EX-99.2 3 exhibit992.htm EXHIBIT Exhibit 99.2


Exhibit 99.2
THE ST. JOE COMPANY
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
On March 5, 2014, the St. Joe Company (the “Company”) completed a sale of approximately 380,000 acres of land located in Northwest Florida owned by the Company to subsidiaries of AgReserves, Inc. (“AgReserves”), along with certain other assets and inventory and rights under certain continuing leases and contracts to AgReserves for $562 million (the “Transaction”). The land sold include substantially all of the Company’s land designated for forestry operations as well as other non-strategic land (i) that is not utilized in the Company’s residential or commercial real estate segments or its resorts, leisure and leasing segment or (ii) that is not part of Company’s development plans.
The purchase price was paid in part cash of $362 million and in part 15 year installment notes of $200 million that are fully secured by irrevocable standby letters of credit (the “Timber Note”).
The Company has agreed to indemnify, defend and hold AgReserves and its affiliates, representatives and agents harmless from certain losses, including those as a result or arising out of breaches of the Company’s representations, warranties, covenants or other agreements and, subject to certain exceptions, third-party personal injury or tort claims regarding the Company’s use, ownership or operation of the land sold (or any party thereof) prior to the closing of the Transaction and claims arising from assumed contracts relating to any act or omission prior to such closing date.
The following Unaudited Pro Forma Consolidated Financial Information of the Company has been derived from the historical financial statements of the Company, as adjusted, to give effect to the Transaction. The historical financial statements of the Company as set forth herein has been derived from the historical consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2013. The Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2013, includes pro forma adjustments giving effect to the Transaction as if it had occurred on that date. The Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 31, 2013, includes pro forma adjustments giving effect to the Transaction as if it had occurred on December 31, 2012. The Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2013 and the Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 31, 2013 reflect all normal recurring adjustments that, in the opinion of management, are necessary for fair presentation of the information contained herein. The Company adheres to the same accounting policies in preparation of its unaudited interim condensed consolidated financial statements. As required under GAAP, interim accounting for certain expenses are based on full year assumptions.
The Unaudited Pro Forma Consolidated Financial Information is presented to comply with the rules and regulations of the Securities and Exchange Commission governing the disclosure of pro forma information. The Unaudited Pro Forma Consolidated Financial Information has been provided for informational purposes only and should not be considered indicative of the financial condition or results of operations that would have been achieved had the Transaction occurred as of the dates presented. Accordingly, the Unaudited Pro Forma Consolidated Financial Information should not be read to be indicative of the Company’s financial condition or results of operations that might be achieved as of any future date or for any future period. The Unaudited Pro Forma Consolidated Financial Information, including the notes thereto, should be read in conjunction with the historical financial statements of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2013.
 





The St. Joe Company
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2013
(In thousands)
 
 
 
Historical
 
(Unaudited)
Pro forma
Adjustments
 
 
 
Pro forma
ASSETS
 
 
 
 
 
 
 
 
Investments in real estate, net
 
$
385,009

 
$
(51,954
)
 
a
 
$
333,055

Cash and cash equivalents
 
21,894

 
345,691

 
b
 
367,585

Investments
 
146,972

 
—

 
 
 
146,972

Notes receivable, net
 
7,332

 
200,000

 
b
 
207,332

Pledged treasury securities
 
26,260

 
—

 
 
 
26,260

Prepaid pension asset
 
35,117

 
—

 
 
 
35,117

Property and equipment, net
 
11,410

 
(219
)
 
a
 
11,191

Deferred tax asset
 
12,866

 
(12,866
)
 
c
 
—

Other assets
 
22,612

 
(1,543
)
 
a
 
21,069

Total Assets
 
$
669,472

 
$
479,109

 
 
 
$
1,148,581

 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
 
 
Debt
 
$
44,217

 
$
—

 
 
 
$
44,217

Accounts payable
 
12,083

 
(456
)
 
a
 
11,627

Income taxes payable
 
302

 
80,096

 
c
 
80,398

Deferred tax liability
 
—

 
15,303

 
c
 
15,303

Accrued liabilities and deferred credits
 
49,345

 
(12,858
)
 
a
 
36,487

Total liabilities
 
105,947

 
82,085

 
 
 
188,032

 
 
 
 
 
EQUITY:
 
 
 
 
 
 
 
 
Common stock, no par value
 
892,027

 
—

 
 
 
892,027

Retained earnings
 
(325,871
)
 
397,024

 
d
 
71,153

Accumulated other comprehensive loss
 
(7,517
)
 
—

 
 
 
(7,517
)
Treasury stock at cost
 
(285
)
 
—

 
 
 
(285
)
Total stockholders’ equity
 
558,354

 
397,024

 
 
 
955,378

Non-controlling interest
 
5,171

 
—

 
 
 
5,171

Total equity
 
563,525

 
397,024

 
 
 
960,549

Total Liabilities and Equity
 
$
669,472

 
$
479,109

 
 
 
$
1,148,581

 
 
 
 
 
 
 
 
 

See Notes to the Unaudited Pro Forma Consolidated Financial Statements
 




The St. Joe Company
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2013
(In thousands, except share and per share amounts)
 
 
 
Historical
 
(Unaudited)
Pro forma
Adjustments
 
 
 
Pro forma
Revenues:
 
 
 
 
 
 
 
 
Real estate sales
 
$
45,039

 
$
—

 
 
 
$
45,039

Resorts, leisure and leasing revenues
 
50,767

 
—

 
 
 
50,767

Timber Sales
 
35,450

 
(28,757
)
 
e
 
6,693

Total revenues
 
131,256

 
(28,757
)
 
 
 
102,499

 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
Cost of real estate sales
 
24,277

 
—

 
 
 
24,277

Cost of resorts, leisure and leasing revenues
 
41,109

 
—

 
 
 
41,109

Cost of timber sales
 
21,527

 
(16,923
)
 
e
 
4,604

Other operating expenses
 
12,323

 
(408
)
 
e
 
11,915

Corporate expense
 
17,032

 
(68
)
 
e
 
16,964

Depreciation, depletion and amortization
 
9,131

 
(1,374
)
 
e
 
7,757

Impairment losses
 
5,080

 
—

 
 
 
5,080

Total expenses
 
130,479

 
(18,773
)
 
 
 
111,706

Operating income (loss)
 
777

 
(9,984
)
 
 
 
(9,207
)
Other income (expense):
 
 
 
 
 
 
 
 
Investment income, net
 
1,498

 
—

 
 
 
1,498

Interest expense
 
(2,040
)
 
—

 
 
 
(2,040
)
Other, net
 
4,210

 
(1,097
)
 
e
 
3,113

Total other income
 
3,668

 
(1,097
)
 
 
 
2,571

Income (loss) from operations before equity in loss of unconsolidated affiliates and income taxes
 
4,445

 
(11,081
)
 
 
 
(6,636
)
Equity in loss of unconsolidated affiliates
 
112

 
—

 
 
 
112

Income tax benefit (expense)
 
409

 
1,494

 
e
 
1,903

Net income (loss)
 
4,966

 
(9,587
)
 
 
 
(4,621
)
Net loss attributable to non controlling interest
 
24

 
—

 
 
 
24

Net income (loss) attributable to the Company
 
$
4,990

 
$
(9,587
)
 
 
 
$
(4,597
)
 
 
 
 
 
 
 
 
 
INCOME (LOSS) PER SHARE
 
 
 
 
 
 
 
 
Basic and Diluted
 
 
 
 
 
 
 
 
Basic and diluted average shares outstanding
 
92,285,888

 
—

 
 
 
92,285,888

Net income (loss) attributable to the Company
 
$
0.05

 
$
(0.10
)
 
 
 
$
(0.05
)
 
 
 
 
 
 
 
 
 

See Notes to the Unaudited Pro Forma Consolidated Financial Statements
 

 

 





The St. Joe Company
Notes to the Unaudited Pro Forma Consolidated Financial Statements
Pro forma adjustments (a, b, c, d and e as referenced in the unaudited pro forma consolidated financial statements)
 

a.
Pro forma adjustments to eliminate approximately $54 million of assets and approximately $13 million of liabilities sold in the Transaction. Included in the $13 million of liabilities is approximately $11 million of deferred revenue related to a 2006 rural land sale, where title had not yet transferred to the buyer and as part of the Transaction, AgReserves has assumed the Company's obligations to ultimately transfer title to the buyer.

b.
Pro forma adjustments to record the estimated cash proceeds received from the Transaction, which is comprised of the $562 million purchase price, less the $200 million Timber Note and estimated closing costs of $16 million. Included in closing costs of $16 million are $8 million of costs related to the potential subsequent monetization of the Timber Note, which is discussed in the following paragraph.
In addition, subsequent to the Transaction the Company expects to contribute the Timber Note to a bankruptcy-remote, qualified special purpose entity (the “St. Joe QSPE”). The Company expects that the St. Joe QSPE will monetize the Timber Note by issuing debt securities to third party investors equal to approximately 80-90% of the of the value of the Timber Note and expects to distribute approximately 80-90% of the net proceeds to the Company. The debt securities will be payable solely out of the assets of the St. Joe QSPE, which will principally consist of the Timber Note and the standby letter of credit. The investors holding the debt securities of the St. Joe QSPE will have no recourse against the Company for payment of the debt securities or related interest expense. The Company expects to retain a beneficial interest in the entity and expects to receive payment of the remaining principal amount of the Timber Note, less net interest expense and costs associated with the monetization of the Timber Note, on the maturity date of the Timber Note.
c.
Pro forma adjustments to reflect the estimated effects on income taxes. The net change in the deferred tax asset and liability is primarily due to the following: i) the Company recorded an estimated deferred tax liability of $73 million related to the receipt of the Timber Note, ii) the Company reversed $55 million of the valuation allowance recorded against the net deferred tax assets; and iii) the Company utilized approximately $10 million of the state net operating loss carryforwards that did not have a valuation allowance.
d.
Pro forma adjustment to reflect the estimated gain on the Transaction, which is comprised of the $562 million purchase price, less estimated closing costs of $16 million, less the carrying value of the assets and liabilities to be sold of $52 million, less estimated income tax expense of $108 million at December 31, 2013. In addition, the pro forma adjustment includes $11 million of deferred revenue recognized related to a 2006 rural land sale, where title had not yet transferred to the buyer and as part of the transaction, AgReserves has assumed the Company's obligations to ultimately transfer title to the buyer.
The estimated income tax expense pro forma adjustment of $108 million included the expected reversals of valuation allowances of approximately $86 million for the utilization of the Company’s federal net operating loss carryforwards, the utilization of a portion of the Company’s state net operating loss carryforwards and net deferred tax assets recorded as of December 31, 2013.
e.
Pro forma adjustments for the estimated forestry operations related to the Transaction and certain other assets and inventory and rights under certain continuing leases and contracts. Pro forma adjustments do not include reductions in corporate overhead costs or restructuring costs.