the deltona corporation

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
As Amended by Amendment No. 1 thereto
Annual Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1984
Commission file number 1-4719
THE DELTONA
CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE
59-0997584
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
3250 S. W. Third Avenue, Miami, Florida
33129
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (305) 854-1111
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
on which registered
Title of each class
Common Stock, $1 par value
New York Stock Exchange
Pacific Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes____K__
No_ __
State the aggregate market value of the voting stock held by non-affiliates of the registrant: $27,400,000
based on the closing price of the stock as traded on the New York Stock Exchange on March 15, 1985. Such
market value includes the price of 22,545 shares held by relatives of certain affiliates as to which the respective
affiliates disclaim beneficial ownership.
Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the
latest practicable date: 5,233,461 shares of common stock, $1 par value, as of March 15, 1985.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Part(s)
Document
•
Registrant's 1985 Annual Meeting Proxy Statement filed with the Securities and
Exchange Commission pursuant to Regulation 14A.
Part III
I
ITEMS 1 AND 2
THE DELTONA CORPORATION
THE COMPANY
CROSS REFERENCE SHEET
Form 10-K
Item No.
Part I
Items 1 and 2
Page
Number
Section Heading in
Attached Material
The Company ....................................... .
Business ............................................ .
General ........................................... .
New Business Strategy .............................. .
Business Segments .................................. .
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .
Utilities ........................... , ............... .
Other Businesses . . . . . . . . . . . . . . ..................... .
Discontinued Operations ............................ .
Employees ........................................ .
Competition ....................... ; ............... .
Regulation ........................................ .
Executive Officers of the Company ..................... .
Item 3 .................. . Legal Proceedings . . . . . . . . . ........................... .
Item 4 .................. . Not Applicable
Part II
Item 5 .................. . Price Range of Common Stock and Dividends ............
Item 6 .................. . Selected Consolidated Financial Information .............
Item 7 .................. . Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................
Item 8 .................. . Index to Consolidated Financial Statements and
Supplementary Data ................................
Item 9 .................. . Not Applicable
2
2
2
3
4
12
13
13
13
14
14
16
17
.
.
18
19
.
22
.
32
Part IV
Item 14 ................. . Exhibits, Financial Statement Schedules and Reports on
Form 8-K ......................................... .
56
Part III
Items 10, 11, 12 and 13 ....
Incorporated by reference to Registrant's 1985 Annual
Meeting Proxy Statement filed with the Securities and
Exchange Commission.
The Company was founded in 1962 to develop planned communities in Florida that would offer the
recreational amenities and lifestyle of a self-contained resort and the utility services and commercial facilities
common to metropolitan areas. The Company has nine planned communities in Florida in various stages of
development, ranging in size from 1,500 to over 17,000 acres with a combined estimated population in excess
of 80,000. Since 1962, the Company has sold over 125,000 single-family lots and multi-family and commercial
tracts in its communities, in addition to approximately 13,000 single-family homes and over 4,000 multi-family
housing units.
Company subsidiaries are engaged in real estate-related businesses which aid in the development of the
Company's communities. The utility subsidiaries design, construct and operate water, sewer and LP gas
systems. Additionally, the Company operates golf courses, country clubs and recreation centers at its
communities, and is engaged in the title insurance and real estate brokerage businesses. Once a community
is completed, the Company's involvement is generally limited to providing utility services and furnishing resale
and rental services through its real estate brokerage subsidiaries.
The Company has substantial land holdings in Florida, virtually all of which were acquired in the 1960's.
Its holdings include approximately 7,000 acres which will form the basis for approximately 600 single-family
homesites in Putnam County, 100 acres zoned for 300 multi-family housing units on Horr's Island and 1,900
acres zoned for 600 single and 10,000 multi-family housing units which will form the basis for the development
of Marco Shores. In addition, the Company has an inventory of approximately 31,500 unsold platted
single-family lots and multi-family and commercial tracts and 1,200 acres of unplatted property in its nine
existing communities. (Platting is the process of recording, in the public records of the county where the land
is located, a map or survey delineating the legal boundaries of the lots and tracts.) The Company also holds
approximately 1,400 acres of land located outside of these communities for investment, bulk sale or future
development, including 50 acres zoned for commercial use located in Dade County. See "Business: Real
Estate-Land".
During the past ten years, the Company has been adversely affected by two recessions and the denial
of federal permits necessary to complete its Marco Island development, and has incurred substantial
indebtedness. See "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and "Business: Regulation-Environmental". As a result of recurring losses and cash shortfalls, the Company
reassessed its operations and implemented plans in 1985 to discontinue the sale and construction of
single-family homes (except for those under contract at the end of 1984) in order to reduce its marketing,
promotion and related overhead costs and, by the end of 1985, to eliminate housing construction and related
support costs. In 1985, the marketing of single-family lots and multi-family and commercial tracts in its existing
communities will be emphasized. The sale of condominium and vacation ownership units will also continue
to be emphasized until the existing inventory is sold. See "Business: New Business Strategy".
A part of the Company's strategy was the development and marketing of a new community located near
Tampa, Florida. The opening of the community was scheduled for January 13, 1985. On January 9, 1985,
the Company entered into a contract to sell the project for $37,900,000 (the "Tampa Sale"). The buyer also
purchased 200,000 shares of the Company's Common Stock for $5.00 per share, or $1,000,000. The Tampa
Sale closed on March 29, 1985, with the Company receiving $14,400,000 in cash (including prior deposits),
a $6,000,000 mortgage note bearing interest at a rate of 15lh% per annum due April29, 1985 and $17,500,000
in non-interest bearing mortgage notes due June 28, 1985.
The Company is incorporated in Delaware and has its principal executive offices at 3250 S.W. Third
Avenue, Miami, Florida 33129. Its telephone number is (305) 854-1111. The Company, as used herein, refers
to The Deltona Corporation and, unless the context otherwise indicates, its wholly-owned subsidiaries.
Business Segments
· t bl ts forth the total amounts of revenues and operating profits (losses) from continuing
Th e fio11 owmg
a e se
·
· d'
d (' h
d)
·
'b
operations attn ut able t o ea ch of the Company's business segments for the pertods m tcate m t ousan s .
See Note 14 to Consolidated Financial Statements:
BUSINESS
General
The Company is principally engaged in the development and sale of Florida real estate, primarily through
the development of planned communities on land acquired for that purpose. The Company offers single-family
lots and multi-family and commercial tracts for sale, primarily in communities designed by the Company.
The Company plans, designs and develops roads, waterways, utility systems, recreational amenities, grading
and drainage systems within these communities. The Company has also designed, constructed and sold single
and multi-family housing and commercial centers in its communities.
1984
Revenues(a)
Real Estate:
$ 2,540
Single-family housing revenues ........... · · · · · · · · · · · · · · · · · · · · · ·
16,669
Multi-family housing revenues
17,501
Net land sales(b) ..................... · · · · · · · · · · · · · · · · · · · · · · · ·
6,594
Improvement revenues(c)
8,015
°
Interest income(d)
114
Other
51,433
Total Real Estate
13,686
Utilities
12,106
Other( e)
1,422
Equify in earnings of joint venture and non-consolidated subsidiary
The Company derives revenues principally from the sale of single-family lots and multi-family and
commercial tracts, as well as from the sale of single and multi-family housing in its communities. See "New
Business Strategy". When land is sold under an installment contract or pursuant to a purchase money
mortgage, the Company recognizes a substantial portion of the revenue. and related profit at the time of the
sale. A portion, however, is deferred to be recognized as land improvements occur under the "percentage-ofcompletion method" in accordance with Statement of Financial Accounting Standards No. 66 and a portion
of the purchase price is discounted and treated as interest income to be amortized over the life of the contract
or mortgage. Interest income is also earned in accordance with the interest rate stated in the installment
contract or mortgage, and from housing deposits received by the Company. Thus, even after a community
is sold out, the Company will continue to recognize revenue from interest and from previously deferred revenue
until development and scheduled contract payments are completed. Thereafter, revenue is derived principally
from the Company's utility and real estate brokerage businesses.
The Company is also engaged in the following related businesses: the design, construction and operation
of utility systems for the distribution of water and LP gas and for the collection and treatment of sewage,
primarily at the Company's communities; the operation of other related businesses which are part of the
Company's real estate operations, such as golf courses and country clubs, a title insurance company and real
estate brokerage companies; and the development, management and marketing of Tierra Verde, a residential
subdivision in Pinellas County, pursuant to a joint venture agreement. See also "Discontinued Operations".
New Business Strategy
In 1985, the Company implemented a new business strategy, concentrating on the sale ofland to builders
and the installment sale of land to retail customers. The strategy also calls for the discontinuance of the
Company's single-family housing program. In 1985, the Company's single and multi-family housing operations
will be limited to the sale of existing inventory and the construction of single-family homes under contract
at the end of 1984. The Company anticipates that all single-family housing construction will be completed
during 1985. As construction activities are phased out, cost savings are expected to result from the elimination
of the labor and overhead involved, as well as from the elimination of certain support services such as housing
administration and contract processing. See "Real Estate: Housing-Discontinuance of Single-Family Housing
Program".
Products to be marketed during 1985 will include single-family lots and commercial and multi-family
tracts in virtually all of the Company's communities and existing housing inventory. Additionally, the
Company intends to offer property in its existing communities to independent builders who will construct
and sell single and multi-family housing in those communities.
The Company's focus in the future will be on the development and sale of land. In 1985, the Company
will proceed with the planning of three new Florida developments: a 7,000 acre sportsmen's facility consisting
of approximately 600 single-family homesites in Putnam County; a secluded resort community zoned for
approximately 300 multi-family housing units on Horr's Island, located near Marco Island; and a recreational
community zoned for approximately 600 single and 10,000 multi-family housing units located at Marco Shores.
The Company will also examine the feasibility of developing approximately 50 acres of commercial property
in Dade County, Florida.
2
••••••••
•
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O
••
0
0
0.
•••
O
0
0.
O
0
:
O
O
O
O
O
•••
Intersegment sales(f)
•••••••
'
••••
••••••
0
0
••••••••••
0
••••••••
•••••••••••••
0
0.
0
0
0
0
0
00
0
0
0
0
0
0
0
0
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0
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o
0
o
O
0
0
O
O
O
I
O
O
0
O
O
O
O
I
O
O
O
O
I
O
O
O
O
O
O
O
O
tOOt
I
O
O
0
O
0
0
0
0
0
o
o
o
0
o
0
0
0
0
0
I
0
0
0
0
0
0
0
O
O
O
O
O
O
0
O
0
O
0
0
0
0
0
0
0
0
o
0
o
o
0
I
I
0
0
0
0
0
0
0
0
0
0
I
O
........
0
•••••••••••••••
0
••••••••••
0.
0
0.
t
•••
0
0
O
0
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••••••••••••
0
•
$ 2,879
$ 14,011
$ 51,971
$ 55,726
26,537
25,078
87,651
50,329
11,044
24,641
29,545
44,284
5,508
7,149
11,885
9,122
11,358
14,296
15,985
119
116
52
13,525
105
57,445
85,291
197,089
173,091
11,758
9,518
9,977
8,138
••••
14,138
17,551
12,845
12,667
1,076
568
1,239
101
•••••••••
............................................
Total ........................ ···························
~)
~)
~)
~)
$ 78,381
$ 83,294
$112,496
$220,350
$193,030
$ (5,434)
$ 9,001
$
6,119
$ 37,756
$ 27,382
3,310
2,403
2,596
2,307
6,663
627
12
2,273
1,076
568
1,239
~
Operating Profits(a)
\
1980
••••
o
••••••
•
'
0
Years ended December 31,
1981
1982
1983
Real estate(g)(h) ................ · . · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Utilities ............................. · · · · · · · · · · · · · · · · · · · · · · · · ·
. Other ....................................... · · · · · · · · · · · · · · · · ·
Equity in earnings of joint venture and non-consolidated subsidiary · · ·
5,730
3,736
1,422
(11,923)
(13,204)
(10,.135)
(17,986)
(18,641)
(27,457)
Income (loss) from continuing operations before income taxes .. · · · · · · $(24,455)
$(11, 795)
$ (27,875)
General corporate expense .................. · · · · · · · · · · · · · · · · · · · ·
Interest expense(g) ............................. · · · . · · · · · · · · · · · ·
$
101
(9,097)
(8,812)
(24,433)
(14,383)
8,073
$
8,868
(a) Due to the sale of the lumber segment and the sale of the airline segment in 1~~4: reve~ues and oper~tin~
profits from such operations have been excluded from the foregoing table. See Dtscontmued Operations
and Note 12 to Consolidated Financial Statements.
(b) Net land sales consist of gross land sales less estimated uncollectible installment sales, deferred revenue
and contract valuation discount. Included in 1984 estimated uncollectible i~stallment sales is a $2,200,000
provision for certain contracts receivable which were deemed uncollecttble. See Notes 1, 2 and 7 to
Consolidated Financial Statements.
(c) Improvement revenues consist of revenue recognized due to completion of improvements on prior period
sales.
(d) Interest income primarily consists of interest earned ?n c~ntracts and mortgages receivable and on
escrowed cash balances and the amortization of valuat10n dtscounts.
(e) Other consists of revenues from sales other than real estate, the major portion of which comes from country
club operations.
· ranee and asphalt
(f) Intersegment sales consist primarily of sales between t h e C ompany and 1'ts t'tl
1 e msu
subsidiaries.
·
· ·
·mterest red uced the operat'mg profit
of the real estate
(g) The effect of expensing prevtously
capitalized
.
81
segment by $1,258,000 in 1984, $1,780,000 in 1983, $2,164,000 in 1~82, $9,391,000 m 19 ~:~6~·~:~9°~~
in 1980. The effect of capitalizing current period interest decreased mterest expe~se by $2,
'
'
$2,980,000 in 1983, $6,421,000 in 1982, $14,516,000 in 1981 and $5,929,000 m 1980.
· · ~ th ritedown of multi-family inventory
(h) Operating profits for the real estate segment reflect a provtston or e w .
f$
· 1982
22 700 000
of $5,700,000 in 1984 and an addition to the provision for Marco permtt costs 0
'
'
m
·
3
3
Real Estate
The Compa~y.'s ~rincipa.l bus.iness segment has primarily involved the development and marketing of
planned ~?mmumttes tn Flonda stnce 1962. The following table sets forth certain information about these
~~mmumttes a~? other 'l'aNnd assets of the Company as of December 31, 1984. For a detailed description of
ese commumttes, see
ew Communities" and "Existing Communities".
New Communities
Acres in
Planning
Initial
Acquisition
Year
Planned
Opening
5,408
7,070
143
1,915
1962
1972
1964
1964
1985
1986
1986
1987
Tampa Palms(a) ............
Putnam County
Horr's Island ...............
Marco Shores
I
I
Total
Itt
Itt
11
111
Ito
t
t
I
It
I
I
Itt
t
I
0
I
I
0
0
0
I
I
I
I
Housing Units
Planned or Zoned
Single-Family Multi-Family
3,110
650
14,536
I
10,387
Total
629
300
10,221
13,497
650
300
10,850
4,389
20,908
25,297
Existing Communities
Platted
Lots & Tracts Unsold Platted
in Masterplan Lots & Tracts Unplatted
(b)
(b) (c)
Acreage
Acreage
in
Masterplan
Initial
Acquisition
Year
Year
Opened
Estimated
Current
Population
Deltona Lakes ...........
Marco Island ............
Spring Hill ..............
Citrus Springs ........ ' ' '
St. Augustine Shores ... ~ ..
Sunny Hills .............
Pine Ridge ..............
Marion Oaks ........ ' ...
Seminole Woods
17,203
7,844
17,240
15,954
1,985
17,743
9,994
14,644
1,554
1962
1964
1966
1969
1969
1968
1969
1969
1969
J962
1965
1967
1970
1970
1971
1972
1973
1979
31,000
8,000
30,000
3,000
4,500
850
200
3,500
15
34,972
8,551
32,909
33,782
2,126
26,251
4,833
27,538
262
277
58
145
6,445
419
12,813
1,387
9,956
Joint Venture Community:
Tierra Verde .............
666
1976
1977
1,250
1,036
26
Total ...........
104,827
82,315
172,260
31,527
I
0
I
I
I
I
Itt
66
79
40
639
400
1,224
Other Properties
Dade County
tIff
If
I
I
I
I
If
I
I
I
I
I
I
I
I
I
I
It
I
I
0
I
I
Itt
t
111
Adjacent to existing communities(e) ................ .
Other Florida land holdings ...................... .
Total .................................. .
Initial
Acquisition
Year
Acres
(d)
1970
Various
51
1,141
214
1,406
(a) The Company sold its entire Tampa Palms property on March 29, 1985. See "The Company".
(b) Includes single-fa~ily lots and multi-family and commercial tracts, not all of which are currently
developed. Approximately 500 of such lots and tracts are required for drainage and cannot be sold.
Land
In selec.ting sites for its communities, the Company examines various demographic and economic factors,
the regulatory climate, the availability of governmental services and medical, educational and commercial
fa~ilities, and estimated development costs. Its communities are accessible to major highways and Florida's
major metropolitan areas and are near at least one large body of water that can be used for recreational
purposes. Other criteria used by the Company in site selection are the suitability of the land for natural or
engineered drainage and the availability of a sufficient supply of potable water to support the community's
anticipated population.
The master plans of the Company's communities have been designed to provide for amenities such as
golf courses, greenbelt areas, parks and recreational areas, as well as for the basic infrastructure, such as roads
and water and sewer lines. Sites are set aside fo'r shopping centers, schools, houses of worship, medical centers
and public facilities such as libraries and fire stations.
In its major planned communities, the Company has designated certain "core" areas in which it has offered
for sale lot and house "packages" with utility connections situated on paved streets. In other areas of these
communities, the Company historically has sold single-family lots and multi-family and commercial tracts
on an installment basis, with downpayments as low as 5% of the sales price and the balance payable over
periods ranging from 2 to 15 years, depending on the payment plan selected. When the Company has received
at least 10% of the contracted sales price, a substantial portion of the revenue and related profit on the sale
is recognized, with the remaining revenue and profit deferred and recognized as land improvements such as
street paving occur. Additionally, a small part of the purchase price is discounted and treated as interest income
to be amortized over the life of the contract. The Company also provides an allowance for contract cancellations
based on the historical experience of the Company for such cancellations. Interest income is also earned in
accordance with the interest rate stated in the installment land sales contract. Substantially all of the Company's
single-family lot and multi-family and commercial tract sales have been made on an installment basis. Of the
over 125,000 lots and tracts sold since the Company's inception, contracts receivable presently exist with
respect to approximately 12,000 lots and tracts with an outstanding balance of approximately $55,000,000
at December 31, 1984. See "Management's Discussion and Analysis of Results of Operations and Financial
Condition" and Note 2 to Consolidated Financial Statements.
Housing
Historically, the Company has been involved in the design, construction and marketing of single-family
homes and multi-family housing, including both condominium apartment complexes and vacation ownership
(timesharing) projects. Since commencing operations, the Company has constructed and sold approximately
13,000 single-family homes and over 4,000 multi-family housing units in its communities, with much of the
actual construction performed by subcontractors. Revenues, as well as related costs and expenses, from
single-family home and vacation ownership sales are recorded at the time of closing. Revenues and related
costs from the sale of condominium units, however, are recognized under the percentage-of-completion
method, such that a portion of revenues, determined by the stage of construction completed, is recognized
when the Company has contracted to sell a unit and received a deposit of at least 15% of the purchase price
which is virtually non-refundable so long as the Company fulfills its construction obligations. The balance
of the revenues is recognized as construction progresses. An allowance for cancellations is reflected in the
Company's recognition of revenues under this method. However, during periods when actual cancellations
exceed such allowance, less revenues are available for recognition.
To aid in its marketing efforts, the Company has reduced prices on certain inventory and has offered,
from time to time, various forms of incentive programs, such as furniture packages, discounts in the form
of leasing arrangements and trade-in allowances for lots in the Company's communities. The Company
anticipates that it will continue such measures until its condominium inventory has been absorbed. Gross profit
margins have been reduced by such measures. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations: Results of Operations".
(c) "Unsold .~la~~ed Lots & Tracts", when added to lots and tracts sold, as described in "Existing
Com~.u~tttes ' may ~ot equal "Platted Lots & Tracts in Masterplan" for various reasons, such as the
subdtvtston of tracts mto- two or more parcels for sale to different purchasers. ·
(d) -Acquired March 14, 1985 pursuant to the 1982 Settlement Agreement. See "Regulation-Enviromental".
(e) Excludes 1,224 unplatted acres in existing communities.
4
5
The following table summarizes certain information about the Company's condominium apartment sales
for the periods indicated:
Single-Family Housing
The following table summarizes certain information about the Company's single-family home sales for
the periods indicated.
Years ended December 31,
1984
'1983
1982
1981
1980
Number of new house contracts during period ...
249
59
99
330
1,011
Cancellations of house contracts during period ...
36
20
53
141
159
Average price per new house contract during
period(a) ................................. $57,087
Number of house sales closed during period
Number of houses under contract at end of
period
t
t
t
I
I
I
I
I
I
I
If
I
I
I
I!
I
I
I
I
I
I
I
I
I
I
I
I
78
I
I
I
I
I
Aggregate sales price of houses under contract at
end of period (in thousands)
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
179
$65,436
$66,257
$59,316
34
210
876
1,195
44
39
203
890
$10,018(b) $2,347
$2,540
$13,806
$49,028
I
I
$57,591
(a) Includes price oflot except where the Company constructs house on lot previously acquired by purchaser.
(b) Represents the maximum revenue to be recognized by the Company upon the closing of these houses.
All sales under contract at December 31, 1984, are anticipated to be reported as revenue during 1985,
but there is no assurance that this will occur.
Discontinuance of Single-Family Housing Program
The Company discontinued its single-family housing program at Marco Island in 1979 and, in its other
communities, in 1981, focusing its housing operations instead on the sale of condominium apartments. The
Company believes that the action taken in 1981 together with the severe cost-cutting measures introduced
by the Company in 1982 hindered its ability to participate in .the 1983 recovery of the single-family home
market.
Years ended December 31,
1984
1982
1981
1980
211
285
$104,277
278
429
$108,114
695
145
$92,060
1,033
27
$108,335
156
259
188
861
612
40
35
368
707
1,018
$3,331
$42,251
$87,403
. $120,920
212
Number of new unit contracts during period ...
51
Cancellations of unit contracts during period ...
Average price per unit contract during period .. $151,461
Number of unit sales closed during period .....
Number of units under contract at end of
period
Condominium revenues to be recognized from
units under contract at end of period (in
thousands)
t
1
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11
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If
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0
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0
0
0
o
11111
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$5,009(a)
(a) This represents the maximum revenue to be recognized by the Company from units under cont.r~ct for
sale. All of the revenues to be recognized from units under contract at December 31, 1984 are anticipated
to be reported during 1985; but there is no assurance that this will occur.
~· In 1983 the Company completed construction of The Surf Club, its first vacation ownership complex.
The Surf Cl~b consists of 44 two-bedroom apartments located on the Gulf of Mexico at Marco Island.
Purchasers buy a unit at The Surf Club for a specified portion of the year, receiving all the rights and benefits
of condominium ownership. At December 31, 1984, one-week unit ownership prices ranged from $5,985 to
$18,525.
The Company has experienced competition in the sale of condominiu·m· and. vacation ow~ership
apartments at Marco Island, as well as the effects of over-building of condommm~s. m South Flonda ..At
December 31, 1984, the Company carried a completed inventory of 209. condo~umum apartment un~ts,
representing $18,233,000 at cost, of which 40 units were under contract pendm~ cl?smg. Of the 2,244 vacation
weeks offered for sale, 747 weeks have been sold and 1,497 weeks remained m mventory at December 31,
1984.
In mid-1983, the Company re-established its single-family housing program through the introduction
of a new line of homes at its Central and North Florida communities and developed a new sales program
which was designed to enable the Company to compete more effectively in the local Florida markets. The
Company, however, has experienced increasingly stronger competition in the sale of single-family homes,
particularly at its more mature communities of Deltona Lakes and Spring Hill, and has determined that the
volume of single-family home sales achieved since mid-1983 has not yielded the cost efficiencies necessary
to generate an adequate return on such operation.
Based on the above and its analysis of the costs and risks involved, the Company has determined to limit
the sale of single-family homes in 1985 to those remaining in inventory and will confine its own housing
construction activities to the construction of single-family homes under contract at the end of 1984. The
Company is inviting independent builders, however, to construct and sell single-family homes in its
communities and will sell single-family lots to builders for such purpose.
Multi-Family Housing
The Company has designed and constructed more than 3,300 condominium apartment units at Marco
Island in buildings ranging from garden-style apartment complexes to luxury high-rise towers overlooking
the Gulf of Mexico, and has sold more than 3,200 of these units. The Company has also completed 239 units
of a condominium complex adjacent to the Marco Shores golf course, 500 condominium units in the community
of Deltona Lakes, and 331 condominium units in St. Augustine Shores. Every condominium complex
constructed by the Company includes at least one pool and patio area; many feature tennis courts and other
recreational amenities. The Company is not currently constructing and does not plan to commence
construction of any multi-family housing in 1985. ·
7
6
1983
The following table summarizes certain information about the multi-family housing in inventory at
December 31, 1984:
Project/Location
Total
Units
Sales Closed
as of
December 31,
1984
1981
1,261
1,259
2
1982
128
107
21
1982
128
118
10
239
114
125
1982
311
302
9
19 82
247
205
42
1983
2,244(b)
Construction
Completed
South Seas Complex . . . . . . . . . . . . . . . . . .
Marco Island
Royal Seafarer . . . . . . . . . . . . . . . . . . . . . . .
Marco Island
Summit House . . . . . . . . . . . . . . . . . . . . . . .
Marco Island
Tropic Schooner ..................... 1982
Marco Shores
Edgewater...........................
Deltona Lakes
Conquistador . . . . . . . . . . . . . . . . . . . . . . . .
St. Augustine Shores
Surf Club . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marco Island
747(b)
Units in
Inventory at
December 31,
1984(a)
1,497(b)
(a) Includes 40 units and 23 vacation weeks under contract.
(b) Vacation weeks.
Marketing
The Company has historically sold its land and housing products on a national and international basis
through independent franchised dealers ("dealers") in the United States, Canada and overseas, as well as
through Company-affiliated salespeople working at branch offices and at its communities ("jobsite offices").
For the year ended December 31, 1984, foreign dealers accounted for approximately 55% (in dollar
volume) of new land sales contracts, while domestic dealers accounted for approximately 21% of such contracts
and Company-affiliated salespeople accounted for approximately 24% of such contracts. Historically, foreign
dealers have accounted for a larger percentage of land sales contracts. Unlike land, where sales by foreign
dealer~ acc?unted for the largest portion of new sales, domestic dealers and Company-affiliated sales people
have htstoncally accounted for the largest portion of new housing contracts. For the year ended December 31,
198~, domestic dealers accounted for approximately 41% (in dollar volume) of new housing contracts while
foretgn dealers accounted for approximately 3% of such contracts and Company-affiliated salespeople
accounted for approximately 56% of such contracts.
Horr's Island
Horr's Island is located in Collier County, approximately 15 miles south of Naples, Florida, and adjacent
to the Company's Marco Island community. The 143 acre site is zoned for up to 300 multi-family units. Horr's
Island will be accessible from Marco Island via a bridge that is anticipated to be constructed by the Company
in 1986.
The Company has obtained substantially all the permits and approvals necessary to permit the
development of the remainder of this community. See "Regulation-Environmental". The Company expects
to complete the initial planning and engineering work for the community in 1985. It is anticipated that the
community will be available for marketing in 1986. No financing has been arranged for the development of
this community.
Marco Shores
Marco Shores is located in Collier County approximately 2 miles from the Company's Marco Island
community and 15 miles south of Naples, Florida. The 1,915-acre site is zoned for 629 single-family units
and 10,221 multi-family units. The Marco Shores area is served by Florida's third largest airport located near
Fort Myers, by the Naples airport and by an airport in the community.
In 1982, the Company completed construction of a 239-unit condominium complex, adjacent to the Marco
Shores Country Club and 18-hole golf course and less than a mile from the airport serving the Marco vicinity
(all of which were built by the Company).
The Company has obtained substantially all the permits and approvals necessary to permit the
development of the remainder of this recreation-oriented community. See "Regulation-Environmental". The
Company expects to complete the initial planning a~d engineering work for the community as a whole in
1985. Such plans include additional golf courses, tennis centers, parks and a recreation complex. The marketing
of the community will be dependent on the growth of, and demand for real estate in, the Naples area and,
accordingly, is not expected to occur prior to 1987. No financing has been arranged for the development of
this community.
Existing Communities
Deltona Lakes
Deltona Lakes is located 26 miles northeast of Orlando, with its popular tourist attractions of Disney
World and Sea World, and is bordered on the northwest by Interstate 4. Opened in 1962, Deltona Lakes now
has a population of approximately 31,000. Over 30,000 lots and tracts with a total sales volume in excess of
$61,000,000 and over 4,500 single and multi-family housing units with a total sales volume in excess of
$102,000,000 have been sold at this community.
Coincident with the implementation of its new business strategy, the Company has reduced its national
advertising program and its marketing, advertising and promotional expenses. The reduced level of marketing
support has resulted in a reduction in the size of the dealer network. In addition, the Company has closed
its four branch offices.
Since Deltona Lakes is virtually sold out, the Company's principal revenues from the community in 1985
will be derived from the utility operations, from its real estate brokerage business, from collections on existing
property contracts receivable and from single-family homes to be completed in 1985.
In 1985, the Company's domestic and foreign dealers and its jobsite offices will market single-family lots
~nd multi-family and commercial tracts at virtually all communities, and the Company's existing housing
m.ventory. In a number of communities dealers will be permitted to enter into co-brokerage arrangements
wtth the Company's real estate brokerage offices, providing additional markets for these local businesses.
Recreational amenities constructed by the Company include tennis courts, a golf course and country club
(which were sold in 1983), and a recreational complex on the shores of Lake Monroe. A 133-room motel,
an industrial park, a medical complex, several shopping centers, numerous houses of worship, a fire station,
a public library, and a junior high school are located in the community. The Company has virtually completed
development of this community, having constructed 427 miles of road and 543 miles of water, sewer and gas
lines.
New Communities
Putnam County
Putnam County is located 36 miles southwest of Jacksonville, Florida and 30 miles east of Gainesville
Florida. The approximately 7,000 acre she is being planned for approximately 650 single-family homesites:
The Company has not applied for permits and approvals to develop this community. Due to the limited
size of this co~munity, the Company does not expect to encounter significant difficulties in obtaining the
necessary permt~s and approv~ls. The initial planning and engineering work for the community is expected
to be completed m 1985. Plans mclude a sports lodge, riding facilities, archery and trap shooting ranges, tennis
courts. and hiking trails. It is anticipated that the community will be available for marketing in 1986. No
financmg has been arranged for the development of ,this community.
8
Marco Island
The Company's resort community of Marco Island is located 104 miles west of Miami and approximately
17 miles south of Naples, Florida. Over 7, 500 lots and tracts with a total sales volume in excess of $171,000,000
and over 4,100 single and multi-family housing units with a total sales volume in excess of $295,Q90,000 have
been sold in this community.
In 1985, the Company expects to market single-family lots and commercial and multi-family tracts on
an installment basis at Marco Island. In addition, the Company will concentrate on selling its remaining
condominium and vacation ownership inventory. Revenues will also be generated from the Company's utility
subsidiary, its country club operations, its real estate brokerage and rental businesses and from collections
on existing property contracts receivable.
9
More than 8,000 persons reside at Marco Island year-round, with the population doubling during the
winter season. It is the largest of Florida's Ten Thousand Islands and is known for its recreational amenities
which, in addition to its 3-1/2 mile white sand beach, sport fishing, sailing and shelling, include an 18-hole
golf course and country club constructed by the Company, tennis courts, swimming pools and recreation
centers. The island community has several major shopping centers, banks and savings & loan associations,
and medical and professional centers.
Since the community's opening in January, 1965, the Company has built, operated and sold a yacht club
and marina, as well as the Marco Beach Hotel & Villas. The Company has completed over 114 miles of roads,
over 102 miles of seawalls along waterways, and approximately 176 miles of utility lines in this community.
The Company has also constructed over 3,300 condominium units and The Surf Club, 44 unit vacation
ownership complex on the island.
The community's planned growth was interrupted in 1976 by denial of certain federal permits needed
to complete the development of approximately 14,500 units. The Settlement Agreement between the Company,
the State of Florida and various environmental interest groups (the "Settlement Agreement") which became
effective on March 14; 1985, will enable the development of additional dwelling units at Marco Island, Horr's
Island and Marco Shores. See "Regulation-Environmental".
a
Spring Hill
Spring Hill, with an estimated population of approximately 30,000, is located 45 miles north of Tampa-St.
Petersburg. Over 29,000 lots and tracts with a total sales volume in excess of $82,000,000 and over 3,900
single-family homes with a total sales volume in excess of $120,000,000 have been sold in this community.
Since this community is virtually sold out, the Company's principal activities at Spring Hill are the
operation of its utility subsidiary, the sale of its remaining multi-family and commercial tracts, and its realty
brokerage business. In addition, the Company will derive revenue from collections on existing property
contracts receivable and from single-family homes to be completed in 1985.
The Company has constructed a recreation complex, a country club, and two golf courses. In 1981, the
Company sold its country club and one of the golf courses, and in October, 1984 sold its remaining golf course.
Several shopping centers and medical centers, two elementary schools, a junior high school, a senior high
school, numerous houses of worship and two fire stations are located in the community. The Company has
virtually completed the development of this community, having constructed 438 miles of roads and over 544
miles of water, sewer and gas lines.
Citrus Springs
Citrus Springs, with an estimated population of 3,000, is located 28 miles southwest of Ocala and 25
miles from the Gulf of Mexico. Over 26,000 lots and tracts with a sales volume in excess of $78,000,000 and
over 700 single-family homes with a sales volume in excess of $20,000,000 have been sold at this community.
In 1985, revenues are expected to be generated from collections on existing property contracts receivable,
from recognition of deferred revenues as land improvements proceed, from single-family homes completed
during the year, and from the sale of its land inventory.
A golf course, a clubhouse and a community center have been completed by the Company. Several
churches and a convenience shopping area are located in the community. The Company has completed or
under construction 394 miles of road. In addition, 167 miles of water, sewer and gas lines have been installed.
In 1985, the Company expects to complete the road base for all properties sold.
St. Augustine Shores
St. Augustine Shores, with a population estimated at 4,500, is located 7 miles south of St. Augustine,
between the Intracoastal Waterway and U.S. Highway 1. Prior to 1985, single-family lots had not been available
for sale in this community. Only commercial and multi-family tracts, house and lot packages and condominium
apartment units had been marketed. Over 25 tracts with a sales volume in excess of $2,000,000 and over 1,900
single and multi-family housing units with a sales volume in excess of $87,000,000 have been sold at this
community.
In the future, the Company's marketing efforts at St. Augustine Shores will be concentrated on its
remaining condominium inventory, as well as on the sale of single-famlly lots and multi-family and commercial
tracts. Revenues will also be generated from club, utility and real estate brokerage operations and from
collections on existing property contracts receivable.
10
Certain common areas of the community, such as parks and swale areas, are maintained by St. Augustine
Shores Service Corporation, a non-profit corporation, of which all property owners are members. This
corporation, formerly controlled by the Company, has been transferred to the property owners.
A golf course and country club and a recreation building have been completed by the Company. Several
houses of worship and shopping facilities are located in the community. In this community, where development
of property occurs either before or at the time of sale, the Company has completed or under construction
23 miles of road. In addition, it has installed 62 miles of water and sewer lines.
Sunny Hills
Sunny Hills, with a population of approximately 850 residents, is located in the Florida Panhandle, 45
miles north of the Gulf of Mexico and 35 miles north of Panama City. Over 13,000 lots and tracts with a
total sales volume in excess of $42,000,000 and over 250 single-family homes with a total sales volume in
excess of $10,000,000 have been sold at this community.
In 1985, revenues are expected to be generated from the sale of its land inventory, from the recognition
of deferred revenue as land improvements proceed, from the completion of single~family homes under contract
at the end of 1984, from collections on existing property contracts receivable, and from utility and golf course
operations.
The community will include two golf courses, one of which has been completed, numerous houses of
worship, several of which are presently in existence, and a convenience shopping center. The Company has
completed or under construction 208 miles of road. In addition, 91 miles of water, sewer and gas lines have
been installed.
Pine Ridge
Pine Ridge, the Company's equestrian community, is located 34 miles southwest of Ocala. It has a
population estimated at 200. Over 3,500 lots and tracts with a total sales volume in excess of $55,000,000
and approximately 45 single-family homes with a total sales volume in excess of $3,000,000 have been sold
in the community. In 1985, revenues are expected to be generated from the sale of its land inventory, from
the completion of single-family homes under contract at year-end, from the recognition of deferred revenue
as land development proceeds and from collections on existing property contracts receivable.
The community consists of single-family lots, ranging from one to five and a half acres, and offers facilities,
including an equestrian club on a 94-acre recreational complex and tennis courts. Currently, eight miles of
equestrian trails wind through the community and 20 additional miles are planned. The community will include
a country club and golf course, nine holes of which were completed in 1982. The Company has completed
or under construction 69 miles of road. In addition, 40 miles of water and gas lines have been installed.
Marion Oaks
Marion Oaks, with a population of approximately 3,500 residents, is located 18 miles south of Ocala.
Over 16,000 lots and tracts with a total sales volume in excess of $126,000,000 and over 1,200 single-family
homes with a total sales volume in excess of $48,900,000 have been sold in the community.
In 1985, revenues are expected to be generated from the sale of its land inventory, from the completion
of single-family homes under contract at year-end, from the recognition of deferred revenue as land
development proceeds, from collections on existing property contracts receivable, and from utility and country
club operations.
The community will include playgrounds, two golf courses, several recreation buildings, and a tennis
club. One golf course and a country club have been completed by the Company. A shopping center and several
churches are located in the community. The Company has completed or under construction 193 miles of road.
In addition, 122 miles of water, sewer and gas lines have been installed.
Seminole Woods
Seminole Woods is comprised of 1,554 acres of property located 20 miles north of Orlando. The
community is comprised of single-family lots, each a minimum of five acres. Of the 262 lots in its master plan,
261lots with a total sales volume of $7,450,000 have been sold. Opened in 1979, the community was virtually
completed by the end of 1984. Since the water system is owned by Seminole Woods Community Association,
a non-profit corporation whose members are the property owners, the Company will not derive any revenue
from utility operations here. The Company will, however, continue to recognize revenue from collections on
existing property contracts receivable ..
11
Tierra Verde
Tierra Verde, a 666-acre waterfront subdivision located eight miles south of St. Petersburg, is being
developed and marketed pursuant to a 50% joint venture between the Company's ,wholly-owned subsidiary
and an unaffiliated corporation. The venture, which extends until December 31, 1990, provides for the
Company's subsidiary to receive an annual management fee of $100,000 and to share in the venture's results
of operations equally with its venture partner. Since the formation of the venture in 1976, the marketing and
development of Tierra Verde has resulted in distributions totalling $8,000,000 being made to the Company's
subsidiary.
The Company has sold over 750 lots and tracts with a total sales volume( in excess of $43,000,000 at
Tierra Verde. Revenues will be reported by the venture in 1985 from ·single-family lot sales and its utility
operations, as well as from collections on existing property contracts receivable and from the recognition of
deferred revenue as land development proceeds.
Other Land Assets
In addition to the properties in its existing and new communities, the Company owns 1,406 acres ofland
in Florida which is being held for investment, bulk sale, or future development. This acreage consists of 1,141
acres of land adjacent to the Company's existing communities, approximately 50 acres of commercial property
located in Dade County and 214 acres of land located elsewhere in Florida. Land which is not included in
the Company's master plans for community development may be sold in bulk to other builders and investors,
primarily through the Company's wholly-owned subsidiary, Deltona Land & Investment Corp. However,
the Company is examining the feasibility of the commercial development of the Dade County property.
Historically, the Company has recorded bulk land sales under the full accrual method when all of the
criteria of a sale as defined by Statement of Financial Accounting Standards No. 66 have been met. Those
criteria include (i) that there be a minimum initial and continuing investment by the buyer; (ii) that the
Company's mortgage receivable not be subject to subordination; and (iii) that the Company be relieved of
substantially all of the risks and rewards of ownership on the subject property.
Other Properties
The Company owns approximately 21,890 square feet of space at various shopping centers located at
its communities.
The Company entered into a sale-leaseback agreement with respect to its 56,000 square foot executive
offices in March, 1983.
Utilities
Deltona Utilities, Inc. ("DU") and United Florida Utilities Corporation ("UF"), design, construct and
operate systems for distribution of water and LP gas and for the collection and treatment of sewage at the
Company's community developments and operate a water and sewer system for a. small residential area in
East Tampa located in Hillsborough County. Although DU and UF are wholly-owned subsidiaries of the
Company and officers of the Company control the boards of directors and business affairs of DU and UF,
they operate largely independently of the Company.
DU, whose divisions provide services to the communities of Deltona Lakes, Marco Island and Spring
Hill and to the residential area in East Tampa, serves over 26,900 water customers, over 12,000 sewage disposal
customers and over 6,800 LP gas customers. During the past 10 years, DU's water, sewer and gas customers
have grown at annual compound rates of 10.7%, 5.0% and 3.2%, respectively.
UF, whose divisions provide services to the Company's Central and North Florida communities which
were opened in the 1970s, is dependenf on the Company to fund the expansion of its systems. It presently
serves over 4,600 water customers, over 3,700 sewage disposal customers and over 1,600 LP gas customers.
During the past five years, UF's water, sewer and gas customers have grown at annual compound rates of
17.6%, 11.0% and 10.7%, respectively. The growth ofUF is dependent on the growth of the communities
it services.
DU and UF capitalize the cost of treatment plants and distribution and collection systems. At December 31,
1984, the total cost of the Company's investment in utility plant and lines was approximately $61,780,000,
excluding work in process. The administrative and accounting offices for DU and UF are located at 1244
Coral Way, Miami, Florida. The building, owned by the Company, contains approximately 4,724 square feet.
The cost of construction of these utility systems was advanced to DU and to UF by the Company. In
1981, a portion of such borrowings were refinanced in the form of an $18,000,000 utility loan from certain
banks (the "Utility Loan"). On December 12, 1984, DU completed a private placement of $30,000,000 of
15~% first mortgage bonds due December 1, 1994 (the "Utility Private Placement"). The bonds provide
for annual mandatory sinking fund payments of $3,000,000 beginning on December 1, 1989. The terms of
the bonds prohibit loans to, and investment of funds in, the Company. However, the bonds permit the quarterly
payment of dividends ranging from 25% to 100% of net income of DU based on minimum net worth levels.
The proceeds were used as follows: $18,000,000 to retire the Utility Loan, approximately $4,100,000 for utility
capital expenditures, approximately $4,800,000 to pay delinquent principal and interest and the remainder
for general corporate purposes. The bonds are collateralized by the stock of DU and UF and a first mortgage
lien on substantially all of DU's assets. The Company plans an expansion of its utility plant, collection and
distribution systems which are estimated to cost $16,500,000 over the next five years. The Company expects
to finance this expansion in part from the working capital of DU.
Other Businesses
The Company's title insurance subsidiary was established in 1978 in order to reduce title insurance, legal
and certain related closings costs incurred by the Company in transferring title at its land and housing products
to its purchasers. The subsidiary serves as an agent for TICOR Title Insurance Company, Chicago Title
Insurance Company and other title insurers.
The Company operates seven golf courses and six country clubs at its communities. The Company believes
that the operation of such golf courses and clubs is a significant feature in marketing its communities and
has operated them with the primary goal of enhancing sales of homes and homesites.
The Company's realty subsidiaries perform real estate brokerage and rental services at its communities.
The Company's broadcasting subsidiary operates a security-cable television system at the Company's
condominium complex in Marco Shores.
Discontinued Operations
In September, 1984, the Company sold its wholly-owned lumber subsidiary for $4,000,000, of which the
Company received approximately $3,000,000 in cash, with the balance due within one year. Approximately
$700,000 of such balance is secured by a first mortgage on real estate in Orlando, Florida and the remainder
was used as credits toward the purchase of lumber utilized by the Company in its construction activities.
In October, 1984, the Company sold its airline subsidiary for $1,500,000. The Company-built airport
at Marco Shores was deeded to the State of Florida as part of the Settlement Agreement and leased back
to the Company to operate. See "Regulation-Environmental". The Company subleased the airport to the
purchaser coincident with the sale of the airline. In March, 1985, the purchaser filed a petition for bankruptcy
under Chapter 11 of the Bankruptcy Code. The Company does not anticipate that this proceeding will have
a material adverse effect on the Company.
The Company's mortgage subsidiary, which functions as a mortgage brokerage agent, was opened in 1982
to assist purchasers of the Company's properties in securing financing. In the past its operations have included
the origination and servicing of outside business. Coincident with the discontinuance of its housing business,
the Company will phase out the operations of its mortgage subsidiary. In the fourth quarter of 1984, the
Company sold substantially all of its mortgage portfolio for a profit of $287,000. See "Real Estate:
Housing-Discontinuance of Single-Family Housing Program".
During the past five years the Company has sold several other businesses not essential to its real estate
business, including its asphalt plants, certain golf courses and an FM radio station. None of these sales were
material.
Employees
The Company has various agreements for the purchase of water and specified amounts of LP gas deemed
sufficient to meet the demands ofDU and UF's customers. The Company anticipates no difficulties in extending
or renegotiating such contracts in the future.
'
At December 31, 1984, the Company had approximately 745 employees, of whom 240 were involved
in real estate, 160 were utility personnel, 225 were involved in other businesses, and 120 served in executive,
12
13
professional or general capacities. Certain of the Company's construction activities are carried out by
subcontractors who separately employ additional personnel. Although the Company is not presently a party
to any collective bargaining agreements, it has, in the past, utilized union labor for construction activities in
its Marco Island community and, to a more limited extent, in certain of its Central Florida communities.
The Company's work force has declined by more than 60% since December 31, 1981, largely as a result of
the contraction of the Company's sales force and reductions in its construction personnel. As a result of the
new business strategy and the discontinuance of certain operations, the Company anticipates further reductions
in its work force. See "New Business Strategy; Real Estate-Marketing". The Company considers its employee
relations to be satisfactory.
Competition
The Company faces intense competition from many entities engaged in real estate development activities,
many of which have greater resources and geographical diversity than the Company, and from property owners
in the Company's communities seeking to resell their land, single-family homes and multi-family housing units.
In the sale of homes and single-family lots for second-home buyers, the Company has competed on a regional
basis with other builders and developers. Competition in the sale of housing units is based primarily upon
location, price, reputation, quality of product, and the existence of commercial and recreational facilities and
amenities.
Large tracts ofland for development in the State of Florida (particularly waterfront property) have become
scarce. In the purchase of undeveloped land, the Company faces competition from numerous entities. The
scarcity of product, combined with inflation, has resulted in higher prices for such properties.
Regulation
The Company's real estate business is subject to regulation by various local, state and federal agencies.
The communities are increasingly subject to substantial regulation as they are planned, designed and
constructed, the nature of such regulation extending to improvements, zoning, building, environmental, health
and related matters.
Community Development
In Florida, as in many growth areas, local governments have sought to limit or control population growth
in their communities through restrictive zoning, density reduction, and the imposition of impact fees and more
stringent development requirements. Although the Company has taken such factors into consideration in its
master plans by agreeing, for example, to make improvements, construct public facilities, and dedicate certain
property for public use, the increased regulation has lengthened the development process and added to
development costs.
Environmental
To varying degrees, certain permits and approvals will be necessary to complete the development of all
of the Company's communities. Despite the fact that the Company has obtained substantially all of the permits
and authorizations necessary to proceed with its development work at this time, it is possible that more stringent
requirements could be imposed on development work in the future. Although the Company cannot predict
the impact of such requirements, they could result in delays and increased expenditures. In addition, the
continued effectiveness of those permits and authorizations already granted is subject to many factors, some
of which, including changes in policies, rules and regulations and their interpretation and application, are
beyond the Company's control.
The Company's Marco Island and Marco Shores communities had been the subject of permitting
uncertainties since the early 1970's, at which time the Company ceased the sale of its Marco properties pending
the resolution of such uncertainties. In 1976, these uncertainties intensified when the Corps denied the
Company dredge and fill permits necessary to complete the development of Marco Island. Untill982, when
the Company entered into the Settlement Agreement referred to below, the Company was unable to determine
the extent to which the development of Marco could be completed.
The Company implemented several programs following the permit denials to resolve the concerns of
customers aflected by the Corps' action, including programs whereby the Company agreed to refund, over
an agreed-upon period, monies previously paid to the Company by such customers for the purchase of land
at Marco. To secure the payment of such refunds, certain land assets of the Company were placed in trust,
with the net proceeds from the sale of such properties to be used for refunds. The number of purchasers
requesting refunds was substantially greater than anticipated, such that the Company was unable to meet the
original refund schedules from the orderly sale of trust properties. Therefore, the refund programs have been
amended to defer repayments to coincide with the anticipated availability of proceeds from the sale of trust
properties. In the event that unfavorable market conditions at Marco continue to hamper the sale of the
remaining trust properties, such repayments could be further delayed.
On July 20, 1982, the Company entered into the Settlement Agreement with the State of Florida and
various state and local agencies, concurred in by certain federal agencies and endorsed by key environmental
interest groups, to resolve the permitting issues affecting Marco. In September, 1983, the Corps issued a federal
permit authorizing development at Marco as provided for in the Settlement Agreement, and in January, 1984,
the Company received a U.S. Coast Guard Permit-the last remaining federal permit needed to complete
·
development at Marco.
The Settlement Agreement and the federal permits provide for the Company to develop as many as 14,500
additional dwelling units in the Marco vicinity. The Settlement Agreement became effective when, pursuant
thereto, approximately 12,400 acres of the Company's Marco wetlands were conveyed to the State in exchange
for ~pproximately 50 acres of State-owned property near the Miami International Airport in Dade County,
Flonda. The Settlement Agreement constitutes the permits required from the Florida Department of Environmental Regulation (the "DER") for the development of the additional dwelling units in the Marco vicinity.
In June, 1984, Collier County issued a development order and the Company obtained the remaining local
approvals necessary to develop Marco Shores, Horr's Island and additional dwellings at Marco Island, in
accordance with its application. In December, 1984, all parties entered into a stipulation to dismiss the appeal
of the development order which had previously been filed by the Florida Department of Veteran and
Community Affairs. See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Nate 9 to Consolidated Financial Statements.
Marketing
The Company is also subject to a number of statutes imposing registration, filing and disclosure
requirements with respect to homesites, homes, condominiums and vacation ownership properties sold or
proposed to be sold to the public. On the state level, the Company's land, condominium and vacation ownership
sales activities are subject to the jurisdiction of the Division of Florida Land Sales, Condominium and Mobile
Homes ("Division") which requires registration of subdividers, subdivided land, condominiums and vacation
ownership properties; reviews the contents of advertising and other promotional material; inspects the
Company's land and development work; exercises jurisdiction over sales practices; and requires full disclosure
to prospective purchasers of pertinent information relating to the property offered for sale.
. In February, 1980, the Company entered into a Consent Order with the Division as a result of delays
the Company encountered in completing improvements to lots in certain of its Central and North Florida
comm~nities. The Consent Order provides a program for notifying all affected customers of the anticipated
delays m the completion of improvements, various options which may be selected by affected purchasers, a
schedule for completing certain improvements, and a deferral of the obligation to install water lines until
requested by the purchaser. The Consent Order also requires the maintenance of a specified ratio of contracts
receivable to improvement obligations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations: Liquidity and Capital Resources-Other Obligatiohs" and Notes 2 and 8 to
Consolidated Financial Statements. Based upon the Company's experience with affected customers the
Comp.any believes that the total costs arising from the delays in completing such improvements wili not
matenally exceed the amount provided for in the Consolidated Financial Statements.
The Company's land sales activities are further subject to the jurisdiction of the laws of various states
and certain Canadian provinces in which the Company's properties are offered for sale. Most jurisdictions
also regulate the sale of condominium apartments and vacation ownership properties and, to a lesser extent,
homes constructed by the Company. Typically, such regulation requires registration and disclosure similar
to the land sales activities described above.
On the federal level, the Company's homesite installment sales are subject to the Federal Consumer Credit
Protection ("Truth-in-Lending") Act. In addition, the Company's activities are subject to regulation by the
Interstate Land Sales Registration Division ("ILSRD"), which administers the Interstate Land Sales Full
Disclosure Act. The Act requires that the Company file with ILSRD copies of applicable materials on file
with the Division as to all properties registered; certain properties must be registered directly with ILSRD,
in addition to being registered with the Division.
14
15
The Company has either complied with applicable statutory requirements relative to the properties it
is offering or has relied on various statutory exemptions which have relieved the Company from such
registration, filing and disclosure requirements. If these exemptions do not continue to remain available to
the Company, compliance with such statutes may result in delays in the offering of the Company's properties
and products to the public.
Real estate salespersons must be licensed in the jurisdiction in which they perform their activities. Real
estate brokerage companies in Florida, as well as their brokers and salespersons, must be registered with the
Division and licensed by the Florida Real Estate Commission.
Utilities
The utility subsidiaries are regulated, as to water and sewer services, in part by the Florida Public Service
Commission and in part by the regulatory authorities of the respective counties in which they are located.
The control exercised by both the Public Service Commission and the counties extends to utility services,
facilities, rates and operating areas.
The utilities' LP gas operations are regulated by the Florida Department of Insurance. The Company
has been granted an exemption by the Securities and Exchange Commission from the Public Utility Holding
Company Act.
Plans and specifications for all central water facilities in Florida are subject to approval by the DER.
Disinfection of such systems is monitored by the DER and the Florida Department of Health and
Rehabilitative Services ("HRS"). Permits to construct or operate any sewage collection or sewage treatment
plants must also be obtained from the DER. Quality control is monitored by the DER and by HRS.
Miscellaneous
In addition, various other subsidiaries and divisions of the Company are subject to regulation by local,
state and federal agencies. Such regulation extends to the licensing of operations, operating areas and personnel;
the establishment of safety and service standards; the approval of rates and charges; and various other matters.
The country clubs operated by the Company are regulated by the Florida Department of Business
Regulation, Division of Hotels and Restaurants; liquor licenses must be obtained from the Department's
Division of Alcoholic Beverages and Tobacco.
EXECUTIVE OFFICERS OF THE COMPANY
The table below sets forth the executive officers of the Company, their ages (at March 31, 1985) and their
principal occupations during the past five years; they have been appointed to serve in the capacities indicated
until their successors are appointed and qualified, subject to their earlier resignation or removal by the Board
of Directors.
Principal Occupations
During Past Five Years
Name and Age
Frank E. Mackie, Jr., 68....................
Chairman of the Board and Chief Executive Officer of the
Company since November, 1979. Mr. Mackie, Jr.
co-founded the Company in 1962.
Principal Occupations
During Past Five Years
Name and Age
Michelle R. Garbis, 38
Mrs. Garbis, who joined the Company in 1973, has been
Corporate Secretary and counsel since July, 1974.
William I. Livingston, 38 .................. . Mr. Living.ston,. who j'?ined the Company in 1973, has
been Semor VIce President-Department of Legal Affairs
& General Couns~l since December 1, 1983. Prior
ther~to, he was Vtce President-Department of Legal
Affatrs & General Counsel since March, 1976.
Joseph Mancilla, 38 ....................... . Mr. ~ancilla, who joined the Company in 1975, has been
Ass.t~tant ~eneral Counsel since Aprill, 1981, an officer
positton smce August 14, 1984.
Donald 0. McNelley, 40 .... , ............. .
Mr. McNelley,, who joined the Company in 1971, has been
Treasurer smce December, 1982. Prior thereto he
served as Comptroller since August', 1976.
'
Robert L. Mehl, 48
Mr .. Mehl, ~ho rejoined .t~e Company in May, 1983 as
VIce. President-Advertising & Sales Promotion, had
pr.evtously served as Director of Marketing for Citrus
Hills Investment Properties, a real estate developer
(June, 1982-May, 1983) and Director of Marketing for
Context Development Company, also a real estate
developer (June, 1976-June, 1982).
Arsenio Milian, 40 ........................ . Mr. M~lian, who joined the Company in 1969, has been
Prestdent o~ Deltona Utilities, Inc., a subsidiary of the
Company, smce January, 1983. Prior thereto he served
as VIce President-Utility Operations (Janu~ry, 1976December, 1982).
Lee M. Sanborn, 44 ....................... . Mr. Sanb.orn, who rejoined the Company in April, 1984
as President of Three Seasons Corporation, a subsidiary
of the Company, had served as Vice President of Real
Estate and Development of Roma Corporation an
operator and franchisor of restaurants (February, 1981March, 1984) and as Vice President of Land Develop!llent for Continental Mortgage Investors, a real estate
mvestment trust (February, 1979-February, 1981). Mr.
Sanborn h~d previo~sly been employed by the Company, servmg as VIce President-Land Development
from 1978 through 1979.
James M. Stackpoole, 40 .................. . Mr. St~ckpoo1e, who joined the Company in 1971, has been
President of.DelMarco Corporation, a subsidiary of the
Co~pany, smce May, 1983. Prior thereto, he served as
Prestdent ofTamJ?a Palms Corporation (January, 1983May, 1983) and Vtce President-Clubs Division (January
1979-January, 1983).
'
Frank E. Mackie, Ill, 40 .................. . President and Chief Operating Officer of the Company
since November, 1979. Prior thereto he held various
executive positions with the Company.
ITEM 3
Neil E. Bahr, 59 .......................... . President of Deltona Land & Investment Corp., a subsidiary of the Company, since September, 1974.
The Co~pany had filed fo~r companion cases against the Property Appraiser and Tax Collector of Marion
County, .Flonda and the Flonda Department of Revenue in the Circuit Court of Marion County Florida
challengmg the 1976, 1977, 1978 and 1979 real property assessments and the related taxes of appr~ximatel;
$7?6,000, $811,000, $792,000 and $829,000, respectively for the Company's Marion Oaks Subdivision. In these
smts, the Company alleged that the. asses~ments exceeded the constitutional standard of just value of the
property and that the. Property Appraiser. fatled to consider the rules and regulations of the Florida Department
of Revenue
. , statutory reqmrements relating to real propert y assessment s. Th e c ompany h a d
.
. "and vanous
~emitted ~ts good fatth payment o~ ~uch taxes. in each of the respective years and had made provision in
tts financtal statements for the rematmng taxes tt believed might be due in the event it did not prevail. In
1982, followin? affirmation by t~~ Fifth Di~tri~t Court of Appeal of the final judgment entered in favor of
the Company m 1981, the provision was ehmmated and the Company reported approximately $1,200,000
Joseph F. X. Corbin, 57 ................... . Mr. Corbin, who joined the Company in 1964, has been
President of Deltona Marketing Corporation, a subsidiary of the Company since December, 1984. Prior thereto,
he served as Sr. Vice President of Deltona Marketing
Corporation (January, 1983-December, 1984) and Vice
President-Sales (October, 1973-December, 1982).
Earle D. Cortright, Jr., 44
Mr. Cortright, who joined the Company in 1966, has been
Senior Vice President and Chief Financial Officer since
November, 1979.
16
LEGAL PROCEEDINGS
17
I
i
I
as other revenues. In 1983, the Florida Supreme Court denied the petition for writ of certiorari filed by the
Property Appraiser, seeking a review of the decision, and also denied the petition filed by the Company seeking
a clarification as to the binding effect of the decision on subsequent tax years.
The Company has also filed five companion cases against the Property Appraiser and Tax Collector of
Marion County, Florida and the Florida Department of Revenue in the Circuit Court of Marion County,
Florida, challenging the 1980, 1981, 1982, 1983 and 1984 real property assessments for the Company's Marion
Oaks Subdivision. The tax payment in dispute for each of the years is $369,807, $625,429, $635,047, $501,837
and $519,654, respectively. Although action in these cases had been stayed pending resolution of the 1976
through 1979 tax cases, these cases are now proceeding. In February, 1985, the trial judge entered final
judgment in favor of the Company with respect to the 1980 real property assessment. The Property Appraiser
has appealed this decision. The Company believes that the 1981 through 1984 cases will also be decided in
accordance with the determinations issued in the earlier cases, and accordingly, has made no provision in
its financial statements for any additional tax payments, beyond good faith payments previously made.
The Company is subject to claims resulting from the 1976 Marco permit denials and has incurred certain
obligations with respect to its affected customers. In the opinion of the Company, however, the ultimate costs
which may result from the resolution of these matters will not materially exceed the amount for which provision
has been made in the financial statements of the Company. See "Business: Regulation-Environmental" and
Note 9 to Consolidated Financial Statements.
The Company is also a party to certain legal proceedings arising in the ordinary course of its business.
The outcome of these matters will not, in the opinion of the Company, have a material adverse effect on the
business or financial condition of the Company.
ITEM 5
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is traded on the New York and Pacific Stock Exchanges under the ticket
symbol D LT. The following table sets forth the reported high and low sales prices for the Company's Common
Stock during the periods indicated as reported in the record of composite transactions for NYSE listed
securities.
Quarter
High
Low
9%
1982-First Quarter
Second Quarter .............................................. .
Third Quarter ................................................ .
Fourth Quarter .............................................. .
8
llYs
6%
6Ys
4%
6%
1983-First Quarter ................................................ .
Second Quarter .............................................. .
Third Quarter ................................................ .
Fourth Quarter .............................................. .
13%
15Ys
14%
12¥s
8%
11
10o/s
8¥s
9~
6'Vs
8
7%
6
6~
•
o
0
0
o
0
0
o
0
0
o
0
0
0
o
0
0
0
0
0
0
If
I
I
0
0
I
I
I
I
0
I
0
0
0
It
f
0
0
0
0
0
0
0
0
0
1984--First Quarter ................................................
Second Quarter ..............................................
Third Quarter ................................................
Fourth Quarter ..............................................
I
.
.
.
.
8~
5
4Y<l
ITEM 6
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following t~ble s~mm~rizes. selected consolidated financial information and is qualified in its entirety
and should be read zn conJunctwn wah the Consolidated Financial Statements. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
Consolidated Income Statement Data
(in thousands except per share amounts)
Revenues:
Sales-houses and apartments
Single-family ............................................. . $ 2,540
16,669
Multi-family ............................................. .
Total ............................................ .
19,209
Net land sales(1) ............................................ .
17,501
Improvement revenue-prior period sales(2) .................... .
6,594
Interest income(3) .......................................... .
8,015
uylity revenues ............................................. .
13,686
Sales--other(4) ............................................. .
11,954
Equity in earnings of joint venture and non-consolidated
subsidiary(5) ............................................. .
Total ............................................ .
Costs and Expenses:
Cost of sales and improvements ............................... .
Provision for multi-family inventory writedown(6) ............... .
Loss from single-family housing operation(?) .................... .
Commission, advertising and other selling expenses .............. .
General and administrative and real estate tax expenses .......... .
Interest expense ............................................ .
Subtotal ......................................... .
Provision for Marco permit costs(8) ........................... .
Total ............................................ .
Income (loss) from continuing operations
before taxes .............................................. .
Provision (benefit) for deferred taxes ............................ : :
Income (loss) from continuing operations ......................... .
Discontinued Operations(9):
Income (loss) from lumber, airline and
lodging segments net of taxes . . . .
Gain on disposal of lumber and airlin~
~~~~·e~~~ ·~~t· ~f ~~~~s·: : :: : : :
$ 2,879
26,537
29,416
11,044
5,508
11,358
11,758
13,134
47,743
5,700
310
16,224
14,873
17,986
102,836
95,089
(24,455)
(11, 795)
(24,455)
101
193,030
125,155
15,053
14,014
18,641
15,414
14,068
27,457
,117,671
22,700
140,371
30,036
16,018
24,433
212,277
29,249
15,375
14,383
184,162
(27,875)
(10,181)
(17,694)
114
(4.86)
$
(2.63)
(4.75)
$
(2.61)
4,478
8,073
8,868
~
~
5,389
4,829
(1,536)
(547)
(225)
$ (19,230)
$
$
(4.41)
$
1.35
$
1.22
$
(4.80)
$
1.21
$
1.16
4,008
See Accompanying Notes to Selected Consolidated Financial Information.
19
50,329
106,055
44,284
9,122
13,525
8,138
11,805
141,790
Per Share Amounts:
Net income (loss) from continuing operations ................... . $
The Company has never paid any cash dividends on its Common Stock. The Company's loan agreements
contain certain restrictions which currently prohibit the Company from paying dividends.
$ 55,726
60,732
(11,795)
(76)
635
5,032
$ 51,971
87,651
139,622
29,545
11,885
15,985
9,977
12,097
47,381
$(11,681)
Net income (loss) ........................................... . $
Weighted average shares outstanding .......................... .
$ 14,011
25,078
39,089
24,641
7,149
14,296
9,518
17,235
1980
568
112,496
Net income (loss) ............................................. . $ (23,896)
On March 15, 1985, the last reported sales price ofthe shares of Common Stock on the NYSE was $5.875.
There were 2,697 holders of record of the Company's Common Stock.
18
Years ended December 31,
1983
1982
1981
1984
4,842
4,003
THE DELTONA CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
NOTES TO SELECTED CONSOLIDATED FINANCIAL INFORMATION
Consolidated Balance Sheet Data
(in thousands)
Years ended December 31,
1982
1981
1980
6,237
52,357
24,357
$ 10,941
64,116
43,940
$ 17,671
73,298
90,421
$ 26,206
73,185
85,802
2. Improvement revenue-prior period sales consists of previously deferred revenue recognized due to
completion of improvements on previously sold lots. Deferred revenue consists of revenue deferred to reflect
the obligation to complete the development of such lots. See Note 7 to Consolidated Financial Statements.
3. Interest income primarily consists of interest earned on contracts and mortgages receivable and on
escrowed cash balances and the amortization of valuation discounts.
1983
1984
$ 8,949
Cash, including escrow deposits(lO)
43,017
Contracts receivable for land sales-net(11) ......................
14,816
Mortgages and other receivables-net ...........................
Inventories, at cost(12):
24,318
Houses and apartments-net
50,066
Land and improvements
_!dg
Other
75,696
Total inventories ...................................
$
39,125
53,714
~
97,913
66,585
46,835
4,432
117,852
53,426
43,786
4,324
101,536
31,066
43,491
~
78,721
34,922
Land held for investment, bulk sales, or future development, at cost .
71,751
Property, plant, and equipment, at cost-net .....................
Prepaid expenses, deferred charges and sundry ................... ~
Total assets ....................................... $252,412
22,317
77,169
4,540
$284,890
15,928
78,331
4,030
$335,138
11,504
77,326
~
$380,931
16,879
64,350
~
$356,678
Mortgages and similar debt ................................... $139,299
30,169
Accounts payable, accrued expenses and customers' deposits(13) ....
25,498
Allowance for Marco permit costs(8)
40,810
Deferred revenue(2) ..................................... · · · · .
Deferred income taxes ........................................
235,776
Total liabilities
Stockholders' equity:
5,033
Common stock, $1 par value ............•.........••.... 0. 0.
49,162
Capital surplus
Retained earnings (deficit) ................................... (37,559)
16,636
Total stockholders' equity .................................... ·
Total liabilities and stockholders' equity ............... $252,412
$147,756
25,887
25,912
44,828
$184,864
36,624
29,716
44,052
$203,082
53,380
7,234
48,195
244,383
295,256
322,072
$174,498
60,997
9,731
49,763
8,064
303,053
5,030
49,140
(13,663)
40,507
$284,890
4,024
37,840
(1,982)
39,882
$335,138
3,989
37,622
17,248
58,859
$380,931
3,947
37,272
12,406
53,625
$356,678
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1. Net land sales consist of gross land sales less estimated uncollectible installment sales, deferred revenue
and contract valuation discount. Included in 1984 estimated uncollectible sales is a $2,200,000 provision for
certain contracts receivable which were deemed uncollectible. See Notes 1, 2 and 7 to Consolidated Financial
Statements.
~
See Accompanying Notes to Selected Consolidated Financial Information.
4. Sales-other consists of revenues primarily from country club operations.
5. Equity in earnings of joint venture and non-consolidated subsidiary constitutes the Company's share
of its Tierra Verde joint venture and the earnings (loss) of its wholly-owned mortgage subsidiary.
6. The provision for multi-family inventory writedown represents a reduction in the book value of the
Company's multi-family housing inventory to its estimated net realizable value.
~· 7. See Note 1 to Consolidated Financial Statements.
8. Provision for Marco permit costs represents the Company's estimated obligations to customers
affected by Marco permit denials. From 1976 through 1982 the Company provided in its financial statements
an aggregate of $58,300,000 towards these obligations, of which $18,507,000 remained at December 31, 1984.
Also included is an additional $6,991,000 relating to interest accrued on these obligations. See Note 9 to
Consolidated Financial Statements.
9. See Note 12 to Consolidated Financial Statements.
10. Cash, including escrow deposits, includes cash escrowed for improvement work, for Marco
Island-Marco Shores refund programs and for deposits held for customers. As of December 31, 1984,
approximately $4,053,000 of total cash was held in escrow. Also included is $4,783,000 held by DU; use of
these funds by the Company is restricted under DU's first mortgage bond agreement.
11. Contracts receivable for land sales (net) consists of contracts receivable outstanding less estimated
uncollectible installment sales, deferred revenue, and contract valuation discount. As of December 31, 1984,
approximately $13,056,000 of gross contracts receivable was due within one year. In addition, approximately
$7,215,000 was past due over 30 days.
12. Inventories, at cost, consist of single and multi-family housing units completed or under construction,
unimproved to fully improved land, other land holdings and other subsidiary inventories.
13. Accounts payable, accrued expenses and customer deposits consist of trade payables, accrued
commissions, accrued taxes (other than payroll), accrued interest, other accrued expenses, and customer
deposits. As of December 31, 1984, customer deposits were $5,031,000.
20
21
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company was founded in 1962 to develop planned communities in Florida. From 1962 through 1973,
the Company opened eight communities, accumulated retained earnings of $28,138,000, acquired large
quantities of undeveloped acreage and platted over 170,000 lots and tracts in its communities.
In the early 1970's, as a result of evolving environmental laws and regulations, the Company ceased the
marketing and sale of its undeveloped land in the Marco vicinity (Marco Island and Marco Shores). This
action, together with the recession which began in 1973, resulted in substantial losses and cash flow problems
in 1974 and 1975 and caused the Company to incur substantial debt for operational purposes, resulting in
a highly leveraged capital structure.
In April, 1976, the U. S. Army Corps of Engineers (the "Corps") denied the Company's application for
dredge and fill permits at its Marco Island community. Although the Marco Shores community was not the
subject of such application and denial, the Company anticipated that, in view of the Corps' decision, permits
necessary for the development of Marco Shores as originally platted would also be denied. As a result the
Company incurred certain obligations to customers who had contracted to purchase property in the Marco
vicinity and were adversely affected (see Note 9 to Consolidated Financial Statements). From 1976 through
1982, the Company provided in its financial statements an aggregate of $58,300,000 toward these obligations,
with the final provision of $22,700,000 made in 1982.
In spite of the continuing impact of the Marco permit denials, the Company recorded net profits in the
years 1977 through 1981 as a result of improved operations, including expanded condominium sales, and a
number of asset sales.
In 1981 and 1982, the Company continued to incur costs associated with the Marco permit denials, and
also experienced a significant decline in new sales of single and multi-family housing units and substantial
cancellations of previous condominium sales due to the effects of the recession on the Florida real estate market.
In late 1981, in order to counteract these factors, the Company implemented cost-cutting programs including
reductions in advertising, marketing and general and administrative expenses. In addition, the Company
discontinued its single-family housing program in order to concentrate on selling its inventory of multi-family
housing.
Although the single-family housing markets improved in late 1982, the Company, due to the cost-cutting
measures implemented in 1981 and early 1982, was not prepared to re-enter the single-family housing market
until mid-1983. Additionally, the market for multi-family housing in South Florida did not improve, thus
adversely affecting the Company's ability to sell its Marco Island multi-family housing.
The Company incurred losses in 1982, 1983 and 1984. As a consequence of these losses, the Company's
highly leveraged capital structure and liquidity problems, the Company implemented a new business strategy
in 1985, designed to improve its profitability and cash flow. Based on its analysis of the costs and risks involved
in its single-family housing program, the Company discontinued the sale and construction of single-family
homes (except for those under contract at December 31, 1984) in order to reduce its marketing, promotion
and related overhead costs and, prior to the end of 1985, to eliminate housing construction and related support
costs. In 1985, the marketing of single-family lots and multi-family and commercial tracts in its existing
communities will be emphasized. The sale of condominium and vacation ownership units will also continue
to be emphasized until the existing inventory is sold.
C:ompany's Board of Directors on specified matters, (iii) not engage in certain takeover actions, and (iv) not
d1sp~se o~ his .stock without Board approval The Tampa transactions constitute Good's only material
relat10nsh1ps w1th the Company and its affiliates.
. On Fe~ruary ~~· 1985: the Tampa Sale contract was. modified to accelerate the scheduled closing date
wh1le allowmg add1t10nal tlme for the payment of a port10n of the purchase price. The Tampa Sale closed
on Marc~ 29: 1985, with the Company receiving $14,400,000 in cash (including prior deposits), a $6,000,000
note beanng mterest at a rate of 15~% per annum due April29, 1985, and $17,500,000 in non-interest bearing
notes due June 28, 1985: All such notes are secured by mortgages on the Tampa property and by the 200,000
shares of Common Stock of the Company acquired by Good. The gain on the Tampa Sale is expected to be
approximately $24,000,000, with approximately $12,000,000 to be recognized in the first quarter of 1985 and
the balance to be recognized in the second quarter. Cash proceeds received on March 29, 1985 were used
to repay loans in the amount of approximately $8,300,000, approximately $900,000 in accrued interest and
the remainder for general corporate purposes. The note collections will be used to repay the approximately
$11,700,000 in bank loans, to escrow $10,000,000 specifically for land development work- in the Company's
Central and North Florida communities and the balance for general corporate purposes. In the event that
Good is unable to meet his debt obligations, the Company would be hampered in its ability to proceed with
such land development work and to make such bank loan repayments, thus requiring a modification of the
loan agreements.
Under its new business strategy, the Company's focus in the future will be on the development and sale
of land. In 1985, the Company will proceed with the planning of three new Florida developments: a 7,000
acre sportsmen'~ facility consisting of approximately 600 single-family homesites in Putnam County; a secluded
resort commumty zoned for approximately 300 multi-family housing units on Horr's Island, located near
Marco Island; and a recreational community zoned for approximately 600 single and 10,000 multi-family
housin~ units located at Marco Shores. The Company will also examine the feasibility of developing
approximately 50 acres of commercial property in Dade County, Florida.
Results of Operations
Years Ended December 31, 1984 and 1983
Revenues
Total revenues were $78,381,000 for 1984 compared to $83,294,000 for 1983. Revenues from housing
sales were down 35% in 1984, due primarily to lower condominium sales which declined approximately 36%
from the prior year. The decline in condominium revenues was a result of lower unit sales volumes and sales
incentive programs introduced in mid-1983, such as discounts in the form of leasing programs, furniture
packages, and lot trade-in allowances. Revenues from the sales of single-family housing and of vacation
ownership units are recorded at the time of closing, while condominium revenues are recognized under the
percentage-of-completion method. See Note 1 to Consolidated Financial Statements.
In August, 1984, the Company announced the discontinuance of the single-family home portion of its
real estate segment. The loss from single-family homes since August, 1984 was $310,000 and is reported
separately from activity prior to the announcement. Revenues and expenses from discontinued single-family
homes for the period from August 14 through December 31, 1984 were $1,902,000 and $2,212,000, respectively.
H?using gross profit margins (sales less cost of sales) were 16.5% and 29.0% for 1984 and 1983,
respectively. The decline in profitability reflects the impact of the sales incentive programs.
The backlog of pre-sold housing products was $15,000,000 at December 31, 1984, compared to $5,700,000
at December 31, 1983. The Company expects that all of the backlog at December 31, 1984 will be delivered
by ~ecember 31, 198.5. The Company has at times experienced cancellations of substantial portions of its
housmg backl~g due 1~ large measure to economic conditions. The Company experienced a decrease in the
percentage of 1ts housmg orders cancelled during 1984.
A part of the Company's strategy was the development and marketing of a new community located near
Tampa, Florida which was scheduled to open on January 13, 1985. On January 9, 1985, the Company entered
into a contract to sell the project to Kenneth M. Good ("Good"), a Colorado-based developer, for $37,900,000
payable in cash at the closing which was scheduled to occur by June 28, 1985. Good also purchased 200,000
shares of the Company's Common Stock for $5 a share, or $1,000,000 (immediately prior to the announcement
of these transactions the price of the Company's Common Stock on the New York Stock Exchange was 5%).
In conjunction with the stock purchase, Good entered into an agreement providing that for a period of two
years he would: (i) not acquire additional shares, (ii) vote in accordance with the recommendation of the
Gross land sales were $26,043,000 for 1984 versus $15,984,000 for 1983. Net land sales (gross land sales
less estimated uncollectible installment sales, deferred revenue and contract valuation discount) increased to
$17,501,000 for 1984 compared to $11,044,000 for 1983. Included in both gross land sales and net land sales
for 1984 was the sale of a Marco Island beachfront tract for $8,400,000, while the 1983 amount included a
$3,800,000 bulk land sale. In the fourth quarter of 1984, the Company made a $2,200,000 additional provision
22
23
Costs and Expenses
to its allowance for contract cancellations for the cancellation of certain contra~ts receivable which were
deemed uncollectible. Such contracts receivable arose from four related commerctal tract sales and are not
necessarily representative of the total contracts receivable portfolio.
The gross profit margin on net land sales (net land sales less cost of sales) was 42.3% for 1984 co~pared
to 55.7% for 1983. The decline was primarily due to the inclusion of.the $8,400,000 tract sale whtch had
a 4% gross profit margin and the $2,200,000 provision referred to above.
In mid-1983, the Company modified the terms of its retail land sales programs by lowering it.s minim~m
down payment from 10% to 5%. Because of accounting requirements, a sale cannot be recogmzed untl~ a
minimum of 10% of the sales price has been collected. The change in the down payment terms, coupled wtth
the accounting requirement, resulted in an increased backlog ofland sales of $3,100,000 at December 31, 1984,
compared to $1,200,000 at December 31, 1983.
The following table reflects the Company's real estate product mix for 1984 and 1983:
Years ended
December 31,
Housing Sales:
Single-family ................. · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Condominium .................. · .. · · · · · · · · · · · • · · · · · · · · · · · · · · ·
Vacation ownership ................ · . · · .. · · · · · · · · · · · · · · · · · · · · ·
Total ............ · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Gross Land Sales:
Bulk sales .................. · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Retail sales . . . . . . . . . . . . . . . . . . . . . . . . .. · . · · · · · · · · · · · · · · · · · · · · · ·
Total ............ · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Total Real Estate ........................ · · · · · · · · · · ·
1984
1983
$ 2,540,000
14,194,000
2,475,000
$ 2,879,000
22,233,000
4,304,000
19,209,000
29,416,000
11,845,000
14,198,000
4,919,000
11,065,000
26,043,000
15,984,000
$45,252,000
$45,400,000
Improvement revenues result from the recognition of revenue deferred from prior period sales.
Recognition occurs as development work proceeds on previously sold property. Improvement re.venues totalled
$6,594,000 for 1984 versus $5,508,000 for 1983. This increase reflects the Company's mcreased land
development expenditures in 1984 compared to 1983.
·
$8 015 ,000 1'cor 1984 compared to $11 , 358 , 000 for 1983. This decline resulted
from
•
I nterest tncome was ,
lower contracts and mortgages receivable balances, as well as from the decrease in cash held m escrow·
Revenues from the utility subsidiaries were $13,686,000 for 1984 compared to $11,758,000 for the 19.83
period. The increase in utility revenues was due to rate increases granted in early 1984. Gross profit margms
were 46.0% for 1984 compared to 45.4% for 1983.
Revenues from sales-other were $11,954,000 for 1984, down from $13,134,000 for 1983. Included in
sales-other revenues for 1983 were $2,000,000 from the Company's asphalt subsidiary. Substantially all of
the assets of the asphalt subsidiary were sold in the first quarter of 1984; such sale accounted for $700,000
in sales-other revenues in the first quarter of 1984.
The Company's joint venture at Tierra Verde contributed $1,319,~ to earnings ~or 1984 compared. to
$834,000 for 1983 as a result of the recognition of deferred revenue due to mcreased land Improvements durmg
1984.
The Company's non-consolidated mortgage subsidiary r~ported a ~rofi~ of $103,000 for 1984 compa~ed
c r 1983 • This was the result of a sigmficant dechne m mortgage. placements
for thtrd
•
•
••
t o a profit of $242 ,000 1'0
party customers caused by increased competition from other fin~ncial ~nstitutions .and a d~chne t~ acttvtty
caused by rising mortgage interest rates. Coincident with the dtscontmuance of tts housmg busmess, the
Company will phase out the operations of its mortgage subs~diary during 1985. In the fourth quarter of 1984,
the Company sold substantially all of its mortgage portfoho for a profit of $287,000.
24
Costs and expenses for 1984 were $102,836,000 compared to $95,089,000 for 1983.
Cost of sales totalled $47,743,000 for 1984 compared to $47,381,000 for 1983. The increase in such costs
represented 5% of the total increase in costs and expenses. The overall increase in the total cost of sales relative
to sales reflects the $8,400,000 sale in 1984 of the Marco Island beachfront tract with a cost of $8,100,000.
In the fourth quarter of 1984, as a result of unfavorable market conditions, the Company reevaluated
its multi-family inventory. Accordingly, the Company incurred a $5,700,000 provision for the writedown of
its multi-family inventory to its estimated net realizable value.
Commissions, advertising and other selling expenses totalled $16,224,000 for 1984 versus $15,053,000
for 1983 and represented 15% of the increase in total costs and expenses over the period indicated. As a
percentage of housing sales and gross land sales, such expenses were 35.9% for 1984 and 33.2% for 1983.
Advertising expenditures increased significantly in late 1983 ~nd 1984 as a part of the Company's marketing
efforts. Such expenses were $2,924,000 for 1984 versus $1,782,000 for 1983 and accounted for 97% of the
increase in commissions, advertising and other selling expenses.
Interest expense for 1984 was $17,986,000 compared to $18,641,000 for 1983, a 3.5% decrease. Total
interest cost (including capitalized interest) was $20,300,000 and $21,621,000 for 1984 and 1983, respectively.
The decline in interest cost was the result of a decrease in outstanding debt obligations and lower interest
rates.
Net Loss
The Company reported a net loss of $23,896,000 ($4.75 per share) for 1984, compared to a net loss of
$11,681,000 ($2.61 per share) for 1983. The loss from continuing operations was $24,455,000 ($4.86 per share)
for 1984, compared to $11,795,000 ($2.63 per share) for 1983. Discontinued operations of the lumber and
airline segments reported losses of $76,000 ($.02 per share) and income of $114,000 ($.03 per share) for 1984
and 1983, respectively. Discontinued operations for 1984 also included a $635,000 gain ($.13 per share) from
the sale of the lumber and airline segments.
Years Ended December 31, 1983 and 1982
Revenues
Revenues declined to $83,294,000 in 1983, down 26% from the 1982 level of $112,496,000. This decline
is primarily the result of a decrease in housing and gross land sales.
Revenues from housing sales declined 25% in 1983 to $29,416,000, compared to $39,089,000 for 1982.
This is primarily the result of a decline in single-family housing revenues, $2,879,000 in 1983 compared to
$14,011,000 in 1982. The Company discontinued its single-family housing sales in late 1981 but revenues from
sales prior to that date and sales of remaining inventory were reported in 1982 and 1983. Gross profit margins
were 29.0% for the year 1983 compared to 30.1% in 1982.
At December 31, 1983, the Company's backlog of pre-sold housing products decreased 87% to $5,700,000
from $44,800,000 at December 31, 1982. The decline in backlog was a result of a decrease in multi-family
housing orders and cancellations of existing orders.
Gross land sales were $15,984,000 in 1983 compared to $33,383,000 in 1982, a decline of 52%. Net land
sales declined to $11,044,000 in 1983, compared to $24,641,000 in 1982. Such declines were primarily due
to reduced retail land sales attributable to reduced advertising and marketing expenditures. Approximately
30% of the decline in gross land sales resulted from a decrease in bulk land sales, $4,919,000 in 1983 compared
to $9,972,000 in 1982. Included in 1982 bulk land sales was an $8,500,000 sale of commercial property
previously designated as the site for new corporate headquarters. In 1983, bulk land sales included a $3,800,000
sale. Retail land sales in 1982 included $2,800,000 resulting from the repeal of a county ordinance which had
required the Company to contribute certain utility fees for each homesite sold at its Marion Oaks community.
25
1983
1982
Commissions, advertising and other selling expenses decreased 2% to $15,053,000 for 1983 versus
$15,414,000 for 1982. As a percentage of housing sales and gross land sales, they were 33% and 21% for
1983 and 1982, respectively. Advertising expenditures decreased in 1983 to $1,782,000 from $2,932,000 in
1982 but were offset by increased marketing overhead costs as the Company developed and implemented its
new marketing programs in the second half of 1983.
$ 2,879,000
22,233,000
4,304,000
$14,011,000
25,078,000
.
Interest expense for 1983 was $18,641,000 compared to $27,457,000 for 1982, a 33% decrease. Total
mterest cost (including capitalized interest) was $21,621,000 and $33,878,000. The cause of the decline was
lower debt balances and a decline in interest rates.
29,416,000
39,089,000
4,919,000
11,065,000
9,972,000
23,411,000
15,984,000
33,383,000
$45,400,000
$72,472,000
The following table reflects the Company's real estate product mix for the years ended December 31,
1983 and 1982:
Years ended
December 31,
Housing Sales:
Single-family ................................................ .
Condominium ............................................ ····
Vacation ownership .......................................... .
Total
o
0
0
0
I
0
0
0
0
0
0
0
0
t
0
0
0
o
o
0
0
It
I
0
tIt
I
Itt
t
0
0
0
t
0
0
f
0
f
0
0
0
0
t
Gross Land Sales:
Bulk sales .................................................. .
Retail sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......... .
Total
t
t
t
too
o
o
ott
t
t
t
t
t
t
t
t
t
t
t
t
tIt
Itt
t
t
I
o
0
tIt
t
t
t
t
t
tot
t
t
Total Real Estate . . . . . . . . . . . . . . . . .................. .
Net Loss
Improvement revenues declined 23% to $5,508,000 in 1983 from $7,149,000 in 1982. The reduction in
revenues was affected by the Company's decision to defer land development expenditures due to its cash
position.
Interest income for 1983 was $11,358,000 versus $14,296,000 for 1982. This decline resulted from lower
contracts and mortgages receivable balances, as well as from the decrease in cash held in escrow and lower
interest rates in 1983 as compared to 1982.
Utility revenues were $11,758,000 in 1983 compared to $9,518,000 in 1982. This increase is due primarily
due to increases in rates and the customer base. Gross profit margins were 45.4% in 1983 and 43.4% in 1982.
Sales-other totalled $13,134,000 in 1983 compared to $17,235,000 in 1982. The decline was primarily
due to three non-recurring transactions which occurred in 1982. They were: the sale of the Company's yacht
club on Marco Island for $2,000,000 (resulting in a gain of $1,387,000); the sale of one of the Company's
office buildings in Dade County, Florida for $1,450,000 (resulting in a gain of $1,136,000); and the successful
conclusion of a lawsuit involving the Company's 1976-1979 real estate tax liability, resulting in a $1,200,000
increase in other revenues. The sale of one of the Company's country club operations for $1,600,000 resulted
in a gain of $345,000 in 1983.
Exclusive of these transactions, sales-other were $12,789,000 in 1983 compared to $13,198,000 in 1982,
a decrease of 3%. Gross profit margins from sales-other declined to 20% in 1983 from 37% in 1982. Without
the non-recurring transactions in 1983 and 1982, gross profit margins would have been 18% and 20%,
respectively.
For the year 1983, the Company's joint venture, Tierra Verde, contributed $834,000 to earnings compared
to $568,000 in 1982 as a result of an increase in property available for sale.
The Company's non-consolidated mortgage subsidiary had a profit of $242,000 for 1983 and broke even
for 1982, the subsidiary's initial year of operation.
Costs and Expenses
Costs and expenses totalled $95,089,000 for the year ended December 31, 1983 compared to $140,371,000
for 1982, a 32% decrease. Included in the 1982 figure was the final provision for Marco permit costs of
In 1983, the Company recorded a net loss of $11,681,000 ($2.61 per share), compared to a net loss of
$19,230,000 ($4.80 per share) in 1982. The loss from continuing operations was $11,795,000 ($2.63 per share)
compared to a loss of$17,694,000 ($4.41 per share) in 1982. Included in the 1982 net loss was the final provision
of$22,700,000 related to the permit denials at Marco Island. Discontinued operations of the airline and lumber
segments reported income of $114,000 ($.02 per share) for 1983 versus a loss of $1,536,000 in 1982 ($.39 per
share).
Liquidity and Capital Resources
~· As a .result of declining revenues, significant operating losses and repayment of borrowings, the Company
has expenenced a net decrea~e in c~sh from continuing operations of $8,373,000 over the three year period
ended December 31, ~984. Thts de?lme was the result of net cash used in continuing operations of$38,588,000,
repayme~~ ofborr.o~t~gs aggregatmg $73,621,000 and acquisition of property, plant and equipment (primarily
by the utthty substdtanes) of $15,811,000 during this period, partially offset by new borrowings of $84 745 000
(excluding construction loans), proceeds of $19,652,000 from the sale of property, plant and eq~ip~ent,
proceeds of $12,250,000 from the private placement of Common Stock and distributions from Tierra Verde
of $3,000,000. See Statements of Consolidated Sources and Uses of Cash in the Consolidated Financial
Statements and Notes 5 and 10 to Consolidated Financial Statements.
Mortgages and Similar Debt
The fdllowing table presents information with respect to mortgages and similar debt (in thousands):
1984
Mortgage Notes Payable .....................
Utility First Mortgage Bonds .................
Bank Loans:
Revolving Credit Loan ....................
Purchase Money Mortgages Loan ...........
Term Loan ..............................
Bridge Loan .............................
Utility Loan .............................
Others ..................................
Construction and Improvement Loans .........
Cost of sales totalled $47,381,000 for the year ended December 31, 1983 compared to $60,732,000 for
the comparable 1982 period. The decrease in such costs represented 30% of the total decrease in costs and
expenses. The decline in cost of sales was the result of lower housing and land costs resulting from lower
housing and land sales volume.
26
1982
.
.
$ 20,331
30,000
$ 11,768
$ 16,889
.
.
.
.
.
.
.
29,536
6,743
6,996
10,000
30,000
18,450
12,246
1,583
34,110
Total Mortgages and Similar Debt .... .
$139,299
29,000
9,050
9,246
6,300
18,000
7,433
56,959
$147,756
18,000
7,434
81,845
$184,864
. T~e Co~pi:my has been late in making certain principal and interest payments on these obligations
~enodtcally smce late 1982 due to the decline in revenues, the resulting decrease in cash flow experienced
m 1982, 1983 and 1984, and delays in completing certain planned asset sales and in collections of certain
purchase money mortgages.
On September 17, 1984, the Company and its lenders entered into an agreement (the "September Letter
whereby the lenders agreed to withhold taking enforcement action on account of any event of
default attnbutable to the. Company's failure to pay delinquent principal and interest and the principal
paymen~s to becom~ due wtth respect to the Bridge Loan and the Purchase Money Mortgages Loan pending
the recetpt of certa.m proceeds from .ass.et sales and the Utility Private Placement. The lenders also agreed
to defer the matunty date of the pnnctpal outstanding ($ 34,771,000 as of December 31, 19 84) under the
Agreement'~)
$22,700,000.
December 31,
1983
27
I
Revolving Credit Loan and a revolving construction loan (collectively, the "Revolving Credit Facilities") until
December 31, 1985. Principal prepayments based on collateral tests could, however, be required on the
Revolving Credit Facilities prior to that date. The terms of the September Letter Agreement further provided
that the lenders would not be obligated to continue their undertaking unless the Company (i) had, by March 31,
1985, made substantial progress toward payment of the principal and interest which was delinquent on the
date of the September Letter Agreement and payment of certain bank loans (excluding the Revolving Credit
Facilities) with a principal balance of $25,587,000 outstanding as of December 31, 1984; (ii) continued
thereafter to enable the lenders to conclude that such principal amount of bank loans will be paid in full by
December 31, 1985; (iii) continued in substantial compliance with an expense reduction plan; and (iv) paid
interest accruing on its bank loans as it became due. Pursuant to the September Letter Agreement, The Mackie
Co. Inc. ("Mackie Co.") advanced an additional $2,000,000 to the Company to meet operating cash shortfalls
and extended the due date of the entire $5,000,000 Mackie Co. loan to September 25, 1985.
Subsequent to September 17, 1984, the Company was in default under the September Letter Agreement
due to its failure to pay current interest, but such default was cured primarily through the application of a
portion of the proceeds from the Utility Private Placement. As of December 31, 1984, the Company was in
default under the September Letter Agreement due to delinquent principal payments of $850,000 due under
certain term loans. Such principal was repaid in February, 1985 from deposit money received on the Tampa
Sale. The Company was again in default for its failure to pay current interest and certain principal payments
during the first quarter of 1985.
In view of these defaults and the Tampa Sale, as of March 29, 1985, the Company and its lenders entered
into an agreement superseding the September Letter Agreement (the "March Letter Agreement") whereby
the lenders agreed to:
(a) continue in effect the deferral provided for in the September Letter Agreement of the maturity
date of the principal amounts outstanding pursuant to the Revolving Credit Facilities until March 31,
1986;
(b) withhold taking enforcement action on account of any event of default attributable to the
Company's failure to pay: (i) the principal of the Bridge Loan or the Term Loan, prior to June 30, 1985;
or (ii) the principal due under the Purchase Money Mortgages Loan and a portion of the Company's
Construction and Improvement Loans prior to March 31, 1986; and
(c) enter into new loan agreements, effective the date of the collection in cash of the full purchase
price of the Tampa Sale (provided that the proceeds thereof are applied to the payment of the balance
of the Bridge Loan and the Term Loan no later than June 30, 1985). Such new loan agreements would
supersede the existing bank loans and would be upon terms and conditions, including a business plan,
satisfactory to the lenders and would provide for the repayment of the remaining bank loans outstanding
(in accordance with their terms) through December 31, 1986.
Pursuant to the March Letter Agreement, the due date of the Mackie Co. loan has been extended to
January 31, 1986 and the Company has pledged to the lenders the notes and related security received in the
Tampa Sale. In addition, the Company is required to demonstrate to the lenders that it is implementing the
business plan referred to in (c) above. The Company believes that it will be able to negotiate satisfactory new
loan agreements under the March Letter Agreement and to demonstrate its implementation of an acceptable
new business plan.
The Company will have to seek further extensions or refinancings of a portion of the Revolving Credit
Facilities at the end of 1986. While the Company has been able to renegotiate its bank loans in the past, there
is no assurance that it will be able to obtain satisfactory amendments or refinancings in the future.
Mortgage Notes Payable of $20,331,000 at December 31, 1984 consists of various purchase money
mortgages and installment notes that mature as follows: $10,317,000 in 1985, $1,040,000 in 1986, $1,568,000
in 1987, $589,000 in 1988 and $6,817,000 in subsequent years. Included in Mortgage Notes Payable is a
$5,000,000 mortgage note due to Mackie Co. The proceeds of such note were used to meet current debt
obligations of 1984. Also included are mortgage notes payable arising from the Company's refinancing of its
country clubs and golf courses at Marco Island, Florida for $5,200,000.
On December 12, 1984, one of the Company's utility subsidiaries completed a private placement of
$30,000,000 of 15Y.z% first mortgage bonds due December 1, 1994, collateralized by substantially all of the
28
subsidiary's assets · The bond s provt'de fior annual mandatory smking
.
fund payments of $3 000 000 b · ·
on D ecember 1 1989 Th t
f h
. .
, ,
egmnmg
However, the b~nds .
~ erms o t e bonds prohtbtt .lo.ans to, and investment of funds in, the Company.
of the utilit subsidia~er~rut the qu~r~erly payment of dtvtdends ranging from 25% to 100% of net income
to retire th:Utilit Lo~n ased on. mtmmum net worth lev:l~. The ~roceeds were used as follows: $18,000,000
to
d r
y . .' approx~mately $4,100,000 for utihty capttal expenditures, approximately $4 800 000
pay e mquent prmctpal and mterest and the remainder for general corporate purposes.
'
'
The Revolving Credit Purchase Mon M t
T
·
Fourth Amended and Res;ated Cr dit de~ o.r gages, erm and Bndge Loans are included under The
effective November 30 1983 and m~difi:~ b ~~ur~y Agr~ement (the "Agreement") which was renegotiated
is collateralized by substantially all of the
e e~tem er and Marc~ Letter Agreements. The Agreement
the loans. Under the Agreement th C
omp~ny s a~sets and provtdes for cross-collateralization among
t dh
, e ompany ts reqmred among other thin
budgets and obtain lender approval for dividend distributi~ns.
gs, o a ere to annual cash
J
The maturity date of the Revolving Credit Loan has been extend d
~a:ch Letter Agreement. The Company may borrow against this loa: a~oa~arch 31,
1986 pursuant to the
ehgt?Ie contracts receivable less the obligation to improve the lots und 1 . o~nt based on a pe~centage of
maxtmum line of credit is $30 000 000 and is fully d
U d h b er yt~g t e contracts recetvable. The
L
$2 600
, ,
rawn. n er t e orrowmg test of the Revolvi C d't
oan, , ,000 in principal payments were due February 20 1985 Th C
b .
. ng re l
its lenders and amended the borrowing test so as to cure s h' d 1' .
e ompany o tat~ed watvers from
Sale Th C
·
uc e mquency upon the closmg of the Tamp
·.fi deb omhpany ts current in its principal and interest obligations under the Revolving Credit L
a
mo dl e y t e March Letter Agreement.
.
.
oan as
to th~:;~u~?t!a=~~~~!~r~~~o~:~e~e~~~~:;:~ ~~:::~b:~::=~~=u~~~~~il, ~986 pursua1
nt
h
e ompany a so
must mamtam a mmtmum coverage ratio of 1009{ of th
D
b 31 1984 h
o
e pure ase money mortgage balance As of
~cern. ~r
,
, t e coverage ratio was 98%. As of March 31, 1985 the
·
· ·
wftt$h mtmmum coverage ratio. During December, 1984, the Company repaid $65~~~~~hwas.m .comlphance
o 3,640,000 due on December 14 1984 p
h
'
e pnnclpa amount
withhold any enforcement action as' to th~ r urs~a~t to ~ e. March Letter Agreement, the lenders agreed to
towards repaying these and other obligatio:s~:1~~:5~nnctpal payments due, if ~cceptable progress is made
The Term Loan amortizes in quarterly installments of $750 000 until aid · f 1 ·
December31, 1984,theCompanywasdelin uent$750000in . . '
p
m .ul m 1986. As of
on February 27 1985. The March 31 19is . t 11 , h pnnctpal payments. Such dehnquency was repaid
•
,
ms a ment as been deferred and the T
L
·
to be repaid from the proceeds of the Tampa Sale notes.
erm oan ts expected
The first $5,000,000 installment of the Bridge Loan wa d
0
December 31 1984 A $5 000 000
h
.
s ue on ctober 1, 1984 and the remainder on
,
·
, ,
payment on t e Bndge Loan was made fro th
d f
Letter
the
have agreed to
th B 'd
. g pnnctpal payments due tf the Bndge Loan is repaid by June 30 1985 Th b 1
f
e n ge Loan ts expected to be repaid from the proceeds of the Tampa Sale note~.
.
e a ance o
~:~;~ ~~:s~:!i~~he ~ar~h
Agreeme~t,
le~ders
wit~ol; ~~;ce~fo:~e~::t:~~~=
t
Other Bank Loans consist primarily of a bank loan administered b h
·
1984, a revolving credit loan ofthe Company's lumbers b 'd'
Th
t e FD!~ and, pnor to September 14,
April I, 1985 and provides for re a m
u st .tary. e oan admtmstered by the FDIC matures
as collateral. As of December 3~ yl9::t th~ou~h :he ~o~lectton of certain purchase money mortgages assigned
,
, pnnctpa an mterest payments on the FDIC loan were current
At December 31' 1984, the Company had $34 110 000 f
.
.
.
' '
Construction and Improvement Loans
outstanding and was d r
e mquent on approxtmately $545 000 in interest d $100 000 ·
· ·
under certain of these loans The del'
. .
'.
an
•
m pnnctpal payments
31, 1985. The Company and its con~~quet~t p~n~pal :nd mterest was repaid during the quarter ended March
will be paid from future closings of rurtc ~on end ers. .ave agr.eed that any delinquent interest on these loans
ce am con ommmm umts and the releas
·
· h
loans h ave been modified to provide fu d fi th
.
e pnces m t ese construction
amount outstanding under a loan a n s or e paym~nt of such mterest. The Company has paid the principal
greement entered mto to finance th
t
·
f
·
··
Tampa Palms from the proceeds of th T
e cons ruction o certam amemties at
maturity dates are typically renewed fie ~mpa Sale. These loans mature at various dates in 1985. Current
.
·
lenders are satisfactory
and the Com or stx
d to twelve month periods with l'ts 1end ers. R e1atwns
wtt· h these
'
pany
oes
not
expect
any
proble
·
t'
·
d
h'
There can be no assurance that the c
.
ms m con mumg un er t ts arrangement.
ompany wlll be able to obtain dd 1·t'
1
I Th C
to retire these loans primarily thro h h
. .
a . tona renewa s.
e ompany expects
ug t e sale of condommmm umts.
°
29
Other Obligations
Land improvement expenditures were reduced from $11,421,000 in 1982 to $5,230,000 in 1983 due to
the Company's cash position. Expenditures for 1984 were $10,112,000. Af; of December 31, 1984, the Company
had estimated development obligations of approximately $27,200,000 on sold property, an estimated liability
to provide title insurance costing $800,000 and an estimated cost of street maintenance, prior to assumption
of such obligations by local governments, of $4,200,000, all of which are included in deferred revenue. The
total cost, including the previously mentioned obligations, to complete improvements to tracts from which
sales were being made at December 31, 1984, was estimated to be approximately $63,300,000. The Company
has included an inllation factor of 8% in estimating these development costs. The Company also escrowed
approximately $1,211,000 specifically for land improvements. Excluding anY future expenditures for the
development of new communities, the Company anticipates expending $6,800,000 in 1985, $10,300,000 in
1986, $11,200,000 in 1987,$11,100,000 in 1988 and $23,900,000 in subsequent years.
The Company intends to finance these development obligations through collections on its contracts
receivable, escrow account balances and cash generated from operations. The contracts receivable balance
at December 31, 1984 was $54,93 8,000. The approximate principal maturities of the contracts receivables are
$13,056,000 in 1985, $10,324,000 in 1986, $8,721,000 in 1987, $6,989,000 in 1988 and $15,848,000 in
subsequent years. In addition, the Company also expects to deposit $10,000,000 from the proceeds of the Tampa
Sale into an escrow account for the financing of development obligations.
As a result of the delays in completing the land improvements to certain property sold in certain of its
Central and North Florida communities, the Company has fallen behind in meeting its contractual obligations
to its customers. In connection with these delays, the Company has entered into a Consent Order with the
Division which provides a program for notifying affected customers (see Notes 2 and 8 to Consolidated
Financial Statements). In accordance with the Consent Order, the Company is required to meet certain
improvement obligations (included in the development obligations described above) and maintain a minimum
ratio of contracts receivable to improvement obligations. The Company is in compliance with the Consent
Order.
In 1976, the Corps denied the Company's application for dredge and fill permits required to complete
development of the Marco Island community (see Note 9 to Consolidated Financial Statements). Although
the Marco Shores community was not the subject of such application and denial, the Company anticipated
that development of Marco Shores as originally platted would not be permitted. As a result, the Company
incurred certain obligations to customers who had contracted to purchase property in the Marco vicinity and
were adversely affected. From 1976 through 1982, the Company provided in its financial statements an
aggregate of $58,300,000 toward these obligations, of which $18,507,000 remained as of December 31, 1984.
Also included in the financial statements is an additional $6,991,000 relating to interest accrued on these
obligations.
In order to meet the refund obligation, the Company has placed certain properties in trust. Net proceeds
from the sale of these trust properties are escrowed and used exclusively for payment of refunds. At
December 31, 1984, the Company had approximately $952,000 in escrow and $745,000 in trust sales
receivables. The remaining refund obligation will be funded from unsold trust properties. Unfavorable market
conditions at Marco have hampered the sale of the trust properties, such that the Company has been delayed
a joint venture. Other assets are being offered for
can be no assurance that such sales will tak 1 sale to generate additional cash for the Company. There
Th C
e pace.
e ompany expects to be able to meet curren
.
~hr~ugh cash generated from
current operations th ~ operatmg expenses during the next twelve months
: t?rs. The Company's principal obligations d~rin~ ~~:~: ~a~e ~nd the revised loan agreements with its
th n ;uatton of land improvements at its existing comm ./
~e ve months are debt retirement and the
:~~!~oceedst~mcoll~tlon
~~~::sr~~::~r~:ttp;~xim~tel~
~m tes.
e ompany's debt matures. The Com
the Tampa Sale an!':Y
$20,000,000 of s:ch
to extory an t e
of purchase money mortgages. The Co roug t .e sale of tts multi-family housing
$6 800e;:g0 the mat~nty dates of the remaining debt. The C mpany w~ll. have to negotiate with its lenders
'
'
.
ompany antlctpates expendin a
.
proc~eds j-~;:"n;mg
such development costs through a $1 ~ ~~unately
on land improvements durin 1985
:~~i!h;!lannincg
;roje:tsai~~l:~~~ ~::a~:~tion,
ex~ect; p:~::e~
=referred ~lock to finance such develo:;ent~ ~~~::~:; ~ropo';',d offering of Cumulative c:nve~~~~~
owever, t e Company would be required to seek I
.
s ro':" t e proposed offering not be available
account to be established from the
nam
v;"'ture
and development of new
ounty, and would utili th
thMe Company
to
near arco Island in Dad C
o~ proJect loan, such that the development ~:;~tlve ~nancmg for these new' projects through
a join;
pany would
a so constder the sale of these pro pe rt'tes.
e proJects could be delayed and the Com
The Company does not anticipate encounteri
. 'fi
.
.
or approvals to proceed with its Putnam Countng stg.m cant dtfficulttes in obtaining any necessary permits
;pprov.als ~o proceed with the development of J:,~~:J:~t a;d ha~ obtained substantially all the necessary
s .an and tts new Marco Shores communi! U
.ormahzatlon of the development lans th
that the funds neede!j to
';"'k suitable means to finance these
orr s Island will be obtained by the end of 1985 Fi e.
opment and marketing of Putnam County ;nd
~ an~icipated
~roc~o:~:~~ w~ll
pr~;,.,t:o~
mo~ths~ancmg
or the Marco Shores community is not expected
to be consummated within the next twelve
ev~
The Company believes that the cash enerat
.
the proposed extension and refinancing ofgexistined by the new busmess strategy, the new loan agreements
~~~Tampa Sale) will be sufficient to meet its debt !n~e:t "';d the sale of a~sets (including the proceeds fron:
o tgattons. However, there can be no assurance that s:c~o;:~nt ~bhgatlOns.and to provide for its ongoing
On September 21 1984 th C
Wl be suffictent for such purposes
·
·
·
. .
'
' e ompany filed
Com.rrusSlon for an offering of Cumulative Conve~~:glStratlon statement with the Securities and Exchan e
In order to proceed with the
offenng of Cumulative Convertible Preferred Stock th
:~ f~rther ex.tend the maturities of the Revolving, Cr~i~;P~Y wtll be required to negotiate with its lenders
P~eferred St~ck.
e
umulattve Convertible Preferred Stock ro ose
the rayme~t ~f any dividends. The offering wi8 n!
m p ace wtth tts lenders. The Company intends to
co!
Prefer~e.d
a~d to permit payment of dividends on
offe~~ smce present loan agreements preclude
mence untt the Company has revised loan agreements
Stock for accelerating the developmen~s~/hte proceeds of th~ ~ffering of Cumulative Convertible
acqulSlllo?s and f?r debt reduction. Any outstandin b~l:,:ew commumtles, for financing future property
ce on the Mackie Co. loan will also be repaid, in
whole ~r m part, m connection with the offering T~
to obtam the necessary revised loan agreements .or
t~:~ ~~ne b~
n? ass~rance that the Company will be able
o enng wtll be able to proceed.
Miscellaneous
30
propos~
act tttes
to be
in meeting its refund obligation.
The Company is continuing to respond to its cash position by actively marketing certain of its assets.
In September, 1984, the Company sold its lumber subsidiary for $4,000,000 of which the Company received
approximately $3,000,000 in cash with the balance due within one year. Approximately $700,000 of such
balance is secured by a first mortgage on real estate in Orlando, Florida and the remainder was used as credits
toward the purchase of lumber utilized by the CompanY in its construction activities. As of December 31,
1984, the mortgagor under such mortgage was delinquent with respect to required interest payments. The
Company does not anticipate any loss resulting from a default under such mortgage. On October 2, 1984,
the Company sold its airline subsidiary for $1,500,000. On October 3, 1984, the Company sold one of its country
club operations for $1,250,000. Pursuan\ to the Settlement Agreement, on March 14, 1985, the Company
obtained title to approximately SO acres of commercially zoned property in Dade County, Florida. See Note
9 to Consolidated Financial Statements. The Company expects to bulk sell this property or develop it through
d~bt tbrou:~
uring 1985 approximate! $60 000 000
31
AUDITORS' REPORT
ITEM 8
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
To THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
THE DELTONA CORPORATION:
33
Auditors' Report ................ · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Consolidated Balance Sheets as of December 31, 1984 and 1983 · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
2
Statements of Consolidated Operations for the years ended December 3·1, 1984, 1983 and 198
34
36
Statements of Consolidated Stockholders' Equity for the years ended December31' 1984, 1983
and 1982 ............ · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·. · · · · · · · ·
37
Statements of Consolidated Sources and Uses of Cash for the years ended December 31, 1984,
1983 and 1982 ............. ·.. · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·.· · · · · · · · · ·
38
Notes to Consolidated Financial Statements ...... · · · · · · · · · · · ·; · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Supplementary Financial Data ......... · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
39
We have examined the consolidated balance sheets of The Deltona Corporation and subsidiaries as of.
December 31, 1984 and 1983 and the related statements of consolidated operations, consolidated stockholders'
equity and consolidated sources and uses of cash for each of the three years in the period ended December 31,
1984. Our examinations were made in accordance with generally accepted auditing standards and, accordingly,
included such tests of the accounting records and such other auditing procedures as we considered necessary
in the circumstances.
In our opinion, the financial statements referred to above present fairly the financial position of The
Deltona Corporation and its subsidiaries at December 31, 1984 and 1983 and the results of their operations
and their sources and uses of cash for each of the three years in the period ended December 31, 1984 in
conformity with generally accepted accounting principles applied on a consistent basis.
53
~·
DELOITTE HASKINS
& SELLS
Miami, Florida
March 29, 1985
33
32
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY
ASSETS
December 31,
December 31,
1983
1984
Cash, including escrow deposits and restricted cash of $8 836 000 in 1984 $
and $6,237,000 in 1983 (Notes 5 and 8) ........... .' ... : ......... .
Contracts receivable for land sales (Notes 2 and 5) ................. .
Less: Allowance for uncollectible contracts ....................... .
Unamortized valuation discount ........................... .
o
t
o
o
t
Contracts receivable-net
Mortgages and other receivables (Notes 2, 3 and 5) ................. .
Less: Allowance for doubtful accounts ................... : ....... .
Unamortized valuation discount ........................... .
I
0
f
0
0
0
0
0
I
0
I
I
I
I
I
I
I"
I
If
I
0
0
10
1
0
0
0
1
8,949,000
Inventories, at lower of cost or net realizable value (Notes 3 and 5):
Houses and apartments completed or under construction ............ .
Less: Cost recorded on the percentage-of-completion method ........ .
Total
Land and land improvements .................................... .
Other ........................................................ .
Total inventories ................................... .
0
0
I
If
I
I
I
I
0
I
I
I
I
I
I
I
0
0
I
I
0
I
I
0
t•O
0
0
0
I
I
I
Itt
It
I
1110
0
Land held for investment, bulk sale, or future development-at cost
(Note 3) .................................................... .
Property, plant, and equipment, at cost (Notes 4 and 5) ............. .
Less: Accumulated depreciation and amortization ................. .
Property, plant, and equipment-net ............................ .
Prepaid expenses and other (Note 11) ............................. .
Total ............................................ .
The
6,237,000
61,822,000
(4,097 ,000)
(5,368,000)
43,017,000
52,357,000
15,291,000
(402,000)
{73,000)
25,835,000
(1,206,000)
{272,000)
14,816,000
24,357,000
24,727,000
{409,000)
41,530,000
(2,405,000)
24,318,000
50,066,000
1,312,000
39,125,000
53,714,000
5,074,000
75,696,000
97,913,000
1
Mortgages and other receivables-net ........................... .
0
$
54,938,000
(5,591,000)
(6,330,000)
0
1984
34,922,000
22,317,000
94,324,000
(22,573,000)
101,061,000
(23,892,000)
71,751,000
77,169,000
3,261,000
4,540,000
$252,412,000
$284,890,000
Mortgages and similar debt (Notes 5 and 13):
$ 20,331,000
Mortgage notes payable ............. .
····························
Utility first mortgage bonds
30,000,000
Bank loans
...... · · · · · · · · · · · · · · · · · · · · · · · · · · · .. · · · ·
54,858,000
Construction. ~~~. i·~~~~~~~~~~ ·1~~~~ .... · · · · · · · · · · · · · · · · · · · · · · · · · · ·
34,110,000
Total mortgages and si~i~~r· ~~~~ . . . . . . . . . . . ........ · · ·
139,299,000
Accounts payable-trade.
·····················
6,466,000
Accrued expenses and oth~r· (~·o·t~. ~)· : : : : : : : : : : : · · · · · · · · · · · · · · · · · · ·
18,672,000
Customers' deposits . . . . . . .
· · ·. · · · · · · · · · · · · · · · ·
5,031,000
25,498,000
Allowance for Marco permit ·;~s~~ ·(~~~e· ~)::::::::::::::::: · · · · · · · ·
40,810,000
Deferred revenue (Notes 4 and 7) . . . . . . . . . . . . .
········
/.
Total Liabilities
................. · · ·
235,776,000
I
I
I
0
I
o
I
I
I
0
0
0
0
I
0
0
I
I
I
I
o
0
I
I
I
I
I
I
I
I
It
I
I
$ 11,768,000
79,029,000
56,959,000
147,756,000
7,285,000
15,880,000
2,722,000
25,912,000
44,828,000
244,383,000
Commitments and contingent liabilities (Notes 7, 8, 9, 11 and 13)
Stockholders' equity (Notes 5, 10 and 13):
Common
stock, $1 par
valueth . d 18.g~o,ooo shares; outstanding:
1984-5,033,461;
1983-5
02~u68~n(e
'
'
exc u mg 29,678 shares held in
treasury at both dates)
Capital surpl
..........·······························
us ..... .
Retained earnings (defi~i~). :: ....... · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Total stockholders' equity ... : : : : : : : : : : : : : : : ............ · · · · · · · · · ·
Total
................ · · · · · ·
I
0
I
0
f
I
I
I
I
I
I
0
I
I
0
I
I
I
I
I
I
0
I
I
I
I
I
I
I
If
I
If
I
I
I
I
I
I
I
I
I
It
5,033,000
49,162,000
(37,559,000)
5,030,000
49,140,000
(13,663,000)
16,636,000
40,507,000
$252,412,000
$284,890,000
part of the consolidated fi nap.cia
. 1 st atements.
The accompanyin g no t es are an mtegral
·
accompanyin~ notes are an integral part of the consolidated financial statements.
35
34
It
1983
STATEMENTS OF CONSOLIDATED OPERATIONS
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
Years ended December 31,
1984
1983
1982
For the years ended December 31, 1984, 1983 and 1982
Common Stock
($1 par value)
Revenues
$ 19,209,000 $ 29,416,000 $ 39,089,000
f.
Sales-houses and apartments
33,383,000
15,984,000
26,043,000
Gross land sales . . . . . ................................................... .
(1,246,000)
(1,078,000)
(3,729,000)
Less: Estimated uncollectible sales (Note 2) ................................ .
(5,444,000)
(2,321,000)
(2, 165,000)
Deferred revenue--future improvements .............................. .
(2,052,000)
(1,541,000)
(2,648,000)
Contract valuation discount ......................................... .
24,641,000
11,044,000
17,501,000
Net land sales .......................................................... .
7,149,000
5,508,000
6,594,000
Improvement revenue-prior period sales ................................... .
14,296,000
11,358,000
8,015,000
Interest income ......................................................... .
9,518,000
11,758,000
13,686,000
Utility revenues ......................................................... .
17,235,000
13,134,000
11,954,000
Sales-other ........................................................... .
568,000
1,076,000
1,422,000
Equity in earnings of joint venture and non-consolidated subsidiaries (Note 11) .. .
112,496,000
83,294,000
78,381,000
Total ........................................................ .
0
0
I
0
0
0
0
0
0
0
I
0
I
0
e
I
0
0
0
I
0
0
0
0
II
0
0
0
0
0
0
0
o
t
00
o
0
0
0
0
0
Balances, December 31 1981
Sh~e ~ issu~d as the' Comp~~;.~. ~~~~;il~~~i~~· ~~ · ~h~
e ona mp1oyees' Profit-Sharing Plan ........ .
Net proceeds from exercise of stock options
Net loss for the year
········
Balances, December 31. ~~~~ ............. · · · · · · · · · ·
1
Net proceeds from e~ercise ~f ~~o.ck. ~~~i·o·~s· · · · · · · · ·
Net loss for the year . . . . . . . . . .
········
Net proceeds from employee stock. ~~~~h~~~s·:::::::
Net proceeds from private placement of 1 000 000
shares
• •
Balances, D~~~~~~~ ·~~,· ~~~~ ........... · · · · · · · · · · · ·
Net loss for the year
······················
e~~i;;e~· ~t·o~k· ~~~~h~~~s·:::::::
December 31, 1984 ......................
Net proceeds from
Costs and expenses
Cost of sales-houses and apartments ...................................... .
Cost of sales-land ...................................................... .
Cost of improvements-prior period sales .................................. .
Cost of sales-utility .................................................... .
Cost of sales-other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... .
Provision for multi-family inventory writedown (Note 3) ..................... .
Loss from single-family housing operation (Note 1) .......................... .
Commissions, advertising, and other selling expenses ......................... .
General and administrative expenses ....................................... .
Real estate tax expense ..... , ............................................. .
Interest expense (Note 5) ................................................ .
Subtotal ............................................................... .
Provision for Marco permit costs (Note 9) .................................. .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
16,049,000
10,097,000
5,595,000
20,872,000
4,895,000
4,697,000
6,417,000
10,500,000
5,387,000
10,830,000
16,224,000
11,923,000
2,950,000
15,053,000
15,414,000
11,053,000
2,961,000
11,605,000
2,463,000
17,986,000
18,641,000
27,457,000
95,089,000
117,671,000
7,396,000
8,606,000
5,700,000
102,836,000
95,089,000
140,371,000
(11,795,000)
(27,875,000)
102,836,000
(24,455,000)
(24,455,000)
(10, 181,000)
(11,795,000)
(17,694,000)
114,000
(1,536,000)
(76,000)
635,000
Gain on disposal of lumber and airline segment (Note 12) .................. .
$(23,896,000)
$(11,681,000) $ (19 ,230,000)
Loss per common and common equivalent shates:
$
From continuing operations .............................................. .
~4.86)
$
~2.63)
$
~4.41)
$
~4.75)
$
{2.61) $
{4.80)
Net loss ............................................................... .
The accompanying notes are an integral part of the consolidated financial statements.
36
3,989,000
37,622,000
31,000
4,000
189,000
29,000
4,024,000
3,000
37,840,000
21,000
3,000
29,000
Retained
Earnings (Deficit)
17,248,000
(19,230,000)
(1,982,000)
(11,681,000)
1,000,000
11,250,000
5,030,000
49,140,000
3,000
22,000
$5,033,000
$49,162,000
(13,663,000)
(23,896,000)
$(37,559,000)
The accompanying
· notes are an integral part of the consolidated financial statements.
22,700,000
Discontinued operations:
Income (loss) from operations of lumber and airline segments less applicable
income taxes ............. ·.......................................... .
Net loss ................................................................. .
Balances,
310,000
Benefit for deferred income taxes (Note 6) .................................. .
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,306,000
11,189,000
6,020,000
Capital
Surplus
37
STATEMENTS OF CONSOLIDATED SOURCES AND USES OF CASH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
Years ended December 31,
1984
1983
1982
Operations:
Cash received from:
Proceeds from sale of residential units ......................... .
$ 23,396,000
$ 32,424,000
$ 80,718,000
Less: Repayment of construction loans ........................ .
(21,011,000)
(28,456,000)
(84, 135,000)
Net proceeds (repayments) residential units .................. .
Collections on contracts and mortgages receivable
(including interest) ....................................... .
2,385,000
3,968,000
(3,417,000)
23,684,000
30,358,000
34,090,000
Down payments on and cash sales of homesites and tracts .......
Proceeds from sale of Marco trust property ....................
Cash received from utility operations ..........................
Other sources (uses)-net ....................................
.
.
.
.
10,428,000
5,927,000
6,735,000
1,561,000
4,189,000
4,631,000
11,840,000
11,747,000
9,496,000
4,469,000
3,299,000
2,176,000
Total ..................................................... .
54,367,000
59,488,000
53,711,000
Cash expended for:
Residential construction ......................... , ........... .
8,215,000
9,272,000
46,149,000
Less: Proceeds from construction loans .......... , , .. , ......... .
(4, 881,000)
(6,761,000)
(41,948,000)
Net expenditures-residential construction ................... .
3,334,000
2,511,000
4,201,000
Land improvements ....................· ............. , ..... , .
Inventory and investment land ............................... .
Marco customer programs payments ....................... , .. .
10,112,000
5,230,000
11,421,000
3,758,000
2,541,000
4,323,000
1,920,000
4,861,000
5,549,000
Utility operating expenses ................................... .
Selling expenses ............................................ .
7,150,000
6,417,000
5,387,000
11,638,000
9,354,000
15,203,000
General and administrative expenses . . . . . . . . . ................. .
Interest costs .............................................. .
Real estate taxes .......... , ................ , .. , , ... , ..... , . ,
8,663,000
8,403,000
7,898,000
15,860,000
21,455,000
20,227,000
2,460,000
2,784,000
3,494,000
Total ....................................... , ............. .
64,895,000
63,556,000
77,703,000
Cash used in continuing operations .......................... , .......... .
(10,528,000)
(4,068,000)
(23,992,000)
New borrowings--other than construction loans ........................ .
Sale of property and equipment ...................................... .
45,037,000
10,195,000
29,513,000
8,145,000
7,539,000
Distribution from joint venture investee .. , ............................. .
Proceeds from the issuance of common stock .............. ~ ............ .
1,000,000
Total . . . ............................ , . . . . . . . . . . . . . . ....... .
54,182,000
29,984,000
35,481,000
Other Sources:
3,968,000
2,000,000
12,250,000
Other Uses:
Repayment of borrowings--other than construction loans .......... , .. , .. .
37,547,000
26,567,000
9,507,000
Acquisition of property, plant and equipment ........................... .
3,428,000
3,928,000
8,455,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .
40,975,000
30,495,000
17,962,000
2,679,000
(4,579,000)
(6,473,000)
33,000
{125,000)
(257,000)
2,712,000
$ {4, 704,000)
$ (6,730,000)
Net increase (decrease) in cash from continuing operations (including escrow
deposits and restricted cash) ......................................... .
Net cash provided by (used in) discontinued
operations ......................................................... .
Net increase (decrease) in cash (including escrow deposits and restricted cash) .
$
The accompanying notes are an integral part of the consolidated financial statements.
1. Significant Accounting Policies
The consolidated financial statements are prepared in accordance with generally accepted accountin
principles and include The Deltona Corporation and its wholly-owned non-financial domestic subsidiaries (th!
"Company"). The Company's wholly-owned financial subsidiary, the Deltona Mortgage Company, is
accounted for using the equity method of accounting (see Note 11). Material intercompany accounts and
transactions are eliminated.
The Company sells homesites under installment contracts which provide for payments over periods
ranging from 2 to 15 years. Sales of homesites are recorded under the percentage-of-completion method in
accordance with Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate"
("FASB No. 66").
Land improvement costs are allocated to individual homesites based upon the re~ationship that the
homesite's sales price bears to the total sales price of all homesites in the community. The estimated costs
of improving homesites are based upon internal engineering estimates made in accordance with sound cost
estimation practices and provide for anticipated cost-inflation factors. Th~ estimates are systematically
reviewed. Whert cost estimates are revised, the percentage they bear to deferred revenues are recalculated on
a ~umulative basis to determine future income recognition as performance takes place.
Interest costs directly related to, and incurred during, a project's construction period are capitalized. Such
capitalized interest amountedto $2,314,000, $2,980,000 and $6,421,000 for the years ended December 31,
1984, 1983 and 1982, respectively.
Bulk land sales are recorded and profit is recognized in accordance with FASB No. 66. Bulk land sales
are discounted so that the resulting purchase money mortgage will yield Y2% above a specified prime rate
at the contract date over the life of the mortgage. 'Bulk land sales of approximately $11,845,000, $4,919,000
and $9,972,000 are included in gross land sales for the years ended December 31, 1984, 1983 and 1982,
respectively.
Sales of houses and vacation ownership units and all related costs and expenses are recorded at the time
of closing. Revenues and related costs and expenses from the sale of condominium apartments are recognized
under the percentage~of-completion method in accordance with FASB No. 66. On August 14, 1984, the Board
of Directors endorsed a plan to discontinue the sale and construction of single-family homes. This represents
the phasing out of part of the Company's product line. In accordance with Accounting Principles Board
Opinion No. 30, subsequent to August 14, 1984 the results of operations of this product line have been shown
as a separate component of income from continuing operations. Revenues and expenses from discontinued
single-family homes for the period from August 14 through December 31, 1984 were $1,902,000 and
$2,212,000, respectively.
Property, plant and equipment are stated at cost. Depreciation is provided by the straight-line method
over the estimated useful lives of the respective assets. Additions and betterments are capitalized, and
maintenance and repairs are charged to income as incurred. Generally, upon the sale or retirement of assets,
the accounts are relieved of the costs and related accumulated depreciation and any gain or loss is reflected
in income.
The Company's profit-sharing plan, which was terminated on October 17, 1984, covered all Company
employees except those on commission and hourly employees engaged in construction. Annual Company
contributions to the plan were made in cash or in shares of Common Stock valued at their fair market value
at the time of contribution.
When property exchanges and refund transactions are consummated under the Company's Marco
Island-Marco Shores option programs (see Note 9), any resulting loss is charged to the allowance for Marco
permit costs. When property exchanges and refund transactions are consummated under the Consent Order
(see Note 8), any resulting loss is charged against the provision included in accrued expenses and other. The
Company accrues interest on its refund obligations in accordance with the various customer refund programs.
Certain amounts in the 1983 and 1982 financial statements have been reclassified for comparative purposes.
38
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
NOTES TO CONSOLIDATED FINANCIALSTATEMENTS-(Continued)
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
2.
Contracts and Mortgages Receivable
At December 31, 1984, interest rates on contracts receivable outstanding ranged from 5% to 11% per
annum (weighted average approximately 8.2%). The approximate principal maturities (in thousands) of
contracts receivable (including $672,000 restricted for use in the Marco refund program) were:
December 31, 1984
1985 ...........................................
1986 ...........................................
1987 ...........................................
1988 ...........................................
1989 ...........................................
1990 and thereafter . . . . . . . . . . . . . . . . . . . . ..........
Total ..............................
.
.
.
.
.
.
.
$13,056
10,324
8,721
6,989
4,712
11,136
$54,938
3.
During 1984 $18,392,000 was reclassified from land and land improvements to land held for investment,
bulk sale or future development. In addition, the carrying value of the Tampa property of approximately
$9,900,000 was reclassified from land held for investment, bulk sale or future development to land and land
improvements (see Note 13). At December 31, 1984, land and land improvements included approximately
$7,791,000 of land placed in the Marco Island and Marco Shores Trusts (see Note 9).
The following table presents cost information (in thousands) with respect to inventory of houses and
apartments, including related land costs:
If a regularly scheduled payment on a contract remains unpaid 30 days after its due date, the contract
is considered delinquent. Aggregate delinquent contracts receivable at December 31, 1984 and December 31,
1983 approximate $7,215,000 and $8,259,000, respectively, of which $1,539,000 matures in 1985.
Information with respect to interest rates and average contract lives used in valuing new contracts
receivable generated from sales follows:
Average
Term
Period ended
Average Stated
Interest Rate
December 31, 1984
1985 ........................................... .
1986 ........................................... .
1987 ........................................... .
1988 ........................................... .
1989 ........................................... .
Total (included in mortgages and other
receivables) ....................... .
5,854
1,272
1,436
308
238
Proceeds from substantially all the mortgages will be used to repay the Company's debt.
3.
Inventories
Information (in thousands) with respect to the classification of inventory of land and improvements is
as follows:
December 31,
1984
Unimproved land ...................................
Land in various stages of development ................
Fully improved land ...............................
Total ................................
40
.
.
.
.
$ 1,867
37,455
10,744
$50,066
December 31,
1983
$20,239
·.- 26,824
6,651
$53,714
December 31,
1984
December 31,
1983
Single-family homes:
Completed ...................................... .
Under construction .............................. .
$ 1,331
4,754
$ 1,489
535
Total ................................ .
6,085
2,024
18,642
39,506
Multi-family units:
Completed ...................................... .
Less: Amounts recorded under the percentage-of-completion
method of accounting
Recovered through customer deposits ............... .
Unrecovered .................................... .
Discounted
to Yield
December 31, 1984 ................................. 134 months
7.0%
13.5%
December 31, 1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 months
8.1%
15.0%
December 31, 1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 months
9.2%
15.0%
Homesite sales to franchised representatives and salespersons aggregated approximately $565,000 in 1984
$369,000 in 1983, $1,054,000 in 1982.
In accordance with the Consent Order (see Note 8), the Company is required to maintain a contracts
receivable balance plus future interest collections from the sale of property in certain of its Central and North
Florida communities equal to at least 110% of the amount necessary to complete certain improvements. At
December 31, 1984 and December 31, 1983, the minimum required amount was $62,420,000 and $65,255,000,
respectively. At December 31, 1984, the Company was in compliance with the Consent Order.
In the fourth quarter of 1984, the Company made a $2,200,000 additional provision for the cancellation of
certain contracts receivable which were deemed uncollectible. Such contracts receivable arose from four related
commercial tract sales and are not necessarily representative of the total contracts receivable portfolio.
At December 31, 1984, mortgages receivable were collectible over periods ranging from one to eight years
at stated interest rates of 7.5% to 14%. Principal maturities (in thousands) were approximately:
Inventories-(Continued)
(61)
{348)
(361)
(2,044)
Net cost of multi-family units ..................... .
18,233
37,101
Total ................................ .
$24,318
$39,125
In the fourth quarter of 1984, as a result of unfavorable market conditions, the Company reevaluated
its multi-family inventory. Accordingly the Company incurred a $5,700,000 provision for the writedown of
. its multi-family inventory to its estimated net realizable value.
Approximately $434,000 and $2,916,000 of revenues recognized under the percentage-of-completion
method were included in mortgages and other receivables at December 31, 1984 and 1983, respectively.
4.
Property, Plant, and Equipment
Property, plant, and equipment, and accumulated depreciation consist of the following (in thousands):
December 31, 1984
Cost
Land and land improvements ........ $ 8,917
Utility plant and equipment ......... 61,780
Other buildings, improvements, and
furnishings . . . . . . . . . . . ........... 11,435
4,682
Construction and other equipment ....
7,510
Utility plant under construction ......
Total ................. $94,324
December 31, 1983
Accumulated
Depreciation
Cost
Accumulated
Depreciation
$13,819
$ 11,773
59,635
$12,062
5,753
3,001
12,877
11,270
5,506
5,614
6,216
$22,573
$101,061
$23,892
Depreciation charged to operations for the years ended December 31, 1984, 1983 and 1982 was
approximately $2,419,000, $2,759,000, and $2,704,000, respectively; depreciation charged to other accounts
was approximately $84,000 in 1984, $163,000 in 1983, and $432,000 in 1982.
During 1983, the Company entered into a sale-leaseback agreement on one of its Miami office buildings.
The profit on this agreement is included in deferred revenue and_ is being amortized as a reduction of rent
expense over the term ofthe lease. At December 31, 1984 and December 31, 1983, $3,826,000 and $4,076,000,
respectively, of the profit remained in deferred revenue.
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
Mortgages and Similar Debt
At December 31, 1984 and 1983, indebtedness under various purchase money mortgages and loan
agreements was collateralized by substantially all of the Company's assets, including stock of certain
wholly-owned subsidiaries.
At December 31, 1984, mortgages and similar debt matures as follows (in thousands):
5.
December 31, 1984
$ 59,884
40,441
1,568
589
6,817
30,000
$139,299
1985 ........................................... .
1986 ........................................... .
1987 ........................................... .
1988 ........................................... .
1989 ........................................... .
1990 and thereafter .............................. .
Total .............................. .
Mortgage Notes Payable
Interest rates on mortgage notes payable ranged from 7.6% to 24.9% at December 31, 1984. The weighted
average interest rate of such mortgages at December 31, 1984, 1983 and 1982 was 12.5%, 12.5% and 13.3%,
respectively.
At December 31, 1984, mortgage notes payable mature as follows (in thousands):
December 31, 1984
1985 ...........................................
1986 ...........................................
1987 ...........................................
1988 ...........................................
1989 ...........................................
Total ..............................
$ 5,317
6,040
1,568
589
6,817
$20,331
.
.
.
.
.
.
Included in mortgage notes payable at December 31, 1983 was $625,000 of the Company's unsecured
6%% note payable. This note was repaid in June, 1984. Included in mortgage notes payable at December
31, 1984 is a $5,000,000 mortgage note due to The Mackie Company, Inc. ("Mackie Co."), a major stockholder
of the Company. Such note matures on January 31, 1986 and bears interest at the prime rate charged by
Citibank, N.A., plus 2%. Also included are mortgage notes payable arising from the Company's refinancing
of its country clubs and golf courses at Marco Island, Florida for $5,200,000.
Utility First Mortgage Bonds
On December 12, 1984, one of the Company's utility subsidiaries completed a private placement of
$30,000,000 of 15~% first mortgage bonds due December 1, 1994 (the "Utility Private Placement"), collateralized by substantially all of the subsidiary's assets. The bonds provide for annual mandatory sinking fund
payments of$3,000,000beginningonDecember 1, 1989. The terms of the bonds prohibit loans to, and investment
offunds in, the Company. However, the bonds permit the quarterly payment of dividends ranging from 25% to
100% of net income of the utility subsidiary based on minimum net worth levels. The proceeds were used as
follows: $18,000,000 to retire the Utility Loan, approximately $4,100,000 for utility capital expenditures,
approximately $4,800,000 to pay delinquent principal and interest and the remainder for general corporate
purposes.
42
Mortgages and Similar Debt-(Continued)
The Company has been late in making certain of its principal and interest payments on its bank and
construction loans periodically since late 1982 due to the decline in revenues, the resulting decrease in cash
flow experienced in 1982, 1983 and 1984 and the first nine months of 1984, and delays in completing certain
planned asset sales and in collections of certain purchase money mortgages.
On September 17, 1984l the Company and its lenders entered into an agreement (the "September Letter
Agreement") whereby the lenders agreed to withhold taking enforcement action on account of any event of
default attributable to the Company's failure to pay delinquent principal and interest and the principal
payments to become due with respect to the Bridge Loan and the Purchase Money Mortgages Loan pending
the receipt of certain proceeds from asset sales and the Utility Private Placement. The lenders also agreed
to defer the maturity date of the principal outstanding ($34,771,000 as of December 31, 1984) under the
Revolving Credit Loan and a revolving construction loan (collectively, the "Revolving Credit Facilities") until
December 31, 1985. Principal prepayments based on collateral tests could, however, be required on the
Revolving Credit Facilities prior to that date. The terms of the September Letter Agreement further provided
that the lenders would not be obligated to continue their undertaking unless the Company (i) had, by March 31,
1985, made substantial progress toward payment of the principal and interest which was delinquent on the
date of the September Letter Agreement and payment of certain bank loans (excluding the Revolving Credit
Facilities) with a principal balance of $25,587,000 outstanding as of December 31, 1984; (ii) continued
thereafter to enable the lenders to conclude that such principal amount of bank loans will be paid in full by
December 31, 1985; (iii) continued in substantial compliance with an expense reduction plan; and (iv) paid
interest accruing on its bank loans as it became due. Pursuant to the September Letter Agreement, Mackie
Co. advanced an additional $2,000,000 to the Company to meet operating cash shortfalls and extend~d the
due date of the entire $5,000,000 Mackie Co. loan to September 25, 1985.
Subsequent to September 17, 1984, the Company was in default under the September Letter Agreement
due to its failure to pay current interest, but such default was cured primarily through the application of a
portion of the proceeds from the Utility Private Placement. As of December 31, 1984, the Company was in
default under the September Letter Agreement due to delinquent principal payments of $850,000 dl:le under
certain term loans. Such principal was repaid in February, 1985 from deposit money received on the sale of
the Company's Tampa Palms property (the "Tampa Sale"). The Company was again in default for its failure
to pay current interest and certain principal payments during the first quarter of 1985.
In view of these defaults and the Tampa Sale, as of March 29, 1985, the Company and its lenders entered
into an agreement superseding the September Letter Agreement (the "March Letter Agreement") whereby
the lenders agreed to:
(a) continue in effect the deferral provided for in the September Letter Agreement of the maturity
date of the principal amounts outstanding pursuant to the Revolving Credit Facilities until March 31, 19 86;
(b) withhold taking enforcement action on account of any event of default attributable to the
Company's failure to pay: (i) the principal of the Bridge Loan or the Term Loan, prior to June 30, 1985;
or (ii) the principal due under the Purchase Money Mortgages Loan and a portion of the Company's
Construction and Improvement Loans prior to March 31, 1986; and
.
$29,536
$29,000
(c) enter into new loan agreements, effective the date of the collection in cash of the full purchase
price of the Tampa Sale (provided that the proceeds thereof are applied to the payment of the balance
of the Bridge Loan and the Term Loan no later than June 30, 1985). Such new loan agreements would
supersede the existing bank loans and would be upon terms and conditions, including a business plan,
satisfactory to the lenders and would provide for the repayment of the remaining bank loans outstanding
(in accordance with their terms) through December 31, 1986.
.
.
.
.
.
.
6,743
6,996
10,000
9,050
9,246
6,300
18,000
7,433
$79,029
Pursuant to the March Letter Agreement, the due date of the Mackie Co. loan has been extended to
January 31, 1986 and the Company has pledged to the lenders the notes and related security received in the
Tampa Sale. In addition, the Company is required to demonstrate to the lenders on a continuing basis that
it is implementing the terms of the business plan referred to in (c) above. The Company believes that it will
be able to negotiate satisfactory new loan agreements under the March Letter Agreement and to demonstrate
its implementation of an acceptable new business plan.
Bank Loans
Bank loans consist of the following (in thousands):
Revolving Credit Loan, due March 31, 1986 .......................
Purchase Money Mortgages Loan due in installments through
March 31, 1986 .............................................
Term Loan due in installments through 1986 ......................
Bridge Loan due in 1985 ........................................
Utility Loan ..................................................
Other due in installments through April 1, 1985 ....................
Total .............................................
5.
December 31,
1984
1983
1,583
$54,858
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
5.
Mortgages and Similar Debt-(Continued)
The Company wi\1 have to seek further extensions or refinancings of a portion of the Revolving Credit
Facilities at the end of '1986. While the Company has been able to renegotiate its bank loans in the past, there
is no assurance that it will be able to obtain satisfactory amendments or refinancings in the future.
The Company believes that the cash generated by the new business strategy, the new loan agreements,
the proposed extension and refinancing of existing debt and the sale of assets (including the proceeds from
the Tampa Sale) will be sufficient to meet its debt and development obligations and to provide for its ongoing
obligations.
The Revolving Credit, Purchase Money Mortgages, Term and Bridge Loans are included under The
Fourth Amended and Restated Credit and Security Agreement (the "Agreement") which was renegotiated
effective November 30, 1983 and modified by the September and March Letter Agreements. The Agreement
is collateralized by substantially all of the Company's assets and provides for cross-collateralization among
the loans. Under the Agreement, the Company is required, among other things, to adhere to annual cash
budgets and obtain lender approval for dividend distributions.
The maturity date of the Revolving Credit Loan has been extended to March 31, 1986 pursuant to the
March Letter Agreement. The Company may borrow against this loan an amount based on a percentage of
eligible contracts receivable less the obligation to improve the lots underlying the contracts receivable. The
maximum line of credit is $30,(X)(),(X)() and is fully drawn. Under the borrowing test of the Revolving Credit
Loan, $2,600,000 in principal payments were due February 20, 1985. The Company obtained waivers from
its lenders and amended the borrowing test so as to cure such delinquency upon the closing of the Tampa
Sale. The Company is current in its principal and interest obligations under the Revolving Credit Loan as
modified by the March Letter Agreement.
The maturity date of the Purchase Money Mortgages Loan has been extended to March 31, 1986 pursuant
to the March Letter Agreement. The loan is repaid based on a fixed payment schedule but the Company also
must maintain a minimum coverage ratio of 100% of the purchase money mortgage balance. As of December
31, 1984, the coverage ratio was 98%. As of March 31, 1985, the Company was in compliance with the
minimum coverage ratio. During December, 1984, the Company repaid $657,(X)() of the principal amount
of $3,640,(X)() due on December 14, 1984. Pursuant to the March Letter Agreement, the lenders agreed to
withhold any enforcement action as to the remaining principal payments due, if acceptable progress is made
toward repaying these and other obligations in 1985.
The Term Loan amortizes in quarterly installments of $750,(X)() until paid in full in 1986. As of
December 31, 1984, the Company was delinquent $7 50,(X)() in principal payments. Such delinquency was repaid
on February 27, 1985. The March 31, 1985 installment has been deferred and the Term Loan is expected
to be repaid from the proceeds of the Tampa Sale notes.
The first $5,(X)(),(X)() installment of the Bridge Loan was due on October 1, 1984 and the remainder on
December 31, 1984. A $5,(X)(),(X)() payment on the Bridge Loan was made from the proceeds of the Tampa
Sale. Pursuant to the March Letter Agreement, the lenders have agreed to withhold any enforcement action
as to the remaining principal payments due if the Bridge Loan is repaid by June 30, 1985. The balance of
the Bridge Loan is expected to be repaid from the proceeds of the Tampa Sale notes.
The Revolving Credit, Purchase Money Mortgages and Term Loans bear interest, at the Company's
choice, at the lender's fluctuating "Base Rate" + 1% ("Base Rate" + 1.25% for the Bridge Loan), or at
a fixed rate of 1.75% (2.0% for the Bridge Loan) above the rates at which dollar deposits are offered in
immediately available funds by banks in the London interbank markets ("LIBOR") for periods from 30 days
to one year.
On December 31, 1984, the "Base_ Rate" was 10.75% and, depending on maturities, the Reference and
LIBOR rates ranged from 10.87% to 12.25%. The effective interest rate of the combined bank loans at
December 31, 1984, 1983 and 1982 was 11.75%, 11.86%, and 14.14% respectively. Bank loans, as of
December 31, 1984 (giving effect to the March Letter Agreement), mature as follows (in thousands):
December 31, 1984
1985 ........................................... .
1986 ........................................ ' .. .
Total
t
0
o
0
0
0
0
o
0
0
0
t
0
0
0
t
0
I
0
0
0
It
I
Itt
t
t
I
0
$20,457
34,401
$54,858
5.
Mortgages and Similar Debt-(Continued)
Other Bank Loans
Other Bank Loans consist of a bank loan administered by the FDIC and, prior to September 14, 1984,
a revolving credit loan of the Company's lumber subsidiary. The loan administered by the FDIC matures
Apri11, 1985, accrues interest at 2% below the "Base Rate" and provides for repayment through the collection
of certain purchase money mortgages assigned as collateral. As of December 31, 1984, principal and interest
payments on the FDIC loan were current.
Construction and Improvement Loans
At December 31, 1984, the Company had $34, 110,000 of construction and improvement loans outstanding
and was delinquent on approximately $545,000 in interest and $100,000 in principal payments under certain
of these loans. The delinquent principal and interest was repaid during the quarter ended March 31, 1985.
The Company and its construction lenders have agreed that any delinquent interest on these loans will be
paid trom future closings of certain condominium units and the release prices in these construction loans have
been modified to provide funds for the payment of such interest. These construction loans bear interest at
1.5% to 2.0% above the "Base Rate" or may be fixed for periods of up to one year at 2.0% to 2.5% above
LIBOR. These loans mature at various dates in 1985. Current maturity dates are typically renewed for six
to twelve month periods with its lenders. Relations with these lenders are satisfactory, and the Company does
not expect any problems in continuing under this arrangement. There can be no assurance that the Company
will be able to obtain additional renewals. The Company expects to retire these loans primarily through the
sale of condominium units.
In July, 1984, the Company entered into a loan agreement in the amount of $6,000,000 to finance the
construction of certain amenities at Tampa Palms. The loan bears interest at a rate of 2% per annum in excess
of the lender's prime rate (10.75% at December 31, 1984) or, at the Company's option, at a rate of 2.5%
in excess of the Federal Home Loan Bank borrowing rate for three-year loans. At December 31, 1984,
$1,411,000 in principal amount was outstanding under this loan. The loan was repaid from the proceeds of
the Tampa Sale.
The maximum and average amounts of short-term borrowings during 1984 and 1983 were approximately
$59,248,000 and $44,362,000, and $82,931,000 and $71,010,000 respectively. During years ended December 31,
1984 and 1983, the interest rate on short-term borrowings ranged from 11.16% to 15.00% and from 10.94%
to 13.50%, respectively. The weighted average annual interest rate was 13.22% during the year ended
December 31, 1984.
6.
Income Taxes
The Company has made no provision for income taxes for the years ended December 31, 1984 and 1983
as the Company is in a net operating loss carryover position for both financial statement and income tax
purposes. After filing its 1984 tax return, the Company's net operating loss carryover for tax purposes is
estimated to be $35,704,000, of which $12,290,000 will be available through 1993, $6,731,000 through 1995,
$5,458,000 through 1996 and the remainder through 1999. The Company's net operating loss carryover for
financial statement purposes was approximately $39,639,000 and $18,449,000 at December 31, 1984, and 1983,
respectively. In addition to the net operating loss carryovers, investment tax credit carryovers of approximately
$4,201,000, which expire from 1989 through 1999, are available to reduce future federal income tax liabilities
only after the net operating loss carryovers have been utilized.
The Internal Revenue Service has commenced an examination of the Company's federal income tax
returns for the 1981 and 1982 years. At the present stage of the examination, it is the Company's opinion
that any proposed adjustments will not have a material effect on the financial statements.
44
45
r
I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
Income Taxes-(Continued)
The 1982 (benefit) for deferred income taxes resulted from timing differences in the recognition of revenues
and expenses for tax and financial statement purposes. The sources of these differences and the estimated tax
effect ($ in thousands) of each is as follows:
7. Liability for lmprovements-(Continued)
31, 1984 and $10,300,000 at December 31, 1983-since such cost will be capitalized as additions to utility
plant when expended. Anticipated expenditures for such land improvements to complete areas from which
sales have been made through December 31, 1984 (in thousands) is as follows:
6.
Amount of Tax Effect Increase (Decrease)
Income from land sales reported on the percentage-of-completion basis per books and
primarily the installment basis for tax purposes-net .......................... .
,,
$
Losses on cancellations and consummated Marco option transactions provided for on the
accrual basis and recognized for tax purposes upon cancellations ............... .
(370)
Equity in joint venture income recognized for tax purposes on a different basis ..... .
(199)
Profit recognized from condominium sales reported on the percentage-of-completion basis
per books and recognized on the completed contract basis for tax purposes-net ...
(4,894)
State income tax provision (benefit), net of federal tax effect, and unrealized state benefit
of net operating loss carryover ............................ ·................. .
(509)
Effect of net operating loss carryovers recognized (generated) for tax purposes ...... .
1,367
Other differences individually less than 5% of deferred income tax (benefit) expense ..
867
Unrealized benefit of net operating loss carryover ............................... .
3,296
.............................................
.............................................
.............................................
.............................................
.............................................
and thereafter ................................
Total ................................
.
.
.
.
.
.
.
December 31, 1984
Real Estate
$ 2,256
1,859
1,505
1,259
1,102
9,166
$17,147
$ 1,084
988
944
954
988
9,166
$14,124
Equipment
$1,172
871
561
305
114
$3,023
46
47
Computed "expected" tax expense (benefit) .................................... .
Increases (reductions) in tax resulting from:
Differential tax provided at higher rates on reversing timing differences generated in
prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... .
Provision (benefit) for state income tax, net of federal income tax effect .......... .
Additional federal provision attributable to prior years' non-deductible expenses .. .
Unrealized benefit of net operating loss carryover ............................. .
:l
:
"Actual" tax expense (benefit)
t
t
t
1
t'
t
I
I
I
I.
I
I
It
1
t
7.
I
1985
1986
1987
1988
1989
1990
Total
Liability for Improvements
The Company has an obligation to complete land improvements upon deeding which, depending on
contractual provisions, typically occurs within 90 to 120 days after the completion of payments by the customer.
The estimated cost to complete improvements to tracts from which sales were being made at December 31,
1984 and 1983 was approximately $63,300,000 and $62,200,000, respectively. The foregoing estimates reflect
the Company's current development plans at its communities (see Note 8). As of December 31, 1984 and
1983, the Company had an estimated development obligation applicable to sold lots of approximately
$27,200,000 and $29,700,000, respectively, a liability to provide title insurance, costing $800,000 and
$1,100,000, respectively, and an estimated cost of street maintenance, prior to assumption of such obligations
by local governments, of $4,200,000 and $4,000,000, respectively, all of which are included in deferred revenue,
and exclude the estimated cost of installing central' water mains:-approximately $10,400,000 at December
34.6%
1982
'
Commitments and Contingent Liabilities
Total rental expense for the years ended December 31, 1984, 1983 and 1982 was approximately $2,411,000,
$2,469,000 and $1,976,000, respectively.
~following is a schedule of future minimum rental payments required under operating leases that have
initial or remaining noncancellable lease terms in excess of one year (in thousands):
The above commitments are not a forecast of future rental expenses and may not necessarily be the amount
payable in the event of default.
Homesite sales contracts provide for the return of all monies paid in (including paid-in interest) should
the Company be unable to meet its contractual obligations after the use of reasonable diligence. If a refund
is made, the Company will recover the related homesite and any improvement thereto. The aggregate amount
of all monies paid in (including paid-in interest) on all homesite contracts having outstanding contractual
obligations (primarily to complete improvements) at December 31, 1984 was approximately $323,359,000.
In certain of its Central and North Florida communities, the Company has been delayed in completing
improvements to lots in accordance with its contractual obligations. The Company has entered into a Consent
Order with the Division of Florida Land Sales and Condominiums which provides a program for notifying
all affected customers of the anticipated delays in the completion of improvements, various options which
may be selected by affected purchasers, and a schedule for completing certain improvements through 1986.
The Consent Order also requires the Company to maintain a contracts receivable balance plus future interest
collections from the sale of property in these communities equal to at least 110% of the amount necessary
to complete certain improvements (see Note 2). At December 31, 1984 the liability to complete improvements
to fully paid-for lots was approximately $26,000,000. At December 31, 1984, the Company was in compliance
with the Consent Order.
Based upon the Company's experience with affected customers, the Company believes that the total costs
arising from the delays in completing such improvements will not materially exceed the amount provided
for in the consolidated financial statements. Approximately $5,116,000 and $5,054,000 of the provision for
the total costs relating to the delays for improvements remained in accrued expenses and other at December
31, 1984 and 1983, respectively.
Included in cash at December 31, 1984 and 1983, are escrow deposits of $1,211,000 and $3,459,000,
respectively, restricted for completion of improvements in certain of the Company's communities, $952,000,
and $1,312,000, respectively, restricted for Marco Island-Marco Shores refund programs and $640,000 and
$700,000, respectively, of deposits held for customers.
i
..
$(10,181)
A reconciliation of the provision for income tax ("actual" tax expense) to the "expected" tax expense
computed by applying the federal income tax rate of 46% to income or loss from continuing operations before
income taxes for the year 1982 (in thousands) is as follows:
!
$ 6,800
10,300
11,200
11,100
23,900
$63,300
8.
Interest expense accrued for financial reporting purposes when paid on consummated
Marco option program refund elections-net (see Note 9) ..................... .
Effective tax rate .......................................................... .
1,'
(100)
803
Total (including state income tax (benefit) of $991,000) ..... : .................... .
I
1985.............................. . . . . . . . . . . . . . .
1986.. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .
1987............................................
1988 .......................................... :.
1989 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,442)
Provision for Marco permit costs (see Note 9) not recognized for tax purposes ...... .
'
December 31, 1984
1982
t
1
t
1
t
1
t
t
1
t
I
I
I
I
I
I
I
0
I
I
I
I
I
I
I
I
I
I
I
I
$(13,530)
25
(509)
537
3,296
$(10,181)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
8.
Commitments and Contingent Liabilities-(Continued)
In addition to the matters discussed above and in Note 9, the Company is a party to other litigation relating
to the conduct of its business which is routine in nature and, in the opinion of management, should have no
material effect upon the Company's operation.
9.
Marco Island-Marco Shores Permits
On Apri116, 1976, the U.S. Army Corps of Engineers (the "Corps") denied the Company's application
for dredge and fill permits required to complete development of the Marco Island community. These denials
adversely affected the Company's ability to obtain the required permits for the Marco Shores community as
originally platted.
Following the denials, the Company instituted legal proceedings, implemented various programs to assist
its customers affected by the Corps' action, and applied for permits from certain administrative agencies for
other areas of the Company's Marco ownership. On July 20, 1982, the Company entered into an agreement
with the State of Florida and various state and local agencies (the "Settlement Agreement"), endorsed by
various environmental interest groups, to resolve pending litigation and administrative proceedings relative
to the Marco permitting issues.
On September 29, 1983, the Company reqeived a Corps permit to develop Marco consistent with the
Settlement Agreement, and on January 19, 1984, the Company received aU. S. Coast Guard permit-the
last remaining federal permit needed to complete development at Marco. The Settlement Agreement and the
federal permits provide for the Company to develop as many as 14,500 additional dwelling units in the Marco
vicinity. The Settlement Agreement became effective in March, 1985 when, pursuant thereto, approximately
12,400 acres of the Company's Marco wetlands were conveyed to the State in exchange for approximately
50 acres of State-owned property near the Miami International Airport in Dade County, Florida. The
Settlement Agreement constitutes the permits required from the Florida Department of Environmental
Regulation ("DER") for the development of the additional dwelling units in the Marco vicinity.
In June, 1984, Collier County issued a development order and the Company obtained the remaining local
approvals necessary to develop Marco Shores, Horr's Island and additional dwelling units at Marco Island,
in accordance with its application. In December, 1984, all parties entered into a stipulation to dismiss the
appeal of the development order which had previously been filed by the Florida Department of Veteran and
Community Affairs. The stipulation will have no material adverse effect on the financial statements of the
Company.
As a result of the permit denials, the Company has incurred certain obligations with respect to its affected
customers. A total of $58,300,000 (including a final provision of $22,700,000 in 1982) has been provided by
the Company for such costs. The Company believes that the remaining costs that may result from such permit
denials will not materially exceed the amount provided for in the financial statements. Included in the allowance
for Marco permit costs is accrued interest of approximately $6,991,000 and $5,802,000 at December 31, 1984
and 1983, respectively, relating to obligations of affected customers.
10.
10.
Common Stock and Loss Per Share Information-(Continued)
Number of Shares
of Common Stock
Under option at December 31, 1982 ............................ , ....... , ...
Options granted during 1983 ..............................................
Options exercised during 1983 .............................................
Options cancelled or expired during 1983 ...................................
Under option at December 31, 1983 ........................................
Options granted during 1984 ............ , .................................
Options exercised during 1984 .............................................
Options cancelled or expired during 19 84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , ...
Under option at December 31, 1984 ........................................
.
.
.
.
.
.
.
.
.
122,000
17,300
(2,600)
(25,400)
111,300
2,500
(56,300)
57,500
The following table summarizes shares under option at December 31, 1984:
December 31, 1984
Number of employees holding options . . . . . . . . . . . . . . . . . . . . . . . .
Average exercise price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aggregate exercise price ............ -. . . . . . . . . . . . . . . . . . . . . . . .
Aggregate market price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares under option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of options exerciseable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unoptioned shares available for grant . . . . . . . . . . . . . . . . . . . . . . . . .
27
$10.46
$602,000
$280,000
57,500
36,000
130,200
The options outstanding have expiration dates between December, 1986 and August, 1989.
The Company has issued warrants in connection with its unsecured 6%% note which was paid on June 15,
1984. The number of shares which may be acq1,1ired through exercise of the warrants diminishes 10%
semi-annually, commencing June 16, 1984 until June 15, 1987 when the warrants expire. The following table
reflects information with respect to the warrants at December 31, 1984 and 1983.
December 31,
1984
Warrants outstanding .............................. .
Exercise price . . . . . . . . . . . . . . . . . . . . . . . . . . ........... .
169,000
$14.46
1983
211,000
$14.46
On December 20, 1983, the Company issued warrants in conjunction with the Bridge Loan agreement
for the purchase of 200,000 shares of Common Stock at $12.00 per share. The warrants became exercisable
on July 1, 1984 and expire July 1, 1988.
On July 19, 1983, the Company completed aprivate placement of 1,000,000 shares of its Common Stock
for $12,250,000 to a New York financial institution. This transaction had the effect of increasing the weighted
average number ofshares by 451,613 for the year ended December 31, 1983.
On January 11, 1985, the Company completed a private placement of 200,000 shares of its Common
Stock for $1,000,000. This placement was in conjunction with the Tampa Sale. (See Note 13.)
Common Stock and Loss Per Share Information
Options to purchase Common Stock of the Company have been granted to employees of the Company
under several stock option plans. Such shares may be treasury or authorized but unissued shares, and are
subject to adjustment resulting from stocK dividends, splits, reorganizations, or other substitutions of securities
for the present Common Stock of the Company. The option price cannot be less than the market value of
the Company's Common Stock on the date of the grant. All options are exercisable for a period of up to five
years from the date of grant at an annual cumulative rate of 20%, except that any incentive stock option
granted to a person who holds an earlier incentive stock option is not exercisable while any such earlier option
is outstanding. No option may be granted after ten years from the date the plan was adopted. No charges
to income are made with respect to any of the stock option plans. Information with respect to shares under
option follows:
'
Tierra Verde Company (the "Venture") was formed pursuant to a joint' venture agreement (the
"Agreement") dated November 22, 1976 between the Company's wholly-owned subsidiary, Delverde, Inc.
("Delverde"), and Madonna Corp. ("Madonna"). The purpose of the Venture is to sell homes and homesites,
to complete development, and to operate and maintain the community's facilities at the subdivision known
as Tierra Verde, located in Pinellas County, Florida. The terms of the Venture extend to December 31, 1990,
48
49
Loss per common and common equivalent share were computed by dividing net loss by the weighted
average number of shares of common stock and common stock equivalents outstanding during each
period-5,031,522 for the year ended December 31, 1984, 4,478,275 in 1983 and 4,008,143 in 1982.
11. Joint Venture And Non-Consolidated Subsidiary Information
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
11.
Joint Venture And Non-Consolidated Subsidiary lnformation-(Continued)
Delverde receives an annual management fee of $100,000 and shares in the Venture's results of operations
equally with Madonna. The Company accounts for the Venture under the equity method. Accordingly, the
investment in the Venture (included in "Prepaid expenses and other") is carried at cost plus the Company's
equity in the Venture's results of operations since inception, net of any distributions received from the Venture.
Condensed consolidated balance sheet information of the Venture at December 31, 1984, 1983 and 1982
and results of operations for the periods then ended follow (in thousands):
12.
Summarized results of operations of the lumber company follow (in thousands):
1984
Revenues ................. .
Costs and expenses . . . . . . . . . .
Income (loss) before income
taxes ................... .
December 31,
Assets .....................
Liabilities . . . . . . . . . . ........
Venturers' equity:
Delverde, Inc.............
Madonna Corp.
Total partners' equity .....
Total liabilities and
partners' equity .....
Revenues ..................
Costs and expenses ..........
Net income ..........
o
I
I
I
I
I
I
I
I
I
1984
1983
1982
$9,097
$8,529
$12,257
$12,327
$12,360
$14,096
284
284
568
(35)
(35)
(70)
(868)
{868)
{1,736)
$9,097
$5,181
2,543
$2,638
$12,257
$ 3,472
1,802
$ 1,670
$12,360
$ 3,890
2,754
$ 1,136
During 1984 and 1982, $1,000,000 and $2,000,000, respectively, was distributed to each of the Ventur.e
partners. The Venture partners' debt agreements restrict future distributions to the Venture partners unttl
such debt is repaid. The Company has guaranteed the Venture's debt.
The Company's investment in its wholly-owned financial subsidiary, Deltona Mortgage Company
("DMC"), is included in "Prepaid expenses and other". DMC provides mortgage loans to certain buyers of
the Company's houses and condominiums. In addition, DMC originates residential mortgag~ loans from
outside sources. With the discontinuance of the Company's housing business, the Company Wlll phase out
the operations of DMC during 1985. In the fourth quarter of 1984, the Company sold substantially all of
its mortgage portfolio for a profit of $287,000.
Condensed balance sheet information of DMC at December 31, 1984, 1983 and 1982 and the results of
operation for the years then ended follow (in thousands):
December 31,
Assets .....................
Liabilities ..................
Stockholder's equity .........
Total liabilities and
stockholder's equity .
Revenues ..................
Costs and expenses ..........
Income before taxes .........
Theoretical taxes
Net income
I
I
I
I
I
I
I
I
I
I
I
I
0
I
I
I
I
I
I
I
I
~
1984
1983
$1,006
$ 280
726
$6,731
$6,058
673
=
$1,006
$1,515
1,412
103
50
$ 53
$6,731
=
$2,047
1,805
242
118
$ 124
$4,383
$ 325
319
6
- -3
$
3
=
$4,383
$3,834
549
Discontinued Operations-(Continued)
$14,926
14,569
$18,483
18,862
$15,299
17,186
$
$ (379)
$ (1,887)
357
In October, 1984, the Company sold its airline subsidiary for $1,500,000 in cash of which $100,000 is
held in escrow to satisfy certain future maintenance requirements.
Summarized results of operations of Marco Island Airways, Inc. follow (in thousands):
Years ended December 31,
Revenues ................. .
Costs and expenses . . . . . . ... .
Income (loss) before income
taxes· ................... .
13.
1984
1983
1982
$3,208
3,641
$5,321
4,828
$4,845
4,494
$ 493
$ 351
Subsequent Events
On January 9, 1985, the Company entered into a contract to sell the property which was to have
constituted its Tampa Palms community to Kenneth M. Good ("Good"), a Colorado-based developer, for
$37,900,000 payable in cash at the closing which was scheduled to occur by June 28, 1985. Good also purchased
200,000 shares of the Company's Common Stock for $5 a share, or $1,000,000. In conjunction with the stock
purchase, Good entered into an agreement providing that for a period of two years he would: (i) not acquire
additional shares, (ii) vote in accordance with the recommendation of the Company's Board of Directors on
specified matters, (iii) not engage in certain takeover actions, and (iv) not dispose of his stock without Board
approval.
On February 26, 1985, the Tampa Sale contract was modified to accelerate the scheduled closing date
while allowing additional time for the payment of a portion of the purchase price. The Tampa Sale closed
on March 29, 1985, with the Company receiving $14,400,000 in cash (including prior deposits), a $6,000,000
note bearing interest at a rate of 15~% per annum due April29, 1985, and $17,500,000 in non-interest bearing
notes due June 28, 1985. All such notes are secured by mortgages on the Tampa property and by the 200,000
shares of Common Stock of the Company acquired by Good. The proceeds from the Tampa Sale will be used
to repay bank loans, to escrow $10,000,000 specifically for land development work in the Company's Central
and North Florida communities and for general corporate purposes (see Notes 5, 7 and 8).
On March 14, 1985, the Company obtained title to approximately 50 acres of commercially zoned property
in Dade County, Florida. (See Note 9.)
=
12.
''
I
!
I
Discontinued Operations
In September, 1984, the Company sold its wholly-owned lumber subsidiary for $4,000,000 of w~ich the
Company received approximately $3,000,000 in cash, with the balanc.e due within on~ year. Approx1~ately
$700,000 of such balance is secured by a first mortgage on real estate 1n Orlando, Flonda and the remamder
will be used as credits toward the purchase oflumber to be utilized by the Company in its construction activities.
The purchasers assumed all the liabilities of the subsidiary.
50
Years ended December 31,
1983
1982
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SUPPLEMENTARY FINANCIAL DATA
(Unaudited)
THE DELTONA CORPORATION AND SUBSIDIARIES
Financial Data Adjusted for the Effects of Changing Prices
14.
Business Segments
Year ended December 31, 1984
(in thousands)
Years ended December 31,
1984
1980
1981
1982
1983
As Stated in
Financial
Statements
Adjusted for
Changes in Specific
Prices (Current
Cost)
$ 78,381
$ 78,381
Cost of sales and other inventory costs .......................... .
53,753
54,451
Selling, general, administrative and other ........................ .
28,678
28,678
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................. .
Interest
°
2,419
2,831
110
17,986
17,986
Total .............................................. .
102,836
103,946
Net loss from continuing operations .............................. .
$ (24,455)
$ (25,565)
(in thousands)
Revenues (a)
Real estate:
Single-family housing revenues ................................ . $ 2,540
16,669
Multi-family housing revenues ................................ .
17,501
Net land sales(b) ............................. · · · · · · · · · · · · · · · ·
6,594
Improvement revenues(c) .......................... · .. · · · · · · · ·
8,015
Interest income(d) ............................. · · · · · · · · · · · · · ·
114
Other ..................................................... .
51,433
Total real estate .................................. · · · · · · ·
13,686
Utilities ...................................... · · . · · · · · · · · · · · · ·
12,106
Other(e) ..................................................... .
1,422
Equity in earnings of joint venture and non-consolidated subsidiary .. .
Intersegment sales(f) ........... , ............... · · · · · · · · · · · · · · · · ~
Total .......................... ························· $ 78,381
Operating Profits(a)
Real estate(g)(h) ............... · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · $ (5,434)
5,730
Utilities ..................................................... .
3,736
Other ................................ , .......... , ........... .
1,422
Equity in earnings of joint venture and non-consolidated subsidiary .. .
General corporate expense ........................ · .. · · · · · · · · · · · (11,923)
Interest expense(g) .... , .................. · ... · . · . · · · · · · · · · · · · · · (17,986)
Income (loss) from continuing operations before income taxes ....... . $(24,455)
Real Estate
Identifiable assets ....... 1984
1983
1982
Depreciation expense .... 1984
1983
1982
Capital expenditures .... 1984
1983
1982
$167,977
199,972
250,819
$
257
290
151
241
$
28
144
Lumber
$7,970
6,655
$ 259
313
$ 519
571
Utilities
Other( e)
$65,728
59,063
57,327
$ 1,368
1,409
1,193
$ 4,696
4,078
5,328
$14,010
15,538
18,139
$ 540
707
709
$ 162
1,391
227
$ 14,011
25,078
24,641
7,149
14,296
116
85,291
9,518
17,551
568
$ 51,971
87,651
29,545
11,885
15,985
52
197,089
9,977
12,845
1,239
$ 55,726
50,329
44,284
9,122
13,525
105
173,091
8,138
12,667
101
~)
~)
~)
~
$ 83,294
$112,496
$220,350
$193,030
$ 37,756
2,596
12
1,239
(9,097)
(24,433)
$ 27,382
2,307
2,273
101
(8,812)
(14,383)
$
$
$ 2,879
26,537
11,044
5,508
11,358
.
119
57,445
11,758
14,138
1,076
$ 9,001
3,310
6,663
1,076
(13,204)
(18,641)
$(11,795)
$
6,119
2,403
627
568
(10,135)
(27,457)
$ (27,875)
8,073
Investment
in Joint
Corporate Elimination Venture
$1,319
$(576)
$3,954
(835)
(777)
3,959
(868)
(678)
3,744
$ 233
94
338
$ 16
1,039
878
8,868
Total
$252,412
284,890
335,138
$ 2,398
2,759
2,704
$ 5,115
7,055
7,148
Total revenues ................................................ .
Costs and expenses:
0
0
0
0
0
0
0
0
0
0
0
0
I
I
0
t
t
t
I
Itt
I
I
Itt
I
I
I
I
I
0
I
I
0
t
0
t
I
I
Itt
t
t
t
t
t
Purchasing power gain on net monetary items held
. during the year . . . . . . . . . . . . .................................. .
$
Decrease in Current Cost of inventories, property,
plant, and equipment held during the year* ...................... .
$ 7,794
Effect of increase in General Price Level ..................... , .... .
15,137
Excess of increase in General Price Level over decrease
in Current Cost ............................................. .
$ 22,931
3,544
*At December 31, 1984, Current Cost of inventory and land held for investment, bulk sale or future
development was $147,995,000 and Current Cost of property, plant, and equipment, net of accumulated
depreciation, was $76,935,000.
Information About The Effects Of Changing Prices
(a) Due to the sale of the sale of the lumber segment and the sale of the airline segment in 1984, revenues
and operating profits from such operations have been excluded from the foregoing table (see Note 12).
(b) Net land sales consist of gross land sales less estimated uncollectible installment sales, deferred revenue
and contract valuation discount. Included in 1984 estimated uncollectible installment sales is a $2,200,000
provision for certain contracts receivable which were deemed uncollectible (see Notes 1, 2 and 7).
(c) Improvement revenues consist of revenue recognized due to completion of improvements on prior period
sales.
(d) Interest income primarily consists of interest earned on contracts and mortgages receivable and on
escrowed cash balances and the amortization of valuation discounts.
(e) Other consists of revenues from sales other than real estate and utilities, the major portion of which comes.
from the country club operations.
(f)
Intersegment sales consist primarily of sales between the Company and its title insurance and asphalt
subsidiaries.
(g) The effect of expensing previously capitalized interest reduced the operat.ing profit of the real est~te segment
by$1,258,000in 1984,$1,780,000in 1983, $2,164,000i~ 1982, $9,391,000m 1981 and$~,394,000m1980. T~e
effect of capitalizing current period interest decreased mterest 7x1?ense by $2,314,000 m 1984, $2,980,000 m
1983, $6,421,000 in 1982, $14,516,000 in 1981 and $5,929,000 m 1980.
Financial Accounting Standards Board Statements No. 33, and No. 82 "Financial Reporting and
Changing Prices," require presentation of supplementary information intended to measure the impact on public
enterprises of specific price changes ("Current Cost"). Statement No. 33 establishes limited disclosure
requirements, emphasizes flexibility and encourages experimentation. Consequently, Current Cost data
presented here is not necessarily comparable with data of other companies--even those operating in the same
industries as the Company.
Current Cost Information
Current Cost accounting is an attempt to measure and report, at today's prices, the cost to the Company
of purchasing or producing assets having the same service potential as the Company's present assets. It is
important to note that Current Cost is not the same as market value. Market value is the price which the
Company can obtain for its assets in the normal course of business. The market value of the Company's assets,
in management's opinion, far exceeds Current Cost. The Company determined its Current Cost as described
below.
Current Cost of"Property, Plant, and Equipment" was determined by the use of appraisals, market values
and internal estimates applied to a statistical sample of the Company's assets.
(h) Operating profits for the real estate segment reflect~.p.rovision for the writ~down of multi-family i~ventory
of $5,700,000 in 1984 and an addition to the provision for Marco permit costs of $22,700,000 m 1982.
For Current Cost, the assets of the Company's utility systems and most golf course operations have been
stated at historical cost. The value-in-use of these operations was estimated to be approximately equal to their
historical cost-in the case of the utility operations because their regulating bodies allow only historical cost
depreciation to be included in their rates, and golf course operations based on an estimate of the net present
value of their future cash flow.
52
53
The Current Cost of the Company's retail land inventory and land underlying buildings under
construction was determined based on (1) estimates of what it would cost the Company to acquire comparable
parcels of raw land today (in the same manner as tracts were acquired for existing communities) and (2) on
engineering estimates of what it would cost, at today's prices, to bring such land to the same stage of
development as the existing inventory.
Quarterly Financial Data
(In thousands, except per share amounts)
Comparison of Selected Financial Data Adjusted for the Effects of Changing Prices
1983
1984
($
Revenues
Years ended December 31,
1982
1981
1980
in thousands of average 1984 dollars, except per share amounts)
Current Cost information:
Loss from continuing operations
$ 25,565
Loss from continuing operations
per common share ............ .
$
5.08
$ 24,633
$
5.50
$ 24,590
$
5,097
6.14
$
1.27
$
$ 7,109
$
1.78
Excess of increase in General
Price Level over increase in
Current Cost ................. .
$ 22,931
$ 6,745
$ (2,706)
$ 20,267
$
Net assets at year-end ........... .
$ 84,039
$119,498
$122,278
$145,450
$160,438
Purchasing power gain on net
monetary items held during
the year ..................... .
$ 3,544
$
3,832
$
3,573
$
5,917
Market price per common share at
year-end .................... .
4.87
$
9.00
$
8.29
$
9.28
Average consumer price index .... .
$
298.4
311.1
289.1
272.4
(643)
$ 7,431
$
16.17
246.8
No cash dividends have been paid.
For Current Cost the inventory of unpermitted areas of Marco Island-Mateo Shores was assumed, for
purposes of this reporting only, to equal historical cost due to the permitting surrounding these areas.
Construction costs in the inventory of "Houses and apartments completed or under construction" were
not adjusted for Current Cost because these costs were incurred within a relatively short period of time and,
consequently, already reflect average-current-year dollars. Likewise, the Current Cost of"Inventories--other"
approximates historical cost due to the high rate of turnover.
Income
(Loss)
From
Continuing
Operations
Before
Income
Taxes
Income
(Loss)
From
Continuing
Operations
Income
(Loss)
Gain on
From
Disposal of
Lumber
Lumber and
And Airline
Airline
Segments Subsidiaries
Earnings (Loss) Per Share
Net Of
Net of
Income
Income
Net Income Continuing
Taxes
Taxes
(Loss)
Operations
Total
1984
First ......... $ 26,805
$ (3,188)
$ (3,188)
$ 230
Second .....
21,068
(3,981)
(3,981)
(273)
Third .......
17,773
(4,709)
(4,709)
48
Fourth .....
12,735(1) . (12,577)(2) (12,577)(2)
(81)
Total ............ $ 78,381
$(24,455)
$(24,455)
$ (76)
1983
First ......... $ 23,200
Second .....
20,034
Third .......
19,796
Fourth .....
20,264
Total ............ $ 83,294
157
(3,880)
(3,997)
(4,075)
$(11,795)
157
(3,880)
(3,997)
{4,075)
$(11,795)
1982
First ......... $ 35,916
Second .....
23,967
Third .......
30,379
Fourth .....
22,234
Total ............ $112,496
$
919
(24,930)
(707)
(3,157)
$(27,875)
$
564
(14,394)
(707)
{3,157)
$(17,694)
$
$
$635
$
(29)
(98)
25
216
$
128
(3,978)
(3,972)
{3,859)
$ .04
(.96)
(.82)
$ .03
(.99)
(.82)
~)
_D])
$
114
${11,681)
$(2.63)
$(2.61)
$ (189)
(10)
(602)
{735)
$
375
(14,404)
(1,309)
{3,892)
$ .09
(3.60)
(.32)
$(1,536)
${19,230)
$ .14
(3.60)
(.17)
(.79)
${4.41)
___tm
$(4.80)
(1) Includes ~n additional provision of $2,200,000 for the cancellation of certain contracts which were deemed
uncollecttble. (See Note 2 to the Consolidated Financial Statements.)
(2) In ~dditi?n to note 1 above, includes a provision of $5,700,000 for the writedown of multi-family inventory
to tts estimated net realizable value. (See Note 3 to the Consolidated Financial Statements.)
"Cost of Sales" for Current Cost was computed using the inventory valuation methods previously
described.
"Depreciation Expense" for Current Cost was computed under the straight-line method using the same
useful lives and salvage values used for historical cost purposes.
Impact on Net Assets and Purchasing Power
Net assets decreased in 1984 primarily due to the significant loss from operations and remained stable
in 1983, despite the significant loss from operations, due primarily to the private placement of one million
shares of Common Stock at avalue of $12,250,000. In 1982, the large loss from operations was only partially
offset by an increase in assets and inventories, attributable mostly to an increase in value of the Tampa Palins
project. This decrease in net assets in 1981 and 1980 was due to the depressed real estate market.
The purchasing power of the Company's monetary items increased in 1984, 1983, 1982, 1981 and 1980.
This increase was attributable to inflation which enables the Company to repay debt in dollars having declining
purchasing power, requiring fewer Company resources for future repayment.
Inflation causes the Company's operating costs to· increase. The Company attempts to anticipate cost
'
increases in its selling prices.
54
322
$313
$ (2,958) $ (.63)
$ (.59)
(4,254)
(.79)
(.84)
(4,339)
(.94)
(.86)
(12,345)(2) (2.50)(2) (2.45)(2)
${23,896) $(4.86)
${4.75)
55
ITEM 14
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(l) Financial Statements
See Item 8, Index to Consolidated Financial Statements and Supplementary Data.
(a)(2) Financial Statement Schedules
Auditors' Report ................... · .... · .. · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Schedule v _Property, plant and equipment for the three years ended December 31,
1984 ................... ·, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule VI_ Accumulated depreciation, depletion and amortization of property, plant and
equipment for the three years ended December 31, 1984 · · · · · · · · · · · · · · ·
Schedule VII _ Guarantees of securities of other issuers for the three years ended December 31, 1984 ........................ · · ·. · · · · · · · · · · · · · · · · · · · · · · · · · ·
Schedule VIII_ Valuation and qualifying accounts for the three years ended December 31,
1984.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AUDITORS' REPORT
57
58
59
60
61
Schedule IX_ Short term borrowings for the three years ended December 31, 1984 · · · · · 62
Schedule X _ Supplementary income statement information for the three years ended
December 31, 1984 ........................ · ... · · · · · · · · · · · · · · · · · · · 6~
All other schedules are omitted because they are not applicable or not required, or because the reqmred
information is included in the Consolidated Financial Statements or Notes thereto.
(a)(3) Exhibits
See the Exhibit Index included herewith.
(b) ·Reports on Form 8-K
.
.
Report on Form 8-K dated December 12, 1984 responding to item 5 and 7 was filed durmg the fourth
quarter of the year ended December 31, 1984.
56
To THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF THE DELTONA CORPORATION:
We have examined the consolidated balance sheets of The Deltona Corporation and subsidiaries (the
"Company") as of December 31, 1984 and 1983 and the related state!llents of consolidated operations,
consolidated stockholders' equity, and consolidated sources and uses of cash for each of the three years in
the period ended December 31, 1984, and have issued our opinion thereon dated March 29, 1985 (included
elsewhere in this Annual Report on Form 10-K). Our examinations also comprehended the supplemental
schedules of the Company, listed in Item 14(a)2. In our opinion, such supplemental schedules, when considered
in relation to the basic financial statements, present fairly in all material respects the information shown therein.
DELOITTE HASKINS & SELLS
Miami, Florida
March 29, 1985
57
SCHEDULE V
SCHEDULE
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
($ in thousands)
($
in thousands)
Balance at
Beginning
of Period
Year ended December 31, 1984
$ 11,773
Land and land improvements
59,635
Utility, plant, and equipment ....
10,263
Other buildings . . . . . . ... · . . . · .
Office furniture, fixtures, and
·
1,898
equipment ............. · ·. · ·
364
Model home furnishings ....... .
352
Leasehold improveme~ts .. : .... .
Construction, automotive, air11,270
craft, and other equipment ... .
95,555
Total ............... .
5,506
Construction in progress ....... .
$101,061
Total ............... .
Year ended December 31, 1983
Land and land improvements .. . $ 11,839
55,539
Utility, plant, and equipment ... .
12,594
Other buildings ............ · · ·
Office furniture, fixtures, and
1,907
equipment .......... · · · · · · · ·
82
Model home furnishings ....... .
599
Leasehold improvements ....... .
Construction, automotive, air11,217
craft, and other equipment ... .
93,777
Total .............. · ·
7,029
Construction in progress ....... .
Total .............. ·. $100,806
Year ended December 31, 1982
Land and land improvements .. . $ 11,936
48,061
Utility, plant, and equipment ... .
13,174
Other buildings .......... · · · · ·
Office furniture, fixtures, and
2,926
equipment ............. · · · · ·
319
Model home furnishings ....... .
792
Leasehold improvements ....... .
Construction, automotive, air13,047
craft, and other equipment ... .
90,255
Total ............... .
9,465
Construction in progress ....... .
Total ............... . $ 99,720
Additions
at Cost
342
2,145(2)
31
$
Retirements
$
910
4,096(2)
833(5)
Balance at
End of Period
$
$ (3,198)(1)
(629)
$ (470)(1)
7 (1)
(306)
(34)
(313)
60
187
37
274
$ 3,076
Other Changes
Add (Deduct)
{6,816)(3)
$(11,296)
(12)(1)
(46)(1)
$ (521)
1,659
517
64
4,682
86,814
7,510
$ 94,324
$ 11,773
59,635
10,263
(976)(4)
$
8,917
61,780
9,195
(3,164)(4)
121
282
20
(158)
(267)
1,898
364
352
1,237(6)
$ 7,499
(1,184)(4)
$ {5,749)
11,270
95,555
28 (1)
$
28
$
5,506
$101,061
$ 6,337(7)
5,888(2)
144
$ (6,434)(7)
(134)(1)
1,907
82
599
(1,916)(10) (1,456)(1)
$$(10,786)
11,217
93,777
(1,224)(8)
(238)
(250)
339
1
57
1,542(9)
$14,308
$ 1,590 (1)
(724)
$ 11,839
55,539
12,594
7,049
$100,806
(1) Reclassification of existing property, p~ant, and .eq~ip~ent..
(2) Principally water and sewer transmission and dtstnbution hnes.
1
Year ended December 31, 1984
Utility, plant, and equipment ....
Other buildings
Office furniture, fixtures, and
equipment ..................
Model home furnishings ........
Leasehold improvements ........
Construction, automotive, aircraft, and other equipment ....
I
I
I
I
I
I
I
If
I
I
11
1
1
Total ................
Year ended December 31, 1983
Utility, plant, and equipment ....
Other buildings
Office furniture, fixtures, and
equipment ..................
Model home furnishings ........
Leasehold improvements ........
Construction, automotive, aircraft, and other equipment ....
It
I
I
I
I
I
I
I
I
I
I
I
I
I
Total ................
Year ended December 31, 1982
Utility, plant, and equipment ....
Other buildings
Office furniture, fixtures, and
equipment ..................
Model home furnishings ........
Leasehold improvements ........
Construction, automotive, aircraft, and other equipment ....
I
I
I
I
I
I
I
I
I
I
111
I
1
Total ................
Balance at
Beginning
of Period
Additions
Charged to
Costs and
Expenses
Retirements
$12,062
4,167
$1,371
395
$ (137)
1,173
51
223
146
89
18
$13,819
4,432
(190)
14 (3)
(6)(3)
(11)(3)
1,147
134
40
~(2)
3,001
(186)
6,216
400
{3,684)
$23,892
$2,419
${4,197)
$ 459
$22,573
$10,317
4,857
$·1,409
355
$(1,065)
$ 336 (1)
20 (2)
$12,062
4,167
1,169
30
290
171
21
39
(91)
(76)(3)
1,173
51
223
(106)
5,812
764
{600)
~
$22,475
$2,759
${1,862)
$ 520
$ 7,904
4,763
$1,193
465
$ (396)
$1,220 (1)(3) $10,317
25 (2)
4,857
2,117
250
276
252
10
87
(1,107)
(230)
(11)
(62)(3)
1,169
30
290
7,084
697
{1,602)
___Q§1)(2)(3)
5,812
$22,394
$2,704
${3,346)
(2)(3)
(93)(3)
$ 723
6,216
$23,892
$22,475
(1) Represents depreciation and amortization charged to construction work in progress.
(2) Represents depreciation and amortization charged to inventory of land and improvements of houses and
apartments completed or under construction for equipment used for construction.
.
~!~ ~~:~\~::\~ :~: :::: ~~ ~:h~:\~~i=~~ !~C:i~~~l~i~~~. ~~~~:t:~b~:~:~~~ ic,~?~::~. and abranch
of the lumber subsidiary.
.
(5) Principally construction of model homes.
(6) Principally addition of construction and computer eqm?ment.
(7) Principally the purchase and subsequen.t sale. of office stte.
(8) Principally the write-off of fully depreciated ttems. .
(9) Principally addition 6f asphalt plant and aircraft ~qmpme.nt.
(10) Principally the sale of asphalt plant and construction equipment.
58
Balance at
End of Period
$ 386 (1)
7 (2)
(3) Primarily reclassification of existing property, plant, and equipment.
. . .
Other Changes
Add (Deduct)
vt
59
SCHEDULE VII
SCHEDULE VIII
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
GUARANTEES OF SECURITIES OF OTHER ISSUERS
($ in thousands)
VALUATION AND QUALIFYING ACCOUNTS
Name of Issuer of
Securities Guaranteed By
Person for Which
Statement is Filed
Title of Issue
of Each Class
of Securities
Guaranteed
Amount
Owned By
Person or
Total Amount Persons for
Which
Guaranteed
Statement
and
Is Filed
Outstanding
Amount in
Treasury of
Issuer of
Securities
Guarantee
Nature
of
Guarantee
($
Nature of
Any Default
By Issuer of
Securities
Guaranteed
in Principal,
Interest,
Sinking Fund
or
Redemption
Provisions,
or Payment
of Dividends
Year ended December 31, 1984
Tierra Verde
Company .......
Term Loan
Agreement
Tierra Verde
Company ....... Letters of Credit
Checker Oil
Deed and
Company .......
Mortgage
50%
Guarantee
of Principal
and Interest
Guarantee
of Principal
Only
0%
Security Sold
with Recourse
50%
$ 650
$3,778
$2,180
None
None
None
Year ended December 31, 1983
Tierra Verde
Company .......
Term Loan
Agreement
Tierra Verde
Company ....... Letters of Credit
Deltona Mortgage
Company ....... Mortgage Loan
Warehousing
Agreement
Mortgages,
Philip Higgins ....
Assignments of
Rents and
Security
Agreements
Checker Oil
Deed and
Company .......
Mortgage
$2,150
50%
$3,778
50%
Guarantee
of Principal
and Interest
Guarantee
of Principal
Only
100%
Guarantee
of Principal
and Interest
$3,794
$2,800
0%
Guarantee
of Principal
and Interest
$4,360
0%
Security Sold
with Recourse
None
None
None
None
None
Year ended December 31, 1982
Tierra Verde
Company .......
Term Loan
Agreement
Tierra Verde
Company ....... Letters of Credit
50%
$2,000
50%
$3,778
60
Guarantee
of Principal
and Interest
Guarantee
of Principal
Only
None
Those Valuation and Qualifying Accounts
Which are Deducted in the Balance Sheet
from the Assets to Which They Apply
Balance at
Beginning
of Period
Year ended December 31, 1984
Allowance for uncollectible
con tracts( 1) . . . . . . . ......... .
$ 4,097
Unamortized contract valuation
discount(2) ................ .
in thousands)
Additions
Charged to
Revenues,
Charged
Costs, and
to Other
Expenses
Account
Deductions
from
Reserves
Balance at
End of
Period
$3,729
$2,235
$ 5,591
$ 5,368
$2,602
$1,640
$ 6,330
Allowance for doubtful
accounts(3) ................ .
$ 1,206
$ 203
$ 267
$
402
Unamortized mortgage valuation
~·discount(4) ................ .
$
$
$ 247
$
73
272
$ (740)(5)
48
Year ended December 31, 1983
Allowance for uncollectible
contracts(!) . . . . . . . . . . . . . . . . .
$ 7,577
Unamortized contract valuation
discount(2) . . . . . . . . . . . . . . . . .
$ 6,474
Allowance for doubtful
accounts(3) . . . . . . . . . . . . . . . . .
$
Unamortized mortgage valuation
discount(4) .. .. .. .. .. .. . .. ..
$ 1,192
$
Year ended December 31, 1982
Allowance for uncollectible
contracts(!) . . . . . . . . . . . . . . . . .
$11,274
$1,246(6)
Unamortized contract valuation
discount(2) . . . . . . . . . . . . . . . . .
$ 6,992
Allowance for doubtful
accounts(3) . . . . . . . . . . . . . . . . .
$
Unamortized mortgage valuation
discount(4) . . . . . . . . . . . . . . . . .
$ 1,657
=
$ 4,097
$
203
888
$ 5,368
$
10
$ (203)
98
$ 727
$ 1,206
$
272
$ 7,577
$' 6,474
590
$ 344
$
62
$
46·
$ 527
$
888
$ 1,192
(1) Represents estimated uncollectible contracts receivable and includes in 1984 estimated uncollectible
installment sales is a $2,200,000 provision for certain contracts receivable which were deemed uncollectible
(see Notes 1 and 2 to Consolidated Financial Statements).
(2) Represents the unamortized discount generated from initial valuations of contracts receivable (see Notes
1 and 2 to Consolidated Financial Statements).
(3) Represents allowance for estimated uncollectible mortgages and other receivables.
None
(4) Represents the unamortized discount generated from initial valuations of mortgages receivable (see Notes
1 and 2 to Consolidated Financial Statements).
(5) Represents the sale of the Company's lumber and airline subsidiaries.
(6) Includes Marco write-off of $616,983.
61
SCHEDULE IX
SCHEDULE X
THE DELTONA CORPORATION AND SUBSIDIARIES
THE DELTONA CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
SUPPLEMENTARY INCOME STATEMENT INFORMATION
($ in thousands)
Category of Aggregate
Short-Term Borrowings
Year ended December 31, 19 84
Bank Borrowings:
Revolving Construction Loan(1)
Condominium Construction
Loans(2) .................. .
Short-Term Loan(3) .......... .
Total Bank Borrowings .. .
Other Financial Institutions:
Tampa Palms Construction
Loan(4) ................... .
Total ................. .
Year ended December 31, 1983
Bank Borrowings:
Revolving Construction Loan( 1)
Condominium Construction
Loans(2) .................. .
Short-Term Loan(5) .......... .
Total Bank Borrowings .. .
Other Financial Institutions:
Condominium Construction
Loan(2) ................... .
Total . . . . . . . . . . . . . . . . . .
Year ended December 31, 1982
Bank Borrowings:
Revolving Construction Loan(1)
Condominium Construction
Loans(2) .................. .
Short-Term Loan(5) .......... .
Total Bank Borrowings .. .
Other Financial Institutions:
Condominium Construction
Loan(2) ................... .
Total .............. ·... .
Balance
at End of
Period
Weighted
Average
Interest
Rate
Maximum
Amount
Outstanding
During the
Period
Average
Amount
Outstanding
During the
Period(6)
Weighted
Average
Interest Rate
During the
Period(7)
Years ended December 31, 1984, 1983 and 1982
Charges (in thousands)
to costs and expenses
Maintenance and repairs ..................................
$ 7,535
12.2%
$ 9,612
$ 9,182
13.2%
24,863
301
32,699
12.3%
12.2%
12.3%
45,905
3,731
59,248
31,939
2,837
43,958
13.2%
14.4%
13.3%
1,411
$34,110
13.2%
12.3%
$ 59,248
404
$44,362
14.1%
13.3%
$ 9,616
12.4%
$ 19,000
$13,760
13.3%
47,343
3,376
60,335
12.4o/o
13.5%
12.5%
57,209
2,400
78,609
52,503
2,355
68,618
12.3%
14.2%
12.6%
$60,335
12.5%
4,322
$ 82,931
2,392
$71,010
14.0%
12.7%
$19,000
12.8%
$ 10,900
$12,723
16.9%
58,287
2,391
79,678
12.9%
14.0%
12.9%
75,448
3,000
89,348
67,156
2,473
82,352
16.9%
17.3%
16.9%
4,558
$84,236
13.5%
12.9%
7,340
$ 96,688
. 5,508
16.8%
16.9%
1983
1982
$2,350
$2,375
$2,950
$2,961
$2,463
179
224
146
$3,129
$3,185
$2,609
$2,924
$1,782
$2,932
Taxes, other than payroll and income taxes:
Real estate
Other
I
Itt
I
Total
0
t
0
0
0
I
I
I
I
It
0
t
f
f
t
Advertising costs
$87,860
1984
$2,330
Ott
0
0
0
t
0
tIt
0
0
If
I
Itt
It
t
t
t
t
t
t
t
t
t
t
t
t
t
1
t
t
0
t
0
tIt
t
f
t
t
t
t
1
t
f
11
f
1
t
t
t
1
1
t
t
Itt
t
I
Iff
t
t
t
t
t
f
t
1
t
0
t
t
0
0
f
t
t
0
0
t
t
t
t
t
t
t
t
t
t
t
t
t
t
t
111
0
0
0
0
................... ' ....................
(1) Revolving construction loan maturing December 31, 1984. To be retired with the proceeds from the sale
of single family homes. The loan bears interest at the Base Rate + 1lh %.
(2) Various construction loans to be retired with the proceeds from the sales of the condominium units. The
loans bear interest ranging from 1.5% to 2% above the Base Rate.
(3) Construction loan collateralized by model homes in one of the Company's Central and North Florida
communities. The loan bears interest at Prime + 2lh %.
.
(4) Construction loan for the administration building at Tampa Palms. The loan bears interest at Prime + 2lh%
(5) Revolving loan collateralized by the inventory and receivable of the lumber segment. The loan bears
interest at Prime + 2lh%.
(6) Based on simple average of month's end balances.
(7) Based on average principal balances outstanding at month's end.
62
63
SIGNATURES
INDEX TO EXHIBITS
Pursuant to the requirements of Section 13 or 15 (d) of th~ Securities Act of 1934, the ~egistrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authonzed.
Exhibit
Number
Exhibits
3(a)
Restated Certificate of Incorporation and By-Laws of Registrant, reflecting
amendment to Article V of the By-Laws adopted by the Board of Directors
of the Registrant on February 28, 1985.
4(a)
Specimen certificates for Common Stock, $1 par value, of Registrant.
Incorporated herein by reference to Exhibit 2 of the Registrant's Registration
Statement on Form S-7, registration number 2-44066.
4(b)
Letter Agreement dated as of March 29, 1985, between the Registrant, certain
subsidiaries of the Registrant, Citibank, N.A., and certain other Banks.
4(c)
Letter Agreement dated as of September 17, 1984, between the Registrant,
certain subsidiaries of the Registrant, Citibank, N.A., and certain other Banks.
Incorporated herein by reference to Exhibit 4(b) to Form 8-K, dated December
12, 1984.
F. E. MACKLE, JR.
F. E. Mackie, Jr., Chairman of
the Board and Chief Executive Officer & Director
3(d)
Note Purchase Agreement dated as of May 19, 1969 between John Hancock
Mutual Life Insurance Company and Insurance Company and Registrant with
form of Warrant contained therein. Incorporated herein by reference to Exhibit
13(b)(5) of the Registrant's Registration Statement on Form S-1, registration
number 2-33076.
F. E. MACKLE, III
F. E. Mackie, Ill, President & Director
4(e)
Amendment to Note Purchase Agreement between John Hancock Mutual Life
Insurance Company and Registrant, dated June 28, 1982, modifying terms of
warrant. Incorporated herein by reference to Exhibit 4(a) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1984.
EARLE D. CoRTRIGHT, JR.
Earle D. Cortright, Jr., Senior
Vice President & Chief Financial Officer
4(f)
Fourth Amended and Restated Credit and Security Agreement, dated as of
November 30, 1983, between the Registrant, certain subsidiaries of the
Registrant, Citibank, N.A., and certain other Banks. Incorporated herein by
reference to Exhibit 4(b) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1984.
WILLIAM H. O'DOWD, JR.
William H. O'Dowd, Jr., Director
4(g)
Warrants issued to Citibank, N.A., Chemical Bank and Fleet National Bank
pursuant to the Fourth Restated and Amended Credit and Security Agreement
dated as of November 30, 1983 between the Registrant, certain subsidiaries
of the Registrant, Citibank, N.A., and certain other Banks. Incorporated herein
by reference to Exhibit 4(c) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1984.
4(h)
Second Amended and Restated Revolving Credit and Security Agreement,
dated as of November 30, 1983, between the Registrant, certain subsidiaries
of the Registrant and Citicorp Real Estate, Inc. Incorporated herein by
reference to Exhibit 4(d) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1984.
4(i)
First Amendment to Second Amended and Restated Revolving Credit and
Security Agreement, dated as of August 9, 1984, between the Registrant,
certain subsidiaries of the Registrant and Citicorp Real Estate, Inc. Incorporated herein by reference to Exhibit 4(i) of the Registrant's Registration
Statement on Form S-1, registration number 2-93400.
4(j)
Modification and Extension Agreement between the Registrant, certain
subsidiaries of the Registrant, and Federal Deposit Insurance Corporation,
dated December 17, 1981. Incorporated herein by reference to Exhibit 4(e)
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1984.
THE DELTONA CORPORATION
(Registrant)
DATE: March 29, 1985
By ________~D~o~N~A~LD~O~.M~c~N~E~L~L~E~Y~-:----Donald 0. McNelley, Treasurer &
Principal Accounting Officer
Pursuant to the requirements of the Secu~ities ~ct of 19~~· t~is .report has been si~ne~ below by the
following persons on behalf of the registrant and in the capacities mdicated on the date mdicated.
NEIL E. BARR
Neil E. Bahr, Director
THOMAS B. McNEILL
Thomas B. McNeill, Director
Conrad S. Young, Director
DATE: March 29, 1985
DoNALD 0. McNELLEY
Donald 0. McNelley, Treasurer & Principal
Accounting Officer
64
65
Sequentially
Numbered
Page
Exhibit
Number
4(k)
4(1)
4(m)
10(a)
10(b)
10(c)
10(d)
10(e)
10(f)
10(g)
Exhibits
Loan Agreement, dated April 30, 1981, betwen Citibank, N.A., and cer~ain
subsidiaries of the Registrant and the Registrant, as guarantor, and Subordmation Agreement dated May 16, 1983. Incorporated herein by reference to
Exhibit 4(f) to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1984.
Sequentially
Numbered
Page
Sequentially
Numbered
Page
Exhibit
Number
10(h)
1969 Employees' Qualified Stock Option Plan. Incorporated herein by
reference to Exhibit 5(5) to Registrant's Registration Statement on Form S-1
registration number 2-33076.
'
10(i)
1970 Employee's Qualified Stock Option Plan. Incorporated herein by
reference to Exhibit 1(e) to Registrant's Registration Statement on Form S-8
registration number 2-40258.
'
10(j)
1971 Employees' Qualified Stock Option Plan. Incorporated herein by
reference to Exhibit 1(f) to Registrant's Registration Statement on Form S-8,
registration number 2-44099.
10(k)
1972 Employees' Incentive Stock Option Plan. Incorporated herein by
reference to Exhibit 1(g) to Registrant's Registration Statement on Form S-8,
registration number 2-48401.
10(1)
Resolution of the Board of Directors of Registrant adopted July 13, 1977,
amending the 1972 Employees' Incentive Stock Option Plan. Incorporated
herein by reference to Exhibit 1(j) to Registrant's Registration Statement on
Form S-8, registration number 2-56553.
10(m)
Resolution of the Board of Directors of Registrant adopted September 29,
1981, amending the 1971 Employees' Qualifi,ed Stock Option Plan and the 1972
Employees' Incentive Stock Option Plan. Incorporated herein by refer~nce to
Exhibit 4(f) to Registrant's Registration Statement on Form S-8, registration
number 2-78904.
10(n)
1982 Employees' Incentive Stock Option Plan. Incorporated herein by
reference to Exhibit 4(g) to Registrant's Registration Statement on Form S-8,
registration number 2-78904.
10(o)
Purchase agreement dated July 14, 1983 between Registrant and Morgan
Guaranty Trust Company of New York. Incorporated herein by reference to
Exhibit 10 to Registrant's Registration Statement on Form S-3, registration
number 2-85691.
10(p)
Letter agreement dated July 16, 1984 between Earle D. Cortright, Jr. and
Registrant.
Promissory Note of Deltampa, Inc., a subsidiary of the Registrant, in favor
of The Mackie Company, Inc., dated May 22, 1984, with Mortgage as security
therefor and Guarantee of the Registrant. Incorporated herein by reference
to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1984.
10(q)
Agreement of Sale and Purchase dated January 9, 1985 between Kenneth M.
Good, Registrant, and certain subsidiaries of Registrant and modification
thereto.
lO(r)
Purchase Agreement and related Agreement dated January 9, 1985 between
Registrant and Kenneth M. Good.
Settlement Agreement, made and entered into by and between the National
Audubon Society, Collier County Conservancy, Florida Audubon Society,
Environmental Defense Fund, Florida Division of the lzaak Walton League,
Department of Environmental Regulation of the State of Florida, the Board
of Trustees of the Internal Improvement Trust Fund, the Department of
Veteran and Community Affairs of the State of Florida, the South Florida
Water Management District and Registrant dated July 20, 1982, and
Agreement of Exchange executed pursuant thereto, dated March 24, 1984.
Incorporated herein by reference to Exhibit 10(c) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1984.
11
22
Statement of computation of net income (loss) per common share.
Subsidiaries of Registrant.
24
Consent of Deloitte Haskins & Sells.
Term Loan Agreement between Deltona's Mackle-Built Construction Company, Inc., a subsidiary of the Registrant, and Citibank, N.A., dated May 3,
1980, and amendment thereto, dated January 1, 1982. Incorporated herein by
reference to Exhibit 4(g) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1984.
Bond Purchase Agreement between Registrant's wholly owned subsidiary,
Deltona Utilities, Inc. and certain institutional purchasers, dated as of
December 1, 1984. Incorporated herein by reference to Exhibit 4(a) to Form
8-K, dated December 12, 1984.
Employment Agreement, dated January 18, 1980, between Frank E. Mackie,
III and Registrant. Incorporated herein by reference to Exhibit 1O(A) to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1980.
Employment and Consulting Agreement, dated July 1, 1980, between Willi~~
H. O'Dowd, Jr. and Registrant. Incorporated herein by reference to Exh1b1t
10(B) to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1980.
Employment Agreement, dated May 1, 1983, between Neil E. Bahr and
Registrant. Incorporated herein by reference to Exhibit 10 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1983.
Employee Long-Term Disability Plan, adopted by the Registrant, effective
January 1, 1982. Incorporated herein by reference to Exhibit 10(a) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
1984.
Consent Order, dated February 13, 1979 entered into by Registrant with the
State of Florida, Department of Business Regulation, Division of Florida ~and
Sales and Condominiums, and amendments thereto. Incorporated herem by
reference to Exhibit 10(g) to Registrant's,Registration Statement on Form S-1,
registration number 2-93400.
66
67
The Deltona Corporation 3250 S.W. Third Avenue Miami, Florida 33129