Business Context and Reporting Period
Company: Consolidated-Tomoka Land Co. (CTO Realty Growth, Inc.)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2011
Business Overview: The Company is engaged in real estate land sales and development, reinvestment of land sales proceeds into income properties, and golf course operations. It owns approximately 11,600 acres in Florida, primarily in the Daytona Beach area. The Company operates three main segments: Real Estate, Income Properties, and Golf Operations.
Key Financial Metrics
| Metric | Q1 2011 | Q1 2010 |
|---|---|---|
| Net Income (Loss) | $(258,905) | $77,819 |
| EPS (Basic & Diluted) | $(0.05) | $0.01 |
| Total Revenues | $3,992,000 | $3,706,000 |
| Operating Income | $1,388,383 | $1,327,752 |
| EBDDT (Non-GAAP) | $250,447 | $769,544 |
| Cash and Investments | $4,940,677 | $5,277,242 |
| Total Assets | $176,913,777 | $177,758,950 |
| Total Liabilities | $59,569,035 | $60,158,850 |
| Notes Payable | $15,564,187 | $15,249,248 |
| Net Cash Used in Operating Activities | $(321,055) | $133,979 |
Material Changes vs. Prior Period
- Net Loss vs. Profit: The Company reported a net loss of $258,905 in Q1 2011, a reversal from the $77,819 profit in Q1 2010. The primary driver was a $758,489 increase in stock option expense due to a rise in the Company's stock price.
- Segment Performance:
- Real Estate: Losses increased to $248,269 from $191,438 due to a 30% rise in costs, primarily from hay operations. No land sales occurred in either period.
- Income Properties: Revenues declined 2% to $2,373,725 due to the loss of rents from two Barnes & Noble properties. Profits decreased 5% to $1,722,025.
- Golf Operations: Revenues increased 18% to $1,373,576 and losses narrowed 28% to $260,584, driven by favorable weather and a 27% increase in rounds played.
- General & Administrative Expenses: Increased 48% to $1,792,613, largely attributable to the aforementioned stock option expense increase.
- Liquidity: Cash and investment securities decreased by $336,565 to $4,940,677. Notes payable increased by $314,939.
Guidance, Outlook, and Risks
- Capital Expenditures: Projected capital expenditures for the remainder of 2011 are approximately $5.2 million. This includes $1.6 million for CVS leasehold improvements in Tallahassee, $1.8 million for land acquisition, and funds for hay conversion and tenant improvements.
- Dividend Policy: The Board declared a $0.01 per share dividend and announced a shift to semi-annual dividend payments, expected to begin in October 2011.
- Debt Management: The Company is negotiating to extend and expand its $15 million revolving line of credit, which matures in March 2012. It also holds $4.8 million in investment securities pledged as collateral for a letter of credit.
- Legal Proceedings:
- Wintergreen Advisers: An appeal regarding inspection of corporate records is pending before the Florida Fifth District Court of Appeal. No loss is expected.
- SJRWMD: An administrative complaint regarding agricultural water management permits is in abeyance pending settlement negotiations and legislative changes. The Company does not expect a material financial effect.
- Risk Factors: The Company faces risks related to the prolonged real estate slump in Florida, the timing of land sales, loss of major tenants, and environmental regulations.
Investor Verification Checklist
- Verify the impact of the $758,489 increase in stock-based compensation on future quarters, as it is tied to stock price performance.
- Monitor the status of the Barnes & Noble lease extensions and the re-leasing of the vacant Lakeland property.
- Confirm the progress of the $1.6 million CVS leasehold improvements and the execution of the new 25-year lease.
- Track the outcome of the negotiations to extend the $15 million line of credit maturing in March 2012.
- Review the status of the pending legal appeals (Wintergreen and SJRWMD) for any potential financial liabilities.