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| JOE > SEC Filings for JOE > Form 10-Q on 3-Aug-2012 | All Recent SEC Filings |
3-Aug-2012
Quarterly Report
Overview
We own land, timber and resort assets located primarily in Northwest Florida and in and around the Jacksonville and Tallahassee regions of North Florida. We seek higher and better uses for our assets, which includes a range of activities from forestry to strategic land planning and development, infrastructure improvements and promoting economic development in the region where we operate.
We have four operating segments: residential real estate, commercial real estate, rural land sales and forestry. The table below sets forth the relative contribution of these operating segments to our consolidated operating revenues:
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
Segment Operating Revenue:
Residential real estate 64.4 % 65.0 % 49.4 % 24.5 %
Commercial real estate 2.9 % 2.4 % 11.7 % 0.9 %
Rural land sales 0.7 % 0.3 % 7.4 % 2.9 %
Forestry 32.0 % 32.3 % 31.5 % 71.7 %
Total 100.0 % 100.0 % 100.0 % 100.0 %
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Our operations continued to be adversely affected during the first six months of 2012 by the national real estate downturn, slow economic recovery and other adverse market conditions. This challenging environment has exerted negative pressure on the demand for real estate in our region.
We believe that the large oil spill in the Gulf of Mexico from the Deepwater Horizon incident had a negative impact on our properties, results of operations and stock price and has created uncertainty about the future of the Gulf Coast region. We have filed lawsuits and claims seeking the recovery of damages against parties we believe are responsible for the oil spill and, in April and May 2012, we received payments of $0.6 million and $1.1 million, respectively, from the Gulf Coast Claims Facility. We cannot be certain, however, of the amount of any further recovery or the ultimate success of our claims.
Residential Real Estate
Our residential real estate segment typically plans and develops mixed-use resort, primary and seasonal residential communities of various sizes, primarily on our existing land. This segment also includes our resort and club operations, the purpose of which is to enhance and promote the desirability of our residential real estate. We own large tracts of land in Northwest Florida, including significant Gulf of Mexico beach frontage and waterfront properties, and land in and around Jacksonville and Tallahassee.
Our residential real estate segment generates revenues from:
• the sale of developed homesites;
• the sale of parcels of entitled, undeveloped lots;
• the sale of housing units built by us or with partners;
• resort and club operations;
• rental income; and
• fees on transactions.
Our residential real estate segment incurs cost of revenues from:
• costs directly associated with the land, development and construction of real estate sold, indirect costs such as development overhead, project administration, warranty, and selling costs;
• resort and club personnel costs, cost of goods sold, and management fees paid to third party managers;
• operating expenses of rental properties; and
• brokerage fees.
Commercial Real Estate
Our commercial real estate segment plans, develops and entitles our land holdings for a broad range of retail, office, hotel, industrial and multi-family uses. We sell and develop commercial land and provide development opportunities for national and regional retailers as well as strategic partners in Northwest Florida. We also offer land for commercial and light industrial uses within large and small-scale commerce parks, as well as for a wide range of multi-family rental projects. Our commercial real estate segment generates revenues from the sale or lease of developed and undeveloped land for retail, multi-family, office, hotel and industrial uses and rental income. Our commercial real estate segment incurs costs of revenues from costs directly associated with the land, development costs and selling costs and operating costs of rental properties.
Rural Land Sales
Our rural land sales segment markets and sells tracts of land of varying sizes for rural recreational, conservation and timberland uses. The land segment prepares land for sale for these uses through harvesting, thinning and other silviculture practices, and in some cases, limited infrastructure development. Our rural land sales segment generates revenues from the sale of undeveloped land, land with limited development, and easements and mitigation bank credits. Our rural land segment incurs costs of revenue from the cost of land sold, minimal development costs and selling costs.
In recent years, our revenue from rural land sales has significantly decreased as a result of our decision to focus our rural land sales on non-strategic parcels and to principally use our rural land resources to create sources of recurring revenue as well as from declines in demand for rural land due to difficult current market conditions. We may, however, rely on rural land sales as a source of revenues and cash in the future.
Forestry
Our forestry segment focuses on the management and harvesting of our extensive timber holdings. We grow, harvest and sell sawtimber, wood fiber and forest products and provide land management services for conservation properties. Our forestry segment generates revenues from the sale of wood fiber, sawtimber, standing timber and forest products and conservation land management services. Our forestry segment incurs costs of revenues from internal costs of forestry management, external logging costs, and property taxes.
New Real Estate Investment Strategy
On January 25, 2012, we adopted a new real estate investment strategy, which is focused on reducing future capital outlays and employing new risk-adjusted investment return criteria for evaluating our properties and future investments in such properties. Pursuant to this new strategy, we intend to significantly reduce planned future capital expenditures for infrastructure, amenities and master planned community development and reposition assets to encourage increased absorption of properties in their respective markets. As part of this repositioning, we expect properties may be sold in bulk in undeveloped or developed parcels, or at lower price points and over shorter time periods. We anticipate that the amount of future capital expenditures associated with existing projects will be reduced by approximately $190 million, the majority of which was expected to be spent in the next 10 years. We believe this new investment strategy continues to build upon the successful cost reduction initiatives implemented in 2011 and positions us to i) increase our short and medium-term cash flow, ii) reduce our long-term risk and iii) maintain the strong cash position necessary to best exploit our substantial land resources. Additionally, reducing capital expenditures on existing projects will allow us to focus on opportunities that meet our new investment criteria.
Operational Developments for the first six months of 2012:
• Leased 20 acres of the Port St. Joe facility to a regional ship builder; the commencement of rent is contingent upon the Company's performance of certain requirements under the agreement, which are expected to occur in the fall of 2012;
• Continued construction of build-to-suit facility for a subsidiary of ITT Corporation at the VentureCrossings site; construction is expected to be completed in the fall of 2012 and rent is scheduled to commence four months thereafter;
• Recognition of a $1.7 million gain related to our claims stemming from the Deepwater Horizon Oil Spill;
• Operating expenses declined $32.9 million as compared to the first six months of 2011 as a result of a reduction in staff, lower legal fees, decreased pension charges, declining restructuring and severance costs, and reduced stock-based compensation charges;
• Closed three commercial property sales in Northwest Florida, consisting of 21.0 acres, for an aggregate of $6.6 million; and
• Completion of a quick-serve restaurant site, generating long-term lease income.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We base these estimates on historical experience, available current market information and on various other assumptions that management believes are reasonable under the circumstances. Additionally we evaluate the results of these estimates on an on-going basis. Management's estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and our accounting estimates are subject to change.
The critical accounting policies that we believe reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements are set forth in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2011. There have been no significant changes in these policies during the first six months of 2012, however there is no assurance that these policies will not change in the future.
Recently Issued Accounting Standards
See Note 1 to our unaudited consolidated financial statements included in this report for recently issued accounting standards, including the expected dates of adoption and estimated effects on our consolidated financial statements.
Seasonality
Our real estate business and our Northwest Florida residential resort and club communities are affected by seasonal fluctuations, with the spring and summer months traditionally being the most active time of year for customer traffic and sales.
Results of Operations
Consolidated Results
Revenues and expenses. The following table sets forth a comparison of revenues
and certain expenses of our operations for the three and six months ended
June 30, 2012 and 2011:
Three Months Ended June 30, Six Months Ended June 30,
% %
2012 2011 Difference Change 2012 2011 Difference Change
Revenues: (in millions) (in millions)
Real estate sales $ 5.0 $ 3.5 $ 1.5 42.9 % $ 19.0 $ 8.7 $ 10.3 118.4 %
Resort and club revenues 14.8 13.0 1.8 13.8 21.1 18.1 3.0 16.6
Timber sales 9.7 8.2 1.5 18.3 19.2 70.8 (51.6 ) (72.9 )
Other 0.9 0.6 0.3 50.0 1.6 1.1 0.5 45.5
Total 30.4 25.3 5.1 20.2 60.9 98.7 (37.8 ) (38.3 )
Expenses:
Cost of real estate sales 2.9 2.8 0.1 3.6 10.5 4.5 6.0 133.3
Cost of resort and club revenues 11.5 11.0 0.5 4.5 18.4 17.6 0.8 4.5
Cost of timber sales 6.2 6.0 0.2 3.3 12.5 12.2 0.3 2.5
Cost of other revenues 0.5 0.5 - - 1.2 1.0 0.2 20.0
Other operating expenses 4.2 6.3 (2.1 ) (33.3 ) 8.0 13.3 (5.3 ) (39.8 )
Corporate expenses 4.9 8.3 (3.4 ) (41.0 ) 9.3 26.5 (17.2 ) (64.9 )
Depreciation and amortization 2.5 3.4 (0.9 ) (26.5 ) 4.8 10.0 (5.2 ) (52.0 )
Impairment losses - 1.7 (1.7 ) (100.0 ) - 2.5 (2.5 ) (100.0 )
Restructuring charges 0.1 5.9 (5.8 ) (98.3 ) 0.1 10.4 (10.3 ) (99.0 )
Total 32.8 45.9 (13.1 ) (28.6 ) 64.8 98.0 (33.2 ) (33.9 )
Operating (Loss) Income $ (2.4 ) $ (20.6 ) $ (18.2 ) (88.4 )% $ (3.9 ) $ 0.7 $ (4.6 ) (657.1 )%
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Real Estate Revenues. For the six month period ended June 30, 2012, revenues increased over the same period ended June 30, 2011 principally due to the following:
• Higher volumes of homesite sales resulting in a net increase in residential revenue of approximately $2.6 million for the six months ended June 30, 2012 as compared to the same period ending June 30, 2011.
• Three commercial sales transactions resulting in increased revenue of approximately $6.0 million for the six months ended June 30, 2012 over the same period for 2011.
• Four rural land sales transactions resulting in increased revenue of approximately $1.7 million for the six months ended June 30, 2012 over the same period for 2011.
Resorts and Club Revenues. For the three and six month periods ended June 30, 2012, the increases in revenues over the same periods in 2011 were driven by increased occupancy, higher room rates and improved operating margins within our four primary property operations.
Timber Revenues. For the three month period ended June 30, 2012, revenues increased by approximately $1.5 million over the same period in 2011 as a result of higher volumes of timber sales. Excluding the impact of a $54.5 million timber deed in the first quarter of 2011, revenues increased approximately $2.9 million in the six month period ended June 30, 2012 over the same period in 2011 due to the volume increases, offset by price per ton declines.
Other operating and Corporate expenses. The quarter over quarter decline of approximately $5.5 million for the three months ended June 30, 3012 and 2011 was driven primarily by a decline in professional fees of $3.4 million, reduced pension costs of $1.6 million, and decreased employee compensation of $0.5 million. The decline of approximately $22.5 million for the six month period ended June 30, 2012 compared to the same period in 2011 was primarily a result of a decline in professional fees of $8.8 million, lower stock-based compensation charges of $7.2 million, reduced pension costs of $3.1 million, decreased occupancy costs of $1.7 million, and decreased employee compensation of $1.7 million.
Depreciation and amortization. The decline in depreciation and amortization costs in the quarter over quarter and year over year period was driven by the impairment of our long-lived assets occurring in the fourth quarter of 2011. The reduction in the carrying cost to many of these assets necessarily reduced the amount subject to depreciation in the three and six month periods ended June 30, 2012 and periods subsequent thereto.
Impairment losses. We incurred no impairment charges in the three and six month periods ended June 30, 2012. Impairment charges for the three months ended June 30, 2011 were related to the $1.7 million write down of a rural retreat community. In the six months ended June 30, 2011 impairment charges were related to the write off of $0.8 million in predevelopment costs related to the construction of the previously proposed new headquarters for the Company.
Restructuring charges. Restructuring charges were limited in the three and six month periods ended June 30, 2012 as programs commencing in periods prior to 2012 were substantially complete at the beginning of 2012, and we did not any introduce any new programs during the period. A substantial portion of restructuring charges incurred in the three and six month periods ended June 30, 2011 were related to our 2011 restructuring program.
Segment Results
Residential Real Estate
Our residential real estate segment typically plans and develops mixed-use resort, primary and seasonal residential communities of various sizes, primarily on our existing land. This segment also includes our resort and club operations, the purpose of which is to enhance and promote the desirability of our residential real estate. We own large tracts of land in Northwest Florida, including significant Gulf of Mexico beach frontage and waterfront properties, and land near Jacksonville and Tallahassee.
We believe our residential sales are showing signs of recovery in many of our Northwest Florida projects. However, with the U.S. and Florida economies still battling the adverse effects of home foreclosures, severely restrictive credit, significant inventories of unsold homes and recessionary economic conditions, the timing of a sustainable recovery to all our residential projects remains uncertain.
The table below sets forth the results of continuing operations of our residential real estate segment for the three and six months ended June 30, 2012 and 2011.
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Revenues: (in millions)
Real estate sales $ 4.2 $ 2.8 $ 7.7 $ 5.1
Resort and club revenues 14.8 13.0 21.1 18.1
Other revenues 0.6 0.6 1.2 1.0
Total revenues 19.6 16.4 30.0 24.2
Expenses:
Cost of real estate sales 2.5 2.2 4.9 3.9
Cost of resort and club revenues 11.5 11.0 18.4 17.6
Cost of other revenues 0.4 0.4 0.9 0.9
Other operating expenses 2.9 4.1 5.3 8.7
Depreciation and amortization 1.8 2.4 3.3 4.9
Impairment losses - 1.7 - 1.7
Restructuring charges - 0.2 - 0.2
Total expenses 19.0 22.0 32.8 37.9
Other (expense) income (0.4 ) (0.7 ) (0.8 ) (1.4 )
Income (loss) from operations
before equity in (loss) income of
unconsolidated affiliates $ 0.2 $ (6.3 ) $ (3.6 ) $ (15.1 )
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Real estate sales include the sale of homesites. Cost of real estate sales includes direct costs (e.g., development and construction costs), selling costs and other indirect costs (e.g., development and construction overhead, warranty and project administration costs). Resort and club revenues and cost of resort and club revenues include results of operations from the WaterColor Inn, WaterColor, WaterSound and WindMark Beach vacation rental programs and other resort, golf, club and marina operations. Other revenues and cost of other revenues consist primarily of brokerage fees and rental operations.
Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011
The following table sets forth the components of our real estate sales and cost
of real estate sales related to homes and homesites:
Three Months Ended Three Months Ended
June 30, 2012 June 30, 2011
Homes Homesites Total Homes Homesites Total
(Dollars in millions)
Sales $ - $ 4.2 $ 4.2 $ 0.5 $ 2.3 $ 2.8
Cost of sales: -
Direct costs - 3.3 3.3 0.5 1.6 2.1
Selling costs - 0.1 0.1 - - -
Other indirect costs - (1.1 ) (1.1 ) - 0.1 0.1
Total cost of sales - 2.3 2.3 0.5 1.7 2.2
Gross profit $ - $ 1.9 $ 1.9 $ - $ 0.6 $ 0.6
Gross profit margin 45 % 45 % - % 26 % 21 %
Units sold - 42 42 1 24 25
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Homesite closings and revenues have increased due to the sale of homesites to national and local homebuilders. These sales may generate additional revenues and gross profit in future periods upon the sale to the end-user if a completed home sells above a stipulated price.
The following table sets forth home and homesite sales activity by geographic region and property type:
Three Months Ended June 30, 2012 Three Months Ended June 30, 2011
Closed Cost of Gross Closed Cost of Gross
Units Revenues Sales Profit Units Revenues Sales Profit
Northwest Florida:
Resort
Single-family homes - $ - $ - $ - 1 $ 0.5 $ 0.5 $ -
Homesites 18 3.1 1.6 1.5 12 1.8 1.3 0.5
Primary
Single-family homes - - - - - - - -
Homesites 15 0.8 0.5 0.3 12 0.5 0.4 0.1
Northeast Florida:
Single-family homes - - - - - - - -
Homesites 9 0.3 0.2 0.1 - - - -
Total 42 $ 4.2 $ 2.3 $ 1.9 25 $ 2.8 $ 2.2 $ 0.6
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Our Northwest Florida resort and seasonal communities include WaterColor, WaterSound Beach, WaterSound, WaterSound West Beach, WindMark Beach, RiverCamps on Crooked Creek, SummerCamp Beach and Wild Heron, while primary communities include Breakfast Point and Southwood. Our sole Northeast Florida community, RiverTown, is primary.
The primary drivers of the increase in real estate sales in the quarter ended June 30, 2012 as compared to the same period in the prior year are as follows:
• For our Northwest Florida resort and seasonal communities, homesite closings and revenues increased primarily due to the increased demand at our WaterColor and WaterSound West Beach communities.
• In our Northwest Florida primary communities, which have lower price points than our resort communities, homesite closings and revenue increased due to sales to homebuilders, some of which may generate additional revenues and gross profits in future periods upon sale to the end-user if a completed home sells above a stipulated price.
• In Northeast Florida, primary homesite closings and revenue increased in 2012 as compared to 2011 due to sales to homebuilders at our RiverTown community.
Resort and club revenues include revenue from the WaterColor Inn, WaterColor, WaterSound Beach and WindMark Beach vacation rental programs and other resort, golf, club and marina operations. Total resort and club revenues were $14.8 million for the quarter ended June 30, 2012 with related costs of $11.5 million as compared to revenue totaling $13.0 million for the quarter ended June 30, 2011 with $11.0 million in related costs. Increased revenues were primarily due to increased activity at our resorts, resulting in higher occupancies, room rates and ancillary revenue at our resort lodging operations as well as stronger activity and rates at our golf courses. Related costs also increased in conjunction with the stronger activity, but operating margins improved due to cost reductions in our resorts and the incremental impact of higher revenues on a cost base that has many fixed components.
Other operating expenses include salaries and benefits, marketing, project administration, support personnel, other administrative expenses and litigation reserves. Other operating expenses were $2.9 million for the quarter ended June 30, 2012 as compared to $4.1 million for the quarter ended June 30, 2011. The decrease of $1.2 million in operating expenses was primarily due to reductions in employee costs and real estate taxes.
Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011 The following table sets forth the components of our real estate sales and cost . . . |
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