UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
AMENDMENT NO. 1
TO
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission file number 1-10466
St. Joe Corporation
(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 September 30, 1996 there were 30,498,650 shares of common
stock, no par value, outstanding.
ST. JOE CORPORATION
INDEX
Page No.
PART I Financial Information:
Consolidated Balance Sheet -
September 30, 1996 and December 31, 1995 3
Consolidated Statement of Income and
Retained Earnings - Nine months
ended September 30, 1996 and 1995 4
Consolidated Statement of Cash Flows -
Nine months ended September 30, 1996 and 1995 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 12
ST. JOE CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
September 30 December 31
1996 1995
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 491,992 $ 16,802
Short-term investments 103,308 96,923
Accounts receivable 44,767 44,390
Income taxes refundable --- 4,314
Inventories 17,133 20,592
Other assets 27,453 18,162
Net assets of discontinued operations --- 296,001
-------- --------
Total Current Assets 684,653 497,184
Investment and Other Assets:
Marketable securities 253,336 189,865
Other assets 53,801 38,971
-------- --------
Total Investments and Other Assets 307,137 228,836
Property, Plant and Equipment, Net 825,816 804,974
---------- ----------
Total Assets $1,817,606 $1,530,994
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 25,854 $ 26,024
Accrued liabilities 43,302 18,445
Income taxes payable 21,223 ---
-------- --------
Total Current Liabilities 90,379 44,469
Accrued casualty reserves and other liabilities 14,115 11,681
Deferred income taxes 252,723 192,036
Minority interest in consolidated subsidiaries 275,225 266,741
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 1,118,698 955,239
Net unrealized gains on debt and marketable
equity securities 57,752 52,114
---------- ----------
Total Stockholders' Equity 1,185,164 1,016,067
---------- ----------
Total Liabilities and Stockholders' Equity $1,817,606 $1,530,994
========== ==========
See accompanying notes.
ST. JOE CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(Unaudited)
(Dollars in thousands except per share amounts)
Three Months Nine Months
ended September 30 ended September 30
1996 1995 1996 1995
Net sales $ 39,787 $ 36,232 $ 198,501 $ 106,579
Operating revenues 44,769 46,645 137,207 138,581
---------- --------- ---------- --------
Net sales and operating revenues 84,556 82,877 335,708 245,160
Cost of sales 30,795 28,116 81,765 83,669
Operating expenses 34,959 34,910 104,824 103,334
Selling, general and administrative expenses 9,207 8,106 23,373 22,727
---------- --------- ---------- --------
Operating profit 9,595 11,745 126,046 35,430
Other income (expense):
Dividends 481 611 2,196 1,944
Interest income 10,334 534 20,887 7,601
Interest expense (102) (547) (426) (2,440)
Gain on sales and other dispositions
of property 2,809 (151) 5,745 1,938
Other, net 998 (44) 3,603 2,628
---------- --------- ---------- --------
14,520 403 32,005 11,671
---------- --------- ---------- --------
Income before income taxes
and minority interest 24,115 12,148 158,051 47,101
Provision for income taxes 9,139 2,499 71,211 16,805
---------- --------- ---------- --------
Income before minority interest 14,976 9,649 86,840 30,296
Income applicable to minority interest in
consolidated subsidiaries 3,527 3,287 9,922 8,943
---------- --------- ---------- --------
Income from continuing operations 11,449 6,362 76,918 21,353
Earnings from discontinued operations net of
income taxes of $0, $5,801, $527 and
$22,713 respectively --- 4,797 746 37,656
Gain on sale of discontinued operations, net of
income taxes of $0, $0, $61,638 and
$0, respectively --- --- 90,370 ---
--------- --------- ---------- --------
--- 4,797 91,116 37,656
---------- --------- ---------- --------
Net income $ 11,449 $ 11,159 $ 168,034 $ 59,009
Retained earnings at beginning of period 1,108,774 932,320 955,239 887,520
Dividends 1,525 1,525 4,575 4,575
---------- --------- ---------- --------
Retained earnings at end of period $1,118,698 $941,954 $1,118,698 $941,954
Per share data:
Dividends $ 0.05 $ 0.05 $ 0.15 $ 0.15
========= ========= ======== ========
Income from continuing operations $ 0.38 $ 0.21 $ 2.53 $ 0.70
Earnings of discontinued operations --- 0.16 2.98 1.23
--------- --------- -------- --------
Net income $ 0.38 $ 0.37 $ 5.51 $ 1.93
========= ========= ======== ========
See accompanying notes.
ST. JOE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands except per share amounts)
Nine Months
ended September 30
1996 1995
Cash flows from operating activities:
Net income $168,034 $59,009
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and depletion 21,232 20,747
Minority interest in income 9,922 8,943
Gain on sale of property (5,745) (1,938)
Gain on sale of discontinued operations (90,370) ---
Increase in deferred income taxes 60,687 3,884
Changes in operating assets and liabilities:
Accounts receivable (377) 6,487
Inventories 3,459 5,708
Other assets (24,151) (9,121)
Accounts payable, accrued liabilities and casualty reserves 42,009 8,592
Income taxes payable 25,537 (6,028)
Discontinued operations - noncash charges, working
capital changes and income taxes paid (87,991) 20,880
-------- --------
Cash provided by operating activities 122,246 117,163
Cash flows from investing activities:
Purchases of property, plant and equipment (41,135) (54,245)
Investing activities of discontinued operations --- (16,668)
Purchases of investments:
Available for sale (18,698) (26,493)
Held to maturity (216,570) (104,719)
Proceeds from dispositions of assets 4,806 4,457
Proceeds from sale of discontinued operations 464,949 ---
Maturity and redemption of investments:
Available for sale 12,218 24,215
Held to maturity 153,194 71,271
-------- ---------
Cash provided by (used in) investing activities 358,764 (102,182)
Cash flows from financing activities:
Financing activities of discontinued operations --- (16,877)
Dividends paid to stockholders (4,575) (4,575)
Dividends paid to minority interest (1,245) (1,239)
-------- ---------
Cash used in financing activities (5,820) (22,691)
-------- ---------
Net increase (decrease) in cash and cash equivalents 475,190 (7,710)
Cash and cash equivalents at beginning of period 16,802 49,132
-------- ---------
Cash and cash equivalents at end of period $491,992 $ 41,422
======== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 835 $ 2,878
Income taxes $ 93,172 $ 42,853
See accompanying notes
ST. JOE CORPORATION
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 September 30, 1996
and December 31, 1995 and the results of operations and cash
flows for the three and nine month periods ended September 30,
1996 and 1995. The 1995 statements have been restated to
reflect the reclassification of the Communications segment and
linerboard mill and container plants as discontinued
operations.
2. The results of operations for the three and nine month
periods ended September 30, 1996 and 1995 are not necessarily
indicative of the results that may be expected for the full
year.
3. On April 11, 1996, St. Joe Industries, Inc., a wholly owned
subsidiary of the Company, sold the stock of St. Joe
Communications, Inc. (SJCI) to TPG Communications, Inc. as
previously discussed. SJCI also sold its interest in four
cellular partnerships. These sales represent the
Company's entire Communication segment.On May 30, 1996, the
Company sold its linerboard mill and container plants. The
Company retains its timberlands and will continue to operate
in this segment.
Operating revenues for the three month periods ended September
30, 1996 and 1995 for the Communications segment were $0 and
$8,400, respectively and for the nine month periods ended
September 30, 1996 and 1995 were $8,435 and $24,259
respectively and net sales for the linerboard mill and
container plants for the three month periods ended September
30, 1996 and 1995 were $0 and $127,958, respectively and for
the nine month periods ended September 30, 1996 and 1995 were
$153,406 and $430,062, respectively. These amounts are not
included in net sales and operating revenues in the
accompanying statement of income and retained earnings.
The gain on the sale of these operations was $90.4 million
after income taxes of $61.6 million. The gain is subject to
final postclosing working capital adjustments.
Net operating results of the Communications segment and for
the linerboard mill and container plants for the three and
nine month periods ended September 30, 1996 and 1995 are shown
separately as earnings from discontinued operations in the
accompanying statement of income and retained earnings.
Net assets to be disposed of have been separately classified
in the accompanying balance sheets at December 31, 1995. At
September 30, there were no specific assets or liabilities
classified as discontinued operations.
4. As a result of the sale of the Communications segment and the
linerboard mill and container plants and the attendant
reduction in employees covered by the Company's pension plans,
an estimated gain from curtailment of the pension plans of
$1,200, net of tax, was recorded as part of the gain on sale
of discontinued operations.
In addition, the Company's pension plans remain in an
overfunded position and, with the reduction in employees
resulting from the sales, it is unlikely that the overfunding
will be realized other than by a plan termination and
reversion of excess assets. Accordingly, the Company has
recorded the 50% excise tax applicable to plan terminations as
additional deferred taxes which amounted to approximately
$11,000. The Company has no immediate plans to terminate the
pension plans and is in the process of evaluating other
alternatives.
5. Inventories at September 30, 1996 and December 31, 1995:
September 30 December 31
1996 1995
------------ -----------
Materials and supplies $ 14,148 $ 12,875
Sugar 2,985 7,717
$ 17,133 $ 20,592
6. Accrued liabilities at September 30, 1996 consisted of real
estate and personal property taxes of $16,879, accrued
casualty and other reserves of $18,125 and other accrued
liabilities of $8,298.
7. 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.
The Company is currently a party to, or involved in, legal
proceedings directed at the cleanup of four Superfund sites.
The Company has accrued its allocated share of the total
estimated cleanup costs for these four 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, liquidity,
or results of operation of the Company. As of September 30,
1996 and December 31, 1995, the aggregate environmental
related accruals were $6.2 million. Environmental liabilities
are paid over an extended period and the timing of such
payments cannot be predicted with any confidence.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
During the second quarter, the Company sold its Communication
segment and its linerboard mill and container plants. Sale of the
Communications segment occurred on April 11, 1996 and the
linerboard mill and container plants on May 30, 1996. Operating
revenues for the three month periods ended September 30, 1996 and
1995 for the Communications segment were $0 and $8,400,
respectively and for the nine month periods ended September 30,
1996 and 1995 were $8,435 and $24,259 respectively. Net sales for
the linerboard mill and container plants for the three month
periods ended September 30, 1996 and 1995 were $0 and $127,958
respectively and for the nine month periods ended September 30,
1996 and 1995 were $153,406 and $430,062, respectively. These
amounts are not included in net sales and operating revenues in the
accompanying statement of income and retained earnings.
The gain on the sale of these operations was $90.4 million after
income taxes of $61.6 million. The gain is subject to final
postclosing working capital adjustments.
Because the completion of these sales, revenues of the Company will
be materially lower than historical levels. Net income, earnings
per share and cash flows may also be materially different than
previous periods.
Quarter ended September 30, 1996
Net sales and operating revenues for the quarter were $84.6
million, a $1.7 million increase from the same period in 1995 and
a $4.4 million increase from the second quarter of 1996. Forestry
net sales increased by $5.5 million over 1995 and $7.3 million over
the second quarter. Cost of sales and operating expenses were $65.8
million, up from $63.0 million in 1995 and $51.6 million in the
second quarter of 1996. These costs were 77.8% of net sales and
operating revenues in 1996 compared to 76.0% in 1995 and 64.4% in
the second quarter 1996. Selling, general and administrative
expenses were $9.2 million in the third quarter of 1996 compared to
$8.1 million in the third quarter of 1995 and $5.5 million in the
second quarter 1996. As a result of these changes, operating profit
was $9.6 million compared to $11.7 million in the same quarter of
1995 and $23.1 million in the second quarter of 1996.
Nine Months ended September 30, 1996
Net sales and operating revenues were $335.7 million for the first
three quarters of 1996, an increase of $90.5 million over the same
period in 1995. The increase was primarily due to land sales to the
State of Florida of $97.8 million offset somewhat by a decline in
sales by the sugar segment of $8.6 million. Cost of sales and
operating expenses stayed fairly constant at $186.5 million
compared to 1995 at $187.0 million. Selling, general and
administrative expenses rose slightly to $23.4 million in 1996 as
compared to $22.7 million in 1995. Operating profit increased to
$126.0 million compared to 1995's $35.4 million. An analysis of
operating results by segment follows:
Forestry
Quarter ended September 30, 1996
1996 1995 % Increase
Net Sales 18.9 13.4 41.0
Cost of Sales 17.2 12.8 34.4
Selling, General and Administrative Expenses 2.6 1.5 73.3
Operating Profit (Loss) (0.9) (0.9) 0
This quarter represents the first full quarter the forestry unit
has operated completely independent of the Company's formerly
owned linerboard mill which was sold on May 30,1996. Sales to the
linerboard mill are governed by the Fiber Supply Agreement
("Agreement") executed by the parties at the time of sale.
Delivered prices to the mill dropped by 1.89% on August 1, 1996
reflecting the lagging market price mechanism negotiated as part of
the Agreement. Sales revenues are booked based on the negotiated
market price mechanism adjusted on a quarterly basis. The
Agreement continues for fifteen years with two five-year
extensions. Annual wood fiber tonnage supplied from Company's lands
will not exceed that previously provided to the linerboard mill.
During the third quarter approximately 557,000 tons were shipped to
the mill under the Agreement compared to approximately 389,000 tons
shipped in the same period of 1995. Approximately 54% of the 1996
tonnage was cut from Company lands versus 52% in 1995, the
remainder was acquired from private purchases.
Nine Months ended September 30, 1996
1996 1995 % Increase
(Decrease)
Net Sales 44.6 45.3 (1.6)
Cost of Sales 42.3 43.1 (2.0)
Selling, General and Administrative ExpenseS 3.2 3.6 (10.2)
Operating Profit (Loss) (0.9) (1.4) 36.3
Reduced production at the Company's linerboard mill prior to its
sale resulted in sales to the mill decreasing during the second
quarter. Cost of sales decreased from 95.1% of sales in the first
nine months of 1995 to 94.7% in the same period of 1996.
Transportation
Quarter ended September 30, 1996
1996 1995 % Increase
(Decrease)
Operating Revenues 44.8 46.7 (4.1)
Operating Expenses 35.0 34.9 0.3
Selling, General and Administrative Expenses 4.7 4.7 (0.0)
Operating Profit 5.1 7.1 (28.2)
Rail traffic continued to decline on both the Company's rail
subsidiaries. The lower operating revenues are primarily
attributable to a decline in rail traffic of 0.5% on FEC and 3.7%
on ANRR.
Nine Months ended September 30, 1996
1996 1995 % Increase
(Decrease)
Operating Revenues 137.2 138.6 (1.0)
Operating Expenses 104.8 103.3 1.5
Selling, General and Administrative Expenses 14.5 14.0 3.6
Operating Profit 17.9 21.3 (16.0)
A decline in rail shipments by for the first nine months
togetherwith the revenue reduction due to the haulage agreement,
were the main contributors to the fall in operating profit.
Sugar
Quarter ended September 30, 1996
1996 1995 % (Decrease)
Net Sales 11.0 14.4 (23.6)
Cost of Sales 7.8 10.5 (25.7)
Selling, General and Administrative Expenses 0.6 0.8 (25.0)
Operating Profit (Loss) 2.6 3.1 (16.1)
The contract with the segment's customer calls for specific
shipment levels throughout the year, but, at the request of the
customer, the Company shipped in the first quarter of 1996, in
advance of the contract, an amount equal to approximately four
months additional shipments. Normal shipments resumed in
August but no sugar was shipped in July. Approximately 6,700 less
tons (21%) at a reduced net margin of $12 per ton were shipped in
the third quarter of 1996 as compared to 1995.
Nine Months ended September 30, 1996
1996 1995 % Decrease
Net Sales 29.7 38.3 (22.5)
Cost of Sales 20.9 26.7 (21.7)
Selling, General and Administrative Expenses 2.5 2.8 (10.7)
Operating Profit 6.3 8.8 (28.4)
Shipments in 1996 dropped 16,200 tons or 19.2% from 1995 levels.
Prices also declined $19 per ton or 4.2%. The cost of production
declined by $5 or 1.5% in 1996 from $316 in 1995.
Real Estate
Quarter ended September 30, 1996
1996 1995 %
Increase
Net Sales 9.9 8.4 17.9
Cost of Sales 5.8 4.8 20.8
Selling, General and Administrative Expenses 1.3 0.9 44.4
Operating Profit 2.8 2.7 3.7
Rent and other income increased by $1.5 million in the second
quarter of 1996 compared to the same period in 1995. Selling,
general and administrative expenses increased by $0.4 million.
Nine Months ended September 30, 1996
1996 1995 % Increase
Net Sales 124.2 23.0 440.0
Cost of Sales 18.4 13.9 32.4
Selling, General and Administrative Expenses 3.1 2.1 47.6
Operating Profit 102.7 7.0 1,367.1
In 1996, realty property sales of $97.8 million were made to the
State of Florida which did not occur in 1995. Rent and other income
increased by $4.6 million in 1996 compared to the same period in
1995 as a result of an increase in normal tenant billings and the
addition of .6 million square feet of leaseable square feet. Cost
of sales increased principally due to cost associated with the sale
of the property to the State of Florida combined with an increase
in normal operating costs associated with the additional square
footage added. Selling, general and administrative expenses
increased by $1.0 million.
Other Income increased $14.1 million in the third quarter of 1996
compared to 1995. Interest income increased by $9.8 million
reflecting investment of the proceeds from the sale of discontinued
operations while awaiting their distribution to shareholders. Gain
on sales and other dispositions of property, plant and equipment
increased $3.0 million, primarily due to the installment sale of
fiber optic conduits by FEC. Other income, net rose by $1.0
million.
Income from Continuing Operations increased $5.5 million (47%)
during the third quarter of 1996 from the same period in 1995.
As a result of the sale of the Communications segment and the
linerboard mill and container plants and the attendant reduction in
employees covered by the Company's pension plans, an estimated gain
from curtailment of the pension plans of $1.2 million, net of tax,
was recorded as part of the gain on sale of discontinued
operations.
In addition, the Company's pension plans are in an overfunded
position and, with the reduction in employees resulting from the
sales, it is unlikely that the overfunding will be realized other
than by a plan termination and reversion of excess assets.
Accordingly, the Company has recorded the 50% excise tax applicable
to plan terminations as additional deferred taxes which amounted to
approximately $11.0 million. The Company has no immediate plans to
terminate the pension plans and is in the process of evaluating
other alternatives.
Net income for the quarter was 2.5% above the same period in 1995.
Net income per share increased $.01 to $0.38. Incoming from
continuing operations was $0.38 per share as compared to $.21 per
share in the same period of 1995.
Financial Position
The Company's financial position remains strong. Current assets
rose to $684.6 million, an $187.4 million increase from year end,
principally due to the proceeds from the sale of discontinued
operations which are awaiting distribution to shareholders. Current
liabilities increased by $40.3 million, reflecting liabilities
arising from the sale of discontinued operations, causing the
current ratio to drop from 11.2 to 1 at year end to 8.1 to 1 at the
end of the second quarter.
Because of the completion of these sales, revenues of the Company
will be materially lower than historical levels. Net income,
earnings per share and cash flows may also be materially different
than previous periods.
The Company increased its investment in marketable securities by
$63.5 million over year end. Net property, plant and equipment
increased by $20.8 million, largely in FECI. Deferred income taxes
grew by $60.7 million, due primarily to deferred taxes on the
proceeds of the condemnation sale to the State of Florida.
Stockholders' equity at September 30, 1996 was $38.86 per share, an
increase of $5.54 from December 31, 1995.
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
The Company has been contacted by the United States
Environmental Protection Agency regarding the remediation of
a designated Superfund site near Sharonville, Ohio. The
Company has denied any liability and intends to vigorously
oppose any attempt to impose any liability upon it for
the remediation of the site.
Item 6.Exhibits and Reports on Form 8-K
(a) Exhibits
10 Promissory Note
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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 Corporation
(Registrant)
/S/ J.M. Jones, Jr.
----------------------
J. M. Jones, Jr.
Vice President and CFO
/S/ D. M. Groos
----------------------
D. M. Groos
Comptroller
Exhibit Index
10 Promissory Note
27 Financial Data Schedule
PROMISSORY NOTE
$10,000,000 subject to
adjustment
May 30, 1996
For value received, the undersigned, FLORIDA COAST PAPER
COMPANY, L.L.C., a Delaware limited liability company ("Maker"),
promises to pay to St. Joe Forest Products Company, a Florida
corporation ("Payee"), or order, the principal amount of TEN
MILLION DOLLARS ($10,000,000.00), plus all amounts added to the
principal amount hereof pursuant to the proviso at the end of this
sentence, and to pay interest on such principal amount from the
date hereof until but not including the date of payment at the rate
of thirteen and one-quarter percent (13 1/4%) per annum, such
interest to be payable quarterly in arrears on the 1st day of
March, June, September and December of each year, commencing
September 1, 1996 (each, an "Interest Payment Date"); provided,
that the interest due on any Interest Payment Date may, at the
option of Maker, be added to the outstanding principal amount of
this Promissory Note and shall accrue interest thereon from and
after such Interest Payment Date. Maker shall be deemed to have
exercised such option unless Maker shall give written notice to
Payee at least five but no more than 30 days in advance of an
Interest Payment Date of Maker's intention to pay interest due on
such Interest Payment Date in cash. This Promissory Note shall
mature on June 1, 2007, at which time all principal and interest
shall be due and payable. Interest shall be calculated on the
basis of a 360 day year. Maker shall pay interest (including post-
petition interest in any proceeding under any applicable Bankruptcy
Law) on overdue principal at the rate equal to 1% per annum in
excess of the rate set forth above to the extent lawful.
Maker shall make each cash payment hereunder not later than
12:00 noon (Eastern time) on the day when due (or if such day is a
Saturday, Sunday or other day on which commercial banks in New York
City are authorized or required by law to close, on the next
succeeding day which is not such a day) in lawful money of the
United States of America and in immediately available funds, by
wire transfer to such account as Payee may designate from time to
time.
If any of the following events ("Events of Default") shall
have occurred and be continuing:
(a) default for thirty (30) days in the payment, when due, of
any installment of interest on this Promissory Note;
(b) default in the payment, when due, of the principal of
this Promissory Note;
(c) failure of the Maker for 30 days after notice to comply
with any of the covenants under the heading "Special Covenants"
below; provided such notice requirement shall not apply to
paragraphs (e), (f) or (g) thereunder;
(d) failure by Maker for thirty (30) days after notice from
Payee to comply with any of Maker's other covenants and agreements
set forth in this Promissory Note;
(e) the occurrence of any "Event of Default" as defined in
the Indenture of even date herewith among Maker and Norwest Bank
Minnesota, N.A., trustee, as in effect on the date hereof (the
"Indenture");
(f) Maker or any Significant Subsidiary or any group of
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary (i) commences a voluntary case under Title 11, U.S. Code
or any similar federal or state law for the relief of debtors (a
"Bankruptcy Law"), (ii) consents to the entry of an order for
relief against it in a involuntary case under a Bankruptcy Law,
(iii) consents to the appointment of a custodian of it or for all
or substantially all of its property, (iv) makes a general
assignment for the benefit of its creditors, or (v) generally is
not paying its debts as they become due; or
(g) a court of competent jurisdiction enters an order or
decree under Bankruptcy Law that (i) is for relief against Maker or
any Significant Subsidiary, or group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary, in an
involuntary case, (ii) appoints a custodian of Maker or any
Significant Subsidiary, or group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, or for all or
substantially all of its property, or (iii) orders the liquidation
of Maker or any Significant Subsidiary, or group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary,
and the order or decree remains unstayed and in effect for sixty
(60) consecutive days,
then Payee may declare the unpaid principal amount of this
Promissory Note, together with all interest accrued thereon, to be
immediately due and payable. Notwithstanding the foregoing, in the
case of an Event of Default specified in clause (f) or clause (g)
above, this Promissory Note will become immediately due and payable
without further action by or notice from Payee. The ability of
Payee to enforce this Promissory Note is subject to the terms and
provisions of this Promissory Note, including, without limitation,
the terms and provisions of the immediately following paragraphs.
Maker may not make any cash payment upon or in respect of this
Promissory Note if (i) a default in the payment of the principal
of, premium, if any, or interest on any indebtedness of Maker with
respect to the Senior Secured Notes (including any refinancing
thereof, provided that the amount of such refinancing shall not
exceed the principal amount of the Senior Secured Notes that is
refinanced plus applicable fees charged or incurred in connection
with such refinancing) ("Senior Debt") occurs and is continuing
beyond any applicable period of grace; or (ii) any other default
occurs and is continuing with respect to any Senior Debt that
permits, or that with the giving of notice or the passage of time
would permit, holders of such Senior Debt to accelerate its
maturity; or (iii) such payment would constitute a default with
respect to any Senior Debt that permits, or that with the giving of
notice or the passage of time would permit, holders of such Senior
Debt to accelerate its maturity. Payments on this Promissory Note
may and shall be resumed upon the date on which such default is
cured or waived, unless the maturity of any Senior Debt has been
accelerated.
Upon (i) any acceleration of the principal amount of this
Promissory Note because of an Event of Default, or (ii) any
distribution of assets of Maker upon any dissolution, winding up,
or liquidation of Maker:
(1) the holders of all Senior Debt shall first be
entitled to receive in full all amounts (including
interest) due thereon before the holder of this
Promissory Note is entitle to receive payment on
account of the principal of or interest on this
Promissory Note;
(2) any payment or distribution of assets of Maker of
any kind or character, whether in cash, property or
securities (other than securities of Maker or of
any other corporation or limited liability company
provided for by a plan or reorganization or
readjustment, the payment of which is subordinated,
at least to the same extent as provided in this
Promissory Note, to the payment in full without
diminution or modification by such plan of all
Senior Debt) to which the holder of this Promissory
Note would be entitled except for the provisions of
this Promissory Note shall be paid by the
liquidating trustee, agent or other person making
such payment or distribution directly to the
holders of Senior Debt to the extent necessary to
pay in full all Senior Debt remaining unpaid after
giving effect to any concurrent payment or
distribution to the holders of such Senior Debt;
and
(3) in the event that, notwithstanding the foregoing,
any payment or distribution of assets of Maker of
any kind or character (other than securities of
Maker or of any other corporation or limited
liability company provided for by a plan of
reorganization or readjustment, the payment of
which is subordinated, at least to the same extent
as provided in this Promissory Note, to the payment
in full without diminution or modification by such
plan of all Senior Debt) shall be received by the
holder of this Promissory Note with actual
knowledge that such payment is prohibited hereby or
is required to be paid over to the holders of
Senior Debt before all Senior Debt is paid in full,
such payment or distribution shall be held in trust
for the benefit of, and shall be paid over to, the
holders of Senior Debt remaining unpaid (or to the
representatives or trustees acting on their behalf)
until all such Senior Debt shall have been paid in
full, after giving effect to any concurrent payment
or distribution to the holders of such Senior Debt.
Subject to the payment in full of all Senior Debt, the holder of
this Promissory Note shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of
cash, property or securities of Maker applicable to the Senior Debt
until the principal of and all interest accrued on this Promissory
Note shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of Senior Debt which
otherwise would have been payable or distributable to the holder of
this Promissory Note shall, as between Maker, its creditors other
than the holders of Senior Debt, and the holder of this Promissory
Note, be deemed to be a payment by Maker to or on account of the
Senior Debt, it being understood that the provisions of this
Promissory Note dealing with subordination are and are intended
solely for the purpose of defining the relative rights of the
holder of this Promissory Note, on the one hand, and the holders of
Senior Debt, on the other hand and shall not impair, as between the
Maker and the Payee, the obligations of Maker, which are absolute
and unconditional, to pay principal and interest in accordance with
the terms hereof.
Special Covenants
Maker hereby covenants and agrees with Payee that, so long as
any principal of or accrued interest on this Promissory Note
remains unpaid, Maker will comply with the following covenants:
(a) Simultaneously with the delivery thereof to the Holders
of Senior Secured Notes, but in any event within 10 days of the
filing thereof with the SEC, Maker shall deliver to Payee one copy
of all financial information and other reports required to be
delivered to the Holders of Senior Secured Notes pursuant to
section 4.03 of the Indenture.
(b) Simultaneously with the delivery thereof to the Holders
of Senior Secured Notes, Maker shall deliver to Payee one copy of
all certificates and statements required to be delivered pursuant
to Section 4.04 of the Indenture.
(c) Neither Maker nor any of its Subsidiaries shall, directly
or indirectly, create, incur, assume or suffer to exist any Lien on
any asset acquired by Maker or any of its Subsidiaries pursuant to
that certain Asset Purchase Agreement dated as of November 1, 1995
among Maker, Payee and certain other parties, or any income or
profits therefrom or assign or convey any right to receive income
therefrom, except Liens referred to in clauses (i), (ii), (ix) and
(x) of the definition of Permitted Liens.
(d) Maker will permit any authorized representatives
designated by Payee, at the sole cost and expense of Payee, to
visit and inspect any of the properties and records of Maker,
including its financial records, and to discuss Maker's affairs and
finances with its officers and employees, all upon reasonable
notice and as often as may be reasonably requested.
(e) Maker and its Restricted Subsidiaries shall comply with
Section 4.07 of the Indenture provided that, for purposes hereof,
the definition of Disqualified Stock shall be amended to change the
words "the Senior Secured Notes mature" at the end thereof to read
"this Promissory Note matures".
(f) Neither Maker nor any of its Subsidiaries will permit any
assets securing the Senior Secured Notes to secure any other
Indebtedness unless this Promissory Note is paid in full; provided
that the foregoing shall not prohibit Maker and its Subsidiaries
from permitting such assets to secure any Indebtedness incurred to
refinance the Senior Secured Notes provided that the amount of such
Indebtedness so secured shall not exceed the principal amount of
the Senior Secured Notes that is refinanced plus any applicable
fees charged or incurred in connection with such refinancing.
(g) In the event that the Company shall be required to
commence an offer to all Holders to repurchase the Senior Secured
Notes pursuant to Section 4.10 of the Indenture, the Company, to
the extent not prohibited by the Indenture, shall make a similar
offer to repurchase this Promissory Note to the Payee in
substantially the manner provided in Section 3.09 of the Indenture
with respect to a Repurchase Offer; provided that the offer to
repurchase this Promissory Note shall be at the amount of the then
outstanding principal plus accrued interest to the date of such
repurchase, and provided that any such offer to repurchase shall be
limited to the amount by which the Excess Proceeds exceed the
aggregate amount required to be paid to the Holders of Senior
Secured Notes who accept the Repurchase Offer pursuant to
Section 4.10.
For purposes hereof this Promissory Note, the terms
"Bankruptcy Laws," "Excess Proceeds," "Excess Proceeds Offer,"
"Holders," "Disqualified Stock," "Indebtedness," "Permitted Liens,"
"Restricted Subsidiary," "SEC", "Senior Secured Notes,"
"Significant Subsidiary," and "Subsidiary" shall have the
respective meanings set forth in the Indenture.
This Promissory Note may be repaid by Maker, in whole or in
part, at any time and from time to time, without penalty or
premium, upon at lease one (1) day's prior written notice to Payee.
Maker waives presentment, demand, protest and, except as
expressly set forth in this Promissory Note, notice thereof or of
dishonor.
Maker agrees to pay all costs and expenses, including without
limitation reasonable attorney's fees, incurred in connection with
the interpretation or enforcement of this Promissory Note. None of
the provisions hereof and none of Payee's rights or remedies
hereunder on account of any past or future defaults shall be deemed
to have been waived by Payee's acceptance of any past due
installments or by any indulgence granted by Payee to Maker.
This Promissory Note has been executed and delivered in and
shall be construed and interpreted in accordance with and governed
by the laws of the State of Florida.
IN WITNESS WHEREOF, Maker has caused this Promissory Note to
be duly executed the day and year first above written.
FLORIDA COAST PAPER COMPANY, L.L.C.
(a Delaware limited liability company)
By: /s/ Mary B. Dopslaff
Name: Mary B. Dopslaff
Title: Vice President
5
9-MOS YEAR
DEC-31-1996 DEC-31-1995
SEP-30-1996 DEC-31-1995
491,992 16,802
103,308 189,865
44,767 44,390
0 0
17,133 20,592
684,653 497,184
1,145,941 804,974
320,125 0
1,817,606 1,530,994
90,379 44,469
0 0
8,714 8,714
0 0
0 0
1,176,450 0
1,817,606 1,530,994
198,501 0
335,707 0
81,465 0
209,663 0
0 0
0 0
426 0
158,050 0
71,211 0
76,917 0
1,274 0
0 0
0 0
168,034 0
5.51 0
5.51 0
