UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the period ended June 30, 1995.
Commission File Number 2-89530
FLORIDA EAST COAST INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2349968
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1650 Prudential Drive, Jacksonville, FL 32201-1380
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code
(904) 396-6600
N O N E
Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ____X____ No _________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at June 30, 1995
Common Stock, $6.25 par value 9,051,987 shares
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
June 30 December 31
1995 1994
(Unaudited)
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 9,802 $ 15,235
Short-term investments 15,673 14,208
Accounts receivable, net 26,218 25,669
Materials and supplies 12,302 11,950
Other 5,456 5,743
-------- --------
Total current assets 69,451 72,805
Other investments 77,454 79,481
Properties, less accumulated depreciation
and amortization 588,182 561,637
Other assets and deferred charges 9,928 8,571
-------- --------
$745,015 $722,494
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 21,856 $ 21,945
Income taxes 1,101 824
Estimated property taxes 5,643 3,174
Accrued casualty and other reserves 5,426 5,400
Other accrued liabilities 2,235 1,712
-------- --------
Total current liabilities 36,261 33,055
Deferred income taxes 129,689 128,237
Reserves and other long-term liabilities 10,671 8,934
Shareholders' equity:
Common stock, $6.25 par value; 9,360,000 shares authorized;
9,271,361 shares issued & outstanding 57,946 57,946
Capital surplus 1,598 101
Retained earnings 518,332 507,813
Net unrealized gain (loss) on debt and
marketable equity securities 791 (884)
Less:
Treasury stock at cost (219,374 and 271,361
shares) (10,273) (12,708)
-------- --------
Total shareholders' equity 568,394 552,268
-------- --------
$745,015 $722,494
======== ========
(See accompanying notes)
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS
OF INCOME AND RETAINED EARNINGS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
1995 1994 1995 1994
-------------------------------------
OPERATING REVENUES:
Transportation $ 45,229 $ 41,528 $ 85,052 $ 81,700
Realty - Land Sales 540 178 540 13,906
- Rents & Other 6,210 4,976 11,966 9,486
-------- -------- -------- --------
Total revenues 51,979 46,682 97,558 105,092
OPERATING EXPENSES:
Transportation 34,239 29,967 63,316 59,381
Realty 4,356 4,155 8,652 8,896
General and Administrative 5,231 4,299 9,774 8,372
-------- -------- --------- --------
Total expenses 43,826 38,421 81,742 76,649
Operating profit 8,153 8,261 15,816 28,443
OTHER INCOME (EXPENSE):
Dividends 198 76 290 161
Interest income 1,422 909 2,779 1,985
Interest expense (161) --- (353) ---
Gains on sales and other disposition
of properties 685 --- 879 317
Other (net) 621 7 346 245
-------- -------- --------- --------
Total other income (expense) 2,765 992 3,941 2,708
Income before income taxes 10,918 9,253 19,757 31,151
INCOME TAXES:
Current 3,808 4,159 7,080 7,442
Deferred 286 (25) 329 4,384
-------- -------- --------- ---------
Total income taxes 4,094 4,134 7,409 11,826
Income before minority interest 6,824 5,119 12,348 19,325
Less: minority interest (24) --- (24) ---
-------- -------- --------- ---------
Net income $ 6,800 $ 5,119 $ 12,324 $ 19,325
Retained earnings:
Balance at beginning of year 512,437 490,114 507,813 476,808
Cash dividends (905) (900) (1,805) (1,800)
-------- -------- -------- --------
Balance at end of period $518,332 $494,333 $518,332 $494,333
======== ======== ======== ========
Per Share Data:
Cash dividends $ 0.10 $ 0.10 $ 0.20 $ 0.20
======== ======== ======== ========
Earnings per common share $ 0.76 $ 0.57 $ 1.37 $ 2.15
======== ======== ======== ========
(See accompanying notes)
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
SIX MONTHS ENDED JUNE 30
1995 1994
---- ----
Cash flows from operating activities:
Net income $12,324 $19,325
Adjustments to reconcile net income to cash
generated:
Depreciation and amortization 11,222 10,638
Minority interest in income 24 ---
Gain on disposition of assets (879) (317)
Deferred taxes 329 4,384
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net (549) 605
(Increase) decrease in other current assets (65) (678)
(Increase) decrease in other assets and
deferred charges (1,357) 167
(Decrease) increase in accounts payable (89) 767
Increase in income taxes payable 277 ---
Increase (decrease) in estimated property taxes 2,469 270
Increase (decrease) in other current liabilities 549 (1,980)
Increase in reserves and other long-term
liabilities 1,737 888
------- -------
Net cash generated by operating activities 25,992 34,069
Cash flows from investing activities:
Purchases of properties (43,774) (27,100)
Purchases of investments:
Available-for-sale (16,401) (2,033)
Held-to-maturity (15,645) (44,554)
Maturities and redemption of investments:
Available-for-sale 18,193 1,789
Held-to-maturity 22,000 31,738
Proceeds from disposition of assets 6,007 311
------- -------
Net cash used in investing activities (29,620) (39,849)
Cash flows from financing activities:
Payment of dividends (1,805) (1,800)
------- -------
Net cash used in financing activities $(1,805) $(1,800)
Net (decrease) increase in cash & cash equivalents (5,433) (7,580)
Cash and cash equivalents at beginning of period 15,235 14,438
------- -------
Cash and cash equivalents at end of period $ 9,802 $ 6,858
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the quarter for income taxes $ 7,208 $ 8,237
======= =======
Cash paid during the quarter for interest $ 206 $ ---
======= =======
(See accompanying notes)
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments considered necessary
to present fairly the financial position as of June 30, 1995, and
December 31, 1994, and the results of operations and cash flows for the
three month and six month periods ended June 30, 1995, and June 30, 1994.
The adjustments to the unaudited financial statements consist only of
normal recurring accruals.
2. The results of operations for the six months ended June 30, 1995, and
1994, are not necessarily indicative of the results that may be expected
for the full year.
3. The Company has retained certain self-insurance risks with respect to
losses for third-party liability, property damage, and group health
insurance coverage provided employees. The Company is the defendant and
plaintiff in various lawsuits resulting from its operations. In the
opinion of management, adequate provision has been made in the financial
statements for the estimated liability which may result from disposition
of such lawsuits.
The Company is subject to proceedings arising out of environmental laws
and regulations, which primarily relate to the disposal and use of fuel
and oil used in the transportation business. It is the Company's policy
to accrue and charge against earnings environmental cleanup costs when it
is probable that a liability has been incurred and an amount can be
reasonably estimated. The estimated liability for environmental costs
was determined without consideration of possible recoverables through
state reimbursement programs. The only time environmental recoverables
are recorded in the books of the Company is at the time a claim is filed
with the state.
The Company is currently a party to, or involved in, legal proceedings
directed at the cleanup of three Superfund sites. The Company has accrued
its allocated share of the total estimated cleanup costs of $.06 million
for these three 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 and have been considered in the environmental
accrual of $3.3 million as of June 30, 1995.
It is not possible to quantify future environmental costs because many
issues relate to actions by third parties or changes in environmental
regulation. Recurring operational environmental expenses are estimated
to be substantially the same as the past four years, approximately $.3
million per year.
4. 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.
Generally accepted accounting principles require the use of historical
costs in preparing financial statements. This approach disregards the
effect of inflation on the replacement cost of property and equipment.
The Company is a capital-intensive company and has approximately $770
million invested in such assets as of December 31, 1994. The
replacement costs of these assets, as well as the related depreciation
expense, would be substantially greater than the amounts reported on the
basis of historical costs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The composition of Transportation revenues and expenses changed during
the second quarter 1995. Primarily, this change was related to the acquisition
of an 80% ownership in International Transit, Inc. (ITI), a common motor carrier
serving most of the southeastern United States. Secondarily affecting this
change was the commencement on April 1, 1995, of a haulage agreement with a
connecting rail carrier under which the connecting rail carrier's intermodal
shipments are handled in wholesale fashion to and from the Company's south
Florida intermodal terminals.
The purchase of ITI, which had 1994 operating revenues in excess of $21
million, is expected to compliment the Company's Transportation segment since
a significant portion of its truckload shipments are susceptible to highway-
rail intermodal movement. The consolidation of ITI's revenues and expenses
into the Company's financials as of April 1, 1995, contributed to certain
changes being recorded in Transportation revenues and expenses.
Rail haulage arrangements are a recent innovation on a number of rail
carriers and basically involves a carrier agreeing to move a connecting rail
carrier's freight cars, containers and/or trailers in a wholesale fashion
under which the rail carrier providing the wholesale service has little or no
responsibilities for the movements other than to provide line-haul and switching
services. These services may include the providing of crews and motive power
or may provide variations involving one or more of these. For example, as a
quid pro quo for the Company granting the haulage agreement to its south Florida
terminals as mentioned above, the Company received a haulage agreement
enabling FEC Railway to move intermodal freight to and from a terminal
established by FEC at Macon, Georgia. In the case of the agreement granted
by FEC, the connecting carrier's intermodal traffic is moved in regular FEC
trains at a cost for each container/trailer platform whether loaded or empty.
In the case of the agreement received by FEC, the connecting carrier only
provides a crew to move FEC-owned locomotives and cars loaded with containers
or trailers. Charges are, of course, set in accordance with the service
provided.
The haulage agreement granted by FEC to the connecting carrier results
in FEC's receipt of less revenue offset by the payment by FEC of less expense
such as per diem for cars and trailers; cost of ramping and deramping of
equipment from flat cars; costs associated with administrative procedures
such as billings and collections; and other intangible savings such as credit
risks, etc. Revenues and expenses attributable to FEC's Macon operation are,
of course, recorded as if the movement was all over tracks and facilities
owned by FEC.
Discounting the land sales, operating revenues increased $5.83 million
in first half 1995 versus first half 1994; $4.94 million in second quarter
1995 versus second quarter 1994; and $5.86 million in second quarter 1995
versus first quarter 1995.
These increases are attributable to the inclusion of ITI's April-June
1995 operating revenues and expenses into the Company's financials, the
revenues and expenses from the Macon operation, and the offset in some
measure by the decreases in revenues associated with the haulage operation.
The contribution to net income by ITI did not significantly impact the
consolidated net income of the Company.
Other factors affecting changes in revenues include a decrease in rock
shipments in second quarter 1995 because of unusually rainy weather and mine
equipment breakdowns adversely affecting mine operations. The Company also
expects rock shipments to match or exceed prior year volumes for the
balance of 1995. Rents and other revenues for each of the comparable periods
reflect increases attributable primarily to increase in inventory of space
available for lease and to a lesser extent to increase in rent rates.
Operating revenues for 1995, with exception of land sales revenues, are
expected to continue to reflect increases over first quarter 1995 and
comparable 1994 periods for at least the next three quarters because of the
introduction of ITI into consolidated results.
Sales of realty properties for the six months ending June 30, 1995,
compared to the same period in 1994, decreased by $13.37 million. This
decrease in 1995 land sales is attributable primarily to the single sale
of realty property for approximately $11.30 million to the State of Florida
in the first quarter 1994.
Operating expenses for the first six months of 1995 increased $5.09
million to $81.74 million as compared to $76.65 million for 1994. Operating
expenses for the second quarter 1995 increased $5.41 million from the same
period in 1994. Comparing second quarter with first quarter 1995, operating
expenses increased $5.91 million.
Transportation expenses, when comparing six months of 1995 with six
months of 1994, increased $3.94 million. When comparing second quarter 1995
with second quarter 1994, Transportation operating expenses increased $4.27
million. These increases primarily represent the cost of third-party
contractors doing work previously performed by the Company's trucking
subsidiaries, namely Operations Unlimited, Inc., and Florida East Coast
Highway Dispatch Company, and the inclusion of International Transit, Inc.'s,
expenses into the Company's consolidated financials. When comparing the
second quarter 1995 with first quarter 1995, Transportation operating
expenses increased $5.16 million, and this increase is again primarily
attributable to the inclusion of ITI into the consolidated financials.
The inclusion of ITI's revenues and expenses into the Company's
financials and the decreases in revenues and expenses associated with the
haulage agreement will continue to affect period-to-period comparisons
throughout the balance of the year.
Realty operating expenses decreased by $.24 million when comparing six
months of 1995 with six months of 1994. When comparing second quarter 1995
with second quarter 1994, Realty operating expenses increased $.20 million.
These increases in Realty operating expenses did not include unexpected
changes when compared to budgetary projections.
General and Administrative expenses increased $1.40 million when
comparing first six months of 1995 with same period 1994, and $.93 million
when comparing second quarter 1995 with second quarter 1994. Again, the
inclusion of ITI's expenses into consolidated financials of the Company
represents those increases.
As information, environmental costs continue to be insignificant
expenditures and represent less than .12% of total revenues or .33% of total
current assets. Compliance with the federal, state, and local laws and
regulations relating to the protection of the environment have not affected
the Company's capital additions, earnings, or competitive position, nor does
management anticipate any future problems which will adversely affect the
Company's financial situation based on the information available today. The
Company's policy is to actively prevent environmental problems, and management
is confident current accruals for present and future environmental costs are
sufficient and represent the upper limit of the Company's exposure.
Other Income for the second quarter 1995 compared to the second quarter
1994 and the six months ending June 30, 1995, versus 1994, reflects increases
of $1.77 million and $1.23 million, respectively. These increases are
primarily reflective of the improvements in dividends and the interest rates
on investments in 1995 versus 1994.
LIQUIDITY AND CAPITAL RESOURCES
FEC's principal sources of liquidity include cash generated by operations,
earnings on invested cash, and earnings on its investment portfolios,
consisting largely of U.S. Treasury securities for its short-term investments,
and approximately $41 million being actively managed in other diversified
investment funds.
Current cash generations are used for capital expenditures in the
Transportation and Realty sectors and in payment of dividends. The investment
portfolios are informally dedicated to major real estate development.
Cash and short-term investments decreased $3.96 million to $25.48 million at
June 30, 1995, from $29.44 million at year-end 1994. The investment portfolios
decreased $2.03 million to $77.45 million at June 30, 1995, from $79.48 million
at year-end 1994. The Company's working capital position changed from a ratio
of 2.20 to 1.00 at year-end 1994 to a ratio of 1.39 to 1.00 at March 31, 1995,
and to a ratio of 1.92 to 1.00 at June 30, 1995.
There were no significant changes in debt, reserves, or other liabilities
during the six-month period. Authorized capital projects at June 30, 1995,
decreased to approximately $30.42 million authorized and outstanding from
$36.20 million as of December 31, 1994.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
No change from 10-K for the year ended
December 31, 1994.
Item 5. Other Information
The Company is not aware of any other matters
of significance to be reported hereunder.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLORIDA EAST COAST INDUSTRIES, INC.
(Registrant)
Date: August 15, 1995 /s/ T. Neal Smith
___________________________________
Vice President & Secretary
(Principal Financial Officer)
Date: August 15, 1995 /s/ J.R. Yastrzemski
___________________________________
Comptroller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-END> JUN-30-1995 DEC-31-1994
<CASH> 9,802 15,235
<SECURITIES> 15,673 14,208
<RECEIVABLES> 26,218 25,669
<ALLOWANCES> 0 0
<INVENTORY> 12,302 11,950
<CURRENT-ASSETS> 69,451 72,805
<PP&E> 801,969 769,817
<DEPRECIATION> (213,787) 208,180
<TOTAL-ASSETS> 745,015 722,494
<CURRENT-LIABILITIES> 36,261 33,055
<BONDS> 0 0
<COMMON> 59,946 57,946
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 745,015 722,494
<SALES> 97,558 199,544
<TOTAL-REVENUES> 101,499 208,661
<CGS> 0 0
<TOTAL-COSTS> 81,742 152,989
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 19,733 55,672
<INCOME-TAX> 7,409 21,067
<INCOME-CONTINUING> 12,324 34,605
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 12,324 34,605
<EPS-PRIMARY> 1.37 3.85
<EPS-DILUTED> .0 .0
</TABLE>
