1
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 March 31, 2000
Commission file number 1-10466
The St. Joe Company
(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)
None
(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 March 31, 2000, there were 85,013,308 shares of common stock, no par
value, issued and outstanding, with an additional 6,684,503 shares issued and
held in treasury.
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THE ST. JOE COMPANY
INDEX
Page No.
PART I Financial Information:
Consolidated Balance Sheets-
March 31, 2000 and December 31, 1999 3
Consolidated Statements of Income -
Three months ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows-
Three months ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations 10
PART II Other Information
Exhibits and Reports on Form 8-K 19
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THE ST. JOE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 64,739 $ 71,987
Short-term investments 56,649 69,174
Accounts receivable 44,912 38,805
Inventory 5,109 6,360
Other assets 13,081 11,158
------------ ------------
Total current assets 184,490 197,484
Investments & other assets:
Marketable securities 160,484 188,884
Prepaid pension asset 66,271 63,771
Other assets 23,698 20,867
Investment in unconsolidated affiliates 73,528 80,652
Goodwill 138,312 138,392
Net assets of discontinued operations -- 215
------------ ------------
Total investment and other assets 462,293 492,781
Investment in real estate 777,990 746,933
Property, plant & equipment, net 409,067 384,429
------------ ------------
Total assets $ 1,833,840 $ 1,821,627
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 47,343 $ 45,697
Accrued liabilities 51,592 54,641
Current portion of long-term debt 34,381 31,250
------------ ------------
Total current liabilities 133,316 131,588
Other liabilities 20,397 17,705
Deferred income taxes 278,831 278,513
Long-term debt 152,978 115,974
Minority interest in consolidated subsidiaries 341,929 336,993
------------ ------------
Total liabilities 927,451 880,773
------------ ------------
Stockholders' equity:
Common stock, no par value; 180,000,000 shares
authorized; 91,697,811 shares issued 13,154 13,170
Retained earnings 973,746 961,819
Accumulated other comprehensive income 77,958 90,597
Restricted stock deferred compensation (3,237) (3,564)
Treasury stock, at cost, 6,684,503 and 5,265,827
shares, respectively (155,232) (121,168)
------------ ------------
Total stockholders' equity 906,389 940,854
------------ ------------
Total liabilities and stockholders' equity $ 1,833,840 $ 1,821,627
============ ============
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THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
Three Months
Ended March 31
---------------------------
2000 1999
--------- ---------
Operating revenues $ 211,031 $ 181,985
--------- ---------
Expenses:
Operating expenses 158,202 144,080
Corporate expense, net 5,264 2,612
Depreciation and amortization 13,987 11,113
--------- ---------
Total expenses 177,453 157,805
--------- ---------
Operating profit 33,578 24,180
--------- ---------
Other income (expense):
Investment income 5,225 3,304
Interest expense (1,629) (248)
Other, net 1,624 2,008
--------- ---------
Total other income 5,220 5,064
--------- ---------
Income from continuing operations before income taxes
and minority interest 38,798 29,244
Income tax expense 14,927 12,399
Minority interest 5,114 7,311
--------- ---------
Income from continuing operations 18,757 9,534
Income from discontinued operations:
Earnings from discontinued operations, net of income
taxes of $1,088 -- 1,730
Gain on sale of discontinued operations, net of income
taxes of $29,031 -- 42,800
--------- ---------
Net income $ 18,757 $ 54,064
========= =========
EARNINGS PER SHARE
Basic:
Income from continuing operations $ 0.22 $ 0.11
Earnings from discontinued operations -- 0.02
Gain on sale of discontinued operations -- 0.48
--------- ---------
Net income $ 0.22 $ 0.61
========= =========
Diluted:
Income from continuing operations $ 0.22 $ 0.11
Earnings from discontinued operations -- 0.02
Gain on sale of discontinued operations -- 0.48
--------- ---------
Net income $ 0.22 $ 0.61
========= =========
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THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months
Ended March 31
---------------------------
2000 1999
--------- ---------
Cash flows from operating activities:
Net income $ 18,757 $ 54,064
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,987 11,113
Minority interest in income 5,114 7,311
Accrued interest increase to long-term debt 926 --
Deferred income tax (benefit) expense 6,817 (1,716)
Equity in income of unconsolidated affiliates (3,535) (5,928)
Gain on sales of property and investments (21,420) (11,022)
Gain on sale of discontinued operations, net of taxes -- (42,800)
Purchases and maturities of trading investments, net 15,770 (8,345)
Cost of community residential properties sold 7,096 685
Expenditures for community residential properties (27,354) (6,388)
Changes in operating assets and liabilities:
Accounts receivable (6,107) 3,279
Inventory 1,251 507
Prepaid pension and other assets (8,954) (6,736)
Accounts payable, accrued liabilities, casualty reserves and other 1,810 10,717
Discontinued operations-non-cash charges and working capital changes 215 (3,226)
--------- ---------
Net cash provided by operating activities 4,373 1,515
Cash flows from investing activities:
Purchases of property, plant and equipment (30,638) (2,125)
Purchases of and development of investments in real estate (31,032) (60,485)
Purchases of available-for-sale investments (299,605) (37,328)
Investments in joint ventures and purchase business acquisitions,
net of cash received (4,124) (4,218)
Proceeds from sale of discontinued operations -- 150,682
Maturities and redemptions of available-for-sale investments 310,048 83,247
Proceeds from dispositions of assets 37,374 48,774
Distributions from unconsolidated affiliates 12,871 16,707
--------- ---------
Net cash (used in) provided by investing activities (5,106) 195,254
Cash flows from financing activities:
Proceeds from long-term debt, net of repayments 34,885 28,222
Proceeds from issuance of common stock 1,200 --
Dividends paid to stockholders (6,830) (1,765)
Dividends paid to minority interest (490) (490)
Treasury stock purchased (35,280) (28,386)
--------- ---------
Net cash used in financing activities (6,515) (2,419)
Net (decrease) increase in cash and cash equivalents (7,248) 194,350
Cash and cash equivalents at beginning of period 71,987 39,108
--------- ---------
Cash and cash equivalents at end of period $ 64,739 $ 233,458
========= =========
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THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been
prepared pursuant to the rules and regulations for reporting on Form 10-Q.
Accordingly, certain information and footnotes required by generally accepted
accounting principles for complete financial statements are not included herein.
The interim statements should be read in conjunction with the financial
statements and notes thereto included in the Company's latest Annual Report on
Form 10-K. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the financial position
as of March 31, 2000 and the results of operations and cash flows for the
three-month periods ended March 31, 2000 and 1999. The results of operations for
the three-month periods ended March 31, 2000 and 1999 are not necessarily
indicative of the results that may be expected for the full year. Certain
reclassifications of 1999 amounts have been made to be consistent with current
period reporting.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings Per Share
Earnings per share ("EPS") are based on the weighted average number of
common shares outstanding during the period. Diluted EPS assumes options to
purchase 1,156,931 shares and 734,634 shares of common stock for the three
months ended March 31, 2000 and 1999, respectively, have been exercised using
the treasury stock method. In August 1998, the Company's Board of Directors
authorized $150.0 million for the repurchase of the Company's outstanding common
stock on the open market. During the first quarter of 2000, the Company
completed this initial repurchase plan by acquiring 1,067,911 shares, for a
total of 6,485,311 shares repurchased under this plan. In February 2000, the
Company's Board of Directors authorized an additional $150.0 million for the
repurchase of the Company's outstanding stock. As of March 31, 2000, the Company
had repurchased 417,255 shares under this authorization for a total of 6,902,566
shares repurchased under both repurchase plans. Weighted average basic and
diluted shares, taking into consideration the options used in calculating EPS
and shares repurchased for each of the periods presented are as follows:
2000 1999
---------- ----------
Basic 85,380,314 88,546,029
---------- ----------
Diluted 86,537,245 89,280,663
---------- ----------
Comprehensive Income
The Company's comprehensive income differs from net income due to
changes in the net unrealized gains on investment securities available-for-sale.
For the three months ended March 31, 2000 and 1999, total comprehensive income
was approximately $7.8 million and $ 54.2 million, respectively.
Supplemental Cash Flow Information
The Company paid $0.1 million for interest in the first quarter of 2000
and 1999. The Company capitalized interest expense of $1.1 million in the first
quarter of 2000 and none in the first quarter of 1999.
Cash flows related to community residential developments are included
in operating activities on the statement of cash flow.
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3. DISCONTINUED OPERATIONS
During 1999, the Company discontinued its operations in the sugar
industry and has thus reported its sugar operations as discontinued operations
for all periods presented. Revenues from Talisman Sugar Corporation,
("Talisman"), the Company's sugar subsidiary, were approximately $17.2 million
for the three months ended March 31,1999. Net income, after tax, for Talisman,
excluding the gain on sale of the land and farming rights, was approximately
$1.7 million for the three months ended March 31, 1999. There were no activities
at Talisman in 2000.
4. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
March 31, 2000 December 31, 1999
-------------- -----------------
Minimum liability owed on sale of equity securities $ 119,424 $ 112,941
Senior revolving credit agreement, unsecured 30,000 --
Revolving credit agreement, secured by restricted
short-term investments 25,985 22,741
Notes payable to former owners of businesses acquired 10,593 10,593
Various secured and unsecured notes payable 1,787 1,511
Less: discounts on non-interest bearing notes payable (430) (562)
--------- ---------
Net borrowings 187,359 147,224
Less: current portion 34,381 31,250
--------- ---------
Total long-term debt $ 152,978 $ 115,974
--------- ---------
In March 2000, the Company entered into a senior unsecured revolving
credit facility for up to $200.0 million, which matures in March of 2002. The
proceeds of this debt will be used for working capital and general corporate
requirements of the Company and to fund repurchases of the Company's outstanding
common stock. This debt accrues interest at different rates based on timing of
the loan and the Company's preferences, but generally will be either the one,
two, three or six month London Interbank Offered Rate ("LIBOR") plus a LIBOR
margin in effect at the time of the loan. The agreement also subjects the
Company to certain restrictive covenants including financial covenants relating
to the Company's leverage position, interest coverage position and minimum net
worth.
The Company has long-term debt relating to the forward sale of its
portfolio of equity securities of approximately $119.4 million, which will
increase as interest expense is imputed at an annual rate of 7.9%. The liability
will also increase by the amount, if any, that the securities increase beyond
the 20% that the Company retains under the terms of the agreement. The balance
as of March 31, 2000 includes imputed interest of approximately $2.2 million
since December 31, 1999 and an amount relating to certain securities increasing
beyond the 20% appreciation that the Company retains of approximately $4.3
million.
5. SEGMENT INFORMATION
The Company conducts primarily all of its business in six reportable
operating segments, which are residential real estate services, community
residential development, commercial real estate development and services, land
sales, forestry and transportation. Intercompany transactions have been
eliminated. The Company evaluates a segment's performance based on Net EBITDA.
Net EBITDA is defined as earnings before interest expense, income taxes,
depreciation and amortization, and is net of the effects of minority interests.
Net EBITDA also excludes gains from discontinued operations and gains (losses)
on sales of nonoperating assets. Net EBITDA is considered a key financial
measurement in the industries that the Company operates. Other primarily
consists of investment income, net of corporate general and administrative
expenses. Also, included in other is an investment in an unconsolidated
affiliate that was previously classified in the leisure and resort segment and
costs related to the initial operations of the Company's newly formed
hospitality development group. The Company's reportable segments are strategic
business units that offer different products and services. They are each managed
separately and decisions about allocations of resources are determined by
management based on these strategic business units.
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Information by business segment for the first quarter is as follows (in
thousands):
March 31, 2000 March 31, 1999
-------------- --------------
Total Revenues:
Residential real estate services $ 50,933 $ 41,404
Community residential development 27,639 5,875
Commercial real estate development and services 48,684 80,960
Land sales 19,871 --
Forestry 11,785 6,929
Transportation 51,939 47,933
Other 180 (1,116)
--------- ---------
Total revenues $ 211,031 $ 181,985
--------- ---------
Net EBITDA:
Residential real estate services $ 2,312 $ 180
Community residential development 4,478 1,541
Commercial real estate development and services 4,883 14,064
Land sales 17,895 --
Forestry 6,885 3,309
Transportation 9,221 6,536
Other (2,982) (373)
--------- ---------
Net EBITDA $ 42,692 $ 25,257
--------- ---------
Adjustments to reconcile to income from continuing operations:
Depreciation and amortization $ (13,987) $ (11,113)
Other income (expense) 88 33
Interest expense (1,629) (248)
Income taxes (14,927) (12,399)
Effects of minority interests on noncash charges 6,520 8,004
--------- ---------
Income from continuing operations $ 18,757 $ 9,534
--------- ---------
There was no material change in any segment's total assets since December
31, 1999.
6. CONTINGENCIES
The Company and its affiliates 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,
results of operations or liquidity.
The Company has retained certain self-insurance risks with respect to
losses for third party liability, worker's compensation, property damage, group
health insurance provided to employees and other types of insurance.
The Company is jointly and severally liable as guarantor on four credit
obligations entered into by partnerships in which the Company has equity
interests. The maximum amount of the guaranteed debt totals $112.6 million; the
amount outstanding at March 31, 2000 totaled $76.9 million.
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 including sites which have been previously sold. 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 Superfund sites. The Company has accrued an allocated
share of the total estimated cleanup costs for these 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
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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
consolidated financial position, results of operations or liquidity of the
Company. Environmental liabilities are paid over an extended period and the
timing of such payments cannot be predicted with any confidence. Aggregate
environmental-related accruals were $7.3 million and $8.2 million as of March
31, 2000 and December 31, 1999, respectively.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
From time to time, the Company has made and will make "forward-looking
statements" as defined by the Private Securities Litigation Reform Act of 1995.
These statements can be identified by the fact that they do not relate strictly
to historical or current facts. Forward-looking statements often use words such
as "anticipate," "expect," "estimate," "intend," "plan," "goal," "believe" or
other words of similar meaning. Forward-looking statements give the Company's
current expectations or forecasts of future events, circumstances or results.
The Company's disclosure in this report, including in the MD&A section, contains
forward-looking statements. The Company may also make forward-looking statements
in our other documents filed with the SEC and in other written materials. In
addition, the Company's senior management may make forward-looking statements
orally to analysts, investors, representatives of the media and others. Any
forward-looking statements made by or on behalf of the Company speak only as of
the date they are made. The Company does not undertake to update forward-looking
statements to reflect the impact of circumstances or events that arise after the
date the forward-looking statement was made. The reader should, however, consult
any further disclosures of a forward-looking nature the Company may make in its
other documents filed with the SEC and in other written materials. All
forward-looking statements, by their nature, are subject to risks and
uncertainties. The Company's actual future results may differ materially from
those set forth in the Company's forward-looking statements. In particular,
discussions regarding the size and number of commercial buildings, residential
units, development timetables, development approvals and the ability to obtain
approvals, anticipated price ranges of developments, the number of units that
can be supported upon full build-out of development, and the absorption rate and
expected gain on land sales are forward-looking statements. Additional risk
factors that may cause actual results to differ materially form those expressed
in forward looking statements in this Form 10-Q are described in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 filed with the
Securities Exchange Commission. In addition, the occurrence or non-occurrence of
the recapitalization, the exchange and the spin-off of the Company's interest in
FECI depends on the satisfaction of a number of conditions among which are the
Company's receipt of an Internal Revenue Service ruling concerning the tax-free
status of the spin-off and the FECI shareholders' approval of the
recapitalization. The anticipated benefits of the recapitalization, the exchange
and the spin-off may be affected by (1) general economic conditions; (2)
economic developments that have a particularly adverse effect on the Company or
FECI and; (3) conditions in the securities markets on which the Company's and
FECI's securities trade. Such statements are based on current expectations and
are subject to certain risks discussed in this report and in our other periodic
reports filed with the SEC. Other factors besides those listed in this report or
discussed in the Company's other reports to the SEC could also adversely affect
the Company's results and the reader should not consider any such list of
factors to be a complete set of all potential risks or uncertainties.
OVERVIEW
The St. Joe Company is a diversified company which conducts primarily
all of its business in six reportable operating segments, which are residential
real estate services, community residential development, commercial real estate
development and services, transportation, forestry, and land sales. In late
1999, the Company also started a hospitality development group that will offer
fee-based development services for hospitality real estate projects including
hotels, resorts, and timeshare facilities. During the fourth quarter of 1998,
the Company discontinued its sugar operations line of business for accounting
purposes and all sugar operations ceased by the fourth quarter of 1999.
Management believes that the Company has a strategy in place for its
non-strategic assets and has begun to execute its long term strategies,
particularly in developing its vast holdings in Northwest Florida and elsewhere
in the State of Florida by receiving DRI (primary discretionary land use
approval for large scale projects in Florida) or county approvals for WaterColor
in Northwest Florida, SouthWood in Tallahassee, St. John's Golf and Country Club
in St. John's County and Victoria Park near Orlando. Management believes that
the Company is now in position to execute and deliver their long-term plan with
regards to these developments and the growth of its other real estate
businesses.
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DISCONTINUED OPERATIONS
During 1999, the Company discontinued its operations in the sugar
industry and has thus reported its sugar operations as discontinued operations
for all periods presented. Revenues from Talisman were approximately $17.2
million for the three months ended March 31,1999. Net income for Talisman,
excluding the gain on sale of the land and farming rights, was approximately
$1.7 million for the three months ended March 31, 1999. There were no activities
at Talisman in 2000.
RECENT EVENTS
FECI Spin-off (Proposed)
The Company owns 19,609,216 shares of FECI's common stock, which
represents an approximate 54% equity interest.
On October 27, 1999, the Company and FECI announced that they have
agreed to undertake a recapitalization of FECI to facilitate a pro rata tax-free
spin-off to the Company's shareholders of the Company's 54% equity interest in
FECI.
As part of the recapitalization, the Company will exchange all of its
shares of FECI common stock for an equal number of shares of a new class of FECI
common stock. The holders of the new class of FECI common stock will be entitled
to elect 80% of the members of the Board of Directors of FECI, but the new FECI
common stock will otherwise have substantially identical rights to the existing
common stock. The new class of FECI common stock will be distributed pro rata to
the Company's shareholders in a tax-free distribution. The Company will not
retain any equity interest in FECI after the spin-off is completed.
At the closing of the transaction, various service agreements between
the Company and FECI's wholly owned subsidiary Gran Central Corporation (GCC)
will become effective. Under the terms of these agreements, which extend for up
to three years after the closing of the transaction, GCC will retain the
Company, through its commercial real estate affiliates, to continue to develop
and manage certain commercial real estate holdings of GCC. The terms of these
agreements have been approved by both the Company's and FECI's Boards of
Directors, and in the judgement of the boards, reflect arms-length terms and
conditions typically found in today's marketplace.
The Boards of Directors of the Company and FECI have unanimously
approved the transaction and on March 8, 2000, the minority shareholders of FECI
approved the transaction. This transaction, expected to be completed in
mid-2000, is subject to the receipt of an Internal Revenue Service ruling
concerning the tax-free status of the proposed spin-off.
Stock--Repurchase Program
In August 1998, the Company's Board of Directors authorized $150
million for the purchase of outstanding common stock through open-market
purchases. During the first quarter of 2000, the Company completed this program
having purchased 6.5 million shares at an average per share price of $23.13. In
February 2000, the Company's Board of Directors authorized a second $150 million
stock repurchase plan. The Company will purchase the Company's stock from time
to time on the open market. As of March 31, 2000, the Company had repurchased an
additional 0.4 million shares at an average per share price of $27.15.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31
CONSOLIDATED RESULTS
Total revenues increased 16% to $211.0 million for the first quarter of
2000 as compared to $182.0 million in the first quarter of 1999. The residential
real estate services segment through Arvida Realty Services ("ARS") contributed
$50.9 million in revenues in the first quarter of 2000, a 23% increase over
$41.4 million for the first quarter of 1999. The community residential
development segment recorded $27.6 million in revenues, an increase of $21.7
million or 367% during the first quarter of 2000, primarily
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due to sales recorded at its development communities in northwest and northeast
Florida and sales of homes by Saussy Burbank, neither of which occurred in the
first quarter of 1999. The commercial real estate development and services
segment reported $48.7 million in revenues, a 40% decrease from $81.0 million of
revenues earned during the first quarter of 1999, due primarily to the sale by
GCC of two industrial parks located in south Florida in the first quarter of
1999. Through its land sales segment, started during the fourth quarter of 1999,
the Company recorded revenues of $19.9 million during the first quarter of 2000.
The forestry segment reported revenues of $11.8 million during the first quarter
of 2000, a 71% increase over $6.9 million during the first quarter of 1999 due
to an increase in bulk timber sales. The transportation segment contributed
$51.9 million in revenues, an 8% increase over $47.9 million in 1999 primarily
through its Florida East Coast Railroad ("FECR") subsidiary. The Company also
recorded $0.2 million in revenues from its newly formed hospitality group in
2000 and had $1.1 million in losses relating to an investment not attributable
to any segment in 1999.
Operating expenses totaled $158.2 million, a 10% increase over $144.1
million for the first quarter of 2000 as compared to the first quarter of 1999.
The residential real estate services segment had $49.0 million in operating
expenses for the first quarter of 2000, an 18% increase over $41.5 million for
the first quarter of 1999. The community residential development segment
recorded $23.1 million in operating expenses, a 381% increase, during the first
quarter of 2000 as compared to $4.8 million during the first quarter of 1999.
The commercial real estate development and services segment reported a decrease
in operating expenses of $17.9 million or 31% to $40.3 million during the first
quarter of 2000 from $58.2 million in 1999, primarily related to the costs of
sales of the two industrial parks located in south Florida in 1999. Land sales
contributed $2.1 million in operating expenses in 2000. The forestry segment
reported operating expenses of $5.6 million, a 33% increase over $4.2 million
during the first quarter of 1999 due to cost of increased timber sales. The
transportation segment contributed $37.8 million in operating expenses, an
increase of $2.4 million or 7%. The Company also recorded $0.3 million in
operating expenses from its newly formed hospitality group in 2000.
Corporate expense increased 104% from $2.6 million in 1999 to $5.3
million in 2000, due to the effects of increased salary and other benefits
costs. Corporate expense also included prepaid pension income of $2.5 million, a
decrease of $0.2 for the first quarter of 2000 as compared to the first quarter
of 1999.
Depreciation and amortization totaled $13.9 million, an increase of
$2.8 million, or 25% primarily due increased depreciation expense on assets
acquired in late 1999 and amortization of goodwill from the Company's
acquisitions during 1999.
Other income (expense) increased $0.2 million in the first quarter of
2000 to $5.2 million. Included in 2000 was a dividend paid to FECR of
approximately $2.4 million that was not received during 1999. The decrease in
other income was primarily due to interest expense of $1.6 million during 2000,
as compared to $0.2 million in 1999 and a loss on sale of assets of $0.2 million
during 2000, as compared to a gain of $0.6 million in 1999.
Income tax expense on continuing operations totaled $14.9 million for
the first quarter of 2000 as compared to $12.4 million for the first quarter of
1999. The effective tax rate was 38.5% for 2000 as compared to 42.4% for 1999.
The decrease was primarily due to the fact that the $2.4 million dividend
received by FECR was taxable at a lower rate because of the dividends received
deduction and the pension excise tax that was still being recorded in the first
quarter of 1999.
Income from discontinued operations during 1999 includes the $42.8
million gain, net of tax, on the sale of Talisman's land and farming rights.
Earnings, net of tax, from discontinued operations totaled $1.7 million for the
first quarter of 1999.
Net income for the first quarter of 2000 was $18.8 million or $0.22 per
diluted share as compared to $54.1 million or $0.61 per diluted share for the
first quarter of 1999. Income from continuing operations was $9.5 million in
1999 as compared to the $18.8 million recorded in 2000.
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RESIDENTIAL REAL ESTATE SERVICES
Three months ended
March 31
------------------------
2000 1999
------ ------
Revenues $ 50.9 $ 41.4
Operating expenses 49.0 41.5
Depreciation and amortization 1.7 1.3
Other income (expense) 0.2 0.1
------ ------
Pretax income from continuing operations 0.4 (1.3)
------ ------
EBITDA 2.3 0.2
------ ------
The residential real estate services segment is comprised of the
operation of the Company's ARS subsidiary. ARS provides a complete array of real
estate brokerage services, including residential real estate sales, relocation
and referral, asset management, mortgage and title services, annual and seasonal
rentals and international real estate marketing. The operations of ARS are
seasonal with the volume of transactions increasing in the spring and summer.
Residential real estate services revenues were $50.9 million for the
first quarter of 2000, a 23% increase over $41.4 million for the first quarter
of 1999. Realty brokerage revenues in the first quarter of 2000 were
attributable to 7,100 closed units representing $1.4 billion in sales volume as
compared to 6,319 closed units representing $1.2 billion of sales volume in
1999. The average home sales price for the first quarter of 2000 increased to
$203,000 as compared to $185,000 for the first quarter of 1999.
Operating expenses were $49.0 million for the first quarter of 2000, an
18% increase over $41.5 million during the first quarter of 1999 and represent
commissions paid on real estate transactions, underwriting fees on title
policies and administrative expenses of the ARS operations. Included in
operating expenses for the first quarter of 1999 were $2.2 million of conversion
expenses related to the operation's name change from Prudential Florida Realty
to ARS which impacted pretax income and EBITDA for that quarter.
COMMUNITY RESIDENTIAL DEVELOPMENT
Three months ended
March 31
-----------------
2000 1999
----- ----
Revenues $27.6 $5.9
Operating expenses 23.0 4.8
Depreciation and amortization -- --
Other income (expense) -- 0.1
----- ----
Pretax income from continuing operations 4.6 1.2
----- ----
EBITDA, gross 4.6 1.1
----- ----
EBITDA, net 4.5 1.5
----- ----
The Company's community residential development operations currently
consist of community development through its 74% ownership of St. Joe/Arvida
Company, L.P. and its 26% equity interest in Arvida/JMB Partners, L.P.
("Arvida/JMB"). Arvida/JMB is recorded on the equity method of accounting for
investments. These two partnerships manage a total of 23 communities in various
stages of planning and development.
In April 1999, the Company acquired all outstanding stock of Saussy
Burbank, Inc. ("Saussy Burbank"), a homebuilder located in Charlotte, North
Carolina, for $14.6 million in cash. Saussy Burbank builds approximately 300
homes a year and has operations in the greater Charlotte, Raleigh and Asheville
market areas. Saussy Burbank's operations are included in community residential
real estate operations since acquisition.
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Real estate sales totaled $23.9 million with related costs of sales of
$18.8 million during the first quarter of 2000 as compared to $1.6 million and
$0.7 million, respectively in 1999. During the first quarter of 2000, 6 lots at
The Retreat in Walton County, Florida closed generating pre-tax gain of $1.9
million. Revenues from these sales totaled $2.5 million with an average lot
price of $417,000, related cost of sales were $0.4 million. This beach club
resort community includes 90 single-family housing units on 76 acres. Upon the
expected closing of two remaining lots during the second quarter of 2000, all of
this resort community's 90 lots will have been sold at an average price of
approximately $419,000. Sales this quarter at James Island in northeast Florida
totaled $6.6 million on closings of 23 units at an average price of
approximately $288,000. Related cost of sales at James Island were $6.0 million.
Other sales this quarter included housing and lots in the Summerwood, Woodrun,
and Camp Creek Point developments in west Florida totaling in the aggregate $2.5
million and at Driftwood in the Tallahassee, Florida area of $0.4 million.
Related cost of sales for these developments totaled $1.9 million . Saussy
Burbank, acquired in April 1999, contributed revenues in 2000 from homebuilding
totaling $11.9 million with related cost of sales of $10.5 million on closing of
60 units at an average price of approximately $199,000. Other revenues from
management fees and rental income totaled $0.3 million with related costs of
$0.5 million as compared to $0.1 million in revenues in 1999. The community
residential development operations also had other operating expenses of $3.7
million during the first quarter of 2000 as compared to $3.4 million in 1999.
During the second quarter of 2000, the initial sales at WaterColor, a new
development on Company-owned property in northwest Florida will be recorded. On
April 15, 2000, deposits were received for 24 lots and 4 multi-family units with
a sales value of $8.6 million. The lots have an average sales price of $300,000
and the condominium residences average approximately $370,000. WaterColor will
eventually be a 1,140 unit beachfront resort and residential community.
Income from the Company's investment in Arvida/JMB was $3.2 million for
the first quarter of 2000, as compared to $4.2 million in 1999. During 2000, the
Company also had income from other joint ventures of $0.2 million.
COMMERCIAL REAL ESTATE DEVELOPMENT AND SERVICES
Three months ended
March 31
2000 1999
----- -----
Revenues $48.7 $81.0
Operating expenses 40.3 58.2
Depreciation and amortization 5.8 3.7
Other income (expense) -- (0.1)
----- -----
Pretax income from continuing operations 2.6 19.0
----- -----
EBITDA, gross 8.4 22.9
----- -----
EBITDA, Net 4.9 14.1
----- -----
Operations of the commercial real estate development and services
segment include the development of St. Joe properties, development and
management of the GCC real estate portfolio, the Advantis service businesses and
investments in affiliates, including the Codina Group, Inc. ("CGI"), to develop
and manage properties throughout the southeast. The Company owns 54% of FECI and
GCC is the wholly owned real estate subsidiary of FECI.
Revenues generated from rental operations in the first quarter of 2000
are from both St. Joe owned operating properties and GCC operating properties
and FECR owned rental properties. Revenues generated from rental operations in
the first quarter of 1999 were from only GCC and FECR owned rental properties.
Total rental revenues in the first quarter of 2000 were $15.3 million, an
increase of 14% over the $13.4 million during the first quarter of 1999.
Rental revenues generated by St. Joe owned operating properties were
$1.9 million during the first quarter of 2000, while operating expenses relating
to these revenues were $.5 million. As of March 31, 2000, St. Joe had interests
in, either wholly-owned or through partnerships, 10 operating buildings with 1.2
million total rentable square feet in service. Approximately 630,000 square feet
of office and industrial space is under construction as of March 31, 2000.
14
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Rental revenues generated by GCC owned operating properties and FECR
rental properties during the first quarter of 2000 were $13.4 million, the same
as 1999, resulting primarily from decreases of $1.5 million in rental income
relating to properties sold in 1999 being offset by increases in same store
revenues totaling $0.5 million and new store revenues of $1.0 million. Operating
expenses on rental revenues, excluding depreciation, increased to $5.0 million
for the first quarter of 2000, from $4.8 million in 1999. As of March 31, 2000,
GCC had 50 operating buildings with 5.2 million total rentable square feet in
service. Approximately 509,000 square feet of office and industrial space is
under construction as of March 31, 2000. Additionally, approximately 821,000
square feet is in the predevelopment stage and GCC is expected to commence
construction on some or all of these properties during 2000.
Operating revenues generated from Advantis totaled $15.9 million during
the first quarter of 2000 compared with $14.2 million for the first quarter of
1999. Advantis expenses were $16.7 million during the first quarter of 2000
compared with $13.6 million in 1999. Advantis' expenses include commissions paid
to brokers, property management expenses and construction costs. The decline in
resulting profits primarily resulted from decreased brokerage transaction
volume, which was $277 million in 2000 as compared to $404 million in 1999.
In the first quarter of 2000, St. Joe sold the Homeside Lending
Building for gross proceeds of $16.0 million and had cost of sales of
approximately $14.4 million resulting in a $1.6 million pre-tax gain.
In the first quarter of 2000, GCC sold real estate properties for gross
proceeds of $1.4 million with cost of sales of $0.4 million. In 1999 GCC had
revenues of $50.4 million which were from the sale of two industrial parks, Gran
Park at McCahill and Gran Park at Lewis Terminals which resulted in a pre-tax
gain of $10.4 million ($5.6 million, net of the effect of FECI's minority
interest). Total costs of these first quarter 1999 sales totaled $39.1 million.
The industrial parks sold in 1999 consisted of 10 buildings with 1.2 million
square feet.
The Company has investments in various real estate developments and
affiliates that are accounted for by the equity method of accounting. Earnings
from these investments contributed $0.1 million to the commercial real estate
segment's revenues during the first quarter of 2000 compared to $2.9 million in
1999. The first quarter 1999 earnings were comprised primarily from $2.8 million
contributed by 1999 land sales from the Company's investment in Deerfield Park,
LLC, located in Atlanta, Georgia which did not occur during the first quarter of
2000, but are expected during the remainder of 2000.
General and administrative expenses for the commercial group, which are
included in operating expenses, increased $1.4 million to $3.3 million for the
first quarter of 2000 from $1.9 million in the first quarter of 1999. Of total
general and administrative expenses for the first quarter of 2000, $1.3 million
are St. Joe related and $1.6 million are related to GCC. For 1999, St. Joe
related expenses were $1.0 million and $0.9 million were related to GCC. Other
operating expenses for the first quarter of 2000 include the $16.7 million of
Advantis expenses, the $14.8 million in cost of sales, and the $5.5 million in
costs related to rental revenues.
Depreciation and amortization increased by $2.1 million to $5.8 million
and is attributable to goodwill amortization of $0.3 million as a result of
acquisitions completed by Advantis in 1999 and additional depreciation on
operating properties of $1.8 million. Of the $1.8 million increase in
depreciation, $1.2 million was from GCC operating buildings and $0.6 million was
from St. Joe Commercial related operating properties.
Net EBITDA totaled $4.9 million for the first quarter of 2000 and was
comprised of $2.5 million from sales of real estate, $2.8 million from rental
operations, $0.1 million from earnings on investments in real estate
developments, and $(0.5) million from Advantis. Excluding GCC, St. Joe
Commercial had Net EBITDA of $0.7 million, compared to $3.7 million in 1999. Net
EBITDA in the first quarter of 1999 included the $2.8 million contribution from
the Company's equity investment in Deerfield Park, LLC.
15
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LAND SALES
Three months ended
March 31
2000 1999
----- -----
Revenues $19.9 --
Operating expenses 2.1 --
Depreciation and amortization -- --
Other income (expense) 0.1 --
----- -----
Pretax income from continuing operations 17.9 --
----- -----
EBITDA, Net 17.9 --
----- -----
During the fourth quarter of 1999, the St. Joe Land Company was created
to sell parcels of land, typically 5 to 5,000 acres, from a portion of the total
of 800,000 acres of timberland held by The Company in northwest Florida and
southwest Georgia. These parcels could be used as large secluded home sites,
quail plantations, ranches, farms, hunting and fishing preserves and for other
recreational uses.
During the first quarter of 2000, the land sales division had revenues
of $19.9 million, which represented sales of 8,772 acres at an average price of
$2,269 per acre. This amount included the sale of approximately 3,620 acres for
approximately $3,200 per acre, in Capps, near Tallahassee, Florida.
FORESTRY
Three months ended
March 31
-----------------
2000 1999
----- ----
Revenues $11.8 $6.9
Operating expenses 5.6 4.2
Depreciation and amortization 0.8 0.6
Other income (expense) 0.7 0.7
----- ----
Pretax income from continuing operations 6.1 2.8
----- ----
EBITDA,net 6.9 3.3
----- ----
Total revenues for the forestry segment increased $4.9 million, or 71%
in the first quarter of 2000 due to an increase in bulk timber sales. Total
sales to Florida Coast Paper Company, L.L.C. ("FCP"), the Company's major
pulpwood customer, were $4.8 million (188,000 tons) in 2000 as compared to $4.3
million (140,000 tons) in 1999. Since August of 1998 the FCP mill has been
shutdown, and it appears unlikely that it will reopen in the near future. Under
the terms and conditions of the amended fiber supply agreement with FCP, the
Company began redirecting the volumes of pulpwood from the FCP mill in Port St.
Joe to another mill in Panama City, Florida, thus sales of pulpwood resumed in
November of 1998 and there was no significant loss in volume of sales. Sales to
other customers increased to $6.3 million (191,000 tons) from $2.5 million
(107,000 tons) a year ago. The increase in sales to other customers is the
result of the Company conducting several lump sum bid timber sales during the
first quarter of 2000 to take advantage of favorable market conditions. Revenues
also include bulk land sales of $0.7 million during the first quarter of 2000;
the same amount as in 1999. The average sales price of timber sold increased to
approximately $29 per ton for the first quarter of 2000 as compared to $28 per
ton in the first quarter of 1999.
Operating expenses for the first quarter of 2000 increased $1.4
million, or 33% compared to 1999 due to higher harvest volumes. Cost of sales
were $5.0 million in 2000 as compared to $3.6 million in 1999. Cost of sales as
a percentage of sales were higher in 1999 as compared to 2000 because the lump
sum bid timber sales in 2000 caused increased sales of wood without cut and haul
expenses. Other operating expenses were $0.6 million in 2000 remaining constant
from 1999.
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TRANSPORTATION
Three months ended
March 31
2000 1999
----- -----
Revenues $51.9 $47.9
Operating expenses 37.8 35.4
Depreciation and amortization 5.0 4.8
Other income (expense) 2.4 --
----- -----
Pretax income from continuing operations 11.5 7.7
----- -----
EBITDA, gross 16.6 12.7
----- -----
EBITDA, net 9.2 6.5
----- -----
The transportation segment includes the railway, trucking and telecom
operations of FECI. Total FECI transportation operating revenues increased to
$50.7 million for the first quarter of 2000 as compared to $46.7 million for the
first quarter of 1999. The Florida economy has continued to be robust and has
FECI experiencing increases in carload traffic that more than offset decreases
in intermodal traffic. Aggregate traffic increased 9%, automotive traffic
increased by 15%, and all other carload traffic increased 3% in the first
quarter of 2000 as compared to the same period for 1999. Intermodal traffic
decreased 8% during the first quarter of 2000 compared to the same period of
1999. Transportation revenues for 2000 included $2.5 million in revenues from
FECI's telecommunications division compared with $1.0 million in 1999.
FECR's operating expenses were $37.1 million in the first quarter of
2000 as compared to $33.5 in 1999, with the increase partially resulting from
$2.1 million relating to operations of FEC's telecommunications division, which
had no expenses in 1999.
Other income for 2000 was a $2.4 million dividend received by FECR.
Apalachicola Northern Railroad Company ("ANRR") operating revenues
remained constant at $1.2 million in 2000 as compared to 1999. In the first
quarter of 2000, included in the $1.2 million of revenues recorded by ANRR were
contractual payments from Seminole Electric Cooperative, Inc. ("Seminole") of
$0.6 million. These payments ceased during the first quarter of 2000. Seminole
halted shipments of coal in January 1999, and filed a lawsuit seeking to
terminate its contract with ANRR to provide transportation of coal from Port St.
Joe, Florida to Chattahoochee, Florida. ANRR has fully performed its obligations
under the contract and is prepared to complete the contract term, which
continues until November 2004 and has filed suit to enforce the contract. ANRR's
workforce has been reduced significantly, commensurate with its loss in traffic.
The railroad intends to maintain a staff adequate to operate a minimal schedule
sufficient to provide service to existing customers.
ANRR's operating expenses decreased $1.3 million to $0.6 million in the
first quarter of 2000 as compared to $1.9 in the first quarter of 1999,
commensurate with the loss in traffic.
FINANCIAL POSITION
In August 1998, the St. Joe Board of Directors authorized $150 million
for the purchase of outstanding common stock through open-market purchases.
During the first quarter of 2000, the Company completed this program having
purchased 6.5 million shares at an average price of $23.13. In February 2000,
the St. Joe Board of Directors authorized a second $150 million stock repurchase
plan. The Board believes that the current price of the Company's common shares
does not reflect the value of the Company's assets or its future prospects. The
Company will purchase the Company's stock from time to time on the open market.
For the quarter ended March 31, 2000, cash provided by operations was
$22.5 million. Included in cash flows from operations were expenditures of $27.3
million relating to its community residential development
17
18
segment. The Company also obtained a $200 million line of credit, of which it
has drawn $30.0 million as of March 31, 2000. Capital expenditures, other than
community residential development expenditures, during the first quarter of 2000
were $61.7 million.
During the quarter ended March 31, 2000, the Company obtained a
syndicated unsecured line of credit in the amount of $200 million that replaced
an existing $75 million dollar line of credit. The credit facility has an
initial term of 2 years. This facility will be available for general corporate
purposes, including repurchases of the Company's outstanding common stock. The
facility includes financial performance covenants relating to its leverage
position, interest coverage and a minimum net worth requirement and also
negative pledge restrictions.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"), which is effective for all fiscal quarters of all
fiscal years beginning after June 15, 2000. FAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. FAS 133
requires entities to recognize all derivatives as either assets or liabilities
in the balance sheet and measure those instruments at fair value. The Company
does not believe FAS 133 will materially effect its financial statements.
Management believes that its financial condition is strong and that its
cash, investments, other liquid assets, operating cash flows, and borrowing
capacity, taken together, provide adequate resources to fund ongoing operating
requirements and future capital expenditures related to the expansion of
existing businesses including the continued investment in real estate
developments.
YEAR 2000 COMPLIANCE
The Company created a Year 2000 Project Team to address potential
problems within the Company's operations that could result from the century
change in the Year 2000. The project team was led by the Senior Vice President
of Finance and Planning and consisted of representatives of the Company's
Information Systems Departments or financial departments for each subsidiary,
and had access to key associates in all areas of the Company's operations. The
Company went through several phases to examine all information technology ("IT")
systems and non-IT systems which may have embedded technology. The Company went
through an assessment phase, a remediation phase, a test phase, an
implementation phase and a check-off phase, all of which were substantially 100%
complete by December 31, 1999 and noted that all critical systems were Year 2000
ready at that date. Subsequent to year-end, there have been no problems relating
to Year 2000 issues with respect to the Company's systems or vendors and no
contingency plans have had to be executed. The Company spent less than $1.0
million to address and modify Year 2000 problems, excluding FECI. Subsequent to
year-end, there have been no problems relating to Year 2000 issues at FECI. FECI
spent less than $10.0 million to address and modify Year 2000 problems.
18
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.01 Credit Agreement among The St. Joe Company, The Lenders Named Herein,
First Union National Bank, as Administrative Agent, Bank of America,
N.A., as Syndication Agent, Wachovia Bank, N.A., as Documentation
Agent, and SunTrust Bank, as Senior Managing Agent. $200,000,000 Senior
Credit Facility dated March 30, 2000
27.01 Financial Data Schedule (for SEC use only)
99.01 Supplemental Calculation of Selected Consolidated Financial Data
(b) Reports on Form 8-K
None.
19
20
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.
The St Joe Company
Date: May 11, 2000 /s/ Peter S. Rummell
--------------------
Peter S. Rummell
Chairman of the Board and
Chief Executive Officer
Date: May 11, 2000 /s/ Kevin M. Twomey
-------------------
Kevin M. Twomey
President, Chief Operating Officer and Chief
Financial Officer
Date: May 11,2000 /s/ Janna L. Connolly
---------------------
Janna L. Connolly
Vice President, Chief Accounting Officer
and Controller
20