Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
We are a real estate development, asset management and operating company with real estate assets currently concentrated primarily between Tallahassee and Destin, Florida, which we predominantly use, or intend to use, for or in connection with, our various residential or commercial real estate developments, resorts and leisure operations, leasing operations or forestry operations on a limited basis. We have significant residential and commercial land-use entitlements in hand or in process. We seek higher and better uses for our real estate assets through a range of activities from strategic land planning and development, infrastructure improvements and promoting economic development in the regions where we operate. We may explore the sale of such assets opportunistically or when we believe that we can better deploy those resources.
Segments
We conduct primarily all of our business in the following
five
reportable operating segments: 1) residential real estate, 2) commercial real estate, 3) resorts and leisure, 4) leasing operations and 5) forestry.
The following table sets forth the relative contribution of these operating segments to our consolidated operating revenue during the three and
nine
months ended
September 30, 2016
and
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Segment Operating Revenue
|
|
|
|
|
|
|
|
Residential real estate
|
11.5
|
%
|
|
17.4
|
%
|
|
20.7
|
%
|
|
17.3
|
%
|
Commercial real estate
|
2.3
|
%
|
|
—
|
%
|
|
0.8
|
%
|
|
5.6
|
%
|
Resorts and leisure
|
70.0
|
%
|
|
66.6
|
%
|
|
61.8
|
%
|
|
55.2
|
%
|
Leasing operations
|
9.8
|
%
|
|
9.1
|
%
|
|
9.5
|
%
|
|
8.1
|
%
|
Forestry
|
5.6
|
%
|
|
6.8
|
%
|
|
6.8
|
%
|
|
13.7
|
%
|
Other
|
0.8
|
%
|
|
0.1
|
%
|
|
0.4
|
%
|
|
0.1
|
%
|
Consolidated operating revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
For more information regarding our operating segments, see Note 17,
Segment Information
of our condensed consolidated financial statements included in this quarterly report.
Residential Real Estate
Our residential real estate segment typically plans and develops mixed-use resort, primary residential and seasonal residential communities of various sizes, primarily on our existing land. The following is a description of some of our major residential development communities in Florida that we are currently in the process of planning or developing:
The Watersound Origins community
is a residential community in South Walton County, Florida, with direct access to Lake Powell. The project has received government approval for 1,074 single-family units with an additional multi-family component, however, the actual number of units that we ultimately approve for development will depend on our development strategy, the extent to which the anticipated returns of the project meets our investment return criteria and the availability of capital resources to fund such development. The Watersound Origins community includes a six-hole golf course that is operated by our resorts and leisure segment.
The Breakfast Point community
is a residential community in Panama City Beach, Florida. The project has received government approval for 368 single family units. However, the actual number of units that we ultimately approve for development will depend on our development strategy, the extent to which the anticipated returns of the project meet our investment return criteria and the availability of capital resources to fund such development.
The SouthWood community
is a large scale, mixed use community located in the southeastern section of Tallahassee. The project has received government approval for 4,770 residential units, including 2,074 single family residences and 2,696 multi-family units, however, the actual number of units that we ultimately approve for development will depend on our development strategy, the extent to which the anticipated returns of the project meet our investment return criteria and the availability of capital resources to fund such development. SouthWood also includes a golf clubhouse, 18-hole golf course and a town center with restaurants, retail shops and offices. The SouthWood Golf Club is operated by our resorts and leisure segment and a portion of the town center is leased and operated by our leasing segment.
We have other residential communities, such as the SummerCamp Beach, RiverCamps and WindMark Beach communities that have homesites available for sale. In addition, we have residential communities, such as the WaterColor, WaterSound Beach and WaterSound West Beach communities that are substantially developed and the remaining developed and available homesites in these communities are available for sale.
Our residential real estate segment generates revenue primarily from the sale of developed homesites; the sale of parcels of entitled, undeveloped land; a lot residual on homebuilder sales that provides us a percentage of the sale price of the completed home if the home price exceeds a negotiated threshold; the sale of impact fee credits; marketing fees and other fees on certain transactions. The results of our residential real estate revenue may vary from period to period depending on the communities where lots are sold, as prices vary significantly by community.
Our customer base for the sale of developed homesites is primarily focused on homebuilders. Homebuilders generally buy more homesites in a single transaction but tend to buy on a more sporadic basis. As a result, we may experience volatility in the consistency and pace of our residential real estate sales. In addition, the mix of homesites that we currently sell consists mostly of homesites in our primary communities which typically have a lower price and gross profit margin than homesites in our resort communities.
Our residential real estate segment incurs cost of revenue primarily from costs directly associated with the land, development and construction of real estate sold and indirect costs such as development overhead, capitalized interest, marketing, project administration and selling costs.
The Bay-Walton Sector Plan is a long term master plan that includes entitlements, or legal rights, to develop over 170,000 residential units and over 22 million square feet of retail, commercial and industrial uses on approximately 110,500 acres of our land holdings. We anticipate a wide range of residential and commercial uses on these land holdings, including some portion of these entitlements serving the active adult retirement market. We believe that there is a growing retirement demographic and that our development experience and the location, size and contiguous nature of our Florida land holdings provide us with strategic opportunities in this demographic. As is true with all of our projects, what will actually be developed will be a function of more detailed planning, analysis and market conditions, which will occur over time.
As part of the April 2014 RiverTown real estate sale, the buyer, Mattamy, is obligated to pay impact fees. Based on Mattamy’s current development plans and St. Johns County’s current costs for impact fees, we estimate that we may receive $20.0 million to $26.0 million for the impact fees over the five-year period following the closing (most of which, we expect to receive at the end of that five-year period). However, the actual additional consideration received for the impact fees will be based on a variety of factors outside our control. We received $0.1 million and $0.2 million during the three and nine months ended September 30, 2016, respectively, and we have received a total of approximately $0.5 million from April 2014 through September 30, 2016.
Commercial Real Estate
In our commercial real estate segment, we plan, develop and entitle our land holdings for a variety of uses including a broad range of retail, office, hotel and industrial uses. We sell land for commercial and light industrial uses. From time to time, our commercial real estate segment also evaluates opportunities to maximize value by selling some of our resorts, leisure or operating properties.
Our commercial real estate segment generates revenue from the sale of developed and undeveloped land for retail, office, hotel and industrial uses, from the sale of undeveloped land or land with limited development and easements and the sale of commercial operating properties. Our commercial real estate segment incurs costs of revenue from costs directly associated with the land, development, construction and selling costs.
Resorts and Leisure
Our resorts and leisure segment features a diverse portfolio of vacation rentals and a hotel, as well as golf courses, a beach club, marinas and other related resort amenities.
WaterColor Inn, Vacation Rentals and Other Management Services -
Our WaterColor Inn and vacation rentals generate revenue from (1) the WaterColor Inn and Resort and other management services, (2) our management of The Pearl Hotel, (3) our vacation rental business and (4) our restaurants. The WaterColor Inn incurs expenses from the cost of services and goods provided, personnel costs and third party management fees. Revenue generated for our management services of The Pearl Hotel include a management fee, fifty percent of certain resort fees and a percentage of The Pearl Hotel’s gross operating profit. Expenses include primarily internal administrative costs. Our vacation rental business generates revenue from the rental of private homes and other services, which includes the entire rental fee collected from the customer, including the homeowner’s portion. A percentage of the fee is remitted to the homeowner and presented in the cost of resorts and leisure revenue. The vacation rental business also incurs expenses from standard lodging personnel, such as front desk, reservations and marketing.
Clubs -
Our club operations include our golf courses, beach club and facilities that generate revenue from memberships, daily play at our golf courses, merchandise sales and food and beverage sales and incur expenses from the services provided, maintenance of the golf course and beach club facilities, personnel costs and third party management fees.
St. Joe Club & Resorts includes our private membership club that provides members, participating homeowners and their rental guests access to our facilities. The focus is on creating a world class membership experience combined with the all-inclusive aspects of a four star/four diamond resort.
Marinas -
Our marinas generate revenue from boat slip rentals and fuel sales, and incur expenses from cost of services provided, maintenance of the marina facilities, personnel costs and third party management fees.
Leasing Operations
Our leasing operations generate revenue from leasing retail and commercial property, including properties located in our consolidated joint venture at Pier Park North, commerce parks and our industrial park, VentureCrossings, and incur expenses primarily from maintenance and management of these properties and personnel costs. Our Pier Park North joint venture also incurs interest and financing expenses related to its loan as described in
Note 9,
Real Estate Joint Ventures
.
Forestry
Our forestry segment focuses on the management of our timber holdings in Northwest Florida. We grow and sell sawtimber, wood fiber and forest products. We generate revenue from our forestry segment primarily from open market sales of timber. We sell product on site without the associated delivery costs. Our forestry segment generates revenue from the sale of wood fiber, sawtimber, standing timber and forest products. Our forestry segment incurs costs of revenue from internal costs of forestry management and property taxes.
Our forestry segment may also generate revenue from the sale of our timber holdings, undeveloped land or land with limited development and easements. Costs incurred as part of a sale of these lands may include the cost of timber, land, minimal development costs and selling costs.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our condensed 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, revenue 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.
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, 2015
. There have been no significant changes in these policies during the first
nine
months of
2016
, however we cannot assure you that these policies will not change in the future.
Recently Adopted and Issued Accounting Pronouncements
See Note 1 to our condensed consolidated financial statements included in this report for recently issued or adopted accounting standards, including the date of adoption and effect on our condensed consolidated financial statements.
Seasonality
Our businesses may be affected by seasonal fluctuations. For example, revenue from our resorts and leisure operations are typically higher in the second and third quarters; however, they can vary depending on the timing of holidays and school breaks, including spring break.
In addition to the seasonality effect described above, our residential real estate business from retail sales, which have a more consistent flow of revenue, are predominantly sales to homebuilders, who tend to buy multiple lots in sporadic transactions which impacts the variability in our results of operations. In addition, the results of our residential real estate revenue may vary from period to period depending on the communities where lots are sold, as prices vary significantly by community. Our commercial real estate projects are likewise subject to one-off sales and the development of specific projects depending on demand. These variables have caused, and may continue to cause, our operating results to vary significantly from period to period.
Results of Operations
Consolidated Results
The following table sets forth a comparison of the results of our operations for the
three and nine
months ended
September 30, 2016
and
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
In millions
|
Revenue:
|
|
|
|
|
|
|
|
Real estate revenue
|
$
|
4.2
|
|
|
$
|
4.9
|
|
|
$
|
18.0
|
|
|
$
|
24.3
|
|
Resorts and leisure revenue
|
19.0
|
|
|
18.5
|
|
|
47.6
|
|
|
45.7
|
|
Leasing revenue
|
2.7
|
|
|
2.5
|
|
|
7.4
|
|
|
6.8
|
|
Timber revenue
|
1.3
|
|
|
1.9
|
|
|
4.0
|
|
|
6.0
|
|
Total
|
27.2
|
|
|
27.8
|
|
|
77.0
|
|
|
82.8
|
|
Expenses:
|
|
|
|
|
|
|
|
Cost of real estate revenue
|
2.0
|
|
|
2.5
|
|
|
6.7
|
|
|
12.3
|
|
Cost of resorts and leisure revenue
|
15.4
|
|
|
14.7
|
|
|
40.4
|
|
|
38.2
|
|
Cost of leasing revenue
|
0.7
|
|
|
0.7
|
|
|
2.2
|
|
|
2.0
|
|
Cost of timber revenue
|
0.2
|
|
|
0.2
|
|
|
0.6
|
|
|
0.6
|
|
Other operating and corporate expenses
|
5.2
|
|
|
9.9
|
|
|
17.7
|
|
|
24.7
|
|
Depreciation, depletion and amortization
|
2.1
|
|
|
2.2
|
|
|
6.5
|
|
|
7.3
|
|
Total expenses
|
25.6
|
|
|
30.2
|
|
|
74.1
|
|
|
85.1
|
|
Operating income (loss)
|
1.6
|
|
|
(2.4
|
)
|
|
2.9
|
|
|
(2.3
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
Investment income, net
|
4.7
|
|
|
9.1
|
|
|
10.4
|
|
|
19.8
|
|
Interest expense
|
(3.1
|
)
|
|
(2.9
|
)
|
|
(9.3
|
)
|
|
(8.4
|
)
|
Claim settlement
|
—
|
|
|
—
|
|
|
12.5
|
|
|
—
|
|
Other, net
|
0.4
|
|
|
0.2
|
|
|
1.5
|
|
|
(6.3
|
)
|
Total other income
|
2.0
|
|
|
6.4
|
|
|
15.1
|
|
|
5.1
|
|
Income before income taxes
|
3.6
|
|
|
4.0
|
|
|
18.0
|
|
|
2.8
|
|
Income tax expense
|
(0.9
|
)
|
|
(1.2
|
)
|
|
(5.2
|
)
|
|
(2.0
|
)
|
Net income
|
$
|
2.7
|
|
|
$
|
2.8
|
|
|
$
|
12.8
|
|
|
$
|
0.8
|
|
Real Estate Revenue and Gross Profit
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
%
(1)
|
|
2015
|
|
%
(1)
|
|
2016
|
|
%
(1)
|
|
2015
|
|
%
(1)
|
|
Dollars in millions
|
|
Dollars in millions
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate revenue
|
$
|
3.1
|
|
|
73.8
|
%
|
|
$
|
4.9
|
|
|
100.0
|
%
|
|
$
|
15.9
|
|
|
88.4
|
%
|
|
$
|
14.3
|
|
|
58.9
|
%
|
Commercial real estate revenue
|
0.6
|
|
|
14.3
|
%
|
|
—
|
|
|
—
|
%
|
|
0.6
|
|
|
3.3
|
%
|
|
4.7
|
|
|
19.3
|
%
|
Rural land and other revenue
|
0.5
|
|
|
11.9
|
%
|
|
—
|
|
|
—
|
%
|
|
1.5
|
|
|
8.3
|
%
|
|
5.3
|
|
|
21.8
|
%
|
Real estate revenue
|
$
|
4.2
|
|
|
100.0
|
%
|
|
$
|
4.9
|
|
|
100.0
|
%
|
|
$
|
18.0
|
|
|
100.0
|
%
|
|
$
|
24.3
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate revenue
|
$
|
1.8
|
|
|
58.1
|
%
|
|
$
|
2.4
|
|
|
49.0
|
%
|
|
$
|
10.1
|
|
|
63.5
|
%
|
|
$
|
6.8
|
|
|
47.6
|
%
|
Commercial real estate revenue
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
0.5
|
|
|
10.6
|
%
|
Rural land and other revenue
|
0.4
|
|
|
80.0
|
%
|
|
—
|
|
|
—
|
%
|
|
1.2
|
|
|
80.0
|
%
|
|
4.7
|
|
|
88.7
|
%
|
Gross profit
|
$
|
2.2
|
|
|
52.4
|
%
|
|
$
|
2.4
|
|
|
49.0
|
%
|
|
$
|
11.3
|
|
|
62.8
|
%
|
|
$
|
12.0
|
|
|
49.4
|
%
|
|
|
|
(1)
|
Calculated percentage of total real estate revenue and the respective gross margin percentage.
|
Real Estate Revenue.
During the three months ended
September 30, 2016
, residential real estate revenue decreased
$1.8 million
, or
36.7%
, as compared to the same period in
2015
, primarily due to the mix of homesites sold in our primary home communities. During both the three months ended
September 30, 2016
and
2015
, we sold
34
lots. The revenue for each period was impacted by the volume of sales within each of the communities and variance in pricing among the communities. During the
nine
months ended
September 30, 2016
, residential real estate revenue increased
$1.6 million
, or
11.2%
, as compared to the same period in
2015
, primarily due to a $3.4 million unimproved land sale and the mix of homesites sold in our communities. During the
nine
months ended
September 30, 2016
, we sold
79
lots compared to
122
lots during the same period in
2015
, due to the timing of builder contractual closing obligations.
During the three and
nine
months ended
September 30, 2016
there were three commercial real estate sales totaling approximately 4 acres for $0.6 million. During the three months ended
September 30, 2015
, there was no commercial real estate revenue. During the
nine
months ended
September 30, 2015
, there were two sales of commercial real estate totaling approximately 11 acres for $4.7 million.
During the three months ended
September 30, 2016
, we sold approximately 90 acres of rural and timber land for
$0.2 million
and approximately 3 acres of mitigation bank credits for less than
$0.3 million
. During the three months ended
September 30, 2015
there was no rural land and other revenue. During the
nine
months ended
September 30, 2016
, we sold approximately 696 acres of rural and timber land for $1.2 million and approximately 4 acres of mitigation bank credits for
$0.3 million
. During the
nine
months ended
September 30, 2015
, we sold approximately 3,330 acres of rural and timber land for $5.3 million and approximately 1 acre of mitigation bank credits for less than $0.1 million. Revenue from rural land and commercial real estate can vary drastically from period to period.
For additional information see the Segment Results sections for
Residential Real Estate
,
Commercial Real Estate
and
Forestry
.
Real Estate Revenue Gross Profit
. During the three months ended
September 30, 2016
, residential real estate gross profit was
$1.8 million
, or
58.1%
, as compared to
$2.4 million
, or
49.0%
, during the same period in
2015
. During the
nine
months ended
September 30, 2016
, residential real estate gross profit was
$10.1 million
, or
63.5%
, as compared to
$6.8 million
, or
47.6%
, during the same period in
2015
. Included in the residential real estate revenue for the
nine
months ended
September 30, 2016
, is a $3.4 million unimproved land sale with a gross profit of $3.3 million due to a low historical basis.
During the three and nine months ended
September 30, 2016
, cost of commercial real estate revenue included
$0.2 million
on the sale of commercial real estate and
$0.4 million
of impairment charges related to a commerce park, which resulted in no commercial real estate gross profit. During the three months ended September 30, 2015, there were no commercial real estate sales or gross profit. During the nine months ended September 30, 2015, the commercial real estate gross profit was
$0.5 million
, or
10.6%
.
During the three months ended
September 30, 2016
, rural land and other revenue gross profit was
$0.4 million
, or
80.0%
. During the three months ended September 30, 2015, there was no rural land and other revenue or gross profit. During the
nine
months ended
September 30, 2016
, rural land and other revenue gross profit was
$1.2 million
, or
80.0%
, as compared to
$4.7 million
, or
88.7%
, during the same period in
2015
.
Our gross profit margin can vary significantly from period to period depending on the type of property sold. Sales of rural and timber land typically have a lower basis than residential and commercial real estate sales. In addition, our basis in residential and commercial real estate can vary depending on the amount of development or other costs spent on the property.
Resorts and Leisure Revenue and Gross Profit
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Dollars in millions
|
Resorts and leisure revenue
|
$
|
19.0
|
|
|
$
|
18.5
|
|
|
$
|
47.6
|
|
|
$
|
45.7
|
|
Gross profit
|
$
|
3.6
|
|
|
$
|
3.8
|
|
|
$
|
7.2
|
|
|
$
|
7.5
|
|
Gross margin
|
18.9
|
%
|
|
20.5
|
%
|
|
15.1
|
%
|
|
16.4
|
%
|
|
|
|
|
|
|
|
|
Resorts and leisure revenue increased
$0.5 million
, or
2.7%
, during the three months ended
September 30, 2016
, as compared to the same period in
2015
, due to an increase in average room rates at both the WaterColor Inn and in the vacation rental program, along with an increase in average home size managed in the vacation rental program and increased membership revenue. Revenue from our resorts and leisure operations are typically higher in the second and third quarters; however, they can vary depending on the timing of holidays and school breaks, including spring break. Our gross margin decreased during the three months ended
September 30, 2016
, primarily due to increased cost of revenue in our vacation rental business, higher contract labor rates and hours worked as compared to the same period in 2015.
Resorts and leisure revenue increased
$1.9 million
, or
4.2%
, during the
nine
months ended
September 30, 2016
, as compared to the same period in
2015
, due to additional vacation rental revenue from renting larger homes, higher room rates and increased membership revenue. Our gross margin has decreased during the
nine
months ended
September 30, 2016
, primarily due to increased cost of revenue in our vacation rental business, higher contract labor rates and hours worked as compared to the same period in 2015.
Leasing Revenue and Gross Profit
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Dollars in millions
|
Leasing revenue
|
$
|
2.7
|
|
|
$
|
2.5
|
|
|
$
|
7.4
|
|
|
$
|
6.8
|
|
Gross profit
|
$
|
2.0
|
|
|
$
|
1.8
|
|
|
$
|
5.2
|
|
|
$
|
4.8
|
|
Gross margin
|
74.1
|
%
|
|
72.0
|
%
|
|
70.3
|
%
|
|
70.6
|
%
|
|
|
|
|
|
|
|
|
Leasing revenue increased
$0.2 million
, or
8.0%
, during the three months ended
September 30, 2016
, as compared to the same period in
2015
. Leasing revenue increased
$0.6 million
, or
8.8%
, during the
nine
months ended
September 30, 2016
, as compared to the same period in
2015
. The increase in revenue for both the three and
nine
months ended
September 30, 2016
, is primarily due to the continued commencement of revenue from new store openings in our Pier Park North joint venture, as well as other new leases.
Timber Revenue and Gross Profit
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Dollars in millions
|
Timber revenue
|
$
|
1.3
|
|
|
$
|
1.9
|
|
|
$
|
4.0
|
|
|
$
|
6.0
|
|
Gross profit
|
$
|
1.1
|
|
|
$
|
1.7
|
|
|
$
|
3.4
|
|
|
$
|
5.4
|
|
Gross margin
|
84.6
|
%
|
|
89.5
|
%
|
|
85.0
|
%
|
|
90.0
|
%
|
|
|
|
|
|
|
|
|
Timber revenue decreased
$0.6 million
, or
31.6%
, during the three months ended
September 30, 2016
as compared to the same period in
2015
, primarily due to a decrease in the amount of tons sold due to fluctuations in market supply. There were
84,000
tons sold during the three months ended
September 30, 2016
, as compared to
109,000
tons sold during the three months ended
September 30, 2015
.
Timber revenue decreased
$2.0 million
, or
33.3%
, during the
nine
months ended
September 30, 2016
as compared to the same period in
2015
, primarily due to a decrease in the amount of tons sold due to fluctuations in market supply. There were
229,000
tons sold during the
nine
months ended
September 30, 2016
, as compared to
338,000
tons sold during the
nine
months ended
September 30, 2015
.
Other operating and corporate expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
In millions
|
Employee costs
|
$
|
1.8
|
|
|
$
|
4.5
|
|
|
$
|
5.3
|
|
|
$
|
10.0
|
|
401(k) contribution / pension costs
|
—
|
|
|
—
|
|
|
1.4
|
|
|
1.1
|
|
Non-cash stock compensation costs
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.2
|
|
Property taxes and insurance
|
1.4
|
|
|
1.4
|
|
|
4.2
|
|
|
4.4
|
|
Professional fees
|
1.2
|
|
|
2.8
|
|
|
3.8
|
|
|
5.6
|
|
Marketing and owner association costs
|
0.3
|
|
|
0.3
|
|
|
1.0
|
|
|
1.0
|
|
Occupancy, repairs and maintenance
|
0.2
|
|
|
0.2
|
|
|
0.5
|
|
|
0.7
|
|
Other
|
0.3
|
|
|
0.7
|
|
|
1.4
|
|
|
1.7
|
|
Total other operating and corporate expense
|
$
|
5.2
|
|
|
$
|
9.9
|
|
|
$
|
17.7
|
|
|
$
|
24.7
|
|
Other operating and corporate expenses decreased by
$4.7 million
, or
47.5%
, during the three months ended
September 30, 2016
, as compared to the same period in
2015
. Other operating and corporate expenses decreased by
$7.0 million
, or
28.3%
, during the
nine
months ended
September 30, 2016
, as compared to the same period in
2015
. The decrease in other operating and corporate expenses is primarily due to our continued focus on a low expense structure, which has led to decreases in personnel costs, professional fees and other expenses.
Investment income, net.
Investment income, net primarily includes (i) interest and dividends earned, (ii) accretion of the net discount, (iii) realized gains from our available for-sale-investments, (iv) interest income earned on the time deposit held by the Buyer SPE and (v) interest earned on mortgage notes receivable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
In millions
|
Net investment income from available-for-sale securities
|
|
|
|
|
|
|
|
Interest and dividend income
|
$
|
1.5
|
|
|
$
|
1.1
|
|
|
$
|
2.0
|
|
|
$
|
5.5
|
|
Accretion income
|
1.0
|
|
|
0.6
|
|
|
2.0
|
|
|
2.1
|
|
Realized gains on the sale of investments
|
—
|
|
|
5.3
|
|
|
—
|
|
|
5.3
|
|
Total net investment income from available-for-sale securities
|
2.5
|
|
|
7.0
|
|
|
4.0
|
|
|
12.9
|
|
Interest income from investments in special purpose entities
|
2.1
|
|
|
2.1
|
|
|
6.2
|
|
|
6.2
|
|
Interest accrued on notes receivable and other interest
|
0.1
|
|
|
—
|
|
|
0.2
|
|
|
0.7
|
|
Total investment income, net
|
$
|
4.7
|
|
|
$
|
9.1
|
|
|
$
|
10.4
|
|
|
$
|
19.8
|
|
Investment income, net, decreased
$4.4 million
, or
48.4%
, to
$4.7 million
for the three months ended
September 30, 2016
as compared to
$9.1 million
for the three months ended
September 30, 2015
, due primarily to the sale of certain corporate debt securities at a realized gain of $5.3 million during the three months ended
September 30, 2015
, which was partially offset by an increase in interest and dividend income and accretion income on available-for-sale securities for the three months ended
September 30, 2016
.
Investment income, net decreased
$9.4 million
, or
47.5%
, to
$10.4 million
for the
nine
months ended
September 30, 2016
as compared to
$19.8 million
for the
nine
months ended
September 30, 2015
, due primarily to the sale of certain corporate debt securities at a realized gain of $5.3 million during the nine months ended
September 30, 2015
and a decrease in interest and dividend income on available-for-sale securities during the
nine
months ended
September 30, 2016
. The decrease in interest and dividend income was due primarily to the reduction in investments held during the period. During the nine months ended
September 30, 2016
, the average balance of investments was approximately
$209.4 million
compared to an average of approximately
$412.5 million
for the nine months ended
September 30, 2015
. The decrease in investments during these periods is primarily related to the repurchase of common stock during 2015 and 2016 under our Stock Repurchase Program.
Interest expense.
Interest expense primarily includes interest expense on our CDD assessments, the Senior Notes issued by NFTF in April 2014 in connection with the AgReserves Sale and the construction loan and Refinanced Loan for our consolidated Pier Park North joint venture.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
In millions
|
Interest expense and amortization of discount and issuance costs for Senior Notes issued by special purpose entity
|
$
|
2.3
|
|
|
$
|
2.2
|
|
|
$
|
6.7
|
|
|
$
|
6.6
|
|
Interest expense
|
0.8
|
|
|
0.7
|
|
|
2.6
|
|
|
1.8
|
|
Total interest expense
|
$
|
3.1
|
|
|
$
|
2.9
|
|
|
$
|
9.3
|
|
|
$
|
8.4
|
|
Interest expense increased
$0.2 million
, or
6.9%
, and
$0.9 million
, or
10.7%
, during the three and
nine
months ended
September 30, 2016
, respectively, as compared to the same periods in 2015. The increase in interest expense is primarily related to the Refinanced Loan for our consolidated Pier Park North joint venture.
Claim settlement.
Claim settlement consists of $12.5 million for the
nine
months ended
September 30, 2016
due to a settlement related to the Deepwater Horizon oil spill.
Other, net.
During the three and
nine
months ended
September 30, 2015
, the Company expensed a total of
$0.4 million
and
$7.9 million
, respectively, related to the SEC investigation, which was resolved in October 2015.
Income tax expense.
We recorded income tax expense of
$0.9 million
during the three months ended
September 30, 2016
, as compared to income tax expense of
$1.2 million
during the same period in
2015
. Our effective tax rate was
25.9%
for the three months ended
September 30, 2016
, as compared to
31.1%
during the same period in
2015
.
We recorded income tax expense of
$5.2 million
during the
nine
months ended
September 30, 2016
, as compared to income tax expense of
$2.0 million
during the same period in
2015
. Our effective tax rate was
28.2%
for the
nine
months ended
September 30, 2016
, as compared to
71.5%
during the same period in
2015
.
These effective tax rates differ from the U.S. Federal statutory rate of 35% primarily due to the effect of the lower timber rate of 23.8%, impact of state taxes, changes in the valuation allowance and changes in permanent book to tax differences. Our effective rate for the
nine
months ended
September 30, 2015
, reflected our expectation that settlement costs related to the SEC investigation may not be deductible for income tax purposes, which increased our effective rate in 2015.
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. We own land in Northwest Florida, including Gulf of Mexico beach frontage and waterfront properties, concentrated primarily between Tallahassee and Destin, Florida.
The table below sets forth the results of operations of our residential real estate segment for the
three and nine
months ended
September 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
In millions
|
Revenue:
|
|
|
|
|
|
|
|
Real estate revenue
|
$
|
2.7
|
|
|
$
|
4.4
|
|
|
$
|
14.4
|
|
|
$
|
13.0
|
|
Other revenue
|
0.4
|
|
|
0.5
|
|
|
1.5
|
|
|
1.3
|
|
Total revenue
|
3.1
|
|
|
4.9
|
|
|
15.9
|
|
|
14.3
|
|
Expenses:
|
|
|
|
|
|
|
|
Cost of real estate and other revenue
|
1.3
|
|
|
2.5
|
|
|
5.8
|
|
|
7.5
|
|
Other operating expenses
|
1.3
|
|
|
3.6
|
|
|
4.2
|
|
|
8.0
|
|
Depreciation and amortization
|
—
|
|
|
0.1
|
|
|
0.3
|
|
|
0.4
|
|
Total expenses
|
2.6
|
|
|
6.2
|
|
|
10.3
|
|
|
15.9
|
|
Operating income (loss)
|
0.5
|
|
|
(1.3
|
)
|
|
5.6
|
|
|
(1.6
|
)
|
Other expense
|
(0.3
|
)
|
|
(0.3
|
)
|
|
(0.9
|
)
|
|
—
|
|
Net income (loss) before income taxes
|
$
|
0.2
|
|
|
$
|
(1.6
|
)
|
|
$
|
4.7
|
|
|
$
|
(1.6
|
)
|
Real estate revenue include sales of homes, homesites and other residential land and certain lot residuals from homebuilder sales that provide us a percentage of the sale price of the completed home if the home price exceeds a negotiated threshold. Other revenue includes brokerage fees, marketing fees and impact fee credits sold. Cost of real estate revenue includes direct costs (e.g., development and construction costs), selling costs and other indirect costs (e.g., development overhead, capitalized interest and project administration costs). For the three and
nine
months ended September 30,
2015
, other operating expenses include non-recurring expenses related to the Bay-Walton Sector Plan.
Three Months Ended September 30, 2016
Compared to the
Three Months Ended September 30, 2015
The following table sets forth our residential real estate revenue and cost of revenue activity by property type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2016
|
|
Three Months Ended September 30, 2015
|
|
Units Sold
|
|
Revenue
|
|
Cost of
Revenue
|
|
Gross
Profit
|
|
Gross
Margin
|
|
Units Sold
|
|
Revenue
|
|
Cost of
Revenue
|
|
Gross
Profit
|
|
Gross
Margin
|
|
(Dollars in millions)
|
Resort homesites
|
2
|
|
|
$
|
1.2
|
|
|
$
|
0.3
|
|
|
$
|
0.9
|
|
|
75.0
|
%
|
|
3
|
|
|
$
|
1.4
|
|
|
$
|
0.4
|
|
|
$
|
1.0
|
|
|
71.4
|
%
|
Primary homesites
|
32
|
|
|
1.5
|
|
|
0.7
|
|
|
0.8
|
|
|
53.3
|
%
|
|
31
|
|
|
3.0
|
|
|
1.7
|
|
|
1.3
|
|
|
43.3
|
%
|
Total
|
34
|
|
|
$
|
2.7
|
|
|
$
|
1.0
|
|
|
$
|
1.7
|
|
|
63.0
|
%
|
|
34
|
|
|
$
|
4.4
|
|
|
$
|
2.1
|
|
|
$
|
2.3
|
|
|
52.3
|
%
|
Resort homesites.
Revenue from resort homesite sales decreased
$0.2 million
, or
14.3%
, during the three months ended
September 30, 2016
, as compared to the same period in
2015
, primarily due to the number and mix of homesites sold in our resort home communities. During the three months ended
September 30, 2016
, the average revenue per resort homesite sold was approximately $0.6 million, as compared to approximately $0.4 million during the same period in 2015. Gross profit margins increased to
75.0%
during the three months ended
September 30, 2016
, as compared to
71.4%
during the same period in
2015
, primarily due to the mix of homesites sold during each respective period.
Primary homesites.
Revenue from primary homesite sales decreased
$1.5 million
, or
50.0%
, during the three months ended
September 30, 2016
, as compared to the same period in
2015
, due to the mix of sales, which were primarily in our Watersound Origins, Breakfast Point and Southwood communities. During the three months ended
September 30, 2016
, the average revenue per primary homesite sold was less than $0.1 million, as compared to approximately $0.1 million during the same period in 2015. Gross profit margin increased to
53.3%
during the three months ended
September 30, 2016
, as compared to
43.3%
during the same period in
2015
, primarily due to the mix of homesites sold during each respective period and the timing of the receipt of lot residuals that have no related costs at the time of recognition.
Other operating expenses include salaries and benefits, property taxes, marketing, project administration, support personnel and other administrative expenses. Other operating expenses decreased
$2.3 million
, or
63.9%
, during the three months ended
September 30, 2016
, as compared to the same period in
2015
, primarily due to decreases in personnel costs and professional fees, due to our continued focus on a low expense structure.
During the three months ended
September 30, 2016
and
2015
, we capitalized less than $0.1 million of indirect development costs related to our residential development projects.
For the three months ended
September 30, 2016
and
2015
, other expense primarily consists of interest expense on CDD assessments and other miscellaneous expenses, partially offset by interest earned on our mortgage notes receivable.
Nine Months Ended September 30, 2016
Compared to the
Nine Months Ended September 30, 2015
The following table sets forth our residential real estate revenue and cost of revenue activity by property type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016
|
|
Nine Months Ended September 30, 2015
|
|
Units Sold
|
|
Revenue
|
|
Cost of
Revenue
|
|
Gross
Profit
|
|
Gross
Margin
|
|
Units Sold
|
|
Revenue
|
|
Cost of
Revenue
|
|
Gross
Profit
|
|
Gross
Margin
|
|
(Dollars in millions)
|
Resort homesites
|
10
|
|
|
$
|
5.8
|
|
|
$
|
2.2
|
|
|
$
|
3.6
|
|
|
62.1
|
%
|
|
17
|
|
|
$
|
5.9
|
|
|
$
|
2.1
|
|
|
$
|
3.8
|
|
|
64.4
|
%
|
Resort home
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
1
|
|
|
0.8
|
|
|
0.8
|
|
|
—
|
|
|
—
|
%
|
Primary homesites
|
69
|
|
|
5.2
|
|
|
2.6
|
|
|
2.6
|
|
|
50.0
|
%
|
|
104
|
|
|
6.3
|
|
|
3.6
|
|
|
2.7
|
|
|
42.9
|
%
|
Land sale
|
N/A
|
|
|
3.4
|
|
|
0.1
|
|
|
3.3
|
|
|
97.1
|
%
|
|
N/A
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
Total
|
79
|
|
|
$
|
14.4
|
|
|
$
|
4.9
|
|
|
$
|
9.5
|
|
|
66.0
|
%
|
|
122
|
|
|
$
|
13.0
|
|
|
$
|
6.5
|
|
|
$
|
6.5
|
|
|
50.0
|
%
|
Resort homesites and resort home.
Revenue from resort homesite sales decreased
$0.1 million
, or
1.7%
, during the
nine
months ended
September 30, 2016
, as compared to the same period in
2015
. During the nine months ended
September 30, 2016
, the average revenue per resort homesite sold was approximately $0.5 million, as compared to approximately $0.4 million during the same period in 2015. Gross profit margins decreased to
62.1%
during the
nine
months ended
September 30, 2016
, as compared to
64.4%
during the same period in
2015
, primarily due to the mix of homesites sold during each respective period.
Primary homesites.
Revenue from primary homesite sales decreased
$1.1 million
, or
17.5%
, during the
nine
months ended
September 30, 2016
, as compared to the same period in
2015
, due to the mix and timing of sales, which were primarily in our Watersound Origins, Breakfast Point and Southwood communities. During both the nine months ended
September 30, 2016
and 2015, the average revenue per primary homesite sold was approximately $0.1 million. Gross profit margin increased to
50.0%
during the
nine
months ended
September 30, 2016
, as compared to
42.9%
during the same period in
2015
, primarily due to the mix of homesites sold during each respective period and the timing of the receipt of lot residuals that have no related costs at the time of recognition.
Land sales. D
uring the
nine
months ended
September 30, 2016
, we had a sale of approximately 111 acres of unimproved residential land for $3.4 million resulting in a gross margin of $3.3 million.
Other operating expenses include salaries and benefits, property taxes, marketing, project administration, support personnel and other administrative expenses. Other operating expenses decreased
$3.8 million
, or
47.5%
, during the
nine
months ended
September 30, 2016
, as compared to the same period in
2015
, primarily due to decreases in personnel costs and professional fees, due to our continued focus on a low expense structure.
During the
nine
months ended
September 30, 2016
and
2015
, we capitalized less than $0.1 million of indirect development costs related to our residential development projects.
For the
nine
months ended
September 30, 2016
, other expense primarily consists of interest expense on CDD assessments and other miscellaneous expenses, partially offset by interest earned on our mortgage notes receivable.
Commercial Real Estate
Our commercial real estate segment plans, develops, entitles and sells our land holdings, often in conjunction with strategic partners, for a broad range of retail, office, hotel, apartments and industrial uses. From time to time, our commercial real estate segment may also sell properties in our resort and leisure or leasing operations segments. The timing of commercial real estate revenue can vary depending on the demand, size and location of the property.
The table below sets forth the results of operations of our commercial real estate segment for the
three and nine
months ended
September 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
In millions
|
Revenue:
|
|
|
|
|
|
|
|
Real estate revenue
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
0.6
|
|
|
$
|
4.7
|
|
Expenses:
|
|
|
|
|
|
|
|
Cost of real estate revenue
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|
4.2
|
|
Other operating expenses
|
0.5
|
|
|
0.6
|
|
|
1.6
|
|
|
1.7
|
|
Total expenses
|
1.1
|
|
|
0.6
|
|
|
2.2
|
|
|
5.9
|
|
Operating loss
|
(0.5
|
)
|
|
(0.6
|
)
|
|
(1.6
|
)
|
|
(1.2
|
)
|
Other expense
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
Net loss before income taxes
|
$
|
(0.5
|
)
|
|
$
|
(0.7
|
)
|
|
$
|
(1.6
|
)
|
|
$
|
(1.3
|
)
|
Three and Nine
Months Ended
September 30, 2016
Compared to the
Three and Nine
Months Ended
September 30, 2015
Commercial land sales can vary depending on the mix of commercial land sold in each period, with varying compositions of retail, office, light industrial and other commercial uses. During the
three and nine
months ended
September 30, 2016
, there were three commercial real estate sales totaling approximately 4 acres for $0.6 million. During the
three and nine
months ended
September 30, 2016
, impairment charges of
$0.4 million
were included in cost of real estate revenue, related to a commerce park. During the three months ended
September 30, 2015
, there was no commercial real estate revenue. During the
nine
months ended
September 30, 2015
, there were two sales of commercial real estate totaling approximately 11 acres for $4.7 million.
Other operating expenses include salaries and benefits, property taxes, professional fees and other administrative expenses.
Resorts and Leisure
Our resorts and leisure segment includes recurring revenue from our resorts and leisure operations. Resorts and leisure revenue and cost of resorts and leisure revenue include results of operations from the WaterColor Inn and vacation rental program, four golf courses, a beach club, marina operations, membership fees, other management services, including management of The Pearl Hotel and other related resort activities.
The table below sets forth the results of operations of our resorts and leisure segment for the
three and nine
months ended
September 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
In millions
|
Revenue:
|
|
|
|
|
|
|
|
Resorts and leisure revenue
|
$
|
19.0
|
|
|
$
|
18.5
|
|
|
$
|
47.6
|
|
|
$
|
45.7
|
|
Expenses:
|
|
|
|
|
|
|
|
Cost of resorts and leisure revenue
|
15.4
|
|
|
14.7
|
|
|
40.4
|
|
|
38.2
|
|
Other operating expenses
|
0.1
|
|
|
0.1
|
|
|
0.5
|
|
|
0.3
|
|
Depreciation
|
1.1
|
|
|
1.1
|
|
|
3.3
|
|
|
4.0
|
|
Total expenses
|
16.6
|
|
|
15.9
|
|
|
44.2
|
|
|
42.5
|
|
Net income before income taxes
|
$
|
2.4
|
|
|
$
|
2.6
|
|
|
$
|
3.4
|
|
|
$
|
3.2
|
|
The following table sets forth the detail of our resorts and leisure revenue and cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2016
|
|
Three Months Ended September 30, 2015
|
|
Revenue
|
|
Gross
Profit
|
|
Gross Margin
|
|
Revenue
|
|
Gross
Profit
|
|
Gross Margin
|
|
Dollars in millions
|
Resorts, vacation rentals and other management services
|
$
|
14.6
|
|
|
$
|
3.0
|
|
|
20.5
|
%
|
|
$
|
14.1
|
|
|
$
|
3.3
|
|
|
23.4
|
%
|
Clubs
|
3.6
|
|
|
0.4
|
|
|
11.1
|
%
|
|
3.4
|
|
|
0.2
|
|
|
5.9
|
%
|
Marinas
|
0.8
|
|
|
0.2
|
|
|
25.0
|
%
|
|
1.0
|
|
|
0.3
|
|
|
30.0
|
%
|
Total
|
$
|
19.0
|
|
|
$
|
3.6
|
|
|
18.9
|
%
|
|
$
|
18.5
|
|
|
$
|
3.8
|
|
|
20.5
|
%
|
Three Months Ended September 30, 2016
Compared to the
Three Months Ended September 30, 2015
Revenue from resorts, vacation rentals and other management services increased
$0.5 million
, or
3.5%
, during the three months ended
September 30, 2016
, as compared to the same period in
2015
, due to an increase in average room rates at both the WaterColor Inn and in the vacation rental program, along with an increase in average home size managed in the vacation rental program. Revenue from our clubs increased
$0.2 million
, or
5.9%
, during the three months ended
September 30, 2016
, as compared to the same period in
2015
, primarily due to a continued increase in total members, growth in rounds played at the golf courses by resort guests, a strong showing by our food and beverage component at the WaterSound Beach Club and increased membership revenue.
Our gross margin has decreased during the three months ended
September 30, 2016
, primarily due to increased cost of revenue in our vacation rental business, higher contract labor rates and hours worked as compared to the same period in 2015.
Other operating expenses include salaries and benefits, occupancy fees and other administrative expenses.
Nine Months Ended September 30, 2016
Compared to the
Nine Months Ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016
|
|
Nine Months Ended September 30, 2015
|
|
Revenue
|
|
Gross
Profit
|
|
Gross Margin
|
|
Revenue
|
|
Gross
Profit
|
|
Gross Margin
|
|
Dollars in millions
|
Resorts, vacation rentals and other management services
|
$
|
35.3
|
|
|
$
|
5.9
|
|
|
16.7
|
%
|
|
$
|
33.8
|
|
|
$
|
6.1
|
|
|
18.0
|
%
|
Clubs
|
10.2
|
|
|
0.8
|
|
|
7.8
|
%
|
|
9.5
|
|
|
0.8
|
|
|
8.4
|
%
|
Marinas
|
2.1
|
|
|
0.5
|
|
|
23.8
|
%
|
|
2.4
|
|
|
0.6
|
|
|
25.0
|
%
|
Total
|
$
|
47.6
|
|
|
$
|
7.2
|
|
|
15.1
|
%
|
|
$
|
45.7
|
|
|
$
|
7.5
|
|
|
16.4
|
%
|
Revenue from resorts, vacation rentals and other management services increased
$1.5 million
, or
4.4%
, during the
nine
months ended
September 30, 2016
, as compared to the same period in
2015
, due to an increase in average room rates at both the WaterColor Inn and in the vacation rental program, along with an increase in average home size managed in the vacation rental program. Revenue from our clubs increased
$0.7 million
, or
7.4%
, during the
nine
months ended
September 30, 2016
, as compared to the same period in
2015
, primarily due to a continued increase in total members, growth in rounds played at the golf courses by resort guests, a strong showing by our food and beverage component at the WaterSound Beach Club and increased membership revenue.
Our gross margin has decreased during the
nine
months ended
September 30, 2016
, primarily due to increased cost of revenue in our vacation rental business, higher contract labor rates and hours worked as compared to the same period in 2015.
Other operating expenses include salaries and benefits, occupancy fees and other administrative expenses.
Leasing Operations
Our leasing operations segment includes recurring revenue from our retail and commercial leasing operations, including our consolidated joint venture at Pier Park North.
The table below sets forth the results of operations of our leasing operations segment for the
three and nine
months ended
September 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
In millions
|
Revenue:
|
|
|
|
|
|
|
|
Leasing revenue
|
$
|
2.7
|
|
|
$
|
2.5
|
|
|
$
|
7.4
|
|
|
$
|
6.8
|
|
Expenses:
|
|
|
|
|
|
|
|
Cost of leasing revenue
|
0.7
|
|
|
0.7
|
|
|
2.2
|
|
|
2.0
|
|
Other operating expenses
|
0.2
|
|
|
0.2
|
|
|
1.1
|
|
|
0.6
|
|
Depreciation
|
0.8
|
|
|
0.8
|
|
|
2.4
|
|
|
2.3
|
|
Total expenses
|
1.7
|
|
|
1.7
|
|
|
5.7
|
|
|
4.9
|
|
Operating income
|
1.0
|
|
|
0.8
|
|
|
1.7
|
|
|
1.9
|
|
Other expense
|
(0.5
|
)
|
|
(0.3
|
)
|
|
(1.6
|
)
|
|
(0.8
|
)
|
Net income before income taxes
|
$
|
0.5
|
|
|
$
|
0.5
|
|
|
$
|
0.1
|
|
|
$
|
1.1
|
|
Three and Nine
Months Ended
September 30, 2016
Compared to the
Three and Nine
Months Ended
September 30, 2015
Revenue from leasing operations increased
$0.2 million
, or
8.0%
, during the three months ended
September 30, 2016
, as compared to the same period in
2015
. Revenue from leasing operations increased
$0.6 million
, or
8.8%
, during the
nine
months ended
September 30, 2016
, as compared to the same period in
2015
. The increase in revenue during the three and
nine
months ended
September 30, 2016
, is primarily due to the continued commencement of revenue from new store openings in our Pier Park North joint venture, as well as other new leases. As of
September 30, 2016
, we had approximately 517,000 square feet under lease.
Other operating expenses include property taxes, insurance, professional fees, marketing, project administration and other administrative expenses. In June of 2016, a settlement of a lease obligation resulted in a payment by the Pier Park North joint venture entity of
$0.4 million
. That
$0.4 million
payment is reflected in other operating expenses for the
nine
months ended
September 30, 2016
.
Other expense increased
$0.2 million
and
$0.8 million
for the three and
nine
months ended
September 30, 2016
, respectively, as compared to the same periods in
2015
. The increase is primarily due to interest expense from the Pier Park North joint venture Refinanced Loan.
During the three and
nine
months ended
September 30, 2016
, we capitalized no indirect development costs related to Pier Park North. During the three and
nine
months ended
September 30, 2015
we capitalized
$0.1 million
and
$0.2 million
, respectively, of indirect development costs related to Pier Park North.
Forestry
Our forestry segment focuses on the management of our timber holdings. We grow and sell timber and wood fiber and provide land management services for conservation properties. Our forestry segment may also sell our timber holdings, undeveloped land or land with limited development and easements.
The table below sets forth the results of operations of our forestry segment for the
three and nine
months ended
September 30, 2016
and
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
In millions
|
Revenue:
|
|
|
|
|
|
|
|
Timber revenue
|
$
|
1.3
|
|
|
$
|
1.9
|
|
|
$
|
4.0
|
|
|
$
|
6.0
|
|
Real estate revenue - Other rural land revenue
|
0.2
|
|
|
—
|
|
|
1.2
|
|
|
5.3
|
|
Total revenue
|
1.5
|
|
|
1.9
|
|
|
5.2
|
|
|
11.3
|
|
Expenses:
|
|
|
|
|
|
|
|
Cost of timber revenue
|
0.2
|
|
|
0.2
|
|
|
0.6
|
|
|
0.6
|
|
Cost of real estate revenue - other rural land revenue
|
0.1
|
|
|
—
|
|
|
0.3
|
|
|
0.6
|
|
Other operating expenses
|
0.1
|
|
|
0.1
|
|
|
0.4
|
|
|
0.4
|
|
Depreciation and depletion
|
0.1
|
|
|
0.2
|
|
|
0.4
|
|
|
0.5
|
|
Total expenses
|
0.5
|
|
|
0.5
|
|
|
1.7
|
|
|
2.1
|
|
Operating income
|
1.0
|
|
|
1.4
|
|
|
3.5
|
|
|
9.2
|
|
Other income
|
0.3
|
|
|
0.4
|
|
|
0.8
|
|
|
0.9
|
|
Net income before income taxes
|
$
|
1.3
|
|
|
$
|
1.8
|
|
|
$
|
4.3
|
|
|
$
|
10.1
|
|
The total tons sold and relative percentage of total tons sold by major type of timber sale for the
three and nine
months ended
September 30, 2016
and
2015
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Pine pulpwood
|
62,000
|
|
|
73.8
|
%
|
|
73,000
|
|
|
67.0
|
%
|
|
166,000
|
|
|
72.5
|
%
|
|
216,000
|
|
|
63.9
|
%
|
Pine sawtimber
|
19,000
|
|
|
22.6
|
%
|
|
28,000
|
|
|
25.7
|
%
|
|
51,000
|
|
|
22.3
|
%
|
|
95,000
|
|
|
28.1
|
%
|
Pine grade logs
|
3,000
|
|
|
3.6
|
%
|
|
8,000
|
|
|
7.3
|
%
|
|
10,000
|
|
|
4.4
|
%
|
|
24,000
|
|
|
7.1
|
%
|
Other
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
2,000
|
|
|
0.8
|
%
|
|
3,000
|
|
|
0.9
|
%
|
Total
|
84,000
|
|
|
100.0
|
%
|
|
109,000
|
|
|
100.0
|
%
|
|
229,000
|
|
|
100.0
|
%
|
|
338,000
|
|
|
100.0
|
%
|
Three Months Ended September 30, 2016
Compared to the
Three Months Ended September 30, 2015
Revenue from timber sales decreased by approximately
$0.6 million
, or
31.6%
, during the three months ended
September 30, 2016
, as compared to the same period in
2015
, primarily due to a decrease in the amount of tons sold due to fluctuations in market supply. Gross margin decreased during the three months ended
September 30, 2016
, to
84.6%
, as compared to
89.5%
during the same period in
2015
, primarily due to fluctuations in market supply.
During the three months ended
September 30, 2016
, we sold approximately 90 acres of rural and timber land for $0.2 million. Other operating expenses include salaries and benefits, professional fees and other administrative expenses. Other income consists primarily of income from hunting leases and fill dirt sales.
Nine Months Ended September 30, 2016
Compared to the
Nine Months Ended September 30, 2015
Revenue from timber sales decreased by approximately
$2.0 million
, or
33.3%
, during the
nine
months ended
September 30, 2016
, as compared to the same period in
2015
, primarily due to a decrease in the amount of tons sold due to fluctuations in market supply. Gross margin decreased during
nine
months ended
September 30, 2016
, to
85.0%
, as compared to
90.0%
during the same period in
2015
, primarily due to fluctuations in market supply.
During the
nine
months ended
September 30, 2016
, we sold approximately 696 acres of rural and timber land for $1.2 million. During the
nine
months ended
September 30, 2015
, we sold approximately 3,330 acres of rural and timber land for $5.3 million. Other operating expenses include salaries and benefits, professional fees and other administrative expenses. Other income consists primarily of income from hunting leases and fill dirt sales.
Liquidity and Capital Resources
As of
September 30, 2016
, we had cash and cash equivalents of
$165.3 million
, compared to
$212.8 million
as of
December 31, 2015
. Our cash and cash equivalents at
September 30, 2016
includes commercial paper of
$139.5 million
and
$9.8 million
of money market funds. In addition to cash and cash equivalents, we consider our investments classified as available-for-sale securities, especially our investments in U.S. Treasury securities, as being generally available to meet our liquidity needs. Securities classified as available-for-sale securities are not as liquid as cash and cash equivalents, but they are generally convertible into cash within a relatively short period of time. As of
September 30, 2016
, we had investments in U.S. Treasuries of
$99.7 million
, investments in corporate debt securities of
$113.7 million
and preferred stock investments of
$23.2 million
. As of
December 31, 2015
, we had investments in U.S. Treasuries of
$184.7 million
, investments in corporate debt securities of
$6.3 million
and preferred stock investments of
$0.2 million
. As of
September 30, 2016
,
$9.1 million
of the
$113.7 million
corporate debt securities and
$0.2 million
of the
$23.2 million
preferred stock are issued by Sears Holdings Corp or affiliates, which may be deemed an affiliate of Fairholme.
Fairholme has served as an investment advisor to the Company since April 2013. As of September 30, 2016, the funds managed by Fairholme beneficially owned approximately
32.3%
of our common stock. Mr. Bruce Berkowitz is the Chief Investment Officer of Fairholme Capital Management, L.L.C., a director of Fairholme Trust Company, LLC and the Chairman of our Board of Directors. Mr. Cesar Alvarez also serves as a director of Fairholme Trust Company, LLC and is a member of our Board of Directors.
Fairholme does not receive any compensation for services as our investment advisor.
Pursuant to the terms of the Agreement, Fairholme agreed to supervise and direct the investments of an investment account established by us in accordance with the investment guidelines and restrictions approved by the Investment Committee of our Board of Directors. The investment guidelines are set forth in the Agreement and require that, as of the date of any investment: (i) no more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government) and (ii) any investment in any one issuer (excluding the U.S. Government) that exceeds 10%, but not 15%, requires the consent of at least two members of the Investment Committee. Effective November 1, 2016, we entered into an Amendment to the Agreement, pursuant to which we modified the investment guidelines and restrictions described in the Agreement to (i) decrease from at least 50% to 25% the amount of the investment account that must be held in cash and cash equivalents, (ii) permit the investment account to be invested in common equity securities; however, common stock investments shall be limited to exchange-traded common equities, shall not exceed 5% ownership of a single issuer and, cumulatively, the common stock held in our investment portfolio shall not exceed $100.0 million market value, and (iii) provide that the aggregate market value of investments in common stock, preferred stock or other equity investments cannot exceed 25% of the market value of our investment portfolio at the time of purchase. All other material investment guidelines remain the same.
We believe that our current cash position and our anticipated cash flows from cash equivalents, short term investments and cash generated from operations will provide us with sufficient liquidity to satisfy our anticipated working capital needs, expected capital expenditures and principal and interest payments on our long term debt for the next twelve months.
During the
nine
months ended
September 30, 2016
, we incurred a total of
$9.2 million
for capital expenditures, which includes
$1.4 million
related to the Pier Park North joint venture, which is included in our leasing operations segment,
$4.6 million
related to the acquisition and development of our residential and commercial real estate projects,
$1.3 million
for our leasing segment,
$0.9 million
related to our resorts and leisure segment and
$1.0 million
related primarily to our forestry and other segments.
Our remaining budgeted capital expenditures for
2016
are estimated to be $11.6 million, which includes $9.6 million primarily for the development and acquisition of land for our residential and commercial real estate projects, $0.3 million for our leasing segment, $1.2 million for our resorts and leisure segment and $0.5 million for our forestry and other segments. A portion of this spending is discretionary and will only be spent if we believe the risk adjusted return warrants the expenditures.
In October 2015, the Pier Park North joint venture refinanced its construction loan and entered into a $48.2 million loan. The Refinanced Loan accrues interest at a rate of 4.1% per annum and matures in November 2025. In connection with the Refinanced Loan, we entered into a limited guarantee in favor of the lender, based on our percentage ownership of the joint venture. In addition, the guarantee can become full recourse in the case of any fraud or intentional misrepresentation by the Pier Park North joint venture; any voluntary transfer or encumbrance of the property in violation of the due-on-sale clause in the security instrument; upon commencement of voluntary or insolvency proceedings and upon breach of covenants in the security instrument. See
Note 9,
Real Estate Joint Ventures
.
CDD bonds financed the construction of infrastructure improvements in some of our projects. The principal and interest payments on the bonds are paid by assessments on, or from sales proceeds of, the properties benefited by the improvements financed by the bonds. We have recorded a liability for CDD assessments that are associated with platted property, which is the point at which the assessments become fixed or determinable. Additionally, we have recorded a liability for the balance of the CDD assessment that is associated with unplatted property if it is probable and reasonably estimable that we will ultimately be responsible for repaying. We have recorded debt of
$6.7 million
related to CDD debt as of
September 30, 2016
. Our total outstanding CDD assessments were
$21.9 million
at
September 30, 2016
, which was comprised of
$18.0 million
at SouthWood,
$3.0 million
at the existing Pier Park retail center,
$0.7 million
at Wild Heron,
$0.1 million
at Rivercrest and less than
$0.1 million
at NatureWalk.
During the
nine
months ended
September 30, 2016
, we repurchased 995,650 shares of our common stock at an average stock price of $14.88 per share, for an aggregate purchase price of $14.8 million pursuant to our Stock Repurchase Program. As of
September 30, 2016
, we had a total authority of $190.9 million available for purchase of shares of our common stock pursuant to our Stock Repurchase Program. We may repurchase our common stock in open market purchases from time to time, in privately negotiated transactions or otherwise, pursuant to Rule 10b-18 under the Exchange Act. The timing and amount of any additional shares to be repurchased will depend upon a variety of factors, including market and business conditions and other factors. Repurchases may be commenced or suspended at any time or from time to time without prior notice. The Stock Repurchase Program will continue until otherwise modified or terminated by our Board of Directors at any time in its sole discretion. In July 2016, we retired 17,998,658 shares of treasury stock at a value of $320.1 million.
Summary of Cash Flows
A summary of our cash flows from operating, investing and financing for the
nine
months ended
September 30, 2016
and
2015
are as follows: