St Joe Co (JOE) 2013 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by, and welcome to the St. Joe Company's first-quarter 2013 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions)

As a reminder, today's conference may be recorded. Now my pleasure to turn the floor over to Park Brady, please go ahead, sir.

Hello, everyone, and welcome to the St. Joe earnings call for the period ending March 31, 2013. I'm Park Brady and joining me on the call today is Tom Hoyer. Before we get started, Tom is going to cover the forward-looking statements. Tom?

Thanks, Park. Some of the information we will discuss in this call is forward-looking. This information includes statements that are preceded by or include the words believe, expect, intend, anticipate, will, may, could, or similar expressions. These forward-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, which documents are publicly available. Our statements are as of today, May 8, 2013. We have no obligation to update any forward-looking statements that we may make. Now I'll turn it to back over to Park for some opening comments, after which I'll review the first-quarter results. Park?

Thanks, Tom. I'd like to take this opportunity to provide some perspective on the evolving strategy of the Company. A few years ago, the Board of Directors gave us a directive to do three things. First, to stop the cash bleed and right-size the Company. The second was to develop a long-term-oriented, comprehensive corporate strategy. The third was to execute that strategy. As part of this directive, the Board emphasized the importance of taking the necessary time to ensure that each of these three elements were appropriately addressed with a constant focus on maximizing shareholder value. We've accomplished our first goal in strengthening the balance sheet and right-sizing the Company. Today, Joe is a much stronger Company with valuable assets across our 570,000 acres.

We have minimal debt outstanding, an over-funded pension plan and ample cash reserves. In our everyday business, we continue to focus on maximizing profitability across all of our operating segments. And this remains a key tenet in the development of the long-term strategy. At the present time, we are continuing to actively work on our second goal of creating our long-term corporate strategy. Given the diversity of our assets and rapid improvements across the real estate and homebuilding markets, we are carefully and prudently refining the various components of our strategy. While doing so, we've been pleased to see positive indicators in Florida's commercial and residential real estate market, and we remain very optimistic about Joe's future. Now I'll turn it back over to Tom to review our first quarter financials.

Great. Thanks, Park. As usual I'll make some brief comments about the first quarter before we open it for your questions. We reported revenue of $26.8 million in the first quarter of this year compared to $30.5 million in the first quarter of last year. We also reported a loss of $2.5 million for the first quarter for this year compared to a $900,000 loss in the first quarter of last year. The primary reason for the lower revenue and larger loss is that we had two land sales in the first quarter of last year that we did not have the benefit of this year. First, we did not sell any rural land in the first quarter this year but we did sell a $4.3 million parcel of rural land in the first quarter of last year. Second, we sold $6 million of commercial property in the first quarter of 2012 and almost no commercial property in the first quarter this year. The $6 million in sales last year included a large commercial transaction for $5.4 million dollars with a national retailer. We did, however, post revenue gains in our other businesses, particularly in the residential development business, where sales more than doubled. We're progressing as we'd hoped and replacing rural land sales with residential sales as we focus on the growth in our residential development business.

In our residential development business, the number of lots sold in the first quarter increased over 150% compared to the first quarter of last year and revenue increased 111%. Our pricing for our lots is generating larger gross margins, and that, combined with a higher volume of lots sold, contributed to positive income for our residential development business in the first quarter compared to a loss in first quarter of last year.

Another bright spot in the first quarter was our timber business, which experienced a 2% increase in revenue and a 28% increase in income. We actually shipped fewer tons of timber in the first quarter of this year compared to the first quarter of last year due to unusually rainy weather, but higher prices for both pulp and sawtimber more than offset the decline in volume and drove the increase in revenue. At the same time, cost declined, primarily because we harvested less trees, which along with the higher timber prices, led to the relatively large increase in income.

As I mentioned during our year-end earnings call, we've created a new business segment for our operations called resorts, leisure, and leasing operations. This segment includes our vacation resorts, golf clubs, and marinas, as well as the retail and commercial leasing operations. This segment represents our businesses with recurring revenue streams. The revenue in this segment was up 30% quarter-over-quarter and the net loss was lower. At the risk of stating the obvious, I should note that this segment is more subject to seasonal cycles than our other business segments and that a loss in the first quarter, or for that matter, in the last quarter of any given year is not unusual. 2013 is shaping up as another strong year as advanced bookings have been outpacing last year.

In our commercial development business, we had little activity in the first quarter this year compared to a relatively big first quarter last year. Last year we sold $6 million of commercial real estate in the first quarter, of which $5.4 million was for the sale of a site to Wal-Mart. We remain bullish on the long-term business prospects for the southeast region of the United States in general and our commercial properties in the region, in particular.

Revenue and income from rural land sales in the first quarter of this year are much lower than last year simply because we did not sell any major pieces of rural land. Just for clarity, though, we do have some land for sale on our website but it is not contiguous to our other properties and non-strategic to our Company. We may be opportunistic in selling rural land if we get a good price.

We ended the quarter with approximately $169 million in cash which is $2.6 million more than we had at the beginning of the year. Although we had net operating loss in the first quarter, deposits from summer vacationers reserving rooms and rental houses were strong enough during the first quarter that we generated positive cash flow overall. Our debt remained at $36 million, which is the same balance we had at the beginning of the year. Keep in mind that $27 million of that debt is a mortgage debt related to a commercial property that we sold several years ago. That debt has been defeased, which means that we've purchased treasury securities that, as they mature, will be sufficient to retire that debt. You can find those pledged treasury securities on the asset side of our balance sheet. The only other debt that we carry on our balance sheet is Community Development District Debt related to a couple of our projects, which we reflect temporarily on our books until the property that secures that debt is sold. The ultimate landowner, typically the homeowner, is ultimately responsible for paying this debt. Now Park would like to make some closing comments.

As a wrap up, let me reiterate that we are working diligently on the Company's strategic plan with a keen focus on maximizing shareholder value. I can tell you that this will include our residential resort communities, primary homes, and active adult markets. It will also include the Port of St. Joe, our timber assets, and our resorts and lodging business. In the meantime, we intend to take advantage of rising prices in our residential resort communities and rising demand from national and local home builders in some of our key primary residential communities. As you would expect, we are closely monitoring the ongoing price appreciation of timber assets and constantly evaluating the growing interest in timberlands. You will find more information in our earnings press release, which was released about an ago and in the 10-Q, which we'll file later tonight. Operator, let's open it up for questions.

(Operator Instructions)

Sheila McGrath, Evercore Partners.

I first had a question on the shelf registration filings. Could you just clarify the timing of that and the inclusion of Fairholme on the filing as well?

Sure. This is Tom speaking. The shelf registration we filed just recently was because we actually had the opportunity to put one up. We just got to a level in our non-affiliated market cap where we qualified as a well-known seasoned issuer, which allowed us to file what's called an automatic shelf registration. And we thought it would be prudent to take advantage of that. Most companies I've worked at have had a shelf registration and we think it's a -- just gives us optionality on down the road if we decide that we need to ever [create these] (inaudible). Fairholme asked to be part of the shelf registration. They wanted their shares to be registered. Many of you are familiar with the rules around mutual funds and the valuing of assets and mutual funds. [Then] registered shares at Fairholme [weren't] being fully valued in [their] portfolio. By registering [your] shares, they now are fully valued [and we believe] it allows them to fully value their shares. It's purely an administrative thing. Fairholme asked us to do this. We don't expect that they are going to sell their shares. We have -- they have not told us of any intention to sell their shares. That wasn't the purpose of this. It was simply an administrative thing [related to their portfolio].

Okay. Thanks, Tom. Also, could you talk about -- you did mention that pricing at some of the communities was up -- and I was just wondering if you could talk about to what magnitude maybe year-over-year the pricing at the resort versus primary and also if you could comment on the volume trends and interest from builders, give a little bit more specifics there?

I'll talk a bit about the pricing. The pricing increases -- where we are seeing the most of that is, we talked about this before, is in our resort communities. We've actually seen some pretty amazing price increases. They are anywhere from around 20% all the way up to 60% depending on the community and the lot. And the resort communities here at WaterColor, WaterSound, West Beach is where we see a lot of that activity. Pricing in our primary communities has been relatively flat year-over-year. The rising interest from national homebuilders we think is changing that. But we haven't seen that come through yet in terms of actual lot transactions.

Okay. And then on -- just if you could give us an update on your dialogues -- you've mentioned the last couple calls about looking at a bigger-scale type retirement community and I was just wondering if you had an update on progress with those discussions?

Really got no -- Sheila, this is Park -- no update on that on this call. Obviously that's part of our strategic plan, we are in that second phase that I mentioned earlier. Know that it's out there and the demographic works for us but we are still in the planning phase so we can't really say anything. Give you an update on that (inaudible).

Okay. All right. Thank you.

(Operator Instructions)

Buck Horne, Raymond James.

This is Ryan Zaborske on for Buck Horne.

Hello, Ryan.

How are you doing? So I know you guys are getting the interest from the national builders and there's a real shortage of developed lots. I know you guys have a pretty good amount of finished lots. Could you maybe just remind us how many finished lots you guys have and if you have any plans to increase spending to prepare land given the interest you are seeing?

We don't -- we haven't been talking about the inventory of finished lots that we have. It's not information that we've been giving out. We do have an inventory, obviously. The interest we are getting from homebuilders in our properties is for a lot of our primary residential properties. It's been very strong. We are in the process of talking with these builders right now and it will start showing up hopefully in our earnings here in -- later on this year and early next year.

Okay. So any plans to increase preparing lots -- increase spending there for any--

Ryan, each project is different and where the demand is, we'll move capital around to do that and obviously with the demand happening that's part of the consideration of what we are doing this year.

Yes, and a few quarter ago, you said you were trying to meter your lot sales in an effort to maximize price, would you still say you are trying to go with that route and just maximize the highest value you can get? Or are you trying to do more bulk deals? Hello?

Are you there? Can you hear me?

Yes.

Okay. It surprised all of us. And because of that, we are very closely monitoring how much we are letting go out the door at what price.

Okay and then one last thing. Could you help us quantify the impact of the earlier spring break -- that had on the resort business?

I don't have an exact number for you on that. It's a little hard to quantify just from a specific number standpoint. We had a couple of days in the first quarter of this year that we did not have last year. And I don't know if -- I can't really equate that into a percentage increase. We just know it was an impact to the first quarter, a positive impact to the first quarter.

Okay. Thank you very much.

Aaron Scully, Janus.

So the resorts, you guys had a lot of success there, 30% growth, and one of the things you said was the vacation rental business. I was wondering how much of that growth was driven by that specific business and then how substantial, as you look out in the future, could this be as you start to expand that business across the Panhandle? Hello?

One moment.

Lose somebody here?

Proceed. We couldn't hear you for a second, sir.

Okay, so Aaron--

Yes, sorry, I don't know if you heard my question, the question was about the resort business?

We heard the entire question, so--

Okay.

It's that we see the vacation rental business as an opportunity for us. We have been in that business and understand the opportunity. We intend to expand it -- the -- but again, that's part of the planning process and we will share that when we have our plan done.

Okay. Thanks.

(Operator Instructions)

Sheila McGrath, Evercore Partners.

All right. Yes, Park, I was wondering if you could give us an update on progress at the Port? Are there any new developments there, anything in terms of -- from the state funding infrastructure there?

[The state] has funded monies to fix the railroad going there -- [is that] we are in the process of talking with the state about [calsing] (inaudible) is that we hope to have some additional users before the end of the year and we feel very good about the potential activity and all the interest that there is in the Port.

Okay. Thank you.

Thank you. And presenters, at this time, I'm showing no additional questioners on the phone queue.

Okay, so it sounds like we've answered all the questions. I want to thank everyone for listening today. We will talk to you again at our next earnings call, which will be the beginning of August to talk about our second-quarter earnings. Thanks again and have a great day.

Thank you, gentlemen. Again, ladies and gentlemen, that does conclude today's conference. Thank you for your participation and have a wonderful day. Attendees, you may disconnect at this time.