CTO Realty Growth, Inc. — 2011 Second-Quarter 10-Q Summary
Issuer and period: The filing identifies the registrant as Consolidated-Tomoka Land Co., not CTO Realty Growth, Inc. It covers the quarter and six months ended June 30, 2011; the financial statements are unaudited.
Business context
The company operated real estate and land businesses, income properties, and golf operations, with substantial land holdings in Florida. It reported owning approximately 11,600 acres, mostly in the Daytona Beach area. No land sales closed in the first half of 2011.
Financial performance and position
- Second-quarter results: Revenue was $3.893 million versus $2.682 million in 2010. Net income was $318,782, or $0.06 per share, versus a $593,171 loss, or $0.10 per share.
- First-half results: Revenue was $7.885 million versus $6.388 million. Net income was $59,877, or $0.01 per share, versus a $515,352 loss, or $0.09 per share. Pretax income was $57,719, compared with a pretax loss of $805,460.
- Segments: Income-property profit was $1.737 million for Q2 and $3.459 million for the half, modestly below prior-year periods. Golf lost $412,000 in Q2, but its first-half loss narrowed to $672,000 from $757,000. Real estate operations lost $303,000 in Q2 and $551,000 in the half, with no land-sale closings.
- Cash flow: First-half operating cash flow was $397,191, down from $812,806. Investing used $2.228 million; financing provided $1.632 million. Cash fell by $199,537 to $138,080.
- Liquidity and debt: Cash plus investment securities totaled $5.123 million at June 30. Notes payable were $16.993 million, up from $15.249 million at year-end; $322,793 was due within one year. Total assets were $178.611 million and shareholders’ equity was $117.649 million. The company said it expected sufficient liquidity for operations, capital needs, and debt service over the next twelve months and beyond.
- Other metrics: First-half interest expense was $378,002, net of $11,213 capitalized. The company paid $114,481 in dividends during the half, or $0.02 per share.
Material changes and management commentary
- The improved comparison with 2010 is substantially affected by a prior-period accounting correction recorded in Q2 2010: a $1.125 million reduction to real-estate sales revenue and a $405,000 reduction in tax expense, decreasing net income by $720,000, or $0.13 per share.
- Management attributed 2011’s small first-half profit to income-property earnings, improved golf operations, and lower general and administrative expenses. Income-property revenue was affected by expired or renegotiated Barnes & Noble leases; new leasing at self-developed properties partly offset the decline.
- On June 28, the company amended its credit agreement, increasing the maximum line from $15 million to $25 million, extending maturity to June 27, 2014, and reducing the spread over one-month LIBOR from 310 to 250 basis points. The facility added collateral involving 13 CVS and Walgreens properties and new debt-service-coverage and loan-to-value covenants. The company reported compliance with covenants at June 30.
- Management projected approximately $3 million of capital expenditures for the remainder of 2011, including $1.25 million for land, about $400,000 for hay conversion, and about $400,000 for tenant improvements. It expected no significant improvement in economic conditions, particularly real estate markets, during 2011.
- The company said future dividends were expected to be declared and paid semi-annually, beginning in October 2011. No specific earnings guidance was provided.
Risks, contingencies, and unusual items
- The company identified its Florida concentration and an uncertain, prolonged real-estate downturn as risks. Other stated risks included tenant losses, market competition, land-use and environmental regulation, weather, capital availability, and unpredictable timing of land sales.
- A St. Johns River Water Management District complaint concerning agricultural water-management permits was placed in abeyance while the parties assessed a new law. Management considered loss remote and did not expect a material adverse effect; a status report was due October 3, 2011.
- A shareholder records-inspection dispute brought by Wintergreen Advisers remained on appeal. The company did not expect its other routine legal proceedings to materially affect results or financial condition.
- The company received $125,000 in insurance proceeds for destroyed agricultural equipment during the first half, included in interest and other income. A $34,000 portion related to Q2.
Important facts for investors to verify
- Confirm the relationship between the filing’s registrant, Consolidated-Tomoka Land Co., and the requested company name, CTO Realty Growth, Inc.
- Separate underlying operating performance from the 2010 accounting correction when assessing year-over-year earnings.
- Review the amended credit agreement’s collateral, covenants, borrowing availability, and repayment schedule, alongside planned capital spending.
- Track occupancy and rent contributions from newly leased properties and the financial impact of the Barnes & Noble vacancies or lease changes.
- Follow the water-management matter, the Wintergreen appeal, and the Dunn Avenue construction-cost true-up.