UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-K
X
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2006
Commission
File Number 0-5556
CONSOLIDATED-TOMOKA
LAND CO.
(Exact
name of registrant as specified in its charter)
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Florida
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59-0483700
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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1530
Cornerstone Boulevard, Suite 100
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32117
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Daytona
Beach, Florida
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(Zip
Code)
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(Address
of principal executive offices)
Registrant's
Telephone Number, including area code
(386)
274-2202
SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
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Title
of each class
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Name
of each exchange on which registered
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COMMON
STOCK, $1 PAR VALUE
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AMERICAN
STOCK EXCHANGE
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SECURITIES
REGISTERED UNDER SECTION 12(g) OF THE ACT:
NONE
(Title
of
Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 if the Securities Act. YES NO X
Indicate
by check mark if the registrant is not required to file reports pursuant to
section 13 or Section 15(d) of the Act. YES NO X
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. YES X NO
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this
Form 10-K. YES X NO
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition “accelerated filer
and large accelerated filer” in Rule
12b-2
of
the Exchange Act.
Large
accelerated filer Accelerated filer X Non-accelerated filer___
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of
the
Act).
YES NO X
The
aggregate market value of the shares of common stock held by non-affiliates
of
the registrant at June 30, 2006, was approximately $313,633,508.
The
number of shares of the registrant's Common Stock outstanding on March 1, 2007
was 5,715,885.
Portions
of the Proxy Statement of registrant, which the Company expects will be dated
March 23, 2007, are incorporated by reference in Part III of this
report.
“Safe
Harbor”
Certain
statements contained in this Form 10-K (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,” “project,” 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, 2007, and thereafter, include many factors that are
beyond the Company’s ability to control or estimate precisely. These risks and
uncertainties include the risk factors set forth in Item 1A below.
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.
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PART
I
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1
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6
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9
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10
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11
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11
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PART
II
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11
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13
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14
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24
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25
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25
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25
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26
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PART
III
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26
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26
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26
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27
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27
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PART
IV
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27
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28
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PART
I
Consolidated-Tomoka
Land Co. (the “Company”) is primarily engaged in real estate, income properties,
and golf operations collectively, “The Real Estate Business,” through its wholly
owned subsidiaries, Indigo Group Inc., Indigo Development Inc., Indigo
International Inc., Indigo Group Ltd., Indigo Commercial Realty Inc., W. Hay
Inc., W. Hay LLC, and Palms Del Mar Inc. Real estate operations include
commercial real estate, land sales and development, agricultural operations,
and
leasing properties for oil and mineral exploration. Income properties primarily
consist of owning properties leased on a triple-net and double-net basis. Golf
operations consist of the operation of two golf courses, a clubhouse facility,
and food and beverage activities. These operations are predominantly located
in
Volusia County, Florida, with various income properties located in Florida,
Georgia, and North Carolina.
The
following is information regarding the Company’s business segments. The
“General, Corporate and Other” category includes general and administrative
expenses, income earned on investment securities, and other miscellaneous income
and expense items.
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2006
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2005
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2004
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(IN
THOUSANDS)
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Revenues
of each segment are as follows:
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Real
Estate
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$
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28,942
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$
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32,074
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$
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32,640
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Income
Properties
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8,184
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6,618
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4,659
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Golf
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5,210
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4,818
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4,579
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|||||||
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General,
Corporate and Other
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1,253
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1,210
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1,213
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$
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43,589
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$
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44,720
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$
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43,091
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Operating
income (loss) before income tax for each segment is as
follows:
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Real
Estate
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$
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21,811
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$
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25,581
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$
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24,939
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||||
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Income
Properties
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6,723
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5,446
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3,852
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|||||||
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Golf
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(1,478
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)
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(1,292
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)
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(1,199
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)
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General,
Corporate and Other
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(5,566
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)
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(6,787
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)
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(3,860
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)
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||||
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$
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21,490
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$
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22,948
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$
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23,732_
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Identifiable
assets of each segment are as follows:
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Real
Estate
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$
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23,088
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$
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15,473
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$
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14,446
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Income
Properties
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106,955
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93,908
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62,167
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Golf
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8,651
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9,308
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9,708
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General,
Corporate and Other
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15,080
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24,569
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32,900
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$
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153,774
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$
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143,258
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$
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119,221
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Identifiable
assets by segment are those assets that are used in each segment. General
corporate assets and those used in the Company’s other operations consist
primarily of cash, investment securities, notes receivable, and property, plant,
and equipment.
1
ITEM
1. BUSINESS (CONTINUED)
REAL
ESTATE OPERATIONS
COMMERCIAL
DEVELOPMENT. In 1993, the Company received Development of Regional Impact
(“DRI”) approval on a 4,500-acre tract of land located both east and west of
Interstate 95 in Daytona Beach, Florida. The tract of land includes
approximately 3,000 acres west of Interstate 95 in a mixed-used development
known as LPGA International. The LPGA International development includes the
headquarters of the Ladies Professional Golf Association, along with two
championship golf courses, clubhouse facilities, and residential communities.
In
addition to these uses, the DRI also provides for resort facilities, and other
commercial uses. Substantially all of the remaining property within the LPGA
International development was sold to MSKP Volusia Partners LLC, a Morgan
Stanley-Kitson Partnership (“MSKP”) in 2004. MSKP assumed responsibilities as
master developer of the project. The property is expected to be developed into
several distinct communities, with lots sold to major builders.
The
Company continues to own approximately 1,100 acres of land within the DRI,
primarily located east of Interstate 95. At the end of 2002, the Company closed
the sale of the first corporate head-quarter’s site at the Company’s new
Cornerstone Office Park located within the 250-acre Gateway Business Center
at
the southeast quadrant of the Interstate 95 interchange at LPGA Boulevard.
Development of the office park was substantially completed in 2003, with the
opening in January 2004 of the first office building owned and constructed
by a
third party, which includes the Company’s corporate office. A second site was
sold within the development during 2005, with a companion 47,000 square-foot
office building owned and constructed by a third party, which opened in early
2006.
Development
of the Gateway Commerce Park, a 250-acre industrial, warehouse, and distribution
park located south of Gateway Business Center on the east side of Interstate
95
in Daytona Beach, commenced in 2004 with the first phase substantially completed
prior to year end 2004. The first sale within the development closed in February
2004, with construction of a 60,000 square-foot manufacturing and distribution
facility by a third party completed in late 2004. Through December 2006, seven
sales totaling approximately 70 acres have closed within the Gateway Commerce
Park with buildings approximating 225,000 square feet constructed and an
additional 60,000 square feet currently under construction. Total buildout,
including expansions of existing buildings, on these parcels will approximate
650,000 square feet.
Indigo
Commercial Realty Inc., a commercial real estate brokerage company formed in
1981, is the Company's agent in the management of developed commercial and
undeveloped acreage. Approximately 24 acres of fully developed sites located
in
the Daytona Beach area and owned by Indigo Group Inc. were available for sale
at
December 31, 2006. All development and improvement costs have been completed
at
these sites.
2
ITEM
1. BUSINESS (CONTINUED)
RESIDENTIAL.
During 2005, Indigo Group Ltd sold its remaining residential lot inventory
in
Tomoka Heights, a 180-acre development adjacent to Lake Henry in Highlands
County, Florida. The remaining residential lots in Riverwood Plantation, a
180-acre community in Port Orange, Florida, were sold during 2004.
AGRICULTURAL
OPERATIONS. The Company’s agricultural lands encompass approximately 11,000
acres on the west side of Daytona Beach, Florida. Management believes the
geographic location of this tract is excellent. In addition to access by major
highways (Interstate 95, State Road 40, and International Speedway Boulevard),
the internal road system for forestry and other agricultural purposes is good.
In the summer of 1998 wildfires ravaged central Florida, destroying
approximately 8,500 acres of the Company’s timber land. This and the sale of an
approximate 11,000-acre parcel to St. Johns River Water Management District
in
1997 have reduced the Company’s potential for future income from sales of forest
products. Expenses associated with forestry operations consist primarily of
real
estate taxes, with additional expenses including the costs of installing and
maintaining roads and drainage systems, reforestation, and wildfire
suppression.
After
the
wildfires experienced in 1998, the Company began replanting approximately 1,000
acres annually in timber. It is anticipated that the newly planted timber will
reach maturity in 14 to 20 years. Based on current growth projections, a
significant portion of the replanted lands east of Interstate 95 and along
LPGA
Boulevard and certain lands west of Interstate 95 appear to be in the path
of
the area’s growth, which could result in some portions of the property being
sold prior to the maturity of the timber crop. This predicament prompted the
Company to develop a business plan in the early 2000’s for conversion of
unplanted and immature timber lands into other agricultural uses that would
produce saleable crops on a shorter maturity schedule.
In
late
2004, the Company formed a wholly owned subsidiary, W. Hay LLC, to manage the
conversion of these timber lands into hay production. Annually, management
assesses which areas should be converted from timber into hay operations. These
decisions are based on the current economics of both the timber and hay
businesses, and the then current evaluation of the estimated maturity date
of
planted timber parcels. As mature timber is harvested, the decision to replant
or convert is evaluated on the same criteria. It is currently anticipated that
over time a significant portion of the Company’s lands will be converted into
hay production.
During
2005, the Company hired a staff to manage and operate equipment for the ongoing
hay operations. Approximately 80 acres of land were planted during 2005, with
the first harvest in the first quarter of 2006. During 2006, the Company
continued to expand its hay operations with the addition of new employees and
equipment. At the end of 2006, approximately 200 acres were planted with an
additional 175 acres in various stages of clearing and planting. Harvesting
activities were limited in 2006 due to a significant shortage of rainfall
throughout the year.
3
ITEM
1. BUSINESS (CONTINUED)
SUBSURFACE
INTERESTS. The Company owns full or fractional subsurface oil, gas, and mineral
interests in approximately 516,000 "surface" acres of land owned by others
in
various parts of Florida, equivalent to approximately 283,000 acres in terms
of
full interest. The Company leases its interests to mineral exploration firms
when such firms deem exploration to be financially feasible. The Company’s basis
in subsurface interests is $574.
Leases
on
800 acres have reached maturity; but, in accordance with their terms, are held
by the oil companies without annual rental payments because of producing oil
wells, from which the Company receives royalties.
The
Company’s current policy is not to release any ownership rights with respect to
its reserved mineral rights. The Company will release surface entry rights
or
other rights upon request of a surface owner who requires such a release for
a
negotiated release price based on a percentage of the surface value. In
connection with any release, the Company charges a minimum administrative
fee.
At
December 31, 2006, there were two producing oil wells on the Company's
interests. Volume in 2006 was 105,533 barrels and volume in 2005 was 95,062
barrels from three producing wells. Production in barrels for prior recent
years
was: 2004 - 109,114, 2003 - 100,098, and 2002 - 115,453.
INCOME
PROPERTIES
The
Company’s business strategy involves becoming a company, over time, with a more
predictable earnings pattern from geographically dispersed real estate holdings.
To this end, the Company has acquired twenty-five income properties since 2000.
Following is a summary of these properties:
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LOCATION
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TENANT
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AREA
(SQUARE
FEET)
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YEAR
PURCHASED
|
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Tallahassee,
Florida
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CVS
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10,880
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2000
|
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Daytona
Beach, Florida
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Barnes
& Noble
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28,000
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2001
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Lakeland,
Florida
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Barnes
& Noble
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18,150
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2001
|
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Sanford,
Florida
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CVS
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11,900
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2001
|
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Palm
Bay, Florida
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Walgreens
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13,905
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2001
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Clermont,
Florida
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CVS
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13,824
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2002
|
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Melbourne,
Florida
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CVS
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10,908
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2003
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Sebring,
Florida
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CVS
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12,174
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2003
|
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Kissimmee,
Florida
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Walgreens
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13,905
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2003
|
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Orlando,
Florida
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Walgreens
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15,120
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2003
|
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Sanford,
Florida
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CVS
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13,813
|
2003
|
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Apopka,
Florida
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Walgreens
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14,560
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2004
|
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Clermont,
Florida
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Walgreens
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13,650
|
2004
|
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Sebastian,
Florida
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CVS
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13,813
|
2004
|
|
Alpharetta,
Georgia
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Walgreens
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15,120
|
2004
|
|
Powder
Springs, Georgia
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Walgreens
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15,120
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2004
|
|
Lexington,North
Carolina
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Lowe’s
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114,734
|
2005
|
|
Alpharetta,
Georgia
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RBC
Centura Bank
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4,128
|
2005
|
|
Asheville,
North Carolina
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NorthernTool
& Equipment
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25,454
|
2005
|
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Altamonte
Springs, Florida
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RBC
Centura Bank
|
4,135
|
2005
|
|
Vero
Beach, Florida
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CVS
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13,813
|
2005
|
|
Orlando,
Florida
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RBC
Centura Bank
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4,128
|
2005
|
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Clermont,
Florida
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CVS
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13,813
|
2005
|
|
McDonough,
Georgia
|
Dick’s
Sporting Goods
|
45,000
|
2006
|
|
McDonough,
Georgia
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Best
Buy
|
30,000
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2006
|
|
25
Properties
|
490,047
|
4
ITEM
1. BUSINESS (CONTINUED)
With
the
exception of the Dick’s Sporting Goods and Best Buy properties acquired in 2006,
all properties are leased on a long-term, double or triple-net lease
basis.
During
the third quarter of 2004, CVS Corp.(“CVS”) completed the acquisition of a
portion of the Eckerd pharmacy chain, including all of the Florida stores.
As
part of the integration of the Eckerd chain into its system, some of the
acquired stores were closed.
Four
stores owned by the Company were closed by CVS. The tenant is obligated on
the
leases and continues to make lease payments. Three of the four closed stores
have been subleased.
Other
rental property is limited to ground leases for billboards, a communication
tower site, and hunting leases covering 7,025 acres. A 12-acre auto dealership
site, formerly under lease, was sold in 2006 at a profit approximating $437,000
before income taxes.
GOLF
OPERATIONS
On
September 1, 1997, responsibility for the operations of the LPGA International
golf courses was transferred from the City of Daytona Beach to a wholly owned
subsidiary of the Company. The agreement with the City of Daytona Beach provided
for a second golf course and a clubhouse to be constructed by the Company in
return for a long-term lease from the City on both golf courses.
The
second golf course was constructed by the Company and opened for play in October
1998. The first phase of the clubhouse, which consisted primarily of the cart
barn, was completed in 1999. Construction of the final phase of the clubhouse,
consisting of a 17,000 square-foot facility including a pro shop, locker rooms,
formal dining and banquet rooms, and a swimming pool, was completed in December
2000 and opened for business in January 2001.
GENERAL,
CORPORATE AND OTHER OPERATIONS
Land
development beyond that discussed at "Business - Real Estate Operations" will
necessarily depend upon the long-range economic and population growth of Florida
and may be significantly affected by fluctuations in economic conditions, prices
of Florida real estate, and the amount of resources available to the Company
for
development.
EMPLOYEES
The
Company has twenty-five employees and considers its employee relations to be
satisfactory.
AVAILABLE
INFORMATION
The
Company’s website is www.ctlc.com. The Company makes available on this website,
free of charge, its annual reports on Form 10-K, quarterly reports on Form
10-Q,
current reports on Form 8-K and amendments to those reports as soon as
reasonably practicable after the Company electronically files or furnishes
such
materials to the SEC, and has done so since March 2003, the date that the
Company’s website became active. The Company will also provide paper copies of
these filings free of charge upon a specific request in writing for such filing
to the Company’s Secretary, P.O. Box 10809, Daytona Beach, Florida
32120-0809.
5
ITEM
1A. RISK FACTORS
The
real
estate business is subject to a number of significant risks. The risks described
below may not be the only risks which potentially could impact our business.
These additional risks include those which are unknown at this time or that
are
currently considered immaterial. If any of the circumstances described below
actually occur to a significant degree, our business, financial condition,
and/or results of operations could suffer, and the trading price of the
Company’s common stock could decline.
FUTURE
CHANGES IN THE REAL ESTATE MARKET COULD AFFECT THE VALUE OF
OUR
PROPERTIES AND BUSINESS
We
have
extensive real estate holdings in the City of Daytona Beach in Volusia County,
Florida. The value of the real property and the revenue from related sale and/or
development activities may be adversely affected by a number of factors,
including:
|
*
|
national,
regional, and local economic
climate;
|
|
*
|
local
real estate conditions (such as an oversupply of land or a reduction
in
demand for real estate in an area);
|
|
*
|
competition
from other available property;
|
|
*
|
availability
of roads and utilities;
|
|
*
|
unexpected
construction costs or delays;
|
|
*
|
government
regulations and changes in real estate, zoning, land use, environmental
or
tax laws;
|
|
*
|
interest
rate levels and the availability of financing;
and
|
|
*
|
potential
liabilities under environmental and other
laws.
|
OUR
FUTURE SUCCESS WILL DEPEND UPON OUR ABILITY TO SUCCESSFULLY EXECUTE ACQUISITION
OR DEVELOPMENT STRATEGIES
There
is
no assurance that we will be able to continue to implement our strategy of
investing in income properties successfully. Additionally, there is no assurance
that the income property portfolio will expand at all, or if it will expand
at
any specified rate or to any specified size. In addition, investment in
additional real estate assets is subject to a number of risks. As we expect
to
invest in markets other than the ones in which currently owned properties are
located, we will be subject to risks associated with investment in new markets
that may be relatively unfamiliar to us.
Development
activities are subject to the risks normally associated with these activities.
These risks include those relating to the availability and timely receipt of
zoning and other regulatory approvals, the cost and timely completion of
construction (including risks from factors beyond our control, such as weather,
labor conditions, or material shortages), and the ability to obtain both
construction and permanent financing on favorable terms. These risks could
result in substantial unanticipated delays or expenses and, under certain
circumstances, could prevent completion of development activities once
undertaken or provide a tenant the opportunity to terminate a lease. Any of
these situations may delay or eliminate proceeds or cash flows expected from
these projects, which could have an adverse affect on our financial condition
and results of operations.
OUR
OPERATIONS COULD BE NEGATIVELY IMPACTED BY THE LOSS OF KEY MANAGEMENT
PERSONNEL
Our
future success depends, to a significant degree, on the efforts of each member
of senior management. Replacement of any member of senior management could
adversely affect our operations and our ability to execute business strategies.
Our Company does not have key man life insurance policies on members of senior
management.
6
ITEM
1A. RISK FACTORS (CONTINUED)
CHANGES
IN LOCAL, REGIONAL, AND NATIONAL ECONOMIC CONDITIONS COULDADVERSELY AFFECT
OUR
BUSINESS
The
real
estate development industry is cyclical in nature and is particularly vulnerable
to shifts in local, regional, and national economic conditions outside of our
control, such as:
|
*
|
short
and long-term interest rates;
|
|
*
|
housing
demand;
|
|
*
|
population
growth; and
|
|
*
|
employment
levels and job growth;
|
|
*
|
property
taxes; and
|
|
*
|
property
and casualty insurance.
|
The
real
estate business is subject to a number of economic factors including the impact
of rising and falling interest rates, which can affect the ability of purchasers
to obtain financing, and population growth, which impacts supply and demand
for
new homes, as well as goods and services; and hence, land to meet those
needs.
Any
decline in the regional or national economies could adversely impact real estate
sales and revenues. Accordingly, our financial condition could be adversely
affected by any weakening in the regional or national economy.
In
addition, weather conditions and natural disasters such as hurricanes,
tornadoes, floods, droughts, fires, and other environmental conditions can
adversely affect the Company’s business.
THE
REAL ESTATE BUSINESS IS SUBJECT TO ENVIRONMENTAL AND LAND USE
REGULATIONS
We
are
subject to a wide variety of federal, state, and local laws and regulations
relating to land use and development and to environmental compliance and
permitting obligations, including those related to the use, storage, discharge,
emission, and disposal of hazardous materials. Any failure to comply with these
laws could result in capital or operating expenditures or the imposition of
severe penalties or restrictions on operations that could adversely affect
present and future operations.
Municipalities
may restrict or place moratoriums on the availability of utilities, such as
water and sewer taps. Additionally, development moratoriums may be imposed
due
to traffic over capacity on roads. In some areas, municipalities may enact
growth control initiatives, which will restrict the number of building permits
available in a given year. If municipalities in which the Company owns land
and
operates take actions like these, it could have an adverse affect by causing
delays, increasing costs, or limiting the ability to operate in those
municipalities.
WE
SELL PROPERTY IN A HIGHLY COMPETITIVE MARKET, WHICH COULD HURT FUTURE
BUSINESS
Our
competitors are primarily other landowners in the Volusia County area. These
competitive conditions can make it difficult to sell land at desirable prices
and can adversely affect operations, financial condition, or results of
operations.
7
ITEM
1A. RISK FACTORS (CONTINUED)
OUR
QUARTERLY RESULTS ARE SUBJECT TO VARIABILITY
We
derive
a substantial portion of our income from land sales. The timing of commercial
land sales activity is not predictable and is generally subject to the
purchaser’s ability to obtain approvals from the city, county and regulatory
agencies for their intended use of the land on a timely basis. As these
approvals are subject to third party responses, it is not uncommon for delays
to
occur, which affect the timing of sales closings. These timing issues have
caused, and may continue to cause, our operating results to vary significantly
from quarter to quarter and year to year.
LOSS
OF REVENUES FROM MAJOR TENANTS WOULD REDUCE CASH FLOW
The
two
largest income property tenants-CVS and Walgreens-accounted for in excess of
10%
of base rent individually and in the aggregate approximately 57% of base rent
as
of December 31, 2006. The default, financial distress, or bankruptcy of one
or
both of these tenants could cause substantial vacancies. Vacancies reduce
revenues until the affected properties can be re-leased and could decrease
the
ultimate sale value of each such vacant property. Upon the expiration of the
leases that are currently in place, we may not be able to re-lease a vacant
property at a comparable lease rate or without incurring additional expenditures
in connection with such re-leasing.
THERE
ARE A NUMBER OF RISKS INHERENT IN OWNING INCOME
PROPERTIES
Factors
beyond our control can affect the performance and value of the income
properties’ portfolio. Changes in national, regional, and local economic and
market conditions may affect the performance of the income properties and their
value. Local real estate market conditions may include excess supply and intense
competition for tenants, including competition based on:
|
*
|
rental
rates;
|
|
*
|
attractiveness
and location of the property; and
|
|
*
|
quality
of maintenance, insurance, and management
services.
|
In
addition, other factors may adversely affect the performance and value of the
income properties, including changes in laws and governmental regulations,
changes in interest rates, and the availability of financing.
In
addition, because real estate investments are relatively illiquid, the ability
to adjust the portfolio of income properties promptly in response to economic
or
other conditions is limited. Certain significant expenditures generally do
not
change in response to economic or other conditions, including debt service
(if
any), real estate taxes, and operating and maintenance costs.
8
ITEM
1A. RISK FACTORS (CONTINUED)
FUTURE
GROWTH AND REAL ESTATE DEVELOPMENT REQUIRES ADDITIONAL
CAPITAL
THE
AVAILABILITY OF WHICH IS NOT ASSURED
We
expect
to continue making investments in real estate development. Based on the status
of several specific real estate projects, we will continue to invest significant
amounts in real estate over the next several years. We could finance future
expenditures from any of the following sources:
|
*
|
cash
flow from operations;
|
|
*
|
bank
borrowings;
|
|
*
|
non-recourse,
sale leaseback, or other financing;
|
|
*
|
public
offerings of debt or equity;
|
|
*
|
private
placement of debt or equity; or
|
|
*
|
some
combination of the above.
|
Financing
for future expenditures may not be available on favorable
terms
or
at all.
COMPETITION
AND MARKET CONDITIONS RELATING TO GOLF OPERATIONS
COULD
ADVERSELY AFFECT OPERATING RESULTS
Golf
operations face competition from similar nearby golf operations. Any new
competitive golf operations that are developed close to our existing golf
operations also may adversely impact results of operations. Golf operations
are
also subject to adverse market conditions such as population trends and changing
demographics, any of which could adversely affect results of operations. In
addition, the golf operations may suffer if the economy weakens, if the
popularity of golf decreases, or if unusual weather conditions or other factors
cause a reduction in rounds played. Our golf operations are seasonal, primarily
due to the impact of the winter tourist season and summer Florida heat and
rain.
OUR
COMMON STOCK IS THINLY TRADED, AND THEREFORE, THE
STOCK
PRICE
MAY FLUCTUATE MORE THAN THE STOCK MARKET AS A WHOLE
As
a
result of the thin trading market for our stock, its market price may fluctuate
significantly more than the stock market as a whole or the stock prices of
similar companies. Without a larger float, common stock will be less liquid
than
the stock of companies with broader public ownership, and as a result, the
trading prices for our common stock may be more volatile. Among other things,
trading of a relatively small volume of common stock may have a greater impact
on the trading price than would be the case if public float were
larger.
ITEM
1B. UNRESOLVED STAFF COMMENTS
The
Company has no unresolved written comments from the Securities and Exchange
Commission regarding its periodic or current reports.
9
ITEM
2. PROPERTIES
Land
holdings of the Company and its affiliates, which are primarily located in
Florida, include: approximately 11,500 acres (including commercial/retail sites)
in the Daytona Beach area of Volusia County; approximately 3 acres in Highlands
County; retail buildings located on 67 acres throughout Florida, Georgia, and
North Carolina; and full or fractional subsurface oil, gas, and mineral
interests in approximately 516,000 "surface acres" in 20 Florida counties.
Approximately 3,000 acres of the lands located in Volusia County are encumbered
under a mortgage. The conversion and subsequent utilization of these assets
provides the base of the Company’s operations.
The
Volusia County holdings include approximately 10,300 acres within the city
limits of Daytona Beach and small acreages in the Cities of Ormond Beach and
Port Orange. During 2003, the Company acquired 946 acres of land, which will
be
used for wetlands mitigation. During 2005, the Company purchased $5.1 million
of
wetland mitigation credits, equivalent to 200 credits. At December 31, 2006,
there were 126 mitigation credits remaining with a book value of $3.5 million.
Of the 10,300 acres inside the city limits of Daytona Beach, approximately
1,120
acres have received development approval by governmental agencies. The 1,120
acres plus approximately 730 acres owned by the City of Daytona Beach, 446
acres
owned by Indigo Community Development District, and 2,000 acres sold to others
for development are the site of a long-term, mixed-use development which
includes "LPGA International." LPGA International includes the national
headquarters of the Ladies Professional Golf Association, along with two
"Signature" golf courses and a residential community, a clubhouse, a maintenance
facility, and main entrance roads to serve the LPGA International
community.
On
October 22, 2004, the Company closed on the sale of most of the remaining land
(over 1,000 acres) within the LPGA International community. The sale to MSKP,
which had previously purchased 261 acres within the development, was for a
sales
price of approximately $18,000,000. The sale included acreage around the Legends
golf course, several commercial parcels fronting International Speedway
Boulevard and LPGA Boulevard, and a hotel/resort parcel adjacent to the LPGA
International Clubhouse. MSKP has become the community’s master developer, and a
subsidiary of the Company continues to operate the golf facilities.
The
lands
not currently being developed, including those on which development approvals
have been received, are involved in active agricultural operations, except
for a
12-acre parcel at the Interstate 95 and Taylor Road interchange in the Port
Orange area, south of Daytona Beach, straddles Interstate 95 for 6-1/2 miles
between International Speedway Boulevard (U. S. Highway 92) and State Road
40,
with approximately 9,900 acres west and 1,600 acres east of the
interstate.
Subsidiaries
of the Company are holders of the developed Volusia County properties and are
involved in the development of additional lands zoned for commercial or
industrial purposes.
The
Company's oil, gas, and mineral interests, which are equivalent to full rights
on 283,000 acres, were acquired by retaining subsurface rights when acreage
was
sold many years ago.
10
ITEM
2. PROPERTIES (CONTINUED)
During
2005, the Company sold its remaining lot inventory located at the 180-acre
Tomoka Heights development in Highlands County, Florida. IG Ltd developed this
community, located adjacent to Lake Henry, which consisted of single-family
and
duplex units.
The
Company also owns and operates properties for leasing. These properties are
discussed in “Business-Income Properties.”
ITEM
3. LEGAL PROCEEDINGS
There
are
no material pending legal proceedings to which the Company or its subsidiaries
are a party.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No
matters were submitted to a vote of security holders during the fourth quarter
of the year ended December 31, 2006.
PART
II
ITEM
5. MARKET FOR THE REGISTRANT'S COMMON EQUITY,
RELATED STOCKHOLDER
MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
COMMON
STOCK PRICES AND DIVIDENDS
The
Company's common stock trades on the American Stock Exchange (“AMEX”) under the
symbol CTO. The Company has paid dividends on a continuous basis since 1976,
the
year in which its initial dividends were paid. The following table summarizes
aggregate annual dividends paid per share over the two years ended December
31,
2006:
|
|
2006
|
$.34
|
|
|
|
|
2005
|
$.30
|
|
Indicated
below are high and low sales prices for the quarters of the
last
two
fiscal years. All quotations represent actual transactions.
|
2006
|
2005
|
|||
|
High
|
Low
|
High
|
Low
|
|
|
$
|
$
|
$
|
$
|
|
|
First
Quarter
|
72.59
|
60.99
|
57.23
|
44.30
|
|
Second
Quarter
|
63.04
|
52.00
|
87.00
|
70.25
|
|
Third
Quarter
|
67.37
|
52.60
|
90.25
|
62.35
|
|
Fourth
Quarter
|
73.99
|
63.00
|
71.25
|
63.76
|
Approximate
number of shareholders of record as of March 1, 2007 (without regard to shares
held in nominee or street name): 812.
There
have been no sales of unregistered securities within the past
three
years.
11
ITEM
5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(CONTINUED)
EQUITY
COMPENSATION PLAN INFORMATION
The
Company maintains the 2001 Stock Option Plan (“the Plan”) pursuant to which
500,000 shares of the Company’s common stock may be issued. The Plan in place
was approved at the April 25, 2001 Shareholders’ meeting. Under the Plan, the
option exercise price equals the stock market price on the date of grant. The
options vest over five-years and all expire after ten-years. The Plan provides
for the grant of (1) incentive stock options, which satisfy the requirements
of
Internal Revenue Code (IRC) Section 422, and (2) non-qualified options which
are
not entitled to favorable tax treatment under IRC Section 422. No optionee
may
exercise incentive stock options in any calendar year for shares of common
stock
having a total market value of more than $100,000 on the date of grant (subject
to certain carryover provisions). In connection with the grant of non-qualified
options, a stock appreciation right for each share covered by the option may
also be granted. The stock appreciation right will entitle the optionee to
receive a supplemental payment, which may be paid in whole or in part in cash
or
in shares of common stock equal to a portion of the spread between the exercise
price and the fair market value of the underlying share at the time of exercise.
All options granted to date have been non-qualified options.
|
Number
of Securities to
|
|||
|
be
Issued Upon Exercise
|
Weighted
Average Exercise
|
Number
of Securities
|
|
|
of
Outstanding Options,
|
Price
of Outstanding Options,
|
Remaining
Available
|
|
|
Warrants
and Rights
|
Warrants
and Rights
|
for
Future Issuance
|
|
|
Plan
Category
|
|||
|
Equity
Compensation Plans
|
|||
|
Approved
by Security Holders:
|
172,200
|
$
41.96
|
180,000
|
|
Equity
Compensation Plans not
|
|||
|
Approved
by Security Holders:
|
--
|
--
|
|
|
TOTAL
|
172,200
|
$
41.96
|
180,000
|
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among
Consolidated-Tomoka Land Co., The AMEX Composite Index
And
a Peer Group
The
following performance graph shows a comparison of cumulative total shareholder
return from a $100 investment in stock of the Company over the five-year period
ending December 31, 2006, with the cumulative shareholder return of the American
Stock Exchange Composite Index and the Real Estate Industry Index (MG Industry
Group), which consists of five companies; American
Community
Properties Trust, Avatar Holdings, California Coastal Communities Inc., Maxxam
Inc., and Oakridge Holdings Inc. Note that historic stock price performance
is
not necessarily indicative of future price performance.
12
ITEM
6. SELECTED FINANCIAL
DATA
The
following selected financial data should be read in conjunction with the
Company’s Consolidated Financial Statements and Notes along with “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
included in this report.
|
Five-Year
Financial Highlights
|
||||||||||||||||
|
(Unaudited)
|
||||||||||||||||
|
(In
thousands except per share amounts)
|
||||||||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
|
$
|
$
|
$
|
$
|
$
|
||||||||||||
|
Summary
of Operations:
|
||||||||||||||||
|
Revenues:
|
||||||||||||||||
|
Real
Estate
|
42,336
|
43,510
|
41,878
|
33,029
|
26,809
|
|||||||||||
|
Profit
on Sales of Other Real Estate Interest
|
679
|
272
|
210
|
632
|
151
|
|||||||||||
|
Interest
and Other Income
|
574
|
938
|
1,003
|
1,114
|
1,464
|
|||||||||||
|
TOTAL
|
43,589
|
44,720
|
43,091
|
34,775
|
28,424
|
|||||||||||
|
Operating
Costs and Expenses
|
(15,280
|
)
|
(13,775
|
)
|
(14,286
|
)
|
(8,856
|
)
|
(10,150
|
)
|
||||||
|
General
and Administrative Expenses
|
(6,819
|
)
|
(7,997
|
)
|
(5,073
|
)
|
(4,588
|
)
|
(3,407
|
)
|
||||||
|
Income
Taxes
|
(7,486
|
)
|
(8,126
|
)
|
(9,134
|
)
|
(8,197
|
)
|
(5,636
|
)
|
||||||
|
Income
Before Discontinued Operations,
and
Cumulative effect of Change
|
||||||||||||||||
|
in
Accounting Principles
|
14,004
|
14,822
|
14,598
|
13,134
|
9,231
|
|||||||||||
|
Income
(Loss) from Discontinued Operations, Net of tax
|
240
|
(4
|
)
|
54
|
60
|
55
|
||||||||||
|
Cumulative
Effect of Change in Accounting Principles, Net of Tax
|
(216
|
)
|
--
|
--
|
--
|
--
|
||||||||||
|
Net
Income (Loss)
|
14,028
|
14,818
|
14,652
|
13,194
|
9,286
|
|||||||||||
|
Basic
Earnings Per Share:
|
||||||||||||||||
|
Income
Before Discontinued Operations
|
||||||||||||||||
|
and
Cumulative Effect of Change
|
||||||||||||||||
|
in
Accounting Principles
|
2.47
|
2.62
|
2.59
|
2.34
|
1.64
|
|||||||||||
|
Income(Loss)from
Discontinued Operations, Net of Tax
|
0.04
|
--
|
0.01
|
0.01
|
0.01
|
|||||||||||
|
Cumulative
Effect of Change in
|
||||||||||||||||
|
Accounting
Principles, Net of Tax
|
(0.04
|
)
|
--
|
--
|
--
|
--
|
||||||||||
|
Net
Income
|
2.47
|
2.62
|
2.60
|
2.35
|
1.65
|
|||||||||||
|
Diluted
Earnings Per Share:
|
||||||||||||||||
|
Income
Before Discontinued Operations,
|
||||||||||||||||
|
and
Cumulative Effect of Change
|
||||||||||||||||
|
in
Accounting Principles
|
2.46
|
2.58
|
2.57
|
2.32
|
1.64
|
|||||||||||
|
Income(Loss)from
Discontinued Operations, Net of Tax
|
0.04
|
--
|
0.01
|
0.01
|
0.01
|
|||||||||||
|
Cumulative
Effect of Change in
|
||||||||||||||||
|
Accounting
Principles, Net of Tax
|
(0.04
|
)
|
--
|
--
|
--
|
--
|
||||||||||
|
Net
Income
|
2.46
|
2.58
|
2.58
|
2.33
|
1.65
|
|||||||||||
|
Dividends
Paid Per Share
|
0.34
|
0.30
|
0.26
|
0.22
|
0.20
|
|||||||||||
|
Summary
of Financial Position:
|
||||||||||||||||
|
Total
Assets
|
153,774
|
143,258
|
119,221
|
97,906
|
74,326
|
|||||||||||
|
Shareholders'
Equity
|
102,997
|
94,268
|
79,611
|
65,658
|
52,858
|
|||||||||||
|
Long-Term
Debt
|
7,062
|
7,298
|
8,717
|
10,129
|
9,235
|
|||||||||||
13
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
OPERATIONS
OVERVIEW
The
Company is primarily engaged in real estate land sales and development,
reinvestment of land sales proceeds into income properties, and golf course
operations. The Company is owner of approximately 11,500 acres in Florida,
of
which approximately 10,300 are located within the City of Daytona Beach, and
form a substantial portion of the western boundary of Daytona Beach. The Company
lands are well located in the growing central Florida Interstate 4 corridor,
providing an excellent opportunity for reasonably stable land sales in the
near-term future and following years.
With
its
substantial land holdings in Daytona Beach, the Company has parcels available
for the entire spectrum of real estate uses. Along with land sales, the Company
selectively develops parcels primarily for commercial uses. Sales and
development activity on and around Company owned lands have been strong in
the
last five years. Although pricing levels and changes by the Company and its
immediate competitors can affect sales, the Company generally enjoys a
competitive edge due to low costs associated with long-time land ownership
and a
significant ownership position in the immediate market.
During
2006, the Company sold approximately 213 acres of land. These land sales
primarily occurred within the Company’s western Daytona Beach area core land
holdings and continue the trend over the last five years of strong sales and
development activities. These activities include the sale of 120 acres of land
to Florida Hospital in 2005 for the construction of a new facility, which
commenced in the second quarter of 2006, the expansion of the Daytona Beach
Auto
Mall, the opening of a second office building in the Cornerstone Office Park,
the continued development within the 250-acre Gateway Commerce Park, and the
sale of approximately 100 acres of land on which a private high school is
expected to be built. Residential development has also been strong on lands
sold
by the Company in prior years, including within the LPGA International
community, and on other lands both east and west of Interstate 95. These
development activities tend to create additional buyer interest and sales
opportunities. While most national homebuilders have experienced significant
reductions in new sales contracts from the peak in mid to late 2005, the Company
has experienced a relatively stable Daytona Beach commercial real estate market.
In
2000,
the Company initiated a strategy of investing in income properties utilizing
the
proceeds of agricultural land sales qualifying for income tax deferral through
like-kind exchange treatment for tax purposes. By the end of 2006, the Company
had invested approximately $110 million in twenty-five income properties through
this process, with an additional $1.2 million held by a qualified intermediary
for investment in additional properties.
During
the third quarter of 2004, CVS Corp (“CVS”) completed the acquisition of a
portion of the Eckerd pharmacy chain, including all of the Florida stores.
As
part of the integration of the Eckerd chain into its system, some of the newly
acquired stores were closed. Four CVS stores owned by the Company were closed.
The tenant is obligated on the leases and continues to make lease payments.
Three of the four stores have been subleased to quality tenants. Management
has
reassessed the value of these properties and concluded there is no
impairment.
14
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
With
an
investment base of approximately $110 million in income properties, lease
revenue of approximately $8.5 million is expected to be generated annually.
This
income, along with income from additional net-lease income property investments,
will decrease earnings volatility in future years and add to overall financial
performance. The Company is now in a position to consider other forms of real
estate investment to diversify and enhance potential returns.
Golf
operations consist of the operation of the golf courses, a clubhouse facility,
and food and beverage activities within the LPGA International mixed-use
residential community on the west side of Interstate 95, south and east of
LPGA
Boulevard. The Champions course was designed by Reese Jones and the Legends
course was designed by Arthur Hills.
Over
the
last three years, golf revenues have grown despite an overall decline in golf
course revenues in Florida. The Florida golf industry has been hurt by over
building of golf courses and hurricane activity over the past three years.
While
little damage was sustained from the hurricanes, business virtually came to
a
standstill for several weeks in 2004 as locals were preoccupied with cleanup
and
repair, and the local and state tourism industry has been slow to recover.
Improvement in golf course operations is a function of increased tourist demand,
a reduction in new golf course construction which has been experienced in the
last several years, and increased residential growth in LPGA International
and
adjoining land to the west and northwest. LPGA International and nearby projects
currently under development are planned to contain about 4,000 additional
dwelling units.
Food
and
banquet service revenues at the clubhouse, generally have improved annually
since its opening in January 2001. Continued improvement over time is a function
of the same factors impacting the golf courses: increased demand and new home
construction. The Company’s efforts to improve revenues and profitability have
focused on providing quality products and services while maintaining consistent
and stringent cost control for golf course and food service
activities.
During
2004, the Company’s 2002 Federal Income Tax Return was examined by the Internal
Revenue Service (“IRS”). The IRS disallowed the deferral of gains taken under
Internal Revenue Code (“IRC”) Section 1031 on three transactions, which took
place on lands within the Company’s Development of Regional Impact (“DRI”). The
Company appealed the IRS’s position, and in early 2006 settled with the IRS by
entering into a closing agreement. The settlement, which affects tax year 2002
and all subsequent years, relates only to transactions within the Company’s DRI.
For tax years after 2002, the settlement provides that as to all DRI lands,
70%
of gains and related income taxes on sales qualifying for IRC Section 1031
will
receive tax deferred treatment and 30% will not be allowed tax deferred
treatment.
In
accordance with the settlement, amended tax returns were filed for years 2003
and 2004. The settlement for all years resulted in the reclassification, during
2005, of approximately $5.0 million of previously deferred federal and state
income taxes to current income taxes payable.
15
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
SUMMARY
OF 2006 OPERATING RESULTS
For
the
year ended December 31, 2006 profits of $14,028,322, equivalent to $2.47 per
share, were earned. These profits represented a 5% decrease from calendar year
2005 profits totaling $14,817,750, equivalent to $2.62 per share. The downturn
was primarily attributed to lower commercial land sales revenue, with 2005
results including the sale of 120 acres, at a price approximating $18 million
to
Florida Hospital for the future site of its hospital. Results from income
properties partially offset the lower land sales volume with a 23% increase
in
earnings as two properties were acquired in 2006 and seven properties acquired
throughout 2005. General and administrative expenses declined in 2006 compared
to 2005 due to lower stock option expense accruals. Included in 2006’s results
were income, net of tax, from discontinued operations of $240,476, equivalent
to
$.04 per share, which represented the operation and sale of an auto dealership
facility site in Daytona Beach, Florida, which was being held as an income
property. Also included in net income for 2006 was a charge of $216,093, net
of
tax, equivalent to $.04 per share, for the cumulative effect of change in
accounting principle for the adoption of SFAS No.123(revised 2004) “Share Based
Payment” (“SFAS 123R”) accounting for stock options.
The
Company also uses Earnings before Depreciation, Amortization and Deferred Taxes
(EBDDT) as a performance measure. The Company’s strategy of investing in income
properties through the deferred tax like-kind exchange process produces
significant amounts of depreciation and deferred taxes.
The
following is the calculation of EBDDT:
|
|
Year Ended | ||||||
|
|
December
31,
|
||||||
|
2006
|
|
|
2005
|
||||
|
Net
Income
|
$
|
14,028,322
|
$
|
14,817,750
|
|||
|
Add
Back:
|
|||||||
|
Depreciation
and Amortization
|
2,265,848
|
1,755,127
|
|||||
|
Deferred
Taxes
|
5,332,513
|
(1,775,401
|
)
|
||||
|
Earnings
before Depreciation,
|
|||||||
|
Amortization
and Deferred Taxes
|
$
|
21,626,683
|
$
|
14,797,476
|
|||
EBDDT
is
calculated by adding depreciation, amortization, and deferred income tax to
net
income as they represent non-cash charges. EBDDT is not a measure of operating
results or cash flows from operating activities as defined by U.S. generally
accepted accounting principles. Further, EBDDT is not necessarily indicative
of
cash availability to fund cash needs and should not be considered as an
alternative to cash flow as a measure of liquidity. The Company believes,
however, that EBDDT provides relevant information about operations and is
useful, along with net income, for an understanding of the Company’s operating
results.
EBDDT
totaled $21,626,683 in 2006, a significant increase over EBDDT of $14,797,476
recorded in 2005. The gain in EBDDT was due a substantial increase in the add
back for deferred taxes with all qualifying profits from 2006 sales deferred
for
tax purposes. During 2005 suitable reinvestment properties for $12.1 million
of
tax deferred profits were not available due to market conditions, and a
settlement with the Internal Revenue Service was reached which reduced deferred
taxes by approximately $5.0 million.
16
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
REAL
ESTATE SALES
During
2006, the sale of 213 acres of land generated revenues of $28,941,749 and
profits totaling $21,811,380. These profits represent a 15% downturn from the
profits of $25,581,408 posted in 2005’s twelve months. Profits for 2005 were
realized on the sale of 317 acres of land which produced revenues totaling
$32,073,472.
INCOME
PROPERTIES
Revenues
from income properties of $8,183,729 were recorded in 2006 and represented
a 24%
increase over 2005’s revenues amounting to $6,618,299. The revenue gain resulted
in a 23% rise in profits from income properties for the twelve months of 2006
compared to 2005’s same period. Profits from income properties were $6,723,017
and $5,446,014 for 2006 and 2005, respectively. These favorable results were
achieved with the addition of two new properties during 2006 and seven new
properties throughout the year in 2005. Income properties costs and expenses
rose 25% during 2006 compared to the prior year due to additional depreciation
associated with the properties acquired.
GOLF
OPERATIONS
Golf
operations revenues of $5,210,725 were posted in 2006 and represented an 8%
rise
over 2005 revenues totaling $4,817,913. Both golf and food and beverage
activities contributed to the gain. Golf revenues rose 8% on a 6% increase
in
the number of rounds played and a 5% rise in the average rate paid per round.
Food and beverage revenues increased 9% when compared to the prior year. Despite
this increase in revenues, losses from golf operations increased 14%. The
increased loss was primarily due to a $341,000 non-cash adjustment made in
accordance with Staff Accounting Bulletin No. 108 “Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements.” The adjustment relates to recording the expense for the
lease of the golf course properties on a straight-line basis and related
depreciation of property under the lease. With this adjustment, along with
increased expenses primarily resulting from the increase in volume, golf
operations expenses increased 9% in 2006 to $6,688,617. Golf operations costs
and expenses totaled $6,110,612 in 2005. Losses from golf operations amounted
to
$1,477,892 and $1,292,699 for the twelve months of 2006 and 2005, respectively.
Without the adjustment discussed above, golf operations net loss would have
improved $156,000 compared to the prior year.
GENERAL,
CORPORATE AND OTHER
The
release of subsurface rights on 610 acres in 2006 and 1,484 acres during 2005
produced profits on sales of other real estate interests totaling $679,315
and
$272,293, respectively.
Interest
and other income decreased 39% to $573,735 for calendar year 2006. This decline,
from $937,979 during 2005, was attributed to lower earnings on interest from
mortgage notes receivable, as there were no notes outstanding during the year,
and lower earnings on funds held for reinvestment through the like-kind exchange
process.
General
and administrative expenses totaled $6,819,371 for the year 2006 compared to
$7,997,058 in 2005’s same period. This 15% reduction was primarily the result of
lower stock option expense in 2006 as the price of the Company’s stock rose
significantly in 2005.
17
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
During
2006, the Company made charitable contributions of land to qualified
organizations. As the Company has reasonable assurance that it will generate
taxable income over the five-year carryforward period to utilize a portion
of
these income tax deductions, the contributions resulted in an approximate
$690,000 positive adjustment to the income tax provision. This positive
adjustment resulted in an effective tax rate approximating 35% for the
year.
During
2005, the Company generated significant taxable income, and there was reasonable
assurance the Company would produce taxable income for the remainder of the
year. Due to this taxable income, the deferred tax asset valuation allowance
associated with charitable contribution carryforwards was reversed, resulting
in
a $695,000 positive adjustment to the income tax provision for 2005 and an
effective tax rate approximating 35%.
In
May
2006, the Company sold a former automobile dealership site located in Daytona
Beach, Florida, which was being held as an income property. The financial
results of operations and sale of this property have been reported separately
as
discontinued operations in the financial statements. Income, net of income
taxes, of $240,476 and a loss of $3,439 were posted in 2006 and 2005,
respectively.
On
January 1, 2006, the Company implemented SFAS No. 123R. The implementation
resulted in the recording of a $216,093, net of income tax, cumulative effect
of
change in accounting principle during the first quarter.
SUMMARY
OF 2005 OPERATING RESULTS
For
the
twelve months of 2005, the Company generated net income of $14,817,750,
equivalent to $2.62 per basic share. This net income represented a slight gain
over 2004's net income totaling $14,651,739, equivalent to $2.60 per basic
share. These positive results were achieved on a 3% increase in profits from
real estate sales combined with a 38% jump in earnings from income properties
and somewhat offset by increased general and administrative expenses due to
increased stock option expense accruals resulting from the rise in the Company’s
stock price.
During
2005, the Company deferred profit after income taxes of approximately $3.3
million or $.58 per basic share resulting from cash sales closed during the
year
for which the Company has post-closing obligations. A majority of the
obligations were completed in 2006, with the deferred profit on that portion
recognized in the Company’s 2006 earnings.
The
Company also uses Earnings before Depreciation, Amortization and Deferred Taxes
(EBDDT) as a performance measure. The Company’s strategy of investing in income
properties through the deferred tax like-kind exchange process produces
significant amounts of depreciation and deferred taxes.
18
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
The
following is the calculation of EBDDT:
|
Year
Ended
|
|||||||
|
December
31,
|
December
31,
|
||||||
|
2005
|
2004
|
||||||
|
Net
Income
|
$
|
14,817,750
|
$
|
14,651,739
|
|||
|
Add
Back:
|
|||||||
|
Depreciation
and Amortization
|
1,755,127
|
1,344,315
|
|||||
|
Deferred
Taxes
|
(1,775,401
|
)
|
8,589,976
|
||||
|
Earnings
before Depreciation,
|
|||||||
|
Amortization
and Deferred Taxes
|
$
|
14,797,476
|
$
|
24,586,030
|
|||
EBDDT
is
not a measure of operating results or cash flows from operating activities
as
defined by U.S. generally accepted accounting principles. Further, EBDDT is
not
necessarily indicative of cash availability to fund cash needs and should not
be
considered as an alternative to cash flow as a measure of liquidity. The Company
believes, however, that EBDDT provides relevant information about operations
and
is useful, along with net income, for an understanding of the Company’s
operating results.
EBDDT
is
calculated by adding depreciation, amortization, and deferred income taxes
to
net income as they represent non-cash charges.
In
the
year 2005, EBDDT was lower than 2004 as suitable reinvestment properties for
$12.1 million of tax deferred profits were not available due to market
conditions, and a settlement agreement with the Internal Revenue Service which
reduced deferred taxes by approximately $5.0 million. In 2004, all deferred
profits were reinvested.
RESULTS
OF OPERATIONS
2005
Compared to 2004
REAL
ESTATE OPERATIONS
REAL
ESTATE SALES
For
the
year ended December 31, 2005, profits from real estate sales totaled $25,581,408
and represented a 3% improvement over profits of $24,939,245 realized during
2004's twelve-month period. During 2005, the sale of 317 acres of land produced
revenues of $32,073,472. Revenues of $32,640,020 were posted in 2004 on the
sale
of 1,725 acres, which included the sale of over 1,000 acres within the LPGA
International mixed-use development at a price approximating $18 million.
INCOME
PROPERTIES
The
addition of seven new properties during 2005 resulted in substantial increases
in both revenues and net income from income properties when compared to 2004's
results. Revenues of $6,618,299 were posted during 2005 and represent a 42%
increase over the prior year’s revenues amounting to $4,658,746. This revenue
increase produced a 41% rise in profits from income properties, with profits
of
$5,446,014 generated in 2005. Profits from income properties totaled $3,851,279
during 2004.
19
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
GOLF
OPERATIONS
Golf
operations losses increased 8% to $1,292,699 during 2005 despite a 5% gain
in
revenues over 2004. Losses of $1,199,088 were recorded in calendar year 2004
on
revenues amounting to $4,579,183. The revenue gain to $4,817,913 in 2005 was
provided from golf activities on a 2% increase in the number of rounds played
combined with a 4% gain in average green fee per round played. This revenue
gain
was offset by a 2% decline in food and beverage revenues. Golf operations costs
and expenses rose 6% for the period to $6,110,612. The expense rise was
primarily due to higher salary and wages for both the golf and food and beverage
activities, increased cost of sales at the food and beverage operation, and
increased golf course maintenance costs.
GENERAL,
CORPORATE AND OTHER
The
Company recognized profits of $272,293 from the release of subsurface rights
on
1,484 acres during 2005. This compared to profits on the sale of other real
estate interests totaling $209,713 during 2004 on the release of 5,881 acres.
Interest
and other income declined 7% during 2005 to $937,979. This reduction was the
result of lower interest earned on mortgage notes receivable, due to declining
balances from collections, offset by higher earnings on funds held for
reinvestment through the like-kind exchange process and increased earning on
investment securities. Interest and other income totaled $1,003,707 during
the
2004 calendar year.
General
and administrative expenses rose 58% during 2005 when compared to the prior
year. The increase in costs was directly attributable to higher stock option
expense, as the result of the increase in the Company’s stock price. General and
administrative expenses totaled $7,997,058 and $5,073,285 for the years 2005
and
2004, respectively.
During
2005, the Company generated significant taxable income. Due to this taxable
income, the deferred tax asset valuation allowance associated with charitable
contribution carryforwards was reversed during the year, resulting in a $791,045
positive adjustment to the income tax provision.
LIQUIDITY
AND CAPITAL RESOURCES
Although
cash, restricted cash, and investment securities decreased $9,603,976 during
2006, the balance sheet of the Company remains strong. Cash, restricted cash
and
investment securities totaled $13,704,431 at December 31, 2006 while notes
payable amounted to $7,061,531, with no outstanding borrowings on the Company’s
$10.0 million revolving line of credit. The primary uses of funds during the
year were for the acquisition of income properties, road and utility
construction, and the payment of income taxes.
The
acquisition of property, plant, and equipment in 2006 totaled $16.1 million,
including the acquisition of two income properties in the Atlanta, Georgia
market at a price approximating $15.3 million, of which $859,000 was allocated
to intangible assets for the market value of the lease. An additional $1.4
million was expended for the conversion of land to hay fields and hay equipment.
Road and utility improvements approximated $6.8 for the year and included the
completion of Tomoka Farms Road on the west side of Interstate 95.
20
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
The
payment of income taxes during 2006 approximated $5.5 million and included
the
payment of taxes resulting from the 2002 tax audit, and the amendment of the
2003 and 2004 income tax returns as the result of the settlement the Company
reached with the Internal Revenue Service on its like-kind exchange transactions
which occurred with the Company’s Development of Regional Impact
lands.
Additional
uses of cash during 2006 included the payment of dividends totaling $1,933,441,
equivalent to $.34 per share.
Capital
expenditures projected for 2007 approximate $9 million in addition to funds
to
be invested in income properties. The use of these funds is centered on road
construction, conversion of timber lands to hay, and construction of a 23,000
square-foot office building. The office building, of which approximately 40%
will be pre-leased to a credit tenant with the remainder held as speculative
space at this time, will be financed to the extent of 50% of the project
value.
Capital
to fund the planned expenditures in 2007 is expected to be provided from cash
and investment securities (as they mature), operating activities, and current
financing sources in place. The Company also has the ability to borrow on a
non-recourse basis against its existing income properties, which are all free
of
debt as of the date of this filing. As additional funds become available through
qualified sales, the Company expects to invest in additional real estate
opportunities.
At
December 31, 2006, approximately $1.2 million was held by a qualified
intermediary to invest in income properties through the completion of the
like-kind exchange process. In addition to these funds, at December 31, 2006,
the Company held $8.5 million in investment securities for investment in
properties which was generated through Internal Revenue Code Section 1033
involuntary conversion under threat of condemnation tax deferral provisions.
This process allows the Company to hold the proceeds up to three years after
the
close of the tax year to reinvest the proceeds tax-deferred.
The
Company’s Board of Directors and management periodically review the allocation
of any excess capital with a goal of providing the highest return for all
shareholders over the long term. The reviews include consideration of various
alternatives, including increasing regular dividends, declaring special
dividends, commencing a stock repurchase program, and retaining funds for
reinvestment. At its July 26, 2006 meeting, the Board increased the quarterly
dividend from $0.08 to $0.09 per share and reaffirmed its support for
continuation of the 1031 tax deferred exchange strategy for investment of
agricultural land sales proceeds and self-development of income properties on
Company owned lands.
CONTRACTUAL
OBLIGATIONS & COMMITMENTS
The
Company has various contractual obligations, which are recorded as liabilities
in our consolidated financial statements. Other items, such as certain
development obligations; are not recognized as liabilities in our consolidated
financial statements, but are required to be disclosed.
The
following table summarizes our significant contractual obligations and
commercial commitments on an undiscounted basis at December 31, 2006, and the
future periods in which such obligations are expected to be settled in cash.
In
addition, the table reflects the timing of principal and interest payments
on
outstanding borrowings.
21
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
PAYMENT
DUE BY PERIOD
|
Contractual
Obligations
|
Total
|
Less
Than
1
Year
|
1-3
Years
|
3-5
Years
|
More
Than
5
Years
|
|||||||||||
|
|
||||||||||||||||
|
Long-Term
Debt Obligations
|
$
|
9,565,257
|
$
|
763,033
|
$
|
1,525,701
|
$
|
1,525,153
|
$
|
5,751,370
|
||||||
|
Operating
Leases Obligations
|
13,699,895
|
439,330
|
835,565
|
532,500
|
11,892,500
|
|||||||||||
|
Development
Obligations
|
185,370
|
185,370
|
--
|
--
|
--
|
|||||||||||
|
Total
|
$
|
23,450,522
|
$
|
1,387,733
|
$
|
2,361,266
|
$
|
2,057,653
|
$
|
17,643,870
|
CRITICAL
ACCOUNTING POLICIES
The
profit on sales of real estate is accounted for in accordance with the
provisions of SFAS No. 66, “Accounting for Sales of Real Estate.” The Company
recognizes revenue from the sale of real estate at the time the sale is
consummated unless the property is sold on a deferred payment plan and the
initial payment does not meet criteria established under SFAS No. 66, or the
Company retains continuing involvement with the property.
During
2006, the Company closed two transactions for which the Company had post-closing
obligations to provide off-site utilities and/or road improvements. Full cash
payment was received at closing, and warranty deeds were transferred and
recorded. The sales contracts do not provide any offsets, rescission or buy-back
if the improvements are not made. On one of the transactions, all of the
obligated improvements were completed prior to December 31, 2006, and thus
no
revenues or profits were deferred as of that date. Post-closing obligations
still existed at December 31, 2006, on the second contract; and in accordance
with SFAS No. 66 revenues and profits of $291,498 and $250,701, respectively
were deferred, at that time. During 2006, revenues and profits of $5,304,246
and
$5,032,240, respectively were recognized as the obligations were completed
on
four transactions which were closed in 2005 and deferred in accordance with
SFAS
No. 66. Continuing obligations still exist on two transactions which closed
in
2005 with revenues and profits of $375,753 and $312,766 deferred, respectively
at December 31, 2006. Total profits deferred at December 31, 2006, amounted
to
$563,467.
During
2005, the Company closed four transactions for which the Company had
post-closing obligations to provide off-site road and/or utilities improvements.
In all cases, full cash payment was received at closing, and a warranty deed
was
transferred and recorded. None of the sales contracts provide any offsets,
rescission or buy-back if the improvements are not made. As the Company had
retained these post-closing obligations, a portion of the revenues and profits
on the sales were deferred in accordance with SFAS No. 66. The transactions
are
being accounted for on a percentage-of-completion method with revenues and
profits recognized as costs are incurred. For the year ended December 31, 2005,
revenues and profits of $5,679,999 and $5,345,006 were deferred, respectively.
No income was deferred for the year ended December 31, 2004.
22
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
In
accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal
of Long-Lived Assets,” the Company has reviewed the recoverability of long-lived
assets, including real estate and development and property, plant, and equipment
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may or may not be recoverable. Real estate and
development is evaluated for impairment by estimating sales prices less costs
to
sell. Impairment on income properties and other property, plant, and equipment
is measured using an undiscounted cash flow approach. There has been no material
impairment of long-lived assets reflected in the consolidated financial
statements.
At
the
time the Company’s debt was refinanced, the Company entered into an interest
rate swap agreement. This swap arrangement changes the variable-rate cash flow
exposure on the debt obligations to fixed cash flows so that the Company can
manage fluctuations in cash flows resulting from interest rate risk. This swap
arrangement essentially creates the equivalent of fixed-rate debt. The above
referenced transaction is accounted for under SFAS No. 133, “Accounting for
Derivative Instruments and Certain Hedging Activities” and SFAS No. 138,
“Accounting for Certain Derivative Instruments and Certain Hedging Activities,
an Amendment of SFAS No. 133.” The accounting requires the derivative to be
recognized on the balance sheet at its fair value and the changes in fair value
to be accounted for as other comprehensive income or loss. The Company measures
the ineffectiveness of the interest rate swap derivative by comparing the
present value of the cumulative change in the expected future cash flows on
the
variable leg of the swap with the present value of the cumulative change in
the
expected future interest cash flows on the floating rate liability. This measure
resulted in no ineffectiveness for the three years ended December 31, 2006.
A
liability in the amount of $348,108 and $494,945 at December 31, 2006 and 2005,
respectively, has been established on the Company’s balance sheet. The change in
fair value, net of applicable taxes, in the cumulative amount of $213,825 and
$304,020 at December 31, 2006 and 2005, respectively, has been recorded as
accumulated other comprehensive loss, a component of shareholders’ equity.
The
Company maintains a stock option plan pursuant to which 500,000 shares of the
Company's common stock may be issued. The Plan in place was approved at the
April 25, 2001 Shareholders’ meeting. Under the Plan, the option exercise price
equals the stock market price on the date of grant. The options vest over five
years and all expire after ten years. The Plan provides for the grant of (1)
incentive stock options, which satisfy the requirements of Internal Revenue
Code
(IRC) Section 422, and (2) non-qualified options which are not entitled to
favorable tax treatment under IRC Section 422. No optionee may exercise
incentive stock options in any calendar year for shares of common stock having
a
total market value of more than $100,000 on the date of grant (subject to
certain carryover provisions).
23
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
In
connection with the grant of non-qualified options, a stock appreciation right
for each share covered by the option may also be granted. The stock appreciation
right will entitle the optionee to receive a supplemental payment, which may
be
paid in whole or in part in cash or in shares of common stock equal to a portion
of the spread between the exercise price and the fair market value of the
underlying shares at the time of exercise. All options granted to date have
been
non-qualified options.
On
January 1, 2006, the Company adopted SFAS No. 123R by using the modified
prospective method of adoption. SFAS No. 123R requires the classification of
share-based payment arrangements as liability or equity instruments.
Both
the
Company’s stock options and stock appreciation rights are liability classified
awards under SFAS No. 123R and are required to be remeasured to fair value
at
each balance sheet date until the award is settled. For liability-classified
awards, SFAS No. 123R requires an entity to remeasure the liability from its
intrinsic value to its fair value on the adoption date, as the cumulative effect
of change in accounting principle, net of any related tax effect. The Company
remeasured the value of its stock options and stock appreciation rights as
of
January 1, 2006, which resulted in a cumulative effect of change in accounting
principle, net of tax, totaling $216,093. Upon adoption of SFAS No. 123R, the
Company also reclassified to liabilities the January 1, 2006, fair value of
its
stock options, which had been classified within shareholders’ equity in the
amount of $3,074,749.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The
principal market risk (i.e., the risk of loss arising from adverse changes
in
market rates and prices) to which the Company is exposed is interest rates.
The
objective of the Company’s asset management activities is to provide an adequate
level of liquidity to fund operations and capital expansion, while minimizing
market risk. The
Company
utilizes overnight sweep accounts and short-term investments to minimize the
interest rate risk. The Company does not actively invest or trade in equity
securities. The Company does not believe that its interest rate risk related
to
cash equivalents and short-term investments is material due to the nature of
the
investments.
The
Company manages its debt, considering investment opportunities and risk, tax
consequences and overall financial strategies. The Company is primarily exposed
to interest rate risk on its $8,000,000 ($7,061,531 outstanding at December
31,
2006) long-term mortgage. The borrowing bears a variable rate of interest based
on market rates. Management’s objective is to limit the impact of interest rate
changes on earnings and cash flows and to lower the overall borrowing costs.
To
achieve this objective, the Company entered into an interest rate swap agreement
during the second quarter of 2002.
24
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The
Company’s Consolidated Financial Statements appear beginning on
page
F-1
of this report. See Item 15 of this report.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON
ACCOUNTING
AND FINANCIAL DISCLOSURES
There
were no disagreements with accountants on accounting and financial
disclosures.
ITEM
9A. CONTROLS AND
PROCEDURES
DISCLOSURE
CONTROLS AND PROCEDURES
As
of the
end of the period covered by this report, an evaluation was carried out under
the supervision and with the participation of the Company's management,
including the Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO"), of the effectiveness of the Company's disclosure controls and
procedures (as defined in Rules 13a-5(e) or 15d-15(e) of the Securities Exchange
Act of 1934). Based on that evaluation, the CEO and CFO have concluded that
the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files
or
submits under the Securities and Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time periods specified in Securities and
Exchange Commission rules and forms, and to provide reasonable assurance that
information required to be disclosed by the Company in such reports is
accumulated and communicated to the Company's management, including its CEO
and
CFO, as appropriate to allow timely decisions regarding required
disclosure.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Securities Exchange Act of 1934.
The
Company’s management assessed the effectiveness of the Company's internal
control over financial reporting as of December 31, 2006. In making this
assessment, it used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework. Based on management’s assessment and those criteria, management
believes that the Company has maintained effective internal control over
financial reporting as of December 31, 2006.
The
Company’s independent auditors have issued an attestation report on management’s
assessment of the Company's internal control over financial reporting. This
report appears on page F-3.
CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There
were no changes in the Company's internal control over financial reporting
(as
defined in Rules 13a-15(f) or 15d-15(f) of the Securities Exchange Act of 1934)
during the fourth fiscal quarter covered by this report that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
25
ITEM
9A. CONTROLS AND PROCEDURES (CONTINUED)
LIMITATIONS
ON THE EFFECTIVENESS OF INTERNAL CONTROLS
The
Company’s internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles. All internal control systems,
no
matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
Also,
projections of any evaluation of effectiveness to future periods are subject
to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
ITEM
9B. OTHER INFORMATION
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
The
information required to be set forth herein, except for the information included
under Executive Officers of the Company, is included in the company’s definitive
proxy statement for its 2007 annual shareholders meeting (the “Proxy
Statement”), which sections are incorporated herein by reference.
EXECUTIVE
OFFICERS OF THE REGISTRANT
The
executive officers of the Company, their ages at January 31, 2007, their
business experience during the past five years, and the year first elected
as an
executive officer of the Company are as follows:
William
H. McMunn, 60, president of the Company since January 2000, and chief executive
officer since April 2001.
Bruce
W.
Teeters, 61, senior vice president-finance and treasurer, since January
1988.
Robert
F.
Apgar, 59, senior vice president-general counsel since January 2003; assistant
corporate secretary since February 2002; and vice president-general counsel
from
December 1990 to January 2003.
All
of
the above are elected annually as provided in the By-laws.
ITEM
11. EXECUTIVE COMPENSATION
The
information required to be set forth herein is included in Proxy Statement,
which sections are incorporated herein by reference.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
information required to be set forth herein is included in the Proxy Statement,
which sections are incorporated herein by reference.
26
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR
INDEPENDENCE
The
information required to be set forth herein is included in the Proxy Statement,
which section is incorporated herein by reference.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
information required to be set forth herein is included in the Proxy Statement,
which section is incorporated herein by reference.
PART
IV
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
|
1.
|
FINANCIAL
STATEMENTS
|
The
following financial statements are filed as part of this report:
|
2.
|
FINANCIAL
STATEMENT SCHEDULES
|
Included
in Part IV on Form 10-K:
Schedule
III - Real Estate and Accumulated Depreciation on page 32 of Form
10-K
Other
Schedules are omitted because of the absence of conditions under which they
are
required, materiality or because the required information is given in the
financial statements or notes thereof.
|
3.
|
EXHIBITS
|
See
Index
to Exhibits on page 30 of this Annual Report on Form 10-K.
27
Pursuant
to the requirements of Section 13 or 15(d) 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)
|
|
3/13/07
|
By:
|
/s/
William H. McMunn
|
|
|
William
H. McMunn
|
|||
|
President
and Chief
|
|||
|
Executive
Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
|
3/13/07
|
Chairman
of the Board and Director
|
By:
/s/
Bob D. Allen
|
|||
|
3/13/07
|
President
and Chief Executive
|
||||
|
Officer
(Principal Executive Officer) and Director
|
/s/
William H, McMunn
|
||||
|
3/13/07
|
Senior
Vice President-Finance,
|
||||
|
Treasurer
(Principal Financial and Accounting Officer)
|
/s/
Bruce W. Teeters
|
||||
|
3/13/07
|
Director
|
/s/
John C. Adams, Jr.
|
|||
|
3/13/07
|
Director
|
/s/
William J. Voges
|
|||
|
3/13/07
|
Director
|
/s/
Gerald L. DeGood
|
28
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
EXHIBITS
TO
FORM
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2006
COMMISSION
FILE NO. 0-5556
CONSOLIDATED-TOMOKA
LAND CO.
(Exact
name of registrant as specified in the charter)
29
EXHIBIT
INDEX
|
Page
No.
|
||
|
(2.1)
|
Agreement
of Merger and Plan of Merger and Reorganization dated April 28, 1993
between Consolidated-Tomoka Land Co. and CTLC, Inc. filed with the
registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31,
1993 and incorporated by this reference.
|
*
|
|
(2.2)
|
Certificate
of Merger dated April 28, 1993 filed with the registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993 and incorporated
by this reference.
|
*
|
|
(3.1)
|
Articles
of Incorporation of CTLC, Inc. dated February 26, 1993 and Amended
Articles of Incorporation dated March 30, 1993 filed with the registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1993
and
incorporated by this reference.
|
*
|
|
(3.2)
|
By-laws
of CTLC, Inc. filed with the registrant's Quarterly Report on Form
10-Q
for the quarter ended March 31, 1993 and incorporated by this
reference.
|
*
|
|
10
|
Material
Contracts:
|
|
|
(10.1)
|
The
Consolidated-Tomoka Land Co. Unfunded Deferred Compensation Plan
filed
with the registrant's Quarterly Report on Form 10-Q for the quarter
ended
June 30, 1981 and incorporated by this reference.
|
*
|
|
(10.2)
|
The
Consolidated-Tomoka Land Co. Unfunded Deferred Compensation Plan
executed
on October 25, 1982 filed with the registrant's Annual Report on
Form 10-K
for the year ended December 31, 1982 and incorporated by this reference.
|
*
|
|
(10.3)
|
The
Consolidated-Tomoka Land Co. 2001 Stock Option Plan effective April
25,
2001, filed with the registrant’s Form S-8 filed on June 20, 2001 and
incorporated by this reference.
|
*
|
|
(10.4)
|
Lease
Agreement dated August 28, 1997 between the City of Daytona Beach
and
Indigo International Inc., a wholly owned subsidiary of
Consolidated-Tomoka Land Co., filed on Form 10-K for the year ended
December 31, 1997 and incorporated by this reference.
|
*
|
|
(10.5)
|
Development
Agreement dated August 18, 1997 between the City of Daytona Beach
and
Indigo International Inc., a wholly owned subsidiary of
Consolidated-Tomoka Land Co., filed on Form 10-K for the year ended
December 31, 1997 and incorporated by this reference.
|
*
|
|
(10.6)
|
Master
Loan and Security Agreement between Consolidated-Tomoka Land Co.
and
SunTrust Bank dated July 1, 2002, filed on Form 10-Q for the quarter
ended
June 30, 2002 and incorporated by this reference.
|
*
|
|
(10.7)
|
Master
Loan and Security Agreement between Consolidated-Tomoka Land Co.
and
SunTrust Bank dated May 31, 2002, filed on Form 10-Q for the quarter
ended
June 30, 2002 and incorporated by this reference.
|
*
|
|
(10.8)
|
International
Swap Dealers Association, Inc. Master Agreement dated April 8, 2002,
between Consolidated-Tomoka Land Co. and SunTrust Bank, filed on
Form 10-Q
for the quarter ended June 30, 2002 and incorporated by this
reference.
|
*
|
|
(10.9)
|
Confirmation
of Interest Rate Transaction dated April 9, 2002, between
Consolidated-Tomoka Land Co. and SunTrust Bank, filed on Form 10-Q
for the
quarter ended June 30, 2002, and incorporated by this
reference.
|
*
|
|
*
|
||
|
(21)
|
*
|
|
|
*
|
30
EXHIBIT
INDEX (CONTINUED)
|
Page
No.
|
||
|
*
|
||
|
*
|
||
|
*
|
||
|
*
|
*
-
Incorporated by Reference
31
SCHEDULE
III
REAL
ESTATE AND ACCUMULATED DEPRECIATION
FOR
THE YEAR ENDED DECEMBER 31, 2006
|
COSTS
CAPITALIZED
|
|||||||||||||
|
INITIAL
COST TO COMPANY
|
SUBSEQUENT
TO ACQUISITION
|
||||||||||||
|
BUILDINGS
&
|
|||||||||||||
|
DESCRIPTION
|
ENCUMBRANCES
|
LAND
|
IMPROVEMENTS
|
IMPROVEMENTS
|
CARRYING
COSTS
|
||||||||
|
$
|
$
|
$
|
$
|
$
|
|||||||||
|
Income
Properties:
|
|||||||||||||
|
CVS,
Tallahassee, FL
|
-0-
|
590,800
|
1,595,000
|
-0-
|
-0-
|
||||||||
|
CVS,
Sanford, FL
|
-0-
|
1,565,176
|
1,890,671
|
-0-
|
-0-
|
||||||||
|
Barnes
& Noble, Daytona Beach, FL
|
-0-
|
1,798,600
|
3,803,000
|
-0-
|
-0-
|
||||||||
|
Barnes
& Noble, Lakeland, FL
|
-0-
|
1,242,300
|
1,884,200
|
-0-
|
-0-
|
||||||||
|
CVS,
Clermont, FL
|
-0-
|
1,493,985
|
1,452,823
|
-0-
|
-0-
|
||||||||
|
CVS,
Sebring, FL
|
-0-
|
1,312,472
|
1,722,559
|
-0-
|
-0-
|
||||||||
|
CVS,
Melbourne, FL
|
-0-
|
1,567,788
|
919,186
|
-0-
|
-0-
|
||||||||
|
CVS,
Sanford, FL
|
-0-
|
2,345,694
|
1,275,625
|
-0-
|
-0-
|
||||||||
|
CVS,
Sebastian, FL
|
-0-
|
2,205,708
|
1,288,995
|
-0-
|
-0-
|
||||||||
|
Walgreens,
Palm Bay, FL
|
-0-
|
1,102,640
|
3,157,360
|
-0-
|
-0-
|
||||||||
|
Walgreens,
Kissimmee, FL
|
-0-
|
1,327,847
|
1,770,986
|
-0-
|
-0-
|
||||||||
|
Walgreens,
Orlando, FL
|
-0-
|
2,280,841
|
1,148,507
|
-0-
|
-0-
|
||||||||
|
Walgreens,
Clermont, FL
|
-0-
|
3,021,665
|
1,269,449
|
-0-
|
-0-
|
||||||||
|
Walgreens,
Apopka, FL
|
-0-
|
2,390,532
|
1,354,080
|
-0-
|
-0-
|
||||||||
|
Walgreens,
Powder Springs, GA
|
-0-
|
2,668,255
|
1,406,160
|
-0-
|
-0-
|
||||||||
|
Walgreens,
Alpharetta, GA
|
-0-
|
3,265,623
|
1,406,160
|
-0-
|
-0-
|
||||||||
|
Lowe’s,
Lexington, NC
|
-0-
|
5,048,640
|
4,548,880
|
-0-
|
-0-
|
||||||||
|
RBC,
Centura Bank, Alpharetta, GA
|
-0-
|
3,402,926
|
426,100
|
-0-
|
-0-
|
||||||||
|
Northern
Tool & Equipment, Asheville, NC
|
-0-
|
2,535,926
|
1,345,200
|
-0-
|
-0-
|
||||||||
|
RBC
Centura Bank, Altamont Springs, FL
|
-0-
|
3,435,502
|
410,961
|
-0-
|
-0-
|
||||||||
|
CVS,
Vero Beach, FL
|
-0-
|
3,113,661
|
1,312,235
|
-0-
|
-0-
|
||||||||
|
RBC
Centura Bank, Orlando, FL
|
-0-
|
2,875,052
|
418,992
|
-0-
|
-0-
|
||||||||
|
CVS,
Clermont, FL
|
-0-
|
2,414,044
|
1,575,184
|
-0-
|
-0-
|
||||||||
|
Best
Buy, McDonough, GA
|
-0-
|
2,622,682
|
3,150,000
|
-0-
|
-0-
|
||||||||
|
Dick’s
Sporting Goods, McDonough, GA
|
-0-
|
3,934,022
|
4,725,000
|
-0-
|
-0-
|
||||||||
|
Agricultural
Lands & Subsurface Interests
|
-0-
|
693,630
|
-0-
|
2,187,311
|
131,683
|
||||||||
|
-0-
|
60,256,011
|
45,257,313
|
2,187,311
|
131,683
|
|||||||||
|
GROSS
AMOUNT AT WHICH
|
|||||||||||||
|
CARRIED
AT CLOSE OF PERIOD
|
|||||||||||||
|
LAND
AND
|
ACCUMULATED
|
COMPLETION
of
|
DATE
|
||||||||||
|
IMPROVEMENTS
|
BUILDINGS
|
TOTAL
|
DEPRECIATION
|
CONSTRUCTION
|
ACQUIRED
|
LIFE
|
|||||||
|
$
|
$
|
$
|
$
|
||||||||||
|
Income
Properties:
|
|||||||||||||
|
CVS,
Tallahassee, FL
|
590,800
|
1,595,000
|
2,185,800
|
242,573
|
N/A
|
12/13/00
|
40Yrs
|
||||||
|
CVS,
Sanford, FL
|
1,565,176
|
1,890,671
|
3,455,847
|
244,212
|
N/A
|
11/15/01
|
40Yrs
|
||||||
|
Barnes
& Noble, Daytona Beach, FL
|
1,798,600
|
3,803,000
|
5,601,600
|
570,450
|
N/A
|
01/11/01
|
40Yrs
|
||||||
|
Barnes
& Noble, Lakeland, FL
|
1,242,300
|
1,884,200
|
3,126,500
|
282,630
|
N/A
|
01/11/01
|
40Yrs
|
||||||
|
CVS,
Clermont, FL
|
1,493,985
|
1,452,823
|
2,946,808
|
150,056
|
N/A
|
11/22/02
|
40Yrs
|
||||||
|
CVS,
Sebring, FL
|
1,312,472
|
1,722,559
|
3,035,031
|
168,667
|
N/A
|
02/04/03
|
40Yrs
|
||||||
|
CVS,
Melbourne, FL
|
1,567,788
|
919,186
|
2,486,974
|
88,089
|
N/A
|
03/05/03
|
40Yrs
|
||||||
|
CVS,
Sanford, FL
|
2,345,694
|
1,275,625
|
3,621,319
|
97,981
|
N/A
|
09/17/03
|
40Yrs
|
||||||
|
CVS,
Sebastian, FL
|
2,205,708
|
1,288,995
|
3,494,703
|
86,166
|
N/A
|
04/23/04
|
40Yrs
|
||||||
|
Walgreens,
Palm Bay, FL
|
1,102,640
|
3,157,360
|
4,260,000
|
440,715
|
N/A
|
06/12/04
|
40Yrs
|
||||||
|
Walgreens,
Kissimmee, FL
|
1,327,847
|
1,770,986
|
3,098,833
|
173,409
|
N/A
|
02/12/03
|
40Yrs
|
||||||
|
Walgreens,
Orlando, FL
|
2,280,841
|
1,148,507
|
3,429,348
|
112,458
|
N/A
|
02/13/03
|
40Yrs
|
||||||
|
Walgreens,
Clermont, FL
|
3,021,665
|
1,269,449
|
4,291,114
|
81,985
|
N/A
|
05/27/04
|
40Yrs
|
||||||
|
Walgreens,
Apopka, FL
|
2,390,532
|
1,354,080
|
3,744,612
|
93,093
|
N/A
|
03/29/04
|
40Yrs
|
||||||
|
Walgreens,
Powder Springs, GA
|
2,668,255
|
1,406,160
|
4,074,415
|
96,673
|
N/A
|
03/31/04
|
40Yrs
|
||||||
|
Walgreens,
Alpharetta, GA
|
3,265,623
|
1,406,160
|
4,671,783
|
96,674
|
N/A
|
03/31/04
|
40Yrs
|
||||||
|
Lowe’s,
Lexington, NC
|
5,048,640
|
4,548,880
|
9,597,520
|
217,967
|
N/A
|
01/20/05
|
40Yrs
|
||||||
|
RBC,
Centura Bank, Alpharetta, GA
|
3,402,926
|
426,100
|
3,829,026
|
16,866
|
N/A
|
05/25/05
|
40Yrs
|
||||||
|
Northern
Tool & Equipment, Asheville, NC
|
2,535,926
|
1,345,200
|
3,881,126
|
53,247
|
N/A
|
05/25/05
|
40Yrs
|
||||||
|
RBC
Centura Bank, Altamonte Springs, FL
|
3,435,502
|
410,961
|
3,846,463
|
17,123
|
N/A
|
05/12/05
|
40Yrs
|
||||||
|
CVS,
Vero Beach, FL
|
3,113,661
|
1,312,235
|
4,425,896
|
51,943
|
N/A
|
06/02/05
|
40Yrs
|
||||||
|
RBC
Centura Bank, Orlando, FL
|
2,875,052
|
418,992
|
3,294,044
|
14,839
|
N/A
|
08/15/05
|
40Yrs
|
||||||
|
CVS,
Clermont, FL
|
2,414,044
|
1,575,184
|
3,989,228
|
42,661
|
N/A
|
12/15/05
|
40Yrs
|
||||||
|
Best
Buy, McDonough, GA
|
2,622,682
|
3,150,000
|
5,772,682
|
45,937
|
N/A
|
06/15/06
|
41Yrs
|
||||||
|
Dick’s
Sporting Goods,McDonough,GA
|
3,934,022
|
4,725,000
|
8,659,022
|
68,906
|
N/A
|
06/15/06
|
42Yrs
|
||||||
|
Agricultural
Lands & Subsurface
|
|||||||||||||
|
Interests
|
3,012,624
|
-0-
|
3,012,624
|
441,945
|
Various
|
N/A
|
5-0Yrs.
|
||||||
|
(1)
|
62,575,005
|
45,257,313
|
107,832,318
|
3,997,265
|
|||||||||
REAL
ESTATE AND ACCUMULATED DEPRECIATION
FOR
THE YEAR ENDED DECEMBER 31, 2006 (Continued)
|
2006
|
2005
|
2004
|
||||||||
|
Cost:
|
||||||||||
|
Balance
at Beginning of Year
|
$
|
93,937,327
|
$
|
60,794,791
|
$
|
40,526,015
|
||||
|
Additions
and Improvements
|
15,317,558
|
33,204,995
|
20,284,215
|
|||||||
|
Cost
of Real Estate Sold
|
(
1,422,567
|
)
|
(
62,459
|
)
|
(
15,439
|
)
|
||||
|
Balance
at End of Year (1)
|
$
|
107,832,318
|
$
|
93,937,327
|
$
|
60,794,791
|
||||
|
|
||||||||||
|
Accumulated
Depreciation:
|
||||||||||
|
Balance
at Beginning of Year
|
$
|
3,019,927
|
$
|
2,151,473
|
$
|
1,446,011
|
||||
|
Depreciation
and Amortization
|
1,083,042
|
868,454
|
705,462
|
|||||||
|
Depreciation
on Real Estate Sold
|
(105,704
|
)
|
--
|
--
|
||||||
|
Balance
at End of Year
|
$
|
3,997,265
|
$
|
3,019,927
|
$
|
2,151,473
|
(1)Reconciliation
to Consolidated Balance Sheet at December 31, 2006
|
Land,
Timber, and Subsurface Interests
|
$
3,012,623
|
|
Income
Properties: Land, Buildings, and Improvements
|
104,819,695
|
|
$107,832,318
|
CONSOLIDATED-TOMOKA
LAND CO.
INDEX
TO FINANCIAL STATEMENTS
|
Reports
of Independent Registered Public Accounting Firm
|
F-2
|
|
Consolidated
Balance Sheets as of December 31, 2006 and 2005
|
F-4
|
|
Consolidated
Statements of Income for the three years ended December 31, 2006
|
F-5
|
|
Consolidated
Statements of Shareholders’ Equity and Comprehensive Income for the three
years ended December 31, 2006
|
F-7
|
|
Consolidated
Statements of Cash Flows for the three years ended December 31,
2006
|
F-8
|
|
Notes
to Consolidated Financial Statements
|
F-9
|
F-1
The
Board of Directors and Shareholders
Consolidated-Tomoka
Land Co.:
We
have
audited the accompanying consolidated balance sheets of Consolidated-Tomoka
Land
Co. and subsidiaries(the Company) as of December 31, 2006 and 2005, and the
related consolidated statements of income, shareholders’ equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2006. In connection with our audits of the
consolidated financial statements, we also have audited the financial statement
schedule III. These consolidated financial statements and financial statement
schedule are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the financial position of the Company as of December
31, 2006 and 2005, and the results of their operations and their cash flows
for
each of the years in the three-year period ended December 31, 2006, in
conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth
therein.
As
discussed in Notes 1 and 10 to the consolidated financial statements, effective
January 1, 2006, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 123R, “Share-Based Payment.” Also, as discussed in
Notes 3, 8 and 9, effective December 31, 2006 to the consolidated financial
statements, the Company adopted Statement of Financial Accounting Standards
No.
158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans.” In addition, as discussed in Note 1 to the consolidated financial
statements, the Company changed its method of quantifying errors in 2006.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2006, based on criteria
established in Internal
Control—Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and our report dated March 13, 2007, expressed an unqualified opinion on
management’s assessment of, and the effective operation of, internal control
over financial reporting.
/S/
KPMG LLP
Jacksonville,
Florida
March
13,
2007
Certified
Public Accountants
F-2
The
Board of Directors and Shareholders
Consolidated-Tomoka
Land Co.:
We
have
audited management's assessment, included in the accompanying Management’s
Report on Internal Control over Financial Reporting,
that
Consolidated-Tomoka Land Co. and subsidiaries (the Company) maintained effective
internal control over financial reporting as of December 31, 2006, based
on
criteria established in
Internal Control—Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
The
Company's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion
on
management’s assessment and an opinion on the effectiveness of the Company’s
internal control over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control
over
financial reporting includes those policies and procedures that (1) pertain
to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary
to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company
are
being made only in accordance with authorizations of management and directors
of
the company; and (3) provide reasonable assurance regarding prevention or
timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In
our
opinion, management's assessment that the Company maintained effective internal
control over financial reporting as of December 31, 2006, is fairly stated,
in
all material respects, based on criteria established in
Internal Control—Integrated Framework
issued
by COSO.
Also,
in
our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2006, based
on
criteria
established in
Internal Control—Integrated Framework issued
by
COSO.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight board (United States), the consolidated balance sheets of the Company
as of December 31, 2006 and 2005, and the related consolidated statements
of
income, shareholders’ equity and comprehensive income, and cash flows for each
of the years in the three-year period ended December 31, 2006, and our report
dated March 13, 2007 expressed
an unqualified opinion on those consolidated financial statements.
/S/
KPMG LLP
Jacksonville,
Florida
March
13,
2007
Certified
Public Accountants
F-3
|
December
31,
|
|||||||
|
2006
|
2005
|
||||||
|
Assets
|
|||||||
|
Cash
|
$
|
738,264
|
$
|
1,127,143
|
|||
|
Restricted
Cash
(Note 1)
|
1,185,962
|
7,840,167
|
|||||
|
Investment
Securities (Note 3)
|
11,780,205
|
14,341,097
|
|||||
|
Notes
Receivable (Note 5)
|
700,000
|
--
|
|||||
|
Land
and Development Costs (Note 6)
|
15,058,340
|
9,142,551
|
|||||
|
Intangible
Assets (Note 1)
|
5,103,649
|
4,591,944
|
|||||
|
Other
Assets
|
5,569,605
|
5,205,415
|
|||||
|
|
40,136,025
|
42,248,317
|
|||||
|
|
|||||||
|
Property,
Plant, and Equipment
|
|||||||
|
Land,
Agriculture and Subsurface Interests
|
3,012,623
|
2,280,355
|
|||||
|
Golf
Buildings, Improvements, and Equipment
|
11,442,492
|
11,382,515
|
|||||
|
Income
Properties: Land, Buildings, and Improvements
|
104,819,695
|
91,656,972
|
|||||
|
Other
Furnishings and Equipment
|
2,584,467
|
1,769,407
|
|||||
|
Total Property, Plant, and Equipment
|
121,859,277
|
107,089,249
|
|||||
|
Less
Accumulated Depreciation and Amortization
|
(
8,221,138
|
)
|
(
6,079,090
|
)
|
|||
|
Net Property, Plant, and Equipment
|
113,638,139
|
101,010,159
|
|||||
|
Total Assets
|
$
|
153,774,164
|
$
|
143,258,476
|
|||
|
Liabilities
|
|||||||
|
Accounts
Payable
|
$
|
167,378
|
$
|
248,698
|
|||
|
Accrued
Liabilities
|
7,749,121
|
4,292,614
|
|||||
|
Accrued
Stock Based Compensation (Note 10)
|
5,743,773
|
1,790,433
|
|||||
|
Income
Taxes Payable (Note 4)
|
--
|
5,157,171
|
|||||
|
Deferred
Profit
(Note 1)
|
563,467
|
5,345,006
|
|||||
|
Deferred
Income
Taxes(Note 4)
|
29,491,587
|
24,159,074
|
|||||
|
Notes
Payable (Note 7)
|
7,061,531
|
7,297,593
|
|||||
|
|
|||||||
|
Total Liabilities
|
50,776,857
|
48,290,589
|
|||||
|
Shareholders'
Equity
|
|||||||
|
Preferred
Stock
- 50,000 Shares Authorized,
$100 Par Value; None Issued
|
--
|
--
|
|||||
|
Common
Stock - 25,000,000 Shares Authorized;
$1
Par Value; 5,693,007 and 5,667,796 Shares
Issued and Outstanding at December 31, 2006
and 2005, respectively
|
5,693,007
|
5,667,796
|
|||||
|
Additional
Paid-In Capital
|
2,630,748
|
4,168,865
|
|||||
|
Retained
Earnings
|
95,650,170
|
85,435,246
|
|||||
|
Accumulated
Other Comprehensive Loss
|
(976,618
|
)
|
(304,020
|
)
|
|||
|
|
|||||||
|
Total Shareholders' Equity
|
102,997,307
|
94,967,887
|
|||||
|
Total Liabilities and Shareholders' Equity
|
$
|
153,774,164
|
$
|
143,258,476
|
|||
F-4
|
Calendar
Year
|
||||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||
|
2006
|
2005
|
2004
|
||||||||
|
Income:
|
||||||||||
|
Real
Estate Operations:
|
||||||||||
|
Real Estate Sales (Note 1)
|
||||||||||
|
Sales and Other Income
|
$
|
28,941,749
|
$
|
32,073,472
|
$
|
32,640,020
|
||||
|
Costs and Other Expenses
|
(
7,130,369
|
)
|
(
6,492,064
|
)
|
(
7,700,775
|
)
|
||||
|
|
||||||||||
|
|
21,811,380
|
25,581,408
|
24,939,245
|
|||||||
|
Income
Properties
|
||||||||||
|
Leasing Revenues and Other
|
||||||||||
|
Income
|
8,183,729
|
6,618,299
|
4,658,746
|
|||||||
|
Costs
and
Other Expenses
|
(
1,460,712
|
)
|
(
1,172,285
|
)
|
(807,467
|
)
|
||||
|
|
6,723,017
|
5,446,014
|
3,851,279_
|
|||||||
|
|
||||||||||
|
Golf
Operations
|
||||||||||
|
Sales and Other Income
|
5,210,725
|
4,817,913
|
4,579,183
|
|||||||
|
Costs
and Other Expenses
|
(
6,688,617
|
)
|
(
6,110,612
|
)
|
(
5,778,271
|
)
|
||||
|
(
1,477,892
|
)
|
(
1,292,699
|
)
|
(
1,199,088
|
)
|
|||||
|
Total
Real Estate Operations
|
27,056,505
|
29,734,723
|
27,591,442
|
|||||||
|
Profit
on Sales of Other
|
||||||||||
|
Real Estate Interests
|
679,315
|
272,293
|
209,713
|
|||||||
|
Interest
and
Other Income
|
573,735
|
937,979
|
1,003,707
|
|||||||
|
Operating
Income
|
28,309,555
|
30,944,995
|
28,804,862
|
|||||||
|
General
and Administrative
|
||||||||||
|
Expenses
|
(6,819,371
|
)
|
(
7,997,058
|
)
|
(
5,073,285
|
)
|
||||
|
Income
from Continuing
Operations
Before Income Taxes
|
21,490,184
|
22,947,937
|
23,731,577
|
|||||||
|
Income
Taxes (Note 4)
|
(
7,486,245
|
)
|
(
8,126,748
|
)
|
(
9,134,125
|
)
|
||||
|
Income
Before Discontinued
|
||||||||||
|
Operations
and
Cumulative
|
||||||||||
|
Effect
of Change
in
|
||||||||||
|
Accounting Principles
|
14,003,939
|
14,821,189
|
14,597,452
|
|||||||
|
Income
(Loss) from Discontinued
|
||||||||||
|
Operations,
Net
of Tax
|
240,476
|
(3,439
|
)
|
54,287
|
||||||
|
Cumulative
Effect of Change in
|
||||||||||
|
Accounting
Principle, Net of Tax
|
(216,093
|
)
|
--
|
--
|
||||||
|
Net
Income
|
$
|
14,028,322
|
$
|
14,817,750
|
$
|
14,651,739
|
||||
F-5
CONSOLIDATED
STATEMENTS OF INCOME (CONTINUED)
|
Calendar
Year
|
||||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||
|
2006
|
2005
|
2004
|
||||||||
|
Per
Share Information (Note 11):
|
||||||||||
|
Basic
Income Per Share
|
||||||||||
|
Income
Before Discontinued Operations
and
Cumulative Effect of Change in
Accounting
Principle
|
$
|
2.47
|
$
|
2.62
|
$
|
2.59
|
||||
|
Income
(Loss) from Discontinued
Operations,
Net
of Tax
|
0.04
|
--
|
0.01
|
|||||||
|
Cumulative
Effect of Change in
Accounting
Principle, Net of Tax
|
(0.04
|
)
|
--
|
--
|
||||||
|
Net
Income
|
$
|
2.47
|
$
|
2.62
|
$
|
2.60
|
||||
|
|
||||||||||
|
Diluted
Income Per Share
|
||||||||||
|
Income
Before Discontinued Operations
and
Cumulative Effect of Change in
Accounting
Principle
|
$
|
2.46
|
$
|
2.58
|
$
|
2.57
|
||||
|
Income
(Loss) from Discontinued
Operations,
Net
of Tax
|
0.04
|
--
|
0.01
|
|||||||
|
Cumulative
Effect of Change in
Accounting
Principle, Net of Tax
|
(0.04
|
)
|
--
|
--
|
||||||
|
Net
Income
|
$
|
2.46
|
$
|
2.58
|
$
|
2.58
|
||||
F-6
|
Common
Stock
|
Additional
Paid-In
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Total
Shareholders’
Equity
|
Comprehensive
Income
|
|||||||||||||||||||||||
|
Balance,
December
31, 2003
|
$
|
5,623,442
|
$
|
1,514,339
|
$
|
59,129,692
|
$
|
(
609,694
|
)
|
$
|
65,657,779
|
|||||||||||||||||
|
Net
Income
|
--
|
--
|
14,651,739
|
--
|
14,651,739
|
$
|
14,651,739
|
|||||||||||||||||||||
|
Other
Comprehensive
Income:
Cash Flow Hedging
Derivative,
Net
of Tax
|
-- | -- | -- | 85,877 | 85,877 | 85,877 | ||||||||||||||||||||||
|
Comprehensive
Income
|
$
|
14,737,616
|
||||||||||||||||||||||||||
|
Stock
Options
|
18,280
|
661,845
|
--
|
--
|
680,125
|
|||||||||||||||||||||||
|
Cash
Dividends
($.26
per share)
|
--
|
--
|
(
1,464,771
|
)
|
--
|
(1,464,771
|
)
|
|||||||||||||||||||||
|
Balance
December 31, 2004
|
$
|
5,641,722
|
$
|
2,176,184
|
$
|
72,316,660
|
$
|
(
523,817
|
)
|
$
|
79,610,749
|
|||||||||||||||||
|
Net
Income
|
--
|
--
|
14,817,750
|
--
|
14,817,750
|
$
|
14,817,750
|
|||||||||||||||||||||
|
Other
Comprehensive
Income:
Cash Flow Hedging
Derivative,
Net of
Tax
|
--
|
--
|
--
|
219,797
|
219,797
|
219,797
|
||||||||||||||||||||||
|
Comprehensive
Income
|
$
|
15,037,547
|
||||||||||||||||||||||||||
|
Stock
Options
|
26,074
|
1,992,681
|
--
|
--
|
$
|
2,018,755
|
||||||||||||||||||||||
|
Cash
Dividends
($.30
per share)
|
-- | -- | (1,699,164 | ) | -- | (1,699,164 | ) | |||||||||||||||||||||
|
Balance,
December
31, 2005
|
$ | 5,667,796 | $ | 4,168,865 | $ | 85,435,246 | $ | (304,020 | ) | $ | 94,967,887 | |||||||||||||||||
|
SAB
108 Cumulative
|
||||||||||||||||||||||||||||
| Adjustment, Net of Tax |
(1,879,957
|
)
|
(1,879,957
|
)
|
||||||||||||||||||||||||
|
Net
Income
|
--
|
--
|
14,028,322
|
--
|
14,028,322
|
$
|
14,028,322
|
|||||||||||||||||||||
|
Other
Comprehensive
Income:
Cash Flow Hedging
Derivative, Net of Tax
|
--
|
--
|
--
|
90,195
|
90,195
|
90,195
|
||||||||||||||||||||||
|
Pension
(Net of Tax):
|
||||||||||||||||||||||||||||
|
Transition Obligation
|
--
|
--
|
--
|
23,315
|
23,315
|
23,315
|
||||||||||||||||||||||
|
Prior Service Cost
|
--
|
--
|
--
|
(86,611
|
)
|
(86,611
|
)
|
(86,611
|
)
|
|||||||||||||||||||
|
Actuarial Net Loss
|
--
|
--
|
--
|
(699,497
|
)
|
(699,497
|
)
|
(699,497
|
)
|
|||||||||||||||||||
|
Comprehensive
Income
|
$
|
13,355,724_
|
||||||||||||||||||||||||||
|
Stock
Options:
Exercise
of Liability
Classified Stock Options
|
25,211
|
1,536,631
|
--
|
--
|
1,561,842
|
|||||||||||||||||||||||
|
Adoption
of SFAS No.
123R
Reclassification for
Liability Based Plan
|
--
|
(3,074,748
|
)
|
--
|
--
|
(3,074,748
|
)
|
|||||||||||||||||||||
|
Cash
Dividends
|
||||||||||||||||||||||||||||
|
($.34
per share)
|
--
|
--
|
(1,933,441
|
)
|
--
|
(1,933,441
|
)
|
|||||||||||||||||||||
|
Balance,
December
31, 2006
|
|
$
|
5,693,007
|
$
|
2,630,748
|
$
|
95,650,170
|
$
|
(
976,618
|
)
|
$
|
102,997,307
|
F-7
|
Calendar
Year
|
||||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||
|
2006
|
2005
|
2004
|
||||||||
|
Cash
Flow from Operating Activities:
|
||||||||||
|
Net
Income
|
$
|
14,028,322
|
$
|
14,817,750
|
$
|
14,651,739
|
||||
|
Adjustments
to Reconcile Net Income to
|
||||||||||
|
Net
Cash Provided
by Operating Activities:
|
||||||||||
|
Depreciation and Amortization
|
2,265,848
|
1,755,127
|
1,344,315
|
|||||||
|
(Gain) Loss on Sale of Property,
|
||||||||||
|
Plant, and Equipment
|
(436,971
|
)
|
66,095
|
31,519
|
||||||
|
Deferred
Income Taxes
|
6,513,130
|
3,222,793
|
8,589,976
|
|||||||
|
Stock
Based Compensation
|
2,948,074
|
3,578,497
|
1,302,001
|
|||||||
|
(Increase)
Decrease in Assets:
|
||||||||||
|
Notes
Receivable
|
(700,000
|
)
|
4,425,252
|
4,724,965
|
||||||
|
Land
and
Development Costs
|
(5,915,789
|
)
|
679,437
|
1,728,921
|
||||||
|
Other
Assets
|
(364,190
|
)
|
(3,170,885
|
)
|
631,123
|
|||||
|
|
||||||||||
|
(Decrease)Increase
in Liabilities:
|
||||||||||
|
Accounts
Payable
|
(81,320
|
)
|
(156,911
|
)
|
299,687
|
|||||
|
Accrued
Liabilities
and Accrued Stock
|
||||||||||
|
Based
Compensation
|
302,721
|
1,378,322
|
117,180
|
|||||||
|
Deferred
Profit
|
(4,781,539
|
)
|
5,345,006
|
(1,131,135
|
)
|
|||||
|
Income
Taxes Payable
|
(5,157,171
|
)
|
(499,063
|
)
|
632,172
|
|||||
|
Net Cash Provided by Operating Activities
|
8,621,115
|
31,441,420
|
32,922,463
|
|||||||
|
|
||||||||||
|
Cash
Flow from Investing Activities:
|
||||||||||
|
Acquisition
of Property, Plant and Equipment
|
(16,069,004
|
)
|
(33,999,763
|
)
|
(20,829,185
|
)
|
||||
|
Intangible Assets
|
(858,808
|
)
|
(2,118,936
|
)
|
(
1,589,081
|
)
|
||||
|
Decrease (Increase) in Restricted Cash for
|
||||||||||
|
Acquisitions
Through the Like-Kind Exchange
|
||||||||||
|
Process
|
6,654,205
|
19,877,715
|
(8,358,784
|
)
|
||||||
|
Proceeds from Calls or Maturities of
|
||||||||||
|
Investment
Securities
|
19,430,625
|
28,031,510
|
3,447,662
|
|||||||
|
Acquisition of Investment Securities
|
(16,869,733
|
)
|
(38,729,822
|
)
|
(3,198,750
|
)
|
||||
|
Proceeds from Disposition of Property,
|
||||||||||
|
Plant
and
Equipment
|
1,630,205
|
--
|
--
|
|||||||
|
Net
Cash Used In Investing Activities
|
(6,082,510
|
)
|
(26,939,296
|
)
|
(30,528,138
|
)
|
||||
|
|
||||||||||
|
Cash
Flow from Financing Activities:
|
||||||||||
|
Proceeds
from Notes Payable
|
6,392,000
|
267,000
|
3,259,000
|
|||||||
|
Payments on Notes Payable
|
(6,628,062
|
)
|
(1,686,383
|
)
|
(4,671,975
|
)
|
||||
|
Cash Proceeds from Exercise of Stock Options
|
22,725
|
107,022
|
24,557
|
|||||||
|
Cash
Used to
Settle Stock Appreciation Rights
|
(780,706
|
)
|
(637,367
|
)
|
(293,435
|
)
|
||||
|
Dividends
Paid
|
(1,933,441
|
)
|
(1,699,164
|
)
|
(1,464,771
|
)
|
||||
|
Net
Cash Used In Financing Activities
|
(2,927,484
|
)
|
(3,648,892
|
)
|
(3,146,624
|
)
|
||||
|
|
||||||||||
|
Net
(Decrease) Increase in Cash
|
(388,879
|
)
|
853,232
|
(752,299
|
)
|
|||||
|
Cash,
Beginning of Year
|
1,127,143
|
273,911
|
1,026,210
|
|||||||
|
Cash,
End of Year
|
$
|
738,264
|
$
|
1,127,143
|
$
|
273,911_
|
||||
F-8
CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)
Supplemental
Disclosure of Operating Activities:
In
connection with the sale of real estate and income properties, the Company
received, as consideration, mortgage notes receivable of $700,000 and $469,500
for the years 2006 and 2005 respectively.
Total
interest paid was $543,242, $643,176, and $692,470, for the years 2006, 2005,
and 2004, respectively. Interest paid included interest of $133,948 and $61,946
capitalized to land and development in 2006 and 2004, respectively. No interest
was capitalized in 2005.
Income
taxes of $5,510,478 and $5,228,891 were paid in 2006 and 2005, respectively
with
no income taxes paid or refunded in 2004.
Income
taxes in the amount of $4,998,194 were reclassified from deferred income
taxes
payable to current income taxes payable in 2005 in conjunction with the closing
agreement with the Internal Revenue Service on the 2002 tax audit.
During
2006, the Company made a charitable contribution of 11 acres of land, which
had
a fair market value of $950,000. Also during 2006, the Company made charitable
contributions totaling $4,050,691 by selling property to two qualified
organizations at bargain sales prices. These contributions were recorded
as real
estate sales with an offset to real estate costs and expenses.
The
accompanying notes are an integral part of these consolidated
statements.
December
31, 2006, 2005, and 2004
NOTE
1 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the accounts of Consolidated-Tomoka
Land Co., a Florida corporation, and its wholly owned subsidiaries: Indigo
Group
Inc., Indigo Group Ltd., Indigo International Inc., Indigo Development Inc.,
W.
Hay Inc., W. Hay LLC, and Palms Del Mar Inc. (collectively, the Company).
All
significant intercompany accounts and transactions have been eliminated in
consolidation.
NATURE
OF OPERATIONS
The
Company is primarily engaged, through its wholly owned subsidiaries, in the
real
estate industry. Real estate operations, which are primarily commercial in
nature, also include residential, golf operations, income properties, leasing
properties for oil and mineral exploration, and agricultural operations.
These
operations are predominantly located in Volusia County, Florida, with various
income properties owned within Florida, Georgia, and North
Carolina.
F-9
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
USE
OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements,
and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RESTRICTED
CASH
The
Company’s qualified intermediary held $1,185,962 and $7,840,167 in escrow, for
the benefit of the Company, at December 31, 2006 and 2005, respectively,
to
complete the purchase of income properties through the deferred tax like-kind
exchange process.
In
the
event that such transactions are not completed, the funds held at December
31,
2006, will become unrestricted and deferred income taxes in the amount of
$457,485, on the like-kind transactions will become currently
payable.
LAND
AND DEVELOPMENT COSTS
The
carrying value of land and development includes the initial acquisition costs
of
land, improvements thereto, and other costs incidental to the acquisition
or
development of land. These costs are allocated to properties on a relative
sales
value basis and are charged to costs of sales as specific properties are
sold.
Due to the nature of the business, land and development costs have been
classified as an operating activity on the consolidated statements of cash
flows.
Interest
of $133,948 was capitalized to land and development during 2006, with no
interest capitalized in 2005, and interest of $61,946 capitalized in
2004.
INTANGIBLE
ASSETS
Intangible
assets consist of the in place lease value associated with single-tenant
income
properties owned by the Company. This in place lease value was determined
by
estimating the cost of replacing the lease should it not be in place. Factors
such as foregone rent, and leasing commissions, among others are taken into
account to determine the in place lease value. This value is amortized over
the
remaining term of the lease at the time the properties are purchased. At
December 31, 2006, the in place lease value totaled $5,103,649, at December
31,
2005, the in place lease value totaled $4,591,944, which is net of amortization
of $788,410 for 2006, which was net of amortization of $441,304 for 2005.
The in
place lease value totaled $2,726,763 at December 31, 2004, which was net
of
amortization of $187,548 for 2004.
The
estimated amortization expense for each of the calendar years 2007-2011 is
$385,946. The weighted average amortization period of the market lease value
is
16 years.
F-10
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
PROPERTY,
PLANT, AND EQUIPMENT
Property,
plant, and equipment are stated at cost, less accumulated depreciation and
amortization. Such properties are depreciated on a straight-line basis over
their estimated useful lives. Renewals and betterments are capitalized to
property accounts. The cost of maintenance and repairs is expensed as incurred.
The cost of property retired or otherwise disposed of, and the related
accumulated depreciation or amortization, are removed from the accounts,
and any
resulting gain or loss is taken into income.
The
amount of depreciation and amortization of property, plant, and equipment,
exclusive of amortization related to intangible assets, recognized for the
years
2006, 2005, and 2004 was $1,918,741,$1,501,371 and
$1,211,691,respectively.
The
range
of estimated useful lives for property, plant, and equipment is as
follows:
|
Golf
Buildings and Improvements
|
10-43
Years
|
||
|
Golf
Equipment
|
|
5-10
Years
|
|
|
Income
Properties Buildings and Improvements
|
40
Years
|
||
|
Other
Furnishings and Equipment
|
5-25
Years
|
||
|
Agriculture
Equipment
|
5-10
Years
|
LONG-LIVED
ASSETS
The
Company has reviewed the recoverability of long-lived assets, including real
estate held for development and sale, and property, plant, and equipment,
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 for the three years ended December 31, 2006.
SALE
OF REAL ESTATE
The
profit on sales of real estate is accounted for in accordance with the
provisions of SFAS No. 66, “Accounting for Sales of Real Estate.” The Company
recognizes revenue from the sale of real estate at the time the sale is
consummated, unless the property is sold on a deferred payment plan and the
initial payment does not meet criteria established under SFAS No. 66, or
the
Company retains some form of continuing involvement in the property.
The
Company closed two transactions in 2006 and four transactions in 2005, which
the
Company had post-closing obligations to provide off-site roads and/or utilities.
In all cases, full cash payment was received at closing, and a warranty deed
was
transferred and recorded. None of the sales contracts provide any offsets,
rescission, or buy-back if the improvements are not made. As the Company
has
retained some continuing involvement with the properties, according to SFAS
No.
66, a portion of the revenues and profits on the sales were deferred. The
transactions are being accounted for on the percentage-of-completion method
with
revenues and profits recognized as costs are incurred. For the year ended
December 31, 2006, revenues and profits of $330,407 and $289,196 were deferred,
respectively. For the year ended December 31, 2005, revenues and profits
of
$5,679,999 and $5,345,006 were deferred, respectively. At December, 31, 2006
and
2005, deferred profits from real estate sales remaining on the balance sheet
totaled $563,467 and $5,345,006, respectively. No income was deferred for
the
year ended December 31, 2004.
F-11
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME
PROPERTIES
The
rental of the Company’s income properties generally are classified as operating
leases. The Company recognizes lease income on these properties on a
straight-line basis over the term of the lease.
OPERATING
LEASE EXPENSE
The
Company leases property and equipment under leases which are classified as
operating leases. The Company recognizes lease expense on a straightline
basis
over the term of the lease.
GOLF
OPERATIONS
The
Company operates two golf courses and a clubhouse facility, including food
and
beverage operations. Revenues from this operation, including greens fees,
cart
rentals, merchandise, and food and beverage sales, are recognized at the
time of
sale. Initiation fees and membership dues are recognized over the life of
the
membership.
UNFUNDED
DEFERRED COMPENSATION PLANS
The
Company maintains two unfunded deferred compensation plans. One plan is
established for the Board of Directors of the Company, with the second plan
established for the officers and key employees of the Company. Under the
plans,
any member of the Board of Directors, officer or key employee may elect to
defer
all or a portion of their compensation. The amount of deferred compensation
shall increase annually by an amount which is equal to interest on the deferred
compensation at the rate of return earned by the Company on its investment
securities. Compensation credited to a participant shall be deferred until
such
participant ceases to be a member of the Board of Directors, officer or key
employee, at which time the amounts accumulated shall be distributed in the
manner elected. The plans are non-qualified plans as defined by the Internal
Revenue Service. The amount of deferred compensation reflected in accrued
liabilities on the consolidated balance sheets at December 31, 2006 and 2005,
was $1,772,649 and $1,649,602, respectively. Deferred compensation expense
for
the three years ended December 31, 2006, was $114,899, $93,213, and $90,247,
respectively.
PENSION
The
Company has a funded, non-contributory defined benefit pension plan covering
all
eligible employees. The Company's method of funding and accounting for pension
costs is to fund and accrue all normal costs plus an amount necessary to
amortize past service cost over a period of 30 years. (See Note 8 “Pension
Plan”).
STOCK
OPTIONS
The
Company maintains a stock option plan (“the Plan”) pursuant to which 500,000
shares of the Company's common stock may be issued. The Plan in place was
approved at the April 25, 2001 Shareholders’ meeting. Under the Plan, the option
exercise price equals the stock market price on the date of grant. The options
vest over five years and all expire after ten years. In connection with the
grant of non-qualified options, a stock appreciation right for each share
covered by the option may also be granted. The stock appreciation right will
entitle the optionee to receive a supplemental payment, which may be paid
in
whole or in part in cash or in shares of common stock equal to a portion
of the
spread between the exercise price and the fair market value of the underlying
share at the time of exercise.
F-12
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
On
January 1, 2006, the Company adopted Financial Accounting Standards Board
Statement No. 123 (revised 2004) ”Share-Based Payment” (SFAS No. 123R)by using
the modified prospective method of adoption. SFAS No. 123R requires the
classification of share-based payment arrangements as liability or equity
instruments. Both the Company’s stock options and stock appreciation rights are
liability-classified awards and are required to be remeasured to fair value
at
each balance sheet date until the award is settled. (See Note 10 “Stock Option
Plan”)
INCOME
TAXES
The
Company uses the asset and liability method to account for income taxes.
Deferred income taxes
result
primarily from the net tax effect of temporary differences between the carrying
amounts of assets
and
liabilities for financial reporting purposes and the amounts used for income
tax
purposes (See Note 4 “Income Taxes”).
EARNINGS
PER COMMON SHARE
Basic
and
diluted earnings per common share are presented in accordance with SFAS No.
128,
“Earnings Per Share.” Basic earnings per common share is computed by dividing
net income by the weighted average number of shares outstanding. Diluted
earnings per common share are based on the assumption of the conversion of
stock
options using the treasury stock method at average cost for the year (see
Note
11 “Earnings Per Share”).
CONCENTRATION
OF CREDIT RISK
Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist principally of cash, investment securities, and accounts
receivables.
A
majority of the Company’s income property tenants consist of CVS Corp. and
Walgreen Co., neither of whose revenues amount to 10% of consolidated revenues,
and which the Company considers good credit tenants. The Company is diversifying
its income property tenant mix with Barnes & Noble, Lowe’s Home Improvement
Center, Northern Tool & Equipment Co., RBC Centura Bank, Dick’s Sporting
Goods and Best Buy as tenants.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
The
carrying amounts of the Company's financial assets and liabilities, including
cash, accounts receivable, and accounts payable at December 31, 2006 and
2005,
approximate fair value because of the short maturity of these instruments.
The
carrying amount of the Company's notes receivable and notes payable approximates
fair value at December 31, 2006 and 2005, since the notes are at floating
rates
or fixed rates, which approximate current market rates for notes with similar
risks and maturities. The interest rate swap derivative is carried at its
fair
value at December 31, 2006 and 2005.
DERIVATIVE
INSTRUMENTS AND CERTAIN HEDGING ACTIVITY
The
Company accounts for derivatives and hedging activity under Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS)
No. 133, “Accounting for Derivative Instruments and Certain Hedging Activities,”
and SFAS No. 138,“Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an Amendment of SFAS No. 133.”
F-13
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
All
derivatives are recognized on the balance sheet at their fair value. On the
date
the derivative contract is entered into, the Company designates the derivative
as a hedge of the variability of cash flows to be paid related to a recognized
liability (“cash flow hedge”). The Company formally documents all relationships
between hedging instruments and hedged items, as well as its risk-management
objective and strategy for undertaking various hedge transactions. This process
includes linking all derivatives that are designated as cash-flow hedges
to
specific liabilities on the balance sheet. The Company also formally assesses,
both at the hedge’s inception and on an ongoing basis, whether the derivatives
that are used in hedging transactions are highly effective in offsetting
changes
in cash flows of hedged items. When it is determined that a derivative is
not
highly effective as a hedge or that it has ceased to be a highly effective
hedge, the Company discontinues hedge accounting prospectively.
Changes
in the fair value of a derivative that is highly effective and that is
designated and qualifies as a cash-flow hedge are recorded in other
comprehensive loss, until earnings are affected by the variability in cash
flows
of the designated hedged item.
The
Company discontinues hedge accounting prospectively when it is determined
that
the derivative is no longer effective in offsetting changes in the cash flows
of
the hedged item, the derivative expires or is sold, terminated, or exercised,
the derivative is re-designated as a non-hedging instrument or management
determines that designation of the derivative as a hedging instrument is
no
longer appropriate. When hedge accounting is discontinued, the Company continues
to carry the derivative at its fair value on the balance sheet, and recognizes
any changes in its fair value in earnings.
RECENT
ACCOUNTING PRONOUNCEMENTS
In
September 2006, the Securities and Exchange Commission (“SEC”) released Staff
Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements (“SAB 108”). SAB 108 requires the use of both the rollover and iron
curtain methods to quantify misstatements. In prior years the Company quantified
misstatements using only the rollover method. SAB 108 permits Companies to
adjust financial statements for cumulative effect of misstatements related
to
prior years, previously deemed to be immaterial, in the carrying amount of
assets and liabilities as of the beginning of the current fiscal year, with
an
offsetting adjustment to the opening balance of retained earnings in the
year of
adoption. This adjustment does not require reports previously filed with
the SEC
to be amended.
The
Company adopted SAB 108 in 2006, and in accordance with SAB 108 reduced
beginning retained earnings for 2006 by $1,879,957, net of income tax of
$1,180,617. SAB 108 also requires the adjustment of any prior quarterly
financial statements in future SEC filings within the fiscal year of adoption
for the effects of such misstatements on the quarters when the information
is
next presented.
The
SAB
108 adjustment relates to golf operations’ lease expense and related
depreciation of property under the lease. The misstatement originated in
1997 at
the inception of the lease, which had not been accounted for on a straight-line
basis.
F-14
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
In
June
2006 the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”). The
interpretation clarifies the accounting for uncertainty in income taxes
recognized in a company’s financial statements in accordance with FASB Statement
No. 109, “Accounting for Income Taxes.”
This
interpretation prescribes a recognition threshold and measurement attribute
for
the financial statement recognition and measurement of a tax position taken
or
expected to be taken in a tax return. This interpretation is effective for
fiscal years beginning after December 15, 2006. The Company does not expect
Fin
48 to have an impact on its financial statements.
NOTE
2 DISCONTINUED OPERATIONS
In
accordance with SFAS No. 144, “Accounting for Impairment or Disposal of
Long-Lived Assets,” the Company has classified the revenues and income/(loss) of
a former automobile dealer site, located in Daytona Beach, Florida, and sold
on
May 25, 2006, as discontinued operations. Financial statements for 2005 have
been reclassified to reflect the discontinued operation.
Summary
financial information for the operation is as follows:
|
For
the Year Ended
|
||||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||
|
2006
|
2005
|
2004
|
||||||||
|
$$
|
$
|
|||||||||
|
Revenues
|
--
|
44,346
|
106,977
|
|||||||
|
Income
(Loss)
|
(45,475
|
)
|
(5,598
|
)
|
88,379
|
|||||
|
Income
Tax Benefit(Expense)
|
17,542
|
2,159
|
(34,092
|
)
|
||||||
|
Gain
from Sale (Net Income Tax of $168,562)
|
268,409
|
--
|
--
|
|||||||
|
Income
(Loss) from Discontinued Operations, Net of Tax
|
240,476
|
3,439
|
54,287_
|
|||||||
NOTE
3 INVESTMENT SECURITIES
The
Company accounts for investment securities under SFAS No. 115, “Accounting for
Certain Investments in Debt and Equity Securities.” This standard requires
classification of the investment portfolio into three categories: held to
maturity, trading, and available for sale.
The
Company classifies as held to maturity those securities which the Company
has
the intent and ability to hold through their stated maturity date. Investment
securities, which are classified as held to maturity, are carried at cost,
adjusted for amortization of premiums and accretion of discounts. Gains and
losses are determined using the specific identification method. For the years
ended December 31, 2006, 2005, and 2004, losses of $143,107, $28,442, and
$33,829 respectively, were recognized on the disposition of investment
securities.
F-15
NOTE
3 INVESTMENT SECURITIES (CONTINUED)
Investment
securities as of December 31, 2006 and 2005, are as follows:
|
2006
|
2005
|
||||||
|
Investments
Held to Maturity
|
|||||||
|
Debt
Securities Issued by States and Political Subdivisions of States
|
$
|
11,650,961
|
$
|
14,211,853
|
|||
|
Preferred
Stocks
|
129,244
|
129,244
|
|||||
|
Total
Investments Held to Maturity
|
$
|
11,780,205
|
$
|
14,341,097
|
|||
The
contractual maturities of investment securities held to maturity are as
follows:
|
Maturity
Date
|
Amount
|
|||
|
Within
1 year
|
$
|
3,416,705
|
||
|
1-5
Years
|
1,895,364
|
|||
|
6-10
Years
|
778,814
|
|||
|
After
10 Years
|
5,689,322
|
|||
|
$
|
11,780,205
|
The
amortized cost, gross unrealized holding gains, gross unrealized holding
losses,
and fair value of held-to-maturity securities by major security type and
class
of security at December 31, 2006 and 2005, were as follows:
|
Gross
|
|
Gross
|
|
|
|
||||||||
|
|
|
|
Unrealized
|
|
Unrealized
|
|
|
|
|||||
|
|
|
Amortized
|
|
|
Holding
|
|
|
Holding
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
At
December 31, 2006 Debt Securities Issued by States and Political
Subdivisions of States
|
$
|
11,650,961
|
$
|
3,984
|
$
|
(154,681
|
)
|
$
|
11,500,264
|
||||
|
Preferred
Stocks
|
129,244
|
--
|
(28,306
|
)
|
100,938
|
||||||||
|
$
|
11,780,205
|
$
|
3,984
|
$
|
(182,987
|
)
|
$
|
11,601,202
|
|||||
|
Unrealized
|
|
Unrealized
|
|
|
|
||||||||
|
|
|
|
Amortized
|
|
|
Holding
|
|
|
Holding
|
|
|
Fair
|
|
|
|
|
|
Cost
|
Gains
|
Losses
|
Value
|
|||||||
|
At
December 31, 2005 Debt Securities Issued by States and Political
Subdivisions of States
|
$
|
14,211,853
|
$
|
22,567
|
$
|
(231,978
|
)
|
$
|
14,002,442
|
||||
|
Preferred
Stocks
|
129,244
|
--
|
(
24,713
|
)
|
104,531
|
||||||||
|
$
|
14,341,097
|
$
|
22,567
|
$
|
(256,691
|
)
|
$
|
14,106,973
|
|||||
F-16
NOTE
3 INVESTMENT SECURITIES (CONTINUED)
The
following tables show the Company’s investments’ gross unrealized losses and
fair value, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position at December
31,
2006 and 2005, respectively. The unrealized losses on investments in debt
securities issued by states and political subdivisions of states were caused
by
interest rate increases. The contractual terms of these investments do not
permit the issuer to settle the securities at a price less than the amortized
cost of the investment. Because the Company has the ability and intent to
hold
these investments until a market price recovery or maturity, these investments
are not considered other-than-temporarily impaired.
|
Less
than 12 Months
|
12
Months or More
|
Total
|
||||
|
Held
at December 31, 2006
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|
Description
of Securities Debt Securities Issued by States and Political Subdivisions
of States
|
$
866,099
|
$
7,465
|
$3,510,822
|
$
147,216
|
$4,376,921
|
$
154,681
|
|
Preferred
Stocks
|
--
|
--
|
100,937
|
28,306
|
100,937
|
28,306
|
|
|
$
866,099
|
$
7,465
|
$3,611,759
|
$
175,522
|
$4,477,858
|
$
182,987
|
|
Less
than 12 Months
|
12
Months or More
|
Total
|
||||
|
Held
at December 31, 2005
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|
Description
of Securities Debt Securities Issued by States and Political Subdivisions
of States
|
$
10,457
|
$
5,535
|
$1,931,060
|
$
223,904
|
$1,941,517
|
$
229,439
|
|
Preferred
Stocks
|
--
|
--
|
101,992
|
27,252
|
101,992
|
27,202
|
|
$
10,457
|
$
5,535
|
$2,033,052
|
$
251,156
|
$2,043,509
|
$
256,691
|
|
NOTE
4 INCOME TAXES
The
Company accounts for income taxes under SFAS No. 109, “Accounting For Income
Taxes.”
The
provisions for income taxes are summarized as follows:
|
2006
|
2005
|
2004
|
|||||||||||||||||
|
Current
|
Deferred
|
Current
|
Deferred
|
Current
|
Deferred
|
||||||||||||||
|
Federal
|
$
|
472,201
|
$
|
5,946,660
|
$
|
8,500,314
|
$
|
(1,690,480
|
)
|
$
|
438,912
|
$
|
7,399,296
|
||||||
|
State
|
78,521
|
988,863
|
1,253,808
|
63,106
|
51,308
|
1,244,609
|
|||||||||||||
|
Total
|
$
|
550,722
|
$
|
6,935,523
|
$
|
9,754,122
|
$
|
(1,627,374
|
)
|
$
|
490,220
|
$
|
8,643,905
|
||||||
Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to the differences between the financial statement carrying
amounts
of existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax
rates is recognized in income in the period that includes the enactment date.
F-17
NOTE
4 INCOME TAXES (CONTINUED)
The
sources of these differences and the related deferred income tax assets
(liabilities) are summarized as follows:
|
Deferred
Taxes
|
|||||||
|
2006
|
2005
|
||||||
|
Depreciation
|
$
|
442,022
|
$
|
244,107
|
|||
|
Sales
of Real Estate
|
(35,079,283
|
)
|
(26,431,277
|
)
|
|||
|
Deferred
Compensation
|
683,799
|
636,334
|
|||||
|
Basis
Difference in Joint Venture
|
194,432
|
1,015,904
|
|||||
|
Charitable
Contributions Carryforward
|
1,948,374
|
--
|
|||||
|
Interest
Rate Swap
|
134,283
|
190,925
|
|||||
|
Deferred
Lease Expense
|
1,312,242
|
--
|
|||||
|
Pension
& Other Post Retirement Benefits
|
655,837
|
82,073
|
|||||
|
Stock
Based Compensation
|
2,215,660
|
690,660
|
|||||
|
Other
|
(348,833
|
)
|
(172,347
|
)
|
|||
|
Less-Valuation
Allowance
|
(1,650,120
|
)
|
(415,453
|
)
|
|||
|
|
$
|
(29,491,587
|
)
|
$
|
(24,159,074
|
)
|
|
In
assessing the realizability of deferred tax assets, management considers
whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the realization of future taxable income during the periods
in
which those temporary differences become deductible. Management considers
past
history, the scheduled reversal of taxable temporary differences, projected
future taxable income, and tax planning strategies in making this assessment.
As
of December 31, 2006 and 2005, management believes it is more likely than
not
that a portion of the Company’s deferred tax assets will not be realized. A
valuation allowance for deferred tax assets is provided when it is more likely
than not that some portion of all of the deferred tax assets will not be
realized. As of December 31, 2006 and 2005, the valuation allowance was
$1,650,120 and $415,453, respectively.
Following
is a reconciliation of the income tax computed at the federal statutory rate
of
35% for 2006, 2005, and 2004:
|
Calendar
Year
|
||||||||||
|
2006
|
2005
|
2004
|
||||||||
|
Income
Tax Expense Computed at Federal Statutory Rate
|
$
|
7,521,564
|
$
|
8,031,778
|
$
|
8,306,052
|
||||
|
Increase
(Decrease) Resulting from:
|
||||||||||
|
State
Income Tax, Net of Federal Income Tax Benefit
|
695,219
|
855,795
|
845,506
|
|||||||
|
Tax
Exempt Interest Income
|
(154,668
|
)
|
(142,655
|
)
|
(66,787
|
)
|
||||
|
Charitable
Contribution of Land
|
(1,929,017
|
)
|
--
|
--
|
||||||
|
Adjustment
to Valuation Allowance
|
1,234,667
|
(791,045
|
)
|
10,403
|
||||||
|
Other
Reconciling Items
|
118,480
|
172,875
|
38,951
|
|||||||
|
Provision
for Income Taxes
|
$
|
7,486,245
|
$
|
8,126,748
|
$
|
9,134,125
|
||||
F-18
NOTE
4 INCOME TAXES (CONTINUED)
During
prior years, the Company generated net operating losses for income tax purposes.
For Federal income tax, these losses can be carried back to prior years,
when
the Company generated taxable income. For State income tax purposes, the
net
operating losses can only be carried forward against future taxable income.
The
net operating losses were fully utilized during 2005.
The
Company’s 2002 Federal Income Tax Return was examined by the Internal Revenue
Service (“IRS”). The IRS disallowed the deferral of gains taken under Internal
Revenue Code (“IRC”) Section 1031 on three transactions which took place on
lands within the Company’s Development of Regional Impact (“DRI”). The Company
appealed the IRS’s position and settled with the IRS by entering into a closing
agreement. The settlement, which affects tax year 2002 and all subsequent
years,
relates only to transactions within the Company’s DRI. For tax years after 2002,
the settlement provides that as to all DRI lands, 70% of gains and related
income taxes on sales qualifying for IRC Section 1031 will receive tax deferred
treatment. In accordance with the settlement, approximately $5,000,000 of
previously deferred income taxes were reclassified to income taxes
payable.
NOTE
5 NOTES RECEIVABLE
Notes
Receivable consisted of the following: December
31,____
0;
2006 2005
|
Mortgage
note with interest at 6.5%
Collateralized
by real estate, due 2009
|
||
|
$
700,000
|
$
--
|
NOTE
6 LAND AND DEVELOPMENT COSTS
Land
and
development costs at December 31, 2006 and 2005, is
summarized
as follows:
; December
31,
2006
2005
|
Undeveloped
Land
|
$
|
1,004,607
|
$
|
1,004,607
|
|||
|
Land
and Development Costs
|
14,053,733
|
8,137,944
|
|||||
|
|
$
|
15,058,340
|
$
|
9,142,551
|
F-19
NOTE
7 NOTES PAYABLE
Notes
Payable consisted of the following:
|
December 31,
2006 2005
|
||
|
MORTGAGE
NOTE PAYABLE
Mortgage
note payable is collateralized by real estate
mortgages held by the respective lenders. As of
December 31, 2006 and 2005, mortgage notes payable
consisted of the following:
Payable
monthly based on 20-year amortization,
interest floating based on the 30-day LIBOR Market Index
rate plus 1.25%. Principal balance due July 2012
(See discussion of interest rate swap, below)
|
||
|
|
||
|
$7,061,531
|
$7,297,593
|
|
|
|
||
|
LINE
OF CREDIT
|
||
|
A
line of credit totaling $10,000,000 at December 31, 2006,
|
||
|
expiring July 2007, with interest at the lower of the
|
||
|
30-day LIBOR Market Index rate plus 1.5% or 1% below
|
||
|
the prime commercial lending rate
|
--
|
--
|
|
|
__________
|
__________
|
|
|
$7,061,531
|
$7,297,593
|
The
required annual principal payments on notes payable are as
follows:
|
Year
Ending December 31,
|
Amount
|
|
2007
|
$
254,009
|
|
2008
|
273,321
|
|
2009
|
294,100
|
|
2010
|
316,460
|
|
2011
and Thereafter (cumulative)
|
5,923,641
|
|
|
$
7,061,531
|
Interest
expense was $398,740, net of capitalized interest $843,176, and $692,470,
for
2006, 2005, and 2004, respectively.
On
April
8, 2002, the Company entered into an interest rate swap agreement to mitigate
the interest rate risk on the variable rate debt of the Company. The Company
expects the cash flows related to the swap to be highly effective in offsetting
the changes in the cash flows of the variable rate debt.
On
July
1, 2002, the Company entered into an $8,000,000 long-term financing arrangement.
The new variable rate debt is for a ten-year term, which has been fixed at
a
rate of 7.35% through the use of an interest rate swap and secured by
approximately 3,000 acres of the Company’s most westerly lands.
The
change in the fair value of the interest rate swap, from its inception, has
resulted in the recording of an accrued liability in the amount of $348,108
and
$494,945 at December 31, 2006 and 2005, respectively. The cumulative change
in
fair value, net of applicable taxes, in the amount of $213,825 and $304,020
at
December 31, 2006 and 2005, respectively, has been recorded as accumulated
other
comprehensive loss, a component of shareholders’ equity. This activity
represents a non-cash transaction. The notional amount of the interest rate
swap
was equivalent to the outstanding balance of the financing, $7,061,531, at
December 31, 2006 and $7,297,593 at December 31, 2005.
F-20
NOTE
7 NOTES PAYABLE (CONTINUED)
In
addition, the Company has placed its unsecured $10,000,000 revolving line
of
credit with the same financing source. There was no outstanding balance on
the
line of credit at December 31, 2006. The line of credit agreement contains
restrictive covenants in regard to debt service coverage ratio and minimum
liquidity, both of which have been met as of and for the periods ended December
31, 2006 and 2005. The Company is in compliance with all debt covenants as
of
December 31, 2006 and 2005. The Company had letters of credit outstanding
totaling $3,270,939 and $352,563 at December 31, 2006 and 2005, respectively.
These letters of credit reserve capacity under the line of credit and guarantee
development work will be completed. The balance available to borrow on the
line
of credit was $6,729,061 and $9,647,437 at December 31, 2006 and 2005,
respectively.
NOTE
8 PENSION PLAN
The
Company maintains a defined benefit plan for all employees who have attained
the
age of 21 and completed one year of service. The pension benefits are based
primarily on years of service and the average compensation for the highest
five
years during the final ten years of employment. The benefit formula generally
provides for a life annuity benefit.
During
the fourth quarter of 2006, the Company adopted FASB No. 158 “Employers’
Accounting for Defined Benefit Pension and Other Post-retirement Plans -
an
amendment of FASB Statements No. 87,88,106, and 132R” (“SFAS No. 158”). This
statement requires an employer to recognize the overfunded or underfunded
status
of a defined benefit post-retirement plan as an asset or a liability in its
statement of financial position and to recognize changes in that funded status
in the year in which the changes occur through comprehensive income. During
2006, the adoption of SFAS No. 158 resulted in an increase in the pension
liability totaling $1,241,829 with $762,793 (net of income tax of $479,036)
recognized as a loss in accumulated comprehensive income.
F-21
NOTE
8 PENSION PLAN (CONTINUED)
Following
are the components of the Net Period Benefit Cost:
components:
|
December
31
|
|||||||||||||
|
|
2006
2005
2004
|
||||||||||||
|
Service
Cost
|
277,164
|
$
|
242,721
|
$
|
227,953
|
||||||||
|
Interest
Cost
|
383,658
|
344,042
|
309,663
|
||||||||||
|
Expected
Return on Plan Assets
|
(645,504)
|
(137,023
|
)
|
(654,431
|
)
|
||||||||
|
Net
Amortization
|
258,530
|
(323,631
|
)
|
223,938
|
|||||||||
|
Net
Periodic Benefit Cost
|
$273,848
|
$
|
126,109
|
$
|
107,123
|
||||||||
The
change in projected benefit obligation is as follows:
|
December
31,
|
|||||||
|
2006 2005
|
|||||||
|
Benefit
Obligation at Beginning of Year
|
$
|
6,479,164
|
$
|
5,535,640
|
|||
|
Service
Cost
|
277,164
|
242,721
|
|||||
|
Interest
Cost
|
383,658
|
344,042
|
|||||
|
Actuarial
Loss
|
366,468
|
693,389
|
|||||
|
Benefits
and Plan Expenses Paid
|
(375,367
|
)
|
(336,628
|
)
|
|||
|
Benefit
Obligation at End of Year
|
$
|
7,131,087
|
$
|
6,479,164_
|
|||
The
change in plan assets is as follows:
|
December
31,
|
|||||||
|
2006
|
2005
|
||||||
|
Fair
Value of Plan Assets at Beginning of Year
|
$
|
5,227,631
|
$
|
5,427,236
|
|||
|
Actual
Return on Plan Assets
|
645,504
|
137,023
|
|||||
|
Employer
Contribution
|
44,630
|
--
|
|||||
|
Plan
Expenses Paid
|
(87,881
|
)
|
(89,412
|
)
|
|||
|
Benefits
Paid
|
(287,486
|
)
|
(247,216
|
)
|
|||
|
Fair
Value of Plan Assets at End of Year
|
$
|
5,542,398
|
$
|
5,227,631
|
|||
The
funded status of the pension obligation consists of the following:
|
December
31,
|
||||
|
2006
|
||||
|
Estimated
Pension Benefit Obligation
|
||||
|
Accumulated
Benefit Obligation
|
$
|
(6,254,813
|
)
|
|
|
Additional
Benefits Based on Estimated
|
||||
|
Future
Salary Levels
|
(876,274
|
)
|
||
|
Projected
Benefit Obligation
|
(7,131,087
|
)
|
||
|
Fair
Value of Plan Assets
|
5,542,398
|
|||
|
Accrued
Pension Liability
|
$
|
(1,588,689)_
|
||
The
accumulated benefits obligation as December 31, 2006 and 2005, was $6,254,813
and $5,618,005, respectively.
The
actuarial assumptions made to determine the projected benefit
obligation
and the fair value of plan assets are as follows:
|
December
31,
|
||
|
2006
|
2005
|
|
|
Weighted
Average Discount Rate
|
5.75%
|
5.75%
|
|
Weighted
Average Asset Rate of Return
|
9.00%
|
9.00%
|
|
Compensation
Scale
|
5.00%
|
5.00%
|
F-22
NOTE
8 PENSION PLAN (CONTINUED)
OTHER
PENSION PLAN DISCLOSURE INFORMATION
Amortization
Periods:
The
transition liability (asset) re-established on January 1, 2001, is being
amortized in level amounts over 11.07 years.
The
excess of the unrecognized (gain) or loss (if any) over the larger of 10%
of the
projected benefit obligation or 10% of the market related value of assets
is
amortized in level amounts over 12.44 years.
The
prior
service cost re-established on January 1, 2001, is being amortized in level
amounts over 11.07 years.
The
prior
service cost established on January 1, 2002 is being amortized in level amounts
over 11.67 years.
Funding
Policy:
Periodic
employer contributions are made in conformance with minimum funding requirements
and maximum
deductible
limitations.
Benefit
Payments and Other Disbursements:
During
the measurement period, disbursements from plan assets were
as
follows:
|
Benefit
Payments
|
$287,486
|
|
Administrative
Expenses
|
87,881
|
|
Total
|
$375,367
|
The
unrecognized (gain) or loss determined subsequent to last year’s measurement
date is determined as follows:
|
Liability
loss determined from the
|
||||
|
January
1, 2006 census and included in
|
||||
|
this
year’s net periodic cost:
|
$
|
366,468
|
||
|
Asset
gain or loss occurring over the
|
||||
|
measurement
period
|
(188,608
|
)
|
||
|
|
||||
|
Total
unrecognized (gain) or loss:
|
$
|
177,860
|
||
Plan
Assets:
The
plan’s weighted average asset allocations at December 31, 2006 and December 31,
2005 by asset category
are
as
follows:
|
December
31,
|
||
|
2006
|
2005
|
|
|
Equity
Securities
|
46%
|
51%
|
|
Fixed
Income Securities
|
43%
|
42%
|
|
Cash
and Money Market Funds
|
11%
|
7%
|
|
Total
|
100%
|
100%
|
F-23
NOTE
8 PENSION PLAN (CONTINUED)
Cash
Flows:
Contributions
The
Company expects the plan to be substantially fully funded for 2007.
As
a
result, a relatively small contribution, if any, is anticipated during this
period.
Estimated
Future Benefit Payments
The
following benefit payments, which reflect expected future service as
appropriate, are expected to
be
paid.
|
2007
|
$
266,200
|
|
|
2008
|
285,900
|
|
|
2009
|
292,100
|
|
|
2010
|
380,800
|
|
|
2011
|
417,900
|
|
|
Years
|
2012-2016
|
$3,382,400
|
The
following assumptions have been made regarding estimated benefit
payments:
All
currently retired participants survive through 2016.
All
currently active participants survive and retire on their normal retirement
dates.
Earnings
are assumed to increase at the rate of 5% per year for active participants
to
their normal retirement dates.
NOTE
9 POST-RETIREMENT BENEFIT PLANS OTHER THAN PENSIONS
The
Company has a current policy regarding post-retirement benefit programs for
certain health care and life insurance benefits for eligible retired employees.
All full-time employees become eligible to receive life benefits if they
retire
after reaching age 55 with 20 or more years of service, and supplemental
medicare benefits if they reach age 65 and 20 years of service. The
post-retirement health care plan is contributory, with retiree contributions
adjusted annually; the life insurance plan is non-contributory up to $5,000
of
coverage.
The
accounting for the health care plan reflects caps on the amount of annual
benefits to be paid to retirees as stipulated by the plan. The Company pays
for
the plan as costs are incurred.
The
Company recognizes post-retirement expenses in accordance with adopted SFAS
No.
106, “Employers' Accounting for Post-Retirement Benefits Other Than Pensions,”
which requires that expected costs of post-retirement benefits be charged
to
expense during the years the employees render service. The Company elected
to
amortize the unfunded obligation measured at adoption of SFAS No. 106 over
a
period of 20 years. The effect of this amortization expense recognized for
the
year ended December 31, 2006 was $56,359 and $36,000 for each of the years
ended
December 31, 2005 and 2004. The accrued post-retirement benefit cost reflected
in the consolidated balance sheet in accrued liabilities at December 31,
2006
and 2005, was $110,219 and $95,119, respectively.
F-24
NOTE
10 STOCK OPTION PLAN
The
Company maintains a stock option plan (“the Plan”) pursuant to which 500,000
shares of the Company's common stock may be issued. The Plan in place was
approved at the April 25, 2001 Shareholders’ meeting. Under the Plan, the option
exercise price equals the stock market price on the date of grant. The options
vest over five years and all expire after ten years. The Plan provides for
the
grant of (1) incentive stock options, which satisfy the requirements of Internal
Revenue Code (IRC) Section 422, and (2) non-qualified options which are not
entitled to favorable tax treatment under IRC Section 422. No optionee may
exercise incentive stock options in any calendar year for shares of common
stock
having a total market value of more than $100,000 on the date of grant (subject
to certain carryover provisions). In connection with the grant of non-qualified
options, a stock appreciation right for each share covered by the option
may
also be granted. The stock appreciation right will entitle the optionee to
receive a supplemental payment, which may be paid in whole or in part in
cash or
in shares of common stock equal to a portion of the spread between the exercise
price and the fair market value of the underlying share at the time of exercise.
All options granted to date have been non-qualified options.
On
January 1, 2006, the Company adopted Financial Accounting Standards Board
Statement No. 123(revised 2004) ”Share-Based Payment” (SFAS No. 123R)by using
the modified prospective method of adoption. SFAS No. 123R requires the
classification of share-based payment arrangements as liability or equity
instruments. Both the Company’s stock options and stock appreciation rights are
liability-classified awards and are required to be remeasured to fair value
at
each balance sheet date until the award is settled.
Prior
to
the adoption of SFAS No. 123R,the Company valued its stock options by applying
the intrinsic value-based method, and its stock options were classified in
shareholders’ equity. For liability-classified awards, SFAS No. 123R requires an
entity to remeasure the liability from its intrinsic value to its fair value
on
the adoption date, and reflect any difference as the cumulative effect of
change
in accounting principle, net of any related tax effect. The Company remeasured
the value of its stock options and stock appreciation rights as of January
1,
2006, which resulted in a cumulative effect of change in accounting principle,
net of tax, totaling $216,093. Upon adoption of SFAS No. 123R, the Company
also
reclassified to liabilities the January 1, 2006, fair value of its stock
options, which had been classified within shareholders’ equity in the amount of
$3,074,748.
F-25
NOTE
10 STOCK OPTION PLAN (CONTINUED)
Amounts
recognized in the financial statements for stock options and
stock
appreciation rights are as follows:
|
Year Ended
December 31,
|
||
|
2006
|
2005
|
|
|
Total
Cost of Share-Based
Plans, Charged Against
Income, Before Tax Effect
|
||
|
$
2,948,074
|
$(3,578,457)
|
|
|
|
||
|
Income
Tax Expense (Benefit)
|
||
|
Recognized
in Income
|
$(1,137,220)
|
$(1,380,390)
|
Total
cost of share-based plans for the year ended December 31, 2006, reflects
$216,093 (cost of $351,800 net of $135,707 income tax benefit) from the adoption
of SFAS No. 123R and reflected as a Cumulative Effect of Change in Accounting
Principle on the Consolidated Statement of Income.
The
fair
value of each share option and stock appreciation right is estimated on the
measurement date using the Black-Scholes option pricing model based on
assumptions noted in the following table. Expected volatility is based on
the
historical volatility and other factors of the Company. The Company has elected
to use the simplified method of estimating the expected term of the options
and
stock appreciation rights. Due to the small number of employees included
in the
Plan, the Company uses the specific identification method to estimate
forfeitures and includes all participants in one group. The risk-free rate
for
periods within the contractual term of the share option is based on the U.S.
Treasury rates in effect at the time of measurement.
The
Company issues new, previously unissued, shares as options are
exercised.
|
Assumptions
at December 31,
|
2006
|
2005
|
2004
|
|
Expected
Volatility
|
28.88%
|
28.11%
|
31.68%
|
|
Expected
Dividends
|
.44%
|
.65%
|
.76%
|
|
Expected
Term
|
4
years
|
7
years
|
7
years
|
|
Risk-Free
Rate
|
4.75%
|
3.73%
|
3.22%
|
F-26
NOTE
10 STOCK OPTION PLAN (CONTINUED)
A
summary
of share option activity under the Plan as of December, 31
2006,
and
changes during the year ended is presented below:
STOCK
OPTIONS FOR THE YEAR
ENDED
DECEMBER 31, 2006
|
Shares
|
Wtd.Avg.
Ex.
Price
|
Wtd.
Avg.
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic Value
|
||||||||||
|
Outstanding
December 31, 2005
|
160,600
|
$
|
30.82
|
||||||||||
|
Granted
|
55,000
|
67.27
|
|||||||||||
|
Exercised
|
(43,400
|
)
|
26.48
|
||||||||||
|
Expired
|
--
|
--
|
|||||||||||
|
Outstanding
December 31, 2006
|
172,200
|
41.96
|
7.79
|
$
|
4,684,968
|
||||||||
|
|
|||||||||||||
|
Exercisable
at December 31, 2006
|
10,400
|
$
|
26.72
|
6.49
|
$
|
475,096
|
|||||||
STOCK
APPRECIATION RIGHTS FOR THE YEAR ENDED
DECEMBER
31, 2006
|
Shares
|
Wtd.Avg.
Ex.
Price
|
Wtd.
Avg.
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic Value
|
||||||||||
|
Outstanding
December 31, 2005
|
160,600
|
$
|
20.33
|
||||||||||
|
Granted
|
55,000
|
11.56
|
|||||||||||
|
Exercised
|
(43,400
|
)
|
21.33
|
||||||||||
|
Expired
|
--
|
--
|
|||||||||||
|
_______
|
_______
|
||||||||||||
|
Outstanding
December 31, 2006
|
172,200
|
$
|
13.60
|
7.79
|
$
|
2,522,675
|
|||||||
|
|
|||||||||||||
|
Exercisable
at December 31, 2006
|
10,400
|
$
|
17.53
|
6.49
|
$
|
255,821
|
|||||||
In
connection with the exercise of 43,400 option shares, 25,211 shares of stock
were issued and 18,189 shares of stock were surrendered to relieve the stock
option liability by $1,539,117. Cash proceeds of $22,725 were received on
the
exercise of stock options.
The
weighted-average fair value at December 31, 2006, of options granted during
2006
and 2005 was $27.87 and $37.63, respectively. Stock appreciation rights granted
during 2006 and 2005 had weighted-average fair values of $15.01 and $20.26,
respectively. The total intrinsic value of options exercised for the year
ended
December 31, 2006 and 2005 was $1,539,117 and $1,316,582, respectively. Stock
appreciation rights exercised during the years ended December 31, 2006 and
2005,
had intrinsic values of $780,706 and $637,367,respectively.
As
of
December 31, 2006, there was $4,209,872, valued at fair value, of total
unrecognized compensation costs related to non-vested stock options and stock
appreciation rights granted under the Plan. That cost is expected to be
recognized over a weighted-average period of 1.35 years.
F-27
NOTE
10 STOCK OPTION PLAN (CONTINUED)
The
liability for stock options and stock appreciation rights valued at fair
value,
reflected on the consolidated balance sheet at December 31, 2006, was
$5,743,773.
Had
compensation cost from prior years been determined under the fair
value
method for all shares under SFAS No. 123, “Accounting for Stock-Based
Compensation” (as amended by Statement 148), the Company’s net earnings and
earnings per share would have been as follows:
|
Year
Ended
|
||
|
December
31,
|
December
31
|
|
|
2005
|
2004
|
|
|
Net
Income as Reported
|
$14,817,750
|
$14,651,739
|
|
Deduct:
Stock-Based Compensation
Under Fair Value Based Method
(Net of Tax)
|
||
|
(384,910)
|
(221,595)
|
|
|
Add
Back:
|
||
|
Stock-Based Compensation Under
|
||
|
Intrinsic Value Method
|
||
|
(Net of Tax)
|
1,174,283
|
402,683
|
|
|
||
|
Pro
Forma Net Income (Loss)
|
$15,607,123
|
$14,832,827
|
|
|
||
|
Basic
Income Per Share:
|
||
|
As
Reported
|
$2.62
|
$2.60
|
|
Pro Forma
|
$2.76
|
$2.63
|
|
Diluted
Income Per Share:
|
||
|
As
Reported
|
$2.58
|
$2.58
|
|
Pro
Forma
|
$2.72
|
$2.61
|
|
|
||
F-28
NOTE
11 EARNINGS PER SHARE
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 using the treasury
stock method at average market prices for the periods.
|
2006
|
2005
|
2004
|
||||||||
|
Income
Available to Common Shareholders:
Income
before Discontinued Operations
And Cumulative Effect of Change
in Accounting Principle
|
$ | 14,003,939 | $ | 14,821,189 | $ |
14,597,520
|
||||
|
Discontinued
Operations, Net of Tax
|
240,476
|
(3,439
|
)
|
54,219
|
||||||
|
Cumulative
Effect of Change in Accounting
|
||||||||||
|
Principle, Net of Tax
|
(216,093
|
)
|
--
|
--
|
||||||
|
Net Income
|
$
|
14,028,322
|
$
|
14,817,750
|
$
|
14,651,739
|
||||
|
Weighted
Average Shares Outstanding
|
5,684,042
|
5,662,387
|
5,635,204
|
|||||||
|
Common
Shares Applicable to Stock
|
||||||||||
|
Options
Using the Treasury Stock Method
|
7,452
|
82,907
|
53,969
|
|||||||
|
Total
Shares Applicable to Diluted Earnings Per Share
|
5,691,494
|
5,745,294
|
$
|
5,689,173
|
||||||
|
Per
Share Information:
Basic
Income Per Share
Income Before Discontinued Operations and
Cumulative Effect of Change in
Accounting Principle
|
$ | 2.47 | $ | 2.62 | $ | 2.59 | ||||
|
Discontinued
Operations, Net of Tax
|
.04
|
--
|
0.01
|
|||||||
|
Cumulative
Effect of Change in
Accounting Principle, Net of Tax
|
(.04 | ) | -- | -- | ||||||
|
Net
Income
|
$
|
2.47
|
$
|
2.62
|
$
|
2.60
|
||||
|
Diluted
Income Per Share
Income
Before Discontinued Operations and
Cumulative Effect of Change in
Accounting Principle
|
$ | 2.46 | $ | 2.58 | $ | 2.57 | ||||
|
Discontinued
Operations, Net of Tax
|
.04
|
--
|
$
|
0.01
|
||||||
|
Cumulative
Effect of Change in
|
||||||||||
|
Accounting Principle, Net of Tax
|
(.04
|
)
|
--
|
--
|
||||||
|
Net
Income
|
$
|
2.46_
|
$
|
2.58
|
$
|
2.58
|
||||
NOTE
12 COMMITMENTS AND CONTINGENCIES
The
Company leases, as lessee, certain equipment, land, and improvements under
operating leases.
Minimum
future rental payments under non-cancelable operating leases having remaining
terms in excess of one year as of December 31, 2006, are summarized as
follows:
|
Year
Ending December 31,
|
Amounts
|
|
|
|
|
2007
|
$
439,330
|
|
2008
|
527,619
|
|
2009
|
307,946
|
|
2010
|
266,250
|
|
2011
|
266,250
|
|
2012
and thereafter (cumulative)
|
11,892,500
|
|
Total
|
$13,699,895
|
F-29
NOTE
12 COMMITMENTS AND CONTINGENCIES (CONTINUED)
Rental
expense under all operating leases amounted to $917,471, $608,923, and $608,325,
for the years ended December 31, 2006, 2005, and 2004,
respectively.
Additionally,
the Company, as lessor, leases certain land, buildings, and improvements
under
operating leases.
Minimum
future rental receipts under non-cancelable operating leases
having
remaining terms in excess of one year as of December 31, 2005,
are
summarized as follows:
|
Year Ending December 31,
|
Amounts
|
|
|
|
|
2007
|
$
8,500,984
|
|
2008
|
8,493,799
|
|
2009
|
8,496,019
|
|
2010
|
8,222,436
|
|
2011
|
7,691,935
|
|
2012
and thereafter (cumulative)
|
184,200,216
|
|
Total
|
$225,605,389
|
NOTE
13 BUSINESS SEGMENT DATA
The
Company primarily operates in three business segments: real estate, income
properties, and golf. Real estate operations include commercial real estate,
land sales and development, residential, agricultural operations, and leasing
properties for oil and mineral exploration.
The
Company evaluates performance based on profit or loss from operations before
income taxes. The Company’s reportable segments are strategic business units
that offer different products. They are managed separately because each segment
requires different management techniques, knowledge, and skills.
F-30
NOTE
13 BUSINESS SEGMENT DATA (CONTINUED)
Information
about the Company’s operations in different segments for each of the three years
ended December 31 is as follows (amounts in thousands):
|
2006
|
2005
|
2004
|
||||||||
|
Revenues:
|
||||||||||
|
Real
Estate
|
$
|
28,942
|
$
|
32,074
|
$
|
32,640
|
||||
|
Income
Properties
|
8,184
|
6,618
|
4,659
|
|||||||
|
Golf
|
5,210
|
4,818
|
4,579
|
|||||||
|
General,
Corporate, and Other
|
1,253
|
1,210
|
1,213
|
|||||||
|
|
$
|
43,589
|
$
|
44,720
|
$
|
43,091
|
||||
|
|
||||||||||
|
Income
(Loss):
|
||||||||||
|
Real
Estate
|
$
|
21,811
|
$
|
25,581
|
$
|
24,939
|
||||
|
Income
Properties
|
6,723
|
5,446
|
3,852
|
|||||||
|
Golf
|
(
1,478
|
)
|
(1,292
|
)
|
(1,199
|
)
|
||||
|
General,
Corporate, and Other
|
_(
5,566
|
)
|
(6,787
|
)
|
(3,860
|
)
|
||||
|
|
$
|
21,490
|
$
|
22,948
|
$
|
23,732
|
||||
|
|
||||||||||
|
Identifiable
Assets:
|
||||||||||
|
Real
Estate
|
$
|
23,088
|
$
|
15,473
|
$
|
14,446
|
||||
|
Income
Properties
|
106,955
|
93,908
|
62,167
|
|||||||
|
Golf
|
8,651
|
9,308
|
9,708
|
|||||||
|
General,
Corporate, and Other
|
15,080
|
24,569
|
32,900
|
|||||||
|
|
$
|
153,774
|
$
|
143,258
|
$
|
119,221
|
||||
|
|
||||||||||
|
Depreciation
and Amortization:
|
||||||||||
|
Real
Estate
|
$
|
295
|
$
|
124
|
$
|
79
|
||||
|
Income
Properties
|
1,413
|
1,127
|
785
|
|||||||
|
Golf
|
473
|
421
|
414
|
|||||||
|
General,
Corporate, and Other
|
85
|
83
|
66
|
|||||||
|
|
$
|
2,266
|
$
|
1,755
|
$
|
1,344
|
||||
|
|
||||||||||
|
Capital
Expenditures:
|
||||||||||
|
Real
Estate
|
$
|
1,463
|
$
|
955
|
$
|
304
|
||||
|
Income
Properties
|
14,462
|
32,953
|
20,261
|
|||||||
|
Golf
|
60
|
37
|
68
|
|||||||
|
General,
Corporate, and Other
|
84
|
55
|
196
|
|||||||
|
|
$
|
16,069
|
$
|
34,000
|
$
|
20,829
|
||||
Income
represents income (loss) from continuing operations before income taxes.
Identifiable assets by industry are those assets that are used in the Company’s
operations in each industry. General corporate assets and assets used in
the
Company’s other operations consist primarily of cash, investment securities,
notes receivable and property, plant and equipment.
NOTE
14 RELATED PARTIES
William
J. Voges, a director of the Company, serves as an officer and director of
the
Managing Member of Silver Holly Development, LLC, and serves or may serve
as
Trustee or Successor Trustee to its members. On December 28, 2004, Silver
Holly
Development, LLC, purchased 4.57 acres at a purchase price of $1,073,858
from
the Company. This contract contains a provision to purchase impact fee credits,
if needed, from the Company. Impact fee credits of $67,240 were purchased
from
the Company on January 6, 2006. This was a cash sale made at market value
and at
prevailing market terms and conditions.
F-31
|
QUARTERLY
FINANCIAL DATA (UNAUDITED)
|
|
||||||||||||||||||||||||
|
THREE
MONTHS ENDED
|
|||||||||||||||||||||||||
|
March
31,
|
June
30,
|
September
30,
|
December
31,
|
||||||||||||||||||||||
|
Income
|
2006
(1
|
)
|
2005
|
2006
(1
|
)
|
2005
|
2006
(1
|
)
|
2005
|
2006
|
2005
|
||||||||||||||
|
Real
Estate Operations:
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|||||||||||||||||
|
Real
Estate Sales
|
|||||||||||||||||||||||||
|
Sales
and Other Income
|
4,611,857
|
20,187,813
|
4,912,645
|
3,066,213
|
5,095,658
|
3,735,564
|
14,321,589
|
5,083,882
|
|||||||||||||||||
|
Costs
and Other Expenses
|
(717,633
|
)
|
(3,624,054
|
)
|
(785,477
|
)
|
(1,155,821
|
)
|
(1,494,549
|
)
|
(635,538
|
)
|
(4,132,710
|
)
|
(1,076,651
|
)
|
|||||||||
|
3,894,224
|
16,563,759
|
4,127,168
|
1,910,392
|
3,601,109
|
3,100,026
|
10,188,879
|
4,007,231
|
||||||||||||||||||
|
Income
Properties
|
|||||||||||||||||||||||||
|
Leasing
Revenues and Other Income
|
1,879,693
|
1,414,184
|
1,934,456
|
1,571,733
|
2,183,626
|
1,789,114
|
2,185,954
|
1,843,268
|
|||||||||||||||||
|
Costs
and Other Expenses
|
(322,086
|
)
|
(257,930
|
)
|
(339,786
|
)
|
(298,467
|
)
|
(407,697
|
)
|
(309,394
|
)
|
(391,143
|
)
|
(306,494
|
)
|
|||||||||
|
1,557,607
|
1,156,254
|
1,594,670
|
1,273,266
|
1,775,929
|
1,479,720
|
1,794,811
|
1,536,774
|
||||||||||||||||||
|
Golf
Operations
|
|||||||||||||||||||||||||
|
Sales
and Other Income
|
1,509,664
|
1,457,575
|
1,373,085
|
1,269,644
|
1,027,067
|
920,836
|
1,300,909
|
1,169,858
|
|||||||||||||||||
|
Costs
and Other Expenses
|
(1,655,352
|
)
|
(1,517,549
|
)
|
(1,722,465
|
)
|
(1,552,703
|
)
|
(1,568,987
|
)
|
(1,439,149
|
)
|
(1,741,813
|
)
|
(1,601,211
|
)
|
|||||||||
|
(145,688
|
)
|
(59,974
|
)
|
(349,380
|
)
|
(283,059
|
)
|
(541,920
|
)
|
(518,313
|
)
|
(440,904
|
)
|
(431,353
|
)
|
||||||||||
|
Total
Real Estate Operations
|
5,306,143
|
17,660,039
|
5,372,458
|
2,900,599
|
4,835,118
|
4,061,433
|
11,542,786
|
5,112,652
|
|||||||||||||||||
|
Profit
on Sales of Other
|
|||||||||||||||||||||||||
|
Real
Estate Interests
|
144,052
|
23,000
|
311,818
|
214,733
|
212,550
|
21,210
|
10,895
|
13,350
|
|||||||||||||||||
|
Interest
and Other Income
|
243,452
|
224,350
|
202,233
|
244,696
|
38,831
|
207,070
|
89,219
|
261,863
|
|||||||||||||||||
|
5,693,647
|
17,907,389
|
5,886,509
|
3,360,028
|
5,086,499
|
4,289,713
|
11,642,900
|
5,387,865
|
||||||||||||||||||
|
General
and Administrative Expenses
|
(1,908,530
|
)
|
(3,138,999
|
)
|
(721,965
|
)
|
(3,124,627
|
)
|
(1,911,250
|
)
|
51,130
|
(2,277,626
|
)
|
(1,784,562
|
)
|
||||||||||
|
Income
from Continuing Operations
|
|||||||||||||||||||||||||
|
Before
Income Taxes
|
3,785,117
|
14,768,390
|
5,164,544
|
235,401
|
3,175,249
|
4,340,843
|
9,365,274
|
3,603,303
|
|||||||||||||||||
|
Income
Taxes
|
(1,432,614
|
)
|
(5,697,237
|
)
|
(1,673,464
|
)
|
617,908
|
(791,231
|
)
|
(1,651,641
|
)
|
(3,588,936
|
)
|
(1,395,778
|
)
|
||||||||||
|
Income
Before Discontinued Operations
|
|||||||||||||||||||||||||
|
and
Cumulative Effect of
|
|||||||||||||||||||||||||
|
Change
in Accounting Principle
|
2,352,503
|
9,071,153
|
3,491,080
|
853,309
|
2,384,018
|
2,689,202
|
5,776,338
|
2,207,525
|
|||||||||||||||||
|
Income
from Discontinued Operations
|
|||||||||||||||||||||||||
|
Net
of Income Tax
|
(7,978
|
)
|
11,280
|
248,454
|
(2,183
|
)
|
--
|
(355
|
)
|
--
|
(12,181
|
)
|
|||||||||||||
|
Cumulative
Effect of Change in
|
|||||||||||||||||||||||||
|
Accounting
Principle Net of Tax
|
(216,093
|
)
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||
|
Net
Income
|
2,128,432
|
9,082,433
|
3,739,534
|
851,126
|
2,384,018
|
2,688,847
|
5,776,338
|
2,195,344
|
|||||||||||||||||
|
Per
Share Information:
|
|||||||||||||||||||||||||
|
Basic
Income Per Share
|
|||||||||||||||||||||||||
|
Income
Before Discontinued Operations
|
|||||||||||||||||||||||||
|
and
Cumulative Effect of
|
|||||||||||||||||||||||||
|
Change
in Accounting Principle
|
$
|
0.41
|
$
|
1.61
|
$
|
0.62
|
$
|
0.15
|
$
|
0.42
|
$
|
0.47
|
$
|
1.02
|
$
|
0.39
|
|||||||||
|
Income
from Discontinued Operations
|
|||||||||||||||||||||||||
|
Net
of Income Tax
|
--
|
--
|
$
|
0.04
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||
|
Cumulative
Effect of Change in
|
|||||||||||||||||||||||||
|
Accounting
Principle Net of Tax
|
($0.04
|
)
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||
|
Net
Income
|
$
|
0.37
|
$
|
1.61
|
$
|
0.66
|
$
|
0.15
|
$
|
0.42
|
$
|
0.47
|
$
|
1.02
|
$
|
0.39
|
|||||||||
|
Diluted
Income Per Share
|
|||||||||||||||||||||||||
|
Income
Before Discontinued Operations
|
|||||||||||||||||||||||||
|
and
Cumulative Effect of
|
|||||||||||||||||||||||||
|
Change
in Accounting Principle
|
$
|
0.41
|
$
|
1.59
|
$
|
0.62
|
$
|
0.14
|
$
|
0.42
|
$
|
0.47
|
$
|
1.01
|
$
|
0.38
|
|||||||||
|
Income
from Discontinued Operations
|
|||||||||||||||||||||||||
|
Net
of Income Tax
|
$
|
0.04
|
|||||||||||||||||||||||
|
Cumulative
Effect of Change in
|
|||||||||||||||||||||||||
|
Accounting
Principle Net of Tax
|
($0.04
|
)
|
|||||||||||||||||||||||
|
Net
Income
|
$
|
0.37
|
$
|
1.59
|
$
|
0.66
|
$
|
0.14
|
$
|
0.42
|
$
|
0.47
|
$
|
1.01
|
$
|
0.38
|
|||||||||
|
(1) The
first three quarters of 2006 have been adjusted to reflect the
quarterly
impact of the SAB 108 adjustment made
in the fourth quarter
of 2006. The
adjustment is considered
immaterial to each of the 2006
quarters.
|
|||||||||||||||||||||||||
F-32
EXHIBIT
10.10
Date
Participant
|
Re:
|
Consolidated-Tomoka
Land Co.
|
|
2001
Stock Option Plan
|
Dear
:
I
am
pleased to inform you that you have been granted an option to purchase up to
________
(______)
shares
of the Common Stock of Consolidated-Tomoka Land Co. (the Company"), par value
One Dollar ($1.00) per share, at a price of ___________ Dollars ($_____) per
share (the “Exercise Price”) and have been awarded an equivalent number of
related Stock Appreciation Rights ("SARs"). This grant and award is made to
you
pursuant to the Company's 2001 Stock Option Plan (the "Plan"). The date of
grant
of this option and award of SARs is ___________. On that date, the fair market
value ("Fair Market Value") of the stock was $_____
per
share. Your option will expire on the earlier of ten (10) years from the date
of
grant of this option or on such earlier date as it is no longer exercisable
as
described in Section 2 below.
The
Board
of Directors of the Company (the "Board") intends that this option be a
"non-statutory stock option." Non-statutory options granted under the Plan
will
be taxed under Section 83 of the Internal Revenue Code of 1986, as amended
(the
"Code").
You
previously received a copy of the Plan, the terms of which are incorporated
by
reference in this letter. Your stock option and SARs are in all respects
controlled by the limitations and conditions of the Plan, including, without
limitation, the following:
1. Exercise
of Option.
(a) Your
option may be exercised as described below, subject to the limitations described
herein and in the Plan. The option may be exercised as follows:
(i) One-fifth
(1/5) of the total number of shares covered by the option shall become
exercisable during each twelve (12) month period commencing twelve (12) months
after the date this option was granted. This may be illustrated by the following
table:
|
Number
of Shares
|
Exercise
Period
|
|
|
#
|
Dates
|
(ii)
Your
option shall remain exercisable during the Exercise Period set forth above,
unless it expires or lapses prior to the end of such period.
(iii) Should
a
change of control (as defined in the Plan) occur in the ownership of the
Company, your option will be immediately exercisable as to 100% of the shares
covered by the option as of the date the change of control occurs (as defined
in
the Plan).
(b) You
may
exercise your option only if either:
(i) A
registration statement pertaining to the shares to be issued upon exercise
has
been filed with, and declared effective, by the Securities and Exchange
Commission and if on the date of your exercise that registration statement
continues to be effective, or
(ii) An
exemption from the registration requirements of applicable securities laws
is
available.
The
Company has filed a registration statement (S-8) pertaining to the shares to
be
issued upon exercise of this option with the Securities and Exchange Commission,
a copy of which was previously provided to you. Additionally, the S-8 is
available for review in the office of the corporate secretary. If on the date
of
your exercise of this option that registration statement continues to be
effective, the securities issued to you upon exercise of the option (the "Option
Shares") will not be "restricted" and can be resold by you without limitation
or
restriction unless you are an "affiliate" of the Company for purposes of the
federal securities laws. An "affiliate" of the Company is a person who directly,
or indirectly through one or more intermediaries, controls or is controlled
by,
or is under common control with, the Company. If you are an "affiliate" of
the
Company, you generally may reoffer or resell the Option Shares only pursuant
to
a registration statement filed under the Securities Act of 1933 (the "1933
Act"), the Company having no obligation to file such a registration statement,
or pursuant to Rule 144 under the 1933 Act.
2. Limitations
on Exercise of the Option.
(a) During
your lifetime, your option may be exercised by you while you are serving as
an
employee of the Company or parent or subsidiary of the Company (or within ninety
(90) days after your termination of employment) or, if you become incompetent,
by your legal guardian or the holder of a durable family power of attorney
executed by you. Continuous service shall not be considered interrupted in
the
case of sick leave, military leave, or any other leave of absence approved
by
the Board.
(b) When
your
service to the Company terminates, other than by reason of your death,
disability or retirement after attainment of age 65, your option will lapse
on
the earlier of the end of your exercise period (___________) or ninety (90)
days
following the effective date of the termination of your services to the
Company.
(c) If
you
die while serving the Company or a parent or subsidiary of the Company as an
employee, your option can be exercised (to the extent, and only for the number
of shares, you could have exercised at the time of your death) by your
designated beneficiaries who acquire the option pursuant to an effective
designation of beneficiary, or if one does not exist, by will or by the laws
of
descent or distribution, at any time before the expiration of the earlier of
(i)
one year after the date of your death, or (ii) the end of your exercise period
(___________).
(d) If
your
service to the Company or a parent or subsidiary of the Company terminates
because you are totally and permanently disabled within the meaning of Section
22(e)(3) of the Code, you may exercise your option (to the extent and only
for
the number of shares you could have exercised it for on the date of your
termination due to disability) at any time before the expiration of the earlier
of (i) one year after your termination of employment, or (ii) the end of your
exercise period (_____________) (e) If
your
service to the Company or a parent or subsidiary of the Company terminates
by
reason of your retirement on or after attaining age 65, your option will
terminate on the earlier of (i) the end of your option period (_____________),
or (ii) ninety (90) days after the date of your retirement, provided, however,
that the option may be exercised only for the number of shares for which you
could have exercised it for on your retirement date.
|
3.
|
Method
of Exercise of Option.
|
(a) To
exercise your option, you must deliver to the Secretary of the Company a written
notice of your decision to exercise the option, and you must concurrently tender
to the Company full payment of the Exercise Price for the shares to be
purchased. Payments must be made in cash, by certified check, or wholly or
partially in the form of Common Stock of the Company having a fair market value
equal to the Exercise Price. To exercise your option, you must also comply
with
any reasonable requirements established by the Committee under the
Plan.
(b) The
option granted to you under the Plan may be exercised in increments of not
less
than 100 shares or, if greater, ten percent (10%) of the full number of shares
as to which it may then be exercised. A partial exercise of your option will
not
affect your right to exercise the option from time to time thereafter in
accordance with the Plan as to any remaining shares subject to the
option.
4. SARs.
When
you
exercise a SAR, you are entitled to receive the value of the SAR in addition
to
any shares purchased pursuant to your exercise of the related option. The value
of each SAR shall be determined by subtracting the Appreciation (defined as
the
fair market value of the SAR’s related share at the time of exercise minus the
Exercise Price of the share) from the quotient resulting from the division
of
the Appreciation by a factor of one (1) minus your personal income tax rate
in
effect under the Code at the time the SAR is exercised. This equation may also
be expressed as follows:
Appreciation
-
Appreciation = SAR Value
1
- Tax
Rate
The
fair
market value of each share shall be conclusively determined by the
Committee.
5. Term
of SARs.
Each SAR
automatically expires on the date the related option expires.
6. Exercise
of SARs. Your
SARs
are exercisable to the extent, but only to the extent, that your related option
is exercisable. You must exercise your SARs by the later of the end of (i)
the
ninety (90) day period beginning on the date of exercise of your option or
(ii)
the ten (10) day period beginning on the third (3rd) business day following
the
date on which the Company releases its official financial data for the quarter
in which the option was exercised. Only one SAR can be exercised for each share
purchased under the related option. If you purchase shares on the exercise
of
your option without exercising within the aforementioned time frame an equal
number of SARs, you will forfeit those SARs which could have been, but were
not,
so exercised. The Committee shall have sole discretion to determine the form
in
which payments shall be made upon the exercise of a SAR.
7. Transferability.
Your
option and SARs are non-transferable, except by reason of your death and then
only according to the terms of your designation of beneficiary, or if one does
not exist, by your will or the provisions of applicable laws of descent and
distribution.
8. Tenure.
Your
right, if any, to continue to serve the Company and its subsidiaries as an
employee or otherwise will not be enlarged or otherwise affected by your receipt
of this option. This designation shall not in any way restrict the right of
the
Company or any of its subsidiaries, as the case may be, to terminate your
employment or affiliation at any time.
9. Rights
of a Stockholder.
Until
shares are issued to you pursuant to the exercise of your option and you have
paid the Company in full for those shares, you will not have any rights as
a
stockholder with respect to any shares covered by your option. For example,
you
will not have a right to vote or to receive cash or stock
dividends.
10. Adjustment
Upon Change of Shares.
If a
reorganization, merger, consolidation, reclassification, recapitalization,
combination or exchange of shares, stock split, stock dividend, rights offering,
or other expansion or contraction of the Common Stock of the Company occurs,
the
number and class of shares for which options are authorized to be granted under
the Plan, the number and class of shares then subject to options previously
granted under the Plan, and the price per share payable on exercise of the
option outstanding shall be equitably adjusted by the Compensation and Stock
Option Committee (the “Committee”) to reflect such changes. To the extent deemed
equitable and appropriate by the Committee, subject to any required action
by
stockholders, in any merger, consolidation, reorganization, liquidation or
dissolution, any option or SAR granted under the Plan shall pertain to the
securities and other property which a holder of the number of shares of stock
covered by the option or SAR would have been entitled to receive in connection
with such event.
11. Representations.
The
option may not be exercised, and shares may not be issued, until the Company
has
obtained the consent or approval from every regulatory body, federal or state,
having jurisdiction over such matter as the Company determines is necessary.
To
ensure compliance with federal and state securities laws, the Company may
require you to make certain representations and to furnish information before
it
is required to deliver any shares to you. The Company may place an appropriate
legend on any certificates evidencing the shares and may issue a stop transfer
order to its transfer agent in respect to the shares, if in the opinion of
the
Company such action is necessary under any state or federal securities laws.
Each person or estate who acquires by bequest or inheritance your right to
exercise the option may be required to furnish reasonable evidence of ownership
of the option as a precondition to the exercise of the option. In addition,
the
Company may require such consents and releases of taxing authorities as the
Company deems advisable.
12. Taxes.
The
Company may, if necessary or desirable, pay or withhold the amount of any tax
attributable to any shares deliverable or amounts payable under this option.
In
addition, the Company may defer making delivery until it is indemnified to
its
satisfaction for that tax.
13. Liability
of the Company.
The
Company, its parent and any subsidiary that is in existence or hereafter comes
into existence shall not be liable to any person for any tax consequences
expected but not realized by the optionee or other person due to the exercise
of
an option to purchase shares in the Company or to exercise a SAR.
We
suggest that you carefully review the Plan and contact a member of the Committee
if you have any questions concerning it. If you then agree to be bound by the
conditions of both the Plan and this letter agreement, please indicate your
agreement by signing at the place indicated below and return the original of
the
letter to Linda Crisp with your Designation of Beneficiary. Retain the other
copy for your files.
Sincerely,
CONSOLIDATED-TOMOKA
LAND CO.
By:
_______________________________
Chairman,
Compensation and Stock Option Committee
I
have
read the Consolidated-Tomoka Land Co. 2001 Stock Option Plan and by my signature
I agree to be bound by the terms and conditions of both that Plan and this
letter agreement.
|
Date:________________________
|
__________________________________
|
NOTE:
This document is an important paper and should be kept by you in a safe place
with other important financial papers and life insurance policies.
EXHIBIT
21
Subsidiaries
of the Registrant
|
Percentage
of
|
||
|
Organized
|
Voting
Securities
|
|
|
Under
|
Owned
by
|
|
|
Laws
of
|
Immediate
Parent
|
|
|
Consolidated-Tomoka
Land Co.
|
Florida
|
--
|
|
Indigo
Group Inc.
|
Florida
|
100.0
|
|
Indigo
Group Ltd.
|
Florida
|
99.0*
|
|
(A
Limited Partnership)
|
||
|
Indigo
Development Inc.
|
Florida
|
100.0
|
|
Indigo
Commercial Realty Inc.
|
Florida
|
100.0
|
|
Palms
Del Mar Inc.
|
Florida
|
100.0
|
|
Indigo
International Inc.
|
Florida
|
100.0
|
|
W.
Hay Inc.
|
Florida
|
**
|
|
W.
Hay LLC
|
Florida
|
***
|
* Consolidated-Tomoka
Land Co. is the limited partner of Indigo Group
Ltd.,
and
owns 99.0% of the total partnership equity. Indigo Group
Inc.
is
the managing general partner of the partnership and owns a
1.0%
of
the partnership equity.
** W.
Hay
Inc. is 100% owned by Indigo Group Inc.
*** W.
Hay
LLC is 100% owned by W. Hay Inc.
All
subsidiaries are included in the Consolidated Financial Statements of the
Company and its subsidiaries appearing elsewhere herein.
EXHIBIT
23.2
Consent
of Independent Registered Public Accounting Firm
To
The
Board of Directors
Consolidated-Tomoka
Land Co.:
We
consent to the incorporation by reference in Registration Statements (Nos.
33-62679 and 333-63400) on Form S-8 of Consolidated-Tomoka Land Co. and
subsidiaries of our reports dated March 13, 2007, with respect to the
consolidated balance sheets of Consolidated-Tomoka Land Co. and subsidiaries
as
of December 31, 2006 and 2005 and the related consolidated statements of income,
shareholders’ equity and comprehensive income and cash flows for each of years
in the three-year period ended December 31, 2006 and the related financial
statement schedule, management’s assessment of the effectiveness of internal
control over financial reporting as of December 31, 2006 and the effectiveness
of internal control over financial reporting as of December 31, 2006, which
reports appear in the December 31, 2006 annual report on Form 10-K of
Consolidated-Tomoka Land Co. and subsidiaries.
Our
report with respect to the consolidated financial statement refers to the
Company’s adoption of Statement of Financial Accounting Standards No. 123R,
“Share-Based Payment,” effective January 1, 2006 and Statement of Financial
Accounting Standards No. 158, “Employers' Accounting for Defined Benefit Pension
and Other Postretirement Plans” effective December 31, 2006 and a change in
quantifying errors in 2006.
/S/
KPMG LLP
Jacksonville,
Florida
March
13,
2007
Certified
Public Accountants
EXHIBIT
31.1
CERTIFICATIONS
I,
William H. McMunn, certify that:
|
1.
|
I
have reviewed this annual report on Form 10-K of Consolidated-Tomoka
Land
Co.;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f))for the Registrant and
have:
|
| (a) |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
| (b) |
Designed
such internal control over financial reporting, or caused such
internal
|
control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability
of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted
accounting
principles;
| (c) |
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
|
| (d) |
Disclosed
in this report any change in the registrant's internal control over
|
financial
reporting that occurred during the registrant's most recent fiscal quarter
that
has materially affected, or is reasonably
likely
to
materially affect,
the registrant's internal control over financial reporting; and
|
5.
|
The
registrant's other certifying officer and I have disclosed, based
on our
most recent evaluation of internal control over financial reporting,
to
the registrant's auditors and the audit committee of the registrant's
board of directors:
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record,
process, summarize and report financial information; and
|
| (b) |
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in
the
|
registrant's internal control over financial reporting.
By:
/s/
William H. McMunn
0; William
H. McMunn
0; President
and Chief
Executive Officer
0; Date:
March 13, 2007
EXHIBIT
31.2
CERTIFICATIONS
I,
Bruce
W. Teeters, certify that:
1.
I
have
reviewed this annual report on Form 10-K of Consolidated-Tomoka Land Co.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f))for the Registrant and
have:
|
| (a) |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
| (b) |
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
| (c) |
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by
this report based on such evaluation;
|
| (d) |
Disclosed
in this report any change in the registrant's internal control over
financial
reporting that occurred during the registrant's most recent fiscal
quarter
that has materially affected, or is reasonably likely to materially
affect,
the registrant's internal control over financial reporting; and
|
| 5. |
The
registrant's other certifying officer and I have disclosed, based on
our
most recent evaluation of internal control over financial reporting,
to
the registrant's auditors and the audit committee of the registrant's
board of directors:
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal
control over financial reporting which are reasonably likely to adversely
affect
the registrant's ability to record, process, summarize
and report financial information;
and
|
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By:
/s/
Bruce W. Teeters
0; Bruce
W. Teeters
0; Senior
Vice
President-Finance
and
Treasurer
0;
Date:
March 13,
2007
EXHIBIT
32.1
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report of Consolidated-Tomoka Land Co. (The
“Company”) on Form 10-K for the period ending
December
31, 2006, as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), I, William H. McMunn,
President
and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906
of
the
Sarbanes-Oxley Act of 2002, that:
| (1) |
The
Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934;
and
|
| (2) |
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations
of the Company.
|
/s/
William H.
McMunn
0; William
H. McMunn
0; President
and
Chief
Executive Officer
March
13,
2007
Exhibit
32.2
CERTIFICATION
PURSUANT TO
18
U.S.C SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual report of Consolidated-Tomoka Land Co. (The
“Company”) on Form 10-K for the period ending
December
31, 2006, as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), I, Bruce W. Teeters,
Senior
Vice President - Finance and Treasurer of the Company, certify, pursuant to
18
U.S.C. Section
1350, as adopted pursuant to
Section
906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The
Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2)
The
information contained in the Report fairly presents, in
all
material respects, the financial condition and results
of operations
of
the Company.
/s/Bruce
W.
Teeters
0; Bruce
W. Teeters
0; Senior
Vice
President-Finance and Treasurer
March
13,
2007