JOE Positions Itself for Future Real Estate Recovery
Continues Focus on Implementation of Strategic Plan
JACKSONVILLE, Fla.--(Business Wire)--
The St. Joe Company (NYSE:JOE) today announced a Net Loss for the
second quarter 2008 of $(20.8) million, or $(0.23) per share, compared
to Net Income of $25.3 million, or $0.34 per share, for the second
quarter of 2007, a decrease of $46.1 million. All per share references
in this release are presented on a diluted basis.
JOE's second quarter results included the following significant
charges:
-- $29.9 million pre-tax, or $0.20 per share after-tax, related
to a loss on the early extinguishment of debt in conjunction
with the prepayment of JOE's senior notes;
-- Pre-tax restructuring of $2.5 million, or $0.02 per share
after-tax;
-- Pre-tax impairment of $1.0 million, or $0.01 per share
after-tax, associated with certain of JOE's communities and
the write-down of a homebuilder note receivable; and
-- $1.9 million pre-tax loss, or $0.01 per share after-tax,
related to a fair value adjustment on retained interests of
monetized installment notes.
Net income for the first half of 2008 was $11.2 million, or $0.13
per share, compared to $45.0 million, or $0.61 per share, for the
first half of 2007. Included in results for the first six months of
2008 were the following significant charges:
-- $29.9 million pre-tax, or $0.21 per share after-tax, related
to a loss on the early extinguishment of debt;
-- Pre-tax restructuring of $3.0 million, or $0.02 per share
after-tax;
-- Pre-tax impairment of $3.2 million, or $0.02 per share
after-tax; and
-- $1.9 million pre-tax loss on the monetization of installment
notes, or $0.01 per share after-tax.
Results for the second quarter and for the first six months of
2007 included the pre-tax gain of $7.6 million, or $0.06 per share
after-tax, reported in continuing operations related to the sale of
three buildings in which we have continuing involvement and the
pre-tax gain on the sale of 14 buildings reported in discontinued
operations totaling $37.6 million, or $0.32 per share after-tax.
Second Quarter Highlights
JOE's real estate markets remain challenging. As a result, during
the second quarter JOE implemented the following steps:
-- JOE completed the prepayment of its $240 million senior notes,
virtually eliminating our debt;
-- JOE significantly reduced its employee headcount and its
annual payroll expense run rate;
-- JOE sold non-strategic rural lands for a total of $39.0
million; and
-- JOE successfully implemented its succession plan in May, with
Britt Greene assuming the role of CEO and Peter Rummell
continuing as chairman.
Concurrently, JOE positioned itself to benefit from the return of
a healthier real estate market:
-- JOE commenced resort operations at WindMark Beach and launched
a national promotion of the resort with its strategic partner,
Southern Progress Corporation, publishers of Southern Living
and Coastal Living magazines;
-- The State of Florida appropriated additional funds that can be
used to extend the runway length and improve highway access to
the new Panama City - Bay County International Airport; and
-- Construction of the new airport continues on schedule and on
budget.
"With continuing economic weakness in the national economy, our
northern Florida real estate markets face difficult conditions," said
JOE's president and CEO Britt Greene. "We cannot predict exactly when
the national economy or our real estate markets will recover, but we
are continuing to execute our strategic plan and keep JOE lean and
efficient to better withstand these very difficult conditions. We have
significantly reduced capital expenditures, virtually eliminated our
debt and meaningfully reduced employee headcount."
"We intend to be well positioned when real estate markets
eventually return to health by providing a variety of real estate
products for the cycle's upturn," said Greene. "This includes key
parcels in Bay County near the new international airport now under
construction, and WindMark Beach in Port St. Joe."
Operating Results
Non-Strategic Rural Land Sales
During the fourth quarter of 2007, JOE announced it was marketing
certain of its non-strategic rural lands for sale. During the quarter
ended June 30, 2008, JOE sold 29,398 acres for a total of $39.0
million as a part of this program.
After the end of the quarter, JOE executed a contract for the sale
of 67,365 acres of non-strategic rural conservation land in Liberty,
Jefferson, Gulf and Franklin Counties. The sale will be closed in two
transactions for a total price of $130.4 million. The first sale of
39,359 acres for $67.3 million is scheduled to be completed in the
fourth quarter of this year. The second sale of 28,005 acres is
scheduled for the second quarter of 2009 at a price of $63.1 million.
These transactions are subject to ongoing due diligence review and
customary closing conditions.
"We look forward to closing this sale and believe it represents
good value for our shareholders," said Greene. "At this time we do not
expect to close any other large-tract land sales in 2008."
Resort and Primary Residential Sales
Resort and primary residential sales generated $7.2 million in
revenue in the second quarter. "The spring and summer selling season
in our resort markets has not materialized as we had hoped," said
Greene. "Although we have seen significant resale activity in
WaterColor and WaterSound Beach, the market remains challenged by high
inventory and cautious buyers."
"In the equally soft primary home market, builders are extending
their takedown schedules and seeking contract modifications to reflect
the current market conditions," said Greene. "We are in discussions
with the builders at RiverTown, SouthWood and Victoria Park concerning
their contractual commitments."
Commercial Land Sales
"Commercial markets also remain weak," said Greene. "Although
longer-term interest in Northwest Florida continues to be strong, the
timing of commercial closings is being impacted by the national
slowdown in retail."
After the close of the second quarter, JOE and Glimcher Realty
Trust entered into a strategic partnership to develop an anchored
retail shopping center across from Pier Park along Highway 98 in
Panama City Beach. JOE and Glimcher will jointly develop 58 acres that
will be marketed to large national retail outlets. The agreement is
subject to minimum leasing requirements, financing and other customary
conditions.
WestBay Development
Construction continues on the relocation of the Panama City-Bay
County International Airport in WestBay. All clearing has been
completed on the 1,330-acre Phase I of the airport, including all
wetland impacts, as authorized by federal and state permits. Over 1.8
million cubic yards of material have been excavated and redistributed
over the site. The two-mile main airport entry road is nearing
completion and is now carrying construction traffic. Two legal
challenges to the relocation of the airport remain pending; however,
neither is currently affecting construction.
The local Airport Authority has indicated that the initial phase
of the new international airport is scheduled to open in mid-2010.
During the second quarter, the State of Florida appropriated an
additional $4.5 million in funding for the construction of additional
operational enhancements for the airport. These funds would be
available to extend the primary runway length from 8,400 feet to
10,000 feet, subject to customary approvals and permits.
The State of Florida also appropriated $7.5 million to improve
airport access by creating an east-west corridor from State Road 77 in
Bay County to U.S. Highway 98 in Walton County that would include a
realignment of County Road 388. The appropriation is to be used to
initiate the necessary project studies. If the project proceeds, the
Florida Department of Transportation would use a portion of the right
of way purchased from JOE in 2006 for the road project.
The primary north-south access road for the airport, State Road
79, is now being widened to four lanes from West Bay north to State
Road 20, and plans suggest that eventually it will be widened to four
lanes to Interstate Highway 10.
Commitment to a Solid Balance Sheet
At June 30, 2008, JOE had cash and marketable securities of $74.0
million, compared to debt of $54.2 million, which includes $29.8
million of defeased debt. On April 4, 2008, JOE paid off $240 million
of senior notes along with a $29.7 million make-whole payment with the
proceeds of the first-quarter equity offering.
"JOE is committed to maintaining a strong balance sheet and
continuing to reduce SG&A expenses," said CFO William McCalmont. "We
fully understand the importance of operating with extreme efficiency,
and we are evaluating all expenditures and strategic initiatives to
ensure we are well prepared when the real estate environment improves.
With our strong balance sheet and cash position, we are prepared to
withstand this prolonged downturn and will continue to prudently
manage our inventory and assets to preserve long-term shareholder
value."
In the second quarter, JOE announced staff reductions that
included the elimination of approximately 30 positions and the
accelerated departure of approximately 10 additional employees. As a
result, the company expects to reduce its projected salary run rate
for the fourth quarter 2008 by over 40 percent, compared with the same
quarter in 2007.
Land Holdings and Entitlements
On June 30, 2008, JOE owned approximately 608,000 acres,
concentrated primarily in Northwest Florida. Approximately 426,000
acres, or 70 percent, of JOE's total land holdings, are within 15
miles of the coast of the Gulf of Mexico.
On June 30, 2008, JOE's land-use entitlements in hand or in
process totaled approximately 45,600 residential units and
approximately 14.4 million square feet of commercial space, as well as
an additional 612 acres with land-use entitlements for commercial
uses.
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FINANCIAL DATA
($ in millions except per share amounts)
Consolidated Results
Quarter Ended June 30, Six Months Ended June 30,
------------------------- -------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Revenues
Real estate
sales $ 46.8 $ 89.4 $ 148.1 $ 171.9
Timber sales 6.4 6.7 14.1 11.5
Rental revenue 0.4 1.0 0.6 1.9
Other revenues 14.1 13.6 21.7 20.4
------------ ------------ ------------ ------------
Total
revenues 67.7 110.7 184.5 205.7
------------ ------------ ------------ ------------
Expenses
Cost of real
estate sales 20.6 66.5 39.5 92.9
Cost of timber
sales 4.9 5.4 9.8 9.8
Cost of rental
revenue 0.1 0.7 0.2 1.3
Cost of other
revenues 13.8 12.3 24.1 20.8
Other operating
expenses 13.4 16.1 28.8 30.8
Corporate
expense, net 9.4 9.1 18.0 17.2
Restructuring
charge 2.5 (0.2) 3.0 3.0
Impairment
losses 1.0 -- 3.2 --
Depreciation and
amortization 4.5 4.6 9.2 9.6
------------ ------------ ------------ ------------
Total
expenses 70.2 114.5 135.8 185.4
------------ ------------ ------------ ------------
Operating
profit (2.5) (3.8) 48.7 20.3
Other income
(expense) (29.9) 3.0 (31.7) 3.9
------------ ------------ ------------ ------------
Pretax income
(loss) from
continuing
operations (32.4) (0.8) 17.0 24.2
Income tax
(expense) benefit 11.7 0.4 (6.0) (5.8)
Minority interest
income (expense) 0.1 (0.4) 0.5 (0.8)
Equity (loss) in
income of
unconsolidated
affiliates (0.1) 0.1 (0.2) 1.0
Discontinued
operations, net
of tax ( 0.1) 26.0 (0.1) 26.4
------------ ------------ ------------ ------------
Net income $ (20.8) $ 25.3 $ 11.2 $ 45.0
============ ============ ============ ============
Net income per
share $ (0.23) $ 0.34 $ 0.13 $ 0.61
============ ============ ============ ============
Weighted average
shares 91,236,851 73,777,169 85,575,590 74,279,799
============ ============ ============ ============
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Revenues by Segment
Quarter Ended June 30, Six Months Ended June 30,
---------------------- -------------------------
2008 2007 2008 2007
----------- ---------- ------------ ------------
Residential
Real estate sales $ 7.2 $ 30.8 $ 17.1 $ 61.0
Rental revenue 0.4 0.4 0.6 0.6
Other revenues 14.1 13.5 21.7 20.3
----------- ---------- ------------ ------------
Total Residential 21.7 44.7 39.4 81.9
----------- ---------- ------------ ------------
Commercial
Real estate sales 0.6 5.7 0.9 11.3
Rental revenue -- 0.6 -- 1.3
Other revenues -- 0.1 -- 0.1
----------- ---------- ------------ ------------
Total Commercial 0.6 6.4 0.9 12.7
----------- ---------- ------------ ------------
Rural Land sales 39.0 52.9 130.1 99.6
------------ ------------
Forestry sales 6.4 6.7 14.1 11.5
----------- ---------- ------------ ------------
Total revenues $ 67.7 $ 110.7 $ 184.5 $ 205.7
=========== ========== ============ ============
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Summary Balance Sheet
June 30, 2008 December 31, 2007
------------- -----------------
Assets
Investment in real estate $ 947.6 $ 944.5
Cash and cash equivalents 44.2 24.3
Pledged treasury securities 29.8 30.7
Notes receivable 133.6 56.3
Prepaid pension asset 112.7 109.3
Property, plant and equipment, net 21.6 23.7
Other assets 92.7 67.0
Assets held for sale 6.5 8.1
------------- -----------------
Total assets $ 1,388.7 $ 1,263.9
============= =================
Liabilities and Stockholders' Equity
Debt $ 54.2 $ 541.2
Accounts payable, accrued
liabilities 134.5 152.3
Deferred income taxes 116.8 83.5
Liabilities of assets held for sale 0.3 0.3
------------- -----------------
Total liabilities 305.8 777.3
Minority interest 3.8 6.3
Total stockholders' equity 1,079.1 480.3
------------- -----------------
Total liabilities and stockholders'
equity $ 1,388.7 $ 1,263.9
============= =================
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Debt Schedule
June 30, 2008 December 31, 2007
------------- -----------------
Senior revolving credit facility $ -- $ 132.0
Senior notes -- 240.0
Term loan -- 100.0
Debt unsecured or secured by
properties or securities 54.2 (1) 69.2 (1)
------------- -----------------
Total debt $ 54.2 $ 541.2
============= =================
(1) Includes debt defeased in connection with the sale of our office
portfolio in the amounts of $29.8 million at June 30, 2008 and $30.7
million at December 31, 2007.
*T
Additional Information
Additional information with respect to the Company's results for
the second quarter 2008 will be made available in a Form 8-K and Form
10-Q that will be filed with the Securities and Exchange Commission
today.
Conference Call Information
On August 5, 2008, at 10:30 a.m. (EDT), JOE will host an
interactive conference call to review the company's results for the
quarter ended June 30, 2008.
To participate in the call, please phone 888-600-4885 (for
domestic calls from the United States) or 913-312-0385 (for
international calls) approximately ten minutes before the scheduled
start time. You will be asked for a Confirmation Code which is
9302446. Approximately three hours following the call, you may access
a replay of the call by phoning 888-203-1112 (domestic) or
719-457-0820 (international) using access code 9302446. The replay
will be available for one week.
JOE will also web cast the conference call live over the internet
in a listen-only format. Listeners can participate by visiting the
company's web site at www.joe.com. Access will be available 15 minutes
prior to the scheduled start time. A replay of the conference call
will be posted to the JOE web site approximately three hours following
the call. The replay of the call will be available for one week.
About JOE
The St. Joe Company (NYSE:JOE), a publicly held company based in
Jacksonville, is one of Florida's largest real estate development
companies. We are primarily engaged in real estate development and
sales, with significant interests in timber. Our mission is to create
places that inspire people and make JOE's Florida an even better place
to live, work and play. We're no ordinary JOE.
More information about JOE can be found at our web site at
www.joe.com.
Forward-Looking Statements
We have made forward-looking statements in this earnings release
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Any statements in this release that are
not historical facts are forward-looking statements. You can find many
of these forward-looking statements by looking for words such as
"intend", "anticipate", "believe", "estimate", "expect", "plan",
"should", "forecast" or similar expressions. In particular,
forward-looking statements include, among others, statements about the
following:
-- future operating performance, revenues, earnings, cash flows,
and short and long-term revenue and earnings growth rates;
-- future residential and commercial entitlements;
-- expected development timetables and projected timing for sales
or closings of housing units or home sites in a community;
-- development approvals and the ability to obtain such
approvals, including possible legal challenges;
-- the anticipated price ranges of developments;
-- the number of units or commercial square footage that can be
supported upon full build out of a development;
-- the number, price and timing of anticipated land sales or
acquisitions;
-- estimated land holdings for a particular use within a specific
time frame;
-- absorption rates and expected gains on land and home site
sales;
-- the levels of resale inventory in our developments and the
regions in which they are located;
-- the development of relationships with strategic partners,
including homebuilders;
-- the pace at which we release new products for sale;
-- comparisons to historical projects;
-- the amount of dividends, if any, we pay; and
-- the number or dollar amount of shares of company stock which
may be purchased under our existing or future share-repurchase
programs.
Forward-looking statements are not guarantees of future
performance. You are cautioned not to place undue reliance on any of
these forward-looking statements. These statements are made as of the
date hereof based on our current expectations, and we undertake no
obligation to update the information contained in this release. New
information, future events or risks may cause the forward-looking
events we discuss in this earnings release not to occur.
Forward-looking statements are subject to numerous assumptions,
risks and uncertainties. Factors that could cause actual results to
differ materially from those contemplated by a forward-looking
statement include the risk factors described in our annual report on
Form 10-K for the year ended December 31, 2007 and our quarterly
reports on Form 10-Q, as well as, among others, the following:
-- a continued downturn in the real estate markets in Florida and
across the nation;
-- economic conditions, particularly in Northwest Florida,
Florida as a whole and key areas of the southeastern United
States that serve as feeder markets to our Northwest Florida
operations;
-- the lack of available mortgage financing, increases in
foreclosures and changes in interest rates and conditions in
the financial markets;
-- changes in the demographics affecting projected population
growth in Florida, including the demographic migration of Baby
Boomers;
-- the inability to raise sufficient cash to enhance and maintain
our operations and to develop our real estate holdings;
-- an event of default under our credit facility or the
restructuring of such debt on terms less favorable to us;
-- possible future write-downs to the book value of our real
estate assets;
-- the termination of sales contracts or letters of intent due
to, among other factors, the failure of one or more closing
conditions or market changes;
-- a failure to attract homebuilding customers for our
developments, or their failure to satisfy their purchase
commitments;
-- the failure to attract desirable strategic partners, complete
agreements with strategic partners and/or manage relationships
with strategic partners going forward;
-- natural disasters, including hurricanes and other severe
weather conditions, and the impact on current and future
demand for our products in Florida;
-- whether our developments receive all land-use entitlements or
other permits necessary for development and/or full build-out
or are subject to legal challenge;
-- local conditions such as the supply of homes and home sites
and residential or resort properties or a change in the demand
for real estate in an area;
-- timing and costs associated with property developments;
-- the pace of commercial development in Northwest Florida;
-- competition from other real estate developers;
-- changes in pricing of our products and changes in the related
profit margins;
-- changes in operating costs, including real estate taxes and
the cost of construction materials;
-- changes in the amount or timing of federal and state income
tax liabilities resulting from either a change in our
application of tax laws, an adverse determination by a taxing
authority or court, or legislative changes to existing laws;
-- the failure to realize significant improvements in job
creation and public infrastructure in Northwest Florida,
including the development of a proposed new airport in Bay
County, which is dependent on the availability of adequate
funding and the successful resolution of any legal challenges;
-- potential liability under environmental laws or other laws or
regulations;
-- changes in laws, regulations or the regulatory environment
affecting the development of real estate;
-- fluctuations in the size and number of transactions from
period to period;
-- the prices and availability of labor and building materials;
-- changes in insurance rates and deductibles for property in
Florida, particularly in coastal areas;
-- high property tax rates in Florida, and future changes in such
rates;
-- changes in gasoline prices; and
-- acts of war, terrorism or other geopolitical events.
The foregoing list is not exhaustive and should be read in
conjunction with other cautionary statements contained in our periodic
and other filings with the Securities and Exchange Commission.
(C) 2008, The St. Joe Company. "St. Joe," "JOE," and the "Taking
Flight" design are service marks of The St. Joe Company.
The St. Joe Company, Jacksonville
JOE Media Contact: Jerry M. Ray, 904-301-4430
jray@joe.com
or
JOE Investor Contact: David Childers, 904-301-4302
dchilders@joe.com
Copyright Business Wire 2008
