St Joe Co (JOE) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to The St. Joe Company quarter three, 2013 earnings conference call. (Operator Instructions). I would now like to introduce your host for today's conference Mr. Park Brady. You may begin.

Thank you. Sorry , everyone. We had a little technical glitch there in the beginning. So sorry to keep you waiting and listening to the music. I would like to say hello to everyone , and welcome you to the St. Joe earnings call for the period ending September 30, 2013. I am Park Brady and joining me on the call is Marek Bakun, our new CFO. Before we get started Marek will cover the forward-looking statements. Marek?

Thank you, Park. Some of the information we will discuss on this call is forward-looking. The 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 of 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 morning's press release and our SEC filings, which documents are publicly available. Our statements are as of today, November 7, 2013. We have no obligation to update any forward-looking statements we may make.

Now I will turn it back over to Park for some opening comments after which I will review the third quarter results.

Thank you, Marek . I would like to start with a brief comment that will provide some context to our discussion today. In our 8-K file this morning we announced that we entered into an agreement to sell approximately 383,000 acres of our timberlands. With this sale of non strategic land it leaves us with approximately 180,000 acres of core real estate in northwest Florida as well as an addition 4,000 plus acres in the remaining Florida areas. It is a strong step forward in the development of our strategy. The closing of the transaction is subject to a number of conditions including the approval by the Company's shareholders.

Based on the terms, we expect the closings to occur in the first half of 2014. This transaction will help the Company concentrate on its core business activity of real estate development in northwest Florida. The proceeds from the sale will provide the Company with significant liquidity and numerous opportunities to create long-term value for our shareholders. The form 8-K provides a copy of the agreement and a summary of the material terms. In addition we will be shortly be filing a preliminary and then definitive proxy statement with the SEC that will provide additional information regarding this proposed transaction. It will be important for all shareholders to read this definitive document.

I will turn it back over to Marek for a review of our third quarter financials.

I will make some brief comments about the third quarter results before we open up for your questions . We reported revenue of $36.8 million in the third quarter of this year, compared to $55.9 million in the third quarter of last year. Of the $55.9 million in third quarter 2012 revenue $18.9 million came from rural land sales primarily from two transactions. Excluding rural land sales the revenue for the third quarter of last year was approximately $37 million.

Net income for third quarter was $4.2 million or $0.05 per share, compared to $15.3 million or $0.17 per share in the third quarter of last year. As with revenue , rural land sales in the third quarter of 2012 accounted for $14.7 million of the $15.3 million in net income. As such, the net income for the third quarter of 2012 was $0.6 million excluding the rural land transactions.

In our residential real estate businesses the number of lots sold in the third quarter increased as compared to prior year. The increase was a result of 62 lot transaction in a Water Sound community. The net income for the segment was $2.4 million compared to net loss in the third quarter of last year of $0.6 million.

The Resorts, Leisure and Leasing operations had a strong third quarter. This segment is comprised of all their recurring revenue streams including vacations resorts, golf clubs and marines as well as the retail and commercial leasing operations. Revenue in this segment which included $2.1 million in sales of specific operating properties in the third quarter was up 30%, as compared to third quarter of last year. Of the 30% increase approximately half came from the asset sale. The remaining 15% increase was related to revenue from the increased number of homes in our vacation rental program, higher average room rates and positive impact of our commercial leases.

Our Timber segment revenue decreased by $1.9 million in the third quarter of this year compared to the third quarter of last year. The volume of timber delivered was down by approximately 100,000 tons as result of unusually high amounts of rain over the summer months which impacted the harvesting. Although the volume was down by 27%, the average price per ton was up 9%.

Net income for forestry segment was $2.8 million, compared to net income of $3.7 million in the third quarter of last year.

Commercial and rural land revenue were minimal in the third quarter as compared to $22.5 million in the third quarter of last year. As stated earlier, two specific transactions made up the majority of that revenue.

We ended the quarter with approximately $23 million in cash and $146 million in investments for a total of approximately $169 million in liquid investments. Our debt remained flat at $38 million over the past year.

Now Park would like to make some closing comments.

As a wrap up I can tell you that we are pleased with the quarter. The increased occupancy rates in our vacation rental program as well as the progress made on our overall cost management and the impact it is having on our bottom line. As announced last quarter we are continuing the slow political process of entitling our active adult project. You will find more information in our earnings release which was released earlier today and in our 10-Q which we are filing probably as we speak.

And for the timberland transaction we know the first thing everyone will ask is, what will Joe do with the money. This is a real estate transaction, and it is not closed yet. This is not the time to have that discussion. After this deal is closed, the Board and management will work together to explore a full spectrum of options. As we have said in the past we are taking our time, and we will keep you posted as we make progress.

Operator, let open it up for questions.

Thank you. (Operator Instructions). Our first question comes from Ms. Sheila McGrath with Evercore. Your line is now open.

Park, I was wondering if you can talk about how we should think about tax implications of the potential sale? Are you able to use any deferred tax asset or NOL to offset potential tax liability?

We have some tax NOLs that we can use, but, Sheila , if you will look at and spend some time, I know the 8-K was a little long because the contract is in there, you will see that we have a provision there which allows us to chose a installment sale if we wish.

Okay. And then the land you are selling I'm just trying to figure out, did that also include the acreage that you pre sold Timber Harvest on? Is that in this transaction?

Yes, it also included the [Timber D] property.

Okay. Sorry about that. And then could you just give us a little color on terms of how long this process took, were there many bidders or a little more detail on that?

Sheila, we announced in our 8-K back in the spring that we were exploring this option. We worked with numerous potential buyers on this transaction. And we are happy with the pricing of the transaction.

Okay. And last question, in the earnings release you mentioned in the resort segment that there were sale of operating properties. Could you discuss what exactly you sold?

Yes, it was one commercial property that was sold for about $1.9 million.

It was a [Hardees] that we had done a Build to Suit on, Sheila.

Okay.

It wasn't any of the resorts operations. It is just that it is in that segment because they operate the businesses.

Okay. All right. Thank as lot.

Thank you. (Operator Instructions). Our next question comes from Mr. Buck Horne. Your line is open.

Good afternoon, guys. Park, I'm a little confused why you think now is not a good time to discuss what St. Joe would like to do with the cash from the potential timber transaction. How would you answer shareholders when they want to understand what the plans are before they approve the transaction? Can we discuss what the intent of the cash is to do whether it is buy backs or dividend or reinvestment in the active adult project?

This is real state transaction and as I said it is not closed yet. And because of that we don't have any plans for the cash at present. We are going to work on that, and management and the Board will get together and decide. What this does is, it gives us a strong balance sheet, it gives us a lots of flexibility. This is land that we are selling at a price that we are happy with , and land that will have no development potential for us for generations to come. So we are not prepared to discuss what we are going to do with the cash yet.

Okay. Let's talk about potentially post deal, we will have about 184,000 acres . Can you help us determine how St. Joe now categorizes the different buckets of land in the remaining portfolio in terms of what is entitle residential acreage, commercial, unentitled, kind of higher and better use land and what you need to set aside for future mitigation or conservation efforts? Can you give us a little bit of flavor on the updated land use analysis?

First of all, let me put 184,000 acres in perspective. It is 287 square miles. It is four times the size of the Miami/ Ft. Lauderdale. It is over twice the size of the Atlanta region. So it is a very large piece of land that we still have. We spent a lot of time in the last two years working on the highest and best value on each of the individual parcels in this remaining acreage. We feel we have an excellent grasp of the best value propisition for each piece. As an example we are in the process of entitling 110,000 acres next to the Panama City Airport for a very large adult oriented community.

We still have a large commercial area adjacent to the airport as well as thousands of other core development acres in northwest Florida , that we feel have great potential for our core business of real estate development. In addition to the development land , we are continuing to grow our resorts and lodging business and we are working on getting the Port operational. This sale allows us to concentrate on each of these.

Okay. One more quick one if I can. Speaking of the Port, can we get a quick update on where we are with that with engineering reports, anything on the next step? Do we have a time line for dredging the Port in hand?

Remember it is a federally permitted Port , so it can be dredged once the funds are found to do that. We are in the process now. We have already started and funded the engineering process. It will take us a few months to get that done. From that we will actually know what the cost of the dredging is going to be. As we have announced , we have two letters of intent for users of the Port. We continue to constantly talk with other people who are interested in that Port facility. The secret is going to be getting it dredged. It is actually usable today. We have a user there in place, but the key is going to be getting the dredging done.

Okay. I will jump back in the queue. Thank you.

Thank you. (Operator Instructions). Our next question comes from Mr. Aaron Scully with Janus. Your line is now open.

Hi , guys. Just a quick question on the tax strategy you have , looking at receiving cash in installments. What are the attributes of receiving the proceeds in installment?

Go ahead, Marek.

As we disclosed in the 8-K and the supporting contract, we do have the flexibility to get cash on installment sale. We are evaluating our options and plan to make the decision the most advantageous way for the Company taking into consideration both costs and benefits of any structure.

It is very complicated , Aaron, the installment process, and it addressed in the contract , our ability to chose to do it or not to do it. I do not think this is a place to get into that much of a detail.

That is fair. I guess just curious on the duration, and apologies if it says it in there, but I think we have talked in the past about maybe 10 years, 15 years. How long potentially could it be that you would see these installments?

What we have learned is that installment sales can go from 10 years to 30 years, so I think 15 years is a good expectation.

Okay. That is helpful. And I appreciate that you do not want to get into too much detail on potential impact if you do see this deal go through. But theoretically let's assume that the deal goes through, does that sale alter or accelerate your strategy in terms of your other growth strategies for the Company?

What it does is it clears the way for us to concentrate on those things that we had started on. We have said we have been working on our strategy, and we are taking our time do it. What this does is allow a lot more flexibility to concentrate on the remaining pieces of Joe.

Great. One last question from me. I know in terms of residential development it may have slowed a bit in terms of the CFO transition , and I know at times sales bulk lot sales where something that would be considered potentially but I think you wanted Marek in place. Just curious on how you think about residential sales and bulk lot sales going forward? Should we expect a re-acceleration there?

We just opened up Water Sound North and made it available. We held that in advance because we were looking at it as being part of the adult community, but we have now put it out as a conventional product so we see that accelerating. That was part of the 62 lot sale that Marek mentioned. We are seeing Breakfast Point a lot of interest there. It continues to move, RiverTown. Yes, we will continue . We will still have many acres that we can continue on in the residential single family lot development.

Great. Thanks, appreciate it.

Thank you. And our next question comes from Mr. Buck Horne with Raymond James. Your line is now open.

Thanks. Just a quick follow onto that. I was wondering can we get a little additional color on how traffic or activity is in terms of demand or pricing for the primary communities; the Breakfast Point and RiverTown projects or anything else relative to the resort communities? How is demand holding up and interest level in future lot sales for the primary versus resort type communities?

In the primary communities we have seen the same philosophy that we have experienced over the last year, is that we have seen no change. In the resort development pieces that has surprised us about how fast that is going. Our inventory in the resort developments that you have visited and seen here are going much faster than we thought. Maybe what we need to do is Marek and I will work together to provide you some additional color the next time around.

Okay. That would be great if we could get a little bit more detail on what is selling and what the pricing trends are looking like in these communities. And the last one I have is just understanding any signs of life for potential commercial activity whether it is interest in retail, hospitality, office type product? Any life in the Commerce Park right now?

No, that is business as usual for us. It still hasn't come back. Our Pier Park project is doing well. It is leased out above expectations, and we feel that one is going to be a really good one for us. But in the Commerce Park the activity has been slow.

Okay, perfect. Thanks, guys.

Thank you. (Operator Instructions). At this time I am not showing any further questions. Please proceed with any further remarks.

I don't think we had any other remarks. It sounds like we answered all the questions. We want to thank everybody for participating in the call. And Marek will be available for questions by phone for the next two weeks regarding the documents that are put out. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.