David Childers - VP - IR Wm. Britton Greene - President and CEO William McCalmont - CFO

Buck Horne - Raymond James Eric Landry - MorningStar Sheila McGrath - Keefe, Bruyette & Woods

Thank you, good morning. Welcome to the St.

Joe company conference call for 2008 second quarter, I'm David Childers, Vice President Investor Relations and on the call this morning are Britt Green, President and CEO of JOE; and our CFO Bill McCalmont. Before we start, let me remind you that matters discussed on this conference call that are not historical facts are forward-looking statements.

That are based on our current expectations, actual results may differ materially. Forward-looking statements are subject to certain risks and uncertainties that are described in today's earnings release, and in our SEC filings.

These filings along with reconciliations of non-GAAP measures mentioned in today's call are on our website at joe.com. Britt?

Thanks, David. Good morning.

This morning JOE announced a net loss for the second quarter 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 last year. Results for the second quarter included a number of charges related to the pre-payment of JOE's senior notes, our restructuring activity during the quarter and impairments and adjustments to our installment notes.

The details are included in this morning's press release. We are working to position St.

Joe for the future real estate recovery with the continued focus on the ample [ph] presentation of our strategic plan. Here are some of the key events and accomplishments for the second quarter.

We will add detail to many of these during the remainder of this call. JOE's real estate market remains challenging.

As a result during the second quarter we implemented the following steps. We completed the prepayment of $240 million of our senior notes virtually eliminating our debt.

We significantly reduced our employee headcount and our annual payroll expense run-rate and we sold non-strategic rural lands for a total of $39 million. Concurrently, we positioned the company to benefit from the eventual return of a healthier real estate market.

We commenced resort operations at WindMark Beach and launched a national promotion of the resort with our strategic partner Southern Progress Corporation. They are the publisher of several magazines including Southern Living and Coastal Living.

The State of Florida appropriated additional funds that can be used to extend the run-rate length and improve highway access to the new Panama City - Bay County International Airport; and construction of new airport continues on schedule and on budget. Even though, even with those significant accomplishments looking ahead we see continuing economic weakness in the national economy, and difficult conditions for our Northern Florida real estate markets.

We cannot predict when the national economy or our real estate markets will recover. But we are continuing to execute our strategic plan keep JOE lean and efficient to better withstand these difficult times.

As you heard a moment ago, we have virtually eliminated our debt and meaningfully reduced employee headcount. Further, we have significantly reduced capital expenditures.

We intend to be well positioned when real estate markets eventually return to health by providing a variety of real estate products for the cycle's up turn. This includes key parcels in Bay County near the new international airport now under construction.

Now Bill is going to provide some additional detail on the quarterly results and discuss our commitment to a solid balance sheet. Bill?

Thank you, Britt. Before discussing the balance sheet let me comment on the quarterly operating results beginning with non-strategic rural land sales.

Last year we announced we are marketing our non-strategic rural lands for sale. As part of this program we sold over 29,000 acres at a total price of $39 million during the second quarter.

After the end of the quarter, we executed a contract for the sale of a little more than 67,000 acres of non-strategic rural conservation land, in Liberty, Jefferson, Gulf and Franklin Counties. The sale will be closed in two transactions for a total price of a little over $130 million.

The first sale of 39,000 acres for approximately $67 million is scheduled to be completed in the fourth quarter of this year. The second sale of 28,000 acres is scheduled for the second quarter of 2009, at a price of approximately $63 million.

The sales are subject to customary closing conditions. We look forward to closing this sale and believe it represents good value for our shareholders and at this time we do not expect to close any other large track land sales in 2008.

Turning to residential; resort and primary residential sale generated $ 7.2 million in revenue in the second quarter. The spring and summer selling season in our resort markets have not materialised as we had hoped.

Although we have seen significant resale activity in WaterColor and WaterSound Beach, the market remains challenged by excess inventory and cautious buyers. In the equally soft primary home market, builders are extending their take downs schedules and seeking contract modifications to reflect current market conditions.

Given our strong balance sheet we can remain patient and not react impulsively to current short term market conditions. Commercial markets also remain weak although longer term interest in North West Florida continues to be strong; the timing of commercial closings has been impacted by the national slowdown in retail.

Tangible evidence of this longer term interest is the strategic partnership that we entered into with Glimcher Realty Trust after the close of the second quarter. We plan to jointly develop a 58 acre 400,000 square foot anchored retail shop in center across from Pier Park.

This center on land that we currently own along Highway 98 in Panama City Beach will be marketed to national retail outlets. Let me now turn to the balance sheet; as you know JOE is committed to maintain a strong balance sheet and continuing to reduce SG&A expenses.

We fully understand the importance of operating with extreme efficiency and we are evaluating all expenditures and strategic initiatives to ensure we are well prepared when the real estate environment improves. We are positioning JOE to withstand this prolonged down turn and we'll continue to prudently manage our inventory and asset to preserve long term shareholder value.

As previously reported we paid off $240 million of senior notes and made an approximate $30 million make-whole payment with the proceeds of the first quarter equity offering. At June 30th we had cash and marketable securities at $74 million compared, to debt of approximately $54 million which includes approximately $30 million of defeased debt.

We also hold $78 million face amount of notes receivable from rural land sales. And we intend to monetize those notes during the third and fourth quarters of 2008.

From a capital perspective, we are continuing to focus on reducing our capital expenditures. In the first six months of this year we spent approximately $32 million compared, to approximately $147 million in last year's first six months and $355 million in the first six months of 2006.

We now expect capital expenditures in 2008 to be less than $75 million and even lower in 2009. These expenditures are primarily in our RiverTown and WindMark Beach communities.

We also continue to focus on our SG&A. In both the fourth quarter of 2007 and this year's second quarter, we announced restructuring plans to dramatically reduce our employee headcount.

In the second quarter we announced staff reductions that include the elimination of approximately 30 positions and the accelerated departure of approximately 10 additional employees. As a result of these restructurings, and a continued focus on cost, our total cash overhead, the combination of corporate overhead, sealed overhead, and capitalized overhead, declined by about $7.5 million or over 25% during the quarter compared, to the second quarter of 2007.

Further, we now expect our projected fourth quarter 2008, salary run-rate to be reduced by more than 40% compared with the same quarter in 2007. Back to you, Britt.

Thank you, Bill. Let's now turn to WestBay and Northwest Florida's new international airport.

Construction continues on the relocation of the new Panama City Bay County International Airport in WestBay. All clearing has been completed on the 1,330-acre Phase I of the airport including all wetland impacts as authorized by federal and state permits.

Over 1.8 million cubic yards of material has been excavated and redistributed over the site. The local airport authority has indicated that the initial phase of the new international airport is scheduled to open in mid 2010.

During the second quarter of the State of Florida appropriated an additional $4.5 million in funding for the construction of additional operational enhancements for the airport. These funds would be available to extend the primary runway length from 8,400 feet to 10,000 feet subject to customary approvals and permits.

In addition, the State of Florida also appropriated another $7.5 million to improve airport access by creating an east-west corridor from State Road 77 in Bay County to U.S. Highway 98 in the West in Walton County that would include a realignment of County Road 388 that fronts along the airport.

The appropriation is to be used to initiate the necessary project studies for this road improvement project. If the project proceeds, the Florida Department of Transportation would use a portion of the right away purchased from JOE in 2006 for this road project.

The primary north-south access road for the airport, State Road 79, is now being widened to four lanes from WestBay North to State Road 20, and plans suggest that eventually it will be widened to four lanes to Interstate 10. All this work is positioning thousands of acres of JOE land for the future economic growth in the region.

There is also a progress, to the East on the new 25-bed Sacred Heart Hospital near WindMark Beach. Sacred Heart Health System has started vertical construction on the new $35 million hospital located along Highway 98 in Port St.

Joe. Completion of the hospital is scheduled for the fall 2009, and is projected to employ approximately 160 people.

It is located on land donated by JOE. This community hospital with an emergency room, two operating rooms and a helipad provides for essential healthcare infrastructure for residents at WindMark Beach, Port St.

Joe, as well as all of Gulf and Franklin Counties and surrounding region. In summary, and before we respond to your questions, let me emphasize.

We face a difficult market in the near term. The only way to get pass current market conditions is to go through them.

Fortunately our strong balance sheet allows us to remain patient. Growth will return.

It's impossible to say exactly when that will be, but know that when it comes JOE will be ready. The construction of the Panama City-Bay County International Airport continues on time and on budget.

We are prudently managing JOE to best position ourselves for the market's return. We significantly reduced capital expenditures, virtually no debt and meaningfully reduced employee headcount.

We intend to be well positioned when real estate markets eventually return to health and we'll be prepared for the cycles up turn. With that summary and that conclusion, we'll be happy to respond to your questions.

Question And Answer

Hi, good morning.

Hi, Buck.

Just wondering if you could talk, maybe you have any data on inventory trend in the resale market, in your key markets and maybe to what extend you might be effected by additional foreclosures?

I think Buck the best analog [ph] obviously is out in Northwest Florida, we have those primary and resort residential. What we have seen is -- don't mistake this has as saying other than there is some stabilization in inventory levels, we have not seen them grow sales, resales year-over-year from '06 to '07 and now to '08 year-to-date that continue to increase in volume, yet the inventory is remaining stable and I would say most of that I would some of that maybe associated with foreclosure, but also those who are starting to see signs of some recovery off of the bottom but still bouncing along the bottom and start to put their units on the market and we are in the high season for sale.

So we've seen some... it was going down now it's come up but all-in-all pretty stable in the inventory and on the price side some stabilization in terms of discounts of the '05 highs [ph].

Great, very helpful. And maybe, could you talk a little bit more about, what the home builders that or talking to you about contractor, you're extending the take downs and modifying contracts, put a extra colour on maybe whose is out there trying to get out of those commitments or what recourse you have if they decided to walk?

Well our recourse is they have deposits up and they would forfeit those deposits, and we also get the lots back and remarket into another builder. The builders generally have been asking for extensions because frankly the market is slow and rather than continue to take lots from us, and put them on their balance sheet, its another reason, we can, we're here to be patient with them and not to try and chase the market down, so the conversations have been about extending those take downs or those lots not necessarily walking.

We have had one builder who has decided to exit not all of our regions but a couple of our regions and we are in renewed talks with other builders who have had an interest to come into these communities. If you remember initially we had limited the number of national builders to some of these communities, so we didn't allow them to cannibalize each other.

So as one departs there is others who have called and expressed an interest to take their position.

Fantastic, thanks.

Thank you. Up to 2007 you quoted your land holdings and entitlements, those within 10 miles of the Coast in the last few quarters you've switched to that within 15 miles of the Coast.

I am wondering why the switch in the quote and if you had a number for that the acreage within 10 miles?

I think it was more just to get clarity of the fact that we have some... when it's off the Coast it's also within 15 miles as we move in and just to demonstrate that there's still significant amount of JOE hills land fill still here the 10 mile line.

Lot of people cut if off with 10 mile and not realize that if you have another five miles that is significant portion of remaining ownership of JOE, so that's why we made the move.

Do you see a difference in value of that incremental five miles. Is there any difference, is there ...

I guess 30,000 foot level is there difference in value between those in the 10 mile to 15 mile range and those--

I think it depends on which county you're in and I could say that I think there is 50 miles off the Coast and Bay County is different in 50 miles off the Coast in Franklin County. So I think it's just, I think at this moment in time it really depends on where you're looking at the acreage.

Yes, it clearly depends on the characters of land, the topographical features, access to waterways, recreational activity. So that I think that what we're trying to do was to demonstrate that number of land total is moving from 10 miles to 15 miles and one still has some very desirable features.

Whether it's on a river or off in intracoastal waterway or off of a large bay. Some of the bays in around Bay County are actually stretch inwards 5 miles, 6 miles off the coast.

So then it's the, the 10 mile number still 310,000 in that area?

I don't have that number in front me but I am sure that's probably pretty close.

Okay, thank you.

Yes, good morning. Could you give us a idea Bill on a quarterly run-rate for SG&A and also looking at the quarter end cash position what that looks like monetizing the remaining timber nodes [ph], how many timber nodes looking through '08 what do you expect the proceeds from those to be?

Sheila yes, thanks, taking your second question first, we have about $78 million of notes at the end of the quarter and when we monetise those, we'd expect to realise proceeds of about $70 million in cash, from those notes. From a G&A perspective, we talked about our cash G&A which is what I focus on to the greatest degree here and at the...

for the quarter ended June, that cash SG&A number was about $21 million down from about $28.5 million in the corresponding quarter of 2007. And included in that, as we've talked about that in the past about 41% of those costs represent employee related costs, the remaining 60% or so are non-employee related costs.

And going forward I think you'll see us make a continued focus on those non-employee related costs, trying to continue to drive those numbers down as low as we can. And so for the balance of 2008, I would expect, the cash SG&A number to trail off, getting the benefit of the restructurings we've announced and continue to focus on reducing the non-employee related costs.

Okay. And then are there any remaining charges from the restructurings that we can expect in the next couple of quarters?

Yes, there's actually a schedule in the 10-Q that highlights that Sheila, so that what we would expect for the balance of 2008 is about $1.4 million and then some trickles over to 2009 that will be little over $0.25 million. So a total of about $1.7 million.

Okay, great. And then one last question, could you give us a little bit more detail on the joint venture on the retail property?

Is that a 50-50 joint venture? How does that work, are you donating the land into a partnership and where kind of the leasing might stand?

It is 50-50, we are donating the land into the partnership and maybe some are wondering why Glimcher well they have a very good leasing group that approached us and we're responsible for destined comments and other local... and we think they understand the local market very well, they understand the tourist industry very well and they understand how to talk to retailers about how to capitalize on that and they brought Glimcher to us.

And we are excited about the opportunity going forward and feel that it will be... what we've been searching for which is the opportunity to start JVs to start generating some recurring income stream for the shareholders of the company.

And would it require any capital for JOE to put into it, other than the land?

That's not our expectation at this time Sheila, no obliviously, we haven't financed the project, and we're in the pre-leasing stages but that's not our expectation.

Okay, thanks a lot.

Great, I appreciate it Dave, and I appreciate everybody's commentaries today and questions and look forward to talking to you in 90 days. Thank you.

Thank you.