1650 Prudential Drive
Telephone: (904) 396-6600
Fax: (904) 396-4042
Sales: $591.9 million
Stock Exchange: New York
SICs: 2631 Paperboard Mills; 2061 Cane Sugar Except Refining
The St. Joe Paper Company is one of the rarest types of companies in existence in America today. Like the Hughes Aircraft Corporation, St. Joe was bequeathed by its principal shareholder to provide operating funds for a charitable institution, in this case the Nemours Foundation. The company was established as a conglomeration of the Florida financial interests of Alfred Irenee duPont, whose will stipulated that, upon his death, the proceeds of his estate be used to support an institution for the rehabilitation and care of crippled children with curable afflictions. While a large portion of the company's shares are publicly traded, a large block remains under the control of this institution.
Alfred duPont was one of five children of Eleuthere Irenee duPont (1829-1877) and Charlotte Henderson (1835-1877). Eleuthere duPont was the great grandson of the American family and founder of the E. I. duPont de Nemours Company. DuPont, noted for its commercial development of gunpowder, later expanded into a wide range of chemical businesses over the years, including plastics, synthetic fibers, and paint. In the process, it ran into numerous managerial difficulties that threatened to ruin the company.
Alfred duPont gained a troublesome reputation as a rebel. At the age of 38, he launched a daring takeover of the financially strapped family company to prevent it from falling into the hands of outside investors. At first the youthful duPont wasn't taken seriously. But when he managed to line up the necessary financing, he was allowed to proceed. In the interest of preserving family control, he convinced his fellow family members to accept notes in lieu of cash payment for their shares. In doing so, Alfred and his cousins Coleman and Pierre managed to gain control of the sprawling $24 million financial empire with only $2,100 of their own money.
DuPont fell from family grace when he divorced his wife, Bessie Gardner, and quickly remarried his cousin Alicia Bradford. Ostracized for his deplorable morals, Alfred was forced out of the duPont company in 1915.
Alfred fought vigorously to prevent Pierre duPont from taking control of the company in his own 1916 coup d'etat, but eventually lost. As the company prospered on government contracts during World War I, the family battles took their toll on the fragile health of Alicia DuPont. Alfred built the grand Nemours estate for his wife, where he hoped they could enjoy greater solitude. Despite this, Alicia died in 1920. A year later he married Jessie Ball, whose family he had known since 1900, and whose brother Edward became a trusted associate. In 1923, in fact, duPont asked Ed Ball to manage his personal business interests while he vacationed in Florida.
DuPont was an avid observer of the growth in real estate activity in Florida. At the time, Jacksonville was the center of Florida commerce; cities such as Miami and Fort Lauderdale were little more than fishing villages. He persuaded Ball to visit the Florida Panhandle and join him in a hunt for properties. DuPont's quest for a vacation home eventually blossomed into a full-fledged acquisition binge of timber properties. By 1925 duPont owned nearly 100,000 acres, mostly of cut-over forest land where growth was slowly returning. In an effort to develop the economies of these areas, duPont organized the Gulf Coast Highway Association, whose mission was to build roads and develop the transportation infrastructure in northwestern Florida.
Back in Delaware, Pierre duPont, now chair of the duPont Company, accepted a position as the state's tax commissioner. In order to escape the probing eye of his nemesis, Alfred transferred all his holdings, except his Nemours estate, to new corporations that he chartered in Florida.
In search of an occupation beyond land speculator, duPont began building interests in a number of banks, including the Florida National Bank of Jacksonville. This he later built into a statewide network called the Florida National Group of Banks. As the nation fell into the Depression years, duPont was frequently called upon to personally intercede when worried depositors made runs on his banks. Rumors of the banks' imminent failure were put to rest by transfers of duPont's $15 million fortune.
Ball used duPont's fortune and his access to the banks to acquire an additional 240,000 acres of land in 1933. This included properties in Gulf, Bay, Liberty, and Franklin Counties and the city of St. Joe, a dying fishing community of 500 people on St. Joseph Bay, about 150 miles east of Pensacola. Included in this transaction was a sawmill, the Apalachicola Northern Railroad Company, the St. Joseph Telephone & Telegraph Company, the Port St. Joe Dock & Terminal Company, and several other land and development companies.
St. Joe had once been a thriving community of 2,000 people whose livelihood stemmed from timber industries and a profitable resort business. Once known as the "richest and wickedest city in the Southeast," St. Joe fell upon hard times after local timber tracts had been exhausted. By 1910, those who remained depended almost entirely on fishing for a living.
Old St. Joseph was founded in 1835 by a group of land speculators and promoters and there, on December 3, 1838, 57 members of the first Constitutional Convention assembled to draft a charter for Florida to become part of the Union. Just 17 years earlier Florida had been a part of a vast territory owned and governed by Spain. Florida was not, however, admitted into the Union until 1845. It then became the thirty-seventh state of the alliance. When citizens of the original city of St. Joseph requested a new post office some years later, they were obliged to find a new name for the community. They chose Port St. Joe as the town's name, but they called it St. Joe.
Alfred duPont acquired St. Joe at the bottom of the Depression and, in effect, took over a huge collection of declining properties at extremely low prices. His initial aim was to revitalize St. Joe and its paper industry. He began by lining the city's streets with trees, building houses and a new business district, and improving the town's schools and playgrounds. He also pursued construction of a new paper mill to produce newsprint. But when the market for this type of paper appeared weak, he converted the design of the plant to produce kraft, a durable paperboard.
In 1935, with the plant under construction as the city once again bloomed, Alfred duPont died at the age of 71. He entrusted Ed Ball to manage his estate, including an unusual request laid out in his will. Alfred duPont asked that a set amount of proceeds from his assets be used to support his wife and family, and the remainder be dedicated to the support of a new institution dedicated to the treatment of crippled children whose conditions were curable. He made this stipulation with the knowledge that numerous government programs and other charities already existed for the care of incurable cases.
Following these instructions, Ball and duPont's widow chartered the Nemours Foundation in 1936 and, in 1937, began laying plans to establish the treatment facility, the Alfred I. duPont Institute. The small hospital, located in Wilmington, opened in 1940.
After payment of $30 million in taxes, duPont's fortune totalled about $27 million. The bulk of this value came from the estate's seven banks, not St. Joe Paper. But Ball worked diligently to complete duPont's goal of building the company. With the paper-making operation just getting into business, the company's Apalachicola Northern Railroad, operating only a 100-mile line between St. Joe to Chattahoochee, had bleak prospects. Worse yet, the telephone company operated only 167 phones, and most were used by the railroad.
St. Joe Paper was incorporated in 1936, and began operations in 1938 through a joint venture with the Mead Corporation, an Ohio company. Mead operated the company's mill under contract until 1940, when Ball exercised the estate's option to buy out that company's interest. Ball subsequently was appointed president of St. Joe Paper.
With the nation finally emerging from the Depression, demand for packaging began to rise. In addition, corrugated cardboard, a new paperboard product that was lighter and more economical than wooden crating, was quickly gaining popularity. This increase in demand led St. Joe to raise its paperboard production capacity from 300 tons a day to 400 tons.
Shipping gained special importance in 1942. With the United States involved in a two-theater war, the transportation of war material and supplies became a high priority. St. Joe established its own corrugating facilities in 1943, and added a second in an expanded facility in 1945.
After the war, St. Joe Paper became heavily engaged in the manufacture of corrugated shipping containers. A corrugator began operating at Port St. Joe just as the war ended. Box plants in Houston, Texas, and South Hackensack, New Jersey, soon came on stream until, by 1960, 20 container plants were in operation.
St. Joe Paper managed to supply its plants with wood products from land owned by the estate and additional leased acreage. But by 1950, with the company's expansion into the Northeast and Texas, it became necessary to secure additional timberland. To speed growth in the company's cut timber lands, St. Joe Paper established a large nursery where millions of pine saplings were produced. These were later transplanted into the depleted forests and allowed to grow naturally. Despite this accelerated reforestation effort, St. Joe Paper had to purchase pulpwood from other foresters in increasingly larger quantities.
The most immediate problem at St. Joe was the need for water. With a projected tripling of output, the flagship plant would require 35 million gallons of fresh water each day. With well sources exhausted, the company was forced to dig a canal to the Chipola River, 18 miles away. This source crossed beneath several existing streams and the Intracoastal Waterway using 42-inch pipes, drawing water down to St. Joe with simple gravity.
While on a trip to Ireland in 1957, Edward Ball visited National Board and Paper Mills, Limited, at Waterford. The Irish company was in need of a steady supply of raw materials and managerial and technical assistance. Ball proposed that St. Joe Paper operate the Irish plant under contract to its owners. This arrangement was finalized in 1958. Some years later, St. Joe Paper purchased the operation outright.
On January 1, 1961, St. Joe Paper formally acquired the Florida East Coast Railway Company, a bankrupt and dilapidated line that ran between Jacksonville and Homestead, in extreme southern Florida. The acquisition followed more than 20 years of constant opposition from the Atlantic Coast Line, which also sought control of the company.
The Florida East Coast Railway was established in 1885 by Henry M. Flagler, a former partner of John D. Rockefeller. Flagler gradually extended the railroad south from Jacksonville, laying track through the swampy wilderness to Palm Beach. Along the line, he established a string of hotels, which became major tourist attractions for vacationing northerners. By 1895 the line had been extended to Biscayne Bay, where the establishment of the Royal Palm Hotel marked the birth of Miami as a resort city.
After stretching the line to Homestead in 1902, Flagler laid out a preposterous plan to extend the line a further 127 miles, through the Florida Keys to Key West. In addition to capitalizing on the island's tourist distinction as the southernmost point in the United States, Flagler recognized that, unlike Miami, Key West had a deep water port that could serve as a center for international commerce. In 1912, after seven years of construction, the $20 million Overseas Railway, called "Flagler's Folly," was completed. The line crossed 75 miles of open water and marshland, including one seven-mile stretch between two islands in the chain.
In later years, the Florida East Coast Railway built a new spur to Lake Okeechobee, where Flagler established yet another vacation community. This development failed miserably, however, and plunged the company into deep financial straits. In 1931, during the Depression, Flagler's survivors were forced to place the railroad into receivership at the bequest of nervous bond holders.
Flagler's brother-in-law William Kenan worked diligently to restore the road to profitability. On Labor Day in 1935, however, a massive hurricane tore through the Keys causing severe damage to the Overseas Railway. Unable to afford repairs, Kenan sold the line from Homestead to Key West to the state of Florida, which later converted it into a highway.
Ball closely watched the demise of the railway company. With experience in operating St. Joe Paper's own run-down railroad, Ball simply awaited an opportunity to take over the company and have a go at turning it around. In 1941, with approval from the duPont estate, Ball began buying up the Florida East Coast's defaulted bonds, thought to be worthless at the time. After gaining 51 percent of the outstanding bonds, Ball could have taken control of the company. Instead, he was challenged in federal court by Champion McDowell Davis, president of the Atlantic Coast Line Railroad. The court battle went on for 17 years, at an estimated cost of $5 million to each Ball and Davis.
In 1959 the president of Florida East Coast announced his retirement. While the court was unwilling to turn over the railroad to the duPont estate, Ball applied for the railroad's presidency. He succeeded, taking a salary of only $12 per year. Ball consolidated control over the Florida East Coast slowly. First, he instituted a new accounting system that gave him a daily view of the company's finances. Second, he updated and mechanized maintenance practices and rationalized job functions. When St. Joe Paper finally was granted permission to exercise its control over Florida East Coast in 1961, Ball reduced the railroad's headcount from 3,300 to less than 2,200. These changes occurred too quickly for much of the unionized work force, which called a strike against the railroad in 1963. The action enabled Ball to initiate even more drastic changes with Florida East Coast, including the elimination of money-losing passenger service.
By 1964 Ball had the railroad down to fewer than 1,000 employees. The line endured several months of sabotage and other disruptions while the strike persisted, but the company was at long last operating profitably.
In 1966 the Congress enacted legislation, believed directed specifically at the duPont estate, which prohibited charitable trusts from engaging in both banking and nonbanking enterprises. The duPont estate was forced to consider divesting either its network of 30 banks or its St. Joe Paper industrial interests. The estate sold its controlling share in the banks in 1971, and was forced in further action to completely dissolve its interests in the banks in 1973.
Meanwhile, Ed Ball, who continued to serve as a trustee of the duPont estate, used the proceeds of the bank sales to further pay down St. Joe Paper's debt and engage in other acquisitions. Among these was the Talisman Sugar Company, which Ball quickly converted to mechanical processes after taking control in 1972. Four years later, the company purchased a sugar refinery from the Borden Company.
Over the years, Ball consistently reinvested the meager earnings of the Apalachicola and Florida East Coast railroads back into their operations. Although it took many years, Ball successfully rehabilitated both lines from veritable scrap heaps to first class rail carriers. By 1980 the railroad had become a larger, more consistently profitable enterprise than its parent, St. Joe Paper.
The company's tiny St. Joseph Telephone operation grew from 167 telephones into a profitable three-company business through the acquisition of Gulf and Florala Telephone companies and an expanding economy during the 1960s and 1970s. More recently, the company has ventured into the cellular operation in partnership with Centel and Alltel.
During the 1980s, after the passing of Ed Ball, St. Joe Paper maintained the same conservative financial policies towards its operations. Like duPont, Ball established his own charity through the Nemours Foundation, dedicated to the care of the crippled children of Florida. During this period, Jacob Belin and Winfred Thornton, long-time trustees of the estate, gained positions as chair and president, respectively, of St. Joe Paper.
In March of 1990 the duPont trust sold 17 percent of St. Joe Paper's shares to the public, raising $230 million. The sale allowed significant trading of the stock for the first time and won St. Joe a listing on the New York Stock Exchange.
In the early 1990s, many of Florida East Coast Industries' properties were being developed by its wholly owned subsidiary, Gran Central Corporation. Likewise, a large portion of St. Joe's 1,100,000 acres of Florida and Georgia holdings were being planned for development. With these holdings in two of the fastest growing states in the union (Florida ranks number four with a population of over 12 million expected to reach nearly 16 million by the turn of the century), St. Joe's assets are expected to appreciate in value. St. Joe's long-standing policy of reinvesting earnings through a meager dividend payout has reflected in greater shareholder value.
The Florida East Coast railroad operations benefitted greatly from increased traffic required for rebuilding from Hurricane Andrew in 1992. In addition, with the collapse of the Soviet Union, hopes were raised for a change in government in Cuba and a resumption of the once highly profitable trade with the Caribbean nation.
The paper company, the Florida East Coast system, the Alfred I. duPont Testamentary Trust, and The Nemours Foundation now control these interests from a new office building that was constructed by the Florida East Coast Industries in 1988.
Principal Subsidiaries: Apalachicola Northern Railroad; Florida East Coast Railway Company; Florida East Coast Industries; Florida East Coast Railway Company; Gran Central; St. Joseph Telephone and Telegraph Company; Gulf Telephone Company; Florala Telephone Company; St. Joe Communications, Inc.; Talisman Sugar Corporation; St. Joe Container Company; St. Joseph Land and Development Company.
"Borden Inc. Has Sold Liquid Sugar Refinery and Pickle Operation," Wall Street Journal, June 4, 1976, p. 18.
"The Estate of Alfred I. duPont and the Nemours Foundation," published by the Estate of Alfred I. duPont, 1974.
"Indictment Cites 14 Paper Makers for Price Fixing," Wall Street Journal, January 26, 1978, p. 3.
"Now, This Is the Way to Run a Railroad," Business Week, September 7, 1974, pp. 66-67.
"Perform or Perish," Forbes, June 11, 1990, p. 132.
St. Joe Paper Company Annual Report, Jacksonville, Florida: St. Joe Paper Company, 1992.
Source: International Directory of Company Histories, Vol. 8. St. James Press, 1994.