St Joe Co (JOE) 2012 Q2 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Q2 2012 earnings conference call. At this time all participants are on a listen-only mode. Later we will conduct a question and answer session, and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Hoyer. Mr. Hoyer, you may begin.

Thank you. Hello everyone, and welcome to the St. Joe earnings call for the period ending June 30th, 2012 . My name is Tom Hoyer, I am the Chief Financial Officer at St. Joe, and I will be the sole representative from the Company conducting the call today.

Some of the information we will discuss in this call is forward-looking. This information includes statements that are proceeded by or include the words, believe, expect, intend, anticipate, will, may, could, or similar expressions. Theseforward-looking statements may be affected by the risks and uncertainties in our business, and actual results may differ materially from the forward-looking statements. Everything we say here today is qualified in its entirety by cautionary statements and risk factors set forth in this afternoon's press release, and our SEC filings, including our Annual Report on Form 10-K filed with the SEC on February 27. 2012, which documents are publicly available. Our statements are of today August 2, 2012, and we have no obligation to update any forward-looking statements we may make.

Let me take a moment to explain our approach to Investor Relations. We are reinstituting a quarterly earnings call on which I will provide brief comments, and then allow pre qualified analysts to ask questions. We are running with a lean management team here, so to save time and make it easier to comply with regulation FD, we are no longer meeting with analysts and investors between the quarterly earnings announcements. These quarterly earnings calls like this one today will be your main opportunity to take questions. I will for a period of 10 days after the call, take phone calls to clarify statements made on today's call, but won't be answering additional questions or adding information to what was said on today's call.

Let's move on to second quarter results. Compared to the second quarter of last year, our situation has certainly improved. Revenue was higher in the second quarter of this year compared to the second quarter of last year, and we generated positive cash flow in the quarter just ended. We are encouraged by the trends that we see developing in our businesses. Revenue in the second quarter increased to $30.4 million compared to $25.3 million in the second quarter of 2011, which is about a 20% increase. For the six months ended June 30, 2012 the Company reported $60.9 million in revenue compared to about $90.87 million for the first six months of last year. If we adjust for a one-time timber deed that was executed in the first half of last year for the amount of $54.5 million. I can tell you that on a proforma basis revenue increased for the first half of the year from $44.2 million to $60.9 million.

Several things have contributed to the improvement of revenues in the second quarter. The sale of residential units increased 68% quarter-over-quarter, and the associated revenue grew 50% for the same periods. Sales of home sitesincreased in all of our communities. Sales in primary communities, such as RiverTown and Breakfast Point grew at a faster pace than sales in the resort communities, such as WaterColor. Price points in our primary communities are lower than the price points in our resort communities, which is whythe percentage increase in home sites sold is greater than the percentage of revenue growth. While we are on the topic of real estate sales, let me also note that the sale of real estate and the Company's commercial and rural land businesses was relatively unchanged in this quarter compared to the second quarter of last year. Our Forestry business was also a contributor to improvement in the revenue in the second quarter. We harvested 23% more tons of timber in the second quarter of 2012 compared to the second quarter 2011 . We were able to do this for several reasons.

First land that had been previously restricted from residential and commercial development was opened to timber operations. Second, we stepped up investment in basic infrastructure, things like roads and bridges which gave us better and more consistent access to our timber. Third, we removed restrictions on our harvest operations, such as the ban to harvesting up to roadsides, which has allowed us to reap more tons per acre. Fourth, we invested in new forest management software that allows us to plan with more clarity. All ofthese things made us more efficient and productive, which in turn increased the tons of timber harvested this quarter.

The other contributor to higher revenue in the second quarter is our resorts and clubs business, which includes The WaterColor Inn, vacation rentals, golf clubs, and marinas. All of those businessesshowed improvement compared to the second quarter of last year, but the Inn and vacations rentals business in particular showed strength this year, as both were experiencing a strong summer season. Both occupancy and rates have improved compared to the second quarter of last year. Net income for second quarter 2012 was $0.2 million compared to a net loss of $13.3 million in the second quarter of 2011.

The revenue increases that I just spoke about were part of the improvement in net income with the majority of improvements came from lower overhead costs in the form of reduced restructuring costs, lower professional fees, and lower pension expense, and less rent cost compared to last year's second quarter. We also bookeda gain in the second quarter 2012 related to payments received for a deepwater Horizon complaint. Year-to-date we have increased cash by $7.5 million, but you can't really extrapolate that into a trend, because we still have property taxes and capital expenditures to fund in the second half of the year. We expect to end the year around breakeven on cash flow, give or take a couple of million dollars, depending on how fast we invest in certain projects.

We ended the quarter with approximately $170 million in cash. We believe that we have a strong balance sheet, and a stable business that will give us time to develop the future of the Company. Although we have been operating with a sense of urgency, we are not rushing into projects ahead of their time. We are testing assets for different ideas. You will know from us when those ideas crystallize into meaningful projects. You will find more information in our press release which was released about an hour ago, and in our 10-Q, which will be filed tomorrow. I will now turn it over to the operator for questions..

(Operator Instructions). Our first question comes from Buck Horne with Raymond James.

On behalf of all investors, the institution of the conference calls here, I guess I do have to lead off, I have got a list of questions. I justwant to ask is there a reason Park is opting not to join us on this conference call, and why he thinks it is not really a good idea to address some of the investors questions?

This was a discussion we have with our Board of Directors and the management team here. As you know, we are running with a pretty lean group here, and we decided to reinstitute these calls. We didn't want to engage the whole management team in the preparation and the conduct of these calls. So ultimately we decided it would be my responsibility going forward. Mostly just a focus thing. We don't have a Chief Operating Officer, we don't have a Treasurer, or an Investor Relations person, so we are trying to keep our management team focused on the things that we are trying to do to assess our projects, assess our assets, and build value there.

Okay. Let me ask you a few questions. Let me start fairly broadly then. I think a lot of investors really just understand, number one, you have accomplished a very important part of your mission already, which was to stop the bleeding, and obviously you have identified you are going to strategically invest in a few projects here. Can you give us a sense of the broader goals and vision for St. Joe and this asset base now, and I guess that is two points. One, how do you want to articulate to the residents of the region and your commercial partners what St. Joe's identity is going to be going forward, and I guess to investors, what do you tell them, or how do you want to articulate to them what you are going to do to maximize the present value of cash flows that these assets represent now?

Sure. Let me start off by saying that we are still working on articulating what we will say to partners and to investors as we go forward here. I can tell you the core of the strategy right now is, we are going to make the most of the assets that we have here in Florida. Focus on Florida. We are going to focus on Florida, we are going to focus on residential and commercial, with that means is we will look for pockets of activity where we can leverage certain projects. Some places are much more active than others. We are going to try to take advantage of demographic trends. The boomer trends, themulti-family housing trend, and see which of our assets we can leverage into those trends. We have a Port, which is a very unique asset. It doesn't fall into any simple bucket, but it is a great tremendous asset. We are talking with some people who are much more expert in port and port operations than we are. We are trying to figure out who would go there, what kind of businesses would be there, what they are willing to pay to be there, and we are really just in the beginning stages of that.

And of course, we have our timber and resorts operations. Timber operation has been a backload and main stay of this business for many years, and certainly the last few years, and the resorts business, we have actually turned around. It is now a profit-generating business for us. Growth going forward I expect the growth is going to come through the residential and commercial development, and to a lesser degree retail and commercial leasing. That is how we are proceeding forward right now. Our vision for the Company is still crystallizing for us, but we have got a great canvas here to work with. That the plan going forward right now.

Let me ask one more, and then I will jump in the queue, and let someone else jump in. Just one on Pier Park North, itlooks like [Glemshire], decided to walk away from Pier Park, and I was just wondering if you could comment at all on why they felt it was best to cut their losses there, and do you think you will be able to find a new retail partner at Pier Park pretty soon?

Our understanding with Glemshire is that they have pulled out of development altogether, it was not just Pier Park but it was all of the developments. They are just going out and going to purchase assets, and run them. At least that is what they communicated to us. We think that project is a pretty good project, and we are very close to bringing in a replacement for Glemshire on there. And actually on terms that we think may be better all around for us. We are not abandoning that project. We think it is a great project, and we should be probably making an announcement here in the not-to0-distant future about what we are going to do with that.

Thanks, Tom. I will jump back in the queue later.

(Operator Instructions). Okay, and I am seeing Buck Horne again.

Got you to myself. I will just go down my list then.

Please do.

Can you give us an update on Venture Crossings, in terms of the airport project what you are working on right now. Are you finding any interest in terms of someone wanting to access your through the fence rights at Venture Crossings, and what type of potential tenants are you getting the most interest from right now?

Sure, you know that we signed a lease with ITT there, and they are actually going to be occupying that building within the next couple months or so. ITT represents the kinds of companies that show interest out there. They are technology, industrial technology, or I am sorry, industrial military kinds of companies. We have some moderate interest in the space out there in the acres that we have out there. That is going to be a slow build for us. The success of that project really depends on the strength of the economy, the Southeast, the businesses in the Southeast. People wanting to expand into a place like Venture Crossings. We haven't had any interest that I am aware of for through the fence access, but we do know of some opportunities where that might be helpful for us in attracting tenants here. So Venture Crossings, I think it is off to a good start. But I think it's going to be a little slower growth than probably what people here previously thought it would be.

Okay. And can we talk a little bit more about Port St. Joe. I know you guys are talking to the experts and trying to get a feel what you can do. Based on those initial conversations, do you have an idea what kind of infrastructure investment would need to be made and ultimately what you think that Port can become, given its size and location?

We compare a lot to a Port over in Louisiana. Port Fourchon, I think that is how you pronounce it. That would be a good proxy for what we think that port might be but that is just one aspect of it. That is just us thinking about it, that is not the experts telling us that is what it is going to be, so we are still in the discovery phase with that. Because we are still in the discovery phase, I really can't answer your question on how much or what we would install there at the Port. What I can tell you is to whatever extent investment goes into the Port, it is not going to be all St. Joe money. We believe that we would have access to public sector funds. We think there is private sector funding that would be available for this, and then the money we would put in. It is kind of consistent with our approach that we are taking now. We are not going to put a lot of infrastructure money in there, until we have a pretty good idea of who is going to be there and what they are going to pay us to be there.

Okay. Switch gears on you a little bit. Are you seeing anything changes to Southwest air service schedule at the airport, following the termination of the backstop agreement. Or are they increasing or decreasing frequencies?

They have actually been, what they did is they had a couple of routes that were doing very well for them, and they have added flights to those. Routes from Houston, for example, the added routes from St. Louis, who has actually been doing very well. And what they are going to take away is a couple of routes that were not doing so well for them, connections through Orlando, and maybe just Orlando. Overall because the flights that they are taking away carry less passengers than the ones that they are adding, overall we expect the passenger traffic to actually increase at the airport over the next year.

Okay. And can I get your sense or take your temperature of the residential housing market in northwest Florida these days? I was up there earlier this spring and saw a lot more new construction underway than I had seen in years, and I am just wondering has that kind of continued in terms of new demand, or are we seeing just really primarily demand for vacation homes in the region, or are you seeing more primary residences getting, starting to accelerate?

We are seeing both, the primary is increasing which is doing well. DR Horton is doing well here. The vacation homes, we are seeing demand there as well, but prices are increasing there as well. All ofthe activity that you saw when you were here is continuing probably even more so than when you were here, vacation properties right along the coast here. IT is actually pretty nice. Kind of exciting to be driving up and down the road seeing all of the construction activity going on around here.

Okay. And just I think you mentioned you are going to be cash flow breakeven by this year. What does that imply for CapEx spending this year?

I think we will probably be around, hold on just a second. Right around about $32 million to $33 million in capital expenditures for this year.

Okay. Would we be looking at a similar number for next year?

I actually think it would be less for next year. We are not finished with our planning, I am not going to give you a specific number. I am not going to give you guidance. A lot of the CapEx this year was finishing out some work at a couple of projects that felt that we should finish out, that if we had been here when they were started, we probably wouldn't have started in the first place. Probably next year, we will see less CapEx next year.

Okay. I would assume the last reference might be or at least in reference to RiverTown. What is the longer term plan for RiverTown?

Right now RiverTown is actually, the business is picking up there. We did finish the amenities down there, we are putting in a new entrance. We think that finishing the amenities is helping unit sells there. We think finishing the entry will help it even more. The market there seems to be picking up. RiverTown has a lot of good things going for it actually. It is in a very good school district. It is a little far away from Jacksonville. But it is along the river there, it is a very beautiful site. So the long term right now is just to hold and market, and see what comes out of it.

And my last one is on the oil spill claims. You got $1 million this quarter. How much more are you guys pursuing in terms of potential claims, and is there any idea when we could expect some resolution on those claims?

Sure, we filed the first claims with the Gulf Coast Claims facility, mostly related to our resorts and clubs business, because that is what that fund was really kind of geared towards. And we have collected about $1.7 millionagainst our claims on that. Our claim is still open on that. It is transferred now over to this multi district litigation venue, which is basically a court process in Louisiana. And in addition to that claim, we are going to file additional claims. We have been working on that here this summer. We have not finalized the claim. I can't really tell you what it is. Unfortunately I can't really tell you when we expect it to be resolved. It is kind of open ended for us right now.

Alright. Well, that is my list. Hopefully someone else is back in the queue now. I will drop off now. Thanks.

Alright, thanks Buck.

(Operator Instructions). Okay. I am showing no further questions.

Thank you, Kay. Thank you everybody. We will talk again the first week of November when we discuss third quarter results. Have a great day.