SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File number 1-7159
FLORIDA ROCK INDUSTRIES, INC.
(exact name of registrant as specified in its charter)
Florida 59-0573002
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
155 East 21st Street, Jacksonville, Florida 32206
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 904/355-1781
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
At December 1, 1996 the aggregate market value of the shares of Common Stock
held by non-affiliates of the registrant was approximately $197,155,206. At
such date there were 9,163,876 shares of the registrant's Common Stock
outstanding.
Documents Incorporated by Reference
Portions of the Florida Rock Industries, Inc. 1996 Annual Report to
stockholders are incorporated by reference in Parts I, II, III and IV.
Portions of the Florida Rock Industries, Inc. Proxy Statement dated December
16, 1996 are incorporated by reference into Parts I and III.<PAGE>
Item 1. BUSINESS.
Florida Rock Industries, Inc., which was incorporated in Florida in 1945, and
its subsidiaries (the "Company"), are principally engaged in the production
and sale of ready mixed concrete and the mining, processing and sale of sand,
gravel and crushed stone ("construction aggregates"). The Company also
produces and sells concrete block and prestressed concrete and sells other
building materials. The Company is also in the process of obtaining permits
to build a Portland Cement plant. Substantially all of the Company's
operations are conducted within the Southeastern United States, primarily in
Florida, Georgia, Virginia, Maryland, Washington, D.C. and North Carolina.
Information as to the Company's business and new developments is presented
under the caption "Operating Review" on pages 4 and 5 of the accompanying
1996 Annual Report to stockholders and such information is incorporated
herein by reference. Information concerning the Company's proposed new
cement plant is present on page 2 under the caption "Planned New Cement
Plant" and on page 5 under the caption "Cement Plant Project" in the
accompanying 1996 Annual Report to stockholders and such information is
incorporated herein by reference.
Information as to principal classes of products and services and major
markets is presented on page 8 of the accompanying 1996 Annual Report to
stockholders, under the caption "Management Analysis," and such information
is incorporated herein by reference.
Sales are subject to factors affecting the level of general construction
activity including the level of interest rates, availability of funds for
construction, appropriations by federal and state governments for
construction, past overbuilding, labor relations in the construction
industry, energy shortages, material shortages, weather, climate, and other
factors affecting the construction industry in general. A decrease in the
level of general construction activity in any of the Company's market areas
caused by any of the above factors may have a material adverse effect on
sales and income derived therefrom. Labor disputes in the construction
industry may result in work stoppages which may interrupt sales in the
affected area. Precipitation or freezing temperatures may cause a reduction
in construction activity and related demand for the Company's products.
Freezing temperatures generally do not affect the Company's Florida
operations. However, during the winter months, sales and income of the
Company's Maryland, Virginia, North Carolina, Washington, D.C., and Georgia
operations are adversely affected by the impact of inclement weather on the
construction industry.
The Company operates seven crushed stone plants, eight sand plants and one
industrial sand plant in Florida. It operates five crushed stone plants in
Georgia; one sand and gravel plant and three crushed stone plants in
Maryland; and two crushed stone plants and one sand and gravel plant in
Virginia. The Company also operates aggregates distribution terminals in
Central Florida; Northern Virginia; Norfolk/Virginia Beach, Virginia;
Baltimore, Maryland and the Eastern Shore of Maryland. The Company's
construction aggregates operations are spread throughout the Southeast. The
Company sells construction aggregates throughout most of Florida with the
principal exception of the panhandle. In Georgia the Company primarily
serves the regional construction markets around Griffin, Macon, Rome and the
southern portion of the Atlanta market. The Rome quarry also sells crushed
limestone to a cement mill. In Virginia the Company primarily serves the
Richmond, Norfolk/Virginia Beach and Northern Virginia markets. In Maryland
the principal markets served are the greater Baltimore area, Frederick and
Montgomery Counties and the Eastern Shore of Maryland from waterfront
distribution yards. In Florida and Georgia shipments are made by rail and
truck. In Virginia and Maryland the Company primarily serves the regional
construction markets around Richmond, Virginia and the greater Baltimore area
by truck; and the Company's marine division ships materials by barge
throughout the Chesapeake Bay area, along the James River between Richmond
and Norfolk/Virginia Beach and as far north as Woodbridge, Virginia on the
Potomac River.
The Company manufactures and markets ready mixed concrete, concrete block and
prestressed concrete. It also markets other building materials. The
Company's concrete operations serve: most of Florida with the principal
exception of the panhandle; Southern Georgia; central Maryland; the Richmond-
Petersburg-Hopewell and Norfolk-Virginia Beach areas of Virginia along with
Northeastern Virginia and Washington, D.C.
Since ready mixed concrete hardens rapidly, delivery is generally confined to
a radius of approximately 20 to 25 miles from the producing plant. The bulk
weight of concrete block limits its delivery to approximately 40 miles from
the producing plant.
The Company's annual single-shift capacity at its 10 operating block plants
is approximately 23 million 8x8x16 equivalent units of block.
At most of the Company's Florida and Georgia concrete facilities, it
purchases and resells building material items related to the use of ready
mixed concrete and concrete block.
Prestressed concrete products for commercial developments and bridge and
highway construction are produced in Wilmington, North Carolina.
During fiscal 1996 the Company purchased cement from 11 suppliers, the
largest of which supplied approximately 25% of the cement used by the Company
in its ready mixed concrete, concrete block, and prestressed concrete
operations. At the present time there is an adequate supply of cement in the
areas in which the Company operates.
In the fiscal year ended September 30, 1996 approximately 48% of the coarse
aggregates and 60% of the sand used in the Company's concrete operations were
produced by the Company. The remaining aggregates were purchased from other
suppliers whose geographic locations coupled with transportation costs make
it more economical to serve several of the Company's plants.
The Company's construction aggregates operations encounter competition in
most of their markets. Price, plant location, transportation costs, service,
product quality and reputation are the major factors which affect competition
within a given market.
The Company's concrete operations encounter competition in all of their
markets ranging from one to nine competitors. Additionally, the Company's
concrete products are competitive with certain other building materials such
as asphalt, brick, lumber, steel and other products. Price, plant location,
service, product quality and reputation are the major factors which affect
competition within a given market.
The Company does not believe that backlog information accurately reflects
anticipated annual revenue or profitability from year to year.
While the Company is affected by environmental regulations, such regulations
are not expected to have a major effect on the Company's capital expenditures
or operating results. Additional information concerning environmental
matters is presented in Item 3 "Legal Proceedings" of this Form 10-K and such
information is incorporated herein by reference.
The Company employed approximately 2,310 persons at September 30, 1996.
Item 2. PROPERTIES.
The Company's principal properties are located in Florida, Georgia, North
Carolina, Virginia, Washington, D.C. and Maryland. The following table
summarizes the Company's principal construction aggregates production
facilities and estimated reserves at September 30, 1996.
Tons Tons of
Delivered in Estimated Approximate
Year Ended Reserves Acres
9/30/96 9/30/96 (L-Leased)(a) Lease
(000's) (000's) (O-Owned) Description
The Company has five
limestone quarries in
Florida located at Gulf
Hammock (which also
produces agricultural
limestone), Brooksville,
Ft. Myers (which also
produces baserock), 12 leases
Naples, and Miami (which L-19,801 expiring from
also produces baserock) 8,730 167,000 O- 3,026 1998 to 2046
The Company has four
granite and one lime-
stone quarries in
Georgia located at
Griffin, Forest Park, 10 leases
Macon, Tyrone and Rome L-1,452 expiring from
(limestone) 6,259 147,000 O- 121 2000 to 2046
The Company has three
crushed stone plants
located at Havre de
Grace, Frederick, and
Greenspring, Maryland
and two located near L- 41 1 lease
Richmond, Virginia 7,232 164,000 O-1,063 expiring 2018
Tons Tons of
Delivered in Estimated Approximate
Year Ended Reserves Acres
9/30/96 9/30/96 (L-Leased)(a) Lease
(000's) (000's) (O-Owned) Description
The Company has two
baserock plants
located at Ft. Pierce 4 leases
and Sunniland, expiring in
Florida 804 21,000 L-13,831 1997 and 2016
The Company has eight
sand plants located
at Keystone Heights,
Astatula, Lake County,
Marion County, Keuka,
Caloosa, Grandin and
Lake Wales, Florida
and two sand and gravel
plants located at
Leonardtown, Maryland 19 leases
and Turkey, Island L-11,912 expiring from
Virginia. 6,870 150,000 O- 836 1996 to 2046
Future reserves:
Sand-three sites
located in Glades
County, Lake County 1 lease
and Marion County L- 390 expiring in
Florida (c) 52,000 O- 894 2024
Limerock: 1 lease
Brooksville, Florida 100,000(b) L- 1,227 expiring in
Newberry, Florida 86,000 O- 258 2046
Granite-two sites located 5 leases
in Muscogee and Paulding L- 384 expiring from
Counties, Georgia 147,000 O- 537 2019 to 2049
Marble-Carroll County,
Maryland 80,000 O- 413
Limestone-Lee County,
Florida (c) 87,000 O- 2,859
(a) Leased acreage includes all properties not owned by the Company as to
which the Company has at least the right to mine construction
aggregates for the terms specified.
(b) Acres are included in the first line of the above table.
(c) All of the required zoning or permits for these locations have not yet
been obtained.
The Company operates seven construction aggregates distribution terminals
located in Florida (two), Maryland (three) and Virginia (two) comprising
approximately 123 acres, of which the Company owns 99 and leases 24.
The Company has 88 sites for its ready mixed concrete, concrete block and
prestressed concrete plants in Florida, Georgia, North Carolina, Virginia and
Maryland aggregating approximately 653 acres. Of these acres, the Company
owns approximately 505 and leases approximately 148. The lease terms vary
from month-to-month to expiring in 2019.
The Company leases, from FRP Properties, Inc., approximately six acres with
two office buildings in Jacksonville, Florida which are used for its
executive offices. Certain of the Company's subsidiaries lease
administrative office space in Springfield, Virginia and Baltimore, Maryland.
Other subsidiaries own administrative offices in Richmond, Virginia; and
Salisbury, Maryland. In addition, the Company owns approximately 155 acres,
some of which are used for shop facilities and some are held for future plant
sites.
The Company owns certain other properties which are summarized as follows:
Approximate
Type Property (1) State Acres
Residential Land Maryland 432
Residential Land New Jersey 33
Industrial/Commercial Virginia 281
Industrial/Commercial Florida 49
Industrial/Commercial Maryland 1,238
Industrial/Commercial North Carolina 27
Agricultural North Carolina 85
(1) The properties owned by the Company are grouped by current or proposed
use. Such use may be subject to obtaining appropriate rezoning, zoning
variances, subdivision approval, permits, licenses, and to compliance
with various zoning, building, environmental and other regulations of various
federal, state, and local authorities.
The Company also owns 1,560 acres in Dade County, Florida. See Part I, Item
3 - Legal Proceedings, of this Form 10-K for additional information on this
property.
At September 30, 1996 certain property, plant and equipment with a carrying
value of $8,539,000 was pledged on industrial development revenue bonds and
certain other notes and contracts with an outstanding principal balance
totaling $11,698,000 on such date.
Reference is made to certain leases with management-related persons disclosed
in the Company's Proxy Statement, to be filed within 120 days of the close of
the fiscal year on September 30, 1996, and in Note 2 to the Company's
Consolidated Financial Statements included in its Annual Report to
stockholders for the year ended September 30, 1996. Such information is
incorporated herein by reference.
Item 3. LEGAL PROCEEDINGS.
The Company has been advised of soil and groundwater contamination on or near
a site used by the Company as a concrete block manufacturing facility in
Kissimmee, Florida. The contamination by petroleum products apparently
resulted from a leaking underground storage tank on the site. The
contaminated soil and groundwater will have to be remediated in accordance
with state and federal laws. An environmental consulting firm is
investigating the site and has submitted a Contamination Assessment Report
("CAR") to the Florida Department of Environmental Protection ("DEP") for
their review and approval. By letter dated July 12, 1995, the DEP requested
additional site information. Pursuant to amended petroleum contaminated site
cleanup funding procedures, the DEP notified the Company that it was eligible
for state funded remediation assistance under the Florida Petroleum Liability
and Restoration Insurance Program (FPLRIP) and assigned a site priority
ranking score of 56. Future state assisted rehabilitation will be dictated
by the site priority ranking score and shall be conducted on a pre-approval
basis. The Company will seek reimbursement of past site cleanup costs from
the FPLRIP and/or the Florida Abandoned Tank Restoration Program. This
matter has been previously reported on the Form 10-K for the years ending
September 30, 1993, 1994 and 1995 and on the Form 10-Q for the quarter ending
June 30, 1995.
On May 8, 1992, oral arguments were held in the Government's appeal of the
U.S. Claims Court judgment entered in favor of the Company in its inverse
condemnation claim against the U.S. Army Corps of Engineers. The case
involves a 98 acre parcel of a 1560 acre tract with limestone reserves in
Dade County, Florida. On March 10, 1994, the Court of Appeals vacated the
U.S. Claims Court judgment and remanded the case for further proceedings.
The Company's petition for rehearing was denied on June 21, 1994. On
September 20, 1994, the Company filed a petition for writ of certiorari in
the U.S. Supreme Court. On January 3, 1995, the U.S. Supreme Court denied
the petition for writ of certiorari. On June 28, 1995, a hearing was held
concerning issues to be decided on remand of the case to the U.S. Court of
Federal Claims. A new trial was held on April 15, 1996. This case has been
previously reported in the Form 10-K for the years 1981 through 1991 and the
years 1994 and 1995 and in the Form 10-Q for the quarters ending June 1986,
December 1986, March 1987, June 1988, June 1989, June 1990, June 1992 and
December 30, 1994. (U.S. Claims Court, Case No. 266-82L and U.S. Court of
Appeals, Case No. 91-5156.)
Part II, Item 1 of the Company's Form 10-Q for the quarters ended December
31, 1995, March 31, 1996 and June 30, 1996 and Note 12 to the Consolidated
Financial Statements included in the accompanying 1996 Annual Report to
stockholders are incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No reportable events.
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
Name Age Office Position Since
Edward L. Baker 61 Chairman of the Board May 1989
John D. Baker II 48 President and Chief February 1996
Chief Executive Officer
H. B. Horner 61 Executive Vice President May 1989
C. J. Shepherdson 80 Vice President September 1972
Donald L. Bloebaum 65 Vice President December 1987
S. Robert Hays 59 Vice President May 1984
Thompson S. Baker II 38 Vice President August 1991
Clarron E. Render, Jr. 54 Vice President August 1991
Fred W. Cohrs 63 Vice President February 1995
Robert C. Peace 64 Vice President February 1973
Ruggles B. Carlson 62 Vice President, Treasurer November 1970
and Assistant Secretary
Dennis D. Frick 54 Secretary October 1992
Wallace A. Patzke, Jr. 49 Vice President, Controller October 1996
John W. Green 44 Assistant Secretary October 1988
In February 1996 John D. Baker II was elected to the additional position of
Chief Executive Officer of the Company. He has served as President of the
Company since May 1989.
Fred W. Cohrs joined the Company in January 1995 and was elected vice
president of the Company in February 1995. In 1994 he was a consultant on
various cement-related projects. From 1991 to 1994 he was a Limited Partner
and Chief Executive Officer of Carolina Cement Company, L.P. (cement
manufacturing). From 1990 to 1991 he was Chairman of the Board and President
of Polysius Corp U.S., an engineering, machinery and process technology
company specializing in cement manufacturing equipment.
Dennis D. Frick has been with the Company since March 1980 as Associate
Corporate Counsel.
In October 1996 Wallace A. Patzke, Jr. was elected to the additional position
of Vice President of the Company. He has served as Controller of the
Company since December 1991.
All other officers have been employed by the Company in their respective
positions for the past five years.
Edward L. Baker and John D. Baker II are brothers and the sons of Thompson S.
Baker who is a member of the Company's Board of Directors. Thompson S. Baker
II is the son of Edward L. Baker.
All executive officers of the Company are elected annually by the Board of
Directors.<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There were approximately 1,166 holders of record of Florida Rock Industries,
Inc. common stock, $.10 par value, as of December 1, 1996. The Company's
common stock is traded on the American Stock Exchange (Symbol: FRK).
Information concerning stock prices and dividends paid during the past two
years is included under the caption "Quarterly Results" on page 7 of the
Company's 1996 Annual Report to stockholders and such information is
incorporated herein by reference. Information concerning restrictions on the
payment of cash dividends is included in Note 5 captioned "Lines of credit
and debt" on pages 15 and 16 of the Company's 1996 Annual Report to
stockholders and such information is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA.
Information required in response to this Item 6 is included under the caption
"Five Year Summary" on page 6 of the Company's 1996 Annual Report to
stockholders, and such information is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information required in response to this Item 7 is included under the
captions "Management Analysis" on pages 8 and 9; "Capital Expenditures" on
page 2; in the second paragraph under the caption "Summary and Outlook" on
page 3; and in Notes 1 through 13 to the Consolidated Financial Statements
included in the accompanying 1996 Annual Report to stockholders and in Item
3 "Legal Proceedings" of this Form 10-K. Such information is incorporated
herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required in response to this Item 8 is included under the caption
"Quarterly Results" on page 7 and on pages 10 through 20 of the Company's
1996 Annual Report to stockholders. Such information is incorporated herein
by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No reportable events.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning directors required in response to this Item 10 is
included under the captions "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement
dated December 16, 1996, and such information is incorporated herein by
reference.
Information concerning executive officers required in response to this Item
10 is included following Item 4 of this Form 10-K.
Item 11. EXECUTIVE COMPENSATION.
Information required in response to this Item 11 is included under the
captions "Executive Compensation," "Compensation Committee Report,"
"Compensation Committee Interlocks and Insider Participation," and
"Shareholder Return Performance" in the Company's Proxy Statement dated
December 16, 1996, and such information is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required in response to this Item 12 is included under the
captions "Common Stock Ownership of Certain Beneficial Owners" and "Common
Stock Ownership by Directors and Officers" in the Company's Proxy Statement
dated December 16, 1996, and such information is incorporated herein by
reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required in response to this Item 13 is included under the
captions "Compensation Committee Interlocks and Insider Participation" and
"Certain Relationships and Related Transactions" in the Company's Proxy
Statement dated December 16, 1996 and in Note 2 to the Consolidated Financial
Statements included in the accompanying 1996 Annual Report to stockholders,
and such information is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2)Financial Statements and Financial Statement Schedules.
The response to this item is submitted as a separate section. See Index
to Financial Statements and Financial Statement Schedules on page 14 of
this Form 10-K.
(3)Exhibits
The response to this item is submitted as a separate section. See
Exhibit Index on pages 11 through 13 of this Form 10-K.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the three months ended
September 30, 1996.<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FLORIDA ROCK INDUSTRIES, INC.
Date: December 4, 1996 By RUGGLES B. CARLSON
Ruggles B. Carlson
Vice President & Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on December 4, 1996.
JOHN D. BAKER II CHARLES H. DENNY III
John D. Baker II Charles H. Denny III
Director, President and Chief Director
Executive Officer
(Principal Executive Officer)
ALBERT D. ERNEST, JR.
Albert D. Ernest, Jr.
RUGGLES B. CARLSON Director
Ruggles B. Carlson
Vice President & Treasurer
(Principal Financial and LUKE E. FICHTHORN III
Accounting Officer) Luke E. Fichthorn III
Director
THOMPSON S. BAKER
Thompson S. Baker FRANK M. HUBBARD
Director Frank M. Hubbard
Director
EDWARD L. BAKER
Edward L. Baker FRANCIS X. KNOTT
Director Francis X. Knott
Director
T. S. BAKER II
Thompson S. Baker II RADFORD D. LOVETT
Director Radford D. Lovett
Director
Alvin R. Carpenter W. THOMAS RICE
Director W. Thomas Rice
Director
ROBERT D. DAVIS
Robert D. Davis C. J. SHEPHERDSON
Director C. J. Shepherdson
Director
<PAGE>
FLORIDA ROCK INDUSTRIES, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
EXHIBIT INDEX
[Item 14(a)(3)]
Page No. in
Sequential
Numbering
(2)(a) Agreement and Plan of Reorganization entered into as of March
5, 1986 between the Company and Florida Rock & Tank Lines,
Inc. ("FRTL") pursuant to the distribution pro rata to the
Company's stockholders of 100% of the outstanding stock of
FRTL has previously been filed as Appendix I to the Company's
Proxy Statement dated June 11, 1986. File No. 1-7159.
(3)(a)(1) Restated Articles of Incorporation of Florida Rock Industries,
Inc., filed with the Secretary of State of Florida on May 9,
1986. Previously filed with Form 10-Q for the quarter ended
December 31, 1986. File No. 1-7159.
(3)(a)(2) Amendment to the Articles of Incorporation of Florida Rock
Industries, Inc. filed with the Secretary of State of Florida
on February 19, 1992. Previously filed with Form 10-K for the
fiscal year ended September 30, 1993. File No. 1-7159.
(3)(a)(3) Amendments to the Articles of Incorporation of Florida Rock
Industries, Inc. filed with the Secretary of State of Florida
on February 7, 1995. Previously filed as appendix to the
Company's Proxy Statement dated December 15, 1994.
(3)(b)(1) Restated Bylaws of Florida Rock Industries, Inc., adopted
December 1, 1993. Previously filed with Form 10-K for the
fiscal year ended September 30, 1993. File No. 1-7159.
(3)(b)(2) Amendment to the Bylaws of Florida Rock Industries, Inc.
adopted October 5, 1994. Previously filed with Form 10-K for
the fiscal year ended September 30, 1994. File No. 1-7159.
(4)(a) Articles III, VII, and XIII of the Articles of Incorporation
of Florida Rock Industries, Inc. Previously filed with Form
10-Q for the quarter ended December 31, 1986 and Form 10-K for
the fiscal year ended September 30, 1993. And Articles XIV
and XV previously filed as appendix to the Company's Proxy
Statement dated December 15, 1994. File No. 1-7159.
(4)(b)(1) Amended and Restated Revolving Credit and Term Loan Agreement
dated as of December 5, 1990, among Florida Rock Industries,
Inc.; Continental Bank, N. A.;Barnett Bank of Jacksonville, N.
A.; Sun Bank, National Association; Crestar Bank; First Union
National Bank of Florida; The First National Bank of Maryland;
Southeast Bank, N. A.; and Maryland National Bank. Previously
filed with Form 10-K for the fiscal year ended September 30,
1990. File No. 1-7159.
(4)(b)(2) First Amendment dated as of September 30, 1992 to the Amended
and Restated Revolving Credit and Term Loan Agreement dated as
of December 5, 1990. Previously filed with Form 10-K for the
fiscal year ended September 30, 1992. No. 1-7159.
Page No. in
Sequential
Numbering
(4)(b)(3) Second Amendment dated as of June 30, 1994 to the Amended and
Restated Revolving Credit and Term Loan Agreement dated as of
December 5, 1990. Previously filed with Form 10-Q for the
quarter ended June 30, 1994. File No. 1-7159.
(4)(c) The Company and its consolidated subsidiaries have other
long-term debt agreements which do not exceed 10% of the total
consolidated assets of the Company and its subsidiaries, and
the Company agrees to furnish copies of such agreements and
constituent documents to the Commission upon request.
(10)(a) Retirement Benefits Agreement between Florida Rock Products
Corporation and Thompson S. Baker dated September 30, 1964.
Previously filed with Form S-1 dated June 29, 1972. File No.
2-44839.
(10)(b) Retirement Benefits Agreement between Shands & Baker, Inc.,
and Thompson S. Baker dated September 30, 1964 and amendment
thereto dated September 22, 1970. Previously filed with Form
S-1 dated June 29, 1972. File No. 2-44839.
(10)(c) Employment Agreement dated June 12, 1972 between Florida Rock
Industries, Inc. and Charles J. Shepherdson, Sr. and form of
Addendum thereto. Previously filed with Form S-1 dated June
29, 1972. File No. 2-44839
(10)(d) Addendums dated April 3, 1974 and November 18, 1975 to
Employment Agreement dated June 12, 1972 between Florida Rock
Industries, Inc., and Charles J. Shepherdson, Sr. Previously
filed with Form 10-K for the fiscal year ended September 30,
1975. File No. 1-7159.
(10)(e) Florida Rock Industries, Inc. 1981 Stock Option Plan.
Previously filed with Form S-8 dated March 3, 1982. File No.
2-76407.
(10)(f) Amended Medical Reimbursement Plan of Florida Rock Industries,
Inc., effective May 24, 1976. Previously filed with Form 10-K
for the fiscal year ended September 30, 1980. File No. 1-7159.
(10)(g) Amendment No. 1 to Amended Medical Reimbursement Plan of
Florida Rock Industries, Inc. effective July 16, 1976.
Previously filed with Form 10-K for the fiscal year ended
September 30, 1980. File No. 1-7159
(10)(h) Tax Service Reimbursement Plan of Florida Rock Industries,
Inc. effective October 1, 1976. Previously filed with Form
10-K for the fiscal year ended September 30, 1980. File No.
1-7159.
(10)(i) Amendment No. 1 to Tax Service Reimbursement Plan of Florida
Rock Industries, Inc. Previously filed with Form
10-K for the fiscal year ended September 30,
1981. File No. 1-7159.
<PAGE>
Page No. in
Sequential
Numbering
(10)(j) Amendment No. 2 to Tax Service Reimbursement Plan of Florida
Rock Industries, Inc. Previously filed with Form 10-K for the
fiscal year ended September 30, 1985. File No. 1-7159.
(10)(k) Summary of Management Incentive Compensation Plan as amended
effective October 1, 1992. Previously filed with Form 10-K
for the fiscal year ended September 30, 1993. File No. 1-7159.
(10)(l) Florida Rock Industries, Inc. Management Security Plan.
Previously filed with Form 10-K for the fiscal year ended
September 30, 1985. File No. 1-7159.
(10)(m) Various mining royalty agreements with FRTL or its subsidiary,
none of which are presently believed to be material
individually, but all of which may be material in the
aggregate. Previously filed with Form 10-K for the fiscal
year ended September 30, 1986. File No. 1-7159.
(10)(n) Florida Rock Industries, Inc. 1991 Stock Option Plan.
Previously filed with Form 10-K for the fiscal year ended
September 30, 1992. And February 1, 1995 Amendment to Florida
Rock Industries, Inc. 1991 Stock Option Plan. Previously
filed as appendix to the Company's Proxy Statement dated
December 15, 1994. File No. 1-7159.
(10)(o) Split Dollar Insurance Agreement dated January 24, 1994
between Edward L. Baker and Florida Rock Industries, Inc.
Previously filed with Form 10-K for the fiscal year ended
September 30, 1994. File No. 1-7159.
(10)(p) Split Dollar Insurance Agreement dated January 24, 1994
between John D. Baker II and Florida Rock Industries, Inc.
Previously filed with Form 10-K for the fiscal year ended
September 30, 1994. File No. 1-7159.
(11) Computation of Earnings Per Common Share.
(13) The Company's 1996 Annual Report to stockholders, portions of
which are incorporated by reference in this Form 10-K. Those
portions of the 1996 Annual Report to stockholders which are
not incorporated by reference shall not be deemed to be filed
as part of this Form 10-K.
(22) Subsidiaries of the Company. Previously filed with Form 10-K
for the fiscal year ended September 30, 1993. File No. 1-7159.
(23) Consent of Deloitte & Touche LLP, Independent Certified Public
Accountants, appears on page 17 of this Form 10-K.
(27) Financial Data Schedule<PAGE>
FLORIDA ROCK INDUSTRIES, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a)(1)and (2))
Page
Consolidated Financial Statements:
Consolidated balance sheet at September 30, 1996 and 1995 11(a)
For the years ended September 30, 1996, 1995 and 1994:
Consolidated statement of income 10(a)
Consolidated statement of stockholders' equity 13(a)
Consolidated statement of cash flows 12(a)
Notes to consolidated financial statements 14-19(a)
Selected quarterly financial data (unaudited) 7(a)
Independent Auditors' Report 20(a)
Consent of Independent Certified Public Accountants 15(b)
Consolidated Financial Statement Schedules:
Independent Auditors' Report 16(b)
II - Valuation and qualifying accounts 17(b)
(a) Refers to the page number in the Company's 1996 Annual Report to
stockholders. Such information is incorporated by reference in Item 8 of
this Form 10-K.
(b) Refers to the page number in this Form 10-K.
All other schedules have been omitted as they are not required under the
related instructions, are inapplicable, or because the information required
is included in the consolidated financial statements.<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Post Effective Amendments
No. 1 to the Registration Statements (Form S-8 Numbers 2-68961 and 2-76407)
pertaining to the Florida Rock Industries, Inc. ("FRI") 1980 Employee Stock
Purchase Plan and 1981 Stock Option Plan and the Registration Statements
(Forms S-8 Numbers 33-56322, 33-56428, and 33-56430) pertaining to the
Florida Rock Industries, Inc. 1991 Stock Option Plan, Amended and Restated
Profit Sharing Plan and Trust including the Deferred Earnings Plan and Tax
Reduction Act Employee Stock Ownership Plan and in the related Prospectuses
of our reports dated December 3, 1996, appearing in and incorporated by
reference in this Annual Report on Form 10-K of FRI for the year ended
September 30, 1996.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 18, 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Florida Rock Industries, Inc.
Jacksonville, Florida
We have audited the consolidated financial statements of Florida Rock
Industries, Inc. and its subsidiary companies ("FRI") as of September 30,
1996 and 1995, and for each of the three years in the period ended September
30, 1996, and have issued our report thereon dated December 3, 1996; such
consolidated financial statements and report are included in your 1996 Annual
Report to Stockholders and are incorporated herein by reference. Our audits
also included the financial statement schedules of FRI, listed in Item 14.
These financial statement schedules are the responsibility of FRI's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 3, 1996<PAGE>
FLORIDA ROCK INDUSTRIES, INC.
SCHEDULE II (CONSOLIDATED) - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
Additions
Balance at Charged to Charged Balance
Beginning Costs and to Other at end
Description of Year Expenses Accounts Deductions of Year
Year ended
September 30,
1996:
Allowance for
doubtful
accounts $1,725,828 $ 34,635 $ 367,260a $1,393,203
Accrued risk
insurance
reserves $5,377,141 $4,831,427 $3,124,374b $7,084,194
Accrued
reclamation
costs $3,982,624 $1,507,923 $ 232,734b $5,257,813
Year ended
September 30,
1995:
Allowance for
doubtful
accounts $1,627,273 $ 222,737 $ 124,182a $1,725,828
Accrued risk
insurance
reserves $5,514,485 $3,168,566 $3,305,910b $5,377.141
Accrued
reclamation
costs $3,151,611 $ 939,680 $ 108,667b $3,982,624
Year ended
September 30,
1994:
Allowance for
doubtful
accounts $1,427,909 $ 464,917 $ 265,553a $1,627,273
Accrued risk
insurance
reserves $6,191,529 $2,584,671 $3,261,715b $5,514.485
Accrued
reclamation
costs $2,730,962 $ 613,238 $ 192,589b $3,151,611
a Accounts written off less recoveries
b Payments<PAGE>
Annual Report 1996
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1996 1995 Change
Net sales $398,673 $368,959 + 8.1
Gross profit $ 79,103 $ 73,752 + 7.3
Operating profit $ 42,335 $ 39,231 + 7.9
Income before income taxes $ 41,110 $ 36,372 + 13.0
Net income $ 27,000 $ 23,912 + 12.9
Per common share:
Net income $ 2.86 $ 2.51 + 13.9
Stockholders' equity $ 24.60 $ 22.27 + 10.5
Cash dividend $ .50 $ .50
Return on ending stockholders' equity 11.8% 11.3%<PAGE>
1996 CORPORATE HIGHLIGHTS
Sales increased - 8%
Net income increased - 13%
Volumes increased
Continuing expense control
$45,544,000 invested in additional property, plant and equipment
$75,000,000 revolving credit agreement of which $69,000,000 was unused at
year end
Short-term lines of credit aggregating $30,000,000 of which $28,600,000 was
unused at year end
BUSINESS. The Company is a major basic construction materials company
concentrating in the Southeastern and Mid-Atlantic states.
OBJECTIVE. The Company's objective is to become a quality-oriented basic
construction materials company that focuses on:
Long-term growth and return on shareholders' equity in excess of 15%
Customer satisfaction through superior products and service
An empowered work force that utilizes teamwork to enhance productivity
and reduce costs<PAGE>
To Our Stockholders
Fiscal 1996 was a good year and a period of continuing growth and
improvement for Florida Rock Industries, Inc. Net income increased 13% on
only an 8% increase in sales. The improved results were due to a
combination of increased demand, higher prices and our management team's
excellent control of expenses. These excellent results were despite a very
severe winter which negatively impacted the first two quarters.
Results. Sales for fiscal 1996 were $398,673,000 up 8.1% from
$368,959,000 in fiscal 1995. The increase in sales was due to increased
volume and increased prices. The increased demand was attributable to
growth in non-residential construction, with infrastructure programs and
residential construction remaining about level. The activity varied
widely by markets, though the Atlanta market was unusually strong because
of the activity associated with the preparation for the Olympics.
Selling, general and administrative expense increased 6.5% primarily
as the result of both higher sales and increased profit sharing and
incentive compensation due to improved profits. Underlying expense levels
increased, but declined slightly as a percent of sales.
In fiscal 1996 operating profit increased 7.9% to $42,335,000 from
$39,231,000.
The small decline in interest expense was principally due to the
modest reduction in average debt outstanding which was substantially offset
by a slight increase in the average interest rate.
Income before income taxes increased 13.0% to $41,110,000 from
$36,372,000 in 1995. Net income was $27,000,000, a 12.9% increase from
fiscal 1995's net income of $23,912,000. Earnings per share for 1996 were
$2.86 a 13.9% increase over $2.51 last year.
The weighted average number of shares decreased to 9,438,345 in 1996
from 9,525,362 in 1995 as the result of the repurchase of 212,747 shares of
common stock for $5,389,000 during 1996.
Planned New Cement Plant. Although delayed by local litigation,
Florida Rock Industries continued plans to construct a 750,000 ton per year
capacity Portland Cement production facility. It will be located on 1,500
acres owned and leased near the town of Newberry in Alachua County,
Florida. Once final zoning and permitting has been completed, it is
estimated that construction will take approximately two years. The project
is further discussed under the Operating Review section of this Annual
Report.
Capital Expenditures. Fiscal 1996 capital expenditures totaled
$45,544,000. The capital expenditures were divided approximately 66% for
replacements, including modernizing, safety and environmental, and 34% for
expansion, land and aggregates deposits to be used in current and future
operations. Depreciation, depletion and amortization was $28,766,000.
The fiscal 1997 capital expenditure plan totals approximately
$70,000,000 versus estimated depreciation and depletion of $32,000,000.
Approximately 40% of the planned expenditures is for plant and equipment
replacements and modernization, 54% is for expansion and new projects, and
6% is for new plant sites and deposits. The expansion and new project
portion of the capital expenditure plan includes $13,000,000 for the first
phase of the new cement plant. The expenditures for the new cement plant
are contingent upon receiving final zoning and permitting approvals. The
1997 capital expenditure plan is subject to review as market conditions and
the economic picture evolve.
Financial Management. Cash flow from operations of $55,716,000
enabled the Company to fund its major capital expenditure program for
fiscal 1996, reduce debt and repurchase common stock.
During 1996 total debt was reduced from $23,224,000 to $20,776,000 at
September 30, 1996.
At September 30, 1996, $6,000,000 was borrowed under the $75,000,000
revolving credit agreement. The Company has $30,000,000 in short-term bank
lines of which $1,400,000 was utilized at year end.
The Company anticipates that after all required permits have been
received for the construction of the new cement plant it will enter into a
new revolving credit agreement which will expand the availability to
$175,000,000 and extend the final maturity to 2002.
Dividends. The Board of Directors maintained the semiannual dividend
of $.25 per share. Consequently, cash dividends of $.50 per share were
paid during the year to stockholders.
Subsequent to fiscal year end, in December 1996, the Board declared
the semiannual cash dividend of $.25 per share payable on January 2, 1997
to stockholders of record on December 17, 1996.
Stock Repurchase. The Board of Directors has authorized management to
repurchase shares of the Company's common stock from time to time as
opportunities may arise.
Stockholders Meeting. On February 7, 1996, the Annual Stockholders
Meeting was held in Jacksonville, Florida. The stockholders elected Robert
D. Davis as a director to a term expiring in 1997, and Edward L. Baker,
Francis X. Knott, Radford D. Lovett and W. Thomas Rice to terms expiring in
2000.
Safety and Environment. Management continued its emphasis on a safe,
drug-free work place.
During 1996 the Company continued to make both capital and operating
expenditures in accordance with its goal to be not only in compliance with
environmental regulations but also to be a model member of each community
in which it has a presence.
The National Safety Council announced that the Company's Macon Quarry
had achieved a new "Best Ever" record for work hours without a lost time
accident at a granite quarry. The Aggregates Group set a new "Best Ever"
record for work hours without a lost-time injury in its industry.
Tidewater Quarries received the National Stone Association's (NSA's)
"Sterling Award" for medium sized operations while the Astatula sand plant
received NSA's "Environmental Eagle" award for their environmental
accomplishments. The Company's Florida stone and sand operations received
more safety awards from the State of Florida than any other company in the
state. In short, we received more safety awards this year than ever
before. Three of the Company's stone quarries, Gulf Hammock, Ft. Myers and
Miami, received awards for meeting or exceeding 1,000,000 man-hours worked
without experiencing a lost-time accident. The Astatula sand plant and
Brooksville quarry both received NSA's "Good Neighbor" awards for
excellence in community relations. Our Keuka sand plant won NSA's "Plant
of the Year" award in the small plant category.
Business Process Improvement. The Company is continuing and expanding
its initiative in total quality management. It's called "Business Process
Improvement". Features of the program remain:
Customer Satisfaction
Employee Involvement and Teamwork
Process Improvement
Since starting the initiative in 1994, approximately 1,400 employees
have been trained in the principles of quality, and 40 process improvement
teams have been formed to address specific issues in customer service and
cost reduction. "Natural Teams" continue to make meaningful process
improvements in their specific areas of our operations.
Summary and Outlook. Sales in 1996 were better than expected.
Increased volumes and prices, combined with continued cost containment,
resulted in improved earnings. The capital expenditure program again
focused on higher than normal replacements and additional trucks and
equipment to meet increased demand and to improve efficiencies.
In 1997 management expects continued slow economic growth. The
Federal Reserve's continuing dedication to inflation containment is
expected to result in fairly constant interest rates. Mortgage interest
rates have declined during 1996
with the result that single family home construction remains at good
levels. Non-residential construction is moving with local supply and
demand. In Georgia, non-residential construction will be down in 1997,
primarily due to completion of construction for the 1996 Summer Olympic
Games. Commercial industrial construction markets remain driven by
capacity utilization. Federal and state infrastructure requirements remain
strong but will remain constrained by each respective state's ability to
fund its programs. Fiscal 1997 sales should grow in step with the
Southeastern economy given continued reasonable long-term mortgage interest
rates and the absence of any overbuilt conditions.
Fiscal 1997 is expected to be a year of modestly improved sales and
earnings.
Management continues to explore new opportunities to further expand
and develop the Company in its existing and contiguous geographical
markets. The Southeastern and Mid-Atlantic markets served by Florida Rock
are among the prime long-term growth markets in the United States.
Management's long-term operating plans remain based on the forecasted
secular growth in the Company's markets and a belief in the fundamental
strength of the U.S. economy.
The continuing dedication and excellent performance of our managers
and employees have been critical in improving profitability and will be the
key to Florida Rock's growth and success in the future.
Respectfully yours,
Edward L. Baker
Chairman of the Board
John D. Baker II
President and Chief Executive Officer
<PAGE>
Operating Review
Operations. Sales increased in fiscal 1996 with growth in Florida, Georgia
and Virginia. Increased sales combined with ongoing cost containment
programs resulted in improved operating profit.
The Company produces and sells construction aggregates, ready mixed
concrete, concrete block and prestressed concrete. It also markets other
building materials.
The Company operates seven crushed stone plants, eight sand plants and
one industrial sand plant in Florida. It operates five crushed stone
plants in Georgia; one sand and gravel plant and three crushed stone plants
in Maryland; and two crushed stone plants and one sand and gravel plant in
Virginia. The Company also operates aggregates distribution terminals in
Northern Virginia; Norfolk/Virginia Beach, Virginia; Baltimore, Maryland
and the Eastern Shore of Maryland. In Florida the Company has two
aggregates distribution terminals which are served by unit trains. The
terminals serve central Florida, including the Orlando and Polk County
markets.
The Company's construction aggregates operations are spread throughout
the Southeast. The Company sells construction aggregates throughout most
of Florida with the principal exception of the panhandle. In Georgia the
Company primarily serves the regional construction markets around Griffin,
Macon, Rome and the southern portion of the Atlanta market. The Rome
quarry also sells crushed limestone to a cement plant. In Virginia the
Company primarily serves the Richmond, Norfolk/Virginia Beach and Northern
Virginia markets. In Maryland the principal markets served are the greater
Baltimore area, Frederick and Montgomery Counties and the Eastern Shore of
Maryland from waterfront distribution yards.
The Company has substantial long-term reserves of sand and stone in
Florida, Georgia, Maryland and Virginia which are owned or under long-term
mining leases with terms generally commensurate with the extent of the
deposits at current rates of extraction.
Ready mixed concrete is produced and sold throughout peninsular Florida;
South Georgia; Richmond, Norfolk/Virginia Beach, and Northeastern
Virginia; Central Maryland; and Washington, D.C.
Prestressed concrete products for commercial developments and bridge and
highway construction are produced in Wilmington, North Carolina.
At the end of fiscal 1996 the Company had 85 ready mixed concrete plants
and 10 concrete block plants, and a delivery fleet of 927 ready mix and
block trucks. During 1996 $12,655,000 was invested in 129 new ready mix
and block trucks to further modernize and expand the fleet.
New Developments. Management continued to modernize and expand
operations where cost savings and/or long-term growth plans warranted.
The vast majority of capital expenditures during 1996 were for equipment
replacements and expansions. The Company purchased three ready mixed
concrete plants in North Florida. Two new ready mixed concrete plants were
put into operation to serve Central Florida. A second aggregates
distribution yard in Central Florida was completed and put into operation
during the year. A new sand plant to better serve segments of the Central
Florida market is under construction and is expected to become operational
in the first quarter of fiscal 1997. Also, under construction is a new
ready mixed concrete plant along the Dade-Broward County lines in South
Florida.
Fiscal 1997 should continue to reflect the benefits of the operating
efficiencies from our quality management initiative and further capital
improvements which, when combined with increased sales, should again result
in increased earnings and improved returns on capital employed.
Cement Plant Project. The Company plans to construct a 750,000 tons
per year capacity Portland Cement production facility. The Company remains
engaged in the arduous process of obtaining all the necessary building,
operating and zoning permits. It is now expected that all necessary
permits will be received in 1997. Construction and equipment contracts are
in place, subject to the completion of permitting. Once permitting is
complete, construction and equipment contracts will be let. Construction
time, measured from the date the principal equipment is ordered, is
expected to be approximately 24 months.
The proposed cement plant will employ state-of-the-art technology for
optimum energy consumption, man-power requirements and pollution control
technology. At capacity it is expected to be the low cost producer in its
market area. The raw materials will be supplied from property presently
owned and leased and zoned for mining by Florida Rock Industries, and from
nearby electric power plants.
The cement will be shipped in bulk and bags in trucks and rail cars to
ready mixed concrete plants, contractors and a variety of customers engaged
in construction activities. It will also produce masonry cement which will
be shipped in bags to distributors, such as building supply dealers.
Consistent with the Company's high environmental standard, all
materials which enter the process will be converted into a saleable
product, avoiding any need to handle solid or liquid waste.<PAGE>
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1996 1995 1994 1993 1992
Summary of Operations
Net sales $398,673 $368,959 $336,526 $294,431 $271,821
Gross profit $ 79,103 $ 73,752 $ 59,431 $ 41,704 $ 34,956
Operating profit $ 42,335 $ 39,231 $ 27,461 $ 11,403 $ 6,480
Interest expense $ 1,980 $ 2,060 $ 2,223 $ 2,850 $ 3,146
Income before income taxes $ 41,110 $ 36,372 $ 25,533 $ 12,185 $ 4,325
Provision for income taxes $ 14,110 $ 12,460 $ 8,317 $ 4,408 $ 469
Net income $ 27,000 $ 23,912 $ 17,216 $ 7,777 $ 3,856
Per Common Share
Net income $ 2.86 $ 2.51 $ 1.82 $ .85 $ .42
Stockholders' equity $24.60 $22.27 $20.25 $18.66 $18.32
Cash dividend $ .50 $ .50 $ .50 $ .50 $ .50
Financial Summary
Current assets $ 87,082 $ 78,788 $ 75,720 $ 73,017 $ 65,907
Current liabilities $ 51,857 $ 57,614 $ 49,298 $ 52,033 $ 46,645
Working capital $ 35,225 $ 21,174 $ 26,422 $ 20,984 $ 19,262
Property, plant and
equipment, net $233,858 $220,325 $208,076 $210,110 $204,235
Total assets $346,709 $326,029 $310,590 $312,384 $296,784
Long-term debt $ 16,862 $ 9,653 $ 23,116 $ 43,877 $ 39,379
Stockholders' equity $228,150 $211,255 $192,090 $171,594 $168,480
Other Data
Return on ending
stockholders' equity 11.8% 11.3% 9.0% 4.5% 2.3%
Return on capital employed 10.3% 9.6% 7.4% 3.7% 2.3%
Additions to property,
plant and equipment $ 45,544 $ 40,374 $ 23,121 $ 33,558 $ 26,789
Depreciation, depletion
and amortization $ 28,766 $ 26,518 $ 25,419 $ 26,168 $ 26,678
Weighted average number
of shares 9,438 9,525 9,485 9,197 9,204
Number of employees at
end of year 2,310 2,201 2,203 2,142 2,221
Stockholders of record 1,174 1,228 1,279 1,335 1,302
(a)Effective October 1, 1992, the Company changed its method of accounting
for employee postretirement benefits in accordance with SFAS 106. The
effect on fiscal 1993 was to reduce net income by $1,252,000 ($.14 per share).
(b)In 1996, 1995, 1994 and 1993 the Company reported a gain(loss) on the
sale and/or write down of assets of ($286,000), ($2,018,000), ($313,000) and
$2,766,000, respectively. See Note 10 to the Consolidated Financial Statements.
(c)In 1993 the Company charged its provision for income taxes $748,000 to
reflect the impact on the deferred income tax liability of the increase
in the top Federal corporate income tax rate.
<PAGE>
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
First Second Third Fourth
1996 1995 1996 1995 1996 1995 1996 1995
Net
sales $92,265 $89,614 $85,801 $84,684 $110,331 $98,256 $110,276 $96,405
Gross
profit $16,899 $17,769 $13,465 $14,003 $ 25,571 $19,906 $ 23,168 $22,074
Operating
profit $ 8,578 $ 9,586 $ 4,472 $ 5,152 $ 15,473 $11,155 $ 13,812 $13,338
Income
before
income
taxes $ 8,390 $ 9,370 $ 4,268 $ 4,966 $ 13,800 $10,829 $ 14,652 $11,207
Net
income $ 5,495 $ 6,137 $ 2,796 $ 3,253 $ 9,039 $ 7,093 $ 9,670 $ 7,429
Per common share:
Net
income $ .58 $ .65 $ .29 $ .34 $ .96 $ .74 $ 1.04 $ .78
Cash
dividend $ .25 $ .25 - - $ .25 $ .25 - -
Market price:
High $ 29.25 $ 27.37 $ 29.50 $ 30.00 $ 26.75 $ 29.75 $ 29.37 $ 29.25
Low $ 26.25 $ 25.25 $ 25.00 $ 26.62 $ 24.37 $ 27.62 $ 23.25 $ 26.37
See Note 14 to the Consolidated Financial Statements.<PAGE>
Management Analysis
Operating Results. The Company's operations are influenced by a number of
external and internal factors. External factors include weather,
competition, levels of construction activity in the Company's markets, the
cost and availability of money, appropriations and construction contract
lettings by federal and state governments, fuel costs, transportation costs
and inflation. Internal factors include sales mix, plant location, quality
and quantities of aggregates reserves, capacity utilization and other
operating factors.
Fiscal 1996 and 1995 sales increased 8.1% and 9.6% respectively, due
to both volume and price increases.
The contribution made to net sales from the sale of construction
materials by the principal classes of products and services for the five
years ended September 30 is as follows:
1996 1995 1994 1993 1992
Ready mixed
concrete 58% 58% 56% 56% 58%
Construction
aggregates 41% 40% 41% 42% 41%
Other concrete
products and
building materials 10% 10% 11% 10% 11%
Less intercompany (9%) (8%) (8%) (8%) (10%)
100% 100% 100% 100% 100%
The estimated contribution to revenues from the sale of construction
materials by major markets follows:
1996 1995 1994 1993 1992
Commercial and
industrial 45% 37% 36% 45% 48%
Residential 35% 40% 42% 29% 26%
Highway and
governmental 20% 23% 22% 26% 26%
In fiscal 1996 gross profit increased 7.3% while the gross profit
margin decreased slightly to 19.8% from 20.0%. The increase in gross
profit was principally due to the increased sales. In the fourth quarter
of fiscal 1996 the Company increased its risk insurance reserves for
incurred but unreported claims approximately $1,000,000. Without this
adjustment the 1996 gross profit margin would have been approximately level
with fiscal 1995.
In fiscal 1995 gross profit increased 24.1% and gross profit margin
increased to 20.0% from 17.7% in 1994. These improvements resulted from
the increase in sales, cost containment, continuing efficiency improvements
and the fixed cost component of the business.
The 6.5% and 8.0% increase in selling, general and administrative
expense in 1996 and 1995 over the prior year, respectively, was primarily
due to an increase in basic expense levels due to increased sales and an
increase in profit sharing which is linked to profitability. Also in 1996,
incentive compensation was up because profit exceeded budget.
The decrease in interest expense in both 1996 and 1995 was
attributable to a decrease in the average debt outstanding which was
partially offset by an increase in the average interest rate.
The increase in interest income in 1996 and 1995 was due principally
to an increase in the average interest rate.
See Note 10 to the Consolidated Financial Statements for information
concerning the gain (loss) on the sale and/or write down of assets.
The effective tax rate for fiscal 1996 remained level with 1995. The
increase to 34.3% in 1995 from 32.6% in 1994 was principally due to the
increase in earnings and relatively higher earnings from non-mining
activities.
Liquidity and Capital Resources. The following key financial measurements
reflect the Company's sound financial position and substantial capital
resources at September 30 (dollars in thousands):
1996 1995 1994
Cash and cash
equivalents $ 4,995 $ 925 $ 804
Total debt $20,776 $23,224 $32,477
Current ratio 1.7 to 1 1.4 to 1 1.5 to 1
Debt as a percent of
capital employed 7.6% 8.9% 12.9%
Unused revolving credit $69,000 $75,000 $64,000
Unused short-term lines $28,600 $20,600 $23,300
In fiscal 1996 cash flow from operations of $55,716,000 covered the
cash required for capital expenditures and other investing activities, the
net debt repayment of $3,007,000, the paying of the regular dividend and
the repurchase of $5,389,000 of common stock. In fiscal 1995 cash flows
from operations of $54,698,000 covered the cash required for capital
expenditures and other investing activities, the net debt repayment of
$9,360,000 and the payment of the regular dividend.
The Company expects its 1997 expenditures for property, plant and
equipment to be approximately $70,000,000 versus depreciation and depletion
of $32,000,000.
Approximately $13,000,000 of the budget is for the first phase of the
proposed cement plant. Management believes that the necessary funds will
be obtained through internal generation and borrowing under the revolving
credit agreement. The Company has available $69,000,000 under the
revolving credit agreement which was unused and available at September 30,
1996. The Company plans to enter into a new revolving agreement for
$175,000,000 with a final maturity in 2002 after all required permits have
been received for construction of the cement plant. The Company's capital
expenditures are by and large discretionary and not contractual commitments
until the actual orders are placed. However, over time it is desirable and
necessary to both replace equipment due to wear and tear and to make
capital expenditures to improve efficiencies and expand capacity where
warranted.
The Company expects that the Purchase and Put Agreements covering
$7,550,000 of the Industrial Revenue Bonds (See Note 5 to the Consolidated
Financial Statements) will continue to be amended until the earlier of the
final maturity date of the respective bonds or until the project financed
by the bonds is terminated. To the extent that the bonds mature or the
Purchase and Put Agreements are not extended, the Company will repurchase
and/or repay the bonds with borrowings under its revolving credit
agreement. The Company believes it will be able to renegotiate its present
credit facilities or obtain similar replacement credit facilities when
necessary in the future.
Inflation. In the past three years price increases have generally
offset inflation. In prior years price increases failed to equal inflation
and in certain markets prices declined due to competition. <PAGE>
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1996 1995 1994
Net sales $398,673 $368,959 $336,526
Cost of sales 319,570 295,207 277,095
Gross profit 79,103 73,752 59,431
Selling, general and administrative expense 36,768 34,521 31,970
Operating profit 42,335 39,231 27,461
Interest expense (1,980) (2,060) (2,223)
Interest income 713 616 462
Gain (loss) on sale and/or write down of assets
($1,248 related party loss in 1995) (286) (2,018) (313)
Other income, net 328 603 146
Income before income taxes 41,110 36,372 25,533
Provision for income taxes 14,110 12,460 8,317
Net income $ 27,000 $ 23,912 $17,216
Earnings per common share $2.86 $2.51 $1.82
Weighted average number of shares used in
computing earnings per common share 9,438 9,525 9,485
See accompanying notes.<PAGE>
Consolidated Balance Sheet September 30
(Dollars in thousands)
1996 1995
Assets
Current assets:
Cash and cash equivalents $ 4,995 $ 925
Accounts receivable, less allowance for doubtful
accounts of $1,393 ($1,726 in 1995) 52,436 47,923
Inventories 23,475 24,324
Prepaid expenses and other 6,176 5,616
Total current assets 87,082 78,788
Other assets 25,769 26,916
Property, plant and equipment, at cost:
Land 107,644 105,801
Plant and equipment 411,882 386,271
519,526 492,072
Less accumulated depreciation and depletion 285,668 271,747
Net property, plant and equipment 233,858 220,325
$346,709 $326,029
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable to banks $ 1,400 $ 9,400
Accounts payable 28,602 27,499
Federal and state income taxes 3,507 3,052
Accrued payroll and benefits 7,710 6,582
Accrued insurance reserve 2,679 2,108
Accrued liabilities, other 5,445 4,802
Long-term debt due within one year 2,514 4,171
Total current liabilities 51,857 57,614
Long-term debt 16,862 9,653
Deferred income taxes 29,699 31,005
Accrued employee benefits 10,726 9,565
Other accrued liabilities 9,415 6,937
Commitments and contingent liabilities (Notes 9, 12 and 13)
Stockholders' equity:
Preferred stock, no par value;
10,000,000 shares authorized, none issued - -
Common stock, $.10 par value;
50,000,000 shares authorized, 9,487,309
shares issued 949 949
Capital in excess of par value 17,400 17,400
Retained earnings 215,195 192,911
Less cost of treasury stock; 212,928 shares (181
shares in 1995) (5,394) (5)
Total stockholders' equity 228,150 211,255
$346,709 $326,029
See accompanying notes.<PAGE>
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1996 1995 1994
Cash flows from operating activities:
Net income $ 27,000 $ 23,912 $ 17,216
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 28,766 26,518 25,419
Net changes in operating assets and
liabilities:
(Increase) decrease in accounts receivable (4,532) 820 (7,305)
(Increase) decrease in inventories 849 (3,709) 2,490
(Increase) decrease in prepaid expenses and
other (89) (100) (259)
Increase in accounts payable and accrued
liabilities 7,539 6,339 4,555
Increase (decrease) in deferred income taxes (1,777) (150) 482
Gain on disposition of property, plant and
equipment (1,977) (1,006) (382)
Other, net (63) 2,074 296
Net cash provided by operating activities 55,716 54,698 42,512
Cash flows from investing activities:
Purchase of property, plant and equipment (44,872) (40,218) (23,063)
Proceeds from the sale of property, plant and
equipment 5,259 1,393 661
Additions to other assets (1,641) (2,232) (1,839)
Proceeds from the disposition of other assets 2,585 80 693
Additions to notes receivable - - (335)
Collection of notes receivable 135 507 3,174
Net cash used in investing activities (38,534) (40,470) (20,709)
Cash flows from financing activities:
Proceeds from long-term debt 6,000 - -
Net increase (decrease) in short-term debt (8,000) 2,700 (3,500)
Repayment of long-term debt (1,007) (12,060) (16,848)
Exercise of employee stock options - - 23
Repurchase of Company stock (5,389) (3) (2)
Payment of dividends (4,716) (4,744) (4,741)
Net cash used in financing activities (13,112) (14,107) (25,068)
Net increase (decrease) in cash and
cash equivalents 4,070 121 (3,265)
Cash and cash equivalents at beginning of year 925 804 4,069
Cash and cash equivalents at end of year $ 4,995 $ 925 $ 804
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 1,926 $ 2,144 $ 2,769
Income taxes $ 15,435 $ 11,425 $ 9,814
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 412 $ 49 $ 58
Issuing debt $ 260 $ 107 $ -
Additions to other assets from
issuing debt $ 300 - -
Issuing common stock in payment
of note payable - - $ 8,000
Addition to notes receivable from
the sale of property, plant and equipment $ 6 - $ 431
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with maturities of three months or less at the time of
purchase to be cash equivalents.
See accompanying notes.<PAGE>
Consolidated Statement of Stockholders' Equity Years ended September 30
(Dollars in thousands except per share amounts)
Capital in
Common Stock Excess of Retained Treasury Stock
Shares Amount Par Value Earnings Shares Amount
Balance at
October 1, 1993 9,288,708 $929 $11,430 $161,268 (93,208) ($2,033)
Shares issued in
payment of note 197,701 20 5,947 93,208 2,033
Exercise of stock
options 900 23
Shares purchased for
treasury (87) (2)
Net income 17,216
Cash dividends
($.50 per share) (4,741)
Balance at
September 30,
1994 9,487,309 949 17,400 173,743 (87) (2)
Shares purchased for
treasury (94) (3)
Net income 23,912
Cash dividends
($.50 per share) (4,744)
Balance at
September 30,
1995 9,487,309 949 17,400 192,911 (181) (5)
Shares purchased
for treasury (212,747) (5,389)
Net income 27,000
Cash dividends
($.50 per share) (4,716)
Balance at
September 30,
1996 9,487,309 $949 $17,400 $215,195 (212,928) ($5,394)
See accompanying notes.<PAGE>
Notes to Consolidated Financial Statements
1. Accounting polices. CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are
wholly owned. All significant intercompany transactions have been eliminated
in consolidation.
INVENTORIES - Inventories are valued at the lower of cost or market. Cost
for parts and supplies inventory is determined under the first-in, first-out
(FIFO) method. Cost for other inventories is determined under the last-in,
first-out (LIFO) and average cost methods.
DEPRECIATION, DEPLETION AND AMORTIZATION - Provision for depreciation of
plant and equipment is computed using the straight-line method based on the
following estimated useful lives:
Years
Buildings and improvements 8-30
Machinery and equipment 3-15
Automobiles, trucks and mobile equipment 3- 8
Furniture and fixtures 3-10
Depletion of sand and stone deposits is computed on the basis of units of
production in relation to estimated reserves. Substantially all goodwill is
being amortized over forty years using the straight-line method.
INCOME TAXES - The Company uses an asset and liability approach to
financial reporting for income taxes. Under this method, deferred tax assets
and liabilities are recognized based on differences between financial
statement and tax bases of assets and liabilities using presently enacted tax
rates. Deferred income taxes result from temporary differences between
pre-tax income reported in the financial statements and taxable income.
EARNINGS PER COMMON SHARE - Earnings per common share are based on the
weighted average number of common shares outstanding and common stock
equivalents, where applicable.
CONCENTRATIONS OF CREDIT RISK - The Company's operations are located within
the Southeastern United States. It sells construction materials and grants
credit to customers, substantially all of whom are related to the
construction industry.
RECLAMATION - The Company accrues the estimated cost of reclamation over
the life of the deposit based on tons sold in relation to total estimated
tons of reserves. Expenses paid by the Company are charged to the reserve.
RISK INSURANCE - The Company has a $500,000 self-insured retention per
occurrence in connection with its workers' compensation, automobile
liability, and general liability insurance programs ("Risk Insurance"). The
Company accrues monthly its estimated cost in connection with its portion of
its Risk Insurance losses. Claims paid by the Company are charged against
the reserve. Additionally, the Company maintains a reserve for incurred but
not reported claims based on historical analysis of such claims.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are
capitalized. Expenditures that relate to an existing condition caused by
past operations, and which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Estimation of such liabilities is extremely complex.
Some factors that must be assessed are engineering estimates, continually
evolving governmental laws and standards, and potential involvement of other
potentially responsible parties.
FUTURE ACCOUNTING REQUIREMENTS - In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 establishes
a fair value based method of accounting for stock-based employee compensation
plans. However, it also allows companies to continue to measure cost for
such plans using the method of accounting prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25).
Companies that elect to continue with the accounting under APB 25 must
provide pro forma disclosures of net income and earnings per share, as if
SFAS 123 had been applied. The accounting and disclosure requirements of
SFAS 123 are effective for the Company for transactions entered into in
fiscal 1997. Pro forma disclosures required if the Company elects to
continue using APB 25 must include the effects of all awards granted in
fiscal 1996, but should be presented for fiscal years subsequent thereto for
fiscal 1996 financial statements presented for comparative purposes. The
Company will continue to measure cost for such plans using the method of
accounting prescribed by APB 25.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121).
SFAS 121, which is effective for years beginning after December 15, 1995,
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles
to be disposed of. Impairment is assessed by comparing the book value of
such assets to the estimated undiscounted future operating cash flows
expected to result from the use of the asset and its final disposition. If
the sum of the expected future cash flow is less than the carrying amount of
the asset, an impairment loss is recognized based on the fair value of the
asset. The Company has not completed its evaluation of the impact of
adoption of SFAS 121.
2. Transactions with related parties. As of September 30, 1996 eight of the
Company's directors were also directors of FRP Properties, Inc. ("FRPP").
Such directors own approximately 40% of the stock of FRPP and 31% of the
stock of the Company. Accordingly, FRPP and the Company are considered
related parties.
FRPP, through its transportation subsidiaries, hauls construction
aggregates for the Company and customers of the Company. It also hauls
diesel fuel and other supplies for the Company. Charges for these services
are based on prevailing market prices.
Other wholly owned subsidiaries of FRPP lease certain construction
aggregates mining and other properties and provide construction management
services to the Company.
The Company paid rents, royalties and transportation charges to
subsidiaries of FRPP totaling $6,544,000 in 1996, $5,869,000 in 1995 and
$6,029,000 in 1994.
At September 30, 1996 and 1995 the Company had a net account payable due to
subsidiaries of FRPP totaling $283,000 and $163,000, respectively.
Under an agreement extending until September 30, 1998, the Company
furnishes certain management and related services, including financial, tax,
legal, administrative, accounting and computer, to FRPP and its subsidiaries.
Charges for such services were $1,383,000 in 1996, $1,312,000 in 1995, and
$1,208,000 in 1994.
On September 30, 1995 a wholly owned subsidiary of the Company entered
into a contract to sell 134 acres of land to a subsidiary of FRP Properties,
Inc. for $500,000 and the assumption of certain reclamation costs and
benefits relating to the site. An appraisal of the property was obtained.
The transaction was approved by the Company's Board of Directors with the
directors who are also directors of FRP Properties, Inc. abstaining. The
Company recorded a write down of $1,248,000 in the carrying value of this
land on September 30, 1995. The transaction closed on October 9, 1996.
A member of the Company's Board of Directors is also a director and has a
beneficial interest in a company that provides services to the Company,
including life insurance on certain employees and officers and claims paying
functions for the Company's employee health benefits program. Premiums paid
on such life insurance during fiscal 1996 and 1995 totaled approximately
$1,288,000 and $1,145,000, respectively. Administrative fees paid in
connection with processing employee health benefit claims totaled
approximately $24,000 and $23,000 for fiscal 1996 and 1995, respectively.
3. Inventories. Inventories at September 30 consisted of the following (in
thousands):
1996 1995
Finished products $18,719 $19,658
Raw materials 3,825 3,580
Parts and supplies 931 1,086
$23,475 $24,324
The excess of current cost over the LIFO stated values of inventories was
$5,438,000 at September 30, 1996 and $3,800,000 at September 30, 1995.
4. Other assets. Other assets at September 30 consisted of the following (in
thousands):
1996 1995
Real estate $ 2,321 $ 2,966
Notes receivable 5,271 5,382
Goodwill at cost less
accumulated amorti-
zation of $3,446
($3,116 in 1995) 9,799 10,129
Other 8,378 8,439
$25,769 $26,916
5. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
1996 1995
Unsecured notes:
8%-10% notes $ 1,678 $ 1,154
Revolving credit 6,000 -
Industrial development
revenue bonds 10,249 11,071
7% - 12% secured notes
and contracts 1,449 1,599
19,376 13,824
Less portion due within
one year 2,514 4,171
$16,862 $ 9,653
Of the industrial development revenue bonds at September 30, 1996,
$7,550,000 is due between 2004 and 2021. The bonds provide for quarterly
interest payments between 68.0% and 71.5% of prime rate (8.25% at September
30, 1996). The bonds are subject to Purchase and Put Agreements with several
banks whereby the bondholders may, at their option, sell the bonds to the
Company during the following fiscal years: $500,000 in 1997; $900,000 in
1998; $3,175,000 in 1999; $2,375,000 in 2000; $200,000 in 2001; and $400,000
in 2002. The balance of the industrial development revenue bonds totaling
$2,699,000 at September 30, 1996 is at floating rates of interest and matures
through 1999. The bonds are collateralized by certain property, plant and
equipment having a carrying value of $5,792,000 at September 30, 1996.
The secured notes and contracts are collateralized by certain real estate
having a carrying value of approximately $2,747,000 at September 30, 1996 and
are payable in installments through 2004.
The aggregate amount of principal payments, excluding the revolving
credit, due subsequent to September 30, 1996, assuming that all of the
industrial development revenue bondholders exercise their options to sell the
bonds to the Company is: 1997 - $2,514,000; 1998 - $1,859,000; 1999 -
$4,128,000; 2000 - $3,319,000; 2001 - $817,000; 2002 and subsequent years -
$739,000.
The Company has a revolving credit agreement under which it may borrow up
to $75,000,000 on term loans payable in consecutive quarterly installments of
5% of the original amount commencing September 30, 1997 and a final payment
of the unpaid balance on June 30, 2000. Interest is payable at prime rate
until June 30, 1997 and at 3/8 of 1% above such prime rate thereafter.
Alternative interest rates based on the London interbank rate and/or the
reserve-adjusted certificate of deposit rate are available at the Company's
option. A commitment fee of 3/16 to 3/8 of 1% is payable on the unused
amount of the commitment.
The Company also has available short-term lines of credit from three banks
aggregating $30,000,000. Under these lines the Company may borrow funds for
a period of one to ninety days. There is no commitment fee and the banks can
terminate the lines at any time. The interest rate is determined at the
time of each borrowing. The weighted average interest rates on such
borrowings at September 30, 1996 and 1995 were 6.3% and 6.2%, respectively.
The various loan agreements contain restrictive covenants, including a
requirement to maintain a consolidated current ratio and consolidated
tangible net worth (as defined) at certain levels, limitations on paying cash
dividends, and other restrictions. As of September 30, 1996, under the most
restrictive of the agreements, $58,844,000 of consolidated retained earnings
was not restricted as to payment of cash dividends.
The Company capitalized interest cost of $32,000 in 1996 and $35,000 in
1994.
6. Stock option plan. The Company has a stock option plan under which
options for shares of common stock may be granted to directors, officers and
key employees. Option transactions for the fiscal years ended September 30
are summarized as follows:
1996 1995 1994
Shares under option:
Outstanding at beginning of year 546,350 534,600 529,050
Granted - 17,500 13,500
Exercised ($25.12 per share) - - (900)
Canceled (3,250) (5,750) (7,050)
Outstanding at end of year (1996-
$24.75 to $30.37 per share) 543,100 546,350 534,600
Aggregate option price $14,472,000 $14,553,000 $14,209,000
Shares available for future grant 500,000 101,750 113,500
Shares exercisable at end of year 448,380 371,510 297,440
Options granted have been at a price equal to the fair market value of the
Company's common stock on the dates of grant. The options expire from seven
to ten years from the date of grant and become exercisable in cumulative
installments of 20% each year after a one year waiting period from the date
of grant.
7. Income taxes. The provision for income taxes for the fiscal years ended
September 30 consisted of the following (in thousands):
1996 1995 1994
Current:
Federal $13,421 $10,507 $ 6,439
State 2,466 2,103 1,396
15,887 12,610 7,835
Deferred (1,777) (150) 482
Total $14,110 $12,460 $8,317
A reconciliation between the amount of reported income tax provision and
the amount computed at the statutory Federal income tax rate follows (in
thousands):
1996 1995 1994
Amount computed at statutory
Federal rate $14,389 $12,731 $8,936
Effect of percentage depletion (1,890) (1,599)
(1,578)
State income taxes (net of Federal
income tax benefit) 1,419 1,219 811
Other, net 192 109 148
Provision for income taxes $14,110 $12,460 $8,317
The types of temporary differences and their related tax effects that give
rise to deferred tax assets and deferred tax liabilities at September 30 are
presented below:
1996 1995
Deferred tax liabilities:
Basis difference in property,
plant and equipment $36,441 $36,393
Other 735 674
Gross deferred tax liabilities 37,176 37,067
Deferred tax assets:
Insurance reserves 2,899 2,212
Other accrued liabilities 7,946 6,652
Other 810 906
Gross deferred tax assets 11,655 9,770
Valuation allowance for deferred
tax assets - -
Net deferred tax assets 11,655 9,770
Net deferred tax liability $25,521 $27,297
8. Employee benefits. The Company and its subsidiaries have a number of
retirement plans which cover substantially all employees.
Certain of the Company's subsidiaries have a noncontributory defined
benefit retirement plan covering certain employees. The benefits are based
on years of service and the employee's highest average compensation for any
five (or in the case of one subsidiary three) consecutive years of service.
Plan assets are invested in mutual funds, listed stocks and bonds and cash
equivalents. The Company's funding policy is to fund annually within the
limits imposed by the Employee Retirement Income Security Act.
Net periodic pension cost (income) for fiscal years ended September 30
included the following components (in thousands):
1996 1995 1994
Service cost-benefits earned during
the period $ 328 $ 377 $ 611
Interest cost on projected benefit
obligation 1,131 1,132 1,046
Actual return on assets (2,984) (2,501) 900
Net amortization and deferral 1,429 1,094 (2,447)
Curtailment gain (184) - (174)
Net periodic pension cost (income) ($ 280) $ 102 ($ 64)
Assumptions used in determining the net periodic pension cost are
summarized as follows:
1996 1995 1994
Discount rate 7.25% 7.25% 8%
Rate of increase in compensation levels 5% 5% 5.25%
Expected long-term rate of return on
assets 9% 9% 9%
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet at September 30 (in
thousands):
1996 1995
Assets Assets
Exceed Exceed
Accumulated Accumulated
Benefits Benefits
Actuarial present value of vested
benefit obligations ($15,250) ($14,891)
Accumulated benefit obligation ($15,317) ($15,002)
Projected benefit obligation ($16,561) ($16,364)
Plan assets at fair value 18,772 16,695
Plan assets in excess of
projected benefit obligation 2,211 331
Unrecognized net gain (1,952) (259)
Unrecognized transition asset (691) (777)
Unrecognized prior service cost (9) (16)
Accrued pension cost ($ 441) ($ 721)
Union employees are covered by multi-employer plans not administered by
the Company. Payments of $202,000, $219,000 and $275,000 were made to these
plans during fiscal 1996, 1995 and 1994, respectively.
Additionally, the Company and certain subsidiaries have savings/profit
sharing plans for the benefit of qualified employees. The savings feature of
the plans incorporates the provisions of Section 401(k) of the Internal
Revenue Code. Under the savings feature of the plans, eligible employees may
elect to save a portion (within limits) of their compensation on a tax
deferred basis. The Company contributes to a participant's account an amount
equal to 50% (with certain limits) of the participant's contribution.
Additionally, the Company and certain subsidiaries may make annual
contributions to the plans as determined by the Board of Directors, with
certain limitations. The plans provide for deferred vesting with benefits
payable upon retirement or earlier termination of employment. The total cost
of the plans was $3,927,000 in 1996; $3,510,000 in 1995 and $2,648,000 in
1994.
The Company has a management security plan for certain officers and key
employees. The accruals for future benefits are based upon the remaining
years to retirement of the participating employees. The Company has
purchased life insurance on the lives of the participants and it is the owner
and beneficiary of such policies. The expense for fiscal 1996, 1995 and 1994
was $1,593,000, $1,296,000 and $1,160,000, respectively.
The Company and one of its subsidiaries provide certain health care
benefits for retired employees. Employees may become eligible for those
benefits if they were employed by the Company prior to December 10, 1992,
meet service requirements and reach retirement age while working for the
Company. The plans are contributory and unfunded. The Company accrues the
estimated cost of retiree health benefits over the years that the employees
render service.
The following table sets forth the plans' combined status reconciled
with the accrued postretirement benefit cost included in the Company's
consolidated balance sheet at September 30 (in thousands):
1996 1995 1994
Accumulated postretirement benefit
obligations:
Retirees $1,310 $ 1,424 $1,680
Fully eligible active participants 517 616 597
Other active participants 1,094 874 677
Total APBO 2,921 2,914 2,954
Unrecognized net loss from past
experience different from that
assumed and from changes in
assumptions (1,011) (1,221)
(1,377)
Unrecognized prior service costs 473 684 894
Accrued postretirement benefit cost $ 2,383 $ 2,377 $2,471
Net periodic postretirement benefit cost for fiscal years ended
September 30 includes the following components (in thousands):
1996 1995 1994
Service cost of benefits earned
during the period $ 134 $ 133 $ 260
Interest cost on APBO 197 206 380
Net amortization and deferral (130) (101)
(127)
Amortization of transition obligation
over 20 years - - 120
Net periodic postretirement benefit
cost $ 201 $ 238 $ 633
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.25% at September 30, 1996 and 1995 and 8% at
September 30, 1994.
Effective January 1, 1994, the Company's share of retiree health care
was capped at the Company's 1993 cost level.
9. Leases. Certain plant sites, office space and equipment are rented under
operating leases. Total rental expense, excluding mineral leases, for fiscal
1996, 1995 and 1994 was $3,867,000, $4,231,000 and $3,465,000, respectively.
Future minimum lease payments under operating leases with an initial or
remaining noncancelable term in excess of one year, exclusive of mineral
leases, at September 30, 1996 are as follows: 1997-$1,497,000;
1998-$1,396,000; 1999-$1,346,000; 2000-$1,326,000; 2001-$1,137,000
after 2001-$8,978,000. Certain leases include options for renewal.
Most leases require the Company to pay for utilities, insurance and maintenance.
The Company has a long-term lease, which may not be canceled prior to
September 1, 1998, with FRPP for sand reserves near Grandin, Florida. Under
the lease the Company will pay minimum royalties of $1,000,000 per year.
10. Gain (loss) on sale and/or write down of assets. In fiscal 1996 the
Company recorded a loss on the sale and write down of the carrying value of
certain real estate totaling $1,619,000 and a gain on the sale of a lease of
$1,333,000. In fiscal 1995 the Company recorded a loss on the write down of
the carrying value of certain real estate totaling $2,018,000. In fiscal
1994 the Company sold certain real estate which resulted in a loss of
$313,000.
11. Fair values of financial instruments. At September 30, 1996 and 1995 the
carrying amount reported in the balance sheet for cash and cash equivalents,
notes receivable, short-term notes payable to banks, revolving credit and
industrial development revenue bonds approximate their fair value. The fair
values of the Company's other long-term debt are estimated using discounted
cash flow analysis, based on the Company's current incremental borrowing
rates for similar types of borrowing arrangements. At September 30, 1996 the
carrying amount and fair value of such other long-term debt was $3,127,000
and $3,240,000, respectively. At September 30, 1995 the carrying amount and
fair value of such other long-term debt was $2,753,000 and $2,941,000,
respectively.
12. Contingent liabilities. The Company and its subsidiaries 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, are expected to have a materially adverse effect on the Company's
consolidated financial statements.
The Company has retained certain self-insurance risks with respect to losses
for third party liability and property damage.
13. Commitments. At September 30, 1996, the Company had placed orders and
was committed to purchase equipment costing approximately $5,944,000.
14. Fourth quarter financial information (unaudited). In the fourth quarter
of fiscal 1996 the Company increased its risk insurance reserves for incurred
but unreported claims approximately $1,000,000. Significant items affecting
income in the fourth quarter of fiscal 1995 include a $2,046,000 increase in
construction aggregates stockpile inventories due to the physical measurement
of the stockpiles and the write down of the carrying value of certain real
estate of $2,018,000.<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders
Florida Rock Industries, Inc.
We have audited the accompanying consolidated balance sheets of Florida Rock
Industries, Inc. and subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Florida Rock Industries, Inc.
and subsidiaries at September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1996 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 3, 1996
<PAGE>
Directors and Officers
Directors
Thompson S. Baker (1)
Chairman Emeritus of the Company
Edward L. Baker (1)
Chairman of the Board
of the Company
John D. Baker II (1)
President and Chief Executive Officer
of the Company
Thompson S. Baker II
Vice President of the Company
Alvin R. (Pete) Carpenter
President and Chief Executive Officer
of CSX Transportation, Inc.
Robert D. Davis (3)
Chairman of the Board of DDI, Inc.
Charles H. Denny III
Investments
Albert D. Ernest, Jr. (2)(3)
President of Albert Ernest Enterprises
Luke E. Fichthorn III (2)
Private Investment Banker,
Twain Associates and Chairman of the
Board and Chief Executive Officer of
Bairnco Corporation
Frank M. Hubbard (2)(3)
Chairman of the Board of
A. Friends' Foundation Trust
Francis X. Knott
Chief Executive Officer
of Partners Management Company
Radford D. Lovett (2)(3)
Chairman of the Board of
Commodores Point Terminal Corp.
W. Thomas Rice (2)(3)
Chairman Emeritus of Seaboard
Coast Line Industries, Inc.
C. J. Shepherdson
Vice President of the Company
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Officers
Edward L. Baker
Chairman of the Board
John D. Baker II
President and Chief Executive Officer
H. B. Horner
Executive Vice President
C. J. Shepherdson
Vice President
Chairman, Northern Concrete Group
Donald L. Bloebaum
Vice President
President, Aggregates Group
S. Robert Hays
Vice President
President, Florida Concrete Group
Fred W. Cohrs
Vice President
President, Cement Group
Clarron E. Render, Jr.
Vice President
President, Northern Concrete Group
Thompson S. Baker II
Vice President
Executive Vice President,
Aggregates Group
Robert C. Peace
Vice President
Quality
Ruggles B. Carlson
Vice President and Treasurer
Finance
Wallace A. Patzke, Jr.
Vice President and Controller
Dennis D. Frick
Secretary
Corporate Counsel
John W. Green
Assistant Secretary
Director of Corporate Credit
Florida Rock Industries, Inc.
General Office: 155 East 21st Street
Jacksonville, Florida 32206
Telephone: (904) 355-1781
Annual Meeting
Shareholders are cordially invited to attend the Annual Stockholders Meeting
which will be held at 9 a.m. local time, on Wednesday, February 5, 1997, at
the general offices of the Company, 155 East 21st Street, Jacksonville,
Florida.
Transfer Agent
First Union National Bank of North Carolina
230 South Tryon Street, 11th Floor
Charlotte, NC 28288-1154
Telephone: 1-800-829-8432
General Counsel
Lewis S. Lee, Esquire
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Jacksonville, Florida
Independent Auditors
Deloitte & Touche LLP
Jacksonville, Florida
Common Stock Listed
American Stock Exchange
(Symbol: FRK)
Form 10-K
Stockholders may receive without charge a copy of Florida Rock Industries,
Inc.'s annual report to the Securities and Exchange Commission on Form 10-K
by writing to the Treasurer at P.O. Box 4667, Jacksonville, Florida 32201.
EXHIBIT (11)
FLORIDA ROCK INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Years Ended September 30
1996 1995 1994
Net income $27,000,000 $23,912,000 $17,216,000
Common shares:
Weighted average shares
outstanding during the period 9,426,394 9,487,158 9,449,992
Shares issuable under stock
options which are potentially
dilutive and affect primary
earnings per share 11,951 38,204 35,049
Maximum potential shares
includable in computation of
primary earnings per share 9,438,345 9,525,362 9,485,041
Additional shares issuable
under stock options which
are potentially dilutive
and affect fully diluted
earnings per share 37,848 1,343 -
Maximum potential shares
included in computation of
fully diluted earnings per
share 9,476,193 9,526,705 9,485,041
Primary earnings per common share $2.86 $2.51 $1.82
Fully diluted earnings per common
share $2.85 $2.51 $1.82
(a) Fully diluted earnings per share are not presented on the income statement
since the potential effect would have been less than 3% dilutive.
<PAGE>
Annual Report 1996
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1996 1995 Change
Net sales $398,673 $368,959 + 8.1
Gross profit $ 79,103 $ 73,752 + 7.3
Operating profit $ 42,335 $ 39,231 + 7.9
Income before income taxes $ 41,110 $ 36,372 + 13.0
Net income $ 27,000 $ 23,912 + 12.9
Per common share:
Net income $ 2.86 $ 2.51 + 13.9
Stockholders' equity $ 24.60 $ 22.27 + 10.5
Cash dividend $ .50 $ .50
Return on ending stockholders' equity 11.8% 11.3%<PAGE>
1996 CORPORATE HIGHLIGHTS
Sales increased - 8%
Net income increased - 13%
Volumes increased
Continuing expense control
$45,544,000 invested in additional property, plant and equipment
$75,000,000 revolving credit agreement of which $69,000,000 was unused at
year end
Short-term lines of credit aggregating $30,000,000 of which $28,600,000 was
unused at year end
BUSINESS. The Company is a major basic construction materials company
concentrating in the Southeastern and Mid-Atlantic states.
OBJECTIVE. The Company's objective is to become a quality-oriented basic
construction materials company that focuses on:
Long-term growth and return on shareholders' equity in excess of 15%
Customer satisfaction through superior products and service
An empowered work force that utilizes teamwork to enhance productivity
and reduce costs<PAGE>
To Our Stockholders
Fiscal 1996 was a good year and a period of continuing growth and
improvement for Florida Rock Industries, Inc. Net income increased 13% on
only an 8% increase in sales. The improved results were due to a
combination of increased demand, higher prices and our management team's
excellent control of expenses. These excellent results were despite a very
severe winter which negatively impacted the first two quarters.
Results. Sales for fiscal 1996 were $398,673,000 up 8.1% from
$368,959,000 in fiscal 1995. The increase in sales was due to increased
volume and increased prices. The increased demand was attributable to
growth in non-residential construction, with infrastructure programs and
residential construction remaining about level. The activity varied
widely by markets, though the Atlanta market was unusually strong because
of the activity associated with the preparation for the Olympics.
Selling, general and administrative expense increased 6.5% primarily
as the result of both higher sales and increased profit sharing and
incentive compensation due to improved profits. Underlying expense levels
increased, but declined slightly as a percent of sales.
In fiscal 1996 operating profit increased 7.9% to $42,335,000 from
$39,231,000.
The small decline in interest expense was principally due to the
modest reduction in average debt outstanding which was substantially offset
by a slight increase in the average interest rate.
Income before income taxes increased 13.0% to $41,110,000 from
$36,372,000 in 1995. Net income was $27,000,000, a 12.9% increase from
fiscal 1995's net income of $23,912,000. Earnings per share for 1996 were
$2.86 a 13.9% increase over $2.51 last year.
The weighted average number of shares decreased to 9,438,345 in 1996
from 9,525,362 in 1995 as the result of the repurchase of 212,747 shares of
common stock for $5,389,000 during 1996.
Planned New Cement Plant. Although delayed by local litigation,
Florida Rock Industries continued plans to construct a 750,000 ton per year
capacity Portland Cement production facility. It will be located on 1,500
acres owned and leased near the town of Newberry in Alachua County,
Florida. Once final zoning and permitting has been completed, it is
estimated that construction will take approximately two years. The project
is further discussed under the Operating Review section of this Annual
Report.
Capital Expenditures. Fiscal 1996 capital expenditures totaled
$45,544,000. The capital expenditures were divided approximately 66% for
replacements, including modernizing, safety and environmental, and 34% for
expansion, land and aggregates deposits to be used in current and future
operations. Depreciation, depletion and amortization was $28,766,000.
The fiscal 1997 capital expenditure plan totals approximately
$70,000,000 versus estimated depreciation and depletion of $32,000,000.
Approximately 40% of the planned expenditures is for plant and equipment
replacements and modernization, 54% is for expansion and new projects, and
6% is for new plant sites and deposits. The expansion and new project
portion of the capital expenditure plan includes $13,000,000 for the first
phase of the new cement plant. The expenditures for the new cement plant
are contingent upon receiving final zoning and permitting approvals. The
1997 capital expenditure plan is subject to review as market conditions and
the economic picture evolve.
Financial Management. Cash flow from operations of $55,716,000
enabled the Company to fund its major capital expenditure program for
fiscal 1996, reduce debt and repurchase common stock.
During 1996 total debt was reduced from $23,224,000 to $20,776,000 at
September 30, 1996.
At September 30, 1996, $6,000,000 was borrowed under the $75,000,000
revolving credit agreement. The Company has $30,000,000 in short-term bank
lines of which $1,400,000 was utilized at year end.
The Company anticipates that after all required permits have been
received for the construction of the new cement plant it will enter into a
new revolving credit agreement which will expand the availability to
$175,000,000 and extend the final maturity to 2002.
Dividends. The Board of Directors maintained the semiannual dividend
of $.25 per share. Consequently, cash dividends of $.50 per share were
paid during the year to stockholders.
Subsequent to fiscal year end, in December 1996, the Board declared
the semiannual cash dividend of $.25 per share payable on January 2, 1997
to stockholders of record on December 17, 1996.
Stock Repurchase. The Board of Directors has authorized management to
repurchase shares of the Company's common stock from time to time as
opportunities may arise.
Stockholders Meeting. On February 7, 1996, the Annual Stockholders
Meeting was held in Jacksonville, Florida. The stockholders elected Robert
D. Davis as a director to a term expiring in 1997, and Edward L. Baker,
Francis X. Knott, Radford D. Lovett and W. Thomas Rice to terms expiring in
2000.
Safety and Environment. Management continued its emphasis on a safe,
drug-free work place.
During 1996 the Company continued to make both capital and operating
expenditures in accordance with its goal to be not only in compliance with
environmental regulations but also to be a model member of each community
in which it has a presence.
The National Safety Council announced that the Company's Macon Quarry
had achieved a new "Best Ever" record for work hours without a lost time
accident at a granite quarry. The Aggregates Group set a new "Best Ever"
record for work hours without a lost-time injury in its industry.
Tidewater Quarries received the National Stone Association's (NSA's)
"Sterling Award" for medium sized operations while the Astatula sand plant
received NSA's "Environmental Eagle" award for their environmental
accomplishments. The Company's Florida stone and sand operations received
more safety awards from the State of Florida than any other company in the
state. In short, we received more safety awards this year than ever
before. Three of the Company's stone quarries, Gulf Hammock, Ft. Myers and
Miami, received awards for meeting or exceeding 1,000,000 man-hours worked
without experiencing a lost-time accident. The Astatula sand plant and
Brooksville quarry both received NSA's "Good Neighbor" awards for
excellence in community relations. Our Keuka sand plant won NSA's "Plant
of the Year" award in the small plant category.
Business Process Improvement. The Company is continuing and expanding
its initiative in total quality management. It's called "Business Process
Improvement". Features of the program remain:
Customer Satisfaction
Employee Involvement and Teamwork
Process Improvement
Since starting the initiative in 1994, approximately 1,400 employees
have been trained in the principles of quality, and 40 process improvement
teams have been formed to address specific issues in customer service and
cost reduction. "Natural Teams" continue to make meaningful process
improvements in their specific areas of our operations.
Summary and Outlook. Sales in 1996 were better than expected.
Increased volumes and prices, combined with continued cost containment,
resulted in improved earnings. The capital expenditure program again
focused on higher than normal replacements and additional trucks and
equipment to meet increased demand and to improve efficiencies.
In 1997 management expects continued slow economic growth. The
Federal Reserve's continuing dedication to inflation containment is
expected to result in fairly constant interest rates. Mortgage interest
rates have declined during 1996
with the result that single family home construction remains at good
levels. Non-residential construction is moving with local supply and
demand. In Georgia, non-residential construction will be down in 1997,
primarily due to completion of construction for the 1996 Summer Olympic
Games. Commercial industrial construction markets remain driven by
capacity utilization. Federal and state infrastructure requirements remain
strong but will remain constrained by each respective state's ability to
fund its programs. Fiscal 1997 sales should grow in step with the
Southeastern economy given continued reasonable long-term mortgage interest
rates and the absence of any overbuilt conditions.
Fiscal 1997 is expected to be a year of modestly improved sales and
earnings.
Management continues to explore new opportunities to further expand
and develop the Company in its existing and contiguous geographical
markets. The Southeastern and Mid-Atlantic markets served by Florida Rock
are among the prime long-term growth markets in the United States.
Management's long-term operating plans remain based on the forecasted
secular growth in the Company's markets and a belief in the fundamental
strength of the U.S. economy.
The continuing dedication and excellent performance of our managers
and employees have been critical in improving profitability and will be the
key to Florida Rock's growth and success in the future.
Respectfully yours,
Edward L. Baker
Chairman of the Board
John D. Baker II
President and Chief Executive Officer
<PAGE>
Operating Review
Operations. Sales increased in fiscal 1996 with growth in Florida, Georgia
and Virginia. Increased sales combined with ongoing cost containment
programs resulted in improved operating profit.
The Company produces and sells construction aggregates, ready mixed
concrete, concrete block and prestressed concrete. It also markets other
building materials.
The Company operates seven crushed stone plants, eight sand plants and
one industrial sand plant in Florida. It operates five crushed stone
plants in Georgia; one sand and gravel plant and three crushed stone plants
in Maryland; and two crushed stone plants and one sand and gravel plant in
Virginia. The Company also operates aggregates distribution terminals in
Northern Virginia; Norfolk/Virginia Beach, Virginia; Baltimore, Maryland
and the Eastern Shore of Maryland. In Florida the Company has two
aggregates distribution terminals which are served by unit trains. The
terminals serve central Florida, including the Orlando and Polk County
markets.
The Company's construction aggregates operations are spread throughout
the Southeast. The Company sells construction aggregates throughout most
of Florida with the principal exception of the panhandle. In Georgia the
Company primarily serves the regional construction markets around Griffin,
Macon, Rome and the southern portion of the Atlanta market. The Rome
quarry also sells crushed limestone to a cement plant. In Virginia the
Company primarily serves the Richmond, Norfolk/Virginia Beach and Northern
Virginia markets. In Maryland the principal markets served are the greater
Baltimore area, Frederick and Montgomery Counties and the Eastern Shore of
Maryland from waterfront distribution yards.
The Company has substantial long-term reserves of sand and stone in
Florida, Georgia, Maryland and Virginia which are owned or under long-term
mining leases with terms generally commensurate with the extent of the
deposits at current rates of extraction.
Ready mixed concrete is produced and sold throughout peninsular Florida;
South Georgia; Richmond, Norfolk/Virginia Beach, and Northeastern
Virginia; Central Maryland; and Washington, D.C.
Prestressed concrete products for commercial developments and bridge and
highway construction are produced in Wilmington, North Carolina.
At the end of fiscal 1996 the Company had 85 ready mixed concrete plants
and 10 concrete block plants, and a delivery fleet of 927 ready mix and
block trucks. During 1996 $12,655,000 was invested in 129 new ready mix
and block trucks to further modernize and expand the fleet.
New Developments. Management continued to modernize and expand
operations where cost savings and/or long-term growth plans warranted.
The vast majority of capital expenditures during 1996 were for equipment
replacements and expansions. The Company purchased three ready mixed
concrete plants in North Florida. Two new ready mixed concrete plants were
put into operation to serve Central Florida. A second aggregates
distribution yard in Central Florida was completed and put into operation
during the year. A new sand plant to better serve segments of the Central
Florida market is under construction and is expected to become operational
in the first quarter of fiscal 1997. Also, under construction is a new
ready mixed concrete plant along the Dade-Broward County lines in South
Florida.
Fiscal 1997 should continue to reflect the benefits of the operating
efficiencies from our quality management initiative and further capital
improvements which, when combined with increased sales, should again result
in increased earnings and improved returns on capital employed.
Cement Plant Project. The Company plans to construct a 750,000 tons
per year capacity Portland Cement production facility. The Company remains
engaged in the arduous process of obtaining all the necessary building,
operating and zoning permits. It is now expected that all necessary
permits will be received in 1997. Construction and equipment contracts are
in place, subject to the completion of permitting. Once permitting is
complete, construction and equipment contracts will be let. Construction
time, measured from the date the principal equipment is ordered, is
expected to be approximately 24 months.
The proposed cement plant will employ state-of-the-art technology for
optimum energy consumption, man-power requirements and pollution control
technology. At capacity it is expected to be the low cost producer in its
market area. The raw materials will be supplied from property presently
owned and leased and zoned for mining by Florida Rock Industries, and from
nearby electric power plants.
The cement will be shipped in bulk and bags in trucks and rail cars to
ready mixed concrete plants, contractors and a variety of customers engaged
in construction activities. It will also produce masonry cement which will
be shipped in bags to distributors, such as building supply dealers.
Consistent with the Company's high environmental standard, all
materials which enter the process will be converted into a saleable
product, avoiding any need to handle solid or liquid waste.<PAGE>
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1996 1995 1994 1993 1992
Summary of Operations
Net sales $398,673 $368,959 $336,526 $294,431 $271,821
Gross profit $ 79,103 $ 73,752 $ 59,431 $ 41,704 $ 34,956
Operating profit $ 42,335 $ 39,231 $ 27,461 $ 11,403 $ 6,480
Interest expense $ 1,980 $ 2,060 $ 2,223 $ 2,850 $ 3,146
Income before income taxes $ 41,110 $ 36,372 $ 25,533 $ 12,185 $ 4,325
Provision for income taxes $ 14,110 $ 12,460 $ 8,317 $ 4,408 $ 469
Net income $ 27,000 $ 23,912 $ 17,216 $ 7,777 $ 3,856
Per Common Share
Net income $ 2.86 $ 2.51 $ 1.82 $ .85 $ .42
Stockholders' equity $24.60 $22.27 $20.25 $18.66 $18.32
Cash dividend $ .50 $ .50 $ .50 $ .50 $ .50
Financial Summary
Current assets $ 87,082 $ 78,788 $ 75,720 $ 73,017 $ 65,907
Current liabilities $ 51,857 $ 57,614 $ 49,298 $ 52,033 $ 46,645
Working capital $ 35,225 $ 21,174 $ 26,422 $ 20,984 $ 19,262
Property, plant and
equipment, net $233,858 $220,325 $208,076 $210,110 $204,235
Total assets $346,709 $326,029 $310,590 $312,384 $296,784
Long-term debt $ 16,862 $ 9,653 $ 23,116 $ 43,877 $ 39,379
Stockholders' equity $228,150 $211,255 $192,090 $171,594 $168,480
Other Data
Return on ending
stockholders' equity 11.8% 11.3% 9.0% 4.5% 2.3%
Return on capital employed 10.3% 9.6% 7.4% 3.7% 2.3%
Additions to property,
plant and equipment $ 45,544 $ 40,374 $ 23,121 $ 33,558 $ 26,789
Depreciation, depletion
and amortization $ 28,766 $ 26,518 $ 25,419 $ 26,168 $ 26,678
Weighted average number
of shares 9,438 9,525 9,485 9,197 9,204
Number of employees at
end of year 2,310 2,201 2,203 2,142 2,221
Stockholders of record 1,174 1,228 1,279 1,335 1,302
(a)Effective October 1, 1992, the Company changed its method of accounting
for employee postretirement benefits in accordance with SFAS 106. The
effect on fiscal 1993 was to reduce net income by $1,252,000 ($.14 per share).
(b)In 1996, 1995, 1994 and 1993 the Company reported a gain(loss) on the
sale and/or write down of assets of ($286,000), ($2,018,000), ($313,000) and
$2,766,000, respectively. See Note 10 to the Consolidated Financial Statements.
(c)In 1993 the Company charged its provision for income taxes $748,000 to
reflect the impact on the deferred income tax liability of the increase
in the top Federal corporate income tax rate.
<PAGE>
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
First Second Third Fourth
1996 1995 1996 1995 1996 1995 1996 1995
Net
sales $92,265 $89,614 $85,801 $84,684 $110,331 $98,256 $110,276 $96,405
Gross
profit $16,899 $17,769 $13,465 $14,003 $ 25,571 $19,906 $ 23,168 $22,074
Operating
profit $ 8,578 $ 9,586 $ 4,472 $ 5,152 $ 15,473 $11,155 $ 13,812 $13,338
Income
before
income
taxes $ 8,390 $ 9,370 $ 4,268 $ 4,966 $ 13,800 $10,829 $ 14,652 $11,207
Net
income $ 5,495 $ 6,137 $ 2,796 $ 3,253 $ 9,039 $ 7,093 $ 9,670 $ 7,429
Per common share:
Net
income $ .58 $ .65 $ .29 $ .34 $ .96 $ .74 $ 1.04 $ .78
Cash
dividend $ .25 $ .25 - - $ .25 $ .25 - -
Market price:
High $ 29.25 $ 27.37 $ 29.50 $ 30.00 $ 26.75 $ 29.75 $ 29.37 $ 29.25
Low $ 26.25 $ 25.25 $ 25.00 $ 26.62 $ 24.37 $ 27.62 $ 23.25 $ 26.37
See Note 14 to the Consolidated Financial Statements.<PAGE>
Management Analysis
Operating Results. The Company's operations are influenced by a number of
external and internal factors. External factors include weather,
competition, levels of construction activity in the Company's markets, the
cost and availability of money, appropriations and construction contract
lettings by federal and state governments, fuel costs, transportation costs
and inflation. Internal factors include sales mix, plant location, quality
and quantities of aggregates reserves, capacity utilization and other
operating factors.
Fiscal 1996 and 1995 sales increased 8.1% and 9.6% respectively, due
to both volume and price increases.
The contribution made to net sales from the sale of construction
materials by the principal classes of products and services for the five
years ended September 30 is as follows:
1996 1995 1994 1993 1992
Ready mixed
concrete 58% 58% 56% 56% 58%
Construction
aggregates 41% 40% 41% 42% 41%
Other concrete
products and
building materials 10% 10% 11% 10% 11%
Less intercompany (9%) (8%) (8%) (8%) (10%)
100% 100% 100% 100% 100%
The estimated contribution to revenues from the sale of construction
materials by major markets follows:
1996 1995 1994 1993 1992
Commercial and
industrial 45% 37% 36% 45% 48%
Residential 35% 40% 42% 29% 26%
Highway and
governmental 20% 23% 22% 26% 26%
In fiscal 1996 gross profit increased 7.3% while the gross profit
margin decreased slightly to 19.8% from 20.0%. The increase in gross
profit was principally due to the increased sales. In the fourth quarter
of fiscal 1996 the Company increased its risk insurance reserves for
incurred but unreported claims approximately $1,000,000. Without this
adjustment the 1996 gross profit margin would have been approximately level
with fiscal 1995.
In fiscal 1995 gross profit increased 24.1% and gross profit margin
increased to 20.0% from 17.7% in 1994. These improvements resulted from
the increase in sales, cost containment, continuing efficiency improvements
and the fixed cost component of the business.
The 6.5% and 8.0% increase in selling, general and administrative
expense in 1996 and 1995 over the prior year, respectively, was primarily
due to an increase in basic expense levels due to increased sales and an
increase in profit sharing which is linked to profitability. Also in 1996,
incentive compensation was up because profit exceeded budget.
The decrease in interest expense in both 1996 and 1995 was
attributable to a decrease in the average debt outstanding which was
partially offset by an increase in the average interest rate.
The increase in interest income in 1996 and 1995 was due principally
to an increase in the average interest rate.
See Note 10 to the Consolidated Financial Statements for information
concerning the gain (loss) on the sale and/or write down of assets.
The effective tax rate for fiscal 1996 remained level with 1995. The
increase to 34.3% in 1995 from 32.6% in 1994 was principally due to the
increase in earnings and relatively higher earnings from non-mining
activities.
Liquidity and Capital Resources. The following key financial measurements
reflect the Company's sound financial position and substantial capital
resources at September 30 (dollars in thousands):
1996 1995 1994
Cash and cash
equivalents $ 4,995 $ 925 $ 804
Total debt $20,776 $23,224 $32,477
Current ratio 1.7 to 1 1.4 to 1 1.5 to 1
Debt as a percent of
capital employed 7.6% 8.9% 12.9%
Unused revolving credit $69,000 $75,000 $64,000
Unused short-term lines $28,600 $20,600 $23,300
In fiscal 1996 cash flow from operations of $55,716,000 covered the
cash required for capital expenditures and other investing activities, the
net debt repayment of $3,007,000, the paying of the regular dividend and
the repurchase of $5,389,000 of common stock. In fiscal 1995 cash flows
from operations of $54,698,000 covered the cash required for capital
expenditures and other investing activities, the net debt repayment of
$9,360,000 and the payment of the regular dividend.
The Company expects its 1997 expenditures for property, plant and
equipment to be approximately $70,000,000 versus depreciation and depletion
of $32,000,000.
Approximately $13,000,000 of the budget is for the first phase of the
proposed cement plant. Management believes that the necessary funds will
be obtained through internal generation and borrowing under the revolving
credit agreement. The Company has available $69,000,000 under the
revolving credit agreement which was unused and available at September 30,
1996. The Company plans to enter into a new revolving agreement for
$175,000,000 with a final maturity in 2002 after all required permits have
been received for construction of the cement plant. The Company's capital
expenditures are by and large discretionary and not contractual commitments
until the actual orders are placed. However, over time it is desirable and
necessary to both replace equipment due to wear and tear and to make
capital expenditures to improve efficiencies and expand capacity where
warranted.
The Company expects that the Purchase and Put Agreements covering
$7,550,000 of the Industrial Revenue Bonds (See Note 5 to the Consolidated
Financial Statements) will continue to be amended until the earlier of the
final maturity date of the respective bonds or until the project financed
by the bonds is terminated. To the extent that the bonds mature or the
Purchase and Put Agreements are not extended, the Company will repurchase
and/or repay the bonds with borrowings under its revolving credit
agreement. The Company believes it will be able to renegotiate its present
credit facilities or obtain similar replacement credit facilities when
necessary in the future.
Inflation. In the past three years price increases have generally
offset inflation. In prior years price increases failed to equal inflation
and in certain markets prices declined due to competition. <PAGE>
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1996 1995 1994
Net sales $398,673 $368,959 $336,526
Cost of sales 319,570 295,207 277,095
Gross profit 79,103 73,752 59,431
Selling, general and administrative expense 36,768 34,521 31,970
Operating profit 42,335 39,231 27,461
Interest expense (1,980) (2,060) (2,223)
Interest income 713 616 462
Gain (loss) on sale and/or write down of assets
($1,248 related party loss in 1995) (286) (2,018) (313)
Other income, net 328 603 146
Income before income taxes 41,110 36,372 25,533
Provision for income taxes 14,110 12,460 8,317
Net income $ 27,000 $ 23,912 $17,216
Earnings per common share $2.86 $2.51 $1.82
Weighted average number of shares used in
computing earnings per common share 9,438 9,525 9,485
See accompanying notes.<PAGE>
Consolidated Balance Sheet September 30
(Dollars in thousands)
1996 1995
Assets
Current assets:
Cash and cash equivalents $ 4,995 $ 925
Accounts receivable, less allowance for doubtful
accounts of $1,393 ($1,726 in 1995) 52,436 47,923
Inventories 23,475 24,324
Prepaid expenses and other 6,176 5,616
Total current assets 87,082 78,788
Other assets 25,769 26,916
Property, plant and equipment, at cost:
Land 107,644 105,801
Plant and equipment 411,882 386,271
519,526 492,072
Less accumulated depreciation and depletion 285,668 271,747
Net property, plant and equipment 233,858 220,325
$346,709 $326,029
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable to banks $ 1,400 $ 9,400
Accounts payable 28,602 27,499
Federal and state income taxes 3,507 3,052
Accrued payroll and benefits 7,710 6,582
Accrued insurance reserve 2,679 2,108
Accrued liabilities, other 5,445 4,802
Long-term debt due within one year 2,514 4,171
Total current liabilities 51,857 57,614
Long-term debt 16,862 9,653
Deferred income taxes 29,699 31,005
Accrued employee benefits 10,726 9,565
Other accrued liabilities 9,415 6,937
Commitments and contingent liabilities (Notes 9, 12 and 13)
Stockholders' equity:
Preferred stock, no par value;
10,000,000 shares authorized, none issued - -
Common stock, $.10 par value;
50,000,000 shares authorized, 9,487,309
shares issued 949 949
Capital in excess of par value 17,400 17,400
Retained earnings 215,195 192,911
Less cost of treasury stock; 212,928 shares (181
shares in 1995) (5,394) (5)
Total stockholders' equity 228,150 211,255
$346,709 $326,029
See accompanying notes.<PAGE>
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1996 1995 1994
Cash flows from operating activities:
Net income $ 27,000 $ 23,912 $ 17,216
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 28,766 26,518 25,419
Net changes in operating assets and
liabilities:
(Increase) decrease in accounts receivable (4,532) 820 (7,305)
(Increase) decrease in inventories 849 (3,709) 2,490
(Increase) decrease in prepaid expenses and
other (89) (100) (259)
Increase in accounts payable and accrued
liabilities 7,539 6,339 4,555
Increase (decrease) in deferred income taxes (1,777) (150) 482
Gain on disposition of property, plant and
equipment (1,977) (1,006) (382)
Other, net (63) 2,074 296
Net cash provided by operating activities 55,716 54,698 42,512
Cash flows from investing activities:
Purchase of property, plant and equipment (44,872) (40,218) (23,063)
Proceeds from the sale of property, plant and
equipment 5,259 1,393 661
Additions to other assets (1,641) (2,232) (1,839)
Proceeds from the disposition of other assets 2,585 80 693
Additions to notes receivable - - (335)
Collection of notes receivable 135 507 3,174
Net cash used in investing activities (38,534) (40,470) (20,709)
Cash flows from financing activities:
Proceeds from long-term debt 6,000 - -
Net increase (decrease) in short-term debt (8,000) 2,700 (3,500)
Repayment of long-term debt (1,007) (12,060) (16,848)
Exercise of employee stock options - - 23
Repurchase of Company stock (5,389) (3) (2)
Payment of dividends (4,716) (4,744) (4,741)
Net cash used in financing activities (13,112) (14,107) (25,068)
Net increase (decrease) in cash and
cash equivalents 4,070 121 (3,265)
Cash and cash equivalents at beginning of year 925 804 4,069
Cash and cash equivalents at end of year $ 4,995 $ 925 $ 804
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 1,926 $ 2,144 $ 2,769
Income taxes $ 15,435 $ 11,425 $ 9,814
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 412 $ 49 $ 58
Issuing debt $ 260 $ 107 $ -
Additions to other assets from
issuing debt $ 300 - -
Issuing common stock in payment
of note payable - - $ 8,000
Addition to notes receivable from
the sale of property, plant and equipment $ 6 - $ 431
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with maturities of three months or less at the time of
purchase to be cash equivalents.
See accompanying notes.<PAGE>
Consolidated Statement of Stockholders' Equity Years ended September 30
(Dollars in thousands except per share amounts)
Capital in
Common Stock Excess of Retained Treasury Stock
Shares Amount Par Value Earnings Shares Amount
Balance at
October 1, 1993 9,288,708 $929 $11,430 $161,268 (93,208) ($2,033)
Shares issued in
payment of note 197,701 20 5,947 93,208 2,033
Exercise of stock
options 900 23
Shares purchased for
treasury (87) (2)
Net income 17,216
Cash dividends
($.50 per share) (4,741)
Balance at
September 30,
1994 9,487,309 949 17,400 173,743 (87) (2)
Shares purchased for
treasury (94) (3)
Net income 23,912
Cash dividends
($.50 per share) (4,744)
Balance at
September 30,
1995 9,487,309 949 17,400 192,911 (181) (5)
Shares purchased
for treasury (212,747) (5,389)
Net income 27,000
Cash dividends
($.50 per share) (4,716)
Balance at
September 30,
1996 9,487,309 $949 $17,400 $215,195 (212,928) ($5,394)
See accompanying notes.<PAGE>
Notes to Consolidated Financial Statements
1. Accounting polices. CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are
wholly owned. All significant intercompany transactions have been eliminated
in consolidation.
INVENTORIES - Inventories are valued at the lower of cost or market. Cost
for parts and supplies inventory is determined under the first-in, first-out
(FIFO) method. Cost for other inventories is determined under the last-in,
first-out (LIFO) and average cost methods.
DEPRECIATION, DEPLETION AND AMORTIZATION - Provision for depreciation of
plant and equipment is computed using the straight-line method based on the
following estimated useful lives:
Years
Buildings and improvements 8-30
Machinery and equipment 3-15
Automobiles, trucks and mobile equipment 3- 8
Furniture and fixtures 3-10
Depletion of sand and stone deposits is computed on the basis of units of
production in relation to estimated reserves. Substantially all goodwill is
being amortized over forty years using the straight-line method.
INCOME TAXES - The Company uses an asset and liability approach to
financial reporting for income taxes. Under this method, deferred tax assets
and liabilities are recognized based on differences between financial
statement and tax bases of assets and liabilities using presently enacted tax
rates. Deferred income taxes result from temporary differences between
pre-tax income reported in the financial statements and taxable income.
EARNINGS PER COMMON SHARE - Earnings per common share are based on the
weighted average number of common shares outstanding and common stock
equivalents, where applicable.
CONCENTRATIONS OF CREDIT RISK - The Company's operations are located within
the Southeastern United States. It sells construction materials and grants
credit to customers, substantially all of whom are related to the
construction industry.
RECLAMATION - The Company accrues the estimated cost of reclamation over
the life of the deposit based on tons sold in relation to total estimated
tons of reserves. Expenses paid by the Company are charged to the reserve.
RISK INSURANCE - The Company has a $500,000 self-insured retention per
occurrence in connection with its workers' compensation, automobile
liability, and general liability insurance programs ("Risk Insurance"). The
Company accrues monthly its estimated cost in connection with its portion of
its Risk Insurance losses. Claims paid by the Company are charged against
the reserve. Additionally, the Company maintains a reserve for incurred but
not reported claims based on historical analysis of such claims.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are
capitalized. Expenditures that relate to an existing condition caused by
past operations, and which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Estimation of such liabilities is extremely complex.
Some factors that must be assessed are engineering estimates, continually
evolving governmental laws and standards, and potential involvement of other
potentially responsible parties.
FUTURE ACCOUNTING REQUIREMENTS - In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 establishes
a fair value based method of accounting for stock-based employee compensation
plans. However, it also allows companies to continue to measure cost for
such plans using the method of accounting prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25).
Companies that elect to continue with the accounting under APB 25 must
provide pro forma disclosures of net income and earnings per share, as if
SFAS 123 had been applied. The accounting and disclosure requirements of
SFAS 123 are effective for the Company for transactions entered into in
fiscal 1997. Pro forma disclosures required if the Company elects to
continue using APB 25 must include the effects of all awards granted in
fiscal 1996, but should be presented for fiscal years subsequent thereto for
fiscal 1996 financial statements presented for comparative purposes. The
Company will continue to measure cost for such plans using the method of
accounting prescribed by APB 25.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121).
SFAS 121, which is effective for years beginning after December 15, 1995,
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles
to be disposed of. Impairment is assessed by comparing the book value of
such assets to the estimated undiscounted future operating cash flows
expected to result from the use of the asset and its final disposition. If
the sum of the expected future cash flow is less than the carrying amount of
the asset, an impairment loss is recognized based on the fair value of the
asset. The Company has not completed its evaluation of the impact of
adoption of SFAS 121.
2. Transactions with related parties. As of September 30, 1996 eight of the
Company's directors were also directors of FRP Properties, Inc. ("FRPP").
Such directors own approximately 40% of the stock of FRPP and 31% of the
stock of the Company. Accordingly, FRPP and the Company are considered
related parties.
FRPP, through its transportation subsidiaries, hauls construction
aggregates for the Company and customers of the Company. It also hauls
diesel fuel and other supplies for the Company. Charges for these services
are based on prevailing market prices.
Other wholly owned subsidiaries of FRPP lease certain construction
aggregates mining and other properties and provide construction management
services to the Company.
The Company paid rents, royalties and transportation charges to
subsidiaries of FRPP totaling $6,544,000 in 1996, $5,869,000 in 1995 and
$6,029,000 in 1994.
At September 30, 1996 and 1995 the Company had a net account payable due to
subsidiaries of FRPP totaling $283,000 and $163,000, respectively.
Under an agreement extending until September 30, 1998, the Company
furnishes certain management and related services, including financial, tax,
legal, administrative, accounting and computer, to FRPP and its subsidiaries.
Charges for such services were $1,383,000 in 1996, $1,312,000 in 1995, and
$1,208,000 in 1994.
On September 30, 1995 a wholly owned subsidiary of the Company entered
into a contract to sell 134 acres of land to a subsidiary of FRP Properties,
Inc. for $500,000 and the assumption of certain reclamation costs and
benefits relating to the site. An appraisal of the property was obtained.
The transaction was approved by the Company's Board of Directors with the
directors who are also directors of FRP Properties, Inc. abstaining. The
Company recorded a write down of $1,248,000 in the carrying value of this
land on September 30, 1995. The transaction closed on October 9, 1996.
A member of the Company's Board of Directors is also a director and has a
beneficial interest in a company that provides services to the Company,
including life insurance on certain employees and officers and claims paying
functions for the Company's employee health benefits program. Premiums paid
on such life insurance during fiscal 1996 and 1995 totaled approximately
$1,288,000 and $1,145,000, respectively. Administrative fees paid in
connection with processing employee health benefit claims totaled
approximately $24,000 and $23,000 for fiscal 1996 and 1995, respectively.
3. Inventories. Inventories at September 30 consisted of the following (in
thousands):
1996 1995
Finished products $18,719 $19,658
Raw materials 3,825 3,580
Parts and supplies 931 1,086
$23,475 $24,324
The excess of current cost over the LIFO stated values of inventories was
$5,438,000 at September 30, 1996 and $3,800,000 at September 30, 1995.
4. Other assets. Other assets at September 30 consisted of the following (in
thousands):
1996 1995
Real estate $ 2,321 $ 2,966
Notes receivable 5,271 5,382
Goodwill at cost less
accumulated amorti-
zation of $3,446
($3,116 in 1995) 9,799 10,129
Other 8,378 8,439
$25,769 $26,916
5. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
1996 1995
Unsecured notes:
8%-10% notes $ 1,678 $ 1,154
Revolving credit 6,000 -
Industrial development
revenue bonds 10,249 11,071
7% - 12% secured notes
and contracts 1,449 1,599
19,376 13,824
Less portion due within
one year 2,514 4,171
$16,862 $ 9,653
Of the industrial development revenue bonds at September 30, 1996,
$7,550,000 is due between 2004 and 2021. The bonds provide for quarterly
interest payments between 68.0% and 71.5% of prime rate (8.25% at September
30, 1996). The bonds are subject to Purchase and Put Agreements with several
banks whereby the bondholders may, at their option, sell the bonds to the
Company during the following fiscal years: $500,000 in 1997; $900,000 in
1998; $3,175,000 in 1999; $2,375,000 in 2000; $200,000 in 2001; and $400,000
in 2002. The balance of the industrial development revenue bonds totaling
$2,699,000 at September 30, 1996 is at floating rates of interest and matures
through 1999. The bonds are collateralized by certain property, plant and
equipment having a carrying value of $5,792,000 at September 30, 1996.
The secured notes and contracts are collateralized by certain real estate
having a carrying value of approximately $2,747,000 at September 30, 1996 and
are payable in installments through 2004.
The aggregate amount of principal payments, excluding the revolving
credit, due subsequent to September 30, 1996, assuming that all of the
industrial development revenue bondholders exercise their options to sell the
bonds to the Company is: 1997 - $2,514,000; 1998 - $1,859,000; 1999 -
$4,128,000; 2000 - $3,319,000; 2001 - $817,000; 2002 and subsequent years -
$739,000.
The Company has a revolving credit agreement under which it may borrow up
to $75,000,000 on term loans payable in consecutive quarterly installments of
5% of the original amount commencing September 30, 1997 and a final payment
of the unpaid balance on June 30, 2000. Interest is payable at prime rate
until June 30, 1997 and at 3/8 of 1% above such prime rate thereafter.
Alternative interest rates based on the London interbank rate and/or the
reserve-adjusted certificate of deposit rate are available at the Company's
option. A commitment fee of 3/16 to 3/8 of 1% is payable on the unused
amount of the commitment.
The Company also has available short-term lines of credit from three banks
aggregating $30,000,000. Under these lines the Company may borrow funds for
a period of one to ninety days. There is no commitment fee and the banks can
terminate the lines at any time. The interest rate is determined at the
time of each borrowing. The weighted average interest rates on such
borrowings at September 30, 1996 and 1995 were 6.3% and 6.2%, respectively.
The various loan agreements contain restrictive covenants, including a
requirement to maintain a consolidated current ratio and consolidated
tangible net worth (as defined) at certain levels, limitations on paying cash
dividends, and other restrictions. As of September 30, 1996, under the most
restrictive of the agreements, $58,844,000 of consolidated retained earnings
was not restricted as to payment of cash dividends.
The Company capitalized interest cost of $32,000 in 1996 and $35,000 in
1994.
6. Stock option plan. The Company has a stock option plan under which
options for shares of common stock may be granted to directors, officers and
key employees. Option transactions for the fiscal years ended September 30
are summarized as follows:
1996 1995 1994
Shares under option:
Outstanding at beginning of year 546,350 534,600 529,050
Granted - 17,500 13,500
Exercised ($25.12 per share) - - (900)
Canceled (3,250) (5,750) (7,050)
Outstanding at end of year (1996-
$24.75 to $30.37 per share) 543,100 546,350 534,600
Aggregate option price $14,472,000 $14,553,000 $14,209,000
Shares available for future grant 500,000 101,750 113,500
Shares exercisable at end of year 448,380 371,510 297,440
Options granted have been at a price equal to the fair market value of the
Company's common stock on the dates of grant. The options expire from seven
to ten years from the date of grant and become exercisable in cumulative
installments of 20% each year after a one year waiting period from the date
of grant.
7. Income taxes. The provision for income taxes for the fiscal years ended
September 30 consisted of the following (in thousands):
1996 1995 1994
Current:
Federal $13,421 $10,507 $ 6,439
State 2,466 2,103 1,396
15,887 12,610 7,835
Deferred (1,777) (150) 482
Total $14,110 $12,460 $8,317
A reconciliation between the amount of reported income tax provision and
the amount computed at the statutory Federal income tax rate follows (in
thousands):
1996 1995 1994
Amount computed at statutory
Federal rate $14,389 $12,731 $8,936
Effect of percentage depletion (1,890) (1,599)
(1,578)
State income taxes (net of Federal
income tax benefit) 1,419 1,219 811
Other, net 192 109 148
Provision for income taxes $14,110 $12,460 $8,317
The types of temporary differences and their related tax effects that give
rise to deferred tax assets and deferred tax liabilities at September 30 are
presented below:
1996 1995
Deferred tax liabilities:
Basis difference in property,
plant and equipment $36,441 $36,393
Other 735 674
Gross deferred tax liabilities 37,176 37,067
Deferred tax assets:
Insurance reserves 2,899 2,212
Other accrued liabilities 7,946 6,652
Other 810 906
Gross deferred tax assets 11,655 9,770
Valuation allowance for deferred
tax assets - -
Net deferred tax assets 11,655 9,770
Net deferred tax liability $25,521 $27,297
8. Employee benefits. The Company and its subsidiaries have a number of
retirement plans which cover substantially all employees.
Certain of the Company's subsidiaries have a noncontributory defined
benefit retirement plan covering certain employees. The benefits are based
on years of service and the employee's highest average compensation for any
five (or in the case of one subsidiary three) consecutive years of service.
Plan assets are invested in mutual funds, listed stocks and bonds and cash
equivalents. The Company's funding policy is to fund annually within the
limits imposed by the Employee Retirement Income Security Act.
Net periodic pension cost (income) for fiscal years ended September 30
included the following components (in thousands):
1996 1995 1994
Service cost-benefits earned during
the period $ 328 $ 377 $ 611
Interest cost on projected benefit
obligation 1,131 1,132 1,046
Actual return on assets (2,984) (2,501) 900
Net amortization and deferral 1,429 1,094 (2,447)
Curtailment gain (184) - (174)
Net periodic pension cost (income) ($ 280) $ 102 ($ 64)
Assumptions used in determining the net periodic pension cost are
summarized as follows:
1996 1995 1994
Discount rate 7.25% 7.25% 8%
Rate of increase in compensation levels 5% 5% 5.25%
Expected long-term rate of return on
assets 9% 9% 9%
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet at September 30 (in
thousands):
1996 1995
Assets Assets
Exceed Exceed
Accumulated Accumulated
Benefits Benefits
Actuarial present value of vested
benefit obligations ($15,250) ($14,891)
Accumulated benefit obligation ($15,317) ($15,002)
Projected benefit obligation ($16,561) ($16,364)
Plan assets at fair value 18,772 16,695
Plan assets in excess of
projected benefit obligation 2,211 331
Unrecognized net gain (1,952) (259)
Unrecognized transition asset (691) (777)
Unrecognized prior service cost (9) (16)
Accrued pension cost ($ 441) ($ 721)
Union employees are covered by multi-employer plans not administered by
the Company. Payments of $202,000, $219,000 and $275,000 were made to these
plans during fiscal 1996, 1995 and 1994, respectively.
Additionally, the Company and certain subsidiaries have savings/profit
sharing plans for the benefit of qualified employees. The savings feature of
the plans incorporates the provisions of Section 401(k) of the Internal
Revenue Code. Under the savings feature of the plans, eligible employees may
elect to save a portion (within limits) of their compensation on a tax
deferred basis. The Company contributes to a participant's account an amount
equal to 50% (with certain limits) of the participant's contribution.
Additionally, the Company and certain subsidiaries may make annual
contributions to the plans as determined by the Board of Directors, with
certain limitations. The plans provide for deferred vesting with benefits
payable upon retirement or earlier termination of employment. The total cost
of the plans was $3,927,000 in 1996; $3,510,000 in 1995 and $2,648,000 in
1994.
The Company has a management security plan for certain officers and key
employees. The accruals for future benefits are based upon the remaining
years to retirement of the participating employees. The Company has
purchased life insurance on the lives of the participants and it is the owner
and beneficiary of such policies. The expense for fiscal 1996, 1995 and 1994
was $1,593,000, $1,296,000 and $1,160,000, respectively.
The Company and one of its subsidiaries provide certain health care
benefits for retired employees. Employees may become eligible for those
benefits if they were employed by the Company prior to December 10, 1992,
meet service requirements and reach retirement age while working for the
Company. The plans are contributory and unfunded. The Company accrues the
estimated cost of retiree health benefits over the years that the employees
render service.
The following table sets forth the plans' combined status reconciled
with the accrued postretirement benefit cost included in the Company's
consolidated balance sheet at September 30 (in thousands):
1996 1995 1994
Accumulated postretirement benefit
obligations:
Retirees $1,310 $ 1,424 $1,680
Fully eligible active participants 517 616 597
Other active participants 1,094 874 677
Total APBO 2,921 2,914 2,954
Unrecognized net loss from past
experience different from that
assumed and from changes in
assumptions (1,011) (1,221)
(1,377)
Unrecognized prior service costs 473 684 894
Accrued postretirement benefit cost $ 2,383 $ 2,377 $2,471
Net periodic postretirement benefit cost for fiscal years ended
September 30 includes the following components (in thousands):
1996 1995 1994
Service cost of benefits earned
during the period $ 134 $ 133 $ 260
Interest cost on APBO 197 206 380
Net amortization and deferral (130) (101)
(127)
Amortization of transition obligation
over 20 years - - 120
Net periodic postretirement benefit
cost $ 201 $ 238 $ 633
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.25% at September 30, 1996 and 1995 and 8% at
September 30, 1994.
Effective January 1, 1994, the Company's share of retiree health care
was capped at the Company's 1993 cost level.
9. Leases. Certain plant sites, office space and equipment are rented under
operating leases. Total rental expense, excluding mineral leases, for fiscal
1996, 1995 and 1994 was $3,867,000, $4,231,000 and $3,465,000, respectively.
Future minimum lease payments under operating leases with an initial or
remaining noncancelable term in excess of one year, exclusive of mineral
leases, at September 30, 1996 are as follows: 1997-$1,497,000;
1998-$1,396,000; 1999-$1,346,000; 2000-$1,326,000; 2001-$1,137,000
after 2001-$8,978,000. Certain leases include options for renewal.
Most leases require the Company to pay for utilities, insurance and maintenance.
The Company has a long-term lease, which may not be canceled prior to
September 1, 1998, with FRPP for sand reserves near Grandin, Florida. Under
the lease the Company will pay minimum royalties of $1,000,000 per year.
10. Gain (loss) on sale and/or write down of assets. In fiscal 1996 the
Company recorded a loss on the sale and write down of the carrying value of
certain real estate totaling $1,619,000 and a gain on the sale of a lease of
$1,333,000. In fiscal 1995 the Company recorded a loss on the write down of
the carrying value of certain real estate totaling $2,018,000. In fiscal
1994 the Company sold certain real estate which resulted in a loss of
$313,000.
11. Fair values of financial instruments. At September 30, 1996 and 1995 the
carrying amount reported in the balance sheet for cash and cash equivalents,
notes receivable, short-term notes payable to banks, revolving credit and
industrial development revenue bonds approximate their fair value. The fair
values of the Company's other long-term debt are estimated using discounted
cash flow analysis, based on the Company's current incremental borrowing
rates for similar types of borrowing arrangements. At September 30, 1996 the
carrying amount and fair value of such other long-term debt was $3,127,000
and $3,240,000, respectively. At September 30, 1995 the carrying amount and
fair value of such other long-term debt was $2,753,000 and $2,941,000,
respectively.
12. Contingent liabilities. The Company and its subsidiaries 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, are expected to have a materially adverse effect on the Company's
consolidated financial statements.
The Company has retained certain self-insurance risks with respect to losses
for third party liability and property damage.
13. Commitments. At September 30, 1996, the Company had placed orders and
was committed to purchase equipment costing approximately $5,944,000.
14. Fourth quarter financial information (unaudited). In the fourth quarter
of fiscal 1996 the Company increased its risk insurance reserves for incurred
but unreported claims approximately $1,000,000. Significant items affecting
income in the fourth quarter of fiscal 1995 include a $2,046,000 increase in
construction aggregates stockpile inventories due to the physical measurement
of the stockpiles and the write down of the carrying value of certain real
estate of $2,018,000.<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders
Florida Rock Industries, Inc.
We have audited the accompanying consolidated balance sheets of Florida Rock
Industries, Inc. and subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Florida Rock Industries, Inc.
and subsidiaries at September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1996 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 3, 1996
<PAGE>
Directors and Officers
Directors
Thompson S. Baker (1)
Chairman Emeritus of the Company
Edward L. Baker (1)
Chairman of the Board
of the Company
John D. Baker II (1)
President and Chief Executive Officer
of the Company
Thompson S. Baker II
Vice President of the Company
Alvin R. (Pete) Carpenter
President and Chief Executive Officer
of CSX Transportation, Inc.
Robert D. Davis (3)
Chairman of the Board of DDI, Inc.
Charles H. Denny III
Investments
Albert D. Ernest, Jr. (2)(3)
President of Albert Ernest Enterprises
Luke E. Fichthorn III (2)
Private Investment Banker,
Twain Associates and Chairman of the
Board and Chief Executive Officer of
Bairnco Corporation
Frank M. Hubbard (2)(3)
Chairman of the Board of
A. Friends' Foundation Trust
Francis X. Knott
Chief Executive Officer
of Partners Management Company
Radford D. Lovett (2)(3)
Chairman of the Board of
Commodores Point Terminal Corp.
W. Thomas Rice (2)(3)
Chairman Emeritus of Seaboard
Coast Line Industries, Inc.
C. J. Shepherdson
Vice President of the Company
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Officers
Edward L. Baker
Chairman of the Board
John D. Baker II
President and Chief Executive Officer
H. B. Horner
Executive Vice President
C. J. Shepherdson
Vice President
Chairman, Northern Concrete Group
Donald L. Bloebaum
Vice President
President, Aggregates Group
S. Robert Hays
Vice President
President, Florida Concrete Group
Fred W. Cohrs
Vice President
President, Cement Group
Clarron E. Render, Jr.
Vice President
President, Northern Concrete Group
Thompson S. Baker II
Vice President
Executive Vice President,
Aggregates Group
Robert C. Peace
Vice President
Quality
Ruggles B. Carlson
Vice President and Treasurer
Finance
Wallace A. Patzke, Jr.
Vice President and Controller
Dennis D. Frick
Secretary
Corporate Counsel
John W. Green
Assistant Secretary
Director of Corporate Credit
Florida Rock Industries, Inc.
General Office: 155 East 21st Street
Jacksonville, Florida 32206
Telephone: (904) 355-1781
Annual Meeting
Shareholders are cordially invited to attend the Annual Stockholders Meeting
which will be held at 9 a.m. local time, on Wednesday, February 5, 1997, at
the general offices of the Company, 155 East 21st Street, Jacksonville,
Florida.
Transfer Agent
First Union National Bank of North Carolina
230 South Tryon Street, 11th Floor
Charlotte, NC 28288-1154
Telephone: 1-800-829-8432
General Counsel
Lewis S. Lee, Esquire
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Jacksonville, Florida
Independent Auditors
Deloitte & Touche LLP
Jacksonville, Florida
Common Stock Listed
American Stock Exchange
(Symbol: FRK)
Form 10-K
Stockholders may receive without charge a copy of Florida Rock Industries,
Inc.'s annual report to the Securities and Exchange Commission on Form 10-K
by writing to the Treasurer at P.O. Box 4667, Jacksonville, Florida 32201.
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