments which are, in the opinion of the
management, necessary to present fairly the Company's financial
position and the results of operations for the interim periods.
The consolidated condensed format is designed to be read
in conjunction with the last annual report. For
further information refer to the consolidated financial
statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000.
The consolidated condensed financial statements include
the accounts of the Company and its wholly owned
subsidiaries. Inter-company balances and transactions have
been eliminated in consolidation.
The Company has reviewed the recoverability of long-lived
assets, including real estate held for development and sale,
property, plant and equipment and certain identifiable
intangibles, for impairment whenever events or changes
in circumstances indicate that the carrying amount of an
asset may not be recoverable. There has been no material
impairment of long-lived assets reflected in the consolidated
financial statements.
2. Common Stock and Earnings Per Common Share. Pursuant to
the stock repurchase program, approved by the Board
of Directors at their July 21, 1999 meeting, the Company
repurchased 18,900 shares of its common stock at a
cost of $226,521 during the nine months ended September, 2001.
For the nine months ended September 30, 2000, the Company
repurchased 680,600 shares of its common stock at a cost of
$8,035,641.
During the quarter ended September 30, 2001, 220,000 stock
options were exercised. Of these options, 170,205 were
surrendered in payment of the cash exercise price of the
remaining options. The option exercise and accrual of stock
appreciation rights resulted in compensation expense of
$660,834, and $595,862, respectively, included in general
and administrative expenses. Additionally, the exercise
resulted in $472,895 of income tax benefit, of which $132,297
was recorded as an addition to additional paid-in capital.
7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
Basic earnings per common share are computed by dividing
net income by the weighted average number of shares of
common stock outstanding during the period. Diluted earnings
per common share are determined based on the assumption of
the conversion of stock options at the beginning of each
period using the treasury stock method at average cost for
the periods.
Three Months Ended Nine Months Ended
-------------------------- ---------------------------
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
------------ ------------ ------------- ------------
Income Available to Common
Shareholders:
Net Income (Loss) $( 1,376,794) $ 2,143,248 $( 1,373,821) $ 1,523,361
============ ============ ============ ===========
Weighted Average Basic and
Diluted Shares Outstanding 5,602,790 5,737,785 5,578,375 5,953,979
============ ============ ============ ===========
Basic and Diluted Earnings
Per Share:
Net Income (Loss) ($0.25) $0.37 ($0.25) $0.26
============ ============ ============ ===========
3. Notes Payable. Notes payable consist of the following:
September 30, 2001
--------------------------
Due Within
Total One Year
--------- ----------
$7,000,000 Line of Credit $ -- $ --
Mortgage Notes Payable 9,241,507 8,041,507
Industrial Revenue Bond 267,227 103,147
--------- ----------
$9,508,734 $ 8,144,654
========= ==========
8
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - CONTINUED
Payments applicable to reduction of principal amounts will be
required as follows:
Year Ending September 30,
------------------------
2002 $8,144,654
2003 121,410
2004 42,670
2005 --
2006 & Thereafter 1,200,000
---------
$9,508,734
=========
In the first nine months of 2001 and 2000 interest totaled
$632,678 and $652,413 respectively. No interest was capitalized
during the nine month period ended September 30, 2001, with
$49,383 of interest capitalized to property, plant and equipment in
the first nine months of 2000.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Management's Discussion and Analysis is designed to be read
in conjunction with the financial statements and Management's
Discussion and Analysis in the last annual report.
Certain statements contained in this report (other than the financial
statements and statements of historical fact), are forward-looking
statements. The words "believe," "estimate," "expect," "intend,"
"anticipate," "will," "could," "may," "should," "plan," "potential,"
"predict," "forecast," and similar expressions and variations thereof
identify certain of such forward-looking statements, which speak only
as of the dates on which they were made. Forward-looking statements
are made based upon management's expectations and beliefs
concerning future developments and their potential effect upon the
Company. There can be no assurance that future developments will be
in accordance with management's expectations or that the effect of
future developments on the Company will be those anticipated by
management.
The Company wishes to caution readers that the assumptions which form
the basis for forward-looking statements with respect to or that
may impact earnings for the year ended December 31, 2001, and
thereafter include many factors that are beyond the Company's ability
to control or estimate precisely. These risks and uncertainties
include, but are not limited to, the market demand of the Company's
real estate parcels; the impact of competitive real estate; changes
in pricing by the Company or its competitors; the costs and other
effects of complying with environmental and other regulatory
requirements; losses due to natural disasters and changes in national,
regional or local economic and political conditions, such as
inflation, deflation, or fluctuation in interest rates.
While the Company periodically reassesses material trends and
uncertainties affecting its results of operations and financial
condition, the Company does not intend to review or revise any
particular forward-looking statement referenced herein in light of
future events.
RESULTS OF OPERATIONS
Real Estate Operations
----------------------
For the quarter ended September 30, 2001, a loss from real estate
operations of $285,496 represents a 120% downturn from prior year's
same period profit of $1,456,801. This downturn can be attributed to
the lack of commercial sales volume in the period coupled with
unfavorable results from golf operations. During 2001's third
quarter there were no commercial land sales. This compares to the
sale of 78 acres of land in the third period of 2000, which produced
gross profits in excess of $1,980,000. Losses from golf operations
increased 71% to $563,237 for the normally slow third quarter. This
compares to a loss of $329,363 in the prior year's same period. The
increased loss is primarily the result of higher food and beverage,
maintenance and depreciation expenses associated with start up
10
Real Estate Operations (Continued)
---------------------------------
and operation of new clubhouse facility, which opened January 2001.
Overall golf revenues rose 30% primarily due to an increase in food
and beverage activity. While revenues remain strong, cost
containment procedures have recently been instituted to control
costs in the golf and food and beverage operations. Offsetting
the decline from land sales and golf activities was a significant
rise in earnings from income properties. Profits from income
properties of $453,629 were posted for the three month
period. This compares favorably to income of $65,566 recorded in
the same period of 2000. These improved results were achieved due
to the addition of five properties during the last quarter of 2000
and the first six months of 2001.
Real estate operating profits for the first nine months of 2001
totaled $772,079. These profits represent a 47% decline from the
$1,463,463 generated in the prior year's first nine months, and can
also be attributed to unfavorable results from commercial land sales
and golf operations. During the first nine months of 2001, gross
profits of $1,440,000 were produced on the sale of 32 acres of land.
The sale of 90 acres generated gross profits of $2,100,000 during the
prior year's same period. Losses from golf operations totaled
$1,041,371, a 143% increase from the $428,987 loss reported one year
earlier, despite a 26% increase in revenues. The unfavorable
comparison results from higher food and beverage costs and
other costs associated with the new clubhouse. Profits from income
properties increased ten-fold to $1,034,560 for the first nine months
of 2001 resulting from the addition of the five properties.
General, Corporate and Other
----------------------------
The sale of one acre of undeveloped land and the release of 34 acres
of subsurface interests produced income of $56,612 for the nine months
ended September 30, 2001. This compares to income of $100,176
generated on the release of subsurface rights on 2,551 acres for the
same period of 2000. Only modest income from the sale of undeveloped
real estate was posted in the third quarter of both 2001 and 2000.
Lower investable funds resulted in declines in interest and other
income of 44% and 19% for the third quarter and nine month period,
respectively, when compared to prior year.
The exercise of stock options, along with an increase in expense from
stock appreciation rights, due to the rise in the Company's stock
price, resulted in charges to general and administrative expenses of
$1,256,696. Stock options expense recorded for financial reporting
purposes is essentially cash neutral to the Company, as reduced
income taxes from deductible expenses offset cash payments associated
with stock appreciation rights. These expenses are the primary cause
for the rise in general and administrative expenses of 144% and 44%
for the third period and nine months, respectively.
11
General, Corporate and Other (Continued)
---------------------------------------
Results for 2000 include the resolution, in the third quarter, of
several income tax issues under examination with tax authorities,
which resulted in the reduction of deferred income taxes by
$1,500,000.
Financial Position
------------------
A loss of $1,373,821, equivalent to $.25 per share, for the first nine
months of 2001 represents a 190% downturn from profits totaling
$1,523,361, equivalent to $.26 per share, posted in the prior year's
first nine months. A loss before depreciation and deferred taxes of
$695,730, equivalent to $.12 per share, was posted in 2001. This
compares to earnings before depreciation and deferred taxes of
$2,253,959, equivalent to $.38 per share, in 2000's nine month period.
These unfavorable results are largely due to slower commercial sales,
negative results from golf operations, as the result of higher costs
associated with the new clubhouse, and expenses associated with stock
options and their exercise. Somewhat offsetting the negative results
are earnings of $1,034,560 from income properties in the first nine
months. This represents a significant improvement over prior year's
first nine month earnings from income properties of $96,030 and is due
to the implementation of the Company's strategy of investing in
quality triple net lease properties through the tax deferred like-kind
exchange process.
During the nine month period the Company invested $13,839,362 in
property, plant and equipment, including the investment $12.9 million
in three income properties under long-term lease to national retail
tenants. An additional $700,000 was expended on the completion of the
clubhouse facility at the LPGA International mixed-use development.
Other cash outflows during the period included $836,869 paid in
dividends equivalent to $.15 per share and $226,521 spent to
repurchase 18,900 shares of Company stock. Operating activities
provided $6,224,867 of cash including the collection of notes
receivable totaling $5,016,609. While cash and investment securities
decreased approximately $9.0 million dollars for the nine month
period, the Company's balance sheet remains strong with cash and
investment securities totaling $12,088,064 at September 30, 2001,
and debt totaling $9,508,734.
Capital requirements for the remainder of the year consist of
approximately $300,000 to be expended for the construction of roads on
lands adjacent to Interstate 95 in addition to $3.3 million to be
invested in an income property using the like-kind exchange process.
Also, when deemed appropriate the Company intends to continue its
stock buyback program. Sources of funds for these requirements are
cash and short-term investment securities on hand and if necessary
existing financing sources. An additional source of funds are the
currently owned income properties, which at this time are free of
debt. The Company has the ability to borrow on a non-recourse basis
against these properties.
12
Financial Position (Continued)
-----------------------------
The effects of the September 11th tragedies and subsequent events have
had some short-term impact as business slowed dramatically for seven
to ten days before gradually picking up. We have had no major
contract cancellations or apparent changes of plans of purchasers
as a result of the national events. The local economy appears
strong as does interest in Company owned land. Interest in
Company land has been aided by development on Company owned and
surrounding lands. This activity includes the continued construction
of homes within the LPGA development, the construction of the multi-
dealership auto mall on lands sold by the Company at the Interstate
95/LPGA Boulevard interchange, the opening of the Advance Technology
Center north of the LPGA interchange, the construction of the United
States Tennis Association Florida District headquarters on lands
donated by the Company and the opening of the new LPGA clubhouse.
A significant real estate contract backlog for closing in 2001 and
future years remains in place. Management will continue to focus on
converting this backlog into closings. As qualified transactions
close the Company intends to continue its strategy of diversification
through the reinvestment of proceeds into quality income properties
within the state of Florida through the tax deferred like-kind
exchange process.
13
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to
which the Company or its subsidiaries is a party.
Items 2 through 5.
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11 - Incorporated by Reference on Page 8
of this 10-Q report.
(b) Reports on Form 8-K
No Form 8-K reports were filed during the second
quarter.
14
SIGNATURES
Pursuant to the requirements 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.
CONSOLIDATED-TOMOKA LAND CO.
(Registrant)
Date: November 8, 2001 By:/s/ William H. McMunn
----------------------------
William H. McMunn, President
and Chief Executive Officer
Date: November 8, 2001 By:/s/ Bruce W. Teeters
----------------------------
Bruce W. Teeters, Senior
Vice President - Finance
and Treasurer
15