UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File No. 0-12001
S T. J O E P A P E R C O M P A N Y
(Exact name of registrant as specified in its charter)
Florida 59-0432511
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 400, 1650 Prudential Drive
Jacksonville, Florida 32207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 396-6600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, No par value New York Stock Exchange
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
The aggregate market value of registrant's Common Stock held by non-affiliates
based on the closing price on March 15, 1995 was $560,474,346.
As of March 15, 1995 there were 30,498,650 shares of Common Stock No par value
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(Specific pages incorporated are identified under the applicable item herein.)
Portions of the Registrant's Annual Report to Stockholders for 1994 (the 1994
Annual Report to Stockholders) are incorporated by reference in Part I and
Part II of this Report.
Portions of the Registrant's definitive Proxy Statement dated March 31, 1995
(the "Proxy Statement") are incorporated by reference in Part III of this
Report. Other documents incorporated by reference in this Report are listed
in the Exhibit Index.
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PART I
ITEM 1. BUSINESS
As used throughout this Form 10-K Annual Report, the terms "St. Joe",
"Company" and "Registrant" means St. Joe Paper Company and its consolidated
subsidiaries unless the context indicates otherwise.
GENERAL
St. Joe was incorporated in 1936 under the laws of the State of
Florida. The general purposes of the Company at incorporation were (1) to
manufacture, buy, sell, import, export and deal in pulpwood, woodpulp, paper,
paperboard, all raw material thereof, and products and by-products therefrom
and to establish, operate and maintain mills, plants and factories for such
purpose and (2) to buy, hold, own, work, develop, improve, divide or sub-
divide, sell, convey, lease, mortgage, pledge, exchange and otherwise deal in
and dispose of all kinds of real and personal property.
The Executive Offices of St. Joe are located in Suite 400, duPont
Center, 1650 Prudential Drive, Jacksonville, Florida, 32207, and its
telephone number is 904/396-6600.
St. Joe is at present primarily engaged in two industry segments: (1)
the growing and harvesting of timber, and the manufacturing, distribution and
sale of forest products and (2) transportation of goods by rail. The
Registrant also is engaged in three other industry segments in which it
derives income: (1) growing and processing of sugarcane into raw sugar, (2)
telephone communications and (3) real estate. Other income was derived from
Company investments in securities, gains on disposition of property and other
miscellaneous items.
Financial information as to revenue, operating profits and identifiable
assets by industry segment is set forth in footnote 11 to the Consolidated
Financial Statements on pages 28 and 29 of the 1994 Annual Report to
Stockholders of this Report. Below is a description of each of these
industry segments with information to the extent necessary and material in
order that the Company's business taken as a whole can be understood.
Forest Products
The Company is a vertically integrated producer of corrugated
containers. It owns approximately 700,000 acres of timberland (most of which
is located in northwestern Florida), a paper mill located in Port St. Joe,
Florida, and 16 container plants located throughout the eastern half of the
United States. The Company's timberland and forestry operations supply wood
chips and pulpwood to the mill, which produces linerboard, some of which is
bartered for corrugating medium. The container plants convert the linerboard
and corrugating medium into corrugated containers. The Company produces and
sells a wide variety of corrugated containers to processors and manufacturers
in the food, agricultural, paper, petrochemical, plastics, electronics,
(2)
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electrical equipment and machinery industries. Demand for corrugated
containers is cyclical and correlates closely with real growth in the United
States gross national product and also with population and other demographic
factors.
The corrugated container industry is highly competitive, with over
1,500 container plants in the United States. When demand for corrugated
containers falls, the ability to maintain prices by adjusting inventory
levels is limited because container plants and paper mills operate most
economically at or near full capacity. In addition, although corrugated
containers are the dominant form of transport packaging nationally,
corrugated containers compete with various other packaging materials,
including paper, plastic, wood and metal.
The Company's operating strategy for its Forest Products sector has
been to reduce unit production costs by increasing operating efficiency and
maximizing capacity utilization. In addition, the Company emphasizes the
marketing and production of higher margin products such as the Company's
mottled white linerboard and high performance linerboard, over unbleached
linerboard.
The Company's paper mill, located at Port St. Joe, Florida, produces
mottled white and unbleached linerboard, a principal component of corrugated
containers. The mill can produce linerboard in a full range of grades and
weights. Set forth below is certain information as to mill linerboard
production for the years indicated:
Linerboard Production
(In tons)
Total Average Daily
Year Production Production*
1994 477,990 1,375
1993 444,005 1,254
1992 425,087 1,266
1991 433,352 1,308
1990 454,342 1,327
*Average daily production is computed by dividing the total production of
each paper machine by the number of days on which such paper machine operates
each year.
In 1993 and 1994, approximately 45% and 52%, respectively, of mill
production in tons was mottled white linerboard marketed by the Company under
the trade name "Crest White." Demand for mottled white linerboard has
increased significantly in recent years. Mottled white linerboard, which is
more aesthetically attractive than unbleached linerboard, in 1994 sold at
approximately 39% over the price of unbleached linerboard while, in 1993,
(3)
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this upcharge was 49%. Since mottled white linerboard offers significantly
higher profit margins than unbleached linerboard, the Company has emphasized,
and expects to continue to emphasize, the production of mottled white over
unbleached linerboard. Approximately 58% of the Company's mottled white
linerboard production in 1994 was traded to other producers under trade
agreements in exchange for corrugating medium or kraft liner.
The capital expenditures at the paper mill in 1993 for maintenance and
upgrade were $18.5 million which compares to $20.3 million for the 1994
capital and maintenance expenditures. The 1995 budget for maintenance and
upgrade at the paper mill is $21.1 million.
The Company has sought to lower its energy costs at the mill by using
increasing amounts of timber harvesting and pulp mill by-products as energy
sources. The mill's boilers use "biomass" fuel (scrub wood, bark and timber
wastes) and "black liquor" solids (a by-product of the wood pulping process)
to meet a substantial percentage of the mill's energy requirements. In 1994
fuel oil and natural gas accounted for 35.1% of mill energy requirements.
Black Liquor solids and biomass supplied most of the mill requirements.
The Company owns 16 container plants located throughout the eastern
half of the United States. Linerboard and corrugating medium are the
principal materials used in the manufacture of corrugated containers. The
container plants have an aggregate production capacity of approximately 8
billion square feet of containerboard per year. The plants in 1994 produced
approximately 7.9 billion square feet of containerboard. In 1994, fourteen
of the container plants operated on two shifts, one on one shift and one on
three shifts. The Company could increase capacity by running the one plant
that is on one shift, two additional shifts, as well as adding a third shift
to the fourteen plants presently on two shifts. The Company's paper mill
production resulted in supplying of approximately 78% of the container
plants' requirements for linerboard and corrugating medium for 1994 which was
down from the 87% that was supplied in 1993.
The Company's container plants accounted for approximately 2% of the
total national industry shipments during 1994 up from the approximately 1.9%
in 1993. The Company's corrugated container business services approximately
2,700 customers. The single largest customer accounted for approximately
3.3% of the Company's corrugated container shipments for 1994 and the ten
largest customers accounted for approximately 15.6% of the Company's 1994
corrugated container revenues.
The Company considers its container plant facilities to be in
satisfactory condition. To maintain and upgrade these facilities, the
Company spent $9.5 million in 1994 and has adopted a budget of $10.2 million
for its 1995 capital maintenance and upgrade program. The Company maintains
a laboratory facility located in Louisville, Kentucky, which tests container
components, materials and workmanship to ensure quality control for container
products.
(4)
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Company-owned timberlands are the principal source of woodchips and
pulpwood for the paper mill. Cellulose fiber which is produced primarily
from wood chips and pulpwood is the principal raw material used in the
manufacture of linerboard. The Company owns approximately 700,000 acres of
timberland, of which approximately 665,000 acres are situated in northwestern
Florida and the remaining 35,000 acres are situated in southern Georgia.
Presently, approximately 624,000 acres have been planted as managed
plantations to facilitate harvesting and reforestation and to maximize timber
yields. During the current planting season, November, 1994 through the end
of February, 1995 the Company planted 18 million seedlings on 24,500 acres.
The Company owns, in total, approximately 1.1 million acres of land.
Six forestry units and a wood procurement unit manage the timberlands.
The timberlands are harvested by local contractors pursuant to agreements
which generally are renewed annually. Timber harvested from Company
timberlands accounted for 1,119,632 tons or 54% of mill wood requirements in
1994, compared to 56% in 1993. The Company has wood chipping facilities
located at the paper mill, Lowry and Newport, Florida.
Recycled fiber is obtained in part from third parties and in part from
mill operations. In 1994 and 1993, recycled or secondary fiber supplied
approximately 17% of the mill's total fiber requirements. We expect to use
approximately 22% recycled fiber in our 1995 production.
The Company operates a nursery located in Capps, Florida. The nursery
conducts research to produce faster-growing, more disease-resistant species
of pine trees, and produces seedlings for planting on Company-owned
plantations. In addition, the Company in cooperation with the University of
Florida, is doing experimental work in genetics on the development of
superior pine seed orchards. In 1994 and 1993 capital expenditures in the
forestry operations were approximately $5.5 million and $5.3 million,
respectively. The Company has adopted a capital expenditure program for 1995
to reinvest approximately $5.5 million in these operations. These
expenditures include nursery expense and tree planting.
In 1994 the mill at Port St. Joe spent $3.0 million on environmental
related items. These were for asbestos removal and disposal, and repair of
the recovery boiler precipitator. The Company has budgeted $5.6 million in
1995 for predominantly capitalized environmental items. The main items in
1995 will be for additional asbestos removal and disposal, and modifications
to meet proposed Environmental Protection Agency Cluster Rule Regulations.
The mill at Port St. Joe is in compliance at this time in all
environmental areas under the present existing laws, rules and permits. The
Company's concerns at this point are with proposed new regulations for
permits in the area of both air and water under the new "Cluster Rule". The
"Cluster Rule" is a proposal to combine the air and water regulations into
one. The U.S. Environmental Protection Agency (EPA) is also considering
adding the new solid waste rule to the "Cluster Rule" umbrella. The proposed
"Cluster Rule" was issued in draft form in the fall of 1993. Additional
changes to the air rules will be announced in mid 1995. Compliance with the
final rules as presently drafted will be required by 1998. The greatest
(5)
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concern remains in the area of dioxin and other toxins in the dioxin family.
If the industry continues to be allowed to bleach via chlorine substitution
as proposed in the new rule, the industry will be able to comply. If,
however, the proposed regulations are changed to require total chlorine free
bleaching, then the paper industry, as well as, a number of other industries
and cities will be faced with major expenditures in order to comply.
In the container plants, there are no known major environmental
problems at this time. In 1994, the Company had expenses at several plants,
mostly for closure of a lagoon, with the total for all plants being less than
$0.4 million. Anticipated spending is approximately $0.8 million in 1995 on
similar items.
The forestry operation continues to have no major environmental
problems. The one area of expense in 1994 was at one of the forestry units
in connection with fuel contamination of soil. Approximately $0.3 million
was spent on this in 1994 and it is estimated that $0.1 million will be spent
in 1995 for clean-up and monitoring the ground water. No problems are
anticipated at any other forestry units.
Transportation
The Company owns 54% of Florida East Coast Industries, Inc. which in
turn owns 100% of Florida East Coast Railway Company (FEC). The Company also
owns and operates Apalachicola Northern Railroad Company (ANRR). The common
stock, par value $6.25 per share, of Florida East Coast Industries, Inc. is
registered pursuant to Section 12(b) of the Securities Exchange Act
(Commission file number 2-89530).
Both FEC and ANRR are subject to regulation by the Interstate Commerce
Commission and, in some areas, the State of Florida. These governmental
agencies must approve, prior to implementation, changes in areas served and
certain other changes in operations of FEC and ANRR.
The principal business of FEC is that of a common carrier of goods by
rail over 442 miles of main and branch line track all in the state of
Florida. The mainline extends 351 miles from Jacksonville on the north, to
Miami on the south, with 91 miles of branch line extending west from Fort
Pierce to Lake Harbor. Principal commodities carried by the FEC in its rail
service include automotive vehicles, crushed stone, cement, trailers-on-
flatcars, containers-on-flatcars and basic consumer goods such as food. FEC
is the only railroad serving the area between Jacksonville and West Palm
Beach on the east coast of Florida. Common motor carriers are competitors
throughout the entire transportation system and CSX Transportation, Inc. is
a competitor over that section of track extending southward from West Palm
Beach to Miami for rail traffic, excluding that of trailer-on-flatcar and
container-on-flatcar traffic.
(6)
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The operating statistics set forth below reflect FEC's performance for
the latest three years:
Operating Statistics
(In thousands except percentage data)
Years Ended December 31,
1994 1993 1992
Operating revenues $ 163,098 $ 162,318 $ 138,736
Operating income 28,506 28,843 18,876
Operating margin 17.5% 17.8% 13.6%
Tonnage 13,693 14,709 13,772
Revenue ton miles 4,487,401 4,257,000 4,157,594
The FEC had capital expenditures in 1994 of $21.3 million in addition
to maintenance expenditures of $55.8 million. This compares to 1993 capital
expenditures of $19.8 million and 1992 of $17.9 million. The maintenance
expense in 1993 was $53.7 million and 1992, $33.8 million.
ANRR is a short line railroad that operates exclusively within the
state of Florida, over 90 miles of main track and 6 miles of rail yard track
extending from Port St. Joe to Chattahoochee where it connects with an
unaffiliated carrier. All 90 miles of the main line are 100% concrete
crossties. Although it is a common carrier, most of ANRR business consists
of carrying coal and items related to wood. In 1994, 68.1% of its carloads
were carrying coal. The carloads of coal carried in 1993 and 1992 were 67.5%
and 67.8% respectively of the total. The other main commodity carried is
wood products, consisting of pulpboard, woodchips and pulpwood. These
products totaled 24.6% of the total 1994 carloads, 24.6% in 1993 and 24.1% in
1992. The other items carried by ANRR are tall oil, chemicals, stone and
clay products and recyclable items. Certain operating statistics for the
latest three years are as shown:
Operating Statistics
(In thousands except percentage data)
Years Ended December 31,
1994 1993 1992
Operating revenues $ 12,886 $ 12,685 $ 12,366
Operating income 1,398 1,969 2,614
Operating margin 10.9% 15.5% 21.1%
Tonnage 4,227 4,187 4,047
Revenue ton miles 407,197 401,907 380,696
(7)
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Capital expenditures by the ANRR in 1994 were $3.8 million which
compares to 1993 capital expenditures of $4.2 million and 1992 of $3.4
million. The ANRR has budgeted $2.2 million in 1995 for capital
expenditures.
FEC is a party to various proceedings before state regulatory agencies
relating to environmental issues. In addition, FEC, along with many other
companies, has been named a potentially responsible party in proceedings
under Federal statutes for the clean up of designated Superfund sites at
Jacksonville, Florida and Portsmouth, Virginia. FEC has made an estimate of
its likely costs attributed to sites for which its clean up responsibility is
probable and a liability has been recorded. Such liability is not material
to the financial position of the FEC. Based upon management's evaluation of
the other potentially responsible parties, the Company does not expect to
incur additional amounts even though the Company has joint and several
liability. FEC is not aware of any monetary sanctions to be proposed which
in the aggregate, are likely to exceed $100,000, nor does it believe that
corrections will necessitate significant capital outlays or cause material
changes in its business.
ANRR has environmental problems involving stormwater run-off and
contaminated soil from fuel oil and gasoline. These items cost approximately
$1.4 million in 1994 for both capital expenditures and expense and are
budgeted for $0.3 million in 1995.
Sugar
In 1971, the Company acquired a 60% interest in Talisman Sugar
Corporation (TSC) which is a grower of sugarcane located in the fertile Belle
Glade area in south central Florida. In addition to growing sugarcane TSC
harvests the cane and processes the cane into raw sugar. In 1984, the
Company acquired the remaining 40% interest in TSC, thereby owning 100% of it
today.
The Company at the end of 1994 owned approximately 48,600 acres of
agricultural land and leased approximately 7,000 acres for use in its
sugarcane growing operation. Sugarcane production and processing is seasonal
in nature. Sugarcane plantings generally yield two harvests before
replanting is necessary. The Company harvests its sugarcane crop in one-year
cycles, as do other Florida producers. The Company generally plants
sugarcane in the fall of each year. Harvesting of a crop generally commences
in October of each year and continues into the following March. During the
1994-1995 crop the TSC grew sugarcane on approximately 43,000 acres of land.
The majority of the Florida sugarcane producers, including TSC,
harvests sugarcane using mechanical cane harvesters. This is a change from
harvesting sugarcane by hand as was the historical practice. Cane cutting
and loading are performed with mechanized harvesters which reduces
significantly the labor requirements, resulting in substantial cost savings
and permits the grinding of the sugarcane more quickly after harvesting,
resulting in improved efficiency. Mechanized harvesting, however, is less
(8)
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precise than manual harvesting, resulting in greater amounts of chaff and
trash being mixed in with the harvested sugarcane. As a result, a minimal
amount of sucrose is lost through leaching into the trash and chaff. In
addition, mechanized harvesting causes more damage to cane fields than manual
harvesting, resulting in slightly lower cane yields in subsequent crops.
Consequently, yields of sucrose from harvested sugarcane and its crop yields
per acre are generally slightly lower than those cut by hand. These negative
effects are far outweighed by the labor cost savings and other efficiencies
resulting from mechanized harvesting.
The Company's sugar mill has a grinding capacity of approximately
11,500 tons of sugarcane per day. The Company ground approximately 1,296,000
tons of sugarcane in 1992, approximately 1,321,000 tons in 1993 and
approximately 1,184,000 tons of sugarcane in 1994 from Company operated
lands. Total raw sugar production for the Company was approximately 117,000
tons in 1992, 119,000 in 1993, and 114,261 tons in 1994.
The sugar mill is virtually energy self-sufficient, with almost all of
its energy requirements supplied through the use of bagasse, a by-product of
the mill's cane grinding operations. The Company harvests and processes its
sugarcane into raw sugar and sells its entire production to Everglades Sugar
Refinery, Inc., a wholly-owned subsidiary of Savannah Foods & Industries,
Inc., pursuant to a contract which was to expire in 1996. In 1993, this
contract was amended and extended through the 1997/1998 crop year and is
automatically renewed each crop year thereafter. Either party can decline to
renew by giving notice to the other party no later than October 1 of the
fourth year prior to the termination date. Under the contract, the Company
is paid for its sugar based on market prices.
The sugar industry is highly competitive. The Company competes with
foreign and domestic sugarcane and sugar beet processors, as well as
manufacturers of corn sweeteners and artificial sweeteners such as aspartame
and saccharin. Sugar is a volatile commodity subject to wide price
fluctuations in the marketplace. Sugar prices have been supported by the
United States Government through the Agriculture and Food Act of 1981 which
restricts sugar imports in order to support the domestic sugar price. This
Act was scheduled to terminate in 1990. The United States Congress in 1990,
passed the Food, Agriculture, Conservation and Trade Act of 1990, which
extended this price support program to cover the 1991-95 crops of sugarcane.
In 1994 the State of Florida enacted the Everglades Forever Act which
significantly affects agriculture in the Everglades Agricultural Area
(EAA).The Act calls for the creation of six Stormwater Treatment Areas (STA)
as buffers between the Everglades Protection Area and the EAA. The Act
imposes substantial taxes on TSC and other agricultural interests to pay for
construction of the STAs. As with the Forest Products segment of the
Company, there is concern in the Sugar segment with the new Clean Air Act and
not knowing at this time what will be the complete impact of the Act on this
operation. The sugarcane growers, as well as, TSC will need to get Title V
permits as required under the Clean Air Act. These permits presently are
required prior to November, 1995.
(9)
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Capital expenditures by TSC in 1994 were $3.4 million and compares to
$2.9 million in 1993 and $7.4 million in 1992. The capital expenditures
budget for 1995 is $4.3 million.
The Company had only minor expenditures for environmental problems,
less than $0.4 million, in 1994. The only environmental problem TSC has, at
present, is in the removal of water from its property. TSC has installed
equipment to monitor the quality and quantity of water being pumped out of
its pumping stations as required by the local Water Management District.
Communications
St. Joe Communications, Inc. (SJCI) provides unregulated tele-
communications services such as the sale of communications systems and of
telephone equipment to commercial and residential customers and in addition
owns three regional operating telephone companies. The operating companies
provide local telephone communications services in 12 northwestern Florida
counties, 2 southern Alabama counties and 1 Georgia county through 19
exchanges located in the region which service approximately 36,900 access
lines. In addition to providing local exchange telephone service, the
Company's facilities are connected with other telephone companies and the
nationwide toll networks of long distance carriers. The Company also
supplies telephone and other communications service to Tyndall Air Force Base
pursuant to a long-term contract.
In addition to its regular telephone services, the Communications
segment participates in four limited partnerships with major telecommun-
ications companies as partners. These interests in the four partnerships
vary from 12% to 51% and are to provide cellular telephone service in their
operating territory. These four partnerships operate in the following areas:
(1) Tallahassee - Perry, Florida (serving six counties in Florida); (2) Port
St. Joe, Florida (serving four counties in Florida); (3) Fort Walton Beach,
Florida (serving five counties in Florida) and (4) southeast Alabama (serving
twelve counties in Alabama). These partnerships operated 66 cell sites at
December 31, 1994 having added 16 cell sites in 1994. The Company
anticipates adding 20 more in 1995.
The Company owns and leases to MCI on a primary term of ten years, with
renewal option provisions, a fiber optic transmission network extending from
Fort Walton Beach to Tallahassee of approximately 150 miles. The Company
owns fiber optic routes from Port St. Joe to Blountstown, Carrabelle, and
Tyndall Air Force Base, Blountstown to Bristol and Perry to Keaton Beach and
one-half of the distance from Perry to Tallahassee. These locations are all
in Florida and total over 326 miles. This network is used exclusively to
serve intercompany and intracompany routes. The intracompany routes are
major feeder routes between exchanges and/or electronic remote facilities
associated with the various exchanges. The companies will continue to
install fiber optic cable for these same basic transmission functions.
(10)
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SJCI has a policy to invest in the latest, most advanced equipment and
technology. In keeping with this policy SJCI expended $5.4 million on
capital improvements in 1994 which compares to $5.3 million that was spent in
1993 and $7.6 million in 1992. SJCI has budgeted $3.9 million for 1995
capital improvements. The Communications operations are subject to
regulations by the Public Service Commissions of the states of Florida and
Alabama with respect to intrastate services and the Federal Communications
Commission with respect to interstate services. The operating companies are
limited to certain specified rates of return on its regulated operations and
in 1990 and 1991 exceeded these permitted rates of return and were required
to rebate the excess revenue to its customers.
Real Estate
The Real Estate segment of the Company consists of two operations, one
a division of St. Joe known as Southwood Properties (Southwood), and Gran
Central Corporation (Gran Central), a subsidiary of Florida East Coast
Industries, Inc. The Company reorganized into industry segments in 1985 and
at that time put most of St. Joe's investment and developable real estate
into Southwood. Gran Central was incorporated in 1981, but was not very
active until 1984 when, by reorganization, it received all Florida East Coast
Industries, Inc. non-operating real estate. The Real Estate segment was
established for more efficient management and for better planning of future
development, sales and/or leasing of various parcels of property. The
property in this segment is suited for development in all areas, commercial,
industrial, residential and resort. The Company began in the mid 80's to
actively pursue plans to develop these real estate properties. The Real
Estate segment became a significant business operation and for the first time
in 1987 was reported as a separate segment of the Company.
The Company has not and does not intend to enter into any debt
financing arrangements in connection with its development activities.
Rather, the Company intends to fund those projects with cash from operations
and from sales of certain properties. Because the Company will not incur
significant financing costs, the Company believes that it will bring a long-
term perspective to its development strategy and will be better able to
withstand any cyclical downturns in the Florida real estate market. In
addition, the Company intends to take a conservative approach to development
and to develop projects only to the extent market conditions and internally
generated funds permit. Accordingly, it can be expected that it will take
many years before the Company may be able to complete developments covering
significant portions of its developable properties. The Company's objective
is to emphasize the long-term capital appreciation of its real estate assets
and as a consequence, the Company expects that substantially all of the cash
flow generated from real estate development activities will be reinvested in
these activities.
(11)
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The growth of the panhandle area, where the Company owns significant
acreage, is expected to continue, although at a much lower rate than is
generally expected for the rest of the state. Florida's fastest population
and employment growth areas are expected to be along both coasts (excluding
the panhandle region) and in central Florida. Gran Central owns sizable
acreage within several high-growth areas along Florida's east coast,
including, but not limited to, the West Palm Beach, Melbourne-Titusville,
Daytona Beach, Miami-Hialeah and Fort Pierce areas. The focus of Gran
Central's activities has been the Miami and Jacksonville area.
Although this growth has provided, and is expected to continue to
provide, significant real estate development opportunities, there is
substantial concern among state and local authorities about the impact that
this development may have on the environment and facilities and services
provided by municipalities. As a result, land use and environmental
regulations are becoming more complex and burdensome. Development of real
property in Florida entails an extensive approval process which involves
regulatory agencies with overlapping jurisdictions. The process requires
compliance with the Local Government Comprehensive Planning and Land
Development Act (the "Growth Management Act"). In addition, development
projects that exceed certain specified regulatory thresholds require approval
of a comprehensive Development of Regional Impact (DRI) application by a
state-appointed regional planning council. Compliance with the Growth
Management Act and the DRI process is usually lengthy and costly and can be
expected to have a material effect on the Company's real estate development
activities in the area of land use and its application to wetlands.
Southwood manages the extensive properties that the Company owns and
has identified as suitable for development in the Florida panhandle and in
St. Johns county. These wooded properties include substantial gulf, lake and
riverfront acreage and, therefore, are well suited to residential and resort
development, including development as large residential and mixed-use planned
communities. A portion of the Company's property along the northwestern
coast of Florida is suitable for commercial or industrial development.
Southwood's general strategy for developing its residential and mixed-use
properties will be to install infrastructure improvements, such as sewers,
utility hookups and roads, and to sell lots to other developers or
individuals for building in accordance with the master development plan
formulated for the community. At present, the Company does not intend to
build individual homes.
In 1991, Southwood completed the construction of its first office
building containing 11,700 square feet. This building is in the Southwood
Center Office Park, Panama City, Florida and at December 31, 1994 was 100%
leased. Architectural design for the next building at this location was
completed during 1994 and site design and permitting are currently active.
Southwood, in 1994, sold the remaining 12 lots in Woods II, and the remaining
lots in the Woodmere subdivision, all being in Panama City. The Company sold
the last 21 lots at Old Florida Beach subdivision, Walton County, Florida.
In 1994 design and permitting continues in Phase III of the Woods for 50
lots. The Retreat, which will be a 100 lot, gulf-front subdivision near Old
(12)
<PAGE>
Florida Beach in Walton County is currently in the design and permitting
stage. Phase I of 50 lots will be completed this year with the first sales
anticipated for 1996. Final engineering and permitting for Summerwood, a 200
lot subdivision in Bay County, is expected to be completed by mid summer.
Construction will start this year with the first sales taking place in early
1996. Final permitting is expected by mid year for Camp Creek subdivision,
an 18 lot gulf-front subdivision in Walton County, with sales possible by
year-end. Southwood had approximately $0.3 million in capital expenditures
in 1994 compared to $1.5 million in 1993. The Company has budgeted $1.8
million in capital expenditures for 1995.
The development properties owned and managed by Gran Central total
approximately 17,900 acres. These properties are in thirteen counties
situated in a corridor running along the eastern seaboard of Florida between
Jacksonville and Miami. They include both urban and rural properties on
sites that range in size from parcels of under one acre to a tract of over
6,000 acres. Many of the properties are located on strategic urban streets
or are easily accessible by major highways such as Interstate 95 or U. S.
Route 1 and several are located adjacent to mass transit facilities.
Approximately two-thirds of Gran Central's properties are located in or
adjacent to industrial and commercial corridors, and are well suited to the
development of office buildings, office/distribution parks and industrial
parks. Gran Central has been pursuing planning, permitting and
infrastructure development and now has approximately 3.8 million square feet
of buildings. Approximately 89% of the leasable space was under lease at
year-end 1994 compared to 88% in 1993 and 90% in 1992. In 1994, Gran Central
completed six buildings with a total square footage of 686,000. Gran Central
had capital expenditures of $28.0 million in 1994 compared to $34.1 million
in 1993 and expects to spend $35.3 million in 1995.
Investments
The Company in addition to its operations has investments in U. S.
Government securities, tax exempt municipal bonds, certificates of deposit,
remarketed certificates of participation, common and preferred stocks, and
other corporate debt securities. The Company's marketable securities include
common stock of E. I. duPont de Nemours & Company, General Motors Corporation
and General Motors Corporation Class-H stock.
New Products
Refinements of existing products are developed and introduced in the
forest products segment of the Company every year. During 1994, no single
refinement or group of refinements was introduced which would require the
investment of a material amount of St. Joe's assets or which otherwise would
be considered material.
(13)
<PAGE>
Sources and Availability of Raw Materials
During 1994 and 1995 to date, all of the raw materials the Company uses
were available in adequate supply from multiple sources.
St. Joe owns slightly over one million acres of timberland, of which
approximately 700,000 acres are suitable for growing commercial species of
trees. Such timberland is the main source of supply for its linerboard mill
which in turn supplies a major part of the requirements for the Company's
corrugated box operations. The remaining timber requirements for the
linerboard mill are obtained on the open market under short-term contracts.
Talisman owns or leases approximately 55,100 acres of land in Palm
Beach County, Florida, of which approximately 43,000 acres are being used to
grow sugarcane.
Patents and Licenses
St. Joe did not obtain any new patents or licenses in 1994. The
Company has pending one application for a trademark in the Container Company.
Seasonality
The sugarcane production and processing segment is seasonal with one
sugarcane crop being harvested each year. None to little significant
seasonality exists for products or services in the other segments of the
Company.
Working Capital
In general, the working capital practices followed by the Company are
typical of industries in which it operates. During some periods the
accumulation of inventories in the sugar operations prior to expected
shipments reflects the seasonal nature of this industry and may require
periodic short-term borrowing.
Customers
Major customers exist for each of the Company's industry segments. TSC
has a contract with Everglades Sugar Refinery, Inc. to purchase the entire
raw sugar production. This contract runs through the 1997/1998 crop year and
is automatically renewed each crop thereafter. Either party can decline to
renew by giving notice to the other party no later than October 1 of the
fourth year prior to the termination date. No single customer accounts for
10% or more of the Company's consolidated revenues.
Research and Development
St. Joe maintains a nursery and research facility in Capps, Florida,
which grows seedlings for use in reforestation of its lands. Experiments in
forestry genetics, including research on the production of faster growing,
(14)
<PAGE>
more disease-resistant pine species, are also conducted at this facility.
The Company also participates through cooperation with the University of
Florida in their Genetics Co-op program. This experimentation work is in
genetics, plantation and fertilization. The amounts spent during the last
three fiscal years on Company-sponsored research and development activities
were not material.
Employees
The Company had approximately 5,000 employees at December 31, 1994.
Approximately 70% of the Company's employees are covered by collective
bargaining agreements with 9 different unions. These agreements generally
have terms of between one and four years and have varying expiration dates.
The Company considers its relations with its employees to be good.
Executive Officers of the Registrant
Set forth below are the names, ages (at March 15, 1995), positions and
offices held, and a brief account of the business experience during the past
five years of each executive officer.
Name Age Position with Company
Winfred L. Thornton 66 Chairman of the Board and Chief
Executive Officer since 1991;
President 1984-1991; Director since
1968; President and Chairman of the
Board of Florida East Coast Industries,
Inc. since 1984; President of FEC
1964-1984.
Robert E. Nedley 56 President since 1991; Vice President
1981-1991; Director since 1989.
Howard L. Brainin 65 Vice President and Director since
1992.
Edward C. Brownlie 57 Vice President - Administration
Director since 1982.
E. Thomas Ford 62 Vice President since 1972;
Director since 1989.
Stanley D. Fraser 70 Vice President since 1972;
Director since 1982.
There are no family relationships among the persons named above. All
officers serve at the pleasure of the Board of Directors of the Company and
there is no arrangement or understanding between any of the officers of the
Company and any other persons pursuant to which such officer was selected as
an officer. Each officer has been elected to the position shown until the
next annual election of officers, which is to be held on May 9, 1995.
(15)
<PAGE>
ITEM 2. PROPERTIES
The principal manufacturing facilities and other materially important
physical properties of the Company at December 31, 1994 are listed below and
grouped by industry segment. All properties shown are owned in fee simple
except where otherwise indicated.
Corporate Facilities
Jacksonville, Florida - Occupies approximately one and one-half floors
of a four story Company-owned building.
Forest Products
Forestry Management Facilities
Albany, Georgia Port St. Joe, Florida
Hosford, Florida West Bay, Florida
Newport, Florida Wewahitchka, Florida
Chip Plants
Lowry
Newport
Nursery and Genetics Research Facility
Capps, Florida
Pulpwood Procurement Offices
Port St. Joe, Florida
Paper Mill
Port St. Joe, Florida
Container Manufacturing Plants
Atlanta, Georgia Lake Wales, Florida
Baltimore, Maryland (subject to Industrial
Birmingham, Alabama Revenue Bond Financing
Charlotte, North Carolina $8.5 million)
Chesapeake, Virginia Laurens, South Carolina
Chicago, Illinois Louisville, Kentucky
Dallas, Texas Memphis, Tennessee
Dothan, Alabama Pittsburgh, Pennsylvania
Hartford City, Indiana Port St. Joe, Florida
Houston, Texas
Marketing Offices
Union, New Jersey
(leased)
Agricultural Lands
The Company owns slightly over one million acres of agricultural lands
in Florida and Georgia and leases an additional 4,800 acres.
(16)
<PAGE>
Transportation
FEC owns three four-story buildings in downtown St. Augustine which it
uses for its corporate headquarters. Its transportation facilities include
351 miles of main track, which is mostly 132# rail on concrete crossties, 97
miles of branch line track, 210 miles of yard switching track and 124 miles
of other track. FEC owns 79 diesel electric locomotives, approximately 2,800
freight cars, approximately 1,630 tractor and/or trailer units for highway
service, numerous pieces of work equipment and automotive vehicles. All
property and equipment owned is in good physical condition.
Sugar Operations
Belle Glade, Florida. The Company owns approximately 48,600 acres of
land and leases approximately 7,000 acres. In addition, it owns a raw sugar
mill and various types of agricultural equipment.
Communications - Telephone Exchanges and Offices
Alligator Point, Florida Keaton Beach, Florida
Altha, Florida Laurel Hill, Florida
Apalachicola, Florida The Beaches, Florida
Blountstown, Florida Paxton, Florida
Bristol, Florida Perry, Florida
Carrabelle, Florida Port St. Joe, Florida
Chattahoochee, Florida Tyndall AFB, Florida
Eastpoint, Florida Wewahitchka, Florida
Florala, Alabama Wing, Alabama
Hosford, Florida
Real Estate
Southwood owns approximately 50,550 acres of investment land the
majority of which is located in West Florida. The counties with the largest
holdings at December 31, 1994 are as follows:
County Acres
Bay 25,040
Leon 9,753
Franklin 7,049
St. Johns 4,321
Walton 2,012
Wakulla 1,153
In addition to these holdings the Company has another approximately 20,000
acres in West Florida that it considers investment or developable property.
Southwood owns an office building in Panama City, Florida which was completed
in 1991 and contains 11,700 square feet.
(17)
<PAGE>
Gran Central at December 31, 1994 owned approximately 17,900 acres of
land held for lease development and/or sale. In addition, it manages
approximately 1,430 acres owned by FEC. The largest holdings by counties are
as follows:
County Acres
Volusia 3,560
St. Johns 3,530
Flagler 3,460
Brevard 2,810
Dade 1,700
Duval 1,530
Manatee 900
Gran Central also owned at year-end 1994 forty-six buildings as
detailed below;
Number of Rentable Year
Location Buildings Type Square Feet Built
duPont Center 1987/
Jacksonville, FL 2 Office 144,000 1988
Barnett Plaza
Jacksonville, FL 1 Office 59,000 1982
Gran Park at
Interstate South Office/Showroom/ 1987/
Jacksonville, FL 6 Warehouses 260,000 1989
Gran Park at
the Avenues 2 Office/Showroom/ 101,000 1992
Jacksonville, FL Warehouses/
2 Office 145,000 1992/
1993
1 Office/Warehouses 139,000 1994
Gran Park at
Melbourne Office/Showroom/
Melbourne, FL 1 Warehouse 28,000 1989
Gran Park at 1 Office/Showroom
Riviera Beach, FL Warehouse 62,000 1987
Lewis Terminals 2 Rail Warehouses 176,000 1982/
1987
4 Cross Docks 75,000 1987/
1991
Gran Park - McCahill
Miami, FL 2 Rail Warehouses 468,000 1992/1994
(18)
<PAGE>
Gran Park at Miami
Miami, FL 5 Office/Showroom/ 368,000 1988/
Warehouses 1990/
1992/
1994
4 Office/Warehouses 382,000 1990/
1991/
1992/
1993
4 Rail Warehouses 398,000 1989/
1990/
1993/
1994
5 Front Load Warehouses 604,000 1991/
1992/
1993
1 Double Front Load
Warehouse 239,000 1993
1 Office Service Center 41,000 1994
Hialeah, FL 1 Cross Dock 20,000 1987
Pompano, FL 1 Rail Warehouse 54,000 1987
TOTAL 46 3,763,000
Gran Central's holdings include lands adjacent to FEC tracks which are
suitable for development into office and industrial parks offering both rail
and non-rail-served parcels. Certain other holdings are in urban or suburban
locations offering opportunities for development of office building
structures or business parks offering both office building sites and sites
for flexible space structure such as office/showroom/warehouse buildings.
General
St. Joe considers that its facilities are suitable and adequate for the
operations involved. All facilities are being productively utilized in the
business.
ITEM 3. LEGAL PROCEEDINGS
The Forest Products segment of the Company has suits pending in several
counties in West Florida contesting ad valorem tax assessments. In 1994, the
Company's mill was named as a potentially responsible party under Federal
regulations for the cleanup of a designated Superfund site in Tampa, Florida.
The alleged violation occurred in the late 1970's or early 1980's. The
Company has investigated this claim and has found no evidence that material
from the mill was dumped at this site and therefore, it should not have been
named as a party in this matter.
(19)
<PAGE>
The Registrant, through its Transportation subsidiary, Florida East
Coast Railway (FEC), was involved in a legal action versus CSX
Transportation, Inc. (CSXT), alleging, in part, violations of a 1978
Agreement between CSXT and FEC and, in part, violations of the Sherman Act.
The complaint alleged that CSXT has, by its actions, placed FEC in a position
such that it could not fairly compete with CSXT for certain carload traffic
destined to or from South Florida points served by the two railroads. In
early 1992, CSXT petitioned the ICC to reopen the merger proceedings for the
purpose of eliminating the merger conditions set down by the ICC in the 1967
merger of ACL/SAL railroads. Under the conditions set by the ICC prior to
merger, the merged company, CSXT, was required to cooperate with FEC in
matters of rates, routes, and service in a fashion allowing FEC to compete
effectively with CSXT on traffic to and from West Palm Beach southward. A
tentative Order by the U.S. District Court dated February 19, 1993, found
that contract rates were included in the 1978 Agreements, but that CSXT could
not be required to establish an equal joint-line contract rate since the
Court views such action as a form of price-setting which is illegal. As
reported in 1993, appeals were made in the U.S. District Court in Chicago and
before the Interstate Commerce Commission in Washington. Both actions were
resolved in favor of CSXT and the Company will not contest this issue
further.
The FEC is also involved in legal actions against the Florida
Department of Revenue (FDR), and several counties of the state, for its ad
valorem assessment covering the years 1987 through 1991. The FDR received a
favorable decision on this case in 1991 for the years 1987 and 1988 which the
FEC appealed. The years 1989 through 1991 which had been stayed, pending the
outcome of the above case, have now been assessed and form the basis for new
suits. In the third quarter of 1993 the FDR and FEC reached a settlement of
$13.5 million as the total amount of ad valorem taxes due for the years 1987
through 1991.
The FEC and ANRR are involved in various proceedings associated with
environmental issues. See page 8 under discussion of the Transportation
segment for details.
ANRR has filed action in the courts against the FDR and several
counties of the state on its ad valorem assessment covering the years 1987
through 1993. The suit covering the years 1987 and 1988 was being held in
abeyance, pending final determination of the companion case of the FEC
discussed above. Since the FDR settlement with the FEC, they have billed the
ANRR $0.3 million as the amount required to settle the case covering these
two years. The suit for the years 1989 through 1993 which was scheduled to
be heard by the courts in 1993 has been reset for 1994. The amount at issue
for these five years is approximately $0.6 million. The Company expects
these cases will be settled in 1995.
The Company knows of no other pending or contemplated legal proceedings
other than ordinary routine litigation incidental to the business or property
of the Company.
(20)
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the Company's 1994
fiscal year to a vote of security holders, whether by solicitation of proxies
or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
STOCK AND RELATED STOCKHOLDER MATTERS
Incorporated by reference to the 1994 Annual Report to Stockholders on
page 11.
The Company has established a regular quarterly cash dividend of $.05
per share. The dividend of $.05 per share for the first quarter of 1995 is
payable on March 31, 1995 on record date of March 24, 1995.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to the 1994 Annual Report to Stockholders on
page 11.
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Incorporated by reference to the 1994 Annual Report to Stockholders
Balance Sheet - Page 13
Statement of Income - Page 15
Statement of Cash Flow - Page 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements on page 12 to 29, inclusive and the
Independent Auditors' Report on page 30 of the Annual Report to Stockholder
for 1994 are filed as part of this Report and incorporated herein by
reference thereto.
(21)
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Reference is made to the information to be set forth in the section
entitled "Election of Directors" in the definitive proxy statement involving
the election of directors in connection with the Annual Meeting of Stock-
holders of St. Joe to be held on May 9, 1995 (the "Proxy Statement"), which
section is incorporated herein by reference. The Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1994, pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended.
The information required with respect to executive officers is set
forth in Part I of this Report under the heading "Executive Officers of the
Registrant", pursuant to instruction 3 to paragraph (b) of Item 401 of
Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information to be set forth in the section
entitled "Compensation of Directors' in the Proxy Statement, which section is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Reference is made to the information to be set forth in the section
entitled "Common Stock Ownership of Certain Beneficial Owners" and "Common
Stock Ownership of Management" in the Proxy Statement, which sections are
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
(22)
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT, SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in the accompanying Index
to Financial Statements and Financial Statement Schedules
are filed as part of this Report.
2. Financial Statement Schedules
The financial statement schedules listed in the
accompanying Index to Financial Statements and Financial
Statement Schedules are filed as part of this report.
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits
are filed as part of this Report.
(b) Reports on Form 8-K
None
(23)
(PAGE)
ST. JOE PAPER COMPANY
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a) 1. and 2.)
Reference
Annual Report
Form 10-K To Stockholders
Page Number Page Number
Report of Independent Certified Public
Accountants F-1 30
Consolidated Balance Sheet at December
31, 1994 and 1993 12
Consolidated Statement of Income for each
of the three years in the period ended
December 31, 1994 14
Consolidated Statement of Changes in
Stockholders' Equity for each of the
three years in the period ended
December 31, 1994 14
Consolidated Statement of Cash Flows for
each of the three years in the period ended
December 31, 1994 17
Notes to Consolidated Financial Statements 19-29
Consolidated Schedules for each of the three years
in the period ended December 31, 1994:
VIII - Valuation and Qualifying Accounts S-1
XI - Real Estate and Accumulated Depreciation S-2-7
All other schedules have been omitted since the required information is
not present or not present in amounts sufficient to require submission of the
schedule or because the information required is included in the consolidated
financial statements, including the summary of significant accounting policies
and the notes to the consolidated financial statements.
(24)
<PAGE>
ST. JOE PAPER COMPANY
INDEX TO EXHIBITS
(Item 14(a) 3.)
S-K
ITEM 601 Documents Page
(3) (a) Articles of Incorporation *
(3) (b) By-Laws *
(10) (b) Agreement between Apalachicola and
Seminole Electric Cooperative,
Incorporated dated October 14, 1982 *
(b) Agreement between Talisman Sugar
Corporation and Everglades Sugar
Refinery dated February 11, 1986 **
(21) Subsidiaries of St. Joe (filed
herewith and attached) E-1
(24) Powers of Attorney E-2 - E-3
*Incorporated herein by reference to Exhibits filed in connection
with St. Joe Paper Company Registration Statement on Form 10 as
filed with the Securities and Exchange Commission on April 30, 1984
(File No. 1-12001).
**Incorporated herein by reference to Exhibits filed with the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990.
(25)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized on February 28, 1995.
ST. JOE PAPER COMPANY
By:
Edward C. Brownlie
Vice President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on March
8, 1995.
Chairman of the Board and
W. L. Thornton* Chief Executive Officer
Winfred L. Thornton
Jacob C. Belin* Chairman of the Executive
Jacob C. Belin Committee
President, Chief
Operating Officer and
Robert E. Nedley* Director
Robert E. Nedley
Vice President and
Stanley D. Fraser* Director
Stanley D. Fraser
Vice President and
Howard L. Brainin* Director
Howard L. Brainin
Vice President and
Director (principal
financial officer)
Edward C. Brownlie
Richard H. Dent* Director
Richard H. Dent
(26)
<PAGE>
Vice President and
E. Thomas Ford* Director
E. Thomas Ford
Russell B. Newton, Jr.* Director
Russell B. Newton, Jr.
Walter L. Revell* Director
Walter L. Revell
John D. Uible* Director
John D. Uible
Comptroller (principal
accounting officer)
D. Michael Groos
By:
Edward C. Brownlie
Attorney-in-Fact
*Such signature has been affixed pursuant to Power of Attorney.
See Exhibit 24.
(27)
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
St. Joe Paper Company:
Under date of February 28, 1995, we reported on the consolidated balance
sheets of St. Joe Paper Company and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1994, as contained in the 1994 annual report to
stockholders. These consolidated financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
1994. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedules as listed in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement
schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
As disclosed in notes 2 and 6 to the consolidated financial statements,
the Company changed its method of accounting for investments to adopt
the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" at December 31,
1993. As disclosed in notes 2 and 8, the Company changed its method of
accounting for income taxes effective January 1, 1993 to adopt the
provisions of the Financial Accounting Standards Board's SFAS No. 109,
"Accounting For Income Taxes".
KPMG PEAT MARWICK LLP
Certified Public Accountants
Jacksonville, Florida
February 28, 1995
F-1
<PAGE>
ST. JOE PAPER COMPANY
SCHEDULE VIII (CONSOLIDATED)
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
Balance at Additions
Beginning Charged to Balance
Reserves included in of Year Expense Payments End of Year
Liabilities
1994
Accrued casualty reserves 22,911 9,995 5,122 27,784 (a)
1993
Accrued casualty reserves 22,916 2,443 2,448 22,911 (a)
1992
Accrued casualty reserves 23,043 3,774 3,901 22,916 (a)
(a) Includes $13,250, $11,601 and $11,213 in current liabilities at
December 31, 1994, 1993 and 1992, respectively. The remainder
is included in "Accrued casualty reserves and other liabilities."
S-1
<PAGE>
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1994, 1993 and 1992
(Dollars in thousands)
Initial Cost to Company
Costs
Buildings Capitalized
Encum- & Tenant Subsequent to
Description brance Land Improvements Acquisition
Duval County
Office Buildings (5) 0 1,153 6,200 26,508
Office/Showroom/Warehouse(9) 0 1,502 23,234
Land w/ Infrastructure 0 6,593 6,786
City & Residential Lots 0 371 5 77
Unimproved land & misc assets 0 915 1,548
St. Johns County
Land w/ Infrastructure 0 10 1,045
Unimproved land 0 2,631 411
Flagler County
Unimproved land 0 3,218 1,137
Volusia County
Unimproved land 0 3,651 501
Brevard County
Office/Showroom/Warehouse 0 73 1,900
Land w/ Infrastructure 0 3,797 0
Unimproved land 0 4,846 191
Indian River County
Unimproved land 0 218 189
St. Lucie County
Unimproved land 0 639 5
Martin County
Unimproved land 0 4,671 2,344
Palm Beach County
Office/Showroom/Warehouse 0 113 2,879
Rail Warehouses (2) 0 449 4,110
Cross Docks (4) 0 117 3,763
Land w/ Infrastructure 0 1,259 0
Unimproved land 0 1,596 0
Broward County
Rail Warehouse 0 85 1,701
Unimproved land 0 733 701
Dade County
Office/Showroom/Warehouses (5) 0 1,003 14,782
Office/Warehouses (5) 0 1,747 14,960
Rail Warehouses (6) 0 808 24,607
Cross Dock 0 137 1,018
Double Front Load Warehouse 0 768 5,485
Front Load Warehouses (5) 0 1,943 16,066
Land w/ Infrastructure 0 2,577 7,854
S-2
<PAGE>
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1994, 1993 and 1992
(Dollars in thousands)
Initial Cost to Company
Costs
Buildings Capitalized
Encum- & Tenant Subsequent to
Description brance Land Improvements Acquisition
Dade County (continued)
Unimproved land & misc assets 0 15,725 9,733
Putnam County
Unimproved land 0 2 0
Manatee County
Unimproved land 0 14 78
Gulf County
Unimproved land 0 559 180
Bay County
Land w/ Infrastructure 0 1 121
Office Building 0 1 1,195
Unimproved land & misc assets 0 517 121
Leon County
Land w/ Infrastructure 0 603 46
Walton County
Land w/ Infrastructure 0 120 480
Other Counties
Unimproved land 0 105 1,949
Grand Total 0 65,270 6,205 177,705
S-3
<PAGE>
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1994, 1993 and 1992
(Dollars in thousands)
Gross Amount at Which
Carried as of December 31, 1994
Land & Buildings &
Land Tenant
Description Improvement Improvement Total
Duval County
Office Buildings (5) 3,917 29,944 33,861
Office/Showroom/Warehouses (9) 5,003 19,733 24,736
Land w/ Infrastructure 13,379 13,379
City & Residential Lots 371 82 453
Unimproved land & misc assets 2,289 174 2,463
St. Johns County
Land w/ Infrastructure 1,055 1,055
Unimproved land 3,042 3,042
Flagler County
Unimproved land 4,355 4,355
Volusia County
Unimproved land 4,152 4,152
Brevard County
Office/Showroom/Warehouse 438 1,535 1,973
Land w/ Infrastructure 3,797 3,797
Unimproved land 5,037 5,037
Indian River County
Unimproved land 407 407
St. Lucie County
Unimproved land 644 644
Martin County
Unimproved land 7,015 7,015
Palm Beach County
Office/Showroom/Warehouse 599 2,393 2,992
Rail Warehouses (2) 557 4,002 4,559
Cross Docks (4) 1,262 2,618 3,880
Land w/ Infrastructure 1,259 1,259
Unimproved land 1,596 1,596
Broward County
Rail Warehouse 405 1,381 1,786
Unimproved land 1,434 1,434
Dade County
Office/Showroom/Warehouses (5) 3,150 12,635 15,785
Office/Warehouses (5) 3,518 13,189 16,707
Rail Warehouses (6) 4,837 20,578 25,415
Cross Dock 137 1,018 1,155
Double Front Load Warehouse 1,409 4,844 6,253
Front Load Warehouses (5) 4,326 13,683 18,009
S-4
<PAGE>
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1994, 1993 and 1992
(Dollars in thousands)
Gross Amount at Which
Carried as of December 31, 1994
Land & Buildings &
Land Tenant
Description Improvement Improvement Total
Dade County (continued)
Land w/ Infrastructure 10,431 10,431
Unimproved land & misc assets 25,126 332 25,458
Putnam County
Unimproved land 2 2
Manatee County
Unimproved land 92 92
Gulf County
Unimproved land 739 739
Bay County
Land w/ Infrastructure 88 34 122
Office Building 1 1,195 1,196
Unimproved land & misc assets 524 114 638
Leon County
Land w/ Infrastructure 610 39 649
Walton County
Land w/ Infrastructure 600 600
Other Counties
Unimproved land 2,012 42 2,054
Grand Total 119,615 129,565 249,180
S-5
<PAGE>
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1994, 1993 and 1992
(Dollars in thousands)
Life on Which
Accum- Depreciation in
ulated Date Latest Income
Depre- Started or Statement is
Description ciation Acquired Computed
Duval County
Office Buildings (5) 5,141 1985 3 to 40 years
Office/Showroom/Warehouses (9) 3,484 1987 3 to 40 years
Land w/ Infrastructure Various
City & Residential Lots 59 Various 3 to 40 years
Unimproved land & misc assets 173 Various 3 to 40 years
St. Johns County
Land w/ Infrastructure Various
Unimproved land Various
Flagler County
Unimproved land Various
Volusia County
Unimproved land Various
Brevard County
Office/Showroom/Warehouse 352 1988 3 to 40 years
Land w/ Infrastructure Various
Unimproved land Various
Indian River County
Unimproved land Various
St. Lucie County
Unimproved land Various
Martin County
Unimproved land Various
Palm Beach County
Office/Showroom/Warehouse 647 1986 3 to 40 years
Rail Warehouses (2) 1,034 1982 3 to 40 years
Cross Docks (4) 747 1987 3 to 40 years
Land w/ Infrastructure Various
Unimproved land Various
Broward County
Rail Warehouse 492 1986 3 to 40 years
Unimproved land Various
Dade County
Office/Showroom/Warehouses (5) 1,826 1988 3 to 40 years
Office/Warehouses (5) 1,413 1990 3 to 40 years
Rail Warehouses (6) 1,554 1988 3 to 40 years
Cross Dock 210 1987 3 to 40 years
Double Front Load Warehouse 321 1993 3 to 40 years
Front Load Warehouses (5) 989 1991 4 to 40 years
Land w/ Infrastructure
S-6
<PAGE>
ST. JOE PAPER COMPANY
SCHEDULE XI (CONSOLIDATED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1994, 1993 and 1992
(Dollars in thousands)
Life on Which
Accum- Depreciation in
ulated Date Latest Income
Depre- Started or Statement is
Description ciation Acquired Computed
Dade County (continued)
Unimproved land & misc assets 1,891 Various 3 to 40 years
Putnam County
Unimproved land Various
Manatee County
Unimproved land Various
Gulf County
Unimproved land 24
Bay County
Land w/ Infrastructure
Office Building 174 1993 3 to 40 years
Unimproved land & misc assets 13 Various 3 to 40 years
Leon County
Land w/ Infrastructure 11 Various 3 to 40 years
Walton County
Land w/ Infrastructure
Other Counties
Unimproved land 41 Various
Grand Total 20,596
Notes
(a) The aggregate cost of real estate owned at December 31, 1994
for federal income tax purposes is $140,875.
1994 1993 1992
(b) Reconciliation of real estate owned:
Balance at beginning of year 222,498 192,466 162,083
Amounts capitalized 28,350 31,691 30,690
Amounts retired or adjusted (1,668) (1,659) (307)
Balanced at close of period 249,180 222,498 192,466
(c) Reconciliation of accumulated depreciation:
Balance at beginning of year 15,475 11,306 8,127
Depreciation expense 5,145 4,169 3,272
Amounts retired or adjusted (24) (93)
Balanced at close of period 20,596 15,475 11,306
(d) Table excludes $25,148 of real estate construction in progress
S-7
ST. JOE PAPER COMPANY
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
December 31
ASSETS 1994 1993
Current Assets:
Cash and cash equivalents $ 71,890 $ 48,304
Short-term investments 61,156 66,307
Accounts receivable 88,606 74,127
Inventories 57,673 69,398
Other assets 21,677 25,720
Total current assets 301,002 283,856
Investments and Other Assets:
Marketable securities 174,027 159,523
Other assets 50,426 40,170
Total investments and other assets 224,453 199,693
Property, Plant and Equipment, net 1,026,875 1,007,722
Total Assets $ 1,552,330 $ 1,491,271
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 44,804 $ 41,515
Accrued liabilities 25,339 27,838
Income taxes payable 7,012 2,737
Long-term debt due within one year 19,672 21,309
Total current liabilities 96,827 93,399
Accrued casualty reserves and other liabilities 14,534 11,063
Long-term debt due after one year 37,220 38,947
Deferred income taxes and income tax credits 215,311 205,531
Minority interest in consolidated subsidiaries 251,457 238,878
Stockholders' Equity:
Common stock, no par value;
60,000,000 shares authorized; 30,498,650
shares issued and outstanding 8,714 8,714
Retained earnings 887,520 851,511
Net unrealized gain on debt and marketable
equity securities 40,747 43,228
Total stockholders' equity 936,981 903,453
Total Liabilities and Stockholders' Equity $ 1,552,330 $ 1,491,271
See notes to consolidated financial statements.
(12)
<PAGE>
Management Discussion and Analysis of Balance Sheet
The Consolidated Balance Sheet gives the financial position or status of
accounts on the date shown and, taken as a whole, provides a picture of the
entire enterprise on that date. A series of balance sheets will show the
progress or movement of the enterprise from one period to the next. The
balance sheet should be viewed as a unit with the income statement to obtain
a sufficiently clear picture of the status and progress of a business.
In 1994, the Company continued to have a strong balance sheet. Management's
long standing policy of retaining funds to internally finance capital additions
was continued in 1994. Cash, short-term investments and marketable securities
totaled $307 million at December 31, 1994, a $32.9 million increase over the
1993 year end amount. The Forest Products segment generated $20.7 million of
this increase as a result of improved operating results. Florida East Coast
Industries, Inc. (FECI) received over $11 million from a condemnation sale of
realty properties to the State of Florida which was invested and will be used
to finance realty improvements in 1995. A reduction in unrealized gains on
debt and marketable equity securities decreased the carrying value of
investments by $4 million.
Accounts receivable increased $14.5 million in 1994 with $12.6 million being
in Forest Products. This increase reflects the strong pricing increases
experienced during the year. Inventories fell by $11.7 million. A shortage
of containerboard led to a $4.9 million decrease in Forest Products' inventory.
The Sugar segment's inventory decreased by $6.4 million due to harvesting
delays caused by rain. Other assets increased by $6.2 million, primarily
due to a $2.9 million increase in the Communications segment's equity
in four cellular partnerships and a $1.4 million increase in prepaid pension
plan costs.
Property, plant and equipment additions were $86.5 million in 1994.
Depreciation expense was $62.4 million. All segments showed a net increase
in fixed assets with the largest increase in FECI.
Stockholders' equity at December 31, 1994 was $30.72, an increase
of $1.10 or 4%. Over the last five years, stockholders' equity has increased
17%.
The Company is currently a party to, or involved in, legal proceedings
directed at the cleanup of two Superfund sites. The Company has accrued its
allocated share of the total estimated cleanup costs for these two sites.
Based upon management's evaluation of the other potentially responsible
parties, the Company does not expect to incur additional amounts even though
the Company has joint and several liability.
The Company is subject to substantial costs arising out of environmental laws
and regulations, which include obligations to remove or limit the effects on
the environment of the disposal or release of certain wastes or substances at
various sites. It is the Company's policy to accrue and charge against
earnings environmental cleanup costs when it is probable that a liability has
been incurred and an amount is reasonably estimable. As assessments and
cleanups proceed, these accruals are reviewed and adjusted, if necessary, as
additional information becomes available.
It is not possible to quantify future environmental costs because many issues
relate to actions by third parties or changes in environmental regulation.
Based on information presently available, management believes that the
ultimate disposition of currently known matters will not have a material
effect on the financial position or liquidity of the Company, but could be
material to the results of operations of the Company in any one period. As of
December 31, 1994 and 1993, the aggregate environmental related accruals were
$6.7 million. Environmental liabilities are paid over an extended period and
the timing of such payments cannot be predicted with any confidence.
The Company's financial position continues to strengthen. Net working capital
(current assets less current liabilities) increased 7% at December 31, 1994
over 1993 to $204.2 million. The current ratio (current assets divided by
current liabilities) grew to 3.1 from 3.0 in 1993.
(13)
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share amounts)
Years ended December 31,
1994 1993 1992
Net sales $ 479,050 $ 387,720 $ 395,074
Operating revenues 206,712 204,248 196,838
685,762 591,968 591,912
Cost of sales 412,577 360,679 366,342
Operating expenses 150,901 147,270 146,837
Selling, general and administrative expenses 57,806 51,917 54,677
621,284 559,866 567,856
Operating profit 64,478 32,102 24,056
Other income (expense):
Dividends 2,187 2,144 2,312
Interest income 11,085 9,575 13,581
Interest expense (4,080) (3,711) (3,884)
Gain on dispositions of
property, plant and equipment 14,450 1,085 2,511
Other, net 3,753 3,380 2,938
27,395 12,473 17,458
Income before income taxes, minority
interest, and cumulative effect of
change in accounting principle 91,873 44,575 41,514
Provision for income taxes:
Current 21,905 13,294 14,259
Deferred 12,032 8,915 591
Total provision for income taxes 33,937 22,209 14,850
Income before minority interest and
cumulative effect of change in
accounting principle 57,936 22,366 26,664
Less income applicable to minority
interest in consolidated subsidiaries 15,827 10,241 11,074
Income before cumulative effect of change
in accounting principle 42,109 12,125 15,590
Cumulative effect of change in accounting
principle for income taxes --- 20,518 ---
Net income $ 42,109 $ 32,643 $ 15,590
Per Share Data:
Income before cumulative effect of change
in accounting principle $ 1.38 $ 0.39 $ 0.51
Cumulative effect of change in accounting
principle for income taxes --- 0.68 ---
Net income per share $ 1.38 $ 1.07 $ 0.51
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands except per share amounts)
Years ended December 31,
1994 1993 1992
COMMON STOCK
Balance, at end of year (1994, 1993 and
1992 - 30,498,650 shares) $ 8,714 $ 8,714 $ 8,714
RETAINED EARNINGS
Balance, at beginning of year $ 851,511 $ 824,968 $ 815,478
Net income 42,109 32,643 15,590
Dividends: Cash ($0.20 per
share - 1994, 1993 and 1992) (6,100) (6,100) (6,100)
Balance, at end of year $ 887,520 $ 851,511 $ 824,968
NET UNREALIZED GAIN ON DEBT AND MARKETABLE EQUITY SECURITIES
Balance, at beginning of year $ 43,228 $ --- $ ---
Decrease in net unrealized gain,
net of tax effect (2,481) --- ---
Cumulative effect of change in accounting
principle for investments --- 43,228 ---
Balance, at end of year $ 40,747 $ 43,228 $ ---
See notes to consolidated financial statements.
(14)
<PAGE>
Management Discussion and Analysis of Statement of Income
The Consolidated Statement of Income compares in summary form the results of
operations for the three year period 1992, 1993 and 1994. This discussion is
to provide help in understanding the significant events which caused the
changes between the years.
Net sales and operating revenues increased 16% in 1994 over 1993 due
principally to a $74.1 million increase in the Forest Products segment. All
segments reported increased revenues in 1994. In 1993, net sales and operating
revenues were flat with increases in the Transportation, Communications and
Real Estate segments and declines in Forest Products and Sugar.
Cost of sales in 1994 increased 14% over 1993 due mainly to a $46.9 million
increase in Forest Products. In 1993, cost of sales decreased 2% from 1992.
Operating expenses increased 3% in 1994 compared to 1993, which held steady
from 1992. Selling, general and administrative expenses were 11% ($5.9
million) higher in 1994 than 1993. The 1993 expenses were $2.8 million lower
than 1992.
Operating profit in 1994 was slightly more than double the 1993 amount which
was a third higher than 1992. Forest Products increased 109%, Real Estate
82%, Communications 32%, Sugar 25% and Transportation decreased 3% in 1994.
In 1993, Forest Products, Transportation and Real Estate had increased
operating profits while Sugar and Communications decreased.
Other income increased in 1994 by $14.9 million due primarily to land sales
of $3.5 million more by FECI and $8.7 million more by Forest Products. 1993
other income was down by $4.9 million from 1992 due to decreases in interest
income and sales of property.
The provision for income taxes increased $11.7 million in 1994 and $7.4
million in 1993. The 1994 increase is due to the higher income while 1993
also reflects the deferred tax effect of the change in the federal income
tax rate. The Company files a consolidated federal income tax return for the
parent and all 80% or greater owned subsidiaries. The effective income tax
rate was 36.9%, 49.8% and 35.8% for 1994, 1993, and 1992 respectively. In
1993, the Company adopted Statement of Financial Accounting Standards No. 109
which resulted in the recognition of $20.5 million in additional income in
the first quarter of 1993 for the cumulative effect of the change in
accounting for income taxes.
Net income before the cumulative effect of a change in accounting principle
for income taxes rose $30 million in 1994 after a decline of $3.5 million in
1993. Net income per share before the cumulative effect of change in
accounting principle for income taxes rose to $1.38 in 1994 compared to $0.39
in 1993 and $0.51 in 1992. Increased profitability in the Forest Products
segment, a condemnation sale to the State of Florida and the other land sales
mentioned above were the primary cause of the improvement in 1994. The
decline in 1993 was largely due to the effect of the enacted income tax
rate increase.
Forest Products
The operating results for the Forest products segment were dramatically
affected by the rapid tightening of the containerboard market during the
latter half of 1994. Domestic prices for kraft linerboard rose from $320 per
ton in January 1994 to $340 per ton in June to $430 per ton in December. The
average sales price of the Company's kraft linerboard rose by $40 per ton and
boxes by $49 per ton. Volumes also contributed to the $74.1 million increase
in Forest Products sales in 1994. Mill sales to outside customer increased 22%
and container sales increased by 10%. The mill also changed its product mix
as Crest White revenues rose to 60% of total mill sales compared to 55% in
1993. Sales by the forestry operation remained constant in 1994.
In 1994, Forest Products revenue was 56% of the Company's total compared with
53% in 1993 and 54% in 1992. In 1993, mill sales to outside customers and our
plants declined $14.1 million due to a decline in the average sales price. The
container operations sales in 1993 were lower than 1992 due to a decrease in
selling price and reduced volume while the forestry operation's revenues were
flat.
Cost of sales for the Forest Products segment rose 15% in 1994 over 1993.
The container plants accounted for most of the increase largely due to the
higher linerboard prices referenced above. The mill cost rose 10% on a volume
increase of 9%. The forestry operation had a slightly lower cost of sales in
1994 than in 1993.
In 1993, the mill and forestry units had increased cost of sales while
container costs were lower than 1992 due to lower linerboard prices. The mill
experienced higher natural gas and fuel oil costs in 1993 than in 1992 and
spent more on repair materials.
Selling, general and administrative expenses were 22% higher for the Forest
Products segment in 1994 than in 1993. The mill operation decreased its
expenses by 8%, forestry increased by 2% and the container plants increased
by 8%. In 1993, the mill's expenses were about the same as 1992 while
forestry increase 1% and containers decreased 2%.
(15)
<PAGE>
Management Discussion and Analysis of Statement of Income
Transportation
In 1994, the Transportation segment accounted for 26% of the Company's total
revenue, compared to 30% in 1993 and 28% in 1992. The Florida East Coast
Railway Company (FEC) experienced an $0.8 million increase in revenue in
1994 over 1993. Adverse weather conditions in the fourth quarter slowed the
gain in rock shipments which increased 6% in 1994 after growing by 14% in
1993. Intermodal shipments were slightly down in both 1994 and 1993 for FEC
while automotive and other traffic increased by a small percentage in 1994
after a decline in 1993. In 1995, FEC is enlarging its scope of operations
to include Macon, Georgia where it will operate an intermodal facility. The
Apalachicola Northern Railroad Company's (ANRR) revenue increased by 2% in
1994 and 1993 principally due to increases in coal and pulpboard shipments.
Operating expenses for the Transportation segment increased by 2% in 1994
caused principally by increased property taxes at FEC. In 1993, operating
expenses dropped 2% at FEC (primarily due to decreased property taxes) and
increased 10% at ANRR (due to increased depreciation and locomotive repairs).
Sugar
Net sales for the sugar segment increased $5.8 million on a 12,233 ton
increase in volume and a slight price increase. The increased volume reduced
per ton costs and led to increased profitability. In 1993, sales decreased
10% due to a reduction in volume. Cost of sales decreased 9% in 1993, again
due principally to the lost volume. As a result of the Everglades Forever Act,
the Company was required to pay approximately $1.3 million new taxes in 1994
Communications
In 1994, Communication operating revenues grew 5% due mainly to increased
interstate long distance pooling settlements. Operating expenses in 1994 were
flat while selling, general and administrative expenses decreased 2% because
of outsourcing of certain customer billing functions.
1993 revenues were up by 6% due mainly to the reversal of excess earning
accruals made in 1992. Outside plant maintenance and increased depreciation
were the main factors in the 10% growth in operating expenses compared to
1992. Selling, general and administrative expenses remained stable form
1992 to 1993.
Real Estate
Real Estate segment revenues increased by $11.4 million in 1994. A
condemnation sale to the State of Florida in the amount of $11.3 million
offset declines in other property sales. Rental income continued to increase
and grew by $3.9 million in 1994. Cost of sales and operating expenses
increased by $2.6 million while selling, general and administrative expenses
were the same as 1993.
1993 revenues were 39% higher than 1992 due mainly to land sales. Cost of
sales and operating expenses increased by $3.6 million while selling, general
and administrative expenses were the same as 1992.
The Company continues to add rental buildings. .6 million square feet were
added in 1994 bringing the total available to 3.8 million square feet with an
additional .4 million square feet of leasable space under construction at
year end.
(16)
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Years ended December 31,
1994 1993 1992
Cash flows from operating activities:
Net Income $ 42,109 $ 32,643 $ 15,590
Adjustments to reconcile net income
to cash provided by operating
activities:
Cumulative effect of a change
in accounting principle --- (20,518) ---
Depreciation and depletion 62,392 62,872 59,757
Minority interest in income 15,827 10,241 11,074
Gain on sale of property (14,450) (1,085) (2,511)
Increase in deferred income taxes 12,032 8,915 3,279
Changes in operating assets and
liabilities:
Accounts receivable (14,479) (2,772) 3,925
Inventories 11,725 (9,378) (1,255)
Other assets (6,213) (2,865) (7,569)
Accounts payable, accrued
liabilities and casualty
reserves 4,261 (362) (1,720)
Income taxes payable 4,275 2,737 (5,674)
Cash provided by operating activities 117,479 80,428 74,896
Cash flows from investing activities:
Purchases of property, plant and equipment (86,450) (93,045) (120,736)
Proceeds from sales of property 18,594 6,960 7,246
Purchases of investments --- (77,964) (162,031)
Available for sale (1) (18,851) --- ---
Held-to-maturity (1) (115,210) --- ---
Proceeds from maturities of investments --- 95,941 189,542
Available for sale (1) 12,779 --- ---
Held-to-maturity (1) 106,388 --- ---
Cash used in investing activities (82,750) (68,108) (85,979)
Cash flows from financing activities:
Net change in short-term borrowings (1,658) 3,400 (4,803)
Proceeds from long-term debt --- --- 7,633
Dividends paid to stockholders (6,100) (6,100) (6,100)
Repayment of long-term debt (1,706) (1,735) (2,242)
Dividends paid to minority interest (1,679) (1,718) (1,698)
Cash used in financing activities (11,143) (6,153) (7,210)
Net increase (decrease) in cash and
cash equivalents 23,586 6,167 (18,293)
Cash and cash equivalents at
beginning of period 48,304 42,137 60,430
Cash and cash equivalents at
end of period $ 71,890 $ 48,304 $ 42,137
Supplemental disclosure of cash flow
information:
Cash paid during the year for certain
expense items:
Interest $ 3,973 $ 3,340 $ 4,117
Income taxes $ 20,494 $ 12,476 $ 21,693
Mortgage assumed in purchase of property,
plant and equipment $ --- $ --- $ 2,200
(1) Disclosure is not applicable for the years ended December 31, 1993
and 1992. See note 2.
See notes to consolidated financial statements.
(17)
<PAGE>
Management Discussion and Analysis of Statement of Cash Flows
The Statement of Cash Flows details information concerning the Company's
sources and uses of cash in its operating, investing and financing activities.
In 1994, the Company experienced a net increase in cash and cash equivalents
of $23.6 million compared to a $6.2 million increase in 1993 and a decrease of
$18.3 in 1992. The improvement in 1994 was due to the increase in cash
provided by operations while 1993 resulted from an increase in cash provided
by operations together with reductions in cash used by investing and financing
activities.
Cash flows from operations increased by $37.1 million in 1994 and $5.5 million
in 1993. The 1994 increase is due to the improved operations of the Forest
Products segment and the condemnation sale mentioned previously.
The Company purchased property, plant and equipment of $86.5 million in 1994,
down from $93 million in 1993 and $120.7 million in 1992. The Real Estate
segment spent $9.3 million less in 1994 than 1993 while Transportation spent
$2.3 million more and the other segments remained relatively constant. In
1993, Forest Products reduced expenditures by $22.5 million, Sugar by $4.5
and Communications by $2.4 while Real Estate remained constant and
Transportation increased by $1.5 million.
In 1992 and 1993, the Company used $27.5 million and $18 million respectively,
of its investments to fund its capital projects. The improved operating results
enabled the Company to fully fund its capital needs in 1994 and increase its
investments by $14.9 million.
Long term debt of $1.7 million was repaid in 1994, the same amount as 1993.
In addition, short term borrowing were reduced by $1.7 million as compared
with an increase of $3.4 million in 1993. No new long term debt was incurred
in 1994.
The Company maintained its policy of paying a $0.20 per share dividend to its
stockholders in 1994, as it had in 1993 and 1992. St. Joe Paper Company
continues to have adequate internally generated cash flow to meet its
foreseeable operating and capital needs.
(18)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
1. Majority Stockholder
The Alfred I. duPont Testamentary Trust (the "Trust") owns approximately 68%
of the common stock of St. Joe Paper Company, (the "Company"). The Company and
its subsidiaries had no significant transactions with the Trust during the
period.
2. Summary of Significant Accounting Policies
Principles of consolidation -- The consolidated financial statements include
the accounts of St. Joe Paper Company and all of its majority owned
subsidiaries. All significant intercompany transactions and balances have
been eliminated.
Cash and cash equivalents -- For purposes of the Consolidated Statement of
Cash Flows, cash and cash equivalents include cash on hand, bank demand
accounts, money market accounts, remarketed certificates of participation
and repurchase agreements having original maturities of three months or less.
Inventories -- Inventories are stated at the lower of cost or market. Cost
for manufactured paper products and associated raw materials are determined
under the last-in, first-out (LIFO) method. Costs for substantially all other
inventories are determined under the first in, first out (FIFO) or the
average cost method.
Property, plant and equipment -- Depreciation is computed using both
straight-line and accelerated methods over the useful lives of various
assets.
Depletion of timber is determined by the units of production method.
Railroad and communications properties are depreciated and amortized using
the straight-line method at rates established by regulatory agencies. Gains
and losses on normal retirements of these items are credited or charged to
accumulated depreciation.
Deferred cane crop costs -- Sugar cane plantings generally yield two annual
harvests, depending on weather conditions and soil quality, before replanting
is necessary. New planting costs are amortized on a straight-line basis over
two years.
Income tax credits -- The Company uses the flow-through method of accounting
for income tax credits except for credits relating to communications property
and equipment which are accounted for using the deferral method with
amortization over the service lives of the related assets as required by
regulatory agencies.
Reclassification -- The 1993 and 1992 consolidated financial statements have
been reclassified to the current year formats. These reclassifications were
not material to the consolidated financial statements.
Earnings per common share -- Earnings per common share are based on the
weighted average number of common shares outstanding during the year.
Fair value of financial instruments -- The carrying amount of the following
financial instruments approximated fair value because of their short maturity:
cash and cash equivalents, accounts receivable, accounts payable and other
accrued liabilities. The fair value of investments differs from the carrying
value as disclosed in Note 6. The fair value of long term debt, as determined
using current rates, approximates carrying value.
(19)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
2. Summary of Significant Accounting Policies (continued)
Income Taxes -- The Company follows the asset and liability method of
accounting for income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes." Under
SFAS 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to affect taxable income. Under SFAS
109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
SFAS 109 also requires the recognition of a deferred tax liability on the
undistributed earnings of subsidiaries applied on a prospective basis.
Effective January 1, 1993, the Company adopted SFAS 109 and has reported the
cumulative effect of that change in the method of accounting for income taxes
in the 1993 consolidated statement of income.
Investments -- Investments consist principally of certificates of deposit,
remarketed certificates of participation, mortgage backed securities,
municipal bonds, common stocks, redeemable preferred stocks, and U.S.
Government obligations. The Company adopted the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" at December
31, 1993. Under SFAS 115, the Company classifies its debt and marketable
equity securities in one of three categories: trading, available-for-sale, or
held-to-maturity. Trading securities are bought and held principally for the
purpose of selling them in the near term. Held-to-maturity securities are
those securities for which the Company has the ability and intent to hold the
security until maturity. All other securities not included in trading or
held-to-maturity are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains
and losses on trading securities are included in earnings. Unrealized holding
gains and losses, net of the related income tax effect and minority interest
in consolidated subsidiaries, on available-for-sale securities are excluded
from earnings and are reported as a separate component of stockholders'
equity until realized.
A decline in the market of any available-for-sale or held-to-maturity security
below cost that is deemed other than temporary is charged to earnings
resulting in the establishment of a new cost basis for the security.
Realized gains and losses for securities classified as available-for-sale and
held-to-maturity are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.
(20)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
3. Inventories
Inventories as of December 31 consist of:
1994 1993
Manufactured paper products and associated
raw materials $ 27,023 $ 30,782
Materials and supplies 25,640 27,407
Sugar 5,010 11,209
$ 57,673 $ 69,398
The replacement cost of manufactured paper products and associated raw
material inventories was in excess of LIFO stated cost by approximately
$21,101 as of December 31, 1994 ($12,781 in 1993).
4. Accrued Liabilities
Accrued liabilities as of December 31 consist of:
1994 1993
Payroll and benefits $ 4,234 $ 5,034
Payroll taxes 666 103
Property and other taxes 3,794 5,561
Accrued casualty reserves 22,136 22,911
Other accrued liabilities 9,043 5,292
39,873 38,901
Less: noncurrent accrued casualty reserves
and other liabilities 14,534 11,063
$ 25,339 $ 27,838
5. Property, Plant and Equipment
Property, plant and equipment, at cost, as of December 31 consist of:
Estimated
1994 1993 Useful Life
Land and timber $ 131,876 $ 125,675 ---
Land improvements 24,919 24,628 20
Buildings 47,255 47,174 45
Machinery and equipment 1,141,013 1,102,450 10 - 30
Office equipment 5,893 6,357 6 - 10
Autos and trucks 7,888 7,205 3 - 6
Construction in progress 12,409 18,161 ---
Investment property 274,328 250,013 various
1,645,581 1,581,663
Accumulated depreciation 618,706 573,941
$1,026,875 $1,007,722
Real estate properties having net book value of $142.2 million at December
31, 1994 are leased under non-cancelable operating leases with expected
aggregate rentals of $74.3 million of which $20.9, $18.6, $15.9, $11.4 and
$7.5 million is due in the years 1995 through 1999, respectively.
(21)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
6. Investments
Investments at December 31, 1994, consist of :
Amortized Carrying Fair Unrealized Unrealized
Cost Value Value Holding Holding
Gain Loss
Short term investments (maturing within one year)
Held to maturity:
U. S. Government securities $ 43,041 $ 43,463 $ 43,875 $ 482 $ 70
Tax exempt municipals 3,157 3,157 3,091 --- 66
Mortgage backed securities 2,990 3,009 2,985 --- 24
Other corporate debt
securities 3,473 3,499 3,499 --- ---
Remarketed certificates
of participation 4,986 5,061 5,061 --- ---
Certificates of deposit 2,963 2,967 2,967 --- ---
$ 60,610 $ 61,156 $ 61,478 $ 482 $ 160
Marketable securities
Available for sale:
U. S. Government securities
Maturing in one to
five years $ 3,003 $ 2,948 $ 2,948 $ --- $ 55
Tax exempt municipals
Maturing in one to
five years 4,457 4,236 4,236 --- 221
Maturing in five to
ten years 22,148 21,278 21,278 --- 870
Maturing in more than
ten years 3,364 3,272 3,272 --- 92
Equity securities 11,601 78,725 78,725 67,347 223
Mortgage backed securities
Maturing in more than
ten years 1,669 1,529 1,529 --- 140
Other corporate debt securities
Maturing in more than
ten years 2,250 2,176 2,176 --- 74
48,492 114,164 114,164 67,347 1,675
Held to maturity:
U. S. Government securities
Maturing within one
year 40,080 40,080 41,136 1,056 ---
Maturing in one to
five years 17,249 17,226 17,350 543 419
Tax exempt municipals
Maturing in one to
five years 1,416 443 1,288 845 ---
Other corporate debt securities
Maturing in five to
ten years 885 2,114 2,293 387 208
59,630 59,863 62,067 2,831 627
$108,122 $174,027 $176,231 $ 70,178 $ 2,302
(22)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
6. Investments (continued)
Investments at December 31, 1993, consist of :
Amortized Carrying Fair Unrealized Unrealized
Cost Value Value Holding Holding
Gain Loss
Short term investments (maturing within one year)
Held to maturity:
U. S. Government securities $ 27,658 $ 27,695 $ 28,214 $ 523 $ 4
Tax exempt municipals 2,401 2,401 2,376 --- 25
Remarketed certificates
of participation 5,000 5,028 5,028 --- ---
Certificates of deposit 31,063 31,183 31,183 --- ---
$ 66,122 $ 66,307 $ 66,801 $ 523 $ 29
Marketable securities
Available for sale:
U. S. Government securities
Maturing in one to
five years $ 393 $ 379 $ 379 $ --- $ 14
Tax exempt municipals
Maturing in five to
ten years 29,961 31,387 31,387 1,426 ---
Equity securities 12,059 79,746 79,746 67,687 ---
Mortgage backed securities
Maturing in more than
ten years 3,567 3,559 3,559 --- 8
Other corporate debt securities
Maturing in five to
ten years 1,684 1,699 1,699 15 ---
47,664 116,770 116,770 69,128 22
Held to maturity:
U. S. Government securities
Maturing within one
year 23,731 23,731 24,500 769 ---
Maturing in one to
five years 11,104 11,267 11,462 197 2
Tax exempt municipals
Maturing in one to
five years 1,612 1,645 2,601 956 ---
Mortgage backed securities
Maturing in one to
five years 2,990 3,003 3,007 4 ---
Maturing in five to
ten years 916 916 1,491 575 ---
Maturing in more than
ten years 91 91 103 12 ---
Other corporate debt securities
Maturing in five to
ten years 812 2,100 2,045 --- 55
41,256 42,753 45,209 2,513 57
$ 88,920 $159,523 $161,979 $ 71,641 $ 79
Marketable securities, including certain investments which mature within one
year, are held as a developmental fund created to accumulate capital expected
to be required for future improvement of the Company's real estate properties.
(23)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
7. Long-Term Debt
Long-term debt as of December 31 consists of:
1994 1993
Notes payable to banks under lines of
credit aggregating $70,000, due March
1995 through May 1996 with interest
rates of 5.94% to 7.9% $ 32,671 $ 35,038
Rural Telephone Bank (RTB) 6.50 % to 10.25%
mortgage notes with principal and interest
due quarterly through 2016 15,443 15,917
Industrial Revenue Bonds payable in
semiannual installments of $425 with
interest payable at 67% of the prime rate 2,046 2,896
Rural Electrification Administration (REA) 2%
mortgage notes with principal and interest
due quarterly through 2008 3,019 3,394
Federal Financing Bank (FFB) notes at varying
rates (weighted average: 1994 - 14.52%; 1993
- 14.50%) guaranteed by the REA 564 640
Mortgage loans payable to various institutions
and individuals with interest rates of 4.5%
to 9.75%, payable in variable installments 2,992 2,184
Other secured notes at variable interest rates
and maturities 157 187
56,892 60,256
Long-term debt due within one year 19,672 21,309
Long-term debt due after one year $ 37,220 $ 38,947
The REA and RTB notes, the Industrial Revenue Bonds and the notes and mortgage
loans payable are secured by company assets with a book value of approximately
$47,780, $7,419 and $44,931, respectively.
The aggregate amount of principal payments due in each of the years subsequent
to December 31, 1994 is:
Year ending
December 31 Amount
1995 $ 19,672
1996 18,797
1997 1,570
1998 1,273
1999 1,213
2000 and later 14,367
$ 56,892
(24)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
8. Income Taxes
Total income tax expense for the years ended December 31,
was allocated as follows:
1994 1993 1992
Income from continuing operations $ 33,937 $ 22,209 $ 14,850
Shareholders' equity, for recognition
of unrealized gain (loss) on debt
and marketable equity securities (2,377) 25,472 ---
$ 31,560 $ 47,681 $ 14,850
Income tax expense attributable to income from continuing operations differed
from the amount computed by applying the statutory federal income tax rate
to pre-tax income as a result of the following:
1994 1993 1992
Tax at the statutory federal rate $ 32,156 $ 15,601 $ 14,115
Dividends received deduction and
tax free interest (1,075) (937) (745)
State income taxes (net of federal benefit) 2,640 1,452 1,411
Adjustment to deferred tax assets and
liabilities for enacted changes in tax
laws and rates --- 4,324 ---
Undistributed earnings of FECI 1,245 775 ---
Other, net (1,029) 994 69
$ 33,937 $ 22,209 $ 14,850
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of December 31,
consist of:
1994 1993
Deferred tax assets:
Accrued casualty and other reserves $ 10,348 $ 10,616
Alternative minimum tax credit carryforward 14,315 12,219
State net operating loss carryforward 6,371 6,183
Other 3,304 1,914
Total gross deferred tax assets 34,338 30,932
Valuation allowance 6,371 6,183
Net deferred tax assets 27,967 24,749
(25)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
8. Income Taxes (continued)
1994 1993
Deferred tax liabilities:
Tax in excess of financial depreciation 159,531 154,817
Deferred gain on land sales 6,904 5,520
Deferred gain on subsidiary's defeased bonds 2,322 2,502
Unrealized gain on debt and marketable
equity securities 23,123 25,472
Deferred gain on involuntary conversion of land 29,227 24,937
Prepaid pension asset recognized for
financial reporting 7,804 7,285
Other 7,880 3,385
Total gross deferred tax liabilities 236,791 223,918
Net deferred tax liability $208,824 $199,169
Based on the timing of reversal of future taxable amounts and the Company's
history of reporting taxable income, the Company believes that the deferred
tax assets will be realized and a valuation allowance is not considered
necessary except for those resulting from the net operating loss carryforward
available for state income taxes. Because of the Company's history of
reporting tax losses in certain states, the Company believes that
substantially all carryforwards will not be realized and, accordingly, has
recorded a valuation allowance equal to the entire amount. This valuation
allowance was $6,371 and $6,183 at December 31, 1994 and 1993, respectively,
which increased $188 and $547 in 1994 and 1993, respectively. The current
deferred tax asset of $6,487 and $6,362 is recorded in other current assets
as of December 31, 1994 and 1993, respectively.
The Company has not recognized a deferred tax liability of approximately
$17,862 for the undistributed earnings of FECI that arose in 1992 and prior
years because the Company does not currently expect those unremitted earnings
to reverse and become taxable to the Company in the foreseeable future. A
deferred tax liability will be recognized when the Company expects that it will
recover those undistributed earnings in a taxable manner, such as through
receipt of dividends or sale of the investment. As of December 31, 1994, the
undistributed earnings of the subsidiary for which no deferred tax liability
was provided were approximately $48,454.
For the year ended December 31, 1992, deferred income tax expense of $591
resulted from differences in the recognition of income and expense for income
tax and financial reporting purposes. The sources and tax effects of those
differences are: accelerated depreciation for tax purposes of $4,366;
alternative minimum tax credit carryforward of ($3,025); prepaid pension cost
of $1,200; accrued casualty reserves of ($468); and, other, net of ($1,482).
9. Pension and Retirement Plans
The company sponsors defined benefit pension plans covering approximately 70%
of its employees. The benefits are based on the employees' years of service
or years of service and compensation during the last five or ten years of
employment. The Company's funding policy is to contribute annually the
maximum contribution required by ERISA.
A summary of the net periodic pension credit follows:
1994 1993
Service cost $ 3,486 $ 2,761
Interest cost 7,418 6,147
Actual return on assets 1,365 (13,460)
Net amortization and deferral (13,673) 1,272
Total pension income $ (1,404) $ (3,280)
(26)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
9. Pension and retirement plans (continued)
A summary of the plans' funded status as of December 31 was:
1994 1993
Accumulated benefit obligation, including vested benefits
of $86,807 and $73,780 in 1994 and 1993, respectively $ 94,485 $ 80,438
Projected benefit obligation for service rendered to date 116,101 96,177
Plan assets at fair value, primarily listed stocks
and U.S. bonds 141,090 144,713
Plan assets in excess of projected benefit obligation 24,989 48,536
Unrecognized net (gain) loss 2,615 (13,618)
Unrecognized prior service cost 11,545 5,393
Unrecognized transition asset (17,961) (20,527)
Prepaid pension cost $ 21,188 $ 19,784
The weighted-average discount rate for the plans was 7% in 1994 and 1993.
The rate of increase in future compensation levels used in determining the
actuarial present value of the projected benefit obligation for salaried
employees was 6% in 1994 and 1993. The expected long-term rates of return
on assets were 8% in 1994 and 7% in 1993.
The Company has an Employee Stock Ownership Plan (ESOP) for the purpose of
purchasing stock of the Company for the benefit of qualified employees.
Contributions to the ESOP are limited to .5% of compensation of employees
covered under the salaried pension plan. The Company also has other defined
contribution plans which, in conjunction with the salaried pension plan, cover
substantially all its salaried employees. Contributions are at the employees'
discretion and are matched by the Company up to certain limits. Expense for
these defined contribution plans was $1,213, $1,387, and $1,253 in 1994, 1993
and 1992, respectively.
10. Quarterly Financial Data (Unaudited)
Quarters Ended
1994 December 31 September 30 June 30 March 31
Net sales and operating
revenues 186,251 166,257 165,886 167,886
Operating profit 23,599 7,887 13,972 19,020
Net income 18,802 7,520 7,627 8,160
Net income per share .61 .25 .25 .27
1993 December 31 September 30 June 30 March 31
Net sales and operating
revenues 153,540 141,182 150,548 146,698
Operating profit 17,852 6,873 2,239 5,138
Net income 8,785 (875) 753 23,980
Net income per share .29 (.03) .02 .79
(27)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
11. Segment Information
The Company is engaged in five principal lines of business. These lines of
business are:
Forest Products - the integrated production of corrugated containers,
including the cultivation and harvesting of pulpwood and the manufacture of
linerboard;
Transportation - the operation of two railroads within the state of
Florida;
Sugar - the cultivation, harvesting and processing of sugar cane;
Communications - the provision of telephone services and telecommunications
equipment; and
Real Estate - the ownership, management and development of real estate.
Total net sales and operating revenues represent sales to unaffiliated
customers, as reported in the Company's consolidated income statement and
intersegment sales which occur principally between the Forest Products and
Transportation segments.
Operating profit is net sales and operating revenues less directly traceable
costs and expenses. In computing operating profit, the following items have
not been considered: other income (expense) and provision for income taxes.
Identifiable assets by lines of business are those assets that are used in the
Company's operations in each segment. Corporate assets are composed of cash,
marketable securities and miscellaneous nonsegment assets.
Information by lines of business segment follows:
1994 1993 1992
Net sales and operating revenues:
Forest Products $ 386,978 $ 312,875 $ 322,096
Transportation 176,074 175,095 169,439
Sugar 54,900 49,138 54,866
Communications 30,638 29,153 27,399
Real Estate 39,774 28,405 20,493
Intersegment (2,602) (2,698) (2,381)
Consolidated $ 685,762 $ 591,968 $ 591,912
Operating profit:
Forest Products $ 1,832 $ (19,684) $ (20,509)
Transportation 29,680 30,648 26,380
Sugar 6,329 5,058 6,313
Communications 6,753 5,130 5,240
Real Estate 19,884 10,950 6,632
Consolidated $ 64,478 $ 32,102 $ 24,056
(28)
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
11. Segment information (continued)
1994 1993 1992
Assets:
Forest Products $ 371,353 $ 373,551 $ 378,461
Transportation 424,241 390,332 387,778
Sugar 93,685 96,925 90,724
Communications 70,658 65,674 63,594
Real Estate 229,449 230,343 198,236
Corporate 362,944 334,446 269,507
Consolidated $1,552,330 $1,491,271 $1,388,300
Capital expenditures:
Forest Products $ 24,270 $ 24,454 $ 46,950
Transportation 25,060 22,682 21,173
Sugar 3,381 2,944 7,441
Communications 5,385 5,271 7,612
Real Estate 28,354 37,694 37,560
Consolidated $ 86,450 $ 93,045 $ 120,736
Depreciation and depletion:
Forest Products $ 31,352 $ 33,015 $ 32,646
Transportation 18,706 18,147 17,112
Sugar 1,605 1,769 1,634
Communications 5,612 5,848 5,051
Real Estate 5,117 4,093 3,314
Consolidated $ 62,392 $ 62,872 $ 59,757
12. Contingencies
The Company and its subsidiaries are involved in litigation on a number of
matters and are subject to certain claims which arise in the normal course of
business. Certain self-insurance risks with respect to losses for third party
liability, property damage and group health insurance provided to employees
have been retained by the Company. In the opinion of management, none of
these items are expected to have a material adverse effect on the Company's
consolidated financial position or results of operations.
The Company is currently a party to, or involved in, legal proceedings
directed at the cleanup of two Superfund sites. The Company has accrued its
allocated share of the total estimated cleanup costs for these two sites.
Based upon management's evaluation of the other potentially responsible
parties, the Company does not expect to incur additional amounts even though
the Company has joint and several liability.
The Company is subject to substantial costs arising out of environmental laws
and regulations, which include obligations to remove or limit the effects on
the environment of the disposal or release of certain wastes or substances at
various sites. It is the Company's policy to accrue and charge against
earnings environmental cleanup costs when it is probable that a liability has
been incurred and an amount is reasonably estimable. As assessments and
cleanups proceed, these accruals are reviewed and adjusted, if necessary, as
additional information becomes available.
It is not possible to quantify future environmental costs because many issues
relate to actions by third parties or changes in environmental regulation.
Based on information presently available, management believes that the
ultimate disposition of currently known matters will not have a material
effect on the financial position or liquidity of the Company, but could be
material to the results of operation of the Company in any one period. As of
December 31, 1994 and 1993, the aggregate environmental related accruals were
$6.7 million. Environmental liabilities are paid over an extended period and
the timing of such payments cannot be predicted with any confidence.
(29)
<PAGE>
Management's Statement
The management of St. Joe Paper Company is responsible for the integrity and
objectivity of the financial statements presented in this Annual Report.
These statements have been prepared in conformity with generally accepted
accounting principles and fairly represent the transactions and financial
position of your company.
Your company maintains a system of internal management controls designed to
provide reasonable assurance that assets are safeguarded, transactions are
properly recorded and executed in accordance with management's authorization,
and that records are updated periodically to reflect assets actually on hand.
These controls are supplemented by internal audits of various units of your
company. Those audits are made on a random basis and are unannounced.
Independent Auditors' Report
The Board of Directors and Stockholders
St. Joe Paper Company:
We have audited the accompanying consolidated balance sheets of St. Joe Paper
Company and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1994.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentations. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of St. Joe
Paper Company and subsidiaries as of December 31, 1994, and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As disclosed in notes 2 and 6 to the consolidated financial statements, the
Company changed its method of accounting for investments to adopt the
provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" at December 31, 1993. As disclosed
in notes 2 and 8, the Company changed its method of accounting for income
taxes effective January 1, 1993 to adopt the provisions of the Financial
Accounting Standards Board's SFAS No. 109, "Accounting for Income Taxes".
KPMG PEAT MARWICK LLP
Certified Public Accountants
Jacksonville, Florida
February 28, 1995
(30)
EXHIBIT 21
ST. JOE PAPER COMPANY
SUBSIDIARIES AT DECEMBER 31, 1994
St. Joe Industries, Inc.
Florida East Coast Industries, Inc.
General Die & Mfg. Corp.
Jacksonville Properties, Inc.
Forest Products
St. Joe Forest Products Company
St. Joe Container Company
St. Joseph Land and Development Company
Railroad
Apalachicola Northern Railroad Company
St. Joe Terminal Company
Florida East Coast Railway Company
Florida East Coast Deliveries, Inc.
Florida East Coast Highway Dispatch Company
Florida East Coast Inspections, Inc.
Florida Express Carrier, Inc.
Operations Unlimited, Inc.
Railroad Concrete Crosstie Corporation
Railroad Track Construction Company
Sugar
Talisman Sugar Corporation
Communications
St. Joe Communications, Inc.
Gulf Telephone Company
St. Joseph Telephone & Telegraph Company
The Florala Telephone Company, Incorporated
Real Estate
St. Joe Utilities Company
Gran Central Corporation
Dade County Land Holding Company, Inc.
All companies are incorporated in the State of Florida, except
for The Florala Telephone Company, Incorporated, which is
incorporated in the State of Alabama.
E-1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each of the undersigned
Directors of St. Joe Paper Company, a Florida corporation
("Corporation"), which is about to file with the Securities and
Exchange Commission, Washington, D. C. 20549, under the provisions
of the Securities Exchange Act of 1934, as amended, an Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
hereby constitutes and appoints Winfred L. Thornton and Edward C.
Brownlie, as his true and lawful attorneys-in-fact and agent, and
each of them with full power to act, without the other in his
stead, in any and all capacities, to sign the 1994 Annual Report of
St. Joe Paper Company on Form 10-K and to file on behalf of the
Corporation such Annual Report and amendments with all exhibits
thereto, and any and all other information and documents in
connection therewith, with the Securities and Exchange Commission,
hereby granting unto said attorneys-in-fact and agent, and each of
them, full power and authority to do and perform any and all acts
and things requisite and ratifying and confirming all that each
said attorneys-in-fact and agent or any one of them, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands on the date indicated below.
Winfred L. Thornton E. Thomas Ford
Chairman of the Board and Vice President and Director
Chief Executive Officer
Robert E. Nedley Stanley D. Fraser
President, Chief Operating Vice President and Director
Officer and Director
Jacob C. Belin Russell B. Newton, Jr.
Director Director
Howard L. Brainin Walter L. Revell
Vice President and Director Director
Edward C. Brownlie John D. Uible
Vice President and Director Director
Richard H. Dent
Director
DATED: February 28, 1995
E-2
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that I, Richard H. Dent, a
Director of St. Joe Paper Company, a Florida corporation
("Corporation"), which is about to file with the Securities and
Exchange Commission, Washington, D. C. 20549, under the provisions
of the Securities Exchange Act of 1934, as amended, an Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
hereby constitutes and appoints Winfred L. Thornton and Edward C.
Brownlie, as his true and lawful attorneys-in-fact and agent, and
each of them with full power to act, without the other in his
stead, in any and all capacities, to sign the 1994 Annual Report of
St. Joe Paper Company on Form 10-K and to file on behalf of the
Corporation such Annual Report and amendments with all exhibits
thereto, and any and all other information and documents in
connection therewith, with the Securities and Exchange Commission,
hereby granting unto said attorneys-in-fact and agent, and each of
them, full power and authority to do and perform any and all acts
and things requisite and ratifying and confirming all that each
said attorneys-in-fact and agent or any one of them, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand on the date
indicated below.
Richard H. Dent
Director
DATED: March 23, 1995
E-3
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
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