JOE - NYSE

Park Brady - CEO Tom Hoyer - CFO

Sheila McGrath - Evercore Aaron Scully - Janus

Good day, ladies and gentlemen, and thank you for standing by. 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’ll conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I’d now like to turn the conference over to Park Brady. Please go ahead, sir.

Hello everyone and welcome to St. Joe earnings call for the period ending 31 March, 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 statement. Tom?

Thanks, Park. Some of the information we will discuss on 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. And we have no obligation to update any forward-looking statements we may make. I’ll turn it back over to Park for some opening comments and after which I’ll review the first quarter results. Mark?

Thanks Tom. I’d like to take this opportunity to provide some perspective on the evolving strategy of the company. 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’d 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, no refunded pension plan and ample cash reserves. In our everyday business, we continue to focus on maximizing profitability for all of our operating segments. And this remains a key tenant 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 home building markets, we are carefully and prudently finding the various components of our strategy. On doing so, we’ve been pleased to see positive indicators for this commercial and residential real estate market. And we remain very optimistic about Joe’s future. I’ll turn it back to 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 up for your questions. We recorded 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 in the first quarter of this year compared to $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. 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 personal rural land in the first quarter of last year. Second, we sold $6 million of commercial property in the first quarter 2012. There was no commercial property in the first quarter this year. The $6 million sale last year included a large commercial transaction of $5.4 million with the national retailer. We did however post revenue gains in our other businesses, particularly in the residential development business, where sales are more than double. Progressing as we hope, and replacing rural land sales with residential sales. We’ll be focused on the growth of 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. The revenue increased 111%. Our pricing for the 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 the first quarter of last year. Another great 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 through our tons of timber in the first quarter of this year compared to the first quarter of last year due to unusually rainy weather. Our higher prices for both (inaudible) and were more than offset the decline of volume, it will be increase in revenue. At the same time, cost declined primarily because we harvested those trees, which along with the higher timber prices led to the relatively large increase in income. As I mentioned during our year-end earning’s call, we created a new business segment for our operations called Resorts, Leisure and Leasing operations. The segment includes our vacation resorts, golf clubs in arenas as well as the retail and commercial leasing operations. The segment represents our businesses in recurring revenue strength. 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. A loss in the first quarter, for that matter in the last quarter of the 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 commercial real estate in the first quarter, of which $5.4 million was for the sale inside the Wal-Mart. We remain bullish in our long-term business prospect for the south east region of the United States in general, and our commercial properties in the region in particular. Revenue income from rural land sales in the first quarter of this year were much slower than last year, simply because we didn’t sell any major pieces of rural land. Just for query though, we do have some land for sale on our website. But it's not contiguous to 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 remains at $36 million which is the same balance that 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 received, which means that repurchased treasury security debt is immature, sufficient to retire that debt. You can find treasury securities on the asset side of the balance sheet. The other debt that we carry in the balance sheet is Community Development District debt, related to a couple of projects which we reflect temporarily on our books until the property to secure that debt is sold. The ultimate land owner, typically the home owner, is also responsible for paying this debt. Now Park would like to make some closing comments.

As a ramp 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 one include our residential resort community, primary homes and active adult markets. We 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 the rising prices in our residential resort community 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 Timberland. You will find more information on our earnings press release which was released about an hour ago, and in the 10-Q which will follow later tonight. Operator lets open it up for questions.

(Operator Instructions) And our first question comes from the line of Sheila McGrath with Evercore. Please go ahead, your line is open.

I had a question on the shelf registration filings; could you just clarify the timing of that and the inclusion of a home on the filing as well?

The shelf registration we filed just recently was because; we actually had the opportunity to put one up. We just got through a level in our market cap, a non-affiliated market cap where we qualified as the one (inaudible) this year which allowed us to file shelf registration. And we thought it would be prudent to take advantage of that. Most companies that I've worked at have had a shelf registration we think it gives us optionality down the road despite the (inaudible). Fairholme has to be part of the shelf registrations; they wanted their shares to be registered. Since many of you are familiar with the rules around mutual funds and the valuing of assets in mutual fund. Then registered chairs at Fairholme were being fully valued in their portfolio by registering the shares, they now are fully valued and need to go out in the full value of shares. Truly, an administrative thing Fairholme just asked us to do this. We don’t sell the shares; they have not told us of any intention to sell the shares, that wasn’t a purpose with this which did the administrative thing really between the portfolios.

Could you talk about, you did mention that pricing at some of the communities was up and I would just wonder if you could talk about to what magnitude may be 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 specific there?

I will talk a bit about the pricing. The pricing increases where we're seeing the most of that as we talked about this before is in the resort communities, we've actually seen some pretty amazing price increases there, anywhere from around 20% all the way up to 60% depending on the community in the lot and the resorts community here at Watercolor and WaterSound West Beach is where we see a lot of that activity. Pricing in our primary communities, has been relatively flat year-over-year have been rising interest in National Home Builders we think is changing that but we haven’t seen that come through yet in terms of actual flat transactions.

Okay and then on typically you could give us an update on your dialogue, you’ve mentioned the fact couple of calls about looking at a bigger scale type retirement community and I was just wondering if you have an update on this progress with those discussions.

No update on that in this call. Obviously that’s part of our strategic plan, we are in that second phase that I mentioned earlier. I know that it’s out there and the demographics well struck but we're still on funding phase so we can't build anything, give you an update on that.

(Operator Instructions). It looks like our next question will come from the line of Buck Horne with Raymond James & Associates. Please go ahead your line is now open.

This is Ryan (inaudible) on for Buck Horne. I know you guys are getting the interest from the national builders and there is a real shortage of developed lots. And then you guys have a pretty good amount of finished lots. Could you, may be, just remind us how many finished lots you guys have? And do you have any plans to increase the spending to prepared land given the interest you are seeing.

We haven’t been talking about the inventory of finished lots we have, certainly not. So that information we've been giving out. And we do have an inventory obviously. The interest we're getting from home builders 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 later on this year and early next year.

Okay so any plans to increase preparing loss, increased spending there?

No each project is different and further demand is we will move capital out to do that and obviously what the demand happen and that’s part of the consideration of what we're doing this year.

Yeah and a few quarters ago, you said you were trying to sort of meter your lot sales in an effort to maximize price. Would you still say you’re trying to go with that route to sort of maximize their highest value you can get or are you going to do more bulk deals?

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

And then one last thing, could you help us quantify the impact of the earlier spring break ahead on the resort business?

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

Our next question will come from Aaron Scully with Janus. Please go ahead, your line is now open.

So the resorts, you got a lot up there, 30% growth and I think 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 (inaudible) business. I'm sorry I don’t know if you heard my question. The question was about the resort business.

We heard the entire question sir. We see the vacation rental business as an opportunity for us. We have been in that business and understand the opportunity, we tend to expand it. Again, that’s part of the planning process and we’ll share that when we have a plan.

(Operator Instructions). Next question will come from Sheila McGrath with Evercore. Please go ahead, your line is now open.

Yes Park, I was wondering if you could give us an update on progress at the (port) was there any new developments there? Anything in terms of from the state funding infrastructure there?

State has funded money to, it’s the (rail work) going there, it’s been pretty responsive talking with the state about company. We hope to ask them some use, additional usage before the end of the year. And we feel very good about the potential activity and all the interest there as there is in the port.

And presenters at this time I am showing no additional questioners on the phone queue.

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