UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number: 1-10466
St. Joe Paper Company
(Exact name of registrant as specified in its charter)
Florida 59-0432511
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 400, 1650 Prudential Drive, Jacksonville, Florida 32207
(Address of principal executive offices) (Zip Code)
(904) 396-6600
(Registrant's telephone number, including area code)
None
(Former name, former address, and former fiscal year if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of March 31, 1996 there were 30,498,650 shares of common stock, no
par value, outstanding.
ST. JOE PAPER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31 December 31
1996 1995
---------- -----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 108,157 $ 16,802
Short-term investments 87,046 96,923
Accounts receivable 52,050 44,390
Income taxes refundable 0 4,314
Inventories 24,832 20,592
Other assets 14,450 18,162
Net assets of discontinued operations 275,906 296,001
-------- ----------
Total Current Assets $ 562,441 $ 497,184
Investment and Other Assets:
Marketable securities 241,821 189,865
Other assets 30,587 38,971
-------- ----------
Total Investments and Other Assets $ 272,408 $ 228,836
Property, Plant, and Equipment, Net 816,020 804,974
-------- ----------
Total Assets $1,650,869 $1,530,994
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 24,450 $ 26,024
Accrued liabilities 19,538 18,445
Income taxes payable 11,744 0
---------- ----------
Total Current Liabilities 55,732 44,469
Accrued casualty reserves and other liabilities 11,598 11,681
Deferred income taxes and income tax credits 225,865 192,036
Minority interest in consolidated subsidiaries 269,627 266,741
Stockholders' Equity:
Common stock, no par value; 60,000,000 shares
authorized; 30,498,650 shares issued and
outstanding 8,714 8,714
Retained earnings 1,022,282 955,239
Net unrealized gains on debt and
marketable equity securities 57,052 52,114
---------- ----------
Total Stockholders' Equity 1,088,048 1,016,067
---------- ----------
Total Liabilities and Stockholders' Equity $1,650,869 $1,530,994
========== ==========
(See accompanying notes)
ST. JOE PAPER COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Dollars in thousands except per share amounts)
(Unaudited)
Three Months Ended March 31
1996 1995
---------- ----------
Net sales $ 125,519 $ 33,202
Operating revenues 45,443 43,176
---------- ----------
Net sales and operating revenues 170,962 76,378
Cost of sales 34,276 26,337
Operating expenses 34,652 31,666
Selling, general and administrative expenses 8,636 7,547
---------- ----------
Operating profit 93,398 10,828
Other income (expense):
Dividends 706 565
Interest income 4,060 3,015
Interest expense (67) (807)
Gain on sales and other dispositions of property 2,811 815
Other, net 1,397 443
---------- ----------
8,907 4,031
---------- ----------
Income before income taxes and minority interest 102,305 14,859
Provision for income taxes 39,197 5,692
---------- ----------
Income before minority interest 65,108 9,167
Income applicable to minority interest in
consolidated subsidiaries 3,429 2,515
---------- ----------
Income from continuing operations 59,679 6,652
Earnings from discontinued operations (net of
income taxes of $4,975 and $8,376, respectively) 8,889 14,862
---------- ----------
Net Income $ 68,568 $ 21,514
Retained earnings at beginning of period 955,239 887,520
Dividends 1,525 1,525
---------- ----------
Retained earnings at end of period $1,022,282 $ 907,509
========== ==========
Per share data:
Dividends $ 0.05 $ 0.05
========== ==========
Income from continuing operations $ 1.96 $ 0.22
Earnings of discontinued operations 0.29 0.49
---------- ----------
Net Income $ 2.25 $ 0.71
========== ==========
(See accompanying notes)
ST. JOE PAPER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands except per share amounts)
(Unaudited)
Three Months Ended March 31
1996 1995
----------------------------
Cash flows from operating activities:
Net Income $ 68,568 $ 21,514
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and depletion 6,826 6,691
Minority interest in income 3,429 2,515
Gain on sale of property (2,811) (815)
Increase in deferred income taxes 29,893 2,361
Changes in operating assets and liabilities:
Accounts receivable (7,660) 270
Inventories (4,240) (10,729)
Other assets 12,096 6,161
Accounts payable, accrued liabilities,
and casualty reserves (564) 5,879
Income taxes payable 16,058 (2,635)
Discontinued operations - non-cash charges
and working capital changes 22,543 (630)
----------------------------
Cash provided by operating activities 144,138 30,582
----------------------------
Cash flows from investing activities:
Purchases of property, plant, and equipment (19,902) (28,146)
Investing activities of discontinued operations (2,448) (5,375)
Purchases of investments:
Available-for-sale (106,682) (8,873)
Held-to-maturity 0 (61,575)
Proceeds from dispositions of assets 4,841 4,854
Maturity and redemption of investments:
Available-for-sale 63,149 8,502
Held-to-maturity 10,200 29,552
----------------------------
Cash used in investing activities (50,842) (61,061)
----------------------------
Cash flows from financing activities:
Net change in short-term borrowings 0 4,661
Dividends paid to stockholders (1,525) (1,525)
Dividends paid to minority interest (416) (410)
---------- ----------
Cash used in financing activities (1,941) (2,726)
---------- ----------
Net decrease in cash and cash equivalents 91,355 (27,753)
Cash and cash equivalents at beginning of period 16,802 46,389
---------- ----------
Cash and cash equivalents at end of period $ 108,157 $ 18,636
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 476 $ 572
Income taxes $ 0 $ 5,803
(See accompanying notes)
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
1. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position
as of March 31, 1996, and December 31, 1995, and the results of operations
and cash flows for the three-month periods ended March 31, 1996, and 1995.
The 1995 statements have been restated to reflect the reclassification of
the Communications segment and linerboard mill and container plants as
discontinued operations.
2. The results of operations for the three-month periods ended March 31, 1996,
and 1995 are not necessarily indicative of the results that may be
expected for the full year.
3. On September 1, 1995, St. Joe Industries, Inc., a wholly-owned subsidiary
of the Company, agreed to sell the stock of St. Joe Communications, Inc.
(SJCI) to TPG Communications, Inc., for approximately $115 million subject
to purchase price adjustments. The sale is subject to customary
conditions, including regulatory approvals. SJCI has sold its interest in
three cellular partnerships and has a contract to sell the remaining one
for an aggregate of approximately $27 million. These sales represent the
Company's entire Communications segment and are all expected to close in
the second quarter of 1996.
On November 2, 1995, the Company announced that it had entered into an
agreement to sell its linerboard mill and container plants for
approximately $390 million subject to purchase price adjustments and
contingent on, among other things, the buyer's receipt of financing.
The Company retains its timberlands and will continue to operate in this
segment. This sale is expected to close in the second quarter of 1996.
Operating revenues for the three-month periods ended March 31, 1996, and
1995 for the Communications segment were $8,435 and $7,799, respectively,
and net sales for the linerboard mill and container plants were $93,306
and $103,807, respectively. These amounts are not included in operating
revenues in the accompanying statements of income and retained earnings.
Net operating results of the Communications segment and for the linerboard
mill and container plants for the three-month periods ended March 31, 1996,
and 1995 are shown separately as earnings from discontinued operations in
the accompanying statements of income and retained earnings.
Net assets to be disposed of have been separately classified in the
accompanying balance sheets at March 31, 1996, and December 31, 1995.
Assets and liabilities of the Communications segment and linerboard mill
and container plants consisted of:
March 31 December 31
1996 1995
-------------------------
Cash and cash equivalents $ 12,916 $ 11,357
Accounts receivable 44,771 43,419
Inventories 44,546 49,414
Other assets 4,338 19,748
Marketable securities 2,607 2,582
Property, plant, and equipment 254,782 261,674
--------------------------
Total assets 363,960 388,194
Accounts payable 9,605 14,460
Accrued liabilities 8,699 7,671
Long-term debt 17,849 18,093
Accrued casualty reserves and other liabilities 4,332 4,332
Deferred income taxes 47,569 47,637
--------------------------
Net assets of discontinued operations $275,906 $296,001
==========================
4. Inventories at March 31, 1996, and December 31, 1995:
March 31 December 31
1996 1995
--------------------------
Materials and supplies $ 13,550 $ 12,875
Sugar 11,282 7,717
--------------------------
$ 24,832 $ 20,592
==========================
5. The Company and its subsidiaries are involved in litigation on a number of
matters and are subject to certain claims which arise in the normal course
of business, none of which, in the opinion of management, is expected to
have a material adverse effect on the Company's consolidated financial
position or results of operations.
The Company has retained certain self-insurance risks with respect to
losses for third-party liability, property damage, and group health
insurance provided to employees.
The Company is subject to costs arising out of environmental laws and
regulations, which include obligations to remove or limit the effects
on the environment of the disposal or release of certain wastes or
substances at various sites. It is the Company's policy to accrue and
charge against earnings environmental cleanup costs when it is probable
that a liability has been incurred and an amount is reasonably estimable.
As assessments and cleanups proceed, these accruals are reviewed and
adjusted, if necessary, as additional information becomes available.
The Company is currently a party to, or involved in, legal proceedings
directed at the cleanup of three Superfund sites. The Company has accrued
its allocated share of the total estimated cleanup costs for these three
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 results of operations
of the Company. As of March 31, 1996, and December 31, 1995, the aggregate
environmentally related accruals were $6.2 million. Environmental
liabilities are paid over an extended period and the timing of such
payments cannot be predicted with any confidence.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
On September 1, 1995, St. Joe Industries, Inc., a wholly-owned subsidiary of
the Company, agreed to sell the stock of St. Joe Communications, Inc. (SJCI) to
TPG Communications, Inc., for approximately $115 million subject to purchase
price adjustments. The sale closed on April 11, 1996. The Company has sold its
interest in three cellular partnerships due in 1995 and two in the first quarter
of 1996 and has a contract to sell the remaining one for an aggregate of
approximately $27 million. The final sale is expected to close in the second
quarter of 1996. These sales represent the Company's entire Communications
segment. Operating revenues for the three-month periods ended March 31, 1996,
and 1995 for the Communications segment were $8.4 million and $7.8 million,
respectively. These amounts are not included in operating revenues in the
accompanying statements of income and retained earnings. Net earnings of the
Communications segment for the three-month periods ended March 31, 1996, and
1995 were $6.7 million and $1.6 million, respectively, and are shown separately
as earnings from discontinued operations in the accompanying statements of
income and retained earnings.
On November 2, 1995, the Company announced that it had entered into an
agreement to sell its linerboard mill and container plants for approximately
$390 million subject to purchase price adjustments and contingent on, among
other things, the buyer's receipt of financing. The sale is expected to close
in the second quarter of 1996. The Company will retain its timberlands and
will enter into a fifteen-year fiber supply agreement with the buyer with two
five-year extensions. Annual wood fiber tonnage to be supplied from the
Company's lands will not exceed that currently provided and will be at
negotiated market prices adjusted on a quarterly basis. The Company plans in
the future to shift its remaining fiber production from the Company's lands to
higher margin timber products. Net sales for the linerboard mill and container
plants were $93.3 million and $103.8 million for the three months ended March
31, 1996, and 1995, respectively. Net earnings for the three months ended
March 31, 1996, and 1995 were $2.2 million and $13.3 million, respectively,
and are shown separately as earnings from discontinued operations in the
accompanying statements of income and retained earnings.
Upon the completion of these sales, revenues of the Company will be materially
lower than historical levels. Net income, earnings per share, and cash flows
may also be materially different from previous periods.
Quarter ended March 31, 1996
Net sales and operating revenues for the quarter were $171.0 million, a $94.5
million increase over the same period in 1995 and $81.2 million over the
fourth quarter of 1995. A land sale to the State of Florida for $84 million
accounted for the increase. Cost of sales and operating expenses were $68.9
million, up from $58.0 million in 1995 and $68.8 million in the fourth quarter
of 1995. These costs were 40.3% of net sales and operating revenues in 1996
compared to 75.9% in 1995 and 76.6% in the fourth quarter 1995. Selling,
general and administrative expenses were $8.6 million in the first quarter of
1996 compared to $7.5 million in the first quarter of 1995 and $9.1 million
in the fourth quarter 1995. As a result of these changes, operating profit
was $93.4 million compared to $10.8 million in the same quarter of 1995 and
$11.9 million in the fourth quarter of 1995.
An analysis of operating results by segment follows:
Forestry
Quarter ended March 31, 1996
% Increase
1996 1995 (Decrease)
--------------------------------
Net Sales 14.1 14.9 (5.4)
Cost of Sales 14.2 13.5 5.0
Selling, General & Administrative Expenses 1.3 1.2 11.9
--------------------------------
Operating Profit (Loss) (1.4) 0.2 (808.8)
Reduced production at the Company's linerboard mill resulted in sales to the
mill decreasing 68,000 tons. An increase of $2.95 per ton in the delivered
price offset some of the volume decrease. Outside sales increased by 3,580
tons but the product mix caused the price per ton to drop $5.71. A $6.22 per
ton increase in the cost of wood purchased for resale was the largest factor
in the overall cost increase.
Transportation
Quarter Ended March 31, 1996
% Increase
1996 1995 (Decrease)
--------------------------------
Operating Revenue 45.4 43.2 5.1
Operating Expenses 34.7 31.7 9.5
Selling, General & Administrative Expenses 5.2 4.3 21.0
--------------------------------
Operating Profit 5.6 7.2 (22.2)
Operating revenues, operating expenses, and selling, general and administrative
expenses all increased due to the inclusion in 1996 of an FECI subsidiary
acquired in the second quarter 1995. The lower operating profit is primarily
attributable to a decline in rail traffic of 7.2% on FEC and 8.1% on ANRR
combined with the FEC haulage agreement.
Sugar
Quarter Ended March 31, 1996
% Increase
1996 1995 (Decrease)
--------------------------------
Net Sales 18.7 12.3 52.0
Cost of Sales 13.1 8.3 57.8
Selling, General & Administrative Expenses 1.1 1.5 (26.7)
--------------------------------
Operating Profit 4.5 2.5 80.0
The sugar segment experienced a 52% volume increase in the first quarter of
1996 compared to 1995. The selling price fell slightly. Production fell 23%,
but costs per ton rose only 1%. Selling, general and administrative expenses
fell due mainly to lower worker's compensation payments in 1996.
Real Estate
Quarter Ended March 31, 1996
% Increase
1996 1995 (Decrease)
--------------------------------
Net Sales 92.7 6.0 1,445.0
Cost of Sales 7.0 4.5 55.7
Selling, General & Administrative Expenses 0.9 0.6 50.0
--------------------------------
Operating Profit 84.8 0.9 9,322.3
In 1996, a single realty property sale of $84.0 million was made to the State
of Florida which did not occur in 1995. Rent and other income increased by
$2 million in the first quarter of 1996 compared to the same period in 1995.
Cost of sales increased due to cost associated with the sale of the property to
the State of Florida. Selling, general and administrative expenses increased by
$0.3 million.
Other Income increased $4.9 million in the first quarter of 1996 compared to
1995. Interest income increased by $1.4 million reflecting increased
investment and higher rates. Gain on sales and other dispositions of property,
plant, and equipment increased $2.0 million primarily due to the first of
three installments involving the sale of fiber optic conduit for a total of
$8.7 million. Other income, net, rose by $0.9 million primarily due to
increased earnings on FECI's investment portfolio held for realty development.
Income from Continuing Operations increased $53.0 million (797%) during the
first quarter of 1996 from the same period in 1995. Earnings from discontinued
operations (net of income taxes) representing the Company's former
Communications segment and linerboard mill and container plants, were $6.0
million less than the first quarter of 1995. Net income for the quarter was
219% above the same period in 1995. Net income per share increased $1.54 to
$2.25. Income from continuing operations was $1.96 per share.
Financial Position
The Company's financial position remains strong. Current assets rose to
$562.4 million, a $65.2 million increase from year-end. Current liabilities
increased by $11.3 million causing the current ratio to drop from 11.2 to 1 at
year-end to 10.1 to 1 at the end of the first quarter.
The Company increased its investment in marketable securities by $42.1 million
over year-end. Net property, plant, and equipment increased by $11.0 million,
largely in FECI. Deferred income taxes grew by $33.8 million, due primarily
to deferred taxes on the proceeds of the condemnation sale to the State of
Florida.
Stockholders' equity at March 31, 1996, was $35.68 per share, an increase of
$2.36 from December 31, 1995.
Recent Events
As reported in the 1995 Annual Report to Shareholders, the Company has
indicated a willingness to consider exchanging shares of FECI stock it owns
for all of the shares of Gran Central Corporation (GCC) held by FECI and, in
that regard, has proposed acquiring all the issued and outstanding shares of
GCC in a tax-free exchange of its shares in FECI in return for 100% ownership
of GCC stock. The Company and FECI have each hired appraisal firms to assit
in evaluating the property of GCC and the Company and FECI intend to see if
they can negotiate terms of an exchange that will be acceptable to both
parties.
To date, no purchase price discussions have been held nor will any discussions
be held until the completion of the appraisals. Accordingly, there can be no
assurance when, if, or on what terms the Company might acquire GCC from FECI.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 19, 1996, Florida East Coast Industries, Inc. (FECI), a
wholly-owned subsidiary of the Company, was served with a complaint
filed by Alan Russell Kahn. The complaint is filed in the Circuit
Court of Duval County, Florida. Mr. Kahn alleges that he is a
shareholder of FECI. In addition to FECI, the following entities
and persons are named as defendants: the Company, St. Joe
Industries, and the Board of Directors of FECI, as individuals.
In his prayer for relief, Mr. Kahn requests the following:
(1) an order certifying the action as a class action;
(2) an injunction preventing the sale of Gran Central to the
Company;
(3) an order requiring the Directors of FECI to place Gran Central
for sale by means of an auction or to accept competitive bids
from third paries in some other fashion;
(4) an order requiring the Company to account to Mr. Kahn and the
class for any profits; and
(5) an order granting Mr. Kahn attorney's fees and costs.
Item 5. Other Information
On March 1, 1996, the United States Securities and Exchange Commission
(SEC) sent letters to FECI and the Company notifying them that the SEC
was conducting an informal inquiry into the trading of the securities
of FECI. The letters requested certain information regarding the
circumstances and events surrounding the proposed acquisition of Gran
Central Corporation by the Company. The requested information was
timely provided to the SEC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
St. Joe Paper Company
(Registrant)
/s/ J.M. Jones, Jr.
Vice President and CFO
/s/ D.M. Groos
Comptroller
May 15, 1996
(Date)
5
3-MOS YEAR
DEC-31-1996 DEC-31-1995
MAR-31-1996 DEC-31-1995
108,156,879 16,802,144
87,046,579 96,923,514
52,050,043 44,389,879
0 0
24,831,487 20,591,717
562,440,465 497,184,935
1,121,883,213 1,105,455,333
305,863,139 300,480,854
1,650,868,804 1,530,995,011
55,732,424 44,469,522
0 0
8,713,900 8,713,900
0 0
0 0
1,079,333,927 1,007,352,932
1,650,868,804 1,530,995,011
125,518,878 148,072,825
170,962,134 334,924,340
34,275,586 116,014,000
77,563,643 287,606,464
0 0
0 0
67,399 2,234,854
102,304,844 66,087,305
39,197,000 24,535,000
59,678,680 29,358,040
13,864,530 70,576,624
0 0
0 0
68,568,109 73,818,564
2.25 2.42
2.25 2.42
