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Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
     
(Mark One)
   
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended December 31, 2005
 
or
 
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from            to
Commission File No. 1-10466
The St. Joe Company
(Exact name of registrant as specified in its charter)
     
Florida
(State or other jurisdiction of
incorporation or organization)
  59-0432511
(I.R.S. Employer
Identification No.)
245 Riverside Avenue, Suite 500
Jacksonville, Florida
(Address of principal executive offices)
  32202
(Zip Code)
Registrant’s telephone number, including area code: (904) 301-4200
Securities Registered Pursuant to Section 12(b) of the Act:
     
Title of Each Class   Name of Each Exchange on Which Registered
     
Common Stock, no par value
  New York Stock Exchange
      Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     YES þ          NO o
      Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     YES o          NO þ
      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.     YES þ          NO o
      Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o
      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):
Large Accelerated filer þ          Accelerated filer o          Non-Accelerated Filer o
      Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     YES o          NO þ
      The aggregate market value of the registrant’s Common Stock held by non-affiliates based on the closing price on June 30, 2005, was approximately $6.04 billion.
      As of March 9, 2006, there were 103,995,359 shares of Common Stock, no par value, issued and 74,827,800  shares outstanding, with 29,167,559 shares of treasury stock.
DOCUMENTS INCORPORATED BY REFERENCE
      Portions of the Registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 16, 2006 (the “proxy statement”) are incorporated by reference in Part III of this Report. Other documents incorporated by reference in this Report are listed in the Exhibit Index.
 
 


 

Table of Contents
             
        Page
Item       No.
         
PART I
 l.
   Business     2  
       Recent Developments     2  
       Land-Use Entitlements     4  
       Towns & Resorts     6  
       Commercial Real Estate     7  
       Land Sales     8  
       Forestry     9  
       Supplemental Information     9  
       Forward-looking Statements     9  
       Employees     11  
       Website Access to Reports     11  
 1A.
   Risk Factors     11  
 1B.
   Unresolved Staff Comments     17  
 2.
   Properties     17  
 3.
   Legal Proceedings     17  
 4.
   Submission of Matters to a Vote of Security Holders     18  
 
PART II
 5.
   Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities     18  
 6.
   Selected Consolidated Financial Data     20  
 7.
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     21  
 7A.
   Quantitative and Qualitative Disclosures about Market Risk     47  
 8.
   Financial Statements and Supplementary Data     48  
 9.
   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     48  
 9A.
   Controls and Procedures     48  
 9B.
   Other Information     50  
 
 PART III*
 10.
   Directors and Executive Officers of the Registrant     50  
 11.
   Executive Compensation     50  
 12.
   Security Ownership of Certain Beneficial Owners and Management     50  
 13.
   Certain Relationships and Related Transactions     50  
 14.
   Principal Accountant Fees and Services     50  
 
 PART IV
 15.
   Exhibits and Financial Statement Schedule     51  
 SIGNATURES     55  
 
Portions of the Proxy Statement for the Annual Meeting of our stockholders to be held on May 16, 2006, are incorporated by reference in Part III of this Form 10-K.
 EX-10.12 Severance Agreement, dated 3/1/02
 EX-10.13 Severance Agreement, dated 12/3/04
 EX-10.16 First Amendment to DCAP, dated 5/22/03
 EX-10.17 Second Amendment to DCAP, dated 11/2/05
 EX-10.18 Third Amendment to DCAP, dated 11/30/05
 EX-10.20 First Amendment to SERP, dated 05/22/03
 EX-10.21 Second Amendment to SERP, dated 11/02/05
 EX-21.1 Subsidiaries of The St. Joe Company
 EX-23.1 Consent of Independent Registered Public Accounting Firm
 EX-31.1 Certification of CEO
 EX-31.2 Certification of CFO
 EX-32.1 Certification of CEO
 EX-32.2 Certification of CFO

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PART I
Item 1. Business
      As used throughout this Form 10-K Annual Report, the terms “we,” “JOE,” “Company” and “Registrant” mean The St. Joe Company and its consolidated subsidiaries unless the context indicates otherwise.
      JOE is one of Florida’s largest real estate operating companies. We believe that we are the largest private landowner in the State of Florida. The majority of our land is located in Northwest Florida. We own approximately 838,000 acres, approximately 338,000 acres of which are within ten miles of the coast of the Gulf of Mexico.
      We are engaged in town and resort development, commercial and industrial development and land sales. We also have significant interests in timber. We believe we are one of the few real estate operating companies to have assembled the range of real estate, financial, marketing and regulatory expertise necessary to take a large-scale approach to real estate development and services.
      Our four operating segments are:
  •  Towns & Resorts
 
  •  Commercial Real Estate
 
  •  Land Sales
 
  •  Forestry
      We believe we have a number of key business strengths and competitive advantages, including one of the largest inventories of private land suitable for development in the State of Florida, a very low cost basis in our land and a strong financial condition, which allow us the financial flexibility to pursue development opportunities.
      Our business plan calls for us to continue to reposition our timberland holdings for higher and better uses in order to optimize the value of our core real estate assets in Northwest Florida. Value creation results from securing higher and better land-use entitlements, land restoration and enhancement, infrastructure improvements, amenity development, strategic planning, and parceling and development of our land holdings. We are currently seeking additional land-use entitlements, development orders and permits throughout our land holdings. Land-use entitlements are intended to facilitate alternative uses of our property and to increase its per-acre value.
Recent Developments
      Our business has experienced the following developments since December 31, 2004:
  •  In February 2006, we acquired from Smurfit-Stone Container Corporation the remaining 50 percent of the joint venture which owns 126 acres of our Port St. Joe millsite project for $21.75 million and our existing debt to the joint venture of $10.7 million was extinguished. This project is being planned for approximately 600 residential units on or near the bay front. The plan also includes commercial space being designed as a civic gathering place and entertainment district for Port St. Joe. The demolition and clean-up of the former paper mill site was completed during 2005.
 
  •  In January 2006, the Panama City — Bay County Airport and Industrial District (the “Airport Authority”) indicated that the Airport Authority and the Federal Aviation Administration (“FAA”) will be conducting additional analysis over the next several months on the redevelopment of the existing Panama City — Bay County International Airport for non-airport uses. This additional work will result in a delay in the release of the Final Environmental Impact Statement (“EIS”) for the relocation of the airport which will be located on property donated by JOE. The Airport Authority now expects that the Final EIS will be made public in May of 2006, and the

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  subsequent FAA Record of Decision will be issued in September of 2006. Also, the Airport Authority said that no legal challenges were made to the notice of intent published by the State of Florida to issue the state environmental permits necessary for the relocation of the Airport. A number of additional steps remain before construction of the airport can begin, including approval by the U.S. Army Corps of Engineers and other federal, state and local regulatory agencies as well as funding from federal, state and Airport Authority sources.
 
  •  Our residential land-use entitlements pipeline increased significantly to approximately 41,700 units (30,700 in hand and 11,000 in process) as of December 31, 2005, from approximately 29,500 units at December 31, 2004. These land-use entitlements cover a broad spectrum of potential products, markets and price points. In addition, on December 31, 2005, JOE had approximately 14.6 million square feet of commercial land-use entitlements in hand or in process, plus an additional 600 acres zoned for commercial uses.
 
  •  In December 2005, our Board of Directors authorized an additional $150 million stock repurchase program. During 2005, we acquired 1,773,648 shares of our common stock for a total cost of $124.8 million.
 
  •  In September 2005, we sold our subsidiary Advantis Real Estate Services Company to the Advantis management team. Advantis is a full-service real estate firm that leases, manages and sells office, industrial, retail and other commercial real estate projects and sites in the southeastern United States. Our commercial real estate development activity was unaffected by the transaction.
 
  •  In August 2005, we increased our quarterly dividend from $0.14 per share to $0.16 per share. Shareholders received $45.8 million or $0.60 per share in dividends for the year.
 
  •  In June 2005, a Development of Regional Impact (“DRI”) was approved for WaterSound, our proposed 1,330-unit, mixed-use development in Walton County. Subsequently, during the fourth quarter, a federal court issued a preliminary injunction suspending use of a regional general permit issued by the U.S. Army Corps of Engineers. The permit covers an area of Walton and Bay Counties consisting of approximately 48,000 acres, which includes a portion of the wetlands in WaterSound. The court’s decision did not affect other areas of the project, nor did it affect permits issued by the State of Florida or Walton County. The court specifically ruled that the traditional individual permitting process, typically used on projects like WaterSound, remains available to JOE for any further permitting required for the additional phases of WaterSound.
 
  •  In 2005, we completed our first sales of finished home sites in Northwest Florida to two national homebuilders, D.R. Horton and David Weekley Homes. These sales represent a new customer base for JOE and indicate the increasing national interest in Northwest Florida.

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Land-Use Entitlements
      We have a broad range of land-use entitlements in hand or in various stages of the approval process for residential communities in Northwest Florida and other high-growth regions of the state as well as commercial entitlements. The following table describes the primary residential, second-home, resort, and commercial developments with land-use entitlements that we are currently planning and developing in Florida. As shown in the table, the expected build-out periods for these communities range from 2006 to 2017, the maximum project units for these communities exceed 39,000, and the total acreage encompassed by these communities is approximately 48,000 acres. Most of the communities are on lands we own. Some of the communities are being developed through ventures with unrelated third parties.
Summary of Land-Use Entitlements(1)
Active JOE Residential Projects in Florida
December 31, 2005
                                                                 
                            Total   Remaining
        Planned           Units Sold       Residential   Commercial
    Beginning   Ending of   Project   Project   Since   Units Under   Units   Entitlements
Name of Community   of Sales(2)   Sales(2)   Acres(3)   Units(4)(5)   Inception(5)   Contract   Remaining   (Sq. Ft.)(6)
                                 
Walton County:
                                                               
WaterColor
    2000       2008       499       1,140       860       3       277       47,600  
WaterSound Beach
    2001       2007       256       511       406       1       104       29,000  
WaterSound West Beach
    2005       2008       62       199       10       1       188        
WaterSound
    2006       2012       1,402       1,330                   1,330       457,380  
Camp Creek Golf Cottages
    2007       2008       10       102                   102        
Topsail
    TBD (7)     TBD       115       627                   627       300,000  
Bay County:
                                                               
Boggy Creek
    2008       TBD       630       400                   400        
College Station
    2006       TBD       567       800                   800        
East Lake Creek
    TBD       TBD       81       533                   533        
Glades
    2005       2006       26       360       240       120              
The Hammocks
    2000       2006       133       457       414       40       3        
Hills Road
    TBD       TBD       30       356                   356        
Laguna Beach East
    TBD       TBD       20       320                   320        
Palmetto Trace
    2001       2007       141       481       379       38       64        
ParkPlace
    2007       TBD       118       257                   257        
ParkSide
    TBD       TBD       48       480                   480        
Pier Park North
    TBD       TBD       57       460                   460       190,000  
Powell Adams
    TBD       TBD       32       1,425                   1,425        
East Lake Powell
    2008       TBD       181       360                   360        
Hawks Landing
    2006       2007       88       168             83       85        
Wavecrest
    2008       2009       7       95                   95        
Pier Park Timeshare
    TBD       TBD       13       125                   125        
RiverCamps on Crooked
Creek
    2003       2009       1,491       408       175       2       231        
RiverCamps on Sandy
Creek
    2007       2012       6,500       624                   624        
WestBay Corners
    TBD       TBD       100       524                   524       50,000  
WestBay DSAP Future Phases
    TBD       TBD       15,089       5,628                   5,628       4,330,000  
WestBay Landing
    2008       2013       950       214                   214        

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                            Total   Remaining
        Planned           Units Sold       Residential   Commercial
    Beginning   Ending of   Project   Project   Since   Units Under   Units   Entitlements
Name of Community   of Sales(2)   Sales(2)   Acres(3)   Units(4)(5)   Inception(5)   Contract   Remaining   (Sq. Ft.)(6)
                                 
Gulf County:
                                                               
Bayview Estates
    2007       2009       30       120                   120        
Bridgeport
    2005       2005       15       37       31       5       1        
Howards Creek
    TBD       TBD       8       33                   33        
Port St. Joe Millsite Area
    2007       TBD       170       598                   598       431,663  
Landings at Wetappo
    2005       2008       113       24       7             17        
Long Avenue
    TBD       TBD       10       30                   30        
Sabal Island
    2006       2008       56       19                   19        
WindMark Beach
    2001       2015       2,020       1,662       104             1,558       75,000  
Franklin County:
                                                               
SummerCamp
    2005       2010       762       499       64       1       434       25,000  
Cutter Ridge
    2006       2006       10       25                   25        
Timber Island
    TBD       TBD       49       458                   458       14,500  
Calhoun County:
                                                               
Riverside at Chipola
    2005       2007       120       10       2             8        
Leon County:
                                                               
SouthWood
    2000       2017       3,370       4,770       1,463       151       3,156       5,449,660  
WhiteFence Farms, Red Hills
    2006       2010       373       50                   50        
St. Johns County:
                                                               
St. Johns Golf and
Country Club
    2001       2006       820       799       724       22       53        
RiverTown
    2006 (8)     2015       4,170       4,500                   4,500       500,000  
Central Florida:
                                                               
Victoria Park
    2001       2012       1,859       4,200       867       138       3,195       854,254  
Artisan Park,
Celebration(9)
    2003       2006       175       616       288       210       118        
Perico Island(10)
    2006       2010       352       686                   686       9,000  
Hillsborough County:
                                                               
Rivercrest(9)
    2002       2006       413       1,382       1,032       347       3        
Palm Beach County:
                                                               
Paseos(9)
    2002       2006       175
43,716
      325
39,227
      256
7,322
      67
1,229
      2
30,676
     
12,763,057
 
Total
                                                               
                                                 
 
  (1)  A project is deemed land-use entitled when all major discretionary governmental land-use approvals have been received. Some of these projects may require additional permits for development and/or build-out; they also may be subject to legal challenge.
 
  (2)  Includes estimated future dates that could vary significantly depending on the pace of sales and market conditions.
 
  (3)  Represents actual acreage utilized or the acres required to gain land-use entitlements for the maximum project units. Total acres utilized for a project may vary considerably from the acres necessary to gain land-use entitlements.
 
  (4)  Project units represent the maximum number of units entitled or currently expected at full build-out. The actual number of units to be constructed at full build-out may be lower than the number entitled or currently expected.
 
  (5)  Units are comprised of home sites, single-family and multi-family units, and Private Residence Clubs (“PRC”) shares, with each PRC share interest treated as one-eighth of a unit.
 
  (6)  Represents the remaining square feet with land-use entitlements as designated in a development order or expected given the existing property land-use or zoning and present plans. Commercial entitlements include retail, office and industrial uses. Industrial uses total 6,128,381 square feet including SouthWood, RiverTown and the West Bay DSAP.
 
  (7)  To be determined.
 
  (8)  We previously sold 23 units in an early waterfront phase of RiverTown in late 2000 and early 2001.
 
  (9)  Artisan Park is 74 percent owned by the Company. Paseos and Rivercrest are each 50 percent owned by the Company.
(10)  We have an option to purchase the land for this project.

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Towns & Resorts
      Our Towns & Resorts segment develops large-scale, mixed-use communities primarily on land that we have owned for a long period of time. We own large tracts of land in Northwest Florida, including large tracts near Tallahassee, and significant Gulf of Mexico beach frontage and waterfront properties, which we believe are suited for primary housing, resort and second-home communities. We believe this large, established land inventory, with a low cost basis, provides us an advantage over our competitors who must purchase real estate at current market prices before beginning projects. We manage the conceptual design, planning and permitting process for each of our new communities. We then construct or contract for the construction of the infrastructure for the community. Developed home sites and finished housing units are then marketed and sold.
      JOE also owns all of the outstanding stock of Saussy Burbank, a homebuilder located in Charlotte, North Carolina. In 2005, Saussy Burbank closed sales of 699 homes it constructed in North and South Carolina.
      The following is a description of some of the communities we are developing:
      WaterColor is situated on approximately 499 acres on the beaches of the Gulf of Mexico in south Walton County. We are selling developed home sites and building homes and condominiums in WaterColor. The community is planned to include approximately 1,140 units, including a private residence club with fractional ownership. Amenities include a beach club, tennis center, boat house, restaurant on an inland freshwater lake, a 60-room inn and restaurant and commercial space and parks.
      WaterSound Beach is located approximately five miles east of WaterColor. Situated on approximately 256 acres, WaterSound Beach includes over one mile of beachfront on the Gulf of Mexico. This community is currently planned to include approximately 511 units. Construction of two additional multi-family buildings with 44 units is scheduled to commence in 2006.
      WaterSound West Beach is located over one half mile west of WaterSound Beach on the beach side of County Road 30A. It has been designed as a gated, high-end community with 199 units with beach access through the adjacent Deer Lake State Park. Construction and sales began in 2005.
      WaterSound, located on approximately 1,402 acres and currently planned for a 1,330-unit mixed-use development, is a resort community approximately three miles from WaterSound Beach north of U.S. 98 in Walton County. WaterSound land-use entitlements include 457,380 square feet of commercial space. The DRI process for WaterSound was completed in 2005. This resort town is being planned for the pre-retirement and second-home markets with six and nine-hole golf courses along with pools, beach access and other amenities. Sales at WaterSound are expected to begin in mid-2006.
      WindMark Beach is situated on approximately 2,020 acres in Gulf County near the town of Port St. Joe and includes approximately 15,000 feet of beachfront. Construction of Phase II of WindMark Beach began in 2005 with sales expected to begin in 2006. This beachfront resort destination is planned to include approximately 1,662 units at full build-out. Construction to realign approximately four miles of U.S. Highway 98 away from the beachfront is scheduled for completion in the summer of 2006.
      SouthWood is situated on approximately 3,370 acres in southeast Tallahassee. Plans for SouthWood include approximately 4,770 residential units and a traditional town center with restaurants, entertainment facilities, retail shops and offices. Over 35% of the land in this community is designated for greenspaces, including a 123-acre central park.
      SummerCamp, in Franklin County, is situated on approximately 762 acres. Current plans include approximately 499 units, a beach club, a community dock and nature trails.
      RiverTown is situated on approximately 4,170 acres located in St. Johns County south of Jacksonville along the St. Johns River. With parks and public meeting places, RiverTown is being planned for 4,500 housing units and 500,000 square feet of commercial space. RiverTown will have seven unique neighborhoods interwoven with community and retail areas by a series of bike paths and walkways, with all

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roads leading to the community’s centerpiece, the St. John’s River. RiverTown will offer homebuyers a wide variety of price points and lifestyles, appealing to several different target markets, including primary and second-home buyers. After six years of pre-development work, sales at RiverTown are scheduled to start in late 2006 with the first closings expected by year-end.
      St. Johns Golf and Country Club is a primary residential community situated on approximately 820 acres we acquired in St. Johns County in 2001. The community includes an 18-hole golf course and is planned to have approximately 799 houses at completion. Most homes will be adjacent to a golf course, conservation land, lakes or natural wooded areas. Sales of all remaining units are expected to occur by the end of 2006.
      Victoria Park is situated on approximately 1,859 acres in Volusia County near Interstate 4 in the historic college town of Deland between Daytona Beach and Orlando. Plans for Victoria Park include approximately 4,200 single and multi-family units built among parks, lakes and conservation areas with a traditional town center and an award-winning 18-hole golf course which is currently open for play.
      Artisan Park, located in Celebration, near Orlando, is being developed through a joint venture in which we own 74%. Artisan Park is situated on approximately 160 acres which we acquired in 2002. Artisan Park is planned to include approximately 267 single-family units, 47 townhomes, and 302 condominiums as well as parks, trails and a community clubhouse with a pool and educational and recreational programming. Sales of all remaining units are expected to occur by the end of 2006.
      Perico Island is situated in the City of Bradenton in Manatee County on Tampa Bay. Planned as an upscale 686-unit condominium community on 352 acres, it is being designed as an environmentally sensitive community. Construction and sales activities at Perico Island are expected to begin later in 2006.
      Several of our planned developments are in the midst of the entitlement process or are in the planning stage. We cannot assure you that:
  •  the necessary entitlements for development will be secured;
 
  •  any of our projects can be successfully developed, if at all; or
 
  •  our projects can be developed in a timely manner.
      It is not feasible to estimate project development costs until entitlements have been obtained. Large-scale development projects can require significant infrastructure development costs and may raise environmental issues that require mitigation.
Commercial Real Estate
      Our Commercial Real Estate segment develops and sells real estate for commercial purposes. We also own office, industrial and retail properties throughout the southeastern United States.
      Development and Sales. We focus on commercial development in Northwest Florida because of our large land holdings along roadways and near or within business districts in the region. We also develop parcels within or near existing Towns & Resorts development projects. For each new development, we direct the conceptual design, planning and permitting process and then contract for the construction of the horizontal infrastructure and any vertical building.
      We develop and sell properties focused on the following products:
  •  Retail properties
 
  •  Multi-family parcels
 
  •  Office parks
 
  •  Commerce or small business parks

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      Investment Property Portfolio. Our commercial development operations, combined with our tax deferral strategy of reinvesting qualifying asset sale proceeds into like-kind properties, have enabled us to create a portfolio of rental properties totaling 2.8 million square feet. Our portfolio of investment properties was 85% leased, based on net rentable square feet, as of December 31, 2005. See Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information on our investment property portfolio.
Land Sales
      Our Land Sales segment markets parcels for a variety of rural residential and recreational uses on a portion of our long-held timberlands in Northwest Florida. We are developing a range of innovative products for rural settings including RiverCamps, WhiteFence Farms, Florida Ranches, FloridaWild and WoodLands.
      In 2005, our Land Sales segment sold 28,958 acres of rural land at an average price of $2,378 per acre, excluding RiverCamps.
      The vast majority of the holdings marketed by our Land Sales segment will continue to be managed as timberland until sold. The revenues and income from our timberland operations are reflected in the results of our forestry segment.
Woodlands
      Our Woodlands product consists of land marketed in tracts from one to 1,000 acres for primary or secondary home building, recreation, timber or private retreats throughout Northwest Florida. Improvements to these tracts vary, but are typically minimal, and are generally restricted to burning, the thinning of timber, and simple fencing. Prices for parcels vary depending on the physical attributes of each site, including timber stands, topography and proximity to rivers, creeks and bays.
WhiteFence Farms and Florida Ranches
      Work continued in 2005 on our WhiteFence Farms and Florida Ranches, two new real estate products which are designed to transform what were once timberlands to higher and better uses. WhiteFence Farms are being designed as rural homesites to allow owners to enjoy an active or passive outdoors and farm-oriented lifestyle with modern conveniences and proximity to suburban and urban centers. Plans call for parcels of three to 15 acres located in communities of approximately 350 to 1,000 acres featuring cleared acreage, fencing, trails and entry features. Each farm will include a home site for a main farmhouse along with sites for other optional outbuildings, such as barns, guest houses and stables.
      WhiteFence Farms — Red Hills, with 59 farmsteads on 373 acres near Tallahassee, will be our first WhiteFence Farms development. Initial pricing is expected to range from $250,000 to $750,000 for farmstead sites ranging in size from three to 6.5 acres. Sales are expected to begin in the third quarter of 2006.
      Florida Ranches are for customers who want to own larger parcels from 10 to 150 acres with common improvements which may generally include clearing, fencing, road stabilization and entry features. Land preparation work continues on the initial Florida Ranches properties in several locations in Northwest Florida. Initial pricing for Florida Ranch parcels is anticipated to range from $4,500 to $10,000 per acre. Sales are expected to begin later in 2006.
FloridaWild
      FloridaWild properties, many adjacent to protected conservation areas, are expected to appeal to environmentally conscious buyers who want to protect and enhance Northwest Florida’s environmental heritage. FloridaWild property owners are expected to use their land for a variety of outdoor activities, including fishing, hiking, hunting and bird and wildlife watching. Prices will generally range from $2,500 to $9,500 per acre.

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RiverCamps
      RiverCamps are planned developments in rustic settings, enhanced with amenities that may include docks, pools and community river houses. Most of the lots in these developments are expected to be located on or near waterfront property. The RiverCamps concept envisions home sites and high-quality finished cabins in low-density settings with access to various outdoor activities such as fishing, boating and hiking.
      The first of potentially several RiverCamps developments is RiverCamps on Crooked Creek, situated on approximately 1,491 acres in western Bay County, and bounded by West Bay, the Intracoastal Waterway and Crooked Creek. In 2005, we closed sales of 111 home sites in RiverCamps on Crooked Creek at prices ranging from $148,500 to $1,195,000. Planning of a new project, RiverCamps on Sandy Creek, continues. This new community is planned for 624 units located on a 6,500-acre parcel in Bay County. Additional RiverCamps locations are actively being reviewed in other parts of Northwest Florida.
Forestry
      Our Forestry segment focuses on the management and harvesting of our extensive timberland holdings. We grow, harvest and sell timber and wood fiber. Our principal forestry product is softwood pulpwood. We also grow and sell softwood and hardwood sawtimber. In addition, we own and operate a cypress sawmill and mulch plant (“Sunshine State Cypress”) which converts cypress logs into wood products and mulch.
      On December 31, 2005, our standing pine inventory totaled approximately 23.1 million tons and our hardwood inventory totaled approximately 8.5 million tons. Our timberlands are harvested by local independent contractors under agreements that are generally renewed annually. Our timberlands are located near key transportation links, including roads, waterways and railroads.
      Our strategy is to actively manage, with the best available silviculture practices, portions of our timberlands that produce adequate amounts of timber to meet our pulpwood supply agreement obligation with Smurfit-Stone Container Corporation, which expires June 30, 2012. We also harvest and sell additional timber to regional sawmills that produce products other than pulpwood. In addition, our forestry operation is focused on selective harvesting, thinning and site preparation of timberlands that may later be sold or developed by other JOE divisions.
Supplemental Information
      Information regarding the revenues, earnings and total assets of each of our operating segments can be found in note 13 to our Consolidated Financial Statements included in this Report.
Forward-looking Statements
      This Form 10-K includes forward-looking statements, particularly in the Management’s Discussion and Analysis Section. The Private Securities Litigation Reform Act of 1995 provides a safe-harbor for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ, possibly materially, from those in the information. Any statements in this Form 10-K that are not historical facts are forward-looking statements. You can find many of these forward-looking statements by looking for words such as “intend”, “anticipate”, “believe”, “estimate”, “expect”, “plan”, “should”, “forecast” or similar expressions. In particular, forward-looking statements include, among others, statements about the following:
  •  the size and number of residential units and commercial buildings;
 
  •  expected development timetables and projected timing for the first sales or closings of homes or home sites in a community;

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  •  development approvals and the ability to obtain such approvals, including possible legal challenges;
 
  •  the anticipated price ranges of developments;
 
  •  the number of units or commercial square footage that can be supported upon full build-out of a development;
 
  •  the number, price and timing of anticipated land sales or acquisitions;
 
  •  estimated land holdings for a particular use within a specific time frame;
 
  •  absorption rates and expected gains on land and home site sales;
 
  •  the pace at which we release new product for sale;
 
  •  future operating performance, revenues, earnings, cash flows, and short and long-term revenue and earnings growth rates;
 
  •  comparisons to historical projects;
 
  •  the amount of dividends we pay; and
 
  •  the number of shares of company stock which may be purchased under the company’s existing or future share-repurchase program.
      Forward-looking statements are not guarantees of future performance. You are cautioned not to place undue reliance on any of these forward-looking statements. These statements are made as of the date hereof based on our current expectations, and we undertake no obligation to update the information contained in this report. New information, future events or risks may cause the forward-looking events we discuss in this report not to occur.
      Forward-looking statements are subject to numerous assumptions, risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated by a forward-looking statement include the risk factors described above as well as, among others, the following:
  •  economic conditions, particularly in Northwest Florida, as well as Florida as a whole and key areas of the southeastern United States that serve as feeder markets to our Northwest Florida operations;
 
  •  changes in the demographics affecting projected population growth in Florida, including the demographic migration of Baby Boomers;
 
  •  changes in perceptions of or conditions in the national or Florida real estate market;
 
  •  whether our developments receive all land-use entitlements or other permits necessary for development and/or full build-out or are subject to legal challenge;
 
  •  local conditions such as the supply of homes and home sites and residential or resort properties or a change in the demand for real estate in an area;
 
  •  timing and costs associated with property developments and rentals;
 
  •  the pace of commercial development in Northwest Florida;
 
  •  competition from other real estate developers;
 
  •  changes in operating costs, including real estate taxes and the cost of construction materials;
 
  •  changes in the amount or timing of federal and state income tax liabilities resulting from either a change in our application of tax laws, an adverse determination by a taxing authority or court, or legislative changes to existing laws;
 
  •  how well we manage our properties;
 
  •  changes in interest rates and the performance of the financial markets;

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  •  changes in market rental rates for our commercial and resort properties;
 
  •  changes in the prices or availability of wood products;
 
  •  the pace of development of public infrastructure, particularly in Northwest Florida, including a proposed new airport in Bay County, which is dependent on approvals of the local Airport Authority and the Federal Aviation Administration, various permits and the availability of adequate funding;
 
  •  potential liability under environmental laws or other laws or regulations;
 
  •  changes in laws, regulations or the regulatory environment affecting the development of real estate;
 
  •  fluctuations in the size and number of transactions from period to period;
 
  •  natural disasters, including hurricanes and other severe weather conditions, and the impact on current and future demand for our products;
 
  •  the continuing effects of recent hurricane disasters on the regional and national economies and current and future demand for our products;
 
  •  the prices and availability of labor and building materials;
 
  •  changes in insurance rates and deductibles for property in Florida;
 
  •  changes in gasoline prices; and
 
  •  acts of war, terrorism or other geopolitical events.
      The foregoing list is not exhaustive and should be read in conjunction with other cautionary statements contained herein and in our periodic and other filings with the Securities and Exchange Commission. We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks. New information, future events or risks may cause the forward-looking events we discuss in this Form 10-K not to occur.
Employees
      We had approximately 1,230 full-time employees and 132 part-time employees at December 31, 2005. We consider our relations with our employees to be good. These employees work in the following segments:
                 
Towns & Resorts
    1,097          
Commercial real estate
    35          
Land sales
    63          
Forestry
    30          
Other — including corporate
    137          
Website Access to Reports
      We will make available, free of charge, access to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC, through our home page at www.JOE.com.
Item 1A.     Risk Factors
      Our business faces numerous risks, including those set forth below. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.

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A downturn in economic conditions and demand for real estate could adversely affect our business.
      Our ability to generate revenues is directly related to the real estate market, primarily in Florida, and to the national and local economy in general. Over the last several years, some investors have increasingly utilized real estate as an investment. Florida resort real estate has benefited from this trend, creating demand for our products. During 2005, the demand for resort real estate in Northwest Florida lessened, causing a decrease in sales of our resort residential products. If this trend were to continue, the demand for our products could further decline, negatively impacting our net income and potentially impacting selling prices and/or absorption rates.
      While the primary residential real estate markets have generally remained healthy in our regions of development, continued demand for our primary residential products is dependent on long-term prospects for job growth and strong in-migration population expansion in our regions of development.
      Considerable economic and political uncertainties currently exist that could have adverse effects on consumer buying habits, construction costs, availability of labor and materials and other factors affecting us and the real estate industry in general. Significant expenditures associated with investment in real estate, such as real estate taxes, insurance, maintenance costs and debt payments, cannot generally be reduced if changes in Florida’s or the nation’s economy cause a decrease in revenues from our properties. In particular, if the growth rate for the Florida economy declines or if a recession in the Florida economy occurs, our profitability could be materially adversely affected.
The occurrence of hurricanes and other natural disasters in Florida could adversely affect our business.
      The southeastern United States experienced a record-setting hurricane season in 2005. In particular, Hurricane Katrina, which struck New Orleans and the Mississippi Gulf Coast in August, caused severe devastation to those areas and received prolonged national media attention. We believe that the 2005 hurricane season had a negative impact on sales of our resort residential products. Another active hurricane season in 2006 could continue to negatively impact sales of our real estate products.
      In addition to the effects on demand, the 2005 hurricane season and future hurricanes could also lead to increased costs and shortages of construction labor and building supplies. The United States has never experienced a post-hurricane reconstruction effort like that planned and underway on the Gulf Coast so the long-term effects of this reconstruction on the construction industry cannot yet be predicted with certainty. Increased costs of labor and materials would negatively impact our profitability. Labor and materials shortages could delay the development of one or more of our projects, which could negatively impact our sales and profitability.
      In addition to hurricanes, the occurrence of other natural disasters in Florida, such as floods, fires, unusually heavy or prolonged rain and droughts, could have a material adverse effect on our ability to develop and sell properties or realize income from our projects. The occurrence of natural disasters could also cause increases in property and flood insurance rates and deductibles, which could reduce demand for our properties.
Our businesses are primarily concentrated in the State of Florida. As a result, our financial results are dependent on the economic growth and health of Florida, particularly Northwest Florida.
      The economic growth and health of the State of Florida, particularly Northwest Florida where the majority of our land is located, are important factors in sustaining demand for our products and services. As a result, any adverse change to the economic growth and health of Florida, particularly Northwest Florida, could materially adversely affect our financial results. The future economic growth in certain portions of Northwest Florida may be adversely affected if its infrastructure, such as roads, airports, medical facilities and schools, are not improved to meet increased demand. There can be no assurance that these improvements will occur.
      Currently, the Federal Aviation Administration is considering five alternatives to expand the capacity of the Panama City — Bay County International Airport. Two of these alternatives involve expansion of the

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current facility, and two alternatives require relocation of the airport to a new site proposed by the Airport Authority in the West Bay Sector on land owned by us. The final alternative is to take no action at all.
      The relocation of the airport is a condition to certain of our land-use entitlements in Bay County. We also believe that the relocation of the airport is important to the overall economic development of Northwest Florida. The FAA has issued a draft EIS with respect to the proposed alternatives. The FAA will be conducting additional analysis over the next several months on the redevelopment of the existing Panama City — Bay County International Airport for non-airport uses. This additional work will result in a delay in the release of the Final EIS for the relocation of the airport which will be located on property donated by JOE. The Airport Authority now expects that the Final EIS will be made public in May of 2006, and the subsequent FAA Record of Decision will be issued in September of 2006. In addition to the EIS process, other regulatory steps remain before a final decision is reached on the relocation of the airport. The relocation is also dependent on adequate funding. If the relocation of the airport does not occur, our business could be materially affected.
Changes in the demographics affecting projected population growth in Florida, including a decrease in the migration of Baby Boomers, could adversely affect our business.
      Florida has experienced strong recent population growth, including the migration of Baby Boomers to the state. This population growth is expected to continue into the foreseeable future. Baby Boomers seeking retirement or vacation homes in Florida represent a significant portion of purchasers in many of our developments, and we intend to continue to plan and market future developments to Baby Boomers. Any decrease in the demographic trend of Baby Boomers moving to Florida could adversely affect our business.
Increases in interest rates could reduce demand for our products.
      Continued increases in interest rates could reduce the demand for homes we build, particularly primary housing and home sites we develop, commercial properties we develop or sell, and land we sell. Increased interest rates could also negatively impact pricing for our products. A reduction in demand or pricing would materially adversely affect our profitability.
Our real estate operations are cyclical.
      Our business is affected by demographic and economic trends and the supply and rate of absorption of lot sales and new construction. As a result, our real estate operations are cyclical, which may cause our quarterly revenues and operating results to fluctuate significantly from quarter to quarter and to differ from the expectations of public market analysts and investors. If this occurs, our stock’s trading price could also fluctuate significantly.
We are exposed to risks associated with real estate sales and development.
      Our real estate development activities entail risks that include:
  •  construction delays or cost overruns, which may increase project development costs;
 
  •  compliance with building codes and other local regulations;
 
  •  evolving liability theories affecting the construction industry;
 
  •  an inability to obtain required governmental permits and authorizations;
 
  •  an inability to secure tenants or anchors necessary to support commercial projects;
 
  •  failure to achieve anticipated occupancy levels or rents; and
 
  •  an inability to sell our constructed inventory.

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      In addition, our real estate development activities require significant capital expenditures. We obtain funds for our capital expenditures through cash flow from operations, property sales or financings. We cannot be sure that the funds available from these sources will be sufficient to fund our required or desired capital expenditures for development. If we are unable to obtain sufficient funds, we may have to defer or otherwise limit our development activities. Our residential projects require significant capital expenditures for infrastructure development before we can begin our selling efforts. If we are unsuccessful in our selling efforts, we may not be able to recover these capital expenditures.
Our business is subject to extensive regulation which makes it difficult and expensive for us to conduct our operations.
Development of real estate entails a lengthy, uncertain and costly entitlements process.
      Approval to develop real property in Florida entails an extensive entitlements process involving multiple and overlapping regulatory jurisdictions and often requiring discretionary action by local government. This process is often political, uncertain and may require significant exactions in order to secure approvals. Real estate projects must generally comply with the provisions of the Local Government Comprehensive Planning and Land Development Regulation Act (the “Growth Management Act”) and local land development regulations. In addition, development projects that exceed certain specified regulatory thresholds require approval of a comprehensive Development of Regional Impact, or DRI, application. Compliance with the Growth Management Act, local land development regulations and the DRI process is usually lengthy and costly and can be expected to materially affect our real estate development activities.
      The Growth Management Act requires local governments to adopt comprehensive plans guiding and controlling future real property development in their respective jurisdictions and to evaluate, assess and keep those plans current. Local governments that fail to keep their plans current may be prohibited by law to amend their plans to allow for new development. All development orders and development permits must be consistent with the plan. Each plan must address such topics as future land use and capital improvements and make adequate provision for a multitude of public services including transportation, schools, solid waste disposal, sanitation, sewerage, potable water supply, drainage, affordable housing, open space and parks. The local governments’ comprehensive plans must also establish “levels of service” with respect to certain specified public facilities, including roads, and services to residents. In many areas, infrastructure funding has not kept pace with growth, causing facilities to operate below established levels of service. Local governments are prohibited from issuing development orders or permits if facilities and services are not operating at established levels of service, or if the projects for which permits are requested will reduce the level of service for public facilities below the level of service established in the local government’s comprehensive plan. If the proposed development would reduce the established level of service below the level set by the plan, the development order will require that the developer either sufficiently improve the services up front to meet the required level or provide financial assurances that the additional services will be provided as the project progresses.
      The DRI review process includes an evaluation of a project’s impact on the environment, infrastructure and government services, and requires the involvement of numerous state and local environmental, zoning and community development agencies. Local government approval of any DRI is subject to appeal to the Governor and Cabinet by the Florida Department of Community Affairs, and adverse decisions by the Governor or Cabinet are subject to judicial appeal. The DRI approval process is usually lengthy and costly, and conditions, standards or requirements may be imposed on a developer with respect to a particular project, which may materially increase the cost of the project. The DRI approval process is expected to have a material impact on our real estate development activities in the future.
      Changes in the Growth Management Act or the DRI review process or the interpretation thereof, new enforcement of these laws, the enactment of new laws regarding the development of real property or the identification of new facts could lead to new or greater liabilities that could materially adversely affect our business, profitability or financial condition.

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Environmental and other regulations may have an adverse effect on our business.
      Our properties are subject to federal, state and local environmental regulations and restrictions that may impose significant limitations on our development ability. In most cases, approval to develop requires multiple permits which involve a long, uncertain and costly regulatory process. Most of our land holdings contain jurisdictional wetlands, some of which may be unsuitable for development or prohibited from development by law. Development approval most often requires mitigation for impacts that require land to be conserved at a disproportionate ratio versus the land approved for development. Much of our property is undeveloped land located in areas where development may have to avoid, minimize or mitigate for impacts to the natural habitats of various protected wildlife or plant species. Much of our property is in coastal areas that usually have a more restrictive permitting burden and must address issues such as coastal high hazard, hurricane evacuation, floodplains and dune protection.
      In addition, our current or past ownership, operation and leasing of real property, and our current or past transportation and other operations are subject to extensive and evolving federal, state and local environmental laws and other regulations. The provisions and enforcement of these environmental laws and regulations may become more stringent in the future. Violations of these laws and regulations can result in:
  •  civil penalties;
 
  •  remediation expenses;
 
  •  natural resource damages;
 
  •  personal injury damages;
 
  •  potential injunctions;
 
  •  cease and desist orders; and
 
  •  criminal penalties.
      In addition, some of these environmental laws impose strict liability, which means that we may be held liable for any environmental damages on our property regardless of fault.
      Some of our past and present real property, particularly properties used in connection with our previous transportation and papermill operations, were involved in the storage, use or disposal of hazardous substances that have contaminated and may in the future contaminate the environment. We may bear liability for this contamination and for the costs of cleaning up a site at which we have disposed of or to which we have transported hazardous substances. The presence of hazardous substances on a property may also adversely affect our ability to sell or develop the property or to borrow funds using the property as collateral.
      Changes in laws or the interpretation thereof, new enforcement of laws, the identification of new facts or the failure of other parties to perform remediation at our current or former facilities could lead to new or greater liabilities that could materially adversely affect our business, profitability or financial condition.
Our joint venture partners may have interests that differ from ours and may take actions that adversely affect us.
      We are involved in joint venture relationships and may initiate future joint venture projects as part of our overall development strategy. A joint venture involves special risks such as:
  •  we may not have voting control over the joint venture;
 
  •  the venture partner at any time may have economic or business interests or goals that are inconsistent with ours;
 
  •  the venture partner may take actions contrary to our instructions or requests, or contrary to our policies or objectives with respect to the real estate investments; and
 
  •  the venture partner could experience financial difficulties.

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      Actions by our venture partners may subject property owned by the joint venture to liabilities greater than those contemplated by the joint venture agreement or have other adverse consequences.
Changes in our income tax estimates could affect our profitability.
      In preparing our consolidated financial statements, significant management judgment is required to estimate our income taxes. Our estimates are based on our interpretation of federal and state tax laws. We estimate our actual current tax due and assess temporary differences resulting from differing treatment of items for tax and accounting purposes. The temporary differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. Adjustments may be required by a change in assessment of our deferred tax assets and liabilities, changes due to audit adjustments by federal and state tax authorities, and changes in tax laws. To the extent adjustments are required in any given period, we will include the adjustments in the tax provision in our financial statements. These adjustments could materially impact our financial position, cash flow and results of operations.
Significant competition could have an adverse effect on our business.
The real estate industry is generally characterized by significant competition.
      A number of residential and commercial developers, some with greater financial and other resources, compete with us in seeking properties for acquisition, resources for development and prospective purchasers and tenants. Competition from other real estate developers and real estate services companies may adversely affect our ability to:
  •  sell homes and home sites;
 
  •  attract purchasers;
 
  •  attract and retain tenants;
 
  •  sell undeveloped rural land;
 
  •  attract and retain experienced real estate development personnel; and
 
  •  obtain construction materials and labor.
The forest products industry is highly competitive.
      Many of our competitors in the forest products industry are fully integrated companies with substantially greater financial and operating resources. Our products are also subject to increasing competition from a variety of non-wood and engineered wood products. In addition, we are subject to competition from lumber products and logs imported from foreign sources. Any significant increase in competitive pressures from substitute products or other domestic or foreign suppliers could have a material adverse effect on our forestry operations.
We are highly dependent on our senior management.
      Our senior management is responsible for the continuing effort to create value for shareholders by repositioning our timberland holdings for higher and better uses. Our future success is highly dependent upon the continued employment of our senior management, particularly Peter Rummell, our Chairman and Chief Executive Officer. In August 2003, we entered into a five-year employment agreement with Mr. Rummell. The loss of one or more of our senior managers could have a material adverse effect on our business. We do not have key-person life insurance on any of our senior managers.
If we are unable to attract or retain experienced real estate development personnel, our business may be adversely affected.
      Our future success largely depends on our ability to attract and retain experienced real estate development personnel. The market for these employees is highly competitive. If we cannot continue to

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attract and retain quality personnel, our ability to effectively operate our business may be significantly limited.
Decline in rental income could adversely affect our financial results.
      We own a large portfolio of commercial real estate rental properties. Our profitability could be adversely affected if:
  •  a significant number of our tenants are unable to meet their obligations to us;
 
  •  we are unable to lease space at our properties when the space becomes available; and
 
  •  the rental rates upon a renewal or a new lease are significantly lower than expected.
Item 1B. Unresolved Staff Comments
      We have no unresolved comments from the Securities and Exchange Commission regarding our periodic or current reports.
Item 2. Properties
      We own our principal executive offices located in Jacksonville, Florida.
      We own approximately 838,000 acres, the majority of which are located in Northwest Florida, including substantial gulf, lake and riverfront acreage. Most of our raw land assets are managed as timberlands until designated for development. For more information on our real estate assets, see Item 1. Business.
Item 3. Legal Proceedings
      We are involved in litigation on a number of matters and are subject to certain claims which arise in the normal course of business, none of which, in the opinion of management, is expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity. However, the aggregate amount being sought by the claimants in these matters is presently estimated to be several million dollars.
      We have retained certain self-insurance risks with respect to losses for third-party liability, worker’s compensation, property damage, group health insurance provided to employees and other types of insurance.
      We are subject to costs arising out of environmental laws and regulations, which include obligations to remove or limit the effects on the environment of the disposal or release of certain wastes or substances at various sites, including sites which have been previously sold. It is our policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and an amount can be reasonably estimated. As assessments and cleanups proceed, these accruals are reviewed and adjusted, if necessary, as additional information becomes available.
      Pursuant to the terms of various agreements by which we disposed of our sugar assets in 1999, we are obligated to complete certain defined environmental remediation. Approximately $5.0 million of the sales proceeds are being held in escrow pending the completion of the remediation. We have separately funded the costs of remediation. Remediation was substantially completed in 2003. We expect the remaining remediation to be completed and the amounts held in escrow to be released to us during 2006.

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      Our former paper mill site in Gulf County, and certain adjacent real property north of the paper mill site are subject to various Consent Agreements and Brownfield Site Rehabilitation Agreements with the Florida Department of Environmental Protection. The paper mill site has been assessed and rehabilitated by Smurfit-Stone Container Corporation in accordance with these agreements. The adjacent real property north of the paper mill site has been assessed by us, with rehabilitation to be performed in 2006. Management does not believe our liability for any remaining rehabilitation on these properties will be material.
      Other proceedings involving environmental matters such as alleged discharge of oil or waste material into water or soil are pending against us. It is not possible to quantify future environmental costs because many issues relate to actions by third parties or changes in environmental regulation. However, based on information presently available, management believes that the ultimate disposition of currently known matters will not have a material effect on our consolidated financial position, results of operations or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
      None.
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
      We had approximately 87,000 beneficial owners of our common stock as of March 2, 2006. Our common stock is quoted on the New York Stock Exchange (“NYSE”) Composite Transactions Tape under the symbol “JOE.”
      The range of high and low prices for our common stock as reported on the NYSE Composite Transactions Tape and the dividends declared for the periods indicated is set forth below:
                           
    Common    
    Stock Price    
        Dividends
    High   Low   Declared
             
2005
                       
 
First Quarter
  $ 75.90     $ 60.21     $ 0.14  
 
Second Quarter
    83.52       64.31       0.14  
 
Third Quarter
    85.25       59.79       0.16  
 
Fourth Quarter
    70.85       58.50       0.16  
2004
                       
 
First Quarter
  $ 41.99     $ 36.39     $ 0.12  
 
Second Quarter
    42.27       35.06       0.12  
 
Third Quarter
    49.08       39.38       0.14  
 
Fourth Quarter
    64.75       46.97       0.14  
      On March 9, 2006, the closing price of our common stock on the NYSE was $56.82.

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      The following table describes the Company’s purchases of its common stock during the fourth quarter of 2005.
                                 
            (c)   (d
            Total Number of   Maximum Dollar
    (a)   (b)   Shares Purchased as   Amount that May
    Total Number   Average   Part of Publicly   Yet Be Purchased
    of Shares   Price Paid   Announced Plans or   Under the Plans or
Period   Purchased(1)   per Share   Programs(2)   Programs
                 
                (In thousands)
Month Ended
                               
October 31, 2005
    196,100     $ 63.75       196,100     $ 47,316  
 
Month Ended
                               
November 30, 2005
    626,000     $ 65.57       626,000     $ 6,272  
 
Month Ended
                               
December 31, 2005
    45,668     $ 63.75       40,500     $ 153,520  
 
(1)  Includes shares surrendered to the Company by executives as payment for the strike prices and taxes due on exercised stock options and/or taxes due on vested restricted stock equal in the aggregate to 5,168 shares in December 2005. There were no shares surrendered by executives in October or November 2005.
 
(2)  For a description of our Stock Repurchase Program, see note 2, “Summary of Significant Accounting Policies — Earnings Per Share,” in the notes to our Consolidated Financial Statements.

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Item 6. Selected Consolidated Financial Data
      The selected consolidated financial data set forth below are qualified in their entirety by and should be read in conjunction with the consolidated financial statements and the related notes included elsewhere herein. The statement of income data with respect to the years ended December 31, 2005, 2004 and 2003 and the balance sheet data as of December 31, 2005 and 2004 have been derived from the financial statements of the Company included herein, which have been audited by KPMG LLP. The statement of income data with respect to the years ended December 31, 2002 and 2001 and the balance sheet data as of December 31, 2003, 2002 and 2001 have been derived from the financial statements of the Company previously filed with the SEC, and also have been audited by KPMG LLP. Historical results are not necessarily indicative of the results to be expected in the future.
                                           
    Year Ended December 31,
     
    2005   2004   2003   2002   2001
                     
    (In thousands, except per share amounts)
Statement of Income Data:
                                       
Total revenues(1)
  $ 938,192     $ 843,631     $ 678,853     $ 558,196     $ 501,539  
Total expenses
    757,403       703,766       538,825       453,838       420,980  
                               
Operating profit
    180,789       139,865       140,028       104,358       80,559  
Other income (expense)
    (7,687 )     (6,484 )     (4,031 )     124,983       (4,060 )
                               
Income from continuing operations before equity in income (loss) of unconsolidated affiliates, income taxes, and minority interest
    173,102       133,381       135,997       229,341       76,499  
Equity in income (loss) of unconsolidated affiliates
    13,016       5,600       (2,168 )     10,940       24,126  
Income tax expense
    64,332       52,525       48,429       88,875       37,484  
                               
Income from continuing operations before minority interest
    121,786       86,456       85,400       151,406       63,141  
Minority interest
    7,820       2,594       553       1,366       524  
                               
Income from continuing operations
    113,966       83,862       84,847       150,040       62,617  
Income (loss) from discontinued operations(2)
    (630 )     1,014       (8,932 )     3,436       7,588  
Gain on sale of discontinued operations(2)
    13,322       5,224        —       20,887        —  
                               
Net income
  $ 126,658     $ 90,100     $ 75,915     $ 174,363     $ 70,205  
                               
Per Share Data:
                                       
 
Basic
                                       
Income from continuing operations
  $ 1.52     $ 1.11     $ 1.12     $ 1.91     $ 0.78  
Income (loss) from discontinued operations(2)
    (0.01 )     0.01       (0.12 )     0.04       0.09  
Gain on the sale of discontinued operations(2)
    0.18       0.07        —       0.27        —  
                               
Net income
  $ 1.69     $ 1.19     $ 1.00     $ 2.22     $ 0.87  
                               
 
Diluted
                                       
Income from continuing operations
  $ 1.50     $ 1.09     $ 1.09     $ 1.84     $ 0.74  
Income(loss) from discontinued operations
    (0.01 )     0.01       (0.11 )     0.04       0.09  
Gain on the sale of discontinued operations
    0.17       0.07        —       0.26        —  
                               
Net income
  $ 1.66     $ 1.17     $ 0.98     $ 2.14     $ 0.83  
                               
Dividends declared and paid
  $ 0.60     $ 0.52     $ 0.32     $ 0.08     $ 0.08  

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    December 31,
     
    2005   2004   2003   2002   2001
                     
Balance Sheet Data:
                                       
Investment in real estate
  $ 1,036,174     $ 942,630     $ 886,076     $ 806,701     $ 736,734  
Cash and investments(3)
    202,605       94,816       57,403       73,273       200,225  
Property, plant & equipment, net
    40,176       33,562       36,272       42,907       49,826  
Total assets
    1,591,946       1,403,629       1,275,730       1,169,887       1,340,559  
Debt
    554,446       421,110       382,176       320,915       498,015  
Total stockholders’ equity
    488,998       495,411       487,315       480,093       518,073  
 
(1)  Total revenues includes real estate revenues from property sales, timber sales, rental revenues and other revenues, primarily club operations and management and brokerage fees, and transportation revenues in 2002 and 2001.
 
(2)  Discontinued operations include the operations and subsequent sale of four commercial office buildings and Advantis Real Estate Services Company (“Advantis”) in 2005, two commercial office buildings sold in 2004 and the sales in 2002 of Arvida Realty Services (“ARS”) and two commercial office buildings. (See note 4 of Notes to Consolidated Financial Statements.)
 
(3)  Includes cash, cash equivalents and marketable securities.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
      The St. Joe Company is one of Florida’s largest real estate operating companies. We believe we have one of the largest inventories of private land suitable for development in the State of Florida, with a very low cost basis. The majority of our land is located in Northwest Florida. In order to optimize the value of these core real estate assets, our business plan calls for us to reposition our substantial timberland holdings for higher and better uses. We increase the value of our raw land assets, most of which are currently managed as timberland, through the entitlement, development and subsequent sale of residential and commercial parcels, home sites and homes, or through the direct sale of unimproved land. In addition, we reinvest the proceeds of qualifying asset sales into like-kind properties under our tax deferral strategy, which has enabled us to create a significant portfolio of commercial rental properties.
      We have four operating segments: Towns & Resorts, commercial real estate, land sales and forestry.
      Our Towns & Resorts segment generates revenues from:
  •  the sale of developed home sites to retail customers and builders;
 
  •  the sale of parcels of entitled, undeveloped land;
 
  •  the sale of housing units built by us;
 
  •  rental income;
 
  •  club operations;
 
  •  investments in limited partnerships and joint ventures;
 
  •  brokerage, title issuance and mortgage origination fees on certain transactions within our Towns & Resorts developments; and
 
  •  management fees.
      Our commercial real estate segment generates revenues from:
  •  the rental and/or sale of commercial buildings owned and/or developed by us; and
 
  •  the sale of developed and undeveloped land for retail, multi-family, office and industrial uses.

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      Our land sales segment generates revenues from:
  •  the sale of parcels of undeveloped land; and
 
  •  the sale of developed home sites primarily within rural settings.
      Our forestry segment generates revenues from:
  •  the sale of pulpwood and timber; and
 
  •  the sale of cypress lumber and mulch.
      Our ability to obtain land-use entitlements for our properties is a key requirement in repositioning our land to higher and better uses and for the generation of revenues. We continue to plan and obtain entitlements for an increasingly diverse set of land uses including retail, office, industrial, multi-family, marina and hotel uses. At the end of 2005, we had land-use entitlements in hand or in process for approximately 41,700 residential units and 14.6 million square feet of commercial space, with an additional 600 acres zoned for commercial uses.
      Our ability to generate revenues, cash flows and profitability is directly related to the real estate market, primarily in Florida, and the economy in general. Economic, political and weather-related conditions could have adverse effects on consumer buying behavior, construction costs, availability of labor and materials, the cost and availability of insurance, the availability of and changes in prices of fuel and energy, and other factors affecting us and the real estate industry in general and coastal real estate in particular. Additionally, increases in interest rates could reduce the demand for homes we build and home sites we develop, particularly primary housing and home sites, and commercial properties we develop or sell.
      Sales activity in our resort residential projects in Northwest Florida slowed in the third and fourth quarters of 2005 as a result of an active hurricane season as well as macroeconomic and real estate supply and demand factors. While sales activity in our primary residential communities remained robust through most of 2005, there are some signs of slowing in the most recent months compared to strong sales for the same period last year, potentially as a result of these same macroeconomic and real estate supply and demand factors.
      The 2005 hurricane season was particularly active, with four named storms impacting the coast of the Gulf of Mexico during these quarters. We were fortunate that there was only minimal physical damage to our properties, allowing us to quickly resume normal operations after each storm. However, the hurricanes in 2005 disrupted and depressed normal visitor traffic flows — and consequently demand for resort residential properties. Resort sales have remained slow thus far in the first quarter of 2006, traditionally the off-season for Northwest Florida. The possible residual effects of 2005’s hurricane season and subsequent increases in resale supply have added some uncertainty to the timing of the rebound of resort residential sales. We do not expect a return to the fevered market of the past few years, but a return to something closer to the historical norm. We continue to view these factors as temporary but meaningful influences on near-term earnings.
      Also during 2005, we noticed an increase in labor and construction material costs, which we attribute in part to the 2005 hurricane season. Although historically we have been able to offset increases in labor and construction material costs by increasing sales prices, as a result of the real estate supply and demand factors noted above, we may not be able to offset such costs with increased prices in the near future. Consequently, we believe our margins may be adversely affected by any additional increases in labor and construction material costs. It will remain unclear for some time what direct and indirect impacts the 2005 hurricane season and these other factors will have on the Company.
      We remain disciplined in this slowing market. We are continuing to diversify our customer base, to include individual homeowners and national homebuilders, local Florida buyers and transitioning Baby Boomers, local commercial developers and regional and national developers. Additionally, we have increased our marketing efforts to promote sales growth.

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Forward-looking Statements
      Management’s discussion and analysis contains forward-looking statements, including statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions, as well as trends and uncertainties that could affect our results. These statements are subject to risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. For additional information concerning these factors and related matters, see “Risk Factors” in Item 1A of the Report and “Forward-looking Statements” in Item 1 of this Report.
Critical Accounting Estimates
      The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We base these estimates on our historical experience 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.
      We believe the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements:
      Investment in Real Estate and Cost of Real Estate Sales. Costs associated with a specific real estate project are capitalized once we determine that the project is economically probable. We capitalize costs directly associated with development and construction of identified real estate projects. Indirect costs that clearly relate to a specific project under development, such as internal costs of a regional project field office, are also capitalized. We capitalize interest based on the amount of underlying expenditures (up to total interest expense), and real estate taxes on real estate projects under development. If we determine not to complete a project, any previously capitalized costs are expensed in the period such determination is made.
      Real estate inventory costs include land and common development costs, such as roads, sewers and amenities, home construction costs, property taxes, capitalized interest and certain indirect costs. A portion of real estate inventory and estimates for costs to complete are allocated to each unit based on the relative sales value of each unit as compared to the estimated sales value of the total project. These estimates are reevaluated at least annually, with any adjustments being allocated prospectively to the remaining units available for sale. The accounting estimate related to inventory valuation is susceptible to change due to the use of assumptions about future sales proceeds and related real estate expenditures. Management’s assumptions about future housing and home site sales prices, sales volume and sales velocity require significant judgment because the real estate market is cyclical and is highly sensitive to changes in economic conditions. In addition, actual results could differ from management’s estimates due to changes in anticipated development, construction and overhead costs. Although we have not made significant adjustments affecting real estate gross profit margins in the past, there can be no assurances that estimates used to generate future real estate gross profit margins will not differ from our current estimates.
      Revenue Recognition — Percentage-of-Completion. In accordance with Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate, revenue for multi-family residences under construction is recognized using the percentage-of-completion method when (1) construction is beyond a preliminary stage, (2) the buyer is committed to the extent of being unable to require a refund except for nondelivery of the unit, (3) sufficient units have already been sold to assure that the entire property will not revert to rental property, (4) sales price is assured, and (5) aggregate sales proceeds and costs can be reasonably estimated. Revenue is recognized in proportion to the percentage of total costs incurred in relation to estimated total costs.

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      Revenue for our multi-family residences which were under construction at WaterSound Beach in 2003 was recognized using the percentage-of-completion method of accounting. Since the project was substantially completed as of December 31, 2003, we recorded substantially all of the activity related to this property during the year ended December 31, 2003. During the period ended March 31, 2004, we incurred $2.0 million in construction cost adjustments for this project. Had these costs been quantified in 2003, they would have been included in our budgets and thus have had an impact on our results for the year ended December 31, 2003. If these costs had been included in the total project budget, 2003 gross profit would have been reduced by $3.6 million (pre-tax), $2.3 million (after tax), since a lower percentage of revenue would also have been recognized. The results for the year ended December 31, 2004 would have been increased by $3.6 million (pre-tax), $2.3 million (after tax). Management has evaluated the impact of this item, which represented 3% of net income ($0.03 per diluted share) for both years ended December 31, 2004 and 2003, and concluded that it is not significant to our 2004 or 2003 results of operations.
      Impairment of Long-lived Assets and Goodwill. Our long-lived assets, primarily real estate held for investment, are carried at cost unless circumstances indicate that the carrying value of the assets may not be recoverable. We review long-lived assets for impairment whenever events or changes in circumstances indicate such an evaluation is warranted. This review involves a number of assumptions and estimates used in determining whether impairment exists, including estimation of undiscounted cash flows. Depending on the asset, we use varying methods to determine fair value, such as (i) discounting expected future cash flows, (ii) determining resale values by market, or (iii) applying a capitalization rate to net operating income using prevailing rates in a given market. These methods of determining fair value can fluctuate up or down significantly as a result of a number of factors, including changes in the general economy of our markets and demand for real estate. If we determine that impairment exists due to the inability to recover an asset’s carrying value, a provision for loss is recorded to the extent that the carrying value exceeds estimated fair value. If such assets were held for sale, the provision for loss is recorded to the extent that the carrying value exceeds estimated fair value less costs to sell.
      Goodwill is carried at the lower of cost or fair value and is tested for impairment at least annually, or whenever events or changes in circumstances indicate such an evaluation is warranted, by comparing the carrying amount of the net assets of each reporting unit with goodwill to the fair value of the reporting unit taken as a whole. The impairment review involves a number of assumptions and estimates including estimating discounted future cash flows, net operating income, future economic conditions, fair value of assets held and discount rates. If this comparison indicates that the goodwill of a particular reporting unit is impaired, the aggregate of the fair value of each of the individual assets and liabilities of the reporting unit are compared to the fair value of the reporting unit to determine the amount of goodwill impairment, if any.
      Intangible Assets. We allocate the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values, using customary estimates of fair value, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. These fair values can fluctuate up or down significantly as a result of a number of factors and estimates, including changes in the general economy of our markets, demand for real estate, lease terms, amortization periods and fair market values assigned to leases as well as fair value assigned to customer relationships.
      Pension Plan. The Company sponsors a defined-benefit pension plan covering a majority of our employees. Currently, our pension plan is over-funded and contributes income to the Company. The accounting for pension benefits is determined by standardized accounting and actuarial methods using numerous estimates, including discount rates, expected long-term investment returns on plan assets, employee turnover, mortality and retirement ages, and future salary increases. Changes in these key assumptions can have a significant impact on the income contributed by the pension plan. We engage the services of an independent actuary and investment consultant to assist us in determining these assumptions and in the calculation of pension income. For example, in 2005, a 1% increase in the assumed long-term rate of return on pension assets would have resulted in a $2.4 million increase in pre-tax income ($1.5 million net of tax). A 1% decrease in the assumed long-term rate of return would have caused an

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equivalent decrease in pre-tax income. A 1% increase or decrease in the assumed discount rate would have resulted in less than a $0.1 million increase in pre-tax income.
      Income Taxes. In preparing our consolidated financial statements, significant management judgment is required to estimate our income taxes. Our estimates are based on our interpretation of federal and state tax laws. We estimate our actual current tax due and assess temporary differences resulting from differing treatment of items for tax and accounting purposes. The temporary differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. Adjustments may be required by a change in assessment of our deferred tax assets and liabilities, changes due to audit adjustments by federal and state tax authorities, and changes in tax laws. To the extent adjustments are required in any given period, we will include the adjustments in the tax provision in our financial statements. These adjustments could materially impact our financial position, cash flow and results of operation.
Recently Issued Accounting Standards
      In December 2004, the Financial Accounting Standards Board ( “FASB”) issued Statement of Financial Accounting Standards No. 152, Accounting for Real Estate Time-Sharing Transactions (“FAS 152”). FAS 152 clarifies the accounting for sales and other transactions involving real estate time-sharing transactions and is effective for financial statements for fiscal years beginning after June 15, 2005. Upon adoption, we do not expect FAS 152 to have a material effect on our financial position or results of operations.
      Also in December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, Exchanges of Nonmonetary Assets (“FAS 153”). FAS 153 eliminates a previous exception from fair value reporting for nonmonetary exchanges of similar productive assets and introduces an exception from fair value reporting for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary change is considered to have commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. FAS 153 is applicable to nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005, with earlier application permitted. The impact of adopting FAS 153 did not have a material adverse impact on the Company’s financial position or results of operations.
      In October 2005, the FASB published FASB Staff Position (“FSP”) No. FAS 13-1, Accounting for Rental Costs Incurred during a Construction Period (“FSP 13-1”), which stipulates that a lessee’s rental costs associated with operating leases during a construction period must be recognized as rental expense, included in income from continuing operations and allocated over the lease term according to current guidance on accounting for leases. We plan to adopt FSP 13-1 beginning January 1, 2006, as required by the FSP. Upon adoption, we do not expect FSP 13-1 to have a material effect on our results of operations or financial position.
      In June 2005, the FASB ratified the Emerging Issues Task Force’s (“EITF”) consensus on Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-5”). In addition, the FASB has issued FSP SOP 78-9-1,“Interaction of AICPA Statement of Position (SOP) 78-9 and EITF Issue 04-5” to amend SOP 78-9, Accounting for Investments in Real Estate Ventures, so that its guidance is consistent with the consensus reached by the EITF in EITF No. 04-5. EITF 04-5 establishes that determining control of a limited partnership requires judgment, but that generally a sole general partner is deemed to control a limited partnership unless the limited partners have (a) the ability to substantially liquidate the partnership or otherwise remove the general partner without cause and/or (b) substantive participating rights. The consensus is currently applicable to the Company for new or modified partnerships, and will otherwise be applicable to existing partnerships in 2006. This consensus applies to limited partnerships or similar entities, such as limited liability companies that have governing provisions that are the functional equivalent of a limited partnership. We will not be required to consolidate any of our current unconsolidated investments nor will this EITF have a material effect on our financial statements.

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      In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections (“FAS 154”). FAS 154 requires companies making voluntary changes to their accounting policies to apply the changes retrospectively, meaning that past earnings will be revised to reflect the impact in each period, rather than the current practice of taking a single charge against current earnings. The statement applies to all voluntary changes in accounting policies and to new rules issued by the FASB that require companies to change their accounting, unless otherwise stated in the new rules. FAS 154 is effective for the Company beginning January 1, 2006, with earlier application allowed. We plan to adopt FAS 154 as of January 1, 2006, and do not expect FAS 154 to have a material effect on our current financial position or results of operations.
      In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations.” The Interpretation requires recognition of an asset and liability with regards to legal obligations associated with the retirement of a tangible long-lived asset, such as the abatement of asbestos. The interpretation is effective for fiscal years ending after December 15, 2005. The adoption of FASB Interpretation No. 47 did not have any effect on our financial statements.
      In April 2005, the Securities and Exchange Commission (“SEC”) adopted a final rule regarding the compliance date for FASB No. 123R, Share-Based Payment (“FAS 123(R)”), for public companies. The new rule changes the required date of implementation to the beginning of the first full fiscal year beginning after June 15, 2005. As a result, we plan to adopt FAS 123(R) as of January 1, 2006. FAS 123(R) requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award (with limited exceptions), eliminating the alternative previously allowed to use the intrinsic value method of accounting. The grant date fair value will be estimated using option-pricing models adjusted for the unique characteristics of the instruments using methods similar to those required previously and currently used by us to calculate pro forma net income and earnings per share disclosures. The cost will be recognized ratably over the period during which the employee is required to provide services in exchange for the award. Upon implementation of FAS 123(R), we will recognize compensation cost over the vesting period in our financial statements for the unvested portion of existing options granted prior to the compliance date and the cost of stock options granted to employees after the compliance date based on the fair value of the stock options at grant date. We will continue to expense restricted stock compensation over the stock’s vesting period, which is deemed to be the period for which services are performed. Additionally, the 15% discount at which employees may purchase the Company’s common stock through payroll deductions will be recognized as compensation expense.
Results of Operations
      Net income for 2005 was $126.6 million, or $1.66 per diluted share, compared with $90.1 million, or $1.17 per diluted share, in 2004, and $75.9 million, or $0.98 per diluted share, in 2003. Results for 2005 reported in discontinued operations include an after-tax loss of $5.9 million, or $0.08 per diluted share, resulting from the sale of Advantis Real Estate Services Company (“Advantis”), our commercial real estate services unit. Discontinued operations for 2005 also include after-tax gains on sales of four office buildings totaling $19.2 million, or $0.25 per diluted share. The results for 2003 included a non-cash charge of $8.8 million, or $0.11 per diluted share, to reduce the carrying value of goodwill associated with Advantis.
      We report revenues from our four operating segments: Towns & Resorts, commercial real estate, land sales and forestry. Real estate sales are generated from sales of residential homes and home sites, parcels of developed and undeveloped land, and commercial buildings which are not reported as discontinued operations. Rental revenue is generated primarily from lease income related to our portfolio of investment and development properties as a component of the commercial real estate segment. Timber sales are generated from the forestry segment. Other revenues are primarily club operations and management fees from the Towns & Resorts segment.

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Consolidated Results
      Revenues and Expenses. The following table sets forth a comparison of the revenues and expenses for the three years ended December 31, 2005.
                                                             
    Years Ended December 31,   2005 vs. 2004   2004 vs. 2003
             
    2005   2004   2003   Difference   % Change   Difference   % Change
                             
    (Dollars in millions)
Revenues:
                                                       
 
Real estate sales
  $ 824.8     $ 734.3     $ 592.2     $ 90.5       12 %   $ 142.1       24 %
 
Rental
    40.7       30.8       21.6       9.9       32       9.2       43  
 
Timber sales
    28.0       35.2       36.6       (7.2 )     (20 )     (1.4 )     (4 )
 
Other
    44.7       43.3       28.5       1.4       3       14.8       52  
                                           
   
Total
  $ 938.2     $ 843.6     $ 678.9     $ 94.6       11 %   $ 164.7       24 %
                                           
Expenses:
                                                       
 
Cost of real estate sales
    526.1       485.4       354.1       40.7       8       131.3       37  
 
Cost of rental revenues
    15.9       12.8       11.3       3.1       24       1.5       13  
 
Cost of timber sales
    20.0       21.8       24.2       (1.8 )     (8 )     (2.4 )     (10 )
 
Cost of other revenues
    39.7       37.6       27.2       2.1       6       10.4       38  
 
Other operating expenses
    69.6       69.0       62.5       0.6       1       6.5       10  
                                           
   
Total
  $ 671.3     $ 626.6     $ 479.3     $ 44.7       7 %   $ 147.3       31 %
                                           
      The increases in revenues from real estate sales and costs of real estate sales were in each case primarily due to increased sales in the Towns & Resorts and land sales segments. These increases were partially offset by a decrease in sales of commercial land and buildings. Results for the 2004 commercial real estate segment included a 93-acre sale for $26.5 million. Additionally, during 2005, four buildings were sold by the commercial real estate segment and recorded as discontinued operations, and during 2004, two buildings were sold by the commercial real estate segment and recorded as discontinued operations. Also, in 2004, costs of real estate sales increased due to actual construction costs in excess of estimates at WaterSound Beach, one of our residential communities. (For a more detailed discussion of this increase, see Revenue Recognition — Percentage-of-Completion under Critical Accounting Estimates above.) The increases in rental revenues and costs of rental revenues were in each case primarily due to the purchase of commercial buildings. Timber revenue decreased each year due to a reduction in volume harvested from Company-owned lands and, in 2005, price decreases. Timber revenue in 2004 was lower than 2003 due to an intentional reduction in production at the cypress mill operation for the purpose of improving margins and profitability, partially offset by price increases. Cost of timber revenues decreased due to lower costs in the timber operation resulting from lower sales and, in 2004, increased efficiencies in the cypress mill operation. Other revenues and costs of other revenues increased from 2004 to 2005 primarily due to increases in resort operations, and from 2003 to 2004 primarily due to increases in resale brokerage activity in the Towns & Resorts segment. Other operating expenses increased primarily due to increases in the land sales segment. For further discussion of revenues and expenses, see Segment Results below.
      Corporate Expense. Corporate expense, representing corporate general and administrative expenses, increased $4.2 million, or 10%, to $48.0 million in 2005 over 2004. The increase was due to an increase in non-capitalizable entitlements costs, a decrease in pension credit and an increase in compensation costs. Corporate expense increased $9.3 million, or 27%, to $43.8 million in 2004 from $34.5 million in 2003. The increase was due to increases in compensation costs, increases in audit and audit related fees, and miscellaneous other corporate expenses.
      Depreciation and Amortization. Depreciation and amortization increased $6.7 million, or 21%, to $38.1 million in 2005 compared to $31.4 million in 2004. The increase was due to a $3.4 million increase

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in depreciation and a $3.3 million increase in amortization due primarily to additional investments in commercial investment property. Depreciation and amortization increased $6.7 million, or 27%, to $31.4 million in 2004 compared to $24.7 million in 2003. The increase was due to a $3.3 million increase in depreciation resulting primarily from additional investments in commercial investment property and residential operating property and property, plant and equipment and a $3.4 million increase in amortization resulting from an increase in intangible assets associated with our commercial operating properties.
      Impairment Losses. No impairment losses were recorded in 2005. During 2004, we recorded a $2.0 million impairment loss related to one of our Towns & Resorts projects in North Carolina pursuant to Statement of Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. See Discontinued Operations for a discussion of the $14.1 million pretax Advantis impairment loss recorded in 2003. During 2003, we also recorded an impairment loss of $0.3 million related to commercial properties.
      Other Income (Expense). Other income (expense) consists of investment income, interest expense, gains on sales and dispositions of assets and other income. Other income (expense) was $(7.7) million in 2005, $(6.5) million in 2004 and $(4.0) million in 2003. Investment income increased to $3.5 million in 2005 due primarily to higher invested cash balances. Investment income was $0.8 million in 2004 compared to $0.9 million in 2003. Interest expense increased to $15.2 million in 2005 from $10.2 million in 2004 primarily due to an increase in the average amount of debt outstanding in 2005. Interest expense increased $2.4 million in 2004 from $7.8 million in 2003, primarily due to an increase in the average amount of debt in 2004. Other income was $4.0 million in 2005, $2.8 million in 2004 and $2.9 million in 2003.
      Equity in Income (Loss) of Unconsolidated Affiliates. We have investments in affiliates that are accounted for by the equity method of accounting. Equity in income (loss) of unconsolidated affiliates totaled $13.0 million in 2005, $5.6 million in 2004 and $(2.2) million in 2003.
      The Towns & Resorts segment recorded equity in the income (loss) of unconsolidated affiliates of $10.6 million in 2005, $5.8 million in 2004 and $(4.1) million in 2003. The 2005 and 2004 results were primarily due to increases in closings at two unconsolidated affiliates that are developing residential property in Florida. For 2003, equity in income (loss) of unconsolidated affiliates included our 24% limited partnership interest in Arvida/JMB Partners, LP. This entity completed its operations in 2003 and continues to wind up its affairs under the name ALP Liquidating Trust. It reported a $(0.7) million loss in 2005 and a $(3.5) million loss in 2003 made up of a pre-tax charge based on estimates of future costs and future cash distributions associated with the completion of operations.
      The commercial real estate segment recorded equity in the income (loss) of unconsolidated affiliates of $2.4 million in 2005, $(0.2) million in 2004 and $1.9 million in 2003. Included in 2005 was equity in income of $2.2 million from Deerfield Commons I, LLC and $0.2 million from Deerfield Park, LLC resulting from the sale of the building and the final parcel of land, respectively, of these two affiliates. Equity in income from Deerfield Commons I and Deerfield Park, LLC combined totaled $1.6 million in 2004 and $1.5 million in 2003. On June 24, 2005, we sold our 50% interest in Codina Group, Inc. (“CGI”) at book value. Included in 2004 and 2003 results were losses of $(1.5) million and $(0.3) million, respectively, related to our 50% previous ownership interest of CGI. Equity in income of unconsolidated affiliates in 2003 also included a gain of $1.0 million from the sale of our 45% interest in the 355 Alhambra building located in Coral Gables, Florida.
      Income Tax Expense. Income tax expense on continuing operations totaled $64.3 million in 2005, $52.5 million in 2004 and $48.4 million in 2003. Our effective tax rate was 36% in 2005, 38% in 2004 and 36% in 2003. Our effective rate decreased in 2005 as a result of our on-going re-evaluation of our estimates of deferred tax assets and liabilities. Our effective tax rate increased in 2004 due to an increase in restricted stock deferred compensation, a portion of which is not deductible for tax purposes.

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      Discontinued Operations. Discontinued operations include the operations and subsequent sales of Advantis and four commercial office buildings in 2005, and the operations and sales of two commercial office buildings sold in 2004. These entities’ results are not included in income from continuing operations.
      On September 7, 2005, Advantis was sold for a sales price of $11.4 million, consisting of $3.9 million in cash and $7.5 million in notes receivable, for a net of tax loss of $5.9 million, or $0.08 per share. For the years ended December 31, 2005, 2004, and 2003, Advantis recorded revenues of $70.0 million, $98.1 million and $62.5 million respectively. Pre-tax (loss) income was $(1.6) million, $0.7 million and $(16.9) million, respectively for the years ended December 31, 2005, 2004 and 2003. During 2003, as a result of declining operations due to the difficult economic environment for commercial real estate services companies, we utilized a discounted cash flow method to determine the fair value of Advantis and recorded an impairment loss to reduce the carrying amount of Advantis’ goodwill from $28.9 million to $14.8 million. This resulted in an impairment loss of $14.1 million pre-tax, or $8.8 million net of tax. Under the terms of the sale, we will continue to use Advantis to manage and lease certain of our commercial properties, and Advantis may be involved in certain land sales in the future. We believe the management contracts are at market rates and that our on-going involvement with Advantis is not material to either them or us.
      Building sales included in discontinued operations in 2005 consisted of the sales of four office buildings for aggregate proceeds of $93.8 million and total pre-tax gains of $30.8 million. For the years ended December 31, 2005, 2004 and 2003, respectively, the aggregate revenues generated by these four buildings prior to their sales totaled $7.5 million, $9.7 million and $9.4 million. Aggregate pre-tax income was $0.1 million, $0.7 million and $0.2 million for the years ended December 31, 2005, 2004 and 2003, respectively.
      In 2004, we sold two office buildings for aggregate proceeds of $67.3 million and pre-tax gains of $7.7 million. Prior to their sale, aggregate revenues during 2004 and 2003 were $5.9 million and $9.8 million, respectively, and aggregate pre-tax income was $0.4 million and $0.7 million, respectively.
Segment Results
     Towns & Resorts
      Our Towns & Resorts segment develops large-scale, mixed-use resort, primary and secondary residential communities primarily on land with very low cost basis. We own large tracts of land in Northwest Florida, including significant Gulf of Mexico beach frontage and waterfront properties, and land near Jacksonville, in Deland and near Tallahassee, the state capital. Our residential homebuilding in North and South Carolina is conducted through Saussy Burbank, Inc. (“Saussy Burbank”), a wholly owned subsidiary.
      Sales activity in our resort residential projects in Northwest Florida slowed in the third and fourth quarters of 2005 as a result of an active hurricane season as well as macroeconomic and real estate supply and demand factors. While sales activity in our primary residential communities remained robust through most of 2005, there are some signs of slowing in the most recent months compared to strong sales for the same period last year, potentially as a result of these same macroeconomic and real estate supply and demand factors.
      The 2005 hurricane season was particularly active, with four named storms impacting the coast of the Gulf of Mexico during these quarters. We were fortunate that there was only minimal physical damage to our properties, allowing us to quickly resume normal operations after each storm. However, the hurricanes in 2005 disrupted and depressed normal visitor traffic flows — and consequently demand for resort residential properties. Resort sales have remained slow thus far in the first quarter of 2006, traditionally the off-season for Northwest Florida. The possible residual effects of 2005’s hurricane season and subsequent increases in resale supply have added some uncertainty to the timing of the rebound of resort residential sales. We do not expect a return to the fevered market of the past few years, but a return to something closer to the historical norm. We continue to view these factors as temporary but meaningful influences on near-term earnings.
      Also during 2005, we noticed an increase in labor and construction material costs, which we attribute in part to the 2005 hurricane season. Although historically we have been able to offset increases in labor

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and construction material costs by increasing sales prices, as a result of the real estate supply and demand factors noted above, we may not be able to offset such costs with increased prices in the near future. Consequently, we believe our margins may be adversely affected by any additional increases in labor and construction material costs. It will remain unclear for some time what direct and indirect impacts the 2005 hurricane season and the potential impact of these other factors will have on the Company.
      Revenues and costs of sales associated with multi-family units and Private Residence Club (“PRC”) units under construction are recognized using the percentage-of-completion method of accounting. Revenue is recognized in proportion to the percentage of total costs incurred in relation to estimated total costs. If a deposit is received for less than 10% for a multi-family unit or a PRC unit, percentage-of-completion accounting is not utilized. Instead, full accrual accounting criteria are used, which recognize revenue when sales contracts are closed. All deposits are non-refundable (subject to a 15-day waiting period as required by law), except for non-delivery of the unit. In the event a contract does not close for reasons other than non-delivery, we are entitled to retain the deposit. However, the revenue and margin related to the previously recorded contract is reversed. Revenues and cost of sales associated with multi-family units where construction has been completed before contracts are signed and deposits made are recognized on the full accrual method of accounting as contracts are closed.
      Our townhomes are attached building units sold individually along with a parcel of land. Revenues and cost of sales for our townhomes are accounted for using the full accrual method. These units differ from multi-family and PRC units, in which buyers hold title to a unit or fractional share of a unit, respectively, within a building and an interest in the underlying land held in common with other building association members.
      Percentage-of-completion accounting is also used for home site sales when required development is not complete at the time of the sale. Currently, we are using percentage-of-completion accounting for home site sales at WaterSound West Beach and SummerCamp. Cash is collected at the time of the sale, while gross profit on home site sales at those communities is recognized based on construction completed in relation to total development costs.
      The table below sets forth the results of operations of our Towns & Resorts segment for the three years ended December 31, 2005:
                             
    Years Ended December 31,
     
    2005   2004   2003
             
    (In millions)
Revenues:
                       
 
Real estate sales
  $ 663.0     $ 575.0     $ 467.3  
 
Rental revenues
    1.6       1.1       0.8  
 
Other revenues
    43.3       41.5       26.8  
                   
   
Total revenues
    707.9       617.6       494.9  
                   
Expenses:
                       
 
Cost of real estate sales
    472.7       419.1       332.9  
 
Cost of rental revenues
    1.7       1.2       1.6  
 
Cost of other revenues
    39.4       36.5       26.6  
 
Other operating expenses
    47.2       48.7       44.6  
 
Depreciation and amortization
    9.9       10.0       8.6  
 
Impairment loss
          2.0        
                   
   
Total expenses
    570.9       517.5       414.3  
                   
Other income (expense)
    0.1       (0.2 )      
                   
Pre-tax income from continuing operations
  $ 137.1     $ 99.9     $ 80.6  
                   

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      The following table summarizes sales activity at various residential communities for the three years ended December 31, 2005:
St. Joe Towns & Resorts
Sales Activity
                                                                                                 
    2005   2004   2003
             
    Units   Avg.   Contracts       Units   Avg.   Contracts   Avg.   Units   Avg.   Contracts   Avg.
    Closed   Price   Accepted(1)   Avg. Price   Closed   Price   Accepted(1)   Price   Closed   Price   Accepted(1)   Price
                                                 
    ($ in thousands)
WaterColor
                                                                                               
Home Sites
    50     $ 660.6       50     $ 660.6       148     $ 488.4       96     $ 616.3       206     $ 285.8       249     $ 277.4  
Single/ Multifamily Homes
    8       885.5             N/A       11       896.8       12       942.6       30       673.8       19       786.7  
PRC Shares
    1       285.0       1       285.0       87       N/A       64       215.5             N/A       23       189.6  
WaterSound Beach
                                                                                               
Home Sites
    46       1,128.4       46       1,128.4       29       523.2       17       626.4       93       399.0       105       396.5  
Single-Family Homes
          N/A             N/A       1       5,100.0       2       3,197.0             N/A             N/A  
Multifamily Homes
    48       1,501.1       (1 )     (1,250.0 )     51       1,172.8       50       1,466.2       30       1,177.3       34       1,142.4  
WaterSound
                                                                                               
West Beach
                                                                                               
Home Sites
    10       719.4       11       722.3             N/A             N/A             N/A             N/A  
Single-Family Homes
          N/A             N/A             N/A             N/A             N/A             N/A  
Palmetto Trace
                                                                                               
Home Sites
    15       75.0       15       75.0             N/A             N/A             N/A             N/A  
Single-Family Homes
    141       214.5       104       276.5       92       149.5       106       167.5       88       154.3       101       156.8  
The Hammocks
                                                                                               
Home Sites
          N/A             N/A       70       37.8       70       37.8       30       30.4       24       30.3  
Single-Family Homes
    79       164.7       71       154.2       77       149.9       81       161.4       48       142.6       72       149.3  
WindMark Beach
                                                                                               
Home Sites
          N/A             N/A       4       1,006.3       4       1,006.3       13       567.3       10       518.0  
Bridgeport
                                                                                               
Home Sites
    31       23.7       36       23.7             N/A             N/A             N/A             N/A  
SouthWood
                                                                                               
Home Sites
    63       124.8       67       125.2       58       97.7       60       97.6       63       84.6       64       89.1  
Single-Family Homes
    216       254.1       209       290.8       174       235.6       210       250.0       133       203.2       151       228.6  
SummerCamp
                                                                                               
Home Sites
    64       350.2       64       350.2             N/A             N/A             N/A             N/A  
Single-Family Homes
          N/A       1       902.4             N/A             N/A             N/A             N/A  
St. Johns G & CC
                                                                                               
Home Sites
    43       68.4       35       70.2       35       83.6       20       61.0       40       55.7       63       70.2  
Single-Family Homes
    111       412.3       47       488.6       104       350.3       125       386.5       124       319.1       122       339.5  

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    2005   2004   2003
             
    Units   Avg.   Contracts       Units   Avg.   Contracts   Avg.   Units   Avg.   Contracts   Avg.
    Closed   Price   Accepted(1)   Avg. Price   Closed   Price   Accepted(1)   Price   Closed   Price   Accepted(1)   Price
                                                 
    ($ in thousands)
Hampton Park/James Island
                                                                                               
Single-Family Homes
    13       419.8       4       502.5       72       360.6       30       377.4       109       328.5       92       341.5  
Victoria Park
                                                                                               
Home Sites
    64       130.9       61       135.3       53       76.9       54       79.3       32       72.0       33       75.2  
Single-Family Homes
    299       267.4       261       303.9       179       221.9       270       245.4       124       196.2       169       204.6  
Artisan Park(2)
                                                                                               
Home Sites
    16       425.6       16       425.6       17       211.5       17       211.5       10       127.9       10       127.9  
Single-Family Homes
    95       529.3       85       654.7       64       404.8       86       452.1             N/A       47       400.8  
Multifamily Homes
    86       294.2       88       472.7             N/A       149       325.3             N/A             N/A  
Paseos(2)
                                                                                               
Single-Family Homes
    117       450.8       1       773.0       124       396.2       182       482.9       15       365.7       108       391.5  
Rivercrest(2)
                                                                                               
Single-Family Homes
    491       168.5       294       203.8       298       152.2       729       171.2       167       146.3       231       146.6  
Saussy Burbank
                                                                                               
Home Sites
          N/A             N/A             N/A             N/A       32       24.0       32       24.0  
Single-Family Homes
    699       254.9       783       257.9       748       221.3       698       229.4       555       208.2       607       207.2  
                                                                         
Total
    2,806               2,349               2,496               3,132               1,942               2,366          
                                                                         
 
(1)  Contracts accepted during the year. Contracts accepted and closed during the year are also included as units closed. Average prices shown reflect variations in the product mix across time periods as well as price changes for similar product.
 
(2)  JOE owns 74 percent of Artisan Park and 50 percent of each of Paseos and Rivercrest. Sales from Paseos and Rivercrest are not consolidated with the financial results of St. Joe Towns & Resorts.

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Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
      Real estate sales include sales of homes and home sites, as well as sales of land. Cost of real estate sales for homes and home sites includes direct costs (e.g., development and construction costs), selling costs and other indirect costs (e.g., construction overhead, capitalized interest, warranty and project administration costs).
      The following table sets forth the components of our real estate sales and cost of real estate sales:
                                                   
    Year Ended December 31, 2005   Year Ended December 31, 2004
         
    Homes   Home Sites   Total   Homes   Home Sites   Total
                         
    (Dollars in millions)
Sales
  $ 537.6     $ 125.1     $ 662.7     $ 462.0     $ 109.8     $ 571.8  
Cost of Sales:
                                               
 
Direct costs
    375.4       25.4       400.8       323.4       26.6       350.0  
 
Selling costs
    27.8       3.9       31.7       24.7       5.2       29.9  
 
Other indirect costs
    37.1       3.0       40.1       34.8       3.7       38.5  
                                     
Total Cost of Sales
    440.3       32.3       472.6       382.9       35.5       418.4  
                                     
Gross Profit
  $ 97.3     $ 92.8     $ 190.1     $ 79.1     $ 74.3     $ 153.4  
                                     
Gross Profit Margin
    18 %     74 %     29 %     17 %     68 %     27 %
      The changes in the components of our real estate sales and cost of real estate sales from the year ended December 31, 2005, to the year ended December 31, 2004, are set forth below by geographic region and product type. A more detailed explanation of the changes follows the table.
                                                                     
    Year Ended December 31, 2005   Year Ended December 31, 2004
         
    Closed       Cost of   Gross   Closed       Cost of   Gross
    Units   Revenues   Sales   Profit   Units   Revenues   Sales   Profit
                                 
    (Dollars in millions)
Northwest Florida:
                                                               
 
Resort
                                                               
   
Single-family homes
    8     $ 7.1     $ 5.1     $ 2.0       12     $ 15.0     $ 10.0     $ 5.0  
   
Multi-family homes
    48       21.2       13.2       8.0       51       55.4       34.2       21.2  
   
Private Residence Club
    1       0.3       0.1       0.2       87       17.0       9.4       7.6  
   
Home sites
    170       96.4       19.5       76.9       181       90.9       26.5       64.4  
 
Primary
                                                               
   
Single-family homes
    301       77.7       64.3       13.4       239       52.0       47.8       4.2  
   
Townhomes
    135       20.5       17.4       3.1       104       14.3       13.1       1.2  
   
Home sites
    109       10.1       5.7       4.4       128       8.1       4.4       3.7  
Northeast Florida:
                                                               
 
Primary
                                                               
   
Single-family homes
    124       51.2       39.5       11.7       176       62.4       52.2       10.2  
   
Home sites
    43       3.4       0.9       2.5       35       2.9       1.1       1.8  
Central Florida:
                                                               
 
Primary
                                                               
   
Single-family homes
    386       126.4       99.6       26.8       237       63.6       51.3       12.3  
   
Multi-family homes
    86       51.3       38.6       12.7             14.8       12.0       2.8  
   
Townhomes
    8       3.8       3.1       0.7       6       2.0       1.7       0.3  
   
Home sites
    80       15.2       6.2       9.0       70       7.8       3.6       4.2  
North and South Carolina:
                                                               
 
Primary
                                                               
   
Single-family homes
    693       177.2       158.6       18.6       735       163.6       149.3       14.3  
   
Townhomes
    6       0.9       0.8       0.1       13       2.0       1.8       0.2  
                                                 
Total
    2,198     $ 662.7     $ 472.6     $ 190.1       2,074     $ 571.8     $ 418.4     $ 153.4  
                                                 
      Our Northwest Florida resort communities include WaterColor, WaterSound Beach, WaterSound West Beach and SummerCamp. Our Northwest Florida primary communities include The Hammocks, Palmetto Trace, SouthWood and Port St. Joe primary housing. Our principal Northeast Florida primary

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communities include St. Johns Golf and Country Club and James Island. Our Central Florida communities, all of which are primary, include Artisan Park and Victoria Park. North and South Carolina include all of the communities of Saussy Burbank, all of which are primary. As of December 31, 2005, a total of six completed homes and 60 resort home sites have been released for sale but remained in inventory at WaterColor, WaterSound Beach, WaterSound West Beach and SummerCamp.
      In our Northwest Florida resort communities, revenue and closed units decreased in 2005 compared to 2004 due to reduced activity in the second half of the year in our resort residential projects as the 2005 hurricane season depressed normal traffic flow to the region. The gross profit percentage from single-family residence sales decreased to 28% in 2005 from 33% in 2004, primarily due to the mix of relative location and size of the home sales closed in each period. The average price of a single-family residence sold in 2005 was $888,000 compared to $1,250,000 in 2004. The decrease in average sales price is due primarily to the sale of the Southern Accents Showhouse at WaterSound Beach in 2004 at a price of $5.1 million. Gross profit recognized on the sale of multi-family residences decreased in 2005 due to the completion of profit recognition on certain multi-family residences in 2004. The gross profit percentage from home site sales increased to 80% in 2005 from 71% in 2004 due primarily to an increase in average prices of home sites sold and a change in the mix of relative locations of the closed home sites. The average price of home sites sold in 2005 was $671,000 compared to $502,000 in 2004.
      Included in Northwest Florida resort communities are WaterSound West Beach and SummerCamp, which had total proceeds from the closing of home sites in 2005 of $7.1 million and $22.4 million, respectively. Since required infrastructure and amenity development was not complete at the time the home sites were sold, a portion of the gross profit had to be deferred based on the amount of required development not yet completed in relation to total estimated required development costs. As a result, for the year ended December 31, 2005, at WaterSound West Beach we deferred $4.0 million in revenue and $3.0 million of gross profit, substantially all of which we expect to recognize in 2006. At SummerCamp, for the year ended December 31, 2005, we deferred $13.6 million in revenue and $8.7 million of gross profit, substantially all of which we expect to recognize over the period from January 1, 2006, through the end of 2008.
      In our Northwest Florida primary communities, units closed and revenues increased due to strong demand which supported price increases. The gross profit percentage from single-family home sales increased to 17% in 2005 from 8% in 2004, primarily due to an increase in the average sales price and the mix of location and size of the home sales closed. The average price of a single-family residence sold in 2005 was $258,000 compared to $218,000 in 2004. Also during 2004, gross profit was reduced by a $1.7 million expense recorded for warranty costs in excess of warranty reserves at a previously completed community. Townhome gross profit percentages also increased in 2005 due primarily to an increase in sales prices of approximately 10% and the mix of locations of the townhomes closed. Home site gross profit percentages decreased to 44% in 2005 from 46% in 2004 due primarily to the closing of lower margin home sites in our Port St. Joe primary housing developments during 2005.
      In our Northeast Florida communities, closed units and revenues decreased in 2005 as a result of a lack of product availability in James Island and Hampton Park, which were substantially sold out in 2004 and completed during 2005. This trend is expected to continue as St. Johns Golf and Country Club is expected to be completed in 2006 and RiverTown is not expected to begin generating significant revenues until 2007 or 2008. The gross profit percentage from single-family residence sales increased to 23% in 2005 from 16% in 2004 primarily due to the strong demand supporting higher prices as we approach sellout in these communities. The average price of a single-family residence sold in 2005 was $413,000 compared to $355,000 in 2004. Home site gross profit percentages increased to 74% in 2005 from 62% in 2004 due primarily to the mix of sizes and locations of the home sites sold during each period.
      In our Central Florida communities, the gross profit percentage on single-family home sales increased to 21% in 2005 from 19% in 2004. The increase, which was a result of our ability to achieve stronger pricing in these primary communities, was partly offset by increasing construction costs following the 2004 hurricane season. Gross profit recognized on the sale of multi-family residences increased $9.9 million in

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2005 due to the accelerated sales and construction activity and the resulting profit recognition under percentage-of-completion accounting. Gross profit percentages on multi-family residences increased to 25% in 2005 from 19% in 2004 due primarily to our ability to raise prices to more than offset increased construction costs. The gross profit percentage from home site sales increased to 59% in 2005 from 54% in 2004 due primarily to the increased average price of home sites to $190,000 in 2005 compared to $112,000 in 2004. Sales of condominium units in Artisan Park have slowed due to increased supply of units in the Orlando area as a result of condominium conversion projects. Another factor in the slower sales is competition from the resale of units sold to investors earlier in the life of the project. Despite these factors, we still expect the sellout of the remaining condominium units in 2006.
      In our North and South Carolina communities, the gross profit percentage on single-family home sales increased to 10% in 2005 from 9% in 2004 due primarily to price increases on comparable homes, lower buyer incentives and changes in the mix of relative locations of homes closed in each period. During 2004 we also recorded an impairment loss of $2.0 million related to one of Saussy Burbank’s community development projects.
      Other revenues included revenues from the WaterColor Inn, other resort and club operations, management fees and brokerage activities. Other revenues were $43.3 million in 2005 with $39.4 million in related costs, compared to revenues totaling $41.5 million in 2004 with $36.5 million in related costs. The decrease in the gross profit of other revenues was primarily due to the decrease in resale brokerage activity.
      Other operating expenses include salaries and benefits, marketing, project administration, support personnel and other administrative expenses. Other operating expenses in 2004 included $3.0 million of nonrecurring uninsured losses related to storm damage while similar losses incurred in 2005 were $1.0 million.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
      Real estate sales include sales of homes and home sites, as well as sales of land. Cost of real estate sales for homes and home sites includes direct costs (e.g., development and construction costs), selling costs and other indirect costs (e.g., construction overhead, capitalized interest, warranty and project administration costs).
      The following table sets forth the components of our real estate sales and cost of real estate sales:
                                                   
    Year Ended December 31, 2004   Year Ended December 31, 2003
         
    Homes   Home Sites   Total   Homes   Home Sites   Total
                         
    (Dollars in millions)
Sales
  $ 462.0     $ 109.8     $ 571.8     $ 348.4     $ 115.7     $ 464.1  
Cost of Sales:
                                               
 
Direct costs
    323.4       26.6       350.0       242.1       34.3       276.4  
 
Selling costs
    24.7       5.2       29.9       17.8       5.8       23.6  
 
Other indirect costs
    34.8       3.7       38.5       27.9       3.4       31.3  
                                     
Total Cost of Sales
    382.9       35.5       418.4       287.8       43.5       331.3  
                                     
Gross Profit
  $ 79.1     $ 74.3     $ 153.4     $ 60.6     $ 72.2     $ 132.8  
                                     
Gross Profit Margin
    17 %     68 %     27 %     17 %     62 %     29 %

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      The changes in the components of our real estate sales and cost of real estate sales from the year ended December 31, 2004, to the year ended December 31, 2003, are set forth below by geographic region and product type. A more detailed explanation of the changes follows the table.
                                                                     
    Year Ended December 31, 2004   Year Ended December 31, 2003
         
    Closed       Cost of   Gross   Closed       Cost of   Gross
    Units   Revenues   Sales   Profit   Units   Revenues   Sales   Profit
                                 
    (Dollars in millions)
Northwest Florida:
                                                               
 
Resort
                                                               
   
Single-family homes
    12     $ 15.0     $ 10.0     $ 5.0       12     $ 9.6     $ 6.3     $ 3.3  
   
Multi-family homes
    51       55.4       34.2       21.2       48       74.7       47.9       26.8  
   
Private Residence Club
    87       17.0       9.4       7.6             1.2       0.7       0.5  
   
Home sites
    181       90.9       26.5       64.4       312       102.5       36.3       66.2  
 
Primary
                                                               
   
Single-family homes
    239       52.0       47.8       4.2       180       35.6       31.3       4.3  
   
Townhomes
    104       14.3       13.1       1.2       89       11.9       10.5       1.4  
   
Home sites
    128       8.1       4.4       3.7       93       6.6       3.3       3.3  
Northeast Florida:
                                                               
   
Primary
                                                               
   
Single-family homes
    176       62.4       52.2       10.2       233       75.4       64.2       11.2  
   
Home sites
    35       2.9       1.1       1.8       40       2.2       1.0       1.2  
Central Florida:
                                                               
   
Primary
                                                               
   
Single-family homes
    237       63.6       51.3       12.3       124       24.3       21.7       2.6  
   
Multi-family homes
          14.8       12.0       2.8                          
   
Townhomes
    6       2.0       1.7       0.3                          
   
Home sites
    70       7.8       3.6       4.2       42       3.6       2.1       1.5  
North and South Carolina:
                                                               
 
Primary
                                                               
   
Single-family homes
    735       163.6       149.3       14.3       542       113.9       103.6       10.3  
   
Townhomes
    13       2.0       1.8       0.2       13       1.8       1.6       0.2  
   
Home sites
                            32       0.8       0.8       0.0  
                                                 
Total
    2,074     $ 571.8     $ 418.4     $ 153.4       1,760     $ 464.1     $ 331.3     $ 132.8  
                                                 
      In our Northwest Florida resort communities, the average price of a single-family residence sold in 2004 was $1,250,000 compared to $801,000 in 2003. The increase in average sales price was due primarily to the sale of the Southern Accents Showhouse in 2004 at a price of $5.1 million. Gross profit recognized on the sale of multi-family residences decreased in 2004 due to the timing of costs incurred on percentage-of-completion products. The gross profit percentage on sales of multi-family residences increased to 38% in 2004 from 36% in 2003. Increased margins were partially offset by an increase in the cost of revenues associated with the 80 completed and sold multi-family residences at WaterSound Beach due to actual construction costs exceeding estimates in the first quarter of 2004, as previously discussed (see Critical Accounting Estimates). Revenues and cost of revenues recorded for the PRC were higher in 2004 than in 2003 because percentage-of-completion accounting on PRC units did not begin until late in 2003 as construction passed the preliminary stage and other percentage-of-completion requirements were met. The average price of a home site sold in 2004 was $502,000 compared to $328,000 in 2003. The gross profit percentage from home site sales was 71% in 2005 and 65% in 2004. The increased gross profit percentage was due primarily to an increase in prices of comparable units and to a change in the mix of relative locations of the home sites sold, partially offset by increases in development costs associated with amenities and roadway improvements.

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      In our Northwest Florida primary communities, the gross profit percentage from single-family residence sales decreased to 8% in 2004 from 12% in 2003, primarily due to a $1.7 million expense recorded for warranty costs in excess of warranty reserves at a previously completed community. The average price of a single-family residence sold in 2004 was $218,000 compared to $198,000 in 2003 primarily as a result of price appreciation in SouthWood. Townhome gross profit percentages decreased in 2004 primarily due to an increase in construction costs at The Hammocks. Home site gross profit percentages decreased to 46% in 2004 from 50% in 2003 due primarily to an increase in development costs and a decrease in the number of residential units included in our plans, resulting in increased development costs on a per-unit basis at SouthWood.
      In our Northeast Florida communities, the gross profit percentage from single-family residence sales increased to 16% in 2004 from 15% in 2003, primarily due to the increase in average sales price and the mix of relative locations and sizes of the home sales closed. The average price of a single-family residence sold in 2004 was $355,000 compared to $324,000 in 2003. Home site gross profit percentages increased to 62% in 2004 from 54% in 2003 due primarily to the mix of sizes and locations of the home sites sold during each period.
      In our Central Florida communities, the gross profit percentage on single-family residence sales increased to 19% in 2004 from 11% in 2003 due to price increases on comparable homes and changes in the mix of relative locations of home sites sold in each period. The average price of a single-family residence sold in 2004 was $268,000 compared to $196,000 in 2003. The gross profit percentage from home site sales increased to 54% in 2004 from 42% in 2003 due primarily to the increase in average price of home sites. The average price of a home site sold in 2005 was $112,000 compared to $87,000 in 2003.
      In our North and South Carolina communities, the gross profit percentage on single-family home sales remained constant at approximately 9% due to price increases on comparable homes and changes in the mix of relative locations of homes sold in each period offset by cost increases and selective discounting of home prices. The average price of a home sold in 2004 was $222,000 compared to $209,000 in 2003. During 2004, we recorded an impairment loss of $2.0 million related to one of Saussy Burbank’s community development projects.
      Other revenues included revenues from the WaterColor Inn, other resort operations and brokerage activities. Other revenues were $41.5 million in 2004 with $36.5 million in related costs, resulting in a gross profit percentage of 12%, compared to revenues totaling $26.8 million in 2003 with $26.6 million in related costs, resulting in a gross profit percentage of 1%. The increases in other revenues, cost of other revenues and gross profit percentage were each primarily due to increases in resale brokerage.
      Other operating expenses, including salaries and benefits of personnel and other administrative expenses, increased $4.1 million during 2004, primarily due to $3.0 million of nonrecurring uninsured losses related to storm damage as well as increases in marketing and project administration costs attributable to the increase in Towns & Resorts development activity.

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      Commercial Real Estate. The table below sets forth the results of continuing operations of our commercial real estate development segment for the three years ended December 31, 2005.
                             
    Years Ended December 31,
     
    2005   2004   2003
             
    (In millions)
Revenues:
                       
 
Real estate sales
  $ 62.7     $ 87.2     $ 25.6  
 
Rental revenues
    39.1       29.7       20.7  
 
Other revenues
    1.2       1.9       1.7  
                   
   
Total revenues
    103.0       118.8       48.0  
                   
Expenses:
                       
 
Cost of real estate sales
    33.8       58.9       7.1  
 
Cost of rental revenues
    14.2       11.6       9.7  
 
Other operating expenses
    9.1       10.5       7.4  
 
Depreciation and amortization
    19.4       13.3       8.5  
 
Impairment loss
                0.3  
                   
   
Total expenses
    76.5       94.3       33.0  
                   
Other income (expense)
    (3.8 )     (2.8 )     (3.1 )
                   
Pre-tax income from continuing operations
  $ 22.7     $ 21.7     $ 11.9  
                   
      Real Estate Sales. Real estate sales were comprised of land and office building sales in which we had continuing involvement for the three years ended December 31, 2005, as follows:
                             
    Years Ended December 31,
     
    2005   2004   2003
             
    (In millions)
Real estate sales:
                       
 
Land
  $ 62.7     $ 62.4     $ 25.6  
 
Buildings
          24.8        
                   
   
Total real estate sales
    62.7       87.2       25.6  
                   
Cost of real estate sales:
                       
 
Land
    34.1       37.0       7.1  
 
Buildings
    (0.3 )     21.9        
                   
   
Total cost of real estate sales
    33.8       58.9       7.1  
                   
Pretax gain:
                       
 
Land
    28.6       25.4       18.5  
 
Buildings
    0.3       2.9        
                   
   
Total pretax gain from real estate sales
  $ 28.9     $ 28.3     $ 18.5  
                   

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      Land sales included the following:
                                                     
    Number of   Acres   Gross   Gross Price       Pre-tax Gain
Land   Sales   Sold   Proceeds   per Acre   Revenue   on Sales
                         
            (In millions)   (In thousands)   (In millions)   (In millions)
Year Ended December 31, 2005:
                                               
 
Northwest Florida
    36       220     $ 30.9     $ 140.5     $ 29.9 (a)   $ 21.9 (a)
 
Other
    8       276       32.8       118.8       32.8       6.7  
                                     
   
Total/ Average
    44       496       63.7       128.4       62.7 (a)     28.6 (a)
Year Ended December 31, 2004:
                                               
 
Northwest Florida
    40       384       43.6       113.6       43.6       24.0  
 
Other
    5       36       18.8       522.2       18.8       1.4  
                                     
   
Total/ Average
    45       420       62.4       148.6       62.4       25.4  
Year Ended December 31, 2003:
                                               
 
Northwest Florida
    45       385       24.5       63.6       24.5       18.2  
 
Other
    4       11       1.1       100.0       1.1       0.4  
                                     
   
Total/ Average
    49       396     $ 25.6     $ 64.6     $ 25.6     $ 18.6  
 
(a) Net of deferral of revenue and gain on sale, based on percentage-of-completion accounting, of $1.0 million and $0.7 million, respectively, on a 2005 land sale.
      The change in average per-acre prices reflects a change in the mix of commercial land sold in each period, with varying compositions of retail, office, light industrial, multi-family and other commercial uses.
      During 2004, a retail land parcel totaling 93 acres at the Pier Park project in Bay County was sold to the Simon Property Group for $26.5 million. Since Northwest Florida land sales in 2005 did not include a similar significant retail land transaction, the number of acres sold, gross proceeds, revenue and pre-tax gain on sales decreased in 2005. However, the gross profit percentage on land sales increased to 46% for 2005 as compared to 41% for 2004, as the Pier Park project has a higher cost basis than our other Northwest Florida commercial land projects.
      The table below summarizes the status of JOE commerce parks throughout Northwest Florida at December 31, 2005.
Commerce Parks
December 31, 2005
                                   
            Acres    
        Project   Sold/Under   Current Asking Price
Commerce Parks   County   Acres   Contract   per Acre
                 
Existing and Under Construction:
                               
South Walton Commerce
    Walton       39       14     $ 335,000 — 600,000  
Beach Commerce
    Bay       157       140       200,000 — 500,000  
Beach Commerce II
    Bay       108             150,000 — 225,000  
Nautilus Court
    Bay       11       8       523,000 — 610,000  
Port St. Joe Commerce
    Gulf       58       58       Sold out  
Port St. Joe Commerce II
    Gulf       40       11        65,000 — 135,000  
Airport Commerce
    Leon       45              75,000 — 260,000  
Hammock Creek Commerce
    Gadsden       165       27        50,000 — 150,000  
Predevelopment:
                               
Cedar Grove Commerce
    Bay       68                
Mill Creek Commerce
    Bay       40                
                         
 
Total
            731       258          
                         
      Building Sales. We sold four buildings in 2005, which have been recorded as Discontinued Operations (see “Discontinued Operations” below).

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      Building sales in 2004 consisted of:
  •  The sale of the 99,000-square-foot TNT Logistics building located in Jacksonville, for $12.8 million, with a pre-tax gain of $3.0 million; and
 
  •  The sale of the 100,000-square-foot Westside Corporate Center building located in Plantation, for $12.0 million, with a pre-tax loss of $(0.1 million).
      In 2005, we recovered $0.3 million in expenses associated with 2004 building sales. The operations of TNT Logistics and Westside Corporate Center have not been recorded as discontinued operations because a former affiliate provided brokerage and leasing services for these buildings.
      Rental Revenues. Rental revenues generated by our commercial real estate segment on owned operating properties increased $9.4 million, or 32%, for 2005 due to the acquisition of five buildings since the last half of 2004, with an aggregate of approximately 553,000 rentable square feet. Cost of rental revenues increased $2.6 million, or 22%, primarily due to the buildings acquired since June 2004. Rental revenues increased $9.0 million, or 43% for 2004 as compared to 2003 primarily due to the purchases of four buildings placed in service in the second half of 2003 with an aggregate of 623,000 square feet and six buildings placed in service in 2004 with an aggregate of 583,000 square feet, partially offset by the sale of a building with 100,000 square feet. Cost of rental revenues increased $1.9 million, or 20%, due to the buildings placed in service.
      The operations of four buildings with an aggregate of approximately 461,000 rentable square feet have been excluded from rental revenues and cost of rental revenues for all years presented and reported as discontinued operations. Two buildings sold in 2004 with an aggregate of approximately 336,000 rentable square feet have been excluded from rental revenues and cost of rental revenues in 2004 and 2003 and reported as discontinued operations.
      This segment’s results from continuing operations include rental revenues and cost of rental revenues from 22 rental properties with 2.6 million total rentable square feet in service at December 31, 2005, 20 rental properties with 2.4 million total rentable square feet in service at December 31, 2004, and 14 rental properties with 1.8 million total rentable square feet in service at December 31, 2003. Additionally, this segment had an interest in one building totaling approximately 0.1 million square feet at December 31, 2004, that was owned by a partnership and accounted for using the equity method of accounting.

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      Further information about commercial income producing properties majority owned or managed is presented in the table below.
                                                                             
    December 31, 2005   December 31, 2004   December 31, 2003
             
        Net           Net           Net    
    Number of   Rentable   Percentage   Number of   Rentable   Percentage   Number of   Rentable   Percentage
    Properties   Square Feet   Leased   Properties   Square Feet   Leased   Properties   Square Feet   Leased
                                     
Buildings purchased with tax-deferred proceeds by location:
                                                                       
Florida
                                                                       
 
Jacksonville
    1       136,000       69 %     1       136,000       57 %     (b )     (b )     (b )
 
Northwest Florida
    3       156,000       96       3       156,000       84       2       122,000       79 %
 
Orlando
    2       317,000       94       2       317,000       69       2       317,000       78  
 
Tampa
    2       147,000       91       2       147,000       82       2       147,000       86  
 
South Florida
    (a )     (a )     (a )     (a )     (a )     (a )     1       100,000       86  
Atlanta
    8       1,289,000       79       8       1,289,000       89       5       863,000       87  
Charlotte
    1       158,000       100       1       158,000       100       1       158,000       100  
Virginia
    3       354,000       96       2       129,000       99       (b )     (b )     (b )
                                                       
 
Subtotal/ Average
    20       2,557,000       85 %     19       2,332,000       85 %     13       1,707,000       86 %
                                                       
Development property:
                                                                       
Florida
                                                                       
 
Northwest Florida
    2       66,000       96 %     1       30,000       100 %     (b )     (b )     (b )
 
Jacksonville
    (a )     (a )     (a )     (a )     (a )     (a )     1       99,000       83 %
                                                       
   
Subtotal/ Average
    2       66,000       96 %     1       30,000       100 %     1       99,000       83 %
                                                       
Total/ Average
    22       2,623,000       86 %     20       2,362,000       85 %     14       1,806,000       86 %
                                                       
 
(a)  These buildings were sold prior to the date reported.
(b) These properties were completed or acquired after the date reported.
     A new tenant at a building in Orlando leased approximately 81,000 square feet in 2005, which caused an increase in the leased percentages and rental revenues. Certain tenants at two buildings in Atlanta did not renew their leases and one large tenant downsized their leased space, which caused the decrease in the leased percentages and related rental revenues in 2005. We are continuing to aggressively market the vacant spaces in Atlanta.
      Other operating expenses decreased $1.4 million or 13%, primarily from reduced compensation costs due to division restructuring and reduced marketing costs.
      Depreciation and amortization, primarily consisting of depreciation on income producing properties and amortization of lease intangibles, increased to $19.4 million in 2005, compared to $13.3 million in 2004, due to the buildings placed in service since June 2004 and increased amortization on lease-related intangible assets.
      Discontinued Operations. Discontinued operations related to this segment for 2005 include the sale and results of operations of Advantis and the sales and results of operations of four commercial buildings sold in 2005. Discontinued operations for 2004 include the results of operations of Advantis and those four commercial buildings, as well as the sales and results of operations of two commercial buildings sold in 2004.
      On September 7, 2005, we sold Advantis for $11.4 million (including $7.5 million in notes receivable from the purchaser) and a pre-tax loss of $9.9 million.

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      Building sales included in discontinued operations in 2005 consisted of the following:
  •  1133 20th Street, with 119,000 net rentable square feet in Washington, DC, sold on September 29 for proceeds of $46.9 million and a pre-tax gain of $19.7 million;
 
  •  Lakeview, with 127,000 net rentable square feet in Tampa, sold on September 7 for proceeds of $18.0 million and a pre-tax gain of $4.1 million;
 
  •  Palm Court, with 62,000 net rentable square feet in Tampa, sold on September 7 for proceeds of $7.0 million and a pre-tax gain of $1.8 million; and
 
  •  Harbourside, with 153,000 net rentable square feet in Tampa, sold on December 14 for proceeds of $21.9 million and a pre-tax gain of $5.2 million.
      Building sales included in discontinued operations in 2004 consisted of the following:
  •  1750 K Street, with 152,000 net rentable square feet in Washington, DC, sold on July 30 for proceeds of $47.3 million ($21.9 million, net of the assumption of a mortgage by the purchaser) and a pre-tax gain of $7.5 million; and
 
  •  Westchase Corporate Center, with 184,000 net rentable square feet in Houston, Texas, sold on August 16 for proceeds of $20.3 million and a pre-tax gain of $0.2 million.
      Land Sales. The table below sets forth the results of operations of our land sales segment for the three years ended December 31, 2005.
                             
    Years Ended December 31,
     
    2005   2004   2003
             
    (In millions)
Revenues
                       
 
Real estate sales
  $ 99.0     $ 72.1     $ 99.2  
 
Other revenues
    0.2              
                   
   
Total revenues
    99.2       72.1       99.2  
Expenses:
                       
 
Cost of real estate sales
    19.6       7.3       14.0  
 
Cost of other revenues
    0.1       1.0       0.6  
 
Other operating expenses
    10.6       6.9       6.8  
 
Depreciation and amortization
    0.3       0.4       0.2  
                   
   
Total expenses
    30.6       15.6       21.6  
                   
Other income
    0.3       0.2       0.1  
                   
Pre-tax income from continuing operations
  $ 68.9     $ 56.7     $ 77.7  
                   
      Land sales activity for 2005, 2004 and 2003, excluding RiverCamps, was as follows:
                                         
    Number   Number of   Average Price   Gross Sales   Gross
Period   of Sales   Acres   Per Acre   Price   Profit
                     
                (In millions)   (In millions)
2005
    142       28,958     $ 2,378     $ 68.9     $ 59.3  
2004
    172       20,175     $ 3,375     $ 68.1     $ 62.0  
2003
    173       64,903     $ 1,487     $ 96.5     $ 84.3  
      Land sales for 2005 included the sales of two parcels totaling 1,046 acres of WoodLands in southwest Georgia for $2.5 million, or $2,390 per acre. Earlier in 2005, we paid $1,225 per acre for approximately 47,000 acres in Southwest Georgia. Land sales for 2004 included two parcels with an aggregate of 20,000 feet of frontage on North Bay in Bay County, and a parcel with approximately 5,000 feet of frontage on East Bay in Bay County. The two North Bay parcels, of approximately 349 and 323 acres, sold

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for $8.7 million, or approximately $25,000 per acre, and $8.7 million, or approximately $27,000 per acre, respectively. The East Bay parcel of 866 acres sold for $10.0 million, or approximately $11,550 per acre. Since average sales prices per acre vary according to the characteristics of each particular piece of land being sold, our average prices may vary from one period to another. Land sales in 2003 included seven large parcels totaling 34,999 acres sold to conservation groups and governmental agencies for an average price of $1,157 per acre.
      During 2005, RiverCamps on Crooked Creek closed 111 home sites with proceeds of $34.9 million. Since required infrastructure and amenity development was not complete at the time of sale, percentage of completion accounting is used. Gross profit was recognized based on construction completed in relation to total construction costs. As a result of using percentage-of-completion accounting, the land sales segment recognized $30.2 million in revenue in 2005 from these sales, with related costs of $10.1 million. As of December 31, 2005, there was a balance of $7.5 million in deferred profit for homesites sold through December 31, 2005 at RiverCamps on Crooked Creek, substantially all of which is expected to be recognized in income by the end of 2006. During 2004, 41 home sites at RiverCamps on Crooked Creek were closed with proceeds of $9.3 million. Revenue recognized as a result of percentage of completion accounting was $5.2 million, with related costs of $2.0 million. Work also continues on other potential RiverCamps locations in Northwest Florida. In 2003, RiverCamps generated $2.7 million in revenues with $1.8 million in related costs, including revenues of $0.7 million and related costs of $0.7 million for the sale of the 2003 HGTV Dream Home, located on East Bay in Bay County.
      Forestry. The table below sets forth the results of operations of our forestry segment for the three years ended December 31, 2005.
                             
    Years Ended December 31,
     
    2005   2004   2003
             
    (In millions)
Revenues:
                       
 
Timber sales
  $ 27.9     $ 35.2     $ 36.6  
Expenses:
                       
 
Cost of timber sales
    20.0       21.8       24.2  
 
Other operating expenses
    2.2       2.6       2.6  
 
Depreciation and amortization
    4.1       4.1       4.1  
                   
   
Total expenses
    26.3       28.5       30.9  
                   
Other income (expense)
    3.1       2.4       2.4  
                   
Pre-tax income from continuing operations
  $ 4.7     $ 9.1     $ 8.1  
                   
      Revenues for the forestry segment in 2005 decreased 21% compared to 2004. Revenues for the forestry segment in 2004 decreased 4% compared to 2003. Total sales under the fiber agreement with Smurfit-Stone Container Corporation were $12.0 million (678,000 tons) in 2005, $13.0 million (681,000 tons) in 2004, and $11.8 million (677,000 tons) in 2003. Sales to other customers totaled $9.9 million (529,000 tons) in 2005, $14.5 million (653,000 tons) in 2004 and $16.3 million (837,000 tons) in 2003. The 2005 decrease in revenues under the fiber agreement was primarily due to lower pulpwood prices under the terms of the agreement. The 2004 increase in revenues under the fiber agreement was primarily due to increasing prices under the terms of the agreement. In 2005 and 2004, sales to other customers decreased due to management’s decision to reduce the harvested volume from clear-cut operations in order to retain more timber on certain tracts planned for later sale for recreational or residential purposes. Revenues from the cypress mill operation were $6.0 million in 2005, $7.7 million in 2004 and $8.5 million in 2003. Revenues from the cypress mill were lower in 2005 due to lower prices as a result of the increased supply of fallen timber caused by hurricanes. In 2004, revenues from the cypress mill decreased as we intentionally reduced production to help improve margins and profitability in response to challenges in finding wood supplies at acceptable prices.

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      Cost of timber sales decreased $1.8 million, or 8%, in 2005 and decreased $2.4 million, or 10%, in 2004. Cost of sales as a percentage of revenues was 72% in 2005, 62% in 2004 and 66% in 2003. The 2005 increase in cost of sales as a percentage of revenues was due primarily to increased logging costs caused by fuel shortages from Hurricane Katrina, road maintenance and timber inventory costs. The 2004 decrease in cost of sales as a percentage of revenues was due to increased efficiencies in our cypress mill operation and slightly lower cost of sales for timber in 2004 compared to 2003. Cost of sales for the cypress mill operation were $4.5 million, or 75% of revenues, in 2005, $5.4 million, or 70% of revenues, in 2004, and $7.4 million, or 87% of revenues, in 2003. Cost of sales for timber was $15.5 million, or 71% of revenues in 2005, $16.4 million, or 59% of revenues, in 2004, and $16.8 million, or 60% of revenues, in 2003.
Liquidity and Capital Resources
      We generate cash from:
  •  Operations;
 
  •  Sales of land holdings, other assets and subsidiaries;
 
  •  Borrowings from financial institutions and other debt; and
 
  •  Issuances of equity, primarily from the exercise of employee stock options.
      We use cash for:
  •  Operations;
 
  •  Real estate development;
 
  •  Construction and homebuilding;
 
  •  Repurchases of our common stock;
 
  •  Payments of dividends;
 
  •  Repayments of debt;
 
  •  Payments of taxes; and
 
  •  Investments in joint ventures and acquisitions.
      Management believes that our financial condition is strong and that our cash, real estate and other assets, operating cash flows, and borrowing capacity, taken together, provide adequate resources to fund ongoing operating requirements and future capital expenditures related to the expansion of existing businesses, including the continued investment in real estate developments. If our liquidity were not adequate to fund operating requirements, capital development, stock repurchases and dividends, we have various alternatives to change our cash flow, including reducing or eliminating our stock repurchase program, reducing or eliminating dividends, altering the timing of our development projects and/or selling existing assets.
Cash Flows from Operating Activities
      Cash flows related to assets ultimately planned to be sold, including Towns & Resorts developments and related amenities, sales of undeveloped and developed land by our land sales and commercial segments, and our timberland operations are included in operating activities. Distributions of income from unconsolidated affiliates are included in cash flows from operating activities. Net cash provided by operations in 2005, 2004 and 2003 was $192.1 million, $128.2 million and $136.8 million, respectively. During such periods, expenditures relating to our Towns & Resorts segment were $515.7 million, $488.8 million, and $342.5 million, respectively. Expenditures for operating properties in 2005, 2004 and 2003 totaled $33.9 million, $62.6 million and $17.8 million, respectively, and were made up of commercial land development and residential club and resort property development.

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      The expenditures for operating activities relating to our Towns & Resorts and commercial real estate segments are primarily for site infrastructure development, general amenity construction and construction of homes and commercial space. Approximately 40-45% of these expenditures are for home construction that generally takes place after the signing of a binding contract with a buyer to purchase the home following construction. As a consequence, if contract activity slows, home construction will also slow. We expect this general expenditure level and relationship between expenditures and housing contracts to continue in the future.
      Over the next several years, our need for cash for operations will increase as development activity increases. During 2006, we will have four new residential communities under development which will require significant up-front capital investment. In addition to cash needed for increased development costs, we will most likely be required to make significant cash payments of income taxes for 2005 and future years.
Cash Flows from Investing Activities
      Our assets purchased with tax-deferred proceeds are intended to be held for investment purposes and related cash flows from acquisitions and dispositions of those assets are included in investing activities. Cash flows from investing activities also include commercial rental property and assets not held for sale. Distributions of capital from unconsolidated affiliates are included in cash flows from investing activities.
      Net cash used in investing activities in 2005 was $31.9 million and included $88.8 million in proceeds from sales of discontinued operations, net of cash included in assets sold. Purchases of investments in real estate included $20.9 million for the purchase of a commercial office building and related intangible assets net of assumption of a mortgage on the property of $29.9 million, the purchases of 16 acres of property in Manatee County for $18.0 million and 47,303 acres of timberland in Southwest Georgia for $58.3 million, in tax-deferred like-kind exchanges and $9.6 million of other real estate investments. Net cash used in investing activities in 2004 was $32.4 million and included $64.4 million for the purchase of five commercial office buildings and related intangible assets, $41.1 million in proceeds from the sale of discontinued operations and $17.7 million of other real estate investments. Net cash used in investing activities in 2003 was $139.6 million and included $93.4 million for the purchase of four commercial buildings and related intangible assets and $25.3 million for the development of commercial buildings and purchases of other real estate investments.
      The purchase of commercial buildings and land, comprising the majority of the cash used in investing activities, generally follow the sale of real estate, principally land sales on a tax-deferred basis. The tax deferral requires the reinvestment of proceeds from qualifying sales within a required time frame. We make these investments in buildings and land only when we can acquire these assets at attractive prices. It is becoming increasingly difficult to acquire assets that meet our pricing and other criteria for reinvestment, and as a result we may not purchase commercial buildings and vacant land to the extent we have in the past. Additionally, if our sales activity slows, the related purchase activity may also slow.
Cash Flows from Financing Activities
      Net cash used in financing activities was $52.3 million in 2005, $58.4 million in 2004 and $13.1 million in 2003. As a result of the significant new development and investing activities anticipated over the next several years, we expect debt to increase compared to December 31, 2005, levels. We have approximately $6.9 million of debt maturing in 2006. For 2006, we expect to spend $125 million to $175 million for the repurchase of shares and dividend payments.
      Prior to July 22, 2005, we had a senior revolving credit facility (the “Senior Credit Facility”) which was to mature on March 30, 2006, that was available for general corporate purposes. On July 22, 2005, we entered into a new four-year $250 million senior revolving credit facility (the “New Credit Facility”) and repaid the balance of our Senior Credit Facility. The New Credit Facility, which expires on July 21, 2009, bears interest based on leverage levels at LIBOR plus an applicable margin in the range of 0.4% to 1.0%.

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The New Credit Facility contains financial covenants including maximum debt ratios and minimum fixed charge coverage and net worth requirements. There was no outstanding balance on the New Credit Facility at December 31, 2005, and no outstanding balance on the Senior Credit Facility at December 31, 2004. Management believes that we were in compliance with the covenants of the New Credit Facility at December 31, 2005.
      At December 31, 2004, we had senior notes outstanding in the aggregate principal amount of $275 million. During 2005, one of the senior notes matured and we paid the principal amount of $18 million. The remaining balance on these notes at December 31, 2005, is $257 million. In addition, on August 25, 2005, we issued senior notes in a private placement having an aggregate principal amount of $150 million, with $65 million maturing on August 25, 2015, at a fixed interest rate of 5.28%, $65 million maturing on August 25, 2017, at a fixed interest rate of 5.38%, and $20 million maturing on August 25, 2020, at a fixed interest rate of 5.49%. The proceeds will be used to finance development and construction projects, to reduce revolving debt and for general corporate purposes. Interest is payable semiannually. These notes contain financial covenants similar to those in the New Credit Facility.
      During 2005, we assumed an existing mortgage of $29.9 million on a commercial building we purchased.
      We have used community development district (“CDD”) bonds to finance the construction of infrastructure improvements at four 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 record a liability for future assessments which are fixed or determinable and will be levied against our properties. In 2005, we paid $10.5 million in principal to one of the community development districts to pay off a portion of the CDD bonds. In accordance with Emerging Issues Task Force Issue 91-10, Accounting for Special Assessments and Tax Increment Financing, we have recorded as debt $14.7 million, $26.4 million and $30.0 million related to CDD bonds as of December 31, 2005, 2004 and 2003, respectively.
      Through December 31, 2005, our Board of Directors had authorized a total of $950.0 million for the repurchase of our outstanding common stock from shareholders from time to time (the “Stock Repurchase Program”), of which $153.5 million remained available at December 31, 2005. There is no expiration date for the Stock Repurchase Program, and the specific timing and amount of repurchases will vary based on market conditions, securities law limitations and other factors. From the inception of the Stock Repurchase Program to December 31, 2005, the Company repurchased from shareholders 26,997,411 shares. During 2005, 2004 and 2003, the Company repurchased from shareholders 1,705,000, 1,561,565 and 2,555,174 shares, respectively.
      Executives have surrendered a total of 2,105,142 shares of our stock since 1998 in payment of strike prices and taxes due on exercised stock options and vested restricted stock. For 2005, 2004 and 2003, 68,648 shares worth $4.8 million, 884,633 shares worth $35.3 million and 812,802 shares worth $25.6 million, respectively, were surrendered by executives, of which $2.3 million, $13.9 million and $8.6 million, respectively, were for the cash payment of taxes due on exercised stock options and vested restricted stock.
Off-Balance Sheet Arrangements
      We are not currently a party to any material off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

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Contractual Obligations and Commercial Commitments at December 31, 2005
                                         
    Payments Due by Period
     
        Less Than       More Than
Contractual Cash Obligations   Total   1 Year   1-3 Years   3-5 Years   5 Years
                     
    (In millions)
Debt
  $ 554.4     $ 6.9     $ 137.6     $ 50.5     $ 359.4  
Interest related to debt
    189.6       33.1       56.7       43.2       56.6  
Purchase obligations(1)
    70.5       61.0       9.5              
Operating leases
    2.9       1.4       1.2       0.3        
                               
Total Contractual Cash Obligations
  $ 817.4     $ 102.4     $ 205.0     $ 94.0     $ 416.0  
                               
 
(1)  These aggregate amounts include individual contracts in excess of $2 million.
                                         
    Amount of Commitment Expirations Per Period
     
    Total Amounts   Less Than       More Than
Other Commercial Commitments   Committed   1 Year   1-3 Years   3-5 Years   5 Years
                     
    (In millions)
Surety bonds
  $ 46.4     $ 45.7     $ 0.7     $     $  
Standby letters of credit
    30.2       30.2                    
                               
Total Commercial Commitments
  $ 76.6     $ 75.9     $ 0.7     $     $  
                               
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
      Our primary market risk exposure is interest rate risk related to our long-term debt. As of December 31, 2005, there was no balance outstanding under our $250 million New Credit Facility, which matures on July 21, 2009. This debt accrues interest at different rates based on timing of the loan and our preferences, but generally will be either the one, two, three or six month London Interbank Offered Rate (“LIBOR”) plus a LIBOR margin in effect at the time of the loan. This loan potentially subjects us to interest rate risk relating to the change in the LIBOR rates. We manage our interest rate exposure by monitoring the effects of market changes in interest rates. If LIBOR had been 100 basis points higher or lower, the effect on net income with respect to interest expense on the $250 million credit facility would have been a respective decrease or increase in the amount of $0.4 million pre-tax ($0.3 million net of tax.)
      The table below presents principal amounts and related weighted average interest rates by year of maturity for our long-term debt. The weighted average interest rates for our fixed-rate long-term debt are based on the actual rates as of December 31, 2005. Weighted average variable rates are based on implied forward rates in the yield curve at December 31, 2005.
Expected Contractual Maturities
                                                                     
                                Fair
    2006   2007   2008   2009   2010   Thereafter   Total   Value
                                 
    $ in millions
Long-term Debt
                                                               
 
Fixed Rate
  $ 5.7     $ 69.2     $ 52.9     $ 41.0     $ 1.1     $ 359.4     $ 529.3     $ 547.2  
   
Wtd. Avg. Interest Rate
    3.1 %     6.6 %     7.4 %     5.7 %     5.6 %     5.4 %     5.7 %        
 
Variable Rate
  $ 1.2     $ 0.2     $ 15.3     $ 8.2     $ 0.2           $ 25.1     $ 25.1  
   
Wtd. Avg. Interest Rate
    5.0 %     4.2 %     5.2 %     4.2 %     3.8 %           4.9 %        
      Management estimates the fair value of long-term debt based on current rates available to us for loans of the same remaining maturities. As the table incorporates only those exposures that exist as of December 31, 2005, it does not consider exposures or positions that could arise after that date. As a result, our ultimate realized gain or loss will depend on future changes in interest rate and market values.

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Item 8. Financial Statements and Supplementary Data
      The Financial Statements in pages F-2 to F-32 and the Report of Independent Registered Accounting Firm on page F-1 are filed as part of this Report and incorporated by reference thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
      None.
Item 9A. Controls and Procedures
      (a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in bringing to their attention on a timely basis material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic filings under the Exchange Act.
      (b) Management’s Annual Report on Internal Control Over Financial Reporting.
      Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
        (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
 
        (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
 
        (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
      Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005. In making this assessment, management used the criteria described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      Based on our assessment and those criteria, management believes that the Company’s internal control over financial reporting as of December 31, 2005, was effective.
      The Company’s independent auditors, KPMG LLP, an independent registered public accounting firm, has issued a report on management’s assessment of the Company’s internal control over financial reporting, which report appears below.
      (c) Report of Independent Registered Public Accounting Firm.
The Board of Directors and Shareholders
The St. Joe Company:
      We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that The St. Joe Company maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal

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Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The St. Joe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
      A Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
      In our opinion, management’s assessment that The St. Joe Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by COSO. Also, in our opinion, The St. Joe Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by COSO.
      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The St. Joe Company and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity, and cash flow for each of the years in the three-year period ended December 31, 2005 and the related financial statement schedule, and our report dated March 13, 2006 expressed an unqualified opinion on those consolidated financial statements and the related financial statement schedule.
/s/ KPMG LLP  
 
Jacksonville, Florida  
March 13, 2006  
Certified Public Accountants  
      (d) Changes in Internal Control over Financial Reporting. During the quarter ended December 31, 2005, there have not been any changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Item 9B. Other Information
      None.
PART III
Item 10. Directors and Executive Officers of the Registrant
      Information concerning our directors, nominees for director and executive officers and our Code of Conduct is described in our proxy statement relating to our 2006 annual meeting of shareholders to be held on May 16, 2006 (the “proxy statement”). This information is incorporated by reference.
Item 11. Executive Compensation
      Information concerning compensation of our executive officers for the year ended December 31, 2005, is presented under the caption “Executive Compensation and Other Information” in our proxy statement. This information is incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
  •  Information concerning the security ownership of certain beneficial owners and of management is set forth under the caption “Security Ownership of Certain Beneficial Owners, Directors and Executive Officers” in our proxy statement and is incorporated by reference.
 
  •  Information concerning Section 16 of the Securities Exchange Act of 1934 is set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our proxy statement and is incorporated by reference.
Equity Compensation Plan Information
      Our shareholders have approved all of our equity compensation plans. These plans are designed to further align our directors’ and management’s interests with the Company’s long-term performance and the long-term interests of our shareholders.
      The following table summarizes the number of shares of our common stock that may be issued under our equity compensation plans as of December 31, 2005:
                         
            Number of Securities
    Number of Securities       Remaining Available for
    to be Issued   Weighted-Average   Future Issuance Under
    Upon Exercise of   Exercise Price of   Equity Compensation Plans
    Outstanding Options,   Outstanding Options,   (Excluding Securities Reflected
Plan Category   Warrants and Rights   Warrants and Rights   in the First Column)
             
Equity compensation plans approved by security holders
    1,051,451     $ 30.64       1,477,677  
Equity compensation plans not approved by security holders
                 
                   
Total
    1,051,451     $ 30.64       1,477,677  
                   
Item 13. Certain Relationships and Related Transactions
      Information concerning certain relationships and related transactions during 2005 is set forth under the caption “Certain Transactions” in our proxy statement. This information is incorporated by reference.
Item 14. Principal Accountant Fees and Services
      Information concerning our independent auditors is presented under the caption “Audit Committee Information” in our proxy statement and is incorporated by reference.

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PART IV
Item 15. Exhibits and Financial Statement Schedule
      (a)(1) Financial Statements
      The financial statements listed in the accompanying Index to Financial Statements and Financial Statement Schedule and Report of Independent Registered Public Accounting Firm are filed as part of this Report.
      (2) Financial Statement Schedule
      The financial statement schedule listed in the accompanying Index to Financial Statements and Financial Statement Schedule is filed as part of this Report.
      (3) Exhibits
      The exhibits listed on the accompanying Index to Exhibits are filed or incorporated by reference as part of this Report.

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INDEX TO EXHIBITS
         
Exhibit    
Number   Description
     
  3 .1   Restated and Amended Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 of the registrant’s registration statement on Form S-3 (File 333-116017)).
  3 .2   Amended and Restated By-laws of the registrant (incorporated by reference to Exhibit 3 to the registrant’s Current Report on Form 8-K dated December 14, 2004).
  4 .1   Agreement to Terminate Registration Rights Agreement between the registrant and the Alfred I. duPont Testamentary Trust, dated August 5, 2005 (incorporated by reference to Exhibit 4.1 to the registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2005).
  10 .1   Third Amended and Restated Credit Agreement dated as of July 22, 2005, among the registrant, Wachovia Bank, National Association, as agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 of the registrant’s current report on Form 8-K dated July 28, 2005).
  10 .2   Note Purchase Agreement dated as of February 7, 2002, among the registrant and the purchasers party thereto ($175 million Senior Secured Notes) (incorporated by reference to Exhibit 10.25 of the registrant’s annual report on Form 10-K for the year ended December 31, 2003)
  10 .3   Note Purchase Agreement dated as of June 8, 2004, among the registrant and the purchasers party thereto ($100 million Senior Notes) (incorporated by reference to Exhibit 10.3 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.
  10 .4   Note Purchase Agreement dated as of August 25, 2005 by and among the registrant and the purchasers party thereto ($150 million Senior Notes)(incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated August 30, 2005).
  10 .5   Employment Agreement between the registrant and Peter S. Rummell dated August 19, 2003 (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).
  10 .6   Employment Agreement between the registrant and Kevin M. Twomey dated August 19, 2003 (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).
  10 .7   Employment Agreement of Michael N. Regan, dated November 3, 1997 (incorporated by reference to Exhibit 10.17 of the registrant’s registration statement on Form S-1 (File 333-89146)).
  10 .8   Form of Severance Agreement for Mr. Regan (incorporated by reference to Exhibit 10.07 to the registrant’s registration statement on Form S-3 (File No. 333-42397)).
  10 .9   Severance Agreement between Christine M. Marx and the registrant dated as of March 24, 2003 (incorporated by reference to Exhibit 99.04 to the registrant’s Form 10-Q for the quarter ended March 31, 2003).
  10 .10   Severance Agreement between Wm. Britton Greene and the registrant, dated January 5, 2005 (incorporated by reference to Exhibit 10.26 of the registrant’s annual report on Form 10-K for the year ended December 31, 2004).
  10 .11   Severance Agreement between Anthony M. Corriggio and the registrant, dated March 14, 2005 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated March 18, 2005).
  10 .12   Severance Agreement between Christopher T. Corr and the registrant, dated March 1, 2002.
  10 .13   Severance Agreement between J. Everitt Drew and the registrant, dated December 3, 2004.
  10 .14   Directors’ Deferred Compensation Plan, dated December 28, 2001 (incorporated by reference to Exhibit 10.10 of the registrant’s registration statement on Form S-1 (File 333-89146)).
  10 .15   Deferred Capital Accumulation Plan, as amended and restated effective January 1, 2002 (incorporated by reference to Exhibit 10.11 of the registrant’s registration statement on Form S-1 (File 333-89146)).
  10 .16   First Amendment to the Deferred Capital Accumulation Plan, dated May 22, 2003 and effective as of June 1, 2003.

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Exhibit    
Number   Description
     
  10 .17   Second Amendment to the Deferred Capital Accumulation Plan, dated November 2, 2005 and effective as of September 8, 2005.
  10 .18   Third Amendment to the Deferred Capital Accumulation Plan, dated as of November 30, 2005 and effective as of January 1, 2005.
  10 .19   Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2002 (incorporated by reference to Exhibit 10.15 of the registrant’s registration statement on Form S-1 (File 333-89146)).
  10 .20   First Amendment to the Supplemental Executive Retirement Plan, dated May 22, 2003 and effective as of June 1, 2003.
  10 .21   Second Amendment to the Supplemental Executive Retirement Plan, dated November 2, 2005 and effective as of September 8, 2005.
  10 .22   1999 Employee Stock Purchase Plan, dated November 30, 1999 (incorporated by reference to Exhibit 10.12 of the registrant’s registration statement on Form S-1 (File 333-89146)).
  10 .23   Amendment to the 1999 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.13 of the registrant’s registration statement on Form S-1 (File 333-89146)).
  10 .24   1997 Stock Incentive Plan (incorporated by reference to Exhibit 10.21 of the registrant’s registration statement on Form S-1 (File 333-89146)).
  10 .25   1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.22 of the registrant’s registration statement on Form S-1 (File 333-89146)).
  10 .26   1999 Stock Incentive Plan (incorporated by reference to Exhibit 10.23 of the registrant’s registration statement on Form S-1 (File 333-89146)).
  10 .27   2001 Stock Incentive Plan (incorporated by reference to Exhibit 10.24 of the registrant’s registration statement on Form S-1 (File 333-89146)).
  10 .28   Form of Stock Option Agreement (incorporated by reference to Exhibit 10.23 of the registrant’s annual report on Form 10-K for the year ended December 31, 2003).
  10 .29   Form of Restricted Stock Agreement-Bonus Award (incorporated by reference to Exhibit 10.24 of the registrant’s annual report on Form 10-K for the year ended December 31, 2003).
  10 .30   Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10 of the registrant’s Current Report on Form 8-K dated September 23, 2004).
  10 .31   Summary of Non-Employee Director Compensation (incorporated by reference to the registrant’s Current Report on Form 8-K dated January 5, 2005).
  10 .32   Form of Non-Employee Director Stock Agreement (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated January 5, 2005).
  10 .33   Form of 2005 Director Investment Election Form (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated January 5, 2005).
  10 .34   Summary of Awards to Executive Officers Under the 2004 Annual Incentive Plan (incorporated by reference to the information set forth under the caption “Awards Under the 2004 Annual Incentive Plan” contained in the registrant’s Current Report on Form 8-K dated March 1, 2005).
  10 .35   Summary of 2005 Executive Officer Salaries (incorporated by reference to the information set forth under the caption “Approval of 2005 Base Salaries” contained in the registrant’s Current Report on Form 8-K dated March 1, 2005).
  10 .36   Summary of the 2005 Annual Incentive Plan (incorporated by reference to the information set forth under the caption “Approval of the 2005 Annual Incentive Plan” contained in the registrant’s Current Report on Form 8-K dated March 1, 2005).
  10 .37   Summary of Awards to Certain Executive Officers and a Director (incorporated by reference to the information set forth in the registrant’s Current Report on Form 8-K dated September 21, 2005).

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Exhibit    
Number   Description
     
  10 .38   Summary of Awards to Executive Officers Under the 2005 Annual Incentive Plan (incorporated by reference to the information set forth under the caption “Awards Under the 2005 Annual Incentive Plan” contained in the registrant’s Current Report on Form 8-K dated February 17, 2006).
  10 .39   Summary of 2006 Executive Officer Salaries (incorporated by reference to the information set forth under the caption “Approval of 2006 Base Salaries” contained in the registrant’s Current Report on Form 8-K dated February 17, 2006).
  10 .40   Annual Incentive Plan (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K dated February 17, 2006).
  10 .41   Summary of 2006 provisions of the Annual Incentive Plan (incorporated by reference to the information set forth under the caption “Approval of the 2006 Annual Incentive Plan” contained in the registrant’s current report on Form 8-K dated February 17, 2006).
  21 .1   Subsidiaries of The St. Joe Company.
  23 .1   Consent of KPMG LLP, independent registered public accounting firm for the registrant.
  31 .1   Certification by Chief Executive Officer.
  31 .2   Certification by Chief Financial Officer.
  32 .1   Certification by Chief Executive Officer.
  32 .2   Certification by Chief Financial Officer.

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SIGNATURES
      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned authorized representative.
  The St. Joe Company
  By:  /s/ Peter S. Rummell
 
 
  Peter S. Rummell
  Chairman and Chief Executive Officer
Dated: March 14, 2006
      Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant in the capacities and as of the dates indicated.
             
Signature   Title   Date
         
 
/s/ Peter S. Rummell

Peter S. Rummell
  Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
  March 14, 2006
 
/s/ Anthony M. Corriggio

Anthony M. Corriggio
  Chief Financial Officer
(Principal Financial Officer)
  March 14, 2006
 
/s/ Michael N. Regan

Michael N. Regan
  Senior Vice President
Finance and Planning
(Principal Accounting Officer)
  March 14, 2006
 
/s/ Michael L. Ainslie

Michael L. Ainslie
  Director   March 14, 2006
 
/s/ Hugh M. Durden

Hugh M. Durden
  Director   March 14, 2006
 
/s/ Thomas A. Fanning

Thomas A. Fanning
  Director   March 14, 2006
 
/s/ Harry H. Frampton, III

Harry H. Frampton, III
  Director   March 14, 2006
 
/s/ Dr. Adam W. Herbert, Jr.

Dr. Adam W. Herbert, Jr.
  Director   March 14, 2006
 
/s/ Delores M. Kesler

Delores M. Kesler
  Director   March 14, 2006
 
/s/ John S. Lord

John S. Lord
  Director   March 14, 2006

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Signature   Title   Date
         
 
/s/ Walter L. Revell

Walter L. Revell
  Director   March 14, 2006
 
/s/ William H. Walton, III

William H. Walton, III
  Director   March 14, 2006

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INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
         
    F-1  
    F-2  
    F-3  
    F-5  
    F-6  
    F-7  
    S-1  

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
The St. Joe Company:
      We have audited the accompanying consolidated balance sheets of The St. Joe Company and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity, and cash flow for each of the years in the three-year period ended December 31, 2005. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedule III — Consolidated Real Estate and Accumulated Depreciation. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The St. Joe Company and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005 in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of The St. Joe Company’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 13, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.
/s/ KPMG LLP  
Jacksonville, Florida
March 13, 2006
Certified Public Accountants

F-1


Table of Contents

THE ST. JOE COMPANY
CONSOLIDATED BALANCE SHEETS
                 
    December 31,   December 31,
    2005   2004
         
    (Dollars in thousands)
ASSETS
Investment in real estate
  $ 1,036,174     $ 942,630  
Cash and cash equivalents
    202,605       94,816  
Accounts receivable, net
    58,905       89,813  
Prepaid pension asset
    95,044       94,079  
Property, plant and equipment, net
    40,176       33,562  
Goodwill, net
    36,733       51,679  
Other intangible assets, net
    46,385       47,415  
Other assets
    75,924       49,635  
             
    $ 1,591,946     $ 1,403,629  
             
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
               
Debt
  $ 554,446     $ 421,110  
Accounts payable
    75,309       76,916  
Accrued liabilities
    139,087       135,425  
Deferred income taxes
    315,912       264,374  
             
Total liabilities
    1,084,754       897,825  
Minority interest in consolidated subsidiaries
    18,194       10,393  
STOCKHOLDERS’ EQUITY:
               
Common stock, no par value; 180,000,000 shares authorized; 103,931,705 and 103,123,017 issued at December 31, 2005 and December 31, 2004, respectively
    300,626       263,044  
Retained earnings
    1,074,990       994,172  
Restricted stock deferred compensation
    (19,656 )     (19,649 )
Treasury stock at cost, 29,003,415 and 27,229,767 shares held at December 31, 2005 and December 31, 2004, respectively
    (866,962 )     (742,156 )
             
Total stockholders’ equity
    488,998       495,411  
             
    $ 1,591,946     $ 1,403,629  
             
See notes to consolidated financial statements.

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Table of Contents

THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
                             
    Years Ended December 31,
     
    2005   2004   2003
             
    (Dollars in thousands, except per share
    amounts)
Revenues:
                       
 
Real estate sales
  $ 824,801     $ 734,251     $ 592,211  
 
Rental revenues
    40,708       30,781       21,560  
 
Timber sales
    27,974       35,218       36,552  
 
Other revenues
    44,709       43,381       28,530  
                   
   
Total revenues
    938,192       843,631       678,853  
                   
Expenses:
                       
 
Cost of real estate sales
    526,179       485,370       354,092  
 
Cost of rental revenues
    15,890       12,842       11,311  
 
Cost of timber sales
    19,995       21,782       24,212  
 
Cost of other revenues
    39,705       37,627       27,235  
 
Other operating expenses
    69,575       69,026       62,488  
 
Corporate expense, net
    48,005       43,759       34,467  
 
Depreciation and amortization
    38,054       31,366       24,744  
 
Impairment losses
          1,994       276  
                   
   
Total expenses
    757,403       703,766       538,825  
                   
   
Operating profit
    180,789       139,865       140,028  
                   
Other income (expense):
                       
 
Investment income, net
    3,543       841       864  
 
Interest expense
    (15,217 )     (10,182 )     (7,773 )
 
Other, net
    3,987       2,857       2,878  
                   
   
Total other income (expense)
    (7,687 )     (6,484 )     (4,031 )
                   
Income from continuing operations before equity in income (loss) of unconsolidated affiliates, income taxes, and minority interest
    173,102       133,381       135,997  
Equity in income (loss) of unconsolidated affiliates
    13,016       5,600       (2,168 )
Income tax expense:
                       
 
Current
    20,788       19,098       6,910  
 
Deferred
    43,544       33,427       41,519  
                   
   
Total income tax expense
    64,332       52,525       48,429  
                   
Income from continuing operations before minority interest
    121,786       86,456       85,400  
Minority interest
    7,820       2,594       553  
                   
Income from continuing operations
    113,966       83,862       84,847  
                   
Discontinued operations:
                       
 
(Loss) income from discontinued operations (net of income taxes of $(378), $610, and $(5,803), respectively)
    (630 )     1,014       (8,932 )
 
Gain on sales of discontinued operations, net (net of income taxes of $7,994 and $3,135, respectively)
    13,322       5,224        
                   
   
Total income (loss) from discontinued operations
    12,692       6,238       (8,932 )
                   
   
Net income
  $ 126,658     $ 90,100     $ 75,915  
                   

F-3


Table of Contents

THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
                           
    Years Ended December 31,
     
    2005   2004   2003
             
    (Dollars in thousands, except
    per share amounts)
EARNINGS PER SHARE
                       
Basic
                       
Income from continuing operations
  $ 1.52     $ 1.11     $ 1.12  
(Loss) income from discontinued operations
    (0.01 )     0.01       (0.12 )
Gain on sale of discontinued operations
    0.18       0.07        
                   
 
Net income
  $ 1.69     $ 1.19     $ 1.00  
                   
Diluted
                       
Income from continuing operations
  $ 1.50     $ 1.09     $ 1.09  
(Loss) income from discontinued operations
    (0.01 )     0.01       (0.11 )
Gain on sale of discontinued operations
    0.17       0.07        
                   
 
Net income
  $ 1.66     $ 1.17     $ 0.98  
                   
See notes to consolidated financial statements.

F-4


Table of Contents

THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
                                                   
    Common Stock                
            Restricted Stock        
    Outstanding       Retained   Deferred   Treasury    
    Shares   Amount   Earnings   Compensation   Stock   Total
                         
        (Dollars in thousands, except per share amounts)    
Balance at December 31, 2002
    76,004,398     $ 122,709     $ 892,622     $ (512 )   $ (534,726 )   $ 480,093  
                                     
Comprehensive income:
                                               
 
Net income
                75,915                   75,915  
                                     
Total comprehensive income
                                  75,915  
Issuances of restricted stock
    609,251       20,995             (20,995 )            
Dividends ($0.32 per share)
                (24,537 )                 (24,537 )
Issuances of common stock
    2,784,418       40,398                         40,398  
Tax benefit on exercises of stock options
          15,685                         15,685  
Amortization of restricted stock deferred compensation
                      2,700             2,700  
Purchases of treasury shares
    (3,367,976 )                       (102,939 )     (102,939 )
                                     
Balance at December 31, 2003
    76,030,091     $ 199,787     $ 944,000     $ (18,807 )   $ (637,665 )   $ 487,315  
                                     
Comprehensive income:
                                               
 
Net income
                90,100                   90,100  
                                     
Total comprehensive income
                                  90,100  
Issuances of restricted stock
    161,465       7,486             (7,486 )            
Forfeitures of restricted stock
    (3,123 )     (130 )           130              
Dividends ($0.52 per share) and other distributions
                (39,928 )                 (39,928 )
Issuances of common stock
    2,140,406       36,591                         36,591  
Tax benefit on exercises of stock options
          19,310                         19,310  
Amortization of restricted stock deferred compensation
                      6,514             6,514  
Purchases of treasury shares
    (2,446,198 )                       (104,998 )     (104,998 )
Issuance of treasury shares
    10,609                         507       507  
                                     
Balance at December 31, 2004
    75,893,250     $ 263,044     $ 994,172     $ (19,649 )   $ (742,156 )   $ 495,411  
                                     
Comprehensive income:
                                               
 
Net income
                126,658                   126,658  
                                     
Total comprehensive income
                                  126,658  
Issuances of restricted stock
    165,741       11,083             (11,083 )            
Forfeitures of restricted stock
    (20,891 )     (998 )           998              
Dividends ($0.60 per share) and other distributions
                (45,840 )                 (45,840 )
Issuances of common stock
    663,838       15,488                         15,488  
Tax benefit on exercises of stock options
          12,009                         12,009  
Amortization of restricted stock deferred compensation
                      10,078             10,078  
Purchases of treasury shares
    (1,773,648 )                       (124,806 )     (124,806 )
                                     
Balance at December 31, 2005
    74,928,290     $ 300,626     $ 1,074,990     $ (19,656 )   $ (866,962 )   $ 488,998  
                                     
See notes to consolidated financial statements.

F-5


Table of Contents

THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOW
<
                               
    Years Ended December 31,
     
    2005   2004   2003
             
    (Dollars in thousands)
Cash flows from operating activities:
                       
 
Net income
  $ 126,658     $ 90,100     $ 75,915  
 
Adjustments to reconcile net income to net cash provided by operating activities:
                       
   
Depreciation and amortization
    40,775       36,838       31,504  
   
Deferred compensation
    10,078       7,944       2,382  
   
Minority interest in income
    7,820       2,594       553  
   
Equity in income of unconsolidated joint ventures
    (13,016 )     (5,600 )     2,168  
   
Distributions of operations from unconsolidated affiliates
    16,585       4,075       10,620  
   
Deferred income tax expense
    37,575       33,427       36,238  
   
Tax benefit on exercise of stock options
    12,009       19,310       15,685  
   
Impairment loss
          1,994       14,359  
   
Cost of operating properties sold
    514,276       524,933       354,636  
   
Expenditures for operating properties
    (549,583 )     (551,416 )     (360,260 )
   
Gains on sale of discontinued operations
    (21,313 )     (4,839 )      
   
Changes in operating assets and liabilities:
                       
     
Accounts receivable
    14,347       (28,005 )     (35,711 )
     
Other assets
    (33,114 )     (37,191 )     (8,034 )
     
Accounts payable and accrued liabilities
    13,190       33,612       10,968  
     
Income taxes payable
    15,767       429       (14,190 )
                   
Net cash provided by operating activities
  $ 192,054     $ 128,205     $ 136,833  
                   
Cash flows from investing activities:
                       
 
Purchases of property, plant and equipment
    (19,909 )     (9,958 )     (6,909 )
 
Purchases of investments in real estate
    (106,822 )     (82,093 )     (118,758 )
 
Purchases of short-term investments, net of maturities and redemptions
                511  
 
Investments in joint ventures and purchase business acquisitions
    5       (3,411 )     (25,615 )
 
Proceeds from dispositions of assets
    88,823       52,883       6,540  
 
Distributions of capital from unconsolidated affiliates
    5,973       10,200       4,583  
                   
Net cash used in investing activities
  $ (31,930 )   $ (32,379 )   $ (139,648 )
                   
Cash flows from financing activities:
                       
 
Proceeds from revolving credit agreements, net of repayments
          (40,000 )     40,000  
 
Proceeds from other long-term debt
    359,363       119,481       34,022  
 
Repayments of other long-term debt
    (258,916 )     (44,952 )     (12,761 )
 
Distributions to minority interests
    (2,879 )     (2,765 )      
 
Proceeds from exercises of stock options
    13,056       15,140       23,351  
 
Dividends paid to stockholders and other distributions
    (45,840 )     (39,928 )     (24,537 )
 
Treasury stock purchases
    (119,979 )     (69,159 )     (77,290 )
 
Investment by minority interest partner
    2,860       3,770       4,160  
                   
Net cash used in financing activities
  $ (52,335 )   $ (58,413 )   $ (13,055