ITEM 1. BUSINESS
(a) Florida East Coast Industries, Inc. (Registrant) was incorporated under the laws of the State of Florida on December 9, 1983, for purposes of (a) directly, or through the ownership of shares in any corporation, to acquire, hold, manage, improve, develop, and dispose of real estate and property; (b) only through the ownership of shares in any corporation, to engage in the transportation industry; (c) directly, or through the ownership of shares in any corporation, to purchase or otherwise acquire, hold, own, and dispose of shares or other securities in any corporation; and (d) to engage in any other lawful act or activity for which a corporation may be organized under the Florida General Corporation Act.
Under terms of an Agreement and Plan of Merger and Reorganization entered into on February 14, 1984, by and between the Registrant, the Registrant's wholly- owned subsidiary, FEC Acquisition, Inc., and Florida East Coast Railway Company, which Plan was subsequently approved by the shareholders, the Registrant became the 100% parent of Florida East Coast Railway Company (Railway) effective May 30, 1984, and by dividend action on May 31, 1984, became the 100% parent of Commercial Realty and Development Company (Realty).
Railway was incorporated under the laws of Florida on May 28, 1892, and was reorganized as of January 1, 1961, under original Charter following the period September 1, 1931, to December 31, 1960, during which period it was first in bankruptcy and then under trusteeship. The principal business of Railway is that of common carriage of goods by rail over 442 miles of main and branch line track in the state of Florida. The main line extends 351 miles from Jacksonville to Miami with 91 miles of branch line extending west from Ft. Pierce to Lake Harbor. Railway formerly operated branch lines from Miami to Florida City and from St. Augustine to East Palatka. Service from Miami to Florida City was discontinued in 1988 and was discontinued from St. Augustine to East Palatka in 1989.
Realty was incorporated as a 100%-owned subsidiary of Railway under the laws of the State of Florida on August 17, 1981, for the general purpose related to dealing in and disposing of real estate and real property. From date of incorporation through May 30, 1984, Realty accrued only nominal revenues earned from commissions on sales and/or purchases of property by Railway; accrued virtually no expense other than income taxes; and possessed only cash and cash equivalent assets in nominal amounts. As result of May 31, 1984, dividend action by Railway and contribution to capital action by Registrant, Realty was vested with approximately 18,090 acres of real estate. As additional parcels of land and buildings have been declared surplus to needs of Railway and received as dividends by Registrant, the Registrant has also contributed those properties to Realty as contributions to capital. Registrant has further made several cash contributions to capital of Realty to provide funds for construction activities commenced since the May 1984 reorganization of the Company. Realty's name was changed in 1987 from Commercial Realty and Development Company to Gran Central Corporation and is presently operating under that name.
(b) Registrant is segmented into areas of Transportation (principally by rail) and Realty (real estate ownership, development and management). As result of acquisitions and construction of property by Realty in the period following the 1984 reorganization, Realty became a significant business segment in 1987.
Consolidated financial information by segments appears as:
1994 1993 1992 (in thousands) ---- -------------- ---- Operating Revenues: Transportation $163,098 $162,318 $156,955 Realty - Land Sales 16,100 2,320 5,947 - Rents & Other 20,346 16,458 12,853
Operating Profit: Transportation $ 28,506 $ 29,346 $ 23,814 Realty 18,049 3,792 6,089
Identifiable Assets: Transportation $357,670 $352,465 $351,850 Realty 251,348 232,068 199,763 Corporate 113,476 103,912 118,806
Operating revenues represent revenues received from unaffiliated entities as reported in the Registrant's consolidated income statement.
Operating profit is operating revenue less directly traceable costs and expenses. Interest income and expenses, dividends, etc., are not segmented by Transportation and Realty, nor are investments generating such income, but rather these type items are classified as Other Income.
Corporate assets are primarily cash and investments accumulated to fund operations and capital requirements of the operating entities, including Realty construction.
(c) Transportation: Registrant owns 100% of the stock of Florida East Coast Railway Company which, in turn, owns 100% of the stock of seven subsidiary corporations, all of which are included in the consolidated Transportation segment and which, considered in the aggregate, do not constitute a significant subsidiary. Of the seven subsidiaries, three are dormant corporations. Third party contractors have assumed the service functions of two of those subsidiaries. Those functions primarily consist of the loading and unloading of automobiles from multilevel rail cars and the loading and unloading of trailers and containers from rail flatcars. The remaining subsidiaries are:
> one common motor carrier primarily engaged in the local drayage of trailers having prior or subsequent rail moves; > one common motor carrier primarily involved in the movement of trailerload traffic from Alabama, Georgia, and the Carolinas to Railway's Jacksonville facility for subsequent carriage by Railway; > one company primarily engaged in contract maintenance of railway track for third parties; and > one company engaged in the manufacture of concrete crossties, concrete grade crossings, and other concrete products principally for sale to Railway, and in the manufacture of concrete light poles for sale to utilities and others.
Principal commodities carried by Transportation include automotive vehicles, crushed stone, cement, trailers-on-flatcars, containers-on-flatcars, and basic consumer goods such as foodstuffs. Movement is relatively stable throughout the year with heaviest traffic ordinarily occurring during the first and last quarters of the year.
Railway is the only railroad serving locations between Jacksonville and West Palm Beach. From West Palm Beach to Miami, Railway is competitive with CSX Transportation for rail traffic, excluding that of trailer-on-flatcar/container- on-flatcar traffic. Common motor carriers and owner operators are competitive throughout the entire Transportation system.
Railway is considered generally as a terminating railroad, meaning that there is little or no rail traffic received from one carrier and delivered to another. A significant portion of traffic handled is received from rail connections, CSX Transportation, and Norfolk Southern Railway at Jacksonville, with terminating points on Railway's line, whereas a less significant portion is forwarded to those connections for destinations outside Florida. Railway has, in recent years, experienced continuing growth in traffic originating and terminating at points on its own line, and this local traffic is now generating in excess of 44% of rail traffic revenues.
Realty: Registrant owns 100% of the stock of Gran Central Corporation which, in turn, owns 100% of the stock of one subsidiary corporation, which is included in the consolidated Realty segment and which, considered in the aggregate, does not constitute a significant subsidiary. The one subsidiary is a corporation leasing and operating a trailer park owned by Gran Central Corporation in Miami.
Realty is engaged in the management of leases of its real property; the development, lease, and sales of its property; and general management of all real property included in the consolidated financials. Realty is in competition with other developers and brokers throughout its operating area.
As of December 31, 1994, Registrant and its subsidiaries employed approximately 1,050 employees with approximately 734 of them covered by collective bargaining agreements. Registrant employed 23 of the total, Realty employed 23, and Transportation employed the balance.
Nothing in the above represents a significant change from prior years.
(d) Registrant has no foreign operations.
ITEM 2.
ITEM 2. PROPERTIES
Transportation - Transportation owns approximately 12,000 acres of land property, all located along the East Coast of the state of Florida and devoted to railroad operations. In addition to rail right-of-way between Jacksonville and Miami and between Ft. Pierce and Lake Harbor, operating property includes significant switching/classification yards, trailer/container loading/unloading facilities, automobile marshalling yard, maintenance facilities, etc., at major terminals throughout the system.
Transportation physical plant (i.e., track structure, shops, and office buildings) is in excellent condition and includes 351 miles of main track, 91 miles of branch line track, 157 miles of yard switching track, and 184 miles of other tracks, including second main and passing tracks. The main track is generally constructed of 132# rail and other track materials on concrete crossties providing a track structure meeting the needs of today's heavy traffic loads. Certain of the branch line and yard tracks, though in good physical condition, are constructed of materials lighter than the 112# and 115# rail deemed necessary for this trackage, and programs are currently under way to re-lay these tracks with the heavier materials. These programs may be expected to extend several years into the future.
Transportation owns 79 diesel electric locomotives, approximately 2,801 freight cars, approximately 97 tractors, and 1,534 trailers for highway revenue service, numerous pieces of rail-mounted and non-rail-mounted work equipment, and numerous automotive vehicles used in maintenance and transportation operations. All equipment owned is in good physical condition.
Realty - Realty owned and managed approximately 19,295 acres of land at year- end 1994, including approximately 1,430 acres owned by Transportation but not required for operations. These properties are held for lease, development, and/or sale, and have a situs in thirteen counties of the state of Florida as follows:
Duval 1,530 acres St. Johns 3,530 " Flagler 3,460 " Volusia 3,560 " Brevard 2,810 " Indian River 5 " St. Lucie 610 " Martin 660 " Palm Beach 300 " Broward 50 " Dade 1,700 " Manatee 900 " Putnam 180 " ---------- Total 19,295 "
Realty also owned at year-end 1994 forty-six (46) buildings as detailed below:
No. of Rentable Year Location Bldgs. Type Square Ft. Built -------- ------ ---- ---------- ----- duPont Center Jacksonville, FL 2 Offices 144,000 1987/88
Barnett Plaza Jacksonville, FL 1 Office 59,000 1982
Gran Park at Interstate South Jacksonville, FL 6 Office/Showroom/ Warehouses 260,000 1987/89
Gran Park at the 2 Office/Showroom/ Avenues Warehouses 101,000 1992 Jacksonville, FL 2 Offices 145,000 1992/93 1 Office/Warehouse 139,000 1994
Gran Park at Melbourne 1 Office/Showroom/ Melbourne, FL Warehouse 28,000 1989
Gran Park at 1 Office/Showroom/ Riviera Beach, FL Warehouse 62,000 1987 2 Rail Warehouses 176,000 1982/87 Lewis Terminals 4 Cross Docks 75,000 1987/91
Gran Park-McCahill Miami, FL 2 Rail Warehouses 468,000 1992/94
Gran Park at Miami 5 Office/Showroom/ Miami, FL Warehouses 368,000 1988/90/92/94 4 Office/Warehouses 382,000 1990/91/92/93 4 Rail Warehouses 398,000 1989/90/93/94 5 Front Load Warehouses 604,000 1991/92/93 1 Double Front Load Warehouse 239,000 1993 1 Office Service Center 41,000 1994
Hialeah, FL 1 Cross Dock 20,000 1987
Pompano Beach, FL 1 Rail Warehouse 54,000 1987 -- --------- TOTALS 46 3,763,000
Realty's holdings include lands adjacent to Railway's tracks which are suitable for development into office and industrial parks offering both rail and non- rail-served parcels. Certain other holdings are in urban or suburban locations offering opportunities for development of office building structures or business parks offering both office building sites and sites for flexible space structure such as office/showroom/warehouse buildings. Wherever possible, Realty intends to develop infrastructure and construct buildings for lease and continued ownership.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Registrant, through its Transportation subsidiary, Florida East Coast Railway (Railway), was involved in a legal action versus CSX Transportation, Inc. (CSXT), alleging, in part, violations of a 1978 Agreement between CSXT and Railway and, in part, violations of the Sherman Act. The complaint alleged that CSXT had, by its actions, placed the Railway in a position such that it could not fairly compete with CSXT for certain carload traffic destined to or from South Florida points served by the two railroads. In early 1992, CSXT petitioned the ICC to reopen the merger proceedings for the purpose of eliminating the merger conditions set down by the ICC in the 1967 merger of ACL/SAL Railroads. Under the conditions set by the ICC prior to merger, the merged company, CSXT, was required to cooperate with the Railway in matters of rates, routes, and service in a fashion allowing Railway to compete effectively with CSXT on traffic to and from West Palm Beach southward. A tentative Order by the U.S. District Court dated February 19, 1993, found that contract rates were included in the 1978 Agreements, but that CSXT could not be required to establish an equal joint-line contract rate since the Court views such action as a form of price-setting which is illegal. As reported in 1993, appeals were made in the U.S. District Court in Chicago and before the Interstate Commerce Commission in Washington. Both actions were resolved in favor of CSXT. These outcomes were not totally unexpected since similar protections for other carriers have been discontinued in the past. Management believes that CSXT is interested in the Railway operating as a viable, independent rail carrier. Therefore, the Railway will not contest this issue further.
The Registrant, also through Railway, is involved in legal actions versus the State of Florida and several counties of the state, in which it was alleged the State, through its "unit assessment procedures," has significantly over- assessed the rail operating properties of Railway for 1994.
The Registrant's Railway is a party to various proceedings before state regulatory agencies relating to environmental issues. In addition, Railway, along with many other companies, has been named a potentially responsible party (PRP) in proceedings under federal statutes for the cleanup of designated Superfund sites at Jacksonville, Florida, and Portsmouth, Virginia.
The assessment of the required responses and remedial costs associated with these sites is extremely complex. Among the variables that management must assess are imprecise engineering estimates, continually evolving governmental standards, potential recoveries from others, including other PRP's, and laws which can impose joint and several liability.
Railway has made an estimate of its likely costs attributable to sites for which its cleanup responsibility is probable, and a liability, therefore, has been recorded. Such liability is not material to the financial position of the Registrant. Railway is not aware of any monetary sanctions to be proposed which, in the aggregate, are likely to exceed $100,000, nor does it believe that corrections will necessitate significant capital outlays or cause material changes in the Registrant's business.
There are no other legal or regulatory proceedings pending or known to be contemplated which, in the opinion of the General Attorney of the Registrant, are other than normal and incidental to the kinds of business conducted by the Registrant.
ITEM 4.
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 $77 5/8 $77 1/4 $72 7/8 $67 1/8 Low $65 1/2 $65 1/4 $61 7/8 $57 5/8 Dividends $.10 $.10 $.10 $.10
---- Quarter Ended Dec. 31 Sept. 30 June 30 March 31 High $70 1/4 $62 $51 1/2 $54 Low $61 1/8 $48 3/8 $46 $48 1/8 Dividends $.10 $.10 $.10 $.10
c. The total number of holders of record of Florida East Coast Industries, Inc., common stock as of December 31, 1994, was 886.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA (Dollars in thousands except per share amounts) (Unaudited) Years Ended December 31 1994 1993 1992 ---- ---- ---- Revenues: Operating Revenues $199,544 $181,096 $175,755 Other Income 9,117 5,103 8,253 Total $208,661 $186,199 $184,008
Income before cumulative effect of change in accounting principle $ 34,605 $ 20,779 $ 24,045 Cumulative effect of change in accounting principle for income taxes 0 1,504 0
Net Income $ 34,605 $22,283 $24,045
Per Share Data Cash Dividend $ 0.40 $ 0.40 $ 0.40 Income before cumulative effect of change in accounting principle $ 3.85 $ 2.31 $ 2.67 Cumulative effect of change in accounting principle for income taxes $ 0 $ 0.17 $ 0
Net Income Per Common Share $ 3.85 $ 2.48 $ 2.67
At year-end: Total Assets $722,494 $688,445 $670,419 Working Capital $ 39,750 $ 42,552 $ 39,407 Shareholders' Equity $552,268 $523,038 $503,464
Revenues: 1991 1990 ---- ---- Operating Revenues $166,561 $169,870 Other Income 26,108 20,440 Total $192,669 $190,310 Income before cumulative effect of change in accounting principle $ 29,056 $ 31,352 Cumulative effect of change in accounting principle for income taxes $ 0 $ 0
Net Income $ 29,056 $ 31,352
Per Share Data Cash Dividend $ 0.40 $ 0.40 Income before cumulative effect of change in accounting principle $ 3.21 $ 3.39 Cumulative effect of change in accounting principle for income taxes $ 0 $ 0
Net income Per Common Share $ 3.21 $ 3.39
At year-end: Total Assets $647,675 $622,835 Working Capital $ 38,476 $ 53,772 Shareholders' Equity $483,020 $469,294
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT DISCUSSION AND ANALYSIS OF INCOME STATEMENTS
This statement summarizes the Company's consolidated income results for the three-year period ending December 31, 1994. The purpose of this discussion is to provide background information for the figures presented, including the significant events which contributed thereto.
Operating revenues have increased throughout the three-year period, with increases of $18.4 million or 10.2% when comparing 1994 with 1993 and $5.3 million or 3.0% when comparing 1993 with 1992.
The 1994 increase in operating revenues of $18.4 million was attributed to an increase of $.8 million in transportation revenues and an increase of $17.7 million in realty revenues. The increase in realty revenues of $17.7 million included sales of realty properties of $16.1 million which included a single sale of realty property in the amount of $11.3 million to the State of Florida via condemnation. When comparing 1993 operating revenues with 1992, operating revenues increased $5.3 million. The 1993 increase was attributed to the $5.4 million increase in transportation revenues with realty revenues remaining at approximately the same level as 1992 at $18.8 million.
Transportation revenues have remained relatively stable over the past three years with increases of $.8 million or .5% when comparing 1994 to 1993 and $5.4 million or 3.4% when comparing 1993 to 1992. Transportation revenues are derived from four major classifications of traffic: shipments of rock, intermodal (container and trailer shipments), automotive, and other. Below are brief discussions of the volumes shipped in 1994 and the conditions which had an impact on those volumes.
The adverse weather conditions in the fourth quarter 1994 in South Florida tempered the accelerated volume growth in rock shipments experienced in the first three quarters of 1994. Rock shipments increased 4,645 shipments or 5.6% when comparing 1994 with 1993 and 10,112 shipments or 13.9% when comparing 1993 with 1992. Over the past three years, the traffic trend reflected higher volumes of rock traffic each year due to road and other commercial construction activities.
Intermodal traffic was adversely affected by weather, union strikes, and intracoastal barge competition between Charleston, Savannah, and Miami. Intermodal shipments decreased by 640 shipments or .2% when comparing 1994 with 1993 and 1,586 shipments or .5% when comparing 1993 with 1992. Over the past three years, high volumes of intermodal traffic were experienced in the first and fourth quarters of each year.
In 1995, the Company is expanding its scope of operations for transportation services to include Macon, Georgia. The Company will have an intermodal facility at Macon to provide rail transportation service to and from South Florida.
The Company's automotive traffic showed a modest gain in 1994 resulting from increased automobile sales in South Florida. Automotive traffic increased by 403 shipments or 2.3% when comparing 1994 with 1993, but decreased 373 shipments or 2.1% when comparing 1993 automotive traffic with 1992. In 1994 the Company's second largest automotive customer executed a five-year contract for continued transportation service, and optimism prevails for continued growth in 1995 consistent with the growth in domestic and export activity. Over the past three years, the trend for automotive traffic indicated peak periods during the fourth quarters.
When comparing 1994 with 1993, carload traffic other than rock and automotive increased by 2,042 shipments or 6.4%, but decreased 519 shipments or 1.6% when comparing 1993 with 1992. Lumber and plywood reload traffic provided a positive trend in 1994, and the Company expects modest growth in 1995 for this type of traffic. The bulk commodities along with shipments of cement increased in 1994, and the Company projects increases in 1995. The high volume periods for this type of traffic, based on the last three years, was during the first and fourth quarters.
Realty revenues increased significantly in 1994 to $36.4 million from $18.8 million or an increase of $17.6 million from 1993 and 1992 revenue levels. This increase of $17.6 million is primarily attributable to the increase in the sales of realty property in 1994 of $16.1 million. A single sale of property of $11.3 million to the State of Florida through condemnation proceedings in the first quarter of 1994 comprises the majority of the $17.6 million increase. The remainder of the realty revenues of $20.3 million is attributed primarily to rental income from buildings, warehouses, etc. At year-end 1994, the Company had a total of 3.8 million square feet of space available for lease. Approximately 90% of that 3.8 million square feet was under lease in 1994 as compared to 88% in 1993 and 90% in 1992. The Company expects rental revenue to continue to increase as new space is constructed and added to inventory.
Under construction at year-end were four new buildings which, upon completion, will add an additional .4 million square feet of leasable space. Since the Company is primarily interested in ongoing development of land for construction of buildings for lease, only occasional realty sales are anticipated.
Operating expenses in 1994 increased $5.0 million or 3.4% when compared to 1993, and 1993 operating expenses increased $2.1 million or 1.4% when compared to 1992. Several factors contributed to the $5.0 million increase. Comparing 1994 with 1993 operating expenses, decreases were represented by $3.5 million in salaries and wages with the associated fringe benefits which were offset by the increase in purchased services of $2.5 million. These changes are the result of outside contractors providing the loading and unloading of automobiles from multilevel rail cars and the loading and unloading of containers and trailers from flatcars at the TOFC/COFC terminals. The Company's decision to contract the above services to third party contractors was based upon projected savings of approximately $2.0 million annually. Property taxes increased by $3.8 million primarily due to a reduction of property taxes in 1993 of $2.8 million as a result of the favorable settlement of the property tax case with the State of Florida for the tax years 1987 through 1991.
When comparing 1993 operating expenses with 1992, operating expenses increased $2.1 million. This increase was represented by decreases of $4.2 million in materials and $2.8 million in property taxes. These decreases were offset by increases of $4.0 million in salaries and wages and associated fringe benefits, $1.6 million in depreciation expense, and $3.3 million in other operating expenses.
Included in the increase of $3.3 million in other expenses was an increase of $1.4 million in casualty and insurance and an increase of $.3 million in environmental. Materials and supplies decreased by $4.2 million resulting primarily from efficiencies achieved in the Maintenance of Way and Maintenance of Equipment Departments by reductions in expenses of $2.7 and $1.1 million, respectively.
Property taxes decreased by approximately $2.8 million in 1993 brought about by the favorable settlement of the ad valorem tax case with the State of Florida for the years 1987 through 1991.
Other income for 1994 when compared to 1993 increased $4.0 million. When comparing 1993 with 1992, other income declined $3.2 million. Other income for the three-year period reflects gains on sales and other disposition of properties of $4.0, $.5, and $1.5 million in 1994, 1993, and 1992, respectively.
Income taxes increased $3.6 million in 1994 from 1993 which was primarily attributable to the increase in net income. On January 1, 1993, the Company adopted Financial Accounting Standards Board Statement 109 which resulted in the recognition of additional income of $1.5 million in the first quarter 1993. When comparing 1993 with 1992, income taxes increased $3.4 million. This increase was primarily the result of an increase in the federal tax rate from 34% to 35% and the associated adjustments to deferred tax assets and liabilities.
MANAGEMENT DISCUSSION AND ANALYSIS OF BALANCE SHEETS
The Consolidated Balance Sheet provides information about the nature and amounts of the Company's investments, its obligations to creditors, and its shareholders' equity at the end of the year. This information complements data found in the Consolidated Statement of Income and Retained Earnings and is designed to contribute to the shareholders' understanding of the Company.
Total current assets for 1994 decreased by $6.2 million when compared to 1993. This change is represented primarily by decreases of $3.0 million in Cash, Cash Equivalents, and Short-term Investments, $2.2 million in Accounts Receivable, and $.9 million in Other Current Assets. Large liquid reserves are maintained to meet the Company's commitment to realty construction and development.
Other investments increased by $13.2 million in 1994 from 1993 to a total of $79.5 million. This increase is attributed primarily to the proceeds from sale of realty properties to the State of Florida in the first quarter 1994 via condemnation proceedings and will be used for realty development in 1995. Other investments include approximately $39.5 million of a portfolio managed actively in diversified investment funds and the balance being invested in U.S. Treasury Bills and similar highly liquid investments. These investments are classified as long-term because of management's intent to use them to finance future realty construction projects. Currently, the Company has four major realty development projects in progress: Gran Park at Jacksonville, Gran Park at the Avenues, Gran Park at Deerwood, and Gran Park at Miami.
Development of Gran Park at Jacksonville is presently in the infrastructure development stage, including permitting, designing, and platting. This process began in March 1994 and was approximately 10% complete at year-end.
At Gran Park at the Avenues (Jacksonville), construction of the third office building began in May 1994. This facility will provide approximately 81,000 square feet of leasable space and was approximately 25% complete at year-end.
At Gran Park at Deerwood (Jacksonville), Phase I development of roads, water and sewer systems, design work, and other site improvements began in June 1994. This project was approximately 25% complete at year-end. In November 1994, the construction of the first office building was started and was approximately 5% complete at year-end.
At Gran Park at Miami (Section 32 property), construction of Front-Load Warehouses Numbers 6 and 7 began in October 1994. Each building will add approximately 92,400 square feet of leasable space. As of December 31, 1994, Building Number 6 was approximately 35% complete and Building Number 7 was approximately 20% complete.
Also, Gran Park at Miami (Section 6 property) was approximately 90% complete at year-end for the demucking and filling phase. The master plan for this property began in 1993 and was approximately 25% complete on December 31, 1994.
These construction activities substantially contributed to the $25.7 million increase in properties from 1993 to 1994. The additions in 1994 amounted to .6 million square feet of leasable space represented by five new buildings.
Total current liabilities in 1994 decreased $3.4 million when compared to 1993. This decrease is primarily attributable to decreases of $2.3 million in accrued casualty and other reserves and $1.5 million in estimated property taxes. The decrease in accrued casualty and other reserves represents a reduction in personal injury accruals.
The Company is subject to proceedings arising out of environmental laws and regulations which primarily relate to the disposal and use of fuel oil used in the transportation business. It is the Company's policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and an amount can be reasonably estimated.
The Company is currently a party to, or involved in, legal proceedings directed at the cleanup of two Superfund sites. The Company has accrued its allocated share of the total estimated cleanup costs for these two sites. Based upon management's evaluation of the other potentially responsible parties, the Company does not expect to incur additional amounts even though the Company has joint and several liability. Other proceedings involving environmental matters such as alleged discharge of oil or waste material into water or soil are pending against the Company.
It is difficult to quantify future environmental costs because many issues relate to actions by third parties or changes in environmental regulation. However, based on information presently available, management believes that the ultimate disposition of currently known matters will not have a material effect on the financial position or liquidity of the Company, but could be material to the results of operations of the Company in any one period. As of December 31, 1994, and 1993, the aggregate environmental related accruals were $3,500,000. Environmental liabilities are paid over an extended period and the timing of such payments cannot be predicted with any confidence.
The Company's financial position continues to be strong as indicated by the current ratios of 2.17 in 1993 and 2.20 in 1994. The Company has no long-term debt or open lines of credit, nor does the Company anticipate that any will be negotiated in the foreseeable future. The Company is not obligated under any significant capital or operating-type leases, except for the short-term leasing of freight cars, trailers, and data processing equipment.
As of December 31, 1994, the Company had authorized approximately $36.2 million for capital expenditures, of which 35% represents realty development and construction. These expenditures are expected to be funded from current operations supplemented, as necessary, by cash and investments currently on hand.
MANAGEMENT DISCUSSION AND ANALYSIS OF STATEMENTS OF CASH FLOWS
The statement of cash flows details the Company's cash flows from operating, investing, and financing activities during the year. Since the Company does not use debt to finance its operations, the source of funds throughout the year is exclusively generated by operating and investing activities. These sources have been sufficient to fund the purchases of properties and pay dividends.
Net income for 1994 increased $12.3 million when compared to 1993, and net income for 1993 decreased $1.8 million when compared to 1992.
Net cash generated by operating activities increased by $16.2 million in 1994 compared to 1993. This increase was primarily attributable to the increase of net income of $12.3 million and the timing of related cash receipts and payments. In comparing 1993 with 1992, net cash generated by operating activities increased $10.7 million. The changes primarily reflect changes in operating income levels and the timing of remitted cash receipts and payments. In 1992, the Company made a large good faith payment related to the ad valorem tax case with the State of Florida for the years 1987 - 1991 which was settled in the third quarter 1993.
Net cash used in investing activities for 1994 when compared to 1993 increased $17.7 million. This increase is primarily attributable to the net increase of $27.6 million in purchases of investments versus maturities of investments, $4.5 million increase in proceeds from disposition of assets, and the decrease in purchases of properties of $5.5 million. Purchases of properties for 1994, 1993, and 1992 reflect spending primarily in realty development. Purchases, maturities, and redemptions of investments vary depending upon the changes in requirements for realty construction and development and cash generated through operations. Other investments on the balance sheets increased $13.2 million in 1994 when compared to 1993 and decreased $12.3 million in 1993 when compared to 1992.
Because a large percentage of the Company's properties are long-lived, asset replacement will be at a higher cost and will take place over many years. The acquisition of new assets will result in higher depreciation charges and, in the case of Realty, higher taxes and operating costs.
Cash dividends of $.40 per share were paid in each of the three years, reflecting the Company's philosophy that shareholders receive a current benefit at the same time that the Company is reinvesting most earnings in a debt-free asset growth program.
The Company continues to believe that asset growth should be internally funded by operating and investing activities rather than through the use of debt. However, the Company is confident that if a need to access the market for funds were to arise, such access would be readily available.
ITEM 8.
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. Joe Paper Director since 1984 Company. Director, St. Joe Paper Company. Age 80 Trustee, Alfred I. duPont Trust.
J. Nelson Fairbanks President and Director, U.S. Sugar Corporation. Director since 1989 Age 59
David M. Foster Attorney, Rogers, Towers, Bailey, Jones & New Nominee Gay for the last five years. Director, Sun Age 60 Bank of North Florida, N.A. Director, Gate Petroleum and subsidiaries. Director, Ponte Vedra Polo Club, Inc.
Allen C. Harper Chairman/CEO, Esslinger-Wooten-Maxwell, Inc., Director since 1994 Realtors, and President, First Reserve, Inc. Age 50 (1984-present). Director, Tri-County Railroad Authority (1989-present).
John H. Mercer, Jr. Retired President, John Mercer Terminal Director since 1984 Warehouse Company. Age 81
R.E. Nedley President, St. Joe Paper Company (1991-present). New Nominee Vice President, St. Joe Paper Company (1982- Age 56 1991). Director, St. Joe Industries, Inc. (1982-present).
J.J. Parrish, III President, Jesse J. Parrish, Inc., Vice Director since 1993 President and Director, Nevins Fruit Company. Age 41 Director and Treasurer, Parrish Medical Center. Director, Barnett Bank of Central Florida.
W.L. Thornton Chairman of the Board and President, Industries. Director since 1984 Chairman and Director, St. Joe Paper Company. Age 66 Trustee, Alfred I. duPont Trust.
Carl F. Zellers, Jr. Vice President, Industries. President, Florida Director since 1984 East Coast Railway and Gran Central Corporation. Age 62 Director, St. Joe Industries, Inc.
With respect to each Executive Officer of the Registrant, there are set forth below as of December 31, 1994, (1) his name; (2) his age; (3) his positions and offices with the Registrant; (4) the date on which he first held office; and (5) a brief account of his business experience during the last five years. Each Executive Officer has been elected to hold such positions and offices until the next annual election of Directors and Officers of the Registrant, which is to be held on May 17, 1995. To the best knowledge of the Registrant, none of the persons named had any arrangement or understanding with any other person pursuant to his election, and none of the persons named have any family relationship with any other such person.
Name, Age, Positions, and Date First Held Such Positions and Offices and Offices Business Experience for the Past Five Years _________________________ ______________________________________________
Winfred L. Thornton (66) Chairman and President of Registrant for more Chairman, President, Chief than five years. Executive Officer & Director
Carl F. Zellers, Jr. (62) Vice President of the Registrant and President Vice President and Director of Gran Central Corporation for more than five years. President of Florida East Coast Railway Company from June 10, 1992.
T. Neal Smith (55) May 15, 1992, elected Vice President & Vice President & Secretary Secretary. Formerly Treasurer and Assistant Secretary for more than five years.
William E. Durham, Jr. (63) Vice President of Registrant for more than Vice President & Director five years.
Louis A. Manz (42) March 1, 1993, elected Vice President - Vice President - Information Information Services. Formerly with Information Services and Computing Services from 1989-1993.
J. Richard Yastrzemski (52) Comptroller of Registrant for more than five Comptroller years.
Gregory P. West (35) May 15, 1992, elected Treasurer. Formerly Treasurer & Assistant Secretary Material Inventory and Accounting Manager.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the annual compensation for Industries' Executive Officers whose 1994 total annual compensation exceeded $100,000, as well as the total compensation paid to those Executives for the past three years. Industries paid no bonuses nor had any stock award or option programs.
Summary Compensation Table
Name and Other Annual All Other Principal Salary Compensation Compensation Position Year ($) ($) ($) -------- ---- ------ ------------ ------------
W.L. Thornton 1994 159,550(a) 5,580(b) 1,800(c) President and CEO 1993 154,900(a) 5,790(b) 1,800(c) 1992 149,650(a) 4,970(b) 1,800(c)
C.F. Zellers, Jr. 1994 133,260 3,700(b) 4,400(c) Vice President 1993 129,370 1,670(b) 4,341(c) 1992 118,100 2,060(b) 4,170(c)
(a) This amount represents 100% of Mr. Thornton's salary. Under arrangement approved by the Board of Directors of both St. Joe Paper Company and Florida East Coast Industries, Inc., Mr. Thornton's salary and expenses are paid by St. Joe Paper Company, with 20% of salary, fringe benefits, and common expenses being billed to and paid by Industries as compensation for his services as President of Industries. Any expenses incurred for the exclusive benefit of either Industries or St. Joe Paper Company are borne 100% by the benefiting corporation.
(b) These amounts include life insurance premiums and the personal use of vehicles owned by Industries.
(c) These amounts represent Industries' matching contribution to a 401(k) Plan and directors' fees. Mr. Thornton was not a participant in the 401(k) Plan of Industries.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") has the responsibility of establishing and administering compensation policies, plans, and programs for the Company and its subsidiaries (herein, "the Company"). The Committee and senior management initiated a comprehensive review of management compensation during 1994.
The study included an evaluation of existing compensation policies; a review of compensation plans and practices prevailing at other companies; and an analytical review of the costs and benefits of the proposed programs. The philosophy and programs resulting from the study's analysis are outlined below and were developed through the active involvement of management and the Committee.
Because this study was completed late in the year, compensation paid for 1994 represents a continuation of past practices. The new compensation program approved by the Board of Directors in 1994 will be fully implemented in fiscal 1995.
Executive Compensation Philosophy
The Committee adopted a compensation philosophy for the Company's management to serve as guiding principles for program design and administration. The overriding philosophy is that compensation should be tied directly to the Company's stated business objectives and to the sustained creation of stockholder value. The Committee believes that stockholder interests and the Company's compensation programs should be closely aligned and integrated. Therefore, the performance measures used to determine compensation levels have been demonstrated to be primary, sustainable drivers of stockholder value among other publicly-held companies including companies having transportation interests.
The Company's performance compensation program consists of two components: (1) Base Salary and (2) Award Opportunity. Each of these components and its respective role in total direct compensation, as well as the basis for determining the compensation of the President and CEO, Mr. W.L. Thornton, are described below.
(1) Base Salary
Pursuant to the compensation philosophy of emphasizing risk-oriented pay to encourage superior performance and consistent with the Company's business strategy of controlling fixed costs, annual salary adjustments will be determined by several factors, including: The Company's performance, the individual's contribution to that performance, the individual's future potential, and competitive pay levels. On an annual basis, the Committee reviews executive salaries with the Chief Executive Officer ("CEO").
(2) Performance Awards
In fiscal 1995, seventeen (17) of the Company's senior executives will be eligible to participate in the Company's annual incentive program. Each participant is assigned a target Award Opportunity equal to the individual's level of responsibility. Target award levels range from 25% to 35% of annual base salary. The CEO and Chief Operating Officer's ("COO") target is 35% and the target for the three other most highly compensated officers is 25%. Actual award levels vary depending upon the degree of achievement relative to specified Company and individual performance objectives and can range in total from 0% to 100% of target levels.
Performance awards under the program are contingent upon both Company and individual performance for the year. Only those individuals who receive a satisfactory or better performance rating in their annual performance reviews are eligible to receive an annual Opportunity Award. The Company's performance relates directly to operating profit. Specific performance objectives have been set by the Committee (as they will be on an annual basis) in relation to the Company's fiscal budget. The payout related to Company performance against these predetermined objectives ranges from 0% to 100% of Target Award. For the CEO, COO, and certain other officers, Company performance governs their entire Performance Award amount. For other participants, their individual performance rating determines up to 60% of their award.
As example of the application of actual awards under this performance program, a covered executive earning $100,000 having an assigned target Company Award Opportunity level of 25% has the opportunity to be awarded an actual award of $12,500 if the "Threshold" Company objective is met or an actual award of $25,000 if the "Target" Company objective is met.
No performance award is payable if Company performance falls below threshold level.
Nondeductible Compensation
The Senior Management Incentive Plan will be fully deductible for federal income tax purposes since it is not possible at this time for any executive officer's compensation to total more than $1 million.
CEO Compensation
The Company's CEO, Mr. W.L. Thornton, is also the CEO of St. Joe Paper Company and is employed under an arrangement approved by each Board which provides that the Company will bear 20% of base salary. Base salary has been the sole basis of compensation for the CEO and other executive officers through 1994.
Mr. Thornton was paid a base salary of $159,550 in 1994 which represented a 3% increase above the base salary in 1993. The Company's portion of the total base salary in 1994 was $31,910. In this regard, this Committee conferred with the Compensation Committee of St. Joe Paper Company relative to Mr. Thornton's 1994 salary, and while it was agreed that the base salary of $159,550 is significantly less than salaries paid by comparable companies and does not recognize Mr. Thornton's individual contribution to the relative success of the combined enterprises in the past or present, it was also agreed to continue pay through 1994 on past practice and that the matter of adjusting base salary of the CEO's position should receive review by the Committee during the study mentioned above. This study concluded that the base salaries of the CEO and other executive officers should be adjusted effective January 1, 1995, to a base salary more nearly equal to the responsibilities of the positions and much more competitive with comparable companies while at the same time putting a portion of the positions' total value to the Company "at risk" subject to the attainment of the specified corporate and personal objectives set forth in the plan for incentive compensation. Any performance award made to the CEO under the incentive plan will be based solely on that portion of total base salary paid by the Company under its arrangement with St. Joe Paper Company.
The Committee believes that the changes described above will help to ensure that executive officers are rewarded appropriately for their services and the Committee is satisfied that the strategy supports corporate objectives and shareholder interests, however, additional changes can and will be considered if and when deemed appropriate within the context of these objectives and interests.
The Compensation Committee is appointed by the Board of Directors and is composed entirely independent of non-employee directors having no interlocking relationship as defined by the Securities and Exchange Commission.
J. Nelson Fairbanks, Chairman M.E. Rinker, Sr., Member Allen C. Harper, Member
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Board of Directors of Industries has designated March 31, 1995, as the record date for the determination of Stockholders entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. As of that date, Industries had 9,271,361 shares issued and outstanding of Common Stock, which is its only voting security. Of the 9,271,361 shares issued and outstanding, 271,361 represent treasury shares. The outstanding, excluding treasury shares, were held by approximately 865 Stockholders of Record on March 10, 1995.
The following table sets forth information as of March 1, 1995, with respect to persons known to Industries to be the beneficial owners of more than 5% of its outstanding Common Stock:
Nature of Beneficial Percent of Names/Address Ownership No. of Shares Class (1) ------------- ---------- ------------- ----------
Nemours Foundation (2) Sole Voting & 450,224 5.0% P.O. Box 1380 Dispositive Jacksonville, FL 32201 Power
St. Joe Industries, Inc. (3) Sole Voting & 4,902,304 (4) 54.5% P.O. Box 1380 Dispositive Jacksonville, FL 32201 Power
Heine Securities Corp. (5) Sole Voting & 575,500 6.4% 51 J.F.K. Parkway Dispositive Short Hills, NJ 07078 Power __________________ (1) All percentages shown are rounded to the nearest one-tenth of one percent.
(2) As of March 1, 1995, the following persons were directors of the Nemours Foundation: Jacob C. Belin, Alfred duPont Dent, H.H. Peyton, J.F. Porter, W.T. Thompson, Winfred L. Thornton, and corporate director, NationsBank of Florida, represented by J.S. Lord. In such capacities, these directors collectively share voting and dispositive power with respect to Industries' Common Stock owned by the Nemours Foundation and, as such, may be deemed to be beneficial owners of that stock.
(3) As of March 1, 1995, the following persons were directors of St. Joe Industries, Inc.: Jacob C. Belin, E.C. Brownlie, S.D. Fraser, R.E. Nedley, Winfred L. Thornton, and C.F. Zellers, Jr. In such capacities, all directors collectively share dispositive and voting power with respect to Industries' Common Stock owned by St. Joe Industries, Inc. All directors may be deemed to be beneficial owners of Industries' Common Stock owned by St. Joe Industries, Inc.
(4) By virtue of its ownership of approximately 54.5% of the outstanding Industries' Common Stock, St. Joe Industries, Inc., may be deemed to be not only an "affiliate" but also a "parent" of Industries.
(5) Mr. Michael F. Price is President of Heine Securities Corporation ("HSC") in which capacity he exercises voting control and dispositive power over these securities. Mr. Price, therefore, may be deemed to have indirect beneficial ownership over such securities. Mr. Price advises he has no interest in dividends or proceeds from the sale of such securities, owns no such securities for his own account, and disclaims beneficial ownership of all the securities reported herein by HSC.
(b) SECURITY OWNERSHIP OF MANAGEMENT
Shown below is information concerning beneficial ownership of Industries' Common Stock for each director and for all directors and officers as a group as of March 1, 1995. Under rules of the Commission, "beneficial ownership" is deemed to include shares for which the individual, directly or indirectly, has or shares voting and/or dispositive power:
Nature of Beneficial Percent of Names Ownership No. of Shares Class (1) ----- ---------- ------------- ---------- J.C. Belin Shared Voting/ Dispositive Power 5,352,528(2) 59.5%
J.N. Fairbanks ----- -----
D.M. Foster ----- -----
A.C. Harper ----- -----
J.H. Mercer, Jr. Sole Voting/ Dispositive Power 100 -----
R.E. Nedley Shared Voting/ Dispositive Power 4,902,304 (3) 54.5%
J.J. Parrish, III ----- -----
W.L. Thornton Sole Voting/ Dispositive Power 5,869 ----- Shared Voting/ Dispositive Power 5,352,528(2) 59.5%
C.F. Zellers, Jr. Sole Voting/ Dispositive Power 1,936 ----- Shared Voting/ Dispositive Power 4,902,304(3) 54.5%
9 directors & Sole Voting/ officers as a Dispositive Power 7,905 ----- group Shared Voting/ Dispositive Power 5,352,528(4) 59.5%
____________________ (1) All percentages shown are rounded to the nearest one-tenth of one percent. Where no percentage is shown, the amount of Industries' Common Stock owned by the beneficial owner listed is less than one-half of one-tenth of one percent (4,500 shares) of all outstanding Industries' Common Stock.
(2) Includes 4,902,304 shares or 54.5% of Industries' Common Stock owned by St. Joe Industries, Inc., and 450,224 shares or 5.0% of Industries' Common Stock owned by the Nemours Foundation.
(3) Includes 4,902,304 shares or 54.5% of Industries' Common Stock owned by St. Joe Industries, Inc., of which Mr. Zellers and Mr. Nedley are directors.
(4) Includes the 4,902,304 and 450,224 listed as beneficially owned by Messrs. Belin and Thornton, and the 4,902,304 listed as beneficially owned by Messrs. Zellers and Nedley, however, reports the same number of shares beneficially owned by these persons only once.
(c) CHANGES IN CONTROL
The Company knows of no contractual arrangements which may, at a subsequent date, result in a change of control of the Company.
ITEM 13.
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, 1994, and 1993
Consolidated Statement of Income and Retained Earnings for each of the three years in the period ended December 31, 1994
Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 1994
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
Supplementary Information: Quarterly Financial Data (Unaudited)
Financial Statement Schedules: II-Valuation and Qualifying Accounts III-Real Estate and Accumulated Depreciation
All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto.
Financial statements and schedules of Florida East Coast Industries, Inc. (not consolidated) are omitted since it is primarily a holding company and all subsidiaries included in the consolidated financial statements being filed, in the aggregate, do not have minority equity interests and/or indebtedness to any person other than the Company or its consolidated subsidiaries in amounts which together exceed five percent of the total assets as shown by the consolidated balance sheet at the end of any year covered by this Report.
The financial statements listed in the above Index which are included in the Annual Report to Stockholders for the year ended December 31, 1994, are hereby incorporated and filed as part of this Report. With the exception of the items listed in the above Index and as mentioned specifically in responses to this and other parts of this Report, the 1994 Annual Report to Stockholders is not to be deemed filed as part of this Report.
INDEX TO EXHIBITS
(ITEM 13[a] 3.) S-K Item 601 Documents -------- ------------ (3) (a) Articles of Incorporation*
(3) (b) By-Laws*
(21) Subsidiaries of Florida East Coast Industries, Inc.
(24) Power of Attorney
*Incorporated herein by reference to Exhibits filed in connection with Florida East Coast Industries, Inc.'s Registration Statement on Form S-14 as filed with the Securities and Exchange Commission on February 17, 1984 (File No. 2-89530).
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized on February 15, 1995.
FLORIDA EAST COAST INDUSTRIES, INC. (Registrant)
By: s/s T.N. Smith, Vice President and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:
s/s W.L. Thornton* Chairman, President, Chief Executive Officer, Director - 3/24/95
s/s C.F. Zellers, Jr.* Vice President and Director - 3/24/95
s/s W.E. Durham, Jr.* Vice President and Director - 3/24/95
s/s R.W. Wyckoff* Director - 3/24/95
s/s J. Nelson Fairbanks* Director - 3/24/95
s/s J.C. Belin* Director - 3/24/95
s/s John H. Mercer, Jr.* Director - 3/24/95
s/s A.C. Harper*. Director - 3/24/95
s/s M.E. Rinker, Sr.* Director - 3/24/95
s/s J.J. Parrish, III* Director - 3/24/95
s/s G.P. West* Treasurer - 3/24/95
s/s J.R. Yastrzemski* Comptroller - 3/24/95
BY: s/s T. Neal Smith* Attorney-in-Fact
*Such signature has been affixed pursuant to Power of Attorney.
CONSOLIDATED BALANCE SHEETS December 31, 1994, and 1993 (Dollars in thousands except per share amounts)
1994 1993 ---- ---- Assets
Current Assets Cash and cash equivalents $ 15,235 $ 14,438 Short-term investments (Note 5) 14,208 18,009 Accounts receivable, net 25,669 27,879 Materials and supplies 11,950 11,974 Other current assets (Note 7) 5,743 6,676 -------- -------- Total current assets 72,805 78,976
Other Investments (Note 5) 79,481 66,233 Properties, less Accumulated Depreciation and Amortization (Note 4) 561,637 535,976
Other Assets and Deferred Charges 8,571 7,260
Total Assets $722,494 $688,445
Liabilities and Shareholders' Equity
Current Liabilities Accounts payable $ 21,945 $ 21,891 Income taxes 824 0 Estimated property taxes 3,174 4,665 Accrued casualty and other reserves (Note 9) 5,400 7,680 Other accrued liabilities 1,712 2,188 -------- -------- Total current liabilities 33,055 36,424
Deferred Income Taxes (Note 7) 128,237 122,520
Reserves and Other Long-Term Liabilities (Note 9) 8,934 6,463
Commitments and Contingencies (Note 9)
Shareholders' Equity Common stock, $6.25 par value; 9,360,000 shares authorized; 9,271,361 shares issued and outstanding 57,946 57,946 Capital surplus 101 101 Retained earnings 507,813 476,808 Net unrealized (loss) gain on investments available for sale (Note 5) (884) 891 Treasury stock at cost (271,361 shares) (12,708) (12,708) -------- -------- Total shareholders' equity 552,268 523,038
Total Liabilities and Shareholders' Equity $722,494 $688,445
(See accompanying notes to consolidated financial statements.)
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share amounts)
Years ended December 31 1994 1993 1992 -------------------------- Operating Revenues Transportation $163,098 $162,318 $156,955 Realty - Land Sales 16,100 2,320 5,947 - Rents & Other 20,346 16,458 12,853 -------- -------- -------- Total Revenues 199,544 181,096 175,755
Operating Expenses Transportation 120,147 117,789 119,630 Realty 16,796 13,403 11,069 General and Administrative 16,046 16,766 15,153 -------- -------- -------- Total Expenses 152,989 147,958 145,852
Operating Profit 46,555 33,138 29,903
Other Income(Expense): Dividends 320 326 207 Interest income 4,614 3,920 5,899 Interest expense (48) 0 (1) Gains on sales and other disposition of properties 4,038 535 1,540 Other (net) 193 322 608
Total Other Income (Expense): 9,117 5,103 8,253
Income before income taxes and cumulative effect of change in accounting principle 55,672 38,241 38,156
Income Taxes: (Note 7) Current 13,990 11,807 12,542 Deferred 7,077 5,655 1,569 -------- -------- -------- Total Income Taxes 21,067 17,462 14,111
Income before cumulative effect of change in accounting principle 34,605 20,779 24,045 Cumulative effect of change in accounting principle for income taxes 0 1,504 0
Net Income 34,605 22,283 24,045 Retained Earnings: Balance at beginning of year $476,808 $458,125 $437,681 Cash dividends (3,600) (3,600) (3,601) -------- -------- -------- Balance at Year-end $507,813 $476,808 $458,125
Per share data: Cash dividends $ 0.40 $ 0.40 $ 0.40
Income before cumulative effect of change in accounting principle $ 3.85 $ 2.31 $ 2.67 Cumulative effect of change in accounting principle for income taxes 0 .17 0 -------- -------- -------- Net income $ 3.85 $ 2.48 $ 2.67
(See accompanying notes to consolidated financial statements.)
CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands)
Years ended December 31 1994 1993 1992 ------------------------- Cash Flows from Operating Activities:
Net Income $34,605 $22,283 $24,045
Adjustments to reconcile net income to cash generated by operating activities: Cumulative effect of change in accounting principle for income taxes 0 (1,504) 0 Depreciation & amortization 21,747 20,335 18,765 Gains on disposition of assets (4,038) (535) (1,540) Deferred taxes 7,077 5,655 1,569 Changes in operating assets and liabilities: Decrease(increase) in accounts receivable 2,210 771 (2,786) Decrease(increase) in other current assets 713 (559) 978 Increase in other assets & deferred chgs (1,311) (468) (436) Increase(decrease) in accounts payable 54 (121) 1,930 Decrease in estimated property taxes (1,491) (1,742) (5,738) (Decrease)increase in other current liabilities (1,932) 216 (2,816) Increase(decrease) in reserves and other long-term liabilities 2,471 (390) (707) ---------------------------- Net cash generated by operating activities 60,105 43,941 33,264
Cash Flows from Investing Activities:
Purchases of properties (49,274) (54,743) (54,193) Purchases of investments Available for sale (17,364) (31,394) (76,231) Held to maturity (58,349) (18,419) (15,843) Maturities & redemption of investments Available for sale 12,799 19,372 50,445 Held to maturity 49,847 44,992 51,216 Proceeds from disposition of assets 6,633 2,157 4,024 ---------------------------- Net cash used in investing activities (55,708) (38,035) (40,582)
Cash Flows from Financing Activities:
Payment of dividends (3,600) (3,600) (3,601)
Net cash used in financing activities (3,600) (3,600) (3,601)
Net Increase (Decrease) in Cash and Cash Equivalents 797 2,306 (10,919)
Cash and Cash Equivalents at Beginning of Year 14,438 12,132 23,051 ---------------------------- Cash and Cash Equivalents at End of Year $15,235 $14,438 $12,132
Supplemental Disclosure of Cash Flow Information: Cash paid during the year for income taxes $14,312 $11,166 $14,200
(See accompanying notes to consolidated financial statements)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1994, 1993, and 1992
1. Nature of Business
The principal operations of Florida East Coast Industries, Inc. (the "Company") and its subsidiaries relate directly to the transportation of goods by rail and to the development, leasing, and sale of real estate. Both the transportation and realty operations are located within the state of Florida.
2. Majority Stockholder
The Nemours Foundation, which is funded by the Alfred I. duPont Testamentary Trust, owns approximately 5% of the Company's common stock. The Alfred I. duPont Testamentary Trust owns approximately 69% of the common stock of St. Joe Paper Company, which owns, through a subsidiary, approximately 54% of the Company's common stock. The payment of dividends by the Company was the only significant transaction with St. Joe Paper Company or its affiliates in 1994, 1993, or 1992.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions and balances have been eliminated in consolidation.
Transportation Properties
Transportation properties are stated at historical cost and are depreciated and amortized on the straight-line method at rates established by the Interstate Commerce Commission (ICC). Gains and losses on normal retirements of these items are credited or charged to accumulated depreciation. Miscellaneous physical property consists principally of non-depreciable real property.
Real Estate Properties
Real estate properties are stated at historical cost. Depreciation is computed using the straight-line method over estimated asset lives of 15 years for land improvements and 18 to 40 years for buildings.
Materials and Supplies
New materials and supplies are stated principally at average cost which is not in excess of replacement cost. Used materials are stated at an amount which does not exceed estimated realizable value.
Earnings per Share
Earnings per common share is based on the weighted average number of shares of common stock outstanding during the year (9,000,000 in 1994, 1993, and 1992).
Reclassification
Certain prior year amounts have been reclassified to conform with the current year's presentation.
Cash and Cash Equivalents
For purposes of Cash Flows, Cash and Cash Equivalents include cash on hand, bank demand accounts, money market accounts, and overnight repurchase agreements having original maturities of less than three months.
Fair Value of Financial Instruments
The carrying amounts of the following financial instruments approximate fair value because of their short maturity: cash and cash equivalents, short- term investments, accounts receivable, accounts payable, estimated property taxes, and other accrued liabilities. The fair value of other investments differs from the carrying value as disclosed in Note 5.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Effective January 1, 1993, the Company adopted Statement 109 and has reported the cumulative effect of that change in the method of accounting for income taxes in the 1993 consolidated statement of income.
Pursuant to the deferred method under APB Opinion 11, which was applied in 1992, deferred income taxes are recognized for income and expense items that are reported in different years for financial reporting purposes and income tax purposes using the tax rate applicable for the year of the calculation. Under the deferred method, deferred taxes are not adjusted for subsequent changes in tax rates.
Investments
Investments consist principally of municipal bonds, common stocks, redeemable preferred stocks, and U.S. Government obligations. The Company adopted the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," as of December 31, 1993. Under Statement 115, the Company classifies its debt and marketable equity securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near-term. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold until maturity. All other securities not included in trading or held-to-maturity are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of shareholders' equity until realized.
A decline in the market value of any available-for-sale or held-to- maturity security below cost that is deemed other than temporary is charged to earnings resulting in the establishment of a new cost basis for the security.
Realized gains and losses for securities classified as available-for-sale and held-to-maturity are included in earnings and are derived using the specific identification method for determining the cost of securities sold.
4. Properties
Properties consist of (in thousands):
1994 1993 --------------------- Transportation Properties Road $302,625 $291,436 Equipment 191,928 189,897 Miscellaneous Physical Property 5,435 5,435 Construction in Progress 3,007 1,421 -------- -------- 502,995 488,189
Less Accumulated Depreciation & Amortization 187,906 179,184 -------- -------- $315,089 $309,005
Real Estate Properties Land and Land Improvements $113,615 $106,832 Buildings 128,059 107,915 Construction in Progress 25,148 27,515 -------- -------- 266,822 242,262
Less Accumulated Depreciation & Amortization 20,274 15,291 -------- -------- $246,548 $226,971
Real Estate properties having a net book value of $142.2 million at December 31, 1994, are leased under non-cancelable operating leases with aggregate rentals of $74.3 million which are due in years 1995-1999 in the amounts of $20.9, $18.6, $15.9, $11.4, and $7.5 million, respectively.
5. Investments
Other investments, including certain held-to-maturity investments which mature within one year, are held as a development fund created to accumulate capital expected to be required for future improvement of the Company's real estate properties.
Investments at December 31, 1994, consist of (in thousands):
Unrealized Carrying Fair Holding Cost Value Value Gain(Loss) -------- -------- ------- ---------- Short-term investments Held-to-Maturity: U.S. Government securities $11,035 $11,035 $11,500 $ 465 Tax exempt municipals 3,157 3,157 3,091 (66) Certificates of Deposit 16 16 16 0 ------- ------- ------- -------- $14,208 $14,208 $14,607 $ 399
Other investments Available-for-sale U.S. Government securities Maturing in 1 to 5 years $ 1,220 $ 1,186 $ 1,186 $ (34) Tax exempt municipals Maturing in 1 to 5 years 4,457 4,236 4,236 (221) Maturing in 5 to 10 years 22,148 21,278 21,278 (870) Maturing in more than 10 years 3,364 3,272 3,272 (92) Equity securities 8,620 8,398 8,398 (222) ------- ------- ------- -------- $39,809 $38,370 $38,370 $(1,439)
Held-to-Maturity U.S. Government securities Maturing within one year $40,080 $40,080 $41,136 $ 1,056 Mortgage backed securities Maturing in 1 to 5 years 243 243 787 544 Other corporate debt securities Maturing in 5 to 10 years 788 788 1,173 385 ------- ------- ------- -------- $41,111 $41,111 $43,096 $ 1,985 ------- ------- ------- -------- $80,920 $79,481 $48,466 $ 546 ------- ------- ------- --------
Investments at December 31, 1993, consist of (in thousands):
Short-term investments Held-to-Maturity: U.S. Government securities $13,545 $13,545 $14,000 $ 455 Tax exempt municipals 2,401 2,401 2,376 (25) Certificates of Deposit 2,063 2,063 2,063 0 ------- ------- ------- -------- $18,009 $18,009 $18,439 $ 430
Marketable securities Available-for-Sale Tax exempt municipals Maturing in 1 to 5 years $ 500 $ 519 $ 519 $ 19 Maturing in 5 to 10 years 24,079 25,264 25,264 1,185 Maturing in more than 10 years 5,382 5,604 5,604 222 Equity securities 9,177 9,202 9,202 25 ------- ------- ------- -------- $39,138 $40,589 $40,589 $ 1,451
Held-to-Maturity U.S. Government securities Maturing within one year $23,927 $23,927 $24,696 $ 769 Mortgage backed securities Maturing in 1 to 5 years 916 916 1,491 575 Other corporate debt securities Maturing in 5 to 10 years 801 801 801 0 ------- ------- ------- ------- $25,644 $25,644 $26,988 $ 1,344 ------- ------- ------- ------- $64,782 $66,233 $67,577 $ 2,795
Gross unrealized holding gains and gross unrealized holding losses at December 31, 1994, were $2,449,000 and $1,504,000, respectively. Gross unrealized holding gains and gross unrealized holding losses at December 31, 1993, were $3,667,000 and $442,000, respectively.
6. Collateral Trust 5% Bonds
There are outstanding at December 31, 1994, and 1993 $12,880,575 and $13,135,325, respectively, of the Company's Collateral Trust 5% Bonds (the "Bonds") due in 2001. Direct obligations of the U.S. Government, the cash flows from which approximately coincide as to timing and amount with the scheduled interest and principal payments on the Bonds, are held in trust for the purpose of making such payments. Accordingly, the Bonds are considered to be extinguished.
7. Income Taxes
Total income tax expense for the years ended December 31, 1994, 1993, and 1992 was allocated as follows (in thousands):
1994 1993 1992 ------------------------ Income from continuing operations $21,067 $17,462 $14,111 Shareholders' equity for recognition of unrealized holding (loss) gain on investments available-for- sale (1,115) 560 0 ------------------------ $19,952 $18,022 $14,111
Income tax expense attributable to income from continuing operations differed from the amounts computed by applying the statutory federal income tax rate to pre-tax income as a result of the following:
1994 1993 1992 ------------------------ Amount computed at statutory federal rate $19,485 $13,384 $12,973 Effect of dividends received exclusion and tax-free interest (700) (538) (242) State taxes (net of federal benefit) 1,979 1,357 1,359 Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and rates 0 2,893 0 Other (net) 303 366 21 ------------------------ $21,067 $17,462 $14,111
The tax effects of temporary differnces that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 1994, and 1993, are as follows:
1994 1993 ---------------- Deferred tax assets: Accrued casualty & other reserves $ 5,395 $ 6,400 Amortization of fiber optic income 612 735 Unrealized holding loss on investments available-for-sale 555 0 Other 285 349 ----------------- Total deferred tax assets $ 6,847 $ 7,484
Deferred tax liabilities: Properties, principally due to differences in depreciation $ 99,361 $ 97,655 Deferred gain on land sales 29,183 24,893 Deferred profit on bonds extinguished 1,846 2,027 Unrealized holding gain on investments available-for-sale 0 560 Other 1,099 1,029 ----------------- Total deferred tax liabilities $131,489 $126,164 ----------------- Net deferred tax liabilities $124,642 $118,680
There was no valuation allowance provided for deferred tax assets as of December 31, 1994, and 1993.
Included in other current assets are net current deferred tax assets of $3,595 and $3,840 at December 31, 1994, and 1993, respectively.
For the year ended December 31, 1992, deferred income tax of $1,569 resulted from differences in the recognition of income and expense for income tax and financial reporting purposes. The sources and tax effects of those differences are accelerated depreciation of $932, accrued causalty reserves of $1,072, and other, net of ($435).
8. Segment Information
The Company operates principally in two industries: transportation and realty. Its transportation operations consist primarily of railroad-related activities and some trucking operations. Realty operations are involved in real estate development, rentals and related management, and operations of properties. Operating revenues represent sales to unaffiliated customers, as reported in the Company's Consolidated Statement of Income and Retained Earnings. Operating profit is operating revenue less directly traceable costs and expenses.
Identifiable assets by industry are those assets that are used in the Company's operations in each industry.
Information by industry segment follows (in thousands):
1994 1993 1992 ---- ---- ---- Operating Revenue: Transportation $163,098 $162,318 $156,955 Realty 36,446 18,778 18,800 ------------------------------ $199,544 $181,096 $175,755
Operating Profit: Transportation $ 28,506 $ 29,346 $ 23,814 Realty 18,049 3,792 6,089 ------------------------------ $ 46,555 $ 33,138 $ 29,903
Identifiable Assets: Transportation $357,670 $352,465 $351,850 Realty 251,348 232,068 199,763 Corporate 113,476 103,912 118,806 ------------------------------ $722,494 $688,445 $670,419
Capital Expenditures: Transportation $ 21,259 $ 19,775 $ 18,040 Realty 28,015 34,968 36,153 ------------------------------ $ 49,274 $ 54,743 $ 54,193 Depreciation: Transportation $ 16,740 $ 16,356 $ 15,567 Realty 5,007 3,979 3,198 ------------------------------ $ 21,747 $ 20,335 $ 18,765
9. Commitments and Contingencies
The Company has retained certain self-insurance risks with respect to losses for third-party liability, property damage, and group health insurance coverage provided employees. The Company is the defendant and plaintiff in various lawsuits resulting from its operations. In the opinion of management, adequate provision has been made in the financial statements for the estimated liability which may result from disposition of such lawsuits.
The Company is subject to proceedings arising out of environmental laws and regulations, which primarily relate to the disposal and use of fuel and oil used in the transportation business. It is the Company's policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and an amount can be reasonably estimated.
The Company is currently a party to, or involved in, legal proceedings directed at the cleanup of two Superfund sites. The Company has accrued its allocated share of the total estimated cleanup costs for these two sites. Based upon management's evaluation of the other potentially responsible parties, the Company does not expect to incur additional amounts even though the Company has joint and several liability. Other proceedings involving environmental matters such as alleged discharge of oil or waste material into water or soil are pending against the Company.
It is difficult to quantify future environmental costs because many issues relate to actions by third parties or changes in environmental regulation. However, based on information presently available, management believes that the ultimate disposition of currently known matters will not have a material effect on the financial position or liquidity of the Company, but could be material to the results of operations of the Company in any one period. As of December 31, 1994, and 1993, the aggregate environmental related accruals were $3,500,000. Environmental liabilities are paid over an extended period and the timing of such payments cannot be predicted with any confidence.
Independent Auditors' Report
The Board of Directors and Shareholders Florida East Coast Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Florida East Coast Industries, Inc., and subsidiaries as of December 31, 1994, and 1993, and the related consolidated statements of income and retained earnings, and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Florida East Coast Industries, Inc., and subsidiaries as of December 31, 1994, and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles.
As discussed in note 3 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standard (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," at December 31, 1993. As discussed in note 3, the Company adopted the provisions of the Financial Accounting Standards Board's SFAS No. 109, "Accounting for Income Taxes," effective January 1, 1993.
s/s KPMG Peat Marwick Certified Public Accountants
Jacksonville, Florida February 10, 1995
SUPPLEMENTARY INFORMATION
Dec. 31 Sept. 30 June 30 March 31 ------- -------- ------- -------- QUARTERLY FINANCIAL DATA Operating Revenues $48,723 $45,729 $46,682 $58,410 Other Income $ 2,962 $ 3,447 $ 992 $ 1,716 Operating Expenses $37,177 $39,164 $38,421 $38,227 Income before cumulative effect of change in accounting principal $ 8,568 $ 6,712 $ 5,119 $14,206 Cumulative effect of change in accounting principle for income taxes (1) $ 0 $ 0 $ 0 $ 0 ----------------------------------- Net Income $ 8,568 $ 6,712 $ 5,119 $14,206
Per Common Share: Income before cumulative effect of change in accounting principle $ 0.95 $ 0.75 $ 0.57 $ 1.58 Cumulative effect of change in accounting principle for income taxes (1) $ 0 $ 0 $ 0 $ 0 ----------------------------------- Net Income Per Common Share $ 0.95 $ 0.75 $ 0.57 $ 1.58
Dec. 31 Sept. 30 June 30 March 31 ------- -------- ------- -------- QUARTERLY FINANCIAL DATA Operating Revenues $47,544 $43,891 $45,642 $44,019 Other Income $ 1,226 $ 2,186 $ 39 $ 1,652 Operating Expenses $37,605 $33,908 $38,802 $37,643 Income before cumulative effect of change in accounting principle $ 6,770 $ 4,459 $ 4,420 $ 5,130 Cumulative effect of change in accounting principle for income taxes (1) $ 0 $ 0 $ 0 $ 1,504 ----------------------------------- Net Income $ 6,770 $ 4,459 $ 4,420 $ 6,634
Per Common Share: Income before cumulative effect of change in accounting principle $ 0.75 $ 0.50 $ 0.49 $ 0.57 Cumulative effect of change in accounting principle for income taxes (1) $ 0 $ 0 $ 0 $ 0.17 ----------------------------------- Net Income Per Common Share $ 0.75 $ 0.50 $ 0.49 $ 0.74
(1) As discussed in Note 3, the Company adopted Statement No. 109 effective January 1, 1993. Accordingly, the cumulative effect of this change in accounting principle was recorded in the first quarter of 1993.
FLORIDA EAST COAST INDUSTRIES, INC. SCHEDULE II (CONSOLIDATED) - VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992 (Dollars in thousands)
Balance at Additions Beginning Charged Balance at of Year to Expense Payments End of Year ---------- ---------- -------- -----------
RESERVES INCLUDED IN LIABILITIES
Casualty & other reserves $14,143 $2,584 $5,122 $11,605[a]
Casualty & other reserves $14,145 $2,443 $2,445 $14,143[a]
Casualty & other reserves $16,691 $ 724 $3,270 $14,145[a]
[a] Includes $5,400, $7,680, and $7,292 in current liabilities at December 31, 1994, December 31, 1993, and December 31, 1992, respectively. The remainder is included in "Reserves and Other Long-Term Liabilities."
FLORIDA EAST COAST INDUSTRIES, INC. SCHEDULE III (CONSOLIDATED) - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1994, 1993, AND 1992 (in thousands)
Initial Cost to Company
Description Encumbrances Land ----------- ------------ ---- Duval County Office Buildings (5) -0- $ 1,153 Office/Showroom/Warehouses (8) -0- 1,502 Office/Warehouse (1) -0- 0 Land w/Infrastructure -0- 6,593 Unimproved Land & Misc. Assets -0- 915
St. Johns County Unimproved Land -0- 2,631
Flagler County Unimproved Land -0- 3,218
Volusia County Unimproved Land -0- 3,651
Brevard County Office/Showroom/Warehouse -0- 73 Land w/Infrastructure -0- 3,797 Unimproved Land -0- 4,846
Indian River County Unimproved Land -0- 218
St. Lucie County Unimproved Land -0- 639
Martin County Unimproved Land -0- 4,671
Putnam County Unimproved Land -0- 2
Palm Beach County Office/Showroom/Warehouse (1) -0- 113 Rail Warehouses (2) -0- 449 Cross Docks (4) -0- 117 Land w/Infrastructure -0- 1,259 Unimproved Land -0- 1,596
Broward County Rail Warehouse -0- 85 Unimproved Land -0- 733
Manatee County Unimproved Land & Misc. Assets -0- 14
Dade County Cross Dock (1) -0- 137 Double Front Load Warehouse (1) -0- 768 Rail Warehouses (6) -0- 808 Office/Showroom/Warehouses (5) -0- 1,003 Office Warehouses (4) -0- 1,462 Front Load Warehouses (5) -0- 1,943 Office Service Center (1) -0- 285 Land w/Infrastructure -0- 2,577 Unimproved Land & Misc. Assets -0- 15,725 ------- TOTALS $62,983
Initial Cost to Company
Costs Capitalized Buildings & Subsequent to Description Improvements Acquisition ----------- ------------ ------------- Duval County Office Buildings (5) $6,200 $ 26,508 Office/Showroom/Warehouses (8) 0 19,158 Office/Warehouse (1) 0 4,076 Land w/Infrastructure 0 6,786 Unimproved Land & Misc. Assets 0 1,548
St. Johns County Unimproved Land 0 411
Flagler County Unimproved Land 0 1,137
Volusia County Unimproved Land 0 501
Brevard County Office/Showroom/Warehouse 0 1,900 Land w/Infrastructure 0 0 Unimproved Land 0 191
Indian River County Unimproved Land 0 189
St. Lucie County Unimproved Land 0 5
Martin County Unimproved Land 0 2,344
Putnam County Unimproved Land 0 0
Palm Beach County Office/Showroom/Warehouse (1) 0 2,879 Rail Warehouses (2) 0 4,110 Cross Docks (4) 0 3,763 Land w/Infrastructure 0 0 Unimproved Land 0 0
Broward County Rail Warehouse 1,701 Unimproved Land 0 701
Manatee County Unimproved Land & Misc. Assets 0 78
Dade County Cross Dock (1) 0 1,018 Double Front Load Warehouse (1) 0 5,485 Rail Warehouses (6) 0 24,607 Office/Showroom/Warehouses (5) 0 14,782 Office Warehouses (4) 0 12,854 Front Load Warehouses (5) 0 16,066 Office Service Center (1) 0 2,106 Land w/Infrastructure 0 7,854 Unimproved Land & Misc. Assets 0 9,733 ------ --------- TOTALS $6,200 $172,491
Carried at Close of Period
Land & Bldgs. & Description Land Improv. Improv. Total ----------- ------------ -------- ----- Duval County Office Buildings (5) $ 3,917 $ 29,944 $ 33,861 Office/Showroom/Warehouses (8) 3,930 16,730 20,660 Office/Warehouse (1) 1,073 3,003 4,076 Land w/Infrastructure 13,379 0 13,379 Unimproved Land & Misc. Assets 2,289 174 2,463
St. Johns County Unimproved Land 3,042 0 3,042
Flagler County Unimproved Land 4,355 0 4,355
Volusia County Unimproved Land 4,152 0 4,152
Brevard County Office/Showroom/Warehouse 438 1,535 1,973 Land w/Infrastructure 3,797 0 3,797 Unimproved Land 5,037 0 5,037
Indian River County Unimproved Land 407 0 407
St. Lucie County Unimproved Land 644 0 644
Martin County Unimproved Land 7,015 0 7,015
Putnam County Unimproved Land 2 0 2
Palm Beach County Office/Showroom/Warehouse (1) 599 2,393 2,992 Rail Warehouses (2) 557 4,002 4,559 Cross Docks (4) 1,262 2,618 3,880 Land w/Infrastructure 1,259 0 1,259 Unimproved Land 1,596 0 1,596
Broward County Rail Warehouse 405 1,381 1,786 Unimproved Land 1,434 0 1,434
Manatee County Unimproved Land & Misc. Assets 92 0 92
Dade County Cross Dock (1) 137 1,018 1,155 Double Front Load Warehouse (1) 1,409 4,844 6,253 Rail Warehouses (6) 4,837 20,578 25,415 Office/Showroom/Warehouses (5) 3,150 12,635 15,785 Office Warehouses (4) 2,838 11,478 14,316 Front Load Warehouses (5) 4,326 13,683 18,009 Office Service Center (1) 680 1,711 2,391 Land w/Infrastructure 10,431 0 10,431 Unimproved Land & Misc. Assets 25,126 332 25,458 -------- -------- --------- TOTALS $113,615 $128,059 $241,674
Life on Which Depreciation in Date First Latest Income Accumulated Started or Statement is Description Depreciation Acquired Computed ----------- ------------ ---------- --------------- Duval County Office Buildings (5) $ 5,141 1985 3 to 40 years Office/Showroom/Warehouses (8) 3,378 1987 3 to 40 years Office/Warehouse (1) 106 1994 3 to 40 years Land w/Infrastructure 0 Various Unimproved Land & Misc. Assets 173 Various 3 to 40 years
St. Johns County Unimproved Land 0 Various
Flagler County Unimproved Land 0 Various
Volusia County Unimproved Land 0 Various
Brevard County Office/Showroom/Warehouse 352 1988 3 to 40 years Land w/Infrastructure 0 Various Unimproved Land 0 Various
Indian River County Unimproved Land 0 Various
St. Lucie County Unimproved Land 0 Various
Martin County Unimproved Land 0 Various
Putnam County Unimproved Land 0 Various
Palm Beach County Office/Showroom/Warehouse (1) 647 1986 3 to 40 years Rail Warehouses (2) 1,034 1982 3 to 40 years Cross Docks (4) 747 1987 3 to 40 years Land w/Infrastructure 0 Various Unimproved Land 0 Various
Broward County Rail Warehouse 492 1986 3 to 40 years Unimproved Land 0 Various
Manatee County Unimproved Land 0 Various
Dade County Cross Dock (1) 210 1987 3 to 40 years Double Front Load Warehouse (1) 321 1993 3 to 40 years Rail Warehouses (6) 1,554 1988 3 to 40 years Office/Showroom/Warehouses (5) 1,826 1988 3 to 40 years Office/Warehouses (4) 1,352 1990 3 to 40 years Front Load Warehouses (5) 989 1991 3 to 40 years Office Service Center (1) 61 1994 3 to 40 years Land w/Infrastructure 0 Various Unimproved Land & Misc. Assets 1,891 Various ------- TOTALS $20,274
Notes:
(A) The aggregate cost of real estate owned at December 31, 1994, for federal income tax purposes is approximately $140,875,139.
(B) Reconciliation of real estate owned (in thousands of dollars):
1994 1993 1992 ---- ---- ---- Balance at Beginning of Year $214,747 $184,565 $155,251 Amounts Capitalized 28,015 30,672 29,452 Amounts Retired or Adjusted (1,088) (490) (138) -------------------------------- Balance at Close of Period $241,674 $214,747 $184,565
(C) Reconciliation of accumulated depreciation (in thousands of dollars):
1994 1993 1992 ---- ---- ---- Balance at Beginning of Year $ 15,291 $ 11,310 $ 8,112 Depreciation Expense 5,007 3,979 3,198 Amounts Retired or Adjusted (24) 2 0 -------------------------------- Balance at Close of Period $ 20,274 $ 15,291 $ 11,310
Independent Auditors' Report
The Board of Directors and Shareholders Florida East Coast Industries, Inc.:
Under date of February 10, 1995, we reported on the consolidated balance sheets of Florida East Coast Industries, Inc., and subsidiaries as of December 31, 1994, and 1993, and the related consolidated statements of income and retained earnings, and cash flows for each of the years in the three-year period ended December 31, 1994, as contained in the 1994 Annual Report to Stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1994. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As discussed in note 3 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standard (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," at December 31, 1993. As discussed in note 3, the Company adopted the provisions of the Financial Accounting Standards Board's SFAS No. 109, "Accounting for Income Taxes," effective January 1, 1993.
s/s KPMG PEAT MARWICK LLP Certified Public Accountants
Jacksonville, Florida February 10, 1995
21. Listing of parent and subsidiaries
Parent - Florida East Coast Industries, Inc.
Subsidiaries - Florida East Coast Railway Company
Florida East Coast Highway Dispatch Company
Florida East Coast Inspections, Inc.
Florida East Coast Deliveries, Inc.
Railroad Concrete Crosstie Corporation
Railroad Track Construction Company
Operations Unlimited, Inc.
Florida Express Carrier, Inc.
Gran Central Corporation
Dade County Land Holding Company, Inc.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each of the undersigned Directors of Florida East Coast Industries, Inc., a Florida corporation ("Corporation"), which is about to file with the Securities and Exchange Commission, Washington, DC 20549, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994, hereby constitutes and appoints Winfred L. Thornton and T.N. Smith as his true and lawful attorneys-in-fact and agent, and each of them with full power to act, without the other in his stead, in any and all capacities, to sign the 1994 Annual Report of Florida East Coast Industries, Inc., on Form 10-K and to file on behalf of the Corporation such Annual Report and amendments with all exhibits thereto, and any and all other information and documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agent, and each of them, full power and authority to do and perform any and all acts and things requisite and ratifying and confirming all that each said attorneys-in-fact and agent or any one of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on the date indicated below:
s/s Winfred L. Thornton, Chairman, s/s T.N. Smith, Vice President President, CEO, and Director and Secretary
s/s J. Nelson Fairbanks, Director s/s J.C. Belin, Director
s/s A.C. Harper, Director s/s R.W. Wyckoff, Director
s/s M.E. Rinker, Sr., Director s/s J.H. Mercer, Jr., Director
s/s J.J. Parrish, III, Director s/s W.E. Durham, Jr., Vice President and Director
s/s C.F. Zellers, Jr., Vice President and Director
Dated: March 24, 1995