UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended June 30, 1994
Commission File Number 2-89530
FLORIDA EAST COAST INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2349968
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1650 Prudential Drive, Jacksonville, FL 32201-1380
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code
(904) 396-6600
N O N E
Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ____X____ No _________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding at June 30, 1994
Common Stock, $6.25 par value 9,000,000 shares
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
June December
1994 1993
(Unaudited)
---------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 6,858 $ 14,438
Short-term investments 18,341 18,009
Accounts receivable, net 27,274 27,879
Materials and supplies 13,150 11,974
Other 6,178 6,676
-------- --------
Total current assets 71,801 78,976
Other investments 76,888 66,233
Properties, less accumulated
depreciation and amortization 552,438 535,976
Other assets and deferred charges 10,737 10,904
-------- --------
$711,864 $692,089
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 22,658 $ 21,891
Income taxes 0 0
Estimated property taxes 4,935 4,665
Accrued casualty and other reserves 6,900 7,680
Other accrued liabilities 988 2,188
-------- --------
Total current liabilities 35,481 36,424
Deferred income taxes 129,746 126,164
Reserves and other long-term liabilities 7,351 6,463
Shareholders' equity:
Common stock, $6.25 par value; 9,360,000
shares authorized; 9,271,361 shares
issued and outstanding 57,946 57,946
Capital surplus 101 101
Retained earnings 494,333 476,808
Net unrealized gain (loss) on debt
and marketable equity securities (386) 891
Less:
Treasury stock at cost
(271,361 shares) (12,708) (12,708)
-------- --------
Total shareholders' equity 539,286 523,038
-------- --------
$711,864 $692,089
======== ========
(See accompanying notes)
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS
OF INCOME AND RETAINED EARNINGS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
1994 1993 1994 1993
---------------------------------------
OPERATING REVENUES:
Transportation $ 41,528 $ 40,036 $ 81,700 $ 80,235
Realty 5,154 5,606 23,392 9,426
-------- -------- -------- --------
Total revenues 46,682 45,642 105,092 89,661
OPERATING EXPENSES:
Transportation 29,967 30,816 59,381 61,389
Realty 4,149 3,247 8,354 6,303
General and Administrative 4,305 4,739 8,914 8,753
-------- ------- -------- --------
Total expenses 38,421 38,802 76,649 76,445
Operating profit 8,261 6,840 28,443 13,216
OTHER INCOME (EXPENSE):
Dividends 76 78 161 151
Interest income 909 976 1,985 1,978
Interest expense 0 (1,461) 0 (1,461)
Gains on sales and other disposition
of properties 0 119 317 521
Other (net) 7 327 245 501
-------- ------- -------- --------
Total other income (expense) 992 39 2,708 1,690
Income before income taxes and
cumulative effect of change in
accounting principle 9,253 6,879 31,151 14,906
INCOME TAXES:
Current 4,159 2,408 7,442 4,264
Deferred (25) 51 4,384 1,093
-------- ------- -------- --------
Total income taxes 4,134 2,459 11,826 5,357
Income before cumulative effect of
change in accounting principle 5,119 4,420 19,325 9,549
Cumulative effect of change in
accounting principle for income taxes 0 0 0 1,504
-------- ------- -------- --------
Net income $ 5,119 $ 4,420 $ 19,325 $ 11,053
Retained earnings:
Balance at beginning of period 490,114 463,858 476,808 458,125
Cash dividends (900) (900) (1,800) (1,800)
-------- -------- -------- --------
Balance at end of period $494,333 $467,378 $494,333 $467,378
======== ======== ======== ========
Per Share Data:
Cash dividends $ 0.10 $ 0.10 $ 0.20 $ 0.20
======== ======== ======== ========
Income before cumulative effect of
change in accounting principle $ 0.57 $ 0.49 $ 2.15 $ 1.06
Cumulative effect of change in
accounting principle for
income taxes 0.00 0.00 0.00 0.17
-------- -------- -------- --------
Net income $ 0.57 $ 0.49 $ 2.15 $ 1.23
======== ======== ======== ========
(See accompanying notes)
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
SIX MONTHS ENDED JUNE 30
1994 1993
---- ----
Cash flows from operating activities:
Net income $19,325 $11,053
Adjustments to reconcile net income
to cash generated:
Cumulative effect of a change in
accounting principle 0 (1,504)
Depreciation and amortization 10,638 10,030
Gain on disposition of assets (317) (521)
Deferred taxes 4,384 1,093
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net 605 3,807
(Increase) decrease in other current assets (678) 1,056
Decrease (increase) in other assets and
deferred charges 167 (260)
Increase (decrease) in accounts payable 767 (2,658)
Increase (decrease) in income taxes payable 0 894
Increase (decrease) in estimated property taxes 270 5,833
(Decrease) increase in other current liabilities(1,980) 444
Increase (decrease) in reserves and other
long-term liabilities 888 (168)
------ ------
Net cash generated by operating activities 34,069 29,099
Cash flows from investing activities:
Purchases of properties (27,100) (27,098)
Purchases of investments (46,587) (38,306)
Maturities and redemption of investments 33,527 36,609
Proceeds from disposition of assets 311 2,381
------- -------
Net cash used in investing activities (39,849) (26,414)
Cash flows from financing activities:
Payment of dividends (1,800) (1,800)
------- -------
Net cash used in financing activities (1,800) (1,800)
Net increase (decrease) in cash
and cash equivalents (7,580) 885
Cash and cash equivalents at beginning of period 14,438 12,132
------- -------
Cash and cash equivalents at end of period $ 6,858 $13,017
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 8,237 $ 2,300
======= =======
(See accompanying notes)
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments (consisting of normal recurring accruals)
considered necessary to present fairly the financial position as
of June 30, 1994, and December 31, 1993, and the results of
operations and cash flows for the three month and six month periods
ended June 30, 1994, and June 30, 1993.
2. The results of operations for the three months ended June
30, 1994, and 1993, are not necessarily indicative of the results
that may be expected for the full year.
3. The Company has retained certain self-insurance risks with
respect to losses for third-party liability, property damage, and
group health insurance coverage provided employees. The Company
is the defendant and plaintiff in various lawsuits resulting
from its operations. In the opinion of management, adequate
provision has been made in the financial statements for the
estimated liability which may result from disposition of such
lawsuits.
The Company is subject to proceedings arising out of
environmental laws and regulations, which primarily relate to the
disposal and use of fuel and oil used in the transportation
business. It is the Company's policy to accrue and charge
against earnings environmental cleanup costs when it is probable
that a liability has been incurred and an amount can be
reasonably estimated.
The Company is currently a party to, or involved in, legal
proceedings directed at the cleanup of two Superfund sites. The
Company has accrued its allocated share of the total estimated
cleanup costs for these two sites. Based upon management's
evaluation of the other potentially responsible parties, the
Company does not expect to incur additional amounts even though
the Company has joint and several liability. Other proceedings
involving environmental matters such as alleged discharge of oil
or waste material into water or soil are pending against the
Company.
It is not possible to quantify future environmental costs
because many issues relate to actions by third parties or changes
in environmental regulation. However, based on information
presently available, management believes that the ultimate
disposition of currently known matters will not have a material
effect on the financial position or liquidity of the Company in
any one period. As of June 30, 1994, and December 31, 1993, the
aggregate environmental related accruals were $3,500,000.
Environmental liabilities are paid over an extended period, and
the timing of such payments cannot be predicted with any
confidence.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Transportation revenues for the 1994 second quarter and six-month period
reflect net increases of 3.7% and 1.8%, respectively, when compared to 1993.
Transportation revenues for the second quarter 1994 reflect an increase of 3.4%
from first quarter 1994. An analysis of the details supporting the above is
as follows:
1. Comparing rail traffic volumes for six-month periods 1994 versus 1993:
Carloads Rock 10.9% increase
Intermodal Units 2.3% decrease
Carloads Automobiles .2% decrease
All Other Carloads 1.7% increase
2. Comparing rail traffic volumes for second quarter 1994 versus second
quarter 1993:
Carloads Rock 10.1% increase
Intermodal Units 1.3% increase
Carloads Automobiles 3.5% increase
All Other Carloads 1.9% increase
3. Comparing rail traffic volumes for second quarter 1994 versus first
quarter 1994:
Carloads Rock 13.2% increase
Intermodal Units 2.7% increase
Carloads Automobiles 2.2% increase
All Other Carloads 7.0% decrease
As reflected by the above comparisons, the volume of rock shipments in
the first six months of 1994 increased by 10.9% or 4,450 shipments over the
same period in 1993. Second quarter 1994 indicates an increase of 10.1%
or 2,203 shipments and 13.2% or 2,806 shipments over second quarter 1993 and
first quarter 1994, respectively. These increases can be attributed to the
general improvement in economy and the normal increase in rock traffic
during the second quarter. Intermodal units decreased 2.3% or 3,750 units
through June 30, 1994, increased 1.3% or 1,026 units for the second quarter
1994 when compared to the same period in 1993, and increased 2.7% or 2,100
units in the second quarter when compared to the first quarter 1994.
Automobile traffic decreased by .2% or 21 carloads in the first six months of
1994 compared to the first six months of 1993. Automobile traffic increased
3.5% or 149 carloads in second quarter 1994 compared to second quarter 1993
and 2.2% or 92 carloads increase from first quarter to second quarter 1994
which represents the seasonal upswing in this type of traffic. When
comparing the first six months of 1994 with 1993, all other traffic increased
by 1.7% or 284 shipments. This traffic also increased 1.9% or 153 shipments
in the second quarter 1994 compared to the second quarter 1993, but declined
by 7% or 610 shipments when compared to the first quarter 1994. This
decrease during the second quarter is reflective of past year trends.
Realty revenues for the six months ended June 30, 1994, and the second
quarter 1994 reflected an increase of $14.0 million and a decrease of
$.5 million, respectively, when compared to the same period in 1993. This
increase of $14.0 million is primarily attributable to an unusually large
sale of realty property to the State of Florida through condemnation for
approximately $11.3 million in the first quarter 1994. However, rental
income increased $1.5 million for the six months ending June 30, 1994,
compared to same period 1993 and $.8 million for the second quarter 1994
when compared to second quarter 1993 because of the additional square footage
which became available for lease during those periods.
Operating expenses for the second quarter 1994 increased $.2 million or
.5% from $38.2 million in first quarter to $38.4 million in second quarter.
The following table sets forth the major areas of expense for the two
periods:
1994 1994
Second First Increase
(in millions) Quarter Quarter (Decrease)
------------- ------- ------- ----------
Labor (including fringe benefits) $16.2 $16.2 $-----
Fuel 2.4 2.4 -----
Material and supplies 2.8 2.7 .1
Equipment rents 1.4 1.4 -----
Depreciation 5.3 5.3 -----
Property taxes 2.5 2.4 .1
Other 7.8 7.8 -----
----- ----- -------
$38.4 $38.2 $ .2
----- ----- -------
Operating expense for the first six months of 1994 increased $.2 million to
$76.6 million as compared to $76.4 million recorded in the first six months
of 1993. The following table sets forth the major areas of expense for the
two periods:
First Half First Half Increase
(in millions) 1994 1993* (Decrease)
Labor (including fringe benefits) $32.4 $32.3 $ .1
Fuel 4.8 5.2 (.4)
Material and supplies 5.5 7.0 (1.5)
Equipment rents 2.8 3.7 (.9)
Depreciation 10.6 10.0 .6
Property taxes 4.9 4.4 .5
Other 15.6 13.8 1.8
----- ----- -------
$76.6 $76.4 $ .2
----- ----- -------
*Note: 1993 expenses reclassified in 1994 for comparison purposes.
Other income for the second quarter 1994 compared to the second quarter 1993
and the six months ending June 30, 1994, reflects an increase of $1.0 million
primarily because of $1.5 million accrual for interest expense on property
taxes in 1993. The interest accrual of $1.5 million was the result of an
adverse ruling against the Company in the property tax case challenging the
"unit assessment procedures" used by the State of Florida for assessing the
railroad's property values for tax purposes, with a favorable settlement
reached in the third quarter of 1993.
LIQUIDITY AND CAPITAL RESOURCES
FEC's principal sources of liquidity include cash generated by
operations, earnings on invested cash, and earnings on its
investment portfolio, consisting largely of U.S. Treasury
securities for its short-term investments and approximately $35 million
being actively managed in other diversified investment funds.
Current cash generations are used for capital expenditures in the
Transportation and Realty sectors and in payment of dividends.
The investment portfolios are informally dedicated to major
real estate development.
Cash and short-term investments decreased $7.2 million to $25.2
million at June 30, 1994, from $32.4 million at year-end 1993.
The investment portfolio increased $10.7 million to $76.9
million at June 30, 1994, from $66.2 million at year-end 1993.
The Company's working capital position changed from a ratio of
2.17 to 1.00 at year-end 1993 to a ratio of 2.37 March 31, 1994, and to
a ratio of 2.02 at June 30, 1994.
There were no significant changes in debt, reserves or other
liabilities during the six-months period. Authorized capital
projects at June 30, 1994, decreased to approximately $30.8 million
authorized and outstanding from $33.4 million as of December 31, 1993.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
No change from 10-K for the year ended
December 31, 1993.
Item 5. Other Information
The Company is not aware of any other matters
of significance to be reported hereunder.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
FLORIDA EAST COAST INDUSTRIES, INC.
(Registrant)
Date: August 5, 1994 /s/ T. Neal Smith
________________________________
Vice President & Secretary
Date: August 5, 1994 /s/ J.R. Yastrzemski
_________________________________
Comptroller
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> QTR-2
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1994
<CASH> 6,858
<SECURITIES> 18,341
<RECEIVABLES> 27,247
<ALLOWANCES> 0
<INVENTORY> 13,150
<CURRENT-ASSETS> 71,801
<PP&E> 775,699
<DEPRECIATION> (203,261)
<TOTAL-ASSETS> 711,864
<CURRENT-LIABILITIES> 35,481
<BONDS> 0
<COMMON> 57,946
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 711,864
<SALES> 105,092
<TOTAL-REVENUES> 107,800
<CGS> 0
<TOTAL-COSTS> 76,649
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 31,151
<INCOME-TAX> 11,826
<INCOME-CONTINUING> 19,325
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,325
<EPS-PRIMARY> 2.15
<EPS-DILUTED> .0
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