Annual Report 2000
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
2000 1999 Change
Net sales $647,753 579,302 + 11.8
Gross profit $147,747 132,523 + 11.5
Operating profit $ 81,466 71,240 + 14.4
Income before income taxes $ 92,153 71,848 + 28.3
Net income $ 59,714 46,557 + 28.3
Per common share:
Basic earnings per share $ 3.21 2.47 + 30.0
Diluted earnings per share $ 3.15 2.42 + 30.2
Stockholders' equity $ 20.45 17.93 + 14.1
Cash dividend $ .425 .35
Return on average Stockholders' equity 16.6% 14.6
<PAGE>
2000 CORPORATE HIGHLIGHTS
Record sales - an increase of 11.8%
Record net income - an increased of 28.3%
Both volumes and prices increased
$127,600,000 invested in additional property, plant and
equipment
A new $200,000,000 revolving five year credit agreement of
which $65,000,000 was available at year end
Cement plant became fully operational and at year end was
capable of producing at rated capacity
50% investment in New Brunswick, Canada mining joint venture
BUSINESS. The Company is a major basic construction materials
company concentrating in the Southeastern and Mid-Atlantic
states.
MISSION STATEMENT. Be an excellent construction materials
company providing long-term growth and a superior return on
investment.
VISION. Through employees committed to continuous improvement,
we will provide quality materials and superb
service for our customers; operate safe, environmentally
responsible facilities that are well maintained and
cost effective; and develop mutually beneficial
relationships with our suppliers and the communities
within which we operate.
<PAGE>
To Our Stockholders:
The Company is pleased to report another record year of profitability.
Net operating profit after tax for fiscal 2000 increased 14% on a 12% increase
in net sales over fiscal 1999. The record operating results this past year
continued to be driven by strong demand for basic construction materials and
resulted in a small improvement in the operating profit margin despite
escalating costs for energy, labor and raw materials.
Results. Net sales for fiscal 2000 were $647,753,000 up 12% from
$579,302,000 in fiscal 1999. The increase in sales was due to both volume
and price increases in the Company's primary product lines as well as sales
related to acquisitions and the new cement plant. Approximately 18% of the
increase in sales was attributed to acquisitions.
Selling, general and administrative expenses increased 8% primarily as
the result of costs incurred in connection with the investigation of new
business opportunities, higher depreciation and amortization of goodwill and
increases in staffing and related personnel costs. While selling, general
and administrative expenses as a percentage of sales did not vary by much
year over year, the Company anticipates these costs will decline as a
percentage of sales in the coming year.
During fiscal 2000 operating profit before interest, taxes and other
income increased 14% to $81,466,000 from $71,240,000 last year. Operating
profit margin increased to 12.6% from 12.3% last year. Higher volume,
pricing and a small marginal contribution from cement sales was largely
offset by the rapid escalation of fuel prices, labor and raw material costs.
Interest expense for fiscal 2000 increased to $8,750,000 from
$1,078,000 last year. The increase was due to increased levels of
borrowings, higher interest rates and a decrease in the amount of interest
capitalized during fiscal 2000 primarily as the result of completing
construction of the new cement plant.
Included in gain on sale of assets was approximately $17,400,000
resulting from the divesture of our Fort Myers Alico Road Quarry during the
first quarter of fiscal 2000. The gain resulted in a contribution of $.59
earnings per diluted share to this year's results.
Income before income taxes increased to $92,153,000 from $71,848,000
in 1999. Net income for fiscal 2000 was $59,714,000 compared to fiscal
1999's net income of $46,557,000. Earnings per diluted share for fiscal
2000 was $3.15 compared to $2.42 per diluted share last year.
For the fiscal year ended September 30, 2000, return on Stockholders
equity increased to 16.6% from 14.6% last year. This was accomplished
despite the fact that the Company's capital investment in the new cement
plant was in a start-up mode for most of the year and operated at an average
below 50% of its rated capacity.
Acquisitions and Capital Expenditures. Cash outlays for capital
investment for fiscal 2000 approximated $107,000,000 and excluding business
acquisitions. Acquisitions made during the fiscal 2000 year expanded the
Company's concrete presence in Southwest Georgia and secured additional high
quality aggregate reserves. Cash from asset divestures during the current
fiscal year approximated $34,000,000. 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 36% for normal replacements, modernization, safety and
environmental, and 64% for growth opportunities such as the cement plant, the
construction of new plants and quarries, new aggregate reserves, land for
future concrete sites and equipment for expansion. Depreciation, depletion
and amortization for the fiscal year totaled $51,960,000.
The Company's capital expenditures for fiscal 2001 will approximate
$86,000,000. Estimated depreciation, depletion and amortization is
projected to increase to $62,000,000 primarily as a result of new capital
projects being completed and the high level of replacement capital spending.
Approximately 48% of the planned expenditures for fiscal 2001 are targeted
for normal replacements, modernization at existing plants and for safety and
environmental upgrades, and 52% for the expansion of existing facilities,
construction of new plants and projects, and land for future plant sites and
aggregate reserves. Expenditures for capital investment 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 capital projects.
Financial Management. Borrowings under the Company's lines of credit
in addition to a strong operating cash flow approximating $91,000,000 allowed
the Company to fund its capital expenditure program and complete the business
acquisitions made during fiscal 2000.
At September 30, 2000 total funded debt had increased from $132,802,000
last year to $166,863,000. In June 2000, the Company entered into a new
$200,000,000 five-year revolving credit agreement, replacing the prior credit
facility.
At September 30, 2000, $135,000,000 was outstanding under the Company's
bank revolving credit agreement. These borrowings were classified as
long-term debt outstanding on the balance sheet. At September 30, 2000 the
Company had $65,000,000 of available credit. Funded debt to equity
approximated 44% while the funded debt to capitalization ratio was 30%.
Dividends. The Board of Directors at its August 2, 2000 meeting
declared an increase in the cash dividend from $.40 per share to $.50 per
share on an annualized basis. The quarterly dividend of $.125 per share was
paid on October 2, 2000 to shareholders of record on September 15, 2000.
Subsequent to fiscal year end, the Board declared the quarterly cash
dividend of $.125 per share payable on January 2, 2001 to Stockholders of
record on December 13, 2000.
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 2000 the Company purchased 366,472
common shares at an average price of $32.91 per share. At September 30,
2000 approximately $9,900,000 was available for share repurchase under
existing Board authorization.
Stockholders Meeting. On February 2, 2000, the Annual Stockholders
Meeting was held in Jacksonville, Florida. The Stockholders elected Edward
L. Baker, Francis X. Knott, and Radford D. Lovett as directors to terms
expiring in 2003.
Safety, Community and Environment. Annually, the Company recognizes
outstanding safety achievements in cumulative hours and years worked without
a lost time accident. Three of the Company's quarries have each amassed
more than 1,000,000 man-hours without experiencing a lost time accident,
including the Miami Quarry, which became the first Florida Rock operation to
record 2,000,000 hours without a lost time injury. Three operations have
not incurred a lost time injury in over 20 years of operation, including the
Sunniland Mine, whose no lost time experience exceeds 25 years.
The Company has also received a number of industry awards recognizing
its operations for their performance in maintaining a safe work place. The
Company received significant recognition this past year for their leadership
in safety in the aggregates industry. Three operations were recipients of
the National Stone Association's (NSA) Safety Achievement Awards recognizing
their ability to maintain sustained periods of time without a lost time
accident. The Fort Myers, Miami and Gulf Hammock Quarries were recognized
by the National Safety Council with their Industry Leader Award, which is
given to the top five percent safest operations in the mining industry.
Fort Myers was also honored by the National Safety Council with a Best Record
for crushed and broken limestone, which represents the third Best Record
achievement received by the Company.
Florida Rock firmly believes that an active Community Relations Program
is the best way for a construction materials producer to clearly demonstrate
its value in the communities we operate. 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 Brooksville
Quarry was awarded NSA's Good Neighbors Gold Medallion, recognizing their
excellence in community relations. Brooksville was also the recipient of
the Florida Education Commissioner's Business Recognition Award for the third
time. As a result of receiving Fayette County's Chamber of Commerce "Spirit
of Industry" award for the second consecutive time, the Tyrone Quarry was
named the statewide winner of the Governor's Existing Industry Appreciation
Award for small manufacturers by the Georgia Economic Developers Association.
The honor is based on the industry's economic and social contributions to the
community. The Marjory Stoneman Douglas Elementary School in Miami, Florida
nominated the Miami Quarry as their choice for Dade County Partner of the
Year in large part for commissioning a mural to be painted by local artists
at the school.
Environmentally, Florida Rock Industries has been nationally recognized
for activities contributing to the maintenance of the environment in and
around the operations. This year, the Havre de Grace Quarry in Maryland
completed and dedicated to the community a wetland mitigation site with
handicap accessible nature study trails. A partnership was created with the
Harford Glen Environmental Education Center in order to use this site as an
outdoor science research lab for the Harford County students. The National
Stone Association named R. Don Darley, Director of Environmental Affairs -
Florida for the Company as the association's Environmental Steward for 2000.
The award recognizes the individual in the aggregates industry who has made
superior and exemplary contributions to the industry's environmental
responsiveness through his or her own leadership and personal effort.
During fiscal 2000 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's Quality improvement
initiative continues to provide a foundation for improving the Company's
processes by creating a team based infrastructure. This infrastructure
provides the support to improve leadership, customer focus, teamwork,
continuous improvement and measurement.
During the past fiscal year most of the natural teams in the Company
have completed a chartering process, which includes determining their
mission, vision, processes, customer needs and performance measures.
Leadership training was given to team leaders. For fiscal 2001 the Company
will continue the chartering of the remaining natural teams and the training
of all its team leaders. The goal is to create a culture where each team
is focused on continuous improvement in all aspects of the business.
Summary and Outlook. Although the operating results for fiscal 2000
were a record, profitability from operations was negatively impacted by
higher costs related to energy, labor and the raw materials used in the
manufacture of products. Capital expenditures continued to focus on higher
than normal replacements and equipment to meet increased demand and to
improve efficiencies.
For fiscal 2001 the Company expects a slowdown in economic growth.
Indications are that labor markets for drivers will remain tight resulting
in increased wage pressures. Petroleum based costs are expected to remain
high and given strong competitive conditions will limit the amount of costs
that can be passed on to the consumer.
Residential construction in the Company's markets is expected to be
down slightly. Non-residential construction is moving with local supply and
demand and continues to look healthy despite reports that backlogs are
declining and vacancy rates are retreating in some areas. The anticipated
increase in public funding for infrastructure as a result of the passage of
the Transportation Equity Act for the 21st Century (TEA 21) has been slow to
roll out in some areas. Much of the delay appears attributed to personnel
shortages and resulting bottlenecks at the state DOT level which varies from
state to state. The Company expects projects driven by TEA 21 funding in
its markets will continue to become a more prominent source of sales during
fiscal 2001.
Given current and expected market conditions for fiscal 2001, the
Company anticipate another record year from operations. Absent adverse
weather conditions or significant deterioration in economic conditions, the
Company should continue to benefit from positive pricing for aggregates and
strong demand for all core product lines. The cement plant is expected to
ship at full production capacity and contribute strongly to results.
Management will continue to evaluate new business 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 major basic construction materials
company concentrating its operations in the Southeastern and Mid-Atlantic
states. The Company is one of the nation's leading producers of
construction aggregates and a provider of cement, ready-mixed concrete and
concrete products. Its main product lines are construction aggregates(sand,
gravel and crushed stone), ready-mixed concrete, concrete block, portland
cement and prestressed concrete. The Company also manufactures calcium
products and markets other building materials.
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 and two sand
and gravel plants in Georgia; two sand and gravel plants and two crushed
stone plants in Maryland; and two crushed stone plants in Virginia. The
Company also has an investment interest in a stone quarry and a sand and
gravel mine located in Charlotte County, New Brunswick, Canada. The Company
operates aggregates distribution terminals in Woodbridge, 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 2.3 billion tons
of long-term aggregate reserves of sand and stone in Florida, Georgia,
Maryland, Virginia and New Brunswick, Canada, 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 2000 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 2000 the Company had 103 ready-mixed
concrete plants, 11 concrete block plants, and a delivery fleet of 1,267
ready mix and block trucks. Concrete block is sold in the peninsular of
Florida and South Georgia.
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 Thompson S. Baker Cement Plant started production in
December 1999 and has consistently improved production levels throughout the
year. By year-end, the plant was producing at the rated capacity of
750,000 tons per year. Initial emission testing at the plant has been
completed and all regulatory requirements currently have been met.
The annexation of the land on which the plant resides by the town of
Newberry, Florida has been challenged by an individual, though the Company
is not a party to the litigation. The Company believes that the outcome of
the legal action will not have any material impact on the financial
performance of the plant.
The International Trade Commission recently voted in favor of retaining
the antidumping orders on cement from Mexico and Japan under the Sunset
Review procedure. It also voted to terminate the countervailing duties
suspension agreement on cement with Venezuela. The Company expects these
rulings to continue to protect the Company's markets from unfair dumping of
cement.
Acquisitions and Divestures. During the past fiscal year the Company
acquired ready-mix and block operations located in Southwest Georgia and the
Tallahassee, Florida area. The acquisition consisted of 12 ready-mix plants,
2 block plants and 2 sand plants. The Company through a combination of
acquisition and greenfield sites added plants in Orlando and Sanford,
Florida; Albany, Camilla, Columbus, Bainbridge, Donaldsonville, Cairo,
Sylvester, Blakely, Leesburg, and Beachton, Georgia.
In February 2000, the Company acquired a 50% interest in a granite
quarry and aggregate distribution venture located at a deep-water port on the
St. Croix River in Bayside, Charlotte County, New Brunswick, Canada. The
deep-water port is the closest Canadian Atlantic port to the United States
and is ice-free and open to year round navigation. The location of the
quarry and port will allow the Company to cost effectively ship aggregates
by sea to local Atlantic Coast markets in the Southeastern United States,
including Florida.
As a condition to being allowed to acquire a stone quarry in Fort
Myers, Florida during fiscal 1999, the Company was required to divest an
adjacent and pre-existing stone quarry. On December 3, 1999 the Company
completed the sale of its pre-existing quarry and recognized a gain on the
divesture of the property in the current fiscal year.
Other. The Company continues its commitment to modernize and expand
operations where cost savings, higher productivity, increased capacity and
long-term growth plans justify the additional capital employed. During
fiscal 2000 capital expenditures, excluding funds used for business
acquisitions were divided approximately 36% for replacements, including
modernizing, safety and environmental, and 64% for new plants, equipment
for expansion, land and aggregates deposits for use in current and future
operations.
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
2000 1999 1998 1997 1996
Summary of Operations
Net sales $647,753 579,302 492,315 456,646 398,673
Gross profit $147,747 132,523 107,749 98,789 79,103
Operating profit $ 81,466 71,240 58,249 55,689 42,335
Interest expense $ 8,750 1,078 555 934 1,980
Income before income $ 92,153 71,848 59,977 56,370 41,110
taxes
Provision for income $ 32,439 25,291 21,117 19,228 14,110
taxes
Net income $ 59,714 46,557 38,860 37,142 27,000
Per Common Share
Basic earnings per share$ 3.21 2.47 2.06 2.01 1.43
Diluted earnings per
share $ 3.15 2.42 2.02 1.99 1.43
Stockholders' equity $ 20.45 17.93 15.90 14.09 12.30
Cash dividend $ .425 .35 .25 .25 .25
Financial Summary
Current assets $123,348 122,465 100,607 104,194 87,082
Current liabilities $ 80,717 107,566 74,786 55,676 51,857
Working capital $ 42,631 14,899 25,821 48,518 35,225
Property, plant and
equipment, net $486,544 419,917 321,055 250,005 233,858
Total assets $690,045 604,168 451,556 382,616 346,709
Long-term debt $163,620 96,989 23,935 10,859 16,862
Stockholders' equity $379,949 338,258 299,886 264,615 228,150
Other Data
Return on average
Stockholders' equity 16.6% 14.6 13.8 15.1 12.3
Return on average capital
employed 12.1% 10.4 10.9 13.1 10.5
Additions to property,
plant and equipment $127,600 132,067 104,501 47,296 45,544
Depreciation, depletion
and amortization $ 51,960 38,497 33,433 30,688 28,766
Weighted average number
of shares - basic 18,593 18,861 18,839 18,450 18,853
Weighted average number
of shares - diluted 18,968 19,278 19,203 18,661 18,867
Number of employees at
end of year 3,243 2,806 2,635 2,448 2,310
Stockholders of record 1,136 1,133 1,133 1,122 1,174
(a) In 2000, 1999, 1998, 1997 and 1996 the Company reported a gain(loss) on the
sale and/or write down of assets of $17,726,000, $1,683,000, $622,000, $14,000
and ($286,000), 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 driver
availability and labor 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 2000 and 1999 sales increased 11.8% and 17.7%, respectively, due
to both higher volumes and price increases and the start up of the cement plant
in fiscal 2000. In 2000, 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 as well as sales
from the cement plant and acquisitions. Revenues for the fourth quarter of
2000 and 1999 were adversely affected due to rainy weather conditions during
the month of September of both years. The price increases resulted from price
increases in core products.
For the contribution made to net sales from each business segment see
Note 13 of the Notes to Consolidated Financial Statements.
Gross profit for 2000 increased 11.5% and gross margin declined slightly
to 22.8% of sales. 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.
Gross profit for 1999 increased 23.0% while gross margin increased to
22.9% from 21.9% in the prior 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.
Selling, general and administrative expenses excluding costs related to
Year 2000 conversion increased 18.9% in 2000 and 15.8% in 1999 over the prior
year. The increase for 2000 was due to increased profit sharing expense that is
linked to profitability, higher depreciation expense primarily due to costs
capitalized for information systems upgrades and to become Year 2000 compliant,
amortization of goodwill and additional administrative costs associated with the
Company's acquisitions and costs associated with investigation of new business
opportunities. The increase for 1999 was 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 2000 remained stable and in 1999 decreased $521,000.
The decrease in 1999 was primarily due to high levels of cash available for
investment during the early part of fiscal 1998.
Interest expense for 2000 increased to $8,750,000 from $1,078,000 in 1999.
The increase in 2000 was due primarily to increased levels of borrowings and
higher interest rates and a decrease in the amount of interest capitalized in
2000. The higher average borrowings were due to the acquisitions in latter half
of 1999. Interest capitalized in 2000 was $1,327,000 as compared to $3,256,000
in 1999. The decrease in interest capitalized resulted from the completion of
the cement plant in December 1999. 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. 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 $4,214,000 in conjunction with interest rate hedge agreements
during the first quarter of 1999. 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):
2000 1999 1998
Cash and cash
equivalents $ 3,372 3,726 4,457
Total debt $ 166,863 132,802 34,759
Current ratio 1.5 to 1 1.1 to 1 1.3 to 1
Debt as a percent of
capital employed 28.9% 26.6 9.7
Unused revolving credit $ 65,000 0 75,000
Unused short-term lines $ 42,500 61,498 26,500
In 2000, 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. During June 2000, the Company entered into a $200
million five year credit agreement. This credit facility replaced a $75
million credit facility and a $50 million 364 day credit facility.
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. During January 1999, the Company increased its
available short-term lines of credit by 10 million. In May 1999, the
Company arranged a 50 million 364 day credit facility that expired in May
2000.
The Company expects its 2001 expenditures for property, plant and
equipment to be approximately $85,758,000 and depreciation, depletion and
amortization to be approximately $62,177,000.
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 replace
equipment due to wear and tear and to make capital expenditures to improve
efficiencies and expand capacity where warranted. At September 30, 2000, the
Company had placed orders and was committed to construction contracts and
equipment costing approximately $5,647,000.
In February 2000, the Board of Directors authorized management to
repurchase $10,000,000 of the Company's common stock from time to time as
opportunities may arise. The Company has approximately $9,882,000 available
under this authorization.
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.
Based on current expectations, management believes that its internally
generated cash flow and access to existing credit facilities are sufficient
to meet the liquidity requirements necessary to fund operations, capital
requirements, debt service and future dividend payments. It may be necessary
to obtain additional levels of financing in the event opportunities arise for
the Company to make a strategic acquisition.
Cement Plant. The Company commenced the construction of the cement
plant near Newberry, Alachua County, Florida in March 1997 and construction
was completed and production began in the first half of the fiscal year. The
plant is capable of running and producing 100% of its permitted capacity.
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. 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. In addition,
various cases have been filed challenging amendments to the City of
Newberry's comprehensive plan. The Company is not a party to the
litigation. Alachua County has filed suit to seek to enforce the terms of
the Developer's Agreement between the County and the Company. This action
does not claim damages against the Company. The Florida Department of
Environmental Protection notified the Company in the fourth quarter of fiscal
2000 of violations in the air permit limits for volatile organic compounds.
The Company believes that it is now operating in compliance with such
permits.
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 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: availability and terms of financing; the
weather; competition; levels of construction activity in the Company's
markets; fuel costs; transportation costs; driver availability and labor
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
2000 1999 2000 1999 2000 1999 2000 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 155,111 143,098 151,768 134,104 170,868 152,257 170,006 149,843
Gross profit $ 34,282 33,131 30,395 28,363 45,331 36,406 37,739 34,623
Operating
profit $ 18,810 19,211 14,177 12,939 28,177 21,551 20,302 17,539
Income before
income taxes $ 35,533 15,554 12,829 14,964 27,137 21,397 16,654 19,933
Net income $ 23,028 10,079 8,314 9,700 17,578 13,863 10,794 12,915
Per common share:
Basic EPS $ 1.23 .53 .45 .51 .95 .74 .58 .68
Diluted EPS $ 1.20 .52 .44 .50 .93 .72 .57 .67
Cash dividend $ .10 .125 .10 - .10 .125 .125 .10
Market price:
High $ 35.88 31.00 38.56 34.25 42.44 45.50 43.25 45.44
Low $ 30.25 22.63 28.00 27.13 28.50 33.00 31.38 34.50
</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, 2000 and 1999, and the
related consolidated statements of income, Stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 2000.
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 auditing standards generally
accepted in the United States of America. 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, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 2000 in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Jacksonville, Florida
December 8, 2000
Florida Rock Industries, Inc.
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
2000 1999 1998
Net sales $647,753 579,302 492,315
Cost of sales 500,006 446,779 384,566
Gross profit 147,747 132,523 107,749
Selling, general and administrative expenses:
Selling, general and administrative 65,131 54,782 47,291
Systems upgrades/year 2000 costs 1,150 6,501 2,209
Total selling, general and administrative 66,281 61,283 49,500
Operating profit 81,466 71,240 58,249
Interest expense (8,750) (1,078) (555)
Interest income 387 380 901
Gain (loss) on sales of assets 17,726 1,683 622
Settlement of interest rate hedge agreements - (4,214) -
Other income, net 1,324 3,837 760
Income before income taxes 92,153 71,848 59,977
Provision for income taxes 32,439 25,291 21,117
Net income $ 59,714 46,557 38,860
Earnings per common share:
Basic $3.21 2.47 2.06
Diluted $3.15 2.42 2.02
Weighted average number of shares used in
computing earnings per common share:
Basic 18,593 18,861 18,839
Diluted 18,968 19,278 19,203
See accompanying notes.
<PAGE>
Florida Rock Industries, Inc.
Consolidated Balance Sheet September 30
(Dollars in thousands)
2000 1999
Assets
Current assets:
Cash and cash equivalents $ 3,372 3,726
Accounts receivable, less allowance for
doubtful accounts of $1,864 ($1,525 in 1999) 82,468 75,386
Inventories 32,831 23,634
Prepaid expenses and other 4,677 4,128
Assets held for sale - 15,591
Total current assets 123,348 122,465
Other assets 30,409 14,822
Goodwill, at cost less accumulated amortization
of $6,633 ($4,905 in 1999) 49,744 46,964
Property, plant and equipment, at cost:
Land 147,052 139,678
Plant and equipment 672,965 498,944
Construction in process 31,513 110,555
851,530 749,177
Less accumulated depreciation and depletion 364,986 329,260
Net property, plant and equipment 486,544 419,917
$ 690,045 604,168
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable to banks $ 2,500 33,502
Accounts payable 40,624 41,590
Dividends payable 2,319 1,890
Federal and state income taxes 3,239 911
Accrued payroll and benefits 19,029 15,098
Accrued insurance reserves 3,191 2,493
Accrued liabilities, other 9,072 9,771
Long-term debt due within one year 743 2,311
Total current liabilities 80,717 107,566
Long-term debt 163,620 96,989
Deferred income taxes 34,074 31,898
Accrued employee benefits 14,765 14,019
Long-term accrued insurance reserves 8,591 7,188
Other accrued liabilities 8,329 8,250
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 17,549 18,249
Retained earnings 373,650 321,832
Less cost of treasury stock; 397,035 shares
(109,228 shares in 1999) (13,147) (3,720)
Total Stockholders' equity 379,949 338,258
$690,045 604,168
See accompanying notes.
Florida Rock Industries, Inc.
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
2000 1999 1998
Cash flows from operating activities:
Net income $ 59,714 46,557 38,860
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 51,960 38,497 33,433
Deferred income taxes 2,002 4,070 1,108
Gain on disposition of property, plant and
equipment and other assets (19,341) (2,938) (1,576)
Net changes in operating assets and
liabilities:
Accounts receivable (3,748) (3,154) (8,756)
Inventories (7,304) 732 (2,948)
Prepaid expenses and other (1,144) 13,787 225
Accounts payable and accrued liabilities 7,877 8,710 12,352
Other, net 644 519 201
Net cash provided by operating activities 90,660 106,780 72,899
Cash flows from investing activities:
Purchase of property, plant and equipment (107,271)(102,741) (95,267)
Proceeds from the sale of property, plant and
equipment 12,104 4,524 2,305
Additions to other assets (15,589) (3,700) (11,861)
Proceeds from the disposition of other assets 33,766 - 199
Business acquisitions net of cash acquired (29,957) (95,149) -
Additions to notes receivable (77) (155) -
Collection of notes receivable 23 64 184
Net cash used in investing activities (107,001)(197,157) (104,440)
Cash flows from financing activities:
Proceeds from long-term debt 143,808 75,000 14,000
Net increase (decrease) in short-term debt (31,002) 24,510 8,200
Repayment of long-term debt (79,225) (3,572) (1,047)
Exercise of employee stock options 1,789 3,965 3,203
Issuance of stock 144 - -
Repurchase of Company common stock (12,060) (5,542) (2,080)
Payment of dividends (7,467) (4,715) (4,711)
Net cash provided by financing activities 15,987 89,646 17,565
Net decrease in cash and cash
equivalents (354) (731) (13,976)
Cash and cash equivalents at beginning of year 3,726 4,457 18,433
Cash and cash equivalents at end of year $ 3,372 3,726 4,457
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 9,143 682 534
Income taxes $27,423 22,569 14,549
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 166 533 442
Issuing debt $ 480 100 -
Other assets $ - - 8,792
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.
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, 1997 18,974,618 $1,897 $18,053 $247,733 (195,434) $(3,068)
Shares purchased for
treasury (71,328) (2,080)
Exercise of stock
options (195) 158,100 2,459
Tax benefits on stock
options exercised 938
Net income 38,860
Cash dividends
($.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 ($.35
per share) (6,607)
Balance at September
30, 1999 18,974,618 1,897 18,249 321,832 (109,228) (3,720)
Shares purchased
for treasury (366,472)(12,060)
Exercise of stock
options (1,340) 74,300 2,489
Shares issued 4,365 144
Tax benefit on stock
options exercised 640
Net income 59,714
Cash dividend ($.425
share) (7,896)
Balance at September
30, 2000 18,974,618 1,897 17,549 373,650 (397,035)(13,147)
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 Florida Rock Industries, Inc. and its more than 50%
owned subsidiaries ("the Company"). All significant intercompany transactions
have been eliminated in consolidation. Investments in joint ventures 50% owned
are accounted for under the equity method of accounting.
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 3-20
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 ten
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. Expenditures to reclaim land are charged to the reserve as paid.
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 are charged against the reserve. Additionally,
the Company maintains a reserve for incurred but not reported claims based on
historical analysis of such claims.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are
capitalized. Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Estimation of such liabilities is extremely complex.
Some factors that must be assessed are engineering estimates, continually
evolving governmental laws and standards, and potential involvement of other
potentially responsible parties.
NEW ACCOUNTING REQUIREMENTS - In June 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 will adopt this
statement effective October 1, 2000 and it will have no impact on the
consolidated 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. 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.
On December 3, 1999, the Company sold Harper's sand mine and the Company's
quarry operation in Ft. Myers for $33,766,000 in cash and recorded a pre-tax
gain on the sale of the Company's quarry operations of $17,406,000 which is
included in gain(loss) on sales of assets. At September 30, 1999, the Company
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.
On June 9, 2000, the Company completed the purchase of the concrete, block and
sand operations of privately held Southern Concrete Construction Company
located in Albany, Georgia for $30.0 million in cash. The transaction
includes the acquisition of eleven ready-mix concrete plants in southwest
Georgia and one in Tallahassee, Florida, two concrete block plants and two sand
mines in southwest Georgia. The Company subsequently sold two ready mix
plants to third parties and swapped one plant in Georgia for a plant in
Florida.
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 assets of Harper and Southern Concrete
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 $43,133,00 and is being amortized over 20 to 30 years. The
results of operations of these acquisitions since the dates of acquisition are
included in the consolidated results of operations of the Company. If the
Company had acquired these companies on October 1, 1998, the proforma results
of operations of the Company would have been:
2000 1999
Net sales $666,081 620,194
Net income $ 60,246 47,985
Earnings per share:
Basic $ 3.24 2.54
Diluted $ 3.18 2.49
3. Transactions with related parties. As of September 30, 2000 six of the
Company's directors were also directors of Patriot Transportation Holding,
Inc.("Patriot"). Such directors own approximately 44% of the stock of Patriot
and 30% of the stock of the Company. Accordingly, Patriot and the Company are
considered related parties.
Patriot, through its transportation subsidiaries, hauls construction
aggregates for the Company and customers of the Company. Patriot 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 Patriot 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 Patriot totaling $7,178,000 in 2000, $6,999,000 in 1999 and $6,256,000 in
1998.
At September 30, 2000 the Company had net accounts receivable from Patriot
of $337,000 and at September 30, 1999 had net accounts payable due to Patriot
of $233,000.
Prior to October 1, 1999 the Company furnished certain management and
related services, including financial, tax, legal, administrative, accounting
and computer, to Patriot and its subsidiaries under an agreement expiring
September 30, 2000. Effective October 1, 1999, the Company and Patriot agreed
to amend the agreement. Under an amended agreement, Patriot assumed
responsibility for accounting, credit and certain computer functions. Charges
for such services were $582,000 in 2000, $1,656,000 in 1999 and $1,515,000 in
1998.
In September 2000, the Company purchased interests in land containing sand
mining reserves for $2,580,000 from an officer and from a trust in which two
officers have a beneficial interest. The transaction including the purchase
price were reviewed and approved on behalf of the Company by a committee of
independent directors.
4. Inventories. Inventories at September 30 consisted of the following (in
thousands):
2000 1999
Finished products $ 21,991 18,717
Raw materials 5,568 4,093
Work in progress 1,701 -
Parts and supplies 3,571 824
$ 32,831 23,634
The excess of current cost over the LIFO stated values of inventories was
$4,898,000 and $3,802,000 at September 30, 2000 and 1999, respectively.
5. Other assets. Other assets at September 30 consisted of the following (in
thousands):
2000 1999
Real estate $ 2,511 1,780
Restricted cash 2,958 822
Other 24,940 12,220
$ 30,409 14,822
6. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
2000 1999
Unsecured notes:
7.5%-10% notes $ 295 834
Revolving credit agreements 135,000 75,000
Industrial development
revenue bonds 21,550 22,209
7% - 12% secured notes
and contracts 7,518 1,257
164,363 99,300
Less portion due within
one year 743 2,311
$163,620 96,989
Of the industrial development revenue bonds at September 30, 2000,
$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 (9.5% at September 30,
2000). 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: $400,000 in 2001; $2,175,000 in
2002; $2,175,000 in 2003; and $700,000 in 2005. The bonds are collateralized
by certain property, plant and equipment having a carrying value of $1,680,000
at September 30, 2000. In addition, the bonds are collateralized by certain
properties of Patriot having a carrying value at September 30, 2000 of
$1,118,000. The remaining $14,000,000 of industrial revenue 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 2000, this rate
averaged 4.1%.
The secured notes and contracts are collateralized by certain real estate
having a carrying value of approximately $3,779,000 at September 30, 2000 and
are payable in installments through 2011.
The aggregate amount of principal payments due subsequent to September 30,
2000, assuming that all of the industrial development revenue bondholders
exercise their options to sell the bonds to the Company is: 2001 - $743,000;
2002 - $2,423,000; 2003 - $2,527,000; 2004 - $226,000; 2005 - $135,953,000 and
subsequent years - $22,491,000.
On June 28, 2000, the Company entered into a new $200,000,000 revolving
credit facility, which is syndicated through a group of five commercial banks.
The credit facility consists of a five-year unsecured revolving credit
agreement that expires on June 28, 2005. Interest is currently payable at
62.5 basis points over the London interbank rate. A commitment fee is paid
on the unused portion of the total credit. At September 30, 2000,
$135,000,000 was outstanding under the credit agreement and classified as
long-term debt.
The credit agreement contains financial covenants requiring the Company to
maintain certain debt to total capitalization and interest coverage ratios.
In addition, the covenants restrict the Company's activities regarding
investments, leasing and borrowing and payment of dividends. As of September
30, 2000, $61,796,000 of consolidated retained earnings was not restricted as
to payment of cash dividends. At September 30, 2000, the Company was in
compliance with all covenants contained in the credit agreement.
The Company also has available short-term lines of credit from four banks
aggregating $45,000,000. At September 30, 2000, $42,500,000 was available
for borrowing. Under these lines the Company may borrow funds for a period
of one to ninety days. There is no commitment fee and the banks can terminate
the lines at any time. The interest rate is determined at the time of each
borrowing. The weighted average interest rates on such borrowings at
September 30, 2000 and 1999 were 6.8% and 5.9%, respectively.
The Company capitalized interest cost on qualified construction projects of
$1,327,000 in 2000, $3,256,000 in 1999, $1,248,000 in 1998.
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, 2000, 4,500 shares of common stock were available
for future grants.
Option transactions for the fiscal years ended September 30 are summarized as
follows:
2000 1999 1998
Average Average Average
Options Price(1) Options Price(1) Options Price(1)
Shares under option:
Outstanding at
beginning of year 1,121,000 15.43 1,307,700 15.31 1,468,800 15.20
Granted 77,500 36.38 - - - -
Exercised (74,300) 15.46 (173,400) 14.44 (158,100) 14.32
Canceled (5,400) 27.50 (13,300) 16.38 (3,000) 16.41
Outstanding at end of
year 1,118,800 16.81 1,121,000 15.43 1,307,700 15.31
Options exercisable at
end of year 712,900 587,800 558,700
(1) Weighted average exercise price
The following table summarizes information concerning stock options outstanding
at September 30, 2000.
Options Options Remaining
Exercise Price Outstanding Exercisable Life
$ 12.375 27,000 27,000 1.7 years
12.5625 217,200 217,200 1.7 years
13.96875 35,000 35,000 1.3 years
16.4063 765,100 433,700 6.5 years
36.325 74,500 - 9.3 years
Total 1,118,800 712,900
Remaining non-exercisable options as of September 30, 2000 become exercisable as
follows: 2001-180,600, 2002-180,600, 2003 - 14,900, 2004 - 14,900 and 2005 -
14,900.
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 options
awarded since October 1, 1996 consistent with the provisions of SFAS No. 123,
the Company's net income, basic and diluted earnings per share would have
been:
2000 1999 1998
Pro forma net earnings $58,896 45,840 38,145
Pro forma basic earnings
per share $ 3.17 2.43 2.02
Pro forma diluted earnings
per share $ 3.11 2.38 1.99
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 in fiscal
2000 was estimated to be $15.35 on the date of grant using the following
assumptions; dividend yield of 1.1%, expected volatility of 31.2%, risk-free
interest rates of 6.7% and expected lives of 7 years.
On October 4, 2000, the Board of Directors adopted a stock option plan for the
issuance of up to 750,000 shares of common stock subject to the approval of
Shareholders at the Annual Meeting in February 2001.
9. Income taxes. The provision for income taxes for the fiscal years ended
September 30 consisted of the following (in thousands):
2000 1999 1998
Current:
Federal $ 25,776 18,163 16,195
State 4,661 3,352 2,926
30,437 21,515 19,121
Deferred 2,002 3,776 1,996
Total $ 32,439 25,291 21,117
A reconciliation between the amount of reported income tax provision and the
amount computed at the statutory Federal income tax rate follows (in thousands):
2000 1999 1998
Amount computed at statutory
Federal rate $32,254 25,147 20,992
Effect of percentage depletion (3,160) (2,720) (2,287)
State income taxes (net of Federal
income tax benefit) 3,185 2,512 2,078
Other, net 160 352 334
Provision for income taxes $32,439 25,291 21,117
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:
2000 1999
Deferred tax liabilities:
Basis difference in property,
plant and equipment $ 43,675 41,435
Other 2,724 1,999
Gross deferred tax liabilities 46,399 43,434
Deferred tax assets:
Insurance reserves 4,566 3,768
Other accrued liabilities 8,714 8,465
Other 1,602 1,686
Gross deferred tax assets 14,882 13,919
Net deferred tax liability $ 31,517 29,515
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):
2000 1999 1998
Service cost-benefits earned during
the period $ 254 273 301
Interest cost on projected benefit
obligation 1,361 1,321 1,300
Return on assets (2,394) (2,389) (2,002)
Amortization of net asset and prior
service cost (93) (93) (93)
Cost of early retirement program - - -
Net periodic pension income ($ 872) ( 888) ( 494)
Assumptions used in determining the net periodic pension cost (income) for
2000 are discount rate of 7.75%, rate of increase in compensation levels of
5% and expected long-term rate of return on assets of 9% and for 1999 and
1998 are discount rate of 7.25%, rate of increase in compensation levels of
5% and expected 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):
2000 1999
Change in benefit obligation
Balance beginning of year $19,337 19,085
Service cost 254 273
Interest cost 1,361 1,321
Actuarial gain (980) (282)
Benefits paid (1,017) (1,060)
Balance end of year $18,955 19,337
Change in plan assets
Balance beginning of year $25,178 24,383
Actual return on assets 764 1,855
Expenses (116) -
Benefits paid (1,017) (1,060)
Balance end of year $24,809 25,178
Funded status $ 5,854 5,841
Unrecognized net actuarial gain (3,591) (4,357)
Unrecognized net obligation (345) (432)
Unrecognized prior service cost 18 12
Prepaid benefit cost $ 1,936 1,064
Union employees are covered by multi-employer plans not administered by
the Company. Payments of $140,000, $183,000 and $406,000 were made to these
plans during fiscal 2000, 1999 and 1998, 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 $7,189,000 in 2000; $6,649,000 in 1999 and $5,449,000 in
1998.
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 to partially fund
this benefit and it is the owner and beneficiary of such policies. The
expense for fiscal 2000, 1999 and 1998 was $1,934,000, $1,968,000, and
$1,974,000, 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 for the retiree health care plan provides a
reconciliation of benefit obligations, the funded status and the amounts
included in the Company's consolidated balance sheet at September 30 (in
thousands):
2000 1999
Change in benefit obligation
Balance beginning of year $ 2,519 2,571
Service cost 96 118
Plan Participant Contributions 132 -
Interest cost 148 169
Actuarial gain (370) (202)
Benefits paid (406) (137)
Balance end of year $ 2,119 2,519
Change in plan assets
Balance beginning of year $ 0 0
Employer contributions 274 138
Plan Participant Contributions 132 -
Benefits paid (406) (138)
Balance end of year $ 0 0
Funded status $(2,119) (2,519)
Unrecognized net gain (313) 44
Unrecognized prior service cost (21) (25)
Accrued postretirement benefit costs $(2,453) (2,500)
Net periodic postretirement benefit cost for fiscal years ended September
30 includes the following components (in thousands):
2000 1999 1998
Service cost of benefits earned
during the period $ 96 118 123
Interest cost on APBO 148 169 173
Net amortization and deferral (17) (57) (207)
Net periodic postretirement benefit
cost $ 227 230 89
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.75% for 2000 and 7.25% for 1999 and 1998.
11. Leases. Certain plant sites, office space and equipment are rented under
operating leases. Total rental expense, excluding mineral leases, for fiscal
2000, 1999 and 1998 was $4,761,000, $5,536,000 and $4,402,000, 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, 2000 are as follows: 2001-$1,267,000;
2002-$1,248,000; 2003-$1,178,000; 2004-$1,181,000; 2005-$933,000 after
2005-$5,118,000. 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 and quarry assets of $17,726,000 in
2000; $1,683,000 in 1999 and $622,000 in 1998. See note 2 for a discussion of
the sale of quarry assets in 2000. 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 cement and
calcium products to customers in Florida and Georgia.
Operating results and certain other financial data for the Company's
business segments are as follows (in thousands):
2000 1999 1998
Revenues
Aggregates $235,036 214,729 176,652
Concrete products 452,908 399,325 349,011
Cement and calcium 24,807 3,623 1,032
Intersegment sales (64,998) (38,375) (34,380)
Total revenues $647,753 579,302 492,315
Operating profit
Aggregates $ 49,831 45,622 30,901
Concrete products 44,969 45,412 41,446
Cement and calcium 4,151 111 (563)
Corporate overhead (17,485) (19,905) (13,535)
Total operating profit $ 81,466 71,240 58,249
Identifiable assets, at year end
Aggregates $309,658 298,014 223,006
Concrete products 211,903 168,781 143,600
Cement and calcium 121,181 103,037 60,713
Unallocated corporate assets 33,420 29,434 19,573
Cash items 3,372 4,658 4,457
Investments in affiliates 10,511 244 207
Total identifiable assets $690,045 604,168 451,556
Depreciation, depletion and
amortization
Aggregates $ 24,715 22,131 20,227
Concrete products 18,427 14,839 12,458
Cement and calcium 5,413 642 266
Other 3,405 885 482
Total depreciation, depletion
and amortization $ 51,960 38,497 33,433
Capital expenditures
Aggregates $ 50,059 46,824 41,022
Concrete products 52,843 32,112 19,914
Cement and calcium 20,132 42,603 40,921
Other 4,566 10,528 2,644
Total capital expenditures $127,600 132,067 104,501
14. Fair values of financial instruments. At September 30, 2000 and 1999 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, 2000 the carrying
amount and fair value of such other long-term debt was $1,792,000 and
$1,860,000, respectively. 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.
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 pursue 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, 2000, the Company had placed orders and was
committed to purchase equipment costing approximately $5,647,000.
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 Chairman of CSX Corporation
Charles H. Denny III (2)
Investments
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)
Chairman of Partners Management
Company, LLC and 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 and Chief Executive Officer,
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
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 7, 2001, 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
McGuireWoods LLP
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.
