SEC Filing - CTO Realty Growth

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) ___ OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 ___ TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___ Commission file number 0-5556 CONSOLIDATED-TOMOKA LAND CO. (Exact name of registrant as specified in its charter) Florida 59-0483700 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 149 South Ridgewood Avenue Daytona Beach, Florida 32114 (Address of principal executive offices) (Zip Code) (904) 255-7558 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class of Common Stock Outstanding April 30, 1999 $1.00 par value 6,371,833 1

CONSOLIDATED-TOMOKA LAND CO. INDEX Page No. PART I - FINANCIAL INFORMATION Consolidated Condensed Balance Sheets - March 31, 1999 and December 31, 1998 3 Consolidated Condensed Statements of Income and Retained Earnings - Three Months Ended March 31, 1999 and 1998 4 Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 1999 and 1998 5 Notes to Consolidated Condensed Financial Statements 6-9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13 PART II -- OTHER INFORMATION 14 SIGNATURES 15 2

PART I -- FINANCIAL INFORMATION CONSOLIDATED-TOMOKA LAND CO. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) March 31, December 31, 1999 1998 --------- ------------ ASSETS Cash & Cash Equivalents $ 393,824 $ 283,200 Investment Securities 1,173,333 1,191,390 Notes Receivable 9,387,812 9,115,868 Real Estate Held for Development and Sale 13,528,871 13,597,967 Deferred Income Taxes 1,826,761 1,826,761 Refundable Income Taxes -- 285,199 Net Investment in Direct Financing Lease 520,284 542,123 Other Assets 1,315,282 1,111,871 Net Assets of Discontinued Citrus Operations 14,372,222 14,792,453 Property, Plant, and Equipment - Net 7,445,900 7,354,619 ---------- ---------- TOTAL ASSETS $49,964,289 $50,101,451 ========== ========== LIABILITIES Accounts Payable $ 42,982 $ 292,646 Notes Payable 11,512,340 10,742,063 Accrued Liabilities 4,865,702 4,368,464 Income Taxes Payable 218,755 -- ---------- ---------- TOTAL LIABILITIES 16,639,779 15,403,173 ---------- ---------- SHAREHOLDERS' EQUITY Common Stock 6,371,833 6,371,833 Additional Paid-in Capital 3,793,066 3,793,066 Retained Earnings 23,159,611 24,533,379 ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 33,324,510 34,698,278 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $49,964,289 $50,101,451 ========== ========== See accompanying Notes to Consolidated Condensed Financial Statements. 3

CONSOLIDATED-TOMOKA LAND CO. CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited) Three Months Ended --------------------------- March 31, March 31, 1999 1998 --------- ----------- INCOME: Real Estate Operations: Sales and Other Income $ 1,287,026 $ 1,376,649 Costs and Expenses ( 1,142,128) ( 931,554) ---------- ---------- 144,898 445,095 ---------- ---------- Profit on Sales of Undeveloped Real Estate Interests 3,500 96,415 ---------- ---------- Interest and Other Income 197,010 257,473 ---------- ---------- General and Administrative Expenses ( 990,206) ( 840,550) ---------- ---------- Loss From Continuing Operations Before Income Taxes ( 644,798) ( 41,567) Income Taxes 250,575 24,841 ---------- ---------- Loss From Continuing Operations ( 394,223) ( 16,726) Income From Discontinued Citrus Operations, Net of Tax 1,250,597 446,877 ---------- --------- Net Income 856,374 430,151 Retained Earnings, Beginning of Period 24,533,379 27,689,548 Dividends ( 2,230,142) ( 2,230,142) ---------- ---------- Retained Earnings, End of Period $23,159,611 $25,889,557 ========== ========== PER SHARE INFORMATION: Basic and Diluted Loss From Continuing Operations $ (0.06) -- Income From Discontinued Citrus Operations $ 0.19 $ 0.07 ---------- --------- Net Income $ 0.13 $ 0.07 ========== ========= Dividends $ 0.35 $ 0.35 ========== ========= See accompanying Notes to Consolidated Condensed Financial Statements. 4

CONSOLIDATED-TOMOKA LAND CO. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended -------------------------- March 31, March 31, 1999 1998 --------- --------- CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 856,374 $ 430,151 Adjustments to Reconcile Net Income to Net Cash Provided by (Used In)Operating Activities: Discontinued Citrus Operations (1,250,597) ( 446,877) Depreciation and Amortization 63,700 38,739 Gain on Sale of Property, Plant and Equipment ( 10,305) ( 17,507) (Increase) Decrease in Assets: Notes Receivable ( 271,944) 100,545 Real Estate Held for Development 69,096 ( 289,408) Other Assets ( 203,411) ( 197,975) (Decrease) Increase in Liabilities: Accounts Payable ( 249,664) 161,406 Accrued Liabilities 497,238 690,513 Income Taxes Payable and Refundable 503,954 (1,871,903) --------- --------- Net Cash Provided By (Used In) Operating Activities 4,441 (1,402,316) --------- --------- CASH FLOW FROM INVESTING ACTIVITIES: Acquisition of Property, Plant, and Equipment ( 165,559) ( 2,054,816) Net Decrease (Increase) in Investment Securities 18,057 ( 4,048,524) Direct Finance Lease 21,839 20,166 Proceeds from Sale of Property, Plant and Equipment 20,883 17,507 Cash from Discontinued Citrus Operations 1,670,828 922,388 --------- --------- Net Cash Provided by (Used In) Investing Activities 1,566,048 ( 5,143,279) --------- --------- CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from Notes Payable 2,443,000 -- Payments on Notes Payable ( 1,672,723) ( 94,529) Dividends Paid ( 2,230,142) ( 2,230,142) --------- --------- Net Cash Used in Financing Activities ( 1,459,865) ( 2,324,671) --------- --------- Net Increase (Decrease) In Cash and Cash Equivalents 110,624 ( 8,870,266) Cash and Cash Equivalents at Beginning of Period 283,200 9,385,327 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 393,824 $ 515,061 ========= ========= See accompanying Notes to Consolidated Condensed Financial Statements. 5

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. Principles of Interim Statements. The following unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures which are normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. The information presented in the unaudited consolidated condensed financial statements reflects all adjustments which are, in the opinion of the management, necessary to present fairly the Company's financial position and the results of operations for the interim periods. The consolidated condensed format is designed to be read in conjunction with the last annual report. For further information refer to the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. The consolidated condensed financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. 2. Discontinued Citrus Operations. On April 7, 1999 the Company completed the sale of its citrus operations at a price approximating $30,945,000. The gain on the transaction will be recognized in the second quarter of 1999. The results of the citrus operations have been reported separately as discontinued operations in the Consolidated Statements of Income. Prior year consolidated financial statements have been restated to present citrus operations as discontinued operations. The assets and liabilities associated with the citrus operations as of March 31, 1999 and December 31, 1998 have been presented separately on the consolidated balance sheets as "Net Assets of Discontinued Citrus Operations." Summary financial information of the citrus operations is as follows: Three Months Ended ---------------------- March 31, March 31, 1999 1998 --------- --------- Revenues from Discontinued Citrus Operations $5,157,513 $4,573,379 ========= ========== Income from Discontinued Citrus Operations Before Tax 2,005,126 716,494 Income Tax Expense from Discontinued Citrus Operations ( 754,529) ( 269,617) ---------- --------- Net Income from Discontinued Citrus Operations $1,250,597 $ 446,877 ========= ========= 6

3. Seasonal Operations. The Company's citrus operations, which are reported as discontinued citrus operations, involve a single-crop agricultural commodity and are seasonal in nature. To a lesser extent, real estate operations including forestry and golf activities are seasonal in nature. Accordingly, results for the three months ended March 31, 1999 and 1998 are not necessarily indicative of results to be expected for the full year. Results of operations for the twelve months ended March 31,1999 and 1998 are summarized as follows (in thousands): Twelve Months Ended March 31, ------------------------------------------------ 1999 1998 ------------------------------------------------ Revenues Income Revenues Income -------- ------------ -------- ----------- Real Estate Operations $ 6,299 $ 1,221 $ 5,940 $2,393 General Corporate & Other 763 (1,705) 9,147 3,258 ------ ----- ------ ----- Total Revenues $ 7,062 $15,087 ====== ====== Income (Loss) From Continuing Operations Before Income Taxes ( 484) 5,651 Income Taxes 207 (2,018) ----- ----- Net Income (Loss) From Continuing Operations ( 277) 3,633 Income From Discontinued Citrus Operations, Net of Tax 2,007 582 ------ ------ Net Income $1,730 $4,215 ====== ====== 4. Common Stock and Earnings Per Common Share. Basic earnings per common share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share are determined based on assumption of the conversion of stock options at the beginning of each period using the treasury stock method at average cost for the periods. 7

Three Months Ended --------------------------- March 31 March 31 1999 1998 --------- -------- Income Available to Common Shareholders: Loss from Continuing Operations $( 394,223) $( 16,726) Income from Discontinued Citrus Operations 1,250,597 446,877 --------- -------- Net Income 856,374 430,151 ========= ======== Weighted Average Shares Outstanding 6,371,833 6,371,833 Common Shares Applicable to Stock Options Using the Treasury Stock Method 7,150 26,759 --------- --------- Total Shares Applicable to Diluted Earnings Per Share $6,378,983 $6,398,592 ========= ========= Basic and Diluted Earnings Per Share: Loss from Continuing Operations ($0.06) $0.00 Income from Discontinued Citrus Operations $0.19 $0.07 --------- --------- Net Income $0.13 $0.07 ========= ========= 8

5. Notes Payable. Notes payable consist of the following: March 31, 1999 ------------------------------------ Due Within Total One Year ------------------------------------ $ 7,000,000 Line of Credit $ 959,000 $ 959,000 Mortgage Notes Payable 10,040,386 221,689 Industrial Revenue Bond 512,954 63,289 ----------- -------- $11,512,340 $1,243,978 ========== ========= Payments applicable to reduction of principal amounts will be required as follows: Year Ending March 31, --------------------- 2000 $ 1,243,978 2001 409,249 2002 453,634 2003 8,065,999 2004 123,854 Thereafter 1,215,626 ---------- $11,512,340 ========== In the first three months of 1999 interest totaled $232,587 of which none was capitalized to land held for development and sale. Total interest for the three months ended March 31, 1998 was $291,816 of which $161,947 was capitalized to land held for development and sale. 9

MANAGEMENT'S DISCUSSION AND ANALYSIS The Management's Discussion and Analysis is designed to be read in conjunction with the financial statements and Management's Discussion and Analysis in the last annual report. RESULTS OF OPERATIONS Real Estate Operations Profits from real estate operations fell 67% for the first three months of 1999 when compared to the prior year. This decline can primarily be attributed to a 72% reduction in profits from forestry operations combined with a 37% decrease in profits generated from golf operations. The lack of harvestable timber due to the fires experienced last summer, coupled with depressed pricing resulted in a 65% reduction in forestry revenues to $97,000 as profits fell to $73,000. The 12% rise in golf revenues, generated on a 9% increase in rounds played, was not enough to offset the additional maintenance expense associated with the second golf course, which opened in the fourth quarter 1998. Income from golf operations totaled $175,000 during 1999's first quarter. Commercial real estate sold for both periods totaled 5 acres with gross profits realized of $86,000 and $60,000 for the first quarter of 1999 and 1998, respectively. General, Corporate and Other The release of surface entry rights on one acre generated $3,500 during 1999's first quarter. This compares unfavorably to the $96,415 realized on the release of surface entry rights on 2,332 acres during 1998's first three month period. Interest and other income declined 23% to $197,000 as interest earned on investment securities was reduced on lower investable funds. General and administrative expenses rose 18% as there was no capitalization of interest or other overhead costs to the LPGA International development and golf course during the first quarter of 1999. In the prior year when the golf course was under construction certain general and administrative expenses were capitalized. This increase is offset to some extent by a reduction in expense associated with stock options, as the price of the Company's stock remained relatively constant during the period. Discontinued Citrus Operations During the first three months of 1999 citrus operations posted profits of $2,005,000 before tax, representing a 180% rise when compared to 1998's first period profits totaling $716,000. Revenues increased 13% during the period, despite a 24% reduction in fruit harvested and sold. A total of 422,000 boxes were sold for the first quarter of 1999 compared to 555,000 boxes of fruit sold for 1998's same period. Average fruit pricing jumped 48%, primarily 10

on the strength of fresh fruit pricing. The rise in pricing was achieved due to significantly lower state crop for the 1998-1999 season, along with the impact of the freeze experienced in California during late 1998. Production and selling expenses dropped 18% on the lower fruit volume. 11

FINANCIAL POSITION Net income for the first quarter of 1999 totaled $856,374, equivalent to $.13 per share and represents a 99% increase in profits over 1998's three month profit of $430,151, equivalent to $.07 per share. The favorable results in profits are attributable to a 180% rise from citrus profits before tax to $2,005,126, with real estate operations income dropping 67% to $144,898. Cash and cash equivalents increased $110,000 for the period after the payment of dividends totaling $2,230,000, equivalent to $.35 per share. Cash used to pay these dividends was generated from citrus operations, along with borrowings on the existing line-of-credit. Capital expenditures during the period totaled $165,000 and consisted of design of the clubhouse at the LPGA International development and forestry tree planting. Capital requirements for the remainder of 1999 approximate $5,000,000 and consist primarily of the design and construction of the clubhouse facility. These expenditures will be funded through existing cash and investments on hand. As previously reported, on April 7, 1999 the Company completed the sale of its citrus business, Lake Placid Groves. The sale at a price of $30,945,000, subject to post closing adjustments, was paid substantially in cash and resulted in an approximate gain of $8,000,000 after income taxes. This gain will be recognized in the second quarter of 1999. The cash proceeds generated on the sale will be used to fund capital expenditures with excess funds to be invested in high quality investment securities. Site work on the clubhouse facilities has commenced. Construction will take place in two phases. The first phase consists of a parking area and cart barn. Construction on this phase is underway. The second phase, which consists of the clubhouse building and amenities, is in the latter stages of the design phase and is anticipated to be under construction during the third quarter of 1999, with completion by year end. Completion of these facilities will be a significant addition to the community and is anticipated to substantially enhance the sales efforts. Sales activity on commercial properties is relatively strong. Contracts are in place on several parcels of land which will generate significant cash and earnings later in the year if successfully closed. Additionally, negotiations are taking place on several other properties. The Company has evaluated and identified the risks of software and hardware failure due to processing errors arising from the year 2000 date. The risk of these software and hardware failures is not judged to have a material affect on the Company's business, results of operations, or financial position. The Company has a plan 12

in place for conversion and is in the midst of carrying-out this plan. The plan, the cost of which is not material in relation to the Company's financial position, will be completed well before year end. With the sale of its citrus operations, the Company is now solely in the real estate business. Management is now focusing its entire efforts on adding value to Company lands by originating development plans and establishing development rights, while recognizing this increased value through sales to site specific developers. 13

PART II -- OTHER INFORMATION Item 1. Legal Proceedings There are no material pending legal proceedings to which the Company or its subsidiaries is a party. Item 2 through 3 Not Applicable Item 4. Submission of matters to a vote of security holders. The annual meeting of Shareholders was held April 15, 1999 and the following votes were received for each of the three nominees for Class II directors: Number of Number of Number of Votes Votes Nominee votes for Withheld Abstaining Robert F. Lloyd 6,139,942 1,882 17,200 William H. McMunn 6,139,142 2,682 17,200 Bruce W. Teeters 6,138,842 2,982 17,200 Item 5. Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11 - Incorporated by Reference on Page 8 of this 10-Q report. Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K A Form 8-K under Item 5 "Other Events", dated March 5, 1999 was filed. The report dealt with the removal of contingencies and the moving forward towards closing on the sale of the citrus business. A Form 8-K under Item 2 "Acquisition or Disposition of Assets", dated April 22, 1999 was filed. The report dealt with the closing of the sale of the citrus business, including pro forma financial statements. 14

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONSOLIDATED-TOMOKA LAND CO. (Registrant) Date: May 5, 1999 By:/s/ Bob D. Allen ---------------------------- Bob D. Allen, President and Chief Executive Officer Date: May 5, 1999 By:/s/ Bruce W. Teeters ---------------------------- Bruce W. Teeters, Senior Vice President - Finance and Treasurer 15

5 The schedule contains summary financial information extracted from Consolidated-Tomoka Land Co.'s March 31, 1999 10-Q and is qualified in its entirety by reference to such financial statements.

3-MOS DEC-31-1999 MAR-31-1999 393,824 1,173,333 9,387,812 0 13,528,871 0 8,359,859 913,959 49,964,289 0 0 0 0 6,371,833 26,952,677 49,964,289 1,290,526 1,487,536 328,034 1,142,128 757,619 0 232,587 (644,798) 250,575 (394,223) 1,250,597 0 0 856,374 .13 .13