===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION 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 001-12211
ECHELON INTERNATIONAL CORPORATION
-------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 59-2554218
------------------------ ----------------------
(State of incorporation) (I.R.S. Employer
Identification Number)
450 CARILLON PARKWAY, SUITE 200
ST. PETERSBURG, FLORIDA 33716 TELEPHONE (727) 803-8200
- --------------------------------------- -------------------------------
(Address of principal executive offices) (Registrant's telephone number)
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 [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Common stock, par value $.01 per share, 6,715,125 shares, as of August
11, 1999
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I.
Item 1. Financial Statements............................................................2
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................................16
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................26
PART II.
Item 4. Submission of Matters to a Vote of Security Holders............................27
Item 5. Other Information..............................................................27
Item 6. Exhibits and Reports on Form 8-K...............................................27
Signatures...................................................................................29
</TABLE>
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ECHELON INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
(IN MILLIONS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
REAL ESTATE, LEASES, LOANS & OTHER INVESTMENTS:
Real estate, net (Note 2) ................................................. $ 253.4 $ 198.8
Aircraft under operating lease (net of accumulated depreciation of
$9.7 and $9.5 million, respectively) ................................. 2.8 3.0
Leases and loans receivable, net (Note 3) ................................. 178.1 190.4
Investments in and advances to unconsolidated partnerships (Note 6) ....... 20.7 21.8
-------- --------
455.0 414.0
-------- --------
ASSETS HELD FOR SALE ........................................................... 2.2 2.3
-------- --------
CURRENT ASSETS:
Cash and equivalents (includes restricted deposits of $1.3 million for both
1999 and 1998, respectively) ......................................... 22.7 21.6
Accounts receivable, net .................................................. 2.4 1.4
Current portion of leases and loans receivable (Note 3) ................... 45.9 50.3
Inventories, at cost ...................................................... 1.0 1.0
Other ..................................................................... .8 .8
-------- --------
Total current assets ................................................. 72.8 75.1
-------- --------
OTHER NON-CURRENT ASSETS ....................................................... 4.6 2.8
-------- --------
Total assets ......................................................... $ 534.6 $ 494.2
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other liabilities .................................... $ 16.5 $ 11.8
Fundings for limited partnership investments (Note 6) ..................... 2.7 2.9
Current portion of deferred income taxes .................................. 10.3 10.1
Current portion of long-term debt (Note 4) ................................ 25.1 15.7
-------- --------
Total current liabilities ............................................ 54.6 40.5
LONG-TERM DEBT (Note 4) ........................................................ 134.3 106.0
DEFERRED INCOME TAXES .......................................................... 125.2 131.4
OTHER LIABILITIES .............................................................. .2 .5
COMMITMENTS AND CONTINGENCIES (Note 9)
-------- --------
Total liabilities .................................................... 314.3 278.4
-------- --------
STOCKHOLDERS' EQUITY (Note 5)
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued -- --
Common stock, $.01 par value, 25,000,000 shares authorized, 6,940,960
issued and 6,714,675 outstanding in 1999 and 6,901,718 issued
and 6,685,780 outstanding in 1998 ................................... .1 .1
Additional paid in capital ................................................ 283.2 282.2
Retained deficit .......................................................... (57.2) (61.0)
Treasury stock, at cost (220,464 shares in 1999 and 215,938 shares in 1998) (4.6) (4.5)
Unearned compensation ..................................................... (1.2) (1.0)
-------- --------
Total stockholders' equity ........................................... 220.3 215.8
-------- --------
Total liabilities and stockholders' equity ........................... $ 534.6 $ 494.2
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
ECHELON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
SALES AND REVENUES:
Real estate operations:
Rental and other operations revenues ............................... $ 8.0 $ 5.3 $ 15.3 $ 9.9
Sales of development properties and development rights ............. 2.4 .4 2.4 3.1
Investments in Financial Assets:
Earned income on finance and operating leases ...................... 1.7 1.3 3.5 2.2
Interest income .................................................... .9 1.1 1.8 2.2
Equity in earnings of unconsolidated partnerships .................. -- .4 -- 2.5
Equity in losses of limited partnership investments ................ (.6) (.1) (1.1) (.6)
Investment income and net realized gain on sale of investments ......... .4 .7 .7 3.0
-------- -------- -------- --------
12.8 9.1 22.6 22.3
-------- -------- -------- --------
OPERATING EXPENSES:
Rental and other operations ............................................ 4.4 3.3 8.1 6.1
Cost of development properties and development rights sold ............. .5 -- .5 1.6
Depreciation ........................................................... 1.7 1.4 3.3 2.7
Provision for (recovery of) lease, real estate and loan losses ......... -- (1.6) -- (1.6)
Interest expense on long-term debt, net of amounts capitalized ......... 1.9 1.2 3.2 2.6
General and administrative expenses .................................... 2.0 1.7 4.3 4.3
-------- -------- -------- --------
10.5 6.0 19.4 15.7
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES ............................................. 2.3 3.1 3.2 6.6
INCOME TAX EXPENSE (BENEFIT) ........................................... .6 .2 (.6) .3
-------- -------- -------- --------
NET INCOME ............................................................. $ 1.7 $ 2.9 $ 3.8 $ 6.3
======== ======== ======== ========
Basic earnings per common share:
Net income per common share ........................................ $ .25 $ .43 $ .56 $ .93
======== ======== ======== ========
Diluted earnings per common share:
Net income per common share ........................................ $ .25 $ .41 $ .56 $ .91
======== ======== ======== ========
Basic weighted average shares of common stock outstanding ............. 6.7 6.8 6.7 6.8
======== ======== ======== ========
Diluted weighted average shares of common stock outstanding ............ 6.7 6.9 6.7 6.9
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
3
<PAGE>
ECHELON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
-----------------
1999 1998
---- ----
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ........................................................................... $ 3.8 $ 6.3
Adjustment to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization of financing costs ................................. 3.3 2.8
Deferred income taxes ............................................................ (6.0) (4.6)
Amortization related to finance leases ........................................... (1.7) (.9)
Provision for (recovery of) lease, loan and real estate losses ................... -- (1.6)
Stock-based compensation expense ................................................. .5 .7
Gain on sale of assets ........................................................... (1.9) (3.0)
Equity in loss (income) of unconsolidated partnerships, net ...................... 1.1 (1.9)
Changes in working capital:
Accounts payable and other liabilities ...................................... 3.5 1.9
Other working capital changes ............................................... (.9) .6
Other ............................................................................ (1.0) (.6)
------- -------
.7 (.3)
------- -------
INVESTING ACTIVITIES:
Purchases of marketable securities ................................................... -- (7.7)
Proceeds from sales of marketable securities ......................................... -- 26.7
Proceeds from sales and collections of leases and loans receivable ................... 19.9 15.8
Real estate property additions and other capital expenditures ........................ (58.6) (40.6)
Net proceeds from sales of real estate properties and development rights ............. 2.4 2.9
Contributions to unconsolidated partnerships ......................................... (.2) (5.7)
Distributions from unconsolidated partnerships ....................................... -- 5.6
------- -------
(36.5) (3.0)
------- -------
FINANCING ACTIVITIES:
Issuance of long-term debt ........................................................... 57.1 9.0
Repayment of long-term debt .......................................................... (20.2) (2.5)
Issuance of common stock ............................................................. .1 .2
Purchase of treasury stock ........................................................... (.1) (.1)
------- -------
36.9 6.6
------- -------
Net increase in cash and equivalents ...................................................... 1.1 3.3
BEGINNING CASH AND EQUIVALENTS ............................................................ 21.6 7.8
------- -------
ENDING CASH AND EQUIVALENTS (INCLUDING RESTRICTED CASH OF
$1.3 MILLION IN 1999) ................................................................ $ 22.7 $ 11.1
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized ............................................. $ 3.0 $ 2.2
======= =======
Income taxes, net of refunds ..................................................... $ 4.4 $ 4.6
======= =======
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING &
FINANCING ACTIVITIES:
Issuance of common stock related to LTIP ......................................... $ .6 $ .4
======= =======
Change in unrealized gain (loss) on available-for-sale securities, net
of tax of $.6 million in 1998 ............................................... $ -- $ (1.0)
======= =======
Delayed equity amortization on leveraged leases .................................. $ .8 $ .8
======= =======
Tax benefit of stock transactions with employees ................................. $ .2 $ --
======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
ECHELON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1999 1998
---- ----
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Net income ................................................................ $ 3.8 $ 6.3
Other comprehensive income, net of tax:
Change in unrealized holding gain on available-for-sale securities
during period ..................................................... -- .1
Less: reclassification adjustment for net gains included in net income -- (1.1)
------ ------
Other comprehensive income .................................. -- (1.0)
------ ------
Total comprehensive income ................................................ $ 3.8 $ 5.3
====== ======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying consolidated financial
statements include all adjustments deemed necessary to summarize fairly and
reflect the financial position and results of operations of Echelon
International Corporation (the "Company") for the interim periods presented.
Results of the second quarter of 1999 are not necessarily indicative of results
for the full year. These consolidated financial statements should be read in
conjunction with the financial statements and notes thereto in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
Certain amounts previously reported in the Form 10-Q for the second quarter
of 1998 have been reclassified to conform to the 1999 presentation.
(2) REAL ESTATE
The depreciable lives and carrying values of real estate, a significant
portion of which is pledged to secure borrowings, are as follows:
<TABLE>
<CAPTION>
DEPRECIABLE JUNE 30, DECEMBER 31,
LIVES (YEARS) 1999 1998
------------- -------- -------------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C>
Land and land improvements held for development or sale $ 26.0 $ 26.9
-------- --------
Real estate under development:
Commercial Development
Land and land improvements .................... 1.0 1.0
Construction in progress ...................... 8.3 10.5
-------- --------
9.3 11.5
-------- --------
Multi-Family Development
Land and land improvements .................... 30.4 15.3
Construction in progress ...................... 38.9 24.8
-------- --------
69.3 40.1
-------- --------
Income producing:
Commercial
Land and land improvements .................... 16.3 15.3
Buildings and improvements .................... 5-40 108.9 102.0
Equipment and other ........................... 3-10 2.2 1.5
-------- --------
127.4 118.8
-------- --------
Multi-Family
Land and land improvements .................... 3.9 1.9
Buildings and improvements .................... 35 37.6 18.0
Equipment and other ........................... 3-10 1.5 0.7
-------- --------
43.0 20.6
-------- --------
Corporate
Equipment and other ........................... 3-10 2.3 2.3
-------- --------
277.3 220.2
Less: accumulated depreciation ........................ 23.9 21.4
-------- --------
$ 253.4 $ 198.8
======== ========
</TABLE>
6
<PAGE>
Capitalized interest during the development of specific projects was $2.0
million and $.6 million during the six months ended June 30, 1999 and 1998,
respectively.
(3) LOANS RECEIVABLE
At June 30, 1999 and December 31, 1998, loans receivable were as follows:
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
(UNAUDITED)
(IN MILLIONS)
Commercial finance loans receivable...... $ 33.1 $ 39.0
======== ===========
The Company's commercial finance loans receivable are secured by first
mortgage liens on the related commercial real estate or by security interests in
aircraft, aircraft engines or spare parts. These loans are further secured,
where applicable, by an assignment to the Company of the borrowers' lease
agreements, and, in some cases, third party guaranties. During the six months
ended June 30, 1999, the Company received scheduled repayments of $.1 million on
these loans and complete repayment on a $5.8 million real estate loan
receivable.
(4) LONG-TERM DEBT
Long-term debt outstanding at June 30, 1999 and December 31, 1998 is as
follows:
<TABLE>
<CAPTION>
INTEREST JUNE 30, DECEMBER 31,
RATE 1999 1998
-------- ----------- -------------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C>
Salomon Brothers Realty Corp. ............... 6.45%(a) $ 22.7 $ 12.8
Northwestern Mutual Life Insurance Company... 6.98% 54.8 55.4
SouthTrust Bank ............................. -- -- 14.9
AmSouth Bank ................................ 6.53%(b) 34.8 8.9
Fleet Capital Corporation ................... 5.99% 12.4 12.9
Teacher's Insurance and Annuity Association
of America .............................. 7.15% 19.3 --
Delayed equity obligation on finance lease... 10.00% 15.4 16.8
-------- --------
159.4 121.7
Less: current portion of long-term debt ..... 25.1 15.7
-------- --------
$ 134.3 $ 106.0
======== ========
</TABLE>
(a) Interest rate at June 30, 1999
(b) Weighted-average interest rate at June 30, 1999.
SALOMON BROTHERS REALTY CORP.
In March 1999, the Company borrowed $10.0 million of the available credit
on the $30.0 million Salomon Brothers Realty Corp. loan. The additional $10.0
million is being repaid over the remaining term of the original loan's 25 year
amortization period. The entire loan matures in May 2000 with the ability to
extend through May 2002.
7
<PAGE>
SOUTHTRUST BANK
In April 1999, the Company closed on a $19.3 million loan with Teacher's
Insurance and Annuity Association of America ("TIAA") for the permanent
financing of ECHELON AT BAY ISLE KEY. This loan is part of the TIAA $55.5
million Credit Facility discussed below. The Company paid off the $16.5 million
construction loan, which included a $.5 million draw in April 1999, from
SouthTrust Bank with the TIAA funding.
AMSOUTH BANK
In April 1998, the Company closed on an $18.6 million construction loan
with AmSouth Bank. The loan is being used to fund the development of ECHELON AT
THE RESERVE, a 314-unit multi-family residential community in CARILLON PARK,
located in the Gateway area of St. Petersburg, Florida. The interest rate is
LIBOR plus 1.50% per annum. As of June 30, 1999, Echelon has drawn $15.3 million
on this loan. The initial term of the loan is three years, with an option to
extend for an additional two years from construction completion. TIAA has
committed to provide the permanent financing for this development, under the
TIAA $55.5 million Credit Facility discussed below.
In May 1998, the Company executed a commitment letter with AmSouth Bank for
a $50.0 million Advised Guidance Line of Credit ("AmSouth Line"). The proceeds
from the AmSouth Line are being used to provide the construction financing for
multi-family residential and commercial projects, as approved by AmSouth Bank.
Each project financed under the AmSouth Line will be a separate loan. The
interest rate for each loan will be the lesser of the prime rate of interest or
the LIBOR rate plus a defined number of basis points per annum. The term for
each multi-family residential loan is 36 months and for each commercial loan is
30 months. The repayment terms of the loans are interest only, with the entire
principal and any accrued interest due at maturity.
To date, the Company has closed on five loans under the AmSouth Line. The
construction projects, the loan amounts and the construction draws as of June
30, 1999 are as follows:
<TABLE>
<CAPTION>
CONSTRUCTION
CONSTRUCTION LOAN DRAWS AS OF
CONSTRUCTION PROJECT AMOUNT JUNE 30, 1999
-------------------- ----------------- --------------
(IN MILLIONS)
<S> <C> <C>
CASTILLE AT CARILLON............................. $10.9 $8.0
ECHELON AT WOODLAND PARK......................... $11.3 $3.9
ECHELON AT NORTHLAKE............................. $17.2 $6.8
ECHELON AT MISSION RANCH......................... $14.1 $ .8
ECHELON AT MEMORIAL CREEK........................ $14.6 --
</TABLE>
Since the total loans approved under the AmSouth Line exceed $50.0
million, AmSouth Bank has participated portions of several loans to other
financial institutions.
8
<PAGE>
OTHER FINANCING COMMITMENTS
In May 1998, Echelon executed a commitment letter with TIAA for a $55.5
million Credit Facility ("Credit Facility") at an interest rate of 7.15% per
annum. The proceeds of the Credit Facility are to be used for the permanent
financing of specific projects. The Credit Facility will be secured by the
projects and funding will occur for each project based on specific conditions.
Each disbursement will constitute a separate loan, which will mature 10 years
from the date of the first loan disbursement. The first loan disbursement
requires interest-only payments for the first 12 months and monthly principal
and interest payments thereafter based on a 30-year amortization schedule. The
remaining loans require monthly principal and interest payments based on a
30-year amortization schedule. The Credit Facility defines the loan disbursement
expiration dates for each loan, with the ability for the Company to extend any
of the expiration dates for 90 days. Under the terms of the commitment, TIAA
required the Company to remit a refundable application fee. The Company
negotiated to provide stand-by letters of credit in lieu of the application fee,
which will be reduced on a pro-rata basis as the loans are funded. As of June
30, 1999, Echelon had certificates of deposit totaling $.8 million securing the
stand-by letters of credit.
As previously discussed, in April 1999 the Company closed on a $19.3
million loan under the Credit Facility for the permanent financing of ECHELON AT
BAY ISLE KEY. The loan requires interest only payments for the first 12 months
of the term and monthly principal and interest payments thereafter based on a
30-year amortization schedule. Final maturity of the loan is no later than April
2009.
In January 1999, the Company executed a commitment letter with NationsBank
for a $100.0 million Advised Guidance Line of Credit ("NationsBank Line"). The
NationsBank Line will provide construction financing for multi-family
residential and commercial projects, as approved by NationsBank. Each project
financed under the NationsBank Line will be a separate loan and the interest
rate for each loan will be negotiated with NationsBank based upon market
conditions at the time of funding. The term for each multi-family residential
loan is 36 months and for each commercial loan 30 months. The loans are interest
only, with the entire principal and any accrued interest due at maturity.
In February 1999, the Company executed a $19.8 million commitment letter
with NationsBank under the NationsBank Line for the construction of ECHELON AT
LAKESIDE, a 184-unit multi-family residential community to be developed in
Plano, Texas. The interest rate is LIBOR plus 1.85% and the term is 36 months
from the date of the loan closing.
In February 1999, the Company also executed a commitment letter with
Wachovia Bank, N.A. for a $21.5 million construction loan for ECHELON AT CHENEY
PLACE, a 303-unit multi-family residential community to be developed in downtown
Orlando, Florida. The interest rate on the loan is LIBOR plus 1.60% and the term
of the loan is 36 months from the date of the loan closing. See further
discussion of the development of ECHELON AT CHENEY PLACE included in Note 12,
"Subsequent Events".
In June 1999, the Company executed a commitment letter with First Union
National Bank of Florida for a $26.1 million construction loan for ECHELON AT
THE BALLPARK, a 384-unit multi-family residential community to be developed in
downtown Memphis, Tennessee. The interest rate on the loan is LIBOR plus 1.65%
and the term of the loan is 36 months from the date of the loan closing.
FINANCIAL COVENANTS
The Company's significant financial covenants include minimum net worth and
liquidity requirements. At June 30, 1999, Echelon was in compliance with all
financial convenants contained in its debt agreements.
9
<PAGE>
(5) STOCKHOLDERS' EQUITY
During the six months ended June 30, 1999, the Company issued 30,976 shares
of restricted Common Stock under the Echelon International Corporation Long-Term
Incentive Plan ("LTIP") in accordance with executive employment agreements.
During the first half of 1999, the Company recorded $.6 million of unearned
compensation for the issuance of the 30,976 shares of restricted Common Stock
and recognized $.4 million of compensation related to the vesting period for all
restricted Common Stock. The remaining unearned compensation will be amortized
as compensation expense over the vesting period of the restricted Common Stock.
During the six months ended June 30, 1998, the Company issued 90,181 shares
of restricted Common Stock under the LTIP in accordance with executive
employment agreements. During the first half of 1998, the Company recorded $1.6
million of unearned compensation and subsequently recognized $.7 of compensation
expense in conjunction with the issuance of the restricted Common Stock.
In February 1998, the Company issued 129,250 stock options under the LTIP
and the Echelon International Corporation 1996 Stock Option Plan ("Stock Option
Plan"). The stock options were granted at market value on the date of grant. The
stock options granted under the LTIP are performance based options which cliff
vest at the end of nine years with a provision for early vesting if certain
performance goals are achieved. The stock options granted under the Stock Option
Plan vest over five years.
The Company issued 672 shares and 1,274 shares of Common Stock under the
Echelon International Corporation Non-Employee Directors' Plan during the six
months ended June 30, 1999 and 1998, respectively.
At the Company's Annual Meeting on May 18, 1999, the Company's stockholders
approved the Echelon International Corporation 1999 Non-Employee Directors' Plan
("1999 Non-Employee Directors' Plan"). Under the 1999 Non-Employee Directors'
Plan, non-employee directors receive an annual retainer of $10,000 paid
quarterly in arrears in the form of Echelon Common Stock and an automatic grant
of options to purchase 5,000 shares of Echelon Common Stock upon each annual
meeting of the Company's stockholders for which they are a Director. During the
three months ended June 30, 1999, the Company issued 573 shares of Common Stock
and 20,000 stock options under the 1999 Non-Employee Directors' Plan.
The Company also issued 7,021 shares and 6,262 shares of Common Stock in
conjunction with the Echelon International Corporation Employee Stock Purchase
Plan during the six month periods ended June 30, 1999 and 1998, respectively.
During the first half of 1999 and 1998, the Company repurchased 4,526
shares and 4,419 shares, respectively, of Common Stock, resulting in additional
Treasury Stock, at cost, of $.1 million in each of the periods. During the six
months ended June 30, 1999, 5821 shares of restricted Common Stock were
forfeited by an employee.
10
<PAGE>
The net income and common shares used to compute basic and diluted earnings
per share is presented in the following table:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
(In millions, except per share amounts)
<S> <C> <C> <C> <C>
BASIC
Weighted average number of shares:
Average common shares outstanding ................ 6.7 6.8 6.7 6.8
======= ======= ======= =======
Net income used to compute basic earnings per share:
Net income ....................................... $ 1.7 $ 2.9 $ 3.8 $ 6.3
======= ======= ======= =======
Basic earnings per common share ...................... $ .25 $ .43 $ .56 $ .93
======== ======= ======= =======
DILUTED
Weighted average number of shares:
Average common shares outstanding ................ 6.7 6.8 6.7 6.8
Dilutive effect for stock options and
contingently issuable common shares ........... -- .1 -- .1
------- ------- ------- -------
Weighted average shares .......................... 6.7 6.9 6.7 6.9
======= ======= ======= =======
Net income used to compute diluted earnings per share:
Net income ....................................... $ 1.7 $ 2.9 $ 3.8 $ 6.3
======= ======= ======= =======
Diluted earnings per common share .................... $ .25 $ .41 $ .56 $ .91
======= ======= ======= =======
</TABLE>
(6) INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED PARTNERSHIPS
As of July 31, 1998, a joint venture in which the Company had a 50%
interest was dissolved and the Company received net assets totaling $19.1
million. Presented below is summarized financial information for this joint
venture for the six months ended June 30, 1998. Amounts reflect 100% of the
joint venture's results of operations through June 30, 1998.
SIX MONTHS ENDED
JUNE 30, 1998
----------------
(UNAUDITED)
(IN MILLIONS)
REVENUES AND EXPENSES
Revenues.......................................... $5.1
Expenses.......................................... .1
----
Combined net earnings of joint venture............ $5.0
====
Company's equity in net earnings of joint venture. $2.5
====
The joint venture's revenues for the six months ended June 30, 1998
included a $3.2 million gain on the sale of two aircraft engines.
11
<PAGE>
The Company also has investments in affordable housing limited
partnerships, which range between a total gross ownership percentage of 7.1% to
11.6% as of both June 30, 1999 and 1998, respectively. The Company accounts for
these investments under the equity method of accounting. Echelon recorded
pre-tax losses of $1.1 million and $.6 million on these investments for the six
month periods ended June 30, 1999 and 1998, respectively.
During 1996 and 1997, Echelon signed commitments to provide total capital
contributions of $25.8 million to affordable housing limited partnerships.
Echelon has funded $23.1 million of these commitments as of June 30, 1999. The
total initial investment commitments of $25.8 million are included as
investments in unconsolidated partnerships in the Company's consolidated balance
sheets as of both June 30, 1999 and December 31, 1998, respectively. The
remaining commitments to be funded by December 31, 1999 total $2.7 million as of
June 30, 1999.
(7) RELATED PARTY TRANSACTIONS
In April 1998, the Board of Directors approved an interest-free loan
program to assist the Company's Executive Officers in meeting tax liabilities
associated with the lapse of restrictions on Echelon's restricted Common Stock.
During the six months ended June 30, 1999, the Company funded $.7 million to
four Executive Officers in conjunction with this loan program. These
transactions resulted in $.1 million of compensation expense to the Company.
(8) EFFECTIVE INCOME TAX RATE
The Company's effective income tax rate differs from the statutory income
tax rate primarily due to tax credits related to the Company's investment in
affordable housing limited partnerships, amortization of investment tax credits
related to the Company's leveraged lease portfolio, and differences in rates
between previously deferred taxes and current taxes.
(9) COMMITMENTS AND CONTINGENCIES
The Company is subject to regulation with respect to the environmental
effects of its operations. Based on information currently available to the
Company, Echelon estimates that its share of liability for cleaning up these
sites ranges from $.1 million to $1.0 million, and has reserved $.3 million for
potential costs. Management currently believes that the ultimate outcome of
these matters will not have a material adverse effect upon the Company's results
of operations, financial condition or liquidity.
The Company is currently involved in the construction of several commercial
projects and multi-family residential communities and at June 30, 1999 had
remaining commitments of $35.3 million with construction contractors.
As of June 30, 1999, Echelon had four contracts, subject to the Company's
final due diligence, to acquire land or execute a joint venture agreement, for
the development of more than 850 multi-family residential units. No assurance
can be given that Echelon will acquire this land or develop these multi-family
residential communities.
Through two previous partnerships, the Company remains contingently liable
for first mortgage bonds issued to residents of the life care communities owned
by such partnerships. The contingent liability reduces over time as those who
were residents at the time of the sale of Echelon's partnership interests
discontinue their residency. If the current owners fail to perform their
obligations and if the partnership assets, consisting primarily of land and
buildings, were worthless, the Company could be liable for an
12
<PAGE>
additional $24.0 million as of December 31, 1998. The Company considers the
incurrence of this liability to be remote based on asset values and the
indemnification agreement from the current owners to Echelon.
(10) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which established accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The Company will be
required to adopt this standard as of January 1, 2001 and based on current
circumstances does not believe the application of the new rules will have a
material impact on the Company's results of operations or its financial
condition.
(11) OPERATING SEGMENTS
As of December 31, 1998, the Company adopted SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information," which established
standards for additional disclosure about operating segments for interim and
annual financial statements. This standard requires financial and descriptive
information be disclosed for segments whose operating results are reviewed by
the chief operating officer for decisions on resource allocation. It also
established standards for related disclosures about products and services,
geographic areas, and major customers.
The Company has three principal operating segments. These segments are 1)
Commercial Real Estate, 2) Multi-Family Residential Real Estate and 3)
Investments in Financial Assets. Commercial Real Estate includes the operation
and development of office and industrial properties, land sales, marina
operations and real estate brokerage services. Multi-family Residential Real
Estate includes the development, ownership and operation of multi-family
residential communities. Investments in Financial Assets include leveraged
leases, direct finance leases, an operating lease, investments in afforadable
housing limited partnerships and commercial finance loans. The Financial Assets
segment is primarily invested in the airline industry.
Segment information for the three and six month periods ended June 30, 1999
and 1998 is summarized below. Revenues received from Florida Progress
Corporation and subsidiaries accounted for 16% and 13% of the Company's revenues
for the three and six month periods ended June 30, 1999. Revenues received from
Florida Progress Corporation and subsidiaries for both the three and six months
ended June 30, 1998 accounted for 5% of the Company's revenues, respectively.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C>
Sales and revenues: (1)
Commercial real estate ............. $ 9.2 $ 5.6 $ 15.7 $ 12.9
Multi-family residential real estate 1.2 .1 2.0 .1
Investments in financial assets .... 2.0 2.7 4.2 6.3
------- ------- ------- -------
12.4 8.4 21.9 19.3
Non-segment ..................... .4 .7 .7 3.0
------- ------- ------- -------
$ 12.8 $ 9.1 $ 22.6 $ 22.3
======= ======= ======= =======
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- ---------------
1999 1998 1999 1998
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C>
Operating expenses: (2)
Commercial real estate ............. $ 6.0 $ 4.6 $ 11.0 $ 10.6
Multi-family residential real estate 1.5 .2 2.5 .2
Investments in financial assets .... .9 (.5) 1.6 .5
------- ------- ------- -------
8.4 4.3 15.1 11.3
Non-segment ..................... 2.1 1.7 4.3 4.4
------- ------- ------- -------
$ 10.5 $ 6.0 $ 19.4 $ 15.7
======= ======= ======= =======
Interest expense, net: (2)
Commercial real estate ............. $ .7 $ .6 $ 1.2 $ 1.3
Multi-family residential real estate .4 -- .6 --
Investments in financial assets .... .8 .6 1.4 1.3
------- ------- ------- -------
1.9 1.2 3.2 2.6
Non-segment ..................... -- -- -- --
------- ------- ------- -------
$ 1.9 $ 1.2 $ 3.2 $ 2.6
======= ======= ======= =======
Depreciation expense: (2)
Commercial real estate ............. $ 1.1 $ 1.0 $ 2.3 $ 1.9
Multi-family residential real estate .3 -- .5 --
Investments in financial assets .... .1 .3 .2 .6
------- ------- ------- -------
1.5 1.3 3.0 2.5
Non-segment ..................... .2 .1 .3 .2
------- ------- ------- -------
$ 1.7 $ 1.4 $ 3.3 $ 2.7
======= ======= ======= =======
Income tax expense (benefit) ........... $ .6 $ .2 $ (.6) $ .3
======= ======= ======= =======
Consolidated net income ................ $ 1.7 $ 2.9 $ 3.8 $ 6.3
======= ======= ======= =======
Capital expenditures:
Commercial real estate ............. $ 4.7 $ 12.4 $ 6.6 $ 19.8
Multi-family residential real estate 28.3 13.7 52.0 19.8
------- ------- ------- -------
33.0 26.1 58.6 39.6
Non-segment ..................... -- .5 -- 1.0
------- ------- ------- -------
$ 33.0 $ 26.6 $ 58.6 $ 40.6
======= ======= ======= =======
</TABLE>
14
<PAGE>
AS OF JUNE 30,
----------------
1999 1998
---- ----
(UNAUDITED)
(IN MILLIONS)
Assets: (3)
Commercial real estate ............. $ 141.6 $148.1
Multi-family residential real estate 120.7 32.0
Investments in financial assets .... 248.2 289.5
-------- ------
510.5 469.6
Non-segment ..................... 24.1 24.6
-------- ------
$ 534.6 $494.2
-------- ------
- ------------------
(1) Non-segment sales and revenues to reconcile to total revenue are comprised
of investment income and net realized gain on sale of investments.
(2) Non-segment operating expenses to reconcile to total operating expenses
are comprised of corporate general and administrative expenses and
corporate depreciation.
(3) Non-segment assets to reconcile to total assets are comprised of all cash
and cash equivalents and corporate equipment, furniture and fixtures.
(12) SUBSEQUENT EVENTS
In July 1999, Fannie Mae's American Communities Fund agreed to invest with
Echelon in the development of ECHELON AT CHENEY PLACE, a 303-unit
multi-family residential community to be developed in downtown Orlando,
Florida. The Company will account for its investment in the development of
ECHELON AT CHENEY PLACE under the equity method. Concurrent with the
execution of the agreement with Fannie Mae's American Communities Fund, the
Company and Fannie Mae's American Communities Fund executed an agreement
with Wachovia Bank, N.A. for a $21.5 million construction loan to fund the
development of ECHELON AT CHENEY PLACE. The construction of ECHELON AT
CHENEY PLACE began in late July 1999.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Echelon is a real estate company which develops, owns, and manages
commercial and multi-family residential real estate (the "Real Estate
Business"). The Real Estate Business includes two segments: 1) Commercial Real
Estate and 2) Multi-Family Residential Real Estate. The Company also owns and
manages a portfolio of financial assets consisting primarily of leased aircraft
and other assets and collateralized financings of commercial real estate and
aircraft (the "Leasing and Lending Business"). The Leasing and Lending Business
comprises the majority of the Company's third segment, Investments in Financial
Assets. Echelon is continuing to withdraw from the aircraft and real estate
lending business to focus on its core real estate operations.
Prior to December 18, 1996 ("Distribution Date"), the Company operated as a
wholly owned subsidiary of Florida Progress Corporation ("Florida Progress").
Effective on the Distribution Date, Florida Progress distributed the Company's
stock to Florida Progress shareholders (one share of the Company for each
fifteen shares of Florida Progress) as a tax-free dividend (the "Distribution").
The Distribution established the Company as a publicly held corporation,
separate from Florida Progress.
The Company's operations for the six months ended June 30, 1999 include the
following transactions related to the Company's ongoing multi-family residential
and commercial development activities:
MULTI-FAMILY RESIDENTIAL DEVELOPMENT
Construction of ECHELON AT BAY ISLE KEY, a 369-unit multi-family
residential community located in the Gateway area of St. Petersburg, Florida,
was 98% leased as of June 30, 1999. ECHELON AT BAY ISLE KEY was named the "1998
Apartment Community of the Year" by the Bay Area Apartment Association, which
covers the Tampa, St. Petersburg and Clearwater area.
Construction of the clubhouse and 14 of 22 total buildings for ECHELON AT
THE RESERVE was completed during the first half of 1999. ECHELON AT THE RESERVE
is a 314-unit multi-family residential community located in CARILLON PARK.
Leasing is in process and to date, over 200 units have been leased, representing
over 66% of the total units. Construction is scheduled for completion in the
last quarter of 1999.
Construction of the clubhouse for ECHELON AT WOODLAND PARK was completed
during June 1999. ECHELON AT WOODLAND PARK is a 232-unit multi-family
residential community located in Tulsa, Oklahoma. Leasing has just begun with 25
leases signed and construction is scheduled for completion in the first quarter
of 2000.
Construction of the clubhouse for ECHELON AT NORTHLAKE is scheduled to be
completed during August 1999. ECHELON AT NORTHLAKE is a 256-unit multi-family
residential community located in Atlanta, Georgia. Construction is scheduled for
completion in the first quarter of 2000.
Construction is continuing for ECHELON AT MISSION RANCH, a 295-unit
multi-family residential community located in Mesquite, Texas (near Dallas) and
ECHELON AT MEMORIAL CREEK, a 292-unit multi-family residential community located
in Tulsa, Oklahoma. Both clubhouses are scheduled to open in October 1999.
16
<PAGE>
In addition to the multi-family residential communities above, there are an
additional seven multi-family residential communities currently under
development and/or construction:
- ECHELON AT CHENEY PLACE - a 303-unit multi-family residential
community located in downtown Orlando, Florida,
- ECHELON AT THE BALLPARK - a 384-unit multi-family residential
community located in downtown Memphis, Tennessee,
- ECHELON AT BRIARGATE - a 395-unit multi-family residential community
located in Colorado Springs, Colorado,
- ECHELON AT TWENTY MILE VILLAGE - a 325-unit multi-family residential
community located in Parker, Colorado (near Denver),
- ECHELON AT WATTERS CREEK - a 200-unit multi-family residential
community located in Allen, Texas (near Dallas),
- ECHELON AT KELLER TOWN CENTER - a 276-unit multi-family residential
community located in Keller, Texas (near Dallas) and
- ECHELON AT MID-TOWN - a 297-unit multi-family residential community
located in downtown Memphis, Tennessee.
COMMERCIAL DEVELOPMENT
Construction was completed in late June 1999 on CASTILLE AT CARILLON, two
class A buildings totaling 103,900 square feet located in CARILLON PARK. As of
mid-August 1999, CASTILLE AT CARILLON is 72% leased with Echelon occupying
approximately 20,000 square feet as its corporate headquarters and leasing
approximately 55,000 square feet to third parties. Echelon has also executed
letters of intent for approximately 24,000 additional square feet.
In June 1999, the Company recorded revenue of $2.4 million for the sale of
development rights in CARILLON PARK to an existing land owner. Echelon intends
to develop a portion of the unsold CARILLON PARK land for its own account and
market the remaining land to third parties.
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE AND SIX MONTHS
ENDED JUNE 30, 1998
Net income for the three months ended June 30, 1999 was $1.7 million or
$.25 basic and diluted earnings per share compared to net income of $2.9 million
or $.43 basic and $.41 diluted earnings per share, respectively, for the three
months ended June 30, 1998. Net income for the six months ended June 30, 1999
was $3.8 million or $.56 basic and diluted earnings per share. This compares to
net income of $6.3 million or $.93 basic and $.91 diluted earnings per share,
respectively, for the six months ended June 30, 1998.
17
<PAGE>
SALES AND REVENUES
COMMERCIAL REAL ESTATE
Commercial real estate sales and revenues for the three and six months
ended June 30, 1999 increased $3.6 million and $2.8 million compared to the same
periods in 1998 primarily due to:
o A $2.0 million increase in revenues from the the sales of development
properties and development rights during the three months ended June 30,
1999 resulting from $2.4 million in revenues from the sale of development
rights in CARILLON PARK during the second quarter of 1999 compared to $.4
million in revenues from the sale of development rights in CARILLON PARK in
the same period of 1998.
A $.7 million decrease in revenues from the sales of development properties
and development rights for the six months ended June 30, 1999 as the 1998
first quarter revenues include revenues of $2.7 million from the sale of
land in CARILLON PARK.
o A $1.5 million and $2.9 million increase in rental revenues for the three
and six month periods ended June 30, 1999, respectively, compared to the
same periods in 1998 resulting from an overall increase in occupancy and
rental rates for the Company's commercial properties, the 100% occupancy of
the commercial properties completed during the second quarter of 1998,
BAYBORO STATION and CENTRAL STATION, the completion of THE NEW MCNULTY in
December 1998 and the construction completion of CASTILLE AT CARILLON in
late June 1999.
o A $.1 million and $.6 million increase in revenues from real estate
brokerage services and other commercial real estate operations for the
three and six month periods ended June 30, 1999 compared to the same
periods in 1998.
MULTI-FAMILY RESIDENTIAL REAL ESTATE
o Multi-family residential real estate revenues of $1.2 million and $2.0
million for the three and six months ended June 30, 1999 resulted from the
leasing of ECHELON AT BAY ISLE KEY, which opened in late April 1998, and
the initial leasing of ECHELON AT THE RESERVE, which completed the
construction of the clubhouse and 14 of 22 total buildings during the first
half of 1999.
INVESTMENTS IN FINANCIAL ASSETS
Investments in financial assets sales and revenues for the three and six
month periods ended June 30, 1999 decreased $.7 million and $2.1 million,
respectively, compared to the same periods in 1998 primarily due to:
o A decrease in equity in earnings of unconsolidated partnerships of $.4
million and $2.5 million for the three and six months ended June 30,
1999, respectively, compared to 1998 due to the July 31, 1998
dissolution of the joint venture partnership in which Echelon had a
50% interest.
o A decrease of $.2 million and $.4 million in interest income for the
three and six months ended June 30, 1999 compared to the same periods
in 1998 as a result of the sales and payoffs of loans receivable as
the Company continues to execute its strategy to liquidate
non-strategic assets and redirect the capital to real estate
development and acquisition.
18
<PAGE>
o Earned income on finance and operating leases increased $.4 million
and $1.3 million for the three and six months ended June 30, 1999
compared to the same periods in 1998 primarily as a result of a $.4
million and $.8 million increase in lease revenues for the three and
six months ended June 30, 1999, respectively, recorded from the direct
finance lease of an aircraft leased to Continental Airlines that the
Company received from the July 31, 1998 dissolution of the joint
venture, in which Echelon was a 50% partner. For the three and six
month periods ended June 30, 1998, the income from the joint venture
was reported in the "Equity in earnings of unconsolidated
partnerships" income statement line item. The Company also recorded an
additional $.3 million of revenues in the first half of 1999 related
to the restructure in the fourth quarter of 1998 of a direct finance
lease for an aircraft leased to Southwest Airlines and a $.2 million
increase in revenues from the Company's leveraged lease portfolio for
the six months ended June 30, 1999.
o Equity in losses of limited partnership investments increased $.5
million for both the three and six month periods ended June 30, 1999
compared to the same periods in 1998. Equity in losses of limited
partnership investments reduced revenues for the three and six months
ended June 30, 1999 by $.6 million and $1.1 million, respectively, as
compared to the same periods of 1998. The equity in losses of limited
partnership investments resulted from the Company recording its share
of pre-tax losses from affordable housing limited partnerships in each
of the periods. The Company recorded $1.7 million and $1.3 million in
related income tax credits for the six months ended June 30, 1999 and
1998, respectively, as a reduction of income tax expense.
As part of Echelon's strategy to focus on real estate development,
Echelon has investments in affordable housing limited partnerships
entitled to the benefits of housing tax credits. The Company's overall
return on these investments includes recording pre-tax losses on this
type of investment. The tax benefits resulting from such losses and
the realization of the housing tax credits are the primary sources of
value from this type of investment.
NON-SEGMENT
o The Company's non-segment sales and revenues are comprised of investment
income and net realized gain on sale of investments, which decreased $.3
million and $2.3 million for the three and six months ended June 30, 1999
compared to the same periods of 1998 as a result of the Company's
conversion of the marketable securities portfolio to cash and short-term
cash investments during the fourth quarter of 1998.
19
<PAGE>
OPERATING EXPENSES
COMMERCIAL REAL ESTATE
Commercial real estate operating expenses for the three and six months
ended June 30, 1999 increased $1.4 million and $.4 million compared to the same
periods in 1998 primarily due to:
o An increase in rental and other operations expenses in the three and
six month periods ended June 30, 1999 of $1.7 million and $1.2 million
over the same periods of 1998 primarily due to the completion and 100%
occupancy of BAYBORO STATION and CENTRAL STATION in the second quarter
of 1998, the completion of THE NEW MCNULTY in December 1998, the
construction completion of CASTILLE AT CARILLON in late June 1999 and
increased occupancy in the Company's other commercial properties in
1999 as compared to 1998, as previously discussed.
o An increase in depreciation expense of $.1 million and $.4 million for
the three and six months ended June 30, 1999, respectively, as
compared to the same periods in 1998 primarily as a result of the
completion of the construction and tenant improvements of two
commercial properties, BAYBORO STATION and CENTRAL STATION, in the
second quarter of 1998 and the completion of THE NEW MCNULTY in
December 1998.
These increases were offset by:
o A decrease in the cost of development properties and development
rights sold of $.5 million and $1.1 million for the three and six
months ended June 30, 1999 compared to the same periods in 1998 due to
a decrease in sales of CARILLON PARK land and development rights, as
discussed previously.
MULTI-FAMILY RESIDENTIAL REAL ESTATE
o Multi-family residential real estate operating expenses of $1.5 million and
$2.5 million for the three and six months ended June 30, 1999,
respectively, resulted from the opening of the first multi-family
residential community, ECHELON AT BAY ISLE KEY, in late April 1998, and the
completion of the clubhouse and 14 of a total 22 buildings, of ECHELON AT
THE RESERVE during the first half of 1999, as discussed above. The $2.5
million of operating expenses incurred during the first half of 1999 is
comprised of $.5 million of depreciation expense, $.6 million of interest
expense and $1.4 million of real estate operating expenses.
20
<PAGE>
INVESTMENTS IN FINANCIAL ASSETS
Expenses related to investments in financial assets for the three and
six months ended June 30, 1999 increased $1.4 million and $1.1 million,
respectively, compared to the same periods in 1998 primarily due to:
o A reversal of a $1.6 million allowance for loan losses in the first
half of 1998 as a result of the complete repayment of a loan, for
which the Company had previously recorded an allowance for loan
losses.
o A decrease in depreciation expense of $.2 million and $.4 million
during the three and six months ended June 30, 1999, respectively,
compared to the same periods of 1998 as a result of increasing the
estimated depreciable life of a leased aircraft due to the extension
of an operating lease from an original maturity of December 31, 1998
to October 31, 2000.
o An increase in interest expense, net of amounts capitalized, of $.2
million and $.1 million for the three and six months ended June 30,
1999, compared to the same periods of 1998 as a result of an overall
increase in debt due to a loan executed in November 1998, which is
secured by a direct finance lease.
NON-SEGMENT
o Non-segment operating expenses to reconcile to total operating expenses are
comprised primarily of corporate general and administrative expenses and
corporate depreciation.
The non-segment operating expenses increased $.4 million and decreased $.1
million for the three and six months ended June 30, 1999, respectively, as
compared to the same periods in 1998.
The increase in non-segment operating expenses for the second quarter of
1999 compared to the second quarter of 1998 is due to the second quarter 1999
operating expenses including 3 months of the annual accrual for management
incentive and long-term incentive compensation as compared to the second quarter
of 1998, which included no management incentive and long-term incentive
compensation accrual. In 1998, the full year accrual for management incentive
and long-term incentive compensation was recorded in the first quarter of the
year as a result of the Company achieving the 1998 annual goals in the first
quarter.
The decrease in non-segment operating expenses for the first half of 1999
is primarily as a result of capitalizing development overhead costs related to
the Company's increased level of construction and development of multi-family
residential and commercial projects. During the formation of the Company's
development pipeline, certain costs were appropriately expensed rather than
capitalized. As specific development projects are approved and construction
begins, costs related to these projects have been, and will continue to be,
capitalized.
21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and capital resources have been, and are expected
to continue to be, impacted by the Company's strategic plan referenced herein.
The Company's sources of liquidity and capital resources have been primarily
from the maturity and collection of Echelon's lease and loan portfolio, proceeds
from the sale of certain non-strategic assets and, with respect to the Echelon's
real estate development, from project-based and other financings. The planned
development of multi-family residential and commercial real estate will require
additional access to external financing. The timing and amount of external
financing requirements will, in part, be dependent upon the timing of
collections from real estate loans and asset sales.
Echelon expects to obtain sufficient capital from its operations, asset
sales, loan collections, project-based and other financings, and the capital
markets to execute its strategic plan. However, no assurance can be given that
such capital will be available at the time or in amounts necessary to execute
the Company's strategic plan.
At the Distribution Date, Echelon and Florida Progress entered into a
distribution agreement, which requires Echelon to maintain a liquidity level of
at least $17.0 million throughout 1999.
CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES
Cash flow provided by operating activities was $.7 million for the six
months ended June 30, 1999. The primary source of cash was the result of an
increase in accounts payable and other liabilities of $3.5 million. The primary
use of cash largely related to previously deferred tax liabilities becoming due
and payable as a result of collections of lease payments. Deferred income taxes
from leveraged leasing activities, which are reflected in cash flows from
operating activities, are offset by related collections from lessees, which are
included in cash flows from investing activities. Net cash flow from future
operations is generally expected to be reinvested in the Real Estate Business.
CASH FLOW PROVIDED BY (USED IN) INVESTING ACTIVITIES
Echelon's net cash flow used in investing activities for the first half of
1999 was $36.5 million. The cash flow reflected the $19.9 million in proceeds
received from the collection of leases and loans, including the $5.8 million
payoff of the real estate loan receivable from Vine Street Partnership. In June
1999, the Company also received $2.4 million for the sale of development rights
in CARILLON PARK. Upon the maturity and collection of Echelon's loan portfolio,
Echelon expects investing activities to continue to be a net use of funds as
Echelon continues to build the Real Estate Business.
22
<PAGE>
Real estate property additions and other capital expenditures were $58.6
million for the six months ended June 30, 1999. The Company's $52.0 million of
multi-family capital expenditures for the six months ended June 30, 1999 were
for the ongoing construction of multi-family residential communities and land
purchases for the development of additional multi-family residential projects.
The Company's commercial capital expenditures were $6.6 million for the six
months ended June 30, 1999 and were primarily for the completion of the
construction and ongoing tenant improvements of CASTILLE AT CARILLON and tenant
improvements for other commercial properties.
For the remainder of 1999, capital expenditures for tenant improvements,
land development, commercial office development and multi-family residential
development are projected to be approximately $30.0 million to $80.0 million.
These expenditures are expected to be funded through project-based and other
financings and from existing cash.
During the six months ended June 30, 1999, contributions to unconsolidated
partnerships were $.2 million. The remaining contributions to be funded by
December 31, 1999 total $2.7 million as of June 30, 1999.
CASH FLOW FROM FINANCING ACTIVITIES
During the six months ended June 30, 1999, the Company's primary source of
cash flow from financing activities was $57.1 million in proceeds from debt
financings, including TIAA's $19.3 million permanent financing for ECHELON AT
BAY ISLE KEY. The proceeds were used to fund the construction of the Company's
multi-family residential communities and commercial projects. The Company also
made scheduled loan repayments on the Company's outstanding debt of $20.2
million during the first half of 1999, which included the $16.5 million payoff
of the construction loan with SouthTrust Bank for ECHELON AT BAY ISLE KEY.
The Company is currently involved in the construction of several commercial
projects and multi-family residential communities and at June 30, 1999, had
remaining commitments of $35.3 million with construction contractors.
As of June 30, 1999, Echelon had four contracts, subject to the Company's
final due diligence, to acquire land or execute a joint venture agreement, for
the development of more than 850 multi-family-residential units. No assurance
can be given that Echelon will acquire this land or develop the multi-family
residential communities.
During the six months ended June 30, 1999, the Company issued 7,021 shares
of Common Stock under the 1996 Echelon Employee Stock Purchase Plan, resulting
in additional paid in capital of $.1 million. The Company also purchased 4,526
shares of Common Stock, resulting in additional Treasury Stock of $.1 million.
OFF-BALANCE SHEET RISK
Through two previous partnerships, Echelon remains contingently liable for
first mortgage bonds issued to residents of the life care communities owned by
such partnerships. The contingent liability reduces over time as those who were
residents at the time of the sale of Echelon's partnership interests discontinue
their residency. If the current owners were to fail to perform their obligations
and if the partnership assets, consisting primarily of land and buildings, were
worthless, Echelon could be liable for an additional $24.0 million as of
December 31, 1998. Echelon considers the incurrence of this liability to be
remote based on asset values and the indemnification agreement from the current
owners to Echelon.
23
<PAGE>
IMPACT OF INFLATION
Inflation and changing prices have not had a material impact on the
Company's revenues, operating income or net income during any of the Company's
three most recent fiscal years. Due to the current economic climate, the Company
does not expect that inflation will have a materially adverse effect on its
business or financial condition. To the extent inflationary trends affect
short-term interest rates, a portion of the Company's debt service costs may be
impacted as well as the lease rates the Company charges on both commercial and
multi-family residential real properties.
YEAR 2000 COMPUTER ISSUE
Many computer systems currently in use were designed and developed using
two digits, rather than four, to identify the year. As a result, such computer
systems will recognize the year 2000 as "00". This could cause many computer
applications to fail completely or to create erroneous results unless corrective
measures are taken.
Echelon has several projects underway to address the Year 2000 issue. These
include: 1) identifying and mitigating Year 2000 problems in Echelon's systems,
including equipment used in the Company's properties, such as elevators and
phone systems that may have date sensitive information within them, 2) working
with the Company's financial institutions, lenders and vendors to assure that
the appropriate steps are being taken to mitigate the Year 2000 issue in each
entity's software systems, and 3) ensuring that each entity that electronically
receives or sends information to Echelon is aware of the steps that the Company
is taking and is taking appropriate steps of its own to address the Year 2000
issue.
During 1998 and 1997 the Company incurred total costs of $.3 million for
the acquisition and implementation of a property management and general ledger
software that is Year 2000 compliant. These costs were recorded in accordance
with Echelon's accounting policies. The Company has incurred costs of less than
$.1 million during the first half of 1999 and estimates an additional $.2
million to be incurred for Year 2000-related projects during the remainder of
the year ending December 31, 1999.
Echelon is currently Year 2000 compliant with some systems and expects to
be complaint with all other systems no later than the third quarter of 1999.
Costs related to the maintenance and/or modifications of Echelon's software
systems have been and will continue to be expensed as incurred. Echelon does not
anticipate the costs related to Year 2000 to have a material impact on its
results of operations. While the Company currently expects that the Year 2000
issues will not pose significant operational problems, delays in the
modification of software systems or failure to fully identify all Year 2000
dependencies in the Company's systems could result in material adverse
consequences, including disruption of operations, loss of information, and
unanticipated increases in costs. The Company's contingency plan for addressing
the Year 2000 issue includes the utilization of manual operation systems.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which established accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The Company will be required to
adopt this standard as of January 1, 2001 and based on current circumstances,
does not believe the application of the new rules will have a material impact on
the Company's results of operations or its financial condition.
24
<PAGE>
STRATEGIC PLAN
A complete discussion of Echelon's Strategic Plan is included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
As previously disclosed, the Company's success to date is not a forecast of
1999 results. Specifically, financial results from 1998 and 1997 are not
indicators of projected 1999 net income. Redirecting capital into the Company's
real estate pipeline will lower net income for 1999, as is typical of the early
stages of real estate development.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein regarding other than historical facts
are forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1955 and are intended to be covered by the Safe Habor
created thereby. Such statements, including those concerning Echelon's expected
sources and uses of funds and capital expenditures and its business strategy
including its plans to gradually withdraw from the aircraft and real estate
lending business and focus on its core real estate operations, involve risks and
uncertainties.
Echelon wishes to caution readers that in addition to the important factors
described elsewhere in this Form 10-Q, where the Company expresses an
expectation or belief as to future events, such expectation or belief is
expressed in good faith and it is believed to have a reasonable basis. However,
such forward-looking statements are subject to risk, uncertainties and other
factors, which could cause actual results to differ materially from future
results express or implied by such forward-looking statements. Important factors
that could cause actual strategies and the timing and expected results thereof
to differ materially from such forward-looking statements ("cautionary
statements"), include, but are not limited to those factors identified under
"CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998. Given these
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements.
25
<PAGE>
PART II
OTHER INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate changes primarily as a result
of its long-term debt used to fund capital expenditures for the expansion of the
Company's real estate portfolio. The Company also has real estate loans
receivable that bear interest at a floating rate based on the prime rate plus a
defined number of basis points. The Company's interest rate risk management
objective is to limit the impact of interest rate changes on earnings and cash
flow. The Company's construction financing is at variable rates of interest and
all permanent and corporate financings are at fixed rates of interest. To date,
the Company has not entered into any derivative or interest rate hedge
transactions.
The Company's interest rate risk is monitored using a variety of
techniques. The table below presents the principal amounts, weighted average
interest rates, fair value and other terms required by year of expected maturity
to evaluate the expected cash flows and sensitivity to interest rate changes.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-------------------
REMAINDER
OF FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
---- ---- ---- ---- ---- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt $ 1.6 $ 6.8 $ 3.3 $ 4.4 $ 4.9 $ 80.9 $101.9 $101.9
===== ===== ===== ==== ===== ===== ===== ======
Weighted average interest rate
at June 30, 1999 7.35%
====
Variable rate LIBOR debt $ 14.8 $ 5.8 $ 2.1 $ -- $ -- $ 34.8 $ 57.5 $ 57.5
===== ===== ===== ==== ==== ===== ====== ======
Weighted average interest rate
at June 30, 1999 6.50%
====
Variable rate prime loans
receivable $ 28.5 $ -- $ 4.5 $ -- $ -- $ -- $ 33.0 $ 33.0
===== ==== ===== ==== ==== ===== ====== ======
Weighted average interest rate
at June 30, 1999 9.39%
====
</TABLE>
As the table incorporates only those exposures that exist as of June
30, 1999, it does not consider those exposures or positions, which could arise
after that date. In addition, the Company's variable interest construction
financing is included in the "thereafter" column based on the fact that the
Company has secured permanent financing commitment for some of these debt
instruments as of June 30, 1999. Moreover, because firm commitments are not
presented in the table above, the information presented therein has limited
predictive value. As a result, the Company's ultimate realized gain or loss with
respect to interest rate fluctuations will depend on the exposures that arise
during the period, the Company's hedging strategies at that time, and interest
rates.
26
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Echelon International Corporation
was held on May 18, 1999. There were 6,681,254 shares of Common Stock entitled
to vote. The following matters were voted upon at the meeting:
1) Election of Directors
Class III - Terms expiring 2002
VOTES FOR VOTES AGAINST
--------- -------------
Darryl A. LeClair........... 4,777,158 69,348
W. Michael Doramus.......... 4,777,568 68,938
2) Ratification of appointment of KPMG LLP as the Company's independent
certified public accountants for fiscal year 1999:
Votes for....................................... 4,808,002
Votes against................................... 14,136
Abstentions..................................... 24,368
3) Proposal to approve the Echelon International Corporation 1999
Non-Employee Directors' Stock Plan
Votes for....................................... 4,545,917
Votes against................................... 202,650
Abstentions..................................... 97,939
See the Echelon International 1999 Non-Employee Directors' Stock Plan filed
herein as Exhibit 22.
ITEM 5. OTHER INFORMATION.
Echelon International Corporation issued a news release dated August
11, 1999, announcing 1999 second quarter financial results. A copy of the news
release is being filed as Exhibit 99.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
EXHIBIT NO. DESCRIPTION
----------- -----------
22 Echelon International Corporation 1999 Non-Employee
Directors' Stock Plan
27 Financial Data Schedule of Echelon International
Corporation
99 Echelon International Corporation New Release dated
August 11, 1999 regarding 1999 second quarter
financial results.
27
<PAGE>
(b) Reports on Form 8-K:
On July 1, 1999, Echelon International Corporation filed the
following report on Form 8-K:
Form 8-K dated June 30, 1999, reporting under Item 5 "Other
Events", included information provided in an information packet
mailed to the investment community on or about June 30, 1999.
28
<PAGE>
SIGNATURES
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 and on the dates indicated.
ECHELON INTERNATIONAL CORPORATION
Registrant
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
/s/ LARRY J. NEWSOME
- -----------------------------
Larry J. Newsome Principal Financial Officer, August 12, 1999
Principal Financial Officer Senior Vice President and
Chief Financial Officer
/s/ JAMES R. HOBBS, JR.
- -----------------------------
James R. Hobbs, Jr. Principal Accounting Officer, August 12, 1999
Principal Accounting Officer Vice President and Controller
29
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
22 Echelon International Corporation 1999 Non-Employee Directors'
Stock Plan
27 Financial Data Schedule of Echelon International Corporation
99 Echelon International Corporation New Release dated August 11,
1999 regarding 1999 second quarter financial results.
EXHIBIT 22
PROSPECTUS
ECHELON INTERNATIONAL CORPORATION
1999 NON-EMPLOYEE DIRECTORS' STOCK PLAN
75,000 SHARES
Common Stock
This Prospectus has been prepared for use by Echelon International
Corporation (the "Company") in connection with the issuance from time to time by
the Company of shares of the Company's Common Stock (the "Common Stock") to its
non-employee directors under the Company's 1999 Non-Employee Directors' Stock
Plan (the "Plan"). This Prospectus also covers such additional shares of Common
Stock as may be issuable under the Plan in the event the Company's outstanding
stock is changed or exchanged by reason of a stock dividend, a stock split or a
recapitalization.
----------------------------------
No person has been authorized to give information or to make any
representations, other than those contained in this Prospectus, in connection
with the offer contained herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, the securities covered by this Prospectus by the Company in
any State to any person to whom it is unlawful for the Company to make such
offer or solicitation. Neither the delivery of this Prospectus nor any sale
hereunder shall, under any circumstances, create an implication that there has
been no change in the facts set forth in this Prospectus since the date hereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMIS-
SION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THIS PROSPECTUS CONSTITUTES PART OF THE PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THE DATE OF THE PROSPECTUS IS __________________________.
- --------------------------------------------------------------------------------
<PAGE>
PLAN SUMMARY
A COPY OF THE PLAN AS CURRENTLY IN EFFECT IS ATTACHED TO THIS SUMMARY PROSPECTUS
AS EXHIBIT A AND THE INFORMATION INCLUDED IN THE BODY OF THIS SUMMARY PROSPECTUS
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE SPECIFIC TERMS AND PROVISIONS
OF THE PLAN. IF THERE IS ANY CONFLICT BETWEEN STATEMENTS OR INFORMATION SET
FORTH IN THIS SUMMARY PROSPECTUS AND THE PLAN, THE PLAN SHALL CONTROL.
- --------------------------------------------------------------------------------
NAME OF THE Echelon International Corporation 1999 Non-Employee
PLAN Directors' Stock Plan
PURPOSE The purpose of the Plan is to provide non-employee
directors with an opportunity, through the issuance
of shares of Common Stock in lieu of such
non-employee directors' annual retainer and the
exercise of non-qualified stock options to purchase
shares of Common Stock ("Options"), to increase the
amount of their stock ownership in the Company.
ELIGIBLE Each non-employee director of the Company serving as
DIRECTORS a member of the Board of Directors as of the
adjournment of each annual meeting of stockholder's.
ANNUAL Each non-employee director shall automatically
RETAINER receive his or her annual retainer in shares of
Common Stock which shall be issued on a quarterly
basis in arrears on March 31, June 30, September 30
and December 31 of each year (each a "Stock Issue
Date"). The total number of shares of Common Stock
to be issued on each Stock Issue Date shall be
determined by multiplying the annual retainer by
twenty-five (25%) percent and then dividing by the
closing price of the Common Stock on the New York
Stock Exchange as of the first day of the applicable
quarter. In the event sufficient shares are not
available to compensate the non-employee directors
in shares of Common Stock for the annual retainer,
compensation may be made in cash.
OPTIONS NUMBER OF SHARES. Upon the adjournment of each
Annual Meeting of Stockholders of the Company, each
non-employee director who has been elected,
reelected or who is continuing as a member of the
Board shall receive Options for 5,000 shares of
Common Stock. Certificates evidencing the Options
setting forth specific terms and conditions
applicable to the Options will be distributed to
recipients of the grants. In the event sufficient
shares are not available to compensate the
non-employee directors in shares of Common Stock for
the annual Options, compensation may be made in
cash.
EXERCISE PRICE; PAYMENT. The exercise price of the
Options will equal the closing price on the New York
Stock Exchange on the day of the adjournment of the
Annual Meeting of Stockholders. The purchase price
must be paid in full upon exercise of the Option and
may be paid in cash or by check or as otherwise
permitted by the Board of Directors or the Plan.
VESTING. Options may be exercised to purchase Common
Stock only to the extent that such exercise rights
have "vested". Generally, options granted under the
Plan will be 100% vested after one year from the
date of grant. No option may be exercised after it
expires (generally 5 years from the date of grant)
or before the non-employee director has served a
<PAGE>
one-year term as director since the date of grant.
EXERCISING AN OPTION. To exercise an Option, the
non-employee director must deliver notice of
exercise to the Company and pay to the Company an
amount equal to the number of shares to be purchased
multiplied by the per share purchase price for the
Option. During his or her lifetime, only the
non-employee director to whom the Option is issued
may exercise the Option.
EFFECT OF Generally, vested Options held at the time the
LEAVING THE non-employee director ceases to be a member of the
BOARD Board (other than for breach of fiduciary duty or
dishonesty) may be exercised for a period of five
years from the date of grant. However, if the
non-employee director is removed or resigns in
connection with a breach of his or her fiduciary
duty or for dishonesty, then unexercised Options
held by a director at the time the director ceases
to be a member of the Board terminate and are void.
RIGHTS TO Options are not transferable to others, except by
TRANSFER will or the laws affecting the property of
decedents.
ADMINISTRATION The Plan is administered by the Company's Board of
Directors. The Board of Directors is elected by the
stockholders and the Company's By-laws provide that
the number of directors shall be not less than three
nor more than nine. The Board of Directors is
divided into three classes of approximately equal
size with directors generally elected for three-year
terms. Directors are subject to being removed by the
stockholders only for cause.
Questions regarding the Plan may be directed to the
General Counsel & Senior Vice President -
Administration of the Company at the Company's
executive offices at 450 Carillon Parkway, Suite
450, St. Petersburg, Florida 33716; telephone
(727) 803-8250.
TERM OF PLAN The Plan shall terminate on May 18, 2009 unless
terminated earlier by action of the Board of
Directors.
AMENDMENT OR The Company's Board of Directors may, at any time or
TERMINATION from time to time, suspend or discontinue the Plan
or revise or amend it in any way without the
approval of the Company's stockholders, however, the
revision or amendment may not change the total
number of shares of Common Stock subject to the
Plan, decrease the price at which Options may be
granted, otherwise materially increase the benefits
accruing to non-employee directors under the Plan,
or remove the administration of the Plan from the
Board. Moreover, no action by the Board may
adversely affect any Options then outstanding,
without the consent of the participant.
ERISA Because of the nature of the Plan, it is not subject
to any provisions of the Employee Retirement Income
Act of 1974.
SHARES 75,000 shares of Common Stock which may be either
COVERED authorized and unissued shares or issued shares
acquired by the Company or its Subsidiaries.
<PAGE>
CERTAIN SECURITIES LAW RESTRICTIONS ON RESALES
Because a non-employee director of the Company will be considered to be
an "affiliate," a non-employee director receiving shares of the Company's Common
Stock upon the exercise of an Option will be restricted to some extent (as
described below) as to the manner in which such shares may be resold.
A non-employee director may effect resales of the stock in accordance
with the requirements of Rule 144 under the Securities Act of 1933 other than
the duration of ownership requirements under such rule. Such persons may also
effect resales of the stock pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to any other exemption from the
securities registration requirements of such Act.
FEDERAL INCOME TAX CONSEQUENCES
The Plan does not, and is not designed to, qualify as a tax-free
employees' benefit plan under Section 401 (a) of the Internal Revenue Code. That
section relates primarily to qualified profit sharing and pension plans.
Upon the issuance of shares of Common Stock to a non-employee director
in payment of the annual retainer, a non-employee director will recognize
taxable income at ordinary rates in an amount equal to the fair market value of
the shares of Common Stock issued on such date. At that time, the Company will
be entitled to a corresponding deduction.
Because the Company does not anticipate that any Option will have a
readily ascertainable fair market value, the recipient of an Option should not
recognize any taxable income or loss for federal income tax purposes at the time
the Option is granted. The exercise of the Option, however, will result in the
immediate recognition of taxable income by its holder at ordinary income rates
based on the difference between the purchase price for shares covered by the
Option and the fair market value of the shares received at the time of exercise.
The Company will receive a corresponding deduction at the same time. Additional
gain or loss, determined under general rules of taxation, may be realized upon
the sale of the shares.
The specific application and impact of the tax rules will vary
depending on the specific personal situation of the individual receiving and
exercising an Option. EACH RECIPIENT OF OPTIONS UNDER THE PLAN IS URGED TO
CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES
- -- FEDERAL, STATE AND LOCAL -- THAT MAY RESULT FROM PARTICIPATION IN THE PLAN
AND THE EXERCISE OF OPTIONS TO PURCHASE SHARES OR THE SALE OR OTHER DISPOSITION
OF ANY SHARES PURCHASED UNDER THE PLAN.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
By this reference, the Company's Registration Statement on Form 10, as
amended (Registration No. 001--2211), is incorporated into and made a part of
the Registration Statement of which this Prospectus is a part and into this
Prospectus.
All documents filed by the Company with the Commission subsequent to
the date of the Registration Statement under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, and prior to the filing of a
post-effective amendment which indicates that all securities offered hereunder
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated into and made a part of the Registration Statement
from the date of filing of such documents with the Commission.
Any document that is incorporated by reference into the Registration
Statement of which this Prospectus is a part is considered a part of this
Prospectus and is available, without charge, upon oral or written request, to
individuals who are eligible to participate in the Plan. Any other document that
the Company is required to provide participants under the provisions of Rule
428(b) under the Securities Act of 1933 is also available, without charge, upon
oral or written request, to individuals eligible to participate in the Plan.
Requests should be made to the General Counsel & Senior Vice President
Administration at the Company, 450 Carillon Parkway, Suite 450, St. Petersburg,
Florida, 33716, telephone (727) 803-8250.
<PAGE>
EXHIBIT A
ECHELON INTERNATIONAL CORPORATION
1999 NON-EMPLOYEE DIRECTORS' STOCK
PLAN
ARTICLE 1
GENERAL
1.1 PURPOSE. The purpose of the Echelon International Corporation 1999
Non-Employee Directors' Stock Plan is to secure for Echelon International
Corporation and its stockholders the benefits of the incentive inherent in
increased common stock ownership by the members of the Board of Directors of the
Company who are not employees of the Company or any of its subsidiaries.
1.2 MAXIMUM NUMBER OF SHARES. The maximum number of shares of Common
Stock that may be offered under the Plan is 75,000, subject to adjustment as
provided in Section 4.1 below. The Common Stock to be issued may be either
authorized and unissued shares or issued shares acquired by the Company or its
Subsidiaries. In the event that Options granted under the Plan shall terminate
or expire without being exercised in whole or in part, new Options may be
granted covering the shares not purchased under such lapsed Options.
1.3 DEFINITIONS. The following words and terms as used herein shall
have that meaning set forth therefor in this Section 1.3 unless a different
meaning is clearly required by the context. Whenever appropriate, words used in
the singular shall be deemed to include the plural and vice versa, and the
masculine gender shall be deemed to include the feminine gender.
1.3.1 "ANNUAL RETAINER" shall mean the annual retainer paid to a
Non-Employee Director each year for service on the Board of
Directors of the Company or Subsidiary.
1.3.2 "BOARD" OR "BOARD OF DIRECTORS" shall mean the Board of
Directors of the Company
1.3.3 "COMMON STOCK" shall mean the common stock of the Company.
1.3.4 "COMPANY" shall mean Echelon International Corporation a
Florida corporation, and any successor.
1.3.5 "EFFECTIVE DATE" is defined in Section 5.0
<PAGE>
1.3.6 "FAIR MARKET VALUE" of the shares of Common Stock shall
mean the closing price on the date in question (or,
if no shares are traded on such day, on the next preceding
day on which shares were traded), of the Common Stock as
reported on the New York Stock Exchange Composite Tape, if
not reported thereon, then such price as reported in the
trading reports of the principal securities exchange in the
United States on which such stock is listed, or if such
stock is not listed on a securities exchange in the United
States, the mean between the dealer closing "bid" and "ask"
prices on the over-the-counter market as reported by the
National Association of Security Dealers Automated Quotation
System (NASDAQ), or NASDAQ's successor, or if not reported
on NASDAQ, the fair market value of such stock as determined
by the Board in good faith and based on all relevant
factors.
1.3.7 "NSO" shall mean a nonqualified stock option granted
in accordance with the provisions of Article 3 of this Plan.
1.3.8 "NEW PLAN" shall mean the Echelon International Corporation
1999 Non-Employee Directors' Stock Plan.
1.3.9 "NON-EMPLOYEE DIRECTOR" shall mean a member of the
Board of Directors of the Company who is not an employee of
the company or any Subsidiary.
1.3.10 "OLD PLAN" shall mean the Echelon International
Corporation Non-Employee Directors' Stock Plan.
1.3.11 "OPTION" shall mean an NSO.
1.3.12 "OPTIONEE" shall mean a Non-Employee Director to whom
an Option is granted under the Plan.
1.3.13 "PLAN" shall mean the Echelon International Corporation 1999
Non-Employee Directors' Stock Plan, as set forth herein and
as amended from time to time.
1.3.14 "SUBSIDIARY" shall mean any corporation that at the time
qualifies as a subsidiary of the Company under the direction
of "subsidiary corporations" contained in Section 424(f) of
the Internal Revenue Code of 1986, as amended.
1.4 ADMINISTRATION. The Plan shall be administered by the Board. The
Board shall have all the powers vested in it by the terms of the Plan, such
powers to include authority (within the limitations described herein) to
prescribe the form of the agreement embodying awards of nonqualified stock
options made under the Plan. The Board shall, subject to the provisions of the
Plan, issue shares of the Company's Common Stock in payment of the Annual
Retainer, grant Options under the Plan and shall have the power to construe the
Plan, to determine all questions arising thereunder and to adopt and amend such
rules and regulations for the administration of the Plan as it may deem
desirable. Any
<PAGE>
decision of the Board in the administration of the Plan, as described herein,
shall be final and conclusive. The Board may act only by a majority of its
members in office, except that the members thereof may authorize any one or more
of their number or the Secretary or any other officer of the Company to execute
and deliver documents on behalf of the Board. No member of the Board shall be
liable for anything done or omitted to be done by such member or by any other
member of the Board in connection with the Plan except for such members own
willful misconduct or as expressly provided by statute.
1.5 ELIGIBILITY REQUIREMENTS. Each Non-Employee Director shall be
eligible to receive an Annual Retainer payable in shares of the Common Stock in
accordance with Article 2 below and shall be eligible to receive Options in
accordance with Article 3 below. The adoption of this Plan shall not be deemed
to give any director any right to receive shares of the Common Stock or be
granted options to purchase Common Stock of the Company, except to the extent
and upon such terms and conditions as set forth in this Plan.
ARTICLE 2
TERMS AND CONDITIONS OF ANNUAL RETAINER
2.1 PAYMENT OF ANNUAL RETAINER IN STOCK. Each Non-Employee Director
shall automatically receive his or her Annual Retainer in shares of Common Stock
in accordance with Section 2.2.
2.2 ISSUANCE OF STOCK. Shares of Common Stock due a Non-Employee
Director pursuant to this Article 2 shall be issued on a quarterly basis in
arrears on March 31, June 30, September 30 and December 31 of each year (each a
"Stock Issue Date"), and shall be paid in lieu of cash for services rendered
during the quarter ended on such Stock Issue Date. The total number of shares of
Common Stock to be issued on each Stock Issue Date shall be determined by
multiplying the Annual Retainer by twenty-five (25%) percent and then dividing
by the Fair Market Value of the Common Stock as of the first day of the
applicable quarter.
2.3 FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued, and Non-Employee Directors shall receive cash equal to the Fair Market
Value of any fractional shares on a Stock Issue Date.
2.4 NO ASSIGNMENT OF RIGHTS. Neither the Non-Employee Director nor his
or her legal representative shall have any right to sell assign, transfer or
otherwise convey the right to receive any Common Stock due hereunder or any
interest under the Plan. Any attempt to assign or transfer any right to payment
or interest under the Plan shall be null and void and of no effect.
2.5 RESTRICTIONS ON TRANSFER OF STOCK. Any shares of Common Stock
issued to any Non-Employee Director under the Plan may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of unless and until
either: (a) the shares of Common Stock have been held by the Non-Employee
Director for six months from the date of issuance, or (b) the shares of Common
Stock are otherwise transferred in a manner that complies with the requirements
of Rule 16b-3 so that the transaction is exempt from
<PAGE>
characterization as a "sale" under Section 16(b) of the Exchange Act. The shares
of Common Stock issued to any Non-Employee Director shall bear an appropriate
legend, if issued in certificated form, and be subject to appropriate "stop
transfer" orders. Any additional stock or other securities or property that may
be issued with respect to shares of Common Stock issued under the Plan as a
result of any stock dividend, stock split, business combination or other event
shall be subject to the restrictions and other terms and conditions of the Plan.
2.6 PAYMENT OF ANNUAL RETAINER IN CASH. Each Non-Employee Director may
receive his or her annual retainer in cash rather than shares of Common Stock in
the event the number of shares required to make such payment are not available
under the Plan.
ARTICLE 3
TERMS AND CONDITIONS OF OPTIONS
3.1 GRANT. Options granted under the Plan shall be evidenced by an
agreement in such form as the board shall prescribe from time to time in
accordance with the Plan and shall comply with the terms and conditions set
forth under this Article 3. The date of the Annual Meeting of Stockholders shall
be the date of grant of the Options.
3.2 NUMBER OF SHARES. Each year, as of the date of the Annual Meeting
of Stockholders of the Company, each Non-Employee Director who has been elected
or reelected or who is continuing as a member of the Board as of the adjournment
of the Annual Meeting shall automatically receive an Option for 5,000 shares of
Common Stock.
3.3 OPTION PRICE. The Option exercise price shall be the Fair Market
Value of the Common Stock on the date of the Annual Meeting of Stockholders.
3.4 METHOD OF EXERCISE. An Option may be exercised by a Non-Employee
Director during such time as may be permitted by the Option and the Plan by
providing written notice to the Board and tendering the purchase price in
accordance with the provisions of Section 3.5, and complying with any other
exercise requirements contained in the Option or promulgated from time to time
by the Board.
3.5 METHOD OF PAYMENT. Each Option shall state the method of payment of
the Option price upon the exercise of the Option. The method of payment stated
in the Option shall include payment (a) in United States dollars in cash or by
check, bank draft or money order payable to the order of the Company, (b) in the
discretion of and in the manner determined by the Board, by the delivery of
shares of Common Stock already owned by the Optionee, (c) by any other legally
permissible means acceptable to the board at the time of the grant of the Option
(including cashless exercise as permitted under the Federal Reserve Board's
Regulation T, subject to applicable legal restrictions), or (d) in the
discretion of the Board, through a combination of (a), (b) and (c) of this
Section 3.5. If the option price is paid in whole or in part through the
delivery of shares of Common Stock, the decision of the Board with respect to
the fair market value of such shares shall be final and conclusive.
<PAGE>
3.6 TERM AND EXERCISE OF OPTIONS.
3.6.1 One hundred percent (100%) of the total number of shares of
Common Stock covered by the Option shall become exercisable beginning with the
first anniversary date of the grant of the Option and shall be exercisable by
the Non-Employee Director for a period of five (5) years from the date of the
grant. Not less than one hundred (100) shares may be exercised at any one time
unless the number exercised is the total number at the time exercisable under
the Option.
3.6.2 Notwithstanding the foregoing, no Option or any part of an Option
shall be exercisable (a) before the Non-Employee Director has served one
term-year as a member of the Board since the date such Option was granted (as
used herein, the term "term-year" means that period from one Annual Meeting to
the subsequent Annual Meeting), (b) after the expiration of five (5) years from
the date the Option was granted, and (c) unless written notice of the exercise
is delivered to the Company specifying the number of shares to be purchased and
payment in full is made for the shares of Common Stock being acquired thereunder
at the time of exercise.
3.7 DEATH OR OTHER TERMINATION OF POSITION AS A DIRECTOR. Subject to
the provisions of Section 3.6 above:
3.7.1 In the event that a Non-Employee Director (a) shall be removed as
a director for dishonesty or violation of his fiduciary duty to the Company, (b)
shall voluntarily resign under or followed by such circumstances as would
constitute a violation of his fiduciary duty to the Company, or (c) shall have
committed an act of dishonesty not discovered by the Company prior to the
cessation of his service as a Director but that would have resulted in his
removal if discovered prior to such date, then forthwith from the happening of
any such event, any Option then held by him shall terminate and become void to
the extent that it them remains unexercised.
3.7.2 If a person shall cease to be a Non-Employee Director for any
reason other than one or more of the reasons set forth in section 3.7.1, such
person, or in the case of death, the executors, administrators or distributees,
as the case may be, may, at any time prior to the date of the expiration of the
Option, exercise the Option with respect to any shares of Common Stock as to
which such person has not exercised the Option on the date the person ceased to
be such a Non-Employee Director.
3.7.3 In the event any Option is exercised by the executors,
administrators, legatees or distributees of the estate of a deceased Optionee,
the Company shall be under no obligation to issue Common Stock thereunder unless
and until the Company is satisfied that the person or persons exercising the
Option are the duly appointed legal representatives of the deceased Optionee's
estate or the proper legatees or distributees thereof.
3.8 TRANSFERABILITY OF OPTIONS. The Option shall not be transferable by
the Optionee otherwise than by will or the laws of descent and distribution, and
shall be exercisable during his lifetime only by him.
<PAGE>
3.9 DELIVERY OF CERTIFICATES REPRESENTING SHARES. As soon as
practicable after the exercise of an Option, the Company shall deliver, or cause
to be delivered, to the Non-Employee Director exercising the Option a
certificate or certificate representing the shares of Common Stock purchased
upon the exercise. Certificates representing shares of Common Stock to be
delivered to a Non-Employee Director shall be registered in the name of such
director.
3.10 RIGHTS AS A STOCKHOLDER. A Non-Employee Director shall have no
rights as a stockholder with respect to any shares of Common Stock covered by
his or her Option until the date on which he or she becomes a record owner of
the shares purchased upon the exercise of the Option (the "record ownership
date"). No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property), distributions, or other rights
for which the record date is prior to the record ownership date, except as
provided in Article 4.
3.11 CASH PAYMENT IN LIEU OF OPTIONS. Each Non-Employee Director may
receive cash in lieu of Options in the event the number of shares required to
make such payment are not available at the time.
ARTICLE 4
MISCELLANEOUS
4.1 STOCK ADJUSTMENTS.
4.1.1 In the event of any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split or other division or
consolidation of shares or the payment of a stock dividend (but only on the
Common Stock) or any other increase or decrease in the number of such shares
effected without any receipt of consideration by the Company, then, in any such
event, the number of shares of Common Stock that remain available under the
Plan, the number of shares of Common Stock covered by each outstanding Option,
and the purchase price per share of Common Stock covered by each outstanding
Option shall be proportionately and appropriately adjusted for any such increase
or decrease.
4.1.2 Subject to any required action by the stockholders, if any change
occurs in the shares of Common Stock by reason of any recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting the shares of Common Stock then, in
any such event, the number and type of shares covered by each outstanding
Option, and the purchase price per share of Common Stock covered by each
outstanding Option and the number of shares to be granted shall be
proportionately and appropriately adjusted for any such change. A dissolution or
liquidation of the Company shall cause each outstanding Option to terminate.
4.1.3 In the event of a change in the Common Stock as presently
constituted that is limited to a change of all of its authorized shares with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any change shall be deemed to be shares of
Common Stock within the meaning of the Plan.
<PAGE>
4.1.4 Except as herein above expressly provided in this Section 4. 1, a
Non-Employee Director shall have no rights by reason of any division or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class or by reason of any dissolution or liquidation, merger or
consolidation, or spin-off of assets or stock of another corporation; and any
issuance by the Company of shares of stock of any class, securities convertible
into shares of stock of any class, or warrants or options for shares of stock of
any class shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to the
Option.
4.1.5 The grant of any Option pursuant to the Plan shall not affect in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate, or to dissolve, to liquidate, to sell,
or to transfer all or any part of its business or assets.
4.2 LISTING AND REGISTRATION OF SHARES. Each Option shall be subject to
the requirement that if at any time the Board shall determine, in its
discretion, that the listing, registration or qualification of the shares of
Common Stock covered thereby upon any securities exchange or under any state or
federal laws, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the issuance or purchase of shares thereunder, such Option may
not be exercised unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Board. Notwithstanding anything in the Plan to the
contrary, if the provisions of this Section become operative, and if, as a
result thereof, the exercise of an Option is delayed, then and in that event,
the term of the Option shall not be affected.
4.3 NO IMPLIED RIGHTS TO DIRECTORS. Except as expressly provided for in
the Plan, no Non-Employee Director or other person shall have any claim or right
to be granted an Option under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any Non-Employee Director any right to be
retained in the service of the Company.
4.4 TERM OF THE PLAN. The Plan shall terminate upon the earlier of the
dates or events to occur: (a) upon the adoption of a resolution of the Board
terminating the Plan; or (b) ten years from the Effective Date.
4.5 AMENDMENT OF THE PLAN, TERMINATION. The Board may, insofar as
permitted by law, from time to time, with respect to any shares at the time not
subject to Options, suspend, discontinue or terminate the Plan or revise or
amend it in any respect whatsoever, except that, without approval of the
stockholders of the Company, no such revision or amendment shall change the
number of shares subject to the Plan, change the designation of the class of
persons eligible to receive Options, decrease the price at which Options may be
granted, otherwise materially increase the benefits accruing to Non-Employee
Directors under the Plan, or remove the administration of the Plan from the
Board; provided however, that neither the plan nor outstanding Options can be
changed to adversely affect the existing rights of the optionees without their
written consent. The foregoing prohibitions shall not be affected by adjustments
in shares and purchase price made in accordance with the provisions of Section
4.1.
<PAGE>
4.6 APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to Options will be used for general corporate
purposes.
4.7 NO OBLIGATION TO EXERCISE. The granting of any Option under the
Plan shall impose no obligation upon any Optionee to exercise such Option.
4.8 WITHHOLDING. Whenever the Company proposes or is required to issue
or transfer shares of Common Stock under the Plan, the Company shall have the
right to require the Optionee to remit to the Company an amount sufficient to
satisfy any federal, state or local withholding tax liability prior to the
delivery of any certificate or certificates for such shares. Whenever under the
Plan payments are to be made in cash such payments shall be made net of an
amount sufficient to satisfy any federal, state or local withholding tax
liability.
4.9 CONDITIONS PRECEDENT TO EFFECTIVENESS. The Plan shall become
effective upon the satisfaction of all the following conditions,
with the Effective Date of the Plan being the date that the last
such condition is satisfied:
4.9.1 the adoption of the Plan by the Board of Directors; and
4.9.2 the approval of the Plan by the Shareholders.
5.0 DISPOSITION OF OLD PLAN. Shares remaining for future awards,
together with any shares covered by awards that may be forfeited under the Old
Plan will be added to the shares available in the New Plan. No further awards
will be made under the Old Plan as of the effective date of the New Plan.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ECHELON INTERNATIONAL FOR THE PERIOD ENDED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 22,700
<SECURITIES> 0
<RECEIVABLES> 49,100
<ALLOWANCES> 0
<INVENTORY> 1,000
<CURRENT-ASSETS> 72,800
<PP&E> 277,300
<DEPRECIATION> 23,900
<TOTAL-ASSETS> 534,600
<CURRENT-LIABILITIES> 54,600
<BONDS> 134,300
0
0
<COMMON> 100
<OTHER-SE> 220,200
<TOTAL-LIABILITY-AND-EQUITY> 534,600
<SALES> 0
<TOTAL-REVENUES> 22,600
<CGS> 0
<TOTAL-COSTS> 11,900
<OTHER-EXPENSES> 4,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,200
<INCOME-PRETAX> 3,200
<INCOME-TAX> (600)
<INCOME-CONTINUING> 3,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,800
<EPS-BASIC> .56
<EPS-DILUTED> .56
</TABLE>
FINAL - SENT 8/11/99
Susan Glatthorn Johnson
Senior Vice President
Echelon International Corporation
Phone: 727-803-8250
E-mail: [email protected]
Cynthia L. Sanders
Manager of Financial Reporting
Echelon International Corporation
Phone: 727-803-8231
FOR IMMEDIATE RELEASE E-mail: [email protected]
ECHELON INTERNATIONAL REPORTS SECOND QUARTER 1999 RESULTS
ONGOING DEVELOPMENT OF MULTI-FAMILY RESIDENTIAL COMMUNITIES AND COMMERCIAL
REAL ESTATE
RECOGNITION BY FLORIDA HOMEBUILDERS ASSOCIATION AS BEST RENTAL COMMUNITY IN
SOUTHEASTERN UNITED STATES
ST. PETERSBURG, FL, August 11, 1999 - Echelon International Corporation (NYSE:
EIN), a real estate company which develops, owns and manages multi-family
residential and commercial real estate, today announced financial results for
the second quarter and six months ended June 30, 1999.
Net income was $1.7 million, or 25 cents per diluted share for the quarter ended
June 30, 1999 and $3.8 million or 56 cents per diluted share for the first six
months of 1999. This compares to net income of $2.9 million, or 41 cents per
diluted share and $6.3 million or 91 cents per diluted share for the same
periods of 1998.
Sales and revenues were $12.8 million and $22.6 million for the second quarter
and first six months of 1999, respectively, compared to $9.1 million and $22.3
million for the same periods last year. The $.3 million increase in revenues for
the first six months of 1999 is primarily the result of an increase in the
Company's core real estate operations as follows:
- A $2.9 million increase in commercial rental revenues resulting
from an overall increase in occupancy and rental rates compared
to the same period of 1998 as well as the 100% occupancy of the
commercial properties completed during the second quarter of
1998, BAYBORO STATION and CENTRAL STATION, the completion of THE
NEW MCNULTY in December 1998 and the construction completion of
CASTILLE AT CARILLON as of June 30, 1999.
<PAGE>
- A $1.9 million increase in multi-family residential rental
revenues resulting from the leasing of ECHELON AT BAY ISLE KEY,
which opened in late April 1998 and the initial leasing of
ECHELON AT THE RESERVE, which completed the clubhouse and 14 of
22 total buildings during the first half of 1999.
The increased revenue in core real estate operations is offset
by,
- A $2.1 million decrease in revenues from the non-core operations
of the Company's aircraft and real estate lending business.
- A $2.3 million decrease in investment income as a result of the
conversion of the marketable securities portfolio to cash and
short-term cash investments in the fourth quarter of 1998.
As of June 30, 1999, the Company's debt / equity ratio (including current
portion of long-term debt) was 42 / 58, with a cash position of $22.7 million.
Darryl A. LeClair, Echelon chairman, president and chief executive officer,
commented,
"We are pleased with our solid success to date and are particularly
excited about the most recent accomplishments in our multi-family
residential developments.
In July 1999, our second multi-family residential community, ECHELON AT
THE RESERVE, located in CARILLON PARK, was recognized with four Aurora
Awards at the Florida Homebuilder Association's Southeast Builders
Conference - Aurora Awards Ceremony. ECHELON AT THE RESERVE received
the Aurora Award for:
"Best Rental Apartment Community",
"Best Recreational Facility/Community Clubhouse",
"Best Recreational Facility/ Community Clubhouse for
Interior Merchandising" and
the Grand Aurora Award for "Best Rental Apartment
Community in the Southeastern United States".
<PAGE>
Also in July 1999, Fannie Mae's American Communities Fund agreed to
invest with Echelon in the development of ECHELON AT CHENEY PLACE, a
303-unit multi-family residential community to be developed in downtown
Orlando, Florida. The construction for ECHELON AT CHENEY PLACE began at
the end of July.
Additional second quarter 1999 activity in our multi-family residential
developments includes:
- ECHELON AT BAY ISLE KEY, our first multi-family residential
community, located in the Gateway area of St. Petersburg,
Florida, was 98% leased as of June 30, 1999. As previously
disclosed, ECHELON AT BAY ISLE KEY was named the "1998 Apartment
Community of the Year" by the Bay Area Apartment Association,
which covers the Tampa, St. Petersburg and Clearwater area.
- Construction of the clubhouse and 14 of 22 total buildings for
ECHELON AT THE RESERVE was completed during the first half of
1999. ECHELON AT THE RESERVE is a 314-unit multi-family
residential community located in CARILLON PARK. Leasing is in
process and to date, over 200 units have been leased,
representing over 66% of the total units. Construction is
scheduled for completion in the last quarter of 1999.
- Construction of the clubhouse for ECHELON AT WOODLAND PARK was
completed at the end of July 1999. ECHELON AT WOODLAND PARK is a
232-unit multi-family residential community located in Tulsa,
Oklahoma. Leasing has just begun with 25 leases signed and
construction is scheduled for completion in the first quarter of
2000.
- Construction of the clubhouse for ECHELON AT NORTHLAKE is
scheduled for completion in September 1999. ECHELON AT NORTHLAKE
is a 256-unit multi-family residential community located in
Atlanta, Georgia. Construction is scheduled for completion in the
first quarter of 2000.
- Construction is continuing for ECHELON AT MISSION RANCH, a
295-unit multi-family residential community located in Mesquite,
Texas (near Dallas) and ECHELON AT MEMORIAL CREEK, a 292-unit
multi-family residential community located in Tulsa, Oklahoma.
Both clubhouses are scheduled to open in October 1999.
<PAGE>
In the area of commercial Development:
- Construction was completed at the end of June 1999 on CASTILLE AT
CARILLON, two class A buildings totaling 103,900 square feet
located in CARILLON PARK. As of mid-August 1999, CASTILLE AT
CARILLON is 72% leased with Echelon occupying approximately
20,000 square feet as its corporate headquarters and leasing
approximately 55,000 square feet to third parties. Echelon has
also executed letters of intent for approximately 24,000
additional square feet. If these leases are executed, CASTILLE AT
CARILLON will be 95% leased. By the end of November 1999, the
building is also projected to be 95% occupied.
Echelon is proud to set new standards of excellence in all of our
multi-family residential and commercial developments. We plan to
continue to set new standards as we open new real estate developments
in Tampa/St. Petersburg, Atlanta, Dallas, Tulsa, Orlando, Memphis,
Denver, and other locations in the southeast and southwest United
States."
Commenting on the quarter and year-to-date results, Larry J. Newsome, Echelon
senior vice president and chief financial officer, stated,
"We are pleased by our second quarter and 1999 year to date financial
performance. We have been successful in continuing to liquidate our
non-strategic assets, as evidenced in the second quarter by the
collection in full on a $5.8 million real estate loan receivable. The
continued liquidation of our non-strategic assets will allow us to
continue to invest in our real estate development and acquisitions.
As we have previously stated, redirecting capital into our real estate
pipeline will lower net income for 1999 in comparison to our net income
for 1997 and 1998, as is typical of the early stages of real estate
development."
<PAGE>
Echelon International Corporation is a real estate company which develops, owns
and manages multi-family residential and commercial real estate. The Company
also owns and manages a portfolio of aircraft leases and aircraft and real
estate loans. Echelon's core growth strategy is to build its multi-family
residential real estate portfolio and maximize the value of and grow its
existing commercial real estate assets. The Company will continue to withdraw
from the real estate and aircraft lending business to focus on its core real
estate operations.
NOTE: CERTAIN STATEMENTS CONTAINED IN THIS PRESS RELEASE REGARDING OTHER THAN
HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS AND ARE MADE UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS, INCLUDING THOSE
CONCERNING ECHELON'S EXPECTED SOURCES AND USES OF FUNDS AND CAPITAL EXPENDITURES
AND ITS BUSINESS STRATEGY INCLUDING ITS PLANS TO GRADUALLY WITHDRAW FROM THE
AIRCRAFT AND REAL ESTATE LENDING BUSINESS AND FOCUS ON ITS CORE REAL ESTATE
OPERATIONS, INVOLVE RISKS AND UNCERTAINTIES. THE ACTUAL STRATEGIES AND THE
TIMING AND EXPECTED RESULTS OF SUCH MAY DIFFER MATERIALLY FROM THOSE EXPRESSED
OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE IDENTIFIED ON PAGE 22 OF THE
COMPANY'S 1998 ANNUAL REPORT.
<PAGE>
ECHELON INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
(IN MILLIONS)
June 30, December 31,
1999 1998
----------- ------------
(unaudited)
Cash and cash equivalents ....................... $ 22.7 $ 21.6
Total current assets ............................ 72.8 75.1
Real estate, leases, loans and other investments 455.0 414.0
Total assets .................................... 534.6 494.2
Total current liabilities ....................... 54.6 40.5
Long-term debt (excluding current portion) ...... 134.3 106.0
Deferred income taxes (excluding current portion) 125.2 131.4
Stockholders' equity ............................ 220.3 215.8
Total liabilities and stockholders' equity ...... 534.6 494.2
Total capital expenditures ...................... 58.6 90.4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Sales and revenues .............. $ 12.8 $ 9.1 $ 22.6 $ 22.3
Operating Expenses .............. 10.5 6.0 19.4 15.7
-------- ------- -------- --------
Income Before Income Taxes ...... 2.3 3.1 3.2 6.6
Income Tax Expense (Benefit) .... .6 .2 (.6) .3
-------- ------- -------- --------
Net income ...................... $ 1.7 $ 2.9 $ 3.8 $ 6.3
======== ======= ======== ========
Diluted earnings per common share $ .25 $ .41 $ .56 $ .91
======== ======= ======== ========
Diluted weighted average common
shares outstanding ........ 6.7 6.9 6.7 6.9
======== ======= ======== ========
</TABLE>
