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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from            to          .

Commission file number 1-10466

The St. Joe Company

(904) 301-4200
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of August 8, 2003, there were 99,242,693 shares of common stock, no par value, issued and 75,692,437 outstanding, with 23,550,256 shares of treasury stock.

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THE ST. JOE COMPANY
INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE ST. JOE COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share data)

See notes to consolidated financial statements.

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THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)

See notes to consolidated financial statements.

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THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

See notes to consolidated financial statements.

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THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands except per share amounts)

1. Basis of presentation

     The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States for complete financial statements are not included herein. The interim statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2003 and December 31, 2002 and the results of operations and cash flows for the three-month and six-month periods ended June 30, 2003 and 2002. The results of operations and cash flows for the three-month and six-month periods ended June 30, 2003 and 2002 are not necessarily indicative of the results that may be expected for the full year.

2. Summary of significant accounting policies

Stock-Based Compensation

     Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, (“FAS 123”) permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, FAS 123 also allows entities to apply the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (“APB 25”) and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants as if the fair-value based method defined in FAS 123 has been applied. Under APB 25, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.

     In December 2002, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure (“FAS 148”). FAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. FAS 148 also requires prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transitional guidance and annual disclosure requirements of FAS 148 are effective for fiscal years ending after December 15, 2002.

     As permitted under FAS 148 and FAS 123, the Company has elected to continue to apply the provisions of APB 25 and provide the pro forma disclosure provisions of FAS 148 and FAS 123. Accordingly, no compensation cost has been recognized for its stock options in the consolidated financial statements.

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     Had the Company determined compensation costs based on the fair value at the grant date for its stock options under SFAS No. 123, the Company’s net income would have been reduced to the pro forma amounts indicated below:

Earnings Per Share

     Earnings per share (“EPS”) is based on the weighted average number of common shares outstanding during the period. Diluted EPS assumes options to purchase shares of common stock have been exercised using the treasury stock method.

     In August 2002, the Company’s Board of Directors had authorized $150,000 for the repurchase of the Company’s outstanding common stock from time to time on the open market (the “St. Joe Stock Repurchase Program”), of which $74,700 remained not yet expended at June 30, 2003. The Company has also entered into a series of agreements with the Alfred I. duPont Testamentary Trust (the “Trust”), the principal stockholder of the Company, and the Trust’s beneficiary, The Nemours Foundation (the “Foundation”), to participate in the St. Joe Stock Repurchase Program, the most recent of which began on May 21, 2003 and lasts for 90 days. From August 1998 through August 2002, the Company’s Board of Directors authorized a total of $650,000 for the St. Joe Stock Repurchase Program, of which a total of approximately $575,277 has been expended.

     As of June 30, 2003, the Company had repurchased 15,512,466 shares on the open market and 7,266,566 shares from the Trust. During the six months ended June 30, 2003, 924,400 shares were repurchased on the open market, 678,960 shares were purchased from the Trust, and 341,884 shares were surrendered to the Company by company executives as payment for the strike price and taxes due on stock options that were exercised, and taxes due on restricted stock that had vested. During the six months ended June 30, 2002, 318,500 shares were repurchased on the open market, 2,586,206 shares were purchased from the Trust, and executives surrendered 43,982 shares of Company stock as payment for taxes due on the vesting of restricted stock. During the first six months of 2002, no Company stock was surrendered as payment for the exercise of stock options or taxes due on the exercise of stock options. Also during the first six months of 2003 and 2002, the Company issued 1,634,822 shares and 1,173,006 shares, respectively, upon the exercise of stock options.

     Weighted average basic and diluted shares, taking into consideration shares issued, weighted average options used in calculating EPS and treasury shares repurchased for each of the periods presented are as follows:

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Comprehensive Income

     For the six months ended June 30, 2003, comprehensive income is equal to net income because there was no other comprehensive income. For the six months ended June 30, 2002, the Company’s comprehensive income differs from net income due to changes in the net unrealized gains on investment securities available-for-sale and derivative instruments. As a result, for the six months ended June 30, 2003 and 2002, total comprehensive income was $24,322 and $43,933, respectively.

Supplemental Cash Flow Information

     The Company paid $10,006 and $4,754 for interest in the first six months of 2003 and 2002, respectively. The Company received income tax refunds of $3,052 and $917, net of payments made, in the first six months of 2003 and 2002, respectively. The Company capitalized interest expense of $4,156 and $3,821 during the first six months of 2003 and 2002, respectively.

     The Company’s non-cash activities included the surrender of shares of Company stock by executives of the Company. During the six months ended June 30, 2003, executives surrendered Company stock worth $9,958 as payment for taxes due on the vesting of restricted stock and for the exercise of stock options and taxes due on the exercise of stock options. During the six months ended June 30, 2002, executives surrendered Company stock worth $1,246 as payment for taxes due on the vesting of restricted stock. During the six months ended June 30, 2002, no Company stock was surrendered by executives as payment for the exercise of stock options or taxes due on the exercise of stock options. The Company’s non-cash activities for the six months ended June 30, 2002, also included the settlement of a portion of its Forward Sale Contracts. The Company transferred stock with a fair value of $74,261 to a financial institution and settled hedge instruments with a fair market value of $27,093, which reduced the debt associated with the sale of the equity securities by $96,963.

     Cash flows related to residential real estate development activities are included in operating activities on the statements of cash flows.

New FASB Interpretations

     In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”). FIN 45 introduces new disclosures and liability recognition requirements for guarantees of debt that fall within its scope. As of January 1, 2003, the Company has adopted FIN 45 and will apply the liability recognition requirements to all guarantees entered into or modified after December 31, 2002. There were no additions to or modifications of guarantees during the first six months of 2003.

     In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 addresses consolidation by business enterprises of variable interest entities which do not effectively disperse risk among the parties involved. FIN 46 requires an enterprise to consolidate the operations of a variable interest entity if the enterprise absorbs a majority of the variable interest entity’s expected losses, receives a majority of its expected residual returns, or both. Although the Company does not believe that any material impact will result from the adoption of FIN 46, the Company can not make any definitive conclusion until it completes its evaluation in the third quarter of 2003.

3. Discontinued operations

     On April 17, 2002, the Company completed the sale of Arvida Realty Services (“ARS”), its residential real estate services segment, for a gain of $33,658, or $20,569 net of tax. In connection with the sale, a liability was recorded related to an issue with an outside party over the use of the Arvida name. See Note 10, Subsequent Event. The Company has reported its residential real estate services operations as discontinued operations for the three-month and six-month periods ended June 30, 2002. Revenues from ARS were $12,500 and $76,230 for the three-month and six-month periods ended June 30, 2002. Net income for ARS was $359 and $2,345 for the three-month and six-month periods ended June 30, 2002.

     Also included in discontinued operations is the sale in the first quarter of 2002 of two commercial office buildings, which generated a gain of $304, or $187 net of tax. Revenues and net operating loss from the buildings for the six months ended June 30, 2002 were $7 and $(6), respectively.

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4. Investment in real estate

Real estate investments by segment include the following:

     Included in operating property are the Company’s timberlands, and land and buildings used for commercial rental purposes. Development property consists of community residential land currently under development. Investment property is the Company’s land held for future use.

5. Goodwill impairment

     Although management previously believed that Advantis’ performance would continue to improve despite a very difficult environment for commercial services companies, Advantis’ results of operations declined for the second quarter of 2003 and expectations for future periods have been reduced. As a result, the Company recorded an impairment loss to reduce the carrying amount of Advantis’ goodwill from $28,891 to $14,808, pursuant to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. This resulted in an impairment loss of $14,083 pre-tax, or $8,801 net of tax.

6. Debt

     Long-term debt consists of the following:

     The aggregate maturities of long-term debt subsequent to June 30, 2003 are as follows: 2003, $15,859; 2004, $30,863; 2005, $20,119; 2006, $3,201; 2007, $69,070; thereafter, $209,599.

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7. Marketable securities settlement

     On October 15, 1999, the Company entered into three-year forward sale contracts (the “Forward Sale Contracts”) with a major financial institution that led to the ultimate disposition of its investments in equity securities. On February 26, 2002, the Company settled a portion of the Forward Sale Contracts by delivering equity securities to the financial institution. The liability related to the contracts that were settled was $96,963 at the time of settlement and the resulting gain that was recognized in the first quarter of 2002 was $94,698 pre-tax, or $61,554, net of tax. The net cash received at settlement was $1,525.

     On October 15, 2002, the remaining Forward Sale Contracts matured and the Company delivered the remaining equity securities to fully settle the Forward Sale Contracts, including the related debt balance.

8. Segment information

     The Company conducts primarily all of its business in four reportable operating segments: community residential development, land sales, commercial real estate development and services, and forestry. The Company’s former residential real estate services segment has been reported as a discontinued operation following the Company’s decision to sell ARS. Intercompany transactions have been eliminated.

     One of the measures that the Company uses to evaluate segment performance is EBITDA. EBITDA is defined as earnings before interest cost, income taxes, depreciation and amortization. EBITDA is not a measure of operating results or cash flows from operating activities as defined by generally accepted accounting principles (“GAAP”). Additionally, EBITDA is not necessarily indicative of cash available to fund cash needs and should not be considered as an alternative to cash flows as a measure of liquidity. However, management believes that EBITDA provides relevant information about the Company’s operations and, along with GAAP measures such as revenue, pre-tax income and net income, is useful in understanding the Company’s operating results. Certain amounts in prior year EBITDA have been reclassified to conform with the Company’s current evaluation methods to now include discontinued operations and other items.

     The caption entitled “Other” primarily consists of general and administrative expenses, net of investment income, and is only presented to reconcile consolidated results. “Other” includes gain on the settlement of the Company’s forward sales contracts of $94,698 for the six months ended June 30, 2002. “Other” also includes operations of the Company’s former transportation segment which, due to the sale of the rolling stock of Apalachicola Northern Railroad in 2002, is no longer material enough to be reported as a separate segment. The Company’s reportable segments are strategic business units that offer different products and services. They are each managed separately and decisions about allocations of resources are determined by management based on these strategic business units.

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     Information by business segment follows:

9. Contingencies

     The Company and its affiliates are involved in litigation on a number of matters and are subject to certain claims which arise in the normal course of business, none of which, in the opinion of management, is expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

     The Company has retained certain self-insurance risks with respect to losses for third party liability, worker’s compensation, property damage, group health insurance provided to employees and directors, and other types of insurance.

     The Company is wholly or jointly and severally liable as guarantor on four credit obligations entered into by partnerships in which the Company has equity interests. At June 30, 2003, the maximum amount of the guaranteed debt totals approximately $54,500; the amount outstanding at June 30, 2003 totaled approximately $52,700. In addition, the Company has indemnification agreements from some of its partners requiring that they will cover a portion of the debt that the Company is guaranteeing. Management believes these guarantees have no significant fair market value due to the availability of underlying collateral and the solvency of the partners.

     At June 30, 2003 and December 31, 2002, the Company was party to surety bonds and standby letters of credit in the amounts of $35,862 and $33,033, respectively, which may potentially result in liability to the Company if certain obligations of the Company are not met.

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     The Company is subject to costs arising out of environmental laws and regulations, which include obligations to remove or limit the effects on the environment of the disposal or release of certain wastes or substances at various sites, including sites which have been previously sold. It is the Company’s policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and an amount can be reasonably estimated. As assessments and cleanups proceed, these accruals will be reviewed and adjusted, if necessary, as additional information becomes available.

     Pursuant to the terms of various agreements by which the Company disposed of its sugar assets in 1999, the Company is obligated to complete certain defined environmental remediation. Approximately $5,000 of the sales proceeds are being held in escrow pending the completion of the remediation. The Company has separately funded the costs of remediation. Upon completion of remediation the escrowed funds will be released to the Company. Based upon the Company’s current environmental studies, management does not believe the costs of the remediation will materially exceed the amount held in escrow. In the event other environmental matters are discovered beyond those contemplated by the $5,000 held in escrow, the purchasers of the Company’s sugar assets will be responsible for the first $500 of the additional costs, the Company will be responsible for the next $4,500, and thereafter the parties shall share costs equally. In addition, approximately $1,700 is being held in escrow, representing the value of land subject to remediation. The Company expects remediation to be complete in 2003, at which time the amounts held in escrow will be released.

     The Company is currently a party to, or involved in, legal proceedings directed at the cleanup of Superfund sites. The Company is also involved in proceedings related to the Company’s former mill site in Gulf County, Florida. The Company has accrued an allocated share of the total estimated cleanup costs for these sites. Based upon management’s evaluation of the other potentially responsible parties, the Company does not expect to incur additional amounts even though the Company has joint and several liability. Other proceedings involving environmental matters such as alleged discharge of oil or waste material into water or soil are pending or threatened against the Company. It is not possible to quantify future environmental costs because many issues relate to actions by third parties or changes in environmental regulations. However, based on information presently available, management believes that the ultimate disposition of currently known matters will not have a material effect on the consolidated financial position, results of operations or liquidity of the Company. Environmental liabilities are paid over an extended period and the timing of such payments cannot be predicted with any confidence. Aggregate environmental-related accruals were $4,003 and $4,152 as of June 30, 2003 and December 31, 2002, respectively.

10. Subsequent Event

     On July 2, 2003, the Company purchased the 26% interest in St. Joe/Arvida Company, L.P. (“St. Joe/Arvida”) that it did not previously own for $20,000 in cash. As a result of this purchase, St. Joe/Arvida is a wholly owned subsidiary of the Company. As part of the purchase, the dispute was also settled regarding the use of the “Arvida” name by the Company and its affiliates.

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Item 2. Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations

Forward Looking Statements

     We make forward-looking statements in this Report, particularly in this Item. The Private Securities Litigation Reform Act of 1995 provides a safe-harbor for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ, possibly materially, from those in the information. You can find many of these forward-looking statements by looking for words such as “intend”, “anticipate”, “believe”, “estimate”, “expect”, “plan” or similar expressions in this Report. In particular, forward-looking statements include, among others, statements about the following:

	•		the size and number of commercial buildings and residential units;
	•		the expected development timetables, development approvals and the ability to obtain approvals;
	•		the anticipated price range of developments;
	•		the number of units that can be supported upon full build-out of a development;
	•		the number, price and timing of anticipated land sales;
	•		estimated land holdings for a particular use within a specific timeframe;
	•		absorption rates and expected gains on land sales;
	•		future operating performance, cash flows, and short and long term revenue and earnings growth rates;
	•		comparisons to historical projects; and
	•		the number of shares of Company stock which may be purchased under the terms of the Company’s existing or future share repurchase program.

     Forward-looking statements are subject to numerous assumptions, risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include, among others, the following:

	•		economic conditions, particularly in Florida and key southeastern United States areas that serve as feeder markets to the Company’s Northwest Florida operations;
	•		acts of war, terrorism, or other geopolitical events;
	•		local conditions such as an oversupply of homes and home sites and residential or resort properties, or a reduction in demand for real estate in an area;
	•		timing and costs associated with property developments and rentals;
	•		competition from other real estate developers;
	•		whether potential residents or tenants consider our properties attractive;
	•		increases in operating costs, including increases in real estate taxes;
	•		changes in the amount or timing of federal and state income tax liabilities resulting from either a change in our application of tax laws, an adverse determination by a taxing authority or court, or legislative changes to existing laws;
	•		how well we manage our properties;
	•		changes in interest rates and the performance of the financial markets;
	•		decreases in market rental rates for our commercial and resort properties;
	•		decreases in prices of wood products;
	•		the pace of development of public infrastructure, particularly in Northwest Florida;
	•		potential liability under environmental laws or other laws or regulations;
	•		adverse changes in laws or regulations affecting the development of real estate;
	•		the availability of funding from governmental agencies and others to purchase conservation lands; and
	•		adverse weather conditions or natural disasters.