The St. Joe Company — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing; it does not provide a standalone fourth-quarter income statement. St. Joe is a real estate development, asset management and operating company with approximately 171,000 acres in Northwest Florida and residential, hospitality and commercial segments.
Financial performance and liquidity
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $160.6 million | $127.1 million | Up 26.3% |
| Operating income | $47.1 million | $31.3 million | Up 50.3% |
| Net income | $45.5 million | $26.7 million | Up 70.6% |
| Net income attributable to St. Joe | $45.2 million | $26.8 million | Up 68.8% |
| Diluted EPS | $0.77 | $0.45 | Up 71.1% |
| Operating cash flow | $37.3 million | $30.4 million | Up $6.9 million |
Operating margin was approximately 29.3% of revenue, versus 24.6% in 2019; net margin was approximately 28.3%, versus 21.0%. These ratios are calculated from reported figures. Gross profit margins were 59.1% for real estate, 26.4% for hospitality, 68.6% for leasing and 87.3% for timber.
- Revenue mix and drivers: Real estate revenue increased to $87.6 million from $61.5 million, led by residential homesites. St. Joe sold 509 homesites versus 379 in 2019; average revenue per homesite, excluding residuals, was approximately $124,000 versus $87,000. Hospitality revenue rose 3.7% to $47.8 million despite pandemic-related closures. Leasing revenue grew 20.5% to $18.8 million, while timber revenue rose 61.5% to $6.3 million.
- Unusual and nonrecurring items: Earnings included a $20.0 million gain on land and infrastructure contributions to equity-method ventures, compared with $2.3 million in 2019. Investment income fell to $5.0 million from $10.7 million, including $4.7 million of unrealized losses on preferred stock in 2020. The filing identifies $1.3 million of marina business-interruption proceeds in each of 2020 and 2019, plus $0.7 million of proceeds related to Pier Park Crossings in 2020.
- Balance sheet and liquidity: At year-end, cash and cash equivalents were $106.8 million, with $48.1 million of debt securities and $2.6 million of equity securities. The company described approximately $157.5 million of cash, cash equivalents and investments. Total assets were $1.037 billion and total equity was $568.2 million.
- Debt: Reported debt, net, was $158.9 million; principal outstanding across listed loans was $161.4 million. The balance sheet also includes $177.3 million of Senior Notes held by a consolidated special-purpose entity, alongside $206.1 million of investments held by special-purpose entities. The weighted average rate on variable-rate loans was 2.2%. Debt maturities run from 2021 onward, with $45.0 million due in 2024 and $45.9 million in 2025. The company reported compliance with financial debt covenants.
- Investment and distributions: Capital expenditures were $162.2 million, versus $114.3 million in 2019; operating cash flow did not cover that investment level. Net cash used in investing activities was $164.5 million. St. Joe repurchased $8.8 million of shares in 2020 and paid its first cash dividend, $0.07 per share, totaling $4.1 million. The Board declared a subsequent $0.08-per-share dividend payable in March 2021.
Material changes versus 2019
- Net income and operating income increased substantially, while reported revenue rose 26.3%. Residential homesite sales and leasing growth were important contributors.
- The $20.0 million venture-contribution gain materially increased other income. Excluding this and other non-operating items, reported net income should not be viewed as solely recurring operating performance.
- Cash and cash equivalents declined to $106.8 million from $185.7 million, reflecting substantial investment and capital spending. Borrowings increased, and debt, net, rose to $158.9 million from $92.5 million.
- Hospitality operations were temporarily closed, curtailed or altered from mid-March 2020, with gradual reopening beginning in May. Revenues recovered from June through December, but management cautioned that pandemic effects could continue.
- The company combined commercial leasing and sales with forestry into one commercial reporting segment. Prior-year segment data was reclassified; the change did not affect consolidated financial statements.
Outlook, risks and contingencies
- Management said current cash, financing arrangements and operating cash generation were expected to cover anticipated working capital, debt service, capital contributions, authorized repurchases and dividends for the next 12 months. The 2021 capital expenditure budget was expected to exceed FY2020 spending; no specific budget amount or earnings guidance was provided.
- Growth plans focus on residential development, expanding recurring commercial and hospitality revenue, and partnering or selling selected assets where appropriate. Management does not expect immediate benefits from investments and noted that project timing can be delayed by factors outside its control.
- COVID-19 remained a material uncertainty, particularly for hospitality, travel, tenants, construction and customer demand. Other principal risks include concentration in Northwest Florida, real estate and entitlement cycles, construction costs and labor availability, hurricanes and insurance, environmental regulation, and reliance on homebuilders and joint-venture partners.
- Potential obligations include guarantees of certain joint-venture debt, $157.1 million of construction and development contractual commitments, $24.2 million of surety bonds and $6.6 million of standby letters of credit. Litigation and environmental matters were described as not expected to materially affect consolidated financial position or liquidity based on current knowledge; accrued aggregate liabilities for described and other litigation matters were $0.7 million.
- LIBOR-linked borrowings create transition and rate risk. A hypothetical 100-basis-point increase in applicable rates was estimated to increase annual interest expense by $0.3 million based on year-end balances. St. Joe also disclosed that Fairholme-related clients beneficially owned approximately 44.89% of common stock at year-end, creating significant ownership influence.
- The 2020 financial statements received an unqualified audit opinion. Management and the auditor reported effective internal control over financial reporting as of year-end.
Important facts for investors to verify
- How much of FY2020 earnings and future earnings capacity is attributable to the $20.0 million land-contribution gain and other nonrecurring or market-sensitive items.
- Whether homesite contracts, including 1,269 homesites under contract with expected closings of approximately $115.0 million over several years, convert to revenue and cash on schedule.
- Progress, occupancy and returns for new apartment, senior-living and hotel projects, and the funding needs associated with the elevated 2021 capital expenditure plan.
- Debt and guarantee exposure across consolidated and unconsolidated ventures, including repayment schedules, covenants, and the treatment of special-purpose-entity notes and assets.
- Cash conversion and liquidity after development spending, dividends and repurchases, as well as the sustainability of dividends and share buybacks.
- The continuing effects of COVID-19 and Hurricane Michael, including marina restoration, insurance recoveries, and any resulting operating or capital costs.