ITEM 1. BUSINESS
(a) Florida East Coast Industries, Inc. (Registrant) was incorporated under the laws of the state of Florida on December 9, 1983, for purposes of (a) directly, or through the ownership of shares in any corporation, to acquire, hold, manage, improve, develop, and dispose of real estate and property; (b) only through the ownership of shares in any corporation, to engage in the transportation industry; (c) directly, or through the ownership of shares in any corporation, to purchase or otherwise acquire, hold, own, and dispose of shares or other securities in any corporation; and (d) to engage in any other lawful act or activity for which a corporation may be organized under the Florida General Corporation Act.
Under terms of an Agreement and Plan of Merger and Reorganization entered into on February 14, 1984, by and between the Registrant, the Registrant's wholly-owned subsidiary, FEC Acquisition, Inc., and Florida East Coast Railway Company, which Plan was subsequently approved by the shareholders, the Registrant became the 100% parent of Florida East Coast Railway Company (Railway) effective May 30, 1984, and by dividend action on May 31, 1984, became the 100% parent of Commercial Realty and Development Company (Realty).
Railway was incorporated under the laws of Florida on May 28, 1892, and was reorganized as of January 1, 1961, under original Charter following the period September 1, 1931, to December 31, 1960, during which period it was first in bankruptcy and then under trusteeship. The principal business of Railway is that of common carriage of goods by rail over 442 miles of main and branch line track in the state of Florida. The main line extends 351 miles from Jacksonville to the north, to Miami on the south, with 91 miles of branch line extending west from Ft. Pierce to Lake Harbor. Railway formerly operated branch lines from Miami to Florida City and from St. Augustine to East Palatka. Service from Miami to Florida City was discontinued in 1988 and discontinued from St. Augustine to East Palatka in 1989. Subsequent to abandonment of service between Miami to Florida City, Agreement was reached with the State of Florida Department of Transportation (FDOT) under which FDOT purchased an approximate 100-foot-wide right-of-way for extension of the Miami-Dade County Rapid Transit System over the route of the abandoned trackage. Agreement provided FDOT pay $35,525,000 over a period of five years, with initial payment of $10,000,000 paid in 1988. Additional payments of principal and interest amounting to $6,250,000 in 1989, $8,857,000 in 1990, and $16,371,326 in 1991 have been received. As each incremental payment was made, FDOT was vested with an incremental part of the total right-of-way. The 1991 payment concluded purchase of the entire contracted route. Some interest has been expressed by FDOT in portions of the abandoned St. Augustine to East Palatka right-of-way; however, no agreement has been reached, nor are there any negotiations under way at this time.
Realty was incorporated as a 100%-owned subsidiary of Railway under the laws of the state of Florida on August 17, 1981, for the general purpose related to dealing in and disposing of real estate and real property. From date of incorporation through May 30, 1984, Realty accrued only nominal revenues earned from commissions on sales and/or purchases of property by Railway; accrued virtually no expense other than income taxes; and possessed only cash and cash equivalent assets in nominal amounts. As result of May 31, 1984, dividend action by Railway and contribution to capital action by Registrant, Realty was vested with approximately 18,090 acres of real estate. As additional parcels of land and buildings have been declared surplus to needs of Railway and received as dividends by Registrant, the Registrant has also contributed those properties to Realty as contributions to capital. Registrant has further made several cash contributions to capital of Realty to provide funds for construction activities commenced since the May 1984 reorganization of the Company. Realty's name was changed in 1987 from Commercial Realty and Development Company to Gran Central Corporation and is presently operating under that name.
(b) Registrant is segmented into areas of Transportation, principally by rail, and Realty, real estate ownership, development and management. As result of acquisitions and construction of property by Realty in the period following the 1984 reorganization, Realty, in 1987, became a significant business segment.
Consolidated financial information by segments appears as:
1993 1992 1991 (in thousands) ---- -------------- ---- Operating Revenues: Transportation $162,318 $156,955 $153,018 Realty 18,778 18,800 13,543
Operating Profit: Transportation $ 28,843 $ 23,735 $ 16,312 Realty 4,295 6,168 2,708
Identifiable Assets: Transportation $352,465 $351,850 $350,025 Realty 232,068 199,763 166,377 Corporate 107,556 118,806 131,273
Operating revenues represent revenues received from unaffiliated entities as reported in the Registrant's consolidated income statement.
Operating profit is operating revenue less directly traceable costs and expenses. Interest income and expenses, dividends, etc., are not segmented by Transportation and Realty, nor are investments generating such income, but rather these type items are classified as Other Income.
Corporate assets are primarily cash and investments accumulated to fund operations and capital requirements, including Realty construction, of the operating entities.
(c) Transportation: Registrant owns 100% of the stock of Florida East Coast Railway Company which, in turn, owns 100% of the stock of seven subsidiary corporations, all of which are included in the consolidated Transportation segment and which, considered in the aggregate, do not constitute a significant subsidiary. Included in the seven subsidiaries is one company primarily engaged in the loading and unloading of trailers and containers from flatcars; one company engaged in the loading and unloading of automotive vehicles from multi-level rail cars; two common motor carriers primarily engaged in the local drayage of trailers having prior or subsequent rail moves; one common motor carrier primarily involved in the movement of trailerload traffic from Alabama, Georgia, and the Carolinas to Railway's Jacksonville facility for subsequent carriage by Railway; one company primarily engaged in contract maintenance of railway track for third parties; and one company engaged in the manufacture of concrete crossties, concrete grade crossings, and other concrete products principally for sale to Railway, and in the manufacture of concrete light poles for sale to utilities and others.
Principal commodities carried by Transportation include automotive vehicles, crushed stone, cement, trailers-on-flatcars, containers-on-flatcars, and basic consumer goods such as foodstuffs. Movement is relatively stable throughout the year with heaviest traffic ordinarily occurring during the first and last quarters of the year.
Railway is the only railroad serving locations between Jacksonville and West Palm Beach. From West Palm Beach to Miami, Railway is competitive with CSX Transportation for rail traffic, excluding that of trailer-on-flatcar/container-on-flatcar traffic. Common motor carriers and owner operators are competitive throughout the entire Transportation system.
Railway is considered generally as a terminating railroad, meaning that there is little or no rail traffic received from one carrier and delivered to another. A significant portion of traffic handled is received from rail connections, CSX Transportation, and Norfolk Southern Railway at Jacksonville, with terminating points on Railway's line, whereas a less significant portion is forwarded to those connections for destinations outside Florida. Railway has, in recent years, experienced continuing growth in traffic originating and terminating at points on its own line, and this local traffic is now generating in excess of 40% of rail traffic revenues. Realty:
Registrant owns 100% of the stock of Gran Central Corporation which,in turn, owns 100% of the stock of one subsidiary corporation, which is included in the consolidated Realty segment and which, considered in the aggregate, does not constitute a significant subsidiary. The one subsidiary is a corporation leasing and operating a trailer park owned by Gran Central Corporation in Miami. Prior to year-end, Gran Central Corporation also owned another subsidiary which was a land holding corporation owning land property only in downtown Jacksonville. On December 28, 1993, the Board of Directors of Gran Central Corporation and the Atlantic and East Coast Terminal Company (A&ECT) voted to merge the subsidiary A&ECT into the parent. This merger had no significant effect on either company.
Realty is engaged in the management of leases of its real property; the development, lease and sales of its property; and general management of all real property included in the consolidated financials. Realty is in competition with other developers and brokers throughout its operating area.
Registrant and its subsidiaries employ approximately 1,483 employees with approximately 1,017 of these covered by collective bargaining agreements. Registrant employs 21 of the total, Realty employs 17, and Transportation employs the balance.
Nothing in the above represents a significant change from prior years.
(d) Registrant has no foreign operations.
ITEM 2.
ITEM 2. PROPERTIES
Transportation - Transportation owns approximately 12,000 acres of land property, all located along the East Coast of the state of Florida and devoted to railroad operations. In addition to rail right-of-way between Jacksonville and Miami and between Ft. Pierce and Lake Harbor, operating property includes significant switching/classification yards, trailer/container loading/unloading facilities, automobile marshalling yard, maintenance facilities, etc., at major terminals throughout the system.
Transportation physical plant (i.e., track structure, shops, and office buildings) is in excellent condition and includes 351 miles of main track, 91 miles of branch line track, 157 miles of yard switching track and 184 miles of other tracks, including second main and passing tracks. The main track is generally constructed of 132# rail and other track materials on concrete crossties providing a track structure meeting the needs of today's heavy traffic loads. Certain of the branch line and yard tracks, though in good physical condition, are constructed of materials lighter than the 112# and 115# rail deemed necessary for this trackage, and programs are currently under way to relay these tracks with the heavier materials. These programs may be expected to extend several years into the future.
Transportation owns 79 diesel electric locomotives, approximately 2,809 freight cars, approximately 155 tractors, and 1,594 trailers for highway revenue service, numerous pieces of rail-mounted and non-rail-mounted work equipment, and numerous automotive vehicles used in maintenance and transportation operations. All equipment owned is in good physical condition.
Realty - Realty owned and managed approximately 19,320 acres of land at year-end 1993, including approximately 1,450 acres owned by Transportation but not required for operations. These properties are held for lease, development and/or sale, and have a situs in thirteen counties of the state of Florida as follows:
Duval 1,490 acres St. Johns 3,540 " Flagler 3,460 " Volusia 3,570 " Brevard 2,810 " Indian River 30 " St. Lucie 610 " Martin 660 " Palm Beach 300 " Broward 50 " Dade 1,740 " Manatee 880 " Putnam 180 " ---------- Total 19,320 "
Realty also owned at year-end 1993 forty-one buildings as detailed below: No. of Rentable Year Location Bldgs. Type Square Ft. Built - -------- ------ ---- ---------- -----
duPont Center Jacksonville, FL 2 Offices 144,000 1987/88
Barnett Plaza Jacksonville, FL 1 Office 59,000 1982
Gran Park at Interstate South Jacksonville, FL 6 Office/Showroom/ Warehouses 260,000 1987/89
Gran Park at the 2 Office/Showroom/ Avenues Warehouses 101,000 1992 Jacksonville, FL 2 Offices 145,000 1992/93
Gran Park at Melbourne 1 Office/Showroom/ Melbourne, FL Warehouse 28,000 1989
Gran Park at 1 Office/Showroom/ Riviera Beach, FL Warehouse 62,000 1987 2 Rail Warehouses 176,000 1982/87 Lewis Terminals 2 Cross Docks 29,000 1987 2 Cross Docks 46,000 1991
Gran Park-McCahill Miami, FL 1 Rail Warehouse 302,000 1992
Gran Park at Miami 4 Office/Showroom/ Miami, FL Warehouses 291,000 1988/90/92 4 Office/Warehouses 382,000 1990/91/92/ 3 Rail Warehouses 258,000 1989/90/93 5 Front Load Warehouses 604,000 1991/92/93 1 Double Front Load Warehouse 239,000 1993 Hialeah, FL 1 Cross Dock 20,000 1987
Pompano Beach, FL 1 Rail Warehouse 54,000 1987 -- --------- TOTALS 41 3,200,000
Realty's holdings include lands adjacent to Railway's tracks which are suitable for development into office and industrial parks offering both rail and non-rail-served parcels. Certain other holdings are in urban or suburban locations offering opportunities for development of office building structures or business parks offering both office building sites and sites for flexible space structure such as office/showroom/warehouse buildings. Wherever possible, Realty intends to develop infrastructure and construct buildings for lease and continued ownership.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Registrant, through its Transportation subsidiary, Florida East Coast Railway (FEC), is involved in a legal action versus CSX Transportation, Inc. (CSXT), alleging, in part, violations of a 1978 Agreement between CSXT and FEC and, in part, violations of the Sherman Act. The complaint alleges that CSXT has, by its actions, placed FEC in position such that it cannot fairly compete with CSXT for certain carload traffic destined to or from South Florida points served by the two railroads. CSXT, in early 1992, petitioned the ICC to reopen the merger proceedings for the purpose of eliminating the merger conditions set down by the ICC in the 1967 merger of ACL/SAL Railroads. Under the conditions set by the ICC prior to merger, the merged company, CSXT, is required to cooperate with FEC in matters of rates, routes, and service in a fashion allowing FEC to compete effectively with CSXT on traffic to and from West Palm Beach south. A tentative Order by the U.S. District Court dated February 19, 1993, found that contract rates were included in the 1978 Agreements, but that CSXT cannot be required to establish an equal joint-line contract rate since the Court views such action as a form of price-setting which is illegal. This Order is being appealed in U.S. District Court of Appeals, and oral arguments were heard on February 11, 1994. The Company is awaiting the results of that hearing. CSXT's request before the ICC for the elimination of merger conditions is still in the opening evidence and argument stage. CSXT introduced new evidence, and FEC requested and received the right to rebuttal. The Company is in the process of preparing its rebuttal. Both the Court Order and the petition to reopen the merger proceedings by CSXT involve complex issues and can be expected to be contested by the respective parties into the future, barring an unexpected amenable settlement being reached.
The Registrant, also through Florida East Coast Railway (FEC), was involved in legal actions versus the State of Florida and several counties of the state, in which it was alleged the State, through its "unit assessment procedures," has significantly over-assessed the rail operation properties of FEC for the years 1987-1991, inclusive. Trial was held in the State Circuit Court during 1991 on the assessments for the years 1987 and 1988, with decision rendered in favor of the State. This decision was appealed. In the third quarter 1993, the State of Florida and FEC reached a settlement of $13.5 million for the years 1987 through 1991 as the total amount of ad valorem taxes due.
The Registrant's Florida East Coast Railway (FEC) is a party to various proceedings before state regulatory agencies relating to environment issues. In addition, FEC, along with many other companies, has been named a potentially responsible party (PRP) in proceedings under federal statutes for the cleanup of designated Superfund sites at Jacksonville, Florida, and Portsmouth, Virginia.
The assessment of the required response and remedial costs associated with these sites is extremely complex. Among the variables that management must assess are imprecise engineering estimates, continually evolving governmental standards, potential recoveries from others, including other PRP's, and laws which can impose joint and several liability.
FEC has made an estimate of its likely costs attributable to sites for which its cleanup responsibility is probable, and a liability, therefore, has been recorded. Such liability is not material to the financial position of the Registrant. FEC is not aware of any monetary sanctions to be proposed which, in the aggregate, are likely to exceed $100,000, nor does it believe that corrections will necessitate significant capital outlays or cause material changes in the Registrant's business.
There are no other legal or regulatory proceedings pending or known to be contemplated which, in the opinion of the General Attorney of the Registrant, are other than normal and incidental to the kinds of business conducted by the Registrant.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
a. Principal market on which Florida East Coast Industries, Inc., common stock is traded: New York Stock Exchange,
Symbol: FLA.
b. The table below presents the high and low market prices, and dividend information for Florida East Coast Industries, Inc., common shares:
---- Quarter Ended Dec. 31 Sept. 30 June 30 March 31 High $70 1/4 $62 $51 1/2 $54 Low $61 1/8 $48 3/8 $46 $48 1/8 Dividends .10 .10 .10 .10
---- Quarter Ended Dec 31 Sept. 30 June 30 March 31 High $49 5/8 $46 $47 $47 Low $41 5/8 $42 1/2 $41 3/4 $39 1/2 Dividends .10 .10 .10 .10
c. The total number of holders of record of Florida East Coast Industries, Inc., common stock as of December 31, 1993, was 981.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA (Dollars in thousands except per share amounts) (Unaudited) Years Ended December 31 1993 1992 1991 ---- ---- ---- Revenues: Operating Revenues $181,096 $175,755 $166,561 Other Income 5,103 8,253 26,108 Total $186,199 $184,008 $192,669
Income before cumulative effect of change in accounting principle $ 20,779 $ 24,045 $ 29,056 Cumulative effect of change in accounting principle for income taxes 1,504 0 0
Net Income $ 22,283 $24,045 $29,056
Per Share Data Cash Dividend $ 0.40 $ 0.40 $ 0.40 Income before cumulative effect of change in accounting principle $ 2.31 $ 2.67 $ 3.21 Cumulative effect of change in accounting principle for income taxes $ 0.17 $ 0 $ 0
Net Income Per Common Share $ 2.48 $ 2.67 $ 3.21
At year-end: Total Assets $692,089 $670,419 $647,675 Working Capital $ 42,552 $ 39,407 $ 38,476 Shareholders' Equity $523,038 $503,464 $483,020
Revenues: 1990 1989 ---- ---- Operating Revenues $169,870 $167,980 Other Income 20,440 27,027 Total $190,310 $195,007 Income before cumulative effect of change in accounting principle $ 31,352 $ 39,629 Cumulative effect of change in accounting principle for income taxes $ 0 $ 0
Net Income $ 31,352 $ 39,629
Per Share Data Cash Dividend $ 0.40 $ 0.40 Income before cumulative effect of change in accounting principle $ 3.39 $ 4.28 Cumulative effect of change in accounting principle for income taxes $ 0 $ 0
Net income Per Common Share $ 3.39 $ 4.28
At year-end: Total Assets $622,835 $596,099 Working Capital $ 53,772 $ 49,285 Shareholders' Equity $469,294 $441,832
(1) As discussed in Note 7, the Company adopted Statement No. 109.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT DISCUSSION AND ANALYSIS OF INCOME STATEMENTS
This statement summarizes the Company's consolidated income results for the three-year period ending December 31, 1993. The purpose of this discussion is to provide background information for the figures presented, including the significant events which contributed thereto.
Operating revenues were relatively stable throughout the three-year period, with 1993's figures reflecting a $5.3 million or a 3.0% increase over 1992 operating revenues and a $14.5 million or an 8.7% increase over 1991. The 1993 increase in operating revenues was attributed to the $5.4 million increase in transportation revenues which was primarily related to the increase in the volume of rail traffic. Realty revenues for 1993 of $18.8 million remained at the same level as 1992, but when compared to 1991, realty revenues increased by $5.2 million or 38.6%.
Because of the increased traffic brought about by the aftermath of Hurricane Andrew in September 1992, the comparison of the 1993 traffic data with the 1992 data is distorted. Therefore, the following analysis of transportation data will provide comparisons of information prior to September 1993 with the same period in 1992 (pre-hurricane data), and the analysis for the four-month period, Sept. through Dec. of 1993 versus 1992 (post-hurricane data).
Through August 1993, transportation revenues increased by approximately $8.5 million or 8.6% when compared to the same eight months of 1992. The composition of traffic for the first eight months of 1993 compared to the same period in 1992 reflected increases of 5,880 shipments or 12.1% in aggregate (rock), 436 shipments or 4.1% in automotive traffic, 11,499 shipments or 5.7% in intermodal, and 1,202 shipments or 5.9% in all other traffic.
The post-hurricane comparison for the last four months of 1993 versus 1992 indicated that revenues decreased by $3.1 million or 5.3%. Total shipments for the last four months of 1993 when compared to 1992 decreased by 11,391 shipments or 6.6%. This decrease in traffic was comprised of an increase in aggregate (rock) of 4,232 shipments or 17.6% and decreases in automobile traffic of 809 shipments or 11.6%, intermodal shipments of 13,093 or 10.3%, and all other traffic of 1,721 or 14.2%.
Transportation revenues for 1992 reflected the net results of an increase of 5.4% over 1991 for intermodal traffic which moved by rail and highway. This increase in intermodal traffic, along with rate and volume increases in other than automobile traffic, offsets the loss of General Motors automobile traffic which began in February 1992, and represented approximately 8% of the total 1991 revenues. Shipments of aggregates (rock) increased by 1,980 carloads or 2.7% above 1991. These traffic increases can be attributed to the after effects of Hurricane Andrew and the improvement in the economy during the fourth quarter 1992.
Realty revenues for 1993 of $18.8 million remained the same as 1992, but when comparing 1993 realty revenues with 1991, realty revenues increased by $5.2 million or 38.6%. Included in the 1993 realty revenues are sales of realty properties amounting to $2.3 million compared with 1992 sales of realty properties of $5.9 million. Realty revenues also include income from leasing operations. Leasing revenues for 1993 increased by $3.6 million or 28.0% over 1992 and by $2.9 million or 33.5% over 1991. Increases in rental income are consistent with the increase in the Company's inventory of space available for lease during these periods. At year-end 1993, the Company had a total of 3.2 million square feet of space available for lease. Of the 3.2 million square feet available for lease, approximately 88% of leasable space was under lease compared to 90% in 1992 and 91% in 1991. The Company expects that rental revenues will continue to reflect increases as new space is constructed and added to inventory.
Operating expenses increased in 1993 by $2.1 million or 1.4% when compared to 1992. This is substantially the result of increases of $4.0 million in salaries and wages with associated fringe benefits, $1.6 million in depreciation expense, and $3.3 million in other expenses offset by decreases of $4.2 million in materials and supplies and $2.8 million in property taxes.
Included in the increase of $3.3 million in other expenses was an increase of $1.4 million in casualty and insurance and an increase of $.3 million in environmental. Materials and supplies decreased by $4.2 million resulting primarily from efficiencies achieved in the Maintenance of Way and Maintenance of Equipment Departments by reduction in expenses of $2.7 and $1.1 million, respectively.
Property taxes decreased by approximately $2.8 million in 1993 brought about by the favorable settlement of the ad valorem tax case with the State of Florida for the years 1987 through 1991.
There were no substantial changes in total operating expenses from 1991 to 1992 except for property taxes. Property taxes declined by $4.0 million in 1992 when compared to 1991 because of the 1991 accruals made for the ad valorem tax case discussed above.
Other income for the three-year period reflects gains on sales and other disposition of properties of $.5, $1.5, and $15.2 million in 1993, 1992, and 1991, respectively. Of these amounts, the 1991 figures reflect a series of purchases of right-of-way by the Florida Department of Transportation, which began in 1988 and was completed in 1991. Interest income from 1992 to 1993 declined $2.0 million because of the decrease in amount of investment and the consistently low interest rates available.
The Company adopted Financial Accounting Standards Board Statement 109 on January 1, 1993, which resulted in the recognition of additional income of $1.5 million in the first quarter 1993. Income taxes for 1993 increased by $3.4 million. This was primarily the result of an increase in the federal tax rate from 34% to 35% and the associated adjustments to deferred tax assets and liabilities.
MANAGEMENT DISCUSSION AND ANALYSIS OF BALANCE SHEETS
The Consolidated Balance Sheet provides information about the nature and amounts of the Company's investments, its obligations to creditors, and its shareholders' equity at the end of the year. This information complements data found in the Consolidated Statement of Income and Retained Earnings and is designed to contribute to the shareholders' understanding of the Company.
Total current assets for 1993 increased by $1.5 million when compared to 1992. This change is primarily represented by increases of $1.5 million in Cash, Cash Equivalents, and Short-term Investments, $1.2 million in Materials and Supplies, and a decrease of $.4 million in Other Assets. Because of the Company's commitment to realty construction and development, the Company continues to maintain large liquid reserves to meet that commitment.
Other investments decreased by $12.3 million in 1993 from 1992 to a total of $66.2 million. This decrease is comprised of a $13.8 million reduction in investment principal used for realty development in 1993 and the recognition of $1.5 million of unrealized gains in the investment portfolio as required by Financial Accounting Standards Board Statement No. 115. Statement 115 was adopted December 31, 1993, and requires the Company to record equity and debt securities, which are classified as available-for-sale at fair market value (see Note No. 5 to the financial statements). Other investments include U.S. Treasury Bills and similar investments which are highly liquid and are classified as long-term because of management's intent to use the investment to finance major realty construction projects. Currently, such major projects include infrastructure development at Gran Park-Jacksonville and building construction at Gran Park-Miami, and Gran Park at the Avenues (Jacksonville).
Properties increased approximately $54.7 million. The additions in 1993 included new buildings at both Gran Park at the Avenues in Jacksonville and Gran Park-Miami. Presently, the Avenues complex consists of two office/showroom/warehouses and two office buildings, with another office/warehouse under construction. This park is planned for approximately 740,000 square feet of building construction at project completion, of which 246,000 square feet is complete, and a new office/warehouse consisting of 140,000 square feet is under construction.
The Gran Park-Miami project has not been completely demucked and filled and is approximately 75% complete in terms of authorized expenditure. This project has seventeen complete buildings consisting of four office/warehouses, four office/showroom/warehouses, three rail buildings, five front load warehouses, and one double front load warehouse. The seventeen buildings have approximately 1.8 million square feet of leasable space, of which 88% is leased. At Gran Park-Miami, two new buildings are under construction and will provide an additional 181,000 square feet of leasable space.
Total current liabilities decreased $1.6 when compared to 1992. This is primarily attributable to the decrease in estimated property taxes of $1.7 million. The adjustment in the accrual for property taxes was the result of the favorable outcome in the settlement for the ad valorem tax case with the State of Florida for the years 1987 through 1991.
The Company is subject to substantial costs arising out of environmental laws and regulations, which primarily relate to the disposal and use of fuel and oil used in the transportation business. It is the Company's policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and an amount can be reasonably estimated.
The Company is currently a party to, or involved in, legal proceedings directed at the cleanup of two Superfund sites. The Company has accrued its allocated share of the total estimated cleanup costs for these two sites. Based upon management's evaluation of the other potentially responsible parties, the Company does not expect to incur additional amounts even though the Company has joint and several liability. Other proceedings involving environmental matters such as alleged discharge of oil or waste material into water or soil are pending against the Company.
It is not possible to quantify future environmental costs because many issues relate to actions by third parties or changes in environmental regulation. However, based on information presently available, management believes that the ultimate disposition of currently known matters will not have a material effect on the financial position or liquidity of the Company, but could be material to the results of operations of the Company in any one period. As of December 31, 1993, and 1992, the aggregate environmental related accruals were $3,500,000. Environmental liabilities are paid over an extended period and the timing of such payments cannot be predicted with any confidence.
The Company's financial position continues to be strong as indicated by the improvement in the current ratios of 2.04 in 1992 and 2.17 in 1993. The Company has no long-term debt or open lines of credit, nor does the Company anticipate that any will be negotiated in the foreseeable future. The Company is not obligated under any significant capital or operating-type leases, except for the short-term leasing of freight cars and data processing equipment.
As of December 31, 1993, the Company has authorized approximately $33.4 million for capital expenditures, of which 67% represents realty development and construction. These expenditures are expected to be funded from current operations supplemented, as necessary, by cash and investments currently on hand.
MANAGEMENT DISCUSSION AND ANALYSIS OF STATEMENTS OF CASH FLOWS
The statement of cash flows details the Company's cash flow from operating, investing, and financing activities during the year. Since the Company does not use debt to finance its operations, the source of funds throughout the year is exclusively generated by operating and investing activities. These sources have been sufficient to fund the purchases of properties and pay dividends.
The composition of gains on disposition of assets includes gains on land sales of $.5, $1.5, and $15.2 million for the years 1993, 1992, and 1991, respectively. The 1991 figure includes the sale of right-of-way to the Florida Department of Transportation in the amount of $15.0 million.
Net cash generated by operating activities increased by $10.7 million in 1993 from 1992 and decreased $7.1 million in 1992 from 1991. These changes primarily reflect changes in operating income levels and the timing of related cash receipts and payments. Other substantial changes include a large good- faith payment in 1992 related to the ad valorem tax case with the State of Florida for the years 1989-1991.
Purchases of properties in 1993, 1992, and 1991 reflect spending primarily in realty development. The Company continued to defer the start of construction of the Gran Central Plaza project in Miami, but is continuing to construct buildings such as office/showroom/warehouses or any combination of the three as the market dictates, principally in Jacksonville and Miami. Cash received from dispositions of assets in 1991 include $16.4 million from sale of property to the Florida Department of Transportation.
Because a large percentage of the Company's properties is long-lived, asset replacement will be at a higher cost and will take place over many years. The acquisition of new assets will result in higher depreciation charges and, in the case of Realty, higher taxes and operating costs. Purchases, maturities and redemptions of investments vary depending upon the changes in requirements for realty construction and development and cash generated through operations. Other investments, including the development fund, decreased $12.3 million in 1993 from 1992, following a $9.4 million decrease in 1992 from 1991. This decrease in 1993 in other investments was primarily attributable to the increase in Realty's inventory of 818,000 square feet of leasable space, which totals 3.2 million square feet as of December 31, 1993.
Cash dividends of $.40 per share were paid in each of the three years, reflecting the Company's philosophy that shareholders receive a current benefit at the same time that the Company is reinvesting most earnings in a debt-free asset growth program. In November 1990, the Company announced a stock repurchase program, and in 1991, increased Treasury share holdings to 271,361 shares.
The Company continues to believe that asset growth should be internally funded by operating and investing activities rather than through the use of debt. However, the Company is confident that if a need to access the market for funds were to arise, such access would be readily available.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is incorporated under Item 14(a) - Index to Financial Statements and Financial Statement Schedules.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Principal Occupation or Employment for the Past Five Years-Positions with Industries - Other Name, Director Since, Age Directorships _________________________ __________________________________
Jacob C. Belin Former Chairman of the Board, St. Director since 1984 Joe Paper Company. Director, St. Age 79 Joe Paper Company. Trustee, Alfred I. duPont Trust.
Thomas S. Coldewey Retired Vice President, St. Joe Director since 1984 Paper Company. Director, St. Joe Age 81 Paper Company. Trustee, Alfred I. duPont Trust.
William E. Durham Vice President, Industries. Director since 1986 Age 62
Allen C. Harper Chairman/CEO, Esslinger-Wooten- New Nominee Maxwell, Inc., Realtors, and Age 49 President, First Reserve, Inc. (1984-Present). Director, Tri- County Railroad Authority (1989- Present).
J. Nelson Fairbanks President and Director, U.S. Sugar Director since 1989 Corporation. Age 58
John H. Mercer, Jr. Retired President, John Mercer Director since 1984 Terminal Warehouse Company. Age 80
J.J. Parrish, III President, Jesse J. Parrish, Inc., Director since 1993 Vice President and Director, Age 40 Nevins Fruit Company. Director and Treasurer, Parrish Medical Center. Director, Barnett Bank of Central Florida.
M.E. Rinker, Sr. Chairman and CEO, M.E. Rinker, Sr. Director since 1984 Companies (1988). Former Age 89 President and Chairman of the Board of Rinker Materials Corporation for more than five years.
R. Eugene Taylor President, Mid-Atlantic Banking Director since 1993 Group NationsBank (1993-Present). Age 46 President, NationsBank Florida, (1991-1993). Executive Vice President, NationsBank, Florida (1989-1991). Employed by NationsBank since 1969 in various management roles.
W.L. Thornton Chairman of the Board and Director since 1984 President, Industries. Chairman Age 65 and Director, St. Joe Paper Company. Trustee, Alfred I. duPont Trust.
Raymond W. Wyckoff Retired Vice President, Director since 1984 Industries. Retired President, Age 70 Florida East Coast Railway.
Carl F. Zellers, Jr. Vice President, Industries. Director since 1984 President, Florida East Coast Age 61 Railway and Gran Central Corporation. Director, St. Joe Industries, Inc.
With respect to each Executive Officer of the Registrant, there are set forth below as of December 31, 1993, (1) his name; (2) his age; (3) his positions and offices with the Registrant; (4) the date on which he first held office; and (5) a brief account of his business experience during the last five years. Each Executive Officer has been elected to hold such positions and offices until the next annual election of Directors and Officers of the Registrant, which is to be held on May 18, 1994. To the best knowledge of the Registrant, none of the persons named had any arrangement or understanding with any other person pursuant to his election, and none of the persons named have any family relationship with any other such person.
Date First Held Such Positions Name, Age, Positions, and and Offices Business Experience Offices for the Past Five Years _________________________ _______________________________
Winfred L. Thornton (65) Chairman and President of Chairman, President, Chief Registrant for more than five Executive Officer & Director years.
Carl F. Zellers, Jr. (61) Vice President of the Registrant Vice President and Director and President of Gran Central Corporation for more than five years. President of Florida East Coast Railway Company from June 10, 1992.
T. Neal Smith (54) May 15, 1992, elected Vice Vice President & Secretary President & Secretary. Formerly Treasurer and Assistant Secretary for more than five years.
William E. Durham, Jr. (62) Vice President of Registrant for Vice President & Director more than five years.
J. Richard Yastrzemski (51) Comptroller of Registrant for Comptroller more than five years.
Gregory P. West (34) May 15, 1992, elected Treasurer. Treasurer & Assistant Secretary Formerly Material Inventory and Accounting Manager.
On December 27, 1993, the Alfred I. duPont Testamentary Trust, which prior to that date directly owned 450,224 shares of the Company's common stock or 5.0% (beneficially owned 3,872,032 shares or 43%) transferred 450,224 shares of this stock to The Nemours Foundation (Nemours). Nemours is a beneficiary of the Trust. The Trust did not file Form 4, Statement of Changes of Beneficial Ownership of Securities, and Nemours did not file Form 3, Initial Statement of Beneficial Ownership of Securities. The Trust and Nemours both timely filed Form 5, Annual Statement of Changes in Ownership, which was due by the 45th day after the end of calendar year 1993.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the annual compensation for Industries' Executive Officers whose 1993 total annual compensation exceeded $100,000, as well as the total compensation paid to those Executives for the past three years.
Summary Compensation Table
Name and Other Annual All Other Principal Salary Compensation Compensation Position Year ($) ($) ($) - -------- ---- ------ ------------ ------------
W.L. Thornton 1993 30,976(a) 5,130(b) 2,923(c) President and CEO 1992 29,930(a) 4,789(b) 2,782(c) 1991 29,200(a) 4,950(b) 2,719(c)
C.F. Zellers, Jr. 1993 129,372 1,668(b) 2,541(c) Vice President 1992 118,100 2,061(b) 2,372(c) 1991 104,000 1,876(b) 2,160(c)
(a) This amount represents 20% of Mr. Thornton's salary. Under arrangement approved by the Board of Directors, Mr. Thornton's salary and expenses are paid by St. Joe Paper Company, with 20% of salary, fringe benefits, and common expenses being billed to and paid by Industries as compensation for his services as President of Industries. Any expenses incurred for the exclusive benefit of either Industries or St. Joe Paper Company are borne 100% by the benefiting corporation.
(b) These amounts include life insurance premiums and the personal use of vehicles owned by Industries.
(c) These amounts represent Industries' matching contribution to a 401(k) plan.
(d) Industries paid no bonuses nor had any stock award or option programs.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of Florida East Coast Industries, Inc. (Industries) is composed entirely of directors who are not, and have never been, Officers or employees of Industries. The Board designates the members of such Committee.
The philosophy of the ownership and investors in Florida East Coast Industries, Inc., has historically been to reinvest a major portion of its earnings and cash flow back into the Company, looking towards share appreciation and growth in long- term value. This philosophy continues and is the current goal of the Company. In light of this policy, short-term earnings and stock values may not accurately reflect the real and long-term results of the executive management of the Company. Therefore, the Chief Executive Officer, based upon his personal assessment, recommends salary increases to the Compensation Committee as pertains to the various corporate officers.
The Compensation Committee members of the Board of Directors were chosen because of their business experience including the diversity of their industry backgrounds and to ensure that the interests of our shareholders are being served as relates to all matters of executive compensation. The Committee reviews the recommendations of the CEO and either approves these recommendations or makes adjustments based upon their judgment of what is the appropriate level of compensation.
As pertained to the salary adjustments made in 1994 for individual corporate officers, the Committee approved the recommendations of the CEO, which on average represented a three percent increase in the base salaries of the covered executives. In like manner, the Committee reviewed the base salary of the CEO and determined that an adjustment of three percent was appropriate and in keeping with the long-term interests of the Company and its shareholders.
The Committee recognizes the need to monitor the Company's executive compensation strategy to ensure that management members are rewarded appropriately for their contributions, and that the strategy supports organization objectives and shareholder interests. Program changes will be considered if and when deemed appropriate within the context of these objectives and interests.
J. Nelson Fairbanks, Chairman M.E. Rinker, Sr., Member Compensation Committee John H. Mercer, Jr., Member December 28, 1993 R. Eugene Taylor, Member
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Shown below is information concerning beneficial ownership of Industries' Common Stock for each director and for all directors and officers as a group as of March 1, 1994. Under rules of the Commission, "beneficial ownership" is deemed to include shares for which the individual, directly or indirectly, has or shares voting and/or dispositive power:
Nature of Beneficial Percent of Names/Address Ownership No. of Shares Class (1) - ------------- ---------- ------------- ----------
Nemours Foundation (2) Sole Voting & 450,224 5.0% P.O. Box 1380 Dispositive Jacksonville, FL 32201 Power
St. Joe Industries, Sole Voting & 4,902,304 (4) 54.5% Inc. (3) Dispositive P.O. Box 1380 Power Jacksonville, FL 32201
Heine Securities Sole Voting & 571,400 6.4% Corp. (5) Dispositive 51 J.F.K. Parkway Power Short Hills, NJ 07078 __________________ (1) All percentages shown are rounded to the nearest one-tenth of one percent.
(2) As of March 1, 1994, the following persons were directors of the Nemours Foundation: Jacob C. Belin, Thomas S. Coldewey, Alfred duPont Dent, Winfred L. Thornton, and corporate director, NationsBank of Florida, represented by J.S. Lord. In such capacities, these directors collectively share voting and dispositive power with respect to Industries' Common Stock owned by the Nemours Foundation and, as such, may be deemed to be beneficial owners of that stock.
(3) As of March 1, 1994, the following persons were directors of St. Joe Industries, Inc.: Jacob C. Belin, E.C. Brownlie, S.D. Fraser, R.E. Nedley, Winfred L. Thornton, and C.F. Zellers, Jr. In such capacities, all directors collectively share dispositive and voting power with respect to Industries' Common Stock owned by St. Joe Industries, Inc. All directors may be deemed to be beneficial owners of Industries' Common Stock owned by St. Joe Industries, Inc.
(4) By virtue of its ownership of approximately 54.5% of the outstanding Industries' Common Stock, St. Joe Industries, Inc., may be deemed to be not only an "affiliate" but also a "parent" of Industries.
(5) Mr. Michael F. Price is President of Heine Securities Corporation ("HSC") in which capacity he exercises voting control and dispositive power over these securities. Mr. Price, therefore, may be deemed to have indirect beneficial ownership over such securities. Mr. Price advises he has no interest in dividends or proceeds from the sale of such securities, owns no such securities for his own account, and disclaims beneficial ownership of all the securities reported therein by HSC.
(b) SECURITY OWNERSHIP OF MANAGEMENT
Shown below is information concerning beneficial ownership of Industries' Common Stock for each director and for all directors and officers as a group as of March 1, 1994. Under rules of the Commission, "beneficial ownership" is deemed to include shares for which the individual, directly or indirectly, has or shares voting and/or dispositive power:
Nature of Beneficial Percent of Names Ownership No. of Shares Class (1) - ----- ---------- ------------- ---------- J.C. Belin Shared Voting/ Dispositive Power 5,352,528(2) 59.5%
T.S. Coldewey Shared Voting/ Dispositive Power 5,352,528(2) 59.5%
W.E. Durham, Jr. Sole Voting 182 --- Dispositive Power --- ---
J.N. Fairbanks ----------------- --- ---
A.C. Harper ----------------- --- ---
J.H. Mercer, Jr. Sole Voting/ Dispositive Power 100 ---
J.J. Parrish, III ----------------- --- ---
M.E. Rinker, Sr. ----------------- --- ---
R.E. Taylor ----------------- --- ---
W.L. Thornton Sole Voting/ Dispositive Power 5,589 --- Shared Voting/ Dispositive Power 5,352,528(2) 59.5%
R.W. Wyckoff Sole Voting/ Dispositive Power 500 ---
C.F. Zellers, Jr. Sole Voting/ Dispositive Power 1,859 --- Shared Voting/ Dispositive Power 4,902,304(3) 54.5%
12 directors & Sole Voting/ officers as a Dispositive Power 8,816 --- group Shared Voting/ Dispositive Power 5,352,528(4) 59.5%
(1) All percentages shown are rounded to the nearest one-tenth of one percent. Where no percentage is shown, the amount of Industries' Common Stock owned by the beneficial owner listed is less than one-half of one-tenth of one percent (4,500 shares) of all outstanding Industries' Common Stock.
(2) Included 4,902,304 shares or 54.5% of Industries' Common Stock owned by St. Joe Industries, Inc., and 450,224 shares or 5.0% of Industries' Common Stock owned by the Nemours Foundation.
(3) Includes 4,902,304 shares or 54.5% of Industries' Common Stock owned by St. Joe Industries, Inc., of which Mr. Zellers is director.
(4) Includes the 4,902,304 and 450,224 listed as beneficially owned by Messrs. Belin, Coldewey, and Thornton, and the 4,902,304 listed as beneficially owned by Mr. Zellers, however, reports the same number of shares beneficially owned by these persons only once.
(c) CHANGES IN CONTROL
The Company knows of no contractual arrangements which may, at a subsequent date, result in a change of control of the Company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The financial statements and schedules listed in the accompanying Index to Financial Statements and Financial Statement Schedules are filed as part of this Annual Report.
2. EXHIBITS
The Exhibits listed on the accompanying Index to Exhibits are filed as part of this Annual Report.
(b) REPORTS ON FORM 8-K
None.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES [ITEM 14(a)]
Consolidated Balance Sheet at December 31, 1993, and 1992
Consolidated Statement of Income and Retained Earnings for each of the three years in the period ended December 31, 1993
Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 1993
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
Supplementary Information: Quarterly Financial Data (Unaudited)
Financial Statement Schedules: I-Marketable Securities and Other Security Investments
V-Property, Plant, and Equipment
VI-Accumulated Depreciation and Amortization of Property, Plant, and Equipment
VIII-Valuation and Qualifying Accounts
X-Supplementary Income Statement Information
XI-Real Estate and Accumulated Depreciation
All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto.
Financial statements and schedules of Florida East Coast Industries, Inc. (not consolidated) are omitted since it is primarily a holding company and all subsidiaries included in the consolidated financial statements being filed, in the aggregate, do not have minority equity interests and/or indebtedness to any person other than the Company or its consolidated subsidiaries in amounts which together exceed five percent of the total assets as shown by the consolidated balance sheet at the end of any year covered by this Report.
The financial statements listed in the above Index which are included in the Annual Report to Stockholders for the year ended December 31, 1993, are hereby incorporated and filed as part of this Report. With the exception of the items listed in the above Index and as mentioned specifically in responses to this and other parts of this Report, the 1993 Annual Report to Stockholders is not to be deemed filed as part of this Report.
INDEX TO EXHIBITS
(ITEM 13[a] 3.)
S-K Item 601 Documents - -------- ------------
(3) (a) Articles of Incorporation*
(3) (b) By-Laws*
(21) Subsidiaries of Florida East Coast Industries, Inc.
(24) Power of Attorney
*Incorporated herein by reference to Exhibits filed in connection with Florida East Coast Industries, Inc.'s Registration Statement on Form S-14 as filed with the Securities and Exchange Commission on February 17, 1984 (File No. 2-89530).
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized on February 16, 1994.
FLORIDA EAST COAST INDUSTRIES, INC. (Registrant)
By: T.N. Smith, Vice President and Secretary*
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:
W.L. Thornton* Chairman, President, Chief Executive Officer, Director - 3/26/94
C.F. Zellers, Jr.* Vice President and Director - 3/26/94
W.E. Durham, Jr.* Vice President and Director - 3/26/94
R.W. Wyckoff* J. Nelson Fairbanks* Director - 3/26/94 Director - 3/26/94
J.C. Belin* John H. Mercer, Jr.* Director - 3/26/94 Director - 3/26/94
T.S. Coldewey* M.E. Rinker, Sr.* Director - 3/26/94 Director - 3/26/94
R.E. Taylor* J.J. Parrish, III* Director - 3/26/94 Director - 3/26/94
G.P. West* J.R. Yastrzemski* Treasurer - 3/26/94 Comptroller - 3/26/94
BY: T.N. Smith* Attorney-in-Fact
*Such signature has been affixed pursuant to Power of Attorney.
CONSOLIDATED BALANCE SHEETS December 31, 1993, and 1992 (Dollars in thousands except per share amounts)
1993 1992 ---- ---- Assets
Current Assets Cash and cash equivalents $ 14,438 $ 12,132 Short-term investments (Note 5) 18,009 18,797 Accounts receivable, net 27,879 28,650 Materials and supplies 11,974 10,803 Other current assets 6,676 7,096
Total current assets 78,976 77,478
Other Investments (Note 5) 66,233 78,545
Properties, less Accumulated Depreciation and Amortization (Note 4) 535,976 503,190
Other Assets and Deferred Charges 10,904 11,206 Total Assets $692,089 $670,419
Liabilities and Shareholders' Equity
Current Liabilities Accounts payable $ 21,891 $ 22,012 Estimated property taxes 4,665 6,407 Accrued casualty and other reserves (Note 9) 7,680 7,292 Other accrued liabilities 2,188 2,360
Total current liabilities 36,424 38,071
Deferred Income Taxes (Note 7) 126,164 122,031
Reserves and Other Long-Term Liabilities (Note 9) 6,463 6,853 Commitments and Contingencies (Note 9)
Shareholders' Equity Common stock, $6.25 par value; 9,360,000 shares authorized; 9,271,361 shares issued and out- standing 57,946 57,946 Capital surplus 101 101 Retained earnings 476,808 458,125 Net unrealized gain on debt and marketable equity securities (Note 5) 891 --- Treasury stock at cost (271,361 shares) (12,708) (12,708)
Total shareholders' equity 523,038 503,464
Total Liabilities and Shareholders' Equity $692,089 $670,419
(See accompanying notes to consolidated financial statements.)
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Years ended December 31, 1993, 1992, and 1991 (Dollars in thousands except per share amounts)
Years ended December 31 1993 1992 1991 -------------------------- Operating Revenues Transportation $162,318 $156,955 $153,018
Realty 18,778 18,800 13,543 Total Revenues 181,096 175,755 166,561
Operating Expenses Transportation 117,789 119,630 121,834 Realty 12,900 10,990 9,426 General and Administrative 17,269 15,232 16,281 Total Expenses 147,958 145,852 147,541
Operating Profit 33,138 29,903 19,020
Other Income(Expense): Dividends 326 207 170 Interest income 3,920 5,899 10,175 Interest expense --- (1) (55) Gains on sales and other disposition of properties 535 1,540 15,243 Other (net) 322 608 575
Total Other Income (Expense): 5,103 8,253 26,108
Income before income taxes and cumulative effect of change in accounting principle 38,241 38,156 45,128
Income Taxes: (Note 7) Current 11,807 12,542 14,351 Deferred 5,655 1,569 1,721 Total Income Taxes 17,462 14,111 16,072
Income before cumulative effect of change in accounting principle 20,779 24,045 29,056 Cumulative effect of change in accounting principle for income taxes 1,504 --- ---
Net Income 22,283 24,045 29,056
Retained Earnings: Balance at beginning of year $458,125 $437,681 $412,243 Cash dividends (3,600) (3,601) (3,618) Balance at Year-end $476,808 $458,125 $437,681
Per share data: Cash dividends $ 0.40 $ 0.40 $ 0.40
Income before cumulative effect of change in accounting principle $ 2.31 $ 2.67 $ 3.21 Cumulative effect of change in accounting principle for income taxes .17 --- ---
Net income $ 2.48 $ 2.67 $ 3.21
(See accompanying notes to consolidated financial statements.)
CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1993, 1992, and 1991 (Dollars in thousands)
Years ended December 31 1993 1992 1991 ------------------------- Cash Flows from Operating Activities:
Net Income $22,283 $24,045 $29,056
Adjustments to reconcile net income to cash generated by operating activities: Cumulative effect of change in accounting principle for income taxes (1,504) --- --- Depreciation & amortization 20,335 18,765 17,569 Gains on disposition of assets (535) (1,540) (15,243) Deferred taxes 5,655 1,569 289 Changes in operating assets and liabilities: Decrease(increase) in A/R 771 (2,786) 1,770 (Increase)decrease in other current assets (559) 978 (1,510) Increase in other assets and deferred charges (468) (436) (3,001) (Decrease)increase in A/P (121) 1,930 2,201 (Decrease)increase in est. property taxes (1,742) (5,738) 7,150 Increase(decrease) in other current liabilities 216 (2,816) 2,234 Decrease in reserves and other long-term liabilities (390) (707) (197)
Net cash generated by operating activities 43,941 33,264 40,318
Cash Flows from Investing Activities:
Purchases of properties (54,743) (54,193) (40,060) Purchases of investments (49,813) (92,074) (110,452) Maturities & redemption of invest. 64,364 101,661 108,203 Proceeds from disposition of assets 2,157 4,024 16,546
Net cash used in investing activities (38,035) (40,582) (25,763)
Cash Flows from Financing Activities:
Payment of dividends (3,600) (3,601) (3,618) Acquisition of treasury shares --- --- (11,712)
Net cash used in financing activities (3,600) (3,601) (15,330)
Net Increase (Decrease) in Cash and Cash Equivalents 2,306 (10,919) (775)
Cash and Cash Equivalents at Beginning of Year 12,132 23,051 23,826
Cash and Cash Equivalents at End of Year $14,438 $12,132 $23,051
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for income taxes $11,166 $14,200 $14,863
(See accompanying notes to consolidated financial statements.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1993, 1992, and 1991
1. Nature of Business
The principal operations of Florida East Coast Industries, Inc. (the "Company") and its subsidiaries relate directly to the transportation of goods by rail and to the development, leasing, and sale of real estate. Both the transportation and realty operations are located within the state of Florida.
2. Majority Stockholder
The Nemours Foundation, which is funded by the Alfred I. duPont Testamentary Trust, owns approximately 5% of the Company's common stock. The Alfred I. duPont Testamentary Trust owns approximately 69% of the common stock of St. Joe Paper Company, which owns, through a subsidiary, approximately 54% of the Company's common stock. The payment of dividends by the Company was the only significant transaction with St. Joe Paper Company or its affiliates in 1993, 1992, or 1991.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions and balances have been eliminated in consolidation.
Transportation Properties
Transportation properties are stated at historical cost and are depreciated and amortized on the straight-line method at rates established by the Interstate Commerce Commission (ICC). Gains and losses on normal retirements of these items are credited or charged to accumulated depreciation. Miscellaneous physical property consists principally of non-depreciable real property.
Real Estate Properties
Real estate properties are stated at historical cost. Depreciation is computed using the straight-line method over estimated asset lives of 15 years for land improvements and 18 to 40 years for buildings.
Materials and Supplies
New materials and supplies are stated principally at average cost which is not in excess of replacement cost. Used materials are stated at an amount which does not exceed estimated realizable value. Earnings per Share
Earnings per common share is based on the weighted average number of shares of common stock outstanding during the year (9,000,000 in 1993; 9,000,000 in 1992; and 9,062,174 in 1991).
Reclassification
Certain prior year amounts have been reclassified to conform with the current year's presentation.
Cash and Cash Equivalents
For purposes of Cash Flows, Cash and Cash Equivalents include cash on hand, bank demand accounts, money market accounts, and overnight repurchase agreements having original maturities of less than three months.
Fair Value of Financial Instruments
The carrying amounts of the following financial instruments approximate fair value because of their short maturity, cash and cash equivalents, short-term investments, accounts receivable, accounts payable, estimated property taxes, and other accrued liabilities. The fair value of other investments differs from the carrying value as disclosed in Note 5.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Statement 109 requires a change from the deferred method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Effective January 1, 1993, the Company adopted Statement 109 and has reported the cumulative effect of that change in the method of accounting for income taxes in the 1993 consolidated statement of income.
Pursuant to the deferred method under APB Opinion 11, which was applied in 1992 and prior years, deferred income taxes are recognized for income and expense items that are reported in different years for financial reporting purposes and income tax purposes using the tax rate applicable for the year of the calculation. Under the deferred method, deferred taxes are not adjusted for subsequent changes in tax rates.
Investments
Investments consist principally of municipal bonds, common stocks, redeemable preferred stocks, and U.S. Government obligations. The Company adopted the provisions of Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" as of December 31, 1993. Under Statement 115, the Company classifies its debt and marketable equity securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near-term. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold until maturity. All other securities not included in trading or held- to-maturity are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available- for-sale securities are excluded from earnings and are reported as a separate component of shareholders' equity until realized.
A decline in the market value of any available-for-sale or held-to-maturity security below cost that is deemed other than temporary is charged to earnings resulting in the establishment of a new cost basis for the security.
Realized gains and losses for securities classified as available-for-sale and held-to-maturity are included in earnings and are derived using the specific identification method for determining the cost of securities sold. 4. Properties
Properties consists of (in thousands):
1993 1992 --------------------- Transportation Properties
Road $291,436 $283,686 Equipment 189,897 186,080 Miscellaneous Physical Property 5,435 5,435 Construction in Progress 1,421 636 488,189 475,837
Less Accumulated Depreciation & Amortization 179,184 169,121
$309,005 $306,716
Real Estate Properties
Land and Land Improvements $106,832 $ 98,869 Buildings 107,915 85,696 Construction in Progress 27,515 23,219
242,262 207,784 Less Accumulated Depreciation & Amortization 15,291 11,310
$226,971 $196,474
Real Estate properties having a net book value of $120.6 million at December 31, 1993, are leased under non-cancelable operating leases with aggregate rentals of $83.3 million, which are due in years 1994-1998 in the amounts of $16.2, $15.1, $13.1, $11.1, and $7.6 million, respectively.
5. Investments
As discussed in Note 3, the Company adopted Statement 115 as of December 31, 1993. The cumulative effect of this change in accounting for investments of $1,451,000 is determined as of December 31, 1993, and is reported separately as a component of shareholders' equity net of related tax of $560,000. Investments at December 31, 1993, consist of (in thousands):
Short-term investments, Held-to-maturity, at amortized cost $18,009 Other investments, Held-to-maturity, at amortized cost $25,644 Available-for-sale, at fair value 40,589 Total other investments $66,233
Other investments, including certain held-to-maturity investments which mature within one year, are held as a development fund created to accumulate capital expected to be required for future improvement of the Company's real estate properties. The amortized cost and fair value for available-for- sale and held-to-maturity securities by major security type at December 31, 1993, were as follows:
Net Unrealized Amortized Fair Holding Cost Value Gain(Loss) --------- ----- ---------- Available-For-Sale: Municipal Bonds* $29,961 $31,387 $1,426 Equity Securities 9,177 9,202 25 Total $39,138 $40,589 $1,451
Held-To-Maturity: Certificates of Deposit** $ 2,259 $ 2,259 $ --- Mortgage Backed Securities* 916 1,491 575 Municipal Bonds* 2,401 2,376 (25) Corporate Debt Securities* 801 801 --- U.S. Treasury Securities** 37,276 38,500 1,224 Total $43,653 $45,427 $1,774
**Due within one year. *Due principally after five years.
Gross unrealized holding gains and gross unrealized holding losses at December 31, 1993, were $3,667,000 and $442,000, respectively. At December 31, 1992, investments are carried at amortized cost ($97,342,000) which approximates quoted market prices ($99,148,000).
6. Collateral Trust 5% Bonds
There are outstanding at December 31, 1993, and 1992 $13,135,325 and $13,362,425, respectively, of the Company's Collateral Trust 5% Bonds (the "Bonds") due in 2001. Direct obligations of the U.S. Government, the cash flows from which approximately coincide as to timing and amount with the scheduled interest and principal payments on the Bonds, are held in trust for the purpose of making such payments. Accordingly, the Bonds are considered to be extinguished.
7. Income Taxes
As discussed in Note 3, the Company adopted Statement 109 as of January 1, 1993. The cumulative effect of this change in accounting for income taxes of $1,504,000 is determined as of January 1, 1993, and is reported separately in the consolidated statement of income for the year ended December 31, 1993. Except for the adjustments to deferred tax assets and liabilities for enacted changes in the tax laws and rates, the accounting change did not have a significant impact on the 1993 provision for income taxes. Prior years' financial statements have not been restated to apply the provisions of Statement 109. Total income tax expense for the year ended December 31, 1993, was allocated as follows (in thousands):
Income from continuing operations $17,462 Shareholders' equity, for recognition of unrealized holding gain on debt and marketable equity securities in connection with adoption of Statement 115 560 $18,022
Income tax expense attributable to income from continuing operations was $17,462, $14,111, and $16,072 for the years ended December 31, 1993, 1992, and 1991, respectively, and differed from the amounts computed by applying the U.S. federal income tax rate of 35% in 1993 and 34% in 1992, and 1991 to pre-tax income as a result of the following:
1993 1992 1991 ---- ---- ---- Amount computed at statutory federal rate $13,384 $12,973 $15,344 Effect of dividends received exclusion and tax-free interest (538) (242) (765) State taxes (net of federal benefit) 1,357 1,359 1,583 Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and rates 2,893 --- --- Other (net) 366 21 (90) ------- ------- ------- $17,462 $14,111 $16,072
For the years ended December 31, 1993, 1992, and 1991, deferred income tax results from differences in the recognition of income and expense for income tax and financial reporting purposes. The sources and tax effects of those differences are presented below:
1993 1992 1991 ---- ---- ---- Depreciation $1,325 $ 932 $1,776 Casualty Claims 586 1,072 (406) Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and rates 2,893 --- --- Other (net) 851 (435) 351 ______ ______ ______ $5,655 $1,569 $1,721
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 1993, are as follows:
Deferred tax assets: Accrued casualty and other reserves $ 6,400 Amortization of fiber optic income 735 Other 349 Total deferred tax assets $ 7,484
Deferred tax liabilities: Properties, principally due to differences in depreciation $ 97,655 Deferred gain on land sales 24,893 Deferred profit on bonds extinguished 2,027 Unrealized holding gain on debt and marketable equity securities 560 Other 1,029 Total deferred tax liabilities $126,164 Net deferred tax liabilities $118,680
There was no valuation allowance provided for deferred tax assets as of January 1, 1993, and December 31, 1993.
8. Segment Information
The Company operates principally in two industries: transportation and realty. Its transportation operations consist primarily of railroad-related activities and some trucking operations. Realty operations are involved in real estate development, rentals and related management, and operations of properties. Operating revenues represent sales to unaffiliated customers, as reported in the Company's Consolidated Statement of Income and Retained Earnings. Operating profit is operating revenue less directly traceable costs and expenses.
Identifiable assets by industry are those assets that are used in the Company's operations in each industry. Information by industry segment follows (in thousands):
1993 1992 1991 ---- ---- ---- Operating Revenue: Transportation $162,318 $156,955 $153,018 Realty 18,778 18,800 13,543 $181,096 $175,755 $166,561
Operating Profit: Transportation $ 28,843 $ 23,735 $ 16,312 Realty 4,295 6,168 2,708 $ 33,138 $ 29,903 $ 19,020
Identifiable Assets: Transportation $352,465 $351,850 $350,025 Realty 232,068 199,763 166,377 Corporate 107,556 118,806 131,273 $692,089 $670,419 $647,675
Capital Expenditures: Transportation $ 19,775 $ 18,040 $ 14,689 Realty 34,968 36,153 25,371 $ 54,743 $ 54,193 $ 40,060 Depreciation: Transportation $ 16,356 $ 15,567 $ 15,170 Realty 3,979 3,198 2,399 $ 20,335 $ 18,765 $ 17,569
9. Commitments and Contingencies
The Company has retained certain self-insurance risks with respect to losses for third-party liability, property damage, and group health insurance coverage provided employees. The Company is the defendant and plaintiff in various lawsuits resulting from its operations. In the opinion of management, adequate provision has been made in the financial statements for the estimated liability which may result from disposition of such lawsuits.
The Company is subject to proceedings arising out of environmental laws and regulations, which primarily relate to the disposal and use of fuel and oil used in the transportation business. It is the Company's policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and an amount can be reasonably estimated.
The Company is currently a party to, or involved in, legal proceedings directed at the cleanup of two Superfund sites. The Company has accrued its allocated share of the total estimated cleanup costs for these two sites. Based upon management's evaluation of the other potentially responsible parties, the Company does not expect to incur additional amounts even though the Company has joint and several liability. Other proceedings involving environmental matters such as alleged discharge of oil or waste material into water or soil are pending against the Company.
It is not possible to quantify future environmental costs because many issues relate to actions by third parties or changes in environmental regulation. However, based on information presently available, management believes that the ultimate disposition of currently known matters will not have a material effect on the financial position or liquidity of the Company, but could be material to the results of operations of the Company in any one period. As of December 31, 1993, and 1992, the aggregate environmental related accruals were $3,500,000. Environmental liabilities are paid over an extended period and the timing of such payments cannot be predicted with any confidence.
10. Sale of Property
In 1988, the Company entered into an agreement with the Florida Department of Transportation (DOT) for the sale of approximately 20.7 miles of abandoned 100-foot-wide right-of-way. The total sales price of $35,525,000 was divided into six segments. The DOT made an initial payment of $10,000,000 and issued an executory note for $25,525,000 at an interest rate of 9.01%. As the payments from DOT were received, the liens on the pro rate portion of the succeeding segments were removed and related gains recognized. Principal and interest payment of $6,250,000 was received in 1989, a payment of $8,857,000 was received in 1990, and a final payment of $16,371,326 was received in 1991. The land sale gains recognized amounted to $15,018,000, $6,884,000, $3,923,000, and $9,574,000 in 1991, 1990, 1989, and 1988, respectively.
Independent Auditors' Report
The Board of Directors and Shareholders Florida East Coast Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Florida East Coast Industries, Inc., and subsidiaries as of December 31, 1993, and 1992, and the related consolidated statements of income and retained earnings, and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Florida East Coast Industries, Inc., and subsidiaries as of December 31, 1993, and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in notes 3 and 5 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standard (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," at December 31, 1993. As discussed in notes 3 and 7, the Company adopted the provisions of the Financial Accounting Standards Board's SFAS No. 109, "Accounting for Income Taxes," effective January 1, 1993.
KPMG Peat Marwick Certified Public Accountants
Jacksonville, Florida February 11, 1994
SUPPLEMENTARY INFORMATION
Dec. 31 Sept. 30 June 30 March 31 ------ -------- ------- -------- QUARTERLY FINANCIAL DATA Operating Revenues $47,544 $43,891 $45,642 $44,019 Other Income $ 1,226 $ 2,186 $ 39 $ 1,652 Operating Expenses $37,605 $33,908 $38,802 $37,643 Income before cumulative effect of change in accounting principle $ 6,770 $ 4,459 $ 4,420 $ 5,130 Cumulative effect of change in accounting principle for income taxes (1) $ --- $ --- $ --- $ 1,504
Net Income $ 6,770 $ 4,459 $ 4,420 $ 6,634
Per Common Share Income before cumulative effect of change in accounting principle $ 0.75 $ 0.50 $ 0.49 $ 0.57 Cumulative effect of change in accounting principle for income taxes (1) $ --- $ --- $ --- $ 0.17
Net Income Per Common Share $ 0.75 $ 0.50 $ 0.49 $ 0.74
Dec. 31 Sept. 30 June 30 March 31 ------- -------- ------- -------- QUARTERLY FINANCIAL DATA Operating Revenues $47,445 $42,778 $45,463 $40,069 Other Income $ 2,931 $ 2,018 $ 1,672 $ 1,632 Operating Expenses $38,001 $37,357 $35,905 $34,589 Income before cumulative effect of change in accounting principle $ 7,823 $ 4,699 $ 6,961 $ 4,562 Cumulative effect of change in accounting principle for income taxes (1) $ --- $ --- $ --- $ ---
Net Income $ 7,823 $ 4,699 $ 6,961 $ 4,562
Per Common Share Income before cumulative effect of change in accounting principle $ 0.87 $ 0.52 $ 0.77 $ 0.51 Cumulative effect of change in accounting principle for income taxes (1) $ --- $ --- $ --- $ ---
Net Income Per Common Share $ 0.87 $ 0.52 $ 0.77 $ 0.51
(1) As discussed in Note 7 of the Financial Statements, the Company adopted Statement No. 109, effective January 1, 1993. Accordingly, the cumulative effect of this change in accounting principle was recorded in the first quarter of 1993.
FLORIDA EAST COAST INDUSTRIES, INC. SCHEDULE I (CONSOLIDATED) MARKETABLE SECURITIES AND OTHER SECURITY INVESTMENTS DECEMBER 31, 1993 (Dollars in Thousands Except for Number of Shares)
NO. OF SHARES AMOUNT OR PRINCIPAL CARRIED IN AMOUNT BALANCE DESCRIPTION (Par Value) COST MKT. VALUE SHEET - ----------- ------------- ---- ---------- ----------
Short-Term Invest. Certificates of Deposit $ 2,063 $ 2,063 $ 2,063 $ 2,063 U.S. Government Sec. $ 14,000 13,545 14,000 13,545 Tax Exempt Municipals(1) $ 2,375 2,401 2,376 2,401 Total Current Assets $18,009
Other Investments Certificates of Deposit $ 196 $ 196 $ 196 $ 196 Various Common & Pref. Stocks (1) 230,383 9,177 9,202 9,202 U.S. Government Sec. $ 24,500 23,731 24,500 23,731 Tax Exempt Municipals(1) $ 29,665 29,961 31,387 31,387 Mortgage Backed Securities 6,132 916 1,491 916 Other Corporate Debt Securities (1) $ 1,326 801 801 801
Total Other Investments $66,233
Total Marketable Securities & Other Investments $84,242
(1) Securities of any one individual issuer do not constitute 2% or more of total assets of the Registrant.
FLORIDA EAST COAST INDUSTRIES, INC. SCHEDULE V (CONSOLIDATED) - PROPERTY, PLANT, AND EQUIPMENT YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991 (Dollars in thousands)
Balance at Additions Beginning Charged to Adjustments/ Balance of Year Expenses Retirements End of Yr. ---------- ---------- ------------ ---------- Transportation Property Road $283,686 $10,049 $(2,299) $291,436 Equipment 186,080 8,941 (5,124) 189,897 Misc. Phy. Prop. 5,435 --- --- 5,435 Const. in Prog. 636 785 --- 1,421 Total $475,837 $19,775 $(7,423) $488,189
Real Estate Property Land/Land Improv. $ 98,869 $ 8,454 $ (490) $106,833 Buildings 85,696 22,218 --- 107,914 Const. in Prog. 23,219 4,296 --- 27,515 Total $207,784 $34,968 $ (490) $242,262 Grand Total $683,621 $54,743 $(7,913) $730,451
Transportation Property Road $274,937 $10,568 $(1,819) $283,686 Equipment 176,627 9,739 (286) 186,080 Misc. Phy. Prop. 5,432 3 --- 5,435 Const. in Prog. 2,906 (2,270)[1] --- 636 Total $459,902 $18,040 $(2,105) $475,837
Real Estate Property Land/Land Improv. $ 91,815 $ 7,192 $ (138) $ 98,869 Buildings 63,436 22,260 --- 85,696 Const. in Prog. 16,518 6,701 --- 23,219 Total $171,769 $36,153 $ (138) $207,784 Grand Total $631,671 $54,193 $(2,243) $683,621
Transportation Property Road $264,998 $11,654 $(1,715) $274,937 Equipment 175,434 2,248 (1,055) 176,627 Misc. Phy. Prop. 5,017 417 (2) 5,432 Const. in Prog. 4,028 370 (1,492) 2,906 Total $449,477 $14,689 $(4,264) $459,902
Real Estate Property Land/Land Improv. $ 81,101 $11,159 $ (445) $ 91,815 Buildings 52,502 10,934 --- 63,436 Const. in Prog. 13,240 3,278 --- 16,518 Total $146,843 $25,371 $ (445) $171,769
Grand Total $596,320 $40,060 $(4,709) $631,671
[1] Reduction in additions attributed to amounts reclassified into primary accounts in excess of current year expenditures.
FLORIDA EAST COAST INDUSTRIES, INC. SCHEDULE VI (CONSOLIDATED) - ACCUMULATED DEPRECIATION AND AMORTIZATION - YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991 (Dollars in thousands)
Balance at Additions Beginning Charged to Adjustments/ Balance at of Year Expenses Retirements End of Yr. ---------- ---------- ----------- ----------
Transportation Property Road $ 74,855 $ 6,631 $(2,398) $ 79,088 Equipment 93,091 9,581 (3,895) 98,777 Other Property 1,175 144 --- 1,319 Total $169,121 $16,356 $(6,293) $179,184
Real Estate Property Land/Land Improv. $ 2,863 $ 950 $ --- $ 3,813 Buildings 8,447 3,029 2 11,478 Total $ 11,310 $ 3,979 $ 2 $ 15,291 Grand Total $180,431 $20,335 $(6,291) $194,475
Transportation Property Road $ 69,723 $ 6,464 $(1,332) $ 74,855 Equipment 82,559 8,959 1,573 93,091 Other Property 1,031 144 --- 1,175 Total $153,313 $15,567 $ 241 $169,121
Real Estate Property Land/Land Improv. $ 2,049 $ 814 $ --- $ 2,863 Buildings 6,063 2,384 --- 8,447 Total $ 8,112 $ 3,198 $ --- $ 11,310
Grand Total $161,425 $18,765 $ 241 $180,431
Transportation Property Road $ 65,930 $ 6,253 $(2,460) $ 69,723 Equipment 74,723 8,784 (948) 82,559 Other Property 898 133 --- 1,031 Total $141,551 $15,170 $(3,408) $153,313
Real Estate Property Land/Land Improv. $ 1,406 $ 641 $ 2 $ 2,049 Buildings 4,305 1,758 --- 6,063 Total $ 5,711 $ 2,399 $ 2 $ 8,112
Grand Total $147,262 $17,569 $(3,406) $161,425
Registrant's track structure and other transportation properties are depreciated on a straight-line basis using annual composite rates approved by the Interstate Commerce Commission using data drawn from Registrant's historical records and special studies. Depreciable lives for road properties range from 9 to 60 years and for equipment properties from 8 to 33 years. Depreciable lives for real estate properties range from 3 to 40 years.
FLORIDA EAST COAST INDUSTRIES, INC. SCHEDULE VIII (CONSOLIDATED) - VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991 (Dollars in Thousands)
Balance at Additions Beginning Charged Balance at of Year to Expense Payments End of Year ---------- ---------- -------- -----------
RESERVES INCLUDED IN LIABILITIES
Casualty & other reserves $14,145 $2,443 $2,445 $14,143[a] Casualty & other reserves $16,691 $ 724 $3,270 $14,145[a] Casualty & other reserves $15,819 $2,378 $1,506 $16,691[a]
[a] Includes $7,680, $7,292, and $9,131 in current liabilities at December 31, 1993, December 31, 1992, and December 31, 1991, respectively. The remainder is included in "Reserves and Other Long-Term Liabilities."
FLORIDA EAST COAST INDUSTRIES, INC. SCHEDULE X (CONSOLIDATED) - SUPPLEMENTARY INCOME STATEMENT INFORMATION - YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991 (Dollars in Thousands)
CHARGES TO COST AND EXPENSES 1993 1992 1991 -----------------------------
Maintenance and repairs:
Track Structure $13,725 $15,254 $20,674
Equipment $18,478 $18,533 $17,690
Taxes other than payroll & income taxes:
Property $ 5,420 $ 7,668 $11,511
Other $ 275 $ 107 $ 446
$ 5,695 $ 7,775 $11,957
FLORIDA EAST COAST INDUSTRIES, INC. SCHEDULE XI (CONSOLIDATED) - REAL ESTATE AND ACCUMULATED DEPRECIATION - DECEMBER 31, 1993, 1992, AND 1991 (in thousands)
Initial Cost to Company
Description Encumbrances Land - ----------- ------------ ----
Duval County Office Bldgs. (4) -0- $ 1,153 Office/Showroom/Wareh. (8) -0- 1,502 Land w/Infrastructure -0- 1,773 Unimproved Land & Misc. Assets -0- 5,735
St. Johns County Unimproved Land -0- 2,631
Flagler County Unimproved Land -0- 3,218
Volusia County Unimproved Land -0- 3,651
Brevard County Office/Showroom/Warehouse -0- 73 Land w/Infrastructure -0- 3,797 Unimproved Land -0- 4,846
Indian River County Unimproved Land -0- 218
St. Lucie County Unimproved Land -0- 639
Martin County Unimproved Land -0- 4,671
Putnam County Unimproved Land -0- 7
Palm Beach County Office/Showroom/Warehouse -0- 113 Rail Warehouses (2) -0- 449 Cross Docks (2) -0- 117 Land w/Infrastructure -0- 1,269 Unimproved Land -0- 1,605
Broward County Rail Warehouse -0- 85 Unimproved Land -0- 733
Manatee County Unimproved Land -0- 14
Dade County Cross Dock -0- 137 Double Front Load Warehouse -0- 768 Rail Warehouses (4) -0- 808 Office/Showroom/Warehouses (4) -0- 1,003 Office Warehouses (4) -0- 1,462 Front Load Warehouses (4) -0- 1,943 Land w/Infrastructure -0- 2,577 Unimproved Land & Misc. Assets -0- 16,010 ------- TOTALS $63,007
Initial Cost to Company
Costs Capitalized Buildings & Subsequent to Description Improvements Acquisition - ----------- ------------ -------------
Duval County Office Bldgs. (4) $6,200 $ 25,374 Office/Showroom/Wareh. (8) 18,700 Land w/Infrastructure 968 Unimproved Land & Misc. Assets 4,325
St. Johns County Unimproved Land 411
Flagler County Unimproved Land 1,008
Volusia County Unimproved Land 499
Brevard County Office/Showroom/Warehouse 1,890 Land w/Infrastructure Unimproved Land 191
Indian River County Unimproved Land 156
St. Lucie County Unimproved Land 8
Martin County Unimproved Land 2,344
Putnam County Unimproved Land
Palm Beach County Office/Showroom/Warehouse 2,641 Rail Warehouses (2) 4,097 Cross Docks (2) 3,763 Land w/Infrastructure 87 Unimproved Land
Broward County Rail Warehouse 1,584 Unimproved Land 701
Manatee County Unimproved Land 3
Dade County Cross Dock 1,018 Double Front Load Warehouse 5,376 Rail Warehouses (4) 13,998 Office/Showroom/Warehouses (4) 11,774 Office Warehouses (4) 12,468 Front Load Warehouses (4) 11,269 Land w/Infrastructure 8,993 Unimproved Land & Misc. Assets 11,894 ------ -------- TOTALS $6,200 $145,540
Carried at Close of Period
Land & Bldgs. & Description Land Improv. Improv. Total - ----------- ------------ -------- -----
Duval County Office Bldgs. (4) $ 3,525 $ 29,202 $ 32,727 Office/Showroom/Wareh. (8) 3,930 16,272 20,202 Land w/Infrastructure 2,741 2,741 Unimproved Land & Misc. Assets 9,863 197 10,060
St. Johns County Unimproved Land 3,042 3,042
Flagler County Unimproved Land 4,226 4,226
Volusia County Unimproved Land 4,150 4,150
Brevard County Office/Showroom/Warehouse 438 1,525 1,963 Land w/Infrastructure 3,797 3,797 Unimproved Land 5,037 5,037
Indian River County Unimproved Land 374 374
St. Lucie County Unimproved Land 647 647
Martin County Unimproved Land 7,015 7,015
Putnam County Unimproved Land 7 7
Palm Beach County Office/Showroom/Warehouse 599 2,155 2,754 Rail Warehouses (2) 544 4,002 4,546 Cross Docks (2) 1,262 2,618 3,880 Land w/Infrastructure 1,356 1,356 Unimproved Land 1,605 1,605
Broward County Rail Warehouse 405 1,264 1,669 Unimproved Land 1,434 1,434
Manatee County Unimproved Land 17 17
Dade County Cross Dock 137 1,018 1,155 Double Front Load Warehouse 1,409 4,735 6,144 Rail Warehouses (4) 2,398 12,408 14,806 Office/Showroom/Warehouses (4) 2,419 10,358 12,777 Office Warehouses (4) 2,838 11,092 13,930 Front Load Warehouses (4) 2,476 10,736 13,212 Land w/Infrastructure 11,570 11,570 Unimproved Land & Misc. Assets 27,571 333 27,904 ------- -------- -------- TOTALS $106,832 $107,915 $214,747
Life on Which Depreciation in Date First Latest Income Accumulated Started or Statement is Description Depreciation Acquired Computed - ----------- ------------ ---------- ---------------
Duval County Office Buildings (4) $ 4,074 1985 3 to 40 years Office/Showroom/Ware.(8) 2,707 1987 3 to 40 years Land w/Infrastructure Various Unimproved Land & Misc. Assets 123 Various 3 to 40 years
St. Johns County Unimproved Land Various
Flagler County Unimproved Land Various
Volusia County Unimproved Land Various
Brevard County Office/Showroom/Warehouse 287 1988 3 to 40 years Land w/Infrastructure Various Unimproved Land Various
Indian River County Unimproved Land Various
St. Lucie County Unimproved Land Various
Martin County Unimproved Land Various
Putnam County Unimproved Land Various
Palm Beach County Office/Showroom/Warehouse 549 1986 3 to 40 years Rail Warehouses (2) 927 1982 3 to 40 years Cross Docks (2) 604 1987 3 to 40 years Land w/Infrastructure Various Unimproved Land Various
Broward County Rail Warehouse 428 1986 3 to 40 years Unimproved Land Various
Manatee County Unimproved Land Various
Dade County Cross Dock 182 1987 3 to 40 years Double Front Load Warehouse 132 1993 3 to 40 years Rail Warehouses (4) 885 1988 3 to 40 years Office/Showroom/Ware. (4) 1,395 1988 3 to 40 years Office/Warehouses (4) 913 1990 3 to 40 years Front Load Warehouses (4) 460 1991 3 to 40 years Land w/Infrastructure 1,560 Various Unimproved Land & Misc. Assets 65 Various 3 to 40 years ------- TOTALS $15,291
Notes:
(A) The aggregate cost of real estate owned at December 31, 1993, for federal income tax purposes is approximately $123,400,065.
(B) Reconciliation of real estate owned:
1993 1992 1991 ---- ---- ---- Balance at Start of Year $184,565 $155,251 $133,603 Amounts Capitalized 30,672 29,452 22,093 Amounts Retired/Adjusted (490) (138) (445) Balance at Close of Period $214,747 $184,565 $155,251
(C) Reconciliation of accumulated depreciation:
1993 1992 1991 ---- ---- ---- Balance at Start of Year $ 11,310 $ 8,112 $5,711 Depreciation Expense 3,979 3,198 2,399 Amounts Retired/Adjusted 2 0 2
Balance at Close of Period $ 15,291 $ 11,310 $8,112
Independent Auditors' Report
The Board of Directors and Shareholders Florida East Coast Industries, Inc.:
Under date of February 11, 1994, we reported on the consolidated balance sheets of Florida East Coast Industries, Inc., and subsidiaries as of December 31, 1993, and 1992, and the related consolidated statements of income and retained earnings, and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the 1993 Annual Report to Stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As discussed in notes 3 and 5 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standard (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," at December 31, 1993. As discussed in notes 3 and 7, the Company adopted the provisions of the Financial Accounting Standards Board's SFAS No. 109, "Accounting for Income Taxes," effective January 1, 1993.
KPMG PEAT MARWICK Certified Public Accountants
Jacksonville, Florida February 11, 1994
22. Listing of parent and subsidiaries
Parent - Florida East Coast Industries, Inc.
Subsidiaries - Florida East Coast Railway Company
Florida East Coast Highway Dispatch Company
Florida East Coast Inspections, Inc.
Florida East Coast Deliveries, Inc.
Railroad Concrete Crosstie Corporation
Railroad Track Construction Company
Operations Unlimited, Inc.
Florida Express Carrier, Inc.
Gran Central Corporation
Dade County Land Holding Company, Inc.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each of the undersigned Directors of Florida East Coast Industries, Inc., a Florida corporation ("Corporation"), which is about to file with the Securities and Exchange Commission, Washington, DC 20549, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993, hereby constitutes and appoints Winfred L. Thornton and T.N. Smith as his true and lawful attorneys-in-fact and agent, and each of them with full power to act, without the other in his stead, in any and all capacities, to sign the 1993 Annual Report of Florida East Coast Industries, Inc., on Form 10-K and to file on behalf of the Corporation such Annual Report and amendments with all exhibits thereto, and any and all other information and documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agent, and each of them, full power and authority to do and perform any and all acts and things requisite and ratifying and confirming all that each said attorneys-in-fact and agent or any one of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on the date indicated below:
Winfred L. Thornton, Chairman, T.N. Smith, Vice President President, CEO, and Director and Secretary
J. Nelson Fairbanks, Director J.C. Belin, Director
T.S. Coldewey, Director R.W. Wyckoff, Director
M.E. Rinker, Sr., Director J.H. Mercer, Jr., Director
J.J. Parrish, III, Director R.E. Taylor, Director
W.E. Durham, Jr., Director C.F. Zellers, Jr., Vice President and Director Dated: March 26, 1994