View:
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File No. 0-12001
S T. J O E P A P E R C O M P A N Y
(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)
Registrant's telephone number, including area code: (904) 396-6600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, No par value New York Stock Exchange
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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 [ ]
The aggregate market value of registrant's Common Stock held by non-
affiliates based on the closing price on March 15, 1994 was $492,081,808.
As of March 15, 1994 there were 30,498,650 shares of Common Stock No par
value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(Specific pages incorporated are identified under the applicable item herein.)
Portions of the Registrant's Annual Report to Stockholders for 1993 (the 1993
Annual Report to Stockholders) are incorporated by reference in Part I and
Part II of this Report.
Portions of the Registrant's definitive Proxy Statement dated March 31, 1994
(the "Proxy Statement") are incorporated by reference in Part III of this
Report. Other documents incorporated by reference in this Report are listed
in the Exhibit Index.
PART I
ITEM 1. BUSINESS
As used throughout this Form 10-K Annual Report, the terms "St. Joe",
"Company" and "Registrant" means St. Joe Paper Company and its consolidated
subsidiaries unless the context indicates otherwise.
GENERAL
St. Joe was incorporated in 1936 under the laws of the State of
Florida. The general purposes of the Company at incorporation were (1) to
manufacture, buy, sell, import, export and deal in pulpwood, woodpulp, paper,
paperboard, all raw material thereof, and products and by-products therefrom
and to establish, operate and maintain mills, plants and factories for such
purpose and (2) to buy, hold, own, work, develop, improve, divide or sub-
divide, sell, convey, lease, mortgage, pledge, exchange and otherwise deal in
and dispose of all kinds of real and personal property.
The Executive Offices of St. Joe are located in Suite 400, duPont
Center, 1650 Prudential Drive, Jacksonville, Florida, 32207, and its
telephone number is 904/396-6600.
St. Joe is at present primarily engaged in two industry segments: (1)
the growing and harvesting of timber, and the manufacturing, distribution and
sale of forest products and (2) transportation of goods by rail. The
Registrant also is engaged in three other industry segments in which it
derives income: (1) growing and processing of sugarcane into raw sugar, (2)
telephone communications and (3) real estate. Other income was derived from
Company investments in securities, gains on disposition of property and other
miscellaneous items.
Financial information as to revenue, operating profits and identifiable
assets by industry segment is set forth in footnote 12 to the Consolidated
Financial Statements on pages 33 and 34 of the 1993 Annual Report to
Stockholders of this Report. Below is a description of each of these
industry segments with information to the extent necessary and material in
order that the Company's business taken as a whole can be understood.
Forest Products
The Company is a vertically integrated producer of corrugated
containers. It owns approximately 700,000 acres of timberland (most of which
is located in northwestern Florida), a paper mill located in Port St. Joe,
Florida, and 16 container plants located throughout the eastern half of the
United States. The Company's timberland and forestry operations supply wood
chips and pulpwood to the mill, which produces linerboard, some of which is
bartered for corrugating medium. The container plants convert the linerboard
and corrugating medium into corrugated containers. The Company produces and
sells a wide variety of corrugated containers to processors and manufacturers
in the food, agricultural, paper, petrochemical, plastics, electronics,
-2-
electrical equipment and machinery industries. Demand for corrugated
containers is cyclical and correlates closely with real growth in the United
States gross national product and also with population and other demographic
factors.
The corrugated container industry is highly competitive, with over
1,500 container plants in the United States. When demand for corrugated
containers falls, the ability to maintain prices by adjusting inventory
levels is limited because container plants and paper mills operate most
economically at or near full capacity. In addition, although corrugated
containers are the dominant form of transport packaging nationally,
corrugated containers compete with various other packaging materials,
including paper, plastic, wood and metal.
The Company's operating strategy for its Forest Products sector has
been to reduce unit production costs by increasing operating efficiency and
maximizing capacity utilization. In addition, the Company emphasizes the
marketing and production of higher margin products such as the Company's
mottled white linerboard and high performance linerboard, over unbleached
linerboard.
The Company's paper mill located at Port St. Joe, Florida, produces
mottled white and unbleached linerboard, a principal component of corrugated
containers. The mill can produce linerboard in a full range of grades and
weights. Set forth below is certain information as to mill linerboard
production for the years indicated:
Linerboard Production
(In tons)
Total Average Daily
Year Production Production*
1993 444,005 1,254
1992 425,087 1,266
1991 433,352 1,308
1990 454,342 1,327
1989 457,638 1,386
*Average daily production is computed by dividing the total production of
each paper machine by the number of days on which such paper machine operates
each year.
In 1992 and 1993, approximately 42% and 45%, respectively, of mill
production in tons was mottled white linerboard marketed by the Company under
the trade name "Crest White." Demand for mottled white linerboard has
increased significantly in recent years. Mottled white linerboard, which is
more aesthetically attractive than unbleached linerboard, in 1992 sold at
approximately 30% over the price of unbleached linerboard while in 1993 this
upcharge was 49%. Since mottled white linerboard offers significantly higher
-3-
profit margins than unbleached linerboard, the Company has emphasized, and
expects to continue to emphasize, the production of mottled white over
unbleached linerboard. Approximately 72% of the Company's mottled white
linerboard production in 1993 was traded to other producers under trade
agreements in exchange for corrugating medium or kraft liner.
The capital expenditures at the paper mill in 1993 for maintenance and
upgrade were $18.5 million which compares to $38.6 for the 1992 capital and
maintenance expenditures. The 1994 budget for maintenance and upgrade at the
paper mill is $23.4 million.
The Company has sought to lower its energy costs at the mill by using
increasing amounts of timber harvesting and pulp mill by-products as energy
sources. The mill's boilers use "biomass" fuel (scrub wood, bark and timber
wastes) and "black liquor" solids (a by-product of the wood pulping process)
to meet a substantial percentage of the mill's energy requirements. In 1993
fuel oil and natural gas accounted for 34.4% of mill energy requirements.
Black Liquor solids and biomass supplied the balance of mill requirements.
Approximately 41% of the biomass burned at the mill in 1993 was harvested
from lands owned by the Company or by-products of the Company's timber
harvesting and woodchipping operations.
The Company owns 16 container plants located throughout the eastern
half of the United States. Linerboard and corrugating medium are the
principal materials used in the manufacture of corrugated containers. The
container plants have an aggregate production capacity of approximately 8
billion square feet of containerboard per year. The plants in 1993 produced
approximately 7.1 billion square feet of containerboard. In 1993, fourteen
of the container plants operated on two shifts, one on one shift and one on
three shifts. The Company could increase capacity by running the one plant
that is on one shift, two additional shifts, as well as adding a third shift
to the fourteen plants presently on two shifts. The Company's paper mill
production resulted in supplying of approximately 87% of the container
plants' requirements for linerboard and corrugating medium for 1993 which was
up from the 84% that was supplied in 1992.
The Company's container plants accounted for approximately 1.9% of the
total national industry shipments during 1993 down from the approximately
2.1% in 1992. The Company's corrugated container business services
approximately 2,750 customers. The single largest customer accounted for
approximately 4.2% of the Company's corrugated container shipments for 1993
and the ten largest customers accounted for approximately 16.9% of the
Company's 1993 corrugated container revenues.
The Company considers its container plant facilities to be in
satisfactory condition. To maintain and upgrade these facilities, the
Company spent $6.3 million in 1993 and has adopted a budget of $7.5 million
for its 1994 capital maintenance and upgrade program. The Company maintains
a laboratory facility located in Louisville, Kentucky, which tests container
components, materials and workmanship to ensure quality control for container
products.
-4-
Company-owned timberlands are the principal source of woodchips and
pulpwood for the paper mill. Cellulose fiber which is produced primarily
from wood chips and pulpwood is the principal raw material used in the
manufacture of linerboard. The Company owns approximately 700,000 acres of
timberland, of which approximately 665,000 acres are situated in northwestern
Florida and the remaining 35,000 acres are situated in southern Georgia.
Presently, approximately 598,000 acres have been planted as managed
plantations to facilitate harvesting and reforestation and to maximize timber
yields. During the current planting season, November, 1993 through the end
of February, 1994 the Company planted 18,305,000 seedlings on 24,775 acres.
The Company owns, in total, approximately 1.1 million acres of land.
Six forestry units and a wood procurement unit manage the timberlands.
The timberlands are harvested by local contractors pursuant to agreements
which generally are renewed annually. Timber harvested from Company
timberlands accounted for 1,071,398 tons or 56% of mill wood requirements in
1993, compared to 60% in 1992. The Company has wood chipping facilities
located at the paper mill, Lowry and Newport, Florida.
Recycled fiber is obtained in part from third parties and in part from
mill operations. In 1993 and 1992, recycled or secondary fiber supplied
approximately 17% and 15% respectively of the mill's total fiber
requirements. We expect to use approximately 22% recycled fiber in our 1994
production.
The Company operates a nursery located in Capps, Florida. The nursery
conducts research to produce faster-growing, more disease-resistant species
of pine trees, and produces seedlings for planting on Company-owned
plantations. In addition, the Company in cooperation with the University of
Florida, is doing experimental work in genetics on the development of
superior pine seed orchards. In 1993 and 1992 capital expenditures in the
forestry operations were approximately $5.3 million and $5.1 million,
respectively. The Company has adopted a capital expenditure program for 1994
to reinvest approximately $6.7 million in these operations. These
expenditures include our nursery expense and includes our tree planting.
In 1993 the mill at Port St. Joe spent $1.2 million on environmental
related items. These were in the area of asbestos removal and disposal,
recovery boiler precipitator, and the heat exchanger on steam stripper. The
Company has budgeted $3.9 million in 1994 for predominantly capitalized
environmental items. The main items in 1994 will be for additional asbestos
removal and disposal, Phase II - replacing recovery boiler precipitator,
disposal of equipment containing PCB and upgrade, and installing system to
remove solids and enlarge effluent ditch in the recovery boiler area.
The mill at Port St. Joe is in compliance at this time in all
environmental areas under the present existing laws, rules and permits as far
as we know. The Company's concerns at this point are with proposed new
regulations for permits in the area of both air and water under the new
"Cluster Rule". The "Cluster Rule" is a proposal to combine the air and
water regulations into one. The U.S. Environmental Protection Agency (EPA)
-5-
is also considering adding the new solid waste rule to the "Cluster Rule"
umbrella. The proposed "Cluster Rule" was issued in draft form in the fall
of 1993. Additional changes to the air rules will be announced in the last
half of 1994. Compliance with the final rules as presently drafted will be
required by 1998. Our greatest concern remains in the area of dioxin and
other toxins in the dioxin family. If the industry continues to be allowed
to bleach via chlorine substitution as proposed in the new rule, the industry
will be able to comply. If, however, the proposed regulations are changed to
require total chlorine free bleaching, then the paper industry, as well as,
a number of other industries and cities will be faced with major expenditures
in order to comply.
In the container plants we have no major environmental problems that we
are aware of at this time. In 1993, we had some expense at several plants,
mostly for tank removals, with the total for all plants being less than $0.2
million. We anticipate spending approximately $0.8 million in 1994 on
similar items.
The forestry operation continues to have no major environmental
problems. The one area of expense in 1993 was at one of the forestry units
in connection with fuel contamination of soil. Approximately $0.1 million
was spent on this in 1993 and it is estimated that $0.3 will be spent in 1994
for clean-up and monitoring the ground water. We do not expect any problems
at any of our other forestry units.
Transportation
The Company owns 54% of Florida East Coast Industries, Inc. which in
turn owns 100% of Florida East Coast Railway Company (FEC). The Company also
owns and operates Apalachicola Northern Railroad Company (ANRR). The common
stock, par value $6.25 per share, of Florida East Coast Industries, Inc. is
registered pursuant to Section 12(b) of the Securities Exchange Act
(Commission file number 2-89530).
Both FEC and ANRR are subject to regulation by the Interstate Commerce
Commission and, in some areas, the State of Florida. These governmental
agencies must approve, prior to implementation, changes in areas served and
certain other changes in operations of FEC and ANRR.
The principal business of FEC is that of a common carrier of goods by
rail over 442 miles of main and branch line track all in the state of
Florida. The mainline extends 351 miles from Jacksonville on the north, to
Miami on the south, with 91 miles of branch line extending west from Fort
Pierce to Lake Harbor. Principal commodities carried by the FEC in its rail
service include automotive vehicles, crushed stone, cement, trailers-on-
flatcars, containers-on-flatcars and basic consumer goods such as food. FEC
is the only railroad serving the area between Jacksonville and West Palm
Beach on the east coast of Florida. Common motor carriers are competitors
throughout the entire transportation system and CSX Transportation, Inc. is
a competitor over that section of track extending southward from West Palm
Beach to Miami for rail traffic, excluding that of trailer-on-flatcar and
container-on-flatcar traffic.
-6-
The operating statistics set forth below reflect FEC's performance for
the latest three years:
Operating Statistics
(In thousands except percentage data)
Years Ended December 31,
1993 1992 1991
Operating revenues $ 162,318 $ 138,736 $ 138,212
Operating income 28,843 18,876 11,900
Operating margin 17.8% 13.6% 8.6%
Tonnage 14,709 13,772 16,107
Revenue ton miles 4,257,000 4,157,594 3,862,377
The FEC had capital expenditures in 1993 of $19.8 million in addition
to maintenance expenditures of $53.7 million. This compares to 1992 capital
expenditures of $17.9 million and 1991 of $14.6 million. The maintenance
expense in 1992 was $33.8 million and 1991, $56.0 million.
ANRR is a short line railroad that operates exclusively within the
state of Florida, over 90 miles of main track and 6 miles of rail yard track
extending from Port St. Joe to Chattahoochee where it connects with an
unaffiliated carrier. All 90 miles of the main line are 100% concrete
crossties. Although it is a common carrier, most of ANRR business consists
of carrying coal and items related to wood. In 1993, 67.5% of its carloads
were carrying coal. The carloads of coal carried in 1992 and 1991 were 67.8%
and 67.3% respectively of the total. The other main commodity carried is
wood products, consisting of pulpboard, woodchips and pulpwood. These
products totaled 24.6% of the total 1993 carloads, 24.1% in 1992 and 24.3% in
1991. The other items carried by ANRR are tall oil chemicals, stone and clay
products and recyclable items. Certain operating statistics for the latest
three years are as shown:
Operating Statistics
(In thousands except percentage data)
Years Ended December 31,
1993 1992 1991
Operating revenues $ 12,685 $ 12,366 $ 12,865
Operating income 1,969 2,614 2,558
Operating margin 15.5% 21.1% 19.9%
Tonnage 4,187 4,047 4,149
Revenue ton miles 401,907 380,696 389,418
-7-
Capital expenditures by the ANRR in 1993 were $4.2 million which
compares to 1992 capital expenditures of $3.4 million and 1991 of $3.0
million. The ANRR has budgeted $4.7 million in 1994 for capital
expenditures.
FEC is a party to various proceedings before state regulatory agencies
relating to environmental issues. In addition, FEC, along with many other
companies, has been named a potentially responsible party in proceedings
under Federal statutes for the clean up of designated Superfund sites at
Jacksonville, Florida and Portsmouth, Virginia. FEC has made an estimate of
its likely costs attributed to sites for which its clean up responsibility is
probable and a liability has been recorded. Such liability is not material
to the financial position of the FEC. Based upon managements 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. FEC is not aware of any monetary sanctions to be proposed which
in the aggregate, are likely to exceed $100,000, nor does it believe that
corrections will necessitate significant capital outlays or cause material
changes in its business.
ANRR has environmental problems involving stormwater run-off and
contaminated soil from fuel oil and gasoline. These items cost approximately
$1.8 million in 1993 for both capital expenditures and expense and are
budgeted for $1.0 million in 1994.
Sugar
In 1971, the Company acquired a 60% interest in Talisman Sugar
Corporation (TSC) which is a grower of sugarcane located in the fertile Belle
Glade area in south central Florida. In addition to growing sugarcane TSC
harvests the cane and processes the cane into raw sugar. In 1984, the
Company acquired the remaining 40% interest in TSC, thereby owning 100% of it
today.
The Company at the end of 1993 owned approximately 47,900 acres of
agricultural land and leased approximately 7,200 acres for use in its
sugarcane growing operation. Sugarcane production and processing is seasonal
in nature. Sugarcane plantings generally yield two harvests before
replanting is necessary. The Company harvests its sugarcane crop in one-year
cycles, as do other Florida producers. The Company generally plants
sugarcane in the fall of each year. Harvesting of a crop generally commences
in October of each year and continues into the following March. During the
1993-1994 crop the TSC grew sugarcane on approximately 43,000 acres of land.
The majority of the Florida sugarcane producers, including TSC,
harvests sugarcane using mechanical cane harvesters. This is a change from
harvesting sugarcane by hand as was the historical practice. Cane cutting
and loading are performed with mechanized harvesters which reduces
significantly the labor requirements, resulting in substantial cost savings
and permits the grinding of the sugarcane more quickly after harvesting,
resulting in improved efficiency. Mechanized harvesting, however, is less
-8-
precise than manual harvesting, resulting in greater amounts of chaff and
trash being mixed in with the harvested sugarcane. As a result, a minimal
amount of sucrose is lost through leaching into the trash and chaff. In
addition, mechanized harvesting causes more damage to cane fields than manual
harvesting, resulting in slightly lower cane yields in subsequent crops.
Consequently, yields of sucrose from harvested sugarcane and its crop yields
per acre are generally slightly lower than those cut by hand. These negative
effects are far outweighed by the labor cost savings and other efficiencies
resulting from mechanized harvesting.
The Company's sugar mill has a grinding capacity of approximately
11,500 tons of sugarcane per day. The Company ground approximately 1,227,000
tons of sugarcane in 1991, approximately 1,296,000 tons in 1992 and
approximately 1,321,000 tons of sugarcane in 1993 from Company operated
lands. The amount of sugarcane ground in the years 1991, 1992 and 1993 from
prior years was greatly increased due to good weather conditions, and 1991
was the first year we had sugarcane from the additional lands purchased in
1989 and 1990. The Company ground an additional 170,000 tons in 1991 for
other sugar growers in exchange for a percentage of the sugar and molasses
obtained from this sugarcane. In 1992 and 1993 the Company did not grind any
cane grown by or for others. Total raw sugar production for the Company was
approximately 134,000 tons in 1991, 117,000 in 1992, and 119,000 in 1993.
These amounts include 10,000 tons in 1991, that were delivered to the other
sugar growers with whom the Company had the grinding arrangement explained
above.
The sugar mill is virtually energy self-sufficient, with almost all of
its energy requirements supplied through the use of bagasse, a by-product of
the mill's cane grinding operations. The Company harvests and processes its
sugarcane into raw sugar and sells its entire production to Everglades Sugar
Refinery, Inc., a wholly-owned subsidiary of Savannah Foods & Industries,
Inc., pursuant to a contract which was to expire in 1996. In 1993 this
contract was amended and is extended through the 1997/1998 crop year and is
automatically renewed each crop thereafter. Either party can decline to
renew by giving notice to the other party no later than October 1 of the
fourth year prior to the termination date. Under the contract, the Company
is paid for its sugar based on market prices.
The sugar industry is highly competitive. The Company competes with
foreign and domestic sugarcane and sugar beet processors, as well as
manufacturers of corn sweeteners and artificial sweeteners such as aspartame
and saccharin. Sugar is a volatile commodity subject to wide price
fluctuations in the marketplace. Sugar prices have been supported by the
United States Government through the Agriculture and Food Act of 1981 which
restricts sugar imports in order to support the domestic sugar price. This
Act was scheduled to terminate in 1990. The United States Congress in 1990,
passed the Food, Agriculture, Conservation and Trade Act of 1990, which
extended this price support program to cover the 1991-95 crops of sugarcane.
-9-
The Florida Department of Environmental Regulation with other state and
federal agencies continue to assess all farming operations, especially the
sugar operation in that area, for its effect on Lake Okeechobee. These state
and federal agencies currently are concerned with the phosphate in fertilizer
used by vegetable farmers and sugarcane growers, running into the Everglades.
These agencies want the farmers to reduce the amount of phosphate in the
storm water run-off from their property. As with the Forest segment of the
Company, the concern in the Sugar segment is with the new Clean Air Act and
not knowing at this time what will be the complete impact of the Act on this
operation. The sugarcane growers, as well as, TSC will need to get Title V
permits as required under the Clean Air Act. These permits presently are
required prior to November, 1995.
Capital expenditures by TSC in 1993 were $2.9 million and compares to
$7.4 million in 1992 and $1.0 million in 1991. The capital expenditures
budget for 1994 is $2.4 million.
The Company had only minor expenditures for environmental problems,
less than $0.2 million, in 1993. The only environmental problem TSC has, at
present, is in the removal of water from our property. The Water Management
District (WMD) required TSC to install equipment to monitor the quality and
quantity of water being pumped out of our pumping stations. We are, at
present, installing this equipment and this project should be completed by
the end of April, 1994.
Communications
St. Joe Communications, Inc. (SJCI) provides unregulated tele-
communications services such as the sale of communications systems and of
telephone equipment to commercial and residential customers and in addition
owns three regional operating telephone companies. The operating companies
provide local telephone communications services in 12 northwestern Florida
counties, 2 southern Alabama counties and 1 Georgia county through 19
exchanges located in the region which service approximately 36,900 access
lines. In addition to providing local exchange telephone service, the
Company's facilities are connected with other telephone companies and the
nationwide toll networks of long distance carriers. The Company also
supplies telephone and other communications service to Tyndall Air Force Base
pursuant to a long-term contract.
In addition to its regular telephone services, the Communications
segment participates in four limited partnerships with major telecommun-
ications companies as partners. These interests in the four partnerships
vary from 13% to 51% and are to provide cellular telephone service in their
operating territory. These four partnerships operate in the (1) Tallahassee
- - Perry, Florida area and serve six counties in Florida (2) Port St. Joe,
Florida and serve four counties in Florida (3) Fort Walton Beach, Florida
area and serve five counties in Florida and (4) southeast Alabama serving
twelve counties in Alabama. These partnerships operated 50 cell sites at
December 31, 1993 having added 21 cell site in 1993 and we anticipate adding
16 more in 1994.
-10-
The Company owns and leases to MCI on a primary term of ten years, with
renewal option provisions, a fiber optic transmission network extending from
Fort Walton Beach to Tallahassee of approximately 150 miles. We also own
fiber optic routes from Port St. Joe to Blountstown, Carrabelle, and Tyndall
Air Force Base, Blountstown to Bristol and Perry to Keaton Beach and one-half
of the distance from Perry to Tallahassee. These locations are all in
Florida and total over 290 miles. This network is used exclusively to serve
intercompany and intracompany routes. The intracompany routes are wholly
within each company and are major feeder routes between exchanges and/or
electronic remote facilities associated with the various exchanges. The
companies will continue to install fiber optic cable for these same basic
transmission functions.
SJCI has a policy to invest in the latest, most advanced equipment and
technology. In keeping with this policy SJCI expended $5.3 million on
capital improvements in 1993 which compares to $7.6 million that was spent in
1992 and $6.3 million in 1991. SJCI has budgeted $5.0 million for 1994
capital improvements. The Communications operations are subject to
regulations by the Public Service Commissions of the states of Florida and
Alabama with respect to intrastate services and the Federal Communications
Commission with respect to interstate services. The operating companies are
limited to certain specified rates of return on its regulated operations and
in 1990 and 1991 exceeded these permitted rates of return and were required
to rebate the excess revenue to its customers.
Real Estate
The Real Estate segment of the Company consists of two operations, one
a division of St. Joe known as Southwood Properties (Southwood), and Gran
Central Corporation (Gran Central) a subsidiary of Florida East Coast
Industries, Inc. The Company reorganized into industry segments in 1985 and
at that time put most of St. Joe's investment and developable real estate
into Southwood. Gran Central was incorporated in 1981, but was not very
active until 1984 when, by reorganization, it received all Florida East Coast
Industries, Inc. non-operating real estate. The setting up of the Real
Estate segment was done to make for more efficient management and for better
planning of future development, sales and/or leasing of various parcels of
property. The property in this segment is suited for development in all
areas, commercial, industrial, residential and resort. The Company began in
the mid 80's to actively pursue plans to develop these real estate
properties. The Real Estate segment became a significant business operation
and for the first time in 1987 was reported as a separate segment of the
Company.
The Company has not and does not intend to enter into any debt
financing arrangements in connection with its development activities.
Rather, the Company intends to fund those projects with cash from operations
and from sales of certain properties. Because the Company will not incur
significant financing costs, the Company believes that it will bring a long-
term perspective to its development strategy and will be better able to
-11-
withstand any cyclical downturns in the Florida real estate market. In
addition, the Company intends to take a conservative approach to development
and to develop projects only to the extent market conditions and internally
generated funds permit. Accordingly, it can be expected that it will take
many years before the Company may be able to complete developments covering
significant portions of its developable properties. The Company's objective
is to emphasize the long-term capital appreciation of its real estate assets
and as a consequence, the Company expects that substantially all of the cash
flow generated from real estate development activities will be reinvested in
these activities.
The growth of the panhandle area, where the Company owns significant
acreage, is expected to continue, although at a much lower rate than is
generally expected for the rest of the state. The state's fastest population
and employment growth areas are expected to be along both coasts (excluding
the panhandle region) and in central Florida. Gran Central owns sizable
acreage within several high-growth areas along Florida's east coast,
including, but not limited to, the West Palm Beach, Melbourne-Titusville,
Daytona Beach, Miami-Hialeah and Fort Pierce areas.
Although this growth has provided, and is expected to continue to
provide, significant real estate development opportunities, there is
substantial concern among state and local authorities about the impact that
this development may have on the environment and facilities and services
provided by municipalities. As a result, land use and environmental
regulations are becoming more complex and burdensome. Development of real
property in Florida entails an extensive approval process which involves
regulatory agencies with overlapping jurisdictions. The process requires
compliance with the Local Government Comprehensive Land Development
Regulations Act (the "Growth Management Act"). In addition, development
projects that exceed certain specified regulatory thresholds require approval
of a comprehensive Development of Regional Impact (DRI) application by a
state-appointed regional planning council. Compliance with the Growth
Management Act and the DRI process is usually lengthy and costly and can be
expected to have a material effect on the Company's real estate development
activities in the area of land use and its application to wetlands.
Southwood manages the extensive properties that the Company owns and
has identified as suitable for development in the Florida panhandle and in
St. Johns county. These wooded properties include substantial gulf, lake and
riverfront acreage and, therefore, are well suited to residential and resort
development, including development as large residential and mixed-use planned
communities. A portion of the Company's property along the northwestern
coast of Florida is suitable for commercial or industrial development.
Southwood's general strategy for developing its residential and mixed-use
properties will be to install infrastructure improvements, such as sewers,
utility hookups and roads, and to sell lots to other developers or
individuals for building in accordance with the master development plan
formulated for the community. At present, the Company does not intend to
build individual homes.
-12-
In 1991, Southwood completed the construction of its first office
building containing 11,700 square feet. This building is in the Southwood
Center Office Park, Panama City, Florida and at December 31, 1993 was 100%
leased. Site work needed to start the next building at this location was
completed during 1993 and construction will start in the second half of 1994.
Southwood, in 1993, sold the remaining 16 lots in Woods I, 42 of the 44 lots
in Woods II and 7 lots of the remaining 8 lots in the Woodmere subdivisions,
all being in Panama City. The Company sold 47 of the 67 lots for sale at Old
Florida Beach subdivision, Walton County, Florida. One lot was used for a
swimming pool and pool house which was completed in 1993. In 1993 design and
permitting began in Phase III of the Woods for 50 lots with construction to
begin by midyear and sales expected by late 1994. The Retreat, which will be
a 100 lot, gulf-front subdivision near Old Florida Beach in Walton County is
currently in the design and permitting stage. Phase I of 50 lots will be
completed this year with the first sales anticipated for 1995. Design is
currently taken place and permits being sought for a 200 lot subdivision in
Panama City Beach. Phase I of this project being 45 lots will start this
year with the first sales taking place in late 1994 or early 1995. Southwood
had approximately $1.5 million in capital expenditures in 1993 compared to
$1.3 million in 1992. The Company has budgeted $2.8 million in capital
expenditures for 1994.
The development properties owned and managed by Gran Central total
approximately 19,300 acres. All of these properties have a situs in thirteen
counties and are situated in a corridor running along the eastern seaboard of
Florida between Jacksonville and Miami. They include both urban and rural
properties on sites that range in size from parcels of under one acre to a
tract of over 6,000 acres. Many of the properties are located on strategic
urban streets or are easily accessible by major highways such as Interstate
95 or U. S. Route 1 and several are located adjacent to mass transit
facilities.
Approximately two-thirds of Gran Central's properties are located in or
adjacent to industrial and commercial corridors, and are well suited to the
development of office buildings, office/distribution parks and industrial
parks. Gran Central has been pursuing planning, permitting and
infrastructure development and now has approximately 3.2 million square feet
of buildings constructed or purchased under management. Approximately 88% of
this leasable space was under lease at year-end 1992 compared to 90% in 1992
and 91% in 1991. These are generally at its business/distribution parks,
using only a small percentage of its acreage. In 1993 Gran Central
completed six buildings with a total square footage of 743,000. Gran Central
had capital expenditures of $34.1 million in 1993 compared to $36.0 million
in 1992 and expects to spend $19.8 million in 1994.
Investments
The Company in addition to its operations has investments in U. S.
Government securities, tax exempt municipal bonds, certificates of deposit,
remarketed certificates of participation, common and preferred stocks, and
other corporate debt securities. The market value of these is set forth in
-13-
the consolidated schedule entitled Marketable Securities - Other Investments,
on page S-1 of this Report. The Company's marketable securities include
common stock of E. I. duPont de Nemours & Company, General Motors Corporation
and General Motors Corporation Class-H stock.
New Products
Refinements of existing products are developed and introduced in the
forest products segment of the Company every year. During 1993, no single
refinement or group of refinements was introduced which would require the
investment of a material amount of St. Joe's assets or which otherwise would
be considered material.
Sources and Availability of Raw Materials
During 1993 and 1994 to date, all of the raw materials the Company uses
were available in adequate supply from multiple sources.
St. Joe owns slightly over one million acres of timberland, of which
approximately 700,000 acres are suitable for growing commercial species of
trees. Such timberland is the main source of supply for its linerboard mill
which in turn supplies a major part of the requirements for the Company's
corrugated box operations. The remaining timber requirements for the
linerboard mill are obtained on the open market under short-term contracts.
Talisman owns or leases approximately 55,100 acres of land in Palm
Beach County, Florida, of which approximately 43,000 acres are being used to
grow sugarcane.
Patents and Licenses
St. Joe did not obtain any new patents or licenses in 1993. The
Company has pending one application for a trademark in the Container Company.
Seasonality
The sugarcane production and processing segment is seasonal with one
sugarcane crop being harvested each year. None to little significant
seasonality exists for products or services in the other segments of the
Company.
Working Capital
In general, the working capital practices followed by the Company are
typical of industries in which it operates. During some periods the
accumulation of inventories in the sugar operations prior to expected
shipments reflects the seasonal nature of this industry and may require
periodic short-term borrowing.
-14-
Customers
Major customers exist for each of the Company's industry segments. TSC
has a contract with Everglades Sugar Refinery, Inc. to purchase the entire
raw sugar production. This contract runs through the 1997/1998 crop year and
is automatically renewed each crop thereafter. Either party can decline to
renew by giving notice to the other party no later than October 1 of the
fourth year prior to the termination date No single customer accounts for
10% or more of the Company's consolidated revenues.
Research and Development
St. Joe maintains a nursery and research facility in Capps, Florida,
which grows seedlings for use in reforestation of its lands. Experiments in
forestry genetics, including research on the production of faster growing,
more disease-resistant pine species, are also conducted at this facility.
The Company also participates through cooperation with the University of
Florida in their Genetics Co-op program. This experimentation work is in
genetics, plantation and fertilization. The amounts spent during the last
three fiscal years on Company-sponsored research and development activities
were not material.
Employees
The Company had approximately 5,160 employees at December 31, 1993.
Approximately 70% of the Company's employees are covered by collective
bargaining agreements with 9 different unions. These agreements generally
have terms of between one and four years and have varying expiration dates.
The Company considers its relations with its employees to be good.
Executive Officers of the Registrant
Set forth below are the names, ages (at March 15, 1994), positions and
offices held, and a brief account of the business experience during the past
five years of each executive officer.
Name Age Position with Company
Winfred L. Thornton 65 Chairman of the Board and Chief
Executive Officer since 1991;
President 1984-1991; Director since
1968; President and Chairman of
the Board of Florida East Coast
Industries, Inc. since 1984;
President of FEC 1964-1984.
Robert E. Nedley 55 President since 1991; Vice
President 1981-1991; Director since
1989.
-15-
Howard L. Brainin 64 Vice President and Director since
1992.
Edward C. Brownlie 56 Vice President - Administration
Director since 1982.
E. Thomas Ford 61 Vice President since 1981;
Director since 1989.
Stanley D. Fraser 69 Vice President since 1972;
Director since 1982.
There are no family relationships among the persons named above. All
officers serve at the pleasure of the Board of Directors of the Company and
there is no arrangement or understanding between any of the officers of the
Company and any other persons pursuant to which such officer was selected as
an officer. Each officer has been elected to the position shown until the
next annual election of officers, which is to be held on May 10, 1994.
ITEM 2. PROPERTIES
The principal manufacturing facilities and other materially important
physical properties of the Company at December 31, 1993 are listed below and
grouped by industry segment. All properties shown are owned in fee simple
except where otherwise indicated.
Corporate Facilities
Jacksonville, Florida - Occupies approximately one and one-half floors
of a four story Company-owned building.
Forest Products
Forestry Management Facilities
Albany, Georgia Port St. Joe, Florida
Hosford, Florida West Bay, Florida
Newport, Florida Wewahitchka, Florida
Chip Plants
Lowry
Newport
Nursery and Genetics Research Facility
Capps, Florida
Pulpwood Procurement Offices
Port St. Joe, Florida
Paper Mill
Port St. Joe, Florida
-16-
Container Manufacturing Plants
Atlanta, Georgia Lake Wales, Florida
Baltimore, Maryland (subject to Industrial
Birmingham, Alabama Revenue Bond Financing
Charlotte, North Carolina $8.5 million)
Chesapeake, Virginia Laurens, South Carolina
Chicago, Illinois Louisville, Kentucky
Dallas, Texas Memphis, Tennessee
Dothan, Alabama Pittsburgh, Pennsylvania
Hartford City, Indiana Port St. Joe, Florida
Houston, Texas
Marketing Offices
Union, New Jersey
(leased)
Agricultural Lands
The Company owns slightly over one million acres of agricultural lands
in Florida and Georgia and leases an additional 4,800 acres.
Transportation
FEC owns three four-story buildings in downtown St. Augustine which it
uses for its corporate headquarters. Its transportation facilities include
351 miles of main track, which is mostly 132# rail on concrete crossties, 91
miles of branch line track, 157 miles of yard switching track and 184 miles
of other track. FEC owns 79 diesel electric locomotives, approximately 2,810
freight cars, approximately 1,750 tractor and/or trailer units for highway
service, numerous pieces of work equipment and automotive vehicles. All
property and equipment owned is in good physical condition.
Sugar Operations
Belle Glade, Florida. The Company owns approximately 47,900 acres of
land and leases approximately 7,200 acres. In addition, it owns a raw sugar
mill and various types of agricultural equipment.
Communications - Telephone Exchanges and Offices
Alligator Point, Florida Keaton Beach, Florida
Altha, Florida Laurel Hill, Florida
Apalachicola, Florida The Beaches, Florida
Blountstown, Florida Paxton, Florida
Bristol, Florida Perry, Florida
Carrabelle, Florida Port St. Joe, Florida
Chattahoochee, Florida Tyndall AFB, Florida
Eastpoint, Florida Wewahitchka, Florida
Florala, Alabama Wing, Alabama
Hosford, Florida
-17-
Real Estate
The Company in its corporate and Southwood holdings owns approximately
50,550 acres of investment land the majority of which is located in West
Florida. The counties with the largest holdings at December 31, 1993 are as
follows:
County Acres
Bay 25,835
Franklin 7,049
Leon 9,759
St. Johns 4,321
Wakulla 1,153
Walton 2,012
In addition to these holdings the Company has another approximately 20,000
acres in West Florida that it considers investment or developable property.
Southwood owns an office building in Panama City, Florida which was completed
in 1991 and contains 11,700 square feet.
Gran Central at December 31, 1993 owned approximately 17,900 acres of
land held for lease development and/or sale. The largest holdings by
counties are as follows:
County Acres
Brevard 2,478
Dade 1,595
Duval 1,482
Flagler 3,462
Manatee 884
St. Johns 3,321
Volusia 3,136
Gran Central also owned at year-end 1993 forty-one buildings as
detailed below;
Number of Rentable Year
Location Buildings Type Square Feet Built
duPont Center 1987/
Jacksonville, FL 2 Office 144,000 1988
Barnett Plaza
Jacksonville, FL 1 Office 59,000 1982
Gran Park at
Interstate South Office/Showroom/ 1987/
Jacksonville, FL 6 Warehouses 260,000 1989
Gran Park at
the Avenues 2 Office/Showroom/ 101,000 1992
Jacksonville, FL Warehouses/
2 Office 145,000 1992/
1993
-18-
Gran Park at
Melbourne Office/Showroom/
Melbourne, FL 1 Warehouse 28,000 1989
Gran Park at
Lewis Terminals 1 Office/Showroom
Riviera Beach, FL Warehouse 62,000 1987
2 Rail Warehouses 176,000 1982/
1987
2 Cross Docks 29,000 1987
2 Cross Docks 46,000 1991
Gran Park - McCahill
Miami, FL 1 Rail Warehouse 302,000 1992
Gran Park at Miami
Miami, FL 4 Office/Showroom/ 291,000 1988/
Warehouses 1990/
1992
4 Office/Warehouses 382,000 1990/
1991/
1992/
1993
3 Rail Warehouses 258,000 1989/
1990/
1993
5 Front Load Warehouses 604,000 1991/
1992/
1993
1 Double Front Load
Warehouse 239,000 1993
Hialeah, FL 1 Cross Dock 20,000 1987
Pompano, FL 1 Rail Warehouse 54,000 1987
TOTAL 41 3,200,000
Realty's holdings include lands adjacent to Railway's tracks which are
suitable for development into office and industrial parks offering both rail
and non-rail-served parcels. Certain other holdings are in urban or suburban
locations offering opportunities for development of office building
structures or business parks offering both office building sites and sites
for flexible space structure such as office/showroom/warehouse buildings.
General
St. Joe considers that its facilities are suitable and adequate for the
operations involved. All facilities are being productively utilized in the
business.
-19-
ITEM 3. LEGAL PROCEEDINGS
The Forest Products segment of the Company has suits pending in several
counties in West Florida contesting ad valorem tax assessments. The Company
reported last year that it was having meetings with EPA to resolve the
alleged permit violations at the City of Port St. Joe Wastewater Treatment
plant during the last half of 1989. The Company has reached an agreement
with the U. S. Department of Justice and EPA to settle this suit with the
Company paying $325,000. The Judge in the case issued an order for dismissal
of the case in January, 1994. In February, 1994 the Company's mill was named
as a potentially responsible party under Federal regulations for the cleanup
of a designated Superfund site in Tampa, Florida. The alleged violation
occurred in the late 1970's or early 1980's. The Company has investigated
this claim and has found no evidence that we had material from our mill
dumped at this site and therefore, we should not have been named as a party
in this matter.
In the Transportation segment FEC has a suit pending against CSXT
Transportation, Inc. (CSXT) for their violations of the 1978 Agreement
between CSXT and FEC and in part, violations of the Sherman Act. This
complaint was filed as a result of General Motors Corporation moving their
automotive traffic from FEC to CSXT. FEC contends that CSXT has placed FEC
in a position that it cannot fairly compete with CSXT. In February 1993, the
U. S. District Court found that contract rates were included in the 1978
Agreement, but that CSXT cannot be required to establish an equal joint-line
contract rate since the Court views such action as a form of illegal price-
setting. This Order is being appealed to the U. S. District Court of
Appeals.
In 1992, CSXT petitioned the ICC to reopen the merger proceedings for
the purpose of eliminating the merger conditions set down by the ICC in the
1967 merger of ACL/SAL Railroads. Under the merger conditions set by the
ICC, CSXT is required to cooperate with the FEC in matters of rates, routes
and service covering traffic to and from West Palm Beach south. The request
of CSXT before the ICC is still in the opening evidence and argument stage.
The FEC is also involved in legal actions against the Florida
Department of Revenue (FDR), and several counties of the state, for its ad
valorem assessment covering the years 1987 through 1991. The FDR received a
favorable decision on this case in 1991 for the years 1987 and 1988 which the
FEC appealed. The years 1989 through 1991 which had been stayed, pending the
outcome of the above case, have now been assessed and form the basis for new
suits. In the third quarter of 1993 the FDR and FEC reached a settlement of
$13.5 million as the total amount of ad valorem taxes due for the years 1987
through 1991.
The FEC and ANRR are involved in various proceedings associated with
environmental issues. See page 8 under discussion of the Transportation
segment for details.
ANRR has filed action in the courts against the FDR and several
counties of the state on its ad valorem assessment covering the years 1987
through 1993. The suit covering the years 1987 and 1988 was being held in
obeyance, pending final determination of the companion case of the FEC
discussed above. Since the FDR settlement with the FEC, they have billed the
ANRR $0.3 million as the amount required to settle the case covering these
-20-
two years. The suit for the years 1989 through 1993 which was scheduled to
be heard by the courts in 1993 has been reset for 1994. The amount at issue
for these five years is approximately $0.6 million. The Company expects
these cases will be settled in 1994.
The Company knows of no other pending or contemplated legal proceedings
other than ordinary routine litigation incidental to the business or property
of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the Company's 1993
fiscal year to a vote of security holders, whether by solicitation of proxies
or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
STOCK AND RELATED STOCKHOLDER MATTERS
Incorporated by reference to the 1993 Annual Report to Stockholders on
page 15.
The Company has established a regular quarterly cash dividend of $.05
per share. The dividend of $.05 per share for the first quarter of 1994 was
payable on March 31, 1994 on record date of March 24, 1994.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to the 1993 Annual Report to Stockholders on
page 15.
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Incorporated by reference to the 1993 Annual Report to Stockholders
Balance Sheet - Page 17
Statement of Income - Page 19
Statement of Cash Flow - Page 23
-21-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements on page 16 to 34, inclusive and the
Independent Auditors' Report on page 35 of the Annual Report to Stockholder
for 1993 are filed as part of this Report and incorporated herein by
reference thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Reference is made to the information to be set forth in the section
entitled "Election of Directors" in the definitive proxy statement involving
the election of directors in connection with the Annual Meeting of Stock-
holders of St. Joe to be held on May 10, 1994 (the "Proxy Statement"), which
section is incorporated herein by reference. The Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1993, pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended.
The information required with respect to executive officers is set
forth in Part I of this Report under the heading "Executive Officers of the
Registrant", pursuant to instruction 3 to paragraph (b) of Item 401 of
Regulation S-K.
On December 27, 1993 the Alfred I. duPont Testamentary Trust, which
owned prior to that date 21,291,900 shares of the Company's common stock or
69.8%, transferred 222,799 shares of this stock to The Nemours Foundation
(Nemours). Nemours is a beneficiary of the Trust. The Trust did not file
Form 4, Statement of Changes of Beneficial Ownership of Securities and
Nemours did not file Form 3, Initial Statement of Beneficial Ownership of
Securities. The Trust and Nemours both timely filed Form 5, Annual Statement
of Changes in Ownership, which was due by the 45th day after the end of
calendar year 1993.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information to be set forth in the section
entitled "Compensation of Directors' in the Proxy Statement, which section is
incorporated herein by reference.
-22-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Reference is made to the information to be set forth in the section
entitled "Common Stock Ownership of Certain Beneficial Owners" and "Common
Stock Ownership of Management" in the Proxy Statement, which sections are
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT, SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in the accompanying Index
to Financial Statements and Financial Statement Schedules
are filed as part of this Report.
2. Financial Statement Schedules
The financial statement schedules listed in the
accompanying Index to Financial Statements and Financial
Statement Schedules are filed as part of this report.
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits
are filed as part of this Report.
(b) Reports on Form 8-K
None
-23-
ST. JOE PAPER COMPANY
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a) 1. and 2.)
Reference
Annual
Report
To
Form 10-K Stockholders
Page Number Page Number
Report of Independent Certified Public Accountants F-1 36
Consolidated Balance Sheet at December 31, 1993 and 1992 16
Consolidated Statement of Income for each of the three
years in the period ended December 31, 1993 18
Consolidated Statement of Changes in Stockholders' Equity
for each of the three years in the period ended
December 31, 1993 18
Consolidated Statement of Cash Flows for each of the
three years in the period ended December 31, 1993 22
Notes to Consolidated Financial Statements 24-35
Consolidated Schedules at December 31, 1993:
I - Marketable Securities - Other Investments S-1
Consolidated Schedules for each of the three years
in the period ended December 31, 1993:
V & VI - Property, Plant & Equipment/
Accumulated Depreciation S-2
VIII - Valuation and Qualifying Accounts S-3
X - Supplementary Income Statement Information S-4
XI - Real Estate and Accumulated Depreciation S-5-10
All other schedules have been omitted since the required information
is not present or not present in amounts sufficient to require submission of
the schedule or because the information required is included in the
consolidated financial statements, including the summary of significant
accounting policies and the notes to the consolidated financial statements.
-24-
ST. JOE PAPER COMPANY
INDEX TO EXHIBITS
(Item 14(a) 3.)
S-K
ITEM 601 Documents Page
(3) (a) Articles of Incorporation *
(3) (b) By-Laws *
(10) (b) Agreement between Apalachicola and
Seminole Electric Cooperative,
Incorporated dated October 14, 1982 *
(b) Agreement between Talisman Sugar
Corporation and Everglades Sugar
Refinery dated February 11, 1986 **
(21) Subsidiaries of St. Joe (filed
herewith and attached) E-1
(24) Power of Attorney E-2
*Incorporated herein by reference to Exhibits filed in connection
with St. Joe Paper Company Registration Statement on Form 10 as
filed with the Securities and Exchange Commission on April 30,
1984 (File No. 1-12001).
**Incorporated herein by reference to Exhibits filed with the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990.
-25-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 8, 1994.
ST. JOE PAPER COMPANY
By:
Stanley D. Fraser
Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 8, 1994.
Chairman of the Board and
W. L. Thornton* Chief Executive Officer
Winfred L. Thornton
Jacob C. Belin* Chairman of the Executive Committee
Jacob C. Belin
President, Chief
Operating Officer and
Robert E. Nedley* Director
Robert E. Nedley
Vice President and
Director (principal)
financial officer)
Stanley D. Fraser
Vice President and
Howard L. Brainin* Director
Howard L. Brainin
Vice President and
E. C. Brownlie* Director
Edward C. Brownlie
T. S. Coldewey* Director
Thomas S. Coldewey
-26-
Tully F. Dunlap* Director
Tully F. Dunlap
Vice President and
E. Thomas Ford* Director
E. Thomas Ford
Robert J. A. Irwin* Director
Robert J. A. Irwin
R. Eugene Taylor* Director
R. Eugene Taylor
W. Taliaferro Thompson, III* Director
W. Taliaferro Thompson, III
Comptroller (principal
accounting officer)
D. Michael Groos
By:
Stanley D. Fraser
Attorney-in-Fact
*Such signature has been affixed pursuant to Power of Attorney.
See Exhibit 24.
-27-
Independent Auditors' Report
The Board of Directors and Stockholders
St. Joe Paper Company:
Under date of February 28, 1994, we reported on the consolidated
balance sheets of St. Joe Paper Company and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements
of income, changes in stockholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1993, as
contained in the 1993 annual report to stockholders. These
consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the
year 1993. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related
financial statement schedules as listed in the accompanying index.
These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered
in relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the information
set forth therein.
As discussed in notes 2 and 3 to the consolidated financial
statements, the Company changed its method of accounting for
investments to adopt the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" at December 31, 1993. As discussed in notes 2
and 9, the Company changed its method of accounting for income
taxes effective January 1, 1993 to adopt the provisions of the
Financial Accounting Standards Board's SFAS No. 109, "Accounting
for Income Taxes."
KPMG PEAT MARWICK
Certified Public Accountants
Jacksonville, Florida
February 28, 1994
F-1
ST. JOE PAPER COMPANY
SCHEDULE I (CONSOLIDATED)
MARKETABLE SECURITIES - OTHER INVESTMENTS
December 31, 1993
(Dollars in thousands)
Name of issuer and Number of shares or Market Carrying
title of each issue principal amount Cost Value Value
Short-term
U. S. Government securities $28,000 principal $27,658 $ 28,214 $27,695
Tax exempt municipals (1) 2,375 principal 2,401 2,376 2,401
Remarketed certificates
of participation (1) 5,000 principal 5,000 5,028 5,028
Certificates of deposit (1) 31,063 principal 31,063 31,183 31,183
$66,122 $ 66,801 $66,307
Long-term
Common and preferred stocks:
E. I. duPont de Nemours &
Company 782,100 shares $ 1,051 $37,736 $37,736
General Motors Corporation 500,480 shares 455 27,464 27,464
General Motors Corporation
Class H 25,024 shares 13 976 976
Other common and preferred stocks 10,540 13,570 13,570
12,059 79,746 79,746
Marketable debt securities:
U. S. Government securities $35,842 principal $35,228 $ 36,341 $35,377
Tax exempt municipals (1) 31,277 principal 31,574 33,988 33,032
Mortgage Backed securities (1) 12,761 principal 7,564 8,160 7,570
Other corporate debt
securities(1) 3,740 principal 2,495 3,743 3,798
$76,861 $ 82,232 $79,777
$88,920 $161,978 $159,523
(1) Securities of any one individual issuer do not exceed 2% of total assets
of the Registrant.
S-1
ST. JOE PAPER COMPANY
SCHEDULE V & VI (CONSOLIDATED)
PROPERTY, PLANT & EQUIPMENT / ACCUMULATED DEPRECIATION
Years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Balance at Additions Balance
beginning of at Retire- at end
Year cost ments of year
Classification:
1993:
Land and timber $ 123,548 $ 4,027 $ 1,900 $ 125,675
Land improvements 24,431 247 50 24,628
Buildings 46,801 425 52 47,174
Machinery and equipment 1,068,499 46,893 12,942 1,102,450
Office equipment 6,667 112 422 6,357
Autos and trucks 6,866 1,006 667 7,205
Construction in progress 13,812 4,349 --- 18,161
Investment property 215,685 35,987 1,659 250,013
$1,506,309 $ 93,047 $17,692 $1,581,663
Accumulated depreciation(1)$ 522,885 $ 62,874 $11,818 $ 573,941
1992:
Land and timber $ 116,341 $ 9,078 $ 1,871 $ 123,548
Land improvements 23,232 1,222 23 24,431
Buildings 46,039 918 156 46,801
Machinery and equipment 982,733 98,184 12,418 1,068,499
Office equipment 7,017 249 599 6,667
Autos and trucks 6,797 654 585 6,866
Construction in progress 40,773 (26,961) --- 13,812
Investment property 178,601 37,392 308 215,685
$1,401,533 $120,736 $15,960 $1,506,309
Accumulated depreciation(1)$ 474,353 $ 59,757 $11,225 $ 522,885
1991:
Land and timber $ 112,984 $ 5,221 $ 1,864 $ 116,341
Land improvements 23,035 292 95 23,232
Buildings 45,587 688 236 46,039
Machinery and equipment 941,234 54,904 13,405 982,733
Office equipment 6,761 638 382 7,017
Autos and trucks 6,808 290 301 6,797
Construction in progress 30,228 12,037 1,492 40,773
Investment property 153,202 26,216 817 178,601
$1,319,839 $100,286 $18,592 $1,401,533
Accumulated depreciation(1)$ 434,192 $ 55,241 $15,080 $ 474,353
(1) The annual provisions for depreciation have been computed using both the
straight-line and accelerated methods principally in accordance with the
following estimated useful lives:
Estimated Useful life
Land and timber ----
Land improvements 20
Buildings 45
Machinery and equipment 10 - 30
Office equipment 6 - 10
Autos and trucks 3 - 6
Construction in progress ----
Investment property various
It is not practical to show accumulated depreciation to correspond with
the above classification as our accounting records do not provide such
information.
S-2
ST. JOE PAPER COMPANY
SCHEDULE VIII (CONSOLIDATED)
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Balance at Additions
Reserves included Beginning Charged to Balance at
in Liabilities of Year Expense Payments End of Year
1993
Accrued casualty reserves 22,916 2,443 2,448 22,911(a)
1992
Accrued casualty reserves 23,043 3,774 3,901 22,916(a)
1991
Accrued casualty reserves 18,382 10,282 5,621 23,043(a)
(a) Includes $11,601, $11,213 and $8,084 in current liabilities at December 31,
1993, 1992 and 1991, respectively. The remainder is included in "Accrued
casualty reserves and other liabilities."
S-3
ST. JOE PAPER COMPANY
SCHEDULE X (CONSOLIDATED)
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Charged to Costs and Expenses
Item Description 1993 1992 1991
Maintenance and repairs $93,803 $83,781 $84,118
Real estate taxes $16,632 $18,847 $21,128
All other expenses categories have been omitted since individually they
represent less than 1% of total consolidated revenue.
S-4
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED) REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1993, 1992 and 1991
(Dollars in thousands)
Initial Cost to Company
Costs
Buildings & Capitalized
Encum- Tenant Subsequent to
Description brances Land Improvements Acquisition
Duval County
Office Buildings (5) 0 1,153 6,200 25,374
Office/Showroom/Warehouses (8) 0 1,502 18,700
Land w/ Infrastructure 0 1,773 968
City & Residential Lots 0 371 5 77
Unimproved land & Misc Assets 0 5,735 4,325
St. Johns County
Land w/ Infrastructure 0 10 1,044
Unimproved land 0 2,631 411
Flagler County
Unimproved land 0 3,218 1,008
Volusia County
Unimproved land 0 3,651 499
Brevard County
Office/Showroom/Warehouse 0 73 1,890
Land w/ Infrastructure 0 3,797 0
Unimproved land 0 4,846 191
Indian River County
Unimproved land 0 218 156
St. Lucie County
Unimproved land 0 639 8
Martin County
Unimproved land 0 4,671 2,344
Palm Beach County
Office/Showroom/Warehouse 0 113 2,641
Rail Warehouses 0 449 4,097
Cross Docks 0 117 3,763
Land w/ Infrastructure 0 1,269 87
Unimproved land 0 1,605 0
Broward County
Rail Warehouse 0 85 1,584
Unimproved land 0 733 701
Dade County
Office/Showroom/Warehouses (4) 0 1,003 11,774
Office/Warehouses (4) 0 1,462 12,468
Rail Warehouses (4) 0 808 13,998
Cross Dock 0 137 1,018
Double Front Load Warehouse 0 768 5,376
Front Load Warehouses (5) 0 1,943 11,269
Land w/ Infrastructure 0 2,577 8,993
Unimproved land & Misc Assets 0 16,010 11,894
Putnam County
Unimproved land 0 7 0
Manatee County
Unimproved land 0 14 3
Gulf County
Unimproved land 0 559 795
S-5
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED) REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1993, 1992 and 1991
(Dollars in thousands)
Initial Cost to Company
Costs
Buildings & Capitalized
Encum- Tenant Subsequent to
Description brances Land Improvements Acquisition
Bay County
Land w/ Infrastructure 0 1 55
Office Building 0 1 763
Unimproved land 0 517 133
Leon County
Land w/ Infrastructure 0 605 39
Walton County
Land w/ Infrastructure 0 127 506
Other Counties
Unimproved land 0 849 1,294
Grand Total 0 66,047 6,205 150,246
S-6
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED) REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1993, 1992 and 1991
(Dollars in thousands)
Gross Amount at Which
Carried as of December 31, 1993
Land & Buildings &
Land Tenant
Description Improvements Improvements Total
Duval County
Office Buildings (5) 3,525 29,202 32,727
Office/Showroom/
Office/Showroom/Warehouses (8) 3,930 16,272 20,202
Land w/ Infrastructure 2,741 2,741
City & Residential Lots 371 82 453
Unimproved land & misc assets 9,863 197 10,060
St. Johns County
Land w/ Infrastructure 1,054 1,054
Unimproved land 3,042 3,042
Flagler County
Unimproved land 4,226 4,226
Volusia County
Unimproved land 4,150 4,150
Brevard County
Office/Showroom/Warehouse 438 1,525 1,963
Land w/ Infrastructure 3,797 3,797
Unimproved land 5,037 5,037
Indian River County
Unimproved land 374 374
St. Lucie County
Unimproved land 647 647
Martin County
Unimproved land 7,015 7,015
Palm Beach County
Office/Showroom/Warehouse 599 2,155 2,754
Rail Warehouses 544 4,002 4,546
Cross Docks 1,262 2,618 3,880
Land w/ Infrastructure 1,356 1,356
Unimproved land 1,605 1,605
Broward County
Rail Warehouse 405 1,264 1,669
Unimproved land 1,434 1,434
Dade County
Office/Showroom/Warehouses (4) 2,419 10,358 12,777
Office/Warehouses (4) 2,838 11,092 13,930
Rail Warehouses (4) 2,398 12,408 14,806
Cross Dock 137 1,018 1,155
Double Front Load Warehouse 1,409 4,735 6,144
Front Load Warehouses (5) 2,476 10,736 13,212
Land w/ Infrastructure 11,570 11,570
Unimproved land & misc assets 27,571 333 27,904
Putnam County
Unimproved land 7 7
Manatee County
Unimproved land 17 17
Gulf County
Unimproved land 1,354 1,354
S-7
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED) REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1993, 1992 and 1991
(Dollars in thousands)
Gross Amounts at Which
Carried as of December 31, 1993
Buildings &
Land & Buildings
Land Tenant
Description Improvements Improvements Total
Bay County
Land w/ Infrastructure 1 55 56
Office Building 1 763 764
Unimproved land 523 127 650
Leon County
Land w/ Infrastructure 605 39 644
Walton County
Land w/ Infrastructure 633 633
Other Counties
Unimproved land 2,102 41 2,143
Grand Total 113,476 109,022 222,498
S-8
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED) REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1993, 1992 and 1991
(Dollars in thousands)
Life on Which
Accum- Depreciation in
ulated Date Latest Income
Depre- Started or Statement is
Description ciation Acquired Computed
Duval County
Office Buildings (5) 4,074 1982 3 to 40 years
Office/Showroom/
Office/Showroom/Warehouses (8) 2,707 1987 3 to 40 years
Land w/ Infrastructure Various 3 to 40 years
City & Residential Lots 5 Various 3 to 40 years
Unimproved land & misc assets 123 Various 3 to 40 years
St. Johns County
Land w/ Infrastructure Various
Unimproved land Various
Flagler County
Unimproved land Various
Volusia County
Unimproved land Various
Brevard County
Office/Showroom/Warehouse 237 1988 3 to 40 years
Land w/ Infrastructure Various
Unimproved land Various
Indian River County
Unimproved land Various
St. Lucie County
Unimproved land Various
Martin County
Unimproved land Various
Palm Beach County
Office/Showroom/Warehouse 549 1986 3 to 40 years
Rail Warehouses 927 1987 3 to 40 years
Cross Docks 604 1987 3 to 40 years
Land w/ Infrastructure Various
Unimproved land Various
Broward County
Rail Warehouse 428 1986 3 to 40 years
Unimproved land Various
Dade County
Office/Showroom/Warehouses (4) 1,395 1988 3 to 40 years
Office/Warehouses (4) 913 1990 3 to 40 years
Rail Warehouses (4) 885 1987 3 to 40 years
Cross Dock 182 1987 3 to 40 years
Double Front Load Warehouse 182 1993 3 to 40 years
Front Load Warehouses (5) 460 1991 4 to 40 years
Land w/ Infrastructure 1,560 Various 3 to 40 years
Unimproved land & misc assets 65 Various 3 to 40 years
Putnam County
Unimproved land Various
Manatee County
Unimproved land Various
Gulf County
Unimproved land 20
S-9
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED) REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1993, 1992 and 1991
(Dollars in thousands)
Life on Which
Accum- Depreciation in
ulated Date Latest Income
Depre- Started or Statement is
Description ciation Acquired Computed
Bay County
Land w/ Infrastructure 21 3 to 40 years
Office Building 116 3 to 40 years
Unimproved land 13 Various
Leon County
Land w/ Infrastructure 9 Various
Walton County
Land w/ Infrastructure 1993 3 to 40 years
Other Counties
Unimproved land Various
Grand Total 15,475
Notes
(a) The aggregate cost of real estate owned at December 31, 1993 for federal
income tax purposes is $113,271.
1993 1992 1991
(b) Reconciliation of real estate owned:
Balance at beginning of year 192,466 162,083 139,962
Amounts capitalized 31,691 30,690 22,938
Amounts retired or adjusted (1,659) (307) (817)
Balanced at close of period 222,498 192,466 162,083
(c) Reconciliation of accumulated depreciation:
Balance at beginning of year 11,306 8,127 5,793
Depreciation expense 4,169 3,272 2,427
Amounts retired or adjusted (93) (93)
Balanced at close of period 15,475 11,306 8,127
(d) Table excludes $27,515 of real estate costs in progress.
S-10
ST. JOE PAPER COMPANY
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
December 31
ASSETS 1993 1992
Current Assets:
Cash and cash equivalents $ 48,304 $ 42,137
Short-term investments 66,307 43,012
Accounts receivable 74,127 71,355
Inventories 69,398 60,020
Other assets 25,720 16,825
Total current assets 283,856 233,349
Investments and Other Assets:
Marketable securities 159,523 131,689
Other assets 40,170 39,838
Total investments and other assets 199,693 171,527
Property, Plant and Equipment, net 1,007,722 983,424
Total Assets $1,491,271 $1,388,300
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 41,515 $ 40,008
Accrued liabilities 27,838 29,067
Income taxes payable 2,737 ---
Long-term debt due within one year 21,309 17,632
Total current liabilities 93,399 86,707
Accrued casualty reserves and other liabilities 11,063 11,703
Long-term debt due after one year 38,947 40,959
Deferred income taxes and income tax credits 205,531 185,300
Minority interest in consolidated subsidiaries 238,878 229,949
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 851,511 824,968
Net unrealized gains on debt and marketable
equity securities 43,228 ---
Total stockholders' equity 903,453 833,682
Total Liabilities and Stockholders' Equity $1,491,271 $1,388,300
See notes to consolidated financial statements.
-16-
BALANCE SHEET
The Consolidated Balance Sheet gives you the financial position or
status of accounts on the date shown and taken as a whole gives a picture of
the entire enterprise on that date. A series of balance sheets will show the
progress or movement of that enterprise from one period to the next. The
balance sheet needs to be looked at, together with the income statement as a
unit to get a sufficiently clear picture of the status and progress of a
business.
The Company continued in 1993 to have a strong balance sheet. Management
continued in 1993 it's long standing policy of paying nominal dividends in
order to fund capital additions and improvements from it's internally generated
cash.
The cash and cash equivalents, items with maturities of less than three
months, increased during the year 1993 by $6.2 million. This increase was in
the accounts of St. Joe Forest Products Company (Forest Products), Florida East
Coast Industries, Inc. (FECI), Apalachicola Northern Railroad Company (ANRR)
and Southwood Properties Division (Southwood). These four accounts had a
larger increase than this, but it was partly offset by decreases in other
segments of the Company. Short-term investments were $23.3 million more at
year end from the prior year end, most of which came from the Company's
corporate account and were the result of moving those investments with a
maturity of twelve months or less into the account from the long-term
investment account reduced by funds received from sales and maturities used in
operations. Other assets in the current asset account increased $8.9 million,
mostly on an increase in prepaid pension plan costs, deferred income taxes and
in the Communication's segment an increase in equity in the four cellular
partnerships this segment has ownership in. The total current assets during
calendar year 1993 increased $50.5 million, which was made up of cash and cash
equivalents, short-term investments, inventories and other assets.
Total investments and other assets (investments) of the Company increased
$28.2 million. This increase includes a $27.8 million increase in marketable
securities and was caused by the adoption by the Company of accounting for
marketable securities under the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", offset by investments transferred to short-term investments as
discussed above. See Note 2. and 3. of Notes to Consolidated Financial
Statements for additional information on this change.
The property, plant and equipment of the Company increased in all
segments, for a total net increase, asset purchases less depreciation, of $24.3
million. The largest increase was in FECI with lesser amounts in the Forest
Products, Sugar and Communications segments of the Company.
Total current liabilities increased $6.7 million. This increase was in
the area of income taxes payable and long-term debt due within one year. The
current portion of long-term debt increase is in the Forest Products and Sugar
segments of the Company. The Company's working capital at year end 1993
(current assets, less current liabilities) was $190.5 million which compared to
$146.6 million at the end of 1992. The Company's current ratio (current assets
to current liabilities) at December 31, 1993 was 3.0 to 1 up from the prior
year of 2.7 to 1.
The Financial Accounting Standards Board issued Statement No. 109
"Accounting for Income Taxes", in early 1992 which made substantial changes
in the method of calculating the income tax reserve account. The Company
adopted this change in the first quarter of 1993 which is a change to the
liability method for showing deferred income taxes. See Note 9 of Notes to
Consolidated Financial Statement for additional information on this change.
Stockholders' equity increased in 1993 from $27.34 per share at December
31, 1992 by $2.28 to $29.62 per share at December 31, 1993. This increase
included the net income per share after dividends of $0.87 and $1.42 for net
unrealized gain on debt and marketable securities as explained above. Over the
past five years stockholders' equity has increased 27.9% per share.
The Company is subject to substantial 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 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 operations of the Company in any one
period. As of December 31, 1993 and 1992, 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.
-17-
ST. JOE PAPER COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share amounts)
Years ended December 31,
1993 1992 1991
Net sales and operating revenues $591,968 $591,912 $582,180
Cost of sales and operating expenses 507,949 513,179 501,806
84,019 78,733 80,374
Selling, general and administrative expenses 51,917 54,677 55,898
Operating profit 32,102 24,056 24,476
Other income (expense):
Dividends 2,144 2,312 2,320
Interest income 9,575 13,581 20,799
Interest expense (3,711) (3,884) (5,036)
Gain on sales and other dispositions
of property, plant and equipment 1,085 2,511 16,099
Other, net 3,380 2,938 3,019
12,473 17,458 37,201
Income before income taxes, minority
interest, and cumulative effect of
change in accounting principle 44,575 41,514 61,677
Provision for income taxes
Current 13,294 14,259 22,490
Deferred 8,915 591 (1,768)
Total provision for income taxes 22,209 14,850 20,722
Income before minority interest and cumulative
effect of change in accounting principle 22,366 26,664 40,955
Less income applicable to minority interest in
consolidated subsidiaries 10,241 11,074 13,367
Income before cumulative effect of change
in accounting principle 12,125 15,590 27,588
Cumulative effect of change in accounting
principle for income taxes 20,518 --- ---
Net income $ 32,643 $ 15,590 $ 27,588
Per Share Data:
Income before cumulative effect of change in
accounting principle $0.39 $0.51 $0.90
Cumulative effect of change in accounting
principle for income taxes 0.68 --- ---
Net income per share $1.07 $0.51 $0.90
See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands except per share amounts)
Years ended December 31,
1993 1992 1991
COMMON STOCK
Balance, at end of year
(1993, 1992 and 1991 - 30, 498,650 shares) $ 8,714 $ 8,714 $ 8,714
RETAINED EARNINGS
Balance, at beginning of year $824,968 $815,478 $793,990
Net income 32,643 15,590 27,588
Dividends:
Cash ($0.20 per share - 1993, 1992 and 1991) (6,100) (6,100) (6,100)
Balance, at end of year $851,511 $824,968 $815,478
NET UNREALIZED GAIN ON DEBT AND MARKETABLE EQUITY SECURITIES
Cumulative effect of change in accounting
principle for investments $ 43,228 --- ---
Balance, at end of year $ 43,228 --- ---
See notes to consolidated financial statements.
-18-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
STATEMENT OF INCOME
The Income Statement on the preceding page is for the consolidated
Company and compares in summary form the items for the calendar three year
period of 1991, 1992 and 1993. Below is a discussion of some of the items
shown on this Statement in order to be of help in understanding the cause of
the changes that occurred between the three years.
Net sales and operating revenues for the Company were flat in 1993 from
1992. This compares to a $9.7 million or 1.7% increase in 1992 from the 1991
amounts. The Transportation, Communications and Real Estate segments of the
Company had increases in 1993, while Forest Products and Sugar declined. In
1992 all segments of the Company, Transportation, Sugar, Communications and
Real Estate increased, except Forest Products which declined. Detailed
information on these results are discussed in the segment sections which
follow.
Cost of sales and operating expenses decreased in 1993, $5.2 million or
1.0% over the 1992 amount which was $11.4 million or 2.3% more than 1991.
Forest Products, Sugar, and Transportation had decreased expenses in 1993,
with Sugar having the largest percentage decrease. Communications and Real
Estate expenses increased in 1993 from 1992. In 1992 Forest Products, Sugar,
Communications and Real Estate all had increased expenses from 1991 while
Transportation expenses decreased.
Selling, general and administrative expenses in 1993 for the Company were
$2.8 million or 5.0% less than 1992. These expenses in 1992 were $1.2 million
or 2.2% less than 1991. Forest Products and Sugar had decreases in this area
of expense in 1993, while Transportation, Communications and Real estate had
increases. In 1992 the Sugar, Communications and Real Estate segments all had
increases over 1991 while Forest Products and Transportation had a small
decrease.
The operating profit of the Company for 1993 was up $8.0 million or 33.4%
from 1992. The 1992 operating profit was down $0.4 million or 1.7% from the
1991 operating results. Forest Products, Transportation and Real Estate were
the segments of the Company that were up in 1993 from 1992 while the other
segments, Sugar and Communications were down. In 1992 Forest Products, Sugar
and Communications were the segments of the Company that had decreased
operating results from 1991 while the other segments Transportation and Real
Estate were up.
Other Income was down in 1993, $5.0 million or 28.6% from 1992 which had
been down $19.7 million or 53.1% from 1991. This decrease was in two areas,
net of interest income over interest expense which was down 39.5% and gain on
sales and other dispositions of property, plant and equipment down 56.8%. The
interest income declined from the continued lower interest rates in this
country over the last several years and the reduction in gain on property sales
was from the Florida East Coast Railway Company (FEC) in 1993 from 1992 and
1992 from 1991. The large FEC sale in 1991 of right-of-way to the Florida
Department of Transportation was not repeated in 1992 and was the main reason
for the increase gains on property sales that year.
The provision for income taxes increased $7.4 million in 1993 and
decreased $5.9 million in 1992 from the prior year. This increase reflects the
retroactive increase in the corporate federal income tax rate from 34% to 35%,
effective January 1, 1993 which resulted in additional income tax expense for
the year. This amount was further increased by an increase in deferred income
taxes resulting from the federal income tax rate increase and undistributed
earnings of FECI as required by Statement of Financial Accounting Standards
No.109, "Accounting for Income Taxes" and undistributed earnings of FECI. This
FASB Statement No. 109 was adopted by the Company in the first quarter of 1993
and resulted in income of $20.5 million. The effective income tax rate for
the three years is 49.8% for 1993, 35.8% for 1992 and 33.6% for 1991. The
Company files a consolidated federal income tax return with the Internal
Revenue Service for the parent and all 80% or greater owned subsidiaries.
Net income before cumulative effect of change in accounting principle for
1993 was down $3.5 million or 22.2% when compared to the results for 1992. The
1992 net income was down $12.0 million or 43.5% from the 1991 net income. Net
income per share before cumulative effect of change in accounting principle
declined $0.12 per share in 1993 to $0.39 per share. The 1992 net income per
share of $0.51 was $0.39 per share less than 1991. This decrease in net income
before cumulative effect of change in accounting principle in 1993 was caused
by the income tax expense as explained above. The decreases in 1992 over 1991
was primarily due to reduced profitability of the Forest Products operation.
SEGMENTS
Forest Products
Net sales and operating revenues in the Forest Products operations
accounted for 52.9% of the Company's total net sales and operating revenues in
1993 which was lower than the 54.4% for 1992 and 56.3% for 1991. Included in
these net sales from this segment of the Company are the net sales by the
Company's paper mill, this includes both sales to outside customers and trades
to our own plants, that were down $14.1 million or 8.5% in 1993 from 1992 which
was down $3.8 million or 2.2% in 1992 from 1991. This decrease in net sales
revenue was made up of a decrease in average sales price with a small offset
by an increase in tons sold. Crest white sales revenue in 1993 was 55% of
total mill sales which was up from 48% for 1992 and tons sold
-19-
in 1993 was 45% of total tons sold, up from 42% in 1992. The Company's
container plants in 1993 had a decrease in sales revenue from the prior year.
The 1993 sales were down $9.5 million or 3.9% caused by both a lower average
selling price of 0.7% and a 3.3% decrease in tons sold. In 1992 sales were up
$14.3 million or 6.2% from 1991 caused by both selling price per ton and tons
sold being higher. The revenue from the Company's forestry operations for
1993 on sales outside the Company were flat from like 1992 sales. The 1992
sales outside the Company were up $0.7 million or 12.0% from the 1991 amounts.
While the net for 1993 when compared to 1992 was flat there was an increase in
sales price of 7.5% offset, to some degree, by a 7.7% decrease in tons sold.
In 1992 there was an increase in revenue caused by an increase of 15.2% in
sales price somewhat offset by less tons sold of 2.8%. The continued decrease
in the mill results of the Company follows the pattern of the forest products
industry, and reflects the slower recovery in this industry from the general
economy of the country.
Cost of sales and operating expenses at both the Company's paper mill and
forestry units for 1993 increased from 1992, 6.2% and 9.0% respectively, while
the container plants had a decrease of 11.0%. In 1992 the Company's paper mill
and container plants experienced increased cost of sales and operating
expenses, while the forestry units had decreased expenses. The major items of
expense at the paper mill that increased in 1993 over 1992 were caused by the
increase in both natural gas and fuel oil, and repair material.
The selling, general and administrative expenses in 1993 were flat at the
paper mill and increased at the forestry operations 1.3% over the 1992 period.
The container plants for the same period decreased 1.9%. In 1992 the paper
mill and container plants had increased costs over 1991 while the forestry
units had a decrease. The 1993 increase in expenses for the forestry
operations was in the area of employee benefits and legal.
Transportation
The Transportation segment of the Company is the second largest and its
net sales and operating revenues for 1993 were 29.6% of the Company's total net
sales and operating revenues. This was an increase from the 28.4% in 1992
which was a slight decrease from the 1991 share of 28.5%. Within the
Transportation segment of the Company total net sales and operating revenues,
FEC had a 3.4% increase while ANRR increase was 2.3% in 1993 when compared to
1992. In 1992, FEC was up 2.6% and ANRR down 3.8% over the 1991 results. The
FEC increase in 1993 reflected the increase in aggregate (rock) shipments. The
1992 increase was caused by an increase in intermodal traffic, an increase in
the rate and volume of other than automobile traffic and an increase in rock
shipments. The ANRR in 1993 had an increase in coal, pulpboard and pulpwood
car shipments. ANRR's decrease in 1992 was due to the decrease in coal
traffic, woodchips and pulpwood car shipments.
The cost of sales and operating expenses in 1993 for FEC were down 1.5%
and the ANRR was up 9.6%. The FEC for 1992 had decreased operating expenses of
1.8% and ANRR 10.2% over 1991. The decrease in FEC for 1993 reflects a
decrease in property taxes and materials and supplies. In 1992 these expenses
had decreased in property taxes, casualty insurance and personal injury
expenditures. The 1993 increase for ANRR was caused by depreciation expense in
the maintenance of way area and locomotive repairs, while the 1992 decrease was
for signal and track maintenance and locomotive repairs.
Sugar
The Sugar segments net sales decreased in 1993 by $5.7 million or 10.4%
from 1992 sales. This included a decrease of 9.8% on tons of sugar sold, which
was slightly offset by an increase of 2.0% in sales price. The 1992 sales were
up 9.6% from 1991 on more tons of sugar sold with a slight reduction in the
sales price. The cost of sales and operating expenses, as well as, selling,
general and administrative expenses in 1993 were down 9.1% and 10.4%
respectively on decreased sales and production. In 1992 the cost of sales and
operating expenses, as well as the selling, general and administrative expenses
were up on increased sales and production from the like 1991 period.
-20-
Communications
Net sales and operating revenues for the Communications segment of the
Company were up $1.8 million or 6.4% in 1993 from 1992. This segment in 1992
was up from 1991 by 7.4%. The revenue increase in 1993 over 1992 was
attributed to the accrual in 1992 of excessive earnings that were restored to
income in 1993 and the 1992 increase in interstate access rates charged
long-distance carriers being in effect for the entire year. The 1992 increase
over 1991 was the result of higher interstate long-distance pooling settlements
and the interstate access rates charged long-distance carriers. The cost of
sales and operating expenses in 1993 were up 10.3% over 1992 expenses. This
increase was largely for outside plant maintenance and increased depreciation
expense at all three operating companies. These operating expenses in 1992
were up 8.8% over 1991 and were for maintenance and upgrade of customers
equipment. Selling, general and administrative expenses for 1993 were up 0.5%
from 1992 which was up 12.1% from 1991. The small increase for 1993 from the
prior year was in all general expenses. The 1992 increase of expense from 1991
was in general office expense and for studies required by the Florida Public
Service Commission.
Real Estate
Real estate net sales and operating revenues in 1993 were up over the
like 1992 period by $7.9 million or 38.6%. Within this segment Southwood's net
sales and revenue were up $7.9 million or 468.8% over 1992 which was down 29.1%
from 1991. This increase for 1993 was on sales of property, rental income and
timber, and in 1992 the decrease was the result of less sales of property and
timber. Gran Central's revenue remained the same in 1993 over 1992, which had
been up 38.8% from 1991. While the total sales and revenue in 1993 was flat,
within this account, rental income was up 31.3% and recollectible from tenants
increased 115.0%, but sales of real property were down 61.0%. The increase in
1992 over 1991 was the result of both increases in rental income due to
increased available space and realty sales. The operating expenses and
selling, general and administrative expenses at Southwood for 1993 were up
152.0% from 1992 and these expenses in 1992 were down 9.6% from 1991. These
1993 expenses were up due to increased sales of property and employee salaries
and benefits and 1992 was lower on reimbursement received from the State of
Florida on a workers compensation claim. Gran Central's operating expenses and
selling, general and administrative expense were up 13.7% in 1993 from 1992 and
16.6% in 1992 over 1991. The increase in these expensesin both 1993 and 1992
over the respective prior years reflects the increasing rental space that has
become available for lease each year as a result of new construction.
-21-
ST. JOE PAPER COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Years ended December 31,
1993 1992 1991
Cash flows from operating activities:
Net Income $32,643 $15,590 $27,588
Adjustments to reconcile net income to
cash provided by operating activities:
Cumulative effect of a change in
accounting principle (20,518) --- ---
Depreciation and depletion 62,872 59,757 55,241
Minority interest in income 10,241 11,074 13,367
Gain on sale of property (1,085) (2,511) (16,099)
Increase (decrease)in deferred income taxes 8,915 3,279 (1,768)
Changes in operating assets and liabilities:
Accounts receivable (2,772) 3,925 (2,695)
Inventories (9,378) (1,255) (2,721)
Other assets (2,865) (7,569) (8,103)
Accounts payable, accrued liabilities
and casualty reserves (362) (1,720) 14,864
Income taxes payable 2,737 (5,674) 2,545
Cash provided by operating activities 80,428 74,896 82,219
Cash flows from investing activities:
Purchases of property, plant and equipment (93,045) (120,736) (100,286)
Purchases of investments (77,964) (162,031) (238,667)
Proceeds from sales of property 6,960 7,246 19,611
Proceeds from maturities of investments 95,941 189,542 247,483
Cash used in investing activities (68,108) (85,979) (71,859)
Cash flows from financing activities:
Net change in short-term borrowings 3,400 (4,803) (4,344)
Proceeds from long-term debt --- 7,633 ---
Dividends paid to stockholders (6,100) (6,100) (6,100)
Repayment of long-term debt (1,735) (2,242) (2,219)
Subsidiary acquisition of treasury shares --- --- (12,093)
Dividends paid to minority interest (1,718) (1,698) (1,697)
Cash used in financing activities (6,153) (7,210) (26,453)
Net increase (decrease) in cash
and cash equivalents 6,167 (18,293) (16,093)
Cash and cash equivalents at beginning of period 42,137 60,430 76,523
Cash and cash equivalents at end of period $48,304 $42,137 $60,430
Supplemental disclosure of cash flow information:
Cash paid during the year for certain expense items is:
Interest $ 3,340 $ 4,117 $ 4,758
Income taxes $ 12,476 $ 21,693 $ 19,324
Mortgage assumed in purchase of
property, plant and equipment --- $ 2,200 ---
See notes to consolidated financial statements.
-22-
MANAGEMENT DISCUSSION AND ANALYSIS OF
STATEMENT OF CASH FLOWS
The purpose of the Statement of Cash Flows is to help provide investors
and other interested parties with relevant information about the Company's
sources and uses of cash as provided from the operating, investing and
financing activities of the Company.
The Company experienced a net increase in cash and cash equivalents of
$6.2 million in 1993, which had decreased $18.3 million in 1992 from 1991.
This improvement for 1993 resulted from reductions in the amounts of cash
expended through financing and investing activities as well as from an increase
in cash provided by operating activities.
Net cash flows provided by operating activities increased by $5.5 million
in 1993 after a decrease of $7.3 million in 1992 from 1991. This increase in
1993 was largely the result of operating profits and was offset by significant
use of cash for operating activities which included increases in inventories
and other assets. The majority of the increase in inventories to $9.4 million
was in quantities and cost of linerboard in the Forest Products segment. Most
of the increase in other assets represents investments by the Communications
segment in four phone partnerships with cellular service providers.
The cash flow statement adjustments resulting from depreciation and
depletion of $62.9 million in 1993 were higher by $3.1 million and $7.6 million
than 1992 and 1991 respectively. This increase in depreciation and depletion
is due to increase in plant, property and equipment purchases for the year
which in turn generated a higher depreciation expense in all segments of the
Company. Depreciation expense was generated by the following segments of the
Company, Forest Products $33.0 million, Transportation $18.1 million, Sugar
$1.8 million,Communications $5.8 million, and Real Estate $4.1 million.
Gain on sale of property of $1.1 million was generated in 1993 by
combined sales of assets in the Forest Products and Transportation segments.
In 1991, $15.0 million was recognized for a sale of right-of-way from the
Transportation segment to the Florida Department of Transportation. Gains from
sales of property are appropriately recognized as an investing activity.
The Company's purchase of property plant and equipment and proceeds from
sales of property combined were $86.1 million. This net expenditure was a
decrease from 1992 of $27.4 million but and increase over 1991 of $5.4 million.
These net purchases were $21.7 million in Forest Products, $20.4 million in
Transportation, $2.9 million Sugar, $5.2 million Communications and $35.9
million Real Estate. In Forest Products the expenditures were mostly for plant
and equipment for existing operations; in Transportation for maintenance of
roadway, tracks and equipment, while in Real Estate it included development of
office complexes, showrooms/warehouse or warehouses principally in the
Jacksonville and Miami, Florida area.
Net cash used in investing activities decreased by $17.9 million in 1993
after a $14.1 million increase in 1992 over 1991. Purchases of investments of
$78.0 million and proceeds from maturities of investments of $96.0 million in
1993 produced a net positive cash flow of $18.0 million. This amount included
$4.5 million in the Forest Products segment, $18.5 million in Transportation
segment and a minus $5.0 million in the Communications segment.
In 1993, $1.7 million was used to repay long-term debt. Net proceeds
from short-term borrowings were $3.4 million. These short-term borrowings were
in the Forest Products and Sugar segments of the Company. The Company incurred
no new long-term debt during the year.
Dividends paid to stockholders remained unchanged at $6.1 million in 1993
which is the same payment made to stockholders in 1992 and 1991.
St. Joe Paper Company continues to have adequate internally generated
cash flows to fund its foreseeable operating and capital needs.
-23-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
1. Majority stockholder
The Alfred I. duPont Testamentary Trust (the "Trust") owns approximately 69% of
the common stock of St. Joe Paper Company (the "Company"). The Company and its
subsidiaries had no significant transactions with the Trust during the period.
2. Summary of significant accounting policies
Principles of consolidation -- The consolidated financial statements include
the accounts of St. Joe Paper Company and all of its majority owned
subsidiaries. All significant intercompany transactions and balances
been eliminated.
Cash and cash equivalents -- For purposes of the Consolidated Statement of Cash
Flows, cash and cash equivalents include cash on hand, bank demand accounts,
money market accounts, remarketed certificates of participation and repurchase
agreements having original maturities of three months or less.
Inventories -- Inventories are stated at the lower of cost or market. Cost for
manufactured paper products and associated raw materials and sugar are
determined under the last-in, first-out (LIFO) method. Costs for substantially
all other inventories are determined under the first in, first out (FIFO) or
the average cost method.
Property, plant and equipment -- Depreciation is computed using both
straight-line and accelerated methods over the useful lives of various assets.
Depletion of timber is determined by the units of production method.
Railroad and communications properties are depreciated and amortized using the
straight-line method at rates established by regulatory agencies. Gains and
losses on normal retirements of these items are credited or charged to
accumulated depreciation.
Deferred cane crop costs -- Sugar cane plantings generally yield two annual
harvests, depending on weather conditions and soil quality, before replanting
is necessary. New planting costs are amortized on a straight-line basis over
two years.
Income tax credits -- The Company uses the flow-through method of accounting
for income tax credits except for credits relating to communications property
and equipment which are accounted for using the deferral method with
amortization over the service lives of the related assets as required by
regulatory agencies.
Reclassification -- The 1992 and 1991 consolidated financial statements have
been reclassified to the current year formats. These reclassifications were
not material to the consolidated financial statements.
Earnings per common share -- Earnings per common share are based on the
weighted average number of common shares outstanding during the year.
(Continued)
-24-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
2. Summary of significant accounting policies (continued)
Fair value of financial instruments -- The carrying amount of the following
financial instruments approximated fair value because of their short maturity:
cash and cash equivalents, accounts receivable, accounts payable, and other
accrued liabilities. The fair value of investments differs from the carrying
value as disclosed in Note 3. The fair value of long term debt, as determined
using current rates, approximates carrying value.
Income Taxes -- In February, 1992, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes" which requires a change from the
deferred to the asset and liability method of accounting for income
taxes. Under the asset and liability method of SFAS 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
SFAS 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date. SFAS 109 also requires the recognition of a deferred tax
liability on the undistributed earnings of subsidiaries applied on a
prospective basis.
Effective January 1, 1993, the Company adopted SFAS 109 and has reported the
cumulative effect of that change in the method of accounting for income taxes
in the 1993 consolidated statement of income.
The deferred method, which was applied in 1992 and prior years, recognized
deferred income taxes using the tax rates applicable for the year of the
calculation and did not adjust for subsequent changes in tax rates.
Investments -- Investments consist principally of certificates of
deposit, remarketed certificates of participation, mortgage backed
securities, municipal bonds, common stocks, redeemable preferred stocks,
and U.S. Government obligations. The Company adopted the provisions of
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" at December 31, 1993. Under SFAS 115, the Company classifies
its debt and marketable equity securities in one of three categories:
trading, available-for-sale, or held-to-maturity. Trading securities are
bought and held principally for the purpose of selling them in the near
term. Held-to-maturity securities are those securities for which the
Company has the ability and intent to hold the security until maturity.
All other securities not included in trading or held-to-maturity are
classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains
and losses on trading securities are included in earnings. Unrealized holding
gains and losses, net of the related income tax effect and minority interest in
consolidated subsidiaries, on available-for-sale securities are excluded from
earnings and are reported as a separate component of stockholders' equity until
realized.
(Continued)
-25-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
2. Summary of significant accounting policies (continued)
A decline in the market of any available-for-sale or held-to-maturity security
below cost that is deemed other than temporary is charged to earnings
resulting in the establishment of a new cost basis for the security.
Realized gains and losses for securities classified as available-for-sale and
held-to-maturity are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.
3. Investments
As discussed in Note 2, the Company adopted SFAS 115 as of December 31,
1993. The cumulative effect of this change in accounting for investments of
$69,106 is determined as of December 31, 1993, and is reported separately as a
component of shareholders' equity net of related income tax effect of $25,472
and minority interest in consolidating subsidiaries of $406.
Investments at December 31, 1993, consist of :
Carrying Fair Unrealized Unrealized
Cost Value Value Holding Holding
Gain Loss
Short term investments (maturing within one year)
Held to maturity
U. S. Government securities $27,658 $27,695 $28,214 $523 $4
Tax exempt municipals 2,401 2,401 2,376 --- 25
Remarketed certificates
of participation 5,000 5,028 5,028 --- ---
Certificates of deposit 31,063 31,183 31,183 --- ---
$66,122 $66,307 $66,801 $523 $29
Marketable securities
Available for sale
U. S. Government securities
Maturing in one to five
years $393 $379 $379 --- $14
Tax exempt municipals
Maturing in five to ten
years 29,961 31,387 31,387 1,426 ---
Equity securities 12,059 79,746 79,746 67,687 ---
Mortgage backed securities
Maturing in more than
ten years 3,567 3,559 3,559 --- 8
Other corporate debt
securities Maturing in
five to ten years 1,684 1,699 1,699 15 ---
$47,664 $116,770 $116,770 $69,128 $22
(Continued)
-26-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
3. Investments (continued)
Amortized Carrying Fair Unrealized Unrealized
Cost Value Value Holding Holding
Gain Loss
Held to maturity
U. S. Government securities
Maturing within one year $23,731 $23,731 $24,500 $769 $---
Maturing in one to five years 11,104 11,267 11,462 197 2
Tax exempt municipals
Maturing in one to five years 1,612 1,645 2,601 956 ---
Mortgage backed securities
Maturing in one to five years 2,990 3,003 3,007 4 ---
Maturing in five to ten years 916 916 1,491 575 ---
Maturing in more than ten years 91 91 103 12 ---
Other corporate debt securities
Maturing in five to ten years 812 2,100 2,045 --- 55
$41,256 $42,753 $45,209 $2,513 $57
$88,920 $159,523 $161,979 $71,641 $79
Gross unrealized gains at December 31, 1992, were as $55,349 and gross
unrealized losses were $2.
Marketable securities, including certain investments which mature within one
year, are held as a developmental fund created to accumulate capital expected
to be required for future improvement of the Company's real estate properties.
4. Inventories
Inventories as of December 31 consist of:
1993 1992
Manufactured paper products and associated raw materials $30,782 $24,615
Materials and supplies 27,407 26,011
Sugar 11,209 9,394
$69,398 $60,020
The replacement cost of manufactured paper products and associated raw material
inventories was in excess of LIFO stated cost by approximately $12,781 as of
December 31, 1993 ($15,433 in 1992).
5. Accrued liabilities
Accrued liabilities as of December 31 consist of:
1993 1992
Payroll and benefits $ 5,034 $ 5,024
Payroll taxes 103 999
Property and other taxes 5,561 7,645
Accrued casualty reserves 22,911 22,916
Other accrued liabilities 5,292 4,186
38,901 40,770
Less: noncurrent accrued casualty
reserves and other liabilities 11,063 11,703
$27,838 $29,067
-27-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
6. Sale of Property
In 1988, s subsidiary entered into an agreement with the Florida Department of
Transportation (DOT) for the sale of approximately 20.7 miles of abandoned
100-foot wide right-of-way. The total sales price of $35,525 was divided into
six segments. The DOT made an initial payment of $10,000 and issued an
executory note for $25,525 at an interest rate of 9.01%. As the payments from
the State were received, the liens on the pro rata portion of the succeeding
segments were removed and related gains recognized. Principal and interest
payment of $6,250 was received in 1989, a payment of $8,857 was received in
1990, and a final payment of $16,371 was received in 1991. The land sale gains
recognized in 1991 amounted to $15,018.
7. Property, plant and equipment
Property, plant and equipment, at cost, as of December 31 consist of:
Estimated
1993 1992 Useful Life
Land and timber $ 125,675 $ 123,548 ----
Land improvements 24,628 24,431 20
Buildings 47,174 46,801 45
Machinery and equipment 1,102,450 1,068,499 10 - 30
Office equipment 6,357 6,667 6 - 10
Autos and trucks 7,205 6,866 3 - 6
Construction in progress 18,161 13,812 ----
Investment property 250,013 215,685 various
1,581,663 1,506,309
Accumulated depreciation 573,941 522,885
$1,007,722 $ 983,424
Real estate properties having net book value of $120.6 million at December 31,
1993 are leased under non-cancelable leases with expected aggregate rentals of
$83,290 of which $16.2, 15.1, 13.1, 11.1 and 7.6 million is due in the years
1994 through 1998, respectively.
-28-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
8. Long-term debt
Long-term debt as of December 31 consists of:
1993 1992
Notes payable to banks under lines of credit
aggregating $70,000, due March 1994 through
May 1995 with interest payable quarterly
at the bank's prime rate (6.0% at December 31,
1993) less 0.6% $35,038 $27,745
Rural Telephone Bank (RTB) 6.50 % to 10.25%
mortgage notes with principal and interest
due quarterly through 2016 15,917 16,360
Industrial Revenue Bonds payable in semiannual
installments of $425 with interest payable
at 67% of the prime rate 2,896 3,747
Rural Electrification Administration (REA) 2%
mortgage notes with principal and interest
due quarterly through 2008 3,394 3,797
Federal Financing Bank (FFB) notes at varying
rates (weighted average: 1993 - 14.50 %;
1992 - 14.52 %) guaranteed by the REA 640 691
Mortgage loans payable to various institutions
and individuals with interest rates of 4.5%
to 9.75%, payable in variable installments 2,184 3,943
Other secured notes at variable interest rates
and maturities 187 2,308
60,256 58,591
Long-term debt due within one year 21,309 17,632
Long-term debt due after one year $38,947 $40,959
The REA and RTB notes, the Industrial Revenue Bonds and the notes and mortgage
loans payable are secured by company assets with a book value of approximately
$45,952, $7,541 and $ 44,931, respectively.
The aggregate amount of principal payments due in each of the years subsequent
to December 31, 1993 is:
Year ending
December 31Amount
1994 21,309
1995 18,431
1996 2,082
1997 1,569
1998 1,273
1999 and later 15,592
$60,256
-29-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
9. Income Taxes
As discussed in Note 2, the Company adopted SFAS 109 as of January 1, 1993.
The cumulative effect of this change in accounting for income taxes of $20,518
is determined as of January 1, 1993, and is reported separately in the
consolidated statement of income for the year ended December 31, 1993. Except
for the adjustment to deferred tax assets and liabilities for enacted changes
in tax laws and rates and deferred taxes provided on undistributed earnings of
Florida East coast Industries, Inc. ("FECI"), the accounting change did not have
a significant impact on the 1993 provision for income taxes. Prior years'
financial statements have not been restated to apply the provisions of SFAS 109.
Total income tax expense for the year ended December 31, 1993, was allocated
as follows:
Income from continuing operations $ 22,209
Shareholders' equity, for recognition of unrealized
gain on debt and marketable equity securities in
connection with adoption of SFAS 115 25,472
$ 47,681
Income tax expense attributable to income from continuing operations was
$22,209, $14,850, and $20,722 for the years ended December 31, 1993, 1992, and
1991, respectively, and differed from the amount computed by applying the
statutory federal income tax rate to pre-tax income as a result of the
following:
1993 1992 1991
Tax at the statutory federal rate $15,601 $14,115 $20,971
Dividends received deduction and tax free interest (937) (745) (1,982)
State income taxes (net of federal benefit) 1,452 1,411 1,937
Adjustment to deferred tax assets and
liabilities for enacted changes in tax
laws and rates 4,324 --- ---
Undistributed earnings of FECI 775 --- ---
Other, net 994 69 (204)
$22,209 $14,850 $20,722
For the years ended December 31, 1993, 1992, and 1991, deferred income
tax results from differences in the recognition of income and expense for
income tax and financial reporting purposes. The sources and tax effects
of those differences are presented below:
1993 1992 1991
Accelerated depreciation for tax purposes $4,396 $4,366 $4,387
Alternative minimum tax credit carryforward (4,281) (3,025) (3,157)
Prepaid pension cost 1,208 1,200 907
Adjustments to deferred tax assets
and liabilities for enacted changes
in tax laws and rates 4,324 --- ---
Accrued casualty reserves 678 (468) (2,176)
Undistributed earning of FECI 775 --- ---
Other, net 1,815 (1,482) (1,729)
$8,915 $591 ($1,768)
(Continued)
-30-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
9. Income Taxes (continued)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at December 31,
1993, are presented below:
Deferred tax assets:
Accrued casualty and other reserves $10,616
Alternative minimum tax credit carryforward 12,219
State net operating loss carryforward 6,183
Other 1,914
Total gross deferred tax assets $30,932
Valuation allowance 6,183
Net deferred tax assets $24,749
Deferred tax liabilities:
Tax in excess of financial depreciation $154,817
Deferred gain on land sales 5,520
Deferred gain on subsidiary's defeased bonds 2,502
Unrealized gain on debt and marketable equity securities 25,472
Deferred gain on involuntary conversion of land 24,937
Prepaid pension asset recognized for financial reporting 7,285
Other 3,385
Total gross deferred tax liabilities $223,918
Net deferred tax liability $199,169
Based on the timing of reversal of future taxable amounts and the
Company's history of reporting taxable income, the Company believes that
the deferred tax assets will be realized and a valuation allowance is not
considered necessary except for those resulting for the net operating
loss carryforward available for state income taxes. Because of the
Company's history of reporting tax losses in certain states, the Company
believes that substantially all carryforwards will not be realized and,
accordingly, has recorded a valuation allowance equal to the entire
amount. This valuation allowance was $6,183 at December 31, 1993, which
increased $547 in 1993. The current deferred tax asset of $6,362 is
recorded in other current assets as of December 31, 1993. There were no
net current deferred income tax assets recorded at December 31, 1992.
The Company has not recognized a deferred tax liability of approximately
$17,842 for the undistributed earnings of FECI that arose in 1992 and prior
years because the Company does not currently expect those unremitted earnings
to reverse and become taxable to the Company in the foreseeable future. A
deferred tax liability will be recognized when the Company expects that it will
recover those undistributed earnings in a taxable manner, such as through
receipt of dividends or sale of the investment. As of December 31, 1993, the
undistributed earnings of the subsidiary for which no deferred tax liability
was provided were approximately $48,454.
-31-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
10. Pension and retirement plans
The company sponsors defined benefit pension plans covering approximately 70 %
of its employees. The benefits are based on the employees' years of service or
years of service and compensation during the last five or ten years of
employment. The Company's funding policy is to contribute annually the maximum
contribution required by ERISA.
A summary of the net periodic pension credit follows:
1993 1992
Service cost $2,761 $2,548
Interest cost 6,147 5,949
Actual return on assets (13,460) (11,387)
Net amortization and deferral 1,272 (462)
Total pension income $ (3,280) $ (3,352)
A summary of the plans' funded status as of December 31 was:
1993 1992
Accumulated benefit obligation, included
vested benefits of $73,780 and $63,885
in 1993 and 1992, respectively $ 80,438 $ 69,872
Projected benefit obligation for service
rendered to date $ 96,177 $ 85,319
Plan assets at fair value, primarily listed
stocks and U.S. bonds 144,713 135,237
Plan assets in excess of projected benefit obligation 48,536 49,918
Unrecognized net gain (13,618) (15,457)
Unrecognized prior service cost 5,393 5,134
Unrecognized transition asset (20,527) (23,093)
Prepaid pension cost $19,784 $16,502
The weighted-average discount rates for the plans were 7% in 1993 and 7 to 8%
in 1992. The rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation for
salaried employees was 6 percent in 1993 and 7% in 1992. The expected
long-term rates of return on assets was 8% in 1993 and ranged from 7 to 8
percent in 1992.
The Company has an Employee Stock Ownership Plan (ESOP) for the purpose of
purchasing stock of the Company for the benefit of qualified employees.
Contributions to the (ESOP) are limited to .5% of compensation of employees
covered under the (ESOP). The Company also has other defined contribution
plans which, in conjunction with the (ESOP) cover substantially all its
salaried employees. Contributions are at the employees' discretion and are
matched by the Company up to certain limits. Expense for these defined
contribution plans was $1,387, $1,253, and $672 in 1993, 1992 and 1991,
respectively.
-32-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
11. Quarterly Financial Data (Unaudited)
Quarters Ended
1993 December 31 September 30 June 30 March 31
Net sales and operating revenues 153,540 141,182 150,548 146,698
Operating profit 17,852 6,873 2,239 5,138
Net income 8,785 (875) 753 23,980
Net income per share .29 (.03) .02 .79
1992 December 31 September 30 June 30 March 31
Net sales and operating revenues 152,549 152,177 143,564 143,622
Operating profit 4,518 5,708 5,516 8,314
Net income 2,842 3,791 3,191 5,766
Net income per share .10 .12 .10 .19
12. Segment information
The Company is engaged in five principal lines of business. These lines of
business are:
Forest Products -- the integrated production of corrugated containers,
including the cultivation and harvesting of pulpwood and the manufacture of
linerboard;
Transportation - the operation of two railroads within the state of
Florida;
Sugar - the cultivation, harvesting and processing of sugar cane;
Communications - the provision of telephone services and
telecommunications equipment; and
Real Estate - the ownership, management and development of real estate.
Total net sales and operating revenues represent sales to unaffiliated
customers, as reported in the Company's consolidated income statement and
intersegment sales which occur principally between the Forest Products and
Transportation segments.
Operating profit is net sales and operating revenues less directly traceable
costs and expenses. In computing operating profit, the following items have
not been considered: other income (expense) and provision for income taxes.
Identifiable assets by lines of business are those assets that are used in the
Company's operations in each segment. Corporate assets are composed of cash,
marketable securities and miscellaneous nonsegment assets.
(Continued)
-33-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
12. Segment information (continued)
Information by lines of business segment follows:
1993 1992 1991
Net sales and operating revenues:
Forest Products $ 312,875 $ 322,096 $ 327,482
Transportation 175,095 169,439 166,001
Sugar 49,138 54,866 50,061
Communications 29,153 27,399 25,515
Real Estate 28,405 20,493 15,931
Intersegment (2,698) (2,381) (2,810)
Consolidated $ 591,968 $ 591,912 $ 582,180
Operating profit:
Forest Products $ (19,684) $ (20,509) $ (12,284)
Transportation 30,648 26,380 18,901
Sugar 5,058 6,313 8,859
Communications 5,130 5,240 5,263
Real Estate 10,950 6,632 3,737
Consolidated $ 32,101 $ 24,056 $ 24,476
Assets:
Forest Products $ 373,551 $ 378,461 $ 388,977
Transportation 390,332 387,778 384,426
Sugar 96,925 90,724 82,443
Communications 65,674 63,594 59,492
Real Estate 230,343 198,236 166,566
Corporate 334,446 269,507 291,057
Consolidated $1,491,271 $1,388,300 $1,372,961
Capital expenditures:
Forest Products $ 24,454 $ 46,950 $ 49,116
Transportation 22,682 21,173 16,295
Sugar 2,944 7,441 1,045
Communications 5,271 7,612 6,321
Real Estate 37,694 37,560 27,509
Consolidated $ 93,045 $ 120,736 $ 100,286
Depreciation and depletion:
Forest Products $ 33,015 $ 32,646 $ 29,507
Transportation 18,147 17,112 16,666
Sugar 1,769 1,634 1,697
Communications 5,848 5,051 4,884
Real Estate 4,093 3,314 2,487
Consolidated $ 62,872 $ 59,757 $ 55,241
-34-
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
13. Contingencies
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 substantial 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 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
December 31, 1993 and 1992, 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.
-35-
Independent Auditors' Report
The Board of Directors and Stockholders
St. Joe Paper Company:
We have audited the accompanying consolidated balance sheets of St. Joe
Paper Company and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, changes in stockholders'
equity, and cash flows for each of the years in the three-year period
ended December 31, 1993. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentations. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of St.
Joe Paper Company and subsidiaries as of December 31, 1993 and 1992,
and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1993, in
conformity with generally accepted accounting principals.
As discussed in notes 2 and 3 to the consolidated financial statements,
the Company changed its method of accounting for investments to adopt
the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" at December 31,
1993. As discussed in notes 2 and 9, the Company changed its method of
accounting for income taxes effective January 1, 1993 to adopt the
provisions of the Financial Accounting Standards Board's SFAS No. 109,
"Accounting For Income Taxes".
KPMG PEAT MARWICK
Certified Public Accountants
Jacksonville, Florida
February 28, 1994
-36-
EXHIBIT 21
ST. JOE PAPER COMPANY
SUBSIDIARIES AT DECEMBER 31, 1993
St. Joe Industries, Inc.
Florida East Coast Industries, Inc.
General Die & Mfg. Corp.
Jacksonville Properties, Inc.
Forest Products
St. Joe Forest Products Company
St. Joe Container Company
St. Joseph Land and Development Company
Railroad
Apalachicola Northern Railroad Company
St. Joe Terminal Company
Florida East Coast Railway Company
Florida East Coast Deliveries, Inc.
Florida East Coast Highway Dispatch Company
Florida East Coast Inspections, Inc.
Florida Express Carrier, Inc.
Operations Unlimited, Inc.
Railroad Concrete Crosstie Corporation
Railroad Track Construction Company
Sugar
Talisman Sugar Corporation
Communications
St. Joe Communications, Inc.
Gulf Telephone Company
St. Joseph Telephone & Telegraph Company
The Florala Telephone Company, Incorporated
Real Estate
St. Joe Utilities Company
Gran Central Corporation
Atlantic & East Coast Terminal Company
Dade County Land Holding Company, Inc.
All companies are incorporated in the State of Florida, except
for The Florala Telephone Company, Incorporated, which is
incorporated in the State of Alabama.
E - 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each of the undersigned
Directors of St. Joe Paper Company, a Florida corporation
("Corporation"), which is about to file with the Securities and
Exchange Commission, Washington, D. C. 20549, under the provisions
of the Securities Exchange Act of 1934, as amended, an Annual
Report on Form 10-K for the fiscal year ended December 31, 1993,
hereby constitutes and appoints Winfred L. Thornton and Stanley D.
Fraser, as his true and lawful attorneys-in-fact and agent, and
each of them with full power to act, without the other in his
stead, in any and all capacities, to sign the 1993 Annual Report of
St. Joe Paper Company on Form 10-K and to file on behalf of the
Corporation such Annual Report and amendments with all exhibits
thereto, and any and all other information and documents in
connection therewith, with the Securities and Exchange Commission,
hereby granting unto said attorneys-in-fact and agent, and each of
them, full power and authority to do and perform any and all acts
and things requisite and ratifying and confirming all that each
said attorneys-in-fact and agent or any one of them, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands on the date indicated below.
Winfred L. Thornton Tully F. Dunlap
Chairman of the Board and Director
Chief Executive Officer
Robert E. Nedley E. Thomas Ford
President, Chief Operating Vice President and Director
Officer and Director
Jacob C. Belin Stanley D. Fraser
Director Vice President and Director
Howard L. Brainin Robert J. A. Irwin
Vice President and Director Director
Edward C. Brownlie R. Eugene Taylor
Vice President and Director Director
Thomas S. Coldewey W. Taliaferro Thompson, III
Director Director
DATED: March 8, 1994