UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-12001 St. Joe Paper Company (Exact name of registrant as specified in its charter) Florida 59-0432511 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Suite 400, 1650 Prudential Drive, Jacksonville, Florida 32207 (Address of principal executive offices) (Zip Code) (904) 396-6600 (Registrant's telephone number, including area code) None (Former name, former address and former fiscal year, if changed since last report) 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 APPLICABLE ONLY TO CORPORATE ISSUERS: As of June 30, 1994 there were 30,498,650 shares of common stock, no par value, outstanding.
ST. JOE PAPER COMPANY INDEX Page No. PART I Financial Information: Consolidated Balance Sheet - June 30, 1994 and December 31, 1993 3 Consolidated Statement of Income and Retained Earnings - Three Months and Six months ended June 30, 1994 and 1993 4 Consolidated Statement of Cash Flows - Six months ended June 30, 1994 and 1993 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations 8 PART II Other Information 14 ST. JOE PAPER COMPANY CONSOLIDATED BALANCE SHEET (Dollars in thousands) June 30 December 31 ASSETS 1994 1993 (Unaudited) Current Assets: Cash and cash equivalents $ 45,177 $ 48,304 Short-term investments 66,745 66,307 Accounts receivable 80,185 74,127 Inventories 62,708 69,398 Other assets 27,967 25,720 Total Current Assets 282,782 283,856 Investment and Other Assets: Marketable securities 179,271 159,523 Other assets 42,251 40,170 Total Investments and Other Assets 221,522 199,693 Property, Plant and Equipment, Net 1,020,364 1,007,722 Total Assets $ 1,524,668 $ 1,491,271 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 40,596 $ 41,515 Accrued liabilities 31,566 27,838 Income taxes payable 4,426 2,737 Long-term debt due within one year 23,828 21,309 Total Current Liabilities 100,416 93,399 Accrued Casualty Reserves and Other Liabilities 11,951 11,063 Long-Term Debt due After One Year 38,304 38,947 Deferred Income Taxes and Income Tax Credits 210,524 205,531 Minority Interest in Consolidated Subsidiaries 245,942 238,878 Stockholders' Equity: Common stock, no par value; 60,000,000 shares authorized; 30,498,650 shares issued and outstanding 8,714 8,714 Retained earnings 864,248 851,511 Net unrealized gains on debt and marketable equity securities 44,569 43,228 Total Stockholders' Equity 917,531 903,453 Total Liabilities and Stockholders' Equity $ 1,524,668 $ 1,491,271 See accompanying notes. - 3 - ST. JOE PAPER COMPANY CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS (Unaudited) (Dollars in thousands except per share amounts) Three Months Six Months ended June 30 ended June 30 1994 1993 1994 1993 Net Sales and Operating Revenues $ 165,886 $ 150,548 $ 333,254 $ 297,246 Cost of Sales and Operating Expenses 138,182 134,183 272,173 260,837 Gross Profit 27,704 16,365 61,081 36,409 Selling, General and Administrative Expenses 13,731 14,126 28,088 29,032 Operating Profit 13,973 2,239 32,993 7,377 Other Income (Expense): Dividends 531 826 1,065 1,055 Interest income 2,329 2,005 4,833 4,780 Interest expense (1,005) (2,419) (1,968) (3,398) Gain on sales and other dispositions of property, plant and equipment 375 (86) 759 891 Other, net 704 1,148 1,791 2,469 2,934 1,474 6,480 5,797 Income before Income Taxes, Minority Interest and Cumulative Effect of Change in Accounting Principle 16,907 3,713 39,473 13,174 Provision for Income Taxes 6,913 925 14,816 4,561 Income before Minority Interest and Cumulative Effect of Change in Accounting Principle 9,994 2,788 24,657 8,613 Income Applicable to Minority Interest in Consolidated Subsidiaries 2,367 2,035 8,870 4,398 Income before Cumulative Effect of Change in Accounting Principle 7,627 753 15,787 4,215 Cumulative Effect of Change in Accounting Principle for Income Taxes --- --- --- 20,518 Net Income $ 7,627 $ 753 $ 15,787 $ 24,733 Retained Earnings at Beginning of Period 858,146 847,423 851,511 824,968 Dividends 1,525 1,525 3,050 3,050 Retained Earnings at End of Period $ 864,248 $ 846,651 $ 864,248 $ 846,651 Per Share Data: Dividends $ 0.05 $ 0.05 $ 0.10 $ 0.10 Income before Cumulative Effect of Change in Accounting Principle $ 0.25 $ 0.02 $ 0.52 $ 0.13 Cumulative Effect of Change in Accounting Principle --- --- --- 0.68 Net Income $ 0.25 $ 0.02 $ 0.52 $ 0.81 Number of Common Shares Outstanding 30,498,650 30,498,650 30,498,650 30,498,650 See accompanying notes. - 4 - ST. JOE PAPER COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Dollars in thousands except per share amounts) Six Months ended June 30 1994 1993 Cash Flows from Operating Activities: Net Income $ 15,787 $ 24,733 Adjustments to reconcile net income to cash provided by operating activities: Cumulative effect of a change in accounting principle --- (20,518) Depreciation and depletion 31,095 32,197 Minority interest in income 8,870 4,398 Gain on sale of property (759) (891) Increase in deferred income taxes 4,993 6,257 Changes in operating assets and liabilities: Accounts receivable (6,058) 9,537 Inventories 6,690 3,136 Other assets (4,328) (15,273) Accounts payable, accrued liabilities and casualty reserves 3,697 9,224 Increase in income taxes payable 1,689 --- Cash Provided by Operating Activities 61,676 52,800 Cash Flows from Investing Activities: Purchases of property, plant and equipment (47,506) (45,857) Purchases of investments (80,986) (23,821) Proceeds from sales of property 4,529 4,950 Proceeds from sales of investments 61,194 18,775 Cash Used in Investing Activities (62,769) (45,953) Cash Flows from Financing Activities: Net change in short-term borrowings 2,514 896 Dividends paid to stockholders (3,050) (3,050) Repayment of long-term debt (638) (983) Dividends paid to minority interest (860) (846) Cash Used in Financing Activities (2,034) (3,983) Net Increase (Decrease) in Cash and Cash Equivalents (3,127) 2,864 Cash and Cash Equivalents at Beginning of Period 48,304 42,137 Cash and Cash Equivalents at End of Period $ 45,177 $ 45,001 Supplemental Disclosure of Cash Flow Information: Cash paid during the year for certain expense items is: Interest $ 1,871 $ 1,827 Income taxes $ 10,927 $ 875 See accompanying notes - 5 - ST. JOE PAPER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands ) 1. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 1994 and December 31, 1993 and the results of operations and cash flows for the three and six month periods ended June 30, 1994 and 1993. 2. The results of operations for the three and six month periods ended June 30, 1994 and 1993 are not necessarily indicative of the results that may be expected for the full year. 3. Inventories at June 30, 1994 and December 31, 1993: June 30 December 31 1994 1993 Manufactured paper products and associated raw materials $ 27,367 $ 30,782 Materials and supplies 27,575 27,407 Sugar 7,766 11,209 $ 62,708 $ 69,398 4. The Company and its subsidiaries are involved in litigation on a number of matters and are subject to certain claims which arise in the normal course of business, none of which, in the opinion of management, is expected to have a material adverse effect on the Company's consolidated financial position or results of operations. The Company has retained certain self-insurance risks with respect to losses for third party liability, property damage and group health insurance provided to employees. The Company is subject to costs arising out of environmental laws and regulations, which include obligations to remove or limit the effects on the environment of the disposal or release of certain wastes or substances at various sites. It is the Company's policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and an amount is reasonably estimable. As assessments and cleanups proceed, these accruals are reviewed and adjusted, if necessary, as additional information becomes available. - 6 - ST. JOE PAPER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands ) The Company is currently a party to, or involved in, legal proceedings directed at the cleanup of two Superfund sites. The Company has accrued its allocated share of the total estimated cleanup costs for these two sites. Based upon management's evaluation of the other potentially responsible parties, the Company does not expect to incur additional amounts even though the Company has joint and several liability. Other proceedings involving environmental matters such as alleged discharge of oil or waste material into water or soil are pending against the Company. It is not possible to quantify future environmental costs because many issues relate to actions by third parties or changes in environmental regulation. However, based on information presently available, management believes that the ultimate disposition of currently known matters will not have a material effect on the financial position or liquidity of the Company, but could be material to the results of operation of the Company in any one period. As of June 30, 1994 and December 31, 1993, the aggregate environmental related accruals were $6.7 million. Environmental liabilities are paid over an extended period and the timing of such payments cannot be predicted with any confidence. - 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net Sales and Operating Revenues for the quarter ended June 30, 1994 increased $15.3 million (10.2%) compared to the same 1993 period. Net sales and operating revenues for the six months ended June 30, 1994 increased $36.0 million (12.1%) compared to the same 1993 period. Cost of Sales and Operating Expenses increased $4.0 million (3.0%) for the quarter ended June 30, 1994 compared to the June 30, 1993 quarter which were 83.3% of net sales and operating revenue for the 1994 quarter and 89.1% for the 1993 quarter. The cost of sales and operating expenses for the six months ended June 30, 1994 were up $11.3 million (4.3%) compared to the same 1993 period and were 81.7% of net sales and operating revenues in 1994 and 87.8% in 1993. Selling, General and Administrative Expenses for the second quarter of 1994 were down $0.4 million (2.8%) compared to the corresponding 1993 quarter. These expenses for the year to date were down $0.9 million (3.3%) compared to 1993. Operating Profit for the quarter ended June 30, 1994 compared to the same 1993 period for the Company was higher by $11.7 million (524.1%) and for the six months period by $25.6 million (347.2%). The operating results for the Company by industry segments for the comparable three month and six month periods follows (in millions of dollars). FOREST PRODUCTS Quarter Ended June 30, 1994 %Increase 1994 1993 (Decrease) Net Sales and Operating Revenue $ 93.0 $ 77.9 19.4 Cost of Sales and Operating Expenses 85.4 80.3 6.3 Selling, General and Administrative Expenses 7.3 7.3 0.3 Operating Profit (Loss) 0.4 (9.7) 103.7 -8- Six Months Ended June 30, 1994 %Increase 1994 1993 (Decrease) Net Sales and Operating Revenue $177.5 $157.0 13.1 Cost of Sales and Operating Expenses 167.8 157.0 6.9 Selling, General and Administrative Expense 14.7 15.9 (7.5) Operating Profit (Loss) (5.0) (15.9) 68.5 Net sales and operating revenue in the Company's paper mill for the six month 1994 period were up 15.2% due to an increase in tons sold to outside customers of 19.8%, while the average selling price from the same 1993 period remained the same. Revenue from sales of crest white were up 13.3% with revenue from crest white sales amounting to 58% of total sales, which was up from 56% in 1993. Sales by the Company's container operations for the six month period this year over 1993 were up 11.1% on an increase of 10.8% in tons sold and a small 0.2% increase in selling price per ton. Timber revenue on sales to outside customers by our land company was up 47.1% on an increase in tons sold of 41.4% and a 4.0% increase in per ton selling price. The cost of sales and operating expenses at the mill for the six months period ended June 30th decreased 3% on a per ton basis compared to last year but due to the increased volume these costs were up primarily in the area of repair materials, shipping department, operations fees, water treatment and workmen's compensation insurance. Production at the mill was up 5.1% for the six month period of 1994 over like 1993 period as the average daily production was up 9.4% which overcame a four day reduction in days operated. The revenue was helped this period by the increase in sales volume particularity in the crest white tons sold and the $30 a ton increase in linerboard prices in March 1994. There has been another $40 per ton increase in linerboard prices in July 1994, which will improve third quarter results. The backlog of orders in our container operations have been at record highs the last several weeks. TRANSPORTATION Quarter Ended June 30, 1994 %Increase 1994 1993 (Decrease) Net Sales and Operating Revenue $ 44.8 $ 43.2 3.7 Cost of Sales and Operating Expenses 32.6 33.3 (2.1) Selling, General and Administrative Expenses 4.1 4.5 (9.9) Operating Profit 8.1 5.3 51.7 -9- Six Months Ended June 30, 1994 %Increase 1994 1993 (Decrease) Net Sales and Operating Revenue $ 87.9 $ 86.5 1.7 Cost of Sales and Operating Expenses 64.4 66.2 (2.7) Selling, General and Administrative Expenses 8.4 8.3 1.2 Operating Profit 15.1 12.0 26.0 Net sales and operating revenue for the six month period increased 1.8% at Florida East Coast Railway Company (FEC). This increase reflects the continued general improvement in the economy. Rail traffic volumes in rock and other types of carloads were up. Rock carloads for the first six months of 1994 were up 10.9%, other carloads up 1.7%, intermodel units and automotive carloads were down from 1993. Apalachicola Northern Railroad Company (ANRR) net revenue was flat for the six months 1994 period compared to 1993. Cost of sales and operating expenses for the FEC decreased 3.3% for the six month period of 1994 and selling, general and administrative expenses were up 1.6%. There were small expense increases in employee wages, including fringe benefits, depreciation and property taxes. ANRR operating expenses for this six month period were up 4.9% and selling, general and administrative expenses were down 9.2%. The main operating expenses at ANRR that were up for this six month period are maintenance on the track, material and labor and repair of freight train cars. SUGAR Quarter Ended June 30, 1994 %Increase 1994 1993 (Decrease) Net Sales and Operating Revenue $ 14.6 $ 12.8 14.1 Cost of Sales and Operating Expenses 11.6 11.8 (2.0) Selling, General and Administrative Expenses 0.8 0.8 (0.9) Operating Profit 2.3 0.3 786.9 Six Months Ended June 30, 1994 Net Sales and Operating Revenue $ 28.0 $ 24.9 12.6 Cost of Sales and Operating Expenses 22.4 21.4 4.5 Selling, General and Administrative Expenses 1.8 1.8 3.5 Operating Profit 3.8 1.7 124.3 -10- Net sales and operating revenue in the Sugar segment were up for the six month period due to an increase in tons sold of 10.2% and a 2.2% increase in sales price per ton. Cost of sales and operating expenses per ton were down 3.5% caused by a decrease in dead season expenses this year and an increase in sales of molasses. Molasses is a by-product of the production of raw sugar and is accounted for as reduction in the cost of sales and operating expense. COMMUNICATIONS Quarter Ended June 30, 1994 %Increase 1994 1993 (Decrease) Net Sales and Operating Revenue $ 7.7 $ 7.7 0.1 Cost of Sales and Operating Expenses 4.6 5.1 (9.5) Selling, General and Administrative Expenses 1.1 1.0 8.3 Operating Profit 2.0 1.6 26.2 Six Months Ended June 30, 1994 Net Sales and Operating Revenue $15.1 $ 15.0 0.4 Cost of Sales and Operating Expenses 9.3 9.8 (4.9) Selling, General and Administrative Expenses 2.2 2.1 4.4 Operating Profit 3.6 3.2 14.3 Net sales and operating revenue for the Communications segment were slightly higher for the six month period the result of access line growth. Cost of sales and operating expenses were lower due primarily to the curtailment of an extensive outside plant maintenance program initiated in mid 1992. Selling, general and administrative expenses had a slight increase in the 1994 six months period from the like 1993 period that was attributable to an ongoing billing and customer service software conversion. -11- REAL ESTATE Quarter Ended June 30, 1994 %Increase 1994 1993 (Decrease) Net Sales and Operating Revenue $ 6.2 $ 9.6 (35.1) Cost of Sales and Operating Expenses 4.5 4.2 5.2 Selling, General and Administrative Expenses 0.5 0.5 (7.8) Operating Profit 1.3 4.8 (73.6) Six Months Ended June 30, 1994 Net Sales and Operating Revenue $ 25.7 $ 15.1 70.2 Cost of Sales and Operating Expenses 9.2 7.6 20.2 Selling, General and Administrative Expenses 1.0 1.0 (0.8) Operating Profit 15.5 6.4 141.0 In the Real Estate segment of the Company, Gran Central, Florida East Coast Industries, Inc.'s real estate subsidiary, had a 148.2% increase in net sales and operating revenue for the first six month period of 1994. This increase was attributable to sales of real estate being higher by $12.5 million and rental income being up $1.5 million. Southwood Properties, the Company's real estate division, had a decrease in net sales and operating revenue of $3.4 million from less property and timber sales. Expenses at Gran Central increased 29.6% in the six month period of 1994 over 1993 and continue to be caused by increased depreciation, property taxes and casualty insurance. Expenses at Southwood were down $0.6 million as the cost of property sold was less on the decrease in realty sales. Other Income for the quarter ended June 30, 1994 was up $1.5 million (99.1%) as compared to the same 1993 period. For the six months ended June 30, 1994, other income was up $0.7 million (11.8%) compared to the same 1993 period. The increase in the six months results occurred in dividend income and the net of interest income less interest expense, being up 61.3%. Taxes for the second quarter were up $6.0 million (647.4%) and $10.3 million (224.8%) for the six month period. The effective tax rate for the six month period is 37.5% for 1994 and 34.6% for 1993. This increase in tax expense is the direct result of increased income. -12- Net Income Before Cumulative Effect Of Change In Accounting Principle for the second quarter of 1994 of $7.6 million was $6.9 million more than the same 1993 period or up 912.9%. The six month period ended June 30, 1994 shows an increase of $11.6 million or up 274.5%. The earnings per share for the six month period ended June 30, 1994 of $0.52 is $0.39 more than the like 1993 period. Financial Position The company continues to have a strong current asset position. Current assets were $282.8 million, down $1.1 million or 0.4% from December 31, 1993. The Company's working capital ratio at June 30, 1994 was 2.8 to 1, a decrease from December 31, 1993 when it was 3.0 to 1. The Company had a net increase in property, plant and equipment at June 30, 1994 of $12.6 million over the December 31, 1993 balance. The Company's net investment in marketable securities has increased $19.7 million compared to December 31, 1993. This is primarily attributable to the investment of proceeds received from Gran Central's sales of real estate in the first quarter. The Company has a minimum amount of long-term debt. The noncurrent long-term debt at June 30, 1994 of $38.3 million was $0.6 million less than at December 31, 1993. There were no other significant changes in the Balance Sheet at June 30, 1994 over December 31, 1993. Stockholder's equity at June 30, 1994 was $917.5 million or $30.08 per share an increase of $14.1 million or $0.46 per share over $903.5 million or $29.62 per share at December 31, 1993. -13- PART II - OTHER INFORMATION Item 1. Legal Proceedings No change from Form 10-K for the year ended December 31, 1993 Item 4. Submission of Matters to a Vote of Security Holders At the Company's annual meeting of shareholders, held on May 10, 1994 the following persons were elected as Directors of the Company: J. C. Belin R. E. Nedley H. L. Brainin R. B. Newton, Jr. E. C. Brownlie W. L. Revell T. S. Coldewey R. E. Taylor R. H. Dent W. T. Thompson, III E. T. Ford W. L. Thornton S.D. Fraser J. D. Uible Item 5. Other Information The Company is not aware of any other matters of significance to be reported hereunder. Item 6(a). Exhibits NOTICE OF ANNUAL MEETING held on May 10, 1994. SIGNATURES Pursuant to the requirements 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. St. Joe Paper Company (Registrant) S. D. Fraser Vice President and Director D. M. Groos Comptroller August 8, 1994 Date -14-
EXHIBIT ST. JOE PAPER COMPANY P. O. BOX 1380 JACKSONVILLE, FLORIDA 32201 MARCH 31, 1994 TO THE HOLDERS OF COMMON STOCK OF ST. JOE PAPER COMPANY NOTICE OF ANNUAL MEETING The Annual Meeting of Shareholders of St. Joe Paper Company will be held on Tuesday, May 10, 1994, at 10:30 A.M. Eastern Daylight Savings Time, at the Commerce-Dockside Room, Marina Hotel and Convention Center at St. Johns Place, 1515 Prudential Drive, Jacksonville, Florida. The meeting will be held to consider and act upon the following matters, namely: 1. To elect a Board of fourteen (14) directors for the ensuing year and until their successors are duly elected and qualified. 2. To transact such other business as may properly come before the Meeting or any adjournment or adjournments thereof. Shareholders of record at the close of business on March 31, 1994 are entitled to notice of and to vote at the Annual Meeting. All shareholders are cordially invited and urged to attend the meeting in person. The holders of a majority of the outstanding shares entitled to vote at the Meeting, present in person or by proxy, shall constitute a quorum. This notice and the accompanying proxy material contains important information regarding the Company and matters to be acted on at the Annual Meeting. BY ORDER OF THE BOARD OF DIRECTORS RONALD A. ANDERSON SECRETARY IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE PROMPTLY.