SEC Filing - CTO Realty Growth

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) ___ OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___ Commission file number 0-5556 CONSOLIDATED-TOMOKA LAND CO. (Exact name of registrant as specified in its charter) Florida 59-0483700 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 149 South Ridgewood Avenue 32114 Daytona Beach, Florida (Zip Code) (Address of principal executive offices) (904) 255-7558 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date Outstanding Class of Common Stock November 1, 1999 _____________________ _________________ $1.00 par value 6,376,484 1

CONSOLIDATED-TOMOKA LAND CO. INDEX Page No. ________ PART I - - FINANCIAL INFORMATION Consolidated Condensed Balance Sheets - September 30, 1999 and December 31, 1998 3 Consolidated Condensed Statements of Income and Retained Earnings - Three Months and Nine Months Ended September 30, 1999 and 1998 4 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 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) September 30, December 31, 1999 1998 ------------ ------------ ASSETS Cash and Cash Equivalents $ 1,878,429 $ 283,200 Investment Securities 26,990,565 1,191,390 Notes Receivable 12,597,108 9,115,868 Real Estate Held For Development and Sale 11,611,839 13,597,967 Deferred Income Taxes 1,826,761 1,826,761 Refundable Income Taxes -- 285,199 Net Investment in Direct Financing Lease 475,277 542,123 Other Assets 1,379,723 1,111,871 Net Assets of Discontinued Citrus Operations -- 14,792,453 Property, Plant, and Equipment - Net 7,896,289 7,354,619 ---------- ---------- TOTAL ASSETS $64,655,991 $50,101,451 ========== ========== LIABILITIES Accounts Payable $ 42,889 $ 292,646 Notes Payable 10,361,855 10,742,063 Accrued Liabilities 5,816,061 4,368,464 Income Taxes Payable 2,488,025 -- ---------- ---------- TOTAL LIABILITIES 18,708,830 15,403,173 ---------- ---------- SHAREHOLDERS' EQUITY Common Stock 6,376,484 6,371,833 Additional Paid-in Capital 3,788,426 3,793,066 Retained Earnings 35,782,251 24,533,379 ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 45,947,161 34,698,278 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $64,655,991 $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) (Unaudited) Three Months Ended Nine Months Ended -------------------------- -------------------------- September 30, September 30, September 30, September 30, 1999 1998 1999 1998 ------------ ------------ ------------ ------------ INCOME: Real Estate Operations: Sales and Other Income $ 6,381,248 $ 1,515,308 $13,660,410 $ 4,425,028 Costs and Other Expenses ( 4,517,593) ( 792,639) ( 7,327,201) (3,075,964) ---------- ---------- ---------- ---------- 1,863,655 722,669 6,333,209 1,349,064 ---------- ---------- ---------- ---------- Profit On Sales of Undeveloped Real Estate Interests 67,476 10,385 2,099,314 124,723 ---------- ---------- ---------- ---------- Interest and Other Income 574,373 242,622 1,178,484 578,553 ---------- ---------- ---------- ---------- 2,505,504 975,676 9,611,007 2,052,340 GENERAL AND ADMINISTRATIVE EXPENSES ( 868,726) ( 596,427) ( 2,737,415) ( 2,022,766) ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 1,636,778 379,249 6,873,592 29,574 INCOME TAXES ( 491,463) ( 144,196) ( 2,463,705) ( 136) ---------- ---------- ---------- ---------- NET INCOME FROM CONTINUING OPERATIONS 1,145,315 235,053 4,409,887 29,438 INCOME (LOSS) FROM DISCONTINUED CITRUS OPERATIONS, NET OF TAX ( 41,130) ( 307,738) 9,069,127 549,026 ---------- ---------- ---------- ---------- NET INCOME (LOSS) 1,104,185 ( 72,685) 13,479,014 578,464 RETAINED EARNINGS, Beginning of Period 34,678,066 26,110,555 24,533,379 27,689,548 DIVIDENDS ( 2,230,142) ( 2,230,142) ( 4,460,284) ---------- ---------- ---------- ---------- RETAINED EARNINGS, End of Period $35,782,251 $23,807,728 $35,782,251 $23,807,728 ========== ========== ========== ========== PER SHARE INFORMATION: Basic and Diluted Income From Continuing Operations $ .19 $ .03 $.70 $ -- Income (Loss) From Discontinued Citrus Operations $(.01) $(.04) $1.42 $.09 --------- --------- --------- --------- Net Income (Loss) $ .18 $(.01) $2.12 $.09 ========== ========== ========== ========== DIVIDENDS PER SHARE -- $ .35 $.35 $.70 ========== ========== ========== ========== See Accompanying Notes to Consolidated Condensed Financial Statements. 4

CONSOLIDATED-TOMOKA LAND CO. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended ---------------------------- September 30, September 30, 1999 1998 ------------- ------------- CASH FLOW FROM OPERATING ACTIVITIES: Net Income $13,479,014 $ 578,464 Adjustments to Reconcile Net Income to Net Cash (Used In) Provided by Operating Activities: Discontinued Citrus Operations ( 9,069,127) ( 549,026) Depreciation and Amortization 178,944 108,842 Gain on Sale of Property, Plant and Equipment ( 9,947) 136,524 (Increase) Decrease in Assets: Notes Receivable ( 3,481,240) ( 86,486) Real Estate Held for Development 1,986,128 ( 461,694) Other Assets ( 267,852) ( 393,486) (Decrease) Increase in Liabilities: Accounts Payable ( 249,757) ( 265,787) Accrued Liabilities 1,447,597 1,594,214 Income Taxes Payable and Refundable 2,773,224 (2,844,822) ---------- --------- Net Cash Provided By (Used In) Operating Activities 6,786,984 (2,183,257) ---------- --------- CASH FLOW FROM INVESTING ACTIVITIES: Acquisitions of Property, Plant and Equipment ( 731,539) (4,536,801) Net Increase in Investment Securities (25,799,175) ( 159,031) Direct Financing Lease 66,846 61,724 Proceeds from Sale of Property, Plant and Equipment 20,883 2,282,868 Cash from Discontinued Citrus Operations 23,861,580 698,712 ---------- --------- Net Cash Used In Investing Activities ( 2,581,405) (1,652,528) ---------- --------- CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from Notes Payable 2,469,000 2,257,000 Payments on Notes Payable (2,849,208) (3,210,741) Dividends Paid (2,230,142) (4,460,284) --------- --------- Net Cash Used in Financing Activities (2,610,350) (5,414,025) --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,595,229 (9,249,810) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 283,200 9,385,327 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,878,429 $ 135,517 ========== ========== See Accompanying Notes to Consolidated Condensed Financial Statements. 5

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. Principles of Interim Statements. The following unaudited consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures which are normally included in annual financial statements pre- pared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. The consolidated condensed financial statements reflect all adjustments which are, in the opinion of the manage- ment, necessary to present fairly the Company's financial position and the results of operations for the interim periods. The consolidated condensed format is designed to be read in conjunction with the last annual report. For further information refer to the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 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. A gain of $7,692,970, net of income taxes, was recognized on the transaction, with an additional $1,376,157 earned from operating activities, net of income taxes. 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. There were no remaining assets or liabilities of the operations as of September 30, 1999. Remaining assets and liabilities associated with the citrus operations as of 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: 6

Three Months Ended Nine Months Ended ---------------------- ------------------- September 30, September 30, September 30, September 30, 1999 1998 1999 1998 --------- --------- ---------- --------- Revenues from Discontinued Citrus Operations $ -- $ 3,729 $5,393,171 $7,551,787 ========= ========== ========== ========== Income (Loss) from Discontinued Citrus Operations Before Tax ( 493,407) 2,206,440 880,272 Income Tax Expense from Discontinued Citrus Operations 185,669 ( 830,283) ( 331,246) Gain on Sale of Citrus Operations (Net of Income Tax of ($226,835) and $4,439,418) (41,130) -- 7,692,970 --------- --------- --------- ---------- Net income from Discontinued Citrus Operations $ (41,130) $ (307,738) $9,069,127 $ 549,026 ========== ========= ========= ========== 3. 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 the assumption of the conversion of stock options at the beginning of each period using the treasury stock method at average cost for the periods. 7

Three Months Ended Nine Months Ended ------------------------ -------------------- Sept. 30, Sept. 30, Sept. 30, Sept.30, 1999 1998 1999 1998 ----------- ----------- ---------- --------- Income Available to Common Shareholders Income from Continuing Operations 1,145,315 235,053 4,409,887 29,438 Income (Loss) from Discontinued Citrus Operations Net of Tax (41,130) (307,738) 9,069,127 549,026 --------- ------- --------- -------- Net Income (Loss) 1,104,185 ( 72,685) 13,479,014 578,464 ========= ======= ========== ======== Weighted Average Shares Outstanding 6,372,600 6,371,833 6,374,108 6,371,833 Common Shares Applicable to Stock Options Using the Treasury Stock Method 8,579 7,662 7,098 16,003 --------- --------- --------- -------- Total Shares Applicable to Diluted Earnings Per Share 6,381,179 6,379,495 6,381,206 6,387,836 ========= ========= ========= ========= Basic and Diluted Earnings Per Share: Income from Continuing Operations $0.19 $0.03 $0.70 -- Income (Loss) from Discontinued Citrus Operations ($0.01) ($0.04) $1.42 $0.09 -------- ------- -------- -------- Net Income (Loss) $0.18 ($0.01) $2.12 $0.09 ======== ======= ======== ======== 8

4. The Company accounts for Investment Securities under Statement of financial Accounting Standards No. 115, "Accounting for Certain Investment in Debt and Equity Securities.: This standard requires classification of the investment portfolio into three categories: held to maturity, trading and available for sale. All investment securities as of September 30, 1999 and December 31, 1998 are classified as held to maturity. The increase in investment securities during the nine month period was due to the proceeds received on the sale of the citrus operations. 5. Notes Payable. Notes payable consist of the following: September 30, 1999 ----------------------------- Due Within Total One Year ---------- ----------- Consolidated-Tomoka Land Co. ---------------------------- $ 7,000,000 Line of Credit $ $ Mortgages Notes Payable 9,894,207 312,155 Industrial Revenue Bonds 467,648 96,264 ---------- ---------- $10,361,855 $ 408,419 ========== ========== Payments applicable to reduction of principal amounts will be required as follows: Year Ending September 30, 2000 $ 408,419 2001 444,749 2002 8,154,359 2003 122,219 2004 32,109 Thereafter 1,200,000 ---------- $10,361,855 ========== In the first nine months of 1999 interest totaled $680,715 of which $30,508 was capitalized. Total interest for the nine months ended September 30, 1998 was $822,442, of which $563,244 was capitalized to land held for development and sale. 9

MANAGEMENT'S DISCUSSION AND ANALYSIS The Managements'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 totaling $1,863,655 for the third quarter of 1999, represent a 158% gain over prior year's same period earnings of $722,669. Increased sales of commercial acreage provided this improvement, with the sale of 205 acres producing gross profits of $2,080,000 during 1999's third period. Gross profits approximating $670,000 were realized on the sale of 44 acres during 1998's same period. Profits from forestry activities fell 97% to breakeven as depressed pricing limited harvesting activities. During 1998's third quarter, profits from forestry operations totaled $227,259 on revenues of $251,857. Revenues from golf operations rose 55% with the addition of the second golf course, but bottom line results were in line with prior year as additional maintenance costs offset the revenue gain. A loss of $138,770 was posted in 1999's third quarter compared to a $136,242 loss one year earlier. For the first nine months of 1999 real estate operations income jumped 369% to $6,333,209 when compared to 1998's nine month income totaling $1,349,064. Commercial land sales again provided this gain, with gross profits of $6,850,000 generated on the sale of 351 acres of property. The sale of 58 acres of property during 1998's first nine months contributed gross profits of $950,000. Forestry operations had a negative impact on 1999 results year-to-date, as the depressed prices limited harvesting activities resulting in an 81% drop in revenue and a corresponding 88% decrease in profits to $72,836. This compares to the $613,359 profit earned in the nine month period of 1998. Profits from golf operations also reflected a downturn, despite a 24% increase in revenue. The additional revenue provided by the second golf course was more than offset by depreciation and the cost of maintaining the course, resulting in a 194% decline in profits. A loss of $129,738 was recorded for the period in 1999 compared to a profit of $137,376 in 1998. General, Corporate and Other The release of subsurface interests on 2,684 acres produced profits of $67,476 during 1999's third period compared to the 10

$10,385 realized on the release of 416 acres in 1998's same period. The sale of 100 acres of land combined with the subsurface interests releases on 3,279 acres for the nine months of 1999 produced profits on sales of undeveloped real estate interests totaling $2,099,314. For the first nine months of 1998 $124,723 was earned on the release of subsurface interests on 3,427 acres. Interest and other income climbed 137% and 104% for the third quarter and first nine months of 1999, respectively, when compared to prior year. These improvements were achieved primarily on increased investment interest earned on the proceeds received from the sale of the citrus operations. General and administrative expenses were substantially higher for both periods compared with last year. The increases, 46% for the three month period and 35% year to date, can be attributed to lower interest and overhead costs capitalized to development projects during the periods. Substantial amounts of interest were capitalized to the construction of the golf course and the LPGA development for the 1998 periods. Discontinued Citrus Operations During the second quarter of 1999 the Company consummated the sale of its citrus operations. An after tax gain of $7,692,970 was posted on the transaction, with post closing adjustments resulting in an after tax loss of $41,130 during the third quarter. Operating activities through the sale date resulted in after tax income of $1,376,157 during 1999. During the third quarter of 1998 an after tax loss of $307,738 was recorded, which was typical for this out of season period when fruit harvesting is minimal. For the first nine months of 1999 profits of $549,026 were earned after tax. 11

FINANCIAL POSITION For the first nine months of 1999 the Company had earnings of $13,479,014, equivalent to $2.12 per share, including $9,069,127 from discontinued citrus operations. This represents a significant gain from the $578,464 profit, equivalent to $.09 per share, earned in 1998's first nine months. The closing of several commercial real estate transactions propelled earnings from continuing operations to $4,409,887, equivalent to $.70 per share, a substantial increase over the breakeven results from continuing operations achieved in the prior year. Cash and cash equivalents, along with investment securities increased in excess of $27,300,000 during the nine month period. These funds were generated from discontinued citrus operations, $23,800,000, including the proceeds from the sale of the business, along with $6,800,000 from operating activities. Uses of cash included the $2,230,000 payment of dividends and $730,000 spent on the acquisition of property, plant and equipment, primarily the cart barn and clubhouse facilities at the LPGA mixed-use development. The funds generated during the period have been invested in high quality short-term investments. It is anticipated these funds will be used to fund the stock repurchase program which was approved by the Board of Directors at their July 21, 1999 meeting. The Board also decided to eliminate the semi-annual dividend payment normally declared at the meeting in order to make an equivalent amount of funds available to the stock repurchase program. The Company is authorized to repurchase up to 25 percent of the then outstanding 6,371,833 shares of common stock on the open market at prevailing prices or in privately negotiated transactions. The program was put in place in anticipation of the September 24, 1999 distribution by Baker, Fentress and Company of 5,000,000 shares of Company stock, representing in excess of 78% of outstanding shares. During the third period the Company sold 180 acres and 44 developed residential lots within the LPGA mixed-use development to Renar Development Company ("Renar"). In addition Renar has been granted two options to purchase additional phases with closings on these options anticipated in three and five years, respectively. This transaction makes Renar the residential and commercial developer of the community, while the Company maintains its position as master developer of the project. Renar has committed to a substantial marketing and promotion effort to accelerate sales activity. The construction of the first phase of the golf clubhouse facilities, which consists primarily of the cart barn, is near completion. The remainder of the project, consisting of a 20,000 square foot facility including pro shop, locker rooms, informal dining and banquet rooms, tennis courts and swimming pool is 12

currently scheduled to commence construction upon contractor selection. It is anticipated the cost of the completed facility will approximate $5,000,000, of which approximately $1,000,000 has been expended through September 30, 1999. The Company projects near-term profitability as real estate contract backlog continues to expand. In addition to contracts scheduled to close in the remainder of 1999, additional contracts are in place or negotiation for closing in future years. Overall the local real estate market has not been significantly impacted by higher interest rates and other economic concerns, as interest in Company owned property is strong. 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 effect on the Company's business, results of operations, or financial position. The Company's plan for conversion, of which the cost was not material, has been completed. 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. Items 2 through 5. Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit (11) - Incorporated by Reference on Page 7 of this 10-Q report Exhibit (27) - Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K A form 8-K under Item 5 "Other Events" dated July 23, 1999 was filed. It dealt with the the Board of Directors approval of a stock repurchase program. 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: November 9, 1999 By: /s/ Bob D. Allen -------------------- Bob D. Allen,President and Chief Executive Officer Date: November 9, 1999 By: /s/ Bruce W. Teeters -------------------- Bruce W. Teeters Sr. Vice President - Finance and Treasurer 15

5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED-TOMOKA LAND CO.'S SEPTEMBER 30, 1999 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

9-MOS DEC-31-1999 SEP-30-1999 1,878,429 26,990,565 12,597,108 0 11,611,839 0 8,826,004 929,715 64,655,991 0 0 0 0 6,376,484 39,570,677 64,655,991 15,759,724 16,938,208 6,339,971 7,327,201 2,056,700 0 680,715 6,873,592 2,463,705 4,409,887 9,069,127 0 0 13,479,014 2.12 2.12