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 September 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 September 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)
SEPTEMBER DECEMBER
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 4,286 $ 15,235
Short-term investments 14,554 14,208
Accounts receivable, net 26,109 25,669
Materials and supplies 11,687 11,950
Other 7,554 5,743
-------- --------
Total current assets 64,190 72,805
Other investments 86,757 79,481
Properties, less accumulated depreciation and
amortization 594,097 561,637
Other assets and deferred charges 8,693 8,571
-------- --------
$753,737 $722,494
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,823 $ 21,945
Income taxes 1,343 824
Estimated property taxes 8,125 3,174
Accrued casualty and other reserves 5,349 5,400
Other accrued liabilities 1,708 1,712
-------- --------
Total current liabilities 37,348 33,055
Deferred income taxes 130,468 128,237
Reserves and other long-term liabilities 10,768 8,934
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 1,598 101
Retained earnings 524,570 507,813
Net unrealized gain (loss) on debt and marketable
equity securities 1,312 (884)
Less:
Treasury stock at cost (219,374 & 271,361 shares) (10,273) (12,708)
-------- --------
Total shareholders' equity 575,153 552,268
-------- --------
$753,737 $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 NINE MONTHS
ENDED SEPT. 30 ENDED SEPT. 30
1995 1994 1995 1994
OPERATING REVENUES:
Transportation $ 43,431 $ 40,387 $128,483 $122,087
Realty-Land Sales 2,000 2 2,540 13,908
-Rents & Other 6,279 5,340 18,245 14,826
-------- -------- -------- --------
Total revenues 51,710 45,729 149,268 150,821
OPERATING EXPENSES:
Transportation 32,373 31,171 95,689 90,552
Realty 4,484 4,106 13,136 12,460
General and Administrative 5,212 3,887 14,986 12,801
-------- -------- -------- --------
Total expenses 42,069 39,164 123,811 115,813
Operating profit 9,641 6,565 25,457 35,008
OTHER INCOME (EXPENSE):
Dividends 62 77 352 238
Interest income 1,387 1,430 4,167 3,415
Interest expense (151) 0 (504) 0
Gains on sales and other
disposition of properties (90) 1,824 789 2,140
Other (net) 599 116 945 361
-------- -------- -------- --------
Total other income (expense) 1,807 3,447 5,749 6,154
Income before income taxes 11,448 10,012 31,206 41,162
INCOME TAXES:
Current 3,842 2,854 10,922 10,296
Deferred 452 446 781 4,830
-------- -------- -------- --------
Total income taxes 4,294 3,300 11,703 15,126
Income before minority interest 7,154 6,712 19,503 26,036
Less: minority interest (12) 0 (36) 0
-------- -------- -------- --------
Net income $ 7,142 $ 6,712 $ 19,467 $ 26,036
Retained earnings:
Balance at beginning of year 518,332 494,332 507,813 476,808
Cash dividends (904) (900) (2,710) (2,700)
-------- -------- -------- --------
Balance at end of period $524,570 $500,144 $524,570 $500,144
======== ======== ======== ========
Per share data:
Cash dividends $ 0.10 $ 0.10 $ 0.30 $ 0.30
======== ======== ======== ========
Earnings per common share $ 0.79 $ 0.75 $ 2.16 $ 2.90
======== ======== ======== ========
(See accompanying notes)
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
NINE MONTHS ENDED SEPT. 30
1995 1994
------ ------
Cash flows from operating activities:
Net income $19,467 $26,036
Adjustments to reconcile net income
to cash generated:
Depreciation and amortization 16,772 16,042
Minority interest in income 36 0
Gain on disposition of assets (789) (2,140)
Deferred taxes 781 4,830
Net changes in operating assets and liabilities:
Accounts receivable, net and inventory 939 2,165
Other current assets (1,492) 394
Other assets and deferred charges 4,049 (1,556)
Accounts payable (2,223) (419)
Income taxes payable 519 598
Estimated property taxes 4,951 3,082
Other current liabilities (384) (2,241)
Reserves and other long-term liabilities 1,475 745
------- -------
Net cash generated by operating activities 44,101 47,536
Cash flows from investing activities:
Purchases of properties (50,397) (39,440)
Purchases of investments:
Available-for-sale (26,209) (10,082)
Held-to-maturity (33,503) (48,138)
Maturities and redemption of investments:
Available-for-sale 24,215 8,488
Held-to-maturity 31,600 34,597
Proceeds from disposition of assets 1,954 5,277
------- -------
Net cash used in investing activities (52,340) (49,298)
Cash flows from financing activities:
Payment of dividends (2,710) (2,700)
------- -------
Net cash used in financing activities $(2,710) $(2,700)
Net decrease in cash and cash equivalents (10,949) (4,462)
Cash and cash equivalents at beginning of period 15,235 14,438
------- -------
Cash and cash equivalents at end of period $ 4,286 $ 9,976
======= =======
Supplemental disclosure of cash flow information:
Cash paid for income taxes $10,885 $10,517
======= =======
Cash paid for interest $ 151 $ 0
======= =======
(See accompanying notes)
<PAGE>
FLORIDA EAST COAST INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of
normal recurring accruals) considered necessary to present fairly the
financial position as of September 30, 1995, and December 31, 1994, and
the results of operations and cash flows for the three-month and nine-
month periods ended September 30, 1995, and September 30, 1994.
2. The results of operations for the nine months ended September 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.
4. 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 two Superfund sites. The Company has accrued
its allocated share of the total estimated cleanup costs of $.02 million
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 and have been considered in the environmental accrual
of $2.8 million as of September 30, 1995.
Recurring operational environmental expenses are estimated to be
substantially the same as the past four years, approximately $.3 million
per year. Future environmental costs are impossible to quantify because
many environmental issues relate to the actions of third parties or
changes in environmental regulations. The ultimate disposition of
currently known environmental issues will not have a material effect on
the financial position or liquidity of the Company in any one period.
5. 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.
6. Certain prior year data has been reclassified to conform to the current
year presentation.
7. On March 30, 1995, the Company purchased 80% of the outstanding stock of
International Transit, Inc., through the issuance of treasury stock.
International Transit, Inc., is a regional truckload carrier. The
transaction has been excluded from the Statement of Cash Flows as it did
not result in the payment or receipt of cash.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues for the first nine months of 1995 versus 1994 decreased by
$1.6 million or 1.0%. Discounting the land sales, operating revenues increased
$9.8 million or 7.2% in the first nine months of 1995 versus the first nine
months of 1994. When comparing third quarter 1995 with third quarter 1994,
operating revenues increased $6.0 million, and discounting land sales during
the same periods, operating revenues increased $4.0 million.
As reported in the second quarter 1995 10-Q, the composition of the revenues
and expenses of the transportation segment of the Company has changed.
Primarily, the change is related to the consolidation of International Transit,
Inc.'s (ITI), revenues and expenses into the Company's financials as of April
1, 1995. However, the contribution to net income by ITI did not significantly
impact the consolidated net income of the Company. Also contributing to the
change was the implementation on April 1, 1995, of a haulage agreement with a
connecting rail carrier whereby the connecting rail carrier's intermodal
shipments are handled in wholesale fashion to and from the Company's South
Florida intermodal terminals. Finally, as a result of this haulage agreement,
a quid pro quo haulage agreement with the same connecting carrier was
implemented on April 1, whereby the Company is able to move intermodal freight
to and from a terminal established by FEC at Macon, Georgia.
An analysis of the various classifications of traffic within the transportation
segment of the Company for the first nine months of 1995 versus 1994 indicates
a moderate decline in shipments. Synonymous with the second quarter 1995, rock
shipments decreased because of unusually rainy weather when comparing the first
nine months of 1995 to the same period in 1994, the third quarter 1995 with
third quarter 1994, and third quarter 1995 with second quarter 1995.
1995 has been a year of change for the automobile industry. Rental car
companies are retaining vehicles for an extended period of time. Primary
vehicle handlers have experienced strikes by unions during the third quarter
1995. As a result, automobile shipments have declined during all the
comparative periods of 1995 with 1994.
Intermodal traffic has been relatively flat for the first nine months of 1995
versus 1994. Motor carrier competition has intensified because of surplus
equipment and drivers which has adversely affected the use of rail by shippers.
This decrease in intermodal traffic is illustrated in the fact that one of the
Company's connecting carriers, which has been a major provider of intermodal
shipments to the Company, is experiencing its worst year since the inception
of its intermodal service.
The only positive trend in the rail traffic is related to all other carloads.
All other carload shipments increased by 6.9% and 4.8% for the first nine
months and for the third quarter 1995, respectively, when compared to the
same periods in 1994, but declined 11.1% when comparing third quarter with
second quarter 1995. This traffic has been defined as fructose, building
materials, raw sugar, beverages, and other consumer products.
Fourth quarter rock traffic projections indicate an increased number of
shipments over the same period in 1994, providing the weather improves.
Projections for automotive and intermodal shipments for the fourth quarter
1995 continue to be disappointing. All other carload traffic projections
indicate a positive trend into and beyond the fourth quarter 1995.
Sales of realty properties for the nine months ending September 30, 1995,
compared to the same period in 1994, decreased by $11.4 million. This
decrease in 1995 land sales is primarily attributable to the single sale
of realty property for approximately $11.4 million to the State of Florida
in the first quarter 1994. Discounting this single sale of realty property,
land sales remained approximatley the same for the first nine months of 1995
versus 1994.
Rents and other realty revenues for the first nine months of 1995 increased
$3.4 million over the same period in 1994. Comparing third quarter 1995
with third quarter 1994 and second quarter 1995, rents and other realty
revenues increased $.9 million and $.07 million, respectively.
Operating expenses for the first nine months of 1995 increased $8.0 million
from $115.8 million in 1994 to $123.8 million in 1995. Operating expenses
for the third quarter 1995 increased $2.9 million from the same period in
1994. Operating expenses decreased $1.8 million from second quarter to
third quarter 1995.
When comparing the first nine months of 1995 with the first nine months of
1994, transportation expenses increased $5.1 million. When comparing third
quarter 1995 with third quarter 1994, transportation operating expenses
increased $1.2 million. These increases primarily represent the inclusion of
ITI's expenses into the Company's consolidated financials. When comparing
the third quarter 1995 with second quarter 1995, transportation operating
expenses decreased $1.9 million.
The inclusion of ITI's revenues and expenses into the Company's financials
and the decrease 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 increased by $.7 million when comparing the first
nine months of 1995 with the first nine months of 1994. When comparing third
quarter 1995 with third quarter 1994, realty operating expenses increased $.4
million and remained approximately the same when comparing third quarter with
second quarter 1995.
General and administrative expenses increased $2.2 million when comparing
first nine months of 1995 with same period 1994, and $1.3 million when
comparing third quarter 1995 with third quarter 1994, and remained
approximately the same when comparing third with second quarter 1995. Again,
the inclusion of ITI's expenses into consolidated financials of the Company
brought about 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 circumstances 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.
Discounting the gain on disposition of properties, other income for the first
nine months of 1995 versus 1994 and for the third quarter 1995 compared to the
third quarter 1994, reflects increases of $.9 million and $.3 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 $10.6 million to $18.8 million
at September 30, 1995, from $29.4 million at year-end 1994. The investment
portfolios increased $7.3 million to $86.8 million at September 30, 1995, from
$79.5 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, to a ratio of 1.92 to 1.00 at June 30, 1995, and to
a ratio of 1.72 to 1.00 at September 30, 1995.
There were no significant changes in debt, reserves, or other liabilities
during the nine-month period. Authorized capital projects at September 30,
1995, decreased to approximately $30.0 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)
s/s T.N. Smith
Vice President & Secretary
Dated November 6, 1995
s/s J.R. Yastrzemski
Comptroller
Dated November 6, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-END> SEP-30-1995 DEC-31-1994
<CASH> 4,286 15,235
<SECURITIES> 14,554 14,208
<RECEIVABLES> 26,109 25,669
<ALLOWANCES> 0 0
<INVENTORY> 11,687 11,950
<CURRENT-ASSETS> 64,190 72,805
<PP&E> 811,512 769,817
<DEPRECIATION> (217,415) (208,180)
<TOTAL-ASSETS> 753,737 722,494
<CURRENT-LIABILITIES> 37,348 33,055
<BONDS> 0 0
<COMMON> 57,946 57,946
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 753,737 722,494
<SALES> 149,268 199,544
<TOTAL-REVENUES> 155,017 208,661
<CGS> 0 0
<TOTAL-COSTS> 123,811 152,989
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 31,170 55,672
<INCOME-TAX> 11,703 21,067
<INCOME-CONTINUING> 19,467 34,605
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 19,467 34,605
<EPS-PRIMARY> 2.16 3.85
<EPS-DILUTED> .0 .0
