<PAGE>
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
For the fiscal year ended September 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)
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 New York 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, 1998 the aggregate market value of the shares of Common Stock
held by non-affiliates of the registrant was approximately $404,705,940. At
such date there were 18,853,256 shares of the registrant's Common Stock
outstanding.
Documents Incorporated by Reference
Portions of the Florida Rock Industries, Inc. 1998 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
14, 1998 are incorporated by reference into Parts I and III.
PART I
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, prestressed concrete and calcium and sells
other building materials. The Company has commenced construction of 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 1998
Annual Report to stockholders and such information is incorporated herein by
reference. Information concerning the Company's new cement plant is presented
on page 8 under the caption "Cement Plant" and on page 4 under the caption
"Cement" in the accompanying 1998 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 pages 6, 7 and 8 of the accompanying 1998 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. 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. 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's
Florida operations usually are not similarly affected. 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 the Company's
sales and income derived therefrom.
The Company operates seven crushed stone plants, nine sand plants and one
industrial sand plant in Florida. It operates six crushed stone plants in
Georgia; two sand and gravel plants and three crushed stone plants in Maryland;
and two crushed stone plants in Virginia. The Company also operates aggregates
distribution terminals in Central Florida; Northern Virginia; Norfolk/Virginia
Beach, Virginia; Baltimore, Maryland; the Eastern Shore of Maryland and
Washington, D.C. 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 and western portions 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,
precast 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 28 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. Precast
concrete lintels and other building products are produced in Kissimmee,
Florida. Calcium products for the animal feed industry is produced in
Brooksville, Florida.
During fiscal 1998, the Company purchased cement from 13 suppliers, the largest
of which supplied approximately 33% 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 fiscal 1998 approximately 49% of the coarse aggregates and 64% 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 and concrete products are sold in
competition with the other types of construction aggregates and products as
well as in competition with other producers of the same type of construction
aggregates and concrete products. The Company's concrete products compete
with other building materials such as asphalt, brick, lumber, steel and other
products. The Company believes that price, plant location, transportation
costs, service, product quality and reputation are the major factors that
affect competition within a given market. Because of the relatively high
transportation costs associated with construction aggregates and concrete
products, competition is often limited to products or competitors in relatively
close proximity to production facilities. Competitive exceptions exist for
areas that may be served by river barges, ocean-going vessels or rail lines.
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 material effect on the Company's capital
expenditures or operating results. The effect of future regulations, however,
cannot be ascertained. 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 2,635 persons at September 30, 1998.
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, 1998.
Tons Tons of
Delivered in Estimated Approximate
Year Ended Reserves Acres
9/30/98 9/30/98 (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) 9,904 89,000 O- 3,847 1999 to 2046
The Company has five
granite and one lime-
stone quarries in
Georgia located at
Griffin, Forest Park,
Macon, Tyrone, Paulding 11 leases
County and Rome L-1,524 expiring from
(limestone) 6,723 252,000 O- 705 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 7,493 150,000 O-1,298 expiring 2018
Tons Tons of
Delivered in Estimated Approximate
Year Ended Reserves Acres
9/30/98 9/30/98 (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 809 20,000 L-13,831 1999 and 2016
The Company has nine
sand plants located
at Keystone Heights,
Astatula, Lake County,
Marion County (two
locations) Keuka,
Grandin, LaBelle and
Lake Wales, Florida and
two sand and gravel plants 19 leases
located at Leonardtown L-11,937 expiring from
and Goose Bay, Maryland 8,075 224,000 O- 1906 1999 to 2046
Future reserves:
Sand: Lake County
Florida(c) 7,500 O- 324
Limerock: 1 lease
Brooksville, Florida 100,000(b) L- 1,227 expiring in
Newberry, Florida 86,000 O- 258 2046
Granite-Muscogee County 5 leases
Georgia L- 384 expiring from
43,000 O- 545 2019 to 2049
Marble-Carroll County,
Maryland 80,000 O- 413
Limestone-Lee County,
Florida(c) 87,000O 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 the required zoning or permits for these locations have not yet
been obtained.
The Company operates eight construction aggregates distribution terminals
located in Florida (two), Maryland (three), Virginia (two) and Washington D.
C. comprising approximately 125 acres, of which the Company owns 99 and leases
26.
The Company has 90 sites for its ready mixed concrete, concrete block and
prestressed concrete plants in Florida, Georgia, North Carolina, Virginia and
Maryland aggregating approximately 662 acres. Of these acres, the Company owns
approximately 505 and leases approximately 157. 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 37 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 427
Residential Land New Jersey 33
Industrial/Commercial Virginia 97
Industrial/Commercial Florida 46
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, 1998 certain property, plant and equipment with a carrying
value of $9,017,000 was pledged on industrial development revenue bonds and
certain other notes and contracts with an outstanding principal balance
totaling $10,364,000 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, 1998, and in Note 2 to the Company's
Consolidated Financial Statements included in its Annual Report to stockholders
for the year ended September 30, 1998. 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.
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. The Company is currently awaiting a ruling from the U. S. Court of
Federal Claims on the April 15, 1996 trial.
Note 12 to the Consolidated Financial Statements included in the accompanying
1998 Annual Report to stockholders are incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No reportable events.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There were approximately 1,125 holders of record of Florida Rock Industries,
Inc. common stock, $.10 par value, as of December 1, 1998. The Company's
common stock is traded on the New York 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 8 of the
Company's 1998 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 page 16 of the Company's 1998 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 1998 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 6, 7 and 8; "Capital Expenditures" on page 1;
in the first 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 1998 Annual Report to stockholders and in Item 3 "Legal
Proceedings" of this Form 10-K. Such information is incorporated herein by
reference.
Item 7.A QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates. For its
cash and cash equivalents a change in interest rates effects the amount of
interest income that can be earned. For its debt instruments changes in
interest rates effect the amount of interest expense incurred. In
anticipation of obtaining a financing commitment to provide capital for various
projects and equipment, the Company entered into treasury yield hedge
agreements for a notional amount of $70,000,000 with a settlement date of
December 31, 1998 in an attempt to manage the interest rate risk associated
with securing a long-term fixed rate at a future date. A number of factors
were taken into account with respect to the specific timing associated with
securing a firm financing commitment. Among those was the timing associated
with management's expectations of when the cash is required for the capital
outlays. The Company anticipates a firm financing commitment will be arranged
during the first or second quarter of fiscal 1999 and has engaged a broker to
assist with this effort. The treasury yield hedges have a weighted average
fixed rate for the ten-year U. S. Treasury yield of 5.41%. At September 30,
1998 the ten-year U. S. Treasury yield was 4.44%. The fair value of these
instruments reflects the cash that will be received or paid on the settlement
of the contracts. At September 30, 1998, the Company would have been obligated
to pay $5,200,000 to settle the contracts. The fair value of these
instruments is not recognized in the financial statements of the Company as of
its fiscal year end, but will be recognized as an adjustment to interest
expense over the term of the debt upon issuance.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates:
Interest rate sensitivity
1999 2000 2001 2002 2003 Thereafter Total Fair Value
Bank lines of credit $8,500 8,500 8,500
Weighted average
Interest rate 5.8%
Long-term debt at
fixed rates $1,394 963 245 163 182 423 3,370 3,474
Weighted average
interest rate 8.9% 9.3 10.2 10.2 9.8 9.1
Long-term debt at
variable interest
Rate $ 930 909 650 2,425 15,350 22,889 22,889
Weighted average
interest 4.6%
The Company's operations are subject to factors affecting the level of general
construction activity including the level of interest rates, availability of
funds for construction and other factors affecting the construction industry.
A significant decrease in the level of general construction activity in any of
the Company's market areas may have a material adverse effect on the Company's
sales and income derived therefrom.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required in response to this Item 8 is included under the caption
"Quarterly Results" on page 9 and on pages 10 through 20 of the Company's 1998
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.
EXECUTIVE OFFICERS OF THE COMPANY
Name Age Office Position Since
Edward L. Baker 63 Chairman of the Board May 1989
John D. Baker II 50 President and Chief February 1996
Executive Officer
H. B. Horner 63 Executive Vice President May 1989
C. J. Shepherdson 82 Vice President September 1972
S. Robert Hays 61 Vice President May 1984
Thompson S. Baker II 40 Vice President August 1991
Clarron E. Render, Jr. 56 Vice President August 1991
Fred W. Cohrs 65 Vice President February 1995
James J. Gilstrap 51 Vice President, Treasurer August 1997
and Chief Financial Officer
Dennis D. Frick 56 Secretary October 1992
Wallace A. Patzke, Jr. 51 Vice President, Controller August 1997
and Chief Accounting Officer
John W. Green 46 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.
James J. Gilstrap joined the Company in March 1997 and was elected vice
president and Chief Financial Officer in May 1997. In August 1997, Mr.
Gilstrap was elected Treasurer. From 1993 to 1997, he was self employed as
a private investor. From 1984 to 1993, he was a Partner and Executive Vice
President and Chief Financial Officer for The Regency Group, Inc., a holding
company with interests and operations in commercial real estate development,
asset management, brokerage and financial services.
In August 1997, Wallace A. Patzke, Jr. was elected to the additional position
of Chief Accounting Officer. In October 1996, he was elected to the 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. 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.
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 14, 1998, and such information is incorporated herein by
reference.
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 14, 1998, 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 14, 1998, 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 14, 1998 and in Note 2 to the Consolidated Financial Statements
included in the accompanying 1998 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
16 of this Form 10-K.
(3)Exhibits
The response to this item is submitted as a separate section. See Exhibit
Index on pages 13 through 15 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, 1998.
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 2, 1998 By JAMES J. GILSTRAP
James J. Gilstrap
Vice President, Treasurer
and Chief Financial Officer
By WALLACE A. PATZKE, JR.
Wallace A. Patzke, Jr.
Vice President, Controller
and Chief Accounting Officer
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 2, 1998.
JOHN D. BAKER II ALBERT D. ERNEST, JR.
John D. Baker II Albert D. Ernest, Jr.
Director, President and Chief Director
Executive Officer
(Principal Executive Officer) LUKE E. FICHTHORN III
Luke E. Fichthorn III
JAMES J. GILSTRAP Director
James J. Gilstrap
Vice President, Treasurer and FRANCIS X. KNOTT
Chief Financial Officer Francis X. Knott
(Principal Financial Officer) Director
WALLACE A. PATZKE, JR. RADFORD D. LOVETT
Wallace A. Patzke, Jr. Radford D. Lovett
Vice President, Controller and Chief Director
Accounting Officer
(Principal Accounting Officer)
C. J. Shepherdson
EDWARD L. BAKER Director
Edward L. Baker
Director G. KENNEDY THOMPSON
G. Kennedy Thompson
THOMPSON S. BAKER II Director
Thompson S. Baker II
Director
Alvin R. Carpenter
Director
CHARLES H. DENNY III
Charles H. Denny III
Director
FLORIDA ROCK INDUSTRIES, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
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)(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.
(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)(b)(4) Third Amendment dated as of June 30, 1997 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, 1997. File No. 1-7159.
(4)(b)(5) Fourth Amendment dated as of July 5, 1998 to the Amended and
Restated Revolving Credit and Term Loan Agreement dated as of
December 5, 1990.
(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.
(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.
Page No. in
Sequential
Numbering
(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.
(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) 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 December 31, 1996.
(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.
(13) The Company's 1998 Annual Report to stockholders,
portions of which are incorporated by reference in this
Form 10-K. Those portions of the 1998 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, 1998 and 1997 11(a)
For the years ended September 30, 1998, 1997 and 1996:
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) 9(a)
Independent Auditors' Report 20(a)
Consent of Independent Certified Public Accountants 17(b)
Consolidated Financial Statement Schedules:
Independent Auditors' Report 18(b)
II - Valuation and qualifying accounts 19(b)
(a) Refers to the page number in the Company's 1998 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 report dated December 1, 1998, appearing in and incorporated by
reference in this Annual Report on Form 10-K of FRI for the year ended
September 30, 1998.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 10, 1998
<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 subsidiaries ("FRI") as of September 30, 1998
and 1997, and for each of the three years in the period ended September 30,
1998, and have issued our report thereon dated December 1, 1998; such
consolidated financial statements and report are included in your 1998 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 1, 1998<PAGE>
FLORIDA ROCK INDUSTRIES, INC.
SCHEDULE II (CONSOLIDATED) - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1998, 1997, AND 1996
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,
1998:
Allowance for
doubtful
accounts $1,126,233 $ 451,072 $ 455,833a $1,121,472
Accrued risk
insurance
reserves $8,232,985 $4,921,305 $4,214,800b $8,939,490
Accrued
reclamation
costs $6,786,282 $1,402,978 $ 796,356b $7,392,904
Year ended
September 30,
1997:
Allowance for
doubtful
accounts $1,393,203 $ 278,809 $ 545,779a $1,126,233
Accrued risk
insurance
reserves $7,084,194 $3,620,504 $2,471,713b $8,232,985
Accrued
reclamation
costs $5,257,813 $1,887,118 $ 358,649b $6,786,282
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
a) Accounts written off less recoveries
b) Payments
Annual Report 1998
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1998 1997 Change
Net sales $492,467 456,803 + 7.8
Gross profit $108,146 99,174 + 9.0
Operating profit $ 58,647 56,078 + 4.6
Income before income taxes $ 59,977 56,370 + 6.4
Net income $ 38,860 37,142 + 4.6
Per common share:
Basic earnings per share $ 2.06 2.01 + 2.5
Diluted earnings per share $ 2.02 1.99 + 1.5
Stockholders' equity $ 15.90 14.09 + 12.8
Cash dividend $ .25 .25
Return on average stockholders' equity 13.8% 15.1
<PAGE>
1998 CORPORATE HIGHLIGHTS
Sales increased - 7.8%
Net income increased - 4.6%
Volumes increased
$104,501,000 invested in additional property, plant and
equipment
$4,457,000 of cash on hand at year end
$75,000,000 revolving credit agreement all of which was
available at year end
Short-term unsecured lines of credit aggregating $35,000,000 of
which $26,500,000 was unused at year end
BUSINESS. The Company is a major basic construction materials
company concentrating in the Southeastern and Mid-Atlantic
states.
MISSION STATEMENT. Be an excellent construction materials
company providing long-term growth and a superior return on
investment.
VISION. Through employees committed to continuous improvement,
we will provide quality materials and superb
service for our customers; operate safe, environmentally
responsible facilities that are well maintained and
cost effective; and develop mutually beneficial
relationships with our suppliers and the communities
within which we operate.
<PAGE>
To Our Stockholders:
The operating results for fiscal 1998 were a record for the Company. Net
income increased 4.6% on a 7.8% increase in sales over fiscal 1997. The
record operating results this year are attributed to strong construction
activity and demand for basic construction materials as a result of favorable
economic conditions.
Results. Sales for fiscal 1998 were $492,467,000 up 7.8% from
$456,803,000 in fiscal 1997. The increase in sales was due to higher volumes
and modest price increases. The increased demand was attributable to growth
in non-residential and residential construction. Sales related to
infrastructure programs decreased as a result of the completion of several
major projects during the year.
Selling, general and administrative expenses increased 14.9% primarily
as the result of costs incurred in connection with computer and system
upgrades necessary for Year 2000 compliance, administrative staffing and
special projects. Selling, general and administrative expenses as a
percentage of sales increased to 10.1% during fiscal 1998 from 9.4% last
year.
In fiscal 1998 operating profit increased 4.6% to $58,647,000 from
$56,078,000 last year. Profit margins declined despite increased sales
volume as the result of increased selling, general and administrative
expenses and higher expenses at our quarries.
Income before income taxes increased 6.4% to $59,977,000 from
$56,370,000 in 1997. Net income was $38,860,000, a 4.6% increase from fiscal
1997's net income of $37,142,000. Earnings per diluted share for 1998 was
$2.02, a 1.5% increase over $1.99 per diluted share last year.
The weighted average number of diluted shares used in the calculation
of earnings per diluted share increased to 19,203,000 for fiscal 1998 from
18,661,000 last year. The net increase in the weighted average number of
diluted shares outstanding is primarily related to the exercise of stock
options and resulting issuance of common shares.
Capital Expenditures. Fiscal 1998 capital expenditures totaled
$104,501,000. The capital expenditures were divided approximately 37% for
replacements, including modernizing, safety and environmental, and 63% for
the cement plant, expansion, land and aggregates deposits to be used in
current and future operations. Depreciation, depletion and amortization for
the fiscal year totaled $33,433,000.
The fiscal 1999 total capital expenditure plan approximates
$106,000,000. Estimated depreciation and depletion is projected at
$37,355,000. Approximately 36% of the planned expenditures is for plant and
equipment replacements and modernization, 64% is for expansion of existing
facilities, new projects including the cement plant, and new plant sites and
deposits. Expenditures for the cement plant are projected at $50,115,000 for
fiscal 1999. Expenditures for capital investments are subject to review and
modification as market conditions and the economic picture evolve.
Financial Management. Cash flow of $72,899,000 from operations and
beginning cash on hand enabled the Company to fund a major portion of its
capital expenditure program for fiscal 1998.
During 1998 total debt increased from $13,606,000 to $34,759,000 at
September 30, 1998, while cash on hand decreased from $18,433,000 to
$4,457,000. The Company raised $14,000,000 of long term capital from the
issuance of Industrial Revenue Bonds which mature November, 2022. The
proceeds of the bonds will be used to finance a portion of the costs of the
cement manufacturing plant. At September 30, 1998 $9,264,000 of the proceeds
remained in trust and restricted to payment of qualifying construction costs
associated with the cement plant.
At September 30, 1998, $75,000,000 was available to the Company under
the revolving credit agreement facility. In addition, the Company has
$35,000,000 in unsecured demand lines of credit of which $8,500,000 was
utilized at year end.
The Company is currently evaluating and pursuing additional financing
alternatives that are available to meet its long term capital expenditures
including long-term fixed rate financing.
Dividends and Stock Split. The Board of Directors maintained the
semiannual dividend of $.125 per share. Consequently, cash dividends of $.25
per share were paid during the year to stockholders.
Subsequent to fiscal year end, the Board declared the semiannual cash
dividend of $.125 per share payable on January 4, 1999 to stockholders of
record on December 15, 1998.
During fiscal 1998 the Board of Directors also declared a two for one
common stock split that was effective October 31, 1997. Since the split
occurred prior to the issuance and release of the fiscal 1997 results all
comparative years were restated last year.
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 4, 1998, the Annual Stockholders
Meeting was held in Jacksonville, Florida. The stockholders elected Thompson
S. Baker II, Albert D. Ernest, Jr., Luke E. Fichthorn III and C. J.
Shepherdson as directors to terms expiring in 2001. The stockholders also
approved the amendment of ARTICLE VII of the Restated Articles of
Incorporation to reduce the number of classes of directors from four to three
and to reduce the term of office of directors from four years to three years.
Appointment of New Director. The Board of Directors, in August 1998,
elected G. Kennedy (Ken) Thompson as a Director. Ken, age 48, is Vice
Chairman for First Union Corporation. A native of Rocky Mount, North
Carolina, he earned a bachelor's degree from the University of North Carolina
at Chapel Hill and a Masters Degree in Business Administration from Wake
Forest University. Ken brings considerable skills, experience and perspective
to the Board and we welcome his appointment.
New York Stock Exchange Listing. Effective March 3, 1998 the Company was
approved to list and trade its common shares with the New York Stock Exchange.
The Company maintained its stock symbol "FRK."
Cement Plant. The Company continued to make steady progress on the
construction of the new cement plant located near Newberry, Florida. At
September 30, 1998 construction was more than 50% completed. The project is
further discussed under the Operating Review section of this Annual Report.
Safety, Environment and Community. Management continues its emphasis on
a safe, drug-free work place. Three of the Company's quarries have each
amassed more than 1,000,000 man-hours without experiencing a lost time
accident.
Annually the Company receives a number of awards recognizing its
operations in the aggregates industry for their pursuit of excellence and
safety. The Company's Aggregates Group received significant recognition this
past year for their leadership in safety in the aggregates industry. The
Group was the recipient of the National Stone Association's (NSA) Sterling
Safety Award, which was established to recognize the companies that have the
lowest total accident incidence rate for the previous year in their category
among NSA members. A number of our quarry operations were also individually
recognized by NSA for achieving no lost time safety milestones, including the
Clermont Sand Plant (20 years) and the Gulf Hammock Quarry (1,500,000 work
hours). The Florida Transportation Builders Association, which is the largest
transportation trade association in the state of Florida, bestowed their Award
of Superior Achievement to the Company's Florida Aggregates Division for
successfully completing 24 months without a lost time accident.
Also this year, the Aggregates Group set a new industry record for
Nonmetallic Minerals, Except Fuel (SIC Code 1400) with 3,094,600 continuous
work hours completed without a lost time injury. For this achievement the
Group was awarded the National Safety Council's Award of Honor, Best Record.
Three Florida quarry locations, Fort Myers, Miami and Gulf Hammock were
recipients of the National Safety Council's Award of Merit for having no lost
time operations in excess of 1,000,000 hours.
Environmental achievement is based on activities which preserve or
improve the environmental benefits of the operation. The 1998 Tawes Award for
a Clean Environment was recently presented by the Deputy Secretary of the
Maryland Department of the Environment. Runner-up in the Adult Category went
to the Leonardtown Plant of Maryland Rock Industries, a subsidiary of Florida
Rock Industries. As a mining operation, it has won a number of state and
national reclamation awards. The Tawes Award is co-sponsored by the Maryland
Petroleum Council and the Maryland Department of the Environment. The
Leonardtown Plant was also recognized for their reclamation projects which
have resulted in wildlife habitats restored from mined-out areas.
During 1998 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.
Business Process Improvement and FAST2000. In 1994 the Company began a
total quality management initiative which we called "Business Process
Improvement (BPI). This initiative places significant emphasis on training our
personnel in the principles of quality and process improvement with the
primary focus being in the area of customer satisfaction, employee
involvement, teamwork and process improvement. Process improvement projects
have been started at all levels of the Company with much success.
During 1998, the Company expanded the quality management initiative to
focus and train our business units and personnel in the essential elements of
business planning processes. This phase will align each business units' goals
and objectives with the Company's overall mission and objectives. Continued
emphasis will be placed on the implementation of business planning processes
during 1999 and special focus will be put on tracking the Company's output
measurements.
In connection with the need to be Year 2000 compliant, the Company has
initiated a project called FAST2000 to address the Year 2000 issues and
upgrade our financial and administrative systems. When completed, FAST2000
will deliver state of the art systems with improved functionality and
productivity features that will benefit not only ourselves but our investors
and customers as well.
Summary and Outlook. Sales in 1998 were excellent. Increased volumes
and modest price increases resulted in improved earnings. The capital
expenditure program continued to focus on higher than normal replacements and
equipment to meet increased demand and to improve efficiencies and expansion.
For fiscal 1999 management remains positive in its outlook for the
construction industry and general economic conditions. The outlook for
residential construction remains favorable with the level of activity continuing
to vary by geographic region. Non-residential construction is moving with local
supply and demand with evidence that more speculative construction is underway.
Commercial industrial construction markets remain driven by capacity
utilization. Public spending on infrastructure will increase due to the recent
passage of the Transportation Equity Act for the 21st Century (TEA 21). The
transportation bill projects annual federal highway spending to increase by 57%
on average in the Company's markets over previous years funding levels.
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
Operating Review
Operations. The Company is a basic construction materials manufacturing company
concentrating in the Southeastern and Mid-Atlantic states. Its main lines of
business are construction aggregates(sand, gravel and crushed stone), ready
mixed concrete, concrete block and prestressed concrete. It also manufactures
calcium products and markets other building materials. The Company will
manufacture and sell cement upon the completion of its cement plant next year.
Aggregates. The Company's construction aggregates group currently
operates seven crushed stone plants, nine sand plants and one industrial sand
plant in Florida. It operates six crushed stone plants in Georgia; two sand
and gravel plants and three crushed stone plants in Maryland; and two crushed
stone plants in Virginia. The Company also operates aggregates distribution
terminals in Northern Virginia; Norfolk/Virginia Beach, Virginia; Baltimore,
Maryland, the Eastern Shore of Maryland and Washington D.C. 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 maintains 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. At the end of fiscal 1998 the Company
had 88 ready mixed concrete plants and 10 concrete block plants, and a delivery
fleet of 1,036 ready mix and block trucks.
Prestressed concrete products for commercial developments and bridge and
highway construction are produced in Wilmington, North Carolina and precast
concrete lintels and other building products are produced in Kissimmee,
Florida.
Cement. The construction of a 750,000 ton annual capacity portland
cement plant near Newberry, Florida continues on schedule and is expected to be
completed during fiscal 1999. The project was slightly more than 50% complete
at year end. All major foundations for structures and equipment have been
placed, and the plant machinery is currently in various stages of assembly.
As reported, certain appeals to the zoning and air permits issued to the
Company were denied this past year in favor of the Company. In addition, a
referendum which could have limited the emissions of the plant beyond practical
limits was rejected by the voters of Alachua County, Florida on November 3,
1998.
When completed, the new facility will represent the first domestic
cement plant built in over a decade and will employ state-of-the-art
technology for optimum energy consumption and pollution control. 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, leased and zoned for
mining, and from nearby electric power plants.
Currently, cement consumption in Florida remains strong and prices have
firmed. Although the Company will be capable of consuming the entire output
of the plant within its concrete operations, it anticipates the sale of bulk
and packaged products to non-affiliated consumers. 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
also anticipates producing 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.
Other. Management continues in its commitment to modernize and expand
operations where cost savings, higher productivity, increased capacity and
long-term growth plans are warranted. During fiscal 1998 capital expenditures
were divided approximately 37% for replacements, including modernizing, safety
and environmental, and 63% for the cement plant, expansion, land and
aggregates deposits to be used in current and future operations.
During the past fiscal year the Company completed the construction of a
calcium products plant in Brooksville, Florida. A new aggregate crushed stone
plant in Paulding County, Georgia was completed to better serve our customers
in Northwest Georgia. Significant upgrades and modernizing at several
quarries was undertaken. The Company also finalized and completed the
acquisition of the Goose Bay Plant which consists of 500 acres of sand and
gravel reserves located near Marbury, Maryland on the Potomac River, with
water access to the Northern Virginia and Washington, D.C. markets
<PAGE>
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1998 1997 1996 1995 1994
Summary of Operations
Net sales $492,467 456,803 398,673 368,959 336,526
Gross profit $108,146 99,174 79,103 73,752 59,431
Operating profit $ 58,647 56,078 42,335 39,231 27,461
Interest expense $ 555 934 1,980 2,060 2,223
Income before income $ 59,977 56,370 41,110 36,372 25,533
taxes
Provision for income $ 21,117 19,228 14,110 12,460 8,317
taxes
Net income $ 38,860 37,142 27,000 23,912 17,216
Per Common Share
Basic earnings per share$ 2.06 2.01 1.43 1.26 .91
Diluted earnings per
share $ 2.02 1.99 1.43 1.26 .91
Stockholders' equity $ 15.90 14.09 12.30 11.14 10.12
Cash dividend $ .25 .25 .25 .25 .25
Financial Summary
Current assets $100,607 104,194 87,082 78,788 75,720
Current liabilities $ 74,786 55,676 51,857 57,614 49,298
Working capital $ 25,821 48,518 35,225 21,174 26,422
Property, plant and
equipment, net $321,055 250,005 233,858 220,325 208,076
Total assets $451,556 382,616 346,709 326,029 310,590
Long-term debt $ 23,935 10,859 16,862 9,653 23,116
Stockholders' equity $299,886 264,615 228,150 211,255 192,090
Other Data
Return on average
stockholders' equity 13.8% 15.1 12.3 11.8 9.5
Return on average capital
employed 10.9% 13.1 10.5 9.8 7.3
Additions to property,
plant and equipment $104,501 47,296 45,544 40,374 23,121
Depreciation, depletion
and amortization $ 33,433 30,688 28,766 26,518 25,419
Weighted average number
of shares - basic 18,839 18,450 18,853 18,974 18,900
Weighted average number
of shares - diluted 19,203 18,661 18,867 19,021 18,943
Number of employees at
end of year 2,635 2,448 2,310 2,201 2,203
Stockholders of record 1,133 1,122 1,174 1,228 1,279
In 1998, 1997, 1996, 1995 and 1994 the Company reported a gain(loss) on the
sale and/or write down of assets of $622,000, $14,000, ($286,000),
($2,018,000), and ($313,000) respectively. See Note 10 to the Consolidated
Financial Statements.
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.
Financial results of the Company for any individual quarter are not
necessarily indicative of results to be expected for the year, due primarily to
the effect that weather has on the Company's sales and production volume.
Normally, the highest sales and earnings of the Company are attained in the
Company's third and fourth quarters and the lowest sales and earnings of the
Company are attained in the Company's first and second quarters.
Fiscal 1998 and 1997 sales increased 7.8% and 14.6% respectively, due to
both higher volumes and modest price increases. In 1998, volume increases were
primarily attributable to strong construction activity and higher demand for
construction products in the Company's markets as well as favorable economic
conditions. The increased demand was attributable to growth in non-residential
and residential construction. Sales related to highway and governmental
decreased as a result of completion of several major projects during the year.
The price increases resulted from modest price increases in core products.
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:
1998 1997 1996 1995 1994
Ready mixed concrete 61% 59 58 58 56
Construction aggregates 36 37 41 40 41
Other concrete products and
building materials 10 10 10 10 11
Less intercompany (7) (6 ) (9 ) (8 ) (8 )
100% 100 100 100 100
The estimated contribution to revenues from the sale of construction
materials by major markets follows:
1998 1997 1996 1995 1994
Commercial and industrial 47% 44 45 37 36
Residential 33% 32 35 40 42
Highway and
governmental 20% 24 20 23 22
Gross profit for 1998 increased 9.0% while the gross profit margin
remained level with last year. The increase was primarily attributable to the
higher sales volumes. In fiscal 1997 gross profit increased 25.4% while the
gross profit margin increased to 21.8% from 19.8%. The increase in gross
profit is a function of higher revenues and the strong marginal contribution
due to the high fixed cost nature of the business. The improvement in gross
profit margin was due primarily to increased volumes as sales price increases
were substantially offset by higher cement and other cost increases.
Selling, general and administrative expenses increased 14.9% in 1998 and
17.2% in 1997 over the prior year. In 1998, costs related to Year 2000
conversion accounted for 4.7% of the increase. The increase was also due to
an increase in basic expense levels due to increased sales, additional staffing
and special projects. The 1997 increase was primarily due to an increase in
basic expense levels due to increased sales and an increase in profit sharing
and incentive compensation which are linked to profitability.
Interest income in 1998 increased $189,000 primarily as a result of
higher levels of cash available for investment during the early part of the
fiscal year. Interest income in 1997 remained stable with 1996.
Interest expense for 1998 declined to $555,000 from $934,000 in 1997 due
to an increase in the amount of interest capitalized in 1998 and a decrease in
the average interest rate partially offset by an increase in the average debt
outstanding. Interest expense for 1997 declined to $934,000 from $1,980,000 in
1996 due to a decrease in average debt outstanding and an increase in the
amount of interest capitalized partially offset by 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.
Liquidity and Capital Resources. The following key financial
measurements reflect the Company's financial position and capital resources at
September 30 (dollars in thousands):
1998 1997 1996
Cash and cash
equivalents $ 4,457 18,433 4,995
Total debt $ 34,759 13,606 20,776
Current ratio 1.3 to 1 1.9 to 1 1.7 to 1
Debt as a percent of
capital employed 9.7% 4.5 7.6
Unused revolving credit $ 75,000 75,000 69,000
Unused short-term lines $ 26,500 29,700 28,600
In 1998 cash required for funding capital expenditures and other
investing activities was provided by cash on hand at the beginning of the
year, cash provided by operating activities and short-term borrowings. In
fiscal 1997 cash flows from operations of $69,501,000 covered the cash
required for capital expenditures and other investing activities, the net debt
repayment of $8,137,000, the payment of the regular dividend and the
repurchase of $4,632,000 of common stock.
The Company expects its 1999 expenditures for property, plant and
equipment to be approximately $106,000,000 and depreciation and depletion to
be approximately $37,355,000. Approximately $50,115,000 of the expenditures
is for the cement plant. Management believes that the necessary funds will be
obtained through internal generation, borrowing under existing loan agreements
and other sources of borrowing. In November 1997, the Company borrowed
$14,000,000 under an Industrial Revenue Bond facility for financing a portion
of the cement plant. At September 30, 1998, $9,264,000 of the proceeds of
this financing was held in trust and restricted to qualifying construction
costs associated with the cement plant. The Company has available
$75,000,000 under the revolving credit agreement which was unused and
available at September 30, 1998. In anticipation of financing, the Company
entered into treasury yield hedge agreements for a notional amount of
$70,000,000 with a settlement date of December 31, 1998 in an attempt to
manage the interest rate associated with securing a long-term fixed rate at a
future date (see note 11). The Company's normal 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. At September 30,
1998, the Company had placed orders and was committed, subject to certain
cancellation provisions, to construction contracts and equipment for the
cement plant costing approximately $36,227,000 and other equipment costing
approximately $28,106,000.
The Board of Directors has authoized managment to repurchase shares of
the Company's common stock from time to time as opportunities may arise.
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.
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. During 1996, the Company began an analysis to
determine which of its business systems were not Year 2000 compliant. During
the second quarter of calendar 1998, the Company completed the development of
plans for addressing its Year 2000 exposure as well as reengineering selective
systems to enhance their functionality. A steering committee has been formed
to monitor the progress of becoming Year 2000 compliant. This committee is
comprised of key personnel from the major functional areas of the Company and
meets monthly. The Committee reports the progress of the Company's Year 2000
conversion to the Board of Directors.
The Company is in various stages of modifying or replacing both
internally developed and purchased software. The Company has purchased new
state of the art financial and administrative systems software and hardware
that is represented to be Year 2000 compliant. An implementation consultant
has been engaged to assist in replacing the existing major systems. Early in
the first quarter of calendar 1999, the Company will begin to phase-in modules
of the purchased software. All modules of the purchased software will be
implemented no later than the third quarter of calendar 1999. Substantially
all of the internally generated software is now Year 2000 compliant. The
balance will be Year 2000 compliant in the near future.
The Company is in the process of identifying operating equipment which
may be effected by Year 2000. Once the equipment has been identified testing
will begin to determine if such equipment is Year 2000 compliant.
Vendors, suppliers and customers that are critical to the Company's
operations are in the process of being identified. Questionnaires will be
sent to these entities to determine their state of readiness for Year 2000.
The Company will identify alternative vendors and suppliers as a contingency
if any of the current suppliers do not appear to be taking corrective actions
and in case these entities are not Year 2000 compliant.
The Company, under an agreement with its affiliate, FRP Properties, Inc.
("FRPP"), provides certain administrative services, including automated data
processing to FRPP ("FRPP Services"). The FRPP 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 hardware. At September 30, 1998, approximately $1,457,000
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 1998, the Company has expensed $2,209,000
related to this project. Based on current information, the Company estimates
that it will incur an additional $8,900,000 over the next fifteen months as a
result of the Year 2000 project of which approximately 50% 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. The Company's
contingency plans will be finalized during the second quarter of calendar
1999. This plan will assess the risks and possible countermeasures. However,
despite efforts and initiatives undertaken by the Company, total assurance 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.
Cement Plant. The Company commenced the construction of the cement
plant near Newberry, Alachua County, Florida in March 1997 with an estimated
$100 million. The plant is approximately 50% 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
referendum on the ballot for the November 3, 1998 general election was
rejected.
Inflation. In the past five years price increases have generally offset
inflation.
Forward-Looking Statements. Certain matters discussed in this report
contain forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from these
indicated by such forward-looking statements. These forward-looking
statements relate to, among other things, capital expenditures, liquidity,
capital resources, competition and the Year 2000 and may be indicated by
words or phrases such as "anticipate," "estimate," "plans," "project,"
"continuing," "ongoing," "expects," "management believes," "the Company
believes," "the Company intends" and similar words or phrases. The
following factors are among the principal factors that could cause actual
results to differ materially from the forward-looking statements: Year 2000
technology issues; availability and terms of financing; the weather;
competition; levels of construction activity in the Company's markets; fuel
costs; transportation costs; inflation; quality and quantities of the
Company's aggregates reserves; and management's ability to determine
appropriate sales mix, plant location and capacity utilization.
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
1998 1997 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 111,624 106,383 107,696 101,611 132,003 123,907 141,144 124,902
Gross profit $ 21,764 22,101 22,539 20,792 31,188 29,307 32,655 26,974
Operating
profit $ 11,195 12,653 11,074 10,061 18,818 18,301 17,560 15,063
Income before
income taxes $ 11,367 12,440 11,303 10,058 19,539 18,465 17,768 15,407
Net income $ 7,366 8,086 7,324 6,537 12,662 12,003 11,508 10,516
Per common share:
Basic EPS $ .39 .44 .39 .36 .67 .65 .61 .56
Diluted EPS $ .38 .44 .38 .35 .66 .65 .60 .55
Cash dividend $ .125 .125 - - .125 .125 - -
Market price:
High $ 29.94 16.88 31.00 17.44 31.50 20.94 31.00 30.00
Low $ 19.50 14.31 19.44 15.66 26.12 15.12 23.44 20.38
</TABLE>
<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, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended September 30, 1998. 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, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 1, 1998
<PAGE>
Florida Rock Industries, Inc.
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1998 1997 1996
Net sales $492,467 456,803 398,673
Cost of sales 384,321 357,629 319,570
Gross profit 108,146 99,174 79,103
Selling, general and administrative expenses:
Selling, general and administrative 47,290 43,096 36,768
Systems upgrades/year 2000 costs 2,209 - -
Total selling, general and administrative 49,499 43,096 36,768
Operating profit 58,647 56,078 42,335
Interest expense (555) (934) (1,980)
Interest income 901 712 713
Gain (loss) on sale and/or write down of assets
622 14 (286)
Other income, net 362 500 328
Income before income taxes 59,977 56,370 41,110
Provision for income taxes 21,117 19,228 14,110
Net income $ 38,860 37,142 27,000
Earnings per common share: $2.06 2.01 1.43
Basic $2.02 1.99 1.43
Diluted
Weighted average number of shares used in
computing earnings per common share:
Basic 18,839 18,450 18,853
Diluted 19,203 18,661 18,867
See accompanying notes.
<PAGE>
Florida Rock Industries, Inc.
Consolidated Balance Sheet September 30
(Dollars in thousands)
1998 1997
Assets
Current assets:
Cash and cash equivalents $ 4,457 18,433
Accounts receivable, less allowance for
doubtful accounts of $1,121 ($1,126 in 1997) 65,334 56,723
Inventories 25,535 22,587
Prepaid expenses and other 5,281 6,451
Total current assets 100,607 104,194
Other assets 29,894 28,417
Property, plant and equipment, at cost:
Land 120,076 111,643
Plant and equipment 477,846 427,832
Construction in process 45,091 13,096
643,013 552,571
Less accumulated depreciation and depletion 321,958 302,566
Net property, plant and equipment 321,055 250,005
$ 451,556 382,616
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable to banks $ 8,500 300
Accounts payable 38,783 32,867
Federal and state income taxes 3,715 0
Accrued payroll and benefits 11,913 11,483
Accrued insurance reserves 2,660 2,230
Accrued liabilities, other 6,891 6,349
Long-term debt due within one year 2,324 2,447
Total current liabilities 74,786 55,676
Long-term debt 23,935 10,859
Deferred income taxes 28,564 28,387
Accrued employee benefits 12,440 11,531
Long-term accrued insurance reserves 6,463 6,153
Other accrued liabilities 5,482 5,395
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, 18,974,618
shares issued 1,897 1,897
Capital in excess of par value 18,796 18,053
Retained earnings 281,882 247,733
Less cost of treasury stock; 108,662 shares
(195,434 shares in 1997) (2,689) (3,068)
Total stockholders' equity 299,886 264,615
$451,556 382,616
See accompanying notes.
<PAGE>
Florida Rock Industries, Inc.
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1998 1997 1996
Cash flows from operating activities:
Net income $ 38,860 37,142 27,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 33,433 30,688 28,766
Net changes in operating assets and
liabilities:
Accounts receivable (8,756) (4,398) (4,532)
Inventories (2,948) 1,249 849
Prepaid expenses and other 225 (465) (89)
Accounts payable and accrued liabilities 12,352 7,922 7,539
Increase (decrease) in deferred income taxes 1,108 (1,184) (1,777)
Gain on disposition of property, plant and
equipment (1,576) (1,886) (1,977)
Other, net 201 433 (63)
Net cash provided by operating activities 72,899 69,501 55,716
Cash flows from investing activities:
Purchase of property, plant and equipment (95,267) (46,493) (44,872)
Proceeds from the sale of property, plant and
equipment 2,305 3,436 5,259
Additions to other assets (11,861) (9,775) (1,641)
Proceeds from the disposition of other assets 199 218 2,585
Collection of notes receivable 184 5,364 135
Net cash used in investing activities (104,440) (47,250) (38,534)
Cash flows from financing activities:
Proceeds from long-term debt 14,000 - 6,000
Net increase (decrease) in short-term debt 8,200 (1,100) (8,000)
Repayment of long-term debt (1,047) (7,037) (1,007)
Exercise of employee stock options 3,203 8,560 -
Repurchase of Company stock (2,080) (4,632) (5,389)
Payment of dividends (4,711) (4,604) (4,716)
Net cash provided by(used) in financing activities 17,565 (8,813) (13,112)
Net increase (decrease) in cash and cash (13,976) 13,438 4,070
equivalents
Cash and cash equivalents at beginning of year 18,433 4,995 925
Cash and cash equivalents at end of year $ 4,457 18,433 4,995
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 534 948 1,926
Income taxes $14,549 23,255 15,435
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 442 294 412
Issuing debt $ - 509 260
Other assets $ 8,792 - -
Additions to inventory from issuing debt $ - 360 -
Additions to prepaid expenses from issuing
debt $ - 96 -
Additions to other assets from issuing debt $ - - 300
Addition to notes receivable from the sale of
property, plant and equipment $ - 200 6
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>
Florida Rock Industries, Inc.
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, 1995 18,974,618 $1,897 $16,452 $192,911 (362)$ (5)
Shares purchased for
treasury (425,494) (5,389)
Net income 27,000
Cash dividends
($.25 per share) (4,716)
Balance at September
30, 1996 18,974,618 1,897 16,452 215,195 (425,856) (5,394)
Shares purchased for
treasury (296,278) (4,632)
Exercise of stock
options 126 526,700 6,958
Tax benefits on stock
options exercised 1,475
Net income 37,142
Cash dividends
($.25 per share) (4,604)
Balance at September
30, 1997 18,974,618 1,897 18,053 247,733 (195,434) (3,068)
Shares purchased for
treasury (71,328) (2,080)
Exercise of stock
options (195) 158,100 2,459
Tax benefits on stock
options exercised 938
Net income
Cash dividends 38,860
($.25 per share) (4,711)
Balance at September
30, 1998 18,974,618 $1,897 $18,796 $281,882 (108,662)$(2,689)
See accompanying notes.
<PAGE>
Florida Rock Industries, Inc.
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. Certain balances for 1997 have been reclassified to conform
to
presentation adopted in 1998.
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.
REVENUE RECOGNITION - Revenue, net of discounts, is generally recognized on
the sale of products at the time the products are shipped, all significant
contractual obligations have been satisfied and the collection of the resulting
receivable is reasonably assured.
PROPERTY, PLANT AND EQUIPMENT - 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.
The Company periodically reviews property and equipment for potential
impairment. If this review indicates that the carrying amount of the asset
may not be recoverable, the Company estimates the future cash flows expected
with regards to the asset and its eventual disposition. If the sum of these
future cash flows (undiscounted and without interest charges) is less than the
carrying amount of the asset, the Company records an impairment loss based on
the fair value of the asset.
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 - 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 period. Diluted EPS 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.
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.
NEW ACCOUNTING REQUIREMENTS - In June 1997, the FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 15, 1997. SFAS 131
establishes standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. SFAS 131
requires reporting segment profit or loss, certain specific revenue and expense
items and segments assets. It also requires reconciliations of total segment
revenues, total segment profit or loss, total segment assets, and other amounts
disclosed for segments to corresponding amounts reported in the financial
statements. Restatement of comparative information for earlier periods
presented is required in the initial year of application. Interim information
is not required until the second year of application, at which time comparative
information is required. The Company has not determined the impact that the
adoption of this new accounting standard will have on its financial statement
disclosures. The Company will adopt this accounting standard October 1, 1998,
as required.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income",
effective for fiscal year beginning after December 15, 1997. SFAS 130
requires that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
Statement also requires that an entity classify items of other comprehensive
earnings may include foreign currency translation adjustments, minimum pension
liability adjustments, and unrealized gains and losses on marketable securities
classified as available-for-sale. Restatement of disclosures for earlier
periods is required. This statement is not expected to have a material effect
on the Company's financial statements.
In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures about
Pensions and Other Postretirement Benefits", effective for fiscal years
beginning after December 15, 1997. SFAS 132 revised employer disclosures
about pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans. This statement standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures. Restatement of disclosures for
earlier periods is required. The Company will adopt this accounting standard
on October 1, 1998, as required.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning after
June 15, 1999. SFAS 133 requires companies to record derivatives on the
balance sheet as assets and liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The Company has not completed its evaluation of the
impact of this standard on the financial statements.
In March 1998, the AICPA issued SOP 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use", effective for fiscal years
beginning after December 15, 1998. This SOP provides guidance on accounting
for the costs of computer software developed or obtained for internal use.
This SOP requires that entities capitalize certain internal-use software costs
once certain criteria are met. Adoption of this standard is not expected to
have a material effect on the Company's financial statements.
2. Transactions with related parties. As of September 30, 1998 seven of the
Company's directors were also directors of FRP Properties, Inc. ("FRPP"). Such
directors own approximately 41% of the stock of FRPP and 30% 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 $6,256,000 in 1998, $6,006,000 in 1997 and $6,544,000 in 1996.
At September 30, 1998 and 1997 the Company had a net account payable due to
subsidiaries of FRPP totaling $295,000 and $206,000, respectively.
Under an agreement extending until September 30, 2000 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 $1,515,000 in 1998, $1,414,000 in 1997, and $1,383,000
in 1996.
3. Inventories. Inventories at September 30 consisted of the following (in
thousands):
1998 1997
Finished products $ 20,683 18,151
Raw materials 4,096 3,630
Parts and supplies 756 806
$ 25,535 22,587
The excess of current cost over the LIFO stated values of inventories was
$5,056,000 at September 30, 1998 and $4,984,000 at September 30, 1997.
4. Other assets. Other assets at September 30 consisted of the following (in
thousands):
1998 1997
Real estate $ 2,056 2,101
Notes receivable 80 118
Goodwill at cost less accumulated
amortization of $4,104
($3,775 in 1997) 9,140 9,470
Restricted cash 9,264 8,792
Other 9,354 7,936
$ 29,894 28,417
5. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
1998 1997
Unsecured notes:
7.5%-10% notes $ 1,895 2,057
Revolving credit - -
Industrial development
revenue bonds 22,889 9,569
7% - 12% secured notes
and contracts 1,475 1,680
26,259 13,306
Less portion due within
one year 2,324 2,447
$ 23,935 10,859
Of the industrial development revenue bonds at September 30, 1998, $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, 1998). 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: $250,000 in 1999; $250,000 in 2000; $650,000 in 2001;
$2,425,000 in 2002; and $2,625,000 in 2003. Another industrial development
revenue bonds totaling $1,339,000 at September 30, 1998 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 $5,238,000 at September
30, 1998. In addition, the bonds are collateralized by certain properties of
FRPP having a carrying value at September 30, 1998 of $1,620,000. During
November 1997, the Company issued $14,000,000 of industrial revenue bonds
related to the construction of the cement plant. The bonds are due in 2022,
and are secured by a letter of credit. The interest rate on the bonds is a
variable rate established weekly. For fiscal 1998, this rate averaged 3.6%.
The secured notes and contracts are collateralized by certain real estate
having a carrying value of approximately $3,779,000 at September 30, 1998 and
are payable in installments through 2011.
The aggregate amount of principal payments, excluding the revolving credit,
due subsequent to September 30, 1998, assuming that all of the industrial
development revenue bondholders exercise their options to sell the bonds to the
Company is: 1999 - $2,324,000; 2000 - $1,873,000; 2001 - $895,000; 2002 -
$2,588,000; 2003 - $2,807,000 and subsequent years - $15,772,000.
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, 2000 and a final payment of the
unpaid balance on June 30, 2003. Interest is payable at the prime rate until
June 30, 2000 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. An annual
commitment fee of 3/16 of 1% is payable on the unused amount of the commitment.
At September 30, 1998, the total amount under the credit agreement was available
for borrowing.
The Company also has available short-term lines of credit from three banks
aggregating $35,000,000. At September 30, 1998, $26,500,000 was available for
borrowing. 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, 1998 and 1997 were 5.8% and 6.0%, 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, 1998, under the most restrictive
of the agreements, $102,834,000 of consolidated retained earnings was not
restricted as to payment of cash dividends.
The Company capitalized interest cost of $1,248,000 in 1998, $176,000 in 1997
and $32,000 in 1996.
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. At September 30, 1998, 82,000 shares of common stock were available
for future grants.
Option transactions for the fiscal years ended September 30 are summarized as
follows:
1998 1997 1996
Average Average Average
Options Price(1) Options Price(1) Options Price(1)
Shares under option:
Outstanding at
beginning of year 1,468,800 15.20 1,086,200 13.32 1,092,700 13.32
Granted - - 918,000 16.41 - -
Exercised (158,100) 14.32 (526,700) 13.45 - -
Canceled (3,000) 16.41 (8,700) 13.89 (6,500) 12.56
Outstanding at end of
year 1,307,700 15.31 1,468,800 15.20 1,086,200 13.32
Options exercisable at
end of year 558,700 522,000 896,760
(1) Weighted average exercise price
The following table summarizes information concerning stock options outstanding
at September 30, 1998.
Options Options Remaining
Exercise Price Outstanding Exercisable Life
$ 12.375 27,000 21,600 3.7 years
12.5625 317,300 317,300 3.7 years
13.96875 35,000 21,000 3.3 years
15.1875 21,500 21,500 .3 years
16.4063 906,900 177,300 8.5 years
Total 1,307,700 558,700
Remaining non-exercisable options as of September 30, 1998 become exercisable as
follows: 1999-194,800; 2000-189,400; 2001-182,400 and 2002-182,400.
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.
If compensation cost for stock option grants had been determined based on
the Black-Scholes option pricing model value at the grant date for the 1997
awards consistent with the provisions of SFAS No. 123, the Company's 1998 net
income, basic and diluted earnings per share would have been $38,145,000,
$2.02 and $1.97, respectively, and 1997 net income and basic and diluted
earnings per share would have been $36,839,000, $2.00 and $1.99 per share,
respectively. The SFAS 123 method has not been applied to options granted
prior to October 1, 1996, and the pro forma compensation expense may not be
indicative of pro forma expense in future years. The fair value of options
granted was estimated to be $6.01 on the date of grant using the following
assumptions; dividend yield of 1.5%, expected volatility of 25.9%, risk-free
interest rates of 6.8% and expected lives of 7 years.
7. Income taxes. The provision for income taxes for the fiscal years ended
September 30 consisted of the following (in thousands):
1998 1997 1996
Current:
Federal $ 16,195 17,211 13,421
State 2,926 3,201 2,466
19,121 20,412 15,887
Deferred 1,996 (1,184) (1,777)
Total $ 21,117 19,228 14,110
A reconciliation between the amount of reported income tax provision and the
amount computed at the statutory Federal income tax rate follows (in thousands):
1998 1997 1996
Amount computed at statutory
Federal rate $20,992 19,730 14,389
Effect of percentage depletion (2,287) (2,144) (1,890)
State income taxes (net of Federal
income tax benefit) 2,078 1,998 1,419
Other, net 334 (356) 192
Provision for income taxes $21,117 19,228 14,110
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:
1998 1997
Deferred tax liabilities:
Basis difference in property,
plant and equipment $ 37,615 36,383
Other 742 901
Gross deferred tax liabilities 38,357 37,284
Deferred tax assets:
Insurance reserves 3,584 3,300
Other accrued liabilities 8,669 9,002
Other 658 643
Gross deferred tax assets 12,911 12,945
Net deferred tax liability $ 25,446 24,339
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):
1998 1997 1996
Service cost-benefits earned during
the period $ 301 291 328
Interest cost on projected benefit
obligation 1,300 1,178 1,131
Actual return on assets (3,748) (4,088) (2,984)
Net amortization and deferral 1,653 2,302 1,429
Curtailment gain - - (184)
Cost of early retirement program - 194 -
Net periodic pension cost (income) ($ 494) ( 123) ( 280)
Assumptions used in determining the net periodic pension cost are discount
rate of 7.25%, rate of increase in compensation levels of 5% and expected
long-term rate of return on assets of 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):
1998 1997
Assets Assets
Exceed Exceed
Accumulated Accumulated
Benefits Benefits
Actuarial present value of vested
benefit obligations ($17,010) (16,261)
Accumulated benefit obligation ($17,044) (16,306)
Projected benefit obligation ($19,085) (17,205)
Plan assets at fair value 24,382 21,887
Plan assets in excess of
projected benefit obligation 5,297 4,682
Unrecognized net gain (4,608) (4,393)
Unrecognized transition asset (518) (605)
Unrecognized prior service cost 5 (2)
Prepaid (accrued) pension cost $ 176 ( 318)
Union employees are covered by multi-employer plans not administered by the
Company. Payments of $406,000, $427,000 and $202,000 were made to these plans
during fiscal 1998, 1997 and 1996, 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 $5,449,000 in 1998;
$4,938,000 in 1997; and $3,927,000 in 1996.
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 1998, 1997 and 1996 was
$1,974,000, $1,814,000, and $1,593,000, 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):
1998 1997 1996
Accumulated postretirement benefit
obligations(APBO):
Retirees $ 1,071 1,122 1,310
Fully eligible active participants 452 436 517
Other active participants 1,048 1,077 1,094
Total APBO 2,571 2,635 2,921
Unrecognized net loss from past
experience different from that
assumed and from changes in
assumptions (246) (490) (1,011)
Unrecognized prior service costs 83 299 473
Accrued postretirement benefit cost $ 2,408 2,444 2,383
Net periodic postretirement benefit cost for fiscal years ended September
30 includes the following components (in thousands):
1998 1997 1996
Service cost of benefits earned
during the period $ 123 129 134
Interest cost on APBO 173 178 197
Net amortization and deferral (207) (176) (130)
Net periodic postretirement benefit
cost $ 89 131 201
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.25%.
9. Leases. Certain plant sites, office space and equipment are rented under
operating leases. Total rental expense, excluding mineral leases, for fiscal
1998, 1997 and 1996 was $4,402,000, $4,176,000 and $3,867,000, 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, 1997 are as follows: 1999-$1,442,000; 2000-$1,356,000;
2001-$1,337,000; 2002-$1,326,000; 2003-$1,101,000; after 2003-$6,960,000.
Certain leases include options for renewal. Most leases require the Company to
pay for utilities, insurance and maintenance.
10. Gain (loss) on sale and/or write down of assets. In fiscal 1998 the Company
recorded a gain on the sale of certain real estate totaling $622,000. In fiscal
1997 the Company recorded a gain on the sale of certain real estate totaling
$14,000 . 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.
11. Fair values of financial instruments. At September 30, 1998 and 1997 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, 1998 the carrying
amount and fair value of such other long-term debt was $3,370,000 and
$3,474,000, respectively. At September 30, 1997 the carrying amount and fair
value of such other long-term debt was $3,737,000 and $3,863,000, respectively.
Off-balance sheet financial instruments. In anticipation of obtaining a
financing commitment to provide capital for various projects and equipment,
the Company entered into treasury yield hedge agreements for a notional amount
of $70,000,000 with a settlement date of December 31, 1998 in an attempt to
manage the interest rate risk associated with securing a long-term fixed rate
at a future date. A number of factors were taken into account with respect
to the specific timing associated with securing a firm financing commitment.
Among those was the timing associated with management's expectations of when
the cash is required for the capital outlays. The Company anticipates a firm
financing commitment will be arranged during the first or second quarter of
fiscal 1999 and has engaged a broker to assist with this effort. The
treasury yield hedges have a weighted average fixed rate for the ten-year U.
S. Treasury yield of 5.41%. The fair value of these instruments reflects
the cash that will be received or paid on the settlement of the contracts.
At September 30, 1998, the Company would have been obligated to pay $5,200,000
to settle the contracts. The fair value of these instruments is not
recognized in the financial statements of the Company as of its fiscal year
end, but will be recognized as an adjustment to interest expense over the term
of the debt upon issuance.
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, 1998, the Company had placed orders and was
committed to purchase equipment costing approximately $28,106,000. In addition,
the Company had placed orders and was committed, subject to certain cancellation
provisions, to construction contracts and equipment for the cement plant costing
approximately $36,227,000.
<PAGE>
Directors and Officers
Directors
Edward L. Baker (1)(4)
Chairman of the Board
of the Company
John D. Baker II (1)(4)
President and Chief Executive Officer
of the Company
Thompson S. Baker II
Vice President of the Company
Alvin R. (Pete) Carpenter (3)(4)
President and Chief Executive Officer
of CSX Transportation, Inc.
Charles H. Denny III (2)
Investments
Albert D. Ernest, Jr. (2)(3)(4)
President of Albert Ernest Enterprises
Luke E. Fichthorn III (2)(3)(4)
Private Investment Banker,
Twain Associates and Chairman of the
Board and Chief Executive Officer of
Bairnco Corporation
Francis X. Knott (2)
Chief Executive Officer
of Partners Management Company
Radford D. Lovett (3)(4)
Chairman of the Board of
Commodores Point Terminal Corp.
C. J. Shepherdson
Vice President of the Company
G. Kennedy Thompson
Vice Chairman of First Union Corporation
Directors Emeritus
Frank M. Hubbard
Chairman of the Board of
A. Friends' Foundation Trust
W. Thomas Rice
Chairman Emeritus of Seaboard
Coast Line Industries, Inc.
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Long Range Planning 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
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
President, Aggregates Group
James J. Gilstrap
Vice President, Treasurer and
Chief Financial Officer
Wallace A. Patzke, Jr.
Vice President, Controller and
Chief Accounting Officer
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 3, 1999, 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
New York 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.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 4,457
<SECURITIES> 0
<RECEIVABLES> 66,455
<ALLOWANCES> 1,121
<INVENTORY> 25,535
<CURRENT-ASSETS> 100,607
<PP&E> 643,013
<DEPRECIATION> 321,958
<TOTAL-ASSETS> 451,556
<CURRENT-LIABILITIES> 74,786
<BONDS> 23,935
0
0
<COMMON> 1,897
<OTHER-SE> 297,989
<TOTAL-LIABILITY-AND-EQUITY> 451,556
<SALES> 492,467
<TOTAL-REVENUES> 492,467
<CGS> 384,321
<TOTAL-COSTS> 384,321
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (555)
<INCOME-PRETAX> 59,977
<INCOME-TAX> 21,117
<INCOME-CONTINUING> 38,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,860
<EPS-PRIMARY> 2.06
<EPS-DILUTED> 2.02
</TABLE>
Exhibit (11)
FLORIDA ROCK INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Years Ended September 30
1998 1997 1996
Net income $38,860,000 37,142,000 27,000,000
Common shares:
Weighted average shares outstanding
during the period - shares used
for basic earnings per share 18,838,579 18,449,760 18,852,788
Shares issuable under stock options
which are potentially dilutive 364,379 211,421 14,680
Shares used for diluted earnings
per share 19,202,958 18,661,181 18,867,468
Basic earnings per common share $2.06 2.01 1.43
Diluted earnings per common share $2.02 1.99 1.43
<PAGE>
<PAGE>
FOURTH AMENDMENT DATED AS OF JULY 15, 1998
TO THE
AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
DATED AS OF DECEMBER 5, 1990
AS AMENDED BY
THE FIRST AMENDMENT DATED AS OF SEPTEMBER 30, 1992,
THE SECOND AMENDMENT DATED AS OF JUNE 30, 1994 AND
THE THIRD AMENDMENT DATED AS OF JUNE 30, 1997
- - - - - - - - - -
THIS FOURTH AMENDMENT dated as of July 15, 1998, TO THE AMENDED AND
RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT DATED AS OF DECEMBER 5, 1990,
as amended (the "Agreement"), is entered into among FLORIDA ROCK INDUSTRIES,
INC., a Florida corporation (the "Company"), BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national bank, with its principal office at 555
California Street, San Francisco, California 94104 (in its individual capacity,
"BA"), as agent (in such capacity, the "Agent"), BARNETT BANK, N.A.
("Barnett"), SUNTRUST BANK, CENTRAL FLORIDA, N.A. ("SunTrust"), CRESTAR BANK,
N.A. ("Crestar"), FIRST UNION NATIONAL BANK, (successor by merger to First
Union National Bank of Florida) ("FUNB"), and THE FIRST NATIONAL BANK OF
MARYLAND ("FNBM"). BA, Barnett, SunTrust, Crestar, FUNB and FNBM are
hereinafter collectively referred to as the "Banks" and individually as a
"Bank".
Recitals:
The Company has requested that the Banks modify the Agreement as set forth
herein. Capitalized terms not otherwise defined herein have the meanings
assigned to them in the Agreement.
Therefore, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to the Company by the Banks, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree that the Agreement is hereby amended as follows:
1. Section 2.6 is hereby amended to read as follows:
"2.6 Notes Evidencing Term Loans. The Term Loans shall be
evidenced by the Term Notes, each of which shall be dated the
Conversion Date, made payable to the order of the Bank making the
Term Loan and shall be payable in consecutive quarterly installments
of principal each equal to five percent (5%) of the original
principal amount of such Term Loan on the last day of September,
December, March and June, commencing September 30, 2000, and a final
payment on the unpaid principal amount of such Term Loan payable on
June 30, 2003".
2. This Amendment shall become effective as of July 15, 1998.
3. As modified herein, all provisions of the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment
to be duly executed by their duly authorized officers, all as of the day and
year first above written.
FLORIDA ROCK INDUSTRIES, INC.
By: JAMES J. GILSTRAP
Title: Vice President
Address:
Post Office Box 4667
Jacksonville, Florida 32201
Facsimile No.: 904/355-0817
Telephone No.: 904/355-1781
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: STEVE A. ARONOWITZ
Title: Managing Director
Address:
335 Madison Avenue
New York, New York 10017
Attn.:Steve A. Aronowitz
Managing Director
Facsimile No.: 212/503-7066
Telephone No.: 212/503-7935
BARNETT BANK, N.A.
By: SUSAN DELGADO
Title: Vice President
Address:
24th Floor, Barnett Tower
50 North Laura Street
Jacksonville, Florida 32202
Attn: Susan S. Delgado
Vice President-Corp. Banking
Facsimile No.: 904/791-5645
Telephone No.: 904/791-7570
SUNTRUST BANK, CENTRAL
FLORIDA, N.A.
By: SCOTT G. BALKE
Title: Vice President
Address:
200 South Orange Avenue Tower
6th Floor
Orlando, Florida 32801
Attn: Scott G. Balke
Sr. Vice President
Facsimile No.: 407/237-4076
Telephone No.: 407/237-5879
CRESTAR BANK, N.A.
By: DIANE E. BAUMAN
Title: Vice President
Address:
1445 New York Avenue N. W.
5th Floor
Washington, D. C. 20005
Attn: Diane Bauman
Vice President
Facsimile No.: 202/879-6137
Telephone No.: 202/879-6107
FIRST UNION NATIONAL BANK
By: CHARLES N. KAUFFMAN
Title: Vice President
Address:
225 Water Street
Jacksonville, Florida 32202
Attn: Charles N. Kauffman
Vice President - Commercial
Banking
Facsimile No.: 904/361-2417
Telephone No.: 904/361-3662
THE FIRST NATIONAL BANK OF
MARYLAND
By: ROBERT M. BEAVER
Title: Vice President
Address:
25 South Charles Street, 18th Floor
National Division
Post Office Box 1596
Baltimore, Maryland 21203
Attn: Robert M. Beaver
Vice President
Facsimile No.: 410/545-2047
Telephone No.: 410/244-4206
<PAGE>
Annual Report 1998
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1998 1997 Change
Net sales $492,467 456,803 + 7.8
Gross profit $108,146 99,174 + 9.0
Operating profit $ 58,647 56,078 + 4.6
Income before income taxes $ 59,977 56,370 + 6.4
Net income $ 38,860 37,142 + 4.6
Per common share:
Basic earnings per share $ 2.06 2.01 + 2.5
Diluted earnings per share $ 2.02 1.99 + 1.5
Stockholders' equity $ 15.90 14.09 + 12.8
Cash dividend $ .25 .25
Return on average stockholders' equity 13.8% 15.1
<PAGE>
1998 CORPORATE HIGHLIGHTS
Sales increased - 7.8%
Net income increased - 4.6%
Volumes increased
$104,501,000 invested in additional property, plant and equipment
$4,457,000 of cash on hand at year end
$75,000,000 revolving credit agreement all of which was available
at year end
Short-term unsecured lines of credit aggregating $35,000,000 of
which $26,500,000 was unused at year end
BUSINESS. The Company is a major basic construction materials
company concentrating in the Southeastern and Mid-Atlantic states.
MISSION STATEMENT. Be an excellent construction materials company
providing long-term growth and a superior return on investment.
VISION. Through employees committed to continuous improvement,
we will provide quality materials and superb
service for our customers; operate safe, environmentally
responsible facilities that are well maintained and
cost effective; and develop mutually beneficial
relationships with our suppliers and the communities
within which we operate.
<PAGE>
To Our Stockholders:
The operating results for fiscal 1998 were a record for the Company. Net
income increased 4.6% on a 7.8% increase in sales over fiscal 1997. The record
operating results this year are attributed to strong construction activity and
demand for basic construction materials as a result of favorable economic
conditions.
Results. Sales for fiscal 1998 were $492,467,000 up 7.8% from
$456,803,000 in fiscal 1997. The increase in sales was due to higher volumes
and modest price increases. The increased demand was attributable to growth in
non-residential and residential construction. Sales related to infrastructure
programs decreased as a result of the completion of several major projects
during the year.
Selling, general and administrative expenses increased 14.9% primarily as
the result of costs incurred in connection with computer and system upgrades
necessary for Year 2000 compliance, administrative staffing and special
projects. Selling, general and administrative expenses as a percentage of sales
increased to 10.1% during fiscal 1998 from 9.4% last year.
In fiscal 1998 operating profit increased 4.6% to $58,647,000 from
$56,078,000 last year. Profit margins declined despite increased sales volume
as the result of increased selling, general and administrative expenses and
higher expenses at our quarries.
Income before income taxes increased 6.4% to $59,977,000 from $56,370,000
in 1997. Net income was $38,860,000, a 4.6% increase from fiscal 1997's net
income of $37,142,000. Earnings per diluted share for 1998 was $2.02, a 1.5%
increase over $1.99 per diluted share last year.
The weighted average number of diluted shares used in the calculation of
earnings per diluted share increased to 19,203,000 for fiscal 1998 from
18,661,000 last year. The net increase in the weighted average number of
diluted shares outstanding is primarily related to the exercise of stock options
and resulting issuance of common shares.
Capital Expenditures. Fiscal 1998 capital expenditures totaled
$104,501,000. The capital expenditures were divided approximately 37% for
replacements, including modernizing, safety and environmental, and 63% for the
cement plant, expansion, land and aggregates deposits to be used in current and
future operations. Depreciation, depletion and amortization for the fiscal year
totaled $33,433,000.
The fiscal 1999 total capital expenditure plan approximates $106,000,000.
Estimated depreciation and depletion is projected at $37,355,000.
Approximately 36% of the planned expenditures is for plant and equipment
replacements and modernization, 64% is for expansion of existing facilities, new
projects including the cement plant, and new plant sites and deposits.
Expenditures for the cement plant are projected at $50,115,000 for fiscal 1999.
Expenditures for capital investments are subject to review and modification as
market conditions and the economic picture evolve.
Financial Management. Cash flow of $72,899,000 from operations and
beginning cash on hand enabled the Company to fund a major portion of its
capital expenditure program for fiscal 1998.
During 1998 total debt increased from $13,606,000 to $34,759,000 at
September 30, 1998, while cash on hand decreased from $18,433,000 to $4,457,000.
The Company raised $14,000,000 of long term capital from the issuance of
Industrial Revenue Bonds which mature November, 2022. The proceeds of the bonds
will be used to finance a portion of the costs of the cement manufacturing
plant. At September 30, 1998 $9,264,000 of the proceeds remained in trust and
restricted to payment of qualifying construction costs associated with the
cement plant.
At September 30, 1998, $75,000,000 was available to the Company under the
revolving credit agreement facility. In addition, the Company has $35,000,000
in unsecured demand lines of credit of which $8,500,000 was utilized at year
end.
The Company is currently evaluating and pursuing additional financing
alternatives that are available to meet its long term capital expenditures
including long-term fixed rate financing.
Dividends and Stock Split. The Board of Directors maintained the
semiannual dividend of $.125 per share. Consequently, cash dividends of $.25
per share were paid during the year to stockholders.
Subsequent to fiscal year end, the Board declared the semiannual cash
dividend of $.125 per share payable on January 4, 1999 to stockholders of record
on December 15, 1998.
During fiscal 1998 the Board of Directors also declared a two for one
common stock split that was effective October 31, 1997. Since the split
occurred prior to the issuance and release of the fiscal 1997 results all
comparative years were restated last year.
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 4, 1998, the Annual Stockholders
Meeting was held in Jacksonville, Florida. The stockholders elected Thompson S.
Baker II, Albert D. Ernest, Jr., Luke E. Fichthorn III and C. J. Shepherdson as
directors to terms expiring in 2001. The stockholders also approved the
amendment of ARTICLE VII of the Restated Articles of Incorporation to reduce the
number of classes of directors from four to three and to reduce the term of
office of directors from four years to three years.
Appointment of New Director. The Board of Directors, in August 1998,
elected G. Kennedy (Ken) Thompson as a Director. Ken, age 48, is Vice Chairman
for First Union Corporation. A native of Rocky Mount, North Carolina, he earned
a bachelor's degree from the University of North Carolina at Chapel Hill and a
Masters Degree in Business Administration from Wake Forest University. Ken
brings considerable skills, experience and perspective to the Board and we
welcome his appointment.
New York Stock Exchange Listing. Effective March 3, 1998 the Company was
approved to list and trade its common shares with the New York Stock Exchange.
The Company maintained its stock symbol "FRK."
Cement Plant. The Company continued to make steady progress on the
construction of the new cement plant located near Newberry, Florida. At
September 30, 1998 construction was more than 50% completed. The project is
further discussed under the Operating Review section of this Annual Report.
Safety, Environment and Community. Management continues its emphasis on a
safe, drug-free work place. Three of the Company's quarries have each amassed
more than 1,000,000 man-hours without experiencing a lost time accident.
Annually the Company receives a number of awards recognizing its
operations in the aggregates industry for their pursuit of excellence and
safety. The Company's Aggregates Group received significant recognition this
past year for their leadership in safety in the aggregates industry. The Group
was the recipient of the National Stone Association's (NSA) Sterling Safety
Award, which was established to recognize the companies that have the lowest
total accident incidence rate for the previous year in their category among NSA
members. A number of our quarry operations were also individually recognized
by NSA for achieving no lost time safety milestones, including the Clermont Sand
Plant (20 years) and the Gulf Hammock Quarry (1,500,000 work hours). The
Florida Transportation Builders Association, which is the largest transportation
trade association in the state of Florida, bestowed their Award of Superior
Achievement to the Company's Florida Aggregates Division for successfully
completing 24 months without a lost time accident.
Also this year, the Aggregates Group set a new industry record for
Nonmetallic Minerals, Except Fuel (SIC Code 1400) with 3,094,600 continuous work
hours completed without a lost time injury. For this achievement the Group was
awarded the National Safety Council's Award of Honor, Best Record. Three
Florida quarry locations, Fort Myers, Miami and Gulf Hammock were recipients of
the National Safety Council's Award of Merit for having no lost time operations
in excess of 1,000,000 hours.
Environmental achievement is based on activities which preserve or improve
the environmental benefits of the operation. The 1998 Tawes Award for a Clean
Environment was recently presented by the Deputy Secretary of the Maryland
Department of the Environment. Runner-up in the Adult Category went to the
Leonardtown Plant of Maryland Rock Industries, a subsidiary of Florida Rock
Industries. As a mining operation, it has won a number of state and national
reclamation awards. The Tawes Award is co-sponsored by the Maryland Petroleum
Council and the Maryland Department of the Environment. The Leonardtown Plant
was also recognized for their reclamation projects which have resulted in
wildlife habitats restored from mined-out areas.
During 1998 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.
Business Process Improvement and FAST2000. In 1994 the Company began a
total quality management initiative which we called "Business Process
Improvement (BPI). This initiative places significant emphasis on training our
personnel in the principles of quality and process improvement with the primary
focus being in the area of customer satisfaction, employee involvement, teamwork
and process improvement. Process improvement projects have been started at all
levels of the Company with much success.
During 1998, the Company expanded the quality management initiative to
focus and train our business units and personnel in the essential elements of
business planning processes. This phase will align each business units' goals
and objectives with the Company's overall mission and objectives. Continued
emphasis will be placed on the implementation of business planning processes
during 1999 and special focus will be put on tracking the Company's output
measurements.
In connection with the need to be Year 2000 compliant, the Company has
initiated a project called FAST2000 to address the Year 2000 issues and upgrade
our financial and administrative systems. When completed, FAST2000 will deliver
state of the art systems with improved functionality and productivity features
that will benefit not only ourselves but our investors and customers as well.
Summary and Outlook. Sales in 1998 were excellent. Increased volumes
and modest price increases resulted in improved earnings. The capital
expenditure program continued to focus on higher than normal replacements and
equipment to meet increased demand and to improve efficiencies and expansion.
For fiscal 1999 management remains positive in its outlook for the
construction industry and general economic conditions. The outlook for
residential construction remains favorable with the level of activity continuing
to vary by geographic region. Non-residential construction is moving with local
supply and demand with evidence that more speculative construction is underway.
Commercial industrial construction markets remain driven by capacity
utilization. Public spending on infrastructure will increase due to the recent
passage of the Transportation Equity Act for the 21st Century (TEA 21). The
transportation bill projects annual federal highway spending to increase by 57%
on average in the Company's markets over previous years funding levels.
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
Operating Review
Operations. The Company is a basic construction materials manufacturing
company concentrating in the Southeastern and Mid-Atlantic states. Its main
lines of business are construction aggregates(sand, gravel and crushed stone),
ready mixed concrete, concrete block and prestressed concrete. It also
manufactures calcium products and markets other building materials. The
Company will manufacture and sell cement upon the completion of its cement
plant next year.
Aggregates. The Company's construction aggregates group currently
operates seven crushed stone plants, nine sand plants and one industrial sand
plant in Florida. It operates six crushed stone plants in Georgia; two sand
and gravel plants and three crushed stone plants in Maryland; and two crushed
stone plants in Virginia. The Company also operates aggregates distribution
terminals in Northern Virginia; Norfolk/Virginia Beach, Virginia; Baltimore,
Maryland, the Eastern Shore of Maryland and Washington D.C. 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 maintains 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. At the end of fiscal 1998 the Company
had 88 ready mixed concrete plants and 10 concrete block plants, and a
delivery fleet of 1,036 ready mix and block trucks.
Prestressed concrete products for commercial developments and bridge and
highway construction are produced in Wilmington, North Carolina and precast
concrete lintels and other building products are produced in Kissimmee,
Florida.
Cement. The construction of a 750,000 ton annual capacity portland
cement plant near Newberry, Florida continues on schedule and is expected to
be completed during fiscal 1999. The project was slightly more than 50%
complete at year end. All major foundations for structures and equipment
have been placed, and the plant machinery is currently in various stages of
assembly.
As reported, certain appeals to the zoning and air permits issued to the
Company were denied this past year in favor of the Company. In addition, a
referendum which could have limited the emissions of the plant beyond
practical limits was rejected by the voters of Alachua County, Florida on
November 3, 1998.
When completed, the new facility will represent the first domestic
cement plant built in over a decade and will employ state-of-the-art
technology for optimum energy consumption and pollution control. 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, leased and zoned
for mining, and from nearby electric power plants.
Currently, cement consumption in Florida remains strong and prices have
firmed. Although the Company will be capable of consuming the entire output
of the plant within its concrete operations, it anticipates the sale of bulk
and packaged products to non-affiliated consumers. 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 also anticipates producing 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.
Other. Management continues in its commitment to modernize and expand
operations where cost savings, higher productivity, increased capacity and
long-term growth plans are warranted. During fiscal 1998 capital expenditures
were divided approximately 37% for replacements, including modernizing,
safety and environmental, and 63% for the cement plant, expansion, land and
aggregates deposits to be used in current and future operations.
During the past fiscal year the Company completed the construction of a
calcium products plant in Brooksville, Florida. A new aggregate crushed
stone plant in Paulding County, Georgia was completed to better serve our
customers in Northwest Georgia. Significant upgrades and modernizing at
several quarries was undertaken. The Company also finalized and completed
the acquisition of the Goose Bay Plant which consists of 500 acres of sand
and gravel reserves located near Marbury, Maryland on the Potomac River, with
water access to the Northern Virginia and Washington, D.C. markets
<PAGE>
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1998 1997 1996 1995 1994
Summary of Operations
Net sales $492,467 456,803 398,673 368,959 336,526
Gross profit $108,146 99,174 79,103 73,752 59,431
Operating profit $ 58,647 56,078 42,335 39,231 27,461
Interest expense $ 555 934 1,980 2,060 2,223
Income before income $ 59,977 56,370 41,110 36,372 25,533
taxes
Provision for income $ 21,117 19,228 14,110 12,460 8,317
taxes
Net income $ 38,860 37,142 27,000 23,912 17,216
Per Common Share
Basic earnings per share$ 2.06 2.01 1.43 1.26 .91
Diluted earnings per
share $ 2.02 1.99 1.43 1.26 .91
Stockholders' equity $ 15.90 14.09 12.30 11.14 10.12
Cash dividend $ .25 .25 .25 .25 .25
Financial Summary
Current assets $100,607 104,194 87,082 78,788 75,720
Current liabilities $ 74,786 55,676 51,857 57,614 49,298
Working capital $ 25,821 48,518 35,225 21,174 26,422
Property, plant and
equipment, net $321,055 250,005 233,858 220,325 208,076
Total assets $451,556 382,616 346,709 326,029 310,590
Long-term debt $ 23,935 10,859 16,862 9,653 23,116
Stockholders' equity $299,886 264,615 228,150 211,255 192,090
Other Data
Return on average
stockholders' equity 13.8% 15.1 12.3 11.8 9.5
Return on average capital
employed 10.9% 13.1 10.5 9.8 7.3
Additions to property,
plant and equipment $104,501 47,296 45,544 40,374 23,121
Depreciation, depletion
and amortization $ 33,433 30,688 28,766 26,518 25,419
Weighted average number
of shares - basic 18,839 18,450 18,853 18,974 18,900
Weighted average number
of shares - diluted 19,203 18,661 18,867 19,021 18,943
Number of employees at
end of year 2,635 2,448 2,310 2,201 2,203
Stockholders of record 1,133 1,122 1,174 1,228 1,279
In 1998, 1997, 1996, 1995 and 1994 the Company reported a gain(loss) on the
sale and/or write down of assets of $622,000, $14,000, ($286,000),
($2,018,000), and ($313,000) respectively. See Note 10 to the Consolidated
Financial Statements.
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.
Financial results of the Company for any individual quarter are not
necessarily indicative of results to be expected for the year, due primarily to
the effect that weather has on the Company's sales and production volume.
Normally, the highest sales and earnings of the Company are attained in the
Company's third and fourth quarters and the lowest sales and earnings of the
Company are attained in the Company's first and second quarters.
Fiscal 1998 and 1997 sales increased 7.8% and 14.6% respectively, due to
both higher volumes and modest price increases. In 1998, volume increases
were primarily attributable to strong construction activity and higher demand
for construction products in the Company's markets as well as favorable
economic conditions. The increased demand was attributable to growth in
non-residential and residential construction. Sales related to highway and
governmental decreased as a result of completion of several major projects
during the year. The price increases resulted from modest price increases in
core products.
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:
1998 1997 1996 1995 1994
Ready mixed concrete 61% 59 58 58 56
Construction aggregates 36 37 41 40 41
Other concrete products and
building materials 10 10 10 10 11
Less intercompany (7) (6 ) (9 ) (8 ) (8 )
100% 100 100 100 100
The estimated contribution to revenues from the sale of construction
materials by major markets follows:
1998 1997 1996 1995 1994
Commercial and industrial 47% 44 45 37 36
Residential 33% 32 35 40 42
Highway and
governmental 20% 24 20 23 22
Gross profit for 1998 increased 9.0% while the gross profit margin
remained level with last year. The increase was primarily attributable to the
higher sales volumes. In fiscal 1997 gross profit increased 25.4% while the
gross profit margin increased to 21.8% from 19.8%. The increase in gross
profit is a function of higher revenues and the strong marginal contribution
due to the high fixed cost nature of the business. The improvement in gross
profit margin was due primarily to increased volumes as sales price increases
were substantially offset by higher cement and other cost increases.
Selling, general and administrative expenses increased 14.9% in 1998 and
17.2% in 1997 over the prior year. In 1998, costs related to Year 2000
conversion accounted for 4.7% of the increase. The increase was also due to
an increase in basic expense levels due to increased sales, additional staffing
and special projects. The 1997 increase was primarily due to an increase in
basic expense levels due to increased sales and an increase in profit sharing
and incentive compensation which are linked to profitability.
Interest income in 1998 increased $189,000 primarily as a result of
higher levels of cash available for investment during the early part of the
fiscal year. Interest income in 1997 remained stable with 1996.
Interest expense for 1998 declined to $555,000 from $934,000 in 1997 due
to an increase in the amount of interest capitalized in 1998 and a decrease in
the average interest rate partially offset by an increase in the average debt
outstanding. Interest expense for 1997 declined to $934,000 from $1,980,000 in
1996 due to a decrease in average debt outstanding and an increase in the
amount of interest capitalized partially offset by 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.
Liquidity and Capital Resources. The following key financial
measurements reflect the Company's financial position and capital resources at
September 30 (dollars in thousands):
1998 1997 1996
Cash and cash
equivalents $ 4,457 18,433 4,995
Total debt $ 34,759 13,606 20,776
Current ratio 1.3 to 1 1.9 to 1 1.7 to 1
Debt as a percent of
capital employed 9.7% 4.5 7.6
Unused revolving credit $ 75,000 75,000 69,000
Unused short-term lines $ 26,500 29,700 28,600
In 1998 cash required for funding capital expenditures and other
investing activities was provided by cash on hand at the beginning of the
year, cash provided by operating activities and short-term borrowings. In
fiscal 1997 cash flows from operations of $69,501,000 covered the cash
required for capital expenditures and other investing activities, the net debt
repayment of $8,137,000, the payment of the regular dividend and the
repurchase of $4,632,000 of common stock.
The Company expects its 1999 expenditures for property, plant and
equipment to be approximately $106,000,000 and depreciation and depletion to
be approximately $37,355,000. Approximately $50,115,000 of the expenditures
is for the cement plant. Management believes that the necessary funds will be
obtained through internal generation, borrowing under existing loan agreements
and other sources of borrowing. In November 1997, the Company borrowed
$14,000,000 under an Industrial Revenue Bond facility for financing a portion
of the cement plant. At September 30, 1998, $9,264,000 of the proceeds of
this financing was held in trust and restricted to qualifying construction
costs associated with the cement plant. The Company has available
$75,000,000 under the revolving credit agreement which was unused and
available at September 30, 1998. In anticipation of financing, the Company
entered into treasury yield hedge agreements for a notional amount of
$70,000,000 with a settlement date of December 31, 1998 in an attempt to
manage the interest rate associated with securing a long-term fixed rate at a
future date (see note 11). The Company's normal 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. At September 30,
1998, the Company had placed orders and was committed, subject to certain
cancellation provisions, to construction contracts and equipment for the
cement plant costing approximately $36,227,000 and other equipment costing
approximately $28,106,000.
The Board of Directors has authoized managment to repurchase shares of
the Company's common stock from time to time as opportunities may arise.
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.
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. During 1996, the Company began an analysis to
determine which of its business systems were not Year 2000 compliant. During
the second quarter of calendar 1998, the Company completed the development of
plans for addressing its Year 2000 exposure as well as reengineering selective
systems to enhance their functionality. A steering committee has been formed
to monitor the progress of becoming Year 2000 compliant. This committee is
comprised of key personnel from the major functional areas of the Company and
meets monthly. The Committee reports the progress of the Company's Year 2000
conversion to the Board of Directors.
The Company is in various stages of modifying or replacing both
internally developed and purchased software. The Company has purchased new
state of the art financial and administrative systems software and hardware
that is represented to be Year 2000 compliant. An implementation consultant
has been engaged to assist in replacing the existing major systems. Early in
the first quarter of calendar 1999, the Company will begin to phase-in modules
of the purchased software. All modules of the purchased software will be
implemented no later than the third quarter of calendar 1999. Substantially
all of the internally generated software is now Year 2000 compliant. The
balance will be Year 2000 compliant in the near future.
The Company is in the process of identifying operating equipment which
may be effected by Year 2000. Once the equipment has been identified testing
will begin to determine if such equipment is Year 2000 compliant.
Vendors, suppliers and customers that are critical to the Company's
operations are in the process of being identified. Questionnaires will be
sent to these entities to determine their state of readiness for Year 2000.
The Company will identify alternative vendors and suppliers as a contingency
if any of the current suppliers do not appear to be taking corrective actions
and in case these entities are not Year 2000 compliant.
The Company, under an agreement with its affiliate, FRP Properties, Inc.
("FRPP"), provides certain administrative services, including automated data
processing to FRPP ("FRPP Services"). The FRPP 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 hardware. At September 30, 1998, approximately $1,457,000
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 1998, the Company has expensed $2,209,000
related to this project. Based on current information, the Company estimates
that it will incur an additional $8,900,000 over the next fifteen months as a
result of the Year 2000 project of which approximately 50% 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. The Company's
contingency plans will be finalized during the second quarter of calendar
1999. This plan will assess the risks and possible countermeasures. However,
despite efforts and initiatives undertaken by the Company, total assurance 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.
Cement Plant. The Company commenced the construction of the cement
plant near Newberry, Alachua County, Florida in March 1997 with an estimated
$100 million. The plant is approximately 50% 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
referendum on the ballot for the November 3, 1998 general election was
rejected.
Inflation. In the past five years price increases have generally offset
inflation.
Forward-Looking Statements. Certain matters discussed in this report
contain forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from these
indicated by such forward-looking statements. These forward-looking
statements relate to, among other things, capital expenditures, liquidity,
capital resources, competition and the Year 2000 and may be indicated by
words or phrases such as "anticipate," "estimate," "plans," "project,"
"continuing," "ongoing," "expects," "management believes," "the Company
believes," "the Company intends" and similar words or phrases. The
following factors are among the principal factors that could cause actual
results to differ materially from the forward-looking statements: Year 2000
technology issues; availability and terms of financing; the weather;
competition; levels of construction activity in the Company's markets; fuel
costs; transportation costs; inflation; quality and quantities of the
Company's aggregates reserves; and management's ability to determine
appropriate sales mix, plant location and capacity utilization.
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
1998 1997 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 111,624 106,383 107,696 101,611 132,003 123,907 141,144 124,902
Gross profit $ 21,764 22,101 22,539 20,792 31,188 29,307 32,655 26,974
Operating
profit $ 11,195 12,653 11,074 10,061 18,818 18,301 17,560 15,063
Income before
income taxes $ 11,367 12,440 11,303 10,058 19,539 18,465 17,768 15,407
Net income $ 7,366 8,086 7,324 6,537 12,662 12,003 11,508 10,516
Per common share:
Basic EPS $ .39 .44 .39 .36 .67 .65 .61 .56
Diluted EPS $ .38 .44 .38 .35 .66 .65 .60 .55
Cash dividend $ .125 .125 - - .125 .125 - -
Market price:
High $ 29.94 16.88 31.00 17.44 31.50 20.94 31.00 30.00
Low $ 19.50 14.31 19.44 15.66 26.12 15.12 23.44 20.38
</TABLE>
<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, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended September 30, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 1, 1998
<PAGE>
Florida Rock Industries, Inc.
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1998 1997 1996
Net sales $492,467 456,803 398,673
Cost of sales 384,321 357,629 319,570
Gross profit 108,146 99,174 79,103
Selling, general and administrative expenses:
Selling, general and administrative 47,290 43,096 36,768
Systems upgrades/year 2000 costs 2,209 - -
Total selling, general and administrative 49,499 43,096 36,768
Operating profit 58,647 56,078 42,335
Interest expense (555) (934) (1,980)
Interest income 901 712 713
Gain (loss) on sale and/or write down of assets
622 14 (286)
Other income, net 362 500 328
Income before income taxes 59,977 56,370 41,110
Provision for income taxes 21,117 19,228 14,110
Net income $ 38,860 37,142 27,000
Earnings per common share: $2.06 2.01 1.43
Basic $2.02 1.99 1.43
Diluted
Weighted average number of shares used in
computing earnings per common share:
Basic 18,839 18,450 18,853
Diluted 19,203 18,661 18,867
See accompanying notes.
<PAGE>
Florida Rock Industries, Inc.
Consolidated Balance Sheet September 30
(Dollars in thousands)
1998 1997
Assets
Current assets:
Cash and cash equivalents $ 4,457 18,433
Accounts receivable, less allowance for
doubtful accounts of $1,121 ($1,126 in 1997) 65,334 56,723
Inventories 25,535 22,587
Prepaid expenses and other 5,281 6,451
Total current assets 100,607 104,194
Other assets 29,894 28,417
Property, plant and equipment, at cost:
Land 120,076 111,643
Plant and equipment 477,846 427,832
Construction in process 45,091 13,096
643,013 552,571
Less accumulated depreciation and depletion 321,958 302,566
Net property, plant and equipment 321,055 250,005
$ 451,556 382,616
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable to banks $ 8,500 300
Accounts payable 38,783 32,867
Federal and state income taxes 3,715 0
Accrued payroll and benefits 11,913 11,483
Accrued insurance reserves 2,660 2,230
Accrued liabilities, other 6,891 6,349
Long-term debt due within one year 2,324 2,447
Total current liabilities 74,786 55,676
Long-term debt 23,935 10,859
Deferred income taxes 28,564 28,387
Accrued employee benefits 12,440 11,531
Long-term accrued insurance reserves 6,463 6,153
Other accrued liabilities 5,482 5,395
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, 18,974,618
shares issued 1,897 1,897
Capital in excess of par value 18,796 18,053
Retained earnings 281,882 247,733
Less cost of treasury stock; 108,662 shares
(195,434 shares in 1997) (2,689) (3,068)
Total stockholders' equity 299,886 264,615
$451,556 382,616
See accompanying notes.
<PAGE>
Florida Rock Industries, Inc.
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1998 1997 1996
Cash flows from operating activities:
Net income $ 38,860 37,142 27,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 33,433 30,688 28,766
Net changes in operating assets and
liabilities:
Accounts receivable (8,756) (4,398) (4,532)
Inventories (2,948) 1,249 849
Prepaid expenses and other 225 (465) (89)
Accounts payable and accrued liabilities 12,352 7,922 7,539
Increase (decrease) in deferred income taxes 1,108 (1,184) (1,777)
Gain on disposition of property, plant and
equipment (1,576) (1,886) (1,977)
Other, net 201 433 (63)
Net cash provided by operating activities 72,899 69,501 55,716
Cash flows from investing activities:
Purchase of property, plant and equipment (95,267) (46,493) (44,872)
Proceeds from the sale of property, plant and
equipment 2,305 3,436 5,259
Additions to other assets (11,861) (9,775) (1,641)
Proceeds from the disposition of other assets 199 218 2,585
Collection of notes receivable 184 5,364 135
Net cash used in investing activities (104,440) (47,250) (38,534)
Cash flows from financing activities:
Proceeds from long-term debt 14,000 - 6,000
Net increase (decrease) in short-term debt 8,200 (1,100) (8,000)
Repayment of long-term debt (1,047) (7,037) (1,007)
Exercise of employee stock options 3,203 8,560 -
Repurchase of Company stock (2,080) (4,632) (5,389)
Payment of dividends (4,711) (4,604) (4,716)
Net cash provided by(used) in financing activities 17,565 (8,813) (13,112)
Net increase (decrease) in cash and cash (13,976) 13,438 4,070
equivalents
Cash and cash equivalents at beginning of year 18,433 4,995 925
Cash and cash equivalents at end of year $ 4,457 18,433 4,995
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 534 948 1,926
Income taxes $14,549 23,255 15,435
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 442 294 412
Issuing debt $ - 509 260
Other assets $ 8,792 - -
Additions to inventory from issuing debt $ - 360 -
Additions to prepaid expenses from issuing
debt $ - 96 -
Additions to other assets from issuing debt $ - - 300
Addition to notes receivable from the sale of
property, plant and equipment $ - 200 6
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>
Florida Rock Industries, Inc.
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, 1995 18,974,618 $1,897 $16,452 $192,911 (362)$ (5)
Shares purchased for
treasury (425,494) (5,389)
Net income 27,000
Cash dividends
($.25 per share) (4,716)
Balance at September
30, 1996 18,974,618 1,897 16,452 215,195 (425,856) (5,394)
Shares purchased for
treasury (296,278) (4,632)
Exercise of stock
options 126 526,700 6,958
Tax benefits on stock
options exercised 1,475
Net income 37,142
Cash dividends
($.25 per share) (4,604)
Balance at September
30, 1997 18,974,618 1,897 18,053 247,733 (195,434) (3,068)
Shares purchased for
treasury (71,328) (2,080)
Exercise of stock
options (195) 158,100 2,459
Tax benefits on stock
options exercised 938
Net income
Cash dividends 38,860
($.25 per share) (4,711)
Balance at September
30, 1998 18,974,618 $1,897 $18,796 $281,882 (108,662)$(2,689)
See accompanying notes.
<PAGE>
Florida Rock Industries, Inc.
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. Certain balances for 1997 have been reclassified to
conform to
presentation adopted in 1998.
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.
REVENUE RECOGNITION - Revenue, net of discounts, is generally recognized on
the sale of products at the time the products are shipped, all significant
contractual obligations have been satisfied and the collection of the
resulting receivable is reasonably assured.
PROPERTY, PLANT AND EQUIPMENT - 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.
The Company periodically reviews property and equipment for potential
impairment. If this review indicates that the carrying amount of the asset
may not be recoverable, the Company estimates the future cash flows expected
with regards to the asset and its eventual disposition. If the sum of these
future cash flows (undiscounted and without interest charges) is less than
the carrying amount of the asset, the Company records an impairment loss
based on the fair value of the asset.
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 - 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 period. Diluted EPS 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.
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.
NEW ACCOUNTING REQUIREMENTS - In June 1997, the FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 15, 1997. SFAS 131
establishes standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and in assessing performance. SFAS
131 requires reporting segment profit or loss, certain specific revenue and
expense items and segments assets. It also requires reconciliations of
total segment revenues, total segment profit or loss, total segment assets,
and other amounts disclosed for segments to corresponding amounts reported in
the financial statements. Restatement of comparative information for
earlier periods presented is required in the initial year of application.
Interim information is not required until the second year of application, at
which time comparative information is required. The Company has not
determined the impact that the adoption of this new accounting standard will
have on its financial statement disclosures. The Company will adopt this
accounting standard October 1, 1998, as required.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income",
effective for fiscal year beginning after December 15, 1997. SFAS 130
requires that all items recognized under accounting standards as components
of comprehensive earnings be reported in an annual financial statement that
is displayed with the same prominence as other annual financial statements.
This Statement also requires that an entity classify items of other
comprehensive earnings may include foreign currency translation adjustments,
minimum pension liability adjustments, and unrealized gains and losses on
marketable securities classified as available-for-sale. Restatement of
disclosures for earlier periods is required. This statement is not expected
to have a material effect on the Company's financial statements.
In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures about
Pensions and Other Postretirement Benefits", effective for fiscal years
beginning after December 15, 1997. SFAS 132 revised employer disclosures
about pension and other postretirement benefit plans. It does not change
the measurement or recognition of those plans. This statement standardizes
the disclosure requirements for pensions and other postretirement benefits to
the extent practicable, requires additional information on changes in the
benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures. Restatement of
disclosures for earlier periods is required. The Company will adopt this
accounting standard on October 1, 1998, as required.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning
after June 15, 1999. SFAS 133 requires companies to record derivatives on
the balance sheet as assets and liabilities, measured at fair value. Gains
or losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The Company has not completed its evaluation of the
impact of this standard on the financial statements.
In March 1998, the AICPA issued SOP 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", effective for
fiscal years beginning after December 15, 1998. This SOP provides guidance
on accounting for the costs of computer software developed or obtained for
internal use. This SOP requires that entities capitalize certain
internal-use software costs once certain criteria are met. Adoption of this
standard is not expected to have a material effect on the Company's financial
statements.
2. Transactions with related parties. As of September 30, 1998 seven of the
Company's directors were also directors of FRP Properties, Inc. ("FRPP").
Such directors own approximately 41% of the stock of FRPP and 30% 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 $6,256,000 in 1998, $6,006,000 in 1997 and
$6,544,000 in 1996.
At September 30, 1998 and 1997 the Company had a net account payable due to
subsidiaries of FRPP totaling $295,000 and $206,000, respectively.
Under an agreement extending until September 30, 2000 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 $1,515,000 in 1998, $1,414,000 in 1997, and
$1,383,000 in 1996.
3. Inventories. Inventories at September 30 consisted of the following (in
thousands):
1998 1997
Finished products $ 20,683 18,151
Raw materials 4,096 3,630
Parts and supplies 756 806
$ 25,535 22,587
The excess of current cost over the LIFO stated values of inventories
was $5,056,000 at September 30, 1998 and $4,984,000 at September 30, 1997.
4. Other assets. Other assets at September 30 consisted of the following (in
thousands):
1998 1997
Real estate $ 2,056 2,101
Notes receivable 80 118
Goodwill at cost less accumulated
amortization of $4,104
($3,775 in 1997) 9,140 9,470
Restricted cash 9,264 8,792
Other 9,354 7,936
$ 29,894 28,417
5. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
1998 1997
Unsecured notes:
7.5%-10% notes $ 1,895 2,057
Revolving credit - -
Industrial development
revenue bonds 22,889 9,569
7% - 12% secured notes
and contracts 1,475 1,680
26,259 13,306
Less portion due within
one year 2,324 2,447
$ 23,935 10,859
Of the industrial development revenue bonds at September 30, 1998,
$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, 1998). 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: $250,000 in 1999; $250,000 in 2000;
$650,000 in 2001; $2,425,000 in 2002; and $2,625,000 in 2003. Another
industrial development revenue bonds totaling $1,339,000 at September 30, 1998
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 $5,238,000 at September 30, 1998. In addition, the bonds are
collateralized by certain properties of FRPP having a carrying value at
September 30, 1998 of $1,620,000. During November 1997, the Company issued
$14,000,000 of industrial revenue bonds related to the construction of the
cement plant. The bonds are due in 2022, and are secured by a letter of
credit. The interest rate on the bonds is a variable rate established
weekly. For fiscal 1998, this rate averaged 3.6%.
The secured notes and contracts are collateralized by certain real estate
having a carrying value of approximately $3,779,000 at September 30, 1998 and
are payable in installments through 2011.
The aggregate amount of principal payments, excluding the revolving credit,
due subsequent to September 30, 1998, assuming that all of the industrial
development revenue bondholders exercise their options to sell the bonds to
the Company is: 1999 - $2,324,000; 2000 - $1,873,000; 2001 - $895,000; 2002 -
$2,588,000; 2003 - $2,807,000 and subsequent years - $15,772,000.
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, 2000 and a final payment of the
unpaid balance on June 30, 2003. Interest is payable at the prime rate until
June 30, 2000 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. An annual
commitment fee of 3/16 of 1% is payable on the unused amount of the commitment.
At September 30, 1998, the total amount under the credit agreement was
available for borrowing.
The Company also has available short-term lines of credit from three banks
aggregating $35,000,000. At September 30, 1998, $26,500,000 was available for
borrowing. 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, 1998 and 1997 were 5.8% and 6.0%, 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, 1998, under the most
restrictive of the agreements, $102,834,000 of consolidated retained earnings
was not restricted as to payment of cash dividends.
The Company capitalized interest cost of $1,248,000 in 1998, $176,000 in
1997 and $32,000 in 1996.
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. At September 30, 1998, 82,000 shares of common stock were available
for future grants.
Option transactions for the fiscal years ended September 30 are summarized as
follows:
1998 1997 1996
Average Average Average
Options Price(1) Options Price(1) Options Price(1)
Shares under option:
Outstanding at
beginning of year 1,468,800 15.20 1,086,200 13.32 1,092,700 13.32
Granted - - 918,000 16.41 - -
Exercised (158,100) 14.32 (526,700) 13.45 - -
Canceled (3,000) 16.41 (8,700) 13.89 (6,500) 12.56
Outstanding at end of
year 1,307,700 15.31 1,468,800 15.20 1,086,200 13.32
Options exercisable at
end of year 558,700 522,000 896,760
(1) Weighted average exercise price
The following table summarizes information concerning stock options outstanding
at September 30, 1998.
Options Options Remaining
Exercise Price Outstanding Exercisable Life
$ 12.375 27,000 21,600 3.7 years
12.5625 317,300 317,300 3.7 years
13.96875 35,000 21,000 3.3 years
15.1875 21,500 21,500 .3 years
16.4063 906,900 177,300 8.5 years
Total 1,307,700 558,700
Remaining non-exercisable options as of September 30, 1998 become exercisable
as follows: 1999-194,800; 2000-189,400; 2001-182,400 and 2002-182,400.
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.
If compensation cost for stock option grants had been determined based on
the Black-Scholes option pricing model value at the grant date for the 1997
awards consistent with the provisions of SFAS No. 123, the Company's 1998 net
income, basic and diluted earnings per share would have been $38,145,000,
$2.02 and $1.97, respectively, and 1997 net income and basic and diluted
earnings per share would have been $36,839,000, $2.00 and $1.99 per share,
respectively. The SFAS 123 method has not been applied to options granted
prior to October 1, 1996, and the pro forma compensation expense may not be
indicative of pro forma expense in future years. The fair value of options
granted was estimated to be $6.01 on the date of grant using the following
assumptions; dividend yield of 1.5%, expected volatility of 25.9%, risk-free
interest rates of 6.8% and expected lives of 7 years.
7. Income taxes. The provision for income taxes for the fiscal years ended
September 30 consisted of the following (in thousands):
1998 1997 1996
Current:
Federal $ 16,195 17,211 13,421
State 2,926 3,201 2,466
19,121 20,412 15,887
Deferred 1,996 (1,184) (1,777)
Total $ 21,117 19,228 14,110
A reconciliation between the amount of reported income tax provision and the
amount computed at the statutory Federal income tax rate follows (in
thousands):
1998 1997 1996
Amount computed at statutory
Federal rate $20,992 19,730 14,389
Effect of percentage depletion (2,287) (2,144) (1,890)
State income taxes (net of Federal
income tax benefit) 2,078 1,998 1,419
Other, net 334 (356) 192
Provision for income taxes $21,117 19,228 14,110
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:
1998 1997
Deferred tax liabilities:
Basis difference in property,
plant and equipment $ 37,615 36,383
Other 742 901
Gross deferred tax liabilities 38,357 37,284
Deferred tax assets:
Insurance reserves 3,584 3,300
Other accrued liabilities 8,669 9,002
Other 658 643
Gross deferred tax assets 12,911 12,945
Net deferred tax liability $ 25,446 24,339
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):
1998 1997 1996
Service cost-benefits earned during
the period $ 301 291 328
Interest cost on projected benefit
obligation 1,300 1,178 1,131
Actual return on assets (3,748) (4,088) (2,984)
Net amortization and deferral 1,653 2,302 1,429
Curtailment gain - - (184)
Cost of early retirement program - 194 -
Net periodic pension cost (income) ($ 494) ( 123) ( 280)
Assumptions used in determining the net periodic pension cost are discount
rate of 7.25%, rate of increase in compensation levels of 5% and expected
long-term rate of return on assets of 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):
1998 1997
Assets Assets
Exceed Exceed
Accumulated Accumulated
Benefits Benefits
Actuarial present value of vested
benefit obligations ($17,010) (16,261)
Accumulated benefit obligation ($17,044) (16,306)
Projected benefit obligation ($19,085) (17,205)
Plan assets at fair value 24,382 21,887
Plan assets in excess of
projected benefit obligation 5,297 4,682
Unrecognized net gain (4,608) (4,393)
Unrecognized transition asset (518) (605)
Unrecognized prior service cost 5 (2)
Prepaid (accrued) pension cost $ 176 ( 318)
Union employees are covered by multi-employer plans not administered by
the Company. Payments of $406,000, $427,000 and $202,000 were made to these
plans during fiscal 1998, 1997 and 1996, 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 $5,449,000 in 1998; $4,938,000 in 1997; and $3,927,000 in
1996.
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 1998, 1997 and 1996
was $1,974,000, $1,814,000, and $1,593,000, 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):
1998 1997 1996
Accumulated postretirement benefit
obligations(APBO):
Retirees $ 1,071 1,122 1,310
Fully eligible active participants 452 436 517
Other active participants 1,048 1,077 1,094
Total APBO 2,571 2,635 2,921
Unrecognized net loss from past
experience different from that
assumed and from changes in
assumptions (246) (490) (1,011)
Unrecognized prior service costs 83 299 473
Accrued postretirement benefit cost $ 2,408 2,444 2,383
Net periodic postretirement benefit cost for fiscal years ended
September 30 includes the following components (in thousands):
1998 1997 1996
Service cost of benefits earned
during the period $ 123 129 134
Interest cost on APBO 173 178 197
Net amortization and deferral (207) (176) (130)
Net periodic postretirement benefit
cost $ 89 131 201
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.25%.
9. Leases. Certain plant sites, office space and equipment are rented under
operating leases. Total rental expense, excluding mineral leases, for fiscal
1998, 1997 and 1996 was $4,402,000, $4,176,000 and $3,867,000, 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, 1997 are as follows: 1999-$1,442,000;
2000-$1,356,000; 2001-$1,337,000; 2002-$1,326,000; 2003-$1,101,000; after
2003-$6,960,000. Certain leases include options for renewal. Most leases
require the Company to pay for utilities, insurance and maintenance.
10. Gain (loss) on sale and/or write down of assets. In fiscal 1998 the
Company recorded a gain on the sale of certain real estate totaling $622,000.
In fiscal 1997 the Company recorded a gain on the sale of certain real estate
totaling $14,000 . 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.
11. Fair values of financial instruments. At September 30, 1998 and 1997 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, 1998 the
carrying amount and fair value of such other long-term debt was $3,370,000 and
$3,474,000, respectively. At September 30, 1997 the carrying amount and fair
value of such other long-term debt was $3,737,000 and $3,863,000,
respectively.
Off-balance sheet financial instruments. In anticipation of obtaining a
financing commitment to provide capital for various projects and equipment,
the Company entered into treasury yield hedge agreements for a notional
amount of $70,000,000 with a settlement date of December 31, 1998 in an
attempt to manage the interest rate risk associated with securing a
long-term fixed rate at a future date. A number of factors were taken into
account with respect to the specific timing associated with securing a firm
financing commitment. Among those was the timing associated with
management's expectations of when the cash is required for the capital
outlays. The Company anticipates a firm financing commitment will be
arranged during the first or second quarter of fiscal 1999 and has engaged a
broker to assist with this effort. The treasury yield hedges have a
weighted average fixed rate for the ten-year U. S. Treasury yield of 5.41%.
The fair value of these instruments reflects the cash that will be received
or paid on the settlement of the contracts. At September 30, 1998, the
Company would have been obligated to pay $5,200,000 to settle the contracts.
The fair value of these instruments is not recognized in the financial
statements of the Company as of its fiscal year end, but will be recognized
as an adjustment to interest expense over the term of the debt upon
issuance.
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, 1998, the Company had placed orders and was
committed to purchase equipment costing approximately $28,106,000. In
addition, the Company had placed orders and was committed, subject to certain
cancellation provisions, to construction contracts and equipment for the cement
plant costing approximately $36,227,000.
<PAGE>
Directors and Officers
Directors
Edward L. Baker (1)(4)
Chairman of the Board
of the Company
John D. Baker II (1)(4)
President and Chief Executive Officer
of the Company
Thompson S. Baker II
Vice President of the Company
Alvin R. (Pete) Carpenter (3)(4)
President and Chief Executive Officer
of CSX Transportation, Inc.
Charles H. Denny III (2)
Investments
Albert D. Ernest, Jr. (2)(3)(4)
President of Albert Ernest Enterprises
Luke E. Fichthorn III (2)(3)(4)
Private Investment Banker,
Twain Associates and Chairman of the
Board and Chief Executive Officer of
Bairnco Corporation
Francis X. Knott (2)
Chief Executive Officer
of Partners Management Company
Radford D. Lovett (3)(4)
Chairman of the Board of
Commodores Point Terminal Corp.
C. J. Shepherdson
Vice President of the Company
G. Kennedy Thompson
Vice Chairman of First Union Corporation
Directors Emeritus
Frank M. Hubbard
Chairman of the Board of
A. Friends' Foundation Trust
W. Thomas Rice
Chairman Emeritus of Seaboard
Coast Line Industries, Inc.
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Long Range Planning 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
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
President, Aggregates Group
James J. Gilstrap
Vice President, Treasurer and
Chief Financial Officer
Wallace A. Patzke, Jr.
Vice President, Controller and
Chief Accounting Officer
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 3, 1999, 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
New York 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.
