FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-7159
FLORIDA ROCK INDUSTRIES, INC.
(exact name of registrant as specified in its charter)
Florida 59-0573002
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
155 East 21st Street, Jacksonville, Florida 32206
(Address of principal executive offices)
(Zip Code)
904/355-1781
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of January 26, 2005: 43,401,908 shares of
$.10 par value common stock.
FLORIDA ROCK INDUSTRIES, INC.
FORM 10-Q
QUARTER ENDED DECEMBER 31, 2004
CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
Item 4. Controls and Procedures 14
Part II. Other Information
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit 11. Computation of Earnings Per Common Share 21
Exhibit 31(a)Certification of John D. Baker, II 22
Exhibit 31(b)Certification of John D. Milton, Jr. 23
Exhibit 31(c)Certification of Wallace A. Patzke, Jr. 24
Exhibit 32. Certification under Section 906 of Sarbanes-Oxley Act 25
of 2002
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FLORIDA ROCK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, September 30,
2004 2004
ASSETS
Current assets:
Cash and cash equivalents $ 13,440 45,891
Accounts receivable, less allowance
for doubtful accounts of $2,446
($2,555 at September 30, 2004) 106,793 107,000
Inventories 37,735 35,100
Current deferred income taxes 5,209 5,454
Prepaid expenses and other 6,782 4,891
Total current assets 169,959 198,336
Other assets 68,013 67,243
Goodwill 148,391 148,391
Property, plant and equipment, at cost:
Depletable land 128,072 127,773
Other land 77,179 75,626
Plant and equipment 829,373 818,378
Construction in process 25,014 15,784
1,059,638 1,037,561
Less accumulated depreciation,
depletion and amortization 525,812 516,602
Net property, plant and equipment 533,826 520,959
$ 920,189 934,929
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 55,594 47,121
Dividends payable 8,680 52,017
Federal and state income taxes 11,569 7,770
Accrued payroll and benefits 25,623 31,974
Accrued insurance reserve 9,391 6,627
Accrued liabilities, other 7,343 11,271
Long-term debt due within one year 2,496 2,121
Total current liabilities 120,696 158,901
Long-term debt, excluding current installment 41,575 41,927
Deferred income taxes 79,714 79,181
Accrued employee benefits 18,416 18,268
Long-term accrued insurance reserves 10,443 10,443
Other accrued liabilities 5,363 5,329
Total liabilities 276,207 314,049
Shareholders' equity:
Preferred stock, no par value; 10,000,000
shares authorized, none issued - -
Common stock, $.10 par value; 50,000,000
shares authorized, 43,401,908 shares issued
(43,347,634 shares at September 30, 2004) 4,340 4,335
Capital in excess of par value 26,121 24,431
Retained earnings 613,521 592,114
Total shareholders' equity 643,982 620,880
$ 920,189 934,929
See accompanying notes.
FLORIDA ROCK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
Three Months Ended
December 31,
2004 2003
Net sales $245,340 220,308
Freight revenues 5,588 5,084
Total sales 250,928 225,392
Cost of sales 175,798 161,521
Freight expense 5,591 5,068
Total cost of sales 181,389 166,589
Gross profit 69,539 58,803
Selling, general and administrative 22,638 22,218
Gain on sale of real estate 46 12,932
Operating profit 46,947 49,517
Interest expense (430) (627)
Interest income 73 288
Other income (expense), net 940 1,021
Income before income taxes 47,530 50,199
Provision for income taxes 17,443 18,071
Net income $ 30,087 32,128
Earnings per share:
Basic $ .69 .75
Diluted $ .68 .73
Cash dividends per common share $ .20 .167
Weighted average shares used
in computing earnings per share:
Basic 43,361 43,087
Diluted 44,313 43,955
See accompanying notes.
FLORIDA ROCK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003
(In thousands)
(Unaudited)
2004 2003
Cash flows from operating activities:
Net income $30,087 32,128
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation, depletion and amortization 15,882 15,598
Deferred income tax provision 778 6,926
Provision for doubtful accounts (137) 117
Gain on disposition of property, plant and
equipment (591) (13,238)
Net changes in operating assets and
liabilities:
Accounts receivable 344 6,559
Inventories (2,635) 3,490
Prepaid expenses and other (1,891) (2,285)
Accounts payable and accrued liabilities 4,895 (4,759)
Other, net (508) (655)
Net cash provided by operating activities 46,224 43,881
Cash flows from investing activities:
Purchases of property, plant and equipment (19,389) (10,997)
Net proceeds from the sale of property, plant
and equipment and other assets 650 19,361
Additions to other assets (1,042) (20,074)
Long-term cash released from escrow 2,915 -
Business acquisition (10,234) -
Collections of notes receivable - 18
Net cash used in investing activities (27,100) (11,692)
Cash flows from financing activities:
Repayment of long-term debt (1,254) (25,099)
Exercise of employee stock options 1,696 556
Payment of dividends (52,017) (7,154)
Net cash used in financing activities (51,575) (31,697)
Net increase(decrease)in cash and cash equivalents(32,451) 492
Cash and cash equivalents at beginning of year 45,891 38,135
Cash and cash equivalents at end of period $13,440 38,627
See accompanying notes.
FLORIDA ROCK INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The accompanying condensed consolidated financial statements
include the accounts of Florida Rock Industries, Inc. and its
more than 50% owned subsidiaries (collectively, the
"Company"). These statements have been prepared in accordance
with accounting principles generally accepted in the United
States of America for interim financial information and the
instructions to Form 10-Q and do not include all the
information and footnotes required by accounting principles
generally accepted in the United States of America for
complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the results
for the interim periods have been included. Operating results
for the three months ended December 31, 2004, are not
necessarily indicative of the results that may be expected for
the fiscal year ended September 30, 2005. The accompanying
condensed consolidated financial statements and the
information included under the heading "Management's
Discussion and Analysis" should be read in conjunction with
the consolidated financial statements and related notes of
Florida Rock Industries, Inc. included in its Annual Report on
Form 10-K for the year ended September 30, 2004.
(2) Stock Option Plan
The Company accounts for stock options under the intrinsic
value method of APB Opinion No. 25. The Company has not
incurred any compensation cost using the intrinsic value
method for employee stock options. If the fair value based
method had been used the following table summarizes the
proforma effect (in thousands except for per share amounts):
Three Months Ended
December 31,
2004 2003
Reported net income $ 30,087 32,128
Compensation cost
determined under fair
value based method, net
of income taxes (682) (437)
Proforma net income $ 29,405 31,691
Basic earnings per share:
Reported net income $ .69 .75
Compensation cost, net
of income taxes (.01) (.01)
Proforma $ .68 .74
Diluted earnings per share:
Reported net income $ .68 .73
Compensation cost, net
of income taxes (.02) (.01)
Proforma $ .66 .72
In December 2004, the FASB issued SFAS No. 123R, Shared-Based
Compensation, which requires companies to expense stock
options effective July 1, 2005. The Company is evaluating
the impact of this statement.
(3) Asset Retirement Obligations
Statement No. 143 requires that the fair value of a liability
for an asset retirement obligation be recognized in the period
in which it is incurred if a reasonable estimate of fair value
can be made. The fair value of the liability is added to the
carrying amount of the associated asset and this additional
carrying amount is depreciated over the life of the asset.
The liability is accreted at the end of each period through
charges to operating expenses. If the obligation is
ultimately settled for other than the carrying amount of the
liability, a gain or loss will be recognized on settlement.
The Company cannot reasonably estimate the fair value of the
asset retirement obligation related to substantially all of
its concrete products segment and all of the cement segment
since the Company is unable to estimate the date the
obligation would be incurred or the cost of the obligation.
For the aggregates segment, an asset retirement obligation was
provided where the Company has a legal obligation to reclaim
the mining site.
The analysis of asset retirement obligation for the three
months ended December 31, 2004 and 2003 is as follows (in
thousands):
2004 2003
Balance at beginning of period $9,033 $8,649
Additional liabilities 44 -
Accretion of expenses 100 90
Payment/settlement of obligations (72) (26)
Balance at end of period $9,105 8,713
(4) Employee Benefits
For the three months ended December 31, 2004 and 2003, no
pension income or expense was recorded. Based on current
estimates, there is no requirement to make cash contributions
for fiscal 2005.
(5) Inventories
Inventories consisted of the following (in thousands):
December 31, September 30,
2004 2004
Finished products $ 22,422 19,878
Raw materials 8,076 8,123
Work in progress 794 449
Parts and supplies 6,443 6,650
$ 37,735 35,100
The excess of current cost over the LIFO stated values of
inventories was $6,627,000 at December 31, 2004 and $6,619,000
at September 30, 2004.
During the first quarter of fiscal 2005, inventory quantities
had a net increase which combined with increased unit costs in
fiscal 2005 resulted in an increase to the LIFO reserves, the
effect of which increased costs of sales by $8,000. During
the first quarter of fiscal 2004, certain inventory quantities
were reduced which resulted in a liquidation of the LIFO
reserve, the effect of which decreased cost of sales by
$120,000.
(6) Gain on Sale of Real Estate
On November 12, 2003, the Company closed on all remaining
installments of a sale of a former quarry site. Gross
proceeds of the sale were $20,250,000 resulting in a pre-tax
gain of approximately $12,927,000 ($8,273,000 after tax) for
the three months ended December 31, 2003.
(7) Business Segments
The Company has identified three business segments, each of
which is managed separately along product lines. All of the
Company's operations are in the Southeastern and Mid-Atlantic
States. The Aggregates segment mines, processes and sells
construction aggregates. The Concrete products segment
produces and sells ready-mix concrete and other concrete
products. The Cement and Calcium segment produces and sells
cement and calcium products to customers in Florida and
Georgia.
Operating results and certain other financial data for the
Company's business segments are as follows (in thousands):
Three Months Ended
December 31,
2004 2003
Net sales, excluding
freight
Construction aggregates $ 71,397 69,990
Concrete products 157,613 135,026
Cement and calcium 44,952 41,005
Intersegment sales (28,622) (25,713)
Total net sales,
excluding freight $245,340 220,308
Operating profit
Construction aggregates $ 18,825 31,387
Concrete products 21,457 12,620
Cement and calcium 10,729 8,711
Corporate overhead (4,064) (3,201)
Total operating $ 46,947 49,517
Profit
Identifiable assets, at quarter end
Construction aggregates $350,931 346,963
Concrete products 259,279 214,318
Cement and calcium 222,148 229,865
Unallocated corporate
assets 61,224 44,702
Cash items 13,440 38,627
Investments in affiliates 13,167 13,776
Total identifiable
Assets $920,189 888,251
Construction aggregates operating profit for the three
months ended December 31, 2003 includes gains on the sale
of real estate of $12,932,000.
(8) Supplemental Disclosures of Cash Flow Information
Cash paid during the three months ended December 31, 2004
and 2003 for certain expense items are as follows (in
thousands):
2004 2003
Interest expense, net of
amount capitalized $ 453 522
Income taxes $12,020 7,894
The following schedule summarizes non-cash investing and
financing activities for the three months ended December 31,
2004 and 2003 (in thousands):
2004 2003
Additions to property, plant
and equipment from exchanges $ 31 15
Additions to property, plant and
equipment financed by issuing debt $1,276 -
(9) Acquisition
On October 1, 2004, the Company acquired a small quarry
operation and certain facilities on the Ohio River for
$10,234,000 and royalties to be paid as mining occurs. A
preliminary purchase price allocation has been made pending
receipt of appraisals on various assets. The result of
operations of this operation is immaterial to the results
of the Company.
(10) Contingent Liabilities
In November 2000, the United States Environmental
Protection Agency through the offices of the United States
Attorney for the District of Columbia commenced an
investigation of DC Materials, Inc. and Cardinal Concrete
Company, both subsidiaries of the Company, with respect to
a parcel of real property leased by DC Materials, Inc. in
the District of Columbia. The investigation consists of
looking into possible violations of the Clean Water Act in
connection with the discharge of runoff water at the
aforementioned site. On September 10, 2003, a former
employee of this facility was convicted of violating the
Clean Water Act. As a result, he has been barred from
receiving federal government contracts or benefits at this
facility. Neither the Company nor its subsidiaries have
been barred from receiving government contracts or benefits
at this facility. The Company and its subsidiaries are
cooperating fully with the investigation, which is still
continuing. On April 27, 2004, the United States
Environmental Protection Agency requested the Company to
provide information on the Company's environmental
compliance programs to show that the Company is a
responsible party that should not be barred from receiving
federal government contracts or benefits. The Company
provided the requested information by letter dated June 24,
2004. Based in part on advice of counsel, in the opinion
of management, the outcome is not expected to have a
material adverse effect on the Company's financial position
or results of operations.
A lawsuit was filed by three national environmental groups
on August 20, 2002 challenging federal agency decisions to
authorize continued limestone mining in Miami-Dade County,
Florida "Lake Belt." Specifically, the environmental
plaintiffs challenge the U.S. Army Corps of Engineers' (the
"Corps") April 2002 decision to issue twelve new mining
permits pursuant to Section 404 of the federal Clean Water
Act, and the U.S. Fish and Wildlife Service's June 2001
decision not to require formal consultation under the
federal Endangered Species Act regarding those permits.
The environmental plaintiffs claim that the two federal
agencies violated the Clean Water Act, the Endangered
Species Act, the Migratory Bird Treaty Act, and the
National Environmental Policy Act. They asked the court to
set aside the April 2002 permits and to enjoin the Corps
from "authorizing any further mining within the Lake Belt
project area unless and until the Corps fully complies with
the requirements of the Clean Water Act, Migratory Bird
Treaty Act, and National Environmental Policy Act."
The mining companies holding the April 2002 permits were
not named as defendants in the lawsuit by the environmental
plaintiffs; however, since the mining companies would be
adversely affected if the environmental groups were to
obtain all of the relief they seek, on September 18, 2002,
two Motions to Intervene were filed on behalf of several of
the mining companies, including the Company which motions
were granted by the Court on February 23, 2004.
On March 25, 2004, the plaintiffs filed a Motion to Amend
Complaint. The amended complaint dropped plaintiffs'
claim under the Migratory Bird Treaty Act and added a claim
that the Corps violated the National Environmental Policy
Act by not preparing a supplemental environmental impact
statement. Plaintiffs' amended complaint did not include
a motion for a preliminary injunction. Oral argument on
the summary judgment motions was held on October 22, 2004;
however, no ruling has been issued.
The Company is unable to assess at this time, with any
degree of certainty, the impact on the Company and its
future financial performance of an adverse judgment in this
lawsuit.
In December 2004, the Company's management discovered that
certain activities at the Company's Miami Quarry may be in
violation of the terms of wetland dredge-and-fill permits
issued by the U.S. Army Corps of Engineers and the Florida
Department of Environmental Protection. Upon discovery,
the Company halted the activities in question pending an
internal investigation. The Company voluntarily
disclosed the activities to the U.S. Army Corps of
Engineers and Florida Department of Environmental
Protection. On December 30, 2004, the Florida Department
of Environmental Protection issued a warning letter to the
Company. On January 13, 2005, the U.S. Army Corps of
Engineers issued a Notice of Noncompliance to the Company.
If the activities in question were found to be violations
of the permits, the Company could possibly be subject to
administrative, civil, or criminal enforcement penalties.
The Company currently is in discussions with the two
agencies to resolve any potential issues related to these
activities, including enforcement actions. The Company is
unable to assess at this time, with any degree of
certainty, the impact on the Company and its future
financial performance of any potential actions by the
government agencies based on these activities.
The Company and its subsidiaries are involved in litigation
on a number of other matters and are subject to certain
claims which arise in the normal course of business, none
of which, in the opinion of management, are expected to
have a materially adverse effect on the Company's
consolidated financial statements.
The Company has retained certain self-insurance risks with
respect to losses for third party liability and property
damage.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview. The Company is one of the nation's leading producers
of construction aggregates, a major provider of ready-mix concrete
and concrete products in the Southeastern and mid Atlantic States
and a significant supplier of cement in Florida and Georgia. We
operate through three business segments: construction aggregates,
concrete products and cement and calcium. The construction
aggregates segment is engaged in the mining, processing,
distribution and sale of sand, gravel and crushed stone. The
concrete products segment is engaged in production and sale of
ready-mix concrete, concrete block, prestressed concrete as well as
sales of other building materials. The cement and calcium products
segment is engaged in the production and sale of Portland and
masonry cement, the importation of cement and slag which are either
sold or ground or blended and then sold and the sale of calcium
products to the animal feed industry.
For the contribution made to net sales and operating profit
from each business segment, see Note 7 to the Condensed Consolidated
Financial Statements.
Our operations are influenced by a number of external and
internal factors. External factors include weather, competition,
levels of construction activity in the Company's markets, the cost
and availability of money, appropriations and construction contract
lettings by federal and state governments, fuel costs,
transportation costs, driver availability, availability and
affordability of clinker and cement, reliability and affordability
of ocean shipping vessels to deliver clinker and cement, labor costs
and inflation. Internal factors include sales mix, plant location,
quality and quantities of aggregates reserves, capacity utilization
and other operating factors.
During August and September 2004, the southeastern United States
was affected by four hurricanes and one tropical storm. These
storms caused a temporary disruption in our business. After the
storms, the focus was on restoring conditions rather than commencing
new construction. In addition, rail operations were interrupted
resulting in restricted delivery of product to our terminals.
This resulted in a negative impact on sales volumes in all of our
southern operations early in the first quarter.
Financial results will be affected by planned maintenance at the
cement plant since these costs, which can be significant, are
expensed when incurred. The Company expensed planned maintenance of
$2,100,000 in the first quarter of fiscal 2005, as compared to
$2,300,000 in the first quarter of fiscal 2004. The plant was shut
down for twelve days in the first quarter of fiscal 2005 and
fourteen days in the first quarter of fiscal 2004 for planned
maintenance.
Our insurance program consists of the Company self-insuring a
portion of the claims and paying premiums for coverage in excess of
this self-insurance retention. The self-insurance retention level
per claim is determined by comparing the premium for the coverage
versus the potential exposure. For the automobile and general
liability insurance programs, self-insurance retention is
$3,000,000. For workers compensation insurance program, during
fiscal 2004 the self-insurance retention was $500,000 and for fiscal
2005 this was increased to $1,000,000.
Operating Results. For the first quarter of fiscal 2005,
which ended December 31, 2004, consolidated sales increased 11.3% to
$250,928,000 from $225,392,000 in the same quarter last year.
The increase in sales was due to increased revenues in all three
segments. Revenues in the concrete products segments increased
primarily due to an increase in the average selling price and to a
lesser extent increased volumes. Revenues in the aggregates segment
increased as a result of higher average selling prices partially
offset by a 3.5% decrease in the volumes. The volume decreases were
primarily related to lower sales volumes at our distribution
terminals due to transportation issues in moving product from our
producing locations and lower volumes in our northern and Georgia
markets. Revenues increased in the cement and calcium segment due
to the higher cement prices and higher volumes at our cement
grinding operations partially offset by lower volumes at our
Newberry cement plant.
Gross profit for the first quarter of fiscal 2005 increased 18.3% to
$69,539,000 from $58,803,000 for the same quarter last year. Gross
profit margin for the first quarter of fiscal 2005 increased to
27.7% from 26.1% for the same period last year. Gross profit and
margin improved in our concrete products and cement and calcium
segments. The improvement in the cement and calcium segment is
due to improved pricing. The improvement in gross profit in the
concrete products segment was due to volume improvements which
lowered the per unit cost and higher sales prices. Gross profit in
the Aggregates segment decreased as a result of volume decreases and
higher fuel and repair costs. Consolidated gross profit was
negatively impacted this quarter by an increase of $2,771,000 in
fuel costs, an increase in repairs and maintenance of $2,043,000 and
an increase of $621,000 in electric costs.
Selling, general and administrative expenses for the first quarter
of fiscal 2005 increased to $22,638,000 as compared to $22,218,000
last year constituting 9.0% of sales as opposed to 9.9% last year.
Operating profit decreased to $46,947,000 in the first quarter of
2005 as compared to $49,517,000 for the same period last year.
Operating profit last year included the sale of the former quarry
site at Naples, Florida. Gross proceeds of the sale were
$20,250,000 resulting in a pre-tax gain of approximately $12,927,000
($8,273,000 after tax) for the first quarter of fiscal 2004. As
discussed in gross profit, the Company had an increase in the gross
profit for the concrete products and cement and calcium segments
while the Aggregates segment had a decrease in gross profit.
Interest expense for the first quarter of fiscal 2005 decreased to
$430,000 from $627,000 for the same quarter last year. This
decrease is attributable to lower debt outstanding under the
Company's revolver partially offset by a slight increase in average
interest rates.
Interest income for the first quarter of fiscal 2005 decreased to
$73,000 as compared to $288,000 for the same quarter last year.
Included in other income is equity in operating results of our 50%
owned joint ventures. The equity in these ventures was a gain of
$468,000 for the first quarter of fiscal 2005 as compared to a gain
of $655,000 last year.
Income tax expense decreased $628,000 for the first quarter of
fiscal 2005. This is due to lower income before taxes primarily
due to gain on the sale of real estate partially offset by an
increase in the tax rate to 36.7% versus 36.0% last year. This
increase in the effective income tax rate was due to increased
contribution to earnings from the cement and calcium and concrete
products business segments not subject to percentage depletion.
Liquidity and Capital Resources. For the first three months
of fiscal 2005, cash provided by operating activities of $46,224,000
and exercise of stock options of $1,696,000 along with cash
available at the beginning of the period funded the repayment of
$1,254,000 of debt, purchases of property, plant and equipment of
$19,389,000 and payment of dividends of $52,017,000.
During the first quarter of fiscal 2005, cash flow provided by
operations increased as compared to the same period last year
primarily due to increased earnings before gain on disposition of
assets, an increase in accounts payable and accrued liabilities.
For the first quarter of fiscal 2005, cash flow used in investing
activities was $27,100,000. This resulted from purchases of
property, plant and equipment of $19,389,000 and $10,234,000 used to
purchase a quarry operation. Proceeds from sales of property,
plant and equipment was $650,000.
Cash flow used for financing activities was $51,575,000 during the
first quarter of fiscal 2005 primarily from the payment of dividends
including a special dividend on October 1, 2004.
For the first quarter of fiscal 2004, cash provided by operating
activities of $43,881,000 and proceeds from sale of property, plant
and equipment of $19,361,000 funded the repayment of $25,099,000 of
debt, purchases of property, plant and equipment of $10,997,000,
additions to other assets of $20,074,000 and payment of dividends of
$7,154,000.
During the first quarter of fiscal 2004, the major reason for the
increase in cash flow provided by operations was the increase in
earnings and an increase in deferred taxes.
Cash flow used in investing activities was $11,692,000 for the first
quarter of fiscal 2004. This resulted from purchases of property,
plant and equipment of $10,997,000 and payment of policy loans on
life insurance policies and investment of other assets of
$19,361,000. Proceeds from sales of property, plant and equipment
was $20,074,000 from the closing of the remaining installment of a
sale of a former quarry.
Cash flow used for financing activities was $31,697,000 in the first
quarter of fiscal 2004. During the period, $25,099,000 of
revolving credit and long-term debt was repaid from excess cash flow
and payment of dividends of $7,154,000.
Cash generated by operating activities is used to fund the capital
expenditure program, dividend payments and if there is excess cash,
it is used to reduce revolving credit facilities. If there is a
shortfall, borrowings are made under the revolving credit
facilities. Based on current expectations, management believes that
its internally generated cash flow and access to existing credit
facilities are sufficient to meet the liquidity requirements
necessary to fund operations, capital requirements, debt service and
future dividend payments. At December 31, 2004, there was
available $250,000,000 under a long-term revolver and $65,000,000
available under overnight lines of credit. In addition, there
is approximately $30,000,000 that could be re-borrowed under
insurance policies.
Working capital at December 31, 2004 was $49,263,000 as compared to
$39,435,000 at September 30, 2004. The primary reason for the
increase was cash generated from operations.
While the Company is affected by environmental regulations, such
regulations are not expected to have a major effect on the Company's
capital expenditures or operating results.
Critical Accounting Policies. The Condensed Consolidated
Financial Statements and Notes to Condensed Consolidated Financial
Statements contain information that is pertinent to Management's
Discussion and Analysis. The preparation of financial statements
in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and
assumptions about future events that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities. There have been no changes in Critical Accounting
Policies as disclosed in the Form 10-K for the year ended September
30, 2004.
Related Party Transactions. Patriot Transportation Holding,
Inc. ("Patriot"), a related party, hauls diesel fuel and other
supplies for the Company. Charges for such services are based on
prevailing market prices. The Company also leases various
aggregate mining and other properties paying rent or royalties based
on long-term contracts entered into during mid 1980's and early
1990's. In addition, the Company provides administrative service
to Patriot and Patriot provides construction management services to
the Company. These services are provided at market prices.
Outlook. For the near term, we remain optimistic about our
markets. Residential construction is still the strongest driver
and it remains vulnerable to any material increases in mortgage
rates.
Forward-Looking Statements. Certain matters discussed in this
report contain forward-looking statements that are subject to risks
and uncertainties that could cause actual results to differ
materially from those indicated by such forward-looking statements.
These forward-looking statements relate to, among other things,
capital expenditures, liquidity, capital resources, and competition
and may be indicated by words or phrases such as "anticipate,"
"estimate," "plans," "project," "continuing," "ongoing," "expects,"
"contemplates," "management believes," "the Company believes," "the
Company intends," and similar words or phrases. The following
factors are among the principal factors that could cause actual
results to differ materially from the forward-looking statements:
availability and terms of financing; the weather; competition;
levels of construction activity in the Company's markets; cement
shipments; fuel and electric costs; transportation costs; inflation;
quality and quantities of the Company's aggregates reserves;
residential and nonresidential construction; public spending for
federal highways and infrastructure; governmental regulations; ocean
shipping rates; and management's ability to determine appropriate
sales mix, plant location and capacity utilization.
However, this list is not a complete statement of all potential
risks or uncertainties. These forward-looking statements are made as
of the date hereof based on management's current expectations and
the Company does not undertake, and affirmatively disclaims, an
obligation to update such statements, whether as a result of new
information, future events or otherwise. Additional information
regarding these and other risks factors may be found in the
Company's other filings made from time to time with the Securities
and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There are no material changes to the disclosures made in Form 10-K
for the fiscal year ended September 30, 2004 on this matter.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
As required by Rule 13a-15 under the Exchange Act, as of
December 31, 2004, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures. This evaluation was carried
out under the supervision and with the participation of the
Company's management, including the Company's President and
Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer. The evaluation conducted by the Company's
President and Chief Executive Officer, Chief Financial Officer
and Chief Accounting Officer has provided them with reasonable
assurance that the Company's disclosure controls and procedures
are effective in alerting them in a timely manner to material
information required to be included in periodic SEC filings.
Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required
to be disclosed in Company reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in Company
reports filed under the Exchange Act is accumulated and
communicated to management, including the Company's Chief
Executive Officer, Chief Financial Officer and Chief Accounting
Officer, as appropriate, to allow timely decisions regarding
required disclosures.
(b) Changes in Internal Controls. There have been no changes in
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Note 10 to the Condensed Consolidated Financial Statements
included in this Form 10-Q is incorporated by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The response to this item is submitted as a
separate section entitled "Exhibit Index" starting on page
19 of this Form 10-Q.
(b) Reports on Form 8-K. During the three months ended
December 31, 2004, the Company filed the following reports
on Form 8-K:
On November 19, 2004, a Form 8-K was filed reporting under
Item 7.01 "Regulation FD Disclosure" the filing of a
Registration Statement on Form S-8.
On November 22, 2004, the Company filed a Form 8-K filing a
copy of the Company's press release on earnings for the
quarter ended September 30, 2004 under Item 2.02
"Disclosure of Results of Operations and Financial
Condition" the Item 9.01 "Financial Statements and
Exhibits".
On December 7, 2004, a Form 8-K was filed reporting under
Item 4.01 "Changes in Registrant's Certifying Accountants"
and Item 9.01 "Financial Statements and Exhibits" the
dismissal of Deloitte Touche LLP as the Company's principal
public accountant.
On December 9, 2004, a Form 8-K was filed reporting under
Item 1.01 "Entry into a Material Definitive Agreement"
additional compensation for non-employee directors in the
form of stock options.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
January 27, 2005 FLORIDA ROCK INDUSTRIES, INC.
JOHN D. BAKER, II
JOHN D. BAKER, II
President and Chief Executive
Officer
JOHN D. MILTON, JR.
JOHN D. MILTON, JR.
Executive Vice President,
Treasurer and Chief Financial
Officer
WALLACE A. PATZKE, JR.
WALLACE A. PATZKE, JR.
Vice President, Controller
and Chief Accounting Officer
FLORIDA ROCK INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER, 2004
EXHIBIT INDEX
(3)(a)(1) Restated Articles of Incorporation of Florida
Rock Industries, Inc., filed with the Secretary
of State of Florida on May 9, 1986, incorporated
by reference to an exhibit previously filed with
Form 10-Q for the quarter ended December 31,
1986. File No. 1-7159.
(3)(a)(2) Amendment to the Articles of Incorporation of
Florida Rock Industries, Inc. filed with the
Secretary of State of Florida on February 19,
1992, incorporated by reference to an exhibit
previously filed with Form 10-Q for the quarter
ended September 30, 1993. File No. 1-7159.
(3)(a)(3) Amendments to the Articles of Incorporation of
Florida Rock Industries, Inc. filed with the
Secretary of the State of Florida on February 7,
1995, incorporated by reference to an appendix
to the Company's Proxy Statement dated December
15, 1994.
(3)(a)(4) Amendment to the Articles of Incorporation of
Florida Rock Industries, Inc. filed with the
Secretary of State of Florida on February 4,
1998, incorporated by reference to an exhibit
previously filed with Form 10-Q for the quarter
ended March 31, 1998. File No. 1-7159.
(3)(a)(5) Amendment to the Articles of Incorporation of
Florida Rock Industries, Inc. filed with the
Secretary of State of Florida on May 5, 1999.
A form of such amendment was previously filed
as Exhibit 4 to the Company Form 8-K dated May
5, 1999 and is incorporated by reference
herein. File No.1-7159.
(3)(b)(1) Restated Bylaws of Florida Rock Industries,
Inc., adopted December 1, 1993, incorporated by
reference to an exhibit previously filed with
Form 10-K for the fiscal year ended September
30, 1993. File No. 1-7159.
(3)(b)(2) Amendment to the Bylaws of Florida Rock
Industries, Inc. adopted October 5, 1994,
incorporated by reference to an exhibit
previously filed with Form 10-K for the fiscal
year ended September 30, 1994. File No. 1-
7159.
(3)(b)(3) Amendment to the Bylaws of Florida Rock
Industries, Inc. adopted February 4, 1998,
incorporated by reference to an exhibit
previously filed with Form 10-Q for the quarter
ended March 31, 1998. File No. 1-7159.
(3)(b)(4) Amendment to the Bylaws of Florida Rock
Industries, Inc. adopted December 5, 2001.
incorporated by reference to an exhibit
previously filed with Form 10-Q for the quarter
ended December 31, 2001. File No. 1-7159.
(3)(b)(5) Amendment to the Bylaws of Florida Rock
Industries, Inc. adopted May 5, 2004.
(4)(a) Articles III, VII, and XIII of the Articles of
Incorporation of Florida Rock Industries, Inc.
incorporated by reference to exhibits previously
filed with Form 10-Q for the quarter ended
December 31, 1986 and Form 10-K for the fiscal
year ended September 30, 1993 and Articles XIV
and XV, of the Articles of Incorporation of
Florida Rock Industries, Inc. incorporated by
reference as appendix to the Company's Proxy
Statement dated December 15, 1994. File No. 1-
7159.
(4)(b) Credit Agreement dated as of May 27, 2004 among
Florida Rock Industries, Inc.; Wachovia Bank,
N.A.; Bank of America, N.A.; SunTrust Bank;
Wachovia Capital Markets, LLC and Banc of
America Securities, LLC.
(4)(c) The Company and its consolidated subsidiaries
have other long-term debt agreements which do
not exceed 10% of the total consolidated assets
of the Company and its subsidiaries, and the
Company agrees to furnish copies of such
agreements and constituent documents to the
Commission upon request.
(4)(d) Rights Agreements, dated as of May 5, 1999
between the Company and First Union National
Bank, incorporated by reference to Exhibit 4 to
the Company's Form 8-K dated May 5, 1999. File
No. 1-7159.
(10)(a) Employment Agreement dated June 12, 1972 between
Florida Rock Industries, Inc. and Charles J.
Shepherdson, Sr. and form of Addendum thereto,
incorporated by reference to an exhibit
previously filed with Form S-1 dated June 29,
1972. File No. 2-44839.
(10)(b) Addendums dated April 3, 1974 and November 18,
1975 to Employment Agreement dated June 12, 1972
between Florida Rock Industries, Inc., and
Charles J. Shepherdson, Sr., incorporated by
reference to an exhibit previously filed with
Form 10-K for fiscal year ended September 30,
1975. File No. 1-7159.
(10)(c) Amended Medical Reimbursement Plan of Florida
Rock Industries, Inc., effective May 24, 1976,
incorporated by reference to an exhibit
previously filed with Form 10-K for the fiscal
year ended September 30, 1980. File No. 1-7159.
(10)(d) Amendment No. 1 to Amended Medical Reimbursement
Plan of Florida Rock Industries, Inc. effective
July 16, 1976, incorporated by reference to an
exhibit previously filed with Form 10-K for the
fiscal year ended September 30, 1980. File No.
1-7159.
(10)(e) Tax Service Reimbursement Plan of Florida Rock
Industries, Inc. effective October 1, 1976,
incorporated by reference to an exhibit
previously filed with Form 10-K for the fiscal
year ended September 30, 1980. File No. 1-
7159.
(10)(f) Amendment No. 1 to Tax Service Reimbursement
Plan of Florida Rock Industries, Inc.,
incorporated by reference to an exhibit
previously filed with Form 10-K for the fiscal
year ended September 30, 1981. File No. 1-
7159.
(10)(g) Amendment No. 2 to Tax Service Reimbursement
Plan of Florida Rock Industries, Inc.,
incorporated by reference to an exhibit
previously filed with Form 10-K for the fiscal
year ended September 30, 1985. File No. 1-
7159.
(10)(h) Summary of Management Incentive Compensation
Plan as amended effective October 1, 1992.
Previously filed with Form 10-K for the fiscal
year ended September 30, 1993. File No. 1-7159.
(10)(i) Florida Rock Industries, Inc. Management
Security Plan, incorporated by reference to an
exhibit previously filed with Form 10-K for the
fiscal year ended September 30, 1985. File No.
1-7159.
(10)(j) Various mining royalty agreements with Patriot
Transportation Holding, Inc. or its subsidiary,
none of which are presently believed to be
material individually, but all of which may be
material in the aggregate, incorporated by
reference to exhibits previously filed with Form
10-K for the fiscal year ended September 30,
1986. File No. 1-7159.
(10)(k) Florida Rock Industries, Inc. 1996 Stock Option
Plan, incorporated by reference to an appendix
to the Company's Proxy Statement dated December
18, 1995. File No. 1-7159.
(10)(l) Florida Rock Industries, Inc. 2000 Stock Option
Plan, incorporated by reference to an exhibit
previously filed with the Proxy Statement dated
December 20, 2000. File No. 1-7159.
(10)(m) Amendment to Florida Rock Industries, Inc. 2000
Stock Option Plan, incorporated by reference to
an exhibit previously filed with Form 10-Q for
the Quarter ended March 31, 2003.
File No. 1-7159
(11) Computation of Earnings Per Common Share.
(14) Financial Code of Ethical Conduct. Previously
filed with Form 10-K for the fiscal year ended
September 30, 2003. File No. 1-7159
(31)(a) Certification of John D. Baker, II
(31)(b) Certification of John D. Milton, Jr.
(31)(c) Certification of Wallace A. Patzke, Jr.
(32) Certification under Section 906 of Sarbanes-
Oxley Act of 2002