<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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)
904/355-1781
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of August 3, 1998: 18,890,156 shares of $.10 par value
common stock.
<PAGE>
FLORIDA ROCK INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands)
(Unaudited)
June 30, September 30,
1998 1997
ASSETS
Current assets:
Cash and cash equivalents $ 3,941 18,433
Accounts and notes receivable, less
allowance for doubtful accounts of
$1,585 ($1,126 at September 30, 1997) 64,151 56,723
Inventories 24,755 22,587
Prepaid expenses and other 5,034 6,451
Total current assets 97,881 104,194
Other assets 31,043 28,417
Property, plant and equipment, at cost:
Land 119,540 111,643
Plant and equipment 502,808 440,928
622,348 552,571
Less accumulated depreciation,
depletion and amortization 315,822 302,566
Net property, plant and equipment 306,526 250,005
$ 435,450 382,616
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term notes payable to banks $ 12,200 300
Accounts payable 31,892 32,867
Dividends payable 2,360 --
Accrued income taxes 1 --
Accrued payroll and benefits 9,743 11,483
Accrued insurance reserve 3,418 2,230
Accrued liabilities, other 6,919 6,349
Long-term debt due within one year 2,297 2,447
Total current liabilities 68,830 55,676
Long-term debt 24,067 10,859
Deferred income taxes 29,113 28,387
Accrued employee benefits 12,671 11,531
Long-term accrued insurance reserves 6,153 6,153
Other accrued liabilities 5,711 5,395
Stockholders' equity:
Preferred stock, no par value; 10,000,000
shares authorized, none issued - -
Common stock, $.10 par value; 50,000,000
shares authorized, 18,974,618 shares issued 1,897 1,897
Capital in excess of par value 18,744 18,053
Retained earnings 270,374 247,733
Less cost of treasury stock, 93,062
shares (195,434 shares at September
30, 1997) (2,110) (3,068)
Total stockholders' equity 288,905 264,615
$ 435,450 382,616
See accompanying notes.<PAGE>
FLORIDA ROCK INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(In thousands except per share amounts)
(Unaudited)
Three Months ended Nine Months ended
June 30, June 30,
1998 1997 1998 1997
Net sales $132,003 123,907 351,323 331,901
Cost of sales 100,815 94,600 275,832 259,701
Gross profit 31,188 29,307 75,491 72,200
Selling, general and
administrative expense 12,370 11,006 34,404 31,185
Operating profit 18,818 18,301 41,087 41,015
Interest expense (218) (239) (552) (754)
Interest income 176 178 746 503
Other income, net 763 225 928 199
Income before income taxes 19,539 18,465 42,209 40,963
Provision for income taxes 6,877 6,462 14,857 14,337
Net income $ 12,662 12,003 27,352 26,626
Earnings per share:
Basic $.67 .65 1.45 1.44
Diluted $.66 .65 1.43 1.43
Cash dividends per common share $.125 .125 .25 .25
Shares used in computing:
Basic earnings per share 18,857 18,421 18,825 18,459
Diluted earnings per share 19,256 18,579 19,191 18,575
See accompanying notes.<PAGE>
FLORIDA ROCK INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands)
(Unaudited)
1998 1997
Cash flows from operating activities:
Net income $27,352 26,626
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation, depletion and amortization 24,142 22,985
Net changes in operating assets and
liabilities:
Accounts receivable (7,555) (7,057)
Inventories (2,168) 347
Prepaid expenses and other 339 159
Accounts payable and accrued liabilities 515 7,072
Decrease in deferred income taxes 1,791 (1,752)
Gain on disposition of property, plant and
equipment (1,486) (1,328)
Other, net 119 290
Net cash provided by operating activities 43,049 47,342
Cash flows from investing activities:
Purchase of property, plant and equipment (68,748) (31,810)
Proceeds from the sale of property, plant and
equipment 2,186 1,875
Additions to other assets (1,593) (816)
Proceeds from the disposition of other assets 182 202
Collections of notes receivable 176 180
Net cash used in investing activities (67,797) (30,369)
Cash flows from financing activities:
Net increase (decrease) short-term debt 11,900 (1,100)
Repayment of long-term debt (942) (7,033)
Payment of dividends (2,351) (4,631)
Exercise of employee stock options 2,894 4,371
Repurchase of Company stock (1,245) (2,293)
Net cash provided by (used in)financing activities 10,256 (10,686)
Net decrease in cash and cash equivalents (14,492) 6,287
Cash and cash equivalents at beginning of year 18,433 4,995
Cash and cash equivalents at end of period $ 3,941 $11,282
See accompanying notes.<PAGE>
FLORIDA ROCK INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated condensed financial statements include
the accounts of the Company and its subsidiaries. These statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to
Form 10-Q and do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for
a fair presentation of the results for the interim period have been
included. Operating results for the nine months ended June 30, 1998,
are not necessarily indicative of the results that may be expected
for the fiscal year ended September 30, 1998. The accompanying
consolidated financial statements and the information included under
the heading "Management's Discussion and Analysis" should be read in
conjunction with the consolidated financial statements and related
notes of Florida Rock Industries, Inc. for the year ended September
30, 1997.
(2) Inventories
Inventories consisted of the following (in thousands):
June 30, September 30,
1998 1997
Finished products $ 19,848 18,151
Raw materials 3,919 3,630
Parts and supplies 988 806
$ 24,755 22,587
(3) Earnings Per Share
Effective December 31, 1997, the Company adopted Statement of
Financial Accounting Standard No. 128, "Earnings per Share" ("SFAS
128"). SFAS 128 replaced the presentation of primary earnings per
share (EPS) and fully diluted EPS with a presentation of basic EPS
and diluted EPS. Basic earnings per share are based on the weighted
average number of common shares outstanding during the periods.
Diluted earnings per share are based on the weighted average number
of common shares outstanding and potential dilution of securities
that could share in earnings. Earnings per share for all prior
periods have been restated.
<PAGE>
(4) Supplemental Disclosures of Cash Flow Information
Cash paid during the nine months ended June 30, 1998 and 1997 for
certain expense items are (in thousands):
1998 1997
Interest expense, net of
amount capitalized $ 540 816
Income taxes $11,282 15,660
The following schedule summarizes noncash investing and financing
activities for the nine months ended June 30, 1998 and 1997
(in thousands):
1998 1997
Additions to property, plant
and equipment from:
Exchanges $ 392 122
Issuing debt $ 2,963 116
Using escrow cash included
in other assets $ 8,792 -
Additions to inventory
from issuing debt $ - 360
Additions to prepaid expenses
from issuing debt $ - 96
Additions to notes receivable
from sales of other assets $ - 200
Additions to other assets from
issuing debt $11,037 -
(5) The Company and its subsidiaries are subject to legal proceedings and
claims arising out of their businesses that cover a wide range of
matters. Additional information concerning these matters is
presented in Note 12 to the consolidated financial statements
included in the Company's 1997 Annual Report to stockholders and Item
3 "Legal Proceedings" of the Company's Form 10-K for fiscal 1997, and
such information is incorporated herein by reference.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating Results
For the third quarter of fiscal 1998, consolidated net sales increased 6.5%
to $132,003,000 from $123,907,000 in the same quarter last year. For the
first nine months of 1998, net sales increased 5.9% to $351,323,000 from
$331,901,000 for the first nine months of 1997. The increase in sales were
primarily attributable strong building activity which resulted in higher
demand for construction products in the Company's markets. Sales also
increased as a result of modest price increases in core products.
Gross profit for the third quarter of 1998 increased 6.4% to $31,188,000 from
$29,307,000 last year. For the first nine months of 1998, gross profit
increased 4.6% to $75,491,000 from $72,200,000 last year. These increases
were attributable primarily to the high sales levels. Gross profit margin
remained level with last year. Higher sales and the adjustment of certain
operating liabilities resulted in the increase in gross profit.
Selling, general and administrative expense increased 12.4% for the third
quarter and 10.3% for the first nine months from the same periods last year.
Selling, general and administrative expense for the third quarter increased
to 9.4% of sales from 8.9% last year. For the first nine months, these
expenses increased to 9.8% of sales from 9.4% last year. The increase was
due primarily to the increase in sales, higher profit and incentive
compensations and costs related to various special projects including the
Company's program to upgrade its computer systems and processes.
Interest expense for the third quarter declined to $218,000 from $239,000
last year and for the first nine months declined to $552,000 from $754,000
last year due to an increase in the amount of interest capitalized this year
and a decrease in the average interest rate partially offset by an increase
in the average debt outstanding. For the third quarter of fiscal 1998,
interest capitalized was $337,000 compared to $26,000 last year and for the
first nine months was $737,000 compared to $52,000 last year. Other income,
net for the first nine months last year includes a loss of $197,000 on the
sale of an asset.
Net earnings for the quarter were $12,662,000 up 5.5% from last year.
Diluted earnings per share for the quarter were $.66 as compared to $.65 last
year. Net earnings for the nine months were $27,352,000 up 2.7% from last
year. Diluted earnings per share for the nine months were $1.43 which is the
same as last year. The average number of shares used in the calculation of
diluted earnings per share for the third quarter and nine months of this
fiscal year were 3.4% higher due to issuance and price appreciation in the
Company's common stock on options granted under the Company's stock option
plans.
Summary and Outlook. The current economic and business outlook for the
construction industry and the Company remains positive. Low interest and
strong economic fundamentals continue to drive demands and have produced an
excellent environment for construction activity. Assuming a continuation of
stable interest rates, the outlook for residential construction remains
favorable for the remainder of the year, with the level of residential
activity continuing to vary by geographic region.
Non-resident construction remains strong as indications of declining vacancy
rates, rising rental rates and increasing speculative construction continue
to be reported. Public spending on infrastructure will increase due to the
recent passage of the Transportation Equity Act for the 21st Century (TEA21).
The transportation bill is projecting annual federal highway spending to
increase by an average of 44% nationwide and 57% in the Company's markets
over previous years funding levels.
Financial Condition
The Company continues to maintain its sound financial condition with
sufficient resources to meet anticipated capital expenditures and other
operating requirements.
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 Item 3 "Legal Proceedings" of the Company's Form 10-K
for fiscal 1997 and such information is incorporated herein by reference.
Year 2000 Conversion
The Company, like most entities relying on automated data processing, is
faced with the task of modifying systems to become Year 2000 compliant. The
Company has analyzed its Year 2000 exposure and during the third quarter of
1998, completed the development of plans for addressing the Year 2000
exposure as well as reengineering selective systems to enhance their
functionality. As a result, the Company has purchased new state of the art
software and hardware that is represented to be Year 2000 compliant and
engaged DeLoitte & Touche LLP as an implementation consultant to assist in
replacing its existing major systems.
The Company, under an agreement with its affiliate, FRP Properties,
Inc.("FRP"), provides certain administrative services, including automated
data processing to FRP("FRP services"). The FRP services are included within
the scope of the Company's Year 2000 project.
The costs associated with the purchase and installation of the software and
hardware will be capitalized and amortized over the estimated useful life of
the software or equipment. At June 30, 1998 approximately $1,388,000 had
been capitalized. Other costs associated with the project such as
selection, training and reengineering of the existing processes are being
expensed as incurred. During the first nine months of 1998, the Company has
expensed $206,000 related to this project. Based on current information,
the Company estimates that it will incur an additional $6,800,000 over the
next eighteen months as a result of the Year 2000 project of which
approximately 40% will be capitalized.
The Company feels it is addressing in a timely manner the major issues
related to the Year 2000 and any significant disruptive problems in its
ability to conduct its business as a result are unlikely. However, despite
efforts and initiatives undertaken by the Company, total assurances can not
be given that absolute compliance can be achieved. There can be no
guarantees that the computer systems of other entities on which the Company
relies will be converted in a timely manner or that their failure to convert,
or a conversion that is incompatible with the Company's system, will not have
an adverse effect on the Company's business, financial condition and results
of operations. The Company is considering other steps to reduce these risks,
including requests for assurances from third parties concerning their Year
2000 compliance.
Cement Plant
The Company commenced the construction of the cement plant near Newberry,
Alachua County, Florida in March 1997 estimated to cost in excess of $100
million. The plant is approximately 35% completed and is expected to be
operational by the fourth quarter of fiscal 1999. Lawsuits pertaining to
the appeal of the zoning and air permits issued for the plant have been
resolved to the favor of the Company. A local Alachua County citizens' Clean
Air Ordinance Committee successfully obtained signatures sufficient to put a
Clean Air Ordinance on the ballot for the November 3, 1998 general election.
The Company sued to block the ordinance. On August 3, 1998, the Trial Court
in Alachua County, Florida ruled that a Clean Air Referendum directed against
the Company's Newberry cement plant may be submitted to the voters of Alachua
County in November. The Company intends to appeal this order. If adopted
and subsequently upheld as applied to the Company, the Clean Air Ordinance
effectively would stop the Company's operation of the cement plant. However,
the Company has been advised of several constitutional and statutory
provisions which the Company believes should nullify the effect of the Clean
Air Ordinance as applied to the Company. If the Company were prohibited by
the Clean Air Ordinance from operating the Newberry cement plant, the Company
believes it would be entitled to receive compensation from Alachua County.
The Company intends vigorously to protect its legal and constitutional rights
and is continuing construction of the cement plant.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Note 12 to the consolidated financial statements included in the Company's
1997 Annual Report to stockholders, and Item 3 "Legal Proceedings" of the
Company's Form 10-K for fiscal 1997 are incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The response to this item is submitted as a separate section
entitled "Exhibit Index" starting on page 8 of this Form 10-Q.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
three months ended June 30, 1998.
SIGNATURES
Pursuant to the requirements 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.
August 12, 1998 FLORIDA ROCK INDUSTRIES, INC.
JAMES J. GILSTRAP
James J. Gilstrap
Vice President, Treasurer
and Chief Financial Officer
WALLACE A. PATZKE, JR.
Wallace A. Patzke, Jr.
Vice President, Controller
and Chief Accounting Officer
<PAGE>
FLORIDA ROCK INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
EXHIBIT INDEX
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 the State of Florida on February 7,
1995. Previously filed as appendix to the Company's
Proxy Statement dated December 15, 1994.
(3)(a)(4) Amendment to the Articles of Incorporation of
Florida Rock Industries, Inc. filed with the
Secretary of State of Florida on February 4, 1998.
Previously filed with Form 10-Q for the quarter
ended March 31, 1998. File No. 1-7159.
(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.
(3)(b)(3) Amendment to the Bylaws of Florida Rock Industries,
Inc. adopted February 4, 1998. Previously filed
with Form 10-Q for the quarter ended March 31, 1998.
File No.1-7159.
Page No. in
Sequential
Numbering
(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. File No. 1-7159.
(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 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) 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)(b) 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.
Page No. in
Sequential
Numbering
(10)(c) Florida Rock Industries, Inc. 1981 Stock Option Plan.
Previously filed with Form S-8 dated March 3, 1982.
File No. 2-76407.
(10)(d) 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)(e) 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)(f) 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)(g) 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.
(10)(h) 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)(I) 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)(j) 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)(k) 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.
Page No. in
Sequential
Numbering
(10)(l) 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)(m) Form of Split Dollar Insurance Agreement and
Assignment of Life Insurance Policy as collateral
between Florida Rock Industries, Inc. and each of
Edward L. Baker and John D. Baker, II with aggregate
face amounts of $5.4 million and $8.0 million,
respectively. Previously filed with Form 10-Q for
the quarter ended June 30, 1997. File 1-7159.
(10)(n) Florida Rock Industries, Inc. 1996 Stock Option Plan.
Previously filed as appendix to the Company's Proxy
Statement dated December 18, 1995. File No. 1-7159.
(11) Computation of Earnings Per Common Share.
(27) Financial Data Schedule<PAGE>
<PAGE>
Exhibit (11)
FLORIDA ROCK INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS ENDED NINE MONTHS ENDED
June 30, June 30,
1998 1997 1998 1997
Net income $12,662,000 12,003,000 27,352,000 26,626,000
Common shares:
Weighted average shares
outstanding during the
period - used for basic
earnings per share 18,857,151 18,420,706 18,825,234 18,459,374
Shares issuable under
stock options which are
potentially dilutive 399,181 157,999 365,770 115,256
Shares used for diluted
earnings per share 19,256,332 18,578,705 19,191,004 18,574,630
Basic earnings per
common share $.67 .65 1.45 1.44
Diluted earnings
per common share $.66 .65 1.43 1.43
<PAGE>
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