class action suit by st. joe company shareholders

8/8/2019 Class Action Suit by St. Joe Company Shareholders

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Case 3:10-cv-00452-RS -EMT Document 1 Filed 11/03/10 Page 1 of 60

UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF FLORIDAPensacola D ivision)

ROBERT J. MEYER, Individually and On Behalf )of All Others Similarly Situated,) CIVIL ACTION NO.Plaintiff,)vs.)CLASS ACTION COMPLAINTTHE ST. JOE COMPANY, WILLIAM BRITTON )GREENE, WILLIAM S. MCCALMONT, PETER )S. RUMMELL, JANNA L. CONNOLLY,MICHAEL L. AINSLIE, HUGH M. DURDEN, ) JURY TRIAL DEMANDEDTHOMA S A. FANNING, HARRY H.FRAMP TON, III, ADAM W. HERB ERT, JR.,DELORES M. KESLER, JOHN S. LORD, )WALTER L. REVELL, WILLIAM H. WALTON, )III, DEUTSCHE BANK SECURITIES INC. and )KPMG LLP,Defendants.)Plaintiff, Robert J. M eyer (Plaintiff), alleges the following based upon the investigationof Plaintiffs counsel, which included, among other things, a review of defendants publicdocuments, conference calls and announcements, United States Securities and ExchangeCommission (SEC) filings, wire and press releases published by and regarding The St. JoeCompany (St. Joe or the Company) and securities analysts reports and advisories about theCompany. Plaintiff incorporates by reference the October 13, 2010 presentation about St. Joe byDavid Einhorn (Einhorn) entitled Field of Schemes: If You Build It, They Wont Come.Plaintiff believes that substantial additional evidentiary support will exist for the allegations setforth herein after a reasonable opportunity for discovery.

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NATURE OF THE ACTION AND OVERVIEW1. This is a federal class action on behalf of purchasers of the securities of St. Joe,

who purchased or otherwise acquired St. Joe securities between February 19, 2008 andOctober 12, 2010, inclusive (the Class Period), including purchasers of the Companyssecurities pursuant or traceable to the Companys public offering of over 17 million shares ofcommon stock on or about February 27, 2008, seeking to pursue remedies under the SecuritiesAct of 1933 (the Securities Act) and the Securities Exchange Act of 1934 (the ExchangeAct).

2. St. Joe is one of the largest real estate development companies in Florida. TheCompany is engaged in town and resort development, commercial and industrial developmentand rural land sales. The Company operates in four segments: Residential Real Estate,Commercial Real Estate, Rural Land Sales and Forestry. As of December 31, 2009, St. Joeowned approximately 577,000 acres of land concentrated primarily in northwest Florida, as wellas approximately 405,000 acres on the coast of the Gulf of Mexico. St. Joes 2009 AnnualReport valued the Com panys real estate holdings at $749,500,000.

3. On October 13, 2010, St. Joes investors were shocked as Greenlight CapitalsMr. Einhorn detailed at the Value Investing Congress how St. Joe needed to take substantialimpairments and accounting writedowns on many of its properties, and that further building bythe Company will drive the stock price to zero. As subsequently reported by Reuters, Mr.Einhorns presentation, entitled Field of Schemes: If You Build It, They Wont Come, notedthat St. Joes development plans have fallen flat, leaving it with ghost towns and inevitablewritedowns. For example, Mr. Einhorn said he would generously place a value of $17.8million on the remaining residential development at St. Joes Windmark Beach property while

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JURISDICTION AND VENUE7. The claims asserted herein arise under and pursuant to Sections 11, 12(a)(2), and

15 of the Securities Act (15 U.S.C. 77k and 77o), and under and pursuant to Sections 10(b)and 20(a) of the Exchange Act, (15 U.S.C. 78j(b) and 78t(a)), and Rule 10b-5 promulgatedthereunder (17 C.F.R. 240.10b-5).

8. This Court has jurisdiction over the subject matter of this action pursuant toSection 22 of the Securities Act (15 U.S.C. 77v) and pursuant to Section 27 of the ExchangeAct (15 U.S.C. 78aa) and 2 8 U.S.C. 1331.

9. Venue is proper in this District pursuant to Section 22 of the Securities Act andpursuant to Section 27 of the Exchange Act, 15 U.S.C. 78aa and 28 U.S.C. 1391(b). Many ofthe acts and transactions alleged herein, including the preparation and dissemination ofmaterially false and misleading information, occurred in substantial part in this District.Additionally, St. Joes principal executive offices are located w ithin this District.

10. In connection with the acts, conduct and other wrongs alleged in this Complaint,defendants, directly or indirectly, used the means and instrumentalities of interstate com merce.

PARTIES11. Plaintiff, Robert J. Meyer, as set forth in the accompanying certification,

incorporated by reference herein, purchased St. Joe securities at artificially inflated prices duringthe Class Period and has been damaged thereby.

12. Defendant St. Joe is a Florida corporation with its principal executive officeslocated at 133 South WaterSound Parkway, WaterSound, Walton County, Florida.

13. Defendant William Britton Greene (Greene) was, at relevant times, theCompanys President, Chief Executive Officer (CEO), and a member of the Companys Board

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of Directors.14. Defendant William S. McCalmont (McCalmont) was, at relevant times, the

Com panys Chief Financial Officer (CFO) an d an Executive Vice President.15. Defendant Peter S. Rummell (Rummell) was, at relevant times, the Companys

CEO and C hairman of the Board.16. Defendant Janna L. Connolly (Connolly) was, at relevant times, the Companys

Controller.17. Defendant Michael L. Ainslie (Ainslie) was, at relevant times, a member of the

Comp anys Board of Directors.18. Defendant Hugh M. Durden (Durden) was, at relevant times, a member of the

Comp anys Board of Directors.19. Defendant Thomas A. Fanning (Fanning) was, at relevant times, a member of

the Companys Bo ard of Directors.20. Defendant Harry H. Frampton, III (Frampton) was, at relevant times, a member

of the Companys Board of D irectors.21. Defendant Adam W. Herbert, Jr. (Herbert) was, at relevant times, a member of

the Companys Bo ard of Directors.22. Defendant Delores M. Kesler (Kesler) was, at relevant times, a member of the

Comp anys Board of Directors.23. Defendant John S. Lord (Lord) was, at relevant times, a member of the

Comp anys Board of Directors.24. Defendant Walter L. Revell (Revell) was, at relevant times, a member of the

Comp anys Board of Directors.

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25. Defendant William H. Walton, III (Walton) was, at relevant times, a member ofthe Companys Bo ard of Directors.

26. Defendants Greene, McCalmont, Rummell, Connolly, Ainslie, Durden, Fanning,Frampton, Herbert, Kesler, Lord, Rev ell and Walton are c ollectively referred to hereinafter as theIndividual Defendants. The Individual Defendants, because of their positions with theCompany, possessed the power and authority to control the contents of St. Joes reports to theSEC, press releases and presentations to securities analysts, money and portfolio managers andinstitutional investors, i.e., the market. Each defendant was provided with copies of the

Companys reports and press releases alleged herein to be misleading prior to, or shortly after,their issuance and had the ability and opportunity to prevent their issuance or cause them to becorrected. Because of their positions and access to material non-public information available tothem, each of these defendants knew that the adverse facts specified herein had not beendisclosed to, and were being concealed from, the public, and that the positive representationswhich were being made were then materially false and misleading. The Individual Defendantsare liable for the false statements pleaded herein, as those statements were each group-published information, the result of the collective actions of the Indiv idual Defendants.

27. Defendant Deutsche Bank Securities Inc. (Deutsche Bank) was an underwriterof the Companys February 2008 public stock offering. Deutsche Bank served as a financialadvisor and assisted in the preparation and dissemination of the offering materials for St. Joespublic stock offering.

28. Defendant KPMG LLP (KPMG) was, at all relevant times, the Companyspublic accounting firm. KPMG audited St. Joes financial statements, and issued unqualifiedopinions about the effectiveness of the C ompany s internal control over financial reporting.

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SUBSTANTIVE ALLEGATIONSBackground

29. St. Joe is a real estate development company, and is one of the largest suchcompanies in Florida. The Company is engaged in town and resort development, commercialand industrial development and rural land sales. The Company operates in four segments:Residential Real Estate, Commercial Real Estate, Rural Land Sales and Forestry. TheResidential Real Estate segment develops mixed-use resort, and seasonal and primary residentialcommunities. This segment also focuses on selling undeveloped land to third-party developers

or investors. The Commercial Real Estate segment develops and sells real estate primarily forcommercial and light industrial uses. The Rural Land Sales segment markets parcels for ruralrecreational, conservation, and timberland uses. The Forestry segment grows, harvests and sellstimber and wood fiber, and provides land management services for conservation properties. Asof December 31, 2009, St. Joe owned approximately 577,000 acres of land concentratedprimarily in northwest Florida, as well as approximately 405,000 acres on the coast of the Gulfof Mexico.

Materially False and MisleadingStatements Issued Du ring the Class Period30. The Class Period begins on February 19, 2008. On this day the Company issued a

press release entitled The St. Joe Company (NYSE: JOE) Reports Fourth Quarter And FullYear 2007 Financial. The press release reported that the Companys investment in real estatewas $943 .5 million, and stated:

The St. Joe Company (NYSE: JOE) today announced Net Income for the fourthquarter 2007 of $1.0 million, or $0.01 per share, compared with $22.3 million, or$0.30 per share, for the fourth quarter of 2006. JOEs fourth quarter resultsincluded pre-tax restructuring charges of $6.2 million, or $0.05 per share after tax,and $4 .3 million, or $0.04 per share after tax, related to the write-off of a m inority

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position in a liquidating trust. All per share references in this release are presentedon a diluted basis.For the full year 2007, JOE had Net Income of $39.2 million, or $0.53 per share,compared with $51.0 million, or $0.69 per share, for the full year 2006. Full yearresults were affected by:Pre-tax impairment charges for the full year 2007 totaled $23.2 million, or$0.19 per share after tax, which included:

o Approximately $13.6 million primarily related to a write-down ofcosts on homes and home sites in JOEs residential segment toapproximate fair value;*

Summ ary Balance SheetDecember 31, 2007ecember 31, 2006AssetsInvestments in real estate943,500,0001,213,500,00031. On February 25, 2008, the Company filed its 2007 Annual Report with the SEC

on Form 10-K. The Companys Form 10-K was signed by Defendants Rummell, Greene andMcCalmont, among others, and reaffirmed the Companys 2007 financial results, financialposition, and the reported value of the Companys investment in real estate as previouslyannounced on February 19, 2008. With respect to the Companys asset impairment costs, St.Joes 2007 Annual Report stated:

During 2007, we recorded total asset impairment costs of $23.2 million,$13.0 m illion of w hich related t o the w rite dow n of capitalized costs at certainprojects due to changes in developm ent plans and the imp airment of comp letedhomes in several of our communities due to current market conditions. Ifmark et conditions were to continue to deteriorate, and t he mark et v alues for ourhome sites , rem aining homes held in inventory and other p roject land w ere tofall below the b ook v alue of these assets, we w ould need t o tak e additional w rite-downs of the book value of these assets. Any such write-downs would decreasethe value of these assets on our balance sheet and wo uld reduce our net income.

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*Impairment Losses. We review our long-lived assets for impairment wheneverevents or changes in circumstances indicate that the carrying amount of an assetmay not be recov erable. Homes and hom e-sites substantially completed and readyfor sale are measured at the lower of carrying value or fair value less costs to sell.For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain the existing service potential of the project and using managem ents bestestimates about future sales prices and holding periods. The decline in demandand market prices for residential real estate caused us to conclude that carryingamounts within our residential real estate segment may not be recoverable, andwe performed an impairment analysis. As a result of our impairment analyses,w e recorded an imp airment charge of $13.6 million in the residential real estatesegment.

*Impairment of Long-lived Assets and Goodwill. Our long-lived assets, primarilyreal estate held for investment, are carried at cost unless circumstances indicatethat the carrying value of the assets may not be recoverable. If we determine thatan impairment exists due to the inability to recover an assets carrying value, aprovision for loss is recorded to the extent that the carrying value exceededestimated fair value. If such assets were held for sale, the provision for loss wouldbe recorded to the extent that the carrying value exceeds estimated fair value lesscosts to sell.Depending on the asset, we use varying methods to determine fair value, such as(i) analyzing expected future cash flows, (ii) determ ining resale values by market,or (iii) app lying a capitalization rate to net operating incom e using prevailing ratesin a given market. The fair value determined u nder these methods can fluctuate upor down significantly as a result of a number of factors, including changes in thegeneral economy of our markets, demand for real estate and the projected netoperating income for a specific property.

*Asset ImpairmentsThe Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Hom es and home -sites substantially completed and read y for sale aremeasured at lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain the existingservice potential of the project and using managements best estimates aboutfuture sales prices and holding periods. The overall decrease in demand and

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market prices for residential real estate indicated that carrying amounts of certainassets within its residential real estate segment may not be recoverable and,accordingly, the Company recorded an impairment charge of $13.6 million in theresidential real estate segment during 2007. [Emphasis added.]32. The Notes to Consolidated Financial Statements section of the 2007 Form 10-K

also discussed asset impairments and the Companys segment results, and provided a schedule ofthe carrying value of the Companys residential real estate and accumulated depreciation. Inrelevant part, the Form 10-K stated:

In 2007 we recorded impairments totaling $13.6 million primarily due to currentadverse market conditions for residential real estate. Approximately $5.2 millionof the impairments related to capitalized costs at certain projects due to changes indevelopment plans, approximately $7.8 million related primarily to completedspec homes in several communities and approximately $0.6 million related to themodified terms of certain promissory notes.

*THE ST. JOE COMPANYSCHEDULE III (CONSOLIDATED) REAL ESTATE AND ACCUMULATED DEPRECIATIONDECEM BER 31, 2007

Initial Cost to Companyarried at Close of PeriodDescriptionncumbrancesanduildings &ostsand & Landuildings andotalccumulatedImprovementsapitalizedmprovements ImprovementsepreciationSubsequenttoAcquisition(in thousands)Bay County, FloridaLand with infrastructure3,3466 4230,54531,18731,18775Buildings,2961,8503,1463,146,113Residential,2033,4745,6775,67723Timberlands,257,8962,0465,9425,94260Unimproved land,504,504,504Broward County, FloridaBuildingCalhoun County, FloridaBuildings8181816Timberlands,510,774,155,929,92956Unimproved land7925,704,704Duval County, FloridaLand with infrastructure556 06 0Buildings,795,795,795,983Residential

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TimberlandsFranklin County, FloridaLand with infrastructure4155Residential,0037,3266,3296,329Timberlands15,241,367,608,6089Unimproved Land111414Buildings,537,499,036,03632Gadsden County, FloridaLand with infrastructure,288,288,288Timberlands6 9,30278,080,0807Unimproved land,8362 9,165,165Gulf C ounty, FloridaLand with infrastructure,591,520,111,111Buildings30,036,966,96669Residential9,84759,95389,80089,80007Timberlands4,958,2387,9393,1773,17723Unimproved land2104,225,225Hillsborough County,FloridaBuildingsJefferson County, FloridaBuildings98989877Timberlands,214,214,2147Unimproved land151515Leon County, FloridaLand with infrastructure7273,121,694,6948Buildings,7181,5137,2317,231,666Residential84388,1208,14388,201,281Timberlands23,827,750,7505Unimproved land383838Liberty County, FloridaBuildings218494923Timberlands,401,449,679,128,12844Unimproved land454545Manatee CountyLand with infrastructureBuildings,3797,446,44660Residential6,7307,2253,9553,9552Orange County, FloridaLand with infrastructureBuildingsOsceola CountyLand with infrastructureResidential93,7692,1337,9027,902BuildingsPalm B each County,FloridaLand with infrastructureResidentialBuildings7222Pinellas County, FloridaBuildingsSt. Johns County, Florida

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Land with infrastructure,016,744,760,76041Buildings,854,632,486,486,093Residential0,276,1426,4735,6155,615Polusia County, FloridaLand with infrastructureBuildings,644, 265,909,90910Residential4,0050,9004,9054,905,864W akulla County , FloridaLand with infrastructure717171Buildings11223Timberlands,1753,218,2187Unimproved Land0111W alton County, FloridaLand with infrastructure6,435,491,491Buildings3,4982,1825,6805,680,664Residential2,67648,99571,67171,671,138Timberlands3454,040,394,3941Unimproved landOther Florida CountiesLand with infrastructureTimberlands891201018Unimproved land98474733. The Companys 2007 Form 10-K also contained Sarbanes-Oxley requiredcertifications, signed by Defenda nts Rumm ell and McCalmo nt, which stated:I, [Peter S. Rumm ell / William S. McC almont], certify that:

1. I have reviewed this annual report on Form 10-K for the year endedDecember 31, 2007 of The St. Joe Company;2. Based on my knowledge, this report does not contain any untrue statementof a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period cov ered by this report;3. Based on my knowledge, the financial statements, and other financialinformation included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report;4. The registrants other certifying officer and I are responsible forestablishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financialreporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:

(a) Designed such disclosure controls and procedures, or caused suchdisclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its

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consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is beingprepared;(b ) Designed such internal control over financial reporting, or causedsuch internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accoun ting principles;(c ) Evaluated the effectiveness of the registrants disclosure controlsand procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such ev aluation; and(d ) Disclosed in this report any change in the registrants internalcontrol over financial reporting that occurred during the registrants mostrecent fiscal quarter that has materially affected, or is reasonably likely tomaterially affect, the registrants internal control over financial reporting;an d

5. The registrants other certifying officer and I have disclosed, based on ourmost recent evaluation of internal control over financial reporting, to theregistrants auditors and the audit comm ittee of the registrants board of directors:(a ) All significant deficiencies and material weaknesses in the designor operation of internal control over financial reporting which arereasonably likely to adversely affect the registrants ability to record,process, summarize and repo rt financial information; and(b ) Any fraud, whether or not material, that involves management orother employees who have a significant role in the registrants internalcontrol over financial reporting.

*Pursuant to 18 USC 1350, the undersigned officer of The St. Joe Company (theCompany) hereby certifies that the Companys Annual Report on Form 10-Kfor the year ended December 31, 2007 (the Report) fully complies with therequirements of Section 13(a) or 15(d), as applicable, of the Securities ExchangeAct of 1934 and that the information contained in the Report fairly presents, in allmaterial respects, the financial condition and results of operations of the Com pany34. St. Joes 2007 Form 10-K also contained a report from KPMG, the Companys

public accounting firm, which stated that the Companys financial statements present fairly, inall material respects, the financial position of The St. Joe Company and subsidiaries as of

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December 31, 2007. KPMG also expressed an unqualified opinion on the effectiveness of theCom panys internal control over financial reporting:

We have audited the accompanying consolidated balance sheets of The St. JoeCompany and subsidiaries as of December 31, 2007 and 2006, and the relatedconsolidated statements of income, chan ges in stockholders equity, and cash flowfor each of the years in the three-year period ended December 31, 2007. Inconnection with our audits of the consolidated financial statements, we also haveaudited financial statement schedule III Consolidated Real Estate andAccumulated Depreciation. These consolidated financial statements and financialstatement schedule are the responsibility of the Companys management. Ourresponsibility is to express an opinion on these consolidated financial statementsand financial statement schedule based on our audits.We conducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence sup porting the amoun ts and disclosures in thefinancial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of The St. Joe Company andsubsidiaries as of Decemb er 31, 2007 an d 2 006 , and the results of their operationsand their cash flows for each of the years in the three-year period endedDecember 31, 2007, in conformity with U.S. generally accepted accountingprinciples. Also in our opinion, the related financial statement schedule, whenconsidered in relation to the basic consolidated financial statements taken as awhole, presents fairly, in all material respects, the information set forth therein.

*We also have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), The St. Joe Companys internalcontrol over financial reporting as of December 31, 2007, based on criteriaestablished in Internal Control - Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO), and ourreport dated February 25, 2008, expressed an unqualified opinion on theeffectiveness of the Com panys internal control over financial reporting.35.he statements contained in 30 34 w ere materially false and misleading whenmade because defendants failed to disclose that: (1) as the Florida real estate market was in

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decline, St. Joe was failing to take adequate and required impairments and accounting write-downs on many of its Florida based property developments; (2) as a result, St. Joes financialstatements materially overvalued the Companys Florida based property developments; (3) theCompanys financial statements were not prepared in accordance with GAAP; (4) the Companylacked adequate internal and financial controls; and (5) as a result of the foregoing, theCom panys financial statements were materially false and misleading at all relevant times.

36. On or about February 27, 2008, the defendants conducted a public offering (theOffering) and sold 17,145,000 shares of St. Joe stock to inv estors at a price of $35.00 per sharefor proceeds of approximately $580,000,000. In connection with this Offering, the Companyfiled a Registration Statement and Prospectus on February 25, 2008 and a ProspectusSupplement on February 26, 2008 (collectively, the Offering Materials). The OfferingMaterials were signed by the Individual Defendants, and incorporated certain information byreference, including the false statements identified at 30 34. The Offering Materials stated,in relevant part:

INFORMATION INCORPORATED BY REFE RENCEThe SEC allows us to incorporate by reference the information contained indocuments we file with the SEC, which means that we can disclose importantinformation to you by referring you to those documents. The informationincorporated by reference is an important part of this prospectus and anyapplicable prospectus supplement. Any statement contained in a document whichis incorporated by reference in this prospectus or the applicable prospectussupplement is automatically updated and superseded if information contained inthis prospectus or any applicable prospectus supplement, or information that welater file with the SEC , modifies or replaces that information. Any statement m adein this prospectus or any applicable prospectus supplement concerning thecontents of any contract, agreement or other document is only a summary of theactual contract, agreement or other document. If we have filed or incorporated byreference any contract, agreement or other document as an exhibit to theregistration statement, you should read the exhibit for a more completeunderstanding of the document or matter involved. Each statement regarding acontract, agreement or other document is qualified in its entirety by reference tothe actual document.

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We incorporate by reference the following documents we filed with the SEC(other than any information contained therein or attached as exhibits theretowhich has been furnished but not filed in accordance with SEC rules):(1 ) Our Annual Report on Form 10-K for the year ended December 31, 2007,

filed February 25, 2008 ;(2 ) Our Current Reports on Form 8-K filed on January 24 and February 19,2008; and(3) Our Proxy S ta tement on Schedule 14A f iled April 13 , 2007 .37. The Offering Materials were materially false and misleading because defendants

failed to disclose that: (1) as the Florida real estate market was in decline, St. Joe was failing totake adequate and required impairments and accounting write-downs on many of its Floridabased property developments; (2) as a result, St. Joes financial statements materially overvaluedthe Companys Florida based property developments; (3) the Companys financial statementswere not prepared in accordance with GAAP; (4) the Company lacked adequate internal andfinancial controls; (5) the Companys financial statements were materially false and misleadingat all relevant times; and (6) as a result of the foregoing, the Companys Offering Materials werefalse and misleading at all relevant times.

38. On February 27, 2008, St. Joe issued a press release announcing that it had pricedthe public offering of 17,145,000 shares of its common stock. The public offering price was$35.00 per share, and St. Joe stated that the approximately $580 million of net proceeds fromthe offering will be used to repay substantially all of JOEs outstanding indebtedness. Theoffering is expected to close on March 3, 2008. The sole underwriter for the Offering wasDeutsche Bank Securities Inc.

39. On or about March 3, 2008, the Offering closed, and the Company receivedproceeds of approximately $580,000,000.

40. On May 6, 2008, the Company issued a press release entitled The St. Joe

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Company (NYSE: Joe) Reports First Quarter 2008 Financial Results. The press releasereported that the Comp anys investment in real estate was $950.7 million, and stated:

The St. Joe Company (NYSE: JOE) today announced Net Income for the firstquarter 2008 increased $12.4 million to $32.1 million, or $0.40 per share,compared to Net Income of $19.7 million, or $0.27 per share, for the first quarterof 2007. JOEs first quarter results included pre-tax impairment charges of $2.3million, or $.02 per share after taxes, as a result of continuing declines in salesand listing prices principally in our primary communities. Also included in 2008results are pre-tax restructuring charges of $0.5 million, or less than $0.01 pershare after tax, compared to $3.2 million, or $0.03 per share after tax, in 2007.All per share references in this release are presented on a diluted basis.Like the rest of the country, Florida is facing very challenging real estate marketconditions. Consumer confidence is declining and many consumers seem to bedeferring residential real estate purchases until there is more economic clarity,said chairman and CEO Peter S. Rummell. With the U.S. and Florida economiesbattling rising hom e foreclosures, a tightening of credit and a significant inventoryof unsold homes, predicting when residential real estate markets will return tohealth remains difficult. However, demand for rural land remains strong, and weare having success selling non-strategic rural land parcels to a wide variety ofcustomers.During the first quarter, significant progress was achieved in four areas:

Construction of the Panama City - Bay County International Airportmoved forward on time and on budget after several favorable judicialdecisions;

JOEs successful equity offering made JOE virtually debt free andincreased its financial flexibility to w eather the current m arket downturn; JOE sold 57,435 acres of non-strategic rural lands for a total of $91.1million; and JOEs succession plan was implemented smoothly with president andCOO B ritt Greene slated to become CEO on May 13th.

While it is impossible to predict when conditions in JOE residential markets willimprove, we are taking important steps to be properly positioned when they do,said Rummell. We have become a leaner, more nimble company.Looking ahead two years from today, 2010 will be an important time for JOE,said Rummell. The new Panama City - Bay County airport is scheduled to openat that point and many economists think economic conditions will be improvingby then. Our job between now and then is to focus on the demand side of the

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equation and work with a broad range of strategic allies - from the state economicdevelopment organizations to third-party developers - to ensure West Bay and thenew airport are a success.*

JOEs Balance SheetOn March 3, 2008, JOE sold 17,145,000 shares of its common stock. Theapproximately $580 million of net proceeds from the public offering were used torepay substantially all of JOEs outstanding indebtedn ess.JOEs successful equity offering has dramatically increased our financialflexibility in weathering the current market downturn, said William S.McCalmont, JOEs CFO. As we move forward, we are committed tomaintaining a strong balance sheet.At March 31, 2008, JOEs debt was $288.7 million, including $30.2 million ofdefeased debt. On April 4, 2008, JOE paid off $240 million of Senior Notesmaking it virtually debt free. At the end of the first quarter, JOE hadapproximately $480.3 million of available capacity under its $500 millionRev olving Credit Facility.

*Demand for both large and small tracts of rural land has held up well during thiscurrent market downturn, said JOE president and COO Britt Greene. Wecontinue to see interest from large landowners, recreational land buyers,conservation land buyers and pe nsion funds.Resort and primary residential sales generated $9.7 million in revenue. Asanticipated, conditions in JOEs residential markets remain difficult. JOE did notclose any commercial land sales during the first quarter. Due to the challengesfacing the retail industry, as well as the nature of commercial land transactions,JOE expects its revenue from co mm ercial land sales to remain lumpy.41. Also on May 6, 2008, St. Joe filed its Quarterly Report with the SEC on Form 10-

Q. The Companys Form 10-Q was signed by Defendants Rummell and Connolly, andreaffirmed the Com panys quarterly financial results, financial position, and the reported value ofthe Companys investment in real estate. The Companys Form 10-Q also contained Sarbanes-Oxley required certifications, which were substantially similar to the certifications contained in33. Additionally, the Form 10-Q discussed asset impairments, stating:

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The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Hom es and home -sites substantially completed and read y for sale aremeasured at lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain the existingservice potential of the project and using managements best estimates aboutfuture sales prices and holding periods. The continued decrease in demand andmarket prices for residential real estate during the first quarter of 2008 indicatedthat certain carrying amounts within our residential real estate segment may notbe recoverable. As a result of the first quarter 2008 impairment analysis, theCompany has recorded an impairment charge of $2.3 million in the residentialreal estate segment.42. On August 5, 2008, the Company issued a press release entitled The St. Joe

Company (NYSE: JOE) Reports Second Quarter 2008 Financial Results. The press releasereported that the Comp anys investment in real estate was $947.6 m illion, and stated:

The St. Joe Company (NYSE: JOE) today announced a Net Loss for the secondquarter 2008 of $(20.8) million, or $(0.23) per share, compared to Net Income of$25.3 million, or $0.34 per share, for the second quarter of 2007, a decrease of$46.1 million. All per share references in this release are presented on a dilutedbasis. JOEs second qu arter results included the following significant charges:

$29.9 million pre-tax, or $0.20 per share after-tax, related to a loss on theearly extinguishment of debt in conjunction with the prepayment of JOEssenior notes; Pre-tax restructuring of $2 .5 million, or $0.02 per share after-tax; Pre-tax impairment o f $1.0 m illion, or $0.01 pe r share after-tax, associated

with certain of JOEs communities and the write-down of a homebuildernote receivable; and $1.9 million pre-tax loss, or $0.01 per share after-tax, related to a fairvalue adjustment o n retained interests of monetized installment no tes.

Net income for the first half of 2008 was $11.2 million, or $0.13 per share,compared to $45.0 million, or $0.61 per share, for the first half of 2007. Includedin results for the first six mon ths of 20 08 were the following significant charges: $29.9 million pre-tax, or $0.21 per share after-tax, related to a loss on theearly extinguishment o f debt; Pre-tax restructuring of $3.0 m illion, or $0.02 per share after-tax;

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Pre-tax impairment of $3.2 million, or $0.02 per share after-tax; and $1.9 million pre-tax loss on the mon etization of installment notes, or $0.01per share after-tax.

*With continuing economic weakness in the national economy, our northernFlorida real estate markets face difficult conditions, said JOEs president andCEO Britt Greene. We cannot predict exactly when the national economy or ourreal estate markets will recover, but we are continuing to execute our strategicplan and keep JOE lean and efficient to better withstand these very difficultconditions. We have significantly reduced capital expenditures, virtuallyeliminated our debt and meaningfully reduced employee headcou nt.We intend to be well positioned when real estate markets eventually return tohealth by providing a variety of real estate products for the cycles upturn, saidGreene. This includes key parcels in Bay County near the new internationalairport now under construction, and WindM ark Beach in Po rt St. Joe.

*Commitment to a Solid Balance SheetAt June 30, 2008, JOE had cash and marketable securities of $74.0 million,compared to d ebt of $54.2 m illion, which includes $29.8 m illion of defeased debt.On April 4, 2008, JOE paid off $240 million of senior notes along with a $29.7million make-whole payment with the proceeds of the first-quarter equityoffering.JOE is comm itted to maintaining a strong balance sheet and con tinuing to reduceSG&A expenses, said CFO William McCalmont. We fully understand theimportance of operating with extreme efficiency, and we are evaluating allexpenditures and strategic initiatives to ensure we are well prepared when the realestate environment improv es. With our strong balance sheet and cash position, weare prepared to withstand this prolonged downturn and will continue to prudentlymanag e our inventory and assets to preserve long-term shareholder value.43. Also on August 5, 2008, St. Joe filed its Quarterly Report with the SEC on Form

10-Q. The Companys Form 10-Q was signed by Defendants Greene and Connolly, andreaffirmed the Com panys quarterly financial results, financial position, and the reported value ofthe Companys investment in real estate. The Companys Form 10-Q also contained Sarbanes-Oxley required certifications, which were substantially similar to the certifications contained in

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33. Additionally, the Form 10-Q discussed asset impairments, stating:The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Hom es and home -sites substantially completed and read y for sale aremeasured at lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain the existingservice potential of the project and using managements best estimates aboutfuture sales prices and holding periods. The continued decrease in demand andmarket prices for residential real estate during the first six months of 2008indicated that certain carrying amounts within the Companys residential realestate segment may not be recoverable. In addition, for the second quarter 2008the Company recorded an impairment charge of $0.8 million related to the writedown of a renegotiated builder note receivable. As a result of its impairmentanalyses, the Company has recorded aggregate impairment charges of$3.2 million in the residential real estate segment for the first six months of 2008of which $2.2 million was recognized in the first quarter and $1.0 million in thesecond quarter.44. On November 4, 2008, the Company issued a press release entitled The St. Joe

Company (NYSE: JOE) Reports Third Quarter 2008 Financial Results. The press releasereported that the Comp anys investment in real estate was $930.4 million, and stated:

The St. Joe Company (NYSE: JOE) today announced a Net Loss for the thirdquarter 2008 of $(19.2) million, or $(0.21) per share, compared to a Net Loss of$(6.8) million, or $(0.09) per share, for the third quarter of 2007.

*Third Q uarter HighlightsDuring these extraordinary times that are impacting the entire real estateindustry, we continue to make progress in the third quarter fortifying JOE, saidBritt Greene, JOEs President and CEO. With virtually no debt and a strong cashposition, JOEs solid balance sheet better positions us to withstand the globalfinancial crisis and the downturn in the Florida real estate market. We remaincomm itted to continuing to manage costs during this prolonged downturn and w illmaintain our focus on managing our inventory and assets to preserve long-termshareholder value. At the same time, we are focusing on the opportunities to bepresented by the opening of the airport and are positioning JOE for when the realestate markets begin to recover.

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Third Q uarter Operating ResultsThe third quarter operating results reflect a challenging environment, saidGreene. The summer selling season in our resort markets was disappointing andthe primary home market remains difficult. We continue to see long-term interestin Northwest Florida commercial markets, but they continue to be affected by thecurrent economic cond itions.

*Year-to-Date ResultsNet Loss for the first nine months of 2008 was $(8.0) million, or $(0.09) pershare, compared to Net Income of $38.2 million, or $0.51 per share, for the firstnine months of 2007.45. Also on November 4, 2008, St. Joe filed its Quarterly Report with the SEC on

Form 10-Q. The Companys Form 10-Q was signed by Defendants Greene and Connolly, andreaffirmed the Com panys quarterly financial results, financial position, and the reported value ofthe Companys investment in real estate. The Companys Form 10-Q also contained Sarbanes-Oxley required certifications, which were substantially similar to the certifications contained in33. Additionally, the Form 10-Q discussed asset impairments, stating:

The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Hom es and home -sites substantially completed and read y for sale aremeasured at lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain the existingproject and using managements best estimates about future sales prices andholding periods. The continued decrease in demand and market prices forresidential real estate during the first nine months of 2008 and 2007 indicated thatcertain carrying amounts within the Companys residential real estate segmentmay not be recoverable. In addition, during the second quarter 2008 the Companyrecorded an impairment charge of $0.8 million related to the write down of arenegotiated builder note receivable. As a result of its 2008 impairment analyses,the Company has recorded aggregate impairment charges of $1.3 million and$4.6 million in the residential real estate segment for the three and nine monthsended September 30, 2008. The Company also recorded an impairment charge of$13.0 million in the third quarter of 2007 .

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46. On February 24, 2009, the Company issued a press release entitled The St. JoeCompany (NYSE: Joe) Reports Fourth Quarter and Full Year 2008 Financial Results. Thepress release reported that the Companys investment in real estate was $890.6 million, andstated:

The St. Joe Company (NYSE: JOE) today announced a Net Loss for the fourthquarter 2008 of $(27.9) million, or $(0.31) per share, which includes non-cashcharges of $57.9 million, or $0.36 per share after tax. This compares to NetIncome of $1.0 million, or $0.01 per share, for the fourth quarter of 2007, whichincludes non-cash charges of $10.5 million, or $0.09 per share after tax. All per-share references in this release are presented on a diluted basis.JOEs fourth quarter 2008 results include the following non-cash charges:Pre-tax impairment charges of $55.8 million, or $0.34 per share after tax,including:

o $28.3 million write-down related to its SevenShores condominiumdevelopment project;o $19.0 million write-off of goodwill related to JOEs 1997 purchaseof Arvida;o $8.3 million charge for the write-down of costs to approximate fairvalue on homes in several JOE communities;

*For the fourth quarter of 2007, JOE recorded p re-tax restructuring charges of $6.2million, or $0.05 per share after tax, and $4.3 million, or $0.04 per share after tax,related to the w rite-off of a m inority position in a liquidating trust.Preserving JOEs unique asset base while identifying and capitalizing on futuregrowth options are our primary focus in these unprecedented economic times,said Britt Greene, JOEs President and CEO. Our solid balance sheet, bolsteredby a strong cash position with virtually no debt, better positions JOE to weatherthis economic crisis. We have benefited greatly from our successful costmanagement and asset preservation initiatives. As we look forward, we are alsocommitting significant resources to the opportunities presented by the opening ofthe new international airport in Panam a City projected for May 2 010.Liquidity and Capital ExpendituresAt December 31, 2008, JOE had cash and pledged treasury securities of $144.4million, compared to debt of $49.6 million, which includes $28.9 million of

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defeased debt. For the year 2008, JOEs capital expenditures were approximately$35 million, compared to approximately $247 m illion in 2007.During the economic uncertainty of 2008, we prudently managed our assets witha restructured business model, reduced capital expenditures and redu ced operatingand overhead expenses, said William S. McCalmont, JOEs Executive VicePresident and CFO. Our strong balance sheet, augmented by our healthy cashposition and virtually no debt, allows us to plan for future opportunities wheneconomic conditions improve.

*Full-Year ResultsFor the full year 2008, JOE had a Net Loss of $(35.9) million, or $(0.40) pershare, compared to Net Income of $39.2 million, or $0.53 per share, for the fullyear 2007. Full year 2008 results include the following charges which totaled$109.5 million, or $0.69 per share after tax:

Pre-tax impairment charges totaling $60.4 million and pre-tax loss of $1.9million related to abandoned property, or an aggregate of $0.35 per shareafter tax;

*The full-year 2007 results were affected by the following: Pre-tax impairment charges totaling $23.2 million, or $0.19 per share aftertax, which includes $9.6 million recorded in discontinued operations;

*Summ ary Balance Sheet December 31, 2008ecember 31, 2007AssetsInvestments in real estate890,600,000943,500,00047. Also on February 24, 2009, St. Joe filed its 2008 Annual Report with the SEC on

Form 10-K. The Companys Form 10-K was signed by Defendants Greene and McCalmont,among others, and reaffirmed the Companys 2008 financial results, financial position, and the

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reported value of the Companys investment in real estate. The Companys Form 10-K alsocontained Sarbanes-Oxley required certifications, which were substantially similar to thecertifications contained in 33. With respect to the Companys asset impairment costs, St. Joes2008 A nnual Report stated:

If the m ark et v alues of our homesites, our r emaining inventory of comp letedhomes and other d eveloped real estate assets w ere to dr op b elow the b ook valueof those propert ies, we w ould b e req uired to wr ite-down the book v alue of thosepr operties, which would have an ad verse affect on our b alance sheet and ourearnings.Unlike most other real estate developers, we have owned the majority of our landfor many years, having acquired most of our land in the 1930s and 1940s.Consequently, we have a very low cost basis in the majority of our lands. Incertain instances, however, we have acquired properties at market values forproject development. Also, many of our projects have expensive amenities, suchas pools, golf courses and clubs, or feature elaborate commercial areas requiringsignificant capital expenditures. M any of these costs are capitalized as part of thebook value of the project land. Adverse market conditions, in certaincircumstances, may req uire the book v alue of real estate assets to be d ecreased,often referred t o as a w rite-down or impairm ent. A w rite-down of an assetwould decrease the v alue of the asset on our b alance sheet and would reduce ourearnings for the period in which the w rite-down is recorded.During 2008, we recorded total asset impairment costs of $60.5 million,$41.3 million of which primar ily related to the wr ite-dow n of capitalized costs atcertain projects and the imp airm ent of com pleted hom es in several of ourcomm unities due to current m ark et conditions. If mark et conditions were tocontinue to deter iorate, and the m ark et values for our homesites, rem aininghomes held in inventory and other pr oject land w ere to fall below the b ookvalue of these assets, we could be req uired to tak e additional write-dow ns of thebook value of those assets.

*Impairment of L ong-lived A ssets and Goodw ill. Our long-lived assets, primarilyreal estate held for investment, are carried at cost unless circumstances indicatethat the carrying value of the assets may not be recoverable. If we determine thatan impairment exists due to the inability to recover an assets carrying value, aprovision for loss is recorded to the extent that the carrying value exceedsestimated fair value. If such assets were held for sale, the provision for loss wouldbe recorded to the extent that the carrying value exceeds estimated fair value lesscosts to sell.

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Depending on the asset, we use varying methods to determine fair value, such as(i) analyzing expected future cash flows, (ii) determ ining resale values by market,or (iii) app lying a capitalization rate to net operating incom e using prevailing ratesin a given market. The fair value determined u nder these methods can fluctuate upor down significantly as a result of a number of factors, including changes in thegeneral economy of our markets, demand for real estate and the projected netoperating income for a specific property.

*We review our long-lived assets for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. Homes and homesites substantially completed and ready for sale aremeasured at the lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain andcomplete the existing project and using managements best estimates about futuresales prices and holding periods. The continued decline in demand and marketprices for residential real estate during 2 008 caused us to evaluate certain carryingamounts within our residential real estate segment. As a result of our propertyimpairment analyses, we recorded aggregate impairment charges in ourresidential real estate segment of $40.3 million during 2008. In addition, werecorded a charge of $1.0 million related to the write down of a renegotiatedbuilder note receivable during 20 08.

*Asset ImpairmentsThe Company reviews its long-lived assets other than goodwill, for impairmentwhenever events or changes in circumstances indicate that the carrying amount ofan asset may not be recoverable. Homes and homesites substantially completedand ready for sale are measured at lower of carrying value or fair value less coststo sell. For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain the existing service potential of the project and using managem ents bestestimates about future sales prices and holding periods. The continued decrease indemand and market prices for residential real estate indicated that carryingamounts of certain assets within its residential real estate segment may not berecoverable.As a result of the Companys property impairment analyses for 2008, itrecorded aggregate impairment charges of $41.3 million consisting of$12.0 million related to completed homes in several communities, $28.3 millionrelated to the Companys SevenShores condominium project and $1.0 millionrelated to the write down o f a renegotiated builder note receivable.

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The Seven Shores condominium project was written down in the fourth quarter of2008 to approximate the fair market value of land entitled for 278 condominiumunits. This write-down was necessary because the Company elected not toexercise its option to acquire additional land under its option agreement. Certaincosts had previously been incurred with the expectation that the project wouldinclude 686 units. Given the reduced potential scope of the project, the Companydoes not believe that those costs are recov erable.In 2007 the Company recorded impairments totaling $13.6 million due to theadv erse mar ket conditions for residential real estate. Approximately $5.2 millionof the impairments related to capitalized costs at certain projects due to changes indevelopment plans, approximately $7.8 million related primarily to the reductionin market value of completed homes in several communities, and approximately$0.6 million related to the modified terms of certain promissory notes. Noimpairment charges were recorded in 2006.The Company reviews its long-lived assets other than goodwill, for impairmentwhenever events or changes in circumstances indicate that the carrying amount ofan asset may not be recoverable. Homes and homesites substantially completedand ready for sale are measured at lower of carrying value or fair value less coststo sell. For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain the existing service potential of the project and using managem ents bestestimates about future sales prices and holding periods. The continued decrease indemand and market prices for residential real estate indicated that carryingamounts of certain assets within its residential real estate segment may not berecoverable. [Emphasis added.]48. The Notes to Consolidated Financial Statements section of the 2008 Form 10-K


Segment R esultsR esidential Real EstateOur residential real estate segment develops large-scale, mixed-use resort,primary and seasonal residential communities, primarily on our existing land. Weown large tracts of land in Northwest Florida, including significant Gulf ofMexico beach frontage and waterfront properties, and land near Jacksonville, inDeland and near Tallahassee.Our residential sales have declined precipitously from 2006 to 2008 (91%) due to

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the collapse of the housing markets in Florida. Inventories of resale homes andhomesites remain high in our markets and prices have declined. With the U.S. andFlorida economies battling rising foreclosures, severely restrictive credit,significant inventories of unsold homes and worsening economic conditions,predicting when real estate markets will return to health remains difficult.Currently, we do not expect any significant favorable change in these trendsduring 2009.In 1997, we recorded goodwill in our residential real estate segment in connectionwith our acquisition of certain assets of Arvida Company and its affiliates. Basedon the continued worsening of the residential real estate markets in 2008 we havenow determined that the remaining goodwill related to this acquisition is notrecoverable based upon a discounted cash flow analysis. Accordingly, animpairment of $19.0 million was recorded in the residential real estate segment inthe fourth quarter of 2008 to reduce the c arrying amount of the goodw ill to zero.Homes and homesites substantially completed and ready for sale are measured atlower of carrying value or fair value less costs to sell. For projects underdevelopment, an estimate of future cash flows on an undiscounted basis isperformed. The overall decrease in demand and market prices for residential realestate indicated that certain carrying amounts within our residential real estatesegment may not be recoverable. As a result of our impairment analyses for2008, w e recorded aggregate imp airm ent charges of $41.3 m illion, consisting of$12.0 million related to completed homes in several communities, $28.3 millionrelated to our SevenShores condominium project, and $1.0 million related to thewrite down of a renegotiated builder note receivable.

*THE ST. JOE COMPANY

SCHEDULE III (CONSOLIDATED) REAL ESTATE AND ACCUMULATED DEPRECIATIONDECEM BER 31, 2008(in thousands)

Initial Cost to Companyarried at Close of PeriodDescriptionncumbrancesanduildings &ostsand & Landuildings andotalccumulatedImprovementsapitalizedmprovements ImprovementsepreciationSubsequenttoAcquisitionBay County, FloridaLand with infrastructure,346392,3232,9622,9625Buildings,2961,8873,1833,183,594Residential,2032,4084,6114,61153Timberlands,165,8961,5565,4525,4522Unimproved land,5046,520,520Broward County, FloridaBuilding

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Calhoun County, FloridaBuildings8181817Timberlands,245,774,759,533,5335Unimproved land7993,672,672Duval County, FloridaLand with infrastructure556 06 0Buildings,743,743,743,095ResidentialTimberlandsFranklin County, FloridaLand with infrastructure4044Residential,0032,2151,2181,218Timberlands9,241,307,548,5483Unimproved Land101515Buildings,537,900,437,43730Gadsden County, FloridaLand with infrastructure,290,290,290Timberlands43,30278,780,780Unimproved land,786,788,788Gulf C ounty, FloridaLand with infrastructure,588,107,695,695Buildings304,5335,4635,463,459Residential9,75665,63095,38695,38621Timberlands2,704,2385,3520,5900,59009Unimproved land0693,199,199Jefferson County, FloridaBuildingsTimberlands898989Unimproved land151919Leon County, FloridaLand with infrastructure7273,270,843,8437Buildings,7181,4127,1307,130,559Residential84380,1650,18880,246,546Timberlands23,104,027,0271Unimproved land38902828Liberty County , FloridaBuildings1115262609Timberlands,851,11280,697,6975Unimproved land444Manatee CountyLand with infrastructureBuildings207878723Residential8,952079,7599,7594Osceola CountyLand with infrastructureResidential93,588,6061,1941,194BuildingsPalm B each County,FloridaLand with infrastructureResidentialBuildingsPinellas County, FloridaBuildings

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St. Johns County, FloridaLand with infrastructure,029,744,773,77350Buildings,854,633,487,487,575Residential0,276,1428,0017,1437,143Polusia County, FloridaLand with infrastructureBuildings,644,001,645,64537Residential3,7616,2590,0200,020,211W akulla County , FloridaLand with infrastructure777777Buildings6666Timberlands797979Unimproved Land222W alton County, FloridaLand with infrastructure6,533,589,589Buildings9,1282,1001,2281,228,405Residential2,67635,40458,08058,080,433Timberlands1354,008,362,362Unimproved landOther Florida CountiesLand with infrastructureTimberlands040404Unimproved land98474749. St. Joes 2008 Form 10-K also contained a report from KPMG, the Companys

public accounting firm, which stated that the Companys financial statements present fairly, inall material respects, the financial position of The St. Joe Company and subsidiaries as ofDecember 31, 2008 and 2007. KPMG also expressed an unqualified opinion on theeffectiveness of the Com panys internal control over financial reporting:

We have audited the accompanying consolidated balance sheets of The St. JoeCompany and subsidiaries as of December 31, 2008 and 2007, and the relatedconsolidated statements of operations, changes in stockholders equity, and cashflow for each of the years in the three-year period ended December 31, 2008. Inconnection with our audits of the consolidated financial statements, we also haveaudited financial statement Schedule III Consolidated Real Estate andAccumulated Depreciation. These consolidated financial statements and financialstatement schedule are the responsibility of the Companys management. Ourresponsibility is to express an opinion on these consolidated financial statementsand financial statement schedule based on our audits.We conducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes

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examining, on a test basis, evidence sup porting the amoun ts and disclosures in thefinancial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of The St. Joe Company andsubsidiaries as of Decemb er 31, 2008 an d 2 007, and the results of their operationsand their cash flows for each of the years in the three-year period endedDecember 31, 2008, in conformity with U.S. generally accepted accountingprinciples. Also in our opinion, the related financial statement schedule, whenconsidered in relation to the basic consolidated financial statements taken as awhole, presents fairly, in all material respects, the information set forth therein.We also have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), The St. Joe Companys internalcontrol over financial reporting as of December 31, 2008, based on criteriaestablished in Internal Control - Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO), and ourreport dated February 24, 2009, expressed an unqualified opinion on theeffectiveness of the Com panys internal control over financial reporting.50. On May 5, 2009, the Company issued a press release entitled The St. Joe

Company (NYSE: JOE) Reports First Quarter 2009 Financial Results. The press releasereported that the Comp anys investment in real estate was $888.1 million, and stated:

The St. Joe Company (NYSE: JOE) today announced a Net Loss for the firstquarter 2009 of $(11.7) million, or $(0.13) per share, which includes non-cashcharges of $1.5 m illion, or $0.01 per share after tax. This comp ares to Net Incom eof $32.1 million, or $0.40 per share, for the first quarter of 2008, which includednon-cash charges of $2.8 million, or $0.02 per share after tax. All per-sharereferences in this release are presented on a diluted basis.Although Northwest Floridas real estate markets remain challenging, ourresidential communities have seen a relatively modest improvement in traffic andsales activity since the end of last year, said Britt Greene, JOEs President andCEO . Howev er, it is too early to predict a bottom or a trend. The actions we hav etaken, such as adjusting pricing for our inventory of homes, has helped us torespond to a market that seems interested but remains timid. We are also seeingmeasured activity in our commercial markets throughout the region. Our primaryfocus is on planning for the opportunities presented by the upcoming opening ofthe new Panama City - Bay County International Airport. The airport, centrallylocated within our key land assets, is scheduled to open in 2 010.

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As we have said earlier, although we expect rural land sales to be our largestcontributor to revenues in 2009, we plan to sell significantly fewer acres in 2009than in 2008, said Greene. During the first quarter 2009, JOE generatedapproximately $4.2 million of revenue from rural land sales, compared to $91.1million in the first quarter last year. While the average price per acre increasedduring the quarter, JOE is carefully monitoring the potential impact that thecurrent economic environment may have on pricing or overall demand for ruralland.Liquidity and Balance SheetAt March 31, 2009, JOE had cash and pledged treasury securities of $138.2million, compared to debt of $49.2 million, $28.5 million of which is defeaseddebt. JOEs $100 m illion line of credit remains undrawn at M arch 31, 20 09.In light of the current economic challenges, we strengthened our liquidityposition by virtually eliminating our debt, enhancing our cash position andsecuring a new credit facility in early 2008, said William S. McCalmont, JOEsExecutive Vice President and CFO . We continue to take a very prudent approachas we manage our assets and continue to reduce capital expenditures, as well asoperating and overhead expenses. We have the flexibility to execute our strategyon our v aluable land holdings proximate to the ne w international airport.51. Also on May 5, 2009, St. Joe filed its Quarterly Report with the SEC on Form 10-

Q. The Companys Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmedthe Companys quarterly financial results, financial position, and the reported value of theCompanys investment in real estate. The Companys Form 10-Q also contained Sarbanes-Oxley required certifications, which were substantially similar to the certifications contained in33. Additionally, the Form 10-Q discussed asset impairments, stating:

The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Homes and homesites substantially completed and ready for sale aremeasured at lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain andcomplete the existing project and using managements best estimates about futuresales prices and holding periods. In the first quarter of 2009 and 2008, theCompany recorded impairment charges in the residential real estate segment of$0.2 million and $2.3 million, respectively, related to completed unsold homes. Inaddition as discussed in Note 3, the Company recorded a $1.3 million impairmentcharge in the first quarter of 2009 related to a renegotiated builder note receivable.

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52. On August 4, 2009, the Company issued a press release entitled The St. JoeCompany (NYSE: JOE) Reports Second Quarter 2009 Financial Results. The press releasereported that the Comp anys investment in real estate was $869.8 m illion, and stated:

The St. Joe Company (NYSE: JOE) today announced a Net Loss for the secondquarter 2009 of $(44.6) million, or $(0.49) per share, which includes pre-tax non-cash charges of $64.7 million, or $0.43 per share after tax. This compares to aNet Loss of $(20.8) million, or $(0.23) per share, for the second quarter of 2008,which included significant charges of $35.3 million, or $0.24 per share after tax.All per-share references in this release are presented on a diluted basis.

*The remaining non-cash ch arges of $20.0 m illion pre-tax, or $0.13 per share after-tax, included the $7.4 million write-off of a note receivable from GVA Advantis,the $6.7 million write-down related to JOEs SevenShores condominium andmarina development project, $5.5 million of impairments associated with homesand home sites in certain of JOEs communities and $0.4 million of impairmentsfor the write-down of a builder note receivable.Net Loss for the first half of 2009 was $(56.3) million, or $(0.62) per share,compared to Net Income of $11.2 million, or $0.13 per share, for the first half of2008.Included in the results for the first six months of 2009 were the followingsignificant non-c ash charges:

Settlement charge on pension annuitization of $44.7 million, or $0.30 pershare after-tax; and Pre-tax impairment charges o f $21 .5 million, or $0.14 per share after-tax.

*With economic challenges unabated, we continue to take a very prudentapproach as we manage our assets and continue to reduce capital expenditures, aswell as operating and overhead expenses, said William S. McCalmont, JOEsExecutive V ice President and CFO . Because we have m anaged our balance sheetin a conservative manner, we now have the flexibility to execute our growthstrategy as we begin to implement the initial development plans on our valuableland holdings near the new international airport.53.lso on August 4, 2009, St. Joe filed its Quarterly Report with the SEC on Form10-Q. The Companys Form 10-Q was signed by Defendants Greene and Connolly, and

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quarter of 2009 of $(14.4) million, or $(0.16) per share, which included pre-taxcharges of $12.9 million, or $0.08 per share after tax. This compares to a NetLoss of $(19.2) million, or $(0.21) per share, for the third quarter of 2008, whichincluded pre-tax charges of $13.0 million, or $0.09 per share after tax. All per-share references in this release are presented on a diluted basis.St. Joes third quarter earnings included $11.1 million of pre-tax, non-cashimpairment charges including $9.0 million related to the settlement of the SaussyBurbank notes receivable, $2.0 million associated with various homes, homesitesand other long-term assets and $0.1 million related to various builder notesreceivable.

*During the third quarter, we continued to make progress in our efforts tostimulate demand for our land in Northwest Florida with an emphasis on our landproximate to the new international airport, said St. Joes President and C EO B rittGreene. The addition of a vice president of economic development and, ofcourse, Southwest Airlines game-changing announcement of planned service tothe new airport will help to create value for our shareholders for many years tocome.

*Year-to-Date ResultsNet Loss for the first nine months of 2009 was $(70.7) million, or $(0.77) pershare, compared to Net Loss of $(8.0) million, or $(0.09) per share, for the firstnine months of 2008. Included in the results for the first nine months of 2009were significant pre-tax charges of $79.1 million, or $0.52 per share after tax,compared to pre-tax charges of $51.8 million, or $0.35 per share after tax, in thefirst nine months of 2 008.55. Also on November 3, 2009, St. Joe filed its Quarterly Report with the SEC on

Form 10-Q. The Companys Form 10-Q was signed by Defendants Greene and Connolly, andreaffirmed the Com panys quarterly financial results, financial position, and the reported value ofthe Companys investment in real estate. The Companys Form 10-Q also contained Sarbanes-Oxley required certifications, which were substantially similar to the certifications contained in33. Additionally, the Form 10-Q discussed asset impairments, stating:

Impairment Losses. We review our long-lived assets for impairment wheneverevents or changes in circumstances indicate that the carrying amount of an asset

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may not be recoverable. Homes and homesites substantially completed and readyfor sale are measured at the lower of carrying value or fair value less costs to sell.For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain and complete the existing project and using managements bestestimates about future sales prices and holding periods.During the third quarter of 2009:

We recorded a $9.0 million write-down related to the settlement of theSaussy Burbank notes receivable, a $0.1 million write-down of buildernotes receivable and a $1.1 million impairment charge related to otherlong-term assets; and

We recorded a $0.9 million write-down related to completed unsoldhomes and hom esites within other communities.During the third quarter of 2008 we recorded impairment charges of $1.3 millionrelated to completed unsold homes.During the first nine months of 2009:

We recorded a $6.5 million impairment charge related to completedunsold homes and homesites in our communities and a $6.7 million write-down of our SevenShores condominium and marina developmentproject; and We recorded a $9.0 million write-down related to the settlement of the

Saussy Burbank notes receivable, a $7.4 million write-off of the Advantisnote receivable, a $1.9 million write-down of builder notes receivable anda $1.1 m illion impairment charge related to other long-term assets.During the first nine months of 2008 we recorded impairment charges of$3.8 million related to completed unsold homes and a $0.8 million write-down ofa builder note receivable.A continued decline in demand and market prices for our real estate products mayrequire us to record additional impairment charges in the future. In addition, dueto the ongoing difficulties in the real estate markets and tightened creditconditions, we may be required to write-down the carrying value of our notesreceivable and such notes m ay not ultimately be collectible.56. On February 23, 2010, the Company issued a press release entitled The St. Joe

Company Reports Full Year and Fourth Quarter 2009 Results. The press release reported thatthe Com panys investment in real estate was $749.5 million, and stated:

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The St. Joe Company (NYSE: JOE) today announced a Net Loss for the full yearended 2009 of $(130.0) million, or $(1.42) per share, compared to a Net Loss of$(35.9) million, or $(0.40) per share, for the year ended 2008. Included in the20 09 results were significant pre-tax charges of $16 3.1 million, or $1.07 per shareafter tax, compared to pre-tax charges of $109.5 million, or $0.69 per share aftertax, in the year ended 2008. All per-share references in this release are presentedon a diluted basis.St. Joes President and CEO Britt Greene stated, 2009 was marked by many St.Joe accomplishments during a very turbulent economic year for the country. Wesignificantly strengthened our balance sheet, reduced overhead costs andincreased our financial flexibility. We also focused our efforts on positioning theCompany to benefit from the May 2010 opening of the new Northwest FloridaBeaches International Airport. We are energized by the significant opportunitiesthe airport will present since it is surrounded by some of St. Joes most valuableland holdings.

*Fourth Quarter 2009 Financial ResultsFor the fourth quarter of 2009, St. Joe had a Net Loss of $(59.3) million, or$(0.65) per share, which included pre-tax charges of $84.0 million, or $0.56 pershare after tax. This compares to a Net Loss of $(27.9) million, or $(0.31) pershare, for the fourth quarter of 2008, which included pre-tax charges of $57.9million, or $0.36 per share after tax.St. Joes fourth quarter earnings included $73.3 million of pre-tax, non-cashimpairment charges including $67.8 million related to the sale of the remainingassets at Victoria Park ($6.9 million recorded in discontinued operations), $3.5million related to the sale of the St. Johns Golf & Country Club (recorded indiscontinued operations), $1.1 million related to the sale of the assets acquired inconnection with the settlement of our Saussy Burbank notes receivable, $0.8million associated with various homes and homesites and $0.1 million associatedwith a builder note receivable. The Company also wrote-off $7.2 million ofcapitalized costs related to abandoned development plans in certain of ourprojects and incurred a restructuring charge of $3.5 million related to one-timetermination benefits.

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Summ ary Balance SheetDecember 31, 2009ecember 31, 2008Assets

Investments in real estate749,500,000890,600,00057. Also on February 23, 2010, St. Joe filed its 2009 Annual Report with the SEC onForm 10-K. The Companys Form 10-K was signed by Defendants Greene and McCalmont,among others, and reaffirmed the Companys 2009 financial results, financial position, and thereported value of the Companys investment in real estate. The Companys Form 10-K alsocontained Sarbanes-Oxley required certifications, which were substantially similar to thecertifications contained in 33. With respect to the Companys asset impairment costs, St. Joes2009 A nnual Report stated:

If the market values of our homesites, our remaining inventory of completedhomes and other developed real estate assets were to drop below the b ook v alueof those proper ties, w e would be req uired to wr ite-down the book v alue of thoseproperties, which would have an adverse affect on our balance sheet and ourearnings.Unlike most other real estate developers, we have owned the majority of our landfor many years, having acquired most of our land in the 1930s and 1940s.Consequently, we have a very low cost basis in the majority of our lands. Incertain instances, however, we have acquired properties at market values forproject development. Also, many of our projects have expensive amenities, suchas pools, golf courses and clubs, or feature elaborate commercial areas requiringsignificant capital expenditures. Many of these costs are capitalized as part of thebook value of the project land. Adverse market conditions, in certaincircumstances, may require the book value of real estate assets to be decreased,often referred to as a write-down or impairment. A write-down of an assetwould decrease the value of the asset on our balance sheet and would reduce ourearnings for the period in which the w rite-down is recorded.If market conditions were to con tinue to deteriorate, and the market va lues for ourhomesites, remaining homes held in inventory and other project land were to fallbelow the book value of these assets, we could be required to take additionalwrite-downs of the book v alue of those assets.

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*Long-Lived Assets and Discontinued OperationsThe Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Homes and homesites substantially completed and ready for sale aremeasured at the lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain the existingproject and using managements best estimates about future sales prices andholding periods.

*Investment in Real E state:We review our long-lived assets for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. Homes and homesites substantially completed and ready for sale aremeasured at the lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain andcomplete the existing project and using managements best estimates about futuresales prices and holding periods. The continued d ecline in dem and and m arketprices for residential real estate during 2007 through 2009 caused us toreevaluate certain carrying am ounts within our r esidential real estate segment,which resulted in the recording of significant impairment charges. [Emphasisadded.]58. The Notes to Consolidated Financial Statements section of the 2009 Form 10-K


Segment R esultsR esidential Real EstateOur residential real estate segment typically plans and develops mixed-use resort,primary and seasonal residential communities of various sizes, primarily on ourexisting land. We own large tracts of land in Northwest Florida, includingsignificant Gulf of Mexico beach frontage and waterfront properties, and landnear Jacksonv ille and Tallahassee.

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Our residential sales remain weak due to the collapse of the housing markets inFlorida. Inventories of resale homes and homesites remain high in our marketsand prices continue to decline. With the U.S. and Florida economies battling theadverse effects of home foreclosures, severely restrictive credit, significantinventories of unsold homes and recessionary economic conditions, predictingwhen real estate markets will return to health remains difficult. Currently, we donot expect any significant favorable changes in these market conditions during2010.

*THE ST. JOE COMPANYSCHEDULE III (CONSOLIDATED) REAL ESTATE AND ACCUMULATED DEPRECIATIONDECEM BER 31, 2009(in thousands)Initial Cost to Companyarried at Close of PeriodDescriptionncumbrancesan duildings &ostsand & Landuildings andotalccumulatedImprovementsapitalizedmprovements ImprovementsepreciationSubsequenttoAcquisitionBay County, FloridaLand with infrastructure3,3586 3631,95532,59132,59169Buildings3,6391,436704,0541,4945,548,855Residential2,762,3004,8437,524,3818,90573Timberlands,976,8961,2715,1675,1679Unimproved land,5048,522,522

Broward County, FloridaBuildingCalhoun County, FloridaBuildings80808017Timberlands,123,774, 623,397,3972Unimproved land7993,672,672Duval County, FloridaLand with infrastructure505555Buildings,752,752,752,152ResidentialTimberlandsFranklin County, FloridaLand with infrastructure4044Residential,7782,9901,7681,76807Timberlands8,241,234,475,4756Unimproved Land101515Buildings31,830,561,56126Gadsden County, FloridaLand with infrastructure,292,292,292Timberlands23,30246,748,7481Unimproved land,784,786,786Gulf C ounty, FloridaLand with infrastructure,586,876,462,462

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8/8/2019 Class Action Suit by St. Joe Company Shareholder

class action suit by st. joe company shareholders

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