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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
AMENDMENT NO. 1
TO
FORM 10-K
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/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, 1995
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. 1-10466
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ST. JOE PAPER COMPANY
(Exact name of registrant as specified in its charter)
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FLORIDA 59-0432511
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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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:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, No par value New York Stock Exchange
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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 knowledge, in definitive proxy of 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 this 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 the registrant's Common Stock held by
non-affiliates based on the closing price on March 15, 1996 was $532,053,520.
As of March 15, 1996, there were 30,498,650 shares of Common Stock, no par
value outstanding.
DOCUMENT INCORPORATED BY REFERENCE
(Specific pages incorporated are identified under the applicable item
herein.) Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 14, 1996 (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.
CONTINUING OPERATIONS
General. The Company 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 materials thereof, and products and by-products therefrom to
establish, operate and maintain mills, plants and factories for such purpose and
(2) to buy, hold, work, develop, improve, divide or subdivide, sell, convey,
lease, mortgage, pledge, exchange and otherwise deal in and dispose of all kinds
of real and personal property.
The Executive Offices of the Company are located in Suite 400, duPont
Center, 1650 Prudential Drive, Jacksonville, Florida 32207 and its telephone
number is (904) 396-6600.
Financial information as to revenues, operating profits and identifiable
assets by industry segment is set forth in footnote 12 to the Consolidated
Financial Statements. 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.
Transportation. The Company owns 54% of Florida East Coast Industries,
Inc. ("FECI") which in turn owns 100% of Florida East Coast Railway ("FEC"). The
Company also owns and operates the Apalachicola Northern Railroad ("ANRR"). The
common stock, par value $6.25 per share, of FECI 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 Surface Transportation
Board 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.
FEC had capital expenditures in 1995 of $26.6 million in addition to
maintenance expenditures of $30.6 million. This compares to 1994 capital
expenditures of $21.3 million and 1993 capital expenditures of $19.8 million.
The maintenance expense in 1994 was $55.8 million and in 1993, $53.7 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. The other items carried by ANRR are tall oil, chemicals, stone
and clay products and recyclable items.
Capital expenditures by ANRR in 1995 were $1.6 million which compares to
1994 capital expenditures of $3.8 million and 1993 capital expenditures of $4.2
million. ANRR has budgeted $1.2 million in 1996 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
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proceedings under Federal statutes for the cleanup 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 cleanup responsibility is
probable and a liability has been recorded. Such liability is not material to
the financial position of 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. See
"Legal Proceedings."
ANRR has environmental problems involving stormwater run-off and
contaminated soil from fuel oil and gasoline. These items cost approximately
$0.3 million in 1995. These items are remediated and the only expenses
anticipated for 1996 are for groundwater monitoring.
Forestry. The Company owns approximately 700,000 acres of plantable pine
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 623,000 acres have been planted as managed plantations
to facilitate harvesting and reforestation and to maximize timber yields. During
the current planting season, November, 1995 through the end of February, 1996,
the Company anticipates planting 17 million seedlings on 22,500 acres. The
Company owns, in total, approximately 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 52% of mill wood requirements in 1995, compared to 54% in 1994.
The Company has wood chipping facilities located at Lowry and Newport, Florida.
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 1995 and 1994 capital expenditures in the forestry operations were
approximately $5.5 million each year. The Company has adopted a capital
expenditure program for 1996 to reinvest approximately $5.5 million in these
operations. These expenditures include nursery expense and tree planting.
The forestry operation continues to have no major environmental problems.
The one area of expense in 1995 was at one of the forestry units in connection
with fuel contamination of soil. Approximately $0.1 million was spent on this in
1995 and it is estimated that $0.1 million will be spent in 1996 for cleanup and
monitoring the ground water.
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 1995 owned approximately 48,600 acres of
agricultural land and leased approximately 6,000 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 1995-1996 crop TSC grew sugarcane on
approximately 43,000 acres of land.
The majority of the Florida sugarcane producers, including TSC, harvest
sugarcane using mechanical cane harvesters. 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 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.
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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 1,321,000 tons of
sugarcane in 1993, approximately 1,184,000 tons in 1994 and approximately
1,386,000 tons of sugarcane in 1995 from Company operated lands. Total raw sugar
production for the Company was approximately 119,000 tons in 1993, 114,000 in
1994, and 137,715 tons in 1995.
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. Currently,
such prices are supported by a combination of nonrecourse loans to domestic
sugar processors and restrictions on sugar imports. The nonrecourse loan portion
of the sugar price support system was extended in 1990 to cover the 1991-1995
crops of sugarcane through the Food, Agriculture, Conservation and Trade Act of
1990 and was just extended to cover the 1996-2002 sugar crops pursuant to the
Federal Agriculture Improvement and Reform Act of 1996 (the "Agriculture Act")
signed into law by President Clinton on April 4, 1996. The restrictions on sugar
imports are implemented through a tariff-rate quota system determined under the
Uruguay Round Agreements Act.
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. 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, as amended. It is not known
at this time what the full impact of amendments to the Clean Air Act will be on
the future operations of the Sugar segment.
Capital expenditures by TSC in 1995 were $0.2 million and compare to $3.4
million in 1994 and $2.9 million in 1993.
The Company had only minor expenditures for environmental problems in 1995.
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.
Real Estate. The Real Estate segment of the Company consists of two
operations, one a division of the Company known as Southwood Properties
("Southwood"), and Gran Central Corporation ("GCC"). The Company reorganized
into industry segments in 1985 and at that time put most of the Company's
investment and developable real estate into Southwood. GCC was incorporated in
1981, but was not very active until 1984 when, by reorganization, it received
all of FECI's nonoperating 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
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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 in the past incurred debt in the development of its
various projects. The financing of development activities has been accomplished
from internally generated cash flows. This policy may not be continued into the
future as the magnitude of construction expands, and new geographic and market
areas are established. Debt may, therefore, be incurred in those situations
where management deems the use of leverage will be appropriate to meet cash flow
requirements and where it will enhance return on equity.
The Company intends to take a more aggressive approach to development and
will thereby utilize well situated properties whenever the market permits. Those
properties that are well situated marketwise that the Company does not elect to
develop may be sold to third parties or utilized in joint ventures. The
Company's objectives will continue to emphasize the building of long-term
appreciation, but at the same time through both horizontal and vertical
construction and the sale/lease of properties generate additional cash flow and
net income.
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. GCC 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 GCC'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 builders 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, 1995 was 100% leased.
Construction of the next building at this location was begun during 1995 and is
expected to be completed in March 1996. In 1995, the Company was successful in a
variance request for Phase III of the Woods. This has delayed construction but
is expected to improve the financial returns of the project. The Retreat, which
will be a 100 lot, gulf-front subdivision near Old Florida Beach in Walton
County has received state environmental permits. Federal permits are pending and
are expected to be issued by the end of the first quarter in 1996. Phase I of 50
lots will be completed this year with the first sales anticipated at year end
1996. Site development for the 70 lot Phase I of Summerwood, a 200 lot
subdivision in Bay County, began in 1995 and is expected to be finished in March
1996. The development permit for Camp Creek subdivision, an 18 lot
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gulf-front subdivision in Walton County, was issued in December 1995 with sales
possible by year end 1996. Southwood had approximately $1.0 million in capital
expenditures in 1995 compared to $0.3 million in 1994 and $1.5 million in 1993.
The development properties owned and managed by GCC total approximately
19,100 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 GCC'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. GCC has been
pursuing planning, permitting and infrastructure development and now has
approximately 4.0 million square feet of buildings. Approximately 95% of the
leasable space was under lease at year-end 1995 compared to 90% in 1994 and 88%
in 1993. In 1995, GCC added approximately 0.3 million square feet of leasable
space. GCC had capital expenditures of $44.0 million in 1995 compared to $28.0
million in 1994 and $34.1 million in 1993.
DISCONTINUED OPERATIONS
Forest Products. The Company is a vertically integrated producer of
corrugated containers. It owns 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 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, 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 operations 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.
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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)
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TOTAL AVERAGE DAILY
YEAR PRODUCTION PRODUCTION*
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1995........................................................... 441,229 1,372
1994........................................................... 477,990 1,375
1993........................................................... 444,005 1,254
1992........................................................... 425,087 1,266
1991........................................................... 433,352 1,308
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* 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 1994 and 1995, approximately 52% 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 1995 sold at approximately 27% over the price of unbleached
linerboard while, in 1994, this upcharge was 39%. 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 60% of the Company's
mottled white linerboard production in 1995 was traded to other producers under
trade agreements in exchange for corrugating medium or kraft liner.
The capital expenditures at the paper mill in 1994 for maintenance and
upgrade were $20.3 million which compares to $11.5 million for the 1995 capital
and maintenance expenditures. The 1996 budget for maintenance and upgrade at the
paper mill is $12.9 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 1995, fuel
oil and natural gas accounted for 27.12% of mill energy requirements. Black
liquor solids and biomass supplied most of the mill requirements.
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 1995 produced approximately 6.7 billion square feet of
containerboard. In 1995, fourteen of the container plants operated on two shifts
and two on one shift. The Company could increase capacity by running the two
plants that are 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 84% of the container plants'
requirements for linerboard and corrugating medium for 1995 which was up from
the 78% that was supplied in 1994.
The Company's container plants accounted for approximately 2% of the total
national industry shipments during 1995 and 1994 up from approximately 1.9% in
1993. The Company's corrugated container business services approximately 2,700
customers. The single largest customer accounted for approximately 3% of the
Company's corrugated container shipments for 1995 and the ten largest customers
accounted for approximately 15% of the Company's 1995 corrugated container
revenues.
The Company considers its container plant facilities to be in satisfactory
condition. To maintain and upgrade these facilities, the Company spent $0.9
million in 1995. The Company maintains a laboratory facility
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located in Louisville, Kentucky, which tests container components, materials and
workmanship to ensure quality control for container products.
Recycled fiber is obtained in part from third parties and in part from mill
operations. In 1995 and 1994, recycled or secondary fiber supplied approximately
13% and 17% respectively, of the mill's total fiber requirements.
In 1995, the mill at Port St. Joe spent $1.88 million on environmental
related items. These were for asbestos removal and disposal, repair of the
recovery boiler precipitator, replacement of PCB transformers, and construction
of chemical containment areas. The Company has budgeted $1.6 million in 1996 for
predominantly capitalized environmental items. The main items in 1996 will be
for additional asbestos removal and disposal and modifications to meet proposed
Environmental Protection Agency Cluster Rules. The imposition of new
requirements is anticipated under revised permits issued under EPA's Title V
program and under the EPA's proposed Effluent Limitation Guidelines,
Pretreatment Standards, and New Source Performance Standards: Pulp Paper and
Paper Board Categories; National Standards for Hazardous Air Pollutants for
Source Category; Pulp and Paper Production (the "Cluster Rules"). The Cluster
Rules have not been finally adopted and remain subject to change. The Company
has not yet formulated a final plan for the application of these programs for
St. Joe Forest Products Company ("SJFP"). Until these regulations are finally
implemented process capital cost and operating estimates cannot be made. EPA has
delayed the issuance of comments regarding revised Cluster Rules that was
scheduled for late 1995 until sometime in 1996.
In addition, SJFP has notified the Florida Department of Environmental
Protection of emission sources not currently permitted and has received an
exemption for them until they are included in the application for permitting
under the Title V program. St. Joe Container Company ("SJCC") will have
additional permitting requirements under the Title V program, but this is not
expected to impose substantial additional cost on the Company.
Wastewater from SJFP is handled by the City of Port St. Joe Industrial
Wastewater Treatment Plant ("IWTP") under a permit issued by the City of Port
St. Joe ("CPSJ"). SJFP bears the preponderate costs of operating the IWTP under
an agreement with the IWTP and other industrial users of the IWTP. The
wastewater is discharged from the IWTP into the Gulf County Canal. The ability
of the CPSJ to take wastewater from SJFP is dependent upon the CPSJ's
maintaining its NPDES Permit. CPSJ is appealing the recent permit issued by the
EPA. The CPSJ objects to certain parameters and conditions of the permit. SJFP
is cooperating with the CPSJ and expects that even if the appeal is not
successful, it will not impair IWTP's ability to accept its wastewater nor
substantially affect its costs.
In 1995, the Company had expenses at several plants with the total for all
plants being less than $0.4 million. Anticipated spending is approximately $0.8
million in 1996 on similar items.
Communications. St. Joe Communications, Inc. ("SJCI") provides unregulated
telecommunications 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 one limited partnership with a major telecommunications company
as partner to provide cellular telephone service.
The Company owns and leases to MCI a fiber optic transmission network
extending from Fort Walton Beach to Tallahassee of approximately 150 miles. The
parties have recently agreed to enter into a 5-year extension of the lease. 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
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between exchanges and/or electronic remote facilities associated with the
various exchanges. The companies will continue to install fiber optic cable for
these same basic transmission functions.
SJCI has a policy to invest in the latest, most advanced equipment and
technology. In keeping with this policy SJCI expended $5.8 million on capital
improvements in 1995 which compares to $5.4 million that was spent in 1994 and
$5.3 million in 1993. 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.
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
During 1995, no single refinement or group of refinements was introduced
which would require the investment of a material amount of the Company's assets
or which otherwise would be considered material.
SOURCES AND AVAILABILITY OF RAW MATERIALS
During 1995 and 1996 to date, all of the raw materials the Company uses
were available in adequate supply from multiple sources.
Talisman owns or leases approximately 53,800 acres of land in Palm Beach
County, Florida, of which approximately 43,000 acres are being used to grow
sugarcane.
PATENTS AND LICENSES
The Company did not obtain any new patents or licenses in 1995. The Company
has no pending applications for trademarks.
SEASONALITY
The sugarcane production and processing segment is seasonal with one
sugarcane crop being harvested each year. 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 other single customer accounts for 10% or more
of the Company's consolidated revenues.
8
<PAGE> 10
RESEARCH AND DEVELOPMENT
The Company maintains a nursery and research facility in Capps, Florida,
which grows seedlings for use in reforestation of its lands. Experiments in
forestry genetics, including research on the production of faster growing, more
disease-resistant pine species, are also conducted at this facility. The Company
also participates through cooperation with the University of Florida in their
Genetics Co-op program. This experimentation work is in genetics, plantation and
fertilization. The amounts spent during the last three fiscal years on
Company-sponsored research and development activities were not material.
EMPLOYEES
The Company had approximately 5,000 employees at December 31, 1995.
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. Upon consummation
of the sale of the pulp and paper mill and container plants and the sale of the
communications segment, the Company expects to have approximately 1,700
employees.
Set forth below are the names, ages (at March 15, 1996), positions and
offices held, and a brief account of the business experience during the past
five years of each executive officer.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Winfred L. Thornton........................ 67 Chairman of the Board and Chief Executive
Officer since 1991; President 1984-1991;
Director since 1968; President of FECI
1984-1995; Chairman of the Board of FECI
since 1984; President of FEC 1964-1984.
Robert E. Nedley........................... 57 President since 1991; Vice President
1981-1991; Director since 1989.
Howard L. Brainin.......................... 66 Vice President and Director since 1992;
President of SJCC since 1992; Regional Vice
President at SJCC 1982-1992.
Edward C. Brownlie......................... 58 Vice President -- Administration since
1992; Treasurer 1977-1992; Director
1982-1995.
E. Thomas Ford............................. 62 Vice President since 1981; Director
1989-1995.
J. Malcolm Jones, Jr....................... 42 Vice President and Chief Financial Officer
since 1995; President, AmSouth Bank of
Florida, Jacksonville Bank 1994-1995;
President and Chief Executive Officer of
Florida Bank 1990-1994.
</TABLE>
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 14, 1996.
ITEM 2 PROPERTIES
The principal manufacturing facilities and other materially important
physical properties of the Company at December 31, 1995 are listed below and
grouped by industry segment. All properties shown are owned in fee simple except
where otherwise indicated.
9
<PAGE> 11
CONTINUING OPERATIONS
Corporate Facilities. Jacksonville, Florida -- Occupies approximately one
and one-half floors of a four story Company-owned building.
Forestry
Forestry Management Facilities
Albany, Georgia
Hosford, Florida
Newport, Florida
Port St. Joe, Florida
West Bay, Florida
Wewahitchka, Florida
Chip Plants
Lowry, Florida
Newport, Florida
Nursery and Genetics Research Facility
Capps, Florida
Pulpwood Procurement Offices
Port St. Joe, Florida
Agricultural Lands. The Company owns slightly over one million acres of
agricultural lands in Florida and Georgia and leases an additional 6,000 acres.
Transportation. FEC owns three four-story buildings in downtown St.
Augustine, Florida which it uses for its corporate headquarters. Its
transportation facilities include 351 miles of main track, which is mostly 132#
rail on concrete crossties, 91 miles of branch line track, 157 miles of yard
switching track and 184 miles of other track. FEC owns 82 diesel electric
locomotives, approximately 2,740 freight cars, approximately 1,590 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 6,000 acres. In addition, it owns
a raw sugar mill and various types of agricultural equipment.
Real Estate. Southwood owns approximately 50,000 acres of investment land
the majority of which is located in West Florida. The counties with the largest
holdings at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
COUNTY ACRES
- ----------------------------------------------------------------- ------
<S> <C>
Bay.............................................................. 25,020
Leon............................................................. 9,612
Franklin......................................................... 7,049
St. Johns........................................................ 4,321
Walton........................................................... 1,993
Wakulla.......................................................... 1,153
</TABLE>
Southwood owns an office building in Panama City, Florida which was
completed in 1991 and contains 11,700 square feet.
10
<PAGE> 12
GCC at December 31, 1995 owned and managed approximately 19,146 acres of
land, including approximately 1,132 acres owned by FEC. The largest holdings by
Florida counties are as follows:
<TABLE>
<CAPTION>
COUNTY ACRES
- ------------------------------------------------------------------ -----
<S> <C>
Volusia........................................................... 3,581
Flagler........................................................... 3,464
St. Johns......................................................... 3,385
Brevard........................................................... 2,799
Dade.............................................................. 1,684
Duval............................................................. 1,534
Manatee........................................................... 897
</TABLE>
GCC also owned at year-end 1995 fifty buildings as detailed below:
<TABLE>
<CAPTION>
NUMBER OF RENTABLE YEAR
LOCATION BUILDINGS TYPE SQUARE FEET BUILT
- ----------------------------- --------- --------------------------- ----------- -------------
<S> <C> <C> <C> <C>
duPont Center 2 Office 144,000 1987/88
Jacksonville, FL
Barnett Plaza 1 Office 59,000 1982
Jacksonville, FL
Gran Park at Interstate South 6 Office/Showroom/Warehouses 260,000 1987/89
Jacksonville, FL
Gran Park at the Avenues 2 Office/Showroom/Warehouses 101,000 1992
Jacksonville, FL
3 Office 225,000 1992/93/95
1 Office/Warehouses 147,000 1994
Gran Park at Melbourne 1 Office/Showroom/Warehouse 28,000 1989
Melbourne, FL
Gran Park at Lewis Terminals 1 Office/Showroom/Warehouse 62,000 1987
Riviera Beach, FL
2 Rail Warehouses 176,000 1982/87
4 Cross Docks 75,000 1987/91
Gran Park -- McCahill 2 Rail Warehouses 468,000 1992/94
Miami, FL
Gran Park at Miami 5 Office/Showroom/Warehouses 368,000 1988/90/92/94
Miami, FL
4 Office/Warehouses 382,000 1990/91/92/93
4 Rail Warehouses 398,000 1989/90/93/94
7 Front Load/Warehouses 790,000 1991/92/93/95
1 Double Front Load Warehouse 239,000 1993
1 Office Service Center 39,000 1994
Hialeah, FL 1 Cross Dock 20,000 1987
1 Transit Warehouse 30,000 1975
Pompano, FL 1 Rail Warehouse 54,000 1987
-- -----------
Total 50 4,065,000
======== =========
</TABLE>
GCC'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 structures such as office/showroom/warehouse buildings.
11
<PAGE> 13
Wherever possible, GCC intends to develop infrastructure and construct buildings
for lease and continued ownership.
DISCONTINUED OPERATIONS -- PROPERTIES UNDER CONTRACTS TO SELL
Forest Products
Paper Mill
Port St. Joe, Florida
Container Manufacturing Plants
Atlanta, Georgia
Baltimore, Maryland
Birmingham, Alabama
Charlotte, North Carolina
Chesapeake, Virginia
Chicago, Illinois
Dallas, Texas
Dothan, Alabama
Hartford City, Indiana
Houston, Texas
Lake Wales, Florida
Laurens, South Carolina
Louisville, Kentucky
Memphis, Tennessee
Pittsburgh, Pennsylvania
Port St. Joe, Florida
Marketing Offices
Union, New Jersey (leased)
Communications -- Telephone Exchanges and Offices
Alligator Point, Florida
Altha, Florida
Apalachicola, Florida
Blountstown, Florida
Bristol, Florida
Carrabelle, Florida
Chattahoochee, Florida
Eastpoint, Florida
Florala, Alabama
Hosford, Florida
Keaton Beach, Florida
Laurel Hill, Florida
The Beaches, Florida
Paxton, Florida
Perry, Florida
Port St. Joe, Florida
Tyndall AFB, Florida
Wewahitchka, Florida
Wing, Alabama
The Company considers that its facilities are suitable and adequate for the
operations involved. All facilities are being productively utilized in the
business.
12
<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS
SJFP has been named as a potentially responsible party for the remediation
of a designated Superfund site near Tampa, Florida. The United States
Environmental Protection Agency ("USEPA") has alleged that SJFP caused certain
materials to be disposed of at the site over a period of years in the late
1970's or early 1980's. SJFP has provided USEPA with certain evidence indicating
that SJFP did not dispose of any material at the site. SJFP has declined an
invitation to join a PRP Group as a de minimis party. SJFP continues to deny
liability, and vigorously opposes any attempt to impose any liability upon it
for the remediation of the site.
FEC has been named as a potentially responsible party for the remediation
of a designated Superfund Site near Jacksonville, Florida. The USEPA has alleged
FEC caused certain materials to be disposed of at the site over a period of
years. The USEPA has offered all named PRP's an opportunity to participate in a
pilot allocation program. This program is similar to binding arbitration. If FEC
participates in this program, its share of the liability for the remediation of
the site will be fixed. The USEPA has also offered to negotiate a separate
settlement with certain parties, including FEC, whom the USEPA considers to be
de minimis parties. FEC believes that, whichever alternative is chosen, its
liability for the remediation of the site will not be material.
FEC has been named as a potentially responsible party for the remediation
of a designated Superfund Site in Portsmouth, Virginia. The USEPA has alleged
that FEC caused certain materials to be sent to the site over a period of years.
These materials were utilized by the owner of the site in the course of its
business which FEC believes caused the site to become contaminated. FEC is
vigorously opposing any attempt to impose any liability upon FEC. The owner of
the site filed suit in the United States District Court for the Eastern District
of Virginia, Norfolk Division, seeking to impose liability upon the defendants,
including FEC, for remediation of the site. Defendant railroad companies have
formed a joint defense group and continue to oppose the imposition of any
liability upon them. In the event the railroad defendants do not prevail upon
the issue of liability, FEC believes its responsibility for the remediation of
the site will not be material.
The Company through its subsidiaries, is a party to various proceedings
before state regulatory agencies relating to environmental issues. The Company
is not aware of any monetary sanctions to be proposed, which in the aggregate,
are likely to exceed $100,000.00, nor does it believe that corrections, if any,
will necessitate significant capital outlays or cause material changes in its
business.
The Company, through its subsidiaries, is a party in various pending legal
proceedings which are ordinary, routine litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the Company's 1995
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
COMMON STOCK INFORMATION
The Company had 876 common stockholders of record as of March 15, 1996. The
Company's common stock is quoted on the New York Stock Exchange ("NYSE")
Composite Transactions Tape under the symbol "SJP".
13
<PAGE> 15
The range of high and low sales prices for the Common Stock as reported on
the NYSE Composite Transactions Tape for the periods indicated is set forth
below.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
- ------------------------------------------------------------------------------ ---- ----
<S> <C> <C> <C>
1994 First Quarter.......................................................... 57 7/8 50 1/4
Second Quarter......................................................... 57 49 1/8
Third Quarter.......................................................... 62 5/8 49 1/4
Fourth Quarter......................................................... 61 7/8 54 1/4
1995 First Quarter.......................................................... 67 3/4 53 3/4
Second Quarter......................................................... 65 1/2 60 5/8
Third Quarter.......................................................... 64 1/2 60
Fourth Quarter......................................................... 62 3/4 53 1/2
1996 First Quarter.......................................................... 61 1/2 53 7/8
</TABLE>
DIVIDENDS
The Company paid a cash dividend of $.20 per share to holders of the Common
Stock in 1994 and 1995. A dividend of $.05 per share for the first quarter of
1996 is payable on March 29, 1996 to holders of record on March 22, 1996.
Although the Company has historically paid quarterly cash dividends of $.05 per
share and there are currently no plans to reduce such dividends following the
sale of the paper mill and container plants and the sale of the communications
segment and the planned pro rata distribution of the net proceeds thereof to its
stockholders, there can be no assurance that such practice will continue in the
future.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for the five years
ended December 31, 1995 have been derived from the audited consolidated
financial statements of the Company. The statement of operations data with
respect to the years ended December 31, 1995, 1994 and 1993 and the balance
sheet data as of December 31, 1995 and 1994 have been derived from the audited
financial statements of the Company as included in this Annual Report on Form
10-K. The statement of operations data with respect to the years ended December
31, 1992 and 1991 and the balance sheet data as of December 31, 1993, 1992 and
1991 have been derived from audited financial statements of the Company
previously filed with the SEC but not incorporated by reference or included
elsewhere in this Annual Report on Form 10-K. The selected consolidated
financial data set forth below are qualified in their entirety by and should be
read in conjunction with the financial statements and the notes related thereto
included elsewhere in this Annual Report on
14
<PAGE> 16
Form 10-K. See "Management Discussion and Analysis of Financial Condition and
Results of Operations; Consolidated Financial Statements."
(DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION
Total Assets.......................................... $1,531 $1,449 $1,396 $1,289 $1,280
====== ====== ====== ====== ======
Current Assets........................................ $ 497 $ 485 $ 486 $ 442 $ 465
Less: Current Liabilities............................. 44 68 69 56 68
------ ------ ------ ------ ------
Working Capital....................................... 453 417 417 386 397
Current Ratio (to 1)................................ 11.3 7.0 6.9 7.9 6.8
Investment & Other Assets............................. 229 207 187 164 175
Properties, at Cost................................... 1,105 1,040 990 935 870
Less:
Accumulated Depreciation............................ 300 283 268 250 229
Long-Term Debt...................................... -- 17 16 16 18
Reserves and Other Liabilities...................... 12 11 8 16 13
Deferred Income Taxes............................... 192 165 161 137 137
Minority Interests.................................. 267 251 239 230 221
------ ------ ------ ------ ------
Shareholders' Equity.................................. $1,016 $ 937 $ 902 $ 836 $ 824
====== ====== ====== ====== ======
RESULTS OF OPERATIONS
Net Sales and Operating Revenues...................... $ 335 $ 331 $ 312 $ 300 $ 287
====== ====== ====== ====== ======
Operating Profit...................................... $ 47 $ 60 $ 55 $ 43 $ 34
Other Income.......................................... 19 25 12 18 37
Less:
Taxes on Income..................................... 25 31 30 22 24
Income Applicable to Minority Interest.............. 12 16 10 11 13
------ ------ ------ ------ ------
Net Income from Continuing Operations................. 29 38 27 28 34
Earnings (Loss) from Discontinued Operations.......... 45 4 (15) (12) (6)
Cumulative Effect of Change in Accounting Principle... -- -- 21 -- --
------ ------ ------ ------ ------
Net Income............................................ $ 74 $ 42 $ 33 $ 16 $ 28
====== ====== ====== ====== ======
PER COMMON SHARE
Book Value -- End of Year............................. $33.31 $30.72 $29.58 $27.35 $27.02
====== ====== ====== ====== ======
Net Income from Continuing Operations................. $ 0.96 $ 1.24 $ 0.87 $ 0.92 $ 1.11
Earnings (Loss) from Discontinued Operations.......... 1.46 0.14 (0.48) (0.40) (0.19)
Cumulative Effect of Change in Accounting Principle... -- -- 0.68 -- --
------ ------ ------ ------ ------
Net Income............................................ $ 2.42 $ 1.38 $ 1.07 $ 0.52 $ 0.92
====== ====== ====== ====== ======
Net Income as % of Book Value......................... 7.3 4.5 3.6 1.9 3.4
Dividends Paid........................................ $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20
</TABLE>
- ---------------
(1) As discussed in Note 3 to the Consolidated Financial Statements, net
operating results of the communications segment, linerboard mill and
container plants are shown separately as earnings (loss) from discontinued
operations for the years ended December 31, 1995, 1994, 1993, 1992 and
1991. Net assets to be disposed of have been classified as a current asset
at December 31, 1995. The 1994, 1993, 1992 and 1991 presentations have been
restated to reflect this classification.
(2) As discussed in Note 4 to the Consolidated Financial Statements, 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
15
<PAGE> 17
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.
(3) As discussed in note 4 to the Consolidated Financial Statements, the Company
adopted the provisions of SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" at December 31, 1993. This adoption
increased Shareholders' Equity by $41.5 million or $1.36 per share.
(4) In 1988, a subsidiary entered into an agreement with the Florida Department
of Transportation (DOT) for the sale of approximately 20.7 miles of
abandoned 100-foot wide right-of-way. The total sales price of $35.5
million was divided into six segments. The DOT made an initial payment of
$10 million and issued an executory note for $25.5 million at an interest
rate of 9.01%. As the payments from the State were received, the liens on
the pro rata portion of the succeeding segments were removed and related
gains recognized. A principal and interest payment of $6.25 million was
received in 1989, a payment of $8.86 million was received in 1990, and a
final payment of $16.4 million was received in 1991. The land sale gain
recognized in 1991 amounted to $15 million and was included in Other
Income.
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Management's Discussion and Analysis should be read in conjunction with the
Consolidated Financial Statements and "Item 1. Business" included elsewhere
herein, which are incorporated herein by reference.
OVERVIEW
On September 1, 1995, a wholly owned subsidiary of the Company, St. Joe
Industries, Inc. ("Industries"), agreed to sell the stock of SJCI to TPG
Communications, Inc. ("TPG") for approximately $115 million, subject to purchase
price adjustments. The waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") has expired, and the
Federal Communications Commission, as well as the Florida and Georgia Public
Service Commissions, have issued all regulatory approvals in connection
therewith. This transaction is currently scheduled to close in April 1996. SJCI
sold its interest in three cellular partnerships for an aggregate sales price of
$25,051,600, and the sales proceeds will be distributed to Industries prior to
the closing of the transaction with TPG. SJCI has also entered into a contract
to sell its remaining cellular partnership for an aggregate sales price of
$1,607,000, and this sale is expected to be consummated following the approval
of the Federal Communications Commission expected in the second quarter of 1996.
These sales represent the Company's entire communications segment. On November
1, 1995, SJFP agreed to sell its pulp and paper mill to a joint venture ("JV")
between Four M Corporation ("FMC") and Stone Container Corporation and SJCC
agreed to sell its container plants to FMC for approximately $390 million
subject to purchase price adjustments and contingent, among other things, on the
buyer's receipt of financing and approval of the Company's stockholders. The
waiting period under the HSR Act in connection with the sale has expired. The
Company expects to hold a special meeting of stockholders for approval of such
transaction in April 1996. In that regard, the Alfred I. duPont Testamentary
Trust, which has the sole right to vote approximately 70% of the Company's
common stock, has advised the Company that it intends to vote its shares in
favor of the transaction, subject to certain conditions. Assuming the conditions
are satisfied, approval of the transaction by the holders of a majority of the
shares of the Company's common stock will be assured. Prior period financial
statements have been restated to reflect the reclassification of the
communications segment, the pulp and paper mill and container plants as
discontinued operations.
Consolidated net income rose to $73.8 million ($2.42 per share) for the
year ended 1995 compared to $42.1 million ($1.38 per share) for 1994 and $32.6
million ($1.07 per share) in 1993. These results included
16
<PAGE> 18
the earnings (loss) from discontinued operations net of taxes, which were $44.5
million in 1995 and $4.3 million in 1994 compared to a loss of $14.6 million in
1993. These results also include the cumulative effect of adopting Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" in
1993. This change amounted to $20.5 million ($0.68 per share) in 1993. Excluding
the cumulative effect of accounting changes, net income for 1993 was $12.1
million ($0.39 per share).
Net sales and operating revenues rose to $334.9 million for the year ended
December 31, 1995, an increase of $4 million from 1994. Transportation operating
revenues increased by $10.9 million and sugar net sales were up by $2.6 million.
Forestry revenues declined slightly while real estate revenues dropped by $9.4
million, principally due to a condemnation sale which occurred in 1994 and was
not repeated in 1995. In 1994, revenues increased in all segments compared to
1993, rising from $312.5 million in 1993 to $330.9 million in 1994.
Operating profits declined by $12.7 million in 1995 from $60 million in
1994. Lower cost of sales helped the sugar segment realize a $7 million increase
in operating profit. The transportation segment experienced a $1.4 million
decrease in operating profit. The net from the condemnation sale referred to
above was the largest factor in the $10.8 million decline of real estate
operating profit. Increased cost of sales in the forestry segment contributed
heavily to the $7.5 million decrease in its 1995 operating profit. In 1994,
sugar and real estate operating profits increased while transportation and
forestry declined.
Other income declined in 1995 primarily due to land sales of $3.5 million
by transportation subsidiaries and $8.7 million by forestry subsidiaries in 1994
which were not repeated in 1995. These sales also contributed to the $12.8
million increase in 1994 over 1993.
The provision for income taxes decreased by $6.9 million in 1995 compared
to 1994 after increasing by $1.1 million in 1994 compared to 1993. These changes
are due to the changes in taxable income during these years. The 1993 provision
reflects the deferred tax effect of the change in the federal income tax rate
enacted that year. 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 37.1%, 36.9% and 45.1% in 1995, 1994 and 1993, respectively. In
1993, the Company adopted SFAS No. 109 which resulted in the recognition of
$20.5 million in additional income in 1993 for the cumulative effect of the
change in accounting for income taxes.
Income from continuing operations was $29.4 million in 1995, a decrease of
$8.5 million from 1994, which had been $11.2 million higher than 1993. The land
sales referred to above were the primary causes of the changes in income.
Assuming consummation of the sale of the paper mill and box plants and the
sale of its telephone communications segment, the Company will have continuing
operations in (i) transportation of goods by rail; (ii) the growing and
harvesting of timber; (iii) growing sugarcane and processing sugarcane into raw
sugar and (iv) development, construction and management of real estate. See Note
1 to "Notes to Consolidated Financial Statements." Following the consummation of
these transactions, the Company plans to scale down and eliminate non-essential
corporate functions. The Company is also undertaking an executive management
search effort to enhance management expertise.
Upon the completion of these sales, revenues of the Company will be
materially lower than historical levels. Net income, earnings per share and cash
flows may also be materially different than previous periods.
In addition, as previously announced on February 28, 1995, the Company has
been exploring the sale of its sugar business and is engaged in discussions with
interested parties. Should such a sale materialize, the Company would also
withdraw from the sugar segment of its business. There can be no assurance when,
if or on what terms such a sale may be made. The Agriculture Act, which was
signed into law by the President on April 4, 1996, includes provisions for the
restoration of the Everglades ecosystem in South Florida. The Agriculture Act
provides significant funding levels for the acquisition of real property located
in the Everglades where the Company's sugar operations are located. It is
currently unknown whether such funds would be available or utilized if a sale of
the sugar segment materializes in the future.
17
<PAGE> 19
As to transportation of goods by rail and real estate, FECI, in which the
Company beneficially owns 54% of the outstanding shares of common stock,
appointed a Special Committee of the Board of Directors (the "FECI Special
Committee") to consider whether its railroad transportation business now owned
by its wholly owned subsidiary, FEC, should be disposed of in a merger or sale
transaction. The FECI Special Committee reached the conclusion that a
disposition should be pursued but only under certain conditions. The Company's
Board agrees with that conclusion. The FECI Special Committee has advised the
Company that the FECI Special Committee will not pursue a disposition of the
railroad unless the FECI Special Committee has adequate assurance that the
remaining business of FECI, the real estate operations conducted by its wholly
owned subsidiary, GCC, can also be disposed of on acceptable terms. There can be
no assurance when, if and on what terms a disposition of FEC may be made.
The FECI Special Committee has recognized that it might be possible for
FECI to merge with another company with substantial railroad operations in a
transaction in which no gain or loss would be recognized to FECI or its
shareholders. FECI believes that the likelihood of such a merger is
significantly lessened as long as GCC remains a FECI subsidiary. The Company has
indicated to FECI that, if a merger of FECI with another railroad corporation
would be facilitated by an exchange of GCC stock for the FECI stock held by the
Company, the Company would be willing to consider exchanging shares of FECI
stock it owns for all of the shares of GCC stock held by FECI and in that regard
has proposed acquiring all the issued and outstanding shares of common stock per
share of GCC in a tax free exchange of its shares in FECI in return for 100%
ownership of GCC stock. GCC is engaged in commercial real estate development in
Florida. Each of the Company and FECI has hired an appraisal firm to assist in
evaluating the property of GCC, and the Company and FECI intend to see if they
can negotiate terms of an exchange that will be acceptable to both parties.
Accordingly, there can be no assurance when, if and on what terms the Company
may acquire GCC from FECI.
President Clinton's Proposed Fiscal 1997 Budget (the "Proposed Budget")
could have a substantial and adverse effect upon a merger of FECI with another
company subsequent to the acquisition of GCC common stock by the Company in
exchange for FECI common stock. The Proposed Budget would amend current laws to
provide that a merger of FECI with another company within two years of the
exchange of GCC common stock for FECI common stock, pursuant to which the FECI
shareholders would own less than fifty percent of the voting power, and less
than fifty percent of the value, of the stock of the surviving company, could
cause FECI to recognize gain on the exchange of the GCC common stock. The gain
would be measured by the difference between the fair market value of the GCC
common stock and FECI's adjusted tax basis in such stock. If enacted, the
Proposed Budget would be effective for distributions made after March 19, 1996.
The Chairmen of the House Ways and Means and Senate Finance Committees, however,
have jointly announced their intention that the effective date of new tax
proposals in the Proposed Budget will not be earlier than "the date of
appropriate Congressional action." Accordingly, there can be no assurance when,
if, and on what terms a merger of FECI with another corporation, or sale of FEC
or GCC, may be made. Also, there can be no assurance when, if, and on what terms
the Company may acquire GCC from FECI.
Assuming the sale of the sugar segment by the Company and the sale of the
railroad by FECI and the acquisition of GCC by the Company, the Company's
operations will thereafter be primarily focused on real estate operations from
the point of view of the growing and harvesting of timber and the development of
commercial and residential real estate.
CONTINUING OPERATIONS
Transportation
The transportation segment accounted for 56% of the consolidated revenues
of the Company in 1995 compared to 53% in 1994 and 56% in 1993. Revenues
increased by $10.9 million in 1995 compared to 1994 and $1.0 million in 1994
compared to 1993. As to the future of this segment, see "Overview."
The revenues and expenses of FEC increased in 1995 due to the purchase of a
trucking subsidiary in the second quarter. The increases in revenues and
expenses are related primarily to this acquisition but the
18
<PAGE> 20
contribution to operating profit of FEC was negligible. Also contributing to the
change was the implementation on April 1, 1995 of a haulage agreement with a
connecting rail carrier, whereby the connecting rail carrier's intermodal
shipments were handled in wholesale fashion to and from FEC's south Florida
intermodal terminals. The purchase of the trucking subsidiary increased revenues
and expenses, whereas the haulage agreement reduced revenues and expenses. FEC's
revenues are derived from four major classifications of traffic: shipments of
rock, intermodal (container and trailer), automotive and other. Rock shipments
were flat in 1995 compared to 1994. Adverse weather conditions during the second
and third quarters of 1995 contributed significantly to the decline. Fourth
quarter shipments rebounded strongly and would have been greater had it not been
for a car shortage created by the increased demand for this commodity.
Intermodal shipments decreased by 1.4% compared to 1994. 1995 first quarter
shipments began with an increase but the rest of the year produced a steady
decline in this classification of traffic. The market for intermodal shipments
became very competitive with the trucking industry, where pricing remained at
low levels. Automotive shipments during 1994 and 1995 remained relatively
unchanged.
All other shipments in 1995 increased by 5% over 1994. Sizable gains were
realized in originating shipments of raw sugar with modest gains in shipments of
beer, fructose, building materials and other consumer goods received from
connecting carriers.
Operating expenses for FEC increased in 1995 due to the acquisition of the
trucking subsidiary. Salaries and wages and associated fringe benefits declined
by $7.1 million while purchased services increased $3.5 million. The increase in
purchased services represents third party contractors performing services for
FEC in 1995 that were performed by employees in 1994.
ANRR increased its operating profits by $0.9 million in 1995 primarily due
to environmental cleanup expenses incurred in 1994, which were not repeated in
1995.
In 1994, transportation segment operating revenues grew by $1.0 million,
with FEC accounting for $0.8 million of the increase. Increased operating
expenses at FEC in 1993, principally property taxes, caused the operating profit
of the transportation segment to drop from $30.6 million in 1993 to $29.7
million in 1994.
Forestry
Net sales by the forestry segment declined by $0.1 million in 1995 compared
with 1994, while operating profit dropped from $4.1 million in 1994 to a loss of
$3.4 million in 1995. The primary factors in this decline was the cost of wood,
which increased by $5.9 million despite volume remaining flat and prices to the
linerboard mill remaining fixed on an annual basis. Increased demand for
pulpwood in the first half of 1995 caused pulpwood prices to increase
substantially. As supplies became tighter near the Company's linerboard mill,
the Company was forced to bring in wood from greater distances, which increased
hauling costs. Fixed expenses of the forestry units (principally depreciation
and property taxes) increased by $1 million in 1995, but other costs were
reduced.
Net sales in 1994 remained at approximately the same level as 1993, while
expenses rose. Higher cost of wood purchased contributed to a decline in
operating profit from $8.3 million to $4.1 million.
In connection with the pending sale of the paper mill, the Forestry segment
would enter a wood fiber supply agreement with JV. Under that agreement, wood
fiber would be supplied for the operations of the paper mill at Port St. Joe,
Florida for a period of 15 years, with two five-year renewal options available
to JV. The tonnage of pulp wood and wood chips to be supplied under the
agreement are 1,600,000 (year one); 1,400,000 (year two); 1,200,000 (year
three); and 900,000 tons in year four and thereafter. The amount of tonnage
required to be provided from the Company's land would be 900,000 tons per year
starting in the third year. In addition, JV would have the election to reduce in
increments the amount of tonnage to not less than 600,000 tons per year. Prices
for the wood fiber were negotiated at the time of the negotiation of the
agreement for the sale of the pulp and paper mill and container plants and were
negotiated based on fixed prices from geographic zones for pulp wood and prices
tied to designated chipping facilities for wood chips. Under the wood fiber
supply agreement, prices are to be renegotiated every two years and are to be
indexed on a quarterly basis to certain published prices resulting in quarterly
adjustments that are not greater than five percent. Under the
19
<PAGE> 21
wood fiber supply agreement, annual wood fiber tonnage to be supplied from the
Company's lands will not exceed that currently provided to the paper mill. In
the future, the Company plans to shift its remaining fiber production from the
Company's lands to higher margin timber products.
The pricing provisions of the wood fiber supply agreement will allow
increased and decreased wood costs to be passed on at least partially to the
Buyer. As tonnage supplied under the wood fiber supply agreement decreases in
relation to the amount of tonnage historically supplied to the linerboard mill
and the Company shifts to higher margin timber products by allowing its forests
to grow for longer periods, the performance of this segment may decline in the
near term as this shift occurs. In the long term, the Company believes that the
performance of this segment will be enhanced.
Sugar
A slight increase in volume combined with a 4% price increase to produce a
$2.6 million increase in net sales in 1995 for the sugar segment compared to
1994. A $14 per ton decrease in harvesting expense and a 24% increase in
production reduced the cost per ton of sugar, resulting in a $4.4 million
decrease in the cost of sales. The increased revenue and decreased costs
contributed to a $7.0 million increase in operating profit, from $6.3 million in
1994 to $13.3 million in 1995. In 1994, volume was 12,233 tons higher than 1993.
This additional volume, coupled with a slight price increase and lower costs of
production, led to a $1.2 million increase in 1994 operating profit over 1993.
The Company is exploring the sale of its sugar business. See "Overview."
Real Estate
Real estate segment net sales declined by $9.4 million in 1995 to $30.4
million. The 1994 net sales included an $11.3 million dollar condemnation sale
to the State of Florida which was not repeated in 1995. Other land sales
decreased by $2.0 million compared to 1994. Rental income increased by $4.3
million in 1995 over 1994. Operating profit for the real estate segment fell to
$9.1 million in 1995 compared to $19.9 million in 1994. The decrease was
primarily due to the condemnation sale referred to earlier. As to the future of
this segment, see "Overview."
1994 real estate revenues were $11.4 million higher than 1993, due
primarily to the condemnation sale. Rental income was $3.9 million higher in
1994 than 1993. Operating profit in 1994 was $8.9 million higher than 1993's
$11.0 million.
As of year-end 1995, GCC owned 50 buildings with approximately 4.1 million
square feet of leasable space. Approximately 95% of this space was under lease
at year end 1995 compared to 90% in 1994 and 88% in 1993. Under construction at
December 31, 1995 were 5 additional buildings which will add 0.6 million square
feet of leasable space.
The Company's Southwood division began construction on a second building in
Southwood Center Office Park in Panama City, Florida in 1995 and expects it to
be completed in March 1996. Building #1 remains fully leased. Site development
for the 70-lot Phase I of Summerwood subdivision also began in 1995 and should
be complete in March 1996. Walton County, Florida issued the Development Order
for Camp Creek Point subdivision in December 1995 and a bid package is currently
out to site contractors. Construction is expected to start in April with the
first sales projected for the last quarter of 1996.
In the first quarter of 1996, the Company reached an agreement with the
State of Florida regarding the Topsail condemnation proceeding. The State will
purchase 680 acres at Topsail for approximately $84 million. The Company has
agreed to sell in 1996 to the State of Florida an additional tract of land at
Deer Lake for $13.7 million.
20
<PAGE> 22
DISCONTINUED OPERATIONS
Forest Products
The linerboard mill operating results in the first half of 1995 continued
the same robust pace as the latter part of 1994. However, the second half of
this year reflected the general slowdown in the economy. Domestic prices for
kraft linerboard rose in 1995 from $430 per ton in January to $530 per ton in
May and declined to $505 per ton in December. The average sales price of the
Company's kraft linerboard rose by $136 per ton. Mill sales to outside customers
increased 8%. Product mix of the mill reflected a decrease in Crest White
revenues in 1995 to 58% compared to 60% in 1994. In 1995, mill net sales to
outside customers increased 9% compared to a 22% increase in 1994. The mill cost
dropped 1% on a volume decrease of 9%. In 1994, the mill had an increase in cost
of sales over 1993. In 1995, the mill's selling, general and administrative
expenses increased by 6%. In 1994, the mills expenses decreased by 8%.
Container plant net sales increased to $332.6 million in 1995 from $283.9
million in 1994 due to increased prices in the first half of 1995. The pricing
levels of linerboard and corrugated containers flattened in midyear and declined
at the end of the year. During the first quarter of 1996, price levels have
continued to deteriorate. Cost of sales increased by $30.0 million due to
increased roll stock prices in 1995. The increased margins allowed the container
operation to post its first operating profit since 1985. Operating profit in
1995 was $4.5 million compared to a loss of $9.5 million in 1994.
The Company's policy of operating the linerboard mill at full capacity and
shipping any excess production to the container plants resulted in an increase
in inventory at the container plants due to the soft linerboard market.
Beginning in late 1995 and continuing through the first quarter of 1996,
demand for containerboard and market pulp dramatically diminished and the
Company took downtime at the paper mill in December and January of one paper
machine for both maintenance and excess inventory purposes and, in order to
prevent excessive increases in inventory, has announced further downtime of both
paper machines for at least the period April 7, 1996 through April 29, 1996.
Pricing for paper products has continued to decline from historical highs as a
result of further reduction in demand and the introduction of new industry
capacity, particularly for containerboard. Prices and shipments for market pulp,
however, have declined significantly since the beginning of the year and it is
expected that these declines will have a substantial, adverse impact on
operating results for the first quarter of 1996. The Company cannot at this time
forecast when demand will increase to offset the current excess supply in the
containerboard industry.
Communications
In 1995 Communication operating revenues increased 7% due to increased
interstate long distance pooling settlements. Operating expenses for the year
increased 12.5% due to extensive cable maintenance efforts at all three of the
operating telephone companies. Selling, general and administrative expenses
remained relatively constant from the prior year.
As a result of recent Florida legislation and order by the Alabama Public
Service Commission, the operating telephone companies of St. Joe Communications
were given options for price cap regulation in their Florida and Alabama service
areas. An election for price cap regulation was actually made for the Alabama
territory effective December 20, 1995. A decision on the Florida territory is
forthcoming with a deadline of July 1, 1996. The essentials of the two state
plans are similar in that price cap elections would remove net income limits
previously imposed under rate base regulation, but would freeze current rates
for a fixed period of time. The price cap elections would also open the
companies' certificated areas to competition from alternate providers although
there is some temporary protection afforded under the Alabama plan.
The decision for price cap versus rate of return regulation requires
consideration of a number of issues, namely, the likelihood of competition, the
adequacy of present rate structures and the quality and variety of services
offered. Management believes there may be positive opportunities in the state
price cap elections depending on the effect of the recent federal
Telecommunications Act that the Company is currently unable to predict.
21
<PAGE> 23
FINANCIAL POSITION
General
In 1995, the Company continued to have a strong balance sheet. Management's
long-standing policy of retaining funds to finance capital additions was
continued in 1995. Cash, short-term investments and marketable securities
totaled $304 million at December 31, 1995, a $28.2 million increase over 1994.
$20.9 million of this increase was due to the increase of unrealized gains on
debt and marketable equity securities.
Net working capital (current assets less current liabilities) increased 9%
at December 31, 1995 over 1994 to $452.7 million. The current ratio (current
assets divided by current liabilities) grew to 11.2 in 1995 compared to 7.1 in
1994. The current ratio excluding net assets of discontinued operations grew
from 2.7 in 1994 to 4.5 at December 31, 1995.
During 1995, the Company paid off its long-term debt and short term
borrowings, except for those related to the communications segment. These
payments amounted to $28.9 million.
Stockholders' equity at December 31, 1995 was $33.31 per share, an increase
of $2.59 or 8% from 1994. Over the last five years, stockholders' equity has
increased 23%.
In light of the Company's strong financial position and other
considerations, the Company plans to distribute the net proceeds of the sale of
the paper mill and box plants and the sale of the communications segment in a
partial liquidation to its stockholders.
Capital Additions
Property, plant and equipment additions were $78.8 million in 1995 compared
to $65.5 million in 1994 and $68.6 million in 1993. $47.0 million of the
additions were in the real estate segment where GCC has seven major projects in
progress. The level of property, plant and equipment additions are expected to
remain at comparable levels or increase despite the sales of assets, with future
emphasis being placed on the real estate segment.
Gran Park at Jacksonville had been permitted, platted and designed at
December 31, 1995. By March 1996, this project is expected to have drainage,
utilities and streets in place. Construction of the first building is planned to
begin in March 1996.
Gran Park at the Avenues (Jacksonville) had approximately 474,000 square
feet of leasable space at December 31, 1995. A second office/warehouse building
is scheduled for completion in March 1996.
Gran Park at Deerwood (Jacksonville) had two buildings under construction
at year-end which will add approximately 260,000 square feet of leasable space.
One of these is scheduled for completion in February 1996 and the other in May.
Gran Park at Miami (Section 32 Property) had 2.2 million square feet of
leasable space as of December 31, 1995. Under construction at year-end was an
office/warehouse building which will add approximately 110,000 square feet to
inventory. As of December 31, 1995, 97% of the available space was leased.
Gran Park at Miami (Section 6 Property) required a turnpike interchange and
a dredge and fill operation which were 95% complete at December 31, 1995. Other
infrastructure construction, including street, water and sewer, of this park
began in late 1995 with the construction of three to four buildings expected to
begin in the first half of 1996.
Gran Park at McCahill (Miami) at year end 1995 had leased 88% of the
available 0.5 million square feet of leasable space. A new office/warehouse was
under construction and approximately 95% complete December 31, 1995.
Gran Park at South Park (Orlando) was purchased in the fourth quarter 1995
for approximately $7.6 million. This purchase includes 78.6 acres located within
the present Orlando Central Park. This
22
<PAGE> 24
development will primarily be an industrial park providing 1.2 million square
feet of leasable space. Building construction is estimated to begin in the third
or fourth quarter of 1996.
Environmental
The Company is subject to costs arising out of environmental laws and
regulations, which include obligations to remove or limit the effects on the
environment of the disposal or release of certain wastes or substances at
various sites. It is the Company's policy to accrue and charge against earnings
environmental cleanup costs when it is probable that a liability has been
incurred and an amount is reasonably estimable. As assessments and cleanups
proceed, these accruals are reviewed and adjusted, if necessary, as additional
information becomes available.
The Company is currently a party to, or involved in, legal proceedings
directed at the cleanup of three Superfund sites. The Company has accrued an
allocated share of the total estimated cleanup costs for these three sites.
Based upon management's evaluation of the other potentially responsible parties,
the Company does not expect to incur additional amounts even though the Company
has joint and several liability. Other proceedings involving environmental
matters such as alleged discharge of oil or waste material into water or soil
are pending against the Company. See, "Legal Proceedings."
It is not possible to quantify future environmental costs because many
issues relate to actions by third parties or changes in environmental
regulation. However, based on information presently available, management
believes that the ultimate disposition of currently known matters will not have
a material effect on the financial position, liquidity or results of operations
of the Company. Aggregate environmental-related accruals were $6.2 and $6.7
million, as of December 31, 1995 and 1994, respectively. Environmental
liabilities are paid over an extended period and the timing of such payments
cannot be predicted with any confidence.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements on page F-2 to F-17, inclusive and the Report of
Independent Certified Public Accountants on page F-1 are filed as part of this
Report and incorporated herein by reference thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information to be set forth in the section
entitled "Election of Directors" in the definitive proxy statement involving the
election of directors in connection with the Annual Meeting of Stockholders of
St. Joe to be held on May 14, 1996 (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,
1995, 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.
23
<PAGE> 25
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
Reference is made to the information to be set forth in the section
entitled "Related Party Transactions" in the Proxy Statement, which section is
incorporated herein by reference.
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.
24
<PAGE> 26
ST. JOE PAPER COMPANY
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(ITEM 14(a) 1. AND 2.)
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Independent Auditors' Report........................................................ F-1
Consolidated Balance Sheet at December 31, 1995 and 1994............................ F-2
Consolidated Statement of Income for each of the three years in the period ended
December 31, 1995................................................................. F-3
Consolidated Statement of Changes in Stockholders' Equity for each of the three
years in the period ended December 31, 1995....................................... F-4
Consolidated Statement of Cash Flows for each of the three years in the period ended
December 31, 1995................................................................. F-5
Notes to Consolidated Financial Statements.......................................... F-6
Consolidated Schedules for each of the three years in the period ended December 31,
1995:
II -- Valuation and Qualifying Accounts........................................... S-1
III -- Real Estate and Accumulated Depreciation................................... S-2
</TABLE>
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 notes to the consolidated financial
statements.
25
<PAGE> 27
ST. JOE PAPER COMPANY
INDEX TO EXHIBITS
(ITEM 14(A) 3.)
<TABLE>
<CAPTION>
S-K
ITEM 601 DOCUMENTS PAGE
- -------- -------------------------------------------------------------------------- ----
<C> <S> <C> <C>
(3)(i) -- Articles of Incorporation................................................. *
(3)(ii) -- By-Laws................................................................... *
(10)(a) -- 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................................................. **
(c) -- Stock Purchase Agreement dated as of September 1, 1995 between St. Joe
Industries, Inc. and TPG Communications, Inc............................ ***
(d) -- Asset Purchase Agreement dated as of November 1, 1995 by and among St. Joe
Forest Products Company, St. Joe Container Company and St. Joe Paper
Company, on the one hand, and Four M Corporation and Port St. Joe Paper
Company on the other hand (the "Asset Purchase Agreement"). ............ ***
(e) -- Amendments dated December 14, 1995; December 20, 1995; January 10, 1996;
and January 12, 1996 to the Asset Purchase Agreement. .................. ****
(21) -- Subsidiaries of St. Joe (filed herewith and attached)..................... ****
(24) -- Power of Attorney......................................................... ****
</TABLE>
- ---------------
* 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.
*** Incorporated herein by reference to Exhibits filed with the Registrant's
Quarterly Report on Form 10-Q for the third quarter ended September 30,
1995.
**** Previously filed.
26
<PAGE> 28
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.
ST. JOE PAPER COMPANY
By: /s/ Robert E. Nedley
-------------------------------------
Robert E. Nedley
President, Chief Operating
Officer and Director
Date: April 11, 1996
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 April 11, 1996.
<TABLE>
<S> <C> <C>
/s/ Winfred L. Thornton Chairman of the Board and Chief
- ------------------------------------- Executive Officer
Winfred L. Thornton
/s/ Robert E. Nedley President, Chief Operating Officer and
- ------------------------------------- Director
Robert E. Nedley
/s/ J. Malcolm Jones, Jr. Chief Financial Officer
- ------------------------------------- (Principal Financial Officer)
J. Malcolm Jones, Jr.
/s/ D. Michael Groos Controller
- ------------------------------------- (Principal Accounting Officer)
D. Michael Groos
/s/ Jacob C. Belin Director
- -------------------------------------
Jacob C. Belin
/s/ Howard L. Brainin Vice President and Director
- -------------------------------------
Howard L. Brainin
/s/ Richard D. Dent Director
- -------------------------------------
Richard D. Dent
/s/ Russell B. Newton, Jr. Director
- -------------------------------------
Russell B. Newton, Jr.
/s/ John J. Quindlen Director
- -------------------------------------
John J. Quindlen
</TABLE>
27
<PAGE> 29
<TABLE>
<S> <C>
/s/ Walter L. Revell Director
- -------------------------------------
Walter L. Revell
/s/ Frank S. Shaw, Jr. Director
- -------------------------------------
Frank S. Shaw, Jr.
/s/ John D. Uible Director
- -------------------------------------
John D. Uible
/s/ Carl F. Zellers, Jr. Director
- -------------------------------------
Carl F. Zellers, Jr.
By: /s/ J. Malcolm Jones, Jr.
- -------------------------------------
J. Malcolm Jones, Jr.
Chief Financial Officer
(Principal Financial Officer)
</TABLE>
28
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
St. Joe Paper Company:
We have audited the consolidated financial statements of St. Joe Paper
Company and subsidiaries as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedules as listed in the accompanying index. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules 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 presentation.
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, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
As discussed in note 4 to the consolidated financial statements, the
Company changed its method of accounting for investments to adopt the provisions
of the Financial Accounting Standards Board's Statement of Financial Accounting
Standards (SFAS) No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" at December 31, 1993. As discussed in note 4, 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
Jacksonville, Florida
February 12, 1996
F-1
<PAGE> 31
ST. JOE PAPER COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................... $ 16,802 $ 46,389
Short-term investments.............................................. 96,923 59,157
Accounts receivable................................................. 44,390 41,251
Income taxes refundable............................................. 4,314 --
Inventories......................................................... 20,592 19,764
Other assets........................................................ 18,162 19,354
Net assets of discontinued operations............................... 296,001 299,347
---------- ----------
Total current assets........................................ 497,184 485,262
Investments and Other Assets:
Marketable securities............................................... 189,865 169,871
Other assets........................................................ 38,971 37,303
---------- ----------
Total investments and other assets.......................... 228,836 207,174
Property, plant and equipment, net.................................... 804,974 756,954
---------- ----------
Total Assets................................................ $1,530,994 $1,449,390
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................................... $ 26,024 $ 26,644
Accrued liabilities................................................. 18,445 22,742
Income taxes payable................................................ -- 7,012
Long-term debt due within one year.................................. -- 12,135
---------- ----------
Total current liabilities................................... 44,469 68,533
Accrued casualty reserves and other liabilities....................... 11,681 11,043
Long-term debt due after one year..................................... -- 16,747
Deferred income taxes and income tax credits.......................... 192,036 164,639
Minority interest in consolidated subsidiaries........................ 266,741 251,447
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................................................... 955,239 887,520
Net unrealized gains on debt and marketable equity securities....... 52,114 40,747
---------- ----------
Total stockholders' equity.................................. 1,016,067 936,981
---------- ----------
Total Liabilities and Stockholders' Equity.................. $1,530,994 $1,449,390
========= =========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 32
ST. JOE PAPER COMPANY
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales...................................................... $148,073 $152,755 $135,417
Operating revenues............................................. 186,851 178,151 177,040
-------- -------- --------
334,924 330,906 312,457
Cost of sales.................................................. 116,014 111,014 105,644
Operating expenses............................................. 139,875 133,091 129,704
Selling, general and administrative expenses................... 31,718 26,836 22,145
-------- -------- --------
Operating profit............................................... 47,317 59,965 54,964
-------- -------- --------
Other income (expense):
Dividends.................................................... 2,595 2,187 2,143
Interest income.............................................. 12,666 9,678 8,696
Interest expense............................................. (2,235) (1,982) (1,644)
Gain on sales and other dispositions of property, plant and
equipment................................................. 2,674 13,895 1,146
Other, net................................................... 3,070 1,386 1,988
-------- -------- --------
18,770 25,164 12,329
-------- -------- --------
Income from continuing operations before income taxes and
minority interest............................................ 66,087 85,129 67,293
Provision for income taxes
Current...................................................... 5,778 24,692 13,654
Deferred..................................................... 18,757 6,754 16,674
-------- -------- --------
Total provision for income taxes..................... 24,535 31,446 30,328
-------- -------- --------
Income from continuing operations before minority interest..... 41,552 53,683 36,965
Minority interest.............................................. 12,194 15,827 10,241
-------- -------- --------
Income from continuing operations.............................. 29,358 37,856 26,724
Earnings (loss) from discontinued operations, net of income
taxes of $26,116, $2,491 and ($8,119), respectively.......... 44,461 4,253 (14,599)
-------- -------- --------
Income before cumulative effect of change in accounting
principle.................................................... 73,819 42,109 12,125
Cumulative effect of change in accounting principle for income
taxes........................................................ -- -- 20,518
-------- -------- --------
Net income..................................................... $ 73,819 $ 42,109 $ 32,643
======== ======== ========
PER SHARE DATA:
Income from continuing operations.............................. $ 0.96 $ 1.24 $ .87
Earnings (loss) from discontinued operations................... 1.46 .14 (.48)
-------- -------- --------
Income before cumulative effect of change in accounting
principle.................................................... 2.42 1.38 0.39
Cumulative effect of change in accounting principle for income
taxes........................................................ -- -- 0.68
-------- -------- --------
Net income..................................................... $ 2.42 $ 1.38 $ 1.07
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 33
ST. JOE PAPER COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
COMMON STOCK
Balance, at end of year (1995, 1994 and 1993 -- 30,498,650
shares)...................................................... $ 8,714 $ 8,714 $ 8,714
======== ======== ========
RETAINED EARNINGS
Balance, at beginning of year.................................. $887,520 $851,511 $824,968
Net income..................................................... 73,819 42,109 32,643
Dividends:
Cash ($0.20 per share -- 1995, 1994 and 1993)................ (6,100) (6,100) (6,100)
-------- -------- --------
Balance, at end of year........................................ $955,239 $887,520 $851,511
======== ======== ========
NET UNREALIZED GAIN ON DEBT AND MARKETABLE EQUITY SECURITIES
Balance, at beginning of year.................................. $ 40,747 $ 41,485 $ --
Increase (decrease) in net unrealized gain, net of tax
effect....................................................... 11,367 (738) --
Cumulative effect of change in accounting principle for
investments.................................................. -- -- 41,485
-------- -------- --------
Balance, at end of year........................................ $ 52,114 $ 40,747 $ 41,485
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 34
ST. JOE PAPER COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income................................................. $ 73,819 $ 42,109 $ 32,643
Adjustments to reconcile net income to cash provided by
operating activities:
Cumulative effect of a change in accounting
principle.......................................... -- -- (20,518)
Depreciation and depletion............................ 28,551 27,612 26,216
Minority interest in income........................... 12,194 15,827 10,241
Gain on sale of property.............................. (2,674) (13,895) (1,146)
Increase in deferred income taxes..................... 18,757 6,754 16,674
Changes in operating assets and liabilities:
Accounts receivable................................ (3,139) (1,375) (1,229)
Inventories........................................ (828) 6,545 (2,533)
Other assets....................................... (4,790) (406) (7,921)
Accounts payable, accrued liabilities and casualty
reserves......................................... (4,279) 3,176 395
Income taxes payable............................... (7,012) 4,275 2,737
Discontinued operations -- noncash charges and
working capital changes.......................... 43,483 12,096 26,046
--------- --------- --------
Cash provided by operating activities........................ 154,082 102,718 81,605
--------- --------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment................. (78,816) (65,450) (68,615)
Investing activities of discontinued operations............ (28,102) (19,513) (25,020)
Proceeds from sales of property............................ 5,119 18,135 6,960
Purchases of investments:.................................. -- -- (72,876)
Available for sale(1)................................... (31,247) (18,851) --
Held-to-maturity(1)..................................... (168,607) (105,091) --
Maturity of investments:................................... -- -- 91,443
Available for sale(1)................................... 29,058 12,779 --
Held-to-maturity(1)..................................... 135,480 95,241 --
--------- --------- --------
Cash used in investing activities............................ (137,115) (82,750) (68,108)
--------- --------- --------
Cash flows from financing activities:
Net change in short-term borrowings........................ (11,989) (5,437) 6,093
Financing activities of discontinued operations............ (9,917) 2,092 (824)
Dividends paid to stockholders............................. (6,100) (6,100) (6,100)
Repayment of long-term debt................................ (16,893) (19) (3,604)
Dividends paid to minority interest........................ (1,655) (1,679) (1,718)
--------- --------- --------
Cash used in financing activities............................ (46,554) (11,143) (6,153)
--------- --------- --------
Net increase (decrease) in cash and cash equivalents......... (29,587) 8,825 7,344
Cash and cash equivalents at beginning of period............. 46,389 37,564 30,220
--------- --------- --------
Cash and cash equivalents at end of period................... $ 16,802 $ 46,389 $ 37,564
========= ========= ========
Supplemental disclosure of cash flow information:
Interest paid.............................................. $ 4,541 $ 3,973 $ 3,340
Income taxes paid.......................................... $ 45,283 $ 20,494 $ 12,476
</TABLE>
- ---------------
(1) Disclosure is not applicable for the year ended December 31, 1993. See note
4.
See notes to consolidated financial statements.
F-5
<PAGE> 35
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. NATURE OF OPERATIONS
The Company is a diversified corporation with primary revenues and assets
based in four different segments: Transportation, Forestry, Sugar and Real
Estate. The Forestry segment has operations in both Florida and Georgia while
the remaining segments operate principally within the state of Florida.
Transportation -- The Transportation segment, which accounted for 56% of
the Company's net sales and operating revenues in 1995, consists of both railway
and trucking operations. The two railroads, one serving the northwest Florida
area from Port St. Joe to Chattahoochee and the other serving the eastern
seaboard of Florida from Jacksonville to Miami, provide transportation services
for the common carriage of goods by rail between their terminating points. Since
the rail operations are within the state of Florida, more than one-half of its
transportation revenue is generated by shipments which originate and terminate
within Florida. Additionally, a significant portion of the traffic handled is
received from or transferred to other rail carriers. The principal commodities
carried by rail include crushed stone, cement, automobile vehicles and parts,
trailer-on-flatcar, container-on-flatcar, basic consumer goods such as
foodstuffs and building material, coal, pulpboard, pulpwood, woodchips, tall oil
chemicals, stone and clay products and recyclables. The trucking portion of the
Company's operation is an interstate, irregular route, common carrier with
terminals located throughout the eastern half of the United States.
Forestry -- The Forestry segment, which accounted for 18% of the Company's
net sales and operating revenues in 1995, consists of the growing and harvesting
of timber on approximately one million acres of timberlands in Florida and
Georgia. The major customer for the wood harvested by the Company has been the
Company's linerboard mill. As discussed in Note 3, the Company has agreed to
sell its linerboard mill. The Company will retain its timberlands and will enter
into a fifteen year fiber supply agreement with the buyer with two five-year
extensions. Annual wood fiber tonnage to be supplied from the Company's lands
will not exceed that currently provided and will be at negotiated market prices
adjusted on a quarterly basis. The Company plans in the future to shift its
remaining fiber production from the Company's lands to higher margin timber
products.
Sugar -- The Sugar segment, which accounted for 17% of the Company's net
sales and operating revenues in 1995, consists of a sugarcane plantation and a
sugar mill which processes the sugarcane into raw sugar. The raw sugar from the
mill is sold to one customer. The sugarcane crop is subject to weather
conditions. Excessive rain or freezing temperatures can significantly reduce the
harvest.
Real Estate -- The Real Estate segment, which accounted for 9% of the
Company's net sales and operating revenues in 1995, consists of the development,
construction and management of real estate projects within the state of Florida,
both for long-term appreciation and for sale to third parties. Along Florida's
east coast, the Company concentrates in industrial property which it can manage,
maintain and develop. In west Florida, the Company has concentrated on
developing small parcels for residential use. The Real Estate segment's
competition is with other developers and brokers throughout its operating area.
2. MAJORITY STOCKHOLDER
The Alfred I. duPont Testamentary Trust (the "Trust") owns approximately
70% of the outstanding shares of common stock of the Company. The Company and
its subsidiaries had no significant transactions with the Trust during the
period.
3. DISCONTINUED OPERATIONS
Communications -- On September 1, 1995, St. Joe Industries, Inc., a wholly
owned subsidiary of the Company, agreed to sell the stock of St. Joe
Communications, Inc. ("SJCI") to TPG Communications, Inc.
F-6
<PAGE> 36
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
for approximately $115 million, subject to purchase price adjustments. The sale
is subject to customary conditions, including certain regulatory approvals. At
year end, SJCI had sold its interest in one cellular partnership for
approximately $2 million and has contracts to sell the remaining three
partnership interests for approximately $25 million. These sales represent the
Company's entire Communications segment and are all expected to close in the
first half of 1996.
Forest Products -- On November 1, 1995, St. Joe Forest Products Company
("SJFP"), a wholly owned subsidiary of the Company, and St. Joe Container
Company, a wholly owned subsidiary of SJFP, agreed to sell the linerboard mill
and container plants (the "Sale Transaction") for approximately $390 million,
subject to purchase price adjustments and contingent, among other things, on the
buyer's receipt of financing and approval of the Company's shareholders. The
Trust has advised the Company that, subject to certain conditions, it intends to
vote its shares of the Company's common stock in favor of the Sale Transaction.
Other customary conditions apply, including termination of the Hart-Scott-Rodino
waiting period. The Company has retained certain liabilities in connection with
the Sale Transaction, environmental matters and workmen's compensation claims,
currently estimated to be approximately $7.9 million. These liabilities have
been recorded in the financial statements and will reduce the gain on disposal.
An additional liability of $1.5 million relating to a proposed transferred
employee early retirement incentive program will result from the Sale
Transaction. While the Company has agreed to indemnify the Buyer in amount equal
to $10,000 for On-Site Environmental Liabilities (as defined in the Agreement)
and $1,000 for certain remediation activities at the paper mill if such
activities are required under environmental laws, no matters have been
identified which would require an accrual in the financial statements. This sale
is expected to close in the second quarter of 1996.
Operating revenues for the Communications segment were $32,826, $30,638 and
$29,153 and net sales for the linerboard mill and container plants were
$438,399, $378,088 and $303,902 for the years ended December 31, 1995, 1994 and
1993, respectively. Operating profit of the Communications segment was $6,261,
$6,753 and $5,130 for the years ended December 31, 1995, 1994 and 1993,
respectively. For the linerboard mill and container plants, operating profit
(loss) for the years ended December 31, 1995, 1994, and 1993 were $56,276
($2,240) and ($27,992), respectively. Net operating results of the
Communications segment and linerboard mill and container plants for the years
ended December 31, 1995, 1994 and 1993 are shown separately as earnings from
discontinued operations in the accompanying statement of income. The gain on the
sale of the one cellular partnership which occurred in 1995 was not material.
Net assets to be disposed of have been separately classified in the
accompanying balance sheet at December 31, 1995. The December 31, 1994 balance
sheet has been restated to conform to the current year
F-7
<PAGE> 37
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
presentation. Assets and liabilities of the Communications segment, linerboard
mill and container plants at December 31 consist of:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Cash and cash equivalents...................................... $ 11,357 $ 25,501
Short-term investments......................................... -- 1,998
Accounts receivable............................................ 43,419 47,355
Inventories.................................................... 49,414 37,910
Other assets................................................... 19,748 15,445
Marketable securities.......................................... 2,582 4,157
Property, plant and equipment.................................. 261,674 269,921
-------- --------
Total assets......................................... 388,194 402,287
Accounts payable............................................... 14,460 18,170
Accrued liabilities............................................ 7,671 2,597
Long term debt................................................. 18,093 28,010
Accrued casualty reserves and other liabilities................ 4,332 3,491
Deferred income taxes.......................................... 47,637 50,672
-------- --------
Net assets of discontinued operations................ $296,001 $299,347
======== ========
</TABLE>
Identifiable assets for the Communications segment were $85,676, $70,658
and $65,674 and for the linerboard mill and container plants were $302,518,
$331,629 and $305,329 at December 31, 1995, 1994 and 1993, respectively.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 except for sales by continuing operations of $59,535, $58,925 and
$58,518 to discontinued operations in the years ended December 31, 1995, 1994
and 1993, respectively. The unrealized profit in ending inventory relating to
these sales has been eliminated.
Revenue Recognition -- Transportation revenues are substantially recognized
upon completion of transportation services at destination. Revenues from sales
of forestry products and sugar are recognized generally on delivery of the
product to the customer. Revenues from realty land sales are recognized upon
closing of sales contracts for sale of land or upon settlement of condemnation
proceedings. Rental revenues are recognized upon completion of rental and lease
contracts, using the straight-line basis for recording the revenues over the
life of the contract.
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.
F-8
<PAGE> 38
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Inventories -- Inventories are stated at the lower of cost or market. Costs
for substantially all 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 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.
Earnings per common share -- Earnings per common share are based on the
weighted average number of common shares outstanding during the year.
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
be recovered or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. SFAS 109 also requires the recognition of a
deferred tax liability on the undistributed earnings of subsidiaries applied on
a prospective basis. Effective January 1, 1993, the Company adopted SFAS 109 and
has reported the cumulative effect of that change in the method of accounting
for income taxes in the 1993 consolidated statement of income.
Investments -- Investments consist principally of certificates of deposit,
certificates of participation, remarketed certificates of participation,
mortgage backed securities, municipal bonds, common stocks, redeemable preferred
stocks, and U.S. Government obligations. Investments maturing in three months to
one year are classified as short term. Those having maturities in excess of one
year are classified as marketable securities.
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.
F-9
<PAGE> 39
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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.
5. INVENTORIES
Inventories as of December 31 consist of:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Materials and supplies............................................. $12,875 $14,754
Sugar.............................................................. 7,717 5,010
------- -------
$20,592 $19,764
======= =======
</TABLE>
6. INVESTMENTS
Investments as of December 31, 1995, consist of:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED CARRYING FAIR HOLDING HOLDING
COST VALUE VALUE GAIN LOSS
--------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Short term investments (maturing
within one year)
Held to maturity
U.S. Government securities..... $ 50,077 $ 50,818 $ 51,203 $ 385 $ 0
Tax exempt municipals.......... 39,135 39,179 39,150 -- 29
Mortgage backed securities..... 5,641 5,911 5,909 -- 2
Certificates of deposit........ 1,000 1,015 1,015 -- --
--------- -------- -------- ---------- ----------
$ 95,853 $ 96,923 $ 97,277 $ 385 $ 31
======== ======== ======== ======== ========
Marketable securities
Available for sale
U.S. Government securities
Maturing in one to five
years..................... $ 872 $ 887 $ 887 $ 15 $ --
Tax exempt municipals
Maturing in one to five
years..................... 6,968 7,181 7,181 213 --
Maturing in five to ten
years..................... 20,093 20,953 20,953 860 --
Maturing in more than ten
years..................... 5,610 5,820 5,820 210 --
Equity securities.............. 11,633 94,027 94,027 82,394 --
Mortgage backed securities
Maturing in five to ten
years..................... 3,801 3,877 3,877 76 --
Other corporate debt securities
Maturing in five to ten
years..................... 1,842 1,897 1,897 55 --
--------- -------- -------- ---------- ----------
50,819 134,642 134,642 83,823 --
--------- -------- -------- ---------- ----------
</TABLE>
F-10
<PAGE> 40
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED CARRYING FAIR HOLDING HOLDING
COST VALUE VALUE GAIN LOSS
--------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Held to maturity
U.S. Government securities
Maturing in one to five
years..................... 45,569 45,902 46,432 530 --
Tax exempt municipals
Maturing in one to five
years..................... 1,283 113 113 -- --
Maturing in more than ten
years..................... 1,000 1,003 1,003 -- --
Mortgage backed securities
Maturing in five to ten
years..................... 6,132 6,143 6,699 556 --
Other corporate debt securities
Maturing in five to ten
years..................... 794 2,062 2,454 451 59
--------- -------- -------- ---------- ----------
54,778 55,223 56,701 1,537 59
--------- -------- -------- ---------- ----------
$ 105,597 $189,865 $191,343 $ 85,360 $ 59
======== ======== ======== ======== ========
</TABLE>
Investments as of December 31, 1994, consist of:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED CARRYING FAIR HOLDING HOLDING
COST VALUE VALUE GAIN LOSS
--------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
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................ 2,988 3,062 3,062 -- --
Certificates of deposit........ 2,963 2,967 2,967 -- --
--------- -------- -------- ---------- ----------
$ 58,612 $ 59,157 $ 59,479 $ 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.............. 10,155 74,568 74,568 64,636 223
Mortgage backed securities
Maturing in more than ten
years..................... 1,669 1,530 1,530 -- 139
Other corporate debt securities
Maturing in more than ten
years..................... 2,250 2,176 2,176 -- 74
--------- -------- -------- ---------- ----------
47,046 110,008 110,008 64,636 1,674
--------- -------- -------- ---------- ----------
</TABLE>
F-11
<PAGE> 41
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED CARRYING FAIR HOLDING HOLDING
COST VALUE VALUE GAIN LOSS
--------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
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
--------- -------- -------- ---------- ----------
$ 106,676 $169,871 $172,075 $ 67,467 $2,301
======== ======== ======== ======== ========
</TABLE>
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.
7. ACCRUED LIABILITIES
Accrued liabilities as of December 31 consist of:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Payroll and benefits............................................... $ 1,433 $ 1,255
Payroll taxes...................................................... 246 573
Property and other taxes........................................... 3,418 3,126
Accrued casualty reserves.......................................... 16,635 21,019
Other accrued liabilities.......................................... 8,394 7,812
------- -------
30,126 33,785
Less: noncurrent accrued casualty reserves and other liabilities... 11,681 11,043
------- -------
$18,445 $22,742
======= =======
</TABLE>
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, as of December 31 consist of:
<TABLE>
<CAPTION>
ESTIMATED
1995 1994 USEFUL LIFE
---------- ---------- -----------
<S> <C> <C> <C>
Land and timber..................................... $ 132,393 $ 130,441 --
Land improvements................................... 19,149 19,024 20
Buildings........................................... 3,686 3,650 45
Machinery and equipment............................. 623,183 605,274 12-30
Office equipment.................................... 799 789 10
Autos and trucks.................................... 2,375 2,235 3-6
Construction in progress............................ 5,689 4,836 --
Investment property................................. 318,181 273,732 various
---------- ----------
1,105,455 1,039,981
Accumulated depreciation............................ 300,481 283,027
---------- ----------
$ 804,974 $ 756,954
========= =========
</TABLE>
F-12
<PAGE> 42
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Real estate properties having net book value of $153.3 million at December
31, 1995 are leased under non-cancelable operating leases with expected
aggregate rentals of $86.7 million of which $25.2, $21.9, $17.2, $12.9 and $9.5
million is due in the years 1996 through 2000, respectively.
9. INCOME TAXES
Total income tax expense for the years ended December 31 was allocated as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Income from continuing operations......................... $24,535 $31,446 $30,328
Earnings (loss) from discontinued operations.............. 26,116 2,491 (8,119)
Shareholders' equity, for recognition of unrealized gain
(loss) on debt and marketable equity securities......... 8,778 (2,377) 25,472
------- ------- -------
$59,429 $31,560 $47,681
======= ======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Tax at the statutory federal rate......................... $23,131 $29,795 $23,552
Dividends received deduction and tax free interest........ (1,277) (1,075) (937)
State income taxes (net of federal benefit)............... 1,916 2,497 1,863
Adjustment to deferred tax assets and liabilities for
enacted changes in tax laws and rates................... -- -- 3,293
Undistributed earnings of FECI............................ 916 1,245 775
Other, net................................................ (151) (1,016) 1,782
------- ------- -------
$24,535 $31,446 $30,328
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities as of December 31
are presented below:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Accrued casualty and other reserves............................ $ 7,451 $ 7,857
Alternative minimum tax credit carryforward.................... -- 14,315
Other.......................................................... 1,912 1,654
-------- --------
Total deferred tax assets.............................. 9,363 23,826
-------- --------
Deferred tax liabilities:
Tax in excess of financial depreciation........................ 114,047 110,732
Deferred gain on land sales.................................... 6,893 6,904
Deferred gain on subsidiary's defeased bonds................... 2,139 2,322
Unrealized gain on debt and marketable equity securities....... 30,902 22,124
Deferred gain on involuntary conversion of land................ 29,160 29,227
Prepaid pension asset recognized for financial reporting....... 8,085 7,804
Other.......................................................... 5,620 4,661
-------- --------
Total gross deferred tax liabilities................... 196,846 183,774
-------- --------
Net deferred tax liability............................. $187,483 $159,948
======== ========
</TABLE>
F-13
<PAGE> 43
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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.
The current deferred tax asset of $4,553 and $4,691 is recorded in other current
assets as of December 31, 1995 and 1994, respectively.
The Company has not recognized a deferred tax liability of approximately
$17,842 for the undistributed earnings of FECI that arose in 1992 and prior
years because the Company does not currently expect those unremitted earnings to
reverse and become taxable to the Company in the foreseeable future. A deferred
tax liability will be recognized when the Company expects that it will recover
those undistributed earnings in a taxable manner, such as through receipt of
dividends or sale of the investment. As of December 31, 1995, the undistributed
earnings of the subsidiary for which no deferred tax liability was provided were
approximately $48,454.
10. PENSION AND RETIREMENT PLANS
The Company sponsors defined benefit pension plans covering approximately
70% of its employees. The benefits are based on the employees' years of service
or years of service and compensation during the last five or ten years of
employment. The Company's funding policy is to contribute annually the maximum
contribution required by ERISA.
A summary of the net periodic pension credit follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Service cost..................................................... $ 3,450 $ 3,486
Interest cost.................................................... 7,986 7,418
Actual return on assets.......................................... (40,436) 1,365
Net amortization and deferral.................................... 28,221 (13,673)
-------- --------
Total pension income............................................. $ (779) $ (1,404)
======== ========
</TABLE>
A summary of the plans' funded status as of December 31 was:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accumulated benefit obligation, included vested benefits of
$92,354 and $86,807 in 1995 and 1994, respectively............. $100,104 $ 94,485
======== ========
Projected benefit obligation for service rendered to date........ 125,136 116,101
Plan assets at fair value, primarily listed stocks and U.S.
bonds.......................................................... 177,276 141,090
-------- --------
Plan assets in excess of projected benefit obligation............ 52,140 24,989
Unrecognized net (gain) loss..................................... (27,734) 2,615
Unrecognized prior service cost.................................. 12,956 11,545
Unrecognized transition asset.................................... (15,395) (17,961)
-------- --------
Prepaid pension cost............................................. $ 21,967 $ 21,188
======== ========
</TABLE>
The weighted-average discount rates for the plans were 7% in 1995 and 1994.
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 1995 and 1994. The expected long-term rates of return on
assets was 8% in 1995 and 1994.
As discussed in note 3, several of the Company's operations are being sold
which will significantly reduce the number of employees covered under the
defined benefit plans. The defined benefit plans' assets are not a
F-14
<PAGE> 44
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
part of the sales. In accordance with SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits", the Company expects to recognize a curtailment gain at
the date of sale.
The Company has an Employee Stock Ownership Plan for the purpose of
purchasing stock of the Company for the benefit of qualified employees.
Contributions to the Plan are limited to .5% of compensation of employees
covered under the Plan. The Company also has other defined contribution plans
which, in conjunction with the 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
$1,322, $1,213, and $1,387 in 1995, 1994 and 1993, respectively.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------
1995 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
- ---------------------------------------------------- ----------- ------------ ------- --------
<S> <C> <C> <C> <C>
Net sales and operating revenues.................... $89,764 $ 82,877 $85,905 $76,378
Operating profit.................................... 11,888 11,745 12,857 10,827
Net income from continuing operations............... 8,006 6,360 8,340 6,652
Earnings from discontinued operations............... 6,804 4,799 17,996 14,862
Net income.......................................... 14,810 11,159 26,336 21,514
Per Share Data:
Net income from continuing operations............... 0.26 0.21 0.27 0.22
Earnings from discontinued operations............... 0.23 0.16 0.59 0.49
Net income.......................................... 0.49 0.37 0.86 0.71
</TABLE>
<TABLE>
<CAPTION>
1994 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
- ---------------------------------------------------- ----------- ------------ ------- --------
<S> <C> <C> <C> <C>
Net sales and operating revenues.................... $87,985 $ 72,572 $80,664 $89,685
Operating profit.................................... 15,038 8,031 12,832 24,064
Net income from continuing operations............... 13,511 6,439 6,711 11,195
Earnings (loss) from discontinued operations........ 5,292 1,080 915 (3,034)
Net income.......................................... 18,803 7,520 7,627 8,159
Per Share Data:
Net income from continuing operations............... 0.44 0.21 0.22 0.37
Earnings (loss) from discontinued operations........ 0.18 0.04 0.03 (0.10)
Net income.......................................... 0.62 0.25 0.25 0.27
</TABLE>
12. SEGMENT INFORMATION
Total net sales and operating revenues represent sales to unaffiliated
customers, as reported in the Company's consolidated income statement and
intercompany sales which occur principally between the Forestry and
Transportation segments and discontinued operations.
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.
F-15
<PAGE> 45
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Information by lines of business segment follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales and operating revenues
Transportation................................... $ 186,941 $ 176,074 $ 175,095
Forestry......................................... 60,057 60,158 59,819
Sugar............................................ 57,547 54,900 49,138
Real Estate...................................... 30,379 39,774 28,405
---------- ---------- ----------
Consolidated....................................... $ 334,924 $ 330,906 $ 312,457
========= ========= =========
Operating profit:
Transportation................................... $ 28,255 $ 29,680 $ 30,648
Forestry......................................... (3,377) 4,072 8,308
Sugar............................................ 13,310 6,329 5,058
Real Estate...................................... 9,129 19,884 10,950
---------- ---------- ----------
Consolidated....................................... $ 47,317 $ 59,965 $ 54,964
========= ========= =========
Assets:
Transportation................................... $ 407,969 $ 424,241 $ 390,332
Forestry......................................... 111,848 91,319 82,002
Sugar............................................ 72,647 93,685 96,925
Real Estate...................................... 290,013 229,449 230,343
Discontinued operations.......................... 296,001 299,347 294,597
Corporate........................................ 352,516 311,349 301,634
---------- ---------- ----------
Consolidated....................................... $1,530,994 $1,449,390 $1,395,833
========= ========= =========
Capital expenditures:
Transportation................................... $ 28,204 $ 25,060 $ 22,682
Forestry......................................... 5,413 8,655 5,295
Sugar............................................ 170 3,381 2,944
Real Estate...................................... 45,029 28,354 37,694
---------- ---------- ----------
Consolidated....................................... $ 78,816 $ 65,450 $ 68,615
========= ========= =========
Depreciation and depletion:
Transportation................................... $ 18,840 $ 18,706 $ 18,147
Forestry......................................... 2,307 2,184 2,207
Sugar............................................ 1,671 1,605 1,769
Real Estate...................................... 5,733 5,117 4,093
---------- ---------- ----------
Consolidated....................................... $ 28,551 $ 27,612 $ 26,216
========= ========= =========
</TABLE>
13. CONTINGENCIES
The Company and its subsidiaries are involved in litigation on a number of
matters and are subject to certain claims which arise in the normal course of
business, none of which, in the opinion of management, is expected to have a
material adverse effect on the Company's consolidated financial position or
results of operations.
F-16
<PAGE> 46
ST. JOE PAPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The Company has retained certain self-insurance risks with respect to
losses for third party liability, property damage and group health insurance
provided to employees.
The Company is subject to costs arising out of environmental laws and
regulations, which include obligations to remove or limit the effects on the
environment of the disposal or release of certain wastes or substances at
various sites. It is the Company's policy to accrue and charge against earnings
environmental cleanup costs when it is probable that a liability has been
incurred and an amount is reasonably estimable. As assessments and cleanups
proceed, these accruals are reviewed and adjusted, if necessary, as additional
information becomes available.
The Company is currently a party to, or involved in, legal proceedings
directed at the cleanup of three Superfund sites. The Company has accrued an
allocated share of the total estimated cleanup costs for these three sites.
Based upon management's evaluation of the other potentially responsible parties,
the Company does not expect to incur additional amounts even though the Company
has joint and several liability. Other proceedings involving environmental
matters such as alleged discharge of oil or waste material into water or soil
are pending against the Company.
It is not possible to quantify future environmental costs because many
issues relate to actions by third parties or changes in environmental
regulation. However, based on information presently available, management
believes that the ultimate disposition of currently known matters will not have
a material effect on the financial position, liquidity or results of operations
of the Company. The aggregate environmental-related accruals were $6.2 and $6.7
million, as of December 31, 1995 and 1994, respectively. Environmental
liabilities are paid over an extended period and the timing of such payments
cannot be predicted with any confidence.
F-17
<PAGE> 47
ST. JOE PAPER COMPANY
SCHEDULE II (CONSOLIDATED)
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO BALANCE AT
RESERVES INCLUDED IN LIABILITIES OF YEAR EXPENSE PAYMENTS END OF YEAR
- ----------------------------------------------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C>
1995
Accrued casualty reserves.................... $ 21,019 4,742 9,126 $16,635(a)
1994
Accrued casualty reserves.................... $ 16,587 9,305 4,873 $21,019(a)(b)
1993
Accrued casualty reserves.................... $ 16,680 2,443 2,536 $16,587(a)(b)
</TABLE>
- ---------------
(a) Includes $7,322, $9,976 and $8,423 in current liabilities at December 31,
1995, 1994 and 1993, respectively. The remainder is included in "Accrued
casualty reserves and other liabilities."
(b) 1994 and 1993 amounts have been restated to reflect the classification of
the Communications segment, the linerboard mill and container plants as
discontinued operations.
S-1
<PAGE> 48
ST. JOE PAPER COMPANY
SCHEDULE III (CONSOLIDATED) REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH
COMPANY CARRIED AS OF DECEMBER 31, 1995
--------------------- COSTS -------------------------------------
BUILDINGS & CAPITALIZED LAND & BUILDINGS &
TENANT SUBSEQUENT TO LAND TENANT
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION IMPROVEMENTS IMPROVEMENTS TOTAL
- ---------------------------------- ------------ ------ ------------ ------------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Duval County
Office Buildings (6)............ $0 $1,153 $6,200 $32,513 $ 4,972 $ 34,894 $39,866
Office/Showroom/Warehouses (8).. 0 1,502 0 19,555 3,930 17,127 21,057
Office/Warehouse................ 0 0 0 4,753 1,074 3,679 4,753
Land w/ Infrastructure.......... 0 6,593 0 6,794 13,387 0 13,387
Unimproved land & Misc Assets... 0 915 0 1,548 2,289 174 2,463
City & Residential Lots......... 0 362 5 77 362 82 444
St. Johns County
Land w/ Infrastructure.......... 0 179 0 621 800 0 800
Unimproved land................. 0 2,631 0 407 3,038 0 3,038
Flagler County
Unimproved land................. 0 3,218 0 1,184 4,402 0 4,402
Volusia County
Unimproved land................. 0 3,651 0 528 4,179 0 4,179
Brevard County
Office/Showroom/Warehouse....... 0 73 0 2,184 438 1,819 2,257
Land w/ Infrastructure.......... 0 3,633 0 0 3,633 0 3,633
Unimproved land................. 0 4,846 0 191 5,037 0 5,037
Indian River County
Unimproved land................. 0 218 0 189 407 0 407
St. Lucie County
Unimproved land................. 0 639 0 5 644 0 644
Martin County
Unimproved land................. 0 4,671 0 2,493 7,164 0 7,164
Palm Beach County
Office/Showroom/Warehouse....... 0 113 0 2,984 599 2,498 3,097
Rail Warehouses (2)............. 0 449 0 4,164 557 4,056 4,613
Cross Docks (4)................. 0 117 0 3,786 1,262 2,641 3,903
Land w/ Infrastructure.......... 0 1,251 0 0 1,251 0 1,251
Unimproved land................. 0 1,596 0 9 1,605 0 1,605
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN
DATE LATEST INCOME
ACCUMULATED STARTED OR STATEMENT IS
DESCRIPTION DEPRECIATION ACQUIRED COMPUTED
- ---------------------------------- ------------ ----------- ---------------
<S> <C> <C> <C>
Duval County
Office Buildings (6)............ $6,302 1985 3 to 40 years
Office/Showroom/Warehouses (8).. 4,069 1987 3 to 40 years
Office/Warehouse................ 280 1994 3 to 40 years
Land w/ Infrastructure.......... 0 Various
Unimproved land & Misc Assets... 457 Various 3 to 40 years
City & Residential Lots......... 5 Various
St. Johns County
Land w/ Infrastructure.......... 0 Various
Unimproved land................. 0 Various
Flagler County
Unimproved land................. 0 Various
Volusia County
Unimproved land................. 0 Various
Brevard County
Office/Showroom/Warehouse....... 424 1988 3 to 40 years
Land w/ Infrastructure.......... 0 Various
Unimproved land................. 0 Various
Indian River County
Unimproved land................. 0 Various
St. Lucie County
Unimproved land................. 0 Various
Martin County
Unimproved land................. 0 Various
Palm Beach County
Office/Showroom/Warehouse....... 754 1986 3 to 40 years
Rail Warehouses (2)............. 1,144 1982 3 to 40 years
Cross Docks (4)................. 890 1987 3 to 40 years
Land w/ Infrastructure.......... 0 Various
Unimproved land................. 0 Various
</TABLE>
S-2
<PAGE> 49
ST. JOE PAPER COMPANY
SCHEDULE III (CONSOLIDATED) REAL ESTATE AND ACCUMULATED
DEPRECIATION -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH
COMPANY CARRIED AS OF DECEMBER 31, 1995
---------------------- COSTS --------------------------------------
BUILDINGS & CAPITALIZED LAND & BUILDINGS &
TENANT SUBSEQUENT TO LAND TENANT
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION IMPROVEMENTS IMPROVEMENTS TOTAL
- -------------------------------- ------------ ------- ------------ ------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Broward County
Rail Warehouse................ 0 85 0 1,708 405 1,388 1,793
Unimproved land............... 0 733 0 1,848 2,581 0 2,581
Dade County
Cross Dock.................... 0 137 0 1,018 137 1,018 1,155
Double Front Load Warehouse... 0 768 0 5,735 1,449 5,054 6,503
Rail Warehouses (6)........... 0 808 0 25,077 4,948 20,937 25,885
Office/Showroom/Warehouses
(5)......................... 0 1,003 0 16,344 4,004 13,343 17,347
Office/Warehouses (4)......... 0 1,462 0 13,363 2,877 11,948 14,825
Front Load Warehouses (7)..... 0 1,943 0 21,888 5,439 18,392 23,831
Office/Service Center......... 0 285 0 2,191 680 1,796 2,476
Land w/ Infrastructure........ 0 2,577 0 5,915 8,492 0 8,492
Unimproved land & Misc
Assets...................... 0 15,725 0 11,575 26,973 327 27,300
Manatee County
Unimproved land............... 0 14 0 87 101 0 101
Orange County
Land w/ Infrastructure........ 0 0 0 7,626 7,626 0 7,626
Gulf County
Unimproved land............... 0 358 0 180 538 0 538
Bay County
Land w/ Infrastructure........ 0 1 0 29 1 29 30
Office Building............... 0 1 0 1,195 1 1,195 1,196
Unimproved land............... 0 517 0 121 524 114 638
Leon County
Land w/ Infrastructure........ 0 603 0 30 594 39 633
Walton County
Land w/ Infrastructure........ 0 120 0 66 186 0 186
Other Counties
Unimproved land............... 0 229 0 3,161 3,349 41 3,390
------------ ------- ------------ ------------- ------------ ------------ --------
Grand Total..................... $0 $65,179 $6,205 $ 203,142 $131,935 $142,591 $274,526
============= ======== ============ ============ ============ ============ =========
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN
DATE LATEST INCOME
ACCUMULATED STARTED OR STATEMENT IS
DESCRIPTION DEPRECIATION ACQUIRED COMPUTED
- -------------------------------- ------------ ----------- ---------------
<S> <<C> <C> <C>
Broward County
Rail Warehouse................ 556 1986 3 to 40 years
Unimproved land............... 0 Various
Dade County
Cross Dock.................... 235 1987 3 to 40 years
Double Front Load Warehouse... 617 1993 3 to 40 years
Rail Warehouses (6)........... 2,343 1990 3 to 40 years
Office/Showroom/Warehouses
(5)......................... 2,380 1988 3 to 40 years
Office/Warehouses (4)......... 1,823 1988 3 to 40 years
Front Load Warehouses (7)..... 1,687 1991 3 to 40 years
Office/Service Center......... 137 1994 3 to 40 years
Land w/ Infrastructure........ 0 Various
Unimproved land & Misc
Assets...................... 1,924 Various
Manatee County
Unimproved land............... 0 Various
Orange County
Land w/ Infrastructure........ 0 1995
Gulf County
Unimproved land............... 24 Various
Bay County
Land w/ Infrastructure........ 0 Various
Office Building............... 238 1993 3 to 40 years
Unimproved land............... 13 Various
Leon County
Land w/ Infrastructure........ 13 Various
Walton County
Land w/ Infrastructure........ 0 Various
Other Counties
Unimproved land............... 41 Various
------------
Grand Total..................... $ 26,356
===========
</TABLE>
S-3
<PAGE> 50
ST. JOE PAPER COMPANY
SCHEDULE III (CONSOLIDATED) REAL ESTATE AND ACCUMULATED
DEPRECIATION -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
Notes
(a) The aggregate cost of real estate owned at December 31, 1995 for federal
income tax purposes $163,175
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
(b) Reconciliation of real estate owned:
Balance at beginning of year.......................................................... $249,180 $222,498 $192,466
Amounts capitalized................................................................... 26,499 28,350 31,691
Amounts retired or adjusted........................................................... (1,153) (1,668) (1,659)
-------- -------- --------
Balance at close of period....................................................... $274,526 $249,180 $222,498
======== ======== ========
(c) Reconciliation of accumulated depreciation:
Balance at beginning of year.......................................................... $ 20,596 $ 15,475 $ 11,306
Depreciation expense.................................................................. 5,760 5,145 4,169
Amounts retired or adjusted........................................................... 0 (24) 0
-------- -------- --------
Balance at close of period....................................................... $ 26,356 $ 20,596 $ 15,475
======== ======== ========
</TABLE>
(d) Table excludes $43,655 of real estate costs in progress.
S-4
<PAGE> 51
ST. JOE PAPER COMPANY
INDEX TO EXHIBITS
(ITEM 14(A) 3.)
<TABLE>
<CAPTION>
S-K
ITEM 601 DOCUMENTS PAGE
- -------- -------------------------------------------------------------------------- ----
<C> <S> <C> <C>
(3)(i) -- Articles of Incorporation................................................. *
(3)(ii) -- By-Laws................................................................... *
(10)(a) -- 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................................................. **
(c) -- Stock Purchase Agreement dated as of September 1, 1995 between St. Joe
Industries, Inc. and TPG Communications, Inc............................ ***
(d) -- Asset Purchase Agreement dated as of November 1, 1995 by and among St. Joe
Forest Products Company, St. Joe Container Company and St. Joe Paper
Company, on the one hand, and Four M Corporation and Port St. Joe Paper
Company on the other hand (the "Asset Purchase Agreement"). ............ ***
(e) -- Amendments dated December 14, 1995; December 20, 1995; January 10, 1996;
and January 12, 1996 to the Asset Purchase Agreement. .................. ****
(21) -- Subsidiaries of St. Joe (filed herewith and attached)..................... ****
(24) -- Power of Attorney......................................................... ****
</TABLE>
- ---------------
* 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.
*** Incorporated herein by reference to Exhibits filed with the Registrant's
Quarterly Report on Form 10-Q for the third quarter ended September 30,
1995.
**** Previously filed.
E-1
