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, 2001
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 May 11, 2001, there were 81,259,789 shares of common stock, no par value,
issued and outstanding, with an additional 12,575,693 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, 2001 and December 31, 2000 3
Consolidated Statements of Income-
Three months ended March 31, 2001 and 2000 4
Consolidated Statements of Cash Flows-
Three months ended March 31, 2001 and 2000 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
(Unaudited)
(Dollars in thousands, except share data)
March 31, December 31,
2001 2000
----------- ------------
ASSETS
Real estate investments $ 611,817 $ 565,769
Property, plant and equipment, net 56,904 56,077
Cash and cash equivalents 39,683 51,605
Short term investments 29,438 30,101
Accounts receivable, net 34,332 45,328
Marketable securities 138,794 121,723
Prepaid pension asset 77,467 74,967
Goodwill 137,328 138,115
Other assets 42,480 31,336
----------- -----------
Total assets $ 1,168,243 $ 1,115,021
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt $ 377,938 $ 296,848
Accounts payable 36,960 37,662
Accrued liabilities 34,107 38,683
Income tax payable 3,256 5,057
Other liabilities 7,831 9,660
Deferred income taxes 166,554 155,161
Minority interest in unconsolidated subsidiaries 2,880 2,866
----------- -----------
629,526 545,937
Stockholders' equity:
Common stock, no par value; 180,000,000 shares
authorized; 93,506,868 and 92,709,185 issued at
March 31, 2001 and December 31, 2000, respectively 43,404 31,181
Retained earnings 665,948 661,500
Accumulated other comprehensive income 88,122 78,129
Restricted stock deferred compensation (1,931) (2,257)
Treasury stock, at cost, 11,323,943 and 8,782,893 shares
at March 31, 2001 and December 31, 2000, respectively (256,826) (199,469)
----------- -----------
Total stockholders' equity 538,717 569,084
Commitments and contingencies
----------- -----------
Total liabilities and stockholders' equity $ 1,168,243 $ 1,115,021
=========== ===========
See notes to consolidated financial statements.
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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
---------------------------
2001 2000
--------- ---------
Operating revenues $ 140,132 $ 211,031
--------- ---------
Expenses:
Operating expenses 111,792 158,202
Corporate expense, net 4,180 5,264
Depreciation and amortization 6,794 13,987
--------- ---------
Total expenses 122,766 177,453
--------- ---------
Operating profit 17,366 33,578
--------- ---------
Other income (expense):
Investment income 1,840 5,225
Interest expense (3,788) (1,629)
Other, net 2,387 1,624
--------- ---------
Total other income 439 5,220
--------- ---------
Income before income taxes and minority interest 17,805 38,798
Income tax expense 6,766 14,927
Minority interest 11 5,114
--------- ---------
Net income $ 11,028 $ 18,757
========= =========
EARNINGS PER SHARE
Basic $ 0.13 $ 0.22
========= =========
Diluted $ 0.13 $ 0.22
========= =========
See notes to consolidated financial statements.
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THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months
Ended March 31
---------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 11,028 $ 18,757
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 6,794 13,987
Imputed interest on long-term debt 2,327 926
Minority interest 11 5,114
Deferred income tax expense 6,012 6,817
Equity in income of unconsolidated affiliates (3,485) (3,535)
Gain on sales of investment property (15,673) (21,420)
Purchases and maturities of trading investments, net -- 15,770
Cost of community residential properties sold 24,908 7,096
Expenditures for residential properties (52,311) (27,354)
Distributions from community residential unconsolidated affiliates 11,152 12,721
Changes in operating assets and liabilities:
Accounts receivable 11,004 (6,107)
Prepaid pension and other assets (15,927) (7,703)
Accounts payable, accrued liabilities, and other liabilities (8,099) 641
Income taxes payable (1,801) 1,169
Discontinued operations -- 215
--------- ---------
Net cash (used in) provided by operating activities (24,060) 17,094
Cash flows from investing activities:
Purchases of property, plant and equipment (2,653) (30,638)
Purchases of and development of commercial investments in real estate (26,177) (31,032)
Purchases of available-for-sale investments -- (299,605)
Investments in joint ventures and purchase business acquisitions,
net of cash received (3,186) (4,124)
Maturities and redemptions of available-for-sale investments 663 310,048
Proceeds from sales of operating and investment property 16,643 37,374
Distributions from unconsolidated affiliates -- 150
--------- ---------
Net cash used in investing activities (14,710) (17,827)
Cash flows from financing activities:
Proceeds from long-term debt, net of repayments 78,562 34,885
Proceeds from exercise of stock options and stock purchase plan 12,223 1,200
Dividends paid to stockholders (6,580) (6,830)
Dividends paid to minority interest -- (490)
Treasury stock purchased (57,357) (35,280)
--------- ---------
Net cash provided by (used in) financing activities 26,848 (6,515)
Net decrease in cash and cash equivalents (11,922) (7,248)
Cash and cash equivalents at beginning of period 51,605 71,987
--------- ---------
Cash and cash equivalents at end of period $ 39,683 $ 64,739
========= =========
See notes to consolidated financial statements.
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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 accounting principles
generally accepted in the United States of America 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, 2001 and December 31, 2000 and the
results of operations and cash flows for the three-month periods ended March 31,
2001 and 2000. The results of operations for the three-month periods ended March
31, 2001 and 2000 are not necessarily indicative of the results that may be
expected for the full year.
On October 9, 2000, the Company distributed to its shareholders all of
its equity interest in Florida East Coast Industries, Inc. ("FLA"). Accordingly,
the results of operations of FLA are included in the consolidated results of
operations for the quarter ended March 31, 2000 and excluded for the quarter
ended March 31, 2001. Subsequent to this distribution, the Company is primarily
engaged in real estate operations. In order to more effectively present the
statement of position of a real estate operating company, the December 31, 2000
balance sheet has been reclassified to conform with presentation consistent for
a real estate operating company.
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 shares of common stock 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, having acquired a total of 6,485,311 shares. In February 2000,
the Company's Board of Directors authorized an additional $150.0 million for the
repurchase of the Company's outstanding stock. During the first quarter of 2001,
the Company repurchased 2,482,500 shares under its second authorization,
including 1,480,800 shares from the Alfred I. DuPont Testamentary Trust (the
"Trust"), the majority stockholder of the Company, and the Trust's beneficiary,
the Nemours Foundation. As of March 31, 2001, a total of 9,520,666 shares have
been repurchased on the open market and 1,896,300 shares have been repurchased
from the Trust under both authorizations. In addition, during the first quarter
of 2001, the Company issued 680,583 shares upon the exercise of stock options.
Weighted average basic and diluted shares, taking into consideration
shares issued, weighted average options used in calculating EPS and treasury
shares repurchased for each of the periods presented are as follows:
Three Months Ended March 31,
----------------------------
2001 2000
---------- ----------
Basic 82,939,359 85,380,314
Diluted 86,012,932 86,537,245
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
and derivative instruments. For the three months ended March 31, 2001 and 2000,
total comprehensive income was approximately $21.0 million and $6.1 million,
respectively.
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Supplemental Cash Flow Information
The Company paid $2.8 million and $0.1 million for interest in the
first three months of 2001 and 2000, respectively. The Company paid $0.8 million
and $5.0 million for income taxes in the first three months of 2001 and 2000,
respectively. The Company capitalized interest expense of $1.6 million and $1.1
million in the first three months of 2001 and 2000, respectively.
Cash flows related to real estate development activities are included
in operating activities on the statements of cash flows.
3. REAL ESTATE INVESTMENTS
Real estate investments include the following (in thousands):
March 31, 2001 December 31, 2000
-------------- -----------------
Operating property $276,796 $261,477
Development property 179,040 151,342
Investment property 97,215 85,507
Investments in unconsolidated affiliates 66,549 73,997
-------- --------
619,600 572,323
Accumulated depreciation (7,783) (6,554)
-------- --------
$611,817 $565,769
======== ========
Included in operating property are the Company's timberlands, and land
and buildings used for commercial rental purposes. Development property consists
of community residential land and property currently under development.
Investment property is the Company's land held for future use.
4. DEBT
Long-term debt consisted of the following (in thousands):
March 31, 2001 December 31, 2000
-------------- -----------------
Minimum liability owed on sale of equity securities $ 124,043 $ 121,717
Senior revolving credit agreement, unsecured 185,000 115,000
Revolving credit agreement, secured by restricted
short-term investments 29,438 30,101
Debt secured by mortgages on certain commercial and
residential property 26,947 27,000
Warehousing credit secured by mortgages 7,468 --
Notes payable to former owners of businesses acquired 2,369 2,829
Various secured and unsecured notes payable 2,719 269
Less: discounts on non-interest bearing notes payable (46) (68)
--------- ---------
Total debt 377,938 296,848
========= =========
Current portion $ 41,781 $ 33,041
========= =========
On March 1, 2001, Arvida Realty Services, the Company's residential
real estate services segment, entered into a $30.0 million warehouse line of
credit secured by certain of its first and second mortgages. The line of credit
matures February 28, 2002 and bears interest at the London Interbank Offered
Rate (LIBOR) plus 1.20%. At March 31, 2001, the interest rate was 6.28%.
5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
On January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("FAS 133") and Statement of Financial Accounting
Standards No. 138, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 138"), an amendment to FAS 133. FAS 138 and FAS 133
establish accounting and reporting standards for derivative instruments
and hedging activities and require entities to recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value.
It is the policy of the Company to enter into hedging activities
when they are deemed beneficial and cost effective for the purpose of
protecting the fair value or future cash flows associated with a particular
asset or liability. At January 1 and March 31, 2001, the Company was party
to forward sale contracts ("Forward Sale Contracts") that provide for
the sale of a portfolio of equity securities held by the Company to a third
party on October 15, 2002. This transaction was initiated on October 15, 1999
in order to minimize the Company's price risk related to the securities. The
Company has designated the Forward Sale Contracts as a hedge of the fair value
of the securities which fixed the fair value at inception. The Forward Sale
Contracts were the only derivatives held by the Company during the period.
Upon execution of the contracts, the Company received approximately $111.1
million in cash.
Pursuant to FAS 138 and FAS 133, the Company has accounted for the
forward sale of its securities as a fair value hedge. The changes in fair value
of the Forward Sale Contracts are recorded through the statement of income.
However, such changes are offset by changes in fair value of the underlying
securities. The net impact of the adoption of these standards, recorded as a
separate component of other comprehensive income at January 1, 2001, was
approximately $10.0 million, net of income taxes, which represents the
reclassification of accumulated other comprehensive income related to the
underlying securities.
During the first quarter of 2001, the value of the Forward Sale
Contracts increased by $12.3 million to $41.4 million. The net impact to
the statement of income for the period was a gain of $1.7 million which was
included in other income and represents the time value component of the change
in fair value of the Forward Sale Contracts which the Company is excluding from
its assessment of hedge effectiveness.
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6. 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 cost, 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. Gross EBITDA has also
been presented where applicable and is defined as Net EBITDA excluding the
effects of minority interests. The segment labeled other primarily consists of
investment income, net of corporate general and administrative expenses. Also
included in the segment labeled other are the revenues 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.
Information by business segment follows: (In thousands)
Three months ended March 31,
-------- --------
2001 2000
-------- --------
Total Revenues:
Residential real estate services $ 53,786 $ 50,933
Community residential development 39,275 27,639
Commercial real estate development and services 19,475 48,684
Land sales 17,458 19,871
Forestry 9,315 11,785
Transportation 482 51,939
Other 341 180
-------- --------
Total revenues $140,132 $211,031
======== ========
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Net EBITDA:
Residential real estate services $ 2,251 $ 2,312
Community residential development 7,861 4,478
Commercial real estate development and services 1,941 4,883
Land sales 14,433 17,895
Forestry 4,036 6,885
Transportation (393) 9,221
Other (2,986) (2,982)
-------- --------
Net EBITDA $ 27,143 $ 42,692
Adjustments to reconcile to net income
Depreciation and amortization $ (6,794) $(13,987)
Gain on valuation of derivatives 1,697 --
Other income (25) 88
Interest expense (4,249) (1,629)
Income tax expense (6,766) (14,927)
Minority interest 22 6,520
-------- --------
Net income $ 11,028 $ 18,757
======== ========
There was no material change in any segment's total assets since
December 31, 2000.
7. 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 $148.6 million; the
amount outstanding at March 31, 2001 totaled $123.2 million. In addition, the
Company has indemnification agreements from some of its partners requiring that
they will cover a portion of the debt that the Company is guaranteeing.
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 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 $4.9 million and
$5.3 million as of March 31, 2001 and December 31, 2000, 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 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, but
without limitation, 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 from 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, 2000 filed with the Securities Exchange Commission. 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 real estate operating company, primarily
engaged in community residential, commercial, hospitality and leisure resort
development, along with residential and commercial real estate services, and
land sales. The Company also has significant interests in timber and a
transportation operation. In October 2000, the Company completed the spin-off of
Florida East Coast Industries, Inc.("FLA"), which was primarily included in the
transportation and commercial real estate development segments.
RECENT EVENTS
On April 16, 2001, the commercial real estate development and services
segment sold a 310,000-square-foot office building in Boca Raton, Florida to the
National Council on Compensation Insurance Holdings, Inc. ("NCCI") for a
purchase price of $52.5 million, resulting in an approximate gain of $4.0. The
building was designed and constructed exclusively for NCCI as the organization's
new corporate headquarters.
On April 20, 2001, the Company closed the sale of Snipe Island, a
10,681 acre hydric hammock area that borders the Aucilla and Econfina Rivers in
Taylor County, Florida. The State of Florida purchased the land in a transaction
negotiated by the Nature Conservancy. The purchase price was $10.0 million,
with $9.4 million recognized as gain.
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS
THREE MONTHS ENDED MARCH 31
Total revenues decreased $70.9 million, or 34% to $140.1 million for
the first quarter of 2001 as compared to $211.0 million in the first quarter of
2000, primarily due to the FLA spin-off. The community residential development
segment, through sales recorded at its northwest and northeast Florida
residential communities and sales of homes by Saussy Burbank, Inc, ("Saussy
Burbank") a homebuilder in Charlotte, North Carolina, recorded $39.2 million in
the first quarter of 2001, a 42% increase over $27.6 million in the
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first quarter of 2000. The residential real estate services segment through
Arvida Realty Services ("ARS") contributed $53.8 million in the first quarter of
2001, a 6% increase over $50.9 million in the first quarter of 2000. The land
sales segment of the Company recorded revenues of $17.5 million in the first
quarter of 2001, a 12% decrease compared to $19.9 million in the first quarter
of 2000. The commercial real estate development and services segment, through
St. Joe Commercial, contributed $19.5 million in the first quarter of 2001, a
60% decrease compared to $48.7 million in the first quarter of 2000, contributed
through both Flagler Development Company ("Flagler"), a wholly owned subsidiary
of FLA, and St. Joe Commercial. The forestry segment reported revenues of $9.3
million during the first quarter of 2001, a 21% decrease compared to $11.8
million in the first quarter of 2000. In the first quarter of 2001, the
transportation segment, through Apalachicola Northern Railroad Company ("ANRR"),
recorded revenues of $0.5 million. In the first quarter of 2000, the
transportation segment recorded total revenues of $51.9 million, comprised of
$1.2 million contributed through ANRR and $50.7 million contributed by FLA.
Revenues not attributable to any particular segment were $0.3 million and $0.2
million in the first quarter of 2001 and 2000, respectively.
Operating expenses totaled approximately $111.8 million, a decrease of
$46.4 million, or 29%, for the first quarter of 2001 as compared to $158.2
million for the first quarter of 2000. The community residential development
segment recorded $32.0 million in costs in the first quarter of 2001, a 39%
increase over the $23.1 million recorded in 2000. The residential real estate
services segment contributed $52.1 million in costs in the first quarter of
2001, a 6% increase over the $49.0 million in costs recorded in the first
quarter of 2000. The land sales segment contributed $3.1 million in costs in the
first quarter of 2001, a 48% increase over the $2.1 million contributed in the
first quarter of 2000. The commercial real estate development and services
segment contributed $17.6 million in costs recorded in the first quarter of
2001, a 56% decrease compared to $40.3 million recorded in 2000. The forestry
segment reported costs of $5.7 million in the first quarter of 2001, a 2%
increase over the $5.6 million recorded in 2000. The transportation segment
costs for the first quarter of 2001 were $0.9 million, contributed through ANRR.
In the first quarter of 2000, transportation segment costs totaled $37.8
million, comprised of $0.7 million contributed by ANRR and $37.1 million
contributed by FLA. The Company also recorded $0.4 million and $0.3 million in
costs that were not attributable to a reportable segment.
Corporate expense decreased 21% from $5.3 million to $4.2 million,
primarily due to the effects of decreased employee benefit costs. Corporate
expense included prepaid pension income of $2.5 in the first quarter of 2001,
equal to the first quarter of 2000.
Depreciation and amortization totaled $6.8 million, a decrease of $7.2
million, or 51%, primarily due to the FLA spin-off.
Other income (expense) decreased $4.8 million, or 92% to $0.4 million
in the first quarter of 2001 compared to $5.2 million in 2000. The decrease
primarily resulted from the spin-off of FLA, partially offset by increased
interest expense.
Income tax expense on continuing operations totaled $6.8 million, an
effective rate of 38%, for the first quarter of 2001 as compared to expense of
$14.9 million, an effective rate of 38.5% for the first quarter of 2000.
Net income for the first quarter of 2001 was $11.0 million or $0.13 per
diluted share as compared to $18.8 million or $0.22 per diluted share for the
first quarter of 2000.
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COMMUNITY RESIDENTIAL DEVELOPMENT
(In millions)
Three months ended
March 31,
------------------
2001 2000
------ ------
Revenues $ 39.2 $ 27.6
Operating expenses 32.0 23.0
Depreciation and amortization 0.2 --
Other income (expense) 0.2 --
Pretax income from continuing operations 7.3 4.6
EBITDA, gross 7.9 4.6
EBITDA, net 7.9 4.5
The Company's community residential development operations currently
consist of community development on land owned 100% by the Company, its 26%
equity interest in Arvida/JMB Partners, L.P. ("Arvida/JMB") and its 74%
ownership of St. Joe/Arvida Company, L.P. Arvida/JMB is recorded using the
equity method of accounting for investments. These two partnerships manage a
total of 20 communities in various stages of planning and development primarily
focused in northwest, northeast, central and south Florida.
WaterColor, a coastal resort community in Walton County, Florida began
sales in March of 2000. Lot sales and home closings are currently occurring.
Construction is underway on the first premium Gulf-front condominiums and
delivery of the first of these 22 residences is scheduled to begin in the third
quarter. The beach club, town center and the 60-room beachfront WaterColor Inn
are also under construction, with the beach club scheduled to open in mid-summer
2001 and the Watercolor Inn in early 2002. WaterColor will eventually be a 1,140
unit beachfront resort and residential community.
Approximately three miles east of WaterColor on about a mile of
beachfront property, WaterSound is being planned as an exclusive and secluded
beachfront community. The first phase will offer 47 single family home sites,
including six beachfront sites, as well as 90 multi-family and townhouse units.
Earnings from WaterSound are expected to begin in the second half of 2001. The
Camp Creek Golf Club, located approximately four miles east of WaterColor and
within one-half mile of WaterSound, is scheduled to open in May 2001.
Construction is well underway at SouthWood in Tallahassee. The first
phase will consist of 134 single-family homes and 60 townhomes. SouthWood will
eventually have more than 4,250 homes, a town center, including retail shops,
professional offices and restaurants and entertainment facilities. Earnings are
expected to commence in the second quarter of 2001. In the fourth quarter of
2000, Southwood began contributing to earnings with the sale of land for the
construction of an apartment complex.
The Point at St. Joe Beach, a beachfront community located in Gulf
County, Florida, is currently under development. This 80-acre community will
offer 110 lots, many of which will be beachfront. The Point at St. Joe Beach
will also offer a pool club, several community docks and a conservation area
accessed by boardwalks and trails. Planning is also underway for further
development along an additional 3.5 mile stretch of beachfront property that
extends approximately five miles from the beach.
Construction continues at Victoria Park, near Orlando. This 1,859 acre
community will have approximately 4,000 residences built among parks, lakes and
conservation areas, as well as an 18-hole golf course. Earnings are expected to
begin in late 2001.
During the first quarter of 2001, contracts have been received for the
first 58 units in the first phase of St. Johns Golf and Country Club in St.
Johns County, Florida. The average price of a home in this 799-unit golf course
community is expected to be approximately $230,000. Responding to consumer
demand, infrastructure construction on phase two of the community is already
underway. Earnings are expected to begin in the third quarter of 2001. Actual
closed units in the first quarter of 2001 consisted of 25 lots at an average
price of $52,000.
12
13
Also in St. Johns County, sales closed on five riverfront lots for an
average price of $380,000. As of March 31, 2001, twenty lots have been sold of
the initial product offering of 23 lots. There are also an additional 4,300
acres and more than three miles of frontage on the St. Johns River remaining.
THREE MONTHS ENDED MARCH 31
Real estate sales totaled $35.0 million with related costs of sales of
$24.9 million during the first quarter of 2001 as compared to sales of $23.9
million in 2000 with related cost of sales of $18.8 million. Following is a
detail of activity by development (in millions):
Quarter ended March 31, 2001 Quarter ended March 31, 2000
----------------------------------------- -----------------------------------------
Closed Cost of Gross Closed Cost of Gross
Units(a) Revenues sales Profit Units(a) Revenues sales Profit
-------- -------- ------- ------ -------- -------- ------- ------
Northwest Florida:
WaterColor 10 $ 11.1 $ 5.9 $ 5.2 -- $ -- $ -- $ --
Summerwood 10 1.7 1.5 0.2 7 1.0 0.9 0.1
Woodrun 5 0.5 0.7 (0.2) 7 0.8 0.7 0.1
SouthWood 13 0.8 0.4 0.4 -- -- -- --
Retreat -- -- -- -- 6 2.5 0.5 2.0
Driftwood -- -- -- -- 4 0.5 0.1 0.4
Camp Creek Point -- -- -- -- 1 0.6 0.1 0.5
Northeast Florida:
James Island 7 2.3 2.0 0.3 23 6.6 6.0 0.6
RiverTown 5 2.0 0.3 1.7 -- -- -- --
St. Johns Golf &
Country Club 25 1.3 0.8 0.5 -- -- -- --
Central Florida:
Victoria Park 3 0.2 0.2 -- -- -- -- --
North Carolina and
South Carolina:
Saussy Burbank 58 15.1 13.1 2.0 60 11.9 10.5 1.4
------ ------ ------ ------ ------ ------
Total $ 35.0 $ 24.9 $ 10.1 $ 23.9 $ 18.8 $ 5.1
====== ====== ====== ====== ====== ======
(a) Units are comprised of lot sales as well as single-family and multi-family
residences.
During the first quarter of 2001, 7 lots, 2 multi-family residences,
and 1 single-family residence closed at WaterColor. The lots closed at
WaterColor had an average sales price of approximately $518,000, while the
residences averaged approximately $470,000. Revenue and costs of sales
associated with multi-family housing units are recognized using the percentage
of completion method of accounting.
Other revenues from management fees and rental income totaled $0.2
million with related costs of $0.9 million in the first quarter of 2001 as
compared to $0.3 million in revenues and $0.5 million in related costs in 2000.
The community residential development operations also had other operating
expenses, including salaries and benefits of personnel and other administrative
expenses, of $6.2 million during the first quarter of 2001 as compared to $3.7
million in 2000. The increase in other operating expenses is due to increases in
marketing and other administrative expenses associated with new residential
development.
Income from the Company's investment in Arvida/JMB was $4.0 million for
the first quarter of 2001, as compared to $3.2 million in 2000. During the first
quarter of 2000, the Company also had income from other joint ventures of $.2
million. The community residential development segment recorded no income from
other joint ventures in the first quarter of 2001.
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RESIDENTIAL REAL ESTATE SERVICES
(In millions)
Three months ended
March 31,
------------------
2001 2000
------ ------
Revenues $ 53.8 $ 50.9
Operating expenses 52.1 49.0
Depreciation and amortization 2.0 1.7
Other income (expense) 0.5 0.2
Pretax income from continuing operations 0.2 0.4
EBITDA, net 2.3 2.3
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.
During the first quarter of 2001, ARS began originating mortgage loans,
including underwriting and closing loans and selling them on the secondary
market. ARS also entered into a $30.0 million warehouse line of credit
secured by certain of its first and second mortgages.
Also in the first quarter of 2001, ARS expanded its integrated,
internet-based real estate services through its new Home-Link service. The new
service offers clients home-related products and services such as homeowners and
service warranties, moving services, home inspections, utility connections,
home, yard and pool maintenance.
THREE MONTHS ENDED MARCH 31
Residential real estate services revenues were $53.8 million for the
first quarter of 2001, a 6% increase over $50.9 million for the first quarter of
2000. Realty brokerage revenues in the first quarter of 2001 were attributable
to 7,059 closed units as compared to 7,100 closed units in 2000. The average
home sales price for the first quarter of 2001 increased to $213,000 as compared
to $203,000 for the first quarter of 2000.
Operating expenses were $52.1 million for the first quarter of 2001, a
6% increase over $49.0 million during the first quarter of 2000 and represent
commissions paid on real estate transactions, underwriting fees on title
policies, costs associated with processing, underwriting and secondary marketing
of mortgage loans, and administrative expenses of the ARS operations.
Contributing to the increase in the first quarter of 2001 as compared to the
first quarter of 2000 was an increase in the percentage of gross commissions
that were paid to real estate agents, an industry wide trend. Also contributing
to the increase was the commencement of mortgage underwriting and secondary
marketing activities, for which costs have already been incurred but revenue
will not be fully recognized until the second quarter of 2001.
LAND SALES
(In millions)
Three months ended
March 31,
------------------
2001 2000
------ ------
Revenues $ 17.5 $ 19.9
Operating expenses 3.1 2.1
Other income (expense) -- 0.1
Pretax income from continuing operations 14.4 17.9
EBITDA, net 14.4 17.9
14
15
During the fourth quarter of 1999, 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 can be used as large secluded home sites,
quail plantations, ranches, farms, hunting and fishing preserves and for other
recreational uses.
THREE MONTHS ENDED MARCH 31
During the first quarter of 2001, the land sales division had revenues
of $17.5 million, which represented sales of 40 parcels totaling 7,506 acres at
an average price of $2,318 per acre. Gross profit resulting from these sales
totaled $15.4 million or 88% of total revenue as compared to gross profit in the
first quarter of 2000 of $18.2 million or 91% of total revenue. During the first
quarter of 2000, the land sales division had revenues of $19.9 million, which
represented sales of 30 parcels totaling 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.
COMMERCIAL REAL ESTATE DEVELOPMENT AND SERVICES
(In millions)
Three months ended
March 31,
------------------
2001 2000
------ ------
Revenues $ 19.5 $ 48.7
Operating expenses 17.6 40.3
Depreciation and amortization 2.5 5.8
Other income (expense) (0.6) --
Pretax income from continuing operations (1.2) 2.6
EBITDA, gross 2.0 8.4
EBITDA, net 1.9 4.9
Operations of the commercial real estate development and services
segment include development of St. Joe properties ("St. Joe Commercial"),
development and management of the real estate portfolio of Flagler , the
Advantis service businesses and investments in affiliates, including the Codina
Group, Inc. ("CGI"), to develop and manage properties throughout the southeast.
Until October 9, 2000, the Company owned 54% of FLA and Flagler is the wholly
owned real estate subsidiary of FLA.
THREE MONTHS ENDED MARCH 31
Revenues generated from rental operations in the first quarter of 2001
are from St. Joe Commercial owned operating properties, while rental revenues in
the first quarter of 2000 are from both St. Joe Commercial owned operating
properties and Flagler operating properties and FLA owned rental properties.
Rental revenues in the first quarter of 2001 were $5.2 million, a decrease of
66% compared to $15.3 million recognized during the first quarter of 2000. The
decrease in rental revenues caused by the FLA spin-off was partially offset by
increased rental revenues from St. Joe Commercial owned operating properties.
Rental revenues generated by St. Joe Commercial owned operating
properties were $5.2 million during the first quarter of 2001 compared to $1.9
million in the first quarter of 2000, while operating expenses relating to these
revenues were $1.5 million and $0.5 million, respectively. Using tax-deferred
proceeds from land sales, St. Joe Commercial has acquired five commercial
properties in the Tampa-St. Petersburg, Florida area, one commercial property in
Plantation, Florida, and one commercial property in east Cobb County, Atlanta,
Georgia. As of March 31, 2001, St. Joe Commercial had interests in, either
wholly owned or through partnerships, 16 operating buildings with 2.1 million
total rentable square feet in service, compared to 10 operating buildings with
1.2 million total rentable square feet in service at March 31, 2000. The overall
occupancy rate at March 31, 2001 was 85%, compared to 63% at March 31, 2000.
Approximately 0.5 million square feet of office space is under construction as
of March 31, 2001.
15
16
Rental revenues generated by Flagler owned operating properties and FLA
rental properties during the first quarter of 2000 were $13.4 million. Operating
expenses on rental revenues, excluding depreciation were $5.0 million in the
first quarter of 2000. In the first quarter of 2000, Flagler sold real estate
properties for gross proceeds of $1.4 million with cost of sales of $0.4
million.
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.
Operating revenues generated from Advantis totaled $14.8 million during
the first quarter of 2001 compared with $15.9 million for the first quarter of
2000, a decrease of 7% due primarily to a decrease in the revenues associated
with construction contracts. This decrease was partially offset by revenue
increases in brokerage and property management. Advantis expenses were $14.5
million during the first quarter of 2001 compared with $16.7 million in 2000, a
decrease of 13%, primarily due to a decrease in construction costs associated
with lower construction volumes. Advantis' expenses include commissions paid to
brokers, property management expenses, office administration expenses and
construction costs.
The Company has investments in various real estate developments and
affiliates that are accounted for by the equity method of accounting. The
Company reported a net loss from these investments of $0.5 million in the first
quarter of 2001, compared to earnings of $0.1 million in the first quarter of
2000.
General and administrative expenses for the commercial group, which are
included in operating expenses, decreased 55% to $1.6 million for the first
quarter of 2001 from $3.3 million in the first quarter of 2000. Of total general
and administrative expenses for the first quarter of 2000, $1.7 million are St.
Joe Commercial related and $1.6 million are related to Flagler.
Depreciation and amortization decreased by $3.3 million to $2.5
million, primarily due to the FLA spin-off.
FORESTRY
(In millions)
Three months ended
March 31,
------------------
2001 2000
------ ------
Revenues $ 9.3 $ 11.8
Operating expenses 5.7 5.6
Depreciation and amortization 0.9 0.8
Other income (expense) 0.5 0.7
Pretax income from continuing operations 3.2 6.1
EBITDA, net 4.0 6.9
THREE MONTHS ENDED MARCH 31
Total revenues for the forestry segment were $9.3 million in the first
quarter of 2001, a decrease of 21% compared to $11.8 million in the first
quarter of 2000. Total sales under the Company's fiber agreement with Jefferson
Smurfit, also known as Smurfit-Stone Container Corporation, were $3.9 million
(182,000 tons) in the first quarter of 2001 as compared to $4.8 million (188,000
tons) in 2000. Sales to other customers totaled $5.1 million (231,000 tons) in
the first quarter of 2001 compared to $6.3 million (191,000 tons) in 2000. The
decrease in revenues is due to decreasing prices as a result of decreasing
demand.
Cost of sales were $5.2 million, or 56% of revenues, in 2001 as
compared to $5.0 million, or 43% of revenues, in 2000 due to the decrease in
sales of higher margin products. Other operating expenses were $.5 million in
2001 and $.6 million in 2000.
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17
TRANSPORTATION
(In millions)
Three months ended
March 31,
-------------------
2001 2000
------ ------
Revenues $ 0.5 $ 51.9
Operating expenses 0.9 37.8
Depreciation and amortization 0.4 5.0
Other income (expense) -- 2.4
Pretax income from continuing operations (0.8) 11.5
EBITDA, gross (0.4) 16.6
EBITDA, net (0.4) 9.2
THREE MONTHS ENDED MARCH 31
During the first quarter of 2001, the transportation segment is
comprised solely of the operations of ANRR. ANRR operating revenues decreased
$0.7 million to $0.5 million in the first quarter of 2001 as compared to 2000.
During the first quarter of 2000, revenues recorded by ANRR included contractual
payments from Seminole Electric Cooperative, Inc. ("Seminole"). In 1999,
Seminole filed a lawsuit to terminate shipments of coal from Port St. Joe,
Florida to Chattahoochee, Florida. ANRR subsequently filed suit to enforce the
contract and accepted a $10.0 million settlement from Seminole. 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 increased $0.2 million to $0.9 million in the
first quarter of 2001 as compared to the first quarter of 2000. The increase is
primarily due to legal expenses associated with ANRR's settlement with Seminole.
During the first quarter of 2000, the transportation segment includes
the railway, trucking and telecom operations of FLA. Total FLA transportation
operating revenues were $50.7 in the first quarter of 2000.
FLA's operating expenses were $37.1 million in the first quarter of
2000.
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 $23.09. In February 2000,
the St. Joe Board of Directors authorized a second $150 million stock repurchase
plan and the Company has purchased 4.9 million shares at an average price of
$22.35 under this program. In December 2000, the Company entered into an
agreement with the Alfred I. DuPont Testamentary Trust (the "Trust"), the
majority stockholder of the Company, and the Trust's beneficiary, the Nemours
Foundation, to participate in the St. Joe Stock Repurchase Program for a 90-day
period. As of March 31, 2001, a total of 9,520,666 shares have been repurchased
on the open market and 1,896,300 shares have been repurchased from the Trust.
The Company's goal is to repurchase, on average, over a million shares per
quarter over the next several quarters.
For the period ended March 31, 2001, cash used in operations was $24.1
million. Included in cash flows from operations were expenditures of $52.3
million relating to the community residential development segment. Cash used in
investing activities totaled $14.7 million and included proceeds from sales of
operating and investment property of $16.6 million and expenditures of $26.2
million related to commercial real estate investments. Other capital
expenditures totaled $2.7 million and represent purchases of property, plant and
equipment. Cash flows from financing activities totaled $26.8 million and
included $78.6 million in proceeds, net of repayments, from the Company's $250
million line of credit and purchases of treasury stock totaling $57.4 million.
17
18
The $250 million credit facility has an initial term of 2 years ending
on March 30, 2002. 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. At March 31, 2001, the Company was in compliance
with all covenants and restrictions related to this facility. The Company is in
the process of executing an extension of this facility to March 30, 2003.
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.
ITEM 7A. MARKET RISK
The Company's primary market risk exposure is interest rate risk
related to the Company's long-term debt. The Company's $250.0 million senior
unsecured revolving credit facility matures in March 2002. As of March 31, 2001,
$185.0 million was outstanding. 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. This loan subjects the
Company to interest rate risk relating to the change in the LIBOR rates. The
Company manages its interest rate exposure by monitoring the effects of market
changes in interest rates.
In addition, in order to minimize the Company's price risk related to
its equity securities, the Company entered into three year forward sale
contracts ("Forward Sale Contracts") in 1999 that will lead to the ultimate
disposition of the securities on October 15, 2002. The Company received
approximately $111.1 million in cash at the time of the transaction. The
agreement allows that the Company may retain an amount of the securities that
represents appreciation up to 20% of their value on October 15, 1999 should the
value increase. Conversely, if the value of the securities decreases below their
value on October 15, 1999, the Company retains no additional liability. The
Company has designated the Forward Sale Contracts as a hedge of the fair value
of the securities by fixing the fair value at inception. The changes in fair
value of the Forward Sale Contracts are recorded through the income statement,
offset by changes in fair value of the underlying securities. During the first
quarter of 2001, the value of the derivative instruments increased by $12.3
million, with $1.7 million included in other income as gain related to the time
value component of the change in fair value of the Forward Sale Contracts, which
the Company is excluding from its assessment of hedge effectiveness.
18
19
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
99.01 Supplemental Calculation of Selected Consolidated Financial
Data
(b) Reports on Form 8-K
Item 7 - Supplemental Information - February 15, 2001
Item 7 - Analyst Presentation - February 22, 2001
Item 7 - Supplemental Information - April 20, 2001
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 14, 2001 /s/ Peter S. Rummell
---------------------------------------------
Peter S. Rummell
Chairman of the Board and
Chief Executive Officer
Date: May 14, 2001 /s/ Kevin M. Twomey
---------------------------------------------
Kevin M. Twomey
President, Chief Operating Officer, and
Chief Financial Officer
Date: May 14, 2001 /s/ Janna L. Connolly
---------------------------------------------
Janna L. Connolly
Vice President, Controller
(Chief Accounting Officer)
20