Market Overview

The St. Joe Company Reports Second Quarter 2018 Results

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The St. Joe Company (NYSE:JOE) (the "Company") today announced Net
Income for the second quarter of 2018 of $26.2 million, or $0.41 per
share, compared with Net Income of $10.8 million, or $0.15 per share,
for the second quarter of 2017. The second quarter of 2018 includes a
$23.1 million pre-tax benefit from an impact fees receipt related to the
Company's 2014 sale of the RiverTown community. For the six months ended
June 30, 2018, the Company reported Net Income of $27.0 million, or
$0.42 per share compared to Net Income of $15.1 million, or $0.21 per
share for the same period last year.

Second quarter update includes:

  • Total revenue for the quarter was $50.4 million as compared to $30.6
    million in 2017 due to increases in real estate, leasing and timber
    revenue, partially offset by a decrease in resorts and leisure revenue.
  • Real estate revenue increased to $32.1 million in 2018 as compared to
    $7.2 million in 2017. Of this increase, $23.1 million is attributable
    to the RiverTown impact fees receipt. The remaining increase of
    approximately $1.8 million was primarily related to an increase in the
    sale of mitigation bank credits and a higher volume of lot sales in
    the Watersound West Beach, RiverCamps, Wild Heron, SouthWood and
    Breakfast Point communities offset by a reduction in the SummerCamp
    community as well as a reduction in commercial real estate sales. The
    Watersound Origins community also experienced a reduction in revenue
    due to timing of builder lot takedowns. Overall, there were 37
    homesites sold in the second quarter of 2018 compared to 32 homesites
    sold in the second quarter of 2017. Gross margin related to homesite
    sales increased to 58.8% for the second quarter of 2018 as compared to
    56.1% for the second quarter of 2017.
  • Resorts and leisure revenue for the quarter decreased in 2018 as
    compared to 2017 by $6.0 million primarily due to the sale of the
    short-term vacation rental management business during December 2017,
    partially offset by an increase in the clubs component. Costs of
    resorts and leisure revenue decreased by $5.1 million primarily due to
    the same sale of the short-term vacation rental management business.
    The clubs component of this segment's revenue improved due to
    increased revenue from the Company's private membership club. The
    clubs component revenue increased $0.9 million, or 20.9%, for the
    second quarter of 2018 as compared to the second quarter of 2017.
  • Timber revenue increased by $0.6 million during the three months ended
    June 30, 2018, as compared to the same period in 2017. Gross margin
    for timber revenue increased during the three months ended June 30,
    2018 to 89.5% compared to 84.6% during the same period in 2017.
  • During the second quarter of 2018, the Company's consolidated joint
    venture (Pier Park Crossings, LLC) entered into a new $36.6 million
    loan commitment for the construction of a previously announced
    240-unit apartment complex in Panama City Beach. The loan, insured by
    U.S. Department of Housing and Urban Development (HUD), bears a fixed
    interest rate of 3.99% and matures on June 1, 2060. As of June 30,
    2018, there was $5.0 million drawn on this commitment.
  • The Company is benefiting from the reduced U.S. federal corporate
    income tax rate. For the three months ended June 30, 2018, the
    Company's effective tax rate (combined federal and state) was 20.0%
    compared to 35.4% for the same period in 2017. The recorded income tax
    expense was $6.5 million for the three months ended June 30, 2018 as
    compared to $5.9 million during the same period in 2017.

As of June 30, 2018, the Company owned approximately 809,000 square feet
of rentable commercial space compared to approximately 671,000 as of
June 30, 2017. The Company's overall lease occupancy percentage
increased to 89% as of June 30, 2018 as compared to 84% as of June 30,
2017. As of June 30, 2018, the Company had two commercial buildings
totaling 18,200 gross square feet under construction as well as the
240-unit apartment complex which is expected to total 282,738 gross
square feet.

The Company had cash, cash equivalents and investments of $268.1 million
as of June 30, 2018, compared to $303.4 million as of December 31, 2017,
a decrease of $35.3 million. During the six months ended June 30, 2018,
the Company used $72.5 million to repurchase 4,065,160 shares of its
common stock. As of June 30, 2018, the Company had approximately 61.8
million shares of its common stock outstanding.

Financial data schedules included in this press release provide greater
detail on business performance, summarizing the consolidated results,
summary balance sheets, debt schedule and other operating and corporate
expenses for the second quarter of 2018 and 2017, respectively.

Jorge Gonzalez, the Company's President and Chief Executive Officer,
said: "We are pleased with our second quarter results. Aside from the
significant revenue and cash generated by the RiverTown impact fees
receipt, our overall operating income is up compared with the prior
year, with increases in margins across our segments, as well as higher
occupancy in our commercial leasing portfolio."

Mr. Gonzalez added, "Looking forward, our team recently submitted a
Detailed Specific Area Plan (DSAP) to local authorities associated with
Latitude Margaritaville, which, in conjunction with our joint venture
partner, is expected to create a significant entry into to the active
adult market with initial plans for approximately 3,000 residential
units, community amenities, and other assets. Subject to completion of
several processes with our joint venture partner, including executing a
definitive joint venture agreement, we anticipate having the sales
center and initial model homes open in 2020."

Mr. Gonzalez continued, "During the quarter, we broke ground on a new
240-unit apartment complex located in close proximity to Pier Park. At
the same time, the Bay County Tourism Development Council broke ground
on its new $37 million Sports Park and Stadium Complex, which is located
adjacent to over 1,000 acres of entitled property which we own near the
Breakfast Point residential community. We also expect to announce the
start of other new business initiatives presented during our Company's
annual shareholder meeting, including the exciting new Club and Resorts
lodging and amenity complex at our Camp Creek golf course, and a new
210-unit apartment complex at Origins."

Mr Gonzalez concluded, "These projects, as well as others we are
currently planning, are expected to favorably impact our future growth."

FINANCIAL DATA
 
Consolidated Results (Unaudited)

($ in millions except share and per share amounts)

   
   

Quarter Ended

June 30,

 

Six Months Ended

June 30,

   

2018

 

2017

 

2018

 

2017

Revenue                
Real estate revenue   $32.1   $7.2   $39.9   $8.7
Resorts and leisure revenue   13.3   19.3   20.7   27.4
Leasing revenue   3.1   2.8   6.1   5.4
Timber revenue  

1.9

 

1.3

 

3.6

 

2.6

Total revenue  

50.4

 

30.6

 

70.3

 

44.1

Expenses                
Cost of real estate revenue   3.0   3.6   7.1   3.9
Cost of resorts and leisure revenue   9.8   14.9   16.8   23.7
Cost of leasing revenue   0.8   0.8   1.7   1.5
Cost of timber revenue   0.2   0.2   0.4   0.4
Other operating and corporate expenses   5.0   4.2   11.0   10.3
Depreciation, depletion and amortization  

2.3

 

2.0

 

4.5

 

4.0

Total expenses  

21.1

 

25.7

 

41.5

 

43.8

Operating income  

29.3

 

4.9

 

28.8

 

0.3

Investment income, net   6.0   14.3   9.6   24.7
Interest expense   (2.9)   (3.0)   (5.9)   (6.1)
Other income, net  

0.2

 

0.3

 

0.5

 

4.1

Income before income taxes   32.6   16.5   33.0   23.0
Income tax expense  

(6.5)

 

(5.9)

 

(6.3)

 

(8.2)

Net income   26.1   10.6   26.7   14.8
Net loss attributable to non-controlling interest  

0.1

 

0.2

 

0.3

 

0.3

Net income attributable to the Company  

$26.2

 

$10.8

 

$27.0

 

$15.1

Net income per share attributable to the Company  

$0.41

 

$0.15

 

$0.42

 

$0.21

Weighted average shares outstanding   63,760,022   71,981,505   64,613,298   72,970,462
 

Summary Balance Sheet (Unaudited)
($ in millions)
   
   

June 30, 2018

 

December 31, 2017

Assets        
Investment in real estate, net   $339.5   $332.6
Cash and cash equivalents   215.1   192.1
Investments – debt securities   14.2   76.3
Investments – equity securities   38.8   35.0
Restricted investments   3.4   4.5
Income tax receivable   1.6   8.4
Claim settlement receivable   5.4   5.3
Other assets   46.4   47.1
Property and equipment, net   11.7   11.8
Investments held by special purpose entities  

207.7

 

207.9

Total assets  

$883.8

 

$921.0

         
Liabilities and Equity        
Debt, net   $59.2   $55.6
Other liabilities   49.3   47.3
Deferred tax liabilities, net   49.1   49.0
Senior Notes held by special purpose entity  

176.6

 

176.5

Total liabilities   334.2   328.4
Total equity  

549.6

 

592.6

Total liabilities and equity  

$883.8

 

$921.0

 
Debt Schedule (Unaudited)
($ in millions – Net of issuance costs)
 
   

June 30, 2018

 

December 31, 2017

Pier Park North joint venture refinanced loan   $46.4   $46.8
Community Development District debt   6.6   7.2
Pier Park Crossings joint venture loan   3.9   --
Pier park outparcel construction loan   1.6   1.6
WaterColor Crossings construction loan  

0.7

 

--

Total debt, net  

$59.2

 

$55.6

 
Other Operating and Corporate Expenses (Unaudited)
($ in millions)
   
   

Quarter Ended

June 30,

 

Six Months Ended

June 30,

   

2018

 

2017

 

2018

 

2017

Employee costs   $1.7   $1.7   $3.5   $3.5
401(k) contribution   --   --   1.1   1.2
Property taxes and insurance   1.2   1.4   2.5   2.8
Professional fees   0.8   0.4   1.7   1.4
Marketing and owner association costs   0.3   0.3   0.6   0.6
Occupancy, repairs and maintenance   0.4   0.1   0.5   0.2
Other  

0.6

 

0.3

 

1.1

 

0.6

Total other operating and corporate expense  

$5.0

 

$4.2

 

$11.0

 

$10.3

 

Additional Information and Where to Find It

Additional information with respect to the Company's results for the
second quarter 2018 will be available in a Form 10-Q that will be filed
with the Securities and Exchange Commission, which can be found at the
SEC's website www.sec.gov.

Important Notice Regarding Forward-Looking
Statements

Certain statements contained in this press release, as well as other
information provided from time to time by the Company or its employees,
may contain forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. You can identify
forward-looking statements by the fact that they do not relate strictly
to historical or current facts. These statements may include words such
as "guidance," "anticipate," "estimate," "expect," "forecast,"
"project," "plan," "intend," "believe," "confident," "may," "should,"
"can have," "likely," "future" and other words and terms of similar
meaning in connection with any discussion of the timing or nature of
future operating or financial performance or other events. Examples of
forward-looking statements in this press release include statements
regarding our continued progress in our operations, expectations on
timing and impact of the proposed Latitude Margaritaville project, the
impact of the Pier Park Crossings apartment complex, future development
of business initiatives at our Camp Creek and Origins properties, and
the impact of related developments on our future results. Any such
forward-looking statements are not guarantees of performance or results,
and involve risks, uncertainties (some of which are beyond the Company's
control) and assumptions.

The Company cautions readers that, although we believe any
forward-looking statements are based on reasonable assumptions, certain
important factors may have affected and could in the future affect the
Company's actual financial results and could cause the Company's actual
financial results for subsequent periods to differ materially from those
expressed in any forward-looking statement made by or on behalf of the
Company, including (1) any changes in our strategic objectives or our
ability to successfully implement such strategic objectives; (2) any
potential negative impact of our longer-term property development
strategy, including losses and negative cash flows for an extended
period of time if we continue with the self-development of recently
granted entitlements; (3) significant decreases in the market value of
our investments in securities or any other investments; (4) our ability
to capitalize on strategic opportunities presented by a growing
retirement demographic; (5) our ability to accurately predict market
demand for the range of potential residential and commercial uses of our
real estate; (6) volatility in the consistency and pace of our
residential real estate sales; (7) any downturns in real estate markets
in Florida or across the nation; (8) our dependence on the real estate
industry and the cyclical nature of our real estate operations; (9) our
ability to successfully and timely obtain land use entitlements and
construction financing, maintain compliance with state law requirements
and address issues that arise in connection with the use and development
of our land, including the permits required for mixed-use and active
adult communities; (10) changes in laws, regulations or the regulatory
environment affecting the development of real estate; (11) our ability
to effectively deploy and invest our assets, including our
available-for-sale securities; (12) our ability to effectively manage
our real estate assets, as well as the ability of our joint venture
partners to effectively manage the day-to-day activities of our joint
venture projects; and (13) increases in operating costs, including costs
related to real estate taxes, owner association fees, construction
materials, labor and insurance, and our ability to manage our cost
structure; as well as, the cautionary statements and risk factor
disclosures contained in the Company's Securities and Exchange
Commission filings including the Company's Annual Report on Form 10-K
for the year ended December 31, 2017, which can be found at the SEC's
website www.sec.gov.
The discussion of these risks is specifically incorporated by reference
into this press release.

Any forward-looking statement made by us in this press release speaks
only as of the date on which it is made. We undertake no obligation to
update any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as may be required
by law.

About The St. Joe Company

The St. Joe Company together with its consolidated subsidiaries is a
real estate development, asset management and operating company with
real estate assets and operations currently concentrated primarily in
Northwest Florida. More information about the Company can be found on
its website at www.joe.com.

© 2018, The St. Joe Company. "St. Joe®", "JOE®", the "Taking Flight"
Design®, "St. Joe (and Taking Flight Design)®" and some of the project
names mentioned herein are registered service marks of The St. Joe
Company, its affiliates or third parties.

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