UNITED STATES
SECURITIES 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 September 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 September 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)
SEPTEMBER DECEMBER
1994 1993
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,976 $ 14,438
Short-term investments 18,347 18,009
Accounts receivable, net 25,579 27,879
Materials and supplies 12,109 11,974
Other 6,282 6,676
-------- --------
Total current assets 72,293 78,976
Other investments 80,724 66,233
Properties, less accumulated depreciation and
amortization 554,762 535,976
Other assets and deferred charges 12,460 10,904
-------- --------
$720,239 $692,089
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,472 $ 21,891
Income taxes 598 0
Estimated property taxes 7,747 4,665
Accrued casualty and other reserves 6,250 7,680
Other accrued liabilities 1,377 2,188
-------- --------
Total current liabilities 37,444 36,424
Deferred income taxes 130,307 126,164
Reserves and other long-term liabilities 7,208 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 500,144 476,808
Net unrealized gain (loss) on debt and equity
marketable securities (203) 891
Less:
Treasury stock at cost (271,361 shares) (12,708) (12,708)
-------- --------
Total shareholders' equity 545,280 523,038
-------- --------
$720,239 $692,089
======== ========
(See accompanying notes)
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME AND RETAINED EARNINGS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
THREE MONTHS NINE MONTHS
ENDED SEPT. 30 ENDED SEPT. 30
1994 1993 1994 1993
OPERATING REVENUES:
Transportation $ 40,387 $ 39,726 $122,087 $119,961
Realty-Land Sales 2 0 13,908 1,656
-Rents & Other 5,340 4,165 14,826 11,935
-------- -------- -------- --------
Total revenues 45,729 43,891 150,821 133,552
OPERATING EXPENSES:
Transportation 31,171 26,391 90,552 87,780
Realty 4,106 3,610 12,460 9,913
General and Administrative 3,887 3,907 12,801 12,660
-------- -------- -------- --------
Total expenses 39,164 33,908 115,813 110,353
Operating profit 6,565 9,983 35,008 23,199
OTHER INCOME (EXPENSE):
Dividends 77 75 238 226
Interest income 1,430 1,069 3,415 3,047
Interest expense 0 832 0 (630)
Gains on sales and other
disposition of properties 1,824 0 2,140 522
Other (net) 116 210 361 710
-------- -------- -------- --------
Total other income (expense) 3,447 2,186 6,154 3,875
Income before income taxes and cumulative
effect of change in accounting
principle 10,012 12,169 41,162 27,074
INCOME TAXES:
Current 2,854 4,535 10,296 8,799
Deferred 446 3,175 4,830 4,267
-------- -------- -------- --------
Total income taxes 3,300 7,710 15,126 13,066
Income before cumulative effect of change
in accounting principle 6,712 4,459 26,036 14,008
Cumulative effect of change in accounting
principle for income taxes 0 0 0 1,504
-------- -------- -------- --------
Net income $ 6,712 $ 4,459 $ 26,036 $ 15,512
Retained earnings:
Balance at beginning of period 494,332 467,378 476,808 458,125
Cash dividends (900) (900) (2,700) (2,700)
-------- -------- -------- --------
Balance at end of period $500,144 $470,937 $500,144 $470,937
======== ======== ======== ========
Per share data:
Cash dividends $ 0.10 $ 0.10 $ 0.30 $ 0.30
======== ======== ======== ========
Income before cumulative effect of
change in accounting principle $ 0.75 $ 0.50 $ 2.90 $ 1.56
Cumulative effect of change in accounting
principle for income taxes 0 0 0 .17
-------- -------- -------- --------
Net income $ 0.75 $ 0.50 $ 2.90 $ 1.73
======== ======== ======== ========
(See accompanying notes)
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
NINE MONTHS ENDED SEPT. 30
1994 1993
------ ------
Cash flows from operating activities:
Net income $26,036 $15,512
Adjustments to reconcile net income
to cash generated:
Cumulative effect of a change in accounting
principle 0 (1,504)
Depreciation and amortization 16,042 15,137
Gain on sales and other dispositions of assets (2,140) (522)
Deferred taxes 4,830 4,267
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net 2,165 3,838
Decrease (increase) in other current assets 394 482
(Increase) decrease in other assets and
deferred charges (1,556) (256)
(Decrease) increase in accounts payable (419) (1,626)
Increase (decrease) in income taxes payable 598 1,207
Increase (decrease) in estimated property taxes 3,082 4,183
(Decrease) increase in other current liabilities (2,241) 129
Increase (decrease) in reserves and other
long-term liabilities 745 146
------- -------
Net cash generated by operating activities 47,536 40,993
Cash flows from investing activities:
Purchases of properties (39,440) (44,983)
Purchases of investments (58,220) (55,677)
Maturities and redemption of investments 43,085 50,345
Proceeds from disposition of assets 5,277 7,563
------- -------
Net cash used in investing activities (49,298) (42,752)
Cash flows from financing activities:
Payment of dividends (2,700) (2,700)
------- -------
Net cash used in financing activities (2,700) (2,700)
Net increase (decrease) in cash and cash equivalents (4,462) (4,459)
Cash and cash equivalents at beginning of period 14,438 12,132
------- -------
Cash and cash equivalents at end of period $ 9,976 $ 7,673
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $10,517 $ 6,576
======= =======
(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 September 30, 1994, and December 31, 1993, and
the results of operations and cash flows for the three month and nine
month periods ended September 30, 1994, and September 30, 1993.
2. The results of operations for the nine months ended September 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 paintiff 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 September 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.
4. Certain prior year data has been reclassified to conform to the current
presentation.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Transportation revenues for the 1994 third quarter and nine-month period
reflected net increases of 1.7% and 1.8%, respectively, when compared to 1993.
Transportation revenues for the third quarter 1994 reflected a decrease of 2.7%
from second quarter 1994. An analysis of the details supporting the above is
as follows:
1. Comparing rail traffic volumes for nine-month periods 1994 versus 1993:
Carloads Rock 8.9% increase
Intermodal Units 1.3% decrease
Carloads Automobiles 1.2% decrease
All Other Carloads 2.0% increase
2. Comparing rail traffic volumes for third quarter 1994 versus third quarter
1993:
Carloads Rock 5.1% increase
Intermodal Units .8% increase
Carloads Automobiles 3.3% decrease
All Other Carloads 2.7% increase
3. Comparing rail traffic volumes for third quarter 1994 versus second
quarter 1994:
Carloads Rock 6.0% decrease
Intermodal Units .6% decrease
Carloads Automobiles 11.9% decrease
All Other Carloads 7.0% decrease
The volume of rock shipments in the first nine months of 1994 increased by
8.9% or 5,539 shipments over the same period in 1993. The trend during the
first nine months has been a positive reflection of road construction, airport
projects, and an increase in commercial/residential building. The third
quarter 1994 indicated an increase of 5.1% or 1,089 shipments over the third
quarter 1993. When comparing the third quarter 1994 with the second quarter
1994, rock shipments decreased 6.0% or 1,445 shipments. This decrease in the
third quarter 1994 versus second quarter is representative of the past history
in rock shipments.
Intermodal units decreased 1.3% or 3,113 units for the first nine months of
1994 when compared to the first nine months of 1993. The decrease of 1.3% in
intermodal traffic for the first nine months of 1994 compared to 1993 was the
result of inclement weather, the Teamsters strike in April, and the loss of
intermodal traffic to barge competition between Charleston and Savannah to
Miami. The number of intermodal units increased by .8% or 637 units in the
third quarter 1994 compared to third quarter 1993, and decreased by .6% or
483 units when comparing third quarter 1994 with second quarter 1994. The
increase of .8% in intermodal traffic for the third quarter 1994 compared to
1993 was the positive result of the northbound traffic to connecting carriers
and the intrastate intermodal traffic. These positive results were offset by
the decrease in intermodal traffic received from connecting carriers. This
decrease in intermodal traffic was the result of business fluctuations and
the loss of approximately 100 trailers per month from General Motors of Canada.
Automotive traffic decreased by 1.2% or 154 shipments in the first nine months
of 1994 over 1993, and 3.3% or 133 shipments when comparing third quarter 1994
with third quarter 1993. The decrease of 1.2% was attributable to the loss
of auto parts for switching movement to South Jacksonville for General
Motors. Automobile shipments during this same period increased by .005% over
1993. When comparing third quarter 1994 to second quarter 1994, automotive
shipments declined 11.9% or 521 shipments.
Other traffic excluding intermodal, rock, and automotive shipments increased
2.0% or 484 shipments for the first nine months of 1994 over 1993. This type
of traffic increased 2.7% or 200 shipments when comparing third quarter 1994
with third quarter 1993, and decreased 7.0% or 574 shipments when comparing
third quarter 1994 with second quarter 1994. This decrease was indicative of
the historical adjustments in this type of traffic during the third quarter.
Realty revenues for the nine months ended September 30, 1994, reflected an
increase of $15.1 million when compared with same period in 1993. Included
in this increase of $15.1 million is the sale of realty property in the first
quarter of 1994 for $11.3 million to the State of Florida through
condemnation procedure. Comparing the third quarter 1994 with third quarter
1993, realty revenues increased $1.2 million or 28.3%, and increased by
$.2 million or 3.6% when comparing third quarter 1994 with second quarter
1994. Realty revenues on building and warehouse leases increased by $2.9
million in the first nine months of 1994 over same period in 1993, and
increased by $1.4 million in the third quarter 1994 when compared to third
quarter 1993.
Operating expenses for the third quarter 1994 increased $.8 million or 2.1%
from $38.4 million in second quarter to $39.2 million in third quarter.
Property taxes increased in third quarter 1994 from second quarter 1994 by
$.4 million. This increase primarily reflected the increase in the ad
valorem tax accrual for 1994. The Company is in the process of filing with
the Court its exceptions to the 1994 property assessments by the State of
Florida. The increase in other expenses of $1.6 million included an
increase of $1.3 million primarily represented by the personal injury
accruals for the third quarter 1994. The following table sets forth the
major areas of expense for the two periods:
1994 1994
Third Second Increase
(in millions) Quarter Quarter (Decrease)
---------------- ------- ------- ----------
Labor (including fringe benefits) $15.3 $16.2 $(.9)
Fuel 2.4 2.4 ----
Material and supplies 2.6 2.8 (.2)
Equipment rents 1.2 1.4 (.2)
Depreciation 5.4 5.3 .1
Property taxes 2.9 2.5 .4
Other 9.4 7.8 1.6
------- ------- ---------
$39.2 $38.4 $ .8
------- ------- ---------
Operating expenses for the first nine months of 1994 increased by $5.5 million
from $110.3 million recorded in the first nine months of 1993 to $ll5.8
million recorded in the first nine months of 1994. This increase of $5.5
million was primarily attributed to an increase of $4.3 million in property
tax accruals, an increase of $1.8 million in casualty and insurance, and a
decrease in interest expense of $.6 million in the third quarter 1993,
brought about by the favorable settlement of the ad valorem tax case with the
State of Florida. The increase of $4.3 million in property tax accruals for
the first nine months of 1994 compared to 1993 was attributed to the
combination of the reduction of the ad valorem tax accruals in the third
quarter 1993 resulting from the favorable settlement with the State of
Florida as mentioned above and the increase in the 1994 tax assessments,
which are under protest by the Company.
Nine Months Nine Months Increase
(in millions) 1994 1993 (Decrease)
------------- ----------- ----------- ----------
Labor (including fringe benefits) $ 47.7 $ 48.7 $(1.0)
Fuel 7.2 7.7 (.5)
Material and supplies 8.2 9.5 (1.3)
Equipment Rents 3.9 5.1 (1.2)
Depreciation 16.0 15.1 .9
Property taxes 7.8 3.5 4.3
Other 25.0 20.7 4.3
---------- ----------- ----------
$115.8 $110.3 $ 5.5
---------- ----------- ----------
Other income for the third quarter 1994 compared to the third quarter 1993
increased by $1.3 million. This increase was primarily comprised of $1.4
million for gains on sale of realty property and an increase of $.4 million
in interest income on investments. Other income for the first nine months of
1994 compared to the first nine months of 1993 increased $2.3 million.
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,
which consists largely of U.S. Treasury securities for its short-term
investments and approximately $39.5 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 portfolio is informally dedicated to major real estate development.
Cash and short-term investments decreased by $4.2 million from $32.5 million
at year-end 1993 to $28.3 million at September 30, 1994. The investment
portfolio increased by $14.5 million from $66.2 million at year-end 1993 to
$80.7 million at September 30, 1994. 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 to
1.00 at March 31, 1994, to a ratio of 2.02 to 1.00 at June 30, 1994, and to
a ratio of 1.93 to 1.00 at September 30, 1994.
There were no significant changes in debt, reserves, or other liabilities
during the nine-month period except as previously discussed. Authorized
capital projects at September 30, 1994, increased to approximately $36.5
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, except as previously
discussed regarding the ad valorem tax
case with the State of Florida.
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)
s/s T.N. Smith
Vice President & Secretary
Dated November 7, 1994
s/s J.R. Yastrzemski
Comptroller
Dated November 7, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> QTR-3 YEAR
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-END> SEP-30-1994 DEC-31-1993
<CASH> 9976 14438
<SECURITIES> 18347 18009
<RECEIVABLES> 25579 27879
<ALLOWANCES> 0 0
<INVENTORY> 12109 11974
<CURRENT-ASSETS> 72293 78976
<PP&E> 761303 730451
<DEPRECIATION> 206541 194475
<TOTAL-ASSETS> 720239 692089
<CURRENT-LIABILITIES> 37444 36424
<BONDS> 0 0
<COMMON> 57946 57946
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 545280 523038
<SALES> 150821 181096
<TOTAL-REVENUES> 156975 186199
<CGS> 0 0
<TOTAL-COSTS> 115813 147958
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 41162 38241
<INCOME-TAX> 15126 17462
<INCOME-CONTINUING> 26036 20779
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 1504<F1>
<NET-INCOME> 26036 22283
<EPS-PRIMARY> 2.90 2.48
<EPS-DILUTED> .0 .0
<FN>
<F1>Cumulative effect of change in accounting principle for income taxes.
