<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 33-26115
FRP PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2924957
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
155 East 21st Street, Jacksonville, Florida 32206
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 904/355-1781
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.10 par value
(Title of class)
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 disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K. [ ]
At December 1, 1997 aggregate market value of the shares of Common Stock
held by non-affiliates of the registrant was $71,237,922. At such date
there were 3,439,235 shares of the registrant's Stock outstanding.
Documents Incorporated by Reference
Portions of the FRP Properties, Inc. 1997 Annual Report to stockholders
are incorporated by reference in Parts I, II, III and IV.
Portions of the FRP Properties, Inc. Proxy Statement dated December 17,
1997 are incorporated by reference in Part III.
<PAGE>
PART I
Item 1. BUSINESS.
FRP Properties, Inc., which was incorporated in Florida in 1988,
and its subsidiaries (the "Company") are engaged in the
transportation and real estate businesses. Florida Rock & Tank
Lines, Inc.("Tank Lines") and SunBelt Transport, Inc. ("SunBelt"),
wholly owned subsidiaries, are southeastern transportation
companies concentrating in the hauling, by motor carrier, of liquid
and dry bulk commodities and materials on flatbed trailers.
Another wholly owned subsidiary, Florida Rock Properties, Inc.
("Properties"), owns real estate of which a substantial portion is
under mining royalty agreements or leased to Florida Rock
Industries, Inc. ("FRI"). It also holds certain other real estate
for investment. Other wholly owned subsidiaries of the Company,
own and are developing certain industrial rental properties near
Baltimore, Maryland. Substantially all of the Company's operations
are conducted within the Southeastern and Mid-Atlantic United
States.
The Company has two major business segments: transportation and
real estate. Industry segment information is presented in Notes 2
and 8 to the consolidated financial statements included in the
accompanying 1997 Annual Report to stockholders and is incorporated
herein by reference.
FRI accounted for approximately 9% of the Company's consolidated
revenues for fiscal 1997.
Revenues from royalties and from the dump and flatbed truck fleet
operations are subject to factors affecting the level of general
construction activity. A decrease in the level of general
construction activity in any of the Company's market areas may have
an adverse effect on such revenues and income derived therefrom.
Transportation. Tank Lines is engaged in hauling liquid and dry
bulk commodities in tank and dump trucks. SunBelt is engaged in
hauling building and construction materials on flatbed trailers.
Information as to the Transportation operations' revenue by
principal markets is presented on page 6 of the accompanying 1997
Annual Report to stockholders under the caption, "Management
Analysis" and is incorporated herein by reference.
The Company's owned and leased dump truck fleet hauls principally
construction aggregates from terminals in Fort Myers, and Orlando,
Florida. There are from 8 to 12 major competitors in each of the
Company's markets and numerous small competitors in all markets.
The Company normally experiences considerable competition in all of
its markets.
The Company's owned and leased tank truck fleet hauls liquid and
dry bulk commodities, including petroleum and chemicals. It
operates from terminals in Jacksonville, Ft. Myers, Orlando, Panama
City, Pensacola, Port Everglades, Tampa and White Springs, Florida;
Albany, Atlanta, Augusta, Bainbridge, Columbus, Macon and Savannah,
Georgia; Knoxville and Nashville, Tennessee; and Birmingham,
Alabama. It also has a central dispatch/office in Greenville,
South Carolina. The Company has from 4 to 8 major tank truck
competitors in each of its markets.
The Company's owned flatbed fleet is based at Jacksonville and
Tampa, Florida and Savannah, Georgia and hauls building and
construction materials in 12 southeastern states. There are 10
major competitors in the Company's market area and numerous small
competitors in the various states served.
At September 30, 1997, the Company had placed orders and was
committed to purchasing tractors and trailers costing approximately
$2,306,000.
Price, service, and terminal location are the major factors which
affect competition within a given market.
During fiscal 1997 the transportation segment's ten largest
customers accounted for approximately 31% of transportation's
revenue. The loss of any one of these customers could have an
adverse effect on the Company's revenues and income.
Real Estate. The Company's real estate and property development
activities are conducted through several wholly owned subsidiaries.
The Company owns real estate in Florida, Georgia, Virginia,
Maryland, and Washington, D.C. The real estate owned falls
generally into one of three categories. The first is land with
stone or sand and gravel deposits, of which substantially all is
leased to Florida Rock Industries, Inc. under mining royalty
agreements whereby the Company is paid a percentage of the revenues
generated by the material mined and sold, or minimum royalties
where there is no current, or only limited, mining activity. The
second is land and/or buildings leased under rental agreements, and
the third is land and/or buildings which are being developed for
rental or held for future appreciation.
Additional information about the Company's Real Estate segment is
contained on page 2 under the captions "FRP Development Corp." and
"Lakeside Business Park" and in Note 11 to the consolidated
financial statements included in the accompanying 1997 Annual
Report to stockholders and is incorporated herein by reference.
The Company's real estate strategy of developing high quality,
flexible warehouse/office space in the Baltimore-Washington markets
continued to be successful. Ninety-nine percent of the
warehouse/office space built by the Company over the last several
years was leased at September 30, 1997. The 28,533 square foot
office building was fully leased at September 30, 1997.
Price, location, rental space availability, structural design and
flexibility are the major factors which affect competition in the
warehouse rental market. The Company experiences considerable
competition in all of its markets.
In fiscal 1997 real estate revenues, excluding the sale of real
estate, were divided approximately 48% from mining and minimum
royalties and 52% from rentals. FRI accounted for approximately
60% of such revenue.
Environmental Matters. While the Company is affected by
environmental regulations, such regulations are not expected to
have a major effect on the Company's capital expenditures or
operating results. Additional information concerning environmental
matters is presented in Note 10 to the consolidated financial
statements included in the accompanying 1997 Annual Report to
stockholders and in Item 3 "Legal Proceedings" of this Form 10-K,
and such information is incorporated herein by reference.
Employees. The Company employed approximately 702 people in its
Transportation Group, 17 people in its Real Estate Group, and 2
people at Corporate at September 30, 1997.
<PAGE>
Item 2. PROPERTIES.
The Company's principal properties are located in Florida, Georgia,
Virginia, Washington, D.C., and Maryland.
Transportation Properties. At September 30, 1997 the Company
operated an owned (515) and leased (6) fleet of 521 trucks and had
18 sites for its trucking terminals in Florida, Georgia, Alabama
and Tennessee totaling approximately 80 acres. Of these acres, the
Company owned approximately 74 and leased approximately 6. The
Company also leases central dispatch/office space in Greenville,
South Carolina. The lease terms run from year-to-year.
Construction Aggregates Properties. The following table summarizes
the Company's principal construction aggregates locations and
estimated reserves at September 30, 1997, substantially all of
which are leased to FRI.
Tons of
Tons Mined Estimated
in Year Reserves
Ended at
9/30/97 9/30/97 Approximate
(000's) (000's) Acres Owned
The Company owns fourteen
locations currently being
mined located at
Brooksville, Astatula,
Miami, Grandin, Gulf
Hammock, Keuka, Lake Wales,
and in Marion and Lake
Counties, Florida; Forest
Park, Macon and Tyrone,
Georgia; St. Mary's County,
Maryland, and Manassas,
Virginia. 10,092 316,000 17,113
The Company owns three locations
being leased but not currently
being mined, located at Ft.
Myers and Newberry, Florida
and Columbus, Georgia. - 136,000 3,363
<PAGE>
Other Properties. The Company owns approximately 120 acres of land
in Virginia and Washington, D.C. and an office building and
approximately 6 acres in Florida which are leased to FRI. The
Company owns four parcels of land near Baltimore, Maryland. One
contains approximately 11 acres with a commercial warehouse and
office space (162,587 square feet), which at November 1, 1997 was
100% leased. The second contains approximately 17 acres with
195,615 square feet of commercial warehouse and office space of
which at November 1, 1997 was 98% leased. The third contains
approximately 10 acres with 187,517 square feet of
commercial/warehouse space that was 100% leased at November 1,
1997. The fourth contains 8.5 acres with an office building
(28,533 square feet) which is 6% occupied by the Company with the
balance 100% leased, including a portion leased to FRI. In October
1996, the Company purchased 134 acres of land in Harford County,
Maryland. The site is being used for the development of the
Lakeside Business Park. In addition, the Company owns
approximately 11,168 acres of investment and other real estate, of
which approximately 7,738 acres are in Suwannee and Columbia
Counties, Florida. In October 1997 the Company purchased
approximately 2 acres of land in Washington, D.C.
At September 30, 1997 certain property, plant and equipment having
a carrying value of $19,358,000 was pledged on certain notes and
contracts with an outstanding principal balance totaling
$16,065,000 on such date.
In addition, certain properties having a carrying value at
September 30, 1997 of $1,720,000 were encumbered by industrial
revenue bonds which are the liability of FRI. FRI has agreed to
pay such debt when due (or sooner if FRI cancels its lease of such
property), and further has agreed to indemnify and hold harmless
the Company.
Item 3. LEGAL PROCEEDINGS.
Note 10 to the Consolidated Financial Statements included in the
accompanying 1997 Annual Report to stockholders are incorporated
herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No reportable events.
EXECUTIVE OFFICERS OF THE COMPANY
Name Age Office Position Since
Edward L. Baker 62 Chairman of the Board May 3, 1989
John E. Anderson 52 President & Chief Feb. 17, 1989
Executive Officer
John D. Baker II 49 Executive Vice President Feb. 2, 1989
John R. Mabbett III 38 Vice President and Feb. 4, 1993
Secretary
Ish Copley 64 President of SunBelt Aug. 9, 1992
Transport, Inc., the
Company's flatbed
trucking operation
David H.
deVilliers, Jr. 46 Vice President June 1, 1989
James J. Gilstrap 50 Treasurer, Assistant Aug. 6, 1997
Secretary and Chief
Financial Officer
Wallace A. Patzke, 50 Controller and Chief Aug. 6, 1997
Jr. Accounting Officer
All of the above officers have been employed in their respective
positions for the past five years, except John R. Mabbett III,
James J. Gilstrap and Wallace A. Patzke,Jr.
John R. Mabbett III joined the Company as Vice President of Florida
Rock & Tank Lines, Inc., a subsidiary, in October 1989 when the
Company purchased J.R. Mabbett & Son, Inc. Effective January 1,
1993, he became President of Florida Rock & Tank Lines, Inc. and in
February 1993 he became Vice President and Secretary of FRP
Properties, Inc. Prior to joining the Company, Mr. Mabbett was
Vice President of J.R. Mabbett & Son, Inc.
James J. Gilstrap joined FRI in March 1997 and was elected Vice
President and Chief Financial Officer in May 1997. In August 1997
Mr. Gilstrap was elected Treasurer of FRI. From 1993 to 1997 he
was self-employed as a private investor. From 1984 to 1993 he was
a Partner and Executive Vice President and Chief Financial Officer
for The Regency Group, Inc., a holding company with interests and
operations in commercial real estate development, asset management,
brokerage and financial services.
Wallace A. Patzke, Jr. has been Vice President, Controller and
Chief Accounting Officer of FRI since August 1997. He was elected
Vice President of FRI in October 1996 and has served as controller
since December 1991.
Edward L. Baker and John D. Baker II are brothers. Thompson S.
Baker II, who is on the Board of Directors of the Company, is the
son of Edward L. Baker.
All executive officers of the Company are elected annually by the
Board of Directors.<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
There were approximately 873 holders of record of FRP Properties,
Inc. common stock, $.10 par value, as of December 1, 1997. The
Company's common stock is traded on the Nasdaq Stock Market (Symbol
FRPP). Information concerning stock prices is included under the
caption "Quarterly Results" on page 5 the Company's 1997 Annual
Report to stockholders, and such information is incorporated herein
by reference. The Company has not paid a cash dividend during the
past two years. It is the present policy of the Board of Directors
not to pay cash dividends. Information concerning restrictions on
the payment of cash dividends is included in Note 3 to the
consolidated financial statements included in the accompanying 1997
Annual Report to stockholders and such information is incorporated
herein by reference.
Item 6. SELECTED FINANCIAL DATA.
Information required in response to this Item 6 is included under
the caption "Five Year Summary" on page 5 of the Company's 1997
Annual Report to stockholders and such information is incorporated
herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Information required in response to this Item 7 is included under
the caption "Management Analysis" on page 6; under the caption
"Capital Expenditures" on page 2; and in Notes 1 through 11 to the
consolidated financial statements included in the accompanying 1997
Annual Report to stockholders and in Item 3 "Legal Proceedings" of
this Form 10-K. Such information is incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required in response to this Item 8 is included under
the caption "Quarterly Results" on page 5 and on pages 7 through 16
of the Company's 1997 Annual Report to stockholders. Such
information is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
No reportable events.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning directors, required in response to this Item
10, is included under the captions "Election of Directors" and
Section 16(a) Beneficial Ownership Reporting Compliance in the
Company's Proxy Statement dated December 17, 1997; and such
information is incorporated herein by reference.
Information concerning executive officers, required in response to
this Item 10, is included following Item 4 of this Form 10-K.
Item 11. EXECUTIVE COMPENSATION.
Information required in response to this Item 11 is included under
the captions "Executive Compensation," "Compensation Committee
Report," "Compensation Committee Interlocks and Insider
Participation," and "Shareholder Return Performance" in the
Company's Proxy Statement dated December 17, 1997; and such
information is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information required in response to this Item 12 is included under
the captions "Common Stock Ownership of Certain Beneficial Owners"
and "Common Stock Ownership by Directors and Officers" in the
Company's Proxy Statement dated December 17, 1997; and such
information is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required in response to this Item 13 is included under
the captions "Compensation Committee Interlocks and Insider
Participation" and "Certain Relationships and Related
Transactions" in the Company's Proxy Statement dated December 17,
1997 and in Note 2 captioned "Transactions with related parties" in
the Company's 1997 Annual Report to stockholders; and such
information is incorporated herein by reference.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) (1)and(2) Financial Statements and Financial Statement
Schedules.
The response to this item is submitted as a
separate section. See Index to Financial
Statements and Financial Statement Schedules on
page 14 of this Form 10-K.
(3)Exhibits.
The response to this item is submitted as a
separate section. See Exhibit Index on pages 11
through 13 of this Form 10-K.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the three
months ended September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FRP PROPERTIES, INC.
Date: December 3, 1997 JAMES J. GILSTRAP
James J. Gilstrap
Treasurer, Assistant Secretary and
Chief Financial Officer
WALLACE A. PATZKE, JR.
Wallace A. Patzke, Jr.
Controller and Chief Accounting
Officer
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 indicated on December 3, 1997.
JOHN E. ANDERSON DAVID H. deVILLIERS, JR.
John E. Anderson David H. deVilliers, Jr.
Director, President, and Chief Director
Executive Officer
(Principal Executive Officer) ALBERT D. ERNEST, JR.
Albert D. Ernest, Jr.
JAMES J. GILSTRAP Director
James J. Gilstrap
Treasurer, Assistant Secretary LUKE E. FICHTHORN III
and Chief Financial Officer Luke E. Fichthorn III
(Principal Financial Officer) Director
WALLACE A. PATZKE, JR. FRANCIS X. KNOTT
Wallace A. Patzke, Jr. Francis X. Knott
Controller and Chief Accounting Director
Officer
(Principal Accounting Officer) RADFORD D. LOVETT
Radford D. Lovett
EDWARD L. BAKER Director
Edward L. Baker
Director JOHN R. MABBETT III
John R. Mabbett III
JOHN D. BAKER II Director
John D. Baker II
Director ROBERT H. PAUL III
Robert H. Paul III
THOMPSON S. BAKER II Director
Thompson S. Baker II
Director MARTIN E. STEIN
Martin E. Stein
ISH COPLEY Director
Ish Copley
Director JAMES H. WINSTON
James H. Winston
Director
FRP PROPERTIES, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
EXHIBIT INDEX
[Item 14(a)(3)]
Page No. in
Sequential
Numbering
(3)(a)(1) Articles of Incorporation of FRP Properties, Inc.
Previously filed with Form S-4 dated December 13, 1988.
File No. 33-26115.
(3)(a)(2) Amendment to the Articles of Incorporation of FRP
Properties, Inc. filed with the Secretary of State of
Florida on February 19, 1991. Previously filed with
Form 10-K for the fiscal year ended September 30, 1993.
File No. 33-26115.
(3)(a)(3) Amendments to the Articles of Incorporation of FRP
Properties, Inc. filed with the Secretary of State of
Florida on February 7, 1995. Previously filed as
appendix to the Company's Proxy Statement dated December
15, 1994.
(3)(b)(1) Restated Bylaws of FRP Properties, Inc. adopted December
1, 1993. Previously filed with Form 10-K for the fiscal
year ended September 30, 1993. File No. 33-26115.
(3)(b)(2) Amendment to the Bylaws of FRP Properties, Inc. adopted
August 3, 1994. Previously filed with Form 10-K for the
fiscal year ended September 30, 1994. File No. 33-26115.
(4)(a) Articles III, VII and XII of the Articles of
Incorporation of FRP Properties, Inc. Previously
filed with Form S-4 dated December 13, 1988.
And amended Article III filed with Form 10-K for
the fiscal year ended September 30, 1993. And
Articles XIII and XIV previously filed as
appendix to the Company's Proxy Statement dated
December 15, 1994. File No. 33-026115.
(4)(b) Specimen stock certificate of FRP Properties,
Inc. Previously filed with Form S-4 dated
December 13, 1988. File No. 33-26115.
(4)(c) Credit Agreement dated as of November 15, 1995
among FRP Properties, Inc.; SunTrust Bank,
Central Florida, National Association; Bank of
America Illinois; Barnett Bank of Jacksonville,
N.A.; and First Union National Bank of Florida.
Previously filed with Form 10-Q for the quarter
ended December 31, 1995. File No. 33-26115.
Page No. in
Sequential
Numbering
(4)(d) The Company and its consolidated subsidiaries
have other long-term debt agreements which do not
exceed 10% of the total consolidated assets of
the Company and its subsidiaries, and the Company
agrees to furnish copies of such agreements and
constituent documents to the Commission upon
request.
(10)(a) Post Distribution Agreement, dated May 7, 1986,
by and between Florida Rock Industries, Inc. and
Florida Rock & Tank Lines, Inc. and amendments
thereto dated July 1, 1987 and September 27,
1988. Previously filed with Form S-4 dated
December 13, 1988. File No. 33-26115.
(10)(b) Tax Sharing Agreement, dated May 7, 1986, between
Florida Rock Industries, Inc. and Florida Rock &
Tank Lines, Inc. Previously filed with Form S-4
dated December 13, 1988. File No. 33-26115.
10)(c) Various leasebacks and mining royalty agreements
with Florida Rock Industries, Inc., none of which
are presently believed to be material
individually, except for the Mining Lease
Agreement dated September 1, 1986, between
Florida Rock Industries Inc. and Florida Rock
Properties, Inc., successor by merger to Grandin
Land, Inc. (see Exhibit (10)(e)), but all of
which may be material in the aggregate.
Previously filed with Form S-4 dated December 13,
1988. File No. 33-26115.
(10)(d) License Agreement, dated June 30, 1986, from
Florida Rock Industries, Inc. to Florida Rock &
Tank Lines, Inc. to use "Florida Rock" in
corporate names. Previously filed with Form S-4
dated December 13, 1988. File No. 33-26115.
(10)(e) Mining Lease Agreement, dated September 1, 1986,
between Florida Rock Industries, Inc. and Florida
Rock Properties, Inc., successor by merger to
Grandin Land, Inc. Previously filed with Form
S-4 dated December 13, 1988. File No. 33-26115.
(10)(f) Summary of Medical Reimbursement Plan of FRP
Properties, Inc. Previously filed with Form 10-K
for the fiscal year ended September 30, 1993.
File No. 33-26115.
(10)(g) Split Dollar Agreement dated October 3, 1984,
between Edward L. Baker and Florida Rock
Industries, Inc. and assignment of such
agreement, dated January 31, 1986 from Florida
Rock Industries, Inc. to Florida Rock & Tank
Lines, Inc. Previously filed with Form S-4 dated
December 13, 1988. File No. 33-26115.
Page No. in
Sequential
Numbering
(10)(h) Summary of Management Incentive Compensation
Plans. Previously filed with Form 10-K for the
fiscal year ended September 30, 1994. File No.
33-26115.
(10)(i) Management Security Agreements between the
Company and certain officers. Form of agreement
previously filed (as Exhibit (10)(I)) with Form
S-4 dated December 13, 1988. File No. 33-26115.
(10)(i)(1) FRP Properties, Inc. 1989 Employee Stock Option Plan.
Previously filed with Form S-4 dated December 13, 1988.
File No. 33-26115.
(10)(i)(2) FRP Properties, Inc. 1995 Stock Option Plan. Previously
filed as an appendix to the Company's Proxy Statement
dated December 15, 1994.
(11) Computation of Earnings Per Common Share.
(13) The Company's 1997 Annual Report to stockholders,
portions of which are incorporated by reference
in this Form 10-K. Those portions of the 1996
Annual Report to stockholders which are not
incorporated by reference shall not be deemed to
be filed as part of this Form 10-K.
(22) Subsidiaries of Registrant at September 30, 1997:
Florida Rock & Tank Lines, Inc. (a Florida
corporation) Florida Rock Properties, Inc. (a
Florida corporation) FRP Development Corp. (a
Maryland corporation) FRP Maryland, Inc. (a
Maryland corporation) 34 Loveton Center Limited
Partnership (a Maryland limited partnership)
FRTL, Inc. (a Florida corporation)SunBelt
Transport, Inc. (a Florida Corporation)Oz Limited
Partnership (a Maryland limited partnership) FRP
Delaware, Inc. (a Delaware corporation) FRP
Lakeside L.P. (a Maryland limited partnership)
FRP Lakeside L.L.P. (a Maryland limited
partnership)
(23)(a) Consent of Deloitte & Touche LLP, Independent
Certified Public Accountants, appears on page 15
of this Form 10-K.
(27) Financial Data Schedule
<PAGE>
FRP PROPERTIES, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a) (1) and 2))
Page
Consolidated Financial Statements:
Consolidated balance sheet at September 30, 1997
and 1996 8(a)
For the years ended September 30, 1997, 1996 and 1995:
Consolidated statement of income 7(a)
Consolidated statement of stockholders' equity 10(a)
Consolidated statement of cash flows 9(a)
Notes to consolidated financial statements 11-15(a)
Selected quarterly financial data (unaudited) 5(a)
Independent Auditors' Report 16(a)
Consent of Independent Certified Public Accountants 15(b)
Consolidated Financial Statement Schedules:
Independent Auditors' Report 16(b)
II - Valuation and qualifying accounts 17(b)
III - Real estate and accumulated depreciation and
depletion 18-19(b)
(a) Refers to the page number in the Company's
1997 Annual Report to stockholders. Such
information is incorporated by reference in
Item 8 of this Form 10-K.
(b) Refers to the page number in this Form 10-K.
All other schedules have been omitted, as they are not required under the
related instructions, are inapplicable, or because the information
required is included in the consolidated financial statements.
<PAGE>
Independent Auditors' Consent
We consent to the incorporation by reference in Registration Statement
(Form S-8 No. 33-43215) pertaining to the FRP Properties, Inc. 1989 Stock
Option Plan and in the related Prospectus of our report dated December
1, 1997, appearing in and incorporated by reference in this Annual Report
(Form 10-K) for the year ended September 30, 1997.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 12, 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
FRP Properties, Inc.
Jacksonville, Florida
We have audited the consolidated financial statements of FRP Properties,
Inc. and its subsidiary companies ("FRP") as of September 30, 1997 and
1996, and for each of the three years in the period ended September 30,
1997, and have issued our report thereon dated December 2, 1997; such
consolidated financial statements and report are included in your 1997
Annual Report to Stockholders and are incorporated herein by reference.
Our audits also included the financial statement schedules of FRP, listed
in Item 14. These financial statement schedules are the responsibility
of FRP's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedules, when
considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 1, 1997
<PAGE>
FRP PROPERTIES, INC.
SCHEDULE II (CONSOLIDATED) - VALUATION
AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
OF YEAR EXPENSES ACCOUNTS DEDUCTIONS END OF YEAR
Year Ended
September 30, 1997:
Allowance for
doubtful accounts $233,537 $18,000 - ($6,415)(a) $257,952
Accrued risk
insurance $3,828,654 $3,113,219 - $2,724,159 (b) $4,217,714
Accrued health
insurance $777,199 1,246,760 - 1,059,261 (b) 964,698
Totals-insurance $4,605,853 $4,359,979 - $3,783,420 $5,182,412
Year Ended
September 30, 1996:
Allowance for
doubtful accounts $218,474 $18,000 - $2,937 (a) $233,537
Accrued risk
insurance $2,736,665 $3,240,572 - $2,148,583 (b) $3,828,654
Accrued health
insurance $817,487 $750,842 - $791,130 (b) $777,199
Total-insurance $3,554,152 $3,991,414 $0 $2,939,713 $4,605,853
Year Ended
September 30, 1995:
Allowance for
doubtful accounts $198,354 $26,000 - $5,880 (a) $218,474
Accrued risk
insurance $3,578,170 $1,492,764 - $2,334,269 (b) $2,736,665
Accrued health
insurance $711,693 $1,231,740 - $1,125,946 (b) $817,487
Totals-insurance $4,289,863 $2,724,504 $0 $3,460,215 $3,554,152
(a) Accounts written off less recoveries
(b) Payments
<TABLE>
FRP PROPERTIES, INC.
SCHEDULE III (CONSOLIDATED) - REAL ESTATE & ACCUMULATED
DEPRECIATION AND DEPLETION
SEPTEMBER 30, 1997
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cost capi- Gross amount Date Deprecia-
Encumb- Initial cost talized at which Accumulated Of Date tion Life
County State rances to subsequent to carried at Depreciation Constr- Acquired Computed
Company acquisition end of period tion on:
(a)
Construction Aggregates
Alachua Florida $1,588,458 $16,507 $1,604,965 $53,748 n/a 4/86 unit
Clay Florida 964,972 15,666 980,638 - n/a 4/86 unit
Clayton Georgia 381,787 0 381,787 1,561 n/a 4/86 unit
Dade Florida 9,374,660 0 9,374,660 5,468,971 n/a 4/86 unit
Fayette Georgia $129,778 400,872 0 400,872 37,587 n/a 4/86 unit
Hernando Florida 2,127,533 1 2,127,534 1,089,868 n/a 4/86 unit
Lake Florida 1,464,625 20,528 1,485,153 1,000,691 n/a 4/86 unit
Lee Florida 4,690,269 0 4,690,269 - n/a 4/86 unit
Floyd Georgia 300,000 0 300,000 - n/a 4/86 -
Levy Florida 1,280,643 83,365 1,364,008 327,727 n/a 4/86 unit
Marion Florida 1,180,366 0 1,180,366 599,478 n/a 4/86 unit
Monroe Florida 840,442 0 840,442 151,893 n/a 4/86 unit
Muscogee Georgia 368,674 0 368,674 45,000 n/a 4/86 unit
Polk Florida 120,502 0 120,502 75,285 n/a 4/86 unit
Prince Wil Virginia 298,463 0 298,463 229,486 n/a 4/86 unit
Putnam Florida 15,014,681 48,800 15,063,481 1,902,719 n/a 4/86 unit
St. Marys Maryland 1,269,878 0 1,269,878 486,769 n/a 4/86 unit
129,778 41,666,825 184,867 41,851,692 11,470,783
Land Rental Property
District of Columbia 2,901,869 827,938 3,729,807 810,089 n/a 4/86 15 yr.
Fairfax Virginia 2,035,013 0 2,035,013 - n/a 10/85 -
Putnam Florida 193,584 0 186,032 136,258 n/a 4/86 10 yr.
Spalding Georgia 19,572 0 19,572 - n/a 4/86 -
Suwannee Florida 4,252,091 73,570 4,325,661 642,928 n/a 4/86 10 yr.
0 9,402,129 901,508 10,296,085 1,589,275
Commercial Property
Baltimore Maryland 1,707,653 439,120 2,390,803 2,829,923 745,135 1990 10/89 31 yr.
Baltimore Maryland 4,830,578 961,379 5,768,186 6,729,565 784,062 1992 12/91 31 yr.
Duval Florida 2,804,344 140,519 2,944,863 1,633,872 n/a 4/86 20 yr.
Harford Maryland 1,754,300 3,420,750 5,175,050 0 1996 8/95 31 yr.
Jessup Maryland 4,900,000 3,069,284 2,971,684 6,040,968 733,447 1987 9/88 31 yr.
Linthicum Maryland 4,497,036 911,060 6,539,375 7,450,435 1,856,286 1989 9/88 31 yr.
Orange Florida 57,047 0 57,047 12,046 n/a 4/86 10 yr.
15,935,267 9,996,534 21,231,317 31,227,851 5,764,848
Investment Property
Caroline Virginia 212,876 6,856 219,732 - n/a 4/86 unit
Duval Florida 693,553 0 693,553 - n/a 4/86 -
Fairfax Virginia 273,198 0 273,198 - n/a 4/86 -
Fayette Georgia 283,875 0 283,875 - n/a 4/86 -
Hillsborough
Florida 187,161 0 187,161 - n/a 4/86 -
Lee Florida 270,641 1,950 272,591 137,754 n/a 4/86 unit
Suwannee Florida 557,694 0 557,606 98,052 n/a 4/86 unit
0 2,478,998 8,806 2,487,716 235,806
Miscellaneous 1,056,454 (1) 1,075,991 402,385
Grand Totals $16,065,045 $64,600,940 $22,326,497 $86,939,335 $19,463,097
(a) The aggregate cost for Federal income tax purposes is $86,268,925.
</TABLE>
FRP PROPERTIES, INC.
SCHEDULE III (CONSOLIDATED) - REAL ESTATE AND
ACCUMULATED DEPRECIATION AND DEPLETION
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
1997 1996 1995
Gross Carrying Cost of Real Estate:
Balance at beginning of period $80,950,619 $78,633,725 $75,816,417
Additions during period:
Acquisitions through foreclosure - - -
Other acquisitions 3,500,646 2,016,371 422,235
Improvements, etc. 2,725,828 811,488 2,804,019
Reclassification of deposit - - -
Other (transfers from Transportation - - 19,680
Deductions during period:
Cost of real estate sold 237,758 510,965 428,626
Other (abandonments) - - -
Other (transfers to Transportation) - - -
Balance at close of period $86,939,335 $80,950,619 $78,633,725
Accumulated Depreciation & Depletion:
Balance at beginning of period $17,440,035 $15,521,665 $13,687,821
Additions during period:
Charged to cost & expense 2,108,105 1,994,854 2,132,551
Other (transfers
from Transportation) - - 6,765
Deductions during period:
Cost of real estate sold 85,043 76,484 305,472
Other (abandonments) - - -
Balance at close of period $19,463,097 $17,440,035 $15,521,665
Annual Report 1997
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1997 1996 Change
Revenues $68,844 64,403 + 6.9
Gross profit $14,908 14,615 + 2.0
Operating profit $ 8,977 9,017 - 0.4
Income before income taxes $ 6,984 6,827 + 2.3
Net income $ 4,260 4,165 + 2.3
Per common share:
Net income $1.20 1.13 + 6.2
Stockholders' equity $18.48 17.72 + 4.3
<PAGE>
1997 CORPORATE HIGHLIGHTS
Revenues - up 6.9% to $68,844,000
Gross profit - up 2.0% to $14,908,000
Net income - up 2.3% to $4,260,000
Earnings per share - up 6.2% to $1.20
$19,000,000 available under the Company's revolving credit agreement at
September 30, 1997
$20,000,000 of unsecured lines of credit of which $4,000,000 was
outstanding at September 30, 1997
BUSINESS. The Company is engaged in the transportation and real estate
businesses. The Company's transportation business is conducted through
two wholly owned subsidiaries. Florida Rock & Tank Lines, Inc. is a
Southeastern transportation company concentrating in the hauling by
motor carrier of liquid and dry bulk commodities. SunBelt Transport,
Inc. serves the flatbed portion of the trucking industry in the
Southeast, hauling primarily construction materials. The Company's Real
Estate Group, through subsidiaries, acquires, constructs, leases,
operates and manages land and buildings to generate both current cash
flows and long-term capital appreciation.
OBJECTIVES. The Company's dual objectives are to build a major
Southeastern transportation company and a real estate company which
provides sound long-term growth, cash generation and asset appreciation.
Transportation
Internal growth is accomplished by a dedicated, competent and
loyal work force emphasizing superior service to customers in
existing markets, developing new transportation services for
customers in current market areas and opening new terminals in
other market areas.
External growth, through the acquisition program, is designed to
broaden the Company's geographic market area and delivery services
by acquiring related businesses in the Southeast.
Real Estate
The growth plan is based on the acquisition, management and
retention of real estate assets and the development of industrial
rental properties to provide long-term positive cash flows and
capital appreciation. <PAGE>
To Our Stockholders:
Fiscal 1997 was a year of continued progress in major projects and
programs consistent with the short and long-term goals in both the
Transportation and Real Estate businesses.
Results. Revenues for fiscal 1997 were $68,844,000, a 6.9% increase over
$64,403,000 in fiscal 1996. Transportation revenues increased 6.7% due
to continued growth and expansion in both SunBelt Transport, Inc. and
Florida Rock & Tank Lines, Inc. Real estate revenues increased 8.3%
principally as the result of the sale of real estate during the fourth
quarter of this fiscal year.
Gross profit of $14,908,000 increased 2.0% from $14,615,000 in
fiscal 1996. The Transportation Group's gross profit for fiscal 1997
decreased $605,000 from last year as the result of higher insurance
costs, increases in depreciation expense resulting from fleet expansion
and modernization and fewer gains resulting from the sale of equipment.
The Real Estate Group's gross profit was above last year principally
because of real estate gains of $817,000 in fiscal 1997 compared to
$93,000 in 1996.
Selling, general and administrative expenses were up 5.9% in 1997
to $5,931,000 as compared to 1996. Selling, general and administrative
expenses as a percent of total revenue remained level with the prior
year.
Interest expense decreased 7.8% to $2,061,000 in 1997 from
$2,234,000 last year. The decrease was due to a lower average interest
rate and an increase in capitalized interest of $206,000 over fiscal
1996.
Net income increased 2.3% to $4,260,000 from $4,165,000 in fiscal
1996. Earnings per share increased 6.2% to $1.20 from $1.13 last year.
The average number of common shares used in computing earnings per share
decreased 3.5% due to ongoing stock repurchases made by the Company.
During the current fiscal year, the Company purchased and retired 147,951
shares of common shares while issuing 95,000 shares asa a result of
shares exercised under the Company's non-qualified stock option plans.
FRP Development Corp. The Company's real estate strategy of developing
high quality, flexible warehouse/office space in carefully selected
markets continued to be successful. At September 30, 1997 99% of the
total 574,252 square feet of completed warehouse/office space was leased
with only 3,200 square feet available.
The second of two buildings at Preston Court in the
Baltimore/Washington Industrial Park, comprised of 90,405 square feet of
flexible warehouse/office space, was completed during 1997 and is 100%
leased.
Lakeside Business Park. The Company continued land development
activities on Lakeside Business Park, a 134 acre site in Harford County,
Maryland, north of Baltimore. It is anticipated that construction of
105,800 square feet of flexible warehouse/office space will be completed
during the first half of fiscal 1998. This space is 100% pre-leased.
Capital Expenditures. Capital expenditures in 1997 for the
transportation business totaled $7,520,000 versus $13,174,000 in 1996.
The 1997 capital expenditures were approximately 59% for new plant and
equipment and replacements represented 41%. Capital expenditures for the
real estate segment in 1997 approximated $6,226,000 versus $2,782,000 in
1996. Total depreciation and depletion for fiscal 1997 was $8,205,000
versus $7,456,000 in 1996.
The 1998 planned capital expenditures for the transportation
business total $6,939,000 for continued expansion of both the flatbed and
tank truck fleets and to maintain the modernized fleet. The capital
budget for the real estate segment is $11,352,000. Total depreciation
expense is expected to be approximately $9,094,000.
Financial Management. The Company's $34,000,000 revolving credit term
loan facility has a final maturity in 2001 of which $15,000,000 was
utilized at the end of 1997. The Company also has $20,000,000 in
unsecured short-term lines of credit of which $4,000,000 was borrowed at
the end of fiscal 1997. $16,065,000 of the Company's total debt is
long-term fixed rate mortgages secured real estate projects. At year end
debt was 33% of capital employed.
Stock Repurchase. Pursuant to the Board's authorization, the Company
purchased 147,951 shares of its common stock during the year. Management
remains authorized to repurchase shares of the Company's common stock
from time to time as opportunities may arise.
Annual Meeting. At the Annual Stockholders' Meeting on February 5, 1996,
the stockholders elected John E. Anderson, Thompson S. Baker, David H.
deVilliers, Jr., and Albert D. Ernest, Jr. as directors to serve a
four-year term expiring in the year 2001.
Outlook. Fiscal 1998 is expected to be another year of growth and
progress. The economy is expected to continue its slow growth.
The Transportation Group is expected to continue to expand in 1998
through the growth of its existing customers as well as entries into new
markets.
Industrial real estate markets served by FRP Development Corp. in
the Baltimore area remain in good condition with low vacancy rates and
steady rent levels. The Company's high quality buildings combined with
good market locations have enabled the properties to remain substantially
fully leased. The favorable long-term outlook is conducive to market
acceptance of the new Baltimore/Washington Industrial Park building and
the multi-year Lakeside Business Park project.
Management intends to continue its careful blend of prudence coupled
with an aggressive search for new opportunities to grow both the
transportation and real estate segments of the business. The Company
plans to build on its financial strength and sound market positions.
The dedication and support of our employees will continue to be the
key to the Company's future success. We extend our sincere thanks to
these loyal men and women for their efforts.
As reported to you earlier this year, we lost our founder and
Chairman Emeritus, Thompson S. Baker when he passed away on February 24,
1997. No words can describe the leadership he gave this Company nor the
love he had for its employees. He will be missed.
Respectfully yours,
Edward L. Baker
Chairman of the Board
John E. Anderson
President and Chief Executive Officer<PAGE>
Operating Review
Transportation. The Company's Transportation Group operates through two
wholly owned subsidiaries, Florida Rock & Tank Lines, Inc., engaged in
hauling liquid and dry bulk commodities primarily in tank trucks, and
SunBelt Transport, Inc., engaged in flatbed hauling.
The Group operates from terminals in Jacksonville, Ft. Myers, Orlando,
Panama City, Pensacola, Port Everglades, Tampa and White Springs,
Florida; Albany, Atlanta, Augusta, Bainbridge, Columbus, Macon and
Savannah, Georgia; Knoxville and Nashville, Tennessee; and Birmingham,
Alabama and has a central dispatch office in Greenville, South Carolina.
During fiscal 1997 the owned and leased fleet increased from 498 to 521
trucks.
Revenues for miles hauled were up 6.7% due to both continued expansion
of flatbed and tank truck hauling.
Gross profit decreased 6.3% from fiscal 1996 primarily due to higher
insurance costs and depreciation associated with the modernization of the
fleet.
During fiscal 1997, including replacements and growth of SunBelt, the
Group purchased 91 new tractors and 70 new trailers. The fiscal 1998
capital expenditure plan is based on maintaining a modernized tank fleet
and also expanding the tank truck and flatbed fleets. The fleet
modernization program has resulted in reduced maintenance expenses and
improved operating efficiencies.
For fiscal 1998 Transportation expects another year of growth in its
existing bulk hauling business resulting from the continued penetration
of targeted market segments. With the anticipated continuing modest
economic growth, the outlook is for increases in the hauling of
petroleum, dry bulk and chemical products. Flatbed hauling is expected
to have another year of good growth in 1998.
Real Estate. The Real Estate Group operates the Company's real estate
and property development activities through subsidiaries.
The Company owns real estate in Florida, Georgia, Virginia, Maryland,
and Washington, D.C. The real estate owned generally falls into one of
three categories. The first is land with stone or sand and gravel
deposits, substantially all of which is leased to Florida Rock
Industries, Inc. under mining royalty agreements, whereby the Company is
paid a percentage of the revenues generated or annual minimums. The
second is land and/or buildings leased under rental agreements, and the
third is land and/or buildings which are being developed for future
rental or held for future appreciation or development.
Real estate revenues increased 8.3% from 1996 principally due to the
sale of real estate. The fiscal 1997 real estate revenues, excluding the
sale of real estate, were divided approximately 48% from mining and
minimum royalties and 52% from rental. Excluding land sales for fiscal
1997, real estate revenues approximated those of last year.
A brief description of FRP Development Corp.'s projects at September
30, 1997 follows:
8230 Preston Court, 72,182 square feet of flexible warehouse/office
space.
8240 Preston Court, a 90,405 square foot flexible warehouse/office
building.
810 Oregon Avenue, 113,280 square feet of flexible warehouse/office
space.
812 Oregon Avenue, 82,335 square feet of flexible warehouse/office
space.
Rossville Business Center, a two building complex consisting of 187,517
square feet of flexible warehouse/office space.
TESSCO Center, a 28,533 square foot suburban office building.
Lakeside Business Park is a 134 acre site capable of supporting
1,400,000 square feet of warehouse/office space is under development.
A 105,800 square foot speculative warehouse is expected to be completed
in the first half of 1998.
The Group during fiscal 1998 will continue to focus on the development
of the property at Lakeside.
At September 30, 1997 the Company owns approximately 574,000 square
feet of rental properties that were 99% leased. The Company's long-term
plan is to gradually build a portfolio of successful rental properties
for investment.
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1997 1996 1995(a) 1994 1993(b)
Summary of Operations
Revenues $ 68,844 64,403 58,273 54,011 46,599
Gross profit(c) $ 14,908 14,615 15,132 12,255 9,773
Operating profit $ 8,977 9,017 9,440 7,264 5,313
Interest expense $ 2,061 2,234 1,933 1,105 897
Income before
income taxe $ 6,984 6,827 7,591 6,219 4,432
Provision for
income taxe $ 2,724 2,662 2,961 2,425 1,735
Net income $ 4,260 4,165 4,630 3,794 2,697
Per Common Share
Net income $ 1.20 1.13 1.21 .94 .65
Stockholders' equity
$ 18.48 17.72 16.74 15.64 14.75
Financial Summary
Current assets $ 8,549 8,003 8,495 7,703 7,247
Current liabilities
$ 11,063 9,595 7,117 10,234 8,198
Working capital (deficit)
($ 2,514) (1,592) 1,378 (2,531) (951)
Property, plant and
equipment, net $ 95,018 90,058 83,319 74,697 72,698
Total assets $116,582 107,036 101,357 91,769 89,026
Long-term debt $ 30,647 26,170 25,503 16,108 15,697
Stockholders' equity
$ 63,734 61,894 61,622 59,437 59,972
Other Data
Return on ending
stockholders' equity
6.7% 6.7 7.5 6.4 4.5
Return on capital employed
4.0% 5.7 6.2 5.4 4.0
Net cash flow provided from
operating activities
$ 13,982 14,681 10,131 10,005 8,452
Additions to property,
plant and equipment
$ 13,746 15,970 15,805 9,165 7,450
Depreciation, depletion
and amortization
$ 8,356 7,667 7,304 6,945 6,196
Weighted average number
of shares 3,554 3,683 3,832 4,045 4,176
Number of employees at
end of year 721 665 644 556 527
Stockholders of record
873 913 939 975 1,032
(a)Effective October 1, 1994, the Company changed depreciation lives on
revenue equipment which resulted in an increase in gross profit of
$842,000 and net income of $525,000 ($.14 per share) for fiscal
1995.
(b)Effective October 1, 1992, the Company changed its method of
accounting for employee postretirement benefits in accordance with
SFAS 106. The effect on fiscal 1993 was to reduce net income by
$252,000 ($.06 per share).
(c)Fiscal 1997, 1996, 1995 and 1994 include gains on the sale of real
estate of $817,000, $93,000, $79,000 and $1,167,000,
respectively.
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
1997 1996 1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $16,398 15,321 16,221 15,949 17,533 16,706 18,692 16,427
Gross profit $ 3,363 3,848 3,244 3,366 4,077 4,050 4,224 3,351
Operating profit $ 1,844 2,391 1,734 1,858 2,573 2,569 2,826 2,199
Income before
income taxes $ 1,369 1,852 1,274 1,304 2,038 1,992 2,303 1,679
Net income $ 835 1,130 777 795 1,243 1,215 1,405 1,025
Per common share:
Net income $ .23 .30 .22 .21 .35 .33 .40 .29
Market price:
High $26.00 22.50 28.75 22.00 28.00 21.50 34.00 22.00
Low $20.50 17.00 24.00 19.69 24.50 19.75 25.25 20.50
</TABLE>
<PAGE>
Management Analysis
Operating Results. The Company's operations are influenced by a number of
external and internal factors. External factors include levels of economic
and industrial activity in the Southeast, petroleum product usage in the
Southeast, fuel costs, construction activity in certain Georgia and Florida
markets, Florida Rock Industries, Inc.'s sales from the Company's mining
properties, interest rates and demand for commercial warehouse space in the
Baltimore/Washington area. Internal factors include revenue mix, capacity
utilization, safety record, other operating factors, and construction costs
of new projects.
In fiscal 1997 and 1996, revenues increased 7% and 10%, respectively.
In the Transportation segment revenue and miles hauled were up 7% in 1997
and 13% in 1996. In fiscal 1995 the Real Estate segment had revenue from
timber sales and a one-time royalty totaling $1,092,000. Absent these
infrequent and one-time revenues, the Real Estate segment's revenues,
exclusive of real estate sales, would have remained stable in 1997 and
increased 8% in 1996. The 1996 increase was principally due to increases
in rents and royalties.
The estimated contribution to Transportation revenues by principal
markets follows:
1997 1996 1995 1994 1993
Petroleum 68% 68 66 45 51
Construction 21% 20 19 26 13
Chemical 6% 7 10 15 12
Other 5% 5 5 14 24
In fiscal 1997, gross profit increased $293,000 from 1996 and gross
margin decreased to 22% from 23%. The Transportation segment's gross
profit decreased $605,000, principally due to higher insurance costs,
increased depreciation expense and lower gains on the sale of equipment.
Gross margin decreased to 15% from 17% principally due to reduced gains on
the sale of equipment, increased depreciation expense and higher operating
costs. In the Real Estate segment gross profit increased $898,000 in
fiscal 1997 from last year. The increase was principally due to real
estate sales gross profit of $817,000 in 1997 compared to $93,000 in 1996,
increase development revenues and a 1996 write-off of $349,000 in
connection with the abandonment of certain development costs.
In fiscal 1996, gross profit decreased $517,000 from 1995 and gross
profit margin decreased to 23% from 26%. The Transportation segment's
gross profit increased $366,000, principally due to higher revenues, while
the gross profit margin decreased to 17% from 19% principally due to an
increase in risk insurance cost of approximately $1,760,000 over 1995. In
the Real Estate segment gross profit decreased $897,000 in fiscal 1996 from
1995. The decrease was principally due to the timber sales and one-time
royalty which produced a gross profit in 1995 of approximately $863,000 and
the write-off in 1996 of $349,000 in connection with the abandonment of
certain development costs.
Selling, general and administrative expense increased 6% in 1997 and
decreased 2% in 1996 from 1995. The 1996 decrease was due to a reduction
of $206,000 in profit sharing and incentive compensation.
In 1997 interest expense decreased 8% from 1996 primarily due to
increased capitalization of interest and increased 16% in 1996 over 1995
due to increased borrowings which was partially offset by a lower average
interest rate.
Liquidity and Capital Resources. The following key financial measurements
reflect the Company's sound financial position and capital resources at
September 30 (dollars in thousands):
1997 1996 1995
Cash $ 429 313 392
Total debt $35,065 30,003 27,650
Debt as a percent of
capital employed 33% 31 29
Unused lines of credit $35,000 35,500 38,200
During 1997, net cash flows from operating activities were $13,982,000,
net cash used in investing activities were $16,508,000 and common stock
repurchased was $3,299,000. These activities were funded by additional
borrowing of $5,400,000 and proceeds from the exercise of stock options of
$879,000.
During 1996, net cash flows from operating activities of $14,681,000
more than covered the $13,220,000 net cash used in investing activities.
The excess cash from operating activities plus additional borrowing was
used to buy back $3,915,000 of the Company's common stock.
The Company is financially postured to be able to take advantage of
external and internal growth opportunities in real estate development and
in the motor carrier industry that may occur in the Southeast.
The Company has a $34,000,000 revolving credit agreement of which
$19,000,000 was available at fiscal year end. In addition, it has
unsecured short-term lines of credit under which it may borrow up to
$20,000,000 of which $4,000,000 was outstanding at September 30, 1997.
The Company currently expects its fiscal 1998 capital expenditures to be
approximately $18,291,000 versus depreciation and depletion expense of
$9,094,000. The expenditures are expected to be financed from the cash
flow from operating activities and the $19,000,000 unused and available
under its revolving credit agreement.
The Company believes it will be able to renegotiate its present credit
facilities or obtain similar replacement credit facilities when necessary
in the future.
Inflation. Historically, the Company has been able to recover
inflationary cost increases through increased freight rates. It is
expected that over time justifiable and necessary rate increases will be
obtained in the future, although deregulation of intrastate trucking rates
has made this more difficult in the past three years. Substantially all
of the Company's royalty agreements are based on a percentage of the sales
price. Minimum royalties and substantially all lease agreements provide
various escalation provisions.
<PAGE>
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1997 1996 1995
Revenues:
Transportation $ 59,530 55,801 49,198
Real estate 8,477 8,434 8,877
Sale of real estate 837 168 198
Total revenues (including revenue from
related parties of $6,006, $6,544 and $5,869) 68,844 64,403 58,273
Cost of operations:
Transportation 50,487 46,153 39,916
Real estate 3,429 3,560 3,106
Cost of real estate sold 20 75 119
Gross profit 14,908 14,615 15,132
Selling, general and administrative expense
(including expenses paid to related party
of $1,414, $1,383 and $1,312) 5,931 5,598 5,692
Operating profit 8,977 9,017 9,440
Interest expense (2,061) (2,234) (1,933)
Interest income 46 34 49
Other income, net 22 10 35
Income before income taxes 6,984 6,827 7,591
Provision for income taxes 2,724 2,662 2,961
Net income $ 4,260 4,165 4,630
Earnings per common share $1.20 1.13 1.21
Weighted average number of shares used in
computing earnings per common share 3,554 3,683 3,832
See accompanying notes.<PAGE>
Consolidated Balance Sheet September 30
(Dollars in thousands)
1997 1996
Assets
Current assets:
Cash and cash equivalents $ 429 313
Accounts receivable, less allowance for doubtful
accounts of $258 ($234 in 1996) (including
related party of $283 and $376) 5,531 5,300
Inventory of parts and supplies 469 502
Prepaid expenses and other 2,120 1,888
Total current assets 8,549 8,003
Other assets:
Real estate held for investment, at cost 5,771 5,791
Goodwill, at cost less amortization of $322
($282 in 1996) 1,288 1,328
Other 5,956 1,856
Total other assets 13,015 8,975
Property, plant and equipment, at cost:
Land 55,614 52,888
Buildings 27,485 25,611
Plant and equipment 59,572 54,584
142,671 133,083
Less accumulated depreciation and depletion 47,653 43,025
Net property, plant and equipment 95,018 90,058
$116,582 107,036
Liabilities and Stockholders' Equity
Current liabilities:
Short-term note payable to bank $ 4,000 3,500
Accounts payable (including related party of
$77 and $93) 2,427 1,779
Federal and state income taxes 779 342
Accrued liabilities:
Payroll and benefits 1,154 1,047
Taxes 582 587
Interest 165 106
Insurance reserves 1,538 1,901
Long-term debt due within one year 418 333
Total current liabilities 11,063 9,595
Long-term debt 30,647 26,170
Deferred income taxes 7,243 6,240
Accrued insurance reserves 3,382 2,705
Other liabilities 513 432
Commitments and contingent liabilities (Notes 10 and 11)
Stockholders' equity:
Preferred stock, no par value;
5,000,000 shares authorized - -
Common stock, $.10 par value;
25,000,000 shares authorized; 3,439,235
shares issued (3,492,186 shares in 1996) 344 349
Capital in excess of par value 17,333 19,748
Retained earnings 46,057 41,797
Total stockholders' equity 63,734 61,894
$116,582 107,036
See accompanying notes.
<PAGE>
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1997 1996 1995
Cash flows from operating activities:
Net income $ 4,260 4,165 4,630
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 8,356 7,667 7,304
Net changes in operating assets and liabilities:
Accounts receivable (250) 268 (1,192)
Inventory of parts and supplies 33 (1) 136
Prepaid expenses (261) 157 (191)
Accounts payable and accrued liabilities 732 1,161 (1,001)
Increase in deferred income taxes 1,181 1,622 1,717
Net change in insurance reserves and other
liabilities 759 242 (350)
Gain on sale of real estate, plant and
equipment (792) (550) (749)
Other, net (36) (50) (173)
Net cash provided by operating activities 13,982 14,681 10,131
Cash flows from investing activities:
Purchase of property, plant and equipment (13,470) (14,070)(15,516)
Purchase of real estate held for investment - (32) (43)
Additions to other assets (4,156) (130) (525)
Proceeds from the sale of real estate held for
investment, property, plant and equipment, and
other assets 1,118 1,012 705
Net cash used in investing activities (16,508) (13,220)(15,379)
Cash flows from financing activities:
Proceeds from long-term debt 4,900 3,000 10,750
Net increase (decrease) in short-term debt 500 1,700 (2,200)
Repayment of long-term debt (338) (2,347) (1,277)
Exercise of employee stock options 879 22 22
Repurchase of Company stock (3,299) (3,915) (2,476)
Net cash provided by (used in) financing activities 2,642 (1,540) 4,819
Net increase (decrease) in cash and cash equivalents 116 (79) (429)
Cash and cash equivalents at beginning of year 313 392 821
Cash and cash equivalents at end of year $ 429 313 392
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 1,997 2,257 1,882
Income taxes (received) $ 898 (216) 3,373
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 276 1,900 526
Issuing accounts payable - - 239
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with maturities of three months or less at time of
purchase to be cash equivalents.
See accompanying notes.<PAGE>
Consolidated Statement of Stockholders' Equity Years ended September 30
(Dollars in thousands)
Capital in
Common Stock Excess of Retained
Shares Amount Par Value Earnings
Balance at October 1, 1994 3,800,719 $380 26,055 33,002
Shares purchased and canceled (121,125) (12) (2,464)
Compensation in the form of stock
options 9
Exercise of stock options 2,000 22
Net income 4,630
Balance at September 30, 1995 3,681,594 368 23,622 37,632
Shares purchased and canceled (191,408) (19) (3,896)
Exercise of stock options 2,000 22
Net income 4,165
Balance at September 30, 1996 3,492,186 349 19,748 41,797
Shares purchased and canceled (147,951) (14) (3,285)
Exercise of stock options 95,000 9 870
Net income 4,260
Balance at September 30, 1997 3,439,235 $344 17,333 46,057
See accompanying notes.<PAGE>
Notes to Consolidated Financial Statements
1. Accounting polices. CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are
wholly owned. All significant intercompany transactions have been eliminated
in consolidation.
INVENTORY - Inventory of parts and supplies is valued at the lower of cost
(first-in, first-out) or market.
REVENUE AND EXPENSE RECOGNITION - Substantially all transportation revenue is
recognized when shipment is complete and transportation expenses are recognized
as incurred.
Real estate rental revenue and mining royalties are generally recognized when
due under the leases. The straight-line method is used to recognize rental
revenues under leases which provide for varying rents over their term.
DEPRECIATION, DEPLETION AND AMORTIZATION - Provision for depreciation of plant
and equipment is computed using the straight-line method based on the following
estimated useful lives:
Years
Buildings and improvements 8-32
Revenue equipment 5-10
Other equipment 3- 5
Furniture and fixtures 5-10
Depletion of sand and stone deposits is computed on the basis of units of
production in relation to estimated reserves. Goodwill is amortized over
forty years using the straight-line method.
After a review of actual revenue equipment lives versus the lives used for
depreciation purposes, effective October 1, 1994, for financial reporting
purposes, the Company extended the estimated useful lives of its tractors from
5 to 7 years and substantially all trailers from 5-7 years to 10 years and
reduced the salvage values on such equipment. The effect for fiscal 1995 was
to increase gross profit by $842,000 and net income by $525,000 ($.14 per
share).
RISK INSURANCE - The Company has a $250,000 to $500,000 self-insured
retention per occurrence in connection with its workers' compensation,
automobile liability, and general liability insurance programs ("Risk
Insurance"). The Company accrues monthly the estimated cost in connection
with its portion of its Risk Insurance losses. Claims paid by the Company are
charged against the reserve. Additionally, the Company maintains a reserve
for incurred but not reported claims based on historical analysis of such
claims.
INCOME TAXES - The Company uses an asset and liability approach to
financial reporting for income taxes. Under this method, deferred tax assets
and liabilities are recognized based on differences between financial
statement and tax bases of assets and liabilities using presently enacted tax
rates. Deferred income taxes result from temporary differences between
pre-tax income reported in the financial statements and taxable income.
EARNINGS PER COMMON SHARE - Earnings per common share are based on the
weighted average number of common shares outstanding and common stock
equivalents, where applicable.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are
capitalized. Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Estimation of such liabilities is extremely complex.
Some factors that must be assessed are engineering estimates, continually
evolving governmental laws and standards, and potential involvement of other
potentially responsible parties.
NEW ACCOUNTING REQUIREMENTS - Effective October 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123). SFAS 123 establishes a fair value based
method of accounting for stock-based employee compensation plans. However,
it also allows companies to continue to measure cost for such plans using the
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). Under the fair value
based method, compensation is measured at the date of grant on the value of
the award and is recognized over the service period, which is usually the
vesting period. Under the intrinsic value based method, compensation cost is
the excess, if any, of the quoted market price of the stock at the grant date
or other measurement date over the amount an employee must pay to acquire the
stock. The Company has elected to continue to account for its employee stock
compensation plans under APB 25 with pro forma disclosures of net earnings and
earnings per share, as if the fair value based method of accounting defined
in SFAB 123 has been applied.
Effective October 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). SFAS 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles
to be disposed of. Impairment is assessed by comparing the book value of such
assets to the estimated undiscounted future operating cash flows expected to
result from the use of the asset and its final disposition. If the sum of the
expected future cash flow is less than the carrying amount of the asset, an
impairment loss is recognized based on the fair value of the asset. The
Company completed its evaluation of the impact of adoption of SFAS 121 and no
adjustment of the carrying value of long-lived assets was necessary.
In March 1997, the FASB issued SFAS No. 128, "Earnings per Share". SFAS 128
establishes standards for computing earnings per share ("EPS") and applies to
all entities with publicly held common stock or potential common stock. SFAS
128 replaces the presentation of primary EPS and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution, and is computed by dividing income available to common stockholders
by the weighted-average number of common shares outstanding for the period.
Similar to fully diluted EPS, diluted EPS reflects the potential dilution of
securities that could share in the earnings. SFAS 128 will be adopted by the
Company for the fiscal quarter ending December 31, 1997 and earnings per share
for all prior periods will be restated upon adoption. Had the Company adopted
SFAS 128 for the periods presented, basic and diluted earnings per share would
have been $1.22 and $1.20, respectively, for the year ended September 30,
1997.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", effective for fiscal years beginning
after December 15, 1997. SFAS 131 establishes standards for reporting
information about operating segments in annual financial statements and
requires selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS 131 requires reporting segment profit or loss,
certain specific revenue and expense items and segment assets. It also
requires reconciliations of total segment revenues, total segment profit or
loss, total segment assets, and other amounts disclosed for segments to
corresponding amounts reported in the financial statements. Restatement of
comparative information for earlier periods presented is required in the
initial year of application. Interim information is not required until the
second year of application, at which time comparative information is required.
The Company has not determined the impact that the adoption of this new
accounting standard will have on its financial statement disclosures. The
Company will adopt this accounting standard on October 1, 1998, as required.
2. Transactions with related parties. As of September 30, 1997 seven of the
Company's directors were also directors of Florida Rock Industries, Inc.
("FRI"). Such directors own approximately 30% of the stock of FRI and 40% of
the stock of the Company. Accordingly, FRI and the Company are considered
related parties.
The Company, through its transportation subsidiaries, hauls construction
aggregates for FRI and customers of FRI. It also hauls diesel fuel and other
supplies for FRI. Charges for these services are based on prevailing market
prices. Other wholly owned subsidiaries lease certain construction aggregates
mining and other properties and provide construction management services to
FRI.
A summary of revenues derived from FRI follows (in thousands):
1997 1996 1995
Transportation $ 883 1,100 759
Real estate 5,123 5,444 5,110
$6,006 6,544 5,869
Under an agreement extending until September 30, 1999, FRI furnishes the
Company with certain management and related services, including financial,
tax, legal, administrative, accounting and computer. Charges for such
services were $1,414,000 in 1997, $1,383,000 in 1996 and $1,312,000 in 1995.
On October 9, 1996 a wholly owned subsidiary of the Company purchased 134
acres of land from a subsidiary of Florida Rock Industries, Inc. for $500,000
and the assumption of certain reclamation costs and benefits relating to the
site. An appraisal of the property was obtained. The transaction was
approved by the Company's Board of Directors with those directors who are also
directors of Florida Rock Industries, Inc. abstaining.
3. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
1997 1996
Revolving credit (unsecured) $15,000 15,000
8% to 9.5% mortgage notes payable
in installments through 2015 16,065 11,455
5% unsecured notes payable in 1997 - 48
31,065 26,503
Less portion due within one year 418 333
$30,647 26,170
The aggregate amount of principal payments, excluding the revolving credit,
due subsequent to September 30, 1997 is: 1998 - $418,000; 1999 - $455,000;
2000 - $495,000; 2001 - $538,000; 2002 - $584,000; 2003 and subsequent years -
$13,575,000.
The Company has a revolving credit agreement under which it may borrow from
four banks up to $34,000,000 on term loans payable 25% on November 15, 1999,
25% on November 15, 2000 and the balance on November 15, 2001. Interest is
payable at SunTrust Bank, Central Florida, N.A.'s prime rate until November
15, 1998, and at 1/4 of 1% above such prime rate thereafter. Alternative
interest rates based on the London interbank rate and/or the reserve-adjusted
certificate of deposit rate are available at the Company's option. A
commitment fee of 1/4 of 1% is payable on the unused amount of the commitment
until November 15, 1998.
The revolving credit agreement contains restrictive covenants, including
limitations on paying cash dividends. As of September 30, 1997 $9,309,000 of
consolidated retained earnings was not restricted as to payment of cash
dividends.
The mortgage notes payable are collateralized by real estate having a
carrying value of approximately $19,358,000 at September 30, 1997.
Certain properties having a carrying value at September 30, 1997 of
$1,720,000 were encumbered by industrial revenue bonds which are the liability
of FRI. FRI has agreed to pay such debt when due (or sooner if FRI cancels
its lease of such property) and further has agreed to indemnify and hold
harmless the Company.
The Company also has short-term lines of credit totaling $20,000,000 from
three banks. Under these lines the Company can borrow funds for a period from
one to ninety days. There is no commitment fee and the banks can terminate
the lines at any time. The interest rate is determined at the time of each
borrowing. The weighted average interest rates of such borrowings on
September 30, 1997 and 1996 were 7.0% and 6.4%, respectively.
During fiscal 1997, 1996 and 1995 the Company capitalized interest cost of
$223,000, $17,000 and $53,000, respectively.
4. Leases. At September 30, 1997, the total carrying value of property owned
by the Company which is leased or held for lease to others is summarized as
follows (in thousands):
Construction aggregates property $41,852
Commercial property 31,228
Land and other property 10,296
83,376
Less accumulated depreciation and depletion 18,825
$64,551
The minimum future rentals on noncancelable operating leases as of September
30, 1997 are as follows: 1998 - $4,849,000; 1999 - $3,743,000; 2000 -
$3,459,000; 2001 - $2,600,000; 2002 - $1,973,000; 2003 and subsequent years
$9,011,000.
5. Stock option plan. The Company has a Stock Option Plan under which options
for shares of common stock may be granted to directors, officers and key
employees. At September 30, 1997 the number of shares available for issuance
is 85,000 shares. The Company did not issue options during 1996 and 1997,
therefore, SFAS No. 123 pro forma disclosures are not presented.
Option transactions for the fiscal years ended September 30 are
summarized as follows:
1997 1996 1995
Average Average Average
Options Price(1) Options Price(1) Options Price(1)
Shares under option:
Beginning of year 245,000 12.78 247,000 12.76 159,000 9.97
Granted - - 90,000 17.67
Exercised (95,000) 8.88 (2,000) 11.00 (2,000) 11.00
End of year 150,000 15.25 245,000 12.78 247,000 12.76
Options exercisable
at end of year 108,600 184,300 161,000
(1) Weighted average exercise price
The following table summarizes information concerning stock options
outstanding at September 30, 1997:
Options Options Weighted-Average
Exercise Price Outstanding Exercisable Remaining Life
11.00 30,000 30,000 .8 years
12.25 30,000 30,000 2.8 years
17.25 15,000 6,000 7.2 years
17.75 75,000 42,600 7.1 years
Remaining non-exercisable options as of September 30, 1997 become exercisable
as follows: 1998 - 19,400, 1999 - 11,000 and 2000 - 11,000.
Options granted have been granted at 72%, 74% and 100% of the fair market
value of the Company's common stock on the dates of grant.
The difference between the fair market value of the Company's common stock
and the option price on the date of grant is recognized as compensation over
the period from the date of grant until the option becomes exercisable. When
the option is exercised the proceeds are credited to stockholders' equity.
The options expire ten years from the date of grant and become exercisable
in cumulative installments of 20% to 33% each year after a one year waiting
period from date of grant.
6. Income taxes. The provision for income taxes for fiscal years ended
September 30 consisted of the following (in thousands):
1997 1996 1995
Current:
Federal $1,317 892 $1,063
State 226 148 181
1,543 1,040 1,244
Deferred 1,181 1,622 1,717
Total $2,724 2,662 2,961
A reconciliation between the amount of tax shown above and the amount
computed at the statutory Federal income tax rate follows (in thousands):
1997 1996 1995
Amount computed at statutory
Federal rate $2,374 2,321 2,581
State income taxes (net of Federal
income tax benefit) 263 255 283
Other, net 87 86 97
Provision for income taxes $2,724 2,662 2,961
The types of temporary differences and their related tax effects that give
rise to deferred tax assets and deferred tax liabilities at September 30, are
presented below:
1997 1996
Deferred tax liabilities:
Basis difference in property,
plant and equipment $8,014 6,776
Depletion 656 678
Prepaid expenses 833 737
Gross deferred tax liabilities 9,503 8,191
Deferred tax assets:
Insurance reserves 1,614 1,479
Other, net 495 501
Gross deferred tax assets 2,109 1,980
Net deferred tax liability $7,394 6,211
7. Employee benefits. The Company and certain subsidiaries have a
savings/profit sharing plan for the benefit of qualified employees. The
savings feature of the plan incorporates the provisions of Section 401(k) of
the Internal Revenue Code. Under the savings feature of the plan, an eligible
employee may elect to save a portion (within limits) of their compensation on
a tax deferred basis. The Company contributes to a participant's account an
amount equal to 50% (with certain limits) of the participant's contribution.
Additionally, the Company may make an annual contribution to the plan as
determined by the Board of Directors, with certain limitations. The plan
provides for deferred vesting with benefits payable upon retirement or earlier
termination of employment. The Company's cost was $403,000 in 1997, $419,000
in 1996 and $464,000 in 1995.
The Company provides certain health benefits for retired employees.
Employees may become eligible for those benefits if they were employed by the
Company prior to December 10, 1992, meet the service requirements and reach
retirement age while working for the Company. The plan is contributory and
unfunded. The Company accrues the estimated cost of retiree health benefits
over the years that the employees render service.
The following table sets forth the plan's status reconciled with the accrued
postretirement benefit cost included in the Company's consolidated balance
sheet at September 30 (in thousands):
1997 1996 1995
Accumulated postretirement benefit
obligation:
Retirees $ 117 133 158
Fully eligible active participants 62 62 99
Other active participants 317 307 293
Total APBO 496 502 550
Unrecognized net gain (loss) from
past experience different from
that assumed and from changes in
assumptions 5 (68) (182)
Unrecognized prior service cost 74 133 193
Accrued postretirement benefit cost $575 567 561
Net periodic postretirement benefit cost for fiscal years ended
September 30 includes the following components (in thousands):
1997 1996 1995
Service cost of benefits earned during
the period $ 38 39 49
Interest cost on APBO 32 32 36
Net amortization and deferral (59) (55) (40)
Net periodic postretirement benefit
cost $ 11 16 45
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.25%.
8. Industry segments. The Company has two major business segments:
transportation and real estate, both operated principally within the
Mid-Atlantic and Southeastern United States. The transportation segment is
operated through two wholly owned subsidiaries which are engaged in the
hauling of liquid and dry commodities by motor carrier. The real estate
segment is operated through wholly owned subsidiaries that own real estate of
which a substantial portion is under mining royalty agreements or leased.
They also hold certain other real estate for investment and are developing
commercial and industrial properties. The Company grants credit to customers
who are in the petroleum, chemical, convenience store, construction materials
and agricultural industries.
Financial data for industry segments is as follows (in thousands):
1997 1996 1995
Revenues:
Transportation $59,530 55,801 49,198
Real estate (a) 9,314 8,602 9,075
$68,844 64,403 58,273
Segment profit:
Transportation $ 4,188 4,947 4,525
Real estate (a) 5,799 4,908 5,759
9,987 9,855 10,284
Corporate expenses (942) (794) (760)
Interest expense (2,061) (2,234) (1,933)
Income before income taxes $ 6,984 6,827 7,591
Capital expenditures:
Transportation $ 7,520 13,174 12,621
Real estate 6,226 2,782 3,162
$ 13,746 15,956 15,783
Depreciation, depletion and
amortization:
Transportation $ 6,136 5,558 5,066
Real estate 2,173 2,065 2,195
$ 8,309 7,623 7,261
Identifiable assets at September 30:
Transportation $ 42,895 41,489 35,116
Real estate 73,159 64,972 64,837
General corporate 528 575 1,404
$116,582 107,036 101,357
(a) Fiscal 1997, 1996 and 1995 includes revenue of $837, $168 and $198 and
segment profit of $817, $93 and $79, respectively, from the sale of real
estate.
General corporate assets consist principally of cash, receivables,
investments and equipment.
9. Fair values of financial instruments. At September 30, 1997, the carrying
amount reported in the balance sheet for cash and cash equivalents, short-term
notes payable to bank and revolving credit approximate their fair value. The
fair values of the Company's other long-term debt are estimated using
discounted cash flow analysis, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. At September 30,
1997 the carrying amount and fair value of such other long-term debt was
$16,065,000 and $15,470,000, respectively. At September 30, 1996 the carrying
amount and fair value of such other long-term debt was $11,503,000 and
$11,025,000, respectively.
10. Contingent liabilities. Certain of the Company's subsidiaries are
involved in litigation on a number of matters and are subject to certain
claims which arise in the normal course of business. The Company has retained
certain self-insurance risks with respect to losses for third party liability
and property damage. In the opinion of management, none of these matters are
expected to have a materially adverse effect on the Company's consolidated
financial statements.
One of the Company's subsidiaries is a potentially responsible party in
connection with a Superfund Site. It is the policy of the Company to accrue
environmental contamination cleanup costs when it is probable that a liability
has been incurred and the amount of such liability is reasonably estimable.
The Company has made an estimate of its likely costs in connection with this
site and a liability has been recorded. Such liability is not material to the
financial statements of the Company.
11. Commitments. At September 30, 1997, the Company had placed orders and was
committed to purchase tractors and trailers costing approximately $2,306,000
and had entered into various contracts to purchase and develop real estate
with remaining commitments totaling $1,304,000.
12. Fourth quarter financial information (unaudited). In the fourth quarter
of fiscal 1997, the Company increased its risk insurance reserves
approximately $682,000.
13. Subsequent event. At September 30, 1997, $3,777,000 of cash was held in
escrow pending the closing of a parcel of land. The cash is included in other
assets in the accompanying balance sheet. The purchase closed on October 3,
1997 and will not have a material effect on the results of operations.
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders
FRP Properties, Inc.
We have audited the accompanying consolidated balance sheets of FRP
Properties, Inc. and subsidiaries as of September 30, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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, such consolidated financial statements present fairly, in all
material respects, the financial position of FRP Properties, Inc. and
subsidiaries at September 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 1, 1997
<PAGE>
Directors and Officers
Directors
John E. Anderson (1)
President and Chief Executive
Officer of the Company
Edward L. Baker (1)
Chairman of the Board of the Company
John D. Baker II (1)
Executive Vice President of the Company
Thompson S. Baker II
Vice President of
Florida Rock Industries, Inc.
Ish Copley
President of SunBelt Transport, Inc.,
the Company's flatbed
trucking operations
David H. deVilliers, Jr.
Vice President of the Company and
President of FRP Development Corp.,
the Company's northern
real estate operations
Albert D. Ernest, Jr. (2)(3)
President of Albert Ernest Enterprises
Luke E. Fichthorn III (2)
Private Investment Banker,
Twain Associates and Chairman of the
Board and Chief Executive Officer of
Bairnco Corporation
Francis X. Knott (2)
Chief Executive Officer of
Partners Management Company
Radford D. Lovett (2)(3)
Chairman of the Board of
Commodores Point Terminal Corp.
John R. Mabbett III
Vice President and Secretary
of the Company and President of
Florida Rock & Tank Lines, Inc.,
the Company's tank and dump
trucking operations
Robert H. Paul III (3)
Chairman of the Board, President
and Chief Executive Officer of
Southeast-Atlantic Beverage Corporation
Martin E. Stein, Jr.
Chairman and Chief Executive Officer of
Regency Realty Corporation
James H. Winston (2)
President of LPMC of Jax, Inc.
and President of
Omega Insurance Company
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Officers
Edward L. Baker
Chairman of the Board
John E. Anderson
President and Chief Executive Officer
John D. Baker II
Executive Vice President
John R. Mabbett III
Vice President and Secretary
President, Florida Rock & Tank Lines, Inc.
David H. deVilliers, Jr.
Vice President
President, FRP Development Corp.,
the Company's northern real estate
operations
James J. Gilstrap
Treasurer and Chief Financial Officer
Wallace A. Patzke, Jr.
Controller and Chief Accounting Officer
FRP PROPERTIES, Inc.
General Office: 155 East 21st Street
Jacksonville, Florida 32206
Telephone: (904) 355-1781
Annual Meeting
Shareholders are cordially invited to attend the Annual Stockholders Meeting
which will be held at 2 p.m. local time, on Wednesday, February 4, 1998, at the
general offices of the Company, 155 East 21st Street, Jacksonville, Florida.
Transfer Agent
First Union Customer Information Center
Corporate Trust Client Services NC-1153
1525 West W. T. Harris Boulevard - 3C3
Charlotte, NC 28288-1153
Telephone: 1-800-829-8432
General Counsel
Lewis S. Lee, Esquire
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Jacksonville, Florida
Independent Auditors
Deloitte & Touche LLP
Jacksonville, Florida
Common Stock Listed
The Nasdaq Stock Market
(Symbol: FRPP)
Form 10-K
Stockholders may receive without charge a copy of FRP Properties, Inc.'s annual
report to the Securities and Exchange Commission on Form 10-K by writing to the
Treasurer at P.O. Box 4667, Jacksonville, Florida 32201.
<PAGE>
EXHIBIT (11)
FRP PROPERTIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Years Ended September 30
1997 1996 1995
Net income $4,260,000 $4,165,000 $4,630,000
Common shares:
Weighted average shares
outstanding during the period 3,490,207 3,587,894 3,742,190
Shares issuable under stock
options which are potentially
dilutive and affect primary
earnings per share 63,683 95,378 90,135
Maximum potential shares
includable in computation of
primary earnings per share 3,553,890 3,683,272 3,832,325
Additional shares issuable
under stock options which
are potentially dilutive
and affect fully diluted
earnings per share 26,253 - 6,092
Maximum potential shares
included in computation of
fully diluted earnings per
share 3,580,143 3,683,272 3,838,417
Primary earnings per common share $1.20 $1.13 $1.21
Fully diluted earnings per common share (a) $1.19 $1.13 $1.21
(a) Fully diluted earnings per share are not presented on the income statement
since the potential effect would have been less than 3% dilutive.
<PAGE>
Annual Report 1997
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1997 1996 Change
Revenues $68,844 64,403 + 6.9
Gross profit $14,908 14,615 + 2.0
Operating profit $ 8,977 9,017 - 0.4
Income before income taxes $ 6,984 6,827 + 2.3
Net income $ 4,260 4,165 + 2.3
Per common share:
Net income $1.20 1.13 + 6.2
Stockholders' equity $18.48 17.72 + 4.3
<PAGE>
1997 CORPORATE HIGHLIGHTS
Revenues - up 6.9% to $68,844,000
Gross profit - up 2.0% to $14,908,000
Net income - up 2.3% to $4,260,000
Earnings per share - up 6.2% to $1.20
$19,000,000 available under the Company's revolving credit agreement at
September 30, 1997
$20,000,000 of unsecured lines of credit of which $4,000,000 was outstanding
at September 30, 1997
BUSINESS. The Company is engaged in the transportation and real estate
businesses. The Company's transportation business is conducted through two
wholly owned subsidiaries. Florida Rock & Tank Lines, Inc. is a
Southeastern transportation company concentrating in the hauling by motor
carrier of liquid and dry bulk commodities. SunBelt Transport, Inc. serves
the flatbed portion of the trucking industry in the Southeast, hauling
primarily construction materials. The Company's Real Estate Group, through
subsidiaries, acquires, constructs, leases, operates and manages land and
buildings to generate both current cash flows and long-term capital
appreciation.
OBJECTIVES. The Company's dual objectives are to build a major Southeastern
transportation company and a real estate company which provides sound
long-term growth, cash generation and asset appreciation.
Transportation
Internal growth is accomplished by a dedicated, competent and loyal work
force emphasizing superior service to customers in existing markets,
developing new transportation services for customers in current market
areas and opening new terminals in other market areas.
External growth, through the acquisition program, is designed to broaden
the Company's geographic market area and delivery services by acquiring
related businesses in the Southeast.
Real Estate
The growth plan is based on the acquisition, management and retention of
real estate assets and the development of industrial rental properties to
provide long-term positive cash flows and capital appreciation.
<PAGE>
To Our Stockholders:
Fiscal 1997 was a year of continued progress in major projects and programs
consistent with the short and long-term goals in both the Transportation and
Real Estate businesses.
Results. Revenues for fiscal 1997 were $68,844,000, a 6.9% increase over
$64,403,000 in fiscal 1996. Transportation revenues increased 6.7% due to
continued growth and expansion in both SunBelt Transport, Inc. and Florida
Rock & Tank Lines, Inc. Real estate revenues increased 8.3% principally as
the result of the sale of real estate during the fourth quarter of this
fiscal year.
Gross profit of $14,908,000 increased 2.0% from $14,615,000 in fiscal 1996.
The Transportation Group's gross profit for fiscal 1997 decreased $605,000
from last year as the result of higher insurance costs, increases in
depreciation expense resulting from fleet expansion and modernization and
fewer gains resulting from the sale of equipment. The Real Estate Group's
gross profit was above last year principally because of real estate gains of
$817,000 in fiscal 1997 compared to $93,000 in 1996.
Selling, general and administrative expenses were up 5.9% in 1997 to
$5,931,000 as compared to 1996. Selling, general and administrative expenses
as a percent of total revenue remained level with the prior year.
Interest expense decreased 7.8% to $2,061,000 in 1997 from $2,234,000 last
year. The decrease was due to a lower average interest rate and an increase
in capitalized interest of $206,000 over fiscal 1996.
Net income increased 2.3% to $4,260,000 from $4,165,000 in fiscal 1996.
Earnings per share increased 6.2% to $1.20 from $1.13 last year. The average
number of common shares used in computing earnings per share decreased 3.5%
due to ongoing stock repurchases made by the Company. During the current
fiscal year, the Company purchased and retired 147,951 shares of common
shares while issuing 95,000 shares asa a result of shares exercised under the
Company's non-qualified stock option plans.
FRP Development Corp. The Company's real estate strategy of developing high
quality, flexible warehouse/office space in carefully selected markets
continued to be successful. At September 30, 1997 99% of the total 574,252
square feet of completed warehouse/office space was leased with only 3,200
square feet available.
The second of two buildings at Preston Court in the Baltimore/Washington
Industrial Park, comprised of 90,405 square feet of flexible warehouse/office
space, was completed during 1997 and is 100% leased.
Lakeside Business Park. The Company continued land development activities on
Lakeside Business Park, a 134 acre site in Harford County, Maryland, north of
Baltimore. It is anticipated that construction of 105,800 square feet of
flexible warehouse/office space will be completed during the first half of
fiscal 1998. This space is 100% pre-leased.
Capital Expenditures. Capital expenditures in 1997 for the transportation
business totaled $7,520,000 versus $13,174,000 in 1996. The 1997 capital
expenditures were approximately 59% for new plant and equipment and
replacements represented 41%. Capital expenditures for the real estate
segment in 1997 approximated $6,226,000 versus $2,782,000 in 1996. Total
depreciation and depletion for fiscal 1997 was $8,205,000 versus $7,456,000
in 1996.
The 1998 planned capital expenditures for the transportation business total
$6,939,000 for continued expansion of both the flatbed and tank truck fleets
and to maintain the modernized fleet. The capital budget for the real estate
segment is $11,352,000. Total depreciation expense is expected to be
approximately $9,094,000.
Financial Management. The Company's $34,000,000 revolving credit term loan
facility has a final maturity in 2001 of which $15,000,000 was utilized at
the end of 1997. The Company also has $20,000,000 in unsecured short-term
lines of credit of which $4,000,000 was borrowed at the end of fiscal 1997.
$16,065,000 of the Company's total debt is long-term fixed rate mortgages
secured real estate projects. At year end debt was 33% of capital employed.
Stock Repurchase. Pursuant to the Board's authorization, the Company
purchased 147,951 shares of its common stock during the year. Management
remains authorized to repurchase shares of the Company's common stock from
time to time as opportunities may arise.
Annual Meeting. At the Annual Stockholders' Meeting on February 5, 1996, the
stockholders elected John E. Anderson, Thompson S. Baker, David H.
deVilliers, Jr., and Albert D. Ernest, Jr. as directors to serve a four-year
term expiring in the year 2001.
Outlook. Fiscal 1998 is expected to be another year of growth and progress.
The economy is expected to continue its slow growth.
The Transportation Group is expected to continue to expand in 1998 through
the growth of its existing customers as well as entries into new markets.
Industrial real estate markets served by FRP Development Corp. in the
Baltimore area remain in good condition with low vacancy rates and steady
rent levels. The Company's high quality buildings combined with good market
locations have enabled the properties to remain substantially fully leased.
The favorable long-term outlook is conducive to market acceptance of the new
Baltimore/Washington Industrial Park building and the multi-year Lakeside
Business Park project.
Management intends to continue its careful blend of prudence coupled with
an aggressive search for new opportunities to grow both the transportation
and real estate segments of the business. The Company plans to build on its
financial strength and sound market positions.
The dedication and support of our employees will continue to be the key to
the Company's future success. We extend our sincere thanks to these loyal
men and women for their efforts.
As reported to you earlier this year, we lost our founder and Chairman
Emeritus, Thompson S. Baker when he passed away on February 24, 1997. No
words can describe the leadership he gave this Company nor the love he had
for its employees. He will be missed.
Respectfully yours,
Edward L. Baker
Chairman of the Board
John E. Anderson
President and Chief Executive Officer<PAGE>
Operating Review
Transportation. The Company's Transportation Group operates through two
wholly owned subsidiaries, Florida Rock & Tank Lines, Inc., engaged in
hauling liquid and dry bulk commodities primarily in tank trucks, and SunBelt
Transport, Inc., engaged in flatbed hauling.
The Group operates from terminals in Jacksonville, Ft. Myers, Orlando,
Panama City, Pensacola, Port Everglades, Tampa and White Springs, Florida;
Albany, Atlanta, Augusta, Bainbridge, Columbus, Macon and Savannah, Georgia;
Knoxville and Nashville, Tennessee; and Birmingham, Alabama and has a central
dispatch office in Greenville, South Carolina. During fiscal 1997 the owned
and leased fleet increased from 498 to 521 trucks.
Revenues for miles hauled were up 6.7% due to both continued expansion of
flatbed and tank truck hauling.
Gross profit decreased 6.3% from fiscal 1996 primarily due to higher
insurance costs and depreciation associated with the modernization of the
fleet.
During fiscal 1997, including replacements and growth of SunBelt, the Group
purchased 91 new tractors and 70 new trailers. The fiscal 1998 capital
expenditure plan is based on maintaining a modernized tank fleet and also
expanding the tank truck and flatbed fleets. The fleet modernization program
has resulted in reduced maintenance expenses and improved operating
efficiencies.
For fiscal 1998 Transportation expects another year of growth in its
existing bulk hauling business resulting from the continued penetration of
targeted market segments. With the anticipated continuing modest economic
growth, the outlook is for increases in the hauling of petroleum, dry bulk
and chemical products. Flatbed hauling is expected to have another year of
good growth in 1998.
Real Estate. The Real Estate Group operates the Company's real estate and
property development activities through subsidiaries.
The Company owns real estate in Florida, Georgia, Virginia, Maryland, and
Washington, D.C. The real estate owned generally falls into one of three
categories. The first is land with stone or sand and gravel deposits,
substantially all of which is leased to Florida Rock Industries, Inc. under
mining royalty agreements, whereby the Company is paid a percentage of the
revenues generated or annual minimums. The second is land and/or buildings
leased under rental agreements, and the third is land and/or buildings which
are being developed for future rental or held for future appreciation or
development.
Real estate revenues increased 8.3% from 1996 principally due to the sale
of real estate. The fiscal 1997 real estate revenues, excluding the sale of
real estate, were divided approximately 48% from mining and minimum royalties
and 52% from rental. Excluding land sales for fiscal 1997, real estate
revenues approximated those of last year.
A brief description of FRP Development Corp.'s projects at September 30,
1997 follows:
8230 Preston Court, 72,182 square feet of flexible warehouse/office space.
8240 Preston Court, a 90,405 square foot flexible warehouse/office
building.
810 Oregon Avenue, 113,280 square feet of flexible warehouse/office space.
812 Oregon Avenue, 82,335 square feet of flexible warehouse/office space.
Rossville Business Center, a two building complex consisting of 187,517
square feet of flexible warehouse/office space.
TESSCO Center, a 28,533 square foot suburban office building.
Lakeside Business Park is a 134 acre site capable of supporting 1,400,000
square feet of warehouse/office space is under development. A 105,800 square
foot speculative warehouse is expected to be completed in the first half of
1998.
The Group during fiscal 1998 will continue to focus on the development of the
property at Lakeside.
At September 30, 1997 the Company owns approximately 574,000 square feet of
rental properties that were 99% leased. The Company's long-term plan is to
gradually build a portfolio of successful rental properties for investment.
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1997 1996 1995(a) 1994 1993(b)
Summary of Operations
Revenues $ 68,844 64,403 58,273 54,011 46,599
Gross profit(c) $ 14,908 14,615 15,132 12,255 9,773
Operating profit $ 8,977 9,017 9,440 7,264 5,313
Interest expense $ 2,061 2,234 1,933 1,105 897
Income before income taxes $ 6,984 6,827 7,591 6,219 4,432
Provision for income taxes $ 2,724 2,662 2,961 2,425 1,735
Net income $ 4,260 4,165 4,630 3,794 2,697
Per Common Share
Net income $ 1.20 1.13 1.21 .94 .65
Stockholders' equity $ 18.48 17.72 16.74 15.64 14.75
Financial Summary
Current assets $ 8,549 8,003 8,495 7,703 7,247
Current liabilities $ 11,063 9,595 7,117 10,234 8,198
Working capital (deficit) ($ 2,514) (1,592) 1,378 (2,531) (951)
Property, plant and
equipment, net $ 95,018 90,058 83,319 74,697 72,698
Total assets $116,582 107,036 101,357 91,769 89,026
Long-term debt $ 30,647 26,170 25,503 16,108 15,697
Stockholders' equity $ 63,734 61,894 61,622 59,437 59,972
Other Data
Return on ending
stockholders' equity 6.7% 6.7 7.5 6.4 4.5
Return on capital employed 4.0% 5.7 6.2 5.4 4.0
Net cash flow provided from
operating activities $ 13,982 14,681 10,131 10,005 8,452
Additions to property,
plant and equipment $ 13,746 15,970 15,805 9,165 7,450
Depreciation, depletion
and amortization $ 8,356 7,667 7,304 6,945 6,196
Weighted average number
of shares 3,554 3,683 3,832 4,045 4,176
Number of employees at
end of year 721 665 644 556 527
Stockholders of record 873 913 939 975 1,032
(a)Effective October 1, 1994, the Company changed depreciation lives on
revenue equipment which resulted in an increase in gross profit of
$842,000 and net income of $525,000 ($.14 per share) for fiscal 1995.
(b)Effective October 1, 1992, the Company changed its method of accounting
for employee postretirement benefits in accordance with SFAS 106. The
effect on fiscal 1993 was to reduce net income by $252,000 ($.06 per
share).
(c)Fiscal 1997, 1996, 1995 and 1994 include gains on the sale of real
estate of $817,000, $93,000, $79,000 and $1,167,000, respectively.
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
1997 1996 1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $16,398 15,321 16,221 15,949 17,533 16,706 18,692 16,427
Gross profit $ 3,363 3,848 3,244 3,366 4,077 4,050 4,224 3,351
Operating profit $ 1,844 2,391 1,734 1,858 2,573 2,569 2,826 2,199
Income before
income taxes $ 1,369 1,852 1,274 1,304 2,038 1,992 2,303 1,679
Net income $ 835 1,130 777 795 1,243 1,215 1,405 1,025
Per common share:
Net income $ .23 .30 .22 .21 .35 .33 .40 .29
Market price:
High $ 26.00 22.50 28.75 22.00 28.00 21.50 34.00 22.00
Low $20.50 17.00 24.00 19.69 24.50 19.75 25.25 20.50
</TABLE>
<PAGE>
Management Analysis
Operating Results. The Company's operations are influenced by a number of
external and internal factors. External factors include levels of economic and
industrial activity in the Southeast, petroleum product usage in the Southeast,
fuel costs, construction activity in certain Georgia and Florida markets,
Florida Rock Industries, Inc.'s sales from the Company's mining properties,
interest rates and demand for commercial warehouse space in the
Baltimore/Washington area. Internal factors include revenue mix, capacity
utilization, safety record, other operating factors, and construction costs of
new projects.
In fiscal 1997 and 1996, revenues increased 7% and 10%, respectively. In the
Transportation segment revenue and miles hauled were up 7% in 1997 and 13% in
1996. In fiscal 1995 the Real Estate segment had revenue from timber sales and
a one-time royalty totaling $1,092,000. Absent these infrequent and one-time
revenues, the Real Estate segment's revenues, exclusive of real estate sales,
would have remained stable in 1997 and increased 8% in 1996. The 1996 increase
was principally due to increases in rents and royalties.
The estimated contribution to Transportation revenues by principal markets
follows:
1997 1996 1995 1994 1993
Petroleum 68% 68 66 45 51
Construction 21% 20 19 26 13
Chemical 6% 7 10 15 12
Other 5% 5 5 14 24
In fiscal 1997, gross profit increased $293,000 from 1996 and gross margin
decreased to 22% from 23%. The Transportation segment's gross profit decreased
$605,000, principally due to higher insurance costs, increased depreciation
expense and lower gains on the sale of equipment. Gross margin decreased to 15%
from 17% principally due to reduced gains on the sale of equipment, increased
depreciation expense and higher operating costs. In the Real Estate segment
gross profit increased $898,000 in fiscal 1997 from last year. The increase was
principally due to real estate sales gross profit of $817,000 in 1997 compared
to $93,000 in 1996, increase development revenues and a 1996 write-off of
$349,000 in connection with the abandonment of certain development costs.
In fiscal 1996, gross profit decreased $517,000 from 1995 and gross profit
margin decreased to 23% from 26%. The Transportation segment's gross profit
increased $366,000, principally due to higher revenues, while the gross profit
margin decreased to 17% from 19% principally due to an increase in risk
insurance cost of approximately $1,760,000 over 1995. In the Real Estate
segment gross profit decreased $897,000 in fiscal 1996 from 1995. The decrease
was principally due to the timber sales and one-time royalty which produced a
gross profit in 1995 of approximately $863,000 and the write-off in 1996 of
$349,000 in connection with the abandonment of certain development costs.
Selling, general and administrative expense increased 6% in 1997 and
decreased 2% in 1996 from 1995. The 1996 decrease was due to a reduction of
$206,000 in profit sharing and incentive compensation.
In 1997 interest expense decreased 8% from 1996 primarily due to increased
capitalization of interest and increased 16% in 1996 over 1995 due to increased
borrowings which was partially offset by a lower average interest rate.
Liquidity and Capital Resources. The following key financial measurements
reflect the Company's sound financial position and capital resources at
September 30 (dollars in thousands):
1997 1996 1995
Cash $ 429 313 392
Total debt $35,065 30,003 27,650
Debt as a percent of
capital employed 33% 31 29
Unused lines of credit $35,000 35,500 38,200
During 1997, net cash flows from operating activities were $13,982,000, net
cash used in investing activities were $16,508,000 and common stock repurchased
was $3,299,000. These activities were funded by additional borrowing of
$5,400,000 and proceeds from the exercise of stock options of $879,000.
During 1996, net cash flows from operating activities of $14,681,000 more
than covered the $13,220,000 net cash used in investing activities. The excess
cash from operating activities plus additional borrowing was used to buy back
$3,915,000 of the Company's common stock.
The Company is financially postured to be able to take advantage of external
and internal growth opportunities in real estate development and in the motor
carrier industry that may occur in the Southeast.
The Company has a $34,000,000 revolving credit agreement of which $19,000,000
was available at fiscal year end. In addition, it has unsecured short-term
lines of credit under which it may borrow up to $20,000,000 of which $4,000,000
was outstanding at September 30, 1997.
The Company currently expects its fiscal 1998 capital expenditures to be
approximately $18,291,000 versus depreciation and depletion expense of
$9,094,000. The expenditures are expected to be financed from the cash flow
from operating activities and the $19,000,000 unused and available under its
revolving credit agreement.
The Company believes it will be able to renegotiate its present credit
facilities or obtain similar replacement credit facilities when necessary in the
future.
Inflation. Historically, the Company has been able to recover inflationary
cost increases through increased freight rates. It is expected that over time
justifiable and necessary rate increases will be obtained in the future,
although deregulation of intrastate trucking rates has made this more difficult
in the past three years. Substantially all of the Company's royalty agreements
are based on a percentage of the sales price. Minimum royalties and
substantially all lease agreements provide various escalation provisions.
<PAGE>
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1997 1996 1995
Revenues:
Transportation $ 59,530 55,801 49,198
Real estate 8,477 8,434 8,877
Sale of real estate 837 168 198
Total revenues (including revenue from
related parties of $6,006, $6,544 and $5,869) 68,844 64,403 58,273
Cost of operations:
Transportation 50,487 46,153 39,916
Real estate 3,429 3,560 3,106
Cost of real estate sold 20 75 119
Gross profit 14,908 14,615 15,132
Selling, general and administrative expense
(including expenses paid to related party
of $1,414, $1,383 and $1,312) 5,931 5,598 5,692
Operating profit 8,977 9,017 9,440
Interest expense (2,061) (2,234) (1,933)
Interest income 46 34 49
Other income, net 22 10 35
Income before income taxes 6,984 6,827 7,591
Provision for income taxes 2,724 2,662 2,961
Net income $ 4,260 4,165 4,630
Earnings per common share $1.20 1.13 1.21
Weighted average number of shares used in
computing earnings per common share 3,554 3,683 3,832
See accompanying notes.<PAGE>
Consolidated Balance Sheet September 30
(Dollars in thousands)
1997 1996
Assets
Current assets:
Cash and cash equivalents $ 429 313
Accounts receivable, less allowance for doubtful
accounts of $258 ($234 in 1996) (including
related party of $283 and $376) 5,531 5,300
Inventory of parts and supplies 469 502
Prepaid expenses and other 2,120 1,888
Total current assets 8,549 8,003
Other assets:
Real estate held for investment, at cost 5,771 5,791
Goodwill, at cost less amortization of $322
($282 in 1996) 1,288 1,328
Other 5,956 1,856
Total other assets 13,015 8,975
Property, plant and equipment, at cost:
Land 55,614 52,888
Buildings 27,485 25,611
Plant and equipment 59,572 54,584
142,671 133,083
Less accumulated depreciation and depletion 47,653 43,025
Net property, plant and equipment 95,018 90,058
$116,582 107,036
Liabilities and Stockholders' Equity
Current liabilities:
Short-term note payable to bank $ 4,000 3,500
Accounts payable (including related party of
$77 and $93) 2,427 1,779
Federal and state income taxes 779 342
Accrued liabilities:
Payroll and benefits 1,154 1,047
Taxes 582 587
Interest 165 106
Insurance reserves 1,538 1,901
Long-term debt due within one year 418 333
Total current liabilities 11,063 9,595
Long-term debt 30,647 26,170
Deferred income taxes 7,243 6,240
Accrued insurance reserves 3,382 2,705
Other liabilities 513 432
Commitments and contingent liabilities (Notes 10 and 11)
Stockholders' equity:
Preferred stock, no par value;
5,000,000 shares authorized - -
Common stock, $.10 par value;
25,000,000 shares authorized; 3,439,235
shares issued (3,492,186 shares in 1996) 344 349
Capital in excess of par value 17,333 19,748
Retained earnings 46,057 41,797
Total stockholders' equity 63,734 61,894
$116,582 107,036
See accompanying notes.
<PAGE>
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1997 1996 1995
Cash flows from operating activities:
Net income $ 4,260 4,165 4,630
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 8,356 7,667 7,304
Net changes in operating assets and liabilities:
Accounts receivable (250) 268 (1,192)
Inventory of parts and supplies 33 (1) 136
Prepaid expenses (261) 157 (191)
Accounts payable and accrued liabilities 732 1,161 (1,001)
Increase in deferred income taxes 1,181 1,622 1,717
Net change in insurance reserves and other
liabilities 759 242 (350)
Gain on sale of real estate, plant and
equipment (792) (550) (749)
Other, net (36) (50) (173)
Net cash provided by operating activities 13,982 14,681 10,131
Cash flows from investing activities:
Purchase of property, plant and equipment (13,470) (14,070)(15,516)
Purchase of real estate held for investment - (32) (43)
Additions to other assets (4,156) (130) (525)
Proceeds from the sale of real estate held for
investment, property, plant and equipment, and
other assets 1,118 1,012 705
Net cash used in investing activities (16,508) (13,220)(15,379)
Cash flows from financing activities:
Proceeds from long-term debt 4,900 3,000 10,750
Net increase (decrease) in short-term debt 500 1,700 (2,200)
Repayment of long-term debt (338) (2,347) (1,277)
Exercise of employee stock options 879 22 22
Repurchase of Company stock (3,299) (3,915) (2,476)
Net cash provided by (used in) financing activities 2,642 (1,540) 4,819
Net increase (decrease) in cash and cash equivalents 116 (79) (429)
Cash and cash equivalents at beginning of year 313 392 821
Cash and cash equivalents at end of year $ 429 313 392
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 1,997 2,257 1,882
Income taxes (received) $ 898 (216) 3,373
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 276 1,900 526
Issuing accounts payable - - 239
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with maturities of three months or less at time of
purchase to be cash equivalents.
See accompanying notes.<PAGE>
Consolidated Statement of Stockholders' Equity Years ended September 30
(Dollars in thousands)
Capital in
Common Stock Excess of Retained
Shares Amount Par Value Earnings
Balance at October 1, 1994 3,800,719 $380 26,055 33,002
Shares purchased and canceled (121,125) (12) (2,464)
Compensation in the form of stock
options 9
Exercise of stock options 2,000 22
Net income 4,630
Balance at September 30, 1995 3,681,594 368 23,622 37,632
Shares purchased and canceled (191,408) (19) (3,896)
Exercise of stock options 2,000 22
Net income 4,165
Balance at September 30, 1996 3,492,186 349 19,748 41,797
Shares purchased and canceled (147,951) (14) (3,285)
Exercise of stock options 95,000 9 870
Net income 4,260
Balance at September 30, 1997 3,439,235 $344 17,333 46,057
See accompanying notes.<PAGE>
Notes to Consolidated Financial Statements
1. Accounting polices. CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are
wholly owned. All significant intercompany transactions have been eliminated
in consolidation.
INVENTORY - Inventory of parts and supplies is valued at the lower of cost
(first-in, first-out) or market.
REVENUE AND EXPENSE RECOGNITION - Substantially all transportation revenue is
recognized when shipment is complete and transportation expenses are recognized
as incurred.
Real estate rental revenue and mining royalties are generally recognized when
due under the leases. The straight-line method is used to recognize rental
revenues under leases which provide for varying rents over their term.
DEPRECIATION, DEPLETION AND AMORTIZATION - Provision for depreciation of plant
and equipment is computed using the straight-line method based on the following
estimated useful lives:
Years
Buildings and improvements 8-32
Revenue equipment 5-10
Other equipment 3- 5
Furniture and fixtures 5-10
Depletion of sand and stone deposits is computed on the basis of units of
production in relation to estimated reserves. Goodwill is amortized over
forty years using the straight-line method.
After a review of actual revenue equipment lives versus the lives used for
depreciation purposes, effective October 1, 1994, for financial reporting
purposes, the Company extended the estimated useful lives of its tractors from
5 to 7 years and substantially all trailers from 5-7 years to 10 years and
reduced the salvage values on such equipment. The effect for fiscal 1995 was
to increase gross profit by $842,000 and net income by $525,000 ($.14 per
share).
RISK INSURANCE - The Company has a $250,000 to $500,000 self-insured
retention per occurrence in connection with its workers' compensation,
automobile liability, and general liability insurance programs ("Risk
Insurance"). The Company accrues monthly the estimated cost in connection
with its portion of its Risk Insurance losses. Claims paid by the Company are
charged against the reserve. Additionally, the Company maintains a reserve
for incurred but not reported claims based on historical analysis of such
claims.
INCOME TAXES - The Company uses an asset and liability approach to
financial reporting for income taxes. Under this method, deferred tax assets
and liabilities are recognized based on differences between financial
statement and tax bases of assets and liabilities using presently enacted tax
rates. Deferred income taxes result from temporary differences between
pre-tax income reported in the financial statements and taxable income.
EARNINGS PER COMMON SHARE - Earnings per common share are based on the
weighted average number of common shares outstanding and common stock
equivalents, where applicable.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are
capitalized. Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Estimation of such liabilities is extremely complex.
Some factors that must be assessed are engineering estimates, continually
evolving governmental laws and standards, and potential involvement of other
potentially responsible parties.
NEW ACCOUNTING REQUIREMENTS - Effective October 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123). SFAS 123 establishes a fair value based
method of accounting for stock-based employee compensation plans. However,
it also allows companies to continue to measure cost for such plans using the
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). Under the fair value
based method, compensation is measured at the date of grant on the value of
the award and is recognized over the service period, which is usually the
vesting period. Under the intrinsic value based method, compensation cost is
the excess, if any, of the quoted market price of the stock at the grant date
or other measurement date over the amount an employee must pay to acquire the
stock. The Company has elected to continue to account for its employee stock
compensation plans under APB 25 with pro forma disclosures of net earnings and
earnings per share, as if the fair value based method of accounting defined
in SFAB 123 has been applied.
Effective October 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). SFAS 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles
to be disposed of. Impairment is assessed by comparing the book value of such
assets to the estimated undiscounted future operating cash flows expected to
result from the use of the asset and its final disposition. If the sum of the
expected future cash flow is less than the carrying amount of the asset, an
impairment loss is recognized based on the fair value of the asset. The
Company completed its evaluation of the impact of adoption of SFAS 121 and no
adjustment of the carrying value of long-lived assets was necessary.
In March 1997, the FASB issued SFAS No. 128, "Earnings per Share". SFAS 128
establishes standards for computing earnings per share ("EPS") and applies to
all entities with publicly held common stock or potential common stock. SFAS
128 replaces the presentation of primary EPS and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution, and is computed by dividing income available to common stockholders
by the weighted-average number of common shares outstanding for the period.
Similar to fully diluted EPS, diluted EPS reflects the potential dilution of
securities that could share in the earnings. SFAS 128 will be adopted by the
Company for the fiscal quarter ending December 31, 1997 and earnings per share
for all prior periods will be restated upon adoption. Had the Company adopted
SFAS 128 for the periods presented, basic and diluted earnings per share would
have been $1.22 and $1.20, respectively, for the year ended September 30,
1997.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", effective for fiscal years beginning
after December 15, 1997. SFAS 131 establishes standards for reporting
information about operating segments in annual financial statements and
requires selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS 131 requires reporting segment profit or loss,
certain specific revenue and expense items and segment assets. It also
requires reconciliations of total segment revenues, total segment profit or
loss, total segment assets, and other amounts disclosed for segments to
corresponding amounts reported in the financial statements. Restatement of
comparative information for earlier periods presented is required in the
initial year of application. Interim information is not required until the
second year of application, at which time comparative information is required.
The Company has not determined the impact that the adoption of this new
accounting standard will have on its financial statement disclosures. The
Company will adopt this accounting standard on October 1, 1998, as required.
2. Transactions with related parties. As of September 30, 1997 seven of the
Company's directors were also directors of Florida Rock Industries, Inc.
("FRI"). Such directors own approximately 30% of the stock of FRI and 40% of
the stock of the Company. Accordingly, FRI and the Company are considered
related parties.
The Company, through its transportation subsidiaries, hauls construction
aggregates for FRI and customers of FRI. It also hauls diesel fuel and other
supplies for FRI. Charges for these services are based on prevailing market
prices. Other wholly owned subsidiaries lease certain construction aggregates
mining and other properties and provide construction management services to
FRI.
A summary of revenues derived from FRI follows (in thousands):
1997 1996 1995
Transportation $ 883 1,100 759
Real estate 5,123 5,444 5,110
$6,006 6,544 5,869
Under an agreement extending until September 30, 1999, FRI furnishes the
Company with certain management and related services, including financial,
tax, legal, administrative, accounting and computer. Charges for such
services were $1,414,000 in 1997, $1,383,000 in 1996 and $1,312,000 in 1995.
On October 9, 1996 a wholly owned subsidiary of the Company purchased 134
acres of land from a subsidiary of Florida Rock Industries, Inc. for $500,000
and the assumption of certain reclamation costs and benefits relating to the
site. An appraisal of the property was obtained. The transaction was
approved by the Company's Board of Directors with those directors who are also
directors of Florida Rock Industries, Inc. abstaining.
3. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
1997 1996
Revolving credit (unsecured) $15,000 15,000
8% to 9.5% mortgage notes payable
in installments through 2015 16,065 11,455
5% unsecured notes payable in 1997 - 48
31,065 26,503
Less portion due within one year 418 333
$30,647 26,170
The aggregate amount of principal payments, excluding the revolving credit,
due subsequent to September 30, 1997 is: 1998 - $418,000; 1999 - $455,000;
2000 - $495,000; 2001 - $538,000; 2002 - $584,000; 2003 and subsequent years -
$13,575,000.
The Company has a revolving credit agreement under which it may borrow from
four banks up to $34,000,000 on term loans payable 25% on November 15, 1999,
25% on November 15, 2000 and the balance on November 15, 2001. Interest is
payable at SunTrust Bank, Central Florida, N.A.'s prime rate until November
15, 1998, and at 1/4 of 1% above such prime rate thereafter. Alternative
interest rates based on the London interbank rate and/or the reserve-adjusted
certificate of deposit rate are available at the Company's option. A
commitment fee of 1/4 of 1% is payable on the unused amount of the commitment
until November 15, 1998.
The revolving credit agreement contains restrictive covenants, including
limitations on paying cash dividends. As of September 30, 1997 $9,309,000 of
consolidated retained earnings was not restricted as to payment of cash
dividends.
The mortgage notes payable are collateralized by real estate having a
carrying value of approximately $19,358,000 at September 30, 1997.
Certain properties having a carrying value at September 30, 1997 of
$1,720,000 were encumbered by industrial revenue bonds which are the liability
of FRI. FRI has agreed to pay such debt when due (or sooner if FRI cancels
its lease of such property) and further has agreed to indemnify and hold
harmless the Company.
The Company also has short-term lines of credit totaling $20,000,000 from
three banks. Under these lines the Company can borrow funds for a period from
one to ninety days. There is no commitment fee and the banks can terminate
the lines at any time. The interest rate is determined at the time of each
borrowing. The weighted average interest rates of such borrowings on
September 30, 1997 and 1996 were 7.0% and 6.4%, respectively.
During fiscal 1997, 1996 and 1995 the Company capitalized interest cost of
$223,000, $17,000 and $53,000, respectively.
4. Leases. At September 30, 1997, the total carrying value of property owned
by the Company which is leased or held for lease to others is summarized as
follows (in thousands):
Construction aggregates property $41,852
Commercial property 31,228
Land and other property 10,296
83,376
Less accumulated depreciation and depletion 18,825
$64,551
The minimum future rentals on noncancelable operating leases as of September
30, 1997 are as follows: 1998 - $4,849,000; 1999 - $3,743,000; 2000 -
$3,459,000; 2001 - $2,600,000; 2002 - $1,973,000; 2003 and subsequent years
$9,011,000.
5. Stock option plan. The Company has a Stock Option Plan under which options
for shares of common stock may be granted to directors, officers and key
employees. At September 30, 1997 the number of shares available for issuance
is 85,000 shares. The Company did not issue options during 1996 and 1997,
therefore, SFAS No. 123 pro forma disclosures are not presented.
Option transactions for the fiscal
years ended September 30 are summarized as follows:
1997 1996 1995
Average Average Average
Options Price(1) Options Price(1) Options Price(1)
Shares under option:
Beginning of year 245,000 12.78 247,000 12.76 159,000 9.97
Granted - - 90,000 17.67
Exercised (95,000) 8.88 (2,000) 11.00 (2,000) 11.00
End of year 150,000 15.25 245,000 12.78 247,000 12.76
Options exercisable
at end of year 108,600 184,300 161,000
(1) Weighted average exercise price
The following table summarizes information concerning stock options
outstanding at September 30, 1997:
Options Options Weighted-Average
Exercise Price Outstanding Exercisable Remaining Life
11.00 30,000 30,000 .8 years
12.25 30,000 30,000 2.8 years
17.25 15,000 6,000 7.2 years
17.75 75,000 42,600 7.1 years
Remaining non-exercisable options as of September 30, 1997 become exercisable
as follows: 1998 - 19,400, 1999 - 11,000 and 2000 - 11,000.
Options granted have been granted at 72%, 74% and 100% of the fair market
value of the Company's common stock on the dates of grant.
The difference between the fair market value of the Company's common stock
and the option price on the date of grant is recognized as compensation over
the period from the date of grant until the option becomes exercisable. When
the option is exercised the proceeds are credited to stockholders' equity.
The options expire ten years from the date of grant and become exercisable
in cumulative installments of 20% to 33% each year after a one year waiting
period from date of grant.
6. Income taxes. The provision for income taxes for fiscal years ended
September 30 consisted of the following (in thousands):
1997 1996 1995
Current:
Federal $1,317 892 $1,063
State 226 148 181
1,543 1,040 1,244
Deferred 1,181 1,622 1,717
Total $2,724 2,662 2,961
A reconciliation between the amount of tax shown above and the amount
computed at the statutory Federal income tax rate follows (in thousands):
1997 1996 1995
Amount computed at statutory
Federal rate $2,374 2,321 2,581
State income taxes (net of Federal
income tax benefit) 263 255 283
Other, net 87 86 97
Provision for income taxes $2,724 2,662 2,961
The types of temporary differences and their related tax effects that give
rise to deferred tax assets and deferred tax liabilities at September 30, are
presented below:
1997 1996
Deferred tax liabilities:
Basis difference in property,
plant and equipment $8,014 6,776
Depletion 656 678
Prepaid expenses 833 737
Gross deferred tax liabilities 9,503 8,191
Deferred tax assets:
Insurance reserves 1,614 1,479
Other, net 495 501
Gross deferred tax assets 2,109 1,980
Net deferred tax liability $7,394 6,211
7. Employee benefits. The Company and certain subsidiaries have a
savings/profit sharing plan for the benefit of qualified employees. The
savings feature of the plan incorporates the provisions of Section 401(k) of
the Internal Revenue Code. Under the savings feature of the plan, an eligible
employee may elect to save a portion (within limits) of their compensation on
a tax deferred basis. The Company contributes to a participant's account an
amount equal to 50% (with certain limits) of the participant's contribution.
Additionally, the Company may make an annual contribution to the plan as
determined by the Board of Directors, with certain limitations. The plan
provides for deferred vesting with benefits payable upon retirement or earlier
termination of employment. The Company's cost was $403,000 in 1997, $419,000
in 1996 and $464,000 in 1995.
The Company provides certain health benefits for retired employees.
Employees may become eligible for those benefits if they were employed by the
Company prior to December 10, 1992, meet the service requirements and reach
retirement age while working for the Company. The plan is contributory and
unfunded. The Company accrues the estimated cost of retiree health benefits
over the years that the employees render service.
The following table sets forth the plan's status reconciled with the accrued
postretirement benefit cost included in the Company's consolidated balance
sheet at September 30 (in thousands):
1997 1996 1995
Accumulated postretirement benefit
obligation:
Retirees $ 117 133 158
Fully eligible active participants 62 62 99
Other active participants 317 307 293
Total APBO 496 502 550
Unrecognized net gain (loss) from
past experience different from
that assumed and from changes in
assumptions 5 (68) (182)
Unrecognized prior service cost 74 133 193
Accrued postretirement benefit cost $575 567 561
Net periodic postretirement benefit cost for fiscal years ended
September 30 includes the following components (in thousands):
1997 1996 1995
Service cost of benefits earned during
the period $ 38 39 49
Interest cost on APBO 32 32 36
Net amortization and deferral (59) (55) (40)
Net periodic postretirement benefit
cost $ 11 16 45
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.25%.
8. Industry segments. The Company has two major business segments:
transportation and real estate, both operated principally within the
Mid-Atlantic and Southeastern United States. The transportation segment is
operated through two wholly owned subsidiaries which are engaged in the
hauling of liquid and dry commodities by motor carrier. The real estate
segment is operated through wholly owned subsidiaries that own real estate of
which a substantial portion is under mining royalty agreements or leased.
They also hold certain other real estate for investment and are developing
commercial and industrial properties. The Company grants credit to customers
who are in the petroleum, chemical, convenience store, construction materials
and agricultural industries.
Financial data for industry segments is as follows (in thousands):
1997 1996 1995
Revenues:
Transportation $59,530 55,801 49,198
Real estate (a) 9,314 8,602 9,075
$68,844 64,403 58,273
Segment profit:
Transportation $ 4,188 4,947 4,525
Real estate (a) 5,799 4,908 5,759
9,987 9,855 10,284
Corporate expenses (942) (794) (760)
Interest expense (2,061) (2,234) (1,933)
Income before income taxes $ 6,984 6,827 7,591
Capital expenditures:
Transportation $ 7,520 13,174 12,621
Real estate 6,226 2,782 3,162
$ 13,746 15,956 15,783
Depreciation, depletion and
amortization:
Transportation $ 6,136 5,558 5,066
Real estate 2,173 2,065 2,195
$ 8,309 7,623 7,261
Identifiable assets at September 30:
Transportation $ 42,895 41,489 35,116
Real estate 73,159 64,972 64,837
General corporate 528 575 1,404
$116,582 107,036 101,357
(a) Fiscal 1997, 1996 and 1995 includes revenue of $837, $168 and $198 and
segment profit of $817, $93 and $79, respectively, from the sale of real
estate.
General corporate assets consist principally of cash, receivables,
investments and equipment.
9. Fair values of financial instruments. At September 30, 1997, the carrying
amount reported in the balance sheet for cash and cash equivalents, short-term
notes payable to bank and revolving credit approximate their fair value. The
fair values of the Company's other long-term debt are estimated using
discounted cash flow analysis, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. At September 30,
1997 the carrying amount and fair value of such other long-term debt was
$16,065,000 and $15,470,000, respectively. At September 30, 1996 the carrying
amount and fair value of such other long-term debt was $11,503,000 and
$11,025,000, respectively.
10. Contingent liabilities. Certain of the Company's subsidiaries are
involved in litigation on a number of matters and are subject to certain
claims which arise in the normal course of business. The Company has retained
certain self-insurance risks with respect to losses for third party liability
and property damage. In the opinion of management, none of these matters are
expected to have a materially adverse effect on the Company's consolidated
financial statements.
One of the Company's subsidiaries is a potentially responsible party in
connection with a Superfund Site. It is the policy of the Company to accrue
environmental contamination cleanup costs when it is probable that a liability
has been incurred and the amount of such liability is reasonably estimable.
The Company has made an estimate of its likely costs in connection with this
site and a liability has been recorded. Such liability is not material to the
financial statements of the Company.
11. Commitments. At September 30, 1997, the Company had placed orders and was
committed to purchase tractors and trailers costing approximately $2,306,000
and had entered into various contracts to purchase and develop real estate
with remaining commitments totaling $1,304,000.
12. Fourth quarter financial information (unaudited). In the fourth quarter
of fiscal 1997, the Company increased its risk insurance reserves
approximately $682,000.
13. Subsequent event. At September 30, 1997, $3,777,000 of cash was held in
escrow pending the closing of a parcel of land. The cash is included in other
assets in the accompanying balance sheet. The purchase closed on October 3,
1997 and will not have a material effect on the results of operations.
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders
FRP Properties, Inc.
We have audited the accompanying consolidated balance sheets of FRP
Properties, Inc. and subsidiaries as of September 30, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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, such consolidated financial statements present fairly, in all
material respects, the financial position of FRP Properties, Inc. and
subsidiaries at September 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 1, 1997
<PAGE>
Directors and Officers
Directors
John E. Anderson (1)
President and Chief Executive
Officer of the Company
Edward L. Baker (1)
Chairman of the Board of the Company
John D. Baker II (1)
Executive Vice President of the Company
Thompson S. Baker II
Vice President of
Florida Rock Industries, Inc.
Ish Copley
President of SunBelt Transport, Inc.,
the Company's flatbed
trucking operations
David H. deVilliers, Jr.
Vice President of the Company and
President of FRP Development Corp.,
the Company's northern
real estate operations
Albert D. Ernest, Jr. (2)(3)
President of Albert Ernest Enterprises
Luke E. Fichthorn III (2)
Private Investment Banker,
Twain Associates and Chairman of the
Board and Chief Executive Officer of
Bairnco Corporation
Francis X. Knott (2)
Chief Executive Officer of
Partners Management Company
Radford D. Lovett (2)(3)
Chairman of the Board of
Commodores Point Terminal Corp.
John R. Mabbett III
Vice President and Secretary
of the Company and President of
Florida Rock & Tank Lines, Inc.,
the Company's tank and dump
trucking operations
Robert H. Paul III (3)
Chairman of the Board, President
and Chief Executive Officer of
Southeast-Atlantic Beverage Corporation
Martin E. Stein, Jr.
Chairman and Chief Executive Officer of
Regency Realty Corporation
James H. Winston (2)
President of LPMC of Jax, Inc.
and President of
Omega Insurance Company
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Officers
Edward L. Baker
Chairman of the Board
John E. Anderson
President and Chief Executive Officer
John D. Baker II
Executive Vice President
John R. Mabbett III
Vice President and Secretary
President, Florida Rock & Tank Lines, Inc.
David H. deVilliers, Jr.
Vice President
President, FRP Development Corp.,
the Company's northern real estate
operations
James J. Gilstrap
Treasurer and Chief Financial Officer
Wallace A. Patzke, Jr.
Controller and Chief Accounting Officer
FRP PROPERTIES, Inc.
General Office: 155 East 21st Street
Jacksonville, Florida 32206
Telephone: (904) 355-1781
Annual Meeting
Shareholders are cordially invited to attend the Annual Stockholders Meeting
which will be held at 2 p.m. local time, on Wednesday, February 4, 1998, at the
general offices of the Company, 155 East 21st Street, Jacksonville, Florida.
Transfer Agent
First Union Customer Information Center
Corporate Trust Client Services NC-1153
1525 West W. T. Harris Boulevard - 3C3
Charlotte, NC 28288-1153
Telephone: 1-800-829-8432
General Counsel
Lewis S. Lee, Esquire
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Jacksonville, Florida
Independent Auditors
Deloitte & Touche LLP
Jacksonville, Florida
Common Stock Listed
The Nasdaq Stock Market
(Symbol: FRPP)
Form 10-K
Stockholders may receive without charge a copy of FRP Properties, Inc.'s annual
report to the Securities and Exchange Commission on Form 10-K by writing to the
Treasurer at P.O. Box 4667, Jacksonville, Florida 32201.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 429
<SECURITIES> 0
<RECEIVABLES> 5,789
<ALLOWANCES> 258
<INVENTORY> 469
<CURRENT-ASSETS> 8,549
<PP&E> 142,671
<DEPRECIATION> 47,653
<TOTAL-ASSETS> 116,582
<CURRENT-LIABILITIES> 11,063
<BONDS> 30,647
0
0
<COMMON> 344
<OTHER-SE> 63,390
<TOTAL-LIABILITY-AND-EQUITY> 116,582
<SALES> 68,844
<TOTAL-REVENUES> 68,844
<CGS> 53,936
<TOTAL-COSTS> 53,936
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,061)
<INCOME-PRETAX> 6,984
<INCOME-TAX> 2,724
<INCOME-CONTINUING> 4,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,260
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
