St Joe Co (JOE) 2009 Q1 法說會逐字稿

Good day and welcome to the St. Joe Company first-quarter earnings release call.

This call is being recorded. Currently, all participants are in a listen-only mode. You will be given a chance later to ask questions.

At this time, I would like to turn the call over to Mr. David Childers, Vice President of Finance. Please go ahead, sir.

Good morning and welcome to the St. Joe Company conference call for 2009's first-quarter results. I am David Childers, Vice President-Finance and Investor Relations. On the call this morning are Britt Greene, our President and CEO, and our Executive Vice President and CFO, Bill McClamont.

Before we start, let me remind you that matters discussed in this conference call that are not historical facts are forward-looking statements based on our current expectations. Actual results may differ materially. Forward-looking statements are subject to certain risks and uncertainties that are described in today's earnings release and in our SEC filings. These filings are on our Web site at Joe.com.

Reconciliations of non-GAAP measures mentioned in today's call are found in the earnings release.

Bill?

Thanks, David.

This morning, we announced a net loss for the first quarter of 2009 of $11.7 million, or $0.13 per share, on revenues of $21.6 million. Our net loss includes pretax non-cash charges of $1.5 million, or $0.01 per share after tax. This compares to net income of $32.1 million, or $0.40 per share, and revenues of $116.6 million for the first quarter last year. Last year's quarter included pretax non-cash charges of $2.8 million, or $0.02 per share after tax.

There is no doubt that we are in one of the most difficult economic cycles in many decades. Although Northwest Florida's real estate markets remain challenging, our residential communities have seen a relatively modest improvement in traffic and sales activity since the end of last year with activity increasing as we move through the first quarter and into the second quarter.

The actions we have taken, such as adjusting pricing for our inventory of homes, has helped us to respond to a market that seems interested but has been on the sideline. Clearly it is too early to predict a bottom or a trend, but the compelling location of many of our communities is a big plus and still attracts a strong following.

In our commercial markets, we are also seeing measured activity throughout the region. As we have said earlier, although we expect rural land sales to be our largest contributor to revenues in 2009, we plan to sell significantly fewer acres in 2009 than in 2008 and will tap this market as needed to maintain our strong liquidity position.

At this time, we remain focused on preparing for the opportunities presented by the upcoming opening of the new Panama City-Bay County International Airport in 2010, centrally located within our key land assets. Britt will comment on these activities during his remarks.

Turning to our cost controls, we continue to emphasize the management of our operating and overhead expenses, as well as reducing, deferring or eliminating capital expenditures. As discussed on our call last quarter, we achieved great success in 2008 with our efforts to reduce SG&A expenses.

We continued to make good progress on this initiative during the first quarter of this year. During this first quarter, we incurred cash overhead costs of $17.3 million, compared to $24.4 million for the first quarter last year, a 29% reduction. We do not believe that we will achieve the same quarter-to-quarter level of improvements during the remainder of 2009, but we do expect to sustain this reduced level of cash overhead.

We also achieved significant success in reducing our capital expenditures in 2008 and have carried that success forward in the first quarter of this year. Our capital expenditures for the first quarter of this year were $5.5 million, compared to $18.2 million in the same quarter last year, a reduction of 70%.

Turning to the balance sheet, at March 31, 2009, we had cash and pledged treasury securities of $138 million, compared to debt of $49 million, $28.5 million of which is (inaudible) debt. Our $100 million line of credit remains undrawn at the quarter's end.

In light of the current economic challenges, we strengthened our liquidity position by virtually eliminating our debt, enhancing our cash position, and securing a new credit facility in early 2008. We remain committed to maintaining this strong liquidity position.

As noted in the earnings release, we renegotiated the terms of a note receivable with a builder during the quarter. The majority of our notes receivable are either from homebuilders or other entities associated with the real estate industry. Many of these industry participants have faced significant challenges during the recent economic downturn. As we move through 2009, we will closely evaluate the collectibility of these notes and the need to provide any additional allowances.

At this time, we continue to expect a tax refund which will improve our cash position and enhance our balance sheet strength. The majority of the $40.5 million income tax receivable is expected to be received before the end of the year.

Looking forward, we continue to take a very prudent approach to managing our assets. Our success in this area provides us the flexibility to execute our strategy and leverage our valuable land holdings, particularly as we anticipate the opening of the new international airport.

For an update on West Bay and the new airport, I will turn it back to Britt.

Thank you, Bill. Good morning.

We talked last quarter about the importance of connectivity in the value creation process. The new airport is a key component of our global conductivity. By combining the new airport with an underutilized, deepwater seaport, Panama City, and a rail system, Northwest Florida has the ability to connect with a global network and create the potential for a unique competitive advantage for businesses locating there. We are working with local officials to take that message worldwide to potential users and partners.

As a result of meaningful, ongoing conversations with end users, we have accelerated preconstruction development activity on 1000 acres adjacent to the new international airport scheduled to open in May 2010. The land is being planned for office, retail and industrial uses. These are world-class assets and our market outreach is to global users.

One of our key planning principles is flexibility. We want to have the ability to respond to user sizes, access and functional requirements, as well as to position ourselves for the multiplier effect we expect. In summary, we want to position these initial parcels near the airport to be revenue-ready.

We see JOE assets as a focal point of economic development for all of Northwest Florida and the adjacent southeastern states of the US. We are targeting businesses from economic clusters that are best positioned for growth as the global economy rebounds. The Gulf Coast in Northwest Florida has a long heritage in aerospace, defense and security. The Air Force, Navy and Army all have bases nearby. JOE's assets in the West Bay sector plan are providing new opportunities to significantly expand this cluster.

The work to bring additional airline service to Northwest Florida also continues. Additional air service will help reposition the region from a regional to national and international destination. Again, the key is connectivity.

The local airport authority recently selected, as the airport's master developer, Jones Lang LaSalle, the global real estate services firm specializing in commercial property management, leasing and investment. The airport authority is currently negotiating an agreement with Jones Lang based out of Chicago. This added level of talent and attention will help the new airport reach its economic potential.

The airport authority has reported that construction in the new international airport is also past the halfway point. The framing for the terminal is advancing and the control tower foundation has been completed, along with the early signs of the maintenance and fire services rescue building.

Aerial photography and the new airport under construction can be seen on the airport authority's Web site, newPCairport.com. Very visible in those aerials is what appears now as a fairly completed primary runway in its first phase, along with taxiways adjacent to it.

Last Friday, we passed another important milestone for the new international airport. The last outstanding legal challenge to the new airport construction was resolved successfully. The United States Court of Appeals for the Second Circuit in New York city denied a pending petition for review of the FAA's record of decision, approving the relocation of the airport to its new site in West Bay. In the ruling, the court upheld the FAA's process and approval of the new airport.

As Bill noted, our primary focus is preserving JOE's unique asset base while identifying and capitalizing on future growth opportunities. As we move through 2009 and this tough economic cycle, we believe it is critical that we continue to carefully manage JOE's assets and maintain our financial and operational flexibility while not losing sight of future value-creation opportunities.

We have benefited greatly from our successful cost management and asset preservation initiatives. We are helping create demand by adjusting our residential pricing to move inventory. JOE's residential communities have seen a relatively modest improvement in traffic, as Bill indicated, and sales activity since the end of the last year is measurably better.

There is no question that, at this point in the cycle, the market remains very price-sensitive, however. Because of our balance sheet strength and the accomplishments of the past year, we are able to focus on the future.

We have substantial opportunities ahead have us. Our time and energy is focused on maximizing our vast assets beyond the current economic crisis. We are eager to forge ahead, be wise and prudent with the current and great resources that we own.

With that, and I will say thank you, and we are prepared and happy to respond to your questions.

The question-and-answer session will be conducted electronically. (Operator Instructions). Buck Horne, Raymond James.

Good morning. I was just wondering. Could you remind us how many finished homes you still have in inventory, as well as your finished homes sites?

At the end of the quarter, we had 149 homes and 1,377 homes sites about.

Okay. I guess, just looking at the WaterColor development, I notice the average sales price per home right around $440,000 for I guess five home sales. I guess I'm just wondering just how many finished homes you still have at WaterColor, and if you have any expectations for average pricing for those units going forward.

Well, we currently -- we have a remainder -- let's see, we have 12 remaining completed homes. I think we are comfortable currently with our pricing in the marketplace.

Bob, those homes are all in what's called Phase IV WaterColor, which is across 395 from phases I, II, and III. Those homes had always been anticipated to be offered to consumers at a lower price point than the previous phases of WaterColor.

I got you. That's helpful.

Just one other if I could, on the rural land sales. I know it is only about 1000 acres, but you did see a nice pickup in the price per acre. I am just wondering where that was located, what kind of buyer was interested in it, and if you have any other similar type of conservation land estimates of how much additional land like that you have.

Hang on one second.

Yes, it was actually for sales, Buck, and they ranged in prices from about $2400 per acre to actually $10,000 per acre.

They were mostly over in our eastern landholdings in Leon and Wakulla County. What we've done is obviously we were targeting nonstrategic core land, and we have others that are like that in varying sizes, so certainly good pricing in the marketplace today and we do have other land that would meet or exceed those type of conditions.

All right, thank you, gentlemen.

(Operator Instructions). Sheila McGrath, KBW.

Good morning. You mentioned that you are accelerating some land development in West Bay. I was wondering if you could give us little more details on that, and what it might mean in terms of additional capital expenditures.

Well, at this point, Sheila, we've had some really I would say very good conversations with end users, both nationally and globally. We are waiting really to get through some of those, and we have identified three important parcels outside the fence at the airport that give us an opportunity to meet the different segments of users we've been talking to. The reason for the 1000 acres is to make sure we have had and ready developable sites that are big enough to meet any one of a number of users, from the smallest to the largest, being anywhere from retail/hotel opportunities up to large industrial manufacturing or supplier bases.

The other thing is some of those -- a large portion of that acreage is just outside and contiguous to the airport property. We, if you remember, have through the fence, rights to have access to taxiway and runway. So developing that and getting that property ready early is important as we talk to these users.

With regard to capital expenditure, most of this year, that effort will be really on the soft side in terms of planning, the site planning, master planning for these three distinct parcels and beyond that, also understanding our master utility service programs, road network, and through the fence security that we have to also investigate.

So a lot of soft-side, very low capital infusion. Once we have users signed up and under contract, then we would advance the capital at that point.

We are also able to piggyback a little bit on some of the airport authority's initiatives as it relates to things like bringing utility to the airport site that we will be able to draw from as we move forward with developing our sites.

Okay. In terms of those users, do you envision that it would be kind of a JV, or a ground lease, or how do you envision how you will monetize that?

I think each deal will be different, but we will certainly look at everything from ground leasing, JV, and up to actually selling, depending on the users' wants or needs. We will certainly run financial models on each of those to equate to the best opportunity for the shareholders of JOE.

So I think what you'll see is a wide range. 1000 acres typically in any market, net billable, you are going to see somewhere around 10 million square feet, plus or minus, so it's a large tract of land and can hold us for a while.

So, this 1000 acres supports 10 million square feet?

This, in typical, in a typical normal --

Right.

Yes, I mean, who knows at the end of the day? But under a basic rule of thumb, about 10,000 feet per acre.

Do you think that, the way yours is zoned, is it going to compete directly with Jones Lang and what they are developing, or is it going to be kind of different users?

No. I think the other thing -- the airport currently, in terms of what they are approved for, is really more aviation and airport-related, and we are going after a different user group. So, we don't see ourselves competing as much as complementary to each other in terms of opportunities both inside and outside the fence. So we expect that we're not going to find ourselves banging heads with each other but more talking to each other about the right way to position people who have interests in that region, the best place to put them -- because you certainly don't want to eat up the acreage with somebody that would be better inside than outside, and vice versa. So, a coordinated effort between the airport authority and St. Joe is ongoing, has been for 11 years and will continue.

You know, as Britt said, we are very pleased that the airport authority selected Jones Lang LaSalle to help bring their global outreach and create an awareness of West Bay that we think will do nothing but benefit our landholdings in the future.

Okay, great. Just quickly, Bill, on the income tax receivable, that did go up in the quarter. I was just wondering if you could explain to us the change there.

It's just a loss from the quarter being recognized on the balance sheet.

Oh, okay. So you expect that whole receivable will be monetized by year-end, or converted?

The majority of it we would expect to be monetized by year-end, yes.

Okay. I think that's -- or just quickly on primary versus resort, I understand you can't extrapolate a trend from just recent activity, but I was just wondering if you could give us a little bit more detail in terms of the developments and whether the activity is picking up at more the lower price-point developments, or if it is at the resort properties.

I would tell you we have seen a little bit of both, and certainly more so in the primary than the resort because we don't have a lot of the resort product to offer in terms of vertical. But I would tell you that most -- right now, everybody is looking for a completed more so than lot in terms of a retail buy. Builders certainly are advancing what they already had purchased from us and are seeing some what I consider decent sales of their existing inventory and moving towards construction. But it is across the board, and it's not dominant in one or the other right now.

Hopefully, we will trend and by the end of next quarter, we will have a better feel for what direction that is headed. Actually, I will take both at this time.

Okay, thank you very much.

This concludes the question-and-answer session. I would now like to turn the call over to Mr. Britt Greene, CEO.

Thank you. I appreciate everybody's questions and appreciate you listening this morning. We'll be back to you in about 90 days, hopefully, with additional good news. Thank you.

That concludes today's conference. Thank you for your participation.