UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission file number 1-10466
St. Joe Corporation
(Exact name of registrant as specified in its charter)
Florida 59-0432511
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 400, 1650 Prudential Drive, Jacksonville, Florida 32207
(Address of principal executive offices) (Zip Code)
(904) 396-6600
(Registrant's telephone number, including area code)
St. Joe Paper Company
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 30, 1996 there were 30,498,650 shares of common stock, no par
value, outstanding.
ST. JOE CORPORATION
INDEX
Page No.
PART I Financial Information:
Consolidated Balance Sheet -
June 30, 1996 and December 31, 1995 3
Consolidated Statement of Income and
Retained Earnings - Six months
ended June 30, 1996 and 1995 4
Consolidated Statement of Cash Flows -
Six months ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations 8
PART II Other Information 12
ST. JOE CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands)
June 30 December 31
1996 1995
ASSETS
Current Assets:
Cash and cash equivalents $ 557,581 $ 16,802
Short-term investments 102,917 96,923
Accounts receivable 45,882 44,390
Income taxes refundable - 4,314
Inventories 26,046 20,592
Other assets 24,339 18,162
Net assets of discontinued operations - 296,001
---------- ----------
Total Current Assets 756,765 497,184
Investment and Other Assets:
Marketable securities 239,895 189,865
Other assets 55,962 38,971
---------- ----------
Total Investments and Other Assets 295,857 228,836
Property, Plant and Equipment, Net 820,568 804,974
---------- ----------
Total Assets $1,873,190 $1,530,994
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 32,544 $ 26,024
Accrued liabilities 46,229 18,445
Income taxes payable 131,390 -
---------- ----------
Total Current Liabilities 210,163 44,469
Accrued casualty reserves and other liabilities 20,125 11,043
Deferred income taxes 198,815 192,036
Minority interest in consolidated subsidiaries 271,971 266,741
Stockholders' Equity:
Common stock, no par value; 60,000,000 shares
authorized; 30,498,650 shares issued and
outstanding 8,714 8,714
Retained earnings 1,108,774 955,239
Net unrealized gains on debt and marketable
equity securities 54,628 52,114
--------- ---------
Total Stockholders' Equity 1,172,116 1,016,067
---------- ----------
Total Liabilities and Stockholders' Equity $1,873,190 $1,530,994
See accompanying notes.
ST. JOE CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(Unaudited)
(Dollars in thousands except per share amounts)
Three Months Six Months
ended June 30 ended June 30
1996 1995 1996 1995
Net sales $ 33,195 $ 37,145 $ 158,714 $ 70,347
Operating revenues 46,995 48,760 92,438 91,936
---------- ---------- ---------- ----------
Net sales and operating revenue 80,190 85,905 251,152 162,283
Cost of sales 16,394 29,216 50,670 55,553
Operating expenses 35,213 36,758 69,865 68,424
Selling, general and
administrative expenses 5,530 7,074 14,166 14,621
---------- ---------- ---------- ----------
Operating profit 23,053 12,857 116,451 23,685
Other income (expense):
Dividends 1,009 768 1,715 1,333
Interest income 6,493 4,052 10,553 7,067
Interest expense (257) (1,086) (324) (1,893)
Gain on sales and other
dispositions of property 125 1,274 2,936 2,089
Other, net 1,208 2,229 2,605 2,672
---------- ---------- ---------- ----------
8,578 7,237 17,485 11,268
---------- ---------- ---------- ----------
Income before income taxes
and minority interest 31,631 20,094 133,936 34,953
Provision for income taxes 22,875 8,614 62,072 14,306
---------- ---------- ---------- ----------
Income before minority interest 8,756 11,480 71,864 20,647
Income applicable to minority
interest in consolidated
subsidiaries 2,966 3,141 6,395 5,656
--------- ---------- ---------- ----------
Income from continuing operations 5,790 8,339 65,469 14,991
Earnings from discontinued
operations net of income taxes
of ($4,448), $8,536, $527 and
$16,912 respectively (8,143) 17,997 746 32,859
Gain on sale of discontinued
operations, net of income taxes
of $61,638, $0, $61,638 and
$0, respectively 90,370 - 90,370 -
---------- ---------- ---------- ----------
82,227 17,997 91,116 32,859
---------- ---------- ---------- ----------
Net income $ 88,017 $ 26,336 $ 156,585 $ 47,850
Retained earnings at beginning
of period 1,022,282 907,509 955,239 887,520
Dividends (1,525) (1,525) (3,050) (3,050)
---------- ---------- ---------- ----------
Retained earnings at end
of period $1,108,774 $ 932,320 $1,108,774 $ 932,320
========== ========== ========== ==========
Per share data:
Dividends $ 0.05 $ 0.05 $ 0.10 $ 0.10
========== ========== ========== ==========
Income from continuing
operations $ 0.19 $ 0.27 $ 2.15 $ 0.49
Earnings of discontinued
operations 2.70 0.59 2.98 1.08
---------- ---------- ---------- ----------
Net income $ 2.89 $ 0.86 $ 5.13 $ 1.57
========== ========== ========== ==========
See accompanying notes.
ST. JOE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands except per share amounts)
Six Months ended June 30
1996 1995
Cash flows from operating activities:
Net income $ 156,585 $ 47,850
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and depletion 13,652 13,614
Minority interest in income 6,395 5,656
Gain on sale of property (2,936) (2,089)
Gain on sale of discontinued operations (90,370) -
Increase in deferred income taxes 6,779 7,857
Changes in operating assets and liabilities:
Accounts receivable (1,492) 3,099
Inventories (5,454) (5,118)
Other assets (23,168) 1,852
Accounts payable, accrued liabilities and
casualty reserves 43,386 5,926
Income taxes payable 29,335 (7,012)
Discontinued operations - noncash
charges and working capital changes 12,165 (7,295)
---------- ----------
Cash provided by operating activities 144,877 64,340
---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment (31,116) (51,040)
Investing activities of discontinued operations - (6,411)
Purchases of investments:
Available for sale (14,515) (16,351)
Held to maturity (118,171) (77,695)
Proceeds from dispositions of assets 4,806 11,682
Proceeds from sale of discontinued operations 497,937 -
Maturities and redemption of investments:
Available for sale 8,420 18,193
Held to maturity 70,421 78,863
---------- ----------
Cash provided by (used in) investing activities 399,782 (42,759)
---------- ----------
Cash flows from financing activities:
Financing activities of discontinued operation - (7,626)
Dividends paid to stockholders (3,050) (3,050)
Dividends paid to minority interest (830) (825)
---------- ----------
Cash used in financing activities (3,880) (11,501)
---------- ----------
Net decrease in cash and cash equivalents 540,779 10,080
Cash and cash equivalents at beginning of period 16,802 71,890
---------- ----------
Cash and cash equivalents at end of period $ 557,581 $ 81,970
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 733 $ 2,524
Income taxes $ 23,136 $ 26,572
See accompanying notes
ST. JOE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
1. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as
of June 30, 1996 and December 31, 1995 and the results of operations and
cash flows for the three and six month periods ended June 30, 1996 and
1995. The 1995 statements have been restated to reflect the reclass-
ification of the Communications segment and linerboard mill and container
plants as discontinued operations.
2. The results of operations for the three and six month periods ended June
30, 1996 and 1995 are not necessarily indicative of the results that may
be expected for the full year.
3. On April 11, 1996, St. Joe Industries, Inc., a wholly owned subsidiary of
the Company, sold the stock of St. Joe Communications, Inc. (SJCI) to TPG
Communications, Inc. as previously discussed. SJCI also sold its interest
in four cellular partnerships. These sales represent the CompanyOs entire
Communication segment. On May 30, 1996, the Company sold its linerboard
mill and container plants. The Company retains its timberlands and will
continue to operate in this segment.
Operating revenues for the three month periods ended June 30, 1996 and 1995
for the Communications segment were $0 and $8,060, respectively and for the
six month periods ended June 30, 1996 and 1995 were $8,435 and $15,859
respectively and net sales for the linerboard mill and container plants
for the three month periods ended June 30, 1996 and 1995 were $60,100 and
$156,533, respectively and for the six month periods ended June 30, 1996
and 1995 were $153,406 and $302,104, respectively. These amounts are not
included in net sales and operating revenues in the accompanying statement
of income and retained earnings. The gain on the sale of these operations
was $90.4 million after income taxes of $61.6 million. The gain is subject
to final post closing working capital adjustments.
Net operating results of the Communications segment and for the liner-
board mill and container plants for the three and six month periods ended
June 30, 1996 and 1995 are shown separately as earnings from discontinued
operations in the accompanying statement of income and retained earnings.
Net assets to be disposed of have been separately classified in the
accompanying balance sheets at December 31, 1995. At June 30, there
were no assets or liabilities to be disposed of.
4. As a result of the sale of the Communications segment and the linerboard
mill and container plants and the attendant reduction in employees covered
by the Company's pension plans, an estimated gain from curtailment of the
pension plans of $1,200, net of tax, was recorded as part of the gain on sale
of discontinued operations.
In addition, the Company's pension plans are in an overfunded position and,
with the reduction in employees resulting from the sales, it is unlikely
that the overfunding will be realized other than by a plan termination and
reversion of excess assets. Accordingly, the Company has recorded the 50%
excise tax applicable to plan terminations as additional deferred taxes
which amounted to approximately $11,000. The Company has no immediate plans
to terminate the pension plans and is in the process of evaluating other
alternatives.
5. Inventories at June 30, 1996 and December 31, 1995:
June 30 December 31
1996 1995
Materials and supplies $14,766 $12,875
Sugar 11,280 7,717
------- -------
$26,046 $20,592
======= =======
6. Accrued liabilities at June 30, 1996 consist of real estate and personal
property taxes of $9,026, accrued casualty and other reserves of $14,910,
purchase price adjustments on the sale of discontinued operations of $14,888
and other accrued liabilities of $7,405.
7. The Company and its subsidiaries are involved in litigation on a number
of matters and are subject to certain claims which arise in the normal
course of business, none of which, in the opinion of management, is expected
to have a material adverse effect on the Company's consolidated financial
position or results of operations.
The Company has retained certain self-insurance risks with respect to
losses for third party liability, property damage and group health
insurance provided to employees.
The Company is subject to costs arising out of environmental laws and
regulations, which include obligations to remove or limit the effects
on the environment of the disposal or release of certain wastes or
substances at various sites. It is the Company's policy to accrue and
charge against earnings environmental cleanup costs when it is probable
that a liability has been incurred and an amount is reasonably estimable.
As assessments and cleanups proceed, these accruals are reviewed and
adjusted, if necessary, as additional information becomes available.
The Company is currently a party to, or involved in, legal proceedings
directed at the cleanup of three Superfund sites. The Company has accrued
its allocated share of the total estimated cleanup costs for these three
sites. Based upon management's evaluation of the other potentially
responsible parties, the Company does not expect to incur additional
amounts even though the Company has joint and several liability. Other
proceedings involving environmental matters such as alleged discharge of
oil or waste material into water or soil are pending against the Company.
It is not possible to quantify future environmental costs because many
issues relate to actions by third parties or changes in environmental
regulation. However, based on information presently available, management
believes that the ultimate disposition of currently known matters will not
have a material effect on the financial position, liquidity, or results of
operation of the Company. As of June 30, 1996 and December 31, 1995, the
aggregate environmental related accruals were $6.2 million. Environmental
liabilities are paid over an extended period and the timing of such payments
cannot be predicted with any confidence.
ST. JOE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
During the second quarter, the Company sold its Communication segment and its
linerboard mill and container plants. Sale of the Communications segment
occured on April 11, 1996 and the linerboard mill and containter plants on
May 30, 1996. Operating revenues for the three month periods ended June 30,
1996 and 1995 for the Communications segment were $0 and $8,060, respectively
and for the six month periods ended June 30, 1996 and 1995 were $8,435 and
$15,859 respectively and net sales for the linerboard mill and container
plants for the three month periods ended June 30, 1996 and 1995 were $60,100
and $156,635, respectively and for the six month periods ended June 30, 1996
and 1995 were $153,406 and $302,104, respectively. These amounts are not
included in net sales and operating revenues in the accompanying statement of
income and retained earnings.
The gain on the sale of these operations was $90.4 million after income taxes
of $61.6 million. The gain is subject to final post-closing working capital
adjustments.
Upon the completion of these sales, revenues of the Company will be
materially lower than historical levels. Net income, earnings per share
and cash flows may also be materially different than previous periods.
Quarter ended June 30, 1996
Net sales and operating revenues for the quarter were $80.2 million, a $5.7
million decrease from the same period in 1995 and a $90.8 million decrease
from the first quarter of 1996. A land sale to the State of Florida for $13.7
million was offset by a decline of $11.6 million in sales by the sugar
segment and a $5.4 million dollar decline in forestry net sales. Cost of
sales and operating expenses were $51.6 million, down from $66.0 million in
1995 and $68.9 million in the first quarter of 1996. These costs were 64.4% of
net sales and operating revenues in 1996 compared to 76.8% in 1995 and 40.3%
in the first quarter of 1996. Selling, general and administrative expenses
were $5.5 million in the second quarter of 1996 compared to $7.1 million in
the second quarter of 1995 and $8.7 million in the first quarter 1996. As a
result of these changes, operating profit was $23.1 million compared to $12.8
million in the same quarter of 1995 and $93.4 million in the first quarter of
1996.
Six Months ended June 30, 1996
Net sales and operating revenues were $251.2 million for the first half of
1996, an increase of $88.8 million over the same period in 1995. The increase
was due to land sales to the State of Florida of $97.8 million. Cost of
sales and operating expenses dropped to $120.5 million from 1995's $124.0
million. Selling, general and administrative expenses declined slightly
to $14.2 million in 1996. Operating profit increased to $116.5 million
compared to 1995's $23.7 million.
An analysis of operating results by segment follows:
Forestry
Quarter ended June 30, 1996
1996 1995 % Decrease
Net Sales 11.6 17.0 (31.8)
Cost of Sales 10.9 16.8 (35.1)
Selling, General and Administrative Expenses (0.7) 0.9 (177.8)
Operating Profit (Loss) 1.4 (0.7) 300.0
A month long shutdown at the Company's linerboard mill prior to its sale
resulted in sales to the mill decreasing. Delivered prices to the mill
dropped by $0.42 per ton from the first quarter reflecting the execution of
the fiber supply agreement with the purchaser of the linerboard mill on
May 30, 1996. The fiber supply agreement is for fifteen years with two five
year extensions. Annual wood fiber tonnage to be supplied from the Company's
lands will not exceed that previously provided and is be at negotiated
market prices adjusted on a quarterly basis. The Company plans in the future
to shift its remaining fiber production from the Company's lands to higher
margin timber products.
Six Months ended June 30, 1996
1996 1995 % Decrease
Net Sales 25.7 31.9 (19.4)
Cost of Sales 25.1 30.3 (17.2)
Selling, General and Administrative Expenses 0.6 2.1 (71.4)
Operating Loss (0.0) (0.5) (100.0)
Reduced production at the Company's linerboard mill prior to its sale
resulted in sales to the mill decreasing. Cost of sales increased from 95.0%
of sales in the first half of 1995 to 97.6% in the same period of 1996.
Transportation
Quarter ended June 30, 1996
1996 1995 % Increase
(Decrease)
Operating Revenues 47.0 48.7 (3.5)
Operating Expenses 35.2 36.7 (4.1)
Selling, General and Administrative Expenses 4.6 5.0 (7.8)
Operating Profit 7.2 7.0 2.5
Rail traffic continued to decline on both the Company's rail subsidiaries.
The lower operating revenues are primarily attributable to a decline in rail
traffic of 1.6% on FEC and 5.8% on ANRR.
Six Months ended June 30, 1996
1996 1995 % Increase
(Decrease)
Operating Revenues 92.4 91.9 0.5
Operating Expenses 69.9 68.4 2.1
Selling, General and Administrative Expenses 9.8 9.3 5.3
Operating Profit 12.7 14.2 (10.3)
A decline of approximately 4.4% in rail shipments for the first six months
together with the revenue reduction due to the haulage agreement, were the
main contributors to the fall in operating profit.
Sugar
Quarter ended June 30, 1996
1996 1995 % Increase
(Decrease)
Net Sales 0.0 11.6 (100.0)
Cost of Sales 0.0 7.9 (100.0)
Selling, General and Administrative Expenses 0.8 0.5 60.0
Operating Profit (Loss) (0.8) 3.2 (125.0)
The sugar segment had no shipments in the second quarter of 1996. The contract
with the segment's customer calls for specific shipment levels throughout the
year, but, at the request of the customer, the Company had shipped in the
first quarter of 1996 in advance of the contract in an amount equal to
approximately four months additional shipments. Normal shipments resumed in
August.
Six Months ended June 30, 1996
1996 1995 % Decrease
Net Sales 18.7 23.9 (21.8)
Cost of Sales 13.1 16.2 (19.1)
Selling, General and Administrative Expenses 1.9 2.0 (5.0)
Operating Profit 3.7 5.7 (35.1)
Shipments in 1996 dropped 18.2% from 1995 levels. Prices also declined 4.3%.
The cost of production declined by $3.89 in 1996 from $311.53 in 1995.
Real Estate
Quarter ended June 30, 1996
1996 1995 % Increase
Net Sales 21.6 8.6 151.2
Cost of Sales 5.5 4.6 20.2
Selling, General and Administrative Expenses 0.9 0.6 46.6
Operating Profit 15.2 3.4 346.8
In 1996, a single realty property sale of $13.8 million was made to the State
of Florida which did not occur in 1995. Rent and other income increased by
$1.1 million in the second quarter of 1996 compared to the same period in
1995. Cost of sales increased due to cost associated with the sale of the
property to the State of Florida. Selling, general and administrative
expenses increased by $0.3 million.
Six Months ended June 30, 1996
1996 1995 % Increase
Net Sales 114.3 14.6 682.9
Cost of Sales 12.5 9.1 37.8
Selling, General and Administrative Expenses 1.8 1.2 51.5
Operating Profit 99.9 4.3 2,224.3
In 1996, realty property sales of $97.8 million were made to the State of
Florida which did not occur in 1995. Rent and other income increased by $3.1
million in 1996 compared to the same period in 1995. Cost of sales increased
principally due to cost associated with the sale of the property to the State
of Florida. Selling, general and administrative expenses increased by $0.6
million.
Other Income increased $1.5 million in the second quarter of 1996 compared to
1995. Interest income increased by $2.4 million reflecting increased
investment and higher rates. Gain on sales and other dispositions of property,
plant and equipment decreased $1.1 million. Other income, net fell by $1.0
million.
Income from Continuing Operations decreased $2.5 million (31%) during the
second quarter of 1996 from the same period in 1995.
As a result of the sale of the Communications segment and the linerboard mill
and container plants and the attendant reduction in employees covered by the
Company's pension plans, an estimated gain from curtailment of the pension
plans of $1.2 million, net of tax, was recorded as a part of the gain on the
sale of discontinued operations.
In addition, the Company's pension plans are in an overfunded position and,
with the reduction in employees resulting from the sales, it is unlikely that
the overfunding will be realized other than by a plan termination and
reversion of the excess assets. Accordingly, the Company has recorded the 50%
excise tax applicable to plan terminations as additional deferred taxes which
amounted to approximately $11.0 million. The Company has no immediate plans to
terminate the pension plans and is in the process of evaluating other
alternatives.
Earnings from discontinued operations (net of income taxes), representing the
Company's former Communication segment and linerboard mill and container
plants, were $26.1 million less than the second quarter of 1995. Net income
for the quarter was 234% above the same period in 1995, due mainly to the
$90.4 million gain on the sale of discontinued operations. Net income per
share increased $2.03 to $2.89. Income from continuing operations
was $0.19 per share.
Financial Position
The Company's financial position remains strong. Current assets rose to
$756.8 million, an $259.6 million increase from year end. Current liabilities
increased by $162.2 million causing the current ratio to drop from 11.2 to 1
at year end to 3.7 to 1 at the end of the second quarter.
The Company increased its investment in marketable securities by $50.1
million over year end. Net property, plant and equipment increased by $15.6
million, largely in FECI. Deferred income taxes grew by $6.8 million, due
primarily to deferred taxes on the proceeds of the condemnation sale to the
State of Florida.
Stockholders' equity at June 30, 1996 was $38.43 per share, an increase of
$5.11 from December 31, 1995.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a Special Meeting of the stockholders held on April 24, 1996, the
stockholders approved a proposal for the sale by the Company of those assets of
St. Joe Forest Products Company ("SJFP") related to its paper mill business to
PSJ Paper company L.L.C. ("JV") (a joint venture organized by Four M Corporation
("FMC") and Stone Container Corporation) and of St. Joe Container Company
("SJCC") related to its container business to FMC pursuant to an Asset Purchase
Agreement dated as of November 1, 1995, as amended, among the Company, SJFP, and
SJCC on one hand, and FMC and JV on the other hand. 25,155,461 votes were cast
for, 17,002 votes were cast against, and 3,440 votes abstained as to the
proposal.
At the Annual Meeting of the stockholders held on May 14, 1996,
stockholders approved a proposed change in the name of the corporation from
St. Joe Paper Company to St. Joe Corporation and an amendment to the
company's articles of incorporation to effect the same. 24,095,914 votes
were cast for, 3,275 votes were cast against, and 3,637 abstained as to the
proposal.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i) Articles of Incorporation
3(ii)Bylaws
10 Wood Fiber Supply Agreement between St. Joseph Land and Development
Company and Florida Coast Paper Company dated as of May 30, 1996
27 Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on August 19, 1996 to report the
closing on May 30, 1996 of the sale of the linerboard mill and container plant
under Item 2, "Acquisition or Disposition of Assets." Except for the actual
date of closing that was announced by press release on May 30, 1996, essentially
all information concerning the sale was previously reported in the Company's
Special Meeting Proxy Statement dated April 11, 1996 in connection with
stockholder approval of the sale and the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996 which segregated discontinued operations.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
St. Joe Corporation
(Registrant)
/s/ J. M. Jones, Jr.
Vice President and CFO
/s/ D. M. Groos
Comptroller