CTO Realty Growth, Inc. (Consolidated-Tomoka Land Co.) 10-Q Summary
Business Context and Reporting Period
This filing is a Quarterly Report on Form 10-Q for the period ended March 31, 2009, filed on May 8, 2009. The registrant, Consolidated-Tomoka Land Co. (operating as CTO Realty Growth, Inc.), is a Florida corporation engaged in real estate land sales and development, investment in income properties, and golf course operations. The company owns approximately 11,200 acres in Florida, primarily in the Daytona Beach area.
Key Financial Metrics
| Metric | Q1 2009 | Q1 2008 |
|---|---|---|
| Net Income | $322,206 | $156,124 |
| Earnings Per Share (Basic/Diluted) | $0.06 | $0.03 |
| Total Revenues | $3,846,000 | $3,938,000 |
| Operating Income | $1,542,309 | $1,474,507 |
| Cash and Investment Securities | $5,451,822 | $6,112,420 |
| Total Assets | $173,804,166 | $168,608,000 |
| Total Liabilities | $56,311,309 | $55,331,756 |
| Notes Payable | $10,845,457 | $8,550,315 |
| EBDDT (Non-GAAP) | $858,325 | $348,037 |
Note: Revenues and segment data are presented in thousands in the source text.
Material Changes vs. Prior Period
- Profitability: Net income increased 106% year-over-year, driven by strong profits from income properties and improved results from golf operations, despite no real estate land sales closings in the quarter.
- Segment Performance:
- Income Properties: Profit rose 6% to $1.85 million on an 8% revenue increase, attributed to the acquisition of a Harris Teeter supermarket in April 2008.
- Golf Operations: Losses narrowed 39% to $144,427 due to a 43% increase in rounds played, though the average rate per round declined 27%.
- Real Estate Sales: Reported a loss of $238,035, an improvement of 31% over the prior year's loss, with expenses down 42% due to lower taxes and harvesting costs.
- Liquidity and Debt: Cash and investment securities decreased by approximately $661,000. Notes payable increased by $2.3 million, with $4.38 million drawn on a $20 million revolving line of credit.
- Interest Income: Interest and other income dropped 78% due to lower investment yields and the non-accrual of interest on delinquent mortgage notes receivable.
Outlook, Risks, and Management Commentary
- Development Pipeline: Construction is underway on a 23,000 sq. ft. "Class A" office building (approx. 75% leased) and a 12-acre commercial complex. A 31,000 sq. ft. flex office complex remains vacant as of March 31, 2009.
- Capital Allocation: The company plans capital expenditures of approximately $7.3 million for the remainder of 2009. It also intends to reinvest $8.5 million via involuntary conversion tax deferral provisions.
- Share Repurchases: The Board authorized an $8 million share repurchase program. As of May 1, 2009, 4,660 shares were repurchased for $104,648.
- Risks and Contingencies:
- Delinquent Notes: A $1.85 million note receivable is in default with foreclosure proceedings started; a $2.16 million note is delinquent. Interest accrual has stopped on both.
- Market Conditions: Weak economic conditions have resulted in a small backlog of land sales contracts, many subject to contingencies.
- Debt Maturity: The $20 million line of credit expires on March 29, 2010.
Investor Verification Checklist
- Verify the status of foreclosure proceedings on the $1.85 million defaulted note receivable and the collectability of the $2.16 million delinquent note.
- Monitor the leasing progress of the vacant 31,000 sq. ft. flex office complex and the completion of tenant improvements for the new "Class A" office building.
- Assess the impact of the $20 million line of credit maturing in March 2010 on future liquidity and refinancing costs.
- Review the timeline for the Dunn Avenue road project and the availability of federal stimulus funds to reduce capital expenditure requirements.
- Confirm the company's ability to identify suitable properties for the $8.5 million planned reinvestment under Section 1033 involuntary conversion provisions.