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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 1999
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
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)
Registrant's telephone Number, including area code
(904) 255-7558
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF
THE SECURITIES EXCHANGE ACT OF 1934:
Name of each exchange on
Title of each class which registered
COMMON STOCK, $1 PAR VALUE AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT:
NONE
(Title of Class)
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. X
___
The aggregate market value of the voting stock held by non-affiliates of
the Registrant at February 23,2000 was approximately $72,384,213.
The number of shares of the Registrant's Common Stock outstanding on
February 23,2000 was 6,226,599.
Portions of the Proxy Statement of Registrant dated March 15, 2000 are
incorporated by reference in Part III of this report.
"Safe Harbor" Statement under the Private Securities Reform Act of 1995
Certain statements contained in this report (other than the
financial statements and statements of historical fact), are
forward-looking statements. 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, 2000
and thereafter include many factors that are beyond the Company's
ability to control or estimate precisely. These risks and
uncertainties include, but are not limited to, the market
demand and acceptance of the Company's existing and new products;
the impact of competitive products; changes in the pricing of the
Company or its competitors; the costs and other effects of complying
with environmental and other regulatory requirements; losses
due to natural disasters and changes in national, regional or
local economic and political conditions, such as inflation,
deflation, or fluctuations in interest rates.
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.
TABLE OF CONTENTS
PART I
Item 1. BUSINESS..............................................1
Item 2. PROPERTIES............................................5
Item 3. LEGAL PROCEEDINGS.....................................6
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...6
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...................................7
Item 6. SELECTED FINANCIAL DATA...............................8
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................9
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK..................................................12
Item 8. FINANCIAL STATEMENTS AND SUPPPLEMENTARY DATA..........12
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES..................12
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT....13
Item 11. EXECUTIVE COMPENSATION................................13
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................13
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........13
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K..............................................14
PART I
Item 1. Business
_______ ________
The Company is primarily engaged through its wholly owned
subsidiaries, Indigo Group Inc.,Indigo Development Inc.,
Indigo International Inc. and Indigo Group Ltd., in the real
estate industry. Real estate operations include commercial real
estate, real estate development, residential and golf
operations, property leasing, leasing properties for
oil and mineral exploration and the sale of forest products.
These operations are predominantly located in Volusia and
Highlands Counties in Florida.
On December 28, 1998, the Company entered into an agreement for
the sale of its citrus operations. The transaction closed
on April 7, 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 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:
Year Ended December 31
----------------------
1999 1998 1997
----------- --------- ---------
Revenues from Discontinued
Citrus Operations $ 5,393,171 $11,726,251 $ 9,444,783
========== ========== ==========
Income from Discontinued Citrus
Operations Before Tax $ 2,206,440 $ 1,930,247 $ 1,092,217
Income Tax Expense from Discontinued
Citrus Operations ( 830,283)( 726,352) ( 411,001)
Gain on Sale of Citrus Operations
Net of Income Tax of $4,721,536 8,047,576 -- --
---------- --------- ----------
Net Income from Discontinued
Citrus Operations $ 9,423,733 $ 1,203,895 $ 681,216
========= ======== =========
Due to the sale of the citrus operations, the Company's
continuing operations include only one segment. Thus
segmental disclosures are not applicable.
1
Item 1. Business (continued)
------ --------
REAL ESTATE OPERATIONS
----------------------
Commercial Development. In August of 1989, the Company reached
an agreement in principle with the Ladies Professional Golf
Association ("LPGA") and the City of Daytona Beach, which calls
for the planning and development of the site for the national
headquarters of the LPGA along with two championship golf
courses. The mixed-use development, located immediately
west of Interstate 95 in Daytona Beach, Florida and known
as LPGA International, will also include a clubhouse, resort
facilities, and residential communities along with other
commercial uses. This development is on approximately
3,300 acres owned by the Company's real estate development
subsidiary, Indigo Development Inc. ("IDI"), the City of
Daytona Beach, other developers, and individual homesite
owners. The LPGA International development is part of a 4,500-acre
tract located both west and east of Interstate 95 which
received Development of Regional Impact (DRI) approval in 1993.
The LPGA has successfully relocated its headquarters to
Daytona Beach and occupies its newly constructed
facilities within the development. The official opening of the
first LPGA International golf course occurred in July 1994 with
the second course opening in October 1998. In early 1996,
the Interstate 95 interchange at LPGA Boulevard, which
is the north and main entrance to the project, was opened
for use. 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 Companys. The agreement with the City of
Daytona Beach provides for the 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 first phase of the clubhouse,
which consists primarily of the cart barn, was completed in 1999.
Construction of the final phase of the clubhouse, consisting of
a 20,000 square-foot facility including a pro shop, locker rooms,
informal dining and banquet rooms, tennis courts and swimming pool,
has commenced and is anticipated to be completed by year-end 2000.
During 1999 the Company sold 180 acres plus 44 developed lots to Renar
Development Company ("Renar"). As part of this transaction, Renar has
become the residential and commercial developer of the community, while
the Company maintains its position as master developer of the project.
Indigo Commercial Realty, a commercial real estate brokerage
company formed in 1981, is the Company's agent in the marketing
and management of commercial properties. In addition to the LPGA
development, approximately 50 acres of fully developed sites
located in the Daytona Beach area and owned by Indigo Group Inc.
were available for sale at December 31, 1999. All development
and improvement costs have been completed at these sites.
Residential. Until December 1993, the Company, through Indigo
Group Ltd. ("IG LTD"),operated in residential development, building
and sales. At the end of 1993 IG LTD closed down the development
and building functions. IG LTD continues to sell its remaining
lot inventory in the following communities:
Riverwood Plantation, a 180-acre community in Port Orange, Florida,
with 52 lots remaining at December 31, 1999.
Indigo Lakes, a 200-acre development located in Daytona Beach,
Florida, with 3 lots remaining at December 31, 1999.
Tomoka Heights, a 180-acre development adjacent to Lake Henry in
Highlands County, Florida. There are approximately 120 developable
lots remaining to be sold including 33 fully developed lots.
The sales and construction operations were assumed by third
parties as of January 1994.
IG LTD also has an inventory of 24 fully developed, non-contiguous
lots in Palm Coast at December 31, 1999, which the Company continues
to sell.
2
Item 1. Business (continued
------ --------
Income Properties. Rental property is limited to a 17,000 square-foot,
three-story office building in downtown Daytona Beach. The building
is under a lease/purchase agreement, and is considered a financing lease.
Other leasing activities of the Company include ground leases for
billboards, lease of a communication tower site, and a hunting
lease covering approximately 8,300 acres.
Over the past several years the Company has successfully implemented
a strategy of disposing of its income properties. During 1998 the
Company sold its 50% interest in a 70,000 square-foot shopping
center located in Marion County, Florida. At the end of 1997,
the Company sold the office building located in Daytona Beach,
known as Consolidated Center. The Company continues to use a
portion of the building as its headquarters, as terms of the sale
included a commitment to lease 6,000 square feet for a period of at
least three years. Also in 1997, the 24,000 square-foot office
building at Palm Coast, Florida was sold. During 1996, the
Company sold the 24,000 square-foot office building in Daytona Beach,
which had been leased to the LPGA as the principal tenant, along
with the 70,000 square-foot Mariner Village shopping center located
in Spring Hill, Florida. Mariner Towne Square, an adjacent 18,000
square-foot shopping center, was sold during 1995.
Forest product sales. The timber lands encompass approximately
13,000 acres west of Daytona Beach. Geographic location of the
timber 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
purposes is good. Income from sales of forest products varies
considerably from year-to-year depending on economic conditions
and rainfall, which sometimes limits access to portions of
the woodlands. In addition, drought conditions sharply increase
the potential of forest fires, as occurred during the summer
of 1998. The wildfires which ravaged central Florida burned
approximately 9,000 acres of the Company's timberland. This
and the sale of the approximately 11,000-acre parcel to St.
Johns River Water Management District in 1997 will reduce
the Company's potential for future income from sales of forest
products; although, sales should more than cover expenses
associated with the forestry operation. These expenses
consist primarily of real estate taxes, with additional
expenses including the costs of installing and maintaining
roads and drainage systems, reforestation, and wild fire
suppression.
Subsurface Interests. The Company owns full or fractional subsurface
oil, gas, and mineral interests in approximately 533,000 "surface"
acres of land owned by others in various parts of Florida, equivalent
to approximately 293,000 acres in terms of full interest. The
Company leases its interests to mineral exploration firms whenever
possible.
At December 31, 1999, mineral leases were in effect covering a total
of 17,325 surface acres. Although the leases are for three- to five-year
terms, they are terminable annually by the lessees; and the lessees
have no obligation to conduct drilling operations. 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, on which the Company receives royalties.
The purchasers of 82,543 surface acres in which the Company has a
one-half reserved mineral interest are entitled to releases of
the Company's rights if such releases are required for residential
or business development. Consideration for such releases on 72,137
of those acres would be at the rate of $2.50 per surface acre.
On other acres in Lee and Hendry Counties (where producing oil
wells exist), the Company's current policy is to grant no release
rights with respect to its reserved mineral rights. In rare instances,
a release of surface entry rights might be granted upon request of a
surface owner who requires such a release for special financing or
development purposes. In counties other than Lee and Hendry, releases are
granted for a percentage of the surface value of a parcel of land.
At December 31, 1999 there were three producing oil wells on the
Company's interests. Volume in 1999 was 141,973 barrels and volume in
1998 was 138,664 barrels. Production for prior recent years
was: 1997 - 125,356, 1996 - 131,231, and 1995 - 117,831
barrels.
3
Item 1. Business (continued)
Real Estate Held and Land Transactions. More than 90% of the
Company's lands have been owned by the Company or its affiliates
for more than fifty years. To date, the Company has not been in
the business of acquiring and holding real estate for sale.
Instead, portions of the Company's lands are put to what
management believes is their best economic use. Unsolicited sales
are made of parcels which do not appear to offer opportunities for
use in the foreseeable future.
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.
CITRUS
------
The Company, under the name Lake Placid Groves, owned
and operated approximately 3,900 acres of orange and grapefruit
groves located primarily on two large parcels in Highlands County,
Florida. On April 7, 1999, the Company's citrus business,
Lake Placid Groves, was sold. The Company harvested and sold both
fresh and to-be-processed citrus from its groves. In connection
with the groves, the Company owned and operated an efficient fresh
fruit citrus packing plant, in which the portion of the crop which
was sold as fresh fruit was packed. Fresh fruit sales were
made by the Company to wholesale produce distributors and retail grocery
chains primarily in the Eastern and Midwestern regions of the United
States and Canada. In an effort to achieve optimum utilization of
the packing facility, the Company also handled the fruit of other
growers in the area.
That portion of the Company's citrus crop which was not sold
as fresh fruit was processed by Citrus World Incorporated
("Citrus World"), an agricultural cooperative, under a participating
marketing pool agreement. Citrus World, one of the larger
processors of citrus products in the United States, pools its
own fruit with the fruit received from the Company and other
citrus growers, processes the pooled fruit, and sells the
products produced therefrom. Each participant in the pool,
including Citrus World, shares ratably in the proceeds from
the sales of these products, net of Citrus World's actual
processing and marketing costs, plus a per-unit handling fee.
Citrus World makes periodic payments to all participants
on their pro rata share of net sales proceeds and makes
final payment after all the products in the pool have
been sold. During the years 1999, 1998, and 1997, the Company's
sales under the above pooling agreement amounted to
$1,217,604, $4,321,531, and $3,107,919, respectively.
Employees
---------
The Company has approximately 17 employees and
considers its employee relations to be satisfactory.
4
Item 2. Properties
------- ----------
Land holdings of Consolidated-Tomoka Land Co. (the "Company") and its
affiliates, all of which are located in Florida, include: approximately
15,000 acres (including commercial/retail sites) in the Daytona
Beach area of Volusia County; approximately 140 acres in
Highlands County, near Lake Placid; and full or fractional
subsurface oil, gas, and mineral interests in approximately
533,000 "surface acres" in 20 Florida counties.
Approximately 8,300 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 11,700 acres within
the city limits of Daytona Beach, approximately 3,200 acres within
the unincorporated area of Volusia County, and small acreages in
the Cities of Ormond Beach and Port Orange. Of the 11,700 acres
inside the city limits of Daytona Beach, approximately 3,300 acres
have received development approval by governmental agencies. The
3,300 acres plus approximately 730 acres owned by the City of
Daytona Beach, 15 acres owned by Indigo Community Development
District, and 410 acres sold to others for development are the
site of a long-term, mixed-use development which includes
"LPGA International," which is made up of the national
headquarters of the Ladies Professional Golf Association
along with two "Signature" golf courses and a residential community,
a maintenance facility, an interim clubhouse, and main entrance roads
to serve the LPGA community. Construction of homes around
the first golf course, on 70 acres of land sold to a residential
developer, began in 1995 with the first residences completed
in early 1996. In 1999 an additional 180 acres and 44
developed lots in LPGA International were sold to Renar
Development Company ("Renar"). Renar has become the new residential
and commercial developer at the LPGA International mixed-use development,
while the Company continues as master developer. The lands
not currently being developed, including those on which development
approvals have been received, are involved in an active forestry
operation. Except for a 15-acre parcel at the Interstate 95 and Taylor
Road interchange in the Port Orange area south of Daytona Beach, the
tract straddles Interstate 95 for 6- 1/2 miles between International
Speedway Boulevard (U. S. Highway 92) and State Road 40,
with approximately 13,500 acres west and 1,500 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 residential,
commercial, or industrial purposes.
In Highlands County, located in south central Florida along U.S. Highway
27, the Company sold its citrus operation of approximately 3,900
acres in 1999. The remaining Highlands County lands, located near Lake
Placid, Florida, which is about 75 miles east of Sarasota and 150 miles
northwest of Miami,total approximately 140 acres. These are primarily
in a subsidiary's inventory of residential or industrial lands.
The Company's oil, gas, and mineral interests, which are equivalent to
full rights of 293,000 acres, were acquired by retaining subsurface
rights when acreage was sold many years ago.
From October 1990 until December 1993, IG LTD centered its operations on
residential community development, construction, and sales. In December
of 1993, IG LTD discontinued its home building and sales activities
in two communities under lot marketing and sales arrangements.
Residential lots owned by IG LTD at December 31, 1999 are:
o 52 lots in Riverwood Plantation, a community of 180 acres
in Port Orange, Florida.
o 3 lots at the 200-acre Indigo Lakes development in Daytona
Beach, Florida
o 33 lots at the 180-acre Tomoka Heights development in
Highlands County, Florida. IG LTD is developing this
community, located adjacent to Lake Henry, and consisting
of single-family and duplex units.
5
Item 2. Properties (continued)
------- ----------
After the sale of the Consolidated Center and the Palm Coast office
buildings in 1997 and the 1998 sale of the Company's 50% interest in the
shopping center in Marion County, Florida, rental property is limited
to a three-story office building in downtown Daytona Beach, adjacent
to the Consolidated Center. The office building, containing 17,000 square
feet, is under a lease/purchase agreement, and is considered a
financing lease. Terms of the sale of the Consolidated Center included
a commitment by the Company to lease the space now occupied as corporate
offices in the building for a period of at least three years from
December 15, 1997. The Company has an option to extend the lease.
Other leasing activities of the Company include ground leases
for billboards, leases of communication tower sites, and a hunting
lease covering approximately 8,300 acres.
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, 1999.
6
PART II
Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters
------ ----------------------------------------------------
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 over the
five years ended December 31, 1999.
1995 $.45 1998 $.70
1996 $.55 1999 $.35
1997 $.65
Indicated below are high and low sales prices for the quarters of
the last two fiscal years. All quotations represent actual transactions.
1999 1998
--------------- ----------------
High Low High Low
----- ----- ----- -----
$ $ $ $
First Quarter 16-3/8 13-1/4 21-5/8 17
Second Quarter 16 12-7/8 19-5/8 17-1/8
Third Quarter 17-1/4 12-5/8 17-5/8 11-1/2
Fourth Quarter 13-13/16 11-11/16 14-3/4 11-7/8
Approximate number of shareholders of record as of December 31, 1999
(without regard to shares held in nominee or street name): 1,950
There have been no sales of unregistered securities.
7
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"
included in this report.
Five-Year Financial Highlights
(In thousands except per share amounts)
1999 1998 1997* 1996* 1995*
$ $ $ $ $
Revenues:
Real Estate 17,130 6,388 5,412 7,642 7,743
Profit on Sales of
Undeveloped Real Estate 2,115 132 7,725 385 4,718
Interest and Other Income 1,854 785 1,369 6,123 2,404
------------------------------------------
TOTAL 21,099 7,305 14,506 14,150 14,865
------------------------------------------
Operating Costs and Expenses 8,600 4,867 3,408 4,170 4,854
General and Administrative
Expenses 2,879 2,319 5,932 3,386 3,484
Income Taxes 3,261 19 1,836 2,493 2,499
Income from Continuing Operations 6,359 100 3,330 4,101 4,028
Income from Discontinued
Operations (net of tax) 9,424 1,204 681 2,502 392
------------------------------------------
Net Income 15,783 1,304 4,011 6,603 4,420
==========================================
Basic Earnings per Share:
Income from Continuing
Operations 1.00 0.01 0.53 0.65 0.64
Net Income 2.48 0.20 0.64 1.05 0.71
Diluted Earning Per Share:
Income from Continuing
Operations 1.00 0.01 0.53 0.65 0.63
Net Income 2.48 0.20 0.64 1.04 0.70
Dividends Paid Per Share 0.35 0.70 0.65 0.55 0.45
Summary of Financial Position:
Total Assets 63,420 50,101 58,026 59,454 59,402
Shareholders' Equity 48,034 34,698 37,854 35,791 32,633
* Restated for Discontinued Operations - See Note 2 to Consolidated
Financial Statements.
8
Item 7. Management's Discussion and Analysis of Financial Condition
------- ------------------------------------------------------------
and Results of Operations.
--------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
1999 COMPARED TO 1998
Real Estate Operations
----------------------
Profits from real estate operations for the year ended
December 31, 1999 surged 461% when compared to the prior year.
Profits of $8,529,694 were realized in 1999 compared to $1,521,401
for the twelve months of 1998. These strong profits were generated
through commercial land sales, with sales of 443 acres
producing gross profits of $9,200,000 for the twelve-month
period of 1999. This compares to gross profits of $1,330,000 earned
on the sale of 90 acres during 1998. The transactions closed
during 1999 generated higher profit margins as pricing and profits
vary from property to property depending upon location and
intended use.
With a full year's operation of the second golf course, which
opened October 1998, golf revenues rose 11% to $2,700,000. This
increase was created on a 27% gain in rounds played. Depreciation
and maintenance costs associated with the new course caused a 30%
jump in golf expenses, resulting in an overall $436,000 downturn
in operating results when compared to prior year.
A 59% decrease in revenues generated from forestry activities
resulted in a 69% decline in forestry profits for the year to
$197,000. This downturn limited harvesting during the year
due to depressed pricing and accelerated salvage harvesting
in 1998 due to fire damages.
General, Corporate and Other
----------------------------
Profits on the sale of undeveloped real estate interests
totaled $2,115,768 during 1999, representing a substantial increase
over the $132,033 profit realized for the year in 1998. The profits
for 1999 were generated on the sale of 100 acres of property in
addition to the release of subsurface interests on 3,918 acres.
Profits on sale of undeveloped real estate interests produced during
1998 were realized on the release of subsurface interests on 2,229
acres.
Interest and other income earned during the twelve months of
1999 amounted to $1,853,808 representing a 136% increase over
prior year's interest and other income totaling $784,471. This
higher income was generated primarily on higher investment
interest earned on the proceeds received from the sale of the citrus
operations.
A 24% increase in general and administrative expenses was reported
for 1999 when compared to prior year. This increase can be
attributed to lower interest and overhead costs capitalized
to development projects during the period. Substantial amounts of
interest were capitalized to the construction of the golf course and
LPGA International development during 1998.
Discontinued Citrus Operations
------------------------------
During the second quarter of 1999, the Company consummated the sale of
its citrus operations. An after-tax gain of $8,047,576 was realized
on the transaction. Operating activities through the sale date
resulted in income after tax of $1,376,157 during 1999.
For the calendar year 1998, after tax profits of $1,203,895 were
generated. The increase in operating profits, despite the short
period, were generated on substantially higher pricing, in
particular fresh fruit pricing. The rise in pricing was achieved
due to a significantly lower state crop for the 1998-1999 season,
along with the impact of the freeze experienced in California in
late 1998.
9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Continued
-------------------------------------------------
Management's Discussion and Analysis
Results of Operations
1998 Compared to 1997
Real Estate Operations
----------------------
Profits from real estate operations declined 24%, to $1,521,401,
for the calendar year 1998 when compared to 1997. The decrease in
profits, from $2,003,678 one year earlier, is primarily attributable
to lower gross profits recognized on the sale of commercial property.
During 1998, 90 acres of property were sold providing gross profits
approximating $1,330,000. This compares to prior year gross profits
amounting to $1,745,000 generated on the sale of 63 acres of
commercial property. The 1997 sales consisted of higher profit margin
transactions as pricing and profit margins vary from property to
property based on location and intended use.
Golf operations contributed an additional $158,000 in profits during
1998, while revenues increased 300% to $2,454,000. These increases
are due to a full year of operating the north "Champions" course
coupled with the opening of the new south "Legends" course in October
of 1998. The Company took over the operation of the "Champions"
course in September 1997.
The wildfires which struck Volusia County during the summer of 1998
had a negative impact on income generated from forestry operations.
Profits fell 16% for the year, to $626,000, on a 16% reduction in
revenues. The fall in revenue is attributed to lower prices due to
the oversupply of timber harvested immediately after the fires and a
slowdown in harvesting during the fourth quarter of the year.
Profit from income properties increased $80,000 over 1997 break-even
results, while leasing revenues fell 72% due to the sale of properties
during 1997 and 1998. The sale of the 24,000 square-foot Palm Coast
office building occurred in May 1997, while the sale of the 70,000
square-foot shopping center located in Marion County took place in
June 1998.
General, Corporate and Other
----------------------------
The release of surface entry rights on 2,229 acres produced profits on
sale of undeveloped real estate interests totaling $132,033 during
1998. This represents a significant downturn in profits from 1997
when the sale of approximately 11,000 acres of the Company's western
most Volusia County lands along with releases on surface entry rights
on 48 acres during 1997 generated profits of $7,725,007.
Interest and other income decreased 43% to $784,471 in 1998, compared
to 1997's interest and other income totaling $1,369,086. This fall is
due to a $330,000 reduction in interest on mortgage notes receivable,
a $80,000 loss posted on the sale of the shopping center in Marion
County, and a $250,000 gain realized on the May 1997 sale of the Palm
Coast office building. These reductions are offset by an increase in
interest earned on investment securities of $124,000.
A 61% decrease in general and administrative expenses is primarily the
result of the 1997 exercise of stock options along with an increase
in expense from stock appreciation rights, due to the rise in the
Company's stock price at the time of exercise.
10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Continued
-------------------------------------------------
Discontinued Citrus Operations
------------------------------
For the twelve months of 1998, profits from citrus operations before
income tax rose 77% to $1,930,247. Revenues of $11,726,251 were
posted during 1998, compared to revenues of $9,444,783 one year
earlier. This 24% increase in revenues is directly the result of a
24% rise in fruit harvested and sold. During 1998 fruit volume
totaled 1,289,000 boxes compared to 1,042,000 boxes produced during
1997. Average fruit pricing showed a 2% increase over prior year's
prices. The rise in pricing was achieved in the fourth quarter due to
the significantly lower state crop forecast for the 1998-1999 season.
Production and selling expenses increased 17% on the higher fruit
volume, although economies of scale were achieved as fixed and semi-
variable costs were absorbed over the greater number of boxes of
fruit.
FINANCIAL POSITION
Overall profits generated by the Company during 1999 totaled
$15,782,692, equivalent to $2.48 per share, and representing a
dramatic increase over the $1,304,114, equivalent to $.20 per
share, posted for the year in 1998. Profits from continuing
operations for 1999 totaling $6,358,959, equivalent to $1.00 per
share, also represent a substantial increase over prior year
results when income from continuing operations of $100,219,
equivalent to $.01 per share, was reported. The favorable results
from continuing operations are attributed to the strong
commercial real estate closing activity for the year.
Cash and investment securities increased $31,700,000 during 1999.
The primary sources of this increase were $17,700,000 net of
income taxes generated from the discontinued citrus operations,
including proceeds from sale of the citrus business, and $11,600,000
from operating activities. Offsetting these increases were $2,200,000
of dividends paid and $1,300,000 in capital expenditures.
Capital expenditures during the year related principally to
the construction of the cart barn and clubhouse at LPGA International.
During 2000 capital expenditures are projected to approximate $5,000,000.
These expenditures consist primarily of the completion of the
clubhouse facilities, estimated to cost $3,600,000, and construction
of an Interstate 95 frontage road, with a projected cost of
$825,000. Available cash and short-term investments are also
anticipated to be used during the coming year to buy back Company
stock. As approved by the Board of Directors at their
July 21, 1999 meeting, 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 due to
the September 24, 1999 distribution by Baker, Fentress and Company
of 5,000,000 shares of Company stock. Through December 31, 1999,
17,200 shares had been purchased. Current cash and short-term
investment positions are anticipated to be sufficient to meet
the preceding funding requirements.
The Company has not experienced any significant system problems
arising from the year 2000 date. Systems conversions were completed
prior to year end at a cost which was not material. The Company
has evaluated and identified additional risks going forward. These
risks are not judged to have a material effect on the Company's
business, results of operations or financial position.
Construction and development activity within the LPGA
International project is ongoing. During the fourth quarter of 1999,
the construction of the cart barn was completed. The construction of
the clubhouse and related amenities, which consists of a 20,000
square-foot facility including a pro shop, locker rooms, informal
dining and banquet rooms, tennis courts and swimming pool, has
commenced, with completion anticipated by year end 2000.
Renar Development Company, which became the residential and
commercial developer of the community with its mid-year 1999 purchase
of 180 acres and 44 lots, continues its permitting, development
and marketing activities. New model villages are anticipated to
be in place by the fall of 2000, with a comprehensive marketing
campaign already underway. These activities should help to
revitalize the LPGA International project. The Company has
identified potential hotel groups to develop a "four-star" resort
within the project and is working with these groups along with the
City of Daytona Beach to finance the project.
11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Continued
-------------------------------------------------
As real estate operating results for 1999 indicate, the local real
estate market has been relatively strong. The Company goes into
2000 with a significant contract backlog for closing in the coming
year and future years, with negotiations for additional sales a
continual process. Given these circumstances in addition to the fact
that many of the Company's land holdings are located within the path
of development, the Company is well-positioned for continued
near-term profits.
The sale of the citrus operations, along with the distribution of
Company stock by Baker, Fentress & Company, has caused management to
re-examine its business strategies. The Company plans to continue to
add value to its core Daytona Beach land holdings through
development activities. In addition, management will seek
opportunities to diversify its land development activities
and build a portfolio of income properties. The company will
pursue investments in land and developed property located in
major metropolitan markets in Florida, emphasizing the
Jacksonville, Orlando and Tampa markets. While this strategic
re-examination is a continuing process, the objective is to become
a company with a more predictable earnings pattern from
geographically dispersed Florida real estate holdings.
Item 7A Quantitative and Qualitative Disclosures about Market Risk
------- ---------------------------------------------------------
Not Applicable.
Item 8. Financial Statements and Supplementary Data
--------------------------------------------------------
The Company's Consolidated Financial Statements appear
beginning on page F-1 of this report. See Item
14 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.
12
PART III
The information required by Items 10, 11, 12, and 13 is
incorporated herein by reference to the registrant's 2000 annual
meeting proxy statement pursuant to Instruction G to Form 10-K.
On March 15, 2000, the registrant anticipates filing with the
Commission, pursuant to Regulation 14A under the Securities Exchange
Act of 1934, its definitive proxy statement to be used in connection
with its 2000 annual meeting of shareholders at which directors will
be elected for the ensuing year.
Executive Officers of the Registrant
------------------------------------
The executive officers of the registrant, their ages at January 31,
2000, their business experience during the past five years, and the year
first elected as an executive officer of the Company are as follows:
Bob D. Allen, 65, chairman of the board since April 1998 and chief
executive officer since March 1990; president from March 1990 to
January 2000.
William H. McMunn, 53, president and chief operating officer
since January 2000; president, Indigo Development Inc., a subsidiary
of the Company, since December 1990.
Bruce W. Teeters, 54, senior vice president-finance and treasurer,
since January 1988.
All of the above are elected annually as provided in the By-Laws.
13
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
------- ---------------------------------------------------------------
1. Financial Statements
--------------------
The following financial statements are filed as part of this
report:
Page No.
--------------
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of December 31,
1999 and 1998 F-3
Consolidated Statements of Income for the
three years ended December 31, 1999 F-4
Consolidated Statements of Shareholders' Equity
for the three years ended December 31, 1999 F-5
Consolidated Statements of Cash Flows for the three
years ended December 31, 1999 F-6
Notes to Consolidated Financial Statements F-8
2. Financial Statement Schedules
-----------------------------
Included in Part IV of Form 10-K:
Schedule III - Real Estate and Accumulated
Depreciation on page 18 of Form 10-K
Schedule IV - Mortgage Loans on Real Estate
on page 19 of Form 10-K
Other Schedules are omitted because of the absence of
conditions under which they are required, materially
or because the required information is given in the financial
statements or notes thereof.
3. Exhibits
See Index to Exhibits on page 17 of this
Annual Report on Form 10-K.
Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the last
quarter of the fiscal year ended December 31, 1999.
14
SIGNATURES
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)
3/14/00 By: /s/ Bob D. Allen
------------------------
Bob D. Allen, Chairman of the
Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
3/14/00 Chairman of the Board and
Chief Executive Officer
(Principal Executive
Officer) and Director /s/ Bob D. Allen
------------------
3/14/00 Senior Vice President-Finance,
Treasurer (Principal Financial
and Accounting Officer), and
Director /s/ Bruce W. Teeters
--------------------
3/14/00 Director /s/ David D. Peterson
---------------------
3/14/00 Director /s/ John C. Adams, Jr.
----------------------
3/14/00 Director /s/ Robert F. Lloyd
----------------------
15
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 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, 1999
Commission File No. 0-5556
CONSOLIDATED-TOMOKA LAND CO.
(Exact name of registrant as specified in the charter)
16
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) 1998-1999 Citrus World Marketing Agreement dated
September 1, 1998 between Citrus World, Inc. and
Consolidated-Tomoka Land Co. filed on Form 10-K
for the year ended December 31, 1998 and incorporated by
this reference *
(10.2) 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. *
(10.3) 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. *
(10.4) The Consolidated-Tomoka Land Co. Stock Option Plan
effective April 26, 1990 filed with the registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1990 and incorporated by this reference. *
(10.5) 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. *
(10.6) 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. *
(10.7) Purchase and Sale Agreement dated December 28, 1998
between Alton D. Rogers and Wade H. Walker and
Consolidated-Tomoka Land Co. filed on Form 10-K for
the year ended December 31, 1998 and incorporated by
this reference *
(21) Subsidiaries of the Registrant 20
(23) Consent of Arthur Andersen LLP 21
* - Incorporated by Reference
17
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1999
COSTS CAPITALIZED
INITIAL COST TO COMPANY SUBSEQUENT TO ACQUISITION
------------------------- ------------------------------
DESCRIPTION ENCUMBRANCES LAND BUILDINGS &
- ----------- ----------- ---- IMPROVEMENTS IMPROVEMENTS CARRYING COSTS
------------ ------------ --------------
CITRUS FACILITY
AT:LAKE PLACID -0- -0- -0- -0- -0-
MISCELLANEOUS -0- 735,433 26,956 990,317 -0-
--------------------------------------------------------------------------
-0- 735,433 26,956 990,317 -0-
==========================================================================
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
DATE OF
--------------------------------- ACCUMULATED COMPLETION OF DATE DEF
LAND BUILDINGS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED LIFE
-------------------------------- ------------ -------------- --------- ------
LAKE PLACID -0- -0- -0- -0- VARIOUS N/A 5-30 Yrs.
MISCELLANEOUS 1,725,750 26,956 1,752,706 267,299 N/A VARIOUS 5-40 Yrs.
--------------------------------------------------
1,725,750 26,956 1,752,706 267,299
==================================================
1999 1998 1997
----------- ---------- ----------
COST:
BALANCE AT BEGINNING OF YEAR 14,365,140 17,693,377 25,544,117
IMPROVEMENTS 148,774 172,322 657,688
COST OF REAL ESTATE SOLD (12,761,208) (3,500,559) (8,508,428)
----------- ----------- -----------
BALANCE AT END OF YEAR 1,752,706 14,365,140 17,693,377
===============================================
ACCUMULATED DEPRECIATION:
BALANCE AT BEGINNING OF YEAR 3,452,758 4,113,403 6,566,029
DEPRECIATION AND AMORTIZATION 120,182 423,570 731,962
DEPRECIATION ON REAL ESTATE
SOLD (3,305,641) (1,084,215) (3,184,588)
------------------------------------------------------
BALANCE AT END OF YEAR 267,299 3,452,758 4,113,403
======================================================
18
SCHEDULE IV
CONSOLIDATED-TOMOKA LAND CO.
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1999
PRINCIPAL
FINAL FINAL PERIODIC AMOUNT OF
DESCRIPTION INTEREST MATURITY PAYMENT PRIOR FACE CARRYING LOANS
RATE DATE TERMS LIENS AMT. AMOUNT (A) DELINQUENT
- ----------- -------- -------- -------- ----- ----- ---------- -----------
MORTGAGE N/R
SECURED BY
REAL ESTATE:
Volusia Co. 9.25% 09/03 Level, plus Balloon of $224,737 -- 299,650 284,667 --
Volusia Co. 7.75% 12/01 Balloon of $531,325 -- 1,969,541 531,325 --
Volusia Co 8.50% 12/01 Level, plus Balloon of $1,004,020 -- 1,220,000 1,107,724 --
Volusia Co 7.25% 12/00 balloon of $612,845 -- 612,845 612,845 --
Volusia Co 8.75% 09/03 Level, plus Balloon of $227,238 -- 284,050 284,050 --
Volusia Co 7.75% 07/02 Balloon of $1,264,000 -- 1,372,000 1,264,000 --
Highlands Co. 6.00% 04/09 Leval, plus Balloon of $1,753,415 -- 2,550,000 2,550,000 --
Highlands Co. 05/02 Level 600,000 600,000 --
Other 6.25%-10% Various Balloon of $34,600 -- 34,600 34,600 --
-----------------------------------------
-- $ 8,942,686 $ 7,269,211 --
=========================================
(A) FOR FEDERAL INCOME TAX PURPOSES, THE AGGREGATE BASIS OF THE LISTED MORTGAGES WAS $7,269,212
(B) A RECONCILIATION OF THE CARRYING AMOUNT OF MORTGAGES FOR THE THREE YEARS ENDED DECEMBER 31, 1999, 1998
AND 1997 IS AS FOLLOWS:
1999 1998 1997
------- ------- --------
BALANCE AT BEGINNING OF YEAR $4,260,347 $ 5,146,017 $10,944,356
NEW MORTGAGE LOANS 5,438,494 628,343 12,900
COLLECTIONS OF PRINCIPAL ( 2,429,630) (1,514,013) ( 5,811,239)
------------------------------------
BALANCE AT END OF YEAR $ 7,269,211 $ 4,260,347 $ 5,146,017
====================================
19
EXHIBIT 21
Subsidiaries of the Registrant
Percentage of
Organized voting securities
under owned by
laws of immediate parent
--------- ------------------
Consolidated-Tomoka Land Co. Florida --
Placid Utilities Company Florida 100.0
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
*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 an additional 1.0% of the
partnership equity.
All subsidiaries are included in the Consolidated Financial Statements of the
Company and its subsidiaries appearing elsewhere herein.
20
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
TO: CONSOLIDATED-TOMOKA LAND CO.
As independent certified public accountants, we hereby consent
to the incorporation of our reports included or incorporated by
reference tin this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 (File 33-62679 (prior
registration number 33-50954)).
Arthur Andersen LLP
Tampa, Florida
March 14, 2000
21
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
TO CONSOLIDATED-TOMOKA LAND CO.:
We have audited in accourdance with generally accepted auditing standards, the
consolidated financial statements of Consolidated-Tomoka Land Co. included in
this Form 10-K, and have issued our report thereon dated January 26, 2000.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in item 14(a) 2
are the responisbility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied in the
audits of the basic consolidated financial statements and, in our opinion,
fairly state in all material respects the financial data, required to be set
forth therein in relation to the basic consolidtated financial statements
taken as a whole.
Arthur Andersen LLP
Orlando, Florida
January 26, 2000
22
CONSOLIDATED-TOMOKA LAND CO.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Income for the three years ended
December 31, 1999 F-4
Consolidated Statements of Shareholders' Equity for the
three years ended December 31, 1999 F-5
Consolidated Statements of Cash Flows for the three years
ended December 31, 1999 F-6
Notes to Consolidated Financial Statements F-8
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of
Consolidated-Tomoka Land Co.
We have audited the accompanying consolidated balance sheets
of Consolidated-Tomoka Land Co. and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. 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 Consolidated-Tomoka Land Co. and subsidiaries as of December 31,
1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999,
in conformity with generally accepted accounting principles.
Orlando, Florida Arthur Andersen LLP
January 26,2000
F-2
Consolidated Balance Sheets
December 31,
----------------------------
1999 1998
----------- -----------
Assets
Cash $16,458,208 $ 283,200
Investment Securities (Note 3) 16,689,438 1,191,390
Notes Receivable (Note 5) 7,365,754 9,115,868
Real Estate Held for Development and Sale (Note 6) 11,624,833 13,597,967
Deferred Income Taxes (Note 4) 1,239,853 1,826,761
Refundable Income Taxes (Note 4) -- 285,199
Other Assets 1,634,499 1,653,994
Net Assets of Discontinued Citrus
Operations(Note 2) -- 14,792,453
---------- ----------
55,012,585 42,746,832
---------- ----------
Property, Plant and Equipment
Land, Timber and Subsurface Interests 1,725,750 1,576,976
Buildings, Equipment and Land Improvements 7,690,042 6,632,686
---------- ----------
Total Property, Plant and Equipment 9,415,792 8,209,662
Less Accumulated Depreciation (1,007,987) ( 855,043)
---------- ----------
Net Property, Plant and Equipment 8,407,805 7,354,619
---------- ----------
Total Assets $63,420,390 $50,101,451
========== ==========
Liabilities
Accounts Payable $ 251,241 $ 292,646
Accrued Liabilities 4,232,820 4,368,464
Income Taxes Payable (Note 4) 631,528 --
Notes Payable (Note 7) 10,270,837 10,742,063
---------- ----------
Total Liabilities 15,386,426 15,403,173
---------- ----------
SHAREHOLDERS' EQUITY
Preferred Stock - 50,000 Shares Authorized,
$100 Par Value; None Issued - -
Common Stock - 10,000,000 Shares Authorized;
$1 Par Value; 6,359,284 and 6,371,833
Shares Issued and Outstanding at
December 31, 1999 and 1998, respectively 6,359,284 6,371,833
Additional Paid-In Capital 3,588,751 3,793,066
Retained Earnings 38,085,929 24,533,379
---------- ----------
Total Shareholders' Equity 48,033,964 34,698,278
---------- ----------
Total Liabilities and Shareholders' Equity $63,420,390 $50,101,451
========== ==========
The accompanying notes are an integral part of these consolidated statements.
F-3
Consolidated Statements of Income
Calendar Year
-----------------------------------------
1999 1998 1997
------------ ---------- ---------
Income
Real Estate Operations:
Sales and Other Income $17,129,879 $ 6,388,289 $ 5,411,787
Costs and Other Expenses ( 8,600,185) ( 4,866,888) ( 3,408,109)
---------- ---------- ----------
8,529,694 1,521,401 2,003,678
---------- ---------- ----------
Profit On Sales of Undeveloped
Real Estate Interests 2,115,768 132,033 7,725,007
---------- ---------- ----------
Interest and Other Income 1,853,808 784,471 1,369,086
---------- ---------- ----------
12,499,270 2,437,905 11,097,771
General and Administrative Expenses ( 2,879,365) ( 2,318,730) ( 5,932,023)
---------- ---------- ----------
Income From Continuing Operations Before
Income Taxes 9,619,905 119,175 5,165,748
Income Taxes (Note 4) ( 3,260,946) ( 18,956) ( 1,835,597)
---------- ---------- ----------
Net Income From Continuing Operations 6,358,959 100,219 3,330,151
Income From Discontinued Citrus Operations,
Net of Tax (Note 2) 9,423,733 1,203,895 681,216
---------- ---------- ----------
Net Income $15,782,692 $ 1,304,114 $4,011,367
========== ========== ==========
Per Share Information:
Basic and Diluted
Income From Continuing Operations $ 1.00 $ 0.01 $ 0.53
Income From Discontinued Citrus Operations $ 1.48 $ 0.19 $ 0.11
---------- ---------- ----------
Net Income $ 2.48 $ 0.20 $ .64
========== ========== ==========
The accompanying notes are an integral part of these consolidated statements.
F-4
Consolidated Statements of Shareholders' Equity
Additional
Common Paid-In Retained
Stock Capital Earnings Total
---------- ----------- ---------- ----------
Balance, December 31, 1996 $6,261,272 $1,782,105 $27,748,008 $35,791,385
Net Income - - 4,011,367 4,011,367
Cash Dividends ($.65 per share) - - ( 4,069,827) ( 4,069,827)
Issuance of 110,561 Shares
Pursuant to Exercise of Stock
Options (Note 10) 110,561 1,717,437 1,827,998
Tax Benefit of Stock Options
Exercised (Note 10) 293,524 293,524
---------- --------- ---------- ---------
Balance, December 31, 1997 6,371,833 3,793,066 27,689,548 37,854,447
Net Income - - 1,304,114 1,304,114
Cash Dividends ($.70 per share) - - ( 4,460,283) ( 4,460,283)
---------- --------- ---------- ----------
Balance, December 31, 1998 6,371,833 3,793,066 24,533,379 34,698,278
Net Income -- -- 15,782,692 15,782,692
Cash Dividends ($.35 per share) -- -- ( 2,230,142) ( 2,230,142)
Issuance of 4,651 Shares
Pursuant to Exercise of Stock
Options (Note 10) 4,651 ( 4,640) - 11
Repurchase of 17,200 Shares ( 17,200) ( 199,675) ( 216,875)
--------- --------- ---------- ----------
Balance, December 31, 1999 $6,359,284 $3,588,751 $38,085,929 $48,033,964
========= ========= ========== ==========
The accompanying notes are an integral part of these consolidated statements.
F-5
Consolidated Statements of Cash Flows
Calendar Year
---------------------------------------
1999 1998 1997
----------- ---------- ----------
Cash Flow from Operating Activities
Net Income $15,782,692 $ 1,304,114 $ 4,011,367
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used In) Operating Activities:
Discontinued Citrus Operations ( 9,423,733) (1,203,895) $( 681,216)
Depreciation and Amortization 257,215 186,886 448,272
(Gain) Loss on Sale of Property, Plant
and Equipment ( 2,177) 114,973 ( 260,490)
Compensation Expense on Exercise of
Stock Options -- -- 1,822,992
Decrease (Increase) in Assets
Notes Receivable 1,750,114 902,482 4,751,931
Real Estate Held for Development and Sale 1,973,134 221,101 680,427
Deferred Income Taxes (Note 4) 586,908 ( 94,483) ( 806,774)
Other Assets 19,495 ( 33,626) ( 421,411)
(Decrease)Increase in Liabilities
Accounts Payable ( 41,405) ( 418,058) 248,156
Accrued Liabilities ( 135,644) 515,061 201,896
Income Taxes Payable and Refundable (Note 4) 916,727 (2,394,727) 1,209,058
---------- --------- ----------
Net Cash Provided by (Used In)
Operating Activities 11,683,326 ( 900,172) 11,204,208
---------- ---------- ----------
Cash Flow from Investing Activities
Acquisition of Property, Plant and Equipment ( 1,329,107) (4,818,717) ( 1,941,415)
Net (Increase) Decrease in Investment
Securities (Note 3) (15,498,048) ( 164,711) 369,736
Proceeds from Sale of Property, Plant and
Equipment 20,883 2,304,277 5,617,082
Cash From Discontinued Citrus Operations (Note 2) 24,216,186 1,692,939 889,914
---------- ---------- ----------
Net Cash Provided by (Used In)
Investing Activities 7,409,914 ( 986,212) 4,935,317
---------- ---------- ----------
Cash Flow from Financing Activities
Proceeds from Notes Payable (Note 7) 2,469,000 5,577,000 7,760,000
Payments on Notes Payable (Note 7) ( 2,940,226)( 8,332,460) (12,210,248)
Cash Proceeds from Exercise of Stock Options -- -- 5,006
Funds Used to Repurchase Common Stock ( 216,864) -- --
Dividends Paid ( 2,230,142)( 4,460,283) ( 4,069,827)
---------- ---------- ----------
Net Cash Used in Financing Activities ( 2,918,232)( 7,215,743) ( 8,515,069)
---------- ---------- ----------
Net Increase (Decrease) in Cash 16,175,008 (9,102,127) 7,624,456
Cash Beginning of Year 283,200 9,385,327 1,760,871
---------- ---------- ----------
Cash End of Year $16,458,208 $ 283,200 $ 9,385,327
========== ========== ==========
F-6
Supplemental Disclosure of Noncash Operating Activities:
In connection with the sale of real estate, the Company received, as consideration,
mortgage notes receivable of $2,268,895, $628,343, and $12,900 for the years
1999, 1998, and 1997, respectively.
In connection with the sale of the citrus operations, the Company received
as consideration, notes receivable of $3,150,000 for the year 1999.
In connection with the exercise of stock options, the Company recorded compensation
expense and income tax benefit of $1,822,992 and $293,524, respectively for the
year 1997.
Total interest paid was $901,988, $1,040,737 and $1,507,246 for the years
1999, 1998, and 1997, respectively.
Total income taxes paid were $8,870,891,$3,069,525 and $1,780,000 for the years
1999, 1998, and 1997, respectively.
The accompanying notes are an integral part of these consolidated statements.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998, and 1997
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts
of Consolidated-Tomoka Land Co. and its wholly owned
subsidiaries: Indigo Group Inc.,Indigo Group Ltd.,
Indigo International Inc., and Indigo Development 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 industry. Real estate operations, which are
primarily commercial in nature, also include residential,
golf operations, income properties and forestry operations.
These operations are predominantly located in Volusia
and Highlands Counties in Florida. From time to time,
the Company sells unimproved real estate considered surplus
to its operating needs. The latter function is not
considered part of the Company's ordinary operations.
See Note 2, "Discontinued Citrus Operations" regarding
citrus activities.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity
with 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.
Real Estate Held for Development and Sale
The carrying value of real estate held for development and
sale 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. Approximately $330,273 and $359,407 of
interest and $321,067 and $465,506 of property taxes
were capitalized during 1998 and 1997, respectively.
No interest or property taxes were capitalized to real
estate held for development and sale during 1999,
as there was no significant development during the period.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less
accumulated depreciation. 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 taken for the years 1999, 1998,
and 1997 was $257,215, $186,886, and $448,272, respectively.
The range of estimated useful lives for property, plant
and equipment is as follows:
Buildings 10-40 Years
Equipment 3-30 Years
Land Improvements 10-20 years
F-8
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-Lived Assets
The Company has reviewed the recoverability of long-lived
assets, including real estate held for development and sale
and certain identifiable intangibles,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, 1999.
Sale of Real Estate
The profit on sales of real estate is accounted
for in accordance with the provisions of the Statement
of Financial Accounting Standards No. 66,
(SFAS) "Accounting for Sales of Real Estate (SFAS 66)."
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 66. No income was
was deferred for the three years in the period ended
December 31, 1999.
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 his 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 short-term
investments. 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 nonqualified plans
as defined by the Internal Revenue Service. The amount
of deferred compensation reflected in accrued liabilities on
the balance sheet at December 31, 1999 and
1998 was $3,591,613 and $3,155,307, respectively.
Pensions
The Company has a funded, non-contributory defined
benefit pension plan covering all eligible full-time
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 9 "Pension Plan").
Concentration of Credit Risk
Financial instruments which potentially subject the Company
to concentrations of credit risk consist principally of cash
and cash equivalents, investment securities,
accounts receivables and notes receivable.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial assets
and liabilities, including cash and cash equivalents,
accounts receivable and accounts payable at
December 31, 1999 and 1998, 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,
1999 and 1998, since the notes are at floating rates or
fixed rates which approximate current market rates for
notes with similar risks and maturities.
F-9
NOTE 2 DISCONTINUED CITRUS OPERATIONS
On December 28, 1998, the Company entered into an agreement
for the sale of its citrus operations. The transaction
closed on April 7, 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
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:
Year Ended December 31,
----------------------
1999 1998 1997
---- ---- ----
Revenues from Discontinued
Citrus Operations $ 5,393,171 $11,726,251 $ 9,444,783
========== ========== ==========
Income from Discontinued Citrus
Operations Before Tax $ 2,206,440 $ 1,930,247 $ 1,092,217
Income Tax Expense from Discontinued
Citrus Operations ( 830,283) ( 726,352) ( 411,001)
Gain on Sale of Citrus Operations
(Net of Income Tax of $4,721,536) 8,047,576 -- --
--------- -------- ----------
Net Income from Discontinued
Citrus Operations $ 9,423,733 $ 1,203,895 $ 681,216
========= ========= =========
Following is a summary of significant accounting
policies related to the citrus operations.
Until the sale of the citrus operations in April 1999,
the Company harvested and sold both fresh and
to-be-processed citrus from its bearing groves, all of which
were located in Highlands County, Florida. Fresh fruit
sales were made by the Company through the Company owned
packing plant to wholesale produce distributors and
retail grocery chains primarily in the Eastern and
Midwestern regions of the United States and Canada. Revenues
and related costs of sales were recognized at time of
shipment. The to-be-processed fruit was sent to Citrus
World, Inc. (Citrus World), an agricultural cooperative
owned by the Company and twelve other growers. The
cooperative processes the fruit and markets it under
several names on a regional and national basis. Citrus
World pools its own fruit with the fruit purchased
fruit with the fruit purchased from the Company and other
citrus growers, processes the pooled fruit and sells
the products produced.
Each participant in the pool, including Citrus World,
shares ratably in the proceeds from the sale of products,
net of Citrus World's actual processing and marketing
marketing costs, plus a per-unit handling fee. Citrus
World makes periodic payments to all participants based on
their pro rata share of net sales proceeds and makes
final payment after all the products in the pool have
been sold. The Company recorded estimated revenues at the
time of delivery of the fruit to Citrus World and
finalized revenues after all the products in the pool had
been sold. During the years 1999, 1998, and 1997, the
Company's estimated pro rata share of net sales proceeds
under the above pooling agreement amounted to $1,217,604,
$4,321,531, and $3,107,919, respectively.
Direct and allocated indirect costs incurred in connection
with the production of crops were capitalized into cost of
fruit on trees. As the crop was harvested and sold, the
related costs were charged to production expense, pro-rata
based on the boxes harvested and sold to the estimated
total boxes expected to be harvested and sold.
The cost of fruit on trees was carried at the lower of cost
or market.
F-10
NOTE 3 INVESTMENT SECURITIES
The Company accounts for investment securities under
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and
Equity Securities (SFAS 115)." 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
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.
Available for sale investment securities are reported
reported at fair value, with unrealized gains and losses
reported as a separate component of comprehensive income.
As of December 31, 1999, there was no material
difference between the carrying value and market value.
Gains and losses are determined using the specific
indentification method. Investment securities
as of December 31, 1999 and 1998 are as follows:
1999 1998
---- ----
Investments Held to Maturity
----------------------------
Debt Securities Issued by States
and Political Subdivisions of States $13,399,247 $1,134,018
Mortgage-Backed Securities 30,236 57,372
---------- ----------
Total Investments Held to Maturity 13,429,483 1,191,390
---------- ---------
Investments Available for Sale
------------------------------
Preferred Stocks 3,259,955 --
---------- ----------
Total Investments Available for Sale 3,259,955 --
---------- ----------
Total Investment Securities $16,689,438 $1,191,390
========== =========
The contractual maturities of investment securities held to maturity
are as follows:
Maturity Date Amount
---------------- -----------
Within 1 year $12,012,016
1-5 Years 513,604
6-10 Years 126,760
After 10 Years 777,103
-----------
$13,429,483
===========
F-11
NOTE 4 INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, "Accounting
for Income Taxes."
The provision for income taxes is summarized as follows:
1999 1998 1997
---- ---- ----
Current Deferred Current Deferred Current Deferred
------- -------- ------- -------- ------- --------
Federal $2,258,051 $ 496,686 $ 134,271 $( 122,538) $2,354,615 $(803,103)
State 415,987 90,222 ( 20,832) 28,055 287,756 ( 3,671)
--------- -------- --------- --------- -------- -------
Total $2,674,038 $ 586,908 $ 113,439 $ ( 94,483) $2,642,371 $(806,774)
========= ======== ========= ========= ========= ========
Deferred income taxes have been provided to reflect
temporary differences that represent the cumulative
difference between taxable or deductible amounts recorded
in the financial statements and in the tax returns. The
sources of these differences and the related deferred
provision (credit) and deferred income tax assets
(liabilities) are summarized as follows:
Provision (Credit) Deferred Taxes
----------------------------- ------------------
1999 1998 1997 1999 1998
---- ---- ---- ---- ----
Depreciation $(123,690) $ 66,778 $ 117,562 $( 82,052) $( 205,742)
Sales of Real
Estate ( 1,379) (103,981) (1,278,181) 417,383 416,004
Deferred
Compensation (198,122) (179,984) ( 197,463) 1,385,464 1,187,342
Basis
Difference in
Joint Venture ( 25,288) 79,707 81,454 1,192,245 1,166,957
Revolving Fund
Certificates ( 58,231) ( 13,798) ( 58,112) 410,274 352,043
Charitable
Contributions
Carryforward 527,115 700,043 (1,961,789) 1,888,566 2,415,681
Other 413,625 ( 34,418) 115,093 ( 119,468) 294,157
Less-Valuation
Allowance 52,878 (608,830) 2,374,662 (3,852,559) (3,799,681)
--------- -------- --------- --------- ---------
$ 586,908 $ ( 94,483)$( 806,774) $1,239,853 $1,826,761
========= ======== ========= ========= ==========
Following is a reconciliation of the income tax computed at
the federal statutory rate of 35 percent for 1999 and 34 percent for
1998 and 1997.
Calendar Year
-------- ----
1999 1998 1997
---- ---- -----
Income Tax Computed at
Federal Statutory Rate $3,366,967 $ 40,520 $1,756,354
Increase (Decrease) Resulting
from:
State Income Tax, Net of
Federal Income Tax Benefit 342,035 4,768 187,497
Tax Exempt Interest Income ( 274,687) (150,461) ( 41,050)
Other Reconciling Items ( 173,369) 124,129 ( 67,204)
--------- --------- ---------
Provision for Income Taxes $3,260,946 $ 18,956 $1,835,597
========= ========= =========
F-12
NOTE 5 NOTES RECEIVABLE
Notes Receivable consisted of the following:
December 31,
-------------------------
1999 1998
----------- ----------
Mortgage Notes Receivable
Various notes with interest rates ranging
from 6% to 9.5% with payments due from 2000
through 2009. Collateralized by real
estate mortgages held by the Company $ 6,669,211 $ 4,260,347
Other Notes Receivable
Interest at 6.2%, total principal and
accrued interest paid in full during 1999 -- 4,740,497
Interest at prime rate, receivable in
monthly installments of principal and
interest to amortize the original note
over a period of 15 years, due January
2004 96,543 115,024
Payable in three annual installments
of $200,000 through May 2002 600,000 --
----------- ----------
Total Notes Receivable $ 7,365,754 $ 9,115,868
========== ==========
The prime rate of interest was 8.50% and 7.75% at
December 31, 1999 and 1998, respectively.
The required annual principal receipts are as follows:
Year ending December 31, Amount
-----------
2000 $ 1,018,270
2001 1,912,040
2002 1,595,621
2003 590,708
2004 89,882
2005 and Thereafter 2,159,233
----------
$ 7,365,754
==========
NOTE 6 REAL ESTATE HELD FOR DEVELOPMENT AND SALE
Real estate held for development and sale as of December 31, 1999 and
1998 is summarized as follows:
December 31
--------------------------
1999 1998
---------- ---------
Undeveloped Land $ 844,523 $ 961,674
Land and Land Development 10,683,285 12,539,268
Completed Houses 97,025 97,025
---------- ----------
$11,624,833 $13,597,967
========== ==========
F-13
NOTE 7 NOTES PAYABLE
Notes Payable consisted of the following:
December 31,
----------------------
1999 1998
---- ----
Mortgage Notes Payable
Mortgage notes payable are collateralized
by real estate mortgages held by the
lender. As of December 31, 1999 and 1998,
mortgage notes payable consisted of the
following:
Payments of $266,783, including interest
at 8.8% payable quarterly through
April 2002; principal balance due
July 2002 $ 8,618,697 $ 8,911,124
Interest payable quarterly at 10%,
principal and outstanding interest
due October 2005 1,200,000 1,200,000
Industrial Revenue Bonds
Industrial revenue bonds payable are
collateralized by real estate.
Interest at 80.65% of prime rate,
payable in monthly installments of
principal and interest to amortize
the original debt over a period
of 18 years, due January 2004 452,140 534,939
Line of Credit
A line of credit totaling $7,000,000
payable on demand, with interest at
the lower of prime rate minus .75% or
the LIBOR Market Index rate plus 1.5% -- 96,000
---------- ----------
$10,270,837 $10,742,063
========== ==========
The required annual principal payments on notes payable are as follows:
Year Ending December 31, Amount
------------------------ ----------
2000 $ 416,575
2001 453,634
2002 8,065,999
2003 123,854
2004 10,775
2005 and Thereafter 1,200,000
----------
$10,270,837
==========
Interest expense was $901,988, $1,070,737, $1,507,246 for 1999, 1998,
and 1997, respectively.
F-14
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 10 years
of employment. The benefit formula generally provides
for a life annuity benefit. During 1998 the Company
adopted SFAS No. 132 "Employer's Disclosures About Pension
and Other Post-Retirement Benefits."
Due to the sale of the citrus operations, the Company
recognized a curtailment and settlement gain during
1999. Consequently, income from discontinued citrus
operations includes a gain of $636,724, resulting
from the settlement and curtailment.
The Company's net periodic pension cost included the
following components:
December 31,
------------
1999 1998 1997
---- ---- ----
Service Cost $ 257,773 $251,669 $198,123
Interest Cost on Projected Benefit
Obligation 329,624 315,598 289,424
Actual Return on Plan Assets (197,462) (581,457) (759,642)
Net Amortization (268,759) 133,627 348,622
Accelerated Recognition of
Unrecognized net gain under FAS 88 (117,020) -- --
-------- ------- -------
Net Periodic Pension Cost $ 4,156 $119,437 $ 76,527
======= ======= =======
F-15
The change in benefit obligation is as follows:
1999 1998
---------- ---------
Benefit Obligation at Beginning of Year $4,784,088 $4,584,714
Service Cost 166,538 251,669
Interest Cost 290,367 315,598
Actuarial Loss (Gain) 10,219 ( 25,943)
Benefits Paid ( 545,320) ( 341,950)
Curtailment and Settlement ( 912,990) --
--------- ---------
Benefit Obligation at End of Year 3,792,902 4,784,088
========= =========
The change in plan assets is as follows:
Fair Value of Plan Assets at Beginning of
Year 5,101,905 4,862,398
Actual Return on Plan Assets 197,462 581,457
Curtailment and Settlement ( 304,176) --
Plan Expenses Paid ( 97,394) ( 86,934)
Benefits Paid ( 143,750) ( 255,016)
-------- ---------
Fair Value of Plan Assets at End of Year 4,754,047 5,101,905
========= =========
The accrued pension liability consists
of the following:
Plan Assets In Excess of
Projected Benefit Obligation 961,145 317,817
Unrecognized Prior Service Cost 4,112 5,029
Unrecognized Net Gain ( 546,478) ( 515,441)
Unrecognized Transition Asset ( 95,078) ( 116,272)
-------- ---------
Prepaid (Accrued) Pension Liability $ 323,701 $( 308,867)
======== =========
The actuarial assumptions made to determine the projected benefit
obligation and the fair value of plan assets are as follows:
December 31,
------------
1999 1998
----- ----
Weighted Average Discount Rate 7.0% 7.0%
Weighted Average Asset Rate of Return 9.0% 9.0%
Compensation Scale 5.0% 5.0%
NOTE 9 POSTRETIREMENT BENEFIT PLANS OTHER THAN
PENSIONS
The Company sponsors two defined benefit postretirement
plans of certain health care and life insurance benefits
for eligible retired employees. All full-time
employees become eligible to receive these benefits if
they retire after reaching age 55 with 20 or more
years of service. The postretirement 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
benefit to be paid to retirees as stipulated by the plan.
The Company pays for the plan as costs are incurred.
The Company recognizes postretirement expenses in
accordance with adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other
Than Pensions" (SFAS 106), which requires that expected
costs of postretirement 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 106 over a period of 20
years. The effect of this amortization expense recognized
in 1999, 1998, and 1997 was $70,160, $98,532,
and $102,639, respectively. The accrued
postretirement benefit cost reflected in the consolidated
consolidated balance sheet at December 31, 1999 and 1998
was $154,283 and $240,129, respectively.
F-16
NOTE 10 STOCK OPTION PLAN
The Company maintains a stock option plan (the Plan)
pursuant to which 530,000 shares of the Company's common
stock may be issued. Under the Plan the option exercise
price equals the stock's 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
The Plan provides for the grant of (1) incentive stock
options which satisfy the requirements of Internal Revenue
Code (IRC) Section 422, and (2) nonqualified 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 nonqualified 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 all or a portion of the spread
between the exercise price and the fair market
value of the underlying share at the time of exercise.
The Company accounts for the Plan under Accounting
Principles Board Opinion No. 25. Had compensation cost
for the Plan been determined consistent with
SFAS Statement No. 123,"Accounting for Stock
Based Compensation", the Company's net income and earnings
per share would not have been materially different than
reported.
On September 24, 1999, Baker, Fentress & Company
distributed its 79% ownership in the Company, resulting
in a change in control and thus vesting of all
outstanding options.
A summary of the status of the Company's stock option plan
for the three years ended December 31, 1999 and changes
during the years then ended is as follows:
1999 1998 1997
-------------- -------------- -------------
Shares Wtd Avg Shares Wtd Avg Shares Wtd Avg
Ex Price Ex Price Ex Price
------- ------- ------ ------- -------- -------
Outstanding at beginning
of year 196,800 $15.91 148,800 $15.36 327,300 $12.87
Granted 48,000 $14.75 48,000 $17.62 48,000 $16.87
Exercised ( 22,400) $13.17 -- (226,500) $12.09
Expired ( 2,400) $14.04 -- --
------ ------ -------
Outstanding at end of year 220,000 $15.95 196,800 $15.91 148,800 $15.36
======= ======= =======
Exercisable at end of year 220,000 $15.95 108,480 $15.07 71,680 $14.52
======= ======= =======
Weighted average fair value
options granted during
the year $4.63 $5.58 $5.13
======= ====== =======
Of the 226,500 options exercised in 1997, 115,939 options
were surrendered in payment of the cash exercise price
of the remaining options. The option exercise and
accrual of stock appreciation rights resulted in
compensation expense of $1,822,992 and
$1,409,109, respectively, included in general and
administrative expenses primarily during the fourth
quarter. Additionally, the exercise resulted in
in $1,216,240 of income tax benefit, of which $293,524
was recorded as an addition to additional paid-in capital.
Of the 220,000 options outstanding at December 31, 1999,
76,000 have exercise prices between $12.12 and $17.15
with a weighted average exercise price of $15.09 and a
weighted average contractual life of 5.2 years. The
remaining 144,000 options have exercise prices between
$14.75 and $17.62, with a weighted average exercise price
of $16.41 and a weighted average contractual life of
8 years. All options outstanding are exercisable.
F-17
NOTE 11 EARNINGS PER SHARE
Basic earnings per common share were computed by
dividing 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 cost for the
periods.
1999 1998 1997
------ ------ ------
Income Available to Common Shareholders:
Income from Continuing Operations $ 6,358,959 $ 100,219 $3,330,151
Income from Discontinued Citrus Operations 9,423,733 1,203,895 681,216
--------- --------- ---------
Net Income $15,782,692 $1,304,114 $4,011,367
========== ========= =========
Weighted Average Shares Outstanding 6,373,490 6,371,833 6,288,452
Common shares Applicable to Stock Options
Using the Treasury Stock Method 3,754 11,834 22,789
--------- --------- ---------
Total Shares Applicable to Diluted Earnings
Per Share 6,377,244 6,383,667 6,311,241
========= ========= =========
Basic and Diluted Earnings Per Share
Income from Continuing Operations $ 1.00 $ .01 $ .53
Income from Discontinued Citrus Operations $ 1.48 $ .19 $ .11
--------- --------- ---------
Net Income $ 2.48 $ .20 $ .64
========= ========= =========
NOTE 12 LEASE OBLIGATIONS
The Company leases 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, 1999, are summarized
as follows:
Year Ending December 31, Amounts
--------
2000 $ 183,860
2001 183,860
2002 164,279
2003 214,278
2004 100,000
2005 and Thereafter 6,550,000
---------
$7,396,277
=========
Rental expense under all operating leases amounted to
$242,300, $347,958,and $351,785 for the years ended
December 31, 1999, 1998 and 1997, respectively.
NOTE 13 RELATED PARTIES
Baker, Fentress & Company, a publicly owned, closed-end
investment company, owned approximately 79 percent
of the Company's outstanding common stock at
December 31, 1998. On September 24, 1999, Baker,
Fentress & Company distributed its ownership
distributed its ownership in the Company to its shareholders.
The Company owns non-voting stock, in the aggregate amount
of $1,063,575, in Citrus World. This non-voting
stock represents per unit retain contributions and are
considered to have no value for financial statement
purposes until redeemed. (See Note 2 "Discontinued
Citrus Operations").
F-18
QUARTERLY FINANCIAL DATA (Unaudited)
(In thousands except per share amounts)
THREE MONTHS ENDED
March 31, June 30, September 30, December 31,
--------------- --------------- ---------------- ---------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ----- ----
Income:
Real Estate Operations:
Sales and Other Income $1,287,026 $1,376,649 $5,992,136 $1,533,071 $6,381,248 $1,515,308 $ 3,469,469 $ 1,963,261
Costs and Other Expenses (1,142,128) ( 931,554) (1,667,480)(1,351,771)(4,517,593) ( 792,639) (1,272,984)( 1,790,924)
--------- ------- --------- --------- ---------- -------- --------- ---------
144,898 445,095 4,324,656 181,300 1,863,655 722,669 2,196,485 172,337
--------- ------- --------- -------- --------- -------- --------- ---------
Profit on Sales of
Undeveloped Real
Estate Interests 3,500 96,415 2,028,338 17,923 67,476 10,385 16,454 7,310
-------- ------- --------- ------- --------- ------- -------- ---------
Interest and Other
Income 197,010 257,473 407,101 78,458 574,373 242,622 675,324 205,918
-------- ------- --------- ------- --------- ------- ------- ---------
345,408 798,983 6,760,095 277,681 2,505,504 975,676 2,888,263 385,565
General and Administrative
Expenses ( 990,206) (840,550) ( 878,483) ( 585,789) ( 868,726) ( 596,427) ( 141,950) ( 295,964)
-------- ------- -------- ------- ------- -------- -------- ---------
Income From Continuing
Operations Before
Income Taxes ( 644,798) ( 41,567) 5,881,612 ( 308,108) 1,636,778 379,249 2,746,313 89,601
Income Taxes 250,575 24,841 (2,222,817) 119,220 ( 491,463) ( 144,197) ( 797,241) ( 18,820)
------- -------- --------- -------- -------- -------- -------- ---------
Net Income From Continuing
Operations ( 394,223) ( 16,726) 3,658,795 ( 188,888) 1,145,315 235,052 1,949,072 70,781
Income From Discontinued
Citrus Operations 1,250,597 446,877 7,859,660 409,886 ( 41,130) ( 307,737) 354,606 654,869
------- -------- --------- -------- --------- -------- -------- ---------
Net Income $ 856,374 $ 430,151 $11,518,455 $220,998 $1,104,185 $( 72,685) $2,303,678 $ 725,650
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Per Share Information:
Basic and Diluted
Income From Continuing
Operations ($0.06) ($0.00) $0.57 ($0.03) $ 0.19 $0.03 $0.30 $0.01
Income From Discontinued
Citrus Operations $0.19 $0.07 $1.24 $0.06 $(0.01) $(0.04) $0.06 $0.10
--------- ------- ------ ------ ------- ------- ----- -----
Net Income $0.13 $0.07 $1.81 $0.03 $ 0.18 $(0.01) $0.36 $0.11
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F-19