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, 1999
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, 1999 the aggregate market value of the shares of Common Stock
held by non-affiliates of the registrant was approximately $425,148,980. At
such date there were 18,771,790 shares of the registrant's Common Stock
outstanding.
Documents Incorporated by Reference
Portions of the Florida Rock Industries, Inc. 1999 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
15, 1999 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 substantially completed 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 1999
Annual Report to stockholders and such information is incorporated herein by
reference. Information concerning the Company's new cement plant is presented
on page 9 under the caption "Cement Plant" and on page 4 under the caption
"Cement" in the accompanying 1999 Annual Report to stockholders and such
information is incorporated herein by reference.
Information as to principal classes of products is presented on pages 7, 8 and
9 of the accompanying 1999 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 and two sand and gravel plant in Virginia. The
Company also operates aggregates distribution terminals in Central and
Northern 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, Williamsburg 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 1999, the Company purchased cement from 10 suppliers, the largest
of which supplied approximately 34% 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 1999 approximately 51% of the coarse aggregates and 62% 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 2,806 persons at September 30, 1999.
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, 1999. The table does not
include the quarry and sand mine sold on December 3, 1999.
Tons Tons of
Delivered in Estimated Approximate
Year Ended Reserves Acres
9/30/99 9/30/99 (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-11,098 expiring from
also produces baserock) 10,899 422,000 O-10,058 2000 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-1,434 expiring from
(limestone) 8,022 362,000 O- 700 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 8,418 153,000 O-1,298 expiring 2018
Tons Tons of
Delivered in Estimated Approximate
Year Ended Reserves Acres
9/30/99 9/30/99 (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 759 19,000 L-13,831 2000 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
located at Leonardtown
and Goose Bay, Maryland
and one sand and gravel 19 leases
plant at Charles City L-12,017 expiring from
Virginia 9,102 229,000 O- 2004 2000 to 2046
Future reserves:
Sand: Lake County
Florida 7,500 O- 324
Polk County, Florida
(two locations) 36,000 O- 894
Limerock: 1 lease
Brooksville, Florida 100,000 L- 1,227 expiring in
2046
Newberry, Florida 210,000(b) O- 435
Granite-Muscogee County 5 leases
Georgia L- 384 expiring from
47,000 O- 5 2019 to 2049
Crushed Stone
Havre de Grace, Maryland 121,000(b)
Marble-Carroll County,
Maryland 80,000 O- 413
Limestone:
Floyd County, Georgia 55,000 L- 325 1 lease
expiring in
2056
Miami Florida (two locations) 135,000 O- 1,902
(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 (three), Maryland (three), Virginia (two) and Washington D.
C. comprising approximately 125 acres, of which the Company owns 99 and leases
26.
The Company has 97 sites for its ready mixed concrete, concrete block and
prestressed concrete plants in Florida, Georgia, North Carolina, Virginia and
Maryland aggregating approximately 712 acres. Of these acres, the Company owns
approximately 544 and leases approximately 168. 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 19 acres, which are used for shop
facilities.
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 93
Industrial/Commercial Florida 27
Industrial/Commercial Maryland 1,236
Industrial/Commercial North Carolina 36
(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, 1999 certain property, plant and equipment with a carrying
value of $8,925,000 was pledged on industrial development revenue bonds and
certain other notes and contracts with an outstanding principal balance
totaling $9,466,000 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, 1999, and in Note 3 to the Company's
Consolidated Financial Statements included in its Annual Report to stockholders
for the year ended September 30, 1999. 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 ("Corps"). 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 ("Court").
A new trial was held on April 15, 1996. On August 31, 1999, the Court ruled
that the Corps permit denial effected a compensable partial regulatory taking
of the ninety-eight (98) acre parcel and that the Company was entitled to
recover $752,444 plus accrued interest from 1980 and its costs and attorneys'
fees. The Court invited the parties to recommend to the Court how the Court
should proceed as to the Company's loss of use of the remaining 1462 acres in
the Tract. A hearing on that issue and the amount of attorneys' fees and
costs is scheduled on January 25, 2000.
Note 15 to the Consolidated Financial Statements included in the accompanying
1999 Annual Report to stockholders is 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 1,128 holders of record of Florida Rock Industries,
Inc. common stock, $.10 par value, as of December 1, 1999. 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 10 of the
Company's 1999 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 6 captioned "Lines of credit and
debt" on page 17 of the Company's 1999 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 1999 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 7, 8 and 9; "Acquisitions and Capital
Expenditures" on page 1; in the first paragraph under the caption "Summary and
Outlook" on page 3; and in Notes 1 through 16 to the Consolidated Financial
Statements included in the accompanying 1999 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 affects the amount of
interest income that can be earned. For its debt instruments changes in
interest rates affect the amount of interest expense incurred.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates:
Interest rate sensitivity
2000 2001 2002 2003 2004 Thereafter Total Fair Value
Bank lines of credit$33,502 33,502 33,502
Weighted average
Interest rate 5.9%
Long-term debt at
fixed rates $ 952 246 264 183 204 242 2,091 2,167
Weighted average
interest rate 9.3% 10.1 10.0 9.7 9.0 7.0
Long-term debt at
variable interest
rate $1,359 2,875 3,325 650 89,000 97,209 97,209
Weighted average
interest 7.4%
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 10 and on pages 11 through 22 of the Company's 1999
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 64 Chairman of the Board May 1989
John D. Baker II 51 President and Chief February 1996
Executive Officer
H. B. Horner 64 Executive Vice President May 1989
C. J. Shepherdson 83 Vice President September 1972
S. Robert Hays 62 Vice President May 1984
Thompson S. Baker II 41 Vice President August 1991
Clarron E. Render, Jr. 57 Vice President August 1991
Fred W. Cohrs 66 Vice President February 1995
James J. Gilstrap 52 Vice President, Treasurer August 1997
and Chief Financial Officer
Dennis D. Frick 57 Secretary October 1992
Wallace A. Patzke, Jr. 52 Vice President and Chief August 1997
Accounting Officer
Stephen C. Travis 44 Controller August 1999
John W. Green 47 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 had served as Controller of the Company
since December 1991 until August 1999.
Stephen C. Travis joined the Company in June 1999 and was elected in August
1999. From 1995 to 1999 he was Vice President of Finance and Administration
for WJCT, Inc.
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 15, 1999, 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 15, 1999, 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 15, 1999, 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 15, 1999 and in Note 3 to the Consolidated Financial Statements
included in the accompanying 1999 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, 1999.
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 1, 1999 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 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 1, 1999.
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 and Chief Accounting Director
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, 1999
EXHIBIT INDEX
[Item 14(a)(3)]
(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.
(2)(b) Stock Purchase Agreement, dated as of May 21, 1999 by and
between Daniel K. Harper, Quinton B. McNew, the Company and
Harper Bros., Inc. Previously, filed as Exhibit 2.1 to the
Company's Form 8-K dated June 1, 1999. 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)(a)(5) Amendment to the Articles of Incorporation of Florida Rock
Industries, Inc. filed with the Secretary of State of Florida
on May 6, 1999. A form of such amendment was previously filed
as Exhibit 4 to the Company's Form 8-K dated May 5, 1999.
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.
(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)(b)(6) Fifth Amendment dated as of May 14, 1999, to the Amended and
Restated Revolving Credit and Term Loan Agreement dated as of
December 5, 1990. Previously filed with Form 8-K dated June
1, 1999. File No. 1-7159.
(4)(c) Promissory Note dated May 28, 1999, from the Company to First
Union National Bank. Previously, filed as Exhibit 4.2 to the
Company's Form 8-K dated June 1, 1999. File No. 1-7159.
(4)(d) 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.
(4)(e) Rights Agreement, dated as of May 5, 1999 between the Company
and First Union National Bank. Previously, filed as Exhibit
4 to the Company's Form 8-K dated May 5, 1999. File No.
1-7159.
(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.
(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 1999 Annual Report to stockholders, portions of
which are incorporated by reference in this Form 10-K. Those
portions of the 1999 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, 1999 and 1998 12(a)
For the years ended September 30, 1999, 1998 and 1997:
Consolidated statement of income 11(a)
Consolidated statement of stockholders' equity 14(a)
Consolidated statement of cash flows 13(a)
Notes to consolidated financial statements 15-22(a)
Independent Auditors' Report 23(a)
Selected quarterly financial data (unaudited) 10(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 1999 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.
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 3, 1999, appearing in and incorporated by reference in
this Annual Report on Form 10-K of FRI for the year ended September
30, 1999.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Jacksonville, Florida
December 17, 1999
<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, 1999 and 1998,
and for each of the three years in the period ended September 30, 1999, and
have issued our report thereon dated December 3, 1999; such consolidated
financial statements and report are included in your 1999 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 consolidated financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Jacksonville, Florida
December 3, 1999
<PAGE>
FLORIDA ROCK INDUSTRIES, INC.
SCHEDULE II (CONSOLIDATED) - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1999, 1998, AND 1997
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,
1999:
Allowance for
doubtful
accounts $1,121,472 $ 532,465 $ 129,257a $1,524,680
Accrued risk
insurance
reserves $8,939,490 $3,640,515 $3,179,131b $9,400,874
Accrued
reclamation
costs $7,392,904 $1,613,990 $ 310,093b $8,696,801
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
a) Accounts written off less recoveries
b) Payments
Annual Report 1999
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1999 1998 Change
Net sales $579,302 492,315 + 17.7
Gross profit $132,523 107,749 + 23.0
Operating profit $ 71,240 58,249 + 22.3
Income before income taxes $ 71,848 59,977 + 19.8
Net income $ 46,557 38,860 + 19.8
Per common share:
Basic earnings per share $ 2.47 2.06 + 19.9
Diluted earnings per share $ 2.42 2.02 + 19.8
Stockholders' equity $ 17.93 15.90 + 12.8
Cash dividend $ .35 .25
Return on average stockholders' equity 14.6% 13.8
<PAGE>
1999 CORPORATE HIGHLIGHTS
Sales increased - 17.7%
Net income increased - 19.8%
Volumes and price increased
$132,067,000 invested in additional property, plant and
equipment
$3,726,000 of cash on hand at year end
$75,000,000 revolving credit agreement all of which was
borrowed at year end
Short-term unsecured lines of credit aggregating $45,000,000 of
which $11,498,000 was unused at year end.
During May 1999, a $50,000,000 364 day credit facility was
arranged. At year end the entire amount was available for
borrowing.
During 1999, the Company made two acquisitions while divesting
of certain assets acquired. These acquisitions broadened the
Company's markets and added substantial reserves.
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:
We are pleased to report record operating results for the Company. Net
income for fiscal 1999 increased 19.8% on a 17.7% increase in sales over
fiscal 1998. The record results this past year can be attributed to the
continuation of strong construction activity and demand for basic construction
materials in the Company's markets coupled with the Company's ongoing internal
initiatives to improve productivity.
Results. Sales for fiscal 1999 were $579,302,000 up 17.7% from
$492,315,000 in fiscal 1998. The increase in sales was due to both volume and
price increases in the Company's primary product lines. Results related to the
Company's acquisitions that occurred late in the third quarter did not
materially impact the comparability of our operations year over year.
Selling, general and administrative expenses increased 23.8% primarily
as the result of costs incurred in connection with computer and system
upgrades necessary for Year 2000 compliance, profit sharing and incentive
compensation linked to profitability, administrative staffing and special
projects. This past fiscal year the Company expensed approximately $6,500,000
in connection with our system upgrade efforts compared to $2,200,000 last
year and feel that most of the costs incurred with this project are now
behind us. Selling, general and administrative expenses as a percentage of
sales increased to 10.6% during fiscal 1999 from 10.1% last year.
In fiscal 1999 operating profit increased 22.3% to $71,240,000 from
$58,249,000 last year. Operating profit margins although negatively affected
by the increase in selling, general and administrative expenses increased to
12.3% from 11.8% last year as a result of increased sales volume, pricing and
improved margins related to higher productivity.
Income before income taxes increased to $71,848,000 from $59,977,000 in
1998. Net income was $46,557,000, an increase from fiscal 1998's net income
of $38,860,000. Earnings per diluted share for 1999 was $2.42, as compared
to $2.02 per diluted share last year.
For the fiscal year ended September 30, 1999, return on stockholders
equity increased to 14.6% from 13.8% last year notwithstanding the Company's
capital investment of approximately $90,000,000 in the cement plant which was
under construction during the year.
Acquisitions and Capital Expenditures . Cash outlays for capital
investment for fiscal 1999 approximated $200,000,000 and included $95,000,000
for business acquisitions. Asset divestures, including those made subsequent
to fiscal year end, related to the acquisitions approximated $50,000,000.
Acquisitions and divestures made by the Company this fiscal year are further
discussed under the Operating Review section of the Annual Report. Capital
expenditures, excluding acquisitions, were divided approximately 34% for
normal replacements, modernization, safety and environmental, and 66% for
growth opportunities such as the cement plant, new aggregate reserves, land
for future sites and equipment for expansion. Depreciation, depletion and
amortization for the fiscal year totaled $38,500,000.
The Company's capital expenditures plan for fiscal 2000 approximates
$112,000,000. Estimated depreciation, depletion and amortization is
projected to increase to $51,600,000 primarily as a result of the cement
plant and higher level of expenditures. Approximately 42% of the planned
expenditures for fiscal 2000 are targeted for recurring replacements and
modernization at existing plants and for safety and environmental upgrades,
and 58% for the expansion of existing facilities, construction of new plants
and projects, and land for future plant sites and deposits. Expenditures
for capital investments are subject to review and modification as market
conditions and the economic outlook warrant. The Company has flexibility to
adjust its capital expenditures as market conditions change given the well
maintained state of its plants and equipment. Annually, expenditures
exceeding necessary maintenance funding levels are carefully evaluated and
justified based on strategic importance and value, payback and after tax
internal rate of return. The Company targets an after tax return of 15% on
new projects.
Financial Management. Borrowings under lines of credit and strong
operating cash flow of $106,780,000 enabled the Company to fund its capital
expenditure program and business acquisitions made during fiscal 1999.
At September 30, 1999 funded debt had increased from $34,759,000 last
year to $132,802,000. During the fiscal third quarter, the Company arranged
a $50,000,000 364 day unsecured credit line to bridge any short term cash
needs for capital expenditures and business acquisitions. The Company had
100% of the committed credit facility available for use at September 30,
1999.
At September 30, 1999, $75,000,000 was outstanding under the Company's
bank revolving credit agreement. These borrowings were classified as
long-term debt outstanding on the balance sheet. In addition to the bank
revolver and 364 day facility, the Company has $45,000,000 of unsecured
demand lines of credit of which $33,502,000 was utilized at year end. At
September 30, 1999 the Company had $61,498,000 of available credit and a
funded debt to equity rate of 39.3%.
The Company is currently evaluating and pursuing additional financing
alternatives available to meet its short and long term credit needs. The
Company expects to modify or extend the existing credit facilities during the
upcoming fiscal year.
Dividends. The Board of Directors at its August 4, 1999 meeting changed
the payment dates of its regular cash dividend from semi-annually to quarterly
and declared an increase in the cash dividend from $.25 per share to $.40 per
share on an annualized basis. The first quarterly dividend of $.10 per share
was paid on October 1, 1999 to shareholders of record on September 15, 1999.
Subsequent to fiscal year end, the Board declared the quarterly cash
dividend of $.10 per share payable on January 3, 2000 to stockholders of
record on December 13, 1999.
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. During fiscal 1999 the Company purchased 173,966
common shares at an average price of $31.85 per share. At September 30, 1999
approximately $15,600,000 was available for share repurchase under Board
authorization.
Stockholders Meeting. On February 3, 1999, the Annual Stockholders
Meeting was held in Jacksonville, Florida. The stockholders elected John D.
Baker II, A.R. Carpenter, Charles H. Denny III and G. Kennedy Thompson as
directors to terms expiring in 2002.
Safety, Environment and Community. Management continues its emphasis on
a safe, drug-free work place. Four of the Company's quarries have each
amassed more than 1,000,000 man-hours without experiencing a lost time
accident, including the Forest Park Quarry, which achieved this milestone in
1999. Two sand plants, Witherspoon and Lake Sand, have not incurred a lost
time injury in over 20 years of operation.
Annually the Company receives a number of awards recognizing its
operations in the aggregates industry for their pursuit of excellence and
safety. Nine locations were the recipients of the National Stone
Association's (NSA) Safety Achievement Awards recognizing landmark
achievements in continuous years of injury-free operation and successive man
hours. The Fort Myers, Miami and Gulf Hammock Quarries were recognized by the
National Safety Council with their Industry Leader Award, which recognizes the
top five percent safest operations in the mining industry. 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 36 months without a lost time accident.
Two of the greatest challenges confronting the aggregates industry today
are improving the public's perception of quarrying and successfully
interacting with neighbors living in close proximity to our plants. NSA's
Community Relations Program recognizes aggregates producers whose community
involvement and support activities have contributed to improving their public
image as a good neighbor and as a responsible corporate citizen. This year,
the Miami Quarry was awarded NSA's Good Neighbor Gold Medallion, recognizing
their excellence in community relations. In addition, each of the Company's
six Georgia Aggregates Division plants was awarded NSA's Good Neighbors Silver
Medallion for their outstanding community relations programs. Locally, the
Tyrone Georgia Quarry received, for the second time in two years, the Spirit
of Industry Award for best small industry in Fayette County, Georgia. This
award is bestowed by the Fayette Chamber of Commerce on certain criteria
including economic impact and industry citizenship.
For the fourth time in six years, Florida Rock Industries has been
recognized with the top award for environmental excellence by the NSA. In
judging by a distinguished panel of outside experts, the Springfield Virginia
Quarry earned the prestigious Gold Environmental Eagle Award for environmental
excellence in its operations. The quarry was cited for excellence in waste
minimization/pollution prevention, distinctive environmental controls and
waste management.
During fiscal 1999 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 (BPI). The Company continues to make
significant progress in its quality initiative which it calls BPI. This
initiative places significant emphasis on training our personnel in the
principles of improving quality through process improvement. Considerable
focus was given this past year to aligning each of our business units'
business plans and measures with the Company's overall vision and business
objectives.
As part of our effort to align company wide goals and plans each
business unit organized teams focused on identifiable measures that establish
baseline performance, set goals, and monitor and track their progress. We are
pleased with the efforts made this year and will continue to focus on quality
initiatives to enhance productivity in the coming fiscal year. The Company
continues in its commitment of using the experience and knowledge of all
employees to achieve excellence in our key success factors.
As reported last year, the Company initiated a project called FAST2000
to address the Year 2000 issues and upgrade our financial and administrative
systems. The project when fully implemented provides the Company with Year
2000 compatible state of the art computer systems with improved functionality
and productivity features that will benefit not only ourselves but our
customers as well. The scope of the project and demands placed on our people
this past year have been significant. The hard work, long hours and the
dedication that our people have exhibited on this project is commendable.
Cement Plant. Construction of the new cement plant located near
Newberry, Florida was near completion as we ended our fiscal year. At
September 30, 1999 construction was more than 90% completed and is expected to
be operational by the end of the Company's first quarter in fiscal 2000. The
project is further discussed under the Operating Review section of this Annual
Report.
Summary and Outlook. The operating results for fiscal 1999 were
excellent. Strong demand resulted in increased volumes, prices and record
earnings this past year. Capital expenditures continued to focus on higher than
normal replacements and equipment to meet increased demand and to improve
efficiencies.
For fiscal 2000 the Company remains positive in its outlook for the construction
and building materials industry. General economic conditions should remain
favorable. The outlook for residential construction in the Company's markets
is expected to be flat to down slightly but remain at strong levels despite the
upward bias in interest rates. Non-residential construction is moving with
local supply and demand and continues to look healthy. Commercial industrial
construction markets remain driven by capacity utilization. The anticipated
increases in public spending on infrastructure as a result of the passage of the
Transportation Equity Act for the 21st Century (TEA 21) is slowly working its
way into the markets. The Company expects projects driven by the increased
spending under the bill will become more prominent during the coming fiscal
year. The transportation bill projects annual federal highway spending to
increase by 57% or $1.2 billion on average in the Company's markets over
previous years funding levels.
Fiscal 2000 results should be up given the continuation of strong demand and a
healthy economy. The cement plant is also expected to have a favorable impact on
results this coming year as it becomes operational. Management will continue to
evaluate new opportunities to further expand and develop the Company in its
existing and contiguous geographical markets. The Southeastern and Mid-Atlantic
markets served by the Company are among the prime long-term growth markets in
the United States.
The dedication and excellent performance of our managers and employees have been
critical in improving profitability and will be the key to the Company'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
with operations in the Southeastern and Mid-Atlantic states. The Company is
one of the largest producers of aggregates in the United States and a major
provider of concrete and concrete products. Its main lines of business are
construction aggregates(sand, gravel and crushed stone), ready mixed concrete,
concrete block and prestressed concrete. The Company also manufactures calcium
products and markets other building materials. Commencing in fiscal 2000 the
Company will manufacture and sell portland cement produced at its new cement
plant located in Newberry, Florida.
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; two sand 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 serves Jacksonville and Central Florida including Orlando
and the Polk County markets through unit train distribution terminals. The two
Central Florida terminals are owned by the Company. The Company maintains in
excess of 1.9 billion tons of long-term aggregate 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. During fiscal 1999 the Company produced and
shipped approximately 38 million tons of aggregates.
Ready mixed concrete is produced and sold by the Company throughout
peninsular Florida; South Georgia; Richmond, Williamsburg, Newport News,
Norfolk/Virginia Beach, and Northeastern Virginia; Central Maryland; and
Washington, D.C. At the end of fiscal 1999 the Company had 93 ready mixed
concrete plants and 10 concrete block plants, a delivery fleet of 1,150 ready
mix and block trucks.
Prestressed concrete products for commercial developments and bridge and
highway construction are produced from two yards in Wilmington, North Carolina
and precast concrete lintels and other building products are produced in
Kissimmee, Florida.
Cement. The start up of a 750,000 ton annual capacity portland cement
plant near Newberry, Florida is scheduled for the first quarter of fiscal 2000.
The project was slightly more than 90% completed at September 30, 1999.
All litigation over the plant's permits has been resolved, with the
exception of a pending circuit court decision on the Company's challenge to the
newly elected Alachua County Commission's right to apply more stringent air
emission standards than were permitted by the Florida Department of
Environmental Protection. The annexation of the land into the town of Newberry
has also been challenged by an individual, though the Company is not a party to
the litigation.
The new facility represents the first domestic greenfield 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
primarily 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. Approximately 75% of the cement manufactured in the United States is
used in ready mixed concrete. Although the Company will be capable of
consuming the entire output of the plant within its concrete operations, it
anticipates more than 50% of the production will be 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.
Acquisitions. During the past fiscal year the Company acquired a
Company located in Fort Myers, Florida that had an aggregate stone quarry, a
sand mine and a heavy construction operation. As a condition to making the
acquisition, the Company was required to divest its adjacent and pre-existing
stone quarry. Also, the Company was required to divest the sand mine
operation which was acquired as part of the transaction. At September 30,
1999 the Company had sold the heavy construction assets and operations
acquired in the transaction and on December 3, 1999 the Company closed the
sale of its pre-existing quarry and the sand mine acquired in the acquisition.
The acquisition, net of divestitures, adds substantial aggregate reserves to
the Company's existing adjacent reserves and provides the Company with a state
of the art, higher capacity plant.
In addition, the Company completed an acquisition of a business that had
four ready mix plants in Williamsburg, Newport News, Hampton and Providence
Forge, and a sand and gravel mine in Charles City County, all in Virginia.
The acquisition broadens the Company's geographic coverage in Virginia and
bolts on to existing operations in the Norfolk and Richmond, Virginia area.
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 1999 capital expenditures
excluding funds used for business acquisitions were divided approximately 34%
for replacements, including modernizing, safety and environmental, and 66% for
the new cement plant, equipment for expansion, land and aggregates deposits to
be used in current and future operations.
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1999 1998 1997 1996 1995
Summary of Operations
Net sales $579,302 492,315 456,646 398,673 368,959
Gross profit $132,523 107,749 98,789 79,103 73,752
Operating profit $ 71,240 58,249 55,689 42,335 39,231
Interest expense $ 1,078 555 934 1,980 2,060
Income before income $ 71,848 59,977 56,370 41,110 36,372
taxes
Provision for income $ 25,291 21,117 19,228 14,110 12,460
taxes
Net income $ 46,557 38,860 37,142 27,000 23,912
Per Common Share
Basic earnings per share$ 2.47 2.06 2.01 1.43 1.26
Diluted earnings per
share $ 2.42 2.02 1.99 1.43 1.26
Stockholders' equity $ 17.93 15.90 14.09 12.30 11.14
Cash dividend $ .35 .25 .25 .25 .25
Financial Summary
Current assets $122,465 100,607 104,194 87,082 78,788
Current liabilities $107,566 74,786 55,676 51,857 57,614
Working capital $ 14,899 25,821 48,518 35,225 21,174
Property, plant and
equipment, net $419,917 321,055 250,005 233,858 220,325
Total assets $604,168 451,556 382,616 346,709 326,029
Long-term debt $ 96,989 23,935 10,859 16,862 9,653
Stockholders' equity $338,258 299,886 264,615 228,150 211,255
Other Data
Return on average
stockholders' equity 14.6% 13.8 15.1 12.3 11.8
Return on average capital
employed 10.4% 10.9 13.1 10.5 9.8
Additions to property,
plant and equipment $132,067 104,501 47,296 45,544 40,374
Depreciation, depletion
and amortization $ 38,497 33,433 30,688 28,766 26,518
Weighted average number
of shares - basic 18,861 18,839 18,450 18,853 18,974
Weighted average number
of shares - diluted 19,278 19,203 18,661 18,867 19,021
Number of employees at
end of year 2,806 2,635 2,448 2,310 2,201
Stockholders of record 1,133 1,133 1,122 1,174 1,228
(a) In 1999, 1998, 1997, 1996, and 1995 the Company reported a gain(loss) on
the sale and/or write down of assets of $1,683,000, $622,000, $14,000,
($286,000), and ($2,018,000), respectively. See Note 12 to the Consolidated
Financial Statements.
(b) In 1999, the Company reported a loss of $4,214,000 on the settlement of
interest rate hedge agreements. See Note 14 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 1999 and 1998 sales increased 17.7% and 7.8% respectively, due to
both higher volumes and price increases. In 1999, volume increases were
primarily attributable to strong construction activity and higher demand for
construction products in the Company's markets as a result of favorable
economic conditions. Revenues for the fourth quarter of 1999 were adversely
affected due to tropical storms and resulting rain during the month of
September. The price increases resulted from 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:
1999 1998 1997 1996 1995
Ready mixed concrete products 69% 71 69 68 68
Construction aggregates 37 36 37 41 40
Less intercompany (6) (7 ) (6 ) (9 ) (8 )
100% 100 100 100 100
Gross profit for 1999 increased 23.0% while gross margin increased to
22.9% from 21.9% last year. The increase in gross profit was due primarily to
higher sales volumes and the strong marginal contribution due to the high fixed
cost nature of the business. The improvement in gross margin was primarily
due to increased volumes as sales price increases were substantially offset by
higher raw materials costs. Gross profit for 1998 increased 9.1% while the
gross profit margin remained level with the prior year. The 1998 increase was
primarily attributable to the higher sales volumes.
Selling, general and administrative expenses increased 23.8% in 1999 and
14.8% in 1998 over the prior year. Costs related to Year 2000 conversion
accounted for 8.7% in 1999 and 4.7% in 1998 of the increase. The increase was
also due to an increase in basic expense levels due to increased sales,
additional staffing, special projects and an increase in profit sharing and
incentive compensation which are linked to profitability.
Interest income in 1999 decreased $521,000 and in 1998 increased
$189,000. This was primarily due to high levels of cash available for
investment during the early part of fiscal 1998.
Interest expense for 1999 increased to $1,078,000 from $555,000 in 1998.
This increase was due primarily to increased levels of borrowings and higher
interest rates partially offset by an increase in the amount of interest
capitalized in 1999. 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. The higher levels of borrowings for
1999 resulted from the construction of the cement plant and two acquisitions in
June 1999. Interest capitalized for 1999 was $3,256,000 and for 1998 was
$1,248,000. This increase was due to the construction of the cement plant.
As discussed in Note 14 to the Consolidated Financial Statements, the
Company expensed during the first quarter of 1999, $4,214,000 in conjunction
with interest rate hedge agreements. Included in other income for 1999 is
$2,801,000 ($1,996,000 was recorded in the fourth quarter) of income from
settlements of class action lawsuits.
See Note 12 to the Consolidated Financial Statements for information
concerning the gain (loss) on the sale 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):
1999 1998 1997
Cash and cash
equivalents $ 3,726 4,457 18,433
Total debt $132,802 34,759 13,606
Current ratio 1.1 to 1 1.3 to 1 1.9 to 1
Debt as a percent of
capital employed 26.6% 9.7 4.5
Unused revolving credit $ 0 75,000 75,000
Unused short-term lines $ 61,498 26,500 29,700
In 1999, cash required for funding of capital expenditures, acquisitions
and other investing activities was provided by borrowings under existing
agreements, borrowings under a new agreement and cash provided by operating
activities. 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.
During January 1999, the Company increased its available short-term lines of
credit by $10,000,000. In May 1999, the Company arranged a $50,000,000 364
day credit facility that expires in May 2000.
The Company expects its 2000 expenditures for property, plant and
equipment to be approximately $112,356,000 and depreciation, depletion and
amortization to be approximately $51,597,000. Management believes that the
necessary funds will be obtained through internal generation, borrowing under
existing loan agreements and other sources of borrowing.
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, 1999, the Company had placed
orders and was committed to construction contracts and equipment costing
approximately $22,439,000.
In February 1999, the Board of Directors authorized management to
repurchase $20,000,000 of the Company's common stock from time to time as
opportunities may arise. The Company has purchased approximately $7,553,000
under this authorization. In August 1999, the Board of Directors changed the
dividend payment dates from semi-annually to quarterly and declared an
increase in the dividend from $.25 per share to $.40 per share on an annual
basis. The first quarterly cash dividend of $.10 per share was paid on
October 1, 1999.
The Company expects that the Purchase and Put Agreements covering
$7,550,000 of the Industrial Revenue Bonds (See Note 6 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 was 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 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. During the first quarter of calendar
1999, the Company began to phase-in modules of the purchased software. All
modules of the purchased software except for the billing module have been
implemented. The billing module will be implemented in early December. All
of the internally generated software is now Year 2000 compliant.
The Company surveyed all locations to identify operating equipment which
may be effected by Year 2000. The equipment has been tested to determine if
such equipment is Year 2000 compliant. When equipment was identified as not
Year 2000 compliant, the equipment was replaced.
Suppliers and customers that are critical to the Company's operations
were identified. Questionnaires were sent to these entities to determine
their state of readiness for Year 2000. The Company identified alternative
suppliers as a contingency if any of the current suppliers 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, 1999, approximately $9,171,000
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 1999 and 1998, the Company has expensed
$6,501,000 and $2,209,000, respectively, related to this project. Based on
current information, the Company estimates that it will incur an additional
$1,300,000 during early 2000 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 have been finalized. This plan assesses the risks and
possible countermeasures. The contingency plan included two tests where the
Company's computers are adjusted to year 2000. The first test results showed
only minor problems which are in the process of being corrected. The second
test will occur in early December. 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
cost of $100 million. Construction has entered the final stages and nears
completion. The Company anticipates that construction will be completed by
the end of the calendar year at which time the Company will commission the
plant into service and begin the steps necessary to place the plant in
production which should be completed by the end of the first quarter or early
second quarter of fiscal 2000. The Company received necessary zoning and
permit approvals from Alachua County and the Florida Department of
Environmental Protection. Lawsuits pertaining to the appeal of the zoning
and air permits issued for the plant were resolved in favor of the Company.
A local Alachua County citizens' Clean Air referendum on the ballot for the
November 3, 1998 general election which would have been adverse to the Company
was rejected. On January 22, 1999, the County Commissioners of Alachua
County, Florida voted 3-2 to make the Company's cement plant comply with
emissions standards submitted to the county in November 1994 on the Company's
initial special-use permit application. The Company had revised its
submission before approval and issuance by Alachua County of the special-use
permit to incorporate standards approximating those contained in the air
permit issued by the Florida Department of Environmental Protection. The new
Alachua County action on its face requires the Company to comply with much
stricter emission levels than approved by the Florida Department of
Environmental Protection. If this Alachua County action is enforced and
upheld the Company does not believe it could comply. The Company has filed
suit against Alachua County to enforce its permit as originally issued. On
January 25, 1999 the City Commissioners of Newberry, Florida voted 4-0 to
annex the Company's cement plant site into the city. The Company anticipates
that future land use and zoning matters relating to the cement plant will be
under the jurisdiction of the City of Newberry, initially subject to Alachua
County existing special-use permit zoning with such other conditions, if any,
as may be held to be valid and enforceable. The annexation of the land into
the town of Newberry has been challenged by an individual, though the Company
is not party of the litigation.
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
1999 1998 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 143,098 111,571 134,104 107,664 152,257 131,973 149,843 141,107
Gross profit $ 33,131 21,655 28,363 22,445 36,406 31,090 34,623 32,559
Operating
profit $ 19,211 11,085 12,939 10,978 21,551 18,721 17,539 17,465
Income before
income taxes $ 15,554 11,367 14,964 11,303 21,397 19,539 19,933 17,768
Net income $ 10,079 7,366 9,700 7,324 13,863 12,662 12,915 11,508
Per common share:
Basic EPS $ .53 .39 .51 .39 .74 .67 .68 .61
Diluted EPS $ .52 .38 .50 .38 .72 .66 .67 .60
Cash dividend $ .125 .125 - - .125 .125 .10 -
Market price:
High $ 31.00 29.94 34.25 31.00 45.50 31.50 45.44 31.00
Low $ 22.63 19.50 27.13 19.44 33.00 26.12 34.50 23.44
</TABLE>
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, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended September 30, 1999. 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, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1999 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Jacksonville, Florida
December 3, 1999
Florida Rock Industries, Inc.
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1999 1998 1997
Net sales $579,302 492,315 456,646
Cost of sales 446,779 384,566 357,857
Gross profit 132,523 107,749 98,789
Selling, general and administrative expenses:
Selling, general and administrative 54,782 47,291 43,100
Systems upgrades/year 2000 costs 6,501 2,209 -
Total selling, general and administrative 61,283 49,500 43,100
Operating profit 71,240 58,249 55,689
Interest expense (1,078) (555) (934)
Interest income 380 901 712
Gain (loss) on sale of assets 1,683 622 14
Settlement of interest rate hedge agreements (4,214) - -
Other income, net 3,837 760 889
Income before income taxes 71,848 59,977 56,370
Provision for income taxes 25,291 21,117 19,228
Net income $ 46,557 38,860 37,142
Earnings per common share: $2.47 2.06 2.01
Basic $2.42 2.02 1.99
Diluted
Weighted average number of shares used in
computing earnings per common share:
Basic 18,861 18,839 18,450
Diluted 19,278 19,203 18,661
See accompanying notes.
Florida Rock Industries, Inc.
Consolidated Balance Sheet September 30
(Dollars in thousands)
1999 1998
Assets
Current assets:
Cash and cash equivalents $ 3,726 4,457
Accounts receivable, less allowance for
doubtful accounts of $1,525 ($1,121 in 1998) 75,386 65,334
Inventories 23,634 25,535
Prepaid expenses and other 4,128 5,281
Assets held for sale 15,591 -
Total current assets 122,465 100,607
Other assets 14,822 20,754
Goodwill, at cost less accumulated amortization
of $4,905 ($4,104 in 1998) 46,964 9,140
Property, plant and equipment, at cost:
Land 139,678 120,076
Plant and equipment 498,944 477,846
Construction in process 110,555 45,091
749,177 643,013
Less accumulated depreciation and depletion 329,260 321,958
Net property, plant and equipment 419,917 321,055
$ 604,168 451,556
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable to banks $ 33,502 8,500
Accounts payable 41,590 38,783
Dividends payable 1,890 -
Federal and state income taxes 911 3,715
Accrued payroll and benefits 15,098 11,913
Accrued insurance reserves 2,493 2,660
Accrued liabilities, other 9,771 6,891
Long-term debt due within one year 2,311 2,324
Total current liabilities 107,566 74,786
Long-term debt 96,989 23,935
Deferred income taxes 31,898 28,564
Accrued employee benefits 14,019 12,440
Long-term accrued insurance reserves 7,188 6,463
Other accrued liabilities 8,250 5,482
Commitments and contingent liabilities
(Notes 11, 15 and 16)
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 18,249 18,796
Retained earnings 321,832 281,882
Less cost of treasury stock; 109,228 shares
(108,662 shares in 1998) (3,720) (2,689)
Total stockholders' equity 338,258 299,886
$604,168 451,556
See accompanying notes.
<PAGE>
Florida Rock Industries, Inc.
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1999 1998 1997
Cash flows from operating activities:
Net income $ 46,557 38,860 37,142
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 38,497 33,433 30,688
Net changes in operating assets and
liabilities:
Accounts receivable (3,154) (8,756) (4,398)
Inventories 732 (2,948) 1,249
Prepaid expenses and other 13,787 225 (465)
Accounts payable and accrued liabilities 8,710 12,352 7,922
Increase (decrease) in deferred income taxes 4,070 1,108 (1,184)
Gain on disposition of property, plant and
equipment (2,938) (1,576) (1,886)
Other, net 519 201 433
Net cash provided by operating activities 106,780 72,899 69,501
Cash flows from investing activities:
Purchase of property, plant and equipment (102,741) (95,267) (46,493)
Proceeds from the sale of property, plant and
equipment 4,524 2,305 3,436
Additions to other assets (3,700) (11,861) (9,775)
Proceeds from the disposition of other assets - 199 218
Business acquisitions net of cash acquired (95,149) - -
Additions to notes receivable (155) - -
Collection of notes receivable 64 184 5,364
Net cash used in investing activities (197,157)(104,440) (47,250)
Cash flows from financing activities:
Proceeds from long-term debt 75,000 14,000 -
Net increase (decrease) in short-term debt 24,510 8,200 (1,100)
Repayment of long-term debt (3,572) (1,047) (7,037)
Exercise of employee stock options 3,965 3,203 8,560
Repurchase of Company common stock (5,542) (2,080) (4,632)
Payment of dividends (4,715) (4,711) (4,604)
Net cash provided by(used) in financing activities 89,646 17,565 (8,813)
Net increase (decrease) in cash and cash
equivalents (731) (13,976) 13,438
Cash and cash equivalents at beginning of year 4,457 18,433 4,995
Cash and cash equivalents at end of year $ 3,726 4,457 18,433
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 682 534 948
Income taxes $22,569 14,549 23,255
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 533 442 294
Issuing debt $ 100 - 509
Other assets $ - 8,792 -
Additions to inventory from issuing debt $ - - 360
Additions to prepaid expenses from issuing
debt $ - - 96
Addition to notes receivable from the sale of
property, plant and equipment $ - - 200
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, 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)
Shares purchased
for treasury (173,966) (5,542)
Exercise of stock
options (2,007) 173,400 4,511
Tax benefit on stock
options exercised 1,460
Net income 46,557
Cash dividend ($.35
per share) (6,607)
Balance at September
30, 1999 18,974,618 $1,897 $18,249 $321,832 (109,228)$(3,720)
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 amounts for prior periods have been reclassified to
conform with presentation adopted in 1999.
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.
GOODWILL - Goodwill is being amortized over various periods ranging from
twenty to forty years.
VALUATION OF LONG-LIVED ASSETS - The Company periodically reviews long-lived
assets including goodwill 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 - Basic earnings per share("EPS")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.
The only difference between basic and diluted shares used for the calculation
is the effect of employee stock options.
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 - Effective October 1, 1998, the Company adopted
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income". 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. There are no items that require disclosures.
Effective October 1, 1998, the Company adopted SFAS No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits". 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.
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. In June 1999, the FASB issued SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of Effective Date SFAS
No. 133" which deferred the effective date to fiscal years beginning after June
15, 2000. 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.
2. Acquisitions. On June 1, 1999, the Company completed the acquisition of
all of the common stock of Harper Brothers, Inc. and Commercial Testing, Inc.
("Harper") located in Ft. Myers, Florida for $87 million in cash. The
purchase price is subject to certain post-closing adjustments related to
working capital. On July 2, 1999, the Company sold the fixed assets of
Harper's highway and heavy construction operations for $13.1 million in cash.
The Company retained and collected the working capital of the highway and heavy
construction business. The Company is subject to a final judgment entered on
October 13, 1999, by the United States District Court, Middle District of
Florida, in an action brought by the United States, requiring the Company to
divest itself of Harper's sand mine and the Company's quarry operations in Ft.
Myers. On December 3, 1999, the Company sold these assets for $34,300,000 in
cash subject to certain adjustments. At September 30, 1999, the Company has
classified these assets as Assets Held for Sale in the accompanying
Consolidated Balance Sheet.
On June 11, 1999, the Company acquired all of the common stock of Custom, LTD
for $5,800,000 in cash.
These acquisitions were accounted for under purchase accounting with the
purchase price allocated to the acquired assets and assumed liabilities based
on estimated fair market values. The allocations of purchase prices is
subject to change based on final determination of purchase price and fair
market value of the net assets. The estimated fair market value of the assets
acquired and liabilities assumed were considered to be the best estimates as of
the acquisition dates and may be adjusted as more information is obtained.
The assets of Harper that were sold were recorded at sales prices. The excess
of the purchase price over the fair market value of the assets acquired and
liabilities assumed amounted to $38,624,000 and is being amortized over 20 to
30 years. The results of operations of these acquisitions since the date of
acquisition are included in the consolidated results of operations of the
Company. If the Company had acquired these companies on October 1, 1997, the
proforma results of operation of the Company would have been:
1999 1998
Net sales $594,383 518,783
Net income $ 47,504 40,055
Earnings per share:
Basic $ 2.52 2.13
Diluted $ 2.46 2.09
These acquisitions were funded by borrowings under the Company's existing
revolving credit agreements and a new $50 million line of credit.
3. Transactions with related parties. As of September 30, 1999 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 29% 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 $6,999,000 in 1999, $6,256,000 in 1998 and $6,006,000 in 1997.
At September 30, 1999 and 1998 the Company had a net account payable due to
subsidiaries of FRPP totaling $233,000 and $295,000, 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 $1,656,000 in 1999, $1,515,000 in 1998 and $1,414,000 in
1997. Effective October 1, 1999, the Company and FRPP agreed to amend the
agreement. Under the amended agreement, FRPP will assume responsibility for
accounting, credit and certain computer functions.
4. Inventories. Inventories at September 30 consisted of the following (in
thousands):
1999 1998
Finished products $ 18,717 20,683
Raw materials 4,093 4,096
Parts and supplies 824 756
$ 23,634 25,535
The excess of current cost over the LIFO stated values of inventories was
$3,802,000 at September 30, 1999 and $5,056,000 at September 30, 1998.
5. Other assets. Other assets at September 30 consisted of the following (in
thousands):
1999 1998
Real estate $ 1,780 2,056
Restricted cash 822 9,264
Other 12,220 9,434
$ 14,822 20,754
6. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
1999 1998
Unsecured notes:
7.5%-10% notes $ 834 1,895
Revolving credit 75,000 -
Industrial development
revenue bonds 22,209 22,889
7% - 12% secured notes
and contracts 1,257 1,475
99,300 26,259
Less portion due within
one year 2,311 2,324
$ 96,989 23,935
Of the industrial development revenue bonds at September 30, 1999, $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, 1999). 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: $700,000 in 2000; $2,875,000 in 2001; $3,325,000 in
2002; and $650,000 in 2003. Another industrial development revenue bonds
totaling $659,000 at September 30, 1999 is at floating rates of interest and
matures in fiscal 2000. The bonds are collateralized by certain property, plant
and equipment having a carrying value of $4,499,000 at September 30, 1999. In
addition, the bonds are collateralized by certain properties of FRPP having a
carrying value at September 30, 1999 of $1,518,000. 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 1999, this rate averaged 3.3%.
The secured notes and contracts are collateralized by certain real estate
having a carrying value of approximately $3,779,000 at September 30, 1999 and
are payable in installments through 2011.
The aggregate amount of principal payments, excluding the revolving credit,
due subsequent to September 30, 1999, assuming that all of the industrial
development revenue bondholders exercise their options to sell the bonds to the
Company is: 2000 - $2,311,000; 2001 - $3,121,000; 2002 - $3,589,000; 2003 -
$833,000; 2004 - $204,000 and subsequent years - $14,242,000.
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, 1999, the total amount under the credit agreement had been
borrowed.
The Company also has available short-term lines of credit from four banks
aggregating $45,000,000. At September 30, 1999, $11,498,000 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, 1999 and 1998 were 5.9% and 5.8%, respectively. In May 1999, the Company
arranged a $50,000,000 364 day credit facility that expires in May 2000. At
September 30, 1999 the total amount under the credit facility was available for
borrowing.
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, 1999, under the most restrictive
of the agreements, $124,230,000 of consolidated retained earnings was not
restricted as to payment of cash dividends.
The Company capitalized interest cost on qualified construction projects of
$3,256,000 in 1999, $1,248,000 in 1998 and $176,000 in 1997.
7. Preferred Shareholder Rights Plan. On May 5, 1999, the Board of Directors
of the Company declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock. The dividend was paid
on June 11, 1999. Each right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock of the Company, par value $.01 per share (The "Preferred
Shares"), at a price of $145 per one one-hundredth of a Preferred Share,
subject to adjustment.
In the event that any Person or group of affiliated or associated Persons
(an "Acquiring Person") acquires beneficial ownership of 15% or more of the
Company's outstanding common stock each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void),
will thereafter have the right to receive upon exercise that number of Common
Shares having a market value of two times the exercise price of the Right.
An Acquiring Person excludes any Person or group of affiliated or associated
Persons who were beneficial owners, individually or collectively, of 15% or
more of the Company's Common Shares on May 4, 1999.
The rights will initially trade together with the Company's common stock
and will not be exercisable. However, if an Acquiring Person acquires 15% or
more of the Company's common stock the rights may become exercisable and trade
separately in the absence of future board action. The Board of Directors
may, at its option, redeem all rights for $.01 per right, at any time prior to
the rights becoming exercisable. The rights will expire September 30, 2009
unless earlier redeemed, exchanged or amended by the Board.
8. 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, 1999, 82,000 shares of common stock were available
for future grants.
Option transactions for the fiscal years ended September 30 are summarized as
follows:
1999 1998 1997
Average Average Average
Options Price(1) Options Price(1) Options Price(1)
Shares under option:
Outstanding at
beginning of year 1,307,700 15.31 1,468,800 15.20 1,086,200 13.32
Granted - - - - 918,000 16.41
Exercised (173,400) 14.44 (158,100) 14.32 (526,700) 13.45
Canceled (13,300) 16.38 (3,000) 16.41 (8,700) 13.89
Outstanding at end of
year 1,121,000 15.43 1,307,700 15.31 1,468,800 15.20
Options exercisable at
end of year 587,800 558,700 522,000
(1) Weighted average exercise price
The following table summarizes information concerning stock options outstanding
at September 30, 1999.
Options Options Remaining
Exercise Price Outstanding Exercisable Life
$ 12.375 27,000 27,000 2.7 years
12.5625 235,450 235,450 2.7 years
13.96875 35,000 28,000 2.3 years
16.4063 823,550 297,350 7.5 years
Total 1,121,000 587,800
Remaining non-exercisable options as of September 30, 1999 become exercisable as
follows: 2000-182,400; 2001-175,400 and 2002-175,400.
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 1999 net
income, basic and diluted earnings per share would have been $45,840,000,
$2.43 and $2.38, respectively, 1998 net income and basic and diluted earnings
per share would have been $38,145,000, $2.02 and $1.99 per share,
respectively, and 1997 net income and basic and diluted earnings per share
would have been $36,839,000, $2.00 and $1.97 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.
9. Income taxes. The provision for income taxes for the fiscal years ended
September 30 consisted of the following (in thousands):
1999 1998 1997
Current:
Federal $ 18,163 16,195 17,211
State 3,352 2,926 3,201
21,515 19,121 20,412
Deferred 3,776 1,996 (1,184)
Total $ 25,291 21,117 19,228
A reconciliation between the amount of reported income tax provision and the
amount computed at the statutory Federal income tax rate follows (in thousands):
1999 1998 1997
Amount computed at statutory
Federal rate $25,147 20,992 19,730
Effect of percentage depletion (2,720) (2,287) (2,144)
State income taxes (net of Federal
income tax benefit) 2,512 2,078 1,998
Other, net 352 334 (356)
Provision for income taxes $25,291 21,117 19,228
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:
1999 1998
Deferred tax liabilities:
Basis difference in property,
plant and equipment $ 41,435 37,615
Other 1,999 742
Gross deferred tax liabilities 43,434 38,357
Deferred tax assets:
Insurance reserves 3,768 3,584
Other accrued liabilities 8,465 8,669
Other 1,686 658
Gross deferred tax assets 13,919 12,911
Net deferred tax liability $ 29,515 25,446
10. 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):
1999 1998 1997
Service cost-benefits earned during
the period $ 273 301 291
Interest cost on projected benefit
obligation 1,321 1,300 1,178
Return on assets (2,389) (2,002) (1,693)
Amortization of net asset and prior
service cost (93) (93) (93)
Cost of early retirement program - - 194
Net periodic pension cost (income) ($ 888) ( 494) ( 123)
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 provides for the retirement plan a reconciliation of
benefit obligations, the funded status and the amounts included in the
Company's consolidated balance sheet at September 30 (in thousands):
1999 1998
Change in benefit obligation
Balance beginning of year $19,085 17,205
Service cost 273 301
Interest cost 1,321 1,300
Actuarial loss(gain) (282) 1,307
Benefits paid (1,060) (1,028)
Balance end of year $19,337 19,085
Change in plan assets
Balance beginning of year $24,383 21,887
Actual return on assets 1,855 3,524
Benefits paid (1,060) (1,028)
Balance end of year $25,178 24,383
Funded status $ 5,841 5,297
Unrecognized net actuarial gain (4,357) (4,608)
Unrecognized net obligation (432) (518)
Unrecognized prior service cost 12 5
Prepaid benefit cost $ 1,064 176
Union employees are covered by multi-employer plans not administered by the
Company. Payments of $183,000, $406,000 and $427,000 were made to these plans
during fiscal 1999, 1998 and 1997, 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 $6,649,000 in 1999;
$5,449,000 in 1998 and $4,938,000 in 1997.
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 1999, 1998 and 1997 was
$1,968,000, $1,974,000, and $1,814,000, 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 provides retiree health care a reconciliation of
benefit obligations, the funded status and the amounts included in the
Company's consolidated balance sheet at September 30 (in thousands):
1999 1998
Change in benefit obligation
Balance beginning of year $ 2,571 2,635
Service cost 118 123
Interest cost 169 173
Actuarial gain (202) (235)
Benefits paid (137) (125)
Balance end of year $ 2,519 2,571
Change in plan assets
Balance beginning of year $ 0 0
Employer contributions 138 125
Benefits paid (138) (125)
Balance end of year $ 0 0
Funded status $(2,519) (2,571)
Unrecognized net gain 44 246
Unrecognized prior service cost (25) (83)
Accrued postretirement benefit costs $(2,500) (2,408)
Net periodic postretirement benefit cost for fiscal years ended September
30 includes the following components (in thousands):
1999 1998 1997
Service cost of benefits earned
during the period $ 118 123 129
Interest cost on APBO 169 173 178
Net amortization and deferral (57) (207) (176)
Net periodic postretirement benefit
cost $ 230 89 131
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.25%.
11. Leases. Certain plant sites, office space and equipment are rented under
operating leases. Total rental expense, excluding mineral leases, for fiscal
1999, 1998 and 1997 was $5,536,000, $4,402,000 and $4,176,000 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, 1999 are as follows: 2000-$1,413,000; 2001-$1,363,000;
2002-$1,353,000; 2003-$1,128,000; 2004-$1,065,000 after 2004-$6,373,000.
Certain leases include options for renewal. Most leases require the Company to
pay for utilities, insurance and maintenance.
12. Gain (loss) on sale of assets and other income. The Company recorded a gain
on the sale of certain real estate of $1,683,000 in 1999, $622,000 in 1998 and
$14,000 in 1997. Included in other income for 1999 is $2,801,000 ($1,996,000
was recorded in the fourth quarter) of income from settlements of class action
lawsuits.
13. Business Segments. On September 30, 1999, the Company adopted SFAS No.
131, "Disclosure about Segments of an Enterprise and Related Information".
SFAS 131 established standards for reporting information about segments in
annual financial statements and requires selected information about segments in
interim financial reports issued to stockholders. In addition, SFAS 131
established standards for related disclosures about products and services, and
geographic areas. 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.
The Company has identified three business segments, each of which is managed
separately along product lines. All the Company's operations are in the
Southeastern and mid-Atlantic states. The Aggregates segment mines, processes
and sells construction aggregates. The Concrete products segment produces and
sells ready-mix concrete and other concrete products. The Cement and Calcium
products segment currently produces and sells calcium products to customers in
Florida. During fiscal 2000 this segment will begin quarrying operations to
produce and distribute portland and masonry cement in Florida.
Operating results and certain other financial data for the Company's
business segments are as follows (in thousands):
1999 1998 1997
Revenues
Aggregates $214,729 176,652 169,647
Concrete products 399,325 349,011 314,979
Cement and calcium 3,623 1,032 -
Intersegment sales (38,375) (34,380) (27,980)
Total revenues $579,302 492,315 456,646
Operating profit(a)
Aggregates $ 45,622 30,901 34,730
Concrete products 45,412 41,446 30,453
Cement and calcium 111 (563) (103)
Corporate overhead (19,905) (13,535) (9,391)
Total operating profit $ 71,240 58,249 55,689
Identifiable assets, at year end
Aggregates $298,014 223,006 205,138
Concrete products 168,781 143,600 131,132
Cement and calcium 103,037 60,713 10,363
Unallocated corporate assets 29,434 19,573 31,862
Cash items 4,658 4,457 3,933
Investments in affiliates 244 207 188
Total identifiable assets $604,168 451,556 382,616
Depreciation, depletion and
amortization
Aggregates $ 22,131 20,227 18,650
Concrete products 14,839 12,458 11,711
Cement and calcium 642 266 11
Other 885 482 316
Total depreciation, depletion
and amortization $ 38,497 33,433 30,688
Capital expenditures
Aggregates $ 46,824 41,022 21,731
Concrete products 32,112 19,914 17,258
Cement and calcium 42,603 40,921 8,045
Other 10,528 2,644 262
Total capital expenditures $132,067 104,501 47,296
(a) Operating profit is earnings before interest expense, interest income, other
income and income taxes.
14. Fair values of financial instruments. At September 30, 1999 and 1998 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, 1999 the carrying
amount and fair value of such other long-term debt was $2,091,000 and
$2,167,000, respectively. 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.
Interest Rate Hedge Agreements. In anticipation of obtaining a financing
commitment to provide capital for various projects and equipment, the Company
entered into interest rate 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 originally
anticipated a firm financing commitment would be arranged with a private
placement offering during the first or second quarter of fiscal 1999.
On December 31, 1998, the Company settled the agreements pursuant to the
contracts and on January 4, 1999 made a payment of $4,214,000. As a result of
changed capital requirements, improved cash flow and adequate existing credit
availability, management decided not to purse a commitment for long-term
financing. Accordingly, the settlement cost was expensed in the first quarter
of fiscal 1999.
15. 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.
16. Commitments. At September 30, 1999, the Company had placed orders and was
committed to purchase equipment costing approximately $22,439,000.
<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)
Vice President of CSX Corporation
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 Realty Trust, Inc.
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 (2)(4)
President, 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 and
Chief Accounting Officer
Dennis D. Frick
Secretary
Corporate Counsel
Stephen C. Travis
Controller
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 2, 2000, at the
general offices of the Company, 155 East 21st Street, Jacksonville, Florida.
Transfer Agent
First Union Customer Information Center
Corporate Trust Client Services NC-1153
1525 West W.T. Harris Boulevard - 3C3
Charlotte, NC 28288-1153
Telephone: 1-800-829-8432
General Counsel
Lewis S. Lee, Esquire
Martin, Ade, Birchfield & Mickler, PA
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>
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 3,726
<SECURITIES> 0
<RECEIVABLES> 76,911
<ALLOWANCES> 1,525
<INVENTORY> 23,634
<CURRENT-ASSETS> 122,465
<PP&E> 749,177
<DEPRECIATION> 329,260
<TOTAL-ASSETS> 604,168
<CURRENT-LIABILITIES> 107,566
<BONDS> 96,989
0
0
<COMMON> 1,897
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<TOTAL-LIABILITY-AND-EQUITY> 604,168
<SALES> 579,302
<TOTAL-REVENUES> 579,302
<CGS> 446,779
<TOTAL-COSTS> 446,779
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,078)
<INCOME-PRETAX> 71,848
<INCOME-TAX> 25,291
<INCOME-CONTINUING> 46,557
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,557
<EPS-BASIC> 2.47
<EPS-DILUTED> 2.42
</TABLE>
Exhibit (11)
FLORIDA ROCK INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Years Ended September 30
1999 1998 1997
Net income $46,557,000 38,860,000 37,142,000
Common shares:
Weighted average shares outstanding
during the period - shares used
for basic earnings per share 18,860,862 18,838,579 18,449,760
Shares issuable under stock options
which are potentially dilutive 417,622 364,379 211,421
Shares used for diluted earnings
per share 19,278,484 19,202,958 18,661,181
Basic earnings per common share $2.47 2.06 2.01
Diluted earnings per common share $2.42 2.02 1.99
<PAGE>
Annual Report 1999
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1999 1998 Change
Net sales $579,302 492,315 + 17.7
Gross profit $132,523 107,749 + 23.0
Operating profit $ 71,240 58,249 + 22.3
Income before income taxes $ 71,848 59,977 + 19.8
Net income $ 46,557 38,860 + 19.8
Per common share:
Basic earnings per share $ 2.47 2.06 + 19.9
Diluted earnings per share $ 2.42 2.02 + 19.8
Stockholders' equity $ 17.93 15.90 + 12.8
Cash dividend $ .35 .25
Return on average stockholders' equity 14.6% 13.8
<PAGE>
1999 CORPORATE HIGHLIGHTS
Sales increased - 17.7%
Net income increased - 19.8%
Volumes and price increased
$132,067,000 invested in additional property, plant and
equipment
$3,726,000 of cash on hand at year end
$75,000,000 revolving credit agreement all of which was
borrowed at year end
Short-term unsecured lines of credit aggregating $45,000,000 of
which $11,498,000 was unused at year end.
During May 1999, a $50,000,000 364 day credit facility was
arranged. At year end the entire amount was available for
borrowing.
During 1999, the Company made two acquisitions while divesting
of certain assets acquired. These acquisitions broadened the
Company's markets and added substantial reserves.
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:
We are pleased to report record operating results for the Company. Net
income for fiscal 1999 increased 19.8% on a 17.7% increase in sales over
fiscal 1998. The record results this past year can be attributed to the
continuation of strong construction activity and demand for basic construction
materials in the Company's markets coupled with the Company's ongoing internal
initiatives to improve productivity.
Results. Sales for fiscal 1999 were $579,302,000 up 17.7% from
$492,315,000 in fiscal 1998. The increase in sales was due to both volume and
price increases in the Company's primary product lines. Results related to the
Company's acquisitions that occurred late in the third quarter did not
materially impact the comparability of our operations year over year.
Selling, general and administrative expenses increased 23.8% primarily
as the result of costs incurred in connection with computer and system
upgrades necessary for Year 2000 compliance, profit sharing and incentive
compensation linked to profitability, administrative staffing and special
projects. This past fiscal year the Company expensed approximately $6,500,000
in connection with our system upgrade efforts compared to $2,200,000 last
year and feel that most of the costs incurred with this project are now
behind us. Selling, general and administrative expenses as a percentage of
sales increased to 10.6% during fiscal 1999 from 10.1% last year.
In fiscal 1999 operating profit increased 22.3% to $71,240,000 from
$58,249,000 last year. Operating profit margins although negatively affected
by the increase in selling, general and administrative expenses increased to
12.3% from 11.8% last year as a result of increased sales volume, pricing and
improved margins related to higher productivity.
Income before income taxes increased to $71,848,000 from $59,977,000 in
1998. Net income was $46,557,000, an increase from fiscal 1998's net income
of $38,860,000. Earnings per diluted share for 1999 was $2.42, as compared
to $2.02 per diluted share last year.
For the fiscal year ended September 30, 1999, return on stockholders
equity increased to 14.6% from 13.8% last year notwithstanding the Company's
capital investment of approximately $90,000,000 in the cement plant which was
under construction during the year.
Acquisitions and Capital Expenditures . Cash outlays for capital
investment for fiscal 1999 approximated $200,000,000 and included $95,000,000
for business acquisitions. Asset divestures, including those made subsequent
to fiscal year end, related to the acquisitions approximated $50,000,000.
Acquisitions and divestures made by the Company this fiscal year are further
discussed under the Operating Review section of the Annual Report. Capital
expenditures, excluding acquisitions, were divided approximately 34% for
normal replacements, modernization, safety and environmental, and 66% for
growth opportunities such as the cement plant, new aggregate reserves, land
for future sites and equipment for expansion. Depreciation, depletion and
amortization for the fiscal year totaled $38,500,000.
The Company's capital expenditures plan for fiscal 2000 approximates
$112,000,000. Estimated depreciation, depletion and amortization is
projected to increase to $51,600,000 primarily as a result of the cement
plant and higher level of expenditures. Approximately 42% of the planned
expenditures for fiscal 2000 are targeted for recurring replacements and
modernization at existing plants and for safety and environmental upgrades,
and 58% for the expansion of existing facilities, construction of new plants
and projects, and land for future plant sites and deposits. Expenditures
for capital investments are subject to review and modification as market
conditions and the economic outlook warrant. The Company has flexibility to
adjust its capital expenditures as market conditions change given the well
maintained state of its plants and equipment. Annually, expenditures
exceeding necessary maintenance funding levels are carefully evaluated and
justified based on strategic importance and value, payback and after tax
internal rate of return. The Company targets an after tax return of 15% on
new projects.
Financial Management. Borrowings under lines of credit and strong
operating cash flow of $106,780,000 enabled the Company to fund its capital
expenditure program and business acquisitions made during fiscal 1999.
At September 30, 1999 funded debt had increased from $34,759,000 last
year to $132,802,000. During the fiscal third quarter, the Company arranged
a $50,000,000 364 day unsecured credit line to bridge any short term cash
needs for capital expenditures and business acquisitions. The Company had
100% of the committed credit facility available for use at September 30,
1999.
At September 30, 1999, $75,000,000 was outstanding under the Company's
bank revolving credit agreement. These borrowings were classified as
long-term debt outstanding on the balance sheet. In addition to the bank
revolver and 364 day facility, the Company has $45,000,000 of unsecured
demand lines of credit of which $33,502,000 was utilized at year end. At
September 30, 1999 the Company had $61,498,000 of available credit and a
funded debt to equity rate of 39.3%.
The Company is currently evaluating and pursuing additional financing
alternatives available to meet its short and long term credit needs. The
Company expects to modify or extend the existing credit facilities during the
upcoming fiscal year.
Dividends. The Board of Directors at its August 4, 1999 meeting changed
the payment dates of its regular cash dividend from semi-annually to quarterly
and declared an increase in the cash dividend from $.25 per share to $.40 per
share on an annualized basis. The first quarterly dividend of $.10 per share
was paid on October 1, 1999 to shareholders of record on September 15, 1999.
Subsequent to fiscal year end, the Board declared the quarterly cash
dividend of $.10 per share payable on January 3, 2000 to stockholders of
record on December 13, 1999.
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. During fiscal 1999 the Company purchased 173,966
common shares at an average price of $31.85 per share. At September 30, 1999
approximately $15,600,000 was available for share repurchase under Board
authorization.
Stockholders Meeting. On February 3, 1999, the Annual Stockholders
Meeting was held in Jacksonville, Florida. The stockholders elected John D.
Baker II, A.R. Carpenter, Charles H. Denny III and G. Kennedy Thompson as
directors to terms expiring in 2002.
Safety, Environment and Community. Management continues its emphasis on
a safe, drug-free work place. Four of the Company's quarries have each
amassed more than 1,000,000 man-hours without experiencing a lost time
accident, including the Forest Park Quarry, which achieved this milestone in
1999. Two sand plants, Witherspoon and Lake Sand, have not incurred a lost
time injury in over 20 years of operation.
Annually the Company receives a number of awards recognizing its
operations in the aggregates industry for their pursuit of excellence and
safety. Nine locations were the recipients of the National Stone
Association's (NSA) Safety Achievement Awards recognizing landmark
achievements in continuous years of injury-free operation and successive man
hours. The Fort Myers, Miami and Gulf Hammock Quarries were recognized by the
National Safety Council with their Industry Leader Award, which recognizes the
top five percent safest operations in the mining industry. 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 36 months without a lost time accident.
Two of the greatest challenges confronting the aggregates industry today
are improving the public's perception of quarrying and successfully
interacting with neighbors living in close proximity to our plants. NSA's
Community Relations Program recognizes aggregates producers whose community
involvement and support activities have contributed to improving their public
image as a good neighbor and as a responsible corporate citizen. This year,
the Miami Quarry was awarded NSA's Good Neighbor Gold Medallion, recognizing
their excellence in community relations. In addition, each of the Company's
six Georgia Aggregates Division plants was awarded NSA's Good Neighbors Silver
Medallion for their outstanding community relations programs. Locally, the
Tyrone Georgia Quarry received, for the second time in two years, the Spirit
of Industry Award for best small industry in Fayette County, Georgia. This
award is bestowed by the Fayette Chamber of Commerce on certain criteria
including economic impact and industry citizenship.
For the fourth time in six years, Florida Rock Industries has been
recognized with the top award for environmental excellence by the NSA. In
judging by a distinguished panel of outside experts, the Springfield Virginia
Quarry earned the prestigious Gold Environmental Eagle Award for environmental
excellence in its operations. The quarry was cited for excellence in waste
minimization/pollution prevention, distinctive environmental controls and
waste management.
During fiscal 1999 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 (BPI). The Company continues to make
significant progress in its quality initiative which it calls BPI. This
initiative places significant emphasis on training our personnel in the
principles of improving quality through process improvement. Considerable
focus was given this past year to aligning each of our business units'
business plans and measures with the Company's overall vision and business
objectives.
As part of our effort to align company wide goals and plans each
business unit organized teams focused on identifiable measures that establish
baseline performance, set goals, and monitor and track their progress. We are
pleased with the efforts made this year and will continue to focus on quality
initiatives to enhance productivity in the coming fiscal year. The Company
continues in its commitment of using the experience and knowledge of all
employees to achieve excellence in our key success factors.
As reported last year, the Company initiated a project called FAST2000
to address the Year 2000 issues and upgrade our financial and administrative
systems. The project when fully implemented provides the Company with Year
2000 compatible state of the art computer systems with improved functionality
and productivity features that will benefit not only ourselves but our
customers as well. The scope of the project and demands placed on our people
this past year have been significant. The hard work, long hours and the
dedication that our people have exhibited on this project is commendable.
Cement Plant. Construction of the new cement plant located near
Newberry, Florida was near completion as we ended our fiscal year. At
September 30, 1999 construction was more than 90% completed and is expected to
be operational by the end of the Company's first quarter in fiscal 2000. The
project is further discussed under the Operating Review section of this Annual
Report.
Summary and Outlook. The operating results for fiscal 1999 were
excellent. Strong demand resulted in increased volumes, prices and record
earnings this past year. Capital expenditures continued to focus on higher than
normal replacements and equipment to meet increased demand and to improve
efficiencies.
For fiscal 2000 the Company remains positive in its outlook for the construction
and building materials industry. General economic conditions should remain
favorable. The outlook for residential construction in the Company's markets
is expected to be flat to down slightly but remain at strong levels despite the
upward bias in interest rates. Non-residential construction is moving with
local supply and demand and continues to look healthy. Commercial industrial
construction markets remain driven by capacity utilization. The anticipated
increases in public spending on infrastructure as a result of the passage of the
Transportation Equity Act for the 21st Century (TEA 21) is slowly working its
way into the markets. The Company expects projects driven by the increased
spending under the bill will become more prominent during the coming fiscal
year. The transportation bill projects annual federal highway spending to
increase by 57% or $1.2 billion on average in the Company's markets over
previous years funding levels.
Fiscal 2000 results should be up given the continuation of strong demand and a
healthy economy. The cement plant is also expected to have a favorable impact on
results this coming year as it becomes operational. Management will continue to
evaluate new opportunities to further expand and develop the Company in its
existing and contiguous geographical markets. The Southeastern and Mid-Atlantic
markets served by the Company are among the prime long-term growth markets in
the United States.
The dedication and excellent performance of our managers and employees have been
critical in improving profitability and will be the key to the Company'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
with operations in the Southeastern and Mid-Atlantic states. The Company is
one of the largest producers of aggregates in the United States and a major
provider of concrete and concrete products. Its main lines of business are
construction aggregates(sand, gravel and crushed stone), ready mixed concrete,
concrete block and prestressed concrete. The Company also manufactures calcium
products and markets other building materials. Commencing in fiscal 2000 the
Company will manufacture and sell portland cement produced at its new cement
plant located in Newberry, Florida.
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; two sand 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 serves Jacksonville and Central Florida including Orlando
and the Polk County markets through unit train distribution terminals. The two
Central Florida terminals are owned by the Company. The Company maintains in
excess of 1.9 billion tons of long-term aggregate 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. During fiscal 1999 the Company produced and
shipped approximately 38 million tons of aggregates.
Ready mixed concrete is produced and sold by the Company throughout
peninsular Florida; South Georgia; Richmond, Williamsburg, Newport News,
Norfolk/Virginia Beach, and Northeastern Virginia; Central Maryland; and
Washington, D.C. At the end of fiscal 1999 the Company had 93 ready mixed
concrete plants and 10 concrete block plants, a delivery fleet of 1,150 ready
mix and block trucks.
Prestressed concrete products for commercial developments and bridge and
highway construction are produced from two yards in Wilmington, North Carolina
and precast concrete lintels and other building products are produced in
Kissimmee, Florida.
Cement. The start up of a 750,000 ton annual capacity portland cement
plant near Newberry, Florida is scheduled for the first quarter of fiscal 2000.
The project was slightly more than 90% completed at September 30, 1999.
All litigation over the plant's permits has been resolved, with the
exception of a pending circuit court decision on the Company's challenge to the
newly elected Alachua County Commission's right to apply more stringent air
emission standards than were permitted by the Florida Department of
Environmental Protection. The annexation of the land into the town of Newberry
has also been challenged by an individual, though the Company is not a party to
the litigation.
The new facility represents the first domestic greenfield 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
primarily 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. Approximately 75% of the cement manufactured in the United States is
used in ready mixed concrete. Although the Company will be capable of
consuming the entire output of the plant within its concrete operations, it
anticipates more than 50% of the production will be 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.
Acquisitions. During the past fiscal year the Company acquired a
Company located in Fort Myers, Florida that had an aggregate stone quarry, a
sand mine and a heavy construction operation. As a condition to making the
acquisition, the Company was required to divest its adjacent and pre-existing
stone quarry. Also, the Company was required to divest the sand mine
operation which was acquired as part of the transaction. At September 30,
1999 the Company had sold the heavy construction assets and operations
acquired in the transaction and on December 3, 1999 the Company closed the
sale of its pre-existing quarry and the sand mine acquired in the acquisition.
The acquisition, net of divestitures, adds substantial aggregate reserves to
the Company's existing adjacent reserves and provides the Company with a state
of the art, higher capacity plant.
In addition, the Company completed an acquisition of a business that had
four ready mix plants in Williamsburg, Newport News, Hampton and Providence
Forge, and a sand and gravel mine in Charles City County, all in Virginia.
The acquisition broadens the Company's geographic coverage in Virginia and
bolts on to existing operations in the Norfolk and Richmond, Virginia area.
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 1999 capital expenditures
excluding funds used for business acquisitions were divided approximately 34%
for replacements, including modernizing, safety and environmental, and 66% for
the new cement plant, equipment for expansion, land and aggregates deposits to
be used in current and future operations.
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1999 1998 1997 1996 1995
Summary of Operations
Net sales $579,302 492,315 456,646 398,673 368,959
Gross profit $132,523 107,749 98,789 79,103 73,752
Operating profit $ 71,240 58,249 55,689 42,335 39,231
Interest expense $ 1,078 555 934 1,980 2,060
Income before income $ 71,848 59,977 56,370 41,110 36,372
taxes
Provision for income $ 25,291 21,117 19,228 14,110 12,460
taxes
Net income $ 46,557 38,860 37,142 27,000 23,912
Per Common Share
Basic earnings per share$ 2.47 2.06 2.01 1.43 1.26
Diluted earnings per
share $ 2.42 2.02 1.99 1.43 1.26
Stockholders' equity $ 17.93 15.90 14.09 12.30 11.14
Cash dividend $ .35 .25 .25 .25 .25
Financial Summary
Current assets $122,465 100,607 104,194 87,082 78,788
Current liabilities $107,566 74,786 55,676 51,857 57,614
Working capital $ 14,899 25,821 48,518 35,225 21,174
Property, plant and
equipment, net $419,917 321,055 250,005 233,858 220,325
Total assets $604,168 451,556 382,616 346,709 326,029
Long-term debt $ 96,989 23,935 10,859 16,862 9,653
Stockholders' equity $338,258 299,886 264,615 228,150 211,255
Other Data
Return on average
stockholders' equity 14.6% 13.8 15.1 12.3 11.8
Return on average capital
employed 10.4% 10.9 13.1 10.5 9.8
Additions to property,
plant and equipment $132,067 104,501 47,296 45,544 40,374
Depreciation, depletion
and amortization $ 38,497 33,433 30,688 28,766 26,518
Weighted average number
of shares - basic 18,861 18,839 18,450 18,853 18,974
Weighted average number
of shares - diluted 19,278 19,203 18,661 18,867 19,021
Number of employees at
end of year 2,806 2,635 2,448 2,310 2,201
Stockholders of record 1,133 1,133 1,122 1,174 1,228
(a) In 1999, 1998, 1997, 1996, and 1995 the Company reported a gain(loss) on
the sale and/or write down of assets of $1,683,000, $622,000, $14,000,
($286,000), and ($2,018,000), respectively. See Note 12 to the Consolidated
Financial Statements.
(b) In 1999, the Company reported a loss of $4,214,000 on the settlement of
interest rate hedge agreements. See Note 14 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 1999 and 1998 sales increased 17.7% and 7.8% respectively, due to
both higher volumes and price increases. In 1999, volume increases were
primarily attributable to strong construction activity and higher demand for
construction products in the Company's markets as a result of favorable
economic conditions. Revenues for the fourth quarter of 1999 were adversely
affected due to tropical storms and resulting rain during the month of
September. The price increases resulted from 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:
1999 1998 1997 1996 1995
Ready mixed concrete products 69% 71 69 68 68
Construction aggregates 37 36 37 41 40
Less intercompany (6) (7 ) (6 ) (9 ) (8 )
100% 100 100 100 100
Gross profit for 1999 increased 23.0% while gross margin increased to
22.9% from 21.9% last year. The increase in gross profit was due primarily to
higher sales volumes and the strong marginal contribution due to the high fixed
cost nature of the business. The improvement in gross margin was primarily
due to increased volumes as sales price increases were substantially offset by
higher raw materials costs. Gross profit for 1998 increased 9.1% while the
gross profit margin remained level with the prior year. The 1998 increase was
primarily attributable to the higher sales volumes.
Selling, general and administrative expenses increased 23.8% in 1999 and
14.8% in 1998 over the prior year. Costs related to Year 2000 conversion
accounted for 8.7% in 1999 and 4.7% in 1998 of the increase. The increase was
also due to an increase in basic expense levels due to increased sales,
additional staffing, special projects and an increase in profit sharing and
incentive compensation which are linked to profitability.
Interest income in 1999 decreased $521,000 and in 1998 increased
$189,000. This was primarily due to high levels of cash available for
investment during the early part of fiscal 1998.
Interest expense for 1999 increased to $1,078,000 from $555,000 in 1998.
This increase was due primarily to increased levels of borrowings and higher
interest rates partially offset by an increase in the amount of interest
capitalized in 1999. 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. The higher levels of borrowings for
1999 resulted from the construction of the cement plant and two acquisitions in
June 1999. Interest capitalized for 1999 was $3,256,000 and for 1998 was
$1,248,000. This increase was due to the construction of the cement plant.
As discussed in Note 14 to the Consolidated Financial Statements, the
Company expensed during the first quarter of 1999, $4,214,000 in conjunction
with interest rate hedge agreements. Included in other income for 1999 is
$2,801,000 ($1,996,000 was recorded in the fourth quarter) of income from
settlements of class action lawsuits.
See Note 12 to the Consolidated Financial Statements for information
concerning the gain (loss) on the sale 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):
1999 1998 1997
Cash and cash
equivalents $ 3,726 4,457 18,433
Total debt $132,802 34,759 13,606
Current ratio 1.1 to 1 1.3 to 1 1.9 to 1
Debt as a percent of
capital employed 26.6% 9.7 4.5
Unused revolving credit $ 0 75,000 75,000
Unused short-term lines $ 61,498 26,500 29,700
In 1999, cash required for funding of capital expenditures, acquisitions
and other investing activities was provided by borrowings under existing
agreements, borrowings under a new agreement and cash provided by operating
activities. 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.
During January 1999, the Company increased its available short-term lines of
credit by $10,000,000. In May 1999, the Company arranged a $50,000,000 364
day credit facility that expires in May 2000.
The Company expects its 2000 expenditures for property, plant and
equipment to be approximately $112,356,000 and depreciation, depletion and
amortization to be approximately $51,597,000. Management believes that the
necessary funds will be obtained through internal generation, borrowing under
existing loan agreements and other sources of borrowing.
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, 1999, the Company had placed
orders and was committed to construction contracts and equipment costing
approximately $22,439,000.
In February 1999, the Board of Directors authorized management to
repurchase $20,000,000 of the Company's common stock from time to time as
opportunities may arise. The Company has purchased approximately $7,553,000
under this authorization. In August 1999, the Board of Directors changed the
dividend payment dates from semi-annually to quarterly and declared an
increase in the dividend from $.25 per share to $.40 per share on an annual
basis. The first quarterly cash dividend of $.10 per share was paid on
October 1, 1999.
The Company expects that the Purchase and Put Agreements covering
$7,550,000 of the Industrial Revenue Bonds (See Note 6 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 was 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 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. During the first quarter of calendar
1999, the Company began to phase-in modules of the purchased software. All
modules of the purchased software except for the billing module have been
implemented. The billing module will be implemented in early December. All
of the internally generated software is now Year 2000 compliant.
The Company surveyed all locations to identify operating equipment which
may be effected by Year 2000. The equipment has been tested to determine if
such equipment is Year 2000 compliant. When equipment was identified as not
Year 2000 compliant, the equipment was replaced.
Suppliers and customers that are critical to the Company's operations
were identified. Questionnaires were sent to these entities to determine
their state of readiness for Year 2000. The Company identified alternative
suppliers as a contingency if any of the current suppliers 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, 1999, approximately $9,171,000
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 1999 and 1998, the Company has expensed
$6,501,000 and $2,209,000, respectively, related to this project. Based on
current information, the Company estimates that it will incur an additional
$1,300,000 during early 2000 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 have been finalized. This plan assesses the risks and
possible countermeasures. The contingency plan included two tests where the
Company's computers are adjusted to year 2000. The first test results showed
only minor problems which are in the process of being corrected. The second
test will occur in early December. 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
cost of $100 million. Construction has entered the final stages and nears
completion. The Company anticipates that construction will be completed by
the end of the calendar year at which time the Company will commission the
plant into service and begin the steps necessary to place the plant in
production which should be completed by the end of the first quarter or early
second quarter of fiscal 2000. The Company received necessary zoning and
permit approvals from Alachua County and the Florida Department of
Environmental Protection. Lawsuits pertaining to the appeal of the zoning
and air permits issued for the plant were resolved in favor of the Company.
A local Alachua County citizens' Clean Air referendum on the ballot for the
November 3, 1998 general election which would have been adverse to the Company
was rejected. On January 22, 1999, the County Commissioners of Alachua
County, Florida voted 3-2 to make the Company's cement plant comply with
emissions standards submitted to the county in November 1994 on the Company's
initial special-use permit application. The Company had revised its
submission before approval and issuance by Alachua County of the special-use
permit to incorporate standards approximating those contained in the air
permit issued by the Florida Department of Environmental Protection. The new
Alachua County action on its face requires the Company to comply with much
stricter emission levels than approved by the Florida Department of
Environmental Protection. If this Alachua County action is enforced and
upheld the Company does not believe it could comply. The Company has filed
suit against Alachua County to enforce its permit as originally issued. On
January 25, 1999 the City Commissioners of Newberry, Florida voted 4-0 to
annex the Company's cement plant site into the city. The Company anticipates
that future land use and zoning matters relating to the cement plant will be
under the jurisdiction of the City of Newberry, initially subject to Alachua
County existing special-use permit zoning with such other conditions, if any,
as may be held to be valid and enforceable. The annexation of the land into
the town of Newberry has been challenged by an individual, though the Company
is not party of the litigation.
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
1999 1998 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 143,098 111,571 134,104 107,664 152,257 131,973 149,843 141,107
Gross profit $ 33,131 21,655 28,363 22,445 36,406 31,090 34,623 32,559
Operating
profit $ 19,211 11,085 12,939 10,978 21,551 18,721 17,539 17,465
Income before
income taxes $ 15,554 11,367 14,964 11,303 21,397 19,539 19,933 17,768
Net income $ 10,079 7,366 9,700 7,324 13,863 12,662 12,915 11,508
Per common share:
Basic EPS $ .53 .39 .51 .39 .74 .67 .68 .61
Diluted EPS $ .52 .38 .50 .38 .72 .66 .67 .60
Cash dividend $ .125 .125 - - .125 .125 .10 -
Market price:
High $ 31.00 29.94 34.25 31.00 45.50 31.50 45.44 31.00
Low $ 22.63 19.50 27.13 19.44 33.00 26.12 34.50 23.44
</TABLE>
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, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended September 30, 1999. 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, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1999 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Jacksonville, Florida
December 3, 1999
Florida Rock Industries, Inc.
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1999 1998 1997
Net sales $579,302 492,315 456,646
Cost of sales 446,779 384,566 357,857
Gross profit 132,523 107,749 98,789
Selling, general and administrative expenses:
Selling, general and administrative 54,782 47,291 43,100
Systems upgrades/year 2000 costs 6,501 2,209 -
Total selling, general and administrative 61,283 49,500 43,100
Operating profit 71,240 58,249 55,689
Interest expense (1,078) (555) (934)
Interest income 380 901 712
Gain (loss) on sale of assets 1,683 622 14
Settlement of interest rate hedge agreements (4,214) - -
Other income, net 3,837 760 889
Income before income taxes 71,848 59,977 56,370
Provision for income taxes 25,291 21,117 19,228
Net income $ 46,557 38,860 37,142
Earnings per common share: $2.47 2.06 2.01
Basic $2.42 2.02 1.99
Diluted
Weighted average number of shares used in
computing earnings per common share:
Basic 18,861 18,839 18,450
Diluted 19,278 19,203 18,661
See accompanying notes.
Florida Rock Industries, Inc.
Consolidated Balance Sheet September 30
(Dollars in thousands)
1999 1998
Assets
Current assets:
Cash and cash equivalents $ 3,726 4,457
Accounts receivable, less allowance for
doubtful accounts of $1,525 ($1,121 in 1998) 75,386 65,334
Inventories 23,634 25,535
Prepaid expenses and other 4,128 5,281
Assets held for sale 15,591 -
Total current assets 122,465 100,607
Other assets 14,822 20,754
Goodwill, at cost less accumulated amortization
of $4,905 ($4,104 in 1998) 46,964 9,140
Property, plant and equipment, at cost:
Land 139,678 120,076
Plant and equipment 498,944 477,846
Construction in process 110,555 45,091
749,177 643,013
Less accumulated depreciation and depletion 329,260 321,958
Net property, plant and equipment 419,917 321,055
$ 604,168 451,556
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable to banks $ 33,502 8,500
Accounts payable 41,590 38,783
Dividends payable 1,890 -
Federal and state income taxes 911 3,715
Accrued payroll and benefits 15,098 11,913
Accrued insurance reserves 2,493 2,660
Accrued liabilities, other 9,771 6,891
Long-term debt due within one year 2,311 2,324
Total current liabilities 107,566 74,786
Long-term debt 96,989 23,935
Deferred income taxes 31,898 28,564
Accrued employee benefits 14,019 12,440
Long-term accrued insurance reserves 7,188 6,463
Other accrued liabilities 8,250 5,482
Commitments and contingent liabilities
(Notes 11, 15 and 16)
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 18,249 18,796
Retained earnings 321,832 281,882
Less cost of treasury stock; 109,228 shares
(108,662 shares in 1998) (3,720) (2,689)
Total stockholders' equity 338,258 299,886
$604,168 451,556
See accompanying notes.
<PAGE>
Florida Rock Industries, Inc.
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1999 1998 1997
Cash flows from operating activities:
Net income $ 46,557 38,860 37,142
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 38,497 33,433 30,688
Net changes in operating assets and
liabilities:
Accounts receivable (3,154) (8,756) (4,398)
Inventories 732 (2,948) 1,249
Prepaid expenses and other 13,787 225 (465)
Accounts payable and accrued liabilities 8,710 12,352 7,922
Increase (decrease) in deferred income taxes 4,070 1,108 (1,184)
Gain on disposition of property, plant and
equipment (2,938) (1,576) (1,886)
Other, net 519 201 433
Net cash provided by operating activities 106,780 72,899 69,501
Cash flows from investing activities:
Purchase of property, plant and equipment (102,741) (95,267) (46,493)
Proceeds from the sale of property, plant and
equipment 4,524 2,305 3,436
Additions to other assets (3,700) (11,861) (9,775)
Proceeds from the disposition of other assets - 199 218
Business acquisitions net of cash acquired (95,149) - -
Additions to notes receivable (155) - -
Collection of notes receivable 64 184 5,364
Net cash used in investing activities (197,157)(104,440) (47,250)
Cash flows from financing activities:
Proceeds from long-term debt 75,000 14,000 -
Net increase (decrease) in short-term debt 24,510 8,200 (1,100)
Repayment of long-term debt (3,572) (1,047) (7,037)
Exercise of employee stock options 3,965 3,203 8,560
Repurchase of Company common stock (5,542) (2,080) (4,632)
Payment of dividends (4,715) (4,711) (4,604)
Net cash provided by(used) in financing activities 89,646 17,565 (8,813)
Net increase (decrease) in cash and cash
equivalents (731) (13,976) 13,438
Cash and cash equivalents at beginning of year 4,457 18,433 4,995
Cash and cash equivalents at end of year $ 3,726 4,457 18,433
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 682 534 948
Income taxes $22,569 14,549 23,255
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 533 442 294
Issuing debt $ 100 - 509
Other assets $ - 8,792 -
Additions to inventory from issuing debt $ - - 360
Additions to prepaid expenses from issuing
debt $ - - 96
Addition to notes receivable from the sale of
property, plant and equipment $ - - 200
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, 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)
Shares purchased
for treasury (173,966) (5,542)
Exercise of stock
options (2,007) 173,400 4,511
Tax benefit on stock
options exercised 1,460
Net income 46,557
Cash dividend ($.35
per share) (6,607)
Balance at September
30, 1999 18,974,618 $1,897 $18,249 $321,832 (109,228)$(3,720)
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 amounts for prior periods have been reclassified to
conform with presentation adopted in 1999.
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.
GOODWILL - Goodwill is being amortized over various periods ranging from
twenty to forty years.
VALUATION OF LONG-LIVED ASSETS - The Company periodically reviews long-lived
assets including goodwill 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 - Basic earnings per share("EPS")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.
The only difference between basic and diluted shares used for the calculation
is the effect of employee stock options.
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 - Effective October 1, 1998, the Company adopted
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income". 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. There are no items that require disclosures.
Effective October 1, 1998, the Company adopted SFAS No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits". 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.
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. In June 1999, the FASB issued SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of Effective Date SFAS
No. 133" which deferred the effective date to fiscal years beginning after June
15, 2000. 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.
2. Acquisitions. On June 1, 1999, the Company completed the acquisition of
all of the common stock of Harper Brothers, Inc. and Commercial Testing, Inc.
("Harper") located in Ft. Myers, Florida for $87 million in cash. The
purchase price is subject to certain post-closing adjustments related to
working capital. On July 2, 1999, the Company sold the fixed assets of
Harper's highway and heavy construction operations for $13.1 million in cash.
The Company retained and collected the working capital of the highway and heavy
construction business. The Company is subject to a final judgment entered on
October 13, 1999, by the United States District Court, Middle District of
Florida, in an action brought by the United States, requiring the Company to
divest itself of Harper's sand mine and the Company's quarry operations in Ft.
Myers. On December 3, 1999, the Company sold these assets for $34,300,000 in
cash subject to certain adjustments. At September 30, 1999, the Company has
classified these assets as Assets Held for Sale in the accompanying
Consolidated Balance Sheet.
On June 11, 1999, the Company acquired all of the common stock of Custom, LTD
for $5,800,000 in cash.
These acquisitions were accounted for under purchase accounting with the
purchase price allocated to the acquired assets and assumed liabilities based
on estimated fair market values. The allocations of purchase prices is
subject to change based on final determination of purchase price and fair
market value of the net assets. The estimated fair market value of the assets
acquired and liabilities assumed were considered to be the best estimates as of
the acquisition dates and may be adjusted as more information is obtained.
The assets of Harper that were sold were recorded at sales prices. The excess
of the purchase price over the fair market value of the assets acquired and
liabilities assumed amounted to $38,624,000 and is being amortized over 20 to
30 years. The results of operations of these acquisitions since the date of
acquisition are included in the consolidated results of operations of the
Company. If the Company had acquired these companies on October 1, 1997, the
proforma results of operation of the Company would have been:
1999 1998
Net sales $594,383 518,783
Net income $ 47,504 40,055
Earnings per share:
Basic $ 2.52 2.13
Diluted $ 2.46 2.09
These acquisitions were funded by borrowings under the Company's existing
revolving credit agreements and a new $50 million line of credit.
3. Transactions with related parties. As of September 30, 1999 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 29% 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 $6,999,000 in 1999, $6,256,000 in 1998 and $6,006,000 in 1997.
At September 30, 1999 and 1998 the Company had a net account payable due to
subsidiaries of FRPP totaling $233,000 and $295,000, 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 $1,656,000 in 1999, $1,515,000 in 1998 and $1,414,000 in
1997. Effective October 1, 1999, the Company and FRPP agreed to amend the
agreement. Under the amended agreement, FRPP will assume responsibility for
accounting, credit and certain computer functions.
4. Inventories. Inventories at September 30 consisted of the following (in
thousands):
1999 1998
Finished products $ 18,717 20,683
Raw materials 4,093 4,096
Parts and supplies 824 756
$ 23,634 25,535
The excess of current cost over the LIFO stated values of inventories was
$3,802,000 at September 30, 1999 and $5,056,000 at September 30, 1998.
5. Other assets. Other assets at September 30 consisted of the following (in
thousands):
1999 1998
Real estate $ 1,780 2,056
Restricted cash 822 9,264
Other 12,220 9,434
$ 14,822 20,754
6. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
1999 1998
Unsecured notes:
7.5%-10% notes $ 834 1,895
Revolving credit 75,000 -
Industrial development
revenue bonds 22,209 22,889
7% - 12% secured notes
and contracts 1,257 1,475
99,300 26,259
Less portion due within
one year 2,311 2,324
$ 96,989 23,935
Of the industrial development revenue bonds at September 30, 1999, $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, 1999). 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: $700,000 in 2000; $2,875,000 in 2001; $3,325,000 in
2002; and $650,000 in 2003. Another industrial development revenue bonds
totaling $659,000 at September 30, 1999 is at floating rates of interest and
matures in fiscal 2000. The bonds are collateralized by certain property, plant
and equipment having a carrying value of $4,499,000 at September 30, 1999. In
addition, the bonds are collateralized by certain properties of FRPP having a
carrying value at September 30, 1999 of $1,518,000. 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 1999, this rate averaged 3.3%.
The secured notes and contracts are collateralized by certain real estate
having a carrying value of approximately $3,779,000 at September 30, 1999 and
are payable in installments through 2011.
The aggregate amount of principal payments, excluding the revolving credit,
due subsequent to September 30, 1999, assuming that all of the industrial
development revenue bondholders exercise their options to sell the bonds to the
Company is: 2000 - $2,311,000; 2001 - $3,121,000; 2002 - $3,589,000; 2003 -
$833,000; 2004 - $204,000 and subsequent years - $14,242,000.
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, 1999, the total amount under the credit agreement had been
borrowed.
The Company also has available short-term lines of credit from four banks
aggregating $45,000,000. At September 30, 1999, $11,498,000 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, 1999 and 1998 were 5.9% and 5.8%, respectively. In May 1999, the Company
arranged a $50,000,000 364 day credit facility that expires in May 2000. At
September 30, 1999 the total amount under the credit facility was available for
borrowing.
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, 1999, under the most restrictive
of the agreements, $124,230,000 of consolidated retained earnings was not
restricted as to payment of cash dividends.
The Company capitalized interest cost on qualified construction projects of
$3,256,000 in 1999, $1,248,000 in 1998 and $176,000 in 1997.
7. Preferred Shareholder Rights Plan. On May 5, 1999, the Board of Directors
of the Company declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock. The dividend was paid
on June 11, 1999. Each right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock of the Company, par value $.01 per share (The "Preferred
Shares"), at a price of $145 per one one-hundredth of a Preferred Share,
subject to adjustment.
In the event that any Person or group of affiliated or associated Persons
(an "Acquiring Person") acquires beneficial ownership of 15% or more of the
Company's outstanding common stock each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void),
will thereafter have the right to receive upon exercise that number of Common
Shares having a market value of two times the exercise price of the Right.
An Acquiring Person excludes any Person or group of affiliated or associated
Persons who were beneficial owners, individually or collectively, of 15% or
more of the Company's Common Shares on May 4, 1999.
The rights will initially trade together with the Company's common stock
and will not be exercisable. However, if an Acquiring Person acquires 15% or
more of the Company's common stock the rights may become exercisable and trade
separately in the absence of future board action. The Board of Directors
may, at its option, redeem all rights for $.01 per right, at any time prior to
the rights becoming exercisable. The rights will expire September 30, 2009
unless earlier redeemed, exchanged or amended by the Board.
8. 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, 1999, 82,000 shares of common stock were available
for future grants.
Option transactions for the fiscal years ended September 30 are summarized as
follows:
1999 1998 1997
Average Average Average
Options Price(1) Options Price(1) Options Price(1)
Shares under option:
Outstanding at
beginning of year 1,307,700 15.31 1,468,800 15.20 1,086,200 13.32
Granted - - - - 918,000 16.41
Exercised (173,400) 14.44 (158,100) 14.32 (526,700) 13.45
Canceled (13,300) 16.38 (3,000) 16.41 (8,700) 13.89
Outstanding at end of
year 1,121,000 15.43 1,307,700 15.31 1,468,800 15.20
Options exercisable at
end of year 587,800 558,700 522,000
(1) Weighted average exercise price
The following table summarizes information concerning stock options outstanding
at September 30, 1999.
Options Options Remaining
Exercise Price Outstanding Exercisable Life
$ 12.375 27,000 27,000 2.7 years
12.5625 235,450 235,450 2.7 years
13.96875 35,000 28,000 2.3 years
16.4063 823,550 297,350 7.5 years
Total 1,121,000 587,800
Remaining non-exercisable options as of September 30, 1999 become exercisable as
follows: 2000-182,400; 2001-175,400 and 2002-175,400.
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 1999 net
income, basic and diluted earnings per share would have been $45,840,000,
$2.43 and $2.38, respectively, 1998 net income and basic and diluted earnings
per share would have been $38,145,000, $2.02 and $1.99 per share,
respectively, and 1997 net income and basic and diluted earnings per share
would have been $36,839,000, $2.00 and $1.97 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.
9. Income taxes. The provision for income taxes for the fiscal years ended
September 30 consisted of the following (in thousands):
1999 1998 1997
Current:
Federal $ 18,163 16,195 17,211
State 3,352 2,926 3,201
21,515 19,121 20,412
Deferred 3,776 1,996 (1,184)
Total $ 25,291 21,117 19,228
A reconciliation between the amount of reported income tax provision and the
amount computed at the statutory Federal income tax rate follows (in thousands):
1999 1998 1997
Amount computed at statutory
Federal rate $25,147 20,992 19,730
Effect of percentage depletion (2,720) (2,287) (2,144)
State income taxes (net of Federal
income tax benefit) 2,512 2,078 1,998
Other, net 352 334 (356)
Provision for income taxes $25,291 21,117 19,228
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:
1999 1998
Deferred tax liabilities:
Basis difference in property,
plant and equipment $ 41,435 37,615
Other 1,999 742
Gross deferred tax liabilities 43,434 38,357
Deferred tax assets:
Insurance reserves 3,768 3,584
Other accrued liabilities 8,465 8,669
Other 1,686 658
Gross deferred tax assets 13,919 12,911
Net deferred tax liability $ 29,515 25,446
10. 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):
1999 1998 1997
Service cost-benefits earned during
the period $ 273 301 291
Interest cost on projected benefit
obligation 1,321 1,300 1,178
Return on assets (2,389) (2,002) (1,693)
Amortization of net asset and prior
service cost (93) (93) (93)
Cost of early retirement program - - 194
Net periodic pension cost (income) ($ 888) ( 494) ( 123)
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 provides for the retirement plan a reconciliation of
benefit obligations, the funded status and the amounts included in the
Company's consolidated balance sheet at September 30 (in thousands):
1999 1998
Change in benefit obligation
Balance beginning of year $19,085 17,205
Service cost 273 301
Interest cost 1,321 1,300
Actuarial loss(gain) (282) 1,307
Benefits paid (1,060) (1,028)
Balance end of year $19,337 19,085
Change in plan assets
Balance beginning of year $24,383 21,887
Actual return on assets 1,855 3,524
Benefits paid (1,060) (1,028)
Balance end of year $25,178 24,383
Funded status $ 5,841 5,297
Unrecognized net actuarial gain (4,357) (4,608)
Unrecognized net obligation (432) (518)
Unrecognized prior service cost 12 5
Prepaid benefit cost $ 1,064 176
Union employees are covered by multi-employer plans not administered by the
Company. Payments of $183,000, $406,000 and $427,000 were made to these plans
during fiscal 1999, 1998 and 1997, 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 $6,649,000 in 1999;
$5,449,000 in 1998 and $4,938,000 in 1997.
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 1999, 1998 and 1997 was
$1,968,000, $1,974,000, and $1,814,000, 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 provides retiree health care a reconciliation of
benefit obligations, the funded status and the amounts included in the
Company's consolidated balance sheet at September 30 (in thousands):
1999 1998
Change in benefit obligation
Balance beginning of year $ 2,571 2,635
Service cost 118 123
Interest cost 169 173
Actuarial gain (202) (235)
Benefits paid (137) (125)
Balance end of year $ 2,519 2,571
Change in plan assets
Balance beginning of year $ 0 0
Employer contributions 138 125
Benefits paid (138) (125)
Balance end of year $ 0 0
Funded status $(2,519) (2,571)
Unrecognized net gain 44 246
Unrecognized prior service cost (25) (83)
Accrued postretirement benefit costs $(2,500) (2,408)
Net periodic postretirement benefit cost for fiscal years ended September
30 includes the following components (in thousands):
1999 1998 1997
Service cost of benefits earned
during the period $ 118 123 129
Interest cost on APBO 169 173 178
Net amortization and deferral (57) (207) (176)
Net periodic postretirement benefit
cost $ 230 89 131
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.25%.
11. Leases. Certain plant sites, office space and equipment are rented under
operating leases. Total rental expense, excluding mineral leases, for fiscal
1999, 1998 and 1997 was $5,536,000, $4,402,000 and $4,176,000 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, 1999 are as follows: 2000-$1,413,000; 2001-$1,363,000;
2002-$1,353,000; 2003-$1,128,000; 2004-$1,065,000 after 2004-$6,373,000.
Certain leases include options for renewal. Most leases require the Company to
pay for utilities, insurance and maintenance.
12. Gain (loss) on sale of assets and other income. The Company recorded a gain
on the sale of certain real estate of $1,683,000 in 1999, $622,000 in 1998 and
$14,000 in 1997. Included in other income for 1999 is $2,801,000 ($1,996,000
was recorded in the fourth quarter) of income from settlements of class action
lawsuits.
13. Business Segments. On September 30, 1999, the Company adopted SFAS No.
131, "Disclosure about Segments of an Enterprise and Related Information".
SFAS 131 established standards for reporting information about segments in
annual financial statements and requires selected information about segments in
interim financial reports issued to stockholders. In addition, SFAS 131
established standards for related disclosures about products and services, and
geographic areas. 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.
The Company has identified three business segments, each of which is managed
separately along product lines. All the Company's operations are in the
Southeastern and mid-Atlantic states. The Aggregates segment mines, processes
and sells construction aggregates. The Concrete products segment produces and
sells ready-mix concrete and other concrete products. The Cement and Calcium
products segment currently produces and sells calcium products to customers in
Florida. During fiscal 2000 this segment will begin quarrying operations to
produce and distribute portland and masonry cement in Florida.
Operating results and certain other financial data for the Company's
business segments are as follows (in thousands):
1999 1998 1997
Revenues
Aggregates $214,729 176,652 169,647
Concrete products 399,325 349,011 314,979
Cement and calcium 3,623 1,032 -
Intersegment sales (38,375) (34,380) (27,980)
Total revenues $579,302 492,315 456,646
Operating profit(a)
Aggregates 45,622 30,901 34,730
Concrete products 45,412 41,446 30,453
Cement and calcium 111 (563) (103)
Corporate overhead (19,905) (13,535) (9,391)
Total operating profit $ 71,240 58,249 55,689
Identifiable assets, at year end
Aggregates $298,014 223,006 205,138
Concrete products 168,781 143,600 131,132
Cement and calcium 103,037 60,713 10,363
Unallocated corporate assets 29,434 19,573 31,862
Cash items 4,658 4,457 3,933
Investments in affiliates 244 207 188
Total identifiable assets $604,168 451,556 382,616
Depreciation, depletion and
amortization
Aggregates $ 22,131 20,227 18,650
Concrete products 14,839 12,458 11,711
Cement and calcium 642 266 11
Other 885 482 316
Total depreciation, depletion
and amortization $ 38,497 33,433 30,688
Capital expenditures
Aggregates $ 46,824 41,022 21,731
Concrete products 32,112 19,914 17,258
Cement and calcium 42,603 40,921 8,045
Other 10,528 2,644 262
Total capital expenditures $132,067 104,501 47,296
(a) Operating profit is earnings before interest expense, interest income, other
income and income taxes.
14. Fair values of financial instruments. At September 30, 1999 and 1998 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, 1999 the carrying
amount and fair value of such other long-term debt was $2,091,000 and
$2,167,000, respectively. 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.
Interest Rate Hedge Agreements. In anticipation of obtaining a financing
commitment to provide capital for various projects and equipment, the Company
entered into interest rate 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 originally
anticipated a firm financing commitment would be arranged with a private
placement offering during the first or second quarter of fiscal 1999.
On December 31, 1998, the Company settled the agreements pursuant to the
contracts and on January 4, 1999 made a payment of $4,214,000. As a result of
changed capital requirements, improved cash flow and adequate existing credit
availability, management decided not to purse a commitment for long-term
financing. Accordingly, the settlement cost was expensed in the first quarter
of fiscal 1999.
15. 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.
16. Commitments. At September 30, 1999, the Company had placed orders and was
committed to purchase equipment costing approximately $22,439,000.
<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)
Vice President of CSX Corporation
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 Realty Trust, Inc.
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 (2)(4)
President, 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 and
Chief Accounting Officer
Dennis D. Frick
Secretary
Corporate Counsel
Stephen C. Travis
Controller
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 2, 2000, at the
general offices of the Company, 155 East 21st Street, Jacksonville, Florida.
Transfer Agent
First Union Customer Information Center
Corporate Trust Client Services NC-1153
1525 West W.T. Harris Boulevard - 3C3
Charlotte, NC 28288-1153
Telephone: 1-800-829-8432
General Counsel
Lewis S. Lee, Esquire
Martin, Ade, Birchfield & Mickler, PA
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.
