SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
____ OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
_____ TRANSITION REPORT PURSUANT TO SECTION 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 32114
Daytona Beach, Florida (Zip Code)
(Address of principal executive offices)
(904) 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.
Outstanding
Class of Common Stock August 1, 1997
$1.00 par value 6,261,272
1
CONSOLIDATED-TOMOKA LAND CO.
INDEX
Page No.
PART I - - FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets -
June 30, 1997 and December 31, 1996 3
Consolidated Condensed Statements of Income and
Retained Earnings - Three Months Ended and
Six Months Ended June 30, 1997 and 1996 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Condensed Financial Statements 6-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II -- OTHER INFORMATION 13
SIGNATURES 14
2
PART I -- FINANCIAL INFORMATION
CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1997 1996
---------- -------------
ASSETS
Cash & Cash Equivalents $ 322,620 $ 1,760,835
Investment Securities 1,013,744 1,396,415
Notes Receivable 14,791,311 14,770,281
Accounts Receivable 1,672,699 2,217,584
Inventories 799,794 686,597
Cost of Fruit on Trees 2,302,006 2,179,989
Real Estate Held for Development and Sale 14,597,791 14,499,495
Net Investment in Direct Financing Lease 668,660 710,990
Other Assets 319,040 354,473
Property, Plant, and Equipment - Net 18,867,120 21,095,863
---------- ----------
TOTAL ASSETS $55,354,785 $59,672,522
========== ==========
LIABILITIES
Accounts Payable $ 355,188 $ 680,935
Notes Payable 15,719,154 17,947,771
Accrued Liabilities 4,218,192 3,651,507
Deferred Income Taxes 406,930 406,930
Income Taxes Payable -- 1,193,994
---------- ----------
TOTAL LIABILITIES 20,699,464 23,881,137
---------- ----------
SHAREHOLDERS' EQUITY
Common Stock 6,261,272 6,261,272
Additional Paid-in Capital 1,782,105 1,782,105
Retained Earnings 26,611,944 27,748,008
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 34,655,321 35,791,385
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $55,354,785 $59,672,522
========== ==========
See accompanying Notes to Consolidated Condensed Financial Statements.
3
CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- ---------
INCOME:
Citrus Operations:
Sales of Fruit and Other Income $ 1,814,367 $ 4,618,325 $ 6,236,793 $ 9,787,226
Production and Selling Expenses ( 1,558,959) ( 2,826,662) ( 5,106,503)( 6,301,127)
---------- ---------- ---------- ----------
255,408 1,791,663 1,130,290 3,486,099
---------- ---------- ---------- ----------
Real Estate Operations:
Sales and Other Income 1,474,824 989,383 2,323,594 3,781,708
Costs and Other Expenses ( 748,794) ( 849,636) ( 1,542,423)( 2,051,201)
---------- ---------- ---------- ----------
726,030 139,747 781,171 1,730,507
---------- ---------- ---------- ----------
Profit On Sales of Undeveloped
Real Estate Interests 16,000 1,200 18,000 3,256
---------- ---------- ---------- ----------
Interest and Other Income 531,906 650,156 830,540 822,471
---------- ---------- ---------- ---------
General and Administrative Expenses ( 765,351) ( 828,012) ( 1,648,284)( 1,678,491)
---------- --------- ---------- ----------
Income Before Income Taxes 763,993 1,754,754 1,111,717 4,363,842
Income Taxes ( 247,979) ( 638,468) ( 369,399)( 1,598,680)
---------- --------- ---------- ---------
Net Income 516,014 1,116,286 742,318 2,765,162
Retained Earnings, Beginning of Period 26,095,930 24,672,708 27,748,008 24,589,150
Dividends -- -- ( 1,878,382)( 1,565,318)
---------- ---------- ---------- ----------
Retained Earnings, End of Period $26,611,944 $25,788,994 $26,611,944 $25,788,994
========== ========== ========== ==========
PER SHARE INFORMATION:
Average Shares Outstanding 6,261,272 6,261,272 6,261,272 6,261,272
========== ========== ========== ==========
Net Income Per Share $ .08 $ .18 $ .12 $ .44
========== ========== ========== ==========
Dividends Per Share $ -- $ -- $ .30 $ .25
========== ========== ========== ==========
See accompanying Notes to Consolidated Condensed Financial Statements.
4
CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Unaudited
Six Months Ended
----------------------
June 30, June 30,
1997 1996
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES:
CASH RECEIVED FROM:
Citrus Sales of Fruit and Other Income $ 6,841,993 $ 8,682,366
Real Estate Sales and Other Income 1,853,937 3,584,405
Sales of Undeveloped Real Estate Interests 18,000 46,027
Interest and Other Income 1,110,260 246,016
---------- -----------
Total Cash Received from Operating Activities 9,824,190 12,558,814
---------- ----------
CASH EXPENDED FOR:
Citrus Production and Selling Expenses 5,275,990 5,683,033
Real Estate Costs and Expenses 809,761 1,180,318
General and Administrative Expenses 1,326,206 1,270,255
Interest 635,924 765,913
Income Taxes 1,575,000 3,590,000
---------- ----------
Total Cash Expended for Operating Activities 9,622,881 12,489,519
---------- ----------
Net Cash Provided by Operating Activities 201,309 69,295
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Property, Plant, and Equipment ( 196,459) ( 265,961)
Net (Increase) Decrease in Investment Securities 382,671 ( 190,975)
Direct Financing Lease 42,330 40,259
Proceeds from Sale of Property, Plant,
and Equipment 2,238,933 3,619,495
---------- ----------
Net Cash Provided by Investing Activities 2,467,475 3,202,818
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Cash Proceeds from Notes Payable -- 1,550,000
Payments on Notes Payable ( 2,228,617) ( 3,814,703)
Dividends Paid ( 1,878,382) ( 1,565,318)
---------- ----------
Net Cash Used in Financing Activities ( 4,106,999) ( 3,830,021)
---------- ----------
Net Decrease In Cash & Cash Equivalents ( 1,438,215) ( 557,908)
Cash and Cash Equivalents at Beginning of Period 1,760,835 1,167,373
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 322,620 $ 609,465
========== ===========
See accompanying Notes to Consolidated Condensed Financial Statements.
5
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
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.
The consolidated condensed financial statements include
the accounts of the Company and its wholly owned
subsidiaries. Intercompany balances and transactions
have been eliminated in consolidation.
2. Seasonal Operations. The company's citrus operations involve
a single-crop agricultural commodity and are seasonal in
nature. To a lessor extent, its forestry activities are
seasonal in nature. Accordingly, results for the six
months ended June 30, 1997 and 1996 are not necessarily
indicative of results to be expected for the full year.
Results of operations for the twelve months ended
June 30, 1997 and 1996 are summarized as follows (in
thousands):
Twelve Months Ended June 30,
----------------------------------------------
1997 1996
--------------------- -------------------------
Revenues Income Revenues Income
-------- ----------- -------- -----------
Citrus Operations $10,312 $ 1,656 $ 12,833 $ 3,634
Real Estate Operations 6,184 2,523 8,967 4,190
General Corporate & Other 6,531 3,174 6,183 2,884
------ ------ ------ ------
Total Revenues $23,027 $27,983
====== ======
Income Before Income Taxes 7,353 10,708
Income Taxes ( 2,773) ( 4,039)
------ ------
Net Income $ 4,580 $ 6,669
====== ======
3. Common Stock and Earnings Per Common Share. Primary earnings
per share are based on the average number of common shares
and common share equivalents outstanding during the period.
Primary and fully diluted earnings per share are the same
for the periods.
6
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128
"Earnings Per Share," (SFAS 128). SFAS 128 establishes new
standards for computing and presenting earnings per share (EPS).
Specifically, SFAS 128 replaces the presentation of primary EPS
with a presentation basic of EPS, requires dual presentation of
basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the diluted
EPS computation. SFAS 128 is effective for financial statements
issued for periods ending after December 15, 1997; earlier
application is not permitted. EPS for the periods ended June 30,
1997 and June 30, 1996 computed under SFAS 128 would not
be different than that previously computed.
4. Notes Payable. Notes payable consist of the following:
June 30, 1997
--------------------------------------------
Due Within
Total One Year
----------------- ---------------
Consolidated-Tomoka Land Co.
----------------------------
$7,000,000 Line of Credit $ -- $ --
Mortgages Payable 9,304,698 190,366
Industrial Revenue Bonds 2,696,569 301,083
---------- ----------
12,001,267 491,449
---------- ----------
Indigo Group Ltd.
-----------------
Mortgages Payable 3,717,887 37,020
---------- ----------
3,717,887 37,020
---------- ----------
Total $15,719,154 $ 528,469
========== ==========
Indigo Group Ltd. ("IG LTD.") is a 100% owned limited partnership
in the real estate business. Included in notes payable is a
$2,517,887 mortgage note collateralized by developed real estate
in a joint venture project. IG Ltd's 50% partner is jointly
liable on the note.
Payments applicable to reduction of principal amounts will be
required as follows:
7
Consolidated- Indigo
Tomoka Group
Year Ending June 30, Land Co. Ltd. Total
------------------- ------------- --------- -----------
1998 $ 491,449 $ 37,020 $ 528,469
1999 628,497 2,480,867 3,109,364
2000 682,839 -- 682,839
2001 741,888 -- 741,888
2002 806,056 -- 806,056
Thereafter 8,650,538 1,200,000 9,850,538
---------- --------- ----------
$12,001,267 $ 3,717,887 $15,719,154
========== ========== ==========
In the first six months of 1997, interest totaled $739,767 of
which $80,429 was capitalized to land held for development and
sale. Total interest for the six months ended June 30, 1996
was $853,708, of which $87,795 was capitalized to land held
for development and sale.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
RESULTS OF OPERATIONS
Citrus Operation
----------------
Profits from citrus operations for the second quarter of 1997 fell 86%
compared to 1996's same period results. This downturn in profits to
$255,408, is directly attributable to a 63% reduction in fruit harvested
and sold during the period, resulting in a 61% decrease in revenues.
Revenues of $1,814,367 were posted in the second period on total fruit
volume of 185,303 boxes. This compares to revenues of $4,618,325
generated on fruit production of 495,785 boxes during 1996's second
period. Overall production and selling expenses declined 45% on the
lower fruit volume.
For the six month period ended June 30, 1997 a significant decline in
citrus profitability was also experienced. The $1,130,290 profit
realized for the first six months of 1997 represents a 68% decrease from
prior year income of $3,486,099. Again lower volume accounts for the
unfavorable results with revenues declining 36% on a 34% reduction in
fruit volume. Fruit volume for 1997 totaled 696,423 boxes compared to
the 1,050,488 boxes produced during 1996's first six months. Unit fruit
pricing was off in 1997 compared to one year earlier with both fresh and
processed fruit contributing to the decline. The lower fruit volume also
accounts for the 19% decrease in production and selling expenses for
1997. Negatively impacting 1997 expenses was a $312,000 decrease in
handling credits which offset expenses.
Real Estate Operations
----------------------
Real estate operations posted a significant improvement for the second
quarter of 1997, with profits of $726,030 recorded compared to $139,747
recognized one year earlier. The primary factor associated with these
favorable results was the sale of 18 acres of commercial lands producing
gross profits approximating $630,000. This compares to no commercial
land closings in 1996's second three month period. Conversely, the six
months to date profits from real estate operations of $781,171 represent
a 55% decrease from prior year's $1,730,507. This fall is the direct
result of lower commercial sales volume as gross profits of $1,460,000
were realized on the sale of 22 acres in 1996's first six months
compared to the sale of 18 acres during the current year.
The sale of the 70,000 square foot Mariner Village shopping center, which
occurred in June 1996, and the December 1996 sale of a 21,000 square foot
office building located in Daytona Beach, resulted in declines in
revenues and profits from income properties in both the second quarter
and year-to-date. Compared to one year earlier, revenues from income
properties were down 38% and 35% for the quarter and six months,
respectively, while net profit declined 51% and 64%, respectively.
9
Forestry income rose 40% for the three month period to $186,000 and 4%
for the six months ended June 30, 1997 to $368,000, as increased
harvesting produced revenue growth of 39% and 5% for the two periods,
respectively.
Subsurface revenue totaling $43,000 reflected an increase of 15% for the
second three month period on additional mineral lease income, while
higher oil royalties coupled with the additional mineral lease income led
to a 59% gain in subsurface revenue to $101,000 for the six month period.
General, Corporate and Other
----------------------------
Interest and other income of $531,906 for the second quarter of 1997
represents an 18% decrease compared to 1996's same period income of
$650,156. Results for 1996's second period include profits of $450,000
recognized on the sale of the Mariner Village shopping center, while
1997's income includes $250,000 posted on the sale of a Palm Coast office
building. For the first six months of 1997 interest and other income of
$830,540 is in line with the $822,471 posted in 1996's six month period
with interest on mortgage notes receivable from year end 1996 closings,
providing an additional $170,000 in 1997 and investment interest rising
slightly.
Lower interest and salaries expense resulted in an 8% decrease in general
and administrative expenses for the quarter and a 2% decline for the six
months.
10
FINANCIAL POSITION
------------------
The Company experienced a downturn in profitability for the six months
ended June 30, 1997 when compared to 1996's first six months results.
Net income posted to date in 1997 amounted to $742,318, equivalent to
$.12 per share, representing a 73% reduction from prior year income of
$2,765,162, equivalent to $.44 per share. The unfavorable results are
attributable to lower citrus earnings, on decreased volume and pricing,
along with reduced profits from commercial real estate activity. Cash
and cash equivalents decreased $1,438,215 for the first half of 1997,
including the payment of dividends totaling $1,878,382 equivalent to $.30
per share. The dividend payment represents a 20% increase over dividends
paid for the first six months of 1996 equivalent to $.25 per share. Cash
generated from operating activities amounted to $201,309, while cash
realized from investing activities totaled $2,467,475 and $4,106,999 was
used in financing activities, including the dividend payment. Included
in cash flow from investing activities was $2,238,933 generated on
proceeds from sale of property, plant and equipment, primarily recognized
on the sale of the 24,000 square foot office building in Palm Coast,
Florida. In turn the payoff of the mortgage on the building makes up the
majority of the $2,228,617 of payments on notes payable included in the
cash flow from financing activities.
Company fruit harvesting for the 1996-1997 crop year was completed in
late May. Total production for the season amounted to 1,044,000 boxes,
which represents 75% of the prior crop year's harvest. The reduction is
primarily due to the sale of older groves in previous years. This volume
will be replaced in future years by younger groves as they reach maturity
and their fruit yield rises. Overall Company groves are in excellent
condition with the fruit sizing well for the coming season. Outbreaks
of the Mediterranean fruit fly and citrus canker have occurred in several
areas in the state. The state has commenced eradication programs and it
appears the outbreaks are on their way to being contained at this time.
Company groves have not been affected by either the medfly or canker at
this time and appear not to be in danger. Pricing for both processed and
fresh fruit remains relatively weak as the supply of fruit from both the
United States and Brazil markets remains abundant.
The efforts by the third party developer to obtain financing for the resort
hotel, second golf course and clubhouse have been unsuccessful; thus,
pending the approval of the City of Daytona Beach the Company is moving
forward on the construction of the second golf course and clubhouse
facilities at the Ladies Professional Golf Association mixed-use
development. Construction of the golf course will commence in early fall
1997 while the clubhouse construction will begin the first quarter of
1998. Completion of both the golf course and clubhouse facilities are
scheduled for summer of 1998. The design and permitting of the golf
course has been completed at this time. The total cost of the combined
projects will approximate $9 to $10 million, of which $2.5 million is
projected to be spent the remainder of 1997. The funds for the project
will be provided from operations and if necessary external financing,
including an existing line of credit. The operation and management of
not only the second golf course and clubhouse facilities, but also the
first golf course and the operations currently in place, will become the
Company's responsibility upon approval by the City of Daytona Beach.
11
Commercial sales activity in and around the LPGA development remains
strong with several parcels under contract for closing in 1997 and future
years. During the second quarter the Company put 11,384 acres of its
most western Volusia County lands under contract to St. Johns' River
Water Management District at a price of $10,245,000. The transaction is
scheduled to close the end of 1997 with an option to move the closing to
1998. Included in the sales price is compensation for timber. Although
from an overall Company standpoint the impact will not be significant;
profits in future years from Company forestry operations will be reduced
due to the reduction in timber available for harvesting.
The Company continues to add value through selective development, while
disposing of assets not in near term plans. Profitability for the near
term looks bright, but depends on the conversion of commercial contracts
into closings and a relatively stable citrus operating environment.
12
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 3.
Not Applicable
Item 4. Submission of matters to a vote of security holders.
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit (11) - Computation of Earnings
Per Common Share
Exhibit (27) - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Company during the quarter covered by
this report.
13
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: August 8, 1997 By: /s/ Bob D. Allen
---------------------
Bob D. Allen
President & Chief
Executive Officer
Date: August 8, 1997 By: /s/ Bruce W. Teeters
-----------------------
Bruce W. Teeters
Sr. Vice President-
Finance & Treasurer
14
EXHIBIT INDEX
Page No.
----------
No. 11 Computation of Earnings Per Common Share 15
No. 27 Financial Data Schedule 16
15
EXHIBIT 11
CONSOLIDATED-TOMOKA LAND CO. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY DILUTED
EARNINGS PER COMMON SHARE
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------- --------- --------- ---------
PRIMARY EARNINGS PER SHARE
NET INCOME 516,014 1,116,286 742,318 2,765,162
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,261,272 6,261,272 6,261,272 6,261,272
COMMON SHARES APPLICABLE TO STOCK
OPTIONS USING THE TREASURY STOCK
METHOD AT AVERAGE MARKET PRICE FOR
THE PERIOD 66,571 89,604 66,877 89,604
--------- --------- --------- ---------
TOTAL PRIMARY SHARES 6,327,843 6,350,876 6,328,149 6,350,876
========= ========= ========= =========
PRIMARY EARNINGS PER COMMON
SHARE $0.08 $0.18 $0.12 $0.44
========= ========= ========= =========
FULLY DILUTED EARNINGS PER
SHARE
TOTAL PRIMARY SHARES 6,327,843 6,350,876 6,328,149 6,350,876
COMMON SHARES APPLICABLE TO STOCK
OPTIONS IN ADDITION TO THOSE
USED IN PRIMARY COMPUTATION
DUE TO USE OF THE HIGHER OF
AVERAGE MARKET PRICE OR PERIOD
END MARKET PRICE 306 18,244 -- 18,244
--------- --------- --------- ---------
TOTAL FULLY DILUTED SHARES 6,328,149 6,369,120 6,328,149 6,369,120
========= ========= ========= =========
FULLY DILUTED EARNINGS PER SHARE $0.08 $0.18 $0.12 $0.44
========= ========= ========= =========
16