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 September 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 November 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 -
September 30, 1998 and December 31, 1997 3
Consolidated Condensed Statements of Income and
Retained Earnings - Three Months and
Nine Months Ended September 30, 1998 and 1997 4
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 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
(Unaudited)
September 30, December 31,
1998 1997
------------ ------------
ASSETS
Cash $ 136,317 $ 9,387,433
Investment Securities 1,185,710 1,026,679
Notes Receivable 10,104,836 10,018,350
Accounts Receivable 1,833,257 1,824,973
Inventories 778,631 921,454
Cost of Fruit on Trees 3,245,588 2,786,501
Real Estate Held for Development and Sale 14,280,762 13,819,068
Net Investment in Direct Financing Lease 563,532 625,256
Prepaid Income Taxes 735,294 --
Deferred Income Taxes 335,530 335,530
Other Assets 704,457 597,761
Property, Plant, and Equipment - Net 18,579,739 16,891,137
---------- ----------
TOTAL ASSETS $52,483,653 $58,234,142
========== ==========
LIABILITIES
Accounts Payable $ 519,627 $ 919,241
Notes Payable 12,543,782 13,497,523
Accrued Liabilities 5,447,617 3,853,403
Income Taxes Payable -- 2,109,528
---------- ----------
TOTAL LIABILITIES 18,511,026 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 23,807,728 27,689,548
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 33,972,627 37,854,447
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $52,483,653 $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 Nine Months Ended
-------------------------- --------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
INCOME:
Citrus Operations:
Sales of Fruit and Other Income $ 3,729 $ 77,896 $ 7,551,787 $ 6,314,689
Production and Selling Expenses ( 497,136) ( 535,438) ( 6,671,515) ( 5,641,941)
---------- ---------- ---------- ----------
( 493,407) ( 457,542) 880,272 672,748
---------- ---------- ---------- ----------
Real Estate Operations:
Sales and Other Income $ 1,515,308 1,242,735 4,425,028 3,566,329
Costs and Other Expenses ( 792,639) ( 805,745) ( 3,075,964) ( 2,348,168)
---------- ---------- ---------- ----------
722,669 436,990 1,349,064 1,218,161
---------- ---------- ---------- ----------
Profit On Sales of Undeveloped
Real Estate Interests 10,385 1,700 124,723 19,700
---------- ---------- ---------- ----------
Interest and Other Income 242,622 274,415 578,553 1,104,955
---------- ---------- ---------- ----------
GENERAL AND ADMINISTRATIVE EXPENSES ( 598,144) ( 1,032,553) ( 2,127,894) ( 2,696,723)
---------- ---------- ---------- ----------
INCOME(LOSS)BEFORE MINORITY INTEREST
IN PARTNERSHIP ( 115,875) ( 776,990) 804,718 318,841
MINORITY INTEREST IN PARTNERSHIP 1,717 11,868 105,128 27,754
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES ( 114,158) ( 765,122) 909,846 346,595
INCOME TAXES 41,473 251,868 ( 331,382) ( 117,531)
---------- ---------- ---------- ----------
NET INCOME (LOSS) ( 72,685) ( 513,254) 578,464 229,064
RETAINED EARNINGS, Beginning of Period 26,110,555 26,611,944 27,689,548 27,748,008
DIVIDENDS ( 2,230,142) ( 2,191,445) ( 4,460,284) ( 4,069,827)
---------- ---------- ---------- ----------
RETAINED EARNINGS, End of Period $23,807,728 $23,907,245 $23,807,728 $23,907,245
========== ========== ========== ==========
PER SHARE INFORMATION:
Average Shares Outstanding 6,371,833 6,265,040 6,371,833 6,262,542
========== ========== ========== ==========
Net Income (Loss) Per share:
Basic $(.01) $(.08) $.09 $.04
========== ========== ========== ==========
Diluted $(.01) $(.08) $.09 $.04
========== ========== ========== ==========
DIVIDENDS PER SHARE $ .35 $ .35 $.70 $.65
========== ========== ========== ==========
See Accompanying Notes to Consolidated Condensed Financial Statements.
4
CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
----------------------------
September 30, September 30,
1998 1997
------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES:
CASH RECEIVED FROM:
Citrus Sales and Other Income $ 7,861,724 $ 7,552,199
Real Estate Sales and Other Income 4,086,378 3,612,620
Sales of Undeveloped Real Estate Interest 124,723 19,700
Interest and Other Income 549,810 1,322,484
---------- ----------
Total Cash Received from Operating Activities 12,622,635 12,507,003
---------- ----------
CASH EXPENDED FOR:
Citrus Production and Selling Expenses 6,815,106 6,576,475
Real Estate Costs and Expenses 2,713,969 974,881
General and Administrative Expenses 549,732 1,762,548
Interest 822,442 979,650
Income Taxes 3,176,203 1,765,000
---------- ----------
Total Cash Expended for Operating
Activities 14,077,452 12,058,554
---------- ----------
Net Cash Provided by (Used In)
Operating Activities ( 1,454,817) 448,449
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Property, Plant, and Equipment ( 4,567,835) ( 410,428)
Net (Increase) Decrease in Investment Securities ( 159,031) 395,338
Direct Financing Lease 61,724 63,896
Proceeds from Sale of Property, Plant,
and Equipment 2,282,868 2,258,931
---------- ----------
Net Cash Provided (Used In) Investing
Activities ( 2,382,274) 2,307,737
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds From Notes Payable 2,257,000 3,600,000
Payments on Notes Payable ( 3,210,741) ( 3,879,590)
Dividends Paid ( 4,460,284) ( 4,069,827)
---------- ----------
Net Cash Used in Financing Activities ( 5,414,025) ( 4,349,417)
---------- ----------
NET DECREASE IN CASH & CASH EQUIVALENTS ( 9,251,116) ( 1,593,231)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,387,433 1,760,835
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 136,317 $ 167,604
========== ==========
See Accompanying Notes to Consolidated Condensed Financial Statements.
5
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Principles of Interim Statements. The following unaudited
consolidated 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 pre-
pared 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 manage-
ment, 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 lesser extent, real estate
operations including forestry and golf activities, are seasonal
in nature. Accordingly, results for the nine months ended
September 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
September 30, 1998 and 1997 are summarized as
follows (in thousands):
Twelve Months Ended September 30,
------------------------------------------------
1998 1997
--------------------- ------------------------
Revenues Income Revenues Income
--------- ----------- ---------- -----------
Citrus Operations $10,682 $ 1,300 $10,341 $ 1,686
Real Estate Operations 6,270 2,134 6,693 2,939
General Corporate & Other 8,673 3,387 6,625 3,009
------ ----- ------ ------
Total Revenues $25,625 $23,659
====== ======
Income Before Income Taxes 6,821 7,634
Income Taxes ( 2,460) ( 2,937)
------ ------
Net Income $ 4,361 $ 4,697
====== ======
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 third quarter and
first nine months in 1997.
Three Months Ended Nine Months Ended
------------------------ --------------------
Sept. 30, Sept. 30, Sept. 30, Sept.30,
1998 1997 1998 1997
----------- ----------- ---------- ----------
Income Available to
Common Shareholders ( 72,685) ( 513,254) 578,464 229,064
========= ========= ========= =========
Weighted Average
Shares Outstanding 6,371,833 6,265,040 6,371,833 6,262,542
Common Shares Applicable
to Stock Options Using
the Treasury Stock
Method 7,662 60,038 16,003 46,706
--------- --------- --------- ---------
Total Shares
Applicable to Diluted
Earnings Per Share 6,379,495 6,325,078 6,387,836 6,309,248
========= ========= ========= =========
Basic Earnings Per
Share ($0.01) ($0.08) $0.09 $0.04
========= ========= ========= =========
Diluted Earnings Per
Share ($0.01) ($0.08) $0.09 $0.04
========= ========= ======== ========
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 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.
7
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 statements of
net income.
5. Notes Payable. Notes payable consist of the following:
September 30, 1998
-----------------------------
Due Within
Total One Year
---------- -----------
Consolidated-Tomoka Land Co.
----------------------------
$ 7,000,000 Line of Credit $ 1,807,000 $ 1,807,000
Mortgages Payable 10,180,339 212,247
Industrial Revenue Bonds 556,443 81,166
---------- ----------
12,543,782 2,100,413
========== ==========
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 Sept. 30,
1999 $ 2,100,413
2000 401,016
2001 436,728
2002 8,241,546
2003 121,410
Thereafter 1,242,669
----------
$12,543,782
==========
In the first nine months of 1998 interest totaled
$822,442 of which $563,244 was capitalized to land
held for development and sale. Total interest for
the nine months ended September 30, 1997 was
$1,112,805, of which $133,153 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
- ----------------
Losses were posted from citrus operations for both the
third period ended September 30, 1998 and 1997 as harvesting
of the crop was completed in the late spring. A loss of
$493,407 was realized for the three month period of 1998,
representing an 8% increase over 1997's loss of $457,542.
The higher loss can be attributed to higher repair and
maintenance costs, along with the fact that no fruit was
harvested during the period for 1998 while approximately
7,000 boxes were sold in 1997 as the season got off to an
earlier start.
For the nine months year-to-date net income from citrus
operations totaled $880,272, a 31% increase over 1997's
nine month profit of $672,748. The gain in profits was
realized on a 20% increase in revenues resulting from a
28% rise in fruit harvested and sold during the period. A total
of 903,000 boxes were harvested and sold during 1998 compared
to 703,000 one year earlier. This gain was partially offset
by an overall 7% reduction in average fruit prices, primarily
attributable to fresh fruit pricing. Production and selling
expenses rose 18% as a result of the increased fruit volume;
although, this was partially offset by increased handling
credits realized on packing outside growers fruit.
Real Estate Operations
- ----------------------
Profits from real estate operations increased 65% for the
third quarter of 1998 on the strength of higher commercial
real estate closing volume. Real estate profits totaled
$722,669 for the period on the sale of 47 acres of land, while
the sale of 27 acres during 1997's third period helped to
generate total real estate profits of $436,990. Revenues
from income properties declined 79% during the three
month period due to the December 1997 sale of the
47,000-square-foot Daytona Beach office building
and the June 1998 sale of the 70,000-square-foot shopping
center located in Marion County, while profits remained stable.
A 10% gain in profits from forestry operations was
achieved on increased harvesting, with profits totaling
$227,000. Golf operations at the LPGA International
golf course added $205,000 in revenues over the
prior year, while losses from the operation increased
$120,000 during the three-month period as the Company took
over the operation effective September 1997.
9
Year-to-date profits from real estate totaled $1,349,064,
an 11% improvement over the $1,218,161 posted in 1997's first
nine months. This improvement can be attributed to a $153,000
gain from golf course operations, along with $38,000 in
additional income from forestry operations. Commercial real
estate results are substantially in line with prior year results
as a 9% reduction in gross profits from sales is offset by
lower advertising and administrative costs. For 1998's first
nine-month period closings on 58 acres produced gross profits
of $950,000, while 1997's first nine-month period saw closings
of 45 acres generating gross profits of $1,040,000. Results
from income properties also are substantially in line with
prior year; although, revenues are down $763,000 due to the
sale of properties mentioned above in addition to the May 1997
sale of the 24,000-square-foot Palm Coast office building.
General, Corporate and Other
- -----------------------------------
Profits on the sale of undeveloped real estate interest for
1998's nine months to date totaled $124,723 on the release
of surface entry rights on 3,427 acres. Interest and other
income declined 12% for the third quarter of 1998 to $242,622
on reduced interest from mortgage notes receivable paid off.
For the nine-month period interest and other income fell
48% to $578,553 on reduced interest from mortgage notes
receivable, $160,000 loss posted on the sale of the Forest
Center shopping center and a $250,000 gain realized on the sale
of the Palm Coast office building during 1997.
General and administrative costs declined 42% and 21% for the
third three month period and nine months to date, respectively.
These reductions can be attributed to lower stock options
and interest expense, along with additional costs capitalized
to the LPGA development and construction of the second golf
course.
10
FINANCIAL POSITION
- ------------------
Net income for the first nine months of 1998 totaled $578,464,
equivalent to $.09 per share, and represents an increase in
excess of 150% when compared to 1997's nine-month profit of
$229,064, equivalent to $.04 per share. This income growth
was achieved on a 31% rise in citrus earnings and 11% gain in
real estate profits coupled with a 21% reduction in general
and administrative expenses. Dividends paid during the period
amounted to $.70 per share, a 8% increase over the $.65 per
share paid in the prior year. Cash flow was a negative
$9,250,000 including $4,460,000 paid in dividends, $4,560,000
cash used to fund the acquisition of property, plant and equipment
and $3,170,000 in payment of income taxes. Offsetting these
cash outflows was $2,280,000 cash generated on the sale of
property, plant and equipment, primarily on the sale of the
Forest Center shopping center. Funds used for the acquisition
of property, plant and equipment were centered on the
construction of the second golf course at the LPGA
International development. For the remainder of 1998 capital
requirements are estimated to approximate $400,000 and will
be focused on the golf course along with the clubhouse
facilities. These requirements will be met with cash
generated from operations along with available financing sources,
if necessary.
The USDA 1998-1999 Florida crop estimate was released in
early October with the estimate of Florida round oranges
totaling 190 million boxes. This estimate represents a 22%
decrease from the 244 million boxes harvested during the
1997-1998 crop year. This significant decline, along with
anticipated smaller crops from Brazil and California, should
lead to significantly stronger prices. These stronger prices
have already been seen to some extent as the 1998-1999 crop
year begins production. The downturn in fruit production is
primarily attributed to severe weather conditions in the first
half of 1998, with heavy rains experienced in the winter and
early spring months and near-drought conditions along
with unusually high temperatures experienced in
late spring and early summer. Company groves remain in very
good condition as soil conditions allow the groves not to
become saturated with moisture in periods of heavy rain, and
irrigation systems supply them with enough water in dry
periods. Early indications of production from Company groves
project volume to be near the 1,255,000 boxes harvested in
the 1997-1998 crop year. The Mediterranean fruit fly which
had been located in groves in northern Highlands County has
been controlled and eradicated with no ill effect to Company
groves.
The second golf course at the LPGA International mixed-use
development opened to the public the 1st of October. The
course has received rave reviews from both golf writers and
players. The clubhouse facilities continue in the design
11
and permitting stage with plans scheduled to be ready the
first quarter of 1999, at which time construction will commence.
Efforts continue to secure a destination resort hotel adjacent
to the clubhouse. The physical and psychological impacts
of the wildfires, experienced in late June and July, on our real
estate development and sales operations have been far less than
anticipated. In general, the area has bounced back and greened up.
It appears there aren't any long lasting negative impacts to our
community because of the fires. Commercial real estate activity
remains relatively strong, with several contracts in place and
negotiations taking place on additional lands.
The Company 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 hardware installation, will be incurred
during 1998 and 1999 and is not expected to be material in
relation to the Company's financial statements.
The good condition of Company citrus groves, relatively strong
pricing and abundant citrus crops from citrus operations,
along with continued healthy 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
(for SEC use only)
(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: November 6, 1998 By: /s/ Bob D. Allen
--------------------
Bob D. Allen,President and
Chief Executive Officer
Date: November 6, 1998 By: /s/ Bruce W. Teeters
--------------------
Bruce W. Teeters
Sr. Vice President -
Finance and Treasurer
14