-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TgVovtw2bowU+g9DVKxT4gMJG+tPYyea92XeWj2MHk7mD8ULo3ZxdGpeY1YRhQJh MVoH9Wmx0W0L2MtI4f3bew== 0000023795-02-000006.txt : 20020415 0000023795-02-000006.hdr.sgml : 20020415 ACCESSION NUMBER: 0000023795-02-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED TOMOKA LAND CO CENTRAL INDEX KEY: 0000023795 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 590483700 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11350 FILM NUMBER: 02575747 BUSINESS ADDRESS: STREET 1: 149 S RIDGEWOOD AVE CITY: DAYTONA BEACH STATE: FL ZIP: 32114 BUSINESS PHONE: 9042557558 MAIL ADDRESS: STREET 1: PO BOX 10809 CITY: DAYTONA BEACH STATE: FL ZIP: 32120-0809 10-K 1 k01b.txt 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, 2001 ---- 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) (Zip Code) Registrant's Telephone Number, including area code (386) 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. ___ The aggregate market value of the voting stock held by non-affiliates of the Registrant at February 11, 2002 was approximately $112,367,736. The number of shares of the Registrant's Common Stock outstanding on February 11, 2002 was 5,615,579. Portions of the Proxy Statement of Registrant dated March 15, 2002 are incorporated by reference in Part III of this report. "Safe Harbor" STATEMENT UNDER THE 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. The words "believe," "estimate," "expect," "intend," "anticipate," "will," "could," "may," "should," "plan," "potential," "predict," "forecast," and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made. Forward-looking statements are made based upon management's expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with management's expectations or that the effect of future developments on the Company will be those anticipated by management. The Company wishes to caution readers that the assumptions which form the basis for forward-looking statements with respect to or that may impact earnings for the year ended December 31, 2002, 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 of the Company's real estate parcels, income properties, timber and other products; the impact of competitive real estate; changes in pricing by 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 fluctuation 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......................................7 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....7 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...................................................13 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ..........13 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES...................13 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.....14 Item 11. EXECUTIVE COMPENSATION.................................14 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............................................14 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........14 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K...............................................15 PART I Item 1. Business ------ -------- Consolidated-Tomoka Land Co. (the "Company") is primarily engaged in the real estate, income properties and golf businesses through its wholly owned subsidiaries, Indigo Group Inc.,Indigo Development Inc., Indigo International Inc., Indigo Group Ltd., and Palms Del Mar Inc. Real estate operations include commercial real estate, real estate development, residential, leasing properties for oil and mineral exploration, and forestry operations. Income properties primarily consist of leasing triple-net lease properties. Golf operations consist of the operation of two golf courses, clubhouse facility, and food and beverage activities. These operations are predominantly located in Volusia and Highlands Counties in Florida, with various income properties located throughout the State of 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. The following is information regarding the Company's business segments. The "General, Corporate and Other" category includes general and administrative expenses, income earned on investment securities, gains earned on the sale of operating properties and other miscellaneous income and expense items. 2001 2000 1999 -------------------------------- Revenues of each segment are as follows: Real Estate $ 3,352 $16,401 $14,243 Income Properties 1,831 248 165 Golf 4,065 3,212 2,722 General, Corporate and Other 2,102 3,365 3,969 -------------------------------- $11,350 $23,226 $21,099 ================================ Operating income before income tax for each segment is as follows: Real Estate $ 1,252 $12,396 $ 8,753 Income Properties 1,403 184 129 Golf (1,329) ( 764) ( 352) General, Corporate and Other (2,493) 0 1,090 ------------------------------- $(1,167) $11,816 $ 9,620 =============================== Identifiable assets of each segment are as follows: Real Estate $15,171 $20,606 $17,006 Income Properties 22,643 6,333 452 Golf 10,769 10,285 6,977 General, Corporate and Other 13,634 26,130 38,985 ------------------------------- $62,217 $63,354 $63,420 ===============================
1 ITEM 1. BUSINESS (CONTINUED) ------ ------------------- Identifiable assets by segment are those assets that are used in each segment. General corporate assets and those used in the Company's other operations consist primarily of cash, investment securities, notes receivable, and property, plant and equipment. 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 called 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 plan, located immediately west of Interstate 95 in Daytona Beach, Florida, and known as LPGA International, additionally provided for 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 facilities constructed in 1996, within the development. The official opening of the first LPGA International golf course, constructed by the City of Daytona Beach, occurred in July 1994 with the second course opening in October 1998, and the clubhouse opened for operation in January 2001. In early 1996, the Interstate 95 interchange at LPGA Boulevard, which is the north and main entrance to the project, was opened for use. During 1999, the Company sold 180 acres plus 44 developed lots to Renar Development Company ("Renar"). As part of this transaction, Renar became the residential and commercial developer of the community, while the Company maintained its position as master developer of the project. Indigo Commercial Realty Inc., a commercial real estate brokerage company formed in 1991, 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, 2001. 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, home 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 28 lots remaining at December 31, 2001. Tomoka Heights, a 180-acre development adjacent to Lake Henry in Highlands County, Florida. There are approximately 87 developable lots remaining to be sold including 44 fully developed lots. 2 ITEM 1. BUSINESS (CONTINUED) ------ ------------------- The remaining lots within Indigo Lakes, a 200-acre development located in Daytona Beach, were sold in 2000. IG LTD also had an inventory of fully developed non-contiguous lots in Palm Coast. The remaining lots were sold during 2000. FOREST PRODUCT SALES. The timber lands encompass approximately 13,000 acres west of Daytona Beach. We believe the 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 have reduced the Company's potential for future income from sales of forest products. Expenses associated with forestry operations consist primarily of real estate taxes, with additional expenses including the costs of installing and maintaining roads and drainage systems, reforestation, and wild fire suppression. SUBSURFACE INTERESTS. The Company owns full or fractional subsurface oil, gas, and mineral interests in approximately 530,000 "surface" acres of land owned by others in various parts of Florida, equivalent to approximately 292,400 acres in terms of full interest. The Company leases its interests to mineral exploration firms whenever possible. 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. Periodically, 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, 2001, there were two producing oil wells on the Company's interests. Volume in 2001 was 116,341 barrels and volume in 2000 was 133,280 barrels from three producing wells. Production for prior recent years was: 1999 - 141,973; 1998 - 138,664; and 1997 - 125,356. 3 ITEM 1. BUSINESS (CONTINUED) ------ ------------------- INCOME PROPERTIES ----------------- During 2000, the Company implemented a new business strategy. This strategy involves becoming a company, over time, with a more predictable earnings pattern from geographically dispersed Florida real estate operations. To this end, the Company acquired several income properties in 2000 and 2001. Following is a summary of these properties: YEAR LOCATION TENANT AREA PURCHASED ---------------------- ------------------ ------------ --------- Tallahassee, Florida Eckerd 10,880 sq.ft. 2000 Daytona Beach, Florida Gary Yeoman's Ford 12 acres 2000 (Auto Dealer) Daytona Beach, Florida Barnes & Noble 28,000 sq.ft. 2001 Lakeland, Florida Barnes & Noble 18,150 sq.ft. 2001 Sanford, Florida Eckerd 11,900 sq.ft. 2001 Palm Bay, Florida Walgreen 13,905 sq.ft. 2001 All properties are leased on a long-term, triple-net lease basis, with the exception of the Walgreen's site in Palm Bay, Florida, which is leased on a double-net lease basis. Other rental property is limited to a 17,000 square-foot office building which is located in Daytona Beach, Florida, along with ground leases for billboards, a communication tower site, and a hunting lease covering 8,300 acres. The office building is under a lease/purchase agreement which is considered a direct-financing lease. A portion of the auto dealership site, which was purchased in 2000, was sold in 2001, for a profit approximating $675,000, with the remaining property under an operating lease arrangement. Prior to 2000, the Company had successfully implemented a strategy of disposing of its inventory of miscellaneous 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. Also in 1997, a 24,000 square-foot office building in Palm Coast, Florida, was sold. GOLF OPERATIONS --------------- On September 1, 1997, responsibility for the operations of the LPGA International golf courses was transferred from the City of Daytona Beach to a wholly owned subsidiary of the Company. The agreement with the City of Daytona Beach provided for 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 second golf course was constructed by the Company and opened for play in October 1998. 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 17,000 square-foot facility including a pro shop, locker rooms, informal dining and banquet rooms, and a swimming pool, was completed in December 2000 and opened for business in January 2001. 4 ITEM 1. BUSINESS (CONTINUED) ------ ------------------- 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, pooled its own fruit with the fruit received from the Company and other citrus growers, processed the pooled fruit, and sold the products produced therefrom. Each participant in the pool, including Citrus World, shared 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 made periodic payments to all participants on their pro rata share of net sales proceeds and made final payment after all the products in the pool had been sold. During the years 1999 and 1998, the Company's sales under the above pooling agreement amounted to $1,217,604 and $4,321,531, respectively. EMPLOYEES --------- The Company has 17 employees and considers its employee relations to be satisfactory. ITEM 2. PROPERTIES ------- ---------- Land holdings of the Company and its affiliates, all of which are located in Florida, include: approximately 14,500 acres (including commercial/retail sites) in the Daytona Beach area of Volusia County; approximately 80 acres in Highlands County, near Lake Placid; retail buildings located on 14 acres throughout Florida; and full or fractional subsurface oil, gas, and mineral interests in 5 ITEM 2. PROPERTIES ------- ---------- approximately 530,000 "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 11,000 acres within the city limits of Daytona Beach, approximately 3,400 acres within the unincorporated area of Volusia County, and small acreages in the Cities of Ormond Beach and Port Orange. Of the 11,000 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." LPGA International is made up of the national headquarters of the Ladies Professional Golf Association along with two "Signature" golf courses and a residential community, a clubhouse, and a maintenance facility, 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. 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 12-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 12,000 acres west and 2,500 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 80 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 on 292,400 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, home construction, and sales. In 1993, IG LTD discontinued its home building and sales activities under lot marketing and sales arrangements. Residential lots owned by IG LTD at December 31, 2001 are: 6 ITEM 2. PROPERTIES (CONTINUED) ------- ---------- 28 lots in Riverwood Plantation, a community of 180 acres in Port Orange, Florida. 44 developed and 43 developable 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. The Company also owns and operates properties for leasing. These properties are discussed in "Business-Income Properties." ITEM 3. LEGAL PROCEEDINGS ------ ----------------- There are no material pending legal proceedings to which the Company or its subsidiaries are a party. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------ --------------------------------------------------- No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2001. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 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, 2001: 1997 $.65 2000 $.20 1998 $.70 2001 $.20 1999 $.35 Indicated below are high and low sales prices for the quarters of the last two fiscal years. All quotations represent actual transactions. 2001 2000 --------------- ------------------ High Low High Low
--------------- ------------------ $ $ $ $ First Quarter 15.25 11.875 12.75 11.00 Second Quarter 15.20 14.20 12.5625 11.1857 Third Quarter 26.70 14.75 12.875 11.625 Fourth Quarter 20.62 17.60 12.75 11.375
Approximate number of shareholders of record as of December 31, 2001 (without regard to shares held in nominee or street name): 1,385 There have been no sales of unregistered securities within the past three years. 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 of Financial Condition and Results of Operations" included in this report. Five-Year Financial Highlights (In thousands except per share amounts) 2001 2000 1999 1998 1997*
-------------------------------------- $ $ $ $ $ Summary of Operations: Revenues: Real Estate 9,248 19,860 17,130 6,388 5,412 Profit on Sales of Undeveloped Real Estate Interest 57 1,379 2,115 132 7,725 Interest and Other Income 2,045 1,987 1,854 785 1,369 ------ ------ ------ ----- ------ TOTAL 11,350 23,226 21,099 7,305 14,506 ------ ------ ------ ----- ------ Operating Costs and Expenses 7,923 8,045 8,600 4,867 3,408 General and Administrative Expenses 4,594 3,365 2,879 2,319 5,932 Income Taxes ( 531) 2,956 3,261 19 1,836 ------ ----- ------ ----- ------ Income (Loss) From Continuing Operations ( 636) 8,860 6,359 100 3,330 Income from Discontinued Operations (Net of Tax) -- -- 9,424 1,204 681 ------ ----- ------ ----- ------ Net Income (Loss) ( 636) 8,860 15,783 1,304 4,011 ====== ===== ====== ===== ====== Basic and Diluted Earnings per Share: Income (Loss) from Continuing Operations ( .11) 1.51 1.00 0.01 0.53 Net Income (Loss) ( .11) 1.51 2.48 0.20 0.64 Dividends Paid Per Share 0.20 0.20 0.35 0.70 0.65 Summary of Financial Position: Total Assets 62,217 63,354 63,420 50,101 58,026 Shareholders' Equity 45,383 46,555 48,034 34,698 37,854
* 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 2001 Compared to 2000 Real Estate Operations ---------------------- Real Estate Sales ----------------- Profits from real estate operations totaling $1,252,000 for the year ended December 31, 2001 represent a 90% decline when compared to profits of $12,396,000 posted for the year 2000. Lower commercial closing volume was the primary factor contributing to this decline. During 2001, gross profits of $2,190,000 were produced on the sale of 82 acres of commercial acreage. This volume compares to the sale of 391 acres of land in 2000, which generated gross profits totaling $13,200,000. Forestry operations produced a nominal loss for 2001 on revenues of $45,000 as harvesting was limited due to depressed timber prices along with the 1998 fires, which burned approximately 9,000 acres of Company owned lands. This loss compares to profits of $125,000 earned from forestry operations in 2000 on revenues amounting to $206,000. Golf Operations --------------- The opening and operation of the new clubhouse facility at LPGA International as of January 2001 resulted in increased golf revenues of 27% for 2001 when compared to 2000. The increase in revenues was predominantly due to the additional food and beverage services provided with the new clubhouse facility. Despite this increase in revenues, losses rose 74% to $1,329,000. Losses from golf operations for 2000 amounted to $764,000. The higher losses were the result of increased food and beverage, and maintenance and depreciation expenses associated with the new clubhouse. Income Properties ----------------- Somewhat offsetting the lower earnings from commercial land sales and golf operations were higher earnings from income properties. Profits from income properties jumped to $1,403,000 in 2001 from $184,000 in the prior year. The improved results were achieved with the acquisition of six new properties, primarily through the deferred tax like-kind exchange process, in 2001 and the last quarter of 2000. 9 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ------- ------------------------------------------------------------ AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------ General, Corporate and Other ---------------------------- The sale of one acre of undeveloped land and the release of 34 acres of subsurface interests produced income of $56,607 for the year ended December 31, 2001. This compares to income of $1,378,918 generated on the sale of 75 acres of undeveloped land and the release of subsurface rights on 2,551 acres for 2000. Interest and other income increased 3% to $2,044,825 for 2001 compared to $1,986,608 for the twelve months of 2000. A portion of the auto dealership site acquired in the fourth quarter of 2000 was sold at year-end 2001 and generated gross profits approximating $675,000. Offsetting this gain was lower investment interest income earned on reduced investable funds. The exercise of stock options along with an increase in expense from stock appreciation rights, due to the rise in the Company's stock price, resulted in charges to general and administrative expenses of $1,256,695 in 2001. These expenses are the primary cause for the 37% rise in general and administrative expenses for the year. Results for 2000 include the resolution of several income tax issues under examination with tax authorities, which resulted in the reduction of deferred income taxes by $1,500,000. MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations 2000 Compared to 1999 Real Estate Operations ---------------------- Real Estate Sales ----------------- Profits from real estate operations for 2000 escalated to $12,396,000. These profits represent a 42% increase over 1999's profits totaling $8,753,000. The higher profits were primarily attributable to higher gross profits recognized on commercial real estate transactions. During 2000 the sale of 391 acres of land produced gross profits approximating $13,200,000. This compares to gross profits realized during 1999 of $9,250,000 on the sale of 443 acres. Sales prices and gross profits vary site to site based on location and intended use. The average sales price per acre on 2000 sales was $39,600, a 33% increase over 1999's average sales price of $29,800. A 31% fall in forestry revenues led to a 37% drop in income from forestry operations. Profits from forestry operations totaled $125,000 during 2000 compared to $197,000 one year earlier. The revenue decline was the result of lower harvesting as pricing levels were depressed during the second half of the year. 10 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ------- ------------------------------------------------------------ AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------ Golf Operations --------------- Revenues from golf operations rose 18% for the year 2000 to $3,212,000, on a 33% increase in rounds played. The increase in rounds played was somewhat offset by a 15% decline in average green fees. Despite this climb in revenues, overall profits from golf operations fell 118% with a loss of $764,000 posted. This decline in operating results occurred due to a 29% rise in expenses resulting from increased depreciation and maintenance costs of the new cart barn, higher course maintenance costs, and increased costs associated with the gain in number of rounds played. Income Properties ----------------- Income properties net income rose 43% over the prior year to $184,000. The addition of the automobile dealership site located in Daytona Beach, in October 2000, and the Eckerd retail building in December 2000 accounted for the gain in profits. General, Corporate and Other ---------------------------- The sale of 75 acres of land, along with the release of subsurface interests on 2,551 acres during 2000, generated profits on sale of undeveloped real estate interests amounting to $1,378,918. This represented a 35% downturn from prior year's profits of $2,115,768. Sales of undeveloped real estate interests in 1999 included the sale of 100 acres of property in addition to the release of subsurface interests on 3,918 acres. Interest and other income earned during 2000 rose 7% to $1,986,608. This gain was achieved on increased interest earned on notes receivable and investment securities. Interest and other income posted in calendar year 1999 totaled $1,853,808. General and administrative expenses of $3,364,792 for the calendar year 2000 represented a 17% increase over prior year's total cost of $2,879,365. This rise can be attributed to higher stockholders' expense, due to the increase in the number of shareholders resulting from the September 1999 distribution of the Company's stock by Baker, Fentress & Company, along with higher compensation costs and professional fees. The resolution in the third quarter 2000 of several income tax issues under examination with tax authorities resulted in the reduction of deferred income taxes by $1,500,000 for the year. 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. After-tax profits of $1,376,157 from operating activities were recognized in 1999 through the sale date. 11 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ------- ------------------------------------------------------------ AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------ FINANCIAL POSITION The Company posted a loss of $635,896, equivalent to $.11 per share, for the year ended December 31, 2001. This loss represents a significant downturn from the profit of $8,859,811, equivalent to $1.51 per share, recorded for 2000's twelve-month period. The unfavorable results can be attributed to lower commercial land sales closing volume, higher losses from golf operations, due to the startup of the clubhouse operation, and unusually high stock options expense. The high stock options expense resulted from an increase in the Company's stock price and a significant number of stock options exercised. The Company also uses Earnings Before Depreciation and Deferred Taxes ("EBDDT") as a performance measure. The Company's strategy of investing in income properties through the deferred tax like-kind exchange process produces significant amounts of depreciation and deferred taxes and this measure tracks results in this area. Following is the calculation of EBDDT: Year Ended December 31, December 31, 2001 2000 -------------------------- Net Income (Loss) $(635,896) $ 8,859,811 Add Back: Depreciation 739,007 278,655 Deferred Taxes 701,341 3,411,291 ---------- ---------- Earnings Before Depreciation and Deferred Taxes $ 804,452 $12,549,757 ========== ========== EBDDT Per Share $.14 $2.14 ========== ========== EBDDT is not a measure of operating results or cash flows from operating activities as defined by generally accepted accounting principles. Further, EBDDT is not necessarily indicative of cash availability to fund cash needs and should not be considered as an alternative to cash flow as a measure of liquidity. The Company believes, however, that EBDDT provides relevant information about operations and is useful, along with net income, for an understanding of the Company's operating results. EBDDT is calculated by adding depreciation, amortization and deferred income taxes to net income as they represent non-cash charges. Cash and investment securities declined $12,802,988 during the year. The primary use of these funds was $17,452,183 for the acquisition of property, plant and equipment, including the purchase of four income properties for approximately $16,440,000 during the year in addition to $750,000 used to complete the construction of the clubhouse facility. Additionally, $1,117,648 was paid in dividends equivalent 12 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ------- ------------------------------------------------------------ AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------ to $.20 per share, while $388,129 was used to reduce debt. Offsetting these cash outflows was $3,113,344 of cash provided from operating activities and proceeds from the sale of a portion of the auto dealership income property site totaling $3,253,015. Cash and investment securities at year-end remained a healthy $8,284,920 while debt amounted to $9,457,698. Capital requirements planned for 2002 approximate $2,350,000 and include $2,100,000 for roads, entrance features and site development on lands adjacent to Interstate 95 in Daytona Beach. Additionally, as funds become available from qualified sales, additional triple-net lease income properties will be acquired through the like-kind exchange process. Also, when deemed appropriate, the Company will continue its stock buyback program. The sources of funds for these requirements are cash and investment securities on hand, operations, and financing sources in place. In July 2002, approximately $7,860,000 becomes due on a long-term note. The Company has begun pursuing alternative sources of financing and believes it can secure replacement financing at more favorable terms. Currently the income properties owned by the Company are free of debt. The Company has the ability to borrow against these properties on a non-recourse basis. Development activity on Company owned and surrounding lands remains strong. During the year several projects were started or completed. The multi-dealership auto mall opened in November 2001 on land sold by the Company at the LPGA Boulevard interchange at Interstate 95. The United States Tennis Association ("USTA") Florida section relocated its headquarters to Daytona Beach. The USTA site, which is located on land donated by the Company, is located adjacent to the LPGA International development. The Advanced Technology Center, a joint venture between the Volusia County School Board, Flagler County School Board and Daytona Beach Community College, opened on approximately 100 acres sold by the Company in 1999, just north of the LPGA Boulevard interchange. These development activities, along with continued residential development and construction within the LPGA International development, provide momentum for additional sales and development of Company lands. Commercial contract closings were not strong in 2001; however, sales inquiries along with the local economy remain moderately strong. Several closings affected by the long approval and permitting process were delayed into 2002. A relatively strong commercial land sales contract backlog is in place. Management continues to focus on the conversion of this contract backlog into closings while adding value to its core Daytona Beach land holdings through the master planning and development process. As these closings occur, funds from qualified transactions will be converted to quality triple-net lease income properties through the deferred tax like-kind exchange process. This strategy will enable the Company to become, over time, a company with a more predictable earnings pattern from geographically dispersed Florida real estate holdings. 13 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ------- --------------------------------------------------------- The Company has no material market risk associated with interest rates, foreign currency exchange rates, or commodity prices. 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. PART III The information required by Items 10, 11, 12, and 13 is incorporated herein by reference to the registrant's 2002 annual meeting proxy statement pursuant to Instruction G to Form 10-K. On March 15, 2002, 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 2002 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, 2002, 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, 67, chairman of the board since April 1998; chief executive officer of the Company from March 1990 to April 2001; and president of the Company from March 1990 to January 2000. William H. McMunn, 55, president of the Company since January 2000 and chief executive officer since April 2001; chief operating officer of the Company from January 2000 to April 2001; president, Indigo Development Inc., a subsidiary of the Company, since December 1990. Bruce W. Teeters, 56, senior vice president-finance and treasurer, since January 1988. All of the above are elected annually as provided in the By-laws. 14 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, 2001 and 2000 F-3 Consolidated Statements of Income for the three years ended December 31, 2001 F-4 Consolidated Statements of Shareholders' Equity for the three years ended December 31, 2001 F-5 Consolidated Statements of Cash Flows for the three years ended December 31, 2001 F-6 Notes to Consolidated Financial Statements F-8 2. Financial Statement Schedules ----------------------------- Included in Part IV on Form 10-K: Schedule III - Real Estate and Accumulated Depreciation on page 20 of Form 10-K Schedule IV - Mortgage Loans on Real Estate on page 21 of Form 10-K Other Schedules are omitted because of the absence of conditions under which they are required, materiality or because the required information is given in the financial statements or notes thereof. 3. Exhibits -------- See Index to Exhibits on page 19 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, 2001. 15 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) 3/15/02 By: /s/ William H. McMunn --------------------- William H. McMunn President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. 3/15/02 Chairman of the Board and Director By: /s/ Bob D. Allen ---------------- 3/15/02 President and Chief Executive Officer (Principal Executive Officer) and Director /s/ William H. McMunn --------------------- 3/15/02 Senior Vice President-Finance, Treasurer (Principal Financial and Accounting Officer), and Director /s/ Bruce W. Teeters -------------------- 3/15/02 Director /s/ John C. Adams, Jr. ---------------------- 3/15/02 Director /s/ Robert F. Lloyd ------------------- 16 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, 2001 Commission File No. 0-5556 CONSOLIDATED-TOMOKA LAND CO. (Exact name of registrant as specified in the charter) 17 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. 2001 Stock Option Plan effective April 25, 2001, filed with the Registrant's Form S-8 filed on June 20, 2001 and incorporated by this reference. * (10.5) 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 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 21 (23) Report of Independent Certified Public Accountants on Financial Statement Schedules. 22 (23.2) Consent of Arthur Andersen LLP. 23 * - Incorporated by Reference 18 SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION FOR THE YEAR ENDED DECEMBER 31, 2001 COSTS CAPITALIZED INITIAL COST TO COMPANY SUBSEQUENT TO ACQUISITION ------------------------------------------------------------------------------- BUILDINGS & DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS CARRYING COSTS - ----------- ------------------------------------------------------------------------------- Income Properties: Gary Yeomans Ford, Daytona Beach, FL -0- 435,121 743,902 -0- -0- Eckerd, Tallahassee, FL -0- 590,800 1,595,000 -0- -0- Eckerd, Sanford, FL -0- 1,565,176 1,890,671 -0- -0- Barnes & Noble, Daytona Beach, FL -0- 1,798,600 3,803,000 -0- -0- Barnes & Noble, Lakeland, FL -0- 1,242,300 1,884,200 -0- -0- Walgreen, Palm Bay, FL -0- 1,102,640 3,157,360 -0- -0- Miscellaneous -0- 726,831 -0- 1,180,344 -0- ------------------------------------------------------------------------------- -0- 7,461,468 13,074,133 1,180,344 -0- =============================================================================== GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD ----------------------------- DATE OF ACCUMULATED COMPLETION OF DATE DEPR LAND BUILDINGS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED LIFE ------------------------------------------------------------------------------- Income Properties: Gary Yeomans Ford, Daytona Beach, FL 435,121 743,902 1,179,023 21,697 N/A 10/31/00 40Yrs. Eckerd, Tallahassee, FL 590,800 1,595,000 2,185,800 43,198 N/A 12/13/00 40Yrs. Eckerd, Sanford, FL 1,565,176 1,890,671 3,455,847 7,878 N/A 11/15/01 40Yrs. Barnes & Noble, Daytona Beach, FL 1,798,600 3,803,000 5,601,600 95,075 N/A 01/11/01 40Yrs. Barnes & Noble, Lakeland, FL 1,242,300 1,884,200 3,126,500 47,105 N/A 01/11/01 40Yrs. Walgreen, Palm Bay, FL 1,102,640 3,157,360 4,260,000 46,045 N/A 06/12/01 40Yrs. Miscellaneous 1,907,175 -0- 1,907,175 266,195 Various N/A 5-30Yrs. ---------------------------------------------- 8,641,812 13,074,133 21,715,945 527,193 ============================================== 2001 2000 1999 ----------- ---------- ---------- Cost: Balance at Beginning of Year 7,817,603 1,752,706 14,365,140 Improvements 16,524,370 6,071,748 148,774 Cost of Real Estate Sold ( 2,626,028) ( 6,851) (12,761,208) ---------------------------------------------- Balance at End of Year 21,715,945 7,817,603 1,752,706 ============================================== Accumulated Depreciation: Balance at Beginning of Year 273,665 267,299 3,452,758 Depreciation and Amortization 301,822 6,366 120,182 Depreciation on Real Estate Sold ( 48,294) 0 (3,305,641) ---------------------------------------------- Balance at End of Year 527,193 273,665 267,299 ==============================================
19 SCHEDULE IV CONSOLIDATED-TOMOKA LAND CO. MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 2001 PRINCIPAL FINAL PERIODIC AMOUNT OF INTEREST MATURITY PAYMENT PRIOR FACE CARRYING LOANS DESCRIPTION RATE DATE TERMS LIENS AMOUNT AMOUNT (A) DELINQUENT - ------------------------------------------------------------------------------------------------------------------ MORTGAGE N/R SECURED BY REAL ESTATE: Volusia Co. 7.50% 09/03 Level, plus Balloon of $239,718 -- $ 299,650 $ 254,702 -- Volusia Co. 7.75% 12/02 Level, plus Balloon of $286,325 -- 1,969,541 436,325 -- Volusia Co. 7.50% 09/03 Level, plus Balloon of $242,152 -- 284,050 256,355 -- Volusia Co. 7.75% 07/02 Balloon of $864,000 -- 1,372,000 864,000 -- Volusia Co. 7.75% 02/02 Balloon of $175,200 -- 275,200 175,200 -- Volusia Co. 6.50% 10/03 Level, plus Balloon of $1,517,647 -- 1,805,424 1,775,647 -- Volusia Co. 7.00% 12/06 Level, plus Balloon of $2,489,841 -- 2,792,250 2,792,250 -- Highlands Co. 6.00% 04/09 Level, plus Balloon of $1,753,415 -- 2,550,000 2,407,200 -- Highlands Co. -- 05/02 Level -- 600,000 200,000 -- Highlands Co. -- Various Balloon of $30,000 -- 30,000 30,000 -- ----------------------------------------- -- $11,978,115 $9,191,679 -- ========================================= (A) FOR FEDERAL INCOME TAX PURPOSES, THE AGGREGATE BASIS OF THE LISTED MORTGAGES WAS $9,191,679. (B) A RECONCILIATION OF THE CARRYING AMOUNT OF MORTGAGES FOR THE THREE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 IS AS FOLLOWS:
2001 2000 1999 ------------------------------------ BALANCE AT BEGINNING OF YEAR $11,526,249 $7,269,211 $4,260,347 NEW MORTGAGE LOANS 2,792,250 4,795,644 5,438,494 COLLECTIONS OF PRINCIPAL ( 5,126,820) ( 538,606) ( 2,429,630) ------------------------------------ BALANCE AT END OF YEAR $ 9,191,679 $11,526,249 $7,269,211 ====================================
20 EXHIBIT 21 Subsidiaries of the Registrant
Percentage of Organized Voting Securities Under Owned by Laws of Immediate Parent ------------------------------------ Consolidated-Tomoka Land Co. Florida -- Indigo Group Inc. Florida 100.0 Indigo Group Ltd. Florida 99.0* (A Limited Partnership) Indigo Development Inc. Florida 100.0 Indigo Commercial Realty Inc. Florida 100.0 Palms Del Mar Inc. Florida 100.0 Indigo International Inc. Florida 100.0
* 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. 21 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES TO CONSOLIDATED-TOMOKA LAND CO.: We have audited in accordance 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 25, 2002. 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 responsibility 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 consolidated financial statements taken as a whole. Arthur Andersen LLP Orlando, Florida January 25, 2002 22 EXHIBIT 23.2 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 33-62679 and 333-63400) of Consolidated-Tomoka Land Co. of our report dated January 25, 2002, appearing on page F-1 of this Annual Report on Form 10-K. Arthur Andersen LLP Orlando, Florida March 6, 2002 23 CONSOLIDATED-TOMOKA LAND CO. INDEX TO FINANCIAL STATEMENTS Reports of Independent Certified Public Accountant F-2 Consolidated Balance Sheets as of December 31, 2001 and 2000 F-3 Consolidated Statements of Income for the three years ended December 31, 2001 F-4 Consolidated Statements of Shareholders' Equity for the three years ended December 31, 2001 F-5 Consolidated Statements of Cash Flows for the three years ended December 31, 2001 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, 2001 and 2000, and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Consolidated-Tomoka Land Co. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Orlando, Florida Arthur Andersen LLP January 25,2002 F-2 Consolidated Balance Sheets
December 31, --------------------------- 2001 2000 ----------- ----------- Assets Cash $ 2,797,868 $12,909,722 Investment Securities (Note 3) 5,487,052 8,178,186 Notes Receivable (Note 5) 9,245,576 11,602,477 Real Estate Held for Development and Sale (Note 6) 9,189,609 9,767,635 Refundable Income Taxes (Note 4) 1,411,557 743,801 Other Assets 2,314,140 2,516,635 ---------- ---------- 30,445,802 45,718,456 ---------- ---------- Property, Plant and Equipment Land, Timber and Subsurface Interests 1,877,240 1,828,503 Golf Buildings, Improvements & Equipment 11,209,610 10,408,134 Income Properties Land, Buildings & Improvements 19,808,770 5,989,100 Other Buildings, Equipment and Land Improvements 790,520 636,819 ---------- ---------- Total Property, Plant and Equipment 33,686,140 18,862,556 Less Accumulated Depreciation and Amortization ( 1,915,241) ( 1,227,098) ---------- ---------- Net Property, Plant and Equipment 31,770,899 17,635,458 ---------- ---------- Total Assets $62,216,701 $63,353,914 ========== ========== Liabilities Accounts Payable $ 181,712 $ 220,515 Accrued Liabilities 4,321,739 4,561,561 Deferred Income Taxes (Note 4) 2,872,779 2,171,438 Notes Payable (Note 7) 9,457,698 9,845,827 ---------- ---------- Total Liabilities 16,833,928 16,799,341 ---------- ---------- Commitments and Contingencies (Note 12) SHAREHOLDERS' EQUITY Preferred Stock - 50,000 Shares Authorized, $100 Par Value; None Issued -- -- Common Stock - 10,000,000 Shares Authorized; $1 Par Value; 5,615,579 and 5,584,684 Shares Issued and Outstanding at December 31, 2001 and 2000, respectively 5,615,579 5,584,684 Additional Paid-In Capital 758,470 -- Retained Earnings 39,008,724 40,969,889 ---------- ---------- Total Shareholders' Equity 45,382,773 46,554,573 ---------- ---------- Total Liabilities and Shareholders' Equity $62,216,701 $63,353,914 ========== ==========
The accompanying notes are an integral part of these consolidated statements. F-3 Consolidated Statements of Income
Calendar Year ------------------------------------------ December 31, December 31, December 31, 2001 2000 1999 ------------------------------------------ Income: Real Estate Operations: Sales and Other Income $9,248,555 $19,860,503 $17,129,879 Costs and Other Expenses (7,922,714) ( 8,045,078) (8,600,185) ---------- ---------- ---------- 1,325,841 11,815,425 8,529,694 ---------- ---------- ---------- Profit On Sales of Undeveloped Real Estate Interests 56,607 1,378,918 2,115,768 ---------- ---------- ---------- Interest and Other Income 2,044,825 1,986,608 1,853,808 ---------- ---------- ---------- 3,427,273 15,180,951 12,499,270 General and Administrative Expenses (4,594,330) ( 3,364,792) ( 2,879,365) ---------- ---------- ---------- Income (Loss) From Continuing Operations Before Income Taxes (1,167,057) 11,816,159 9,619,905 Income Taxes (Note 4) 531,161 ( 2,956,348) ( 3,260,946) ---------- ---------- ---------- Income (Loss) From Continuing Operations ( 635,896) 8,859,811 6,358,959 Income From Discontinued Citrus Operations, Net of Tax (Note 2) -- -- 9,423,733 ---------- ---------- ---------- Net Income (Loss) $( 635,896) $ 8,859,811 $15,782,692 ========== ========== ========== Per Share Information (Note 11): Basic and Diluted Income (Loss) From Continuing Operations $(0.11) $1.51 $1.00 Income From Discontinued Citrus Operations -- -- 1.48 ---------- ---------- ---------- Net Income (Loss) $(0.11) $1.51 $2.48 ========== ========== ==========
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, 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 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 Net Income -- -- 8,859,811 8,859,811 Cash Dividends ($.20 per share) -- -- ( 1,186,851) ( 1,186,851) Repurchase of 774,600 Shares ( 774,600) (3,588,751) ( 4,789,000) ( 9,152,351) --------- --------- ---------- ---------- Balance, December 31, 2000 5,584,684 -- 40,969,889 46,554,573 Net Loss -- -- ( 635,896) ( 635,896) Cash Dividends ($.20 per share) -- -- ( 1,117,648) (1,117,648) Repurchase of 18,900 Shares ( 18,900) -- ( 207,621) ( 226,521) Issuance of 49,795 Shares Pursuant to Exercise of Stock Options 49,795 626,173 -- 675,968 Tax Benefit of Stock Options Exercised -- 132,297 -- 132,297 --------- --------- ---------- ---------- Balance, December 31, 2001 $ 5,615,579 $ 758,470 $39,008,724 $45,382,773 ========= ========= ========== ==========
The accompanying notes are an integral part of these consolidated statements. F-5 Consolidated Statements of Cash Flows
Calendar Year --------------------------------------- December 31, December 31, December 31, 2001 2000 1999 ----------- ----------- ----------- Cash Flow from Operating Activities: Net Income (Loss) $( 635,896) $ 8,859,811 $15,782,692 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Discontinued Citrus Operations -- -- (9,423,733) Depreciation and Amortization 739,007 278,655 257,215 Compensation Expense on Exercise of Stock Options 660,834 -- -- (Gain) Loss on Sale of Property, Plant and Equipment ( 675,280) 23,937 ( 2,177) Decrease (Increase) in Assets: Notes Receivable 2,356,901 (4,236,723) 1,750,114 Real Estate Held for Development and Sale 578,026 1,857,198 1,973,134 Deferred Income Taxes -- 1,239,853 586,908 Refundable Income Taxes ( 535,459) ( 743,801) 285,199 Other Assets 202,495 ( 882,136) 19,495 (Decrease) Increase in Liabilities: Accounts Payable ( 38,803) ( 30,726) ( 41,405) Accrued Liabilities ( 239,822) 328,741 ( 135,644) Deferred Income Taxes 701,341 2,171,438 -- Income Taxes Payable -- ( 631,528) 631,528 --------- --------- ---------- Net Cash Provided by Operating Activities 3,113,344 8,234,719 11,683,326 --------- --------- ---------- Cash Flow from Investing Activities: Acquisition of Property, Plant and Equipment (17,452,183) (9,530,245) (1,329,107) Net Decrease (Increase) in Investment Securities 2,691,134 8,511,252 (15,498,048) Proceeds from Sale of Property, Plant and Equipment 3,253,015 -- 20,883 Cash From Discontinued Citrus Operations -- -- 24,216,186 ---------- ---------- ---------- Net Cash (Used In) Provided By Investing Activities (11,508,034) ( 1,018,993) 7,409,914 ---------- ---------- ---------- Cash Flow from Financing Activities: Proceeds from Notes Payable 845,000 1,471,000 2,469,000 Payments on Notes Payable ( 1,233,129) ( 1,896,010) ( 2,940,226) Cash Proceeds from Exercise of Stock Options 15,134 -- -- Funds Used to Repurchase Common Stock ( 226,521) ( 9,152,351) ( 216,864) Dividends Paid ( 1,117,648) ( 1,186,851) ( 2,230,142) ---------- ---------- ---------- Net Cash Used in Financing Activities ( 1,717,164) (10,764,212) ( 2,918,232) ---------- ---------- ---------- Net (Decrease) Increase in Cash (10,111,854) ( 3,548,486) 16,175,008 Cash, Beginning of Year 12,909,722 16,458,208 283,200 ---------- ---------- ---------- Cash, End of Year $ 2,797,868 $12,909,722 $16,458,208 ========== ========== ==========
F-6 Consolidated Statements of Cash Flows (continued) Supplemental Disclosure of Operating Activities: In connection with the sale of real estate and income properties, the Company received, as consideration, mortgage notes receivable of $2,792,250, $4,935,624, and $2,268,895 for the years 2001, 2000, and 1999, respectively. In addition, the Company received letters of credit totaling $632,495 as consideration for real estate sales in 2000, which are included in other assets. In connection with the sale of the citrus operations, the Company received as consideration, notes receivable of $3,150,000 for the year 1999. Total interest paid was $839,631, $867,134, and $901,988 for the years 2001, 2000, and 1999, respectively. Income taxes of $697,044 were refunded in 2001, with total income taxes paid of $920,387 and $8,870,891, for the years 2000 and 1999, respectively. In connection with the exercise of stock options, the Company recorded compensation expense and income tax benefit of $660,834 and $132,297, respectively, for the year 2001. The accompanying notes are an integral part of these consolidated statements. F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000 and 1999 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Consolidated-Tomoka Land Co., a Florida corporation, and its wholly owned subsidiaries: Indigo Group Inc., Indigo Group Ltd., Indigo International Inc., Indigo Development Inc. and Palms Del Mar Inc. (collectively, the Company). All significant intercompany accounts and transactions have been eliminated in consolidation. NATURE OF OPERATIONS The Company is primarily engaged, through its wholly owned subsidiaries, in the real estate industry. Real estate operations, which are primarily commercial in nature, also include residential, golf operations, income properties and forestry operations. These operations are predominantly located in Volusia and Highlands Counties in Florida, with various income properties owned throughout the State of Florida. 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 accounting principles generally accepted in the United States 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. CASH At December 31, 2001, the Company held $755,237 in escrow to complete the purchase of income properties. 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. No interest or property taxes were capitalized to real estate held for development and sale during 2001 and 2000, as there was no significant development during the periods. F-8 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Such properties are depreciated on a straight-line basis over their estimated useful lives. Renewals and betterments are capitalized to property accounts. The cost of maintenance and repairs is expensed as incurred. The cost of property retired or otherwise disposed of, and the related accumulated depreciation or amortization, are removed from the accounts, and any resulting gain or loss is taken into income. The amount of depreciation and amortization taken for the years 2001, 2000 and 1999 was $739,007, $278,655, and $257,215, respectively. The range of estimated useful lives for property, plant and equipment is as follows: Golf Buildings & Improvements 10-40 Years Golf Equipment 5-10 Years Income Properties Buildings, Equipment & Improvements 40 years Other Furnishings & Equipment 5-25 years LONG-LIVED ASSETS The Company has reviewed the recoverability of long-lived assets, including real estate held for development and sale, property, plant and equipment 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, 2001. In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting For the Disposal or Impairment of Long- Lived Assets." SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," and requires that one accounting impairment model be used for long-lived assets to be disposed of by sales, whether previously held and used or newly acquired, and broadens the presentation of discontinued operations to include more disposal transactions. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Company has determined that the adoption of the standard will not have a material impact on the financial statements. SALE OF REAL ESTATE The profit on sales of real estate is accounted for in accordance with the provisions of the SFAS No. 66, "Accounting for Sales of Real Estate." The Company recognizes revenue from the sale of real estate at the time the sale is consummated unless the property is sold on a F-9 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) SALE OF REAL ESTATE (CONTINUED) deferred payment plan and the initial payment does not meet criteria established under SFAS No. 66. No income was deferred for the three years ended December 31, 2001. UNFUNDED DEFERRED COMPENSATION PLANS The Company maintains two unfunded deferred compensation plans. One plan is established for the Board of Directors of the Company, with the second plan established for the officers and key employees of the Company. Under the plans, any member of the Board of Directors, officer or key employee may elect to defer all or a portion of their compensation. The amount of deferred compensation shall increase annually by an amount which is equal to interest on the deferred compensation at the rate of return earned by the Company on its 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 consolidated balance sheets at December 31, 2001 and 2000 were $3,943,647 and $3,898,787, 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 8 "Pension Plan"). CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, 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, accounts receivable and accounts payable at December 31, 2001 and 2000, 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, 2001 and 2000, since the notes are at floating rates or fixed rates which approximate current market rates for notes with similar risks and maturities. F-10 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECLASSIFICATIONS Certain reclassifications were made to the 2000 accompanying consolidated financial statements to conform to the 2001 presentation. 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. Summary financial information of the citrus operations is as follows: Year Ended December 31,
-------------------------------------- 2001 2000 1999 -------- ---------- ---------- Revenues from Discontinued Citrus Operations -- -- $ 5,393,171 ======== ========== ========== Income from Discontinued Citrus Operations Before Tax -- -- $ 2,206,440 Income Tax Expense from Discontinued Citrus Operations -- -- ( 830,283) 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 ======== ========= ==========
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 processed the fruit and marketed it under several names on a regional and national basis. Citrus World pooled its own fruit with the fruit purchased from the Company and other citrus growers, processed the pooled fruit and sold the products produced. F-11 NOTE 2 DISCONTINUED CITRUS OPERATIONS (CONTINUED) Each participant in the pool, including Citrus World, shared ratably in the proceeds from the sale of products, net of Citrus World's actual processing and marketing costs, plus a per-unit handling fee. Citrus World made periodic payments to all participants based on their pro-rata share of net sales proceeds and made final payment after all the products in the pool had 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 year 1999, the Company's estimated pro-rata share of net sales proceeds under the above pooling agreement amounted to $1,217,604. 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. NOTE 3 INVESTMENT SECURITIES The Company accounts for investment securities under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This standard requires classification of the investment portfolio into three categories: held to maturity, trading, and available for sale. The Company classifies as held to maturity those securities which the Company has the intent and ability to hold through their stated maturity date. Investment securities which are classified as held to maturity are carried at cost, adjusted for amortization of premiums and accretion of discounts. Gains and losses are determined using the specific identification method. Investment securities as of December 31, 2001 and 2000 are as follows:
2001 2000 ---------- ----------- Investments Held to Maturity - ---------------------------- Debt Securities Issued by States and Political Subdivisions of States $4,258,049 $5,590,047 Corporate Debt Securities 134,197 526,169 Preferred Stocks 1,094,806 2,052,081 Mortgage-Backed Securities -- 9,889 --------- ---------- Total Investments Held to Maturity $5,487,052 $8,178,186 ========= ==========
F-12 NOTE 3 INVESTMENT SECURITIES (CONTINUED) The contractual maturities of investment securities held to maturity are as follows: Maturity Date Amount -------------- --------- Within 1 year $1,241,721 1-5 Years 664,969 6-10 Years 1,380,411 After 10 Years 2,199,951 --------- $5,487,052 ========= 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: 2001 2000 1999
---- ---- ---- Current Deferred Current Deferred Current Deferred -------------------- -------------------- -------------------- Federal $(1,284,978) $ 821,226 $(609,756) $2,921,385 $2,258,051 $496,686 State 52,476 (119,885) 154,813 489,906 415,987 90,222 --------- -------- ------- --------- --------- ------- Total $(1,232,502) $ 701,341 $(454,943) $3,411,291 $2,674,038 $586,908 ========= ======== ======= ========= ========= =======
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
--------------------------------- ------------------------ 2001 2000 1999 2001 2000 --------------------------------- ------------------------ Depreciation $ 31,349 $ 54,166 $(123,690) $( 167,567) $( 136,218) Sales of Real Estate 693,530 5,051,395 ( 1,379) (5,327,542) (4,634,012) Deferred Compensation ( 17,305) (118,493) (198,122) 1,521,262 1,503,957 Basis's Difference In Joint Venture 37,081 ( 61,775) ( 25,288) 1,216,939 1,254,020 Revolving Fund Certificates 55,376 5,449 ( 58,231) 349,449 404,825 Charitable Contributions Carryforward (362,529) 1,772,841 527,115 478,254 115,725 Other (224,117) ( 36,686) 413,625 141,335 ( 82,782) Less-Valuation Allowance 487,956 (3,255,606) 52,878 (1,084,909) ( 596,953) -------- --------- -------- --------- --------- $ 701,341 $3,411,291 $ 586,908 $(2,872,779) $(2,171,438) ======== ========= ======== ========= =========
F-13 NOTE 4 INCOME TAXES (CONTINUED) Following is a reconciliation of the income tax computed at the federal statutory rate of 35% for 2001, 2000 and 1999. Calendar Year
------------------------------------ 2001 2000 1999 ------------------------------------ Income Tax Computed at Federal Statutory Rate $(408,470) $4,135,656 $3,366,967 (Decrease) Increase Resulting from: State Income Tax, Net of Federal Income Tax Effect ( 43,816) 419,067 342,035 Tax Exempt Interest Income ( 86,959) ( 190,474) ( 274,687) Adjustment to Valuation Allowance 30,000 (1,375,000) ( 155,000) Other Reconciling Items ( 21,916) ( 32,901) ( 18,369) -------- --------- --------- (Benefit) Provision for Income Taxes $(531,161) $2,956,348 $3,260,946 ======== ========= =========
During 2000, certain tax issues under examination with tax authorities were resolved. The resolution of these issues resulted in a $1,500,000 reduction in the valuation allowances associated with deferred income taxes. During 2001, the Company generated a net operating loss for income tax purposes. For Federal income tax, this loss can be carried back to 1999, when the Company generated significant taxable income. This carryback will result in a tax refund approximating $1,245,000. For State income tax purposes, the net operating loss can only be carried forward against future taxable income. NOTE 5 NOTES RECEIVABLE Notes Receivable consisted of the following: December 31,
------------------------- 2001 2000 ------------------------- MORTGAGE NOTES RECEIVABLE Various notes with interest rates ranging from 6.5% to 10.5% with payments due from 2002 through 2009. Collateralized by real estate mortgages held by the Company $8,991,679 $11,126,249 OTHER NOTES RECEIVABLE 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 53,897 76,228 Payable in three annual installments of $200,000 through May 2002 200,000 400,000 --------- ---------- Total Notes Receivable $9,245,576 $11,602,477 ========= ==========
F-14 NOTE 5 NOTES RECEIVABLE (CONTINUED) The prime rate of interest was 4.75% and 9.50% at December 31, 2001 and 2000, respectively. The required annual principal receipts are as follows: Year ending December 31, Amount ---------------------------------------- 2002 $ 2,163,259 2003 2,181,942 2004 167,862 2005 176,206 2006 2,588,174 2007 and Thereafter 1,968,133 ---------- $ 9,245,576 ========== NOTE 6 REAL ESTATE HELD FOR DEVELOPMENT AND SALE Real estate held for development and sale as of December 31, 2001 and 2000 is summarized as follows: December 31,
--------------------------- 2001 2000 --------------------------- Undeveloped Land $ 89,253 $ 89,253 Land and Land Development 9,003,331 9,581,357 Completed Houses 97,025 97,025 --------- ---------- $9,189,609 $9,767,635 ========= =========
F-15 NOTE 7 NOTES PAYABLE Notes Payable consisted of the following: December 31,
-------------------------- 2001 2000 -------------------------- MORTGAGE NOTES PAYABLE Mortgage notes payable are collateralized by real estate mortgages held by the lender. As of December 31, 2001 and 2000, 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 $7,951,637 $8,299,674 Interest payable quarterly at 10%, principal and outstanding interest due October 2005 1,200,000 1,200,000 Payments of $6,019, payable monthly through November 2002 66,209 -- 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 239,852 346,153 LINE OF CREDIT A line of credit totaling $7,000,000 payable on demand expiring July 2002, with interest at the 30-DAY LIBOR Market Index rate plus 1.5% -- -- --------- ---------- $9,457,698 $9,845,827 ========= ==========
The required annual principal payments on notes payable are as follows: Year Ending December 31, Amount -------------------------------------------- 2002 $ 8,123,069 2003 123,854 2004 10,775 2005 1,200,000 ---------- $ 9,457,698 ========== Interest expense was $839,631, $867,134, and $901,988 for 2001, 2000, and 1999, respectively. There was no interest capitalized in 2001, with $159,649 capitalized to property, plant and equipment in 2000. F-16 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. 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,
---------------------------------- 2001 2000 1999 -------- ------- -------- Service Cost $ 157,384 $169,060 $257,773 Interest Cost on Projected Benefit Obligation 286,748 284,442 329,624 Actual Return on Plan Assets (719,855) (409,113) (197,462) Net Amortization 295,619 (18,031) (268,759) Accelerated Recognition of Unrecognized net gain under SFAS No. 88 -- -- (117,020) -------- ------- ------- Net Periodic Pension Cost $ 19,896 $ 26,358 $ 4,156 ======== ======= =======
F-17 NOTE 8 PENSION PLAN (CONTINUED) The change in benefit obligation is as follows: December 31,
------------------------ 2001 2000 ------------------------ Benefit Obligation at Beginning of Year $4,197,614 $3,792,902 Service Cost 157,384 169,060 Interest Cost 286,748 284,442 Actuarial Loss 3,228 369,057 Benefits Paid ( 335,076) ( 231,068) Curtailment and Settlement -- ( 186,779) -------- --------- Benefit Obligation at End of Year $4,309,898 $4,197,614 ========= ========= The change in plan assets is as follows: Fair Value of Plan Assets at Beginning of Year $4,738,602 $4,754,047 Actual Return on Plan Assets 719,855 409,113 Curtailment and Settlement -- ( 193,490) Plan Expenses Paid ( 82,711) ( 83,986) Benefits Paid ( 252,365) ( 147,082) -------- --------- Fair Value of Plan Assets at End of Year $5,123,381 $4,738,602 ========= ========= The accrued pension liability consists of the following: Plan Assets In Excess of Projected Benefit Obligation $ 813,483 $ 540,988 Unrecognized Prior Service Cost 3,261 3,585 Unrecognized Net Gain ( 459,951) ( 160,397) Unrecognized Transition Asset ( 75,391) ( 82,878) -------- -------- Prepaid Pension Liability $ 281,402 $ 301,298 ======== ========
The actuarial assumptions made to determine the projected benefit obligation and the fair value of plan assets are as follows: December 31, ------------ 2001 2000 ---- ---- 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 POST-RETIREMENT BENEFIT PLANS OTHER THAN PENSIONS The Company sponsors two defined benefit post-retirement 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 post-retirement health care plan is contributory, with retiree contributions adjusted annually; the life insurance F-18 NOTE 9 POST-RETIREMENT BENEFIT PLANS OTHER THAN PENSIONS (CONTINUED) 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 post-retirement expenses in accordance with adopted SFAS No. 106, "Employers' Accounting for Post-retirement Benefits Other Than Pensions," which requires that expected costs of post-retirement benefits be charged to expense during the years the employees render service. The Company elected to amortize the unfunded obligation measured at adoption of SFAS No. 106 over a period of 20 years. The effect of this amortization expense recognized in 2001, 2000, and 1999 was $64,590, $67,781, and $70,160, respectively. The accrued post- retirement benefit cost reflected in the consolidated balance sheet at December 31, 2001 and 2000 was $130,107 and $147,097, respectively. NOTE 10 STOCK OPTION PLAN The Company maintains a stock option plan ("the Plan") pursuant to which 500,000 shares of the Company's common stock may be issued. The Plan in place was approved at the April 25, 2001 Shareholders' meeting and replaces the previous stock option plan which expired in 2000. Provisions under both plans are materially the same. Under the Plan, the option exercise price equals the stock market price on the date of grant. The options vest over five years and all expire after ten years. The Plan provides for the grant of (1) incentive stock options which satisfy the requirements of Internal Revenue Code (IRC) Section 422, and (2) 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 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. F-19 NOTE 10 STOCK OPTION PLAN (CONTINUED) 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 (Note 13). A summary of the status of the Company's stock options for the three years ended December 31, 2001 and changes during the years then ended is as follows: 2001 2000 1999
---------------- ---------------- ----------------- Wtd Avg Wtd Avg Wtd Avg Shares Ex Price Shares Ex Price Shares Ex Price ------- -------- ------ -------- ------- -------- Outstanding at beginning of year 220,000 $15.95 220,000 $15.95 196,800 $15.91 Granted 46,000 $14.45 -- 48,000 $14.75 Exercised (220,000) $15.95 -- ( 22,400) $13.17 Expired -- -- ( 2,400) $14.04 ------ ------- ------- Outstanding at end of year 46,000 $14.45 220,000 $15.95 220,000 $15.95 ======= ======== ======= Exercisable at end of year -- 220,000 $15.95 220,000 $15.95 ======= ======== ======= Weighted average fair value of options granted during the year $3.59 -- $4.63 ======= ======== =======
Of the 46,000 options outstanding at December 31, 2001, none of them were exercisable and they had a contractual life of 9 years. Of the 220,000 options exercised in 2001, 170,205 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 $660,834 and $595,862, respectively, included in general and administrative expenses. Additionally, the exercise resulted in $605,192 of income tax benefit, of which $132,297 was recorded as an addition to additional paid-in capital. 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. F-20 NOTE 11 EARNINGS PER SHARE (CONTINUED) 2001 2000 1999
--------- ---------- --------- Income (Loss) Available to Common Shareholders: Income (Loss) from Continuing Operations $(635,896) $8,859,811 $ 6,358,959 Income from Discontinued Citrus Operations -- -- 9,423,733 --------- ---------- --------- Net Income (Loss) $(635,896) $8,859,811 $15,782,692 ========= ========= ========== Weighted Average Shares Outstanding 5,587,752 5,877,047 6,373,490 Common shares Applicable to Stock Options Using the Treasury Stock Method -- -- 3,754 --------- --------- --------- Total Shares Applicable to Diluted Earnings Per Share 5,587,752 5,877,047 6,377,244 ========= ========= ========= Basic and Diluted Earnings Per Share Income (Loss) from Continuing Operations $(0.11) $1.51 $1.00 Income from Discontinued Citrus Operations -- -- 1.48 --------- --------- -------- Net Income (Loss) $(0.11) $1.51 $2.48 ========= ========= ========
NOTE 12 COMMITMENTS AND CONTINGENCIES 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, 2001, are summarized as follows: Year Ending December 31, Amounts ----------------------- -------- 2002 $ 313,156 2003 321,746 2004 154,101 2005 119,414 2006 105,345 2007 and Thereafter 6,350,000 --------- $7,363,762 ========= Rental expense under all operating leases amounted to $523,866, $561,737,and $357,469 for the years ended December 31, 2001, 2000, and 1999, respectively. Additionally, the Company, as lessor, leases certain land, buildings and improvements under operating leases. Minimum future rental receipts under non-cancelable operating leases having remaining terms in excess of one year as of December 31, 2001, are summarized as follows: F-21 NOTE 12 COMMITMENTS AND CONTINGENCIES (CONTINUED) Year Ending December 31, Amounts ---------- 2002 $ 1,826,796 2003 1,838,796 2004 1,702,685 2005 1,731,765 2006 1,773,551 2007 and Thereafter 29,381,972 ---------- $38,255,565 ========== Rental income under all operating leases amounted to $1,830,689, $247,531, and $164,692 for the years ended December 31, 2001, 2000, and 1999, respectively. NOTE 13 RELATED PARTIES Baker, Fentress & Company, a publicly owned, closed-end investment company, owned approximately 79% of the Company's outstanding common stock at December 31, 1998. On September 24, 1999, Baker, Fentress & Company distributed its ownership in the Company to its shareholders. The Company owns non-voting stock, in the aggregate amount of $905,896, in Citrus World. This non-voting stock is considered to have no value for financial statement purposes until redeemed. (See Note 2 "Discontinued Citrus Operations"). NOTE 14 BUSINESS SEGMENT DATA The Company primarily operates in three business segments: real estate, income properties and golf. Real estate operations include commercial real estate, real estate development, residential, leasing properties for oil and mineral exploration, and forestry operations. Information about the Company's operations in different industries for each of the three years ended December 31 is as follows (amounts in thousands): F-22 NOTE 14 BUSINESS SEGMENT DATA (CONTINUED)
2001 2000 1999 -------------------------------------------- Revenues: Real Estate $ 3,352 $16,401 $14,243 Income Properties 1,831 248 165 Golf 4,065 3,212 2,722 General, Corporate and Other 2,102 3,365 3,969 ------ ------ ------ $11,350 $23,226 $21,099 ====== ====== ====== Income: Real Estate $ 1,252 $12,396 $ 8,753 Income Properties 1,403 184 129 Golf (1,329) ( 764) ( 352) General, Corporate and Other (2,493) -- 1,090 ------ ------ ------ $(1,167) $11,816 $ 9,620 ====== ====== ====== Identifiable Assets Real Estate $15,171 $20,606 $17,006 Income Properties 22,643 6,333 452 Golf 10,769 10,285 6,977 General, Corporate and Other 13,634 26,130 38,985 ------ ------ ------ $62,217 $63,354 $63,420 ====== ====== ====== Depreciation and Amortization: Real Estate $ 10 $ 23 $ 43 Income Properties 303 20 7 Golf 403 217 189 General, Corporate and Other 23 19 18 ------ ------ ------ $ 739 $ 279 $ 257 ====== ====== ====== Capital Expenditures: Real Estate $ 133 $ 109 $ 150 Income Properties 16,444 5,989 1 Golf 801 3,391 1,163 General, Corporate and Other 74 41 15 ------ ------ ------ $17,452 $ 9,530 $ 1,329 ====== ====== ======
Income represents income from continuing operations before income taxes. Identifiable assets by industry are those assets that are used in the Company's operations in each industry. General corporate assets and assets used in the Company's other operations consist primarily of cash, investment securities, notes receivable and property, plant and equipment. F-23 QUARTERLY FINANCIAL DATA (Unaudited)
THREE MONTHS ENDED March 31, June 30, September 30, December 31, --------------------- ---------------------- -------------------- ---------------------- 2001 2000 2001 2000 2001 2000 2001 2000 --------------------- ---------------------- -------------------- ---------------------- Income: Real Estate Operations: Sales and Other Income $2,234,391 $1,497,678 $2,708,032 $1,304,720 $1,724,155 $2,882,689 $2,581,977 $14,175,416 Costs and Other Expenses (1,772,531)(1,285,785) (2,112,317) (1,509,951) (2,009,651)(1,425,888)(2,028,215)( 3,823,454) --------- --------- --------- --------- --------- --------- --------- ---------- 461,860 211,893 595,715 ( 205,231) ( 285,496) 1,456,801 553,762 10,351,962 --------- --------- --------- --------- --------- --------- --------- ---------- Profit on Sales of Undeveloped Real Estate Interests 1,340 82,527 50,939 2,899 4,333 14,750 ( 5) 1,278,742 --------- ------- --------- --------- --------- --------- --------- ---------- Interest and Other Income 390,404 443,539 407,109 404,230 236,642 423,419 1,010,670 715,420 --------- ------- --------- --------- --------- --------- --------- ---------- 853,604 737,959 1,053,763 201,898 ( 44,521) 1,894,970 1,564,427 12,346,124 General and Administrative Expenses (1,009,332)(1,008,798) ( 893,280) ( 914,638) (2,135,284) ( 876,533)( 556,434)( 564,823) --------- --------- -------- --------- --------- -------- --------- ---------- Income (Loss) Before Income Taxes ( 155,728)( 270,839) 160,483 ( 712,740) (2,179,805) 1,018,437 1,007,993 11,781,301 Income Taxes 56,841 100,003 ( 58,623) 263,689 803,011 1,124,811 ( 270,068)( 4,444,851) --------- -------- -------- --------- --------- --------- --------- ---------- Net Income (Loss) $( 98,887)$( 170,836) $ 101,860 $( 449,051)$(1,376,794)$2,143,248 $ 737,925 $ 7,336,450 ========= ======== ======== ========= ========= ========= ========= ========== Basic and Diluted Net Income (Loss) Per Share $( 0.02)$( 0.03) $ 0.02 $( 0.07)$( 0.25)$ 0.37 $ 0.14 $ 1.24 ========= ======== ======== ========= ========= ========= ======== ==========
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