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, 1998
_____ 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, 1998
$1.00 par value 6,371,833
1
CONSOLIDATED-TOMOKA LAND CO.
INDEX
Page No.
PART I - - FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets -
June 30, 1998 and December 31, 1997 3
Consolidated Condensed Statements of Income and
Retained Earnings - Three Months Ended and
Six Months Ended June 30, 1998 and 1997 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997 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
CAPTION
(Unaudited)
June 30, December 31,
1998 1997
---------- -------------
ASSETS
Cash & Cash Equivalents $ 534,491 $ 9,387,433
Investment Securities 2,867,625 1,026,679
Notes Receivable 9,815,879 10,018,350
Accounts Receivable 2,314,461 1,824,973
Inventories 928,288 921,454
Cost of Fruit on Trees 2,045,402 2,786,501
Real Estate Held for Development and Sale 14,020,223 13,819,068
Net Investment in Direct Financing Lease 584,518 625,256
Refundable Income Taxes 304,296 --
Deferred Income Taxes 335,530 335,530
Other Assets 608,053 597,761
Property, Plant, and Equipment - Net 17,977,693 16,891,137
---------- ----------
TOTAL ASSETS $52,336,459 $58,234,142
========== ==========
LIABILITIES
Accounts Payable $ 386,954 $ 919,241
Notes Payable 10,825,635 13,497,523
Accrued Liabilities 4,848,416 3,853,403
Income Taxes Payable -- 2,109,528
---------- ----------
TOTAL LIABILITIES 16,061,005 20,379,695
---------- ----------
SHAREHOLDERS' EQUITY
Common Stock 6,371,833 6,371,833
Additional Paid-in Capital 3,793,066 3,793,066
Retained Earnings 26,110,555 27,689,548
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 36,275,454 37,854,447
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $52,336,459 $58,234,142
========== ==========
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,
1998 1997 1998 1997
---------- ---------- ---------- ---------
INCOME:
Citrus Operations:
Sales of Fruit and Other Income $ 2,974,679 $ 1,814,367 $ 7,548,058 $ 6,236,793
Production and Selling Expenses ( 2,317,494) ( 1,558,959) ( 6,174,379)( 5,106,503)
---------- ---------- ---------- ----------
657,185 255,408 1,373,679 1,130,290
---------- ---------- ---------- ----------
Real Estate Operations:
Sales and Other Income 1,533,071 1,474,824 2,909,720 2,323,594
Costs and Other Expenses ( 1,351,771) ( 748,794) ( 2,283,325)( 1,542,423)
---------- ---------- ---------- ----------
181,300 726,030 626,395 781,171
---------- ---------- ---------- ----------
Profit On Sales of Undeveloped
Real Estate Interests 17,923 16,000 114,338 18,000
---------- ---------- ---------- ----------
Interest and Other Income 78,458 531,906 335,931 830,540
---------- ---------- ---------- ---------
General and Administrative Expenses ( 678,668) ( 770,486) ( 1,529,750)( 1,664,170)
---------- --------- ---------- ----------
Income Before Minority Interest
In Partnership 256,198 758,858 920,593 1,095,831
Minority Interest in Partnership 92,879 5,135 103,411 15,886
---------- --------- ---------- ----------
Income Before Income Taxes 349,077 763,993 1,024,004 1,111,717
Income Taxes ( 128,079) ( 247,979) ( 372,855)( 369,399)
---------- --------- ---------- ---------
Net Income 220,998 516,014 651,149 742,318
Retained Earnings, Beginning of Period 25,889,557 26,095,930 27,689,548 27,748,008
Dividends -- -- ( 2,230,142)( 1,878,382)
---------- ---------- ---------- ----------
Retained Earnings, End of Period $26,110,555 $26,611,944 $26,110,555 $26,611,944
========== ========== ========== ==========
PER SHARE INFORMATION:
Average Shares Outstanding 6,371,833 6,261,272 6,371,833 6,261,272
========== ========== ========== ==========
Net Income Per Share:
Basic $ .03 $ .08 $ .10 $ .12
========== ========== ========== ==========
Diluted $ .03 $ .08 $ .10 $ .12
========== ========== ========== ==========
Dividends Per Share $ -- $ -- $ .35 $ .30
========== ========== ========== ==========
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,
1998 1997
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES:
CASH RECEIVED FROM:
Citrus Sales of Fruit and Other Income $ 7,055,253 $ 6,841,993
Real Estate Sales and Other Income 3,258,778 1,853,937
Sales of Undeveloped Real Estate Interests 114,338 18,000
Interest and Other Income 353,073 1,110,260
---------- -----------
Total Cash Received from Operating Activities 10,781,442 9,824,190
---------- ----------
CASH EXPENDED FOR:
Citrus Production and Selling Expenses 5,209,747 5,275,990
Real Estate Costs and Expenses 1,905,086 809,761
General and Administrative Expenses 894,451 1,326,206
Interest 583,037 635,924
Income Taxes 2,786,678 1,575,000
---------- ----------
Total Cash Expended for Operating Activities 11,378,999 9,622,881
---------- ----------
Net Cash Provided By (Used In)
Operating Activities ( 597,557) 201,309
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Property, Plant, and Equipment (3,835,641) ( 196,459)
Net (Increase) Decrease in Investment Securities (1,840,946) 382,671
Direct Financing Lease 40,738 42,330
Proceeds from Sale of Property, Plant,
and Equipment 2,282,494 2,238,933
---------- ----------
Net Cash Provided By (Used In) Investing
Activities (3,353,355) 2,467,475
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable 300,000 --
Payments on Notes Payable ( 2,971,888) ( 2,228,617)
Dividends Paid ( 2,230,142) ( 1,878,382)
---------- ----------
Net Cash Used in Financing Activities ( 4,902,030) ( 4,106,999)
---------- ----------
Net Decrease In Cash & Cash Equivalents ( 8,852,942) ( 1,438,215)
Cash and Cash Equivalents at Beginning of Period 9,387,433 1,760,835
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 534,491 $ 322,620
========== ===========
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. 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, 1997.
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, real estate operations including
forestry and golf activities are seasonal in nature.
Accordingly, results for the six months ended June 30, 1998
and 1997 are not necessarily indicative of results to be
expected for the full year. Results of operations for the
twelve months ended June 30, 1998 and 1997 are summarized
as follows (in thousands):
Twelve Months Ended June 30,
----------------------------------------------
1998 1997
--------------------- -------------------------
Revenues Income Revenues Income
-------- ----------- -------- -----------
Citrus Operations $10,756 $ 1,335 $ 10,312 $ 1,656
Real Estate Operations 5,998 1,849 6,184 2,523
General Corporate & Other 8,696 2,986 6,531 3,174
------ ------ ------ ------
Total Revenues $25,450 $23,027
====== ======
Income Before Income Taxes 6,170 7,353
Income Taxes ( 2,250) ( 2,773)
------ ------
Net Income $ 3,920 $ 4,580
====== ======
6
3. Common Stock and Earnings Per Common Share. Effective December
15, 1997 the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings Per Share." SAFS No. 128
requires companies to present basic earnings per share ("EPS") and
diluted EPS, instead of primary and fully diluted EPS previously
required. This accounting change had no material effect on
previously reported EPS data for the second quarter and first
six months of 1997.
<CAPTIONS>
Three Months Ended Six Months Ended
-------------------- -------------------
June 30 June 30 June 30, June 30
1998 1997 1998 1997
-------- -------- -------- --------
Income Available to
Common Shareholders $ 220,998 $ 516,014 $651,149 $ 742,318
======== ======== ======== ========
Weighted Average
Shares Outstanding 6,371,833 6,261,272 6,371,833 6,261,272
Common Shares Applicable
to Stock Options Using
the Treasury Stock
Method 25,971 66,571 26,364 66,877
--------- --------- --------- ---------
Total Shares Applicable
to Diluted Earnings
Per Share 6,397,804 6,327,843 6,398,197 6,328,149
========= ========= ========== =========
Basic Earnings Per Share $0.03 $0.08 $0.10 $ 0.12
========= ========= ========== =========
Diluted Earnings Per
Share $0.03 $0.08 $0.10 $ 0.12
========= ========= ========== =========
Basic earnings per common share were computed by
dividing net income by the weighted average number of
shares of common stock outstanding during the year.
Diluted earnings per common share were determined based
on assumption of the conversion of stock options at the
beginning of each period using the treasury stock
method at average cost for the periods.
7
PAGE>
4. Comprehensive Income. During the first quarter of 1998, the
Company adopted SFAS 130, "Reporting Comprehensive Income" which
had no effect on the accompanying consolidated statement of
net income.
5. Notes Payable. Notes payable consist of the following:
June 30, 1998
--------------------------------------------
Due Within
Total One Year
----------------- ---------------
$7,000,000 Line of Credit $ -- $ --
Mortgages Payable 10,248,065 207,679
Industrial Revenue Bonds 577,570 79,564
----------- ----------
10,825,635 287,243
=========== ==========
Notes Payable include $1,200,000 owed by Indigo Group Ltd. ("IG LTD."),
a 100% owned limited partnership in the real estate business.
Payments applicable to reduction of principal amounts will be
required as follows:
Year Ending June 30,
-------------------
1999 $ 287,243
2000 392,555
2001 427,511
2002 465,587
2003 7,978,803
Thereafter 1,273,936
----------
$10,825,635
==========
In the first six months of 1998, interest totaled $402,410 of
which $346,042 was capitalized to land held for development and
sale. Total interest for the six months ended June 30, 1997
was $739,767, of which $80,429 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
- ----------------
Profit from citrus operations for the three months ended
June 30, 1998 rose 157% to $657,185 from same period prior year
profits of $255,408. The increase in profits is directly
attributable to an 88% increase in fruit volume, with 348,000
boxes of fruit harvested and sold for the second three month
period of 1998 compared to 1997's same period volume of 185,000
boxes. The improved volume led to a 64% gain in revenues despite
a 13% reduction in average fruit pricing. Lower prices for both
fresh and processed fruit, along with a lower percentage of fruit
sold as fresh, contributed to the decline in average fruit
prices. Production and selling expenses increased 49% on the
higher fruit volume, with some efficiencies achieved as fixed costs
were spread over the larger volume.
For the first six months of 1998 increased fruit volume again
accounted for a rise in profits. Profits for 1998's first six
month period totaled $1,373,679, representing a 22% improvement of
1997's same period profit of $1,130,290. Fruit harvested and
sold totaled 904,000 for 1998 with 1997's volume 30% below that level
at 696,000 boxes. Revenues totaling $7,548,058 represent a
21% gain over prior year on the rise in volume, although offset
somewhat by a 7% fall in average fruit pricing. The reduction in
fruit pricing is primarily due to lower fresh fruit pricing. The
increased volume led to a 21% rise in production and selling expenses
for the period.
Real Estate Operations
- ----------------------
Profits from real estate operations for the second quarter of
1998 decreased 75% to $181,300 from year earlier profits of
$726,030. This reduction in profits is primarily the result
of lower commercial land sales with six acres closed producing
gross profits approximating $210,000 in 1998's second period.
This compares to gross profits totaling $625,000 generated on the
sale of eighteen acres during 1997's same period. The sale of the
Palm Coast office building, which occurred in May 1997, and the
December 1997 sale of the 47,000 square foot Daytona Beach
office building along with the delay of a hunting lease
renewal resulted in a $60,000 reduction in profits from income
properties. Forestry operations income declined 31% to $128,000
for the three month period on a 25% decline in revenues from
decreased harvesting. The LPGA International golf operations,
which the Company took over in September 1997, provided additional
revenues in excess of $550,000 on break-even bottom line results.
9
Lower commercial sales volume also accounted for the reduced
profits posted for the six month period, as profits from real
estate operations totaled $626,395, representing a 20% decrease from
prior year's $781,171 profit. Gross profits of $260,000 were produced
on the sale of eleven acres during 1998's first six month period,
with the sale of eighteen acres generating $630,000 during 1997's
same period. The sale of the office buildings and delay in the
hunting lease mentioned above also contributed to a downturn in
results from income properties for the six month period with
profits declining $50,000 to break-even. Forestry profits rose 5%
to 386,000 on a 6% gain in revenue for the six month period.
Golf operations provided income of $274,000 on revenues
totaling $1,378,000.
General, Corporate and Other
- -----------------------------------
Profits on the sale of undeveloped real estate interest for
1998's six months to date totaled $114,338 on the release of
surface entry rights on 3,011 acres. Interest and other income
declined 85% for the second quarter of 1998 to $78,458 and 60%
for the six month period to $335,931. Contributing to the downturn from
interest and other income for both the second quarter and six month periods is
a $250,000 gain posted in 1997 on the sale of the Palm Coast office building
along with decreased interest on mortgage notes receivable paid off during 1997.
General and administrative costs declined 12% and 8% for the second
three month period and six months to date, respectively.
These reductions can be attributed to lower interest and
contributions expense, along with additional costs capitalized to the
LPGA development and construction of the second golf course.
10
FINANCIAL POSITION
- ------------------
Company profits for the first six months of 1998 of $651,149,
equivalent to $.10 per share, represent a 12% decrease from year
earlier profits of $742,318, equivalent to $.12 per share. This
downturn is attributed to lower commercial sales volume and the
sale of income properties, offset by increased earnings from
citrus operations. Dividends paid during the six month period
increased 17% to $.35 per share. Cash and cash equivalents
decreased $8.9 million during the period, while debt outstanding
was reduced nearly $2.7 million. Cash used in operating
activities totaled $600,000 while cash used in investing
activities totaled $3.4 million and cash used in financing
activities amounted to $4.9 million including the debt reduction
and dividend payment. Cash used in investing activities includes
$3.8 million expended on the acquisition of property, plant
and equipment, primarily the construction of the second golf course,
with an additional $1.8 million transferred to investment securities.
These outflows were offset by proceeds from the sale of property,
plant and equipment totaling $2.3 million. These proceeds were
primarily generated from the sale of the Forest Center shopping
center. Capital requirements for the remainder of 1998 approximate
$1.8 million, which is primarily centered on development in and
around the LPGA mixed-use project, including the second golf
course. Funding of these expenditures will come from cash
and investments on hand, operating activities and if necessary
existing financing sources.
Harvesting for the 1997-1998 citrus crop year was completed in
late May with Company fruit volume amounting to 1,255,000 boxes.
This volume represented a 20% increase over the 1,044,000 boxes harvested
for the 1996-1997 crop year. Pricing remains relatively weak,
although stable, as the state of Florida orange crop totaled 244
million boxes for the season, representing an 8% increase over the
prior year's record crop. Although temperatures have been extremely
high and rainfall extremely low during the late spring and early
summer period the condition of company groves is very good as
brief, timely rainfalls coupled with irrigation has provided
adequate moisture. The Mediterranean fruit fly has been located
in Highlands County in groves well to the north of Company groves.
It is anticipated that it will be controlled or eradicated, with no
ill-effects to Company fruit or groves, before harvesting for the
1998-1999 crop season begins in September.
Company owned lands were in the midst of the wildfires experienced
in late June and early July across western Volusia County. Approximately
8,000 acres of Company lands were damaged by the fires, with the
damage limited to timber on lands held for future development.
Timber harvesting is in progress, and although timber prices
have declined due to the volume of timber on the market, bottom
line financial statement impact should be minimal. However,
future economic gain has been sacrificed due to earlier than
planned harvesting and some loss of immature trees planted in recent
years which are not of sufficient size to harvest.
11
Development activities remain centered on the LPGA mixed-use
development. Construction of the second golf course is near completion
and is in the grow-in stage. Play on the course is anticipated to
begin the fourth quarter of this year. The clubhouse facilities
continue in the permitting and design phase. The golf facilities
along with land for development of a destination resort hotel
and timeshare units are currently under negotiation for sale
to a resort developer. It is anticipated the development of
this project will attract additional activity on Company lands
in and around the LPGA project. Commercial sales activity
remains relatively strong, with negotiations underway on several
parcels of land and additional properties under contract. The
wildfires have not had a material impact on either sales or development
activities.
The corporation has evaluated and identified the risks of software
failure due to processing errors arising from calculation using the
Year 2000 date. A plan for conversion has been established to
maintain the integrity of its financial systems and ensure the
reliability of its operating systems. The cost of achieving Year
2000 compliance, which includes software and installation and
will be incurred during 1998 and 1999 is not expected to be material
in relation to the Company's financial statements.
Good condition of Company citrus groves, relatively stable pricing
and abundant citrus crops from citrus operations, along with
continued strong commercial sales activity lead to projections
of continued near term profits.
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 5.
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit (11) - Incorporated by Reference on Page 7
of this 10-Q report.
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 11, 1998 By: /s/ Bob D. Allen
---------------------
Bob D. Allen
President & Chief
Executive Officer
Date: August 11, 1998 By: /s/ Bruce W. Teeters
-----------------------
Bruce W. Teeters
Sr. Vice President-
Finance & Treasurer
14