<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 1994.
FLORIDA EAST COAST INDUSTRIES, INC.
(Exact name of Registrant as specified in its Charter)
Florida 59-2349968
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1650 Prudential Drive, Jacksonville, FL 32201-1380
(Address of principal executive offices)
Registrant's telephone number, including area code (904) 396-6600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, $6.25 Par Value New York Stock Exchange
Collateral Trust 5% Bonds New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, or
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated into Part III of this Form 10-K or any amendment to
this Form 10-K. (X)
Based on the closing sales price of March 10, 1995, the aggregate market value
of the voting stock held by non-affiliates of the Registrant was $265,024,714.
The number of shares outstanding of the Registrant's common stock, $6.25 par
value, was 9,271,361 at March 10, 1995, with 271,361 shares of treasury stock.
<PAGE>
PART I
ITEM 1. BUSINESS
(a) Florida East Coast Industries, Inc. (Registrant) was incorporated under the
laws of the State of Florida on December 9, 1983, for purposes of (a)
directly, or through the ownership of shares in any corporation, to acquire,
hold, manage, improve, develop, and dispose of real estate and property; (b)
only through the ownership of shares in any corporation, to engage in the
transportation industry; (c) directly, or through the ownership of shares in
any corporation, to purchase or otherwise acquire, hold, own, and dispose of
shares or other securities in any corporation; and (d) to engage in any other
lawful act or activity for which a corporation may be organized under the
Florida General Corporation Act.
Under terms of an Agreement and Plan of Merger and Reorganization entered into
on February 14, 1984, by and between the Registrant, the Registrant's wholly-
owned subsidiary, FEC Acquisition, Inc., and Florida East Coast Railway Company,
which Plan was subsequently approved by the shareholders, the Registrant
became the 100% parent of Florida East Coast Railway Company (Railway)
effective May 30, 1984, and by dividend action on May 31, 1984, became the
100% parent of Commercial Realty and Development Company (Realty).
Railway was incorporated under the laws of Florida on May 28, 1892, and was
reorganized as of January 1, 1961, under original Charter following the period
September 1, 1931, to December 31, 1960, during which period it was first in
bankruptcy and then under trusteeship. The principal business of Railway is
that of common carriage of goods by rail over 442 miles of main and branch line
track in the state of Florida. The main line extends 351 miles from
Jacksonville to Miami with 91 miles of branch line extending west from Ft.
Pierce to Lake Harbor. Railway formerly operated branch lines from Miami to
Florida City and from St. Augustine to East Palatka. Service from Miami to
Florida City was discontinued in 1988 and was discontinued from St. Augustine
to East Palatka in 1989.
Realty was incorporated as a 100%-owned subsidiary of Railway under the laws
of the State of Florida on August 17, 1981, for the general purpose related
to dealing in and disposing of real estate and real property. From date of
incorporation through May 30, 1984, Realty accrued only nominal revenues
earned from commissions on sales and/or purchases of property by Railway;
accrued virtually no expense other than income taxes; and possessed only cash
and cash equivalent assets in nominal amounts. As result of May 31, 1984,
dividend action by Railway and contribution to capital action by Registrant,
Realty was vested with approximately 18,090 acres of real estate. As
additional parcels of land and buildings have been declared surplus to needs
of Railway and received as dividends by Registrant, the Registrant has also
contributed those properties to Realty as contributions to capital.
Registrant has further made several cash contributions to capital of Realty to
provide funds for construction activities commenced since the May 1984
reorganization of the Company. Realty's name was changed in 1987 from
Commercial Realty and Development Company to Gran Central Corporation and is
presently operating under that name.
(b) Registrant is segmented into areas of Transportation (principally by
rail) and Realty (real estate ownership, development and management). As result
of acquisitions and construction of property by Realty in the period following
the 1984 reorganization, Realty became a significant business segment in 1987.
Consolidated financial information by segments appears as:
1994 1993 1992
(in thousands)
---- -------------- ----
Operating Revenues:
Transportation $163,098 $162,318 $156,955
Realty - Land Sales 16,100 2,320 5,947
- Rents & Other 20,346 16,458 12,853
Operating Profit:
Transportation $ 28,506 $ 29,346 $ 23,814
Realty 18,049 3,792 6,089
Identifiable Assets:
Transportation $357,670 $352,465 $351,850
Realty 251,348 232,068 199,763
Corporate 113,476 103,912 118,806
Operating revenues represent revenues received from unaffiliated entities as
reported in the Registrant's consolidated income statement.
Operating profit is operating revenue less directly traceable costs and
expenses. Interest income and expenses, dividends, etc., are not segmented by
Transportation and Realty, nor are investments generating such income, but
rather these type items are classified as Other Income.
Corporate assets are primarily cash and investments accumulated to fund
operations and capital requirements of the operating entities, including Realty
construction.
(c) Transportation: Registrant owns 100% of the stock of Florida East Coast
Railway Company which, in turn, owns 100% of the stock of seven subsidiary
corporations, all of which are included in the consolidated Transportation
segment and which, considered in the aggregate, do not constitute a significant
subsidiary. Of the seven subsidiaries, three are dormant corporations. Third
party contractors have assumed the service functions of two of those
subsidiaries. Those functions primarily consist of the loading and unloading
of automobiles from multilevel rail cars and the loading and unloading of
trailers and containers from rail flatcars. The remaining subsidiaries are:
> one common motor carrier primarily engaged in the local drayage of trailers
having prior or subsequent rail moves;
> one common motor carrier primarily involved in the movement of trailerload
traffic from Alabama, Georgia, and the Carolinas to Railway's Jacksonville
facility for subsequent carriage by Railway;
> one company primarily engaged in contract maintenance of railway track for
third parties; and
> one company engaged in the manufacture of concrete crossties, concrete
grade crossings, and other concrete products principally for sale to
Railway, and in the manufacture of concrete light poles for sale to
utilities and others.
Principal commodities carried by Transportation include automotive vehicles,
crushed stone, cement, trailers-on-flatcars, containers-on-flatcars, and basic
consumer goods such as foodstuffs. Movement is relatively stable throughout
the year with heaviest traffic ordinarily occurring during the first and last
quarters of the year.
Railway is the only railroad serving locations between Jacksonville and West
Palm Beach. From West Palm Beach to Miami, Railway is competitive with CSX
Transportation for rail traffic, excluding that of trailer-on-flatcar/container-
on-flatcar traffic. Common motor carriers and owner operators are competitive
throughout the entire Transportation system.
Railway is considered generally as a terminating railroad, meaning that there
is little or no rail traffic received from one carrier and delivered to another.
A significant portion of traffic handled is received from rail connections, CSX
Transportation, and Norfolk Southern Railway at Jacksonville, with terminating
points on Railway's line, whereas a less significant portion is forwarded to
those connections for destinations outside Florida. Railway has, in recent
years, experienced continuing growth in traffic originating and terminating at
points on its own line, and this local traffic is now generating in excess of
44% of rail traffic revenues.
Realty: Registrant owns 100% of the stock of Gran Central Corporation which,
in turn, owns 100% of the stock of one subsidiary corporation, which is included
in the consolidated Realty segment and which, considered in the aggregate, does
not constitute a significant subsidiary. The one subsidiary is a corporation
leasing and operating a trailer park owned by Gran Central Corporation in
Miami.
Realty is engaged in the management of leases of its real property; the
development, lease, and sales of its property; and general management of all
real property included in the consolidated financials. Realty is in
competition with other developers and brokers throughout its operating area.
As of December 31, 1994, Registrant and its subsidiaries employed approximately
1,050 employees with approximately 734 of them covered by collective bargaining
agreements. Registrant employed 23 of the total, Realty employed 23, and
Transportation employed the balance.
Nothing in the above represents a significant change from prior years.
(d) Registrant has no foreign operations.
ITEM 2. PROPERTIES
Transportation - Transportation owns approximately 12,000 acres of land
property, all located along the East Coast of the state of Florida and
devoted to railroad operations. In addition to rail right-of-way between
Jacksonville and Miami and between Ft. Pierce and Lake Harbor, operating
property includes significant switching/classification yards, trailer/container
loading/unloading facilities, automobile marshalling yard, maintenance
facilities, etc., at major terminals throughout the system.
Transportation physical plant (i.e., track structure, shops, and office
buildings) is in excellent condition and includes 351 miles of main track, 91
miles of branch line track, 157 miles of yard switching track, and 184 miles
of other tracks, including second main and passing tracks. The main track is
generally constructed of 132# rail and other track materials on concrete
crossties providing a track structure meeting the needs of today's heavy
traffic loads. Certain of the branch line and yard tracks, though in good
physical condition, are constructed of materials lighter than the 112# and 115#
rail deemed necessary for this trackage, and programs are currently under way
to re-lay these tracks with the heavier materials. These programs may be
expected to extend several years into the future.
Transportation owns 79 diesel electric locomotives, approximately 2,801 freight
cars, approximately 97 tractors, and 1,534 trailers for highway revenue service,
numerous pieces of rail-mounted and non-rail-mounted work equipment, and
numerous automotive vehicles used in maintenance and transportation operations.
All equipment owned is in good physical condition.
Realty - Realty owned and managed approximately 19,295 acres of land at year-
end 1994, including approximately 1,430 acres owned by Transportation but not
required for operations. These properties are held for lease, development,
and/or sale, and have a situs in thirteen counties of the state of Florida as
follows:
Duval 1,530 acres
St. Johns 3,530 "
Flagler 3,460 "
Volusia 3,560 "
Brevard 2,810 "
Indian River 5 "
St. Lucie 610 "
Martin 660 "
Palm Beach 300 "
Broward 50 "
Dade 1,700 "
Manatee 900 "
Putnam 180 "
----------
Total 19,295 "
Realty also owned at year-end 1994 forty-six (46) buildings as detailed below:
No. of Rentable Year
Location Bldgs. Type Square Ft. Built
-------- ------ ---- ---------- -----
duPont Center
Jacksonville, FL 2 Offices 144,000 1987/88
Barnett Plaza
Jacksonville, FL 1 Office 59,000 1982
Gran Park at
Interstate South
Jacksonville, FL 6 Office/Showroom/
Warehouses 260,000 1987/89
Gran Park at the 2 Office/Showroom/
Avenues Warehouses 101,000 1992
Jacksonville, FL 2 Offices 145,000 1992/93
1 Office/Warehouse 139,000 1994
Gran Park at
Melbourne 1 Office/Showroom/
Melbourne, FL Warehouse 28,000 1989
Gran Park at 1 Office/Showroom/
Riviera Beach, FL Warehouse 62,000 1987
2 Rail Warehouses 176,000 1982/87
Lewis Terminals 4 Cross Docks 75,000 1987/91
Gran Park-McCahill
Miami, FL 2 Rail Warehouses 468,000 1992/94
Gran Park at Miami 5 Office/Showroom/
Miami, FL Warehouses 368,000 1988/90/92/94
4 Office/Warehouses 382,000 1990/91/92/93
4 Rail Warehouses 398,000 1989/90/93/94
5 Front Load
Warehouses 604,000 1991/92/93
1 Double Front Load
Warehouse 239,000 1993
1 Office Service
Center 41,000 1994
Hialeah, FL 1 Cross Dock 20,000 1987
Pompano Beach, FL 1 Rail Warehouse 54,000 1987
-- ---------
TOTALS 46 3,763,000
Realty's holdings include lands adjacent to Railway's tracks which are suitable
for development into office and industrial parks offering both rail and non-
rail-served parcels. Certain other holdings are in urban or suburban locations
offering opportunities for development of office building structures or
business parks offering both office building sites and sites for flexible space
structure such as office/showroom/warehouse buildings. Wherever possible,
Realty intends to develop infrastructure and construct buildings for lease and
continued ownership.
ITEM 3. LEGAL PROCEEDINGS
The Registrant, through its Transportation subsidiary, Florida East Coast
Railway (Railway), was involved in a legal action versus CSX Transportation,
Inc. (CSXT), alleging, in part, violations of a 1978 Agreement between CSXT
and Railway and, in part, violations of the Sherman Act. The complaint alleged
that CSXT had, by its actions, placed the Railway in a position such that it
could not fairly compete with CSXT for certain carload traffic destined to or
from South Florida points served by the two railroads. In early 1992, CSXT
petitioned the ICC to reopen the merger proceedings for the purpose of
eliminating the merger conditions set down by the ICC in the 1967 merger of
ACL/SAL Railroads. Under the conditions set by the ICC prior to merger, the
merged company, CSXT, was required to cooperate with the Railway in matters of
rates, routes, and service in a fashion allowing Railway to compete effectively
with CSXT on traffic to and from West Palm Beach southward. A tentative Order
by the U.S. District Court dated February 19, 1993, found that contract rates
were included in the 1978 Agreements, but that CSXT could not be required to
establish an equal joint-line contract rate since the Court views such action
as a form of price-setting which is illegal. As reported in 1993, appeals were
made in the U.S. District Court in Chicago and before the Interstate Commerce
Commission in Washington. Both actions were resolved in favor of CSXT. These
outcomes were not totally unexpected since similar protections for other
carriers have been discontinued in the past. Management believes that CSXT is
interested in the Railway operating as a viable, independent rail carrier.
Therefore, the Railway will not contest this issue further.
The Registrant, also through Railway, is involved in legal actions versus the
State of Florida and several counties of the state, in which it was alleged the
State, through its "unit assessment procedures," has significantly over-
assessed the rail operating properties of Railway for 1994.
The Registrant's Railway is a party to various proceedings before state
regulatory agencies relating to environmental issues. In addition, Railway,
along with many other companies, has been named a potentially responsible
party (PRP) in proceedings under federal statutes for the cleanup of designated
Superfund sites at Jacksonville, Florida, and Portsmouth, Virginia.
The assessment of the required responses and remedial costs associated with
these sites is extremely complex. Among the variables that management must
assess are imprecise engineering estimates, continually evolving governmental
standards, potential recoveries from others, including other PRP's, and laws
which can impose joint and several liability.
Railway has made an estimate of its likely costs attributable to sites for
which its cleanup responsibility is probable, and a liability, therefore, has
been recorded. Such liability is not material to the financial position of the
Registrant. Railway is not aware of any monetary sanctions to be proposed
which, in the aggregate, are likely to exceed $100,000, nor does it believe
that corrections will necessitate significant capital outlays or cause material
changes in the Registrant's business.
There are no other legal or regulatory proceedings pending or known to be
contemplated which, in the opinion of the General Attorney of the Registrant,
are other than normal and incidental to the kinds of business conducted by the
Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
a. Principal market on which Florida East Coast Industries, Inc., common stock
is traded: New York Stock Exchange, Symbol: FLA.
b. The table below presents the high and low market prices and dividend
information for Florida East Coast Industries, Inc., common shares:
1994
----
Quarter Ended Dec. 31 Sept. 30 June 30 March 31
High $77 5/8 $77 1/4 $72 7/8 $67 1/8
Low $65 1/2 $65 1/4 $61 7/8 $57 5/8
Dividends $.10 $.10 $.10 $.10
1993
----
Quarter Ended Dec. 31 Sept. 30 June 30 March 31
High $70 1/4 $62 $51 1/2 $54
Low $61 1/8 $48 3/8 $46 $48 1/8
Dividends $.10 $.10 $.10 $.10
c. The total number of holders of record of Florida East Coast Industries,
Inc., common stock as of December 31, 1994, was 886.
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands except per share amounts)
(Unaudited)
Years Ended December 31
1994 1993 1992
---- ---- ----
Revenues:
Operating Revenues $199,544 $181,096 $175,755
Other Income 9,117 5,103 8,253
Total $208,661 $186,199 $184,008
Income before cumulative
effect of change in
accounting principle $ 34,605 $ 20,779 $ 24,045
Cumulative effect of
change in accounting
principle for income
taxes 0 1,504 0
Net Income $ 34,605 $22,283 $24,045
Per Share Data
Cash Dividend $ 0.40 $ 0.40 $ 0.40
Income before cumulative
effect of change in
accounting principle $ 3.85 $ 2.31 $ 2.67
Cumulative effect of
change in accounting
principle for income
taxes $ 0 $ 0.17 $ 0
Net Income Per Common
Share $ 3.85 $ 2.48 $ 2.67
At year-end:
Total Assets $722,494 $688,445 $670,419
Working Capital $ 39,750 $ 42,552 $ 39,407
Shareholders' Equity $552,268 $523,038 $503,464
Revenues: 1991 1990
---- ----
Operating Revenues $166,561 $169,870
Other Income 26,108 20,440
Total $192,669 $190,310
Income before cumulative effect of
change in accounting principle $ 29,056 $ 31,352
Cumulative effect of change in
accounting principle for income
taxes $ 0 $ 0
Net Income $ 29,056 $ 31,352
Per Share Data
Cash Dividend $ 0.40 $ 0.40
Income before cumulative effect of
change in accounting principle $ 3.21 $ 3.39
Cumulative effect of change in
accounting principle for income
taxes $ 0 $ 0
Net income Per Common Share $ 3.21 $ 3.39
At year-end:
Total Assets $647,675 $622,835
Working Capital $ 38,476 $ 53,772
Shareholders' Equity $483,020 $469,294
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MANAGEMENT DISCUSSION AND ANALYSIS OF INCOME STATEMENTS
This statement summarizes the Company's consolidated income results for
the three-year period ending December 31, 1994. The purpose of this
discussion is to provide background information for the figures presented,
including the significant events which contributed thereto.
Operating revenues have increased throughout the three-year period,
with increases of $18.4 million or 10.2% when comparing 1994 with 1993 and
$5.3 million or 3.0% when comparing 1993 with 1992.
The 1994 increase in operating revenues of $18.4 million was attributed
to an increase of $.8 million in transportation revenues and an increase of
$17.7 million in realty revenues. The increase in realty revenues of $17.7
million included sales of realty properties of $16.1 million which included a
single sale of realty property in the amount of $11.3 million to the State of
Florida via condemnation. When comparing 1993 operating revenues with 1992,
operating revenues increased $5.3 million. The 1993 increase was attributed
to the $5.4 million increase in transportation revenues with realty revenues
remaining at approximately the same level as 1992 at $18.8 million.
Transportation revenues have remained relatively stable over the past
three years with increases of $.8 million or .5% when comparing 1994 to 1993
and $5.4 million or 3.4% when comparing 1993 to 1992. Transportation revenues
are derived from four major classifications of traffic: shipments of rock,
intermodal (container and trailer shipments), automotive, and other. Below
are brief discussions of the volumes shipped in 1994 and the conditions which
had an impact on those volumes.
The adverse weather conditions in the fourth quarter 1994 in South Florida
tempered the accelerated volume growth in rock shipments experienced in the
first three quarters of 1994. Rock shipments increased 4,645 shipments or 5.6%
when comparing 1994 with 1993 and 10,112 shipments or 13.9% when comparing 1993
with 1992. Over the past three years, the traffic trend reflected higher
volumes of rock traffic each year due to road and other commercial construction
activities.
Intermodal traffic was adversely affected by weather, union strikes, and
intracoastal barge competition between Charleston, Savannah, and Miami.
Intermodal shipments decreased by 640 shipments or .2% when comparing 1994 with
1993 and 1,586 shipments or .5% when comparing 1993 with 1992. Over the past
three years, high volumes of intermodal traffic were experienced in the first
and fourth quarters of each year.
In 1995, the Company is expanding its scope of operations for
transportation services to include Macon, Georgia. The Company will have an
intermodal facility at Macon to provide rail transportation service to and
from South Florida.
The Company's automotive traffic showed a modest gain in 1994 resulting
from increased automobile sales in South Florida. Automotive traffic increased
by 403 shipments or 2.3% when comparing 1994 with 1993, but decreased 373
shipments or 2.1% when comparing 1993 automotive traffic with 1992. In 1994
the Company's second largest automotive customer executed a five-year contract
for continued transportation service, and optimism prevails for continued
growth in 1995 consistent with the growth in domestic and export activity.
Over the past three years, the trend for automotive traffic indicated peak
periods during the fourth quarters.
When comparing 1994 with 1993, carload traffic other than rock and
automotive increased by 2,042 shipments or 6.4%, but decreased 519 shipments
or 1.6% when comparing 1993 with 1992. Lumber and plywood reload traffic
provided a positive trend in 1994, and the Company expects modest growth in
1995 for this type of traffic. The bulk commodities along with shipments of
cement increased in 1994, and the Company projects increases in 1995. The
high volume periods for this type of traffic, based on the last three years,
was during the first and fourth quarters.
Realty revenues increased significantly in 1994 to $36.4 million from
$18.8 million or an increase of $17.6 million from 1993 and 1992 revenue
levels. This increase of $17.6 million is primarily attributable to the
increase in the sales of realty property in 1994 of $16.1 million. A single
sale of property of $11.3 million to the State of Florida through
condemnation proceedings in the first quarter of 1994 comprises the majority
of the $17.6 million increase. The remainder of the realty revenues of $20.3
million is attributed primarily to rental income from buildings, warehouses,
etc. At year-end 1994, the Company had a total of 3.8 million square feet of
space available for lease. Approximately 90% of that 3.8 million square feet
was under lease in 1994 as compared to 88% in 1993 and 90% in 1992. The
Company expects rental revenue to continue to increase as new space is
constructed and added to inventory.
Under construction at year-end were four new buildings which, upon
completion, will add an additional .4 million square feet of leasable space.
Since the Company is primarily interested in ongoing development of land for
construction of buildings for lease, only occasional realty sales are
anticipated.
Operating expenses in 1994 increased $5.0 million or 3.4% when compared to
1993, and 1993 operating expenses increased $2.1 million or 1.4% when compared
to 1992. Several factors contributed to the $5.0 million increase. Comparing
1994 with 1993 operating expenses, decreases were represented by $3.5 million
in salaries and wages with the associated fringe benefits which were offset by
the increase in purchased services of $2.5 million. These changes are the
result of outside contractors providing the loading and unloading of
automobiles from multilevel rail cars and the loading and unloading of
containers and trailers from flatcars at the TOFC/COFC terminals. The
Company's decision to contract the above services to third party contractors
was based upon projected savings of approximately $2.0 million annually.
Property taxes increased by $3.8 million primarily due to a reduction of
property taxes in 1993 of $2.8 million as a result of the favorable settlement
of the property tax case with the State of Florida for the tax years 1987
through 1991.
When comparing 1993 operating expenses with 1992, operating expenses
increased $2.1 million. This increase was represented by decreases of $4.2
million in materials and $2.8 million in property taxes. These decreases were
offset by increases of $4.0 million in salaries and wages and associated fringe
benefits, $1.6 million in depreciation expense, and $3.3 million in other
operating expenses.
Included in the increase of $3.3 million in other expenses was an
increase of $1.4 million in casualty and insurance and an increase of $.3
million in environmental. Materials and supplies decreased by $4.2 million
resulting primarily from efficiencies achieved in the Maintenance of Way and
Maintenance of Equipment Departments by reductions in expenses of $2.7 and
$1.1 million, respectively.
Property taxes decreased by approximately $2.8 million in 1993 brought
about by the favorable settlement of the ad valorem tax case with the State of
Florida for the years 1987 through 1991.
Other income for 1994 when compared to 1993 increased $4.0 million. When
comparing 1993 with 1992, other income declined $3.2 million. Other income for
the three-year period reflects gains on sales and other disposition of
properties of $4.0, $.5, and $1.5 million in 1994, 1993, and 1992,
respectively.
Income taxes increased $3.6 million in 1994 from 1993 which was primarily
attributable to the increase in net income. On January 1, 1993, the Company
adopted Financial Accounting Standards Board Statement 109 which resulted in
the recognition of additional income of $1.5 million in the first quarter
1993. When comparing 1993 with 1992, income taxes increased $3.4 million.
This increase was primarily the result of an increase in the federal tax rate
from 34% to 35% and the associated adjustments to deferred tax assets and
liabilities.
MANAGEMENT DISCUSSION AND ANALYSIS OF BALANCE SHEETS
The Consolidated Balance Sheet provides information about the nature and
amounts of the Company's investments, its obligations to creditors, and its
shareholders' equity at the end of the year. This information complements
data found in the Consolidated Statement of Income and Retained Earnings and
is designed to contribute to the shareholders' understanding of the Company.
Total current assets for 1994 decreased by $6.2 million when compared to
1993. This change is represented primarily by decreases of $3.0 million in
Cash, Cash Equivalents, and Short-term Investments, $2.2 million in Accounts
Receivable, and $.9 million in Other Current Assets. Large liquid reserves are
maintained to meet the Company's commitment to realty construction and
development.
Other investments increased by $13.2 million in 1994 from 1993 to a
total of $79.5 million. This increase is attributed primarily to the proceeds
from sale of realty properties to the State of Florida in the first quarter
1994 via condemnation proceedings and will be used for realty development in
1995. Other investments include approximately $39.5 million of a portfolio
managed actively in diversified investment funds and the balance being
invested in U.S. Treasury Bills and similar highly liquid investments. These
investments are classified as long-term because of management's intent to use
them to finance future realty construction projects. Currently, the Company
has four major realty development projects in progress: Gran Park at
Jacksonville, Gran Park at the Avenues, Gran Park at Deerwood, and Gran Park
at Miami.
Development of Gran Park at Jacksonville is presently in the
infrastructure development stage, including permitting, designing, and
platting. This process began in March 1994 and was approximately 10% complete
at year-end.
At Gran Park at the Avenues (Jacksonville), construction of the third
office building began in May 1994. This facility will provide approximately
81,000 square feet of leasable space and was approximately 25% complete at
year-end.
At Gran Park at Deerwood (Jacksonville), Phase I development of roads,
water and sewer systems, design work, and other site improvements began in
June 1994. This project was approximately 25% complete at year-end. In
November 1994, the construction of the first office building was started and
was approximately 5% complete at year-end.
At Gran Park at Miami (Section 32 property), construction of Front-Load
Warehouses Numbers 6 and 7 began in October 1994. Each building will add
approximately 92,400 square feet of leasable space. As of December 31, 1994,
Building Number 6 was approximately 35% complete and Building Number 7 was
approximately 20% complete.
Also, Gran Park at Miami (Section 6 property) was approximately 90%
complete at year-end for the demucking and filling phase. The master plan
for this property began in 1993 and was approximately 25% complete on December
31, 1994.
These construction activities substantially contributed to the $25.7
million increase in properties from 1993 to 1994. The additions in 1994
amounted to .6 million square feet of leasable space represented by five new
buildings.
Total current liabilities in 1994 decreased $3.4 million when compared to
1993. This decrease is primarily attributable to decreases of $2.3 million in
accrued casualty and other reserves and $1.5 million in estimated property
taxes. The decrease in accrued casualty and other reserves represents a
reduction in personal injury accruals.
The Company is subject to proceedings arising out of environmental laws
and regulations which primarily relate to the disposal and use of fuel 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 difficult 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,
but could be material to the results of operations of the Company in any one
period. As of December 31, 1994, and 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.
The Company's financial position continues to be strong as indicated by
the current ratios of 2.17 in 1993 and 2.20 in 1994. The Company has no
long-term debt or open lines of credit, nor does the Company anticipate that
any will be negotiated in the foreseeable future. The Company is not
obligated under any significant capital or operating-type leases, except for
the short-term leasing of freight cars, trailers, and data processing equipment.
As of December 31, 1994, the Company had authorized approximately $36.2
million for capital expenditures, of which 35% represents realty development
and construction. These expenditures are expected to be funded from current
operations supplemented, as necessary, by cash and investments currently on
hand.
MANAGEMENT DISCUSSION AND ANALYSIS OF STATEMENTS OF CASH FLOWS
The statement of cash flows details the Company's cash flows from
operating, investing, and financing activities during the year. Since the
Company does not use debt to finance its operations, the source of funds
throughout the year is exclusively generated by operating and investing
activities. These sources have been sufficient to fund the purchases of
properties and pay dividends.
Net income for 1994 increased $12.3 million when compared to 1993, and
net income for 1993 decreased $1.8 million when compared to 1992.
Net cash generated by operating activities increased by $16.2 million
in 1994 compared to 1993. This increase was primarily attributable to the
increase of net income of $12.3 million and the timing of related cash receipts
and payments. In comparing 1993 with 1992, net cash generated by operating
activities increased $10.7 million. The changes primarily reflect changes in
operating income levels and the timing of remitted cash receipts and payments.
In 1992, the Company made a large good faith payment related to the ad valorem
tax case with the State of Florida for the years 1987 - 1991 which was settled
in the third quarter 1993.
Net cash used in investing activities for 1994 when compared to 1993
increased $17.7 million. This increase is primarily attributable to the net
increase of $27.6 million in purchases of investments versus maturities of
investments, $4.5 million increase in proceeds from disposition of assets,
and the decrease in purchases of properties of $5.5 million. Purchases of
properties for 1994, 1993, and 1992 reflect spending primarily in realty
development. Purchases, maturities, and redemptions of investments vary
depending upon the changes in requirements for realty construction and
development and cash generated through operations. Other investments on the
balance sheets increased $13.2 million in 1994 when compared to 1993 and
decreased $12.3 million in 1993 when compared to 1992.
Because a large percentage of the Company's properties are long-lived,
asset replacement will be at a higher cost and will take place over many
years. The acquisition of new assets will result in higher depreciation
charges and, in the case of Realty, higher taxes and operating costs.
Cash dividends of $.40 per share were paid in each of the three years,
reflecting the Company's philosophy that shareholders receive a current
benefit at the same time that the Company is reinvesting most earnings in a
debt-free asset growth program.
The Company continues to believe that asset growth should be internally
funded by operating and investing activities rather than through the use of
debt. However, the Company is confident that if a need to access the market
for funds were to arise, such access would be readily available.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is incorporated under Item
14(a) - Index to Financial Statements and Financial
Statement Schedules.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Principal Occupation or Employment
for the Past Five Years - Positions
with Industries - Other
Name, Director Since, Age Directorships
_________________________ __________________________________
Jacob C. Belin Former Chairman of the Board, St. Joe Paper
Director since 1984 Company. Director, St. Joe Paper Company.
Age 80 Trustee, Alfred I. duPont Trust.
J. Nelson Fairbanks President and Director, U.S. Sugar Corporation.
Director since 1989
Age 59
David M. Foster Attorney, Rogers, Towers, Bailey, Jones &
New Nominee Gay for the last five years. Director, Sun
Age 60 Bank of North Florida, N.A. Director, Gate
Petroleum and subsidiaries. Director, Ponte
Vedra Polo Club, Inc.
Allen C. Harper Chairman/CEO, Esslinger-Wooten-Maxwell, Inc.,
Director since 1994 Realtors, and President, First Reserve, Inc.
Age 50 (1984-present). Director, Tri-County Railroad
Authority (1989-present).
John H. Mercer, Jr. Retired President, John Mercer Terminal
Director since 1984 Warehouse Company.
Age 81
R.E. Nedley President, St. Joe Paper Company (1991-present).
New Nominee Vice President, St. Joe Paper Company (1982-
Age 56 1991). Director, St. Joe Industries, Inc.
(1982-present).
J.J. Parrish, III President, Jesse J. Parrish, Inc., Vice
Director since 1993 President and Director, Nevins Fruit Company.
Age 41 Director and Treasurer, Parrish Medical Center.
Director, Barnett Bank of Central Florida.
W.L. Thornton Chairman of the Board and President, Industries.
Director since 1984 Chairman and Director, St. Joe Paper Company.
Age 66 Trustee, Alfred I. duPont Trust.
Carl F. Zellers, Jr. Vice President, Industries. President, Florida
Director since 1984 East Coast Railway and Gran Central Corporation.
Age 62 Director, St. Joe Industries, Inc.
With respect to each Executive Officer of the Registrant, there are set
forth below as of December 31, 1994, (1) his name; (2) his age; (3) his
positions and offices with the Registrant; (4) the date on which he first
held office; and (5) a brief account of his business experience during the
last five years. Each Executive Officer has been elected to hold such
positions and offices until the next annual election of Directors and
Officers of the Registrant, which is to be held on May 17, 1995. To the best
knowledge of the Registrant, none of the persons named had any arrangement or
understanding with any other person pursuant to his election, and none of the
persons named have any family relationship with any other such person.
Name, Age, Positions, and Date First Held Such Positions and Offices and
Offices Business Experience for the Past Five Years
_________________________ ______________________________________________
Winfred L. Thornton (66) Chairman and President of Registrant for more
Chairman, President, Chief than five years.
Executive Officer & Director
Carl F. Zellers, Jr. (62) Vice President of the Registrant and President
Vice President and Director of Gran Central Corporation for more than five
years. President of Florida East Coast
Railway Company from June 10, 1992.
T. Neal Smith (55) May 15, 1992, elected Vice President &
Vice President & Secretary Secretary. Formerly Treasurer and Assistant
Secretary for more than five years.
William E. Durham, Jr. (63) Vice President of Registrant for more than
Vice President & Director five years.
Louis A. Manz (42) March 1, 1993, elected Vice President -
Vice President - Information Information Services. Formerly with Information
Services and Computing Services from 1989-1993.
J. Richard Yastrzemski (52) Comptroller of Registrant for more than five
Comptroller years.
Gregory P. West (35) May 15, 1992, elected Treasurer. Formerly
Treasurer & Assistant Secretary Material Inventory and Accounting Manager.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the annual compensation for Industries'
Executive Officers whose 1994 total annual compensation exceeded $100,000, as
well as the total compensation paid to those Executives for the past three
years. Industries paid no bonuses nor had any stock award or option programs.
Summary Compensation Table
Name and Other Annual All Other
Principal Salary Compensation Compensation
Position Year ($) ($) ($)
-------- ---- ------ ------------ ------------
W.L. Thornton 1994 159,550(a) 5,580(b) 1,800(c)
President and CEO 1993 154,900(a) 5,790(b) 1,800(c)
1992 149,650(a) 4,970(b) 1,800(c)
C.F. Zellers, Jr. 1994 133,260 3,700(b) 4,400(c)
Vice President 1993 129,370 1,670(b) 4,341(c)
1992 118,100 2,060(b) 4,170(c)
(a) This amount represents 100% of Mr. Thornton's salary. Under arrangement
approved by the Board of Directors of both St. Joe Paper Company and
Florida East Coast Industries, Inc., Mr. Thornton's salary and expenses
are paid by St. Joe Paper Company, with 20% of salary, fringe benefits,
and common expenses being billed to and paid by Industries as compensation
for his services as President of Industries. Any expenses incurred for
the exclusive benefit of either Industries or St. Joe Paper Company are
borne 100% by the benefiting corporation.
(b) These amounts include life insurance premiums and the personal use of
vehicles owned by Industries.
(c) These amounts represent Industries' matching contribution to a 401(k)
Plan and directors' fees. Mr. Thornton was not a participant in the
401(k) Plan of Industries.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee")
has the responsibility of establishing and administering compensation
policies, plans, and programs for the Company and its subsidiaries (herein,
"the Company"). The Committee and senior management initiated a comprehensive
review of management compensation during 1994.
The study included an evaluation of existing compensation policies; a
review of compensation plans and practices prevailing at other companies; and
an analytical review of the costs and benefits of the proposed programs. The
philosophy and programs resulting from the study's analysis are outlined below
and were developed through the active involvement of management and the
Committee.
Because this study was completed late in the year, compensation paid for
1994 represents a continuation of past practices. The new compensation program
approved by the Board of Directors in 1994 will be fully implemented in fiscal
1995.
Executive Compensation Philosophy
The Committee adopted a compensation philosophy for the Company's
management to serve as guiding principles for program design and
administration. The overriding philosophy is that compensation should be tied
directly to the Company's stated business objectives and to the sustained
creation of stockholder value. The Committee believes that stockholder
interests and the Company's compensation programs should be closely aligned
and integrated. Therefore, the performance measures used to determine
compensation levels have been demonstrated to be primary, sustainable
drivers of stockholder value among other publicly-held companies including
companies having transportation interests.
The Company's performance compensation program consists of two
components: (1) Base Salary and (2) Award Opportunity. Each of these
components and its respective role in total direct compensation, as well as
the basis for determining the compensation of the President and CEO, Mr. W.L.
Thornton, are described below.
(1) Base Salary
Pursuant to the compensation philosophy of emphasizing risk-oriented pay
to encourage superior performance and consistent with the Company's business
strategy of controlling fixed costs, annual salary adjustments will be
determined by several factors, including: The Company's performance, the
individual's contribution to that performance, the individual's future
potential, and competitive pay levels. On an annual basis, the Committee
reviews executive salaries with the Chief Executive Officer ("CEO").
(2) Performance Awards
In fiscal 1995, seventeen (17) of the Company's senior executives will be
eligible to participate in the Company's annual incentive program. Each
participant is assigned a target Award Opportunity equal to the individual's
level of responsibility. Target award levels range from 25% to 35% of annual
base salary. The CEO and Chief Operating Officer's ("COO") target is 35% and
the target for the three other most highly compensated officers is 25%. Actual
award levels vary depending upon the degree of achievement relative to
specified Company and individual performance objectives and can range in
total from 0% to 100% of target levels.
Performance awards under the program are contingent upon both Company
and individual performance for the year. Only those individuals who receive
a satisfactory or better performance rating in their annual performance
reviews are eligible to receive an annual Opportunity Award. The Company's
performance relates directly to operating profit. Specific performance
objectives have been set by the Committee (as they will be on an annual basis)
in relation to the Company's fiscal budget. The payout related to Company
performance against these predetermined objectives ranges from 0% to 100% of
Target Award. For the CEO, COO, and certain other officers, Company
performance governs their entire Performance Award amount. For other
participants, their individual performance rating determines up to 60% of
their award.
As example of the application of actual awards under this performance
program, a covered executive earning $100,000 having an assigned target
Company Award Opportunity level of 25% has the opportunity to be awarded an
actual award of $12,500 if the "Threshold" Company objective is met or an
actual award of $25,000 if the "Target" Company objective is met.
No performance award is payable if Company performance falls below
threshold level.
Nondeductible Compensation
The Senior Management Incentive Plan will be fully deductible for federal
income tax purposes since it is not possible at this time for any executive
officer's compensation to total more than $1 million.
CEO Compensation
The Company's CEO, Mr. W.L. Thornton, is also the CEO of St. Joe Paper
Company and is employed under an arrangement approved by each Board which
provides that the Company will bear 20% of base salary. Base salary has been
the sole basis of compensation for the CEO and other executive officers
through 1994.
Mr. Thornton was paid a base salary of $159,550 in 1994 which represented
a 3% increase above the base salary in 1993. The Company's portion of the
total base salary in 1994 was $31,910. In this regard, this Committee conferred
with the Compensation Committee of St. Joe Paper Company relative to Mr.
Thornton's 1994 salary, and while it was agreed that the base salary of
$159,550 is significantly less than salaries paid by comparable companies
and does not recognize Mr. Thornton's individual contribution to the relative
success of the combined enterprises in the past or present, it was also agreed
to continue pay through 1994 on past practice and that the matter of
adjusting base salary of the CEO's position should receive review by the
Committee during the study mentioned above. This study concluded that the
base salaries of the CEO and other executive officers should be adjusted
effective January 1, 1995, to a base salary more nearly equal to the
responsibilities of the positions and much more competitive with comparable
companies while at the same time putting a portion of the positions' total
value to the Company "at risk" subject to the attainment of the specified
corporate and personal objectives set forth in the plan for incentive
compensation. Any performance award made to the CEO under the incentive plan
will be based solely on that portion of total base salary paid by the
Company under its arrangement with St. Joe Paper Company.
The Committee believes that the changes described above will help to
ensure that executive officers are rewarded appropriately for their services
and the Committee is satisfied that the strategy supports corporate objectives
and shareholder interests, however, additional changes can and will be
considered if and when deemed appropriate within the context of these
objectives and interests.
The Compensation Committee is appointed by the Board of Directors and
is composed entirely independent of non-employee directors having no
interlocking relationship as defined by the Securities and Exchange
Commission.
J. Nelson Fairbanks, Chairman
M.E. Rinker, Sr., Member
Allen C. Harper, Member
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Board of Directors of Industries has designated March 31, 1995, as the
record date for the determination of Stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof. As of that date,
Industries had 9,271,361 shares issued and outstanding of Common Stock, which
is its only voting security. Of the 9,271,361 shares issued and outstanding,
271,361 represent treasury shares. The outstanding, excluding treasury
shares, were held by approximately 865 Stockholders of Record on March 10,
1995.
The following table sets forth information as of March 1, 1995, with respect
to persons known to Industries to be the beneficial owners of more than 5%
of its outstanding Common Stock:
Nature of
Beneficial Percent of
Names/Address Ownership No. of Shares Class (1)
------------- ---------- ------------- ----------
Nemours Foundation (2) Sole Voting & 450,224 5.0%
P.O. Box 1380 Dispositive
Jacksonville, FL 32201 Power
St. Joe Industries, Inc. (3) Sole Voting & 4,902,304 (4) 54.5%
P.O. Box 1380 Dispositive
Jacksonville, FL 32201 Power
Heine Securities Corp. (5) Sole Voting & 575,500 6.4%
51 J.F.K. Parkway Dispositive
Short Hills, NJ 07078 Power
__________________
(1) All percentages shown are rounded to the nearest one-tenth of one percent.
(2) As of March 1, 1995, the following persons were directors of the Nemours
Foundation: Jacob C. Belin, Alfred duPont Dent, H.H. Peyton, J.F. Porter,
W.T. Thompson, Winfred L. Thornton, and corporate director, NationsBank
of Florida, represented by J.S. Lord. In such capacities, these
directors collectively share voting and dispositive power with respect
to Industries' Common Stock owned by the Nemours Foundation and, as such,
may be deemed to be beneficial owners of that stock.
(3) As of March 1, 1995, the following persons were directors of St. Joe
Industries, Inc.: Jacob C. Belin, E.C. Brownlie, S.D. Fraser,
R.E. Nedley, Winfred L. Thornton, and C.F. Zellers, Jr. In such
capacities, all directors collectively share dispositive and voting
power with respect to Industries' Common Stock owned by St. Joe
Industries, Inc. All directors may be deemed to be beneficial owners of
Industries' Common Stock owned by St. Joe Industries, Inc.
(4) By virtue of its ownership of approximately 54.5% of the outstanding
Industries' Common Stock, St. Joe Industries, Inc., may be deemed to be
not only an "affiliate" but also a "parent" of Industries.
(5) Mr. Michael F. Price is President of Heine Securities Corporation ("HSC")
in which capacity he exercises voting control and dispositive power over
these securities. Mr. Price, therefore, may be deemed to have indirect
beneficial ownership over such securities. Mr. Price advises he has no
interest in dividends or proceeds from the sale of such securities, owns
no such securities for his own account, and disclaims beneficial
ownership of all the securities reported herein by HSC.
(b) SECURITY OWNERSHIP OF MANAGEMENT
Shown below is information concerning beneficial ownership of Industries'
Common Stock for each director and for all directors and officers as a group
as of March 1, 1995. Under rules of the Commission, "beneficial ownership"
is deemed to include shares for which the individual, directly or indirectly,
has or shares voting and/or dispositive power:
Nature of
Beneficial Percent of
Names Ownership No. of Shares Class (1)
----- ---------- ------------- ----------
J.C. Belin Shared Voting/
Dispositive Power 5,352,528(2) 59.5%
J.N. Fairbanks ----- -----
D.M. Foster ----- -----
A.C. Harper ----- -----
J.H. Mercer, Jr. Sole Voting/
Dispositive Power 100 -----
R.E. Nedley Shared Voting/
Dispositive Power 4,902,304 (3) 54.5%
J.J. Parrish, III ----- -----
W.L. Thornton Sole Voting/
Dispositive Power 5,869 -----
Shared Voting/
Dispositive Power 5,352,528(2) 59.5%
C.F. Zellers, Jr. Sole Voting/
Dispositive Power 1,936 -----
Shared Voting/
Dispositive Power 4,902,304(3) 54.5%
9 directors & Sole Voting/
officers as a Dispositive Power 7,905 -----
group Shared Voting/
Dispositive Power 5,352,528(4) 59.5%
____________________
(1) All percentages shown are rounded to the nearest one-tenth of one
percent. Where no percentage is shown, the amount of Industries'
Common Stock owned by the beneficial owner listed is less than one-half
of one-tenth of one percent (4,500 shares) of all outstanding
Industries' Common Stock.
(2) Includes 4,902,304 shares or 54.5% of Industries' Common Stock owned by
St. Joe Industries, Inc., and 450,224 shares or 5.0% of Industries'
Common Stock owned by the Nemours Foundation.
(3) Includes 4,902,304 shares or 54.5% of Industries' Common Stock owned by
St. Joe Industries, Inc., of which Mr. Zellers and Mr. Nedley are
directors.
(4) Includes the 4,902,304 and 450,224 listed as beneficially owned by
Messrs. Belin and Thornton, and the 4,902,304 listed as beneficially
owned by Messrs. Zellers and Nedley, however, reports the same number of
shares beneficially owned by these persons only once.
(c) CHANGES IN CONTROL
The Company knows of no contractual arrangements which may, at a
subsequent date, result in a change of control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The financial statements and schedules listed in the accompanying
Index to Financial Statements and Financial Statement Schedules are
filed as part of this Annual Report.
2. EXHIBITS
The Exhibits listed on the accompanying Index to Exhibits are
filed as part of this Annual Report.
(b) REPORTS ON FORM 8-K
None.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
[ITEM 14(a)]
Consolidated Balance Sheet at December 31, 1994, and 1993
Consolidated Statement of Income and Retained Earnings for each of the three
years in the period ended December 31, 1994
Consolidated Statement of Cash Flows for each of the three years in the
period ended December 31, 1994
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
Supplementary Information:
Quarterly Financial Data (Unaudited)
Financial Statement Schedules:
II-Valuation and Qualifying Accounts
III-Real Estate and Accumulated Depreciation
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the
consolidated financial statements or the notes thereto.
Financial statements and schedules of Florida East Coast Industries, Inc.
(not consolidated) are omitted since it is primarily a holding company and
all subsidiaries included in the consolidated financial statements being
filed, in the aggregate, do not have minority equity interests and/or
indebtedness to any person other than the Company or its consolidated
subsidiaries in amounts which together exceed five percent of the total
assets as shown by the consolidated balance sheet at the end of any year
covered by this Report.
The financial statements listed in the above Index which are included in the
Annual Report to Stockholders for the year ended December 31, 1994, are
hereby incorporated and filed as part of this Report. With the exception of
the items listed in the above Index and as mentioned specifically in
responses to this and other parts of this Report, the 1994 Annual Report to
Stockholders is not to be deemed filed as part of this Report.
INDEX TO EXHIBITS
(ITEM 13[a] 3.)
S-K
Item 601 Documents
-------- ------------
(3) (a) Articles of Incorporation*
(3) (b) By-Laws*
(21) Subsidiaries of Florida East Coast Industries,
Inc.
(24) Power of Attorney
*Incorporated herein by reference to Exhibits filed in connection with Florida
East Coast Industries, Inc.'s Registration Statement on Form S-14 as filed
with the Securities and Exchange Commission on February 17, 1984 (File No.
2-89530).
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized on
February 15, 1995.
FLORIDA EAST COAST INDUSTRIES, INC.
(Registrant)
By: s/s T.N. Smith, Vice President and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
s/s W.L. Thornton*
Chairman, President, Chief Executive Officer, Director - 3/24/95
s/s C.F. Zellers, Jr.*
Vice President and Director - 3/24/95
s/s W.E. Durham, Jr.*
Vice President and Director - 3/24/95
s/s R.W. Wyckoff*
Director - 3/24/95
s/s J. Nelson Fairbanks*
Director - 3/24/95
s/s J.C. Belin*
Director - 3/24/95
s/s John H. Mercer, Jr.*
Director - 3/24/95
s/s A.C. Harper*.
Director - 3/24/95
s/s M.E. Rinker, Sr.*
Director - 3/24/95
s/s J.J. Parrish, III*
Director - 3/24/95
s/s G.P. West*
Treasurer - 3/24/95
s/s J.R. Yastrzemski*
Comptroller - 3/24/95
BY: s/s T. Neal Smith*
Attorney-in-Fact
*Such signature has been affixed pursuant to Power of Attorney.
<PAGE>
CONSOLIDATED BALANCE SHEETS
December 31, 1994, and 1993
(Dollars in thousands except per share amounts)
1994 1993
---- ----
Assets
Current Assets
Cash and cash equivalents $ 15,235 $ 14,438
Short-term investments (Note 5) 14,208 18,009
Accounts receivable, net 25,669 27,879
Materials and supplies 11,950 11,974
Other current assets (Note 7) 5,743 6,676
-------- --------
Total current assets 72,805 78,976
Other Investments (Note 5) 79,481 66,233
Properties, less Accumulated Depreciation and
Amortization (Note 4) 561,637 535,976
Other Assets and Deferred Charges 8,571 7,260
Total Assets $722,494 $688,445
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 21,945 $ 21,891
Income taxes 824 0
Estimated property taxes 3,174 4,665
Accrued casualty and other reserves (Note 9) 5,400 7,680
Other accrued liabilities 1,712 2,188
-------- --------
Total current liabilities 33,055 36,424
Deferred Income Taxes (Note 7) 128,237 122,520
Reserves and Other Long-Term Liabilities (Note 9) 8,934 6,463
Commitments and Contingencies (Note 9)
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 507,813 476,808
Net unrealized (loss) gain on investments available
for sale (Note 5) (884) 891
Treasury stock at cost (271,361 shares) (12,708) (12,708)
-------- --------
Total shareholders' equity 552,268 523,038
Total Liabilities and Shareholders' Equity $722,494 $688,445
(See accompanying notes to consolidated financial statements.)
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share amounts)
Years ended December 31
1994 1993 1992
--------------------------
Operating Revenues
Transportation $163,098 $162,318 $156,955
Realty - Land Sales 16,100 2,320 5,947
- Rents & Other 20,346 16,458 12,853
-------- -------- --------
Total Revenues 199,544 181,096 175,755
Operating Expenses
Transportation 120,147 117,789 119,630
Realty 16,796 13,403 11,069
General and Administrative 16,046 16,766 15,153
-------- -------- --------
Total Expenses 152,989 147,958 145,852
Operating Profit 46,555 33,138 29,903
Other Income(Expense):
Dividends 320 326 207
Interest income 4,614 3,920 5,899
Interest expense (48) 0 (1)
Gains on sales and other
disposition of properties 4,038 535 1,540
Other (net) 193 322 608
Total Other Income (Expense): 9,117 5,103 8,253
Income before income taxes and cumulative
effect of change in accounting principle 55,672 38,241 38,156
Income Taxes: (Note 7)
Current 13,990 11,807 12,542
Deferred 7,077 5,655 1,569
-------- -------- --------
Total Income Taxes 21,067 17,462 14,111
Income before cumulative effect
of change in accounting principle 34,605 20,779 24,045
Cumulative effect of change in accounting
principle for income taxes 0 1,504 0
Net Income 34,605 22,283 24,045
Retained Earnings:
Balance at beginning of year $476,808 $458,125 $437,681
Cash dividends (3,600) (3,600) (3,601)
-------- -------- --------
Balance at Year-end $507,813 $476,808 $458,125
Per share data:
Cash dividends $ 0.40 $ 0.40 $ 0.40
Income before cumulative effect of
change in accounting principle $ 3.85 $ 2.31 $ 2.67
Cumulative effect of change in accounting
principle for income taxes 0 .17 0
-------- -------- --------
Net income $ 3.85 $ 2.48 $ 2.67
(See accompanying notes to consolidated financial statements.)
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands)
Years ended December 31
1994 1993 1992
-------------------------
Cash Flows from Operating Activities:
Net Income $34,605 $22,283 $24,045
Adjustments to reconcile net income to cash
generated by operating activities:
Cumulative effect of change in
accounting principle for income taxes 0 (1,504) 0
Depreciation & amortization 21,747 20,335 18,765
Gains on disposition of assets (4,038) (535) (1,540)
Deferred taxes 7,077 5,655 1,569
Changes in operating assets and liabilities:
Decrease(increase) in accounts receivable 2,210 771 (2,786)
Decrease(increase) in other current assets 713 (559) 978
Increase in other assets & deferred chgs (1,311) (468) (436)
Increase(decrease) in accounts payable 54 (121) 1,930
Decrease in estimated property taxes (1,491) (1,742) (5,738)
(Decrease)increase in other current
liabilities (1,932) 216 (2,816)
Increase(decrease) in reserves and other
long-term liabilities 2,471 (390) (707)
----------------------------
Net cash generated by operating activities 60,105 43,941 33,264
Cash Flows from Investing Activities:
Purchases of properties (49,274) (54,743) (54,193)
Purchases of investments
Available for sale (17,364) (31,394) (76,231)
Held to maturity (58,349) (18,419) (15,843)
Maturities & redemption of investments
Available for sale 12,799 19,372 50,445
Held to maturity 49,847 44,992 51,216
Proceeds from disposition of assets 6,633 2,157 4,024
----------------------------
Net cash used in investing activities (55,708) (38,035) (40,582)
Cash Flows from Financing Activities:
Payment of dividends (3,600) (3,600) (3,601)
Net cash used in financing activities (3,600) (3,600) (3,601)
Net Increase (Decrease) in Cash and
Cash Equivalents 797 2,306 (10,919)
Cash and Cash Equivalents at Beginning of Year 14,438 12,132 23,051
----------------------------
Cash and Cash Equivalents at End of Year $15,235 $14,438 $12,132
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for income taxes $14,312 $11,166 $14,200
(See accompanying notes to consolidated financial statements)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
1. Nature of Business
The principal operations of Florida East Coast Industries, Inc. (the
"Company") and its subsidiaries relate directly to the transportation of goods
by rail and to the development, leasing, and sale of real estate. Both the
transportation and realty operations are located within the state of Florida.
2. Majority Stockholder
The Nemours Foundation, which is funded by the Alfred I. duPont
Testamentary Trust, owns approximately 5% of the Company's common stock. The
Alfred I. duPont Testamentary Trust owns approximately 69% of the common stock
of St. Joe Paper Company, which owns, through a subsidiary, approximately 54%
of the Company's common stock. The payment of dividends by the Company was
the only significant transaction with St. Joe Paper Company or its affiliates
in 1994, 1993, or 1992.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions and balances have been eliminated in consolidation.
Transportation Properties
Transportation properties are stated at historical cost and are
depreciated and amortized on the straight-line method at rates established by
the Interstate Commerce Commission (ICC). Gains and losses on normal
retirements of these items are credited or charged to accumulated depreciation.
Miscellaneous physical property consists principally of non-depreciable real
property.
Real Estate Properties
Real estate properties are stated at historical cost. Depreciation is
computed using the straight-line method over estimated asset lives of 15 years
for land improvements and 18 to 40 years for buildings.
Materials and Supplies
New materials and supplies are stated principally at average cost which is
not in excess of replacement cost. Used materials are stated at an amount
which does not exceed estimated realizable value.
Earnings per Share
Earnings per common share is based on the weighted average number of
shares of common stock outstanding during the year (9,000,000 in 1994, 1993,
and 1992).
Reclassification
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
Cash and Cash Equivalents
For purposes of Cash Flows, Cash and Cash Equivalents include cash on hand,
bank demand accounts, money market accounts, and overnight repurchase
agreements having original maturities of less than three months.
Fair Value of Financial Instruments
The carrying amounts of the following financial instruments approximate
fair value because of their short maturity: cash and cash equivalents, short-
term investments, accounts receivable, accounts payable, estimated property
taxes, and other accrued liabilities. The fair value of other investments
differs from the carrying value as disclosed in Note 5.
Income Taxes
The Company follows the asset and liability method of accounting for income
taxes in accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes." Under Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Effective January 1,
1993, the Company adopted Statement 109 and has reported the cumulative effect
of that change in the method of accounting for income taxes in the 1993
consolidated statement of income.
Pursuant to the deferred method under APB Opinion 11, which was applied in
1992, deferred income taxes are recognized for income and expense items that
are reported in different years for financial reporting purposes and income tax
purposes using the tax rate applicable for the year of the calculation. Under
the deferred method, deferred taxes are not adjusted for subsequent changes in
tax rates.
Investments
Investments consist principally of municipal bonds, common stocks,
redeemable preferred stocks, and U.S. Government obligations. The Company
adopted the provisions of SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," as of December 31, 1993. Under Statement 115, the
Company classifies its debt and marketable equity securities in one of three
categories: trading, available-for-sale, or held-to-maturity. Trading
securities are bought and held principally for the purpose of selling them in
the near-term. Held-to-maturity securities are those securities in which the
Company has the ability and intent to hold until maturity. All other
securities not included in trading or held-to-maturity are classified as
available-for-sale.
Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains
and losses on trading securities are included in earnings. Unrealized holding
gains and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate
component of shareholders' equity until realized.
A decline in the market value of any available-for-sale or held-to-
maturity security below cost that is deemed other than temporary is charged to
earnings resulting in the establishment of a new cost basis for the security.
Realized gains and losses for securities classified as available-for-sale
and held-to-maturity are included in earnings and are derived using the
specific identification method for determining the cost of securities sold.
4. Properties
Properties consist of (in thousands):
1994 1993
---------------------
Transportation Properties
Road $302,625 $291,436
Equipment 191,928 189,897
Miscellaneous Physical Property 5,435 5,435
Construction in Progress 3,007 1,421
-------- --------
502,995 488,189
Less Accumulated Depreciation & Amortization 187,906 179,184
-------- --------
$315,089 $309,005
Real Estate Properties
Land and Land Improvements $113,615 $106,832
Buildings 128,059 107,915
Construction in Progress 25,148 27,515
-------- --------
266,822 242,262
Less Accumulated Depreciation & Amortization 20,274 15,291
-------- --------
$246,548 $226,971
Real Estate properties having a net book value of $142.2 million at
December 31, 1994, are leased under non-cancelable operating leases with
aggregate rentals of $74.3 million which are due in years 1995-1999 in the
amounts of $20.9, $18.6, $15.9, $11.4, and $7.5 million, respectively.
5. Investments
Other investments, including certain held-to-maturity investments which
mature within one year, are held as a development fund created to accumulate
capital expected to be required for future improvement of the Company's real
estate properties.
Investments at December 31, 1994, consist of (in thousands):
Unrealized
Carrying Fair Holding
Cost Value Value Gain(Loss)
-------- -------- ------- ----------
Short-term investments
Held-to-Maturity:
U.S. Government securities $11,035 $11,035 $11,500 $ 465
Tax exempt municipals 3,157 3,157 3,091 (66)
Certificates of Deposit 16 16 16 0
------- ------- ------- --------
$14,208 $14,208 $14,607 $ 399
Other investments
Available-for-sale
U.S. Government securities
Maturing in 1 to 5 years $ 1,220 $ 1,186 $ 1,186 $ (34)
Tax exempt municipals
Maturing in 1 to 5 years 4,457 4,236 4,236 (221)
Maturing in 5 to 10 years 22,148 21,278 21,278 (870)
Maturing in more than 10 years 3,364 3,272 3,272 (92)
Equity securities 8,620 8,398 8,398 (222)
------- ------- ------- --------
$39,809 $38,370 $38,370 $(1,439)
Held-to-Maturity
U.S. Government securities
Maturing within one year $40,080 $40,080 $41,136 $ 1,056
Mortgage backed securities
Maturing in 1 to 5 years 243 243 787 544
Other corporate debt securities
Maturing in 5 to 10 years 788 788 1,173 385
------- ------- ------- --------
$41,111 $41,111 $43,096 $ 1,985
------- ------- ------- --------
$80,920 $79,481 $48,466 $ 546
------- ------- ------- --------
Investments at December 31, 1993, consist of (in thousands):
Short-term investments
Held-to-Maturity:
U.S. Government securities $13,545 $13,545 $14,000 $ 455
Tax exempt municipals 2,401 2,401 2,376 (25)
Certificates of Deposit 2,063 2,063 2,063 0
------- ------- ------- --------
$18,009 $18,009 $18,439 $ 430
Marketable securities
Available-for-Sale
Tax exempt municipals
Maturing in 1 to 5 years $ 500 $ 519 $ 519 $ 19
Maturing in 5 to 10 years 24,079 25,264 25,264 1,185
Maturing in more than 10 years 5,382 5,604 5,604 222
Equity securities 9,177 9,202 9,202 25
------- ------- ------- --------
$39,138 $40,589 $40,589 $ 1,451
Held-to-Maturity
U.S. Government securities
Maturing within one year $23,927 $23,927 $24,696 $ 769
Mortgage backed securities
Maturing in 1 to 5 years 916 916 1,491 575
Other corporate debt securities
Maturing in 5 to 10 years 801 801 801 0
------- ------- ------- -------
$25,644 $25,644 $26,988 $ 1,344
------- ------- ------- -------
$64,782 $66,233 $67,577 $ 2,795
Gross unrealized holding gains and gross unrealized holding losses at December
31, 1994, were $2,449,000 and $1,504,000, respectively.
Gross unrealized holding gains and gross unrealized holding losses at December
31, 1993, were $3,667,000 and $442,000, respectively.
6. Collateral Trust 5% Bonds
There are outstanding at December 31, 1994, and 1993 $12,880,575 and
$13,135,325, respectively, of the Company's Collateral Trust 5% Bonds (the
"Bonds") due in 2001. Direct obligations of the U.S. Government, the cash
flows from which approximately coincide as to timing and amount with the
scheduled interest and principal payments on the Bonds, are held in trust for
the purpose of making such payments. Accordingly, the Bonds are considered to
be extinguished.
7. Income Taxes
Total income tax expense for the years ended December 31, 1994, 1993, and
1992 was allocated as follows (in thousands):
1994 1993 1992
------------------------
Income from continuing operations $21,067 $17,462 $14,111
Shareholders' equity for recognition of unrealized
holding (loss) gain on investments available-for-
sale (1,115) 560 0
------------------------
$19,952 $18,022 $14,111
Income tax expense attributable to income from continuing operations
differed from the amounts computed by applying the statutory federal income
tax rate to pre-tax income as a result of the following:
1994 1993 1992
------------------------
Amount computed at statutory federal rate $19,485 $13,384 $12,973
Effect of dividends received exclusion and
tax-free interest (700) (538) (242)
State taxes (net of federal benefit) 1,979 1,357 1,359
Adjustment to deferred tax assets and liabilities
for enacted changes in tax laws and rates 0 2,893 0
Other (net) 303 366 21
------------------------
$21,067 $17,462 $14,111
The tax effects of temporary differnces that give rise to significant portions
of deferred tax assets and deferred tax liabilities at December 31, 1994, and
1993, are as follows:
1994 1993
----------------
Deferred tax assets:
Accrued casualty & other reserves $ 5,395 $ 6,400
Amortization of fiber optic income 612 735
Unrealized holding loss on investments
available-for-sale 555 0
Other 285 349
-----------------
Total deferred tax assets $ 6,847 $ 7,484
Deferred tax liabilities:
Properties, principally due to differences
in depreciation $ 99,361 $ 97,655
Deferred gain on land sales 29,183 24,893
Deferred profit on bonds extinguished 1,846 2,027
Unrealized holding gain on investments
available-for-sale 0 560
Other 1,099 1,029
-----------------
Total deferred tax liabilities $131,489 $126,164
-----------------
Net deferred tax liabilities $124,642 $118,680
There was no valuation allowance provided for deferred tax assets as of
December 31, 1994, and 1993.
Included in other current assets are net current deferred tax assets of
$3,595 and $3,840 at December 31, 1994, and 1993, respectively.
For the year ended December 31, 1992, deferred income tax of $1,569
resulted from differences in the recognition of income and expense for income
tax and financial reporting purposes. The sources and tax effects of those
differences are accelerated depreciation of $932, accrued causalty reserves of
$1,072, and other, net of ($435).
8. Segment Information
The Company operates principally in two industries: transportation and
realty. Its transportation operations consist primarily of railroad-related
activities and some trucking operations. Realty operations are involved in
real estate development, rentals and related management, and operations of
properties. Operating revenues represent sales to unaffiliated customers, as
reported in the Company's Consolidated Statement of Income and Retained
Earnings. Operating profit is operating revenue less directly traceable costs
and expenses.
Identifiable assets by industry are those assets that are used in the
Company's operations in each industry.
Information by industry segment follows (in thousands):
1994 1993 1992
---- ---- ----
Operating Revenue:
Transportation $163,098 $162,318 $156,955
Realty 36,446 18,778 18,800
------------------------------
$199,544 $181,096 $175,755
Operating Profit:
Transportation $ 28,506 $ 29,346 $ 23,814
Realty 18,049 3,792 6,089
------------------------------
$ 46,555 $ 33,138 $ 29,903
Identifiable Assets:
Transportation $357,670 $352,465 $351,850
Realty 251,348 232,068 199,763
Corporate 113,476 103,912 118,806
------------------------------
$722,494 $688,445 $670,419
Capital Expenditures:
Transportation $ 21,259 $ 19,775 $ 18,040
Realty 28,015 34,968 36,153
------------------------------
$ 49,274 $ 54,743 $ 54,193
Depreciation:
Transportation $ 16,740 $ 16,356 $ 15,567
Realty 5,007 3,979 3,198
------------------------------
$ 21,747 $ 20,335 $ 18,765
9. Commitments and Contingencies
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 difficult 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,
but could be material to the results of operations of the Company in any one
period. As of December 31, 1994, and 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.
Independent Auditors' Report
The Board of Directors and Shareholders
Florida East Coast Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Florida East
Coast Industries, Inc., and subsidiaries as of December 31, 1994, and 1993,
and the related consolidated statements of income and retained earnings, and
cash flows for each of the years in the three-year period ended December 31,
1994. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Florida East Coast
Industries, Inc., and subsidiaries as of December 31, 1994, and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in note 3 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standard (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," at December 31, 1993. As discussed
in note 3, the Company adopted the provisions of the Financial Accounting
Standards Board's SFAS No. 109, "Accounting for Income Taxes," effective
January 1, 1993.
s/s KPMG Peat Marwick
Certified Public Accountants
Jacksonville, Florida
February 10, 1995
SUPPLEMENTARY INFORMATION
1994
Dec. 31 Sept. 30 June 30 March 31
------- -------- ------- --------
QUARTERLY FINANCIAL DATA
Operating Revenues $48,723 $45,729 $46,682 $58,410
Other Income $ 2,962 $ 3,447 $ 992 $ 1,716
Operating Expenses $37,177 $39,164 $38,421 $38,227
Income before cumulative effect of
change in accounting principal $ 8,568 $ 6,712 $ 5,119 $14,206
Cumulative effect of change in
accounting principle for income
taxes (1) $ 0 $ 0 $ 0 $ 0
-----------------------------------
Net Income $ 8,568 $ 6,712 $ 5,119 $14,206
Per Common Share:
Income before cumulative effect of
change in accounting principle $ 0.95 $ 0.75 $ 0.57 $ 1.58
Cumulative effect of change in
accounting principle for income
taxes (1) $ 0 $ 0 $ 0 $ 0
-----------------------------------
Net Income Per Common Share $ 0.95 $ 0.75 $ 0.57 $ 1.58
1993
Dec. 31 Sept. 30 June 30 March 31
------- -------- ------- --------
QUARTERLY FINANCIAL DATA
Operating Revenues $47,544 $43,891 $45,642 $44,019
Other Income $ 1,226 $ 2,186 $ 39 $ 1,652
Operating Expenses $37,605 $33,908 $38,802 $37,643
Income before cumulative effect of
change in accounting principle $ 6,770 $ 4,459 $ 4,420 $ 5,130
Cumulative effect of change in
accounting principle for income
taxes (1) $ 0 $ 0 $ 0 $ 1,504
-----------------------------------
Net Income $ 6,770 $ 4,459 $ 4,420 $ 6,634
Per Common Share:
Income before cumulative effect of
change in accounting principle $ 0.75 $ 0.50 $ 0.49 $ 0.57
Cumulative effect of change in
accounting principle for income
taxes (1) $ 0 $ 0 $ 0 $ 0.17
-----------------------------------
Net Income Per Common Share $ 0.75 $ 0.50 $ 0.49 $ 0.74
(1) As discussed in Note 3, the Company adopted Statement No. 109 effective
January 1, 1993. Accordingly, the cumulative effect of this change in
accounting principle was recorded in the first quarter of 1993.
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
SCHEDULE II (CONSOLIDATED) - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(Dollars in thousands)
Balance at Additions
Beginning Charged Balance at
of Year to Expense Payments End of Year
---------- ---------- -------- -----------
RESERVES INCLUDED IN LIABILITIES
1994
Casualty & other reserves $14,143 $2,584 $5,122 $11,605[a]
1993
Casualty & other reserves $14,145 $2,443 $2,445 $14,143[a]
1992
Casualty & other reserves $16,691 $ 724 $3,270 $14,145[a]
[a] Includes $5,400, $7,680, and $7,292 in current liabilities at December 31,
1994, December 31, 1993, and December 31, 1992, respectively. The
remainder is included in "Reserves and Other Long-Term Liabilities."
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
SCHEDULE III (CONSOLIDATED) - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994, 1993, AND 1992
(in thousands)
Initial Cost to Company
Description Encumbrances Land
----------- ------------ ----
Duval County
Office Buildings (5) -0- $ 1,153
Office/Showroom/Warehouses (8) -0- 1,502
Office/Warehouse (1) -0- 0
Land w/Infrastructure -0- 6,593
Unimproved Land & Misc. Assets -0- 915
St. Johns County
Unimproved Land -0- 2,631
Flagler County
Unimproved Land -0- 3,218
Volusia County
Unimproved Land -0- 3,651
Brevard County
Office/Showroom/Warehouse -0- 73
Land w/Infrastructure -0- 3,797
Unimproved Land -0- 4,846
Indian River County
Unimproved Land -0- 218
St. Lucie County
Unimproved Land -0- 639
Martin County
Unimproved Land -0- 4,671
Putnam County
Unimproved Land -0- 2
Palm Beach County
Office/Showroom/Warehouse (1) -0- 113
Rail Warehouses (2) -0- 449
Cross Docks (4) -0- 117
Land w/Infrastructure -0- 1,259
Unimproved Land -0- 1,596
Broward County
Rail Warehouse -0- 85
Unimproved Land -0- 733
Manatee County
Unimproved Land & Misc. Assets -0- 14
Dade County
Cross Dock (1) -0- 137
Double Front Load Warehouse (1) -0- 768
Rail Warehouses (6) -0- 808
Office/Showroom/Warehouses (5) -0- 1,003
Office Warehouses (4) -0- 1,462
Front Load Warehouses (5) -0- 1,943
Office Service Center (1) -0- 285
Land w/Infrastructure -0- 2,577
Unimproved Land & Misc. Assets -0- 15,725
-------
TOTALS $62,983
Initial Cost to Company
Costs
Capitalized
Buildings & Subsequent to
Description Improvements Acquisition
----------- ------------ -------------
Duval County
Office Buildings (5) $6,200 $ 26,508
Office/Showroom/Warehouses (8) 0 19,158
Office/Warehouse (1) 0 4,076
Land w/Infrastructure 0 6,786
Unimproved Land & Misc. Assets 0 1,548
St. Johns County
Unimproved Land 0 411
Flagler County
Unimproved Land 0 1,137
Volusia County
Unimproved Land 0 501
Brevard County
Office/Showroom/Warehouse 0 1,900
Land w/Infrastructure 0 0
Unimproved Land 0 191
Indian River County
Unimproved Land 0 189
St. Lucie County
Unimproved Land 0 5
Martin County
Unimproved Land 0 2,344
Putnam County
Unimproved Land 0 0
Palm Beach County
Office/Showroom/Warehouse (1) 0 2,879
Rail Warehouses (2) 0 4,110
Cross Docks (4) 0 3,763
Land w/Infrastructure 0 0
Unimproved Land 0 0
Broward County
Rail Warehouse 1,701
Unimproved Land 0 701
Manatee County
Unimproved Land & Misc. Assets 0 78
Dade County
Cross Dock (1) 0 1,018
Double Front Load Warehouse (1) 0 5,485
Rail Warehouses (6) 0 24,607
Office/Showroom/Warehouses (5) 0 14,782
Office Warehouses (4) 0 12,854
Front Load Warehouses (5) 0 16,066
Office Service Center (1) 0 2,106
Land w/Infrastructure 0 7,854
Unimproved Land & Misc. Assets 0 9,733
------ ---------
TOTALS $6,200 $172,491
Carried at Close of Period
Land & Bldgs. &
Description Land Improv. Improv. Total
----------- ------------ -------- -----
Duval County
Office Buildings (5) $ 3,917 $ 29,944 $ 33,861
Office/Showroom/Warehouses (8) 3,930 16,730 20,660
Office/Warehouse (1) 1,073 3,003 4,076
Land w/Infrastructure 13,379 0 13,379
Unimproved Land & Misc. Assets 2,289 174 2,463
St. Johns County
Unimproved Land 3,042 0 3,042
Flagler County
Unimproved Land 4,355 0 4,355
Volusia County
Unimproved Land 4,152 0 4,152
Brevard County
Office/Showroom/Warehouse 438 1,535 1,973
Land w/Infrastructure 3,797 0 3,797
Unimproved Land 5,037 0 5,037
Indian River County
Unimproved Land 407 0 407
St. Lucie County
Unimproved Land 644 0 644
Martin County
Unimproved Land 7,015 0 7,015
Putnam County
Unimproved Land 2 0 2
Palm Beach County
Office/Showroom/Warehouse (1) 599 2,393 2,992
Rail Warehouses (2) 557 4,002 4,559
Cross Docks (4) 1,262 2,618 3,880
Land w/Infrastructure 1,259 0 1,259
Unimproved Land 1,596 0 1,596
Broward County
Rail Warehouse 405 1,381 1,786
Unimproved Land 1,434 0 1,434
Manatee County
Unimproved Land & Misc. Assets 92 0 92
Dade County
Cross Dock (1) 137 1,018 1,155
Double Front Load Warehouse (1) 1,409 4,844 6,253
Rail Warehouses (6) 4,837 20,578 25,415
Office/Showroom/Warehouses (5) 3,150 12,635 15,785
Office Warehouses (4) 2,838 11,478 14,316
Front Load Warehouses (5) 4,326 13,683 18,009
Office Service Center (1) 680 1,711 2,391
Land w/Infrastructure 10,431 0 10,431
Unimproved Land & Misc. Assets 25,126 332 25,458
-------- -------- ---------
TOTALS $113,615 $128,059 $241,674
Life on Which
Depreciation in
Date First Latest Income
Accumulated Started or Statement is
Description Depreciation Acquired Computed
----------- ------------ ---------- ---------------
Duval County
Office Buildings (5) $ 5,141 1985 3 to 40 years
Office/Showroom/Warehouses (8) 3,378 1987 3 to 40 years
Office/Warehouse (1) 106 1994 3 to 40 years
Land w/Infrastructure 0 Various
Unimproved Land & Misc. Assets 173 Various 3 to 40 years
St. Johns County
Unimproved Land 0 Various
Flagler County
Unimproved Land 0 Various
Volusia County
Unimproved Land 0 Various
Brevard County
Office/Showroom/Warehouse 352 1988 3 to 40 years
Land w/Infrastructure 0 Various
Unimproved Land 0 Various
Indian River County
Unimproved Land 0 Various
St. Lucie County
Unimproved Land 0 Various
Martin County
Unimproved Land 0 Various
Putnam County
Unimproved Land 0 Various
Palm Beach County
Office/Showroom/Warehouse (1) 647 1986 3 to 40 years
Rail Warehouses (2) 1,034 1982 3 to 40 years
Cross Docks (4) 747 1987 3 to 40 years
Land w/Infrastructure 0 Various
Unimproved Land 0 Various
Broward County
Rail Warehouse 492 1986 3 to 40 years
Unimproved Land 0 Various
Manatee County
Unimproved Land 0 Various
Dade County
Cross Dock (1) 210 1987 3 to 40 years
Double Front Load Warehouse (1) 321 1993 3 to 40 years
Rail Warehouses (6) 1,554 1988 3 to 40 years
Office/Showroom/Warehouses (5) 1,826 1988 3 to 40 years
Office/Warehouses (4) 1,352 1990 3 to 40 years
Front Load Warehouses (5) 989 1991 3 to 40 years
Office Service Center (1) 61 1994 3 to 40 years
Land w/Infrastructure 0 Various
Unimproved Land & Misc. Assets 1,891 Various
-------
TOTALS $20,274
Notes:
(A) The aggregate cost of real estate owned at December 31, 1994, for
federal income tax purposes is approximately $140,875,139.
(B) Reconciliation of real estate owned (in thousands of dollars):
1994 1993 1992
---- ---- ----
Balance at Beginning of Year $214,747 $184,565 $155,251
Amounts Capitalized 28,015 30,672 29,452
Amounts Retired or Adjusted (1,088) (490) (138)
--------------------------------
Balance at Close of Period $241,674 $214,747 $184,565
(C) Reconciliation of accumulated depreciation (in thousands of dollars):
1994 1993 1992
---- ---- ----
Balance at Beginning of Year $ 15,291 $ 11,310 $ 8,112
Depreciation Expense 5,007 3,979 3,198
Amounts Retired or Adjusted (24) 2 0
--------------------------------
Balance at Close of Period $ 20,274 $ 15,291 $ 11,310
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Florida East Coast Industries, Inc.:
Under date of February 10, 1995, we reported on the consolidated balance
sheets of Florida East Coast Industries, Inc., and subsidiaries as of
December 31, 1994, and 1993, and the related consolidated statements of
income and retained earnings, and cash flows for each of the years in the
three-year period ended December 31, 1994, as contained in the 1994 Annual
Report to Stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the Annual Report on Form
10-K for the year 1994. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related financial
statement schedules as listed in the accompanying index. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement
schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
As discussed in note 3 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standard (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," at December 31, 1993. As
discussed in note 3, the Company adopted the provisions of the Financial
Accounting Standards Board's SFAS No. 109, "Accounting for Income Taxes,"
effective January 1, 1993.
s/s KPMG PEAT MARWICK LLP
Certified Public Accountants
Jacksonville, Florida
February 10, 1995
<PAGE>
21. Listing of parent and subsidiaries
Parent - Florida East Coast Industries, Inc.
Subsidiaries - Florida East Coast Railway Company
Florida East Coast Highway Dispatch Company
Florida East Coast Inspections, Inc.
Florida East Coast Deliveries, Inc.
Railroad Concrete Crosstie Corporation
Railroad Track Construction Company
Operations Unlimited, Inc.
Florida Express Carrier, Inc.
Gran Central Corporation
Dade County Land Holding Company, Inc.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each of the undersigned Directors of
Florida East Coast Industries, Inc., a Florida corporation ("Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
DC 20549, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1994, hereby constitutes and appoints Winfred L. Thornton and T.N. Smith as
his true and lawful attorneys-in-fact and agent, and each of them with full
power to act, without the other in his stead, in any and all capacities, to
sign the 1994 Annual Report of Florida East Coast Industries, Inc., on Form
10-K and to file on behalf of the Corporation such Annual Report and
amendments with all exhibits thereto, and any and all other information and
documents in connection therewith, with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agent, and each
of them, full power and authority to do and perform any and all acts and things
requisite and ratifying and confirming all that each said attorneys-in-fact
and agent or any one of them, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on the date
indicated below:
s/s Winfred L. Thornton, Chairman, s/s T.N. Smith, Vice President
President, CEO, and Director and Secretary
s/s J. Nelson Fairbanks, Director s/s J.C. Belin, Director
s/s A.C. Harper, Director s/s R.W. Wyckoff, Director
s/s M.E. Rinker, Sr., Director s/s J.H. Mercer, Jr., Director
s/s J.J. Parrish, III, Director s/s W.E. Durham, Jr., Vice President
and Director
s/s C.F. Zellers, Jr., Vice President and Director
Dated: March 24, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-END> DEC-31-1994 DEC-31-1993
<CASH> 15,235 14,438
<SECURITIES> 14,208 18,009
<RECEIVABLES> 25,669 27,879
<ALLOWANCES> 0 0
<INVENTORY> 11,950 11,974
<CURRENT-ASSETS> 72,805 78,976
<PP&E> 769,817 730,451
<DEPRECIATION> 208,180 194,475
<TOTAL-ASSETS> 722,494 688,445
<CURRENT-LIABILITIES> 33,055 36,424
<BONDS> 0 0
<COMMON> 57,946 57,946
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 722,494 688,445
<SALES> 199,544 181,096
<TOTAL-REVENUES> 208,661 186,199
<CGS> 0 0
<TOTAL-COSTS> 152,989 147,958
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 55,672 38,241
<INCOME-TAX> 21,067 17,462
<INCOME-CONTINUING> 34,605 20,779
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 1,504<F1>
<NET-INCOME> 34,605 22,283
<EPS-PRIMARY> 3.85 2.48
<EPS-DILUTED> .0 .0
<FN>
<F1>Cumulative effect of change in accounting principle for income taxes.
</FN>
</TABLE>
