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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File number 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)
Registrant's telephone number, including area code: 904/355-1781
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.[ ]
At December 1, 1997 the aggregate market value of the shares of Common Stock
held by non-affiliates of the registrant was approximately $361,195,632. At
such date there were 18,805,684 shares of the registrant's Common Stock
outstanding.
Documents Incorporated by Reference
Portions of the Florida Rock Industries, Inc. 1997 Annual Report to
stockholders are incorporated by reference in Parts I, II, III and IV.
Portions of the Florida Rock Industries, Inc. Proxy Statement dated December
15,1997 are incorporated by reference into Parts I and III.
PART I
Item 1. BUSINESS.
Florida Rock Industries, Inc., which was incorporated in Florida in 1945, and
its subsidiaries (the "Company"), are principally engaged in the production and
sale of ready mixed concrete and the mining, processing and sale of sand,
gravel and crushed stone ("construction aggregates"). The Company also
produces and sells concrete block and prestressed concrete and sells other
building materials. The Company has commenced construction of a Portland
Cement plant and a calcium plant. Substantially all of the Company's
operations are conducted within the Southeastern United States, primarily in
Florida, Georgia, Virginia, Maryland, Washington, D.C. and North Carolina.
Information as to the Company's business and new developments is presented
under the caption "Operating Review" on pages 6 and 7 of the accompanying 1997
Annual Report to stockholders and such information is incorporated herein by
reference. Information concerning the Company's new cement plant is present
on page 13 under the caption "New Cement Plant" and on page 6 under the caption
"Cement Plant" in the accompanying 1997 Annual Report to stockholders and such
information is incorporated herein by reference.
Information as to principal classes of products and services and major markets
is presented on pages 8 and 9 of the accompanying 1997 Annual Report to
stockholders, under the caption "Management Analysis", and such information is
incorporated herein by reference.
Sales are subject to factors affecting the level of general construction
activity including the level of interest rates, availability of funds for
construction, appropriations by federal and state governments for construction,
past overbuilding, labor relations in the construction industry, energy
shortages, material shortages, weather, climate, and other factors affecting
the construction industry in general. A decrease in the level of general
construction activity in any of the Company's market areas caused by any of the
above factors may have a material adverse effect on sales and income derived
therefrom. Labor disputes in the construction industry may result in work
stoppages which may interrupt sales in the affected area. Precipitation or
freezing temperatures may cause a reduction in construction activity and
related demand for the Company's products. Freezing temperatures generally do
not affect the Company's Florida operations. However, during the winter
months, sales and income of the Company's Maryland, Virginia, North Carolina,
Washington, D.C., and Georgia operations are adversely affected by the impact
of inclement weather on the construction industry.
The Company operates seven crushed stone plants, nine sand plants and one
industrial sand plant in Florida. It operates five crushed stone plants in
Georgia; two sand and gravel plants and three crushed stone plants in Maryland;
and two crushed stone plants and one sand and gravel plant in Virginia. The
Company also operates aggregates distribution terminals in Central Florida;
Northern Virginia; Norfolk/Virginia Beach, Virginia; Baltimore, Maryland; the
Eastern Shore of Maryland and Washington, D.C. The Company's construction
aggregates operations are spread throughout the Southeast. The Company sells
construction aggregates throughout most of Florida with the principal exception
of the panhandle. In Georgia the Company primarily serves the regional
construction markets around Griffin, Macon, Rome and the southern portion of
the Atlanta market. The Rome quarry also sells crushed limestone to a cement
mill. In Virginia the Company primarily serves the Richmond, Norfolk/Virginia
Beach and Northern Virginia markets. In Maryland the principal markets served
are the greater Baltimore area, Frederick and Montgomery Counties and the
Eastern Shore of Maryland from waterfront distribution yards. In Florida and
Georgia shipments are made by rail and truck. In Virginia and Maryland the
Company primarily serves the regional construction markets around Richmond,
Virginia and the greater Baltimore area by truck; and the Company's marine
division ships materials by barge throughout the Chesapeake Bay area, along the
James River between Richmond and Norfolk/Virginia Beach and as far north as
Woodbridge, Virginia on the Potomac River.
The Company manufactures and markets ready mixed concrete, concrete block and
prestressed concrete. It also markets other building materials. The Company's
concrete operations serve: most of Florida with the principal exception of the
panhandle; Southern Georgia; central Maryland; the Richmond-Petersburg-Hopewell
and Norfolk/Virginia Beach areas of Virginia along with Northeastern Virginia
and Washington, D.C.
Since ready mixed concrete hardens rapidly, delivery is generally confined to
a radius of approximately 20 to 25 miles from the producing plant. The bulk
weight of concrete block limits its delivery to approximately 40 miles from the
producing plant.
The Company's annual single-shift capacity at its 10 operating block plants is
approximately 23 million 8x8x16 equivalent units of block.
At most of the Company's Florida and Georgia concrete facilities, it purchases
and resells building material items related to the use of ready mixed concrete
and concrete block.
Prestressed concrete products for commercial developments and bridge and
highway construction are produced in Wilmington, North Carolina.
During fiscal 1997 the Company purchased cement from 11 suppliers, the largest
of which supplied approximately 31% of the cement used by the Company in its
ready mixed concrete, concrete block, and prestressed concrete operations. At
the present time there is an adequate supply of cement in the areas in which
the Company operates.
In the fiscal year ended September 30, 1997 approximately 48% of the coarse
aggregates and 57% of the sand used in the Company's concrete operations were
produced by the Company. The remaining aggregates were purchased from other
suppliers whose geographic locations coupled with transportation costs make it
more economical to serve several of the Company's plants.
The Company's construction aggregates operations encounter competition in most
of their markets. Price, plant location, transportation costs, service,
product quality and reputation are the major factors which affect competition
within a given market.
The Company's concrete operations encounter competition in all of their markets
ranging from one to nine competitors. Additionally, the Company's concrete
products are competitive with certain other building materials such as asphalt,
brick, lumber, steel and other products. Price, plant location, service,
product quality and reputation are the major factors which affect competition
within a given market.
The Company does not believe that backlog information accurately reflects
anticipated annual revenue or profitability from year to year.
While the Company is affected by environmental regulations, such regulations
are not expected to have a major effect on the Company's capital expenditures
or operating results. Additional information concerning environmental matters
is presented in Item 3 "Legal Proceedings" of this Form 10-K and such
information is incorporated herein by reference.
The Company employed approximately 2,448 persons at September 30, 1997.
Item 2. PROPERTIES.
The Company's principal properties are located in Florida, Georgia, North
Carolina, Virginia, Washington, D.C. and Maryland. The following table
summarizes the Company's principal construction aggregates production
facilities and estimated reserves at September 30, 1997. Reserves and acres
of the operations acquired on October 3, 1997 are included in the following
table.
Tons Tons of
Delivered in Estimated Approximate
Year Ended Reserves Acres
9/30/97 9/30/97 (L-Leased)(a) Lease
(000's) (000's) (O-Owned) Description
The Company has five
limestone quarries in
Florida located at Gulf
Hammock (which also
produces agricultural
limestone), Brooksville,
Ft. Myers (which also
produces baserock), 12 leases
Naples, and Miami (which L-19,801 expiring from
also produces baserock) 9,745 171,000 O- 3,235 1998 to 2046
The Company has four
granite and one lime-
stone quarries in
Georgia located at
Griffin, Forest Park, 11 leases
Macon, Tyrone and Rome L-1,524 expiring from
(limestone) 6,674 155,000 O- 163 2000 to 2046
The Company has three
crushed stone plants
located at Havre de
Grace, Frederick, and
Greenspring, Maryland
and two located near L- 41 1 lease
Richmond, Virginia 8,355 156,000 O-1,063 expiring 2018
Tons Tons of
Delivered in Estimated Approximate
Year Ended Reserves Acres
9/30/97 9/30/97 (L-Leased)(a) Lease
(000's) (000's) (O-Owned) Description
The Company has two
baserock plants
located at Ft. Pierce 4 leases
and Sunniland, expiring in
Florida 789 20,000 L-13,831 1998 and 2016
The Company has nine
sand plants located
at Keystone Heights,
Astatula, Lake County,
Marion County (two
locations) Keuka,
Caloosa, Grandin and
Lake Wales, Florida
and three sand and
gravel plants located
at Leonardtown and
Goose Bay, Maryland 20 leases
and Turkey Island, L-12,023 expiring from
Virginia. 7,404 169,000 O- 1906 1998 to 2046
Future reserves:
Sand-two sites
located in Glades 1 lease
County and Lake County L- 390 expiring in
Florida (c) 38,000 O- 324 2024
Limerock: 1 lease
Brooksville, Florida 100,000(b) L- 1,227 expiring in
Newberry, Florida 86,000 O- 258 2046
Granite-two sites located 5 leases
in Muscogee and Paulding L- 384 expiring from
Counties, Georgia 147,000 O- 542 2019 to 2049
Marble-Carroll County,
Maryland 80,000 O- 413
Limestone-Lee County,
Florida (c) 87,000 O- 2,859
(a) Leased acreage includes all properties not owned by the Company as to
which the Company has at least the right to mine construction
aggregates for the terms specified.
(b) Acres are included in the first line of the above table.
(c) All of the required zoning or permits for these locations have not yet
been obtained.
The Company operates eight construction aggregates distribution terminals
located in Florida (two), Maryland (three), Virginia (two) and Washington D.
C. comprising approximately 125 acres, of which the Company owns 99 and leases
26.
The Company has 89 sites for its ready mixed concrete, concrete block and
prestressed concrete plants in Florida, Georgia, North Carolina, Virginia and
Maryland aggregating approximately 659 acres. Of these acres, the Company owns
approximately 510 and leases approximately 149. The lease terms vary from
month-to-month to expiring in 2019.
The Company leases, from FRP Properties, Inc., approximately six acres with two
office buildings in Jacksonville, Florida which are used for its executive
offices. Certain of the Company's subsidiaries lease administrative office
space in Springfield, Virginia and Baltimore, Maryland. Other subsidiaries own
administrative offices in Richmond, Virginia; and Salisbury, Maryland. In
addition, the Company owns approximately 37 acres, some of which are used for
shop facilities and some are held for future plant sites.
The Company owns certain other properties which are summarized as follows:
Approximate
Type Property (1) State Acres
Residential Land Maryland 432
Residential Land New Jersey 33
Industrial/Commercial Virginia 285
Industrial/Commercial Florida 46
Industrial/Commercial Maryland 1,238
Industrial/Commercial North Carolina 27
Agricultural North Carolina 85
(1) The properties owned by the Company are grouped by current or proposed
use. Such use may be subject to obtaining appropriate rezoning, zoning
variances, subdivision approval, permits, licenses, and to compliance with
various zoning, building, environmental and other regulations of various
federal, state, and local authorities.
The Company also owns 1,560 acres in Dade County, Florida. See Part I, Item
3 - Legal Proceedings, of this Form 10-K for additional information on this
property.
At September 30, 1997 certain property, plant and equipment with a carrying
value of $ 9,109,000 was pledged on industrial development revenue bonds and
certain other notes and contracts with an outstanding principal balance
totaling $ 11,249,000 on such date.
Reference is made to certain leases with management-related persons disclosed
in the Company's Proxy Statement, to be filed within 120 days of the close of
the fiscal year on September 30, 1997, and in Note 2 to the Company's
Consolidated Financial Statements included in its Annual Report to stockholders
for the year ended September 30, 1997. Such information is incorporated herein
by reference.
Item 3. LEGAL PROCEEDINGS.
The Company has been advised of soil and groundwater contamination on or near
a site used by the Company as a concrete block manufacturing facility in
Kissimmee, Florida. The contamination by petroleum products apparently
resulted from a leaking underground storage tank on the site. The contaminated
soil and groundwater will have to be remediated in accordance with state and
federal laws. An environmental consulting firm is investigating the site and
has submitted a Contamination Assessment Report ("CAR") to the Florida
Department of Environmental Protection ("DEP") for their review and approval.
By letter dated July 12, 1995, the DEP requested additional site information.
Pursuant to amended petroleum contaminated site cleanup funding procedures, the
DEP notified the Company that it was eligible for state funded remediation
assistance under the Florida Petroleum Liability and Restoration Insurance
Program (FPLRIP) and assigned a site priority ranking score of 56. Future
state assisted rehabilitation will be dictated by the site priority ranking
score and shall be conducted on a pre-approval basis. The Company will seek
reimbursement of past site cleanup costs from the FPLRIP and/or the Florida
Abandoned Tank Restoration Program. This matter has been previously reported
on the Form 10-K for the years ending September 30, 1993, 1994, 1995 and 1996
and on the Form 10-Q for the quarter ending June 30, 1995.
On May 8, 1992, oral arguments were held in the Government's appeal of the U.S.
Claims Court judgment entered in favor of the Company in its inverse
condemnation claim against the U.S. Army Corps of Engineers. The case involves
a 98 acre parcel of a 1560 acre tract with limestone reserves in Dade County,
Florida. On March 10, 1994, the Court of Appeals vacated the U.S. Claims Court
judgment and remanded the case for further proceedings. The Company's petition
for rehearing was denied on June 21, 1994. On September 20, 1994, the Company
filed a petition for writ of certiorari in the U.S. Supreme Court. On January
3, 1995, the U.S. Supreme Court denied the petition for writ of certiorari.
On June 28, 1995, a hearing was held concerning issues to be decided on remand
of the case to the U.S. Court of Federal Claims. A new trial was held on April
15, 1996. This case has been previously reported in the Form 10-K for the
years 1981 through 1991 and the years 1994, 1995 and 1996 and in the Form 10-Q
for the quarters ending June 1986, December 1986, March 1987, June 1988, June
1989, June 1990, June 1992 and December 30, 1994. (U.S. Claims Court, Case No.
266-82L and U.S. Court of Appeals, Case No. 91-5156.)
Note 12 to the Consolidated Financial Statements included in the accompanying
1997 Annual Report to stockholders are incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No reportable events.
EXECUTIVE OFFICERS OF THE COMPANY
Name Age Office Position Since
Edward L. Baker 62 Chairman of the Board May 1989
John D. Baker II 49 President and Chief February 1996
Executive Officer
H. B. Horner 62 Executive Vice President May 1989
C. J. Shepherdson 81 Vice President September 1972
S. Robert Hays 60 Vice President May 1984
Thompson S. Baker II 39 Vice President August 1991
Clarron E. Render, Jr. 55 Vice President August 1991
Fred W. Cohrs 64 Vice President February 1995
James J. Gilstrap 50 Vice President, Treasurer August 1997
and Chief Financial Officer
Dennis D. Frick 55 Secretary October 1992
Wallace A. Patzke, Jr. 50 Vice President, Controller August 1997
and Chief Accounting Officer
John W. Green 45 Assistant Secretary October 1988
In February 1996 John D. Baker II was elected to the additional position of
Chief Executive Officer of the Company. He has served as President of the
Company since May 1989.
Fred W. Cohrs joined the Company in January 1995 and was elected vice president
of the Company in February 1995. In 1994 he was a consultant on various
cement-related projects. From 1991 to 1994 he was a Limited Partner and Chief
Executive Officer of Carolina Cement Company, L.P. (cement manufacturing).
From 1990 to 1991 he was Chairman of the Board and President of Polysius Corp
U.S., an engineering, machinery and process technology company specializing in
cement manufacturing equipment.
James J. Gilstrap joined the Company in March 1997 and was elected Vice
President and Chief Financial Officer in May 1997. In August 1997, Mr.
Gilstrap was elected Treasurer. From 1993 to 1997, he was self employed as
a private investor. From 1984 to 1993, he was a Partner and Executive Vice
President and Chief Financial Officer for The Regency Group, Inc., a holding
company with interests and operations in commercial real estate development,
asset management, brokerage and financial services.
Dennis D. Frick has been with the Company since March 1980 as Associate
Corporate Counsel.
In August 1997, Wallace A. Patzke, Jr. was elected to the additional position
of Chief Accounting Officer. In October 1996, he was elected to the position
of Vice President of the Company. He has served as Controller of the Company
since December 1991.
All other officers have been employed by the Company in their respective
positions for the past five years.
Edward L. Baker and John D. Baker II are brothers. Thompson S. Baker II is the
son of Edward L. Baker.
All executive officers of the Company are elected annually by the Board of
Directors.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There were approximately 1,122 holders of record of Florida Rock Industries,
Inc. common stock, $.10 par value, as of December 1, 1997. The Company's
common stock is traded on the American Stock Exchange (Symbol: FRK).
Information concerning stock prices and dividends paid during the past two
years is included under the caption "Quarterly Results" on page 10 of the
Company's 1997 Annual Report to stockholders and such information is
incorporated herein by reference. Information concerning restrictions on the
payment of cash dividends is included in Note 5 captioned "Lines of credit and
debt" on page 17 of the Company's 1997 Annual Report to stockholders and such
information is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA.
Information required in response to this Item 6 is included under the caption
"Five Year Summary" on page 8 of the Company's 1997 Annual Report to
stockholders, and such information is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information required in response to this Item 7 is included under the captions
"Management Analysis" on pages 8 and 9; "Capital Expenditures" on page 3; in
the first paragraph under the caption "Summary and Outlook" on page 5; and in
Notes 1 through 13 to the Consolidated Financial Statements included in the
accompanying 1997 Annual Report to stockholders and in Item 3 "Legal
Proceedings" of this Form 10-K. Such information is incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required in response to this Item 8 is included under the caption
"Quarterly Results" on page 10 and on pages 10 through 20 of the Company's 1997
Annual Report to stockholders. Such information is incorporated herein by
reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No reportable events.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning directors required in response to this Item 10 is
included under the captions "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement
dated December 15, 1997, and such information is incorporated herein by
reference.
Information concerning executive officers required in response to this Item 10
is included following Item 4 of this Form 10-K.
Item 11. EXECUTIVE COMPENSATION.
Information required in response to this Item 11 is included under the captions
"Executive Compensation", "Compensation Committee Report", "Compensation
Committee Interlocks and Insider Participation", and "Shareholder Return
Performance" in the Company's Proxy Statement dated December 15, 1997, and such
information is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required in response to this Item 12 is included under the captions
"Common Stock Ownership of Certain Beneficial Owners" and "Common Stock
Ownership by Directors and Officers" in the Company's Proxy Statement dated
December 15, 1997, and such information is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required in response to this Item 13 is included under the captions
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" in the Company's Proxy Statement dated
December 15, 1997 and in Note 2 to the Consolidated Financial Statements
included in the accompanying 1997 Annual Report to stockholders, and such
information is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2)Financial Statements and Financial Statement Schedules.
The response to this item is submitted as a separate section. See Index
to Financial Statements and Financial Statement Schedules on page 15 of
this Form 10-K.
(3)Exhibits
The response to this item is submitted as a separate section. See Exhibit
Index on pages 11 through 14 of this Form 10-K.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the three months ended
September 30, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FLORIDA ROCK INDUSTRIES, INC.
Date: December 3, 1997 By JAMES J. GILSTRAP
James J. Gilstrap
Vice President, Treasurer
and Chief Financial Officer
By W. A. Patzke, Jr.
Wallace A. Patzke, Jr.
Vice President, Controller
and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on December 3, 1997.
JOHN D. BAKER II ALBERT D. ERNEST, JR.
John D. Baker II Albert D. Ernest, Jr.
Director, President and Chief Director
Executive Officer
(Principal Executive Officer) LUKE E. FICHTHORN III
Luke E. Fichthorn III
JAMES J. GILSTRAP Director
James J. Gilstrap
Vice President, Treasurer and
Chief Financial Officer FRANK M. HUBBARD
(Principal Financial Officer) Frank M. Hubbard
Director
WALLACE A. PATZKE, JR.
Wallace A. Patzke, Jr.
Vice President, Controller and Chief
Accounting Officer FRANCIS X. KNOTT
(Principal Accounting Officer) Francis X. Knott
Director
EDWARD L. BAKER
Edward L. Baker
Director
RADFORD D. LOVETT
T. S. BAKER II Radford D. Lovett
Thompson S. Baker II Director
Director
W. THOMAS RICE
ALVIN R. CARPENTER W. Thomas Rice
Alvin R. Carpenter Director
Director
C. J. SHEPHERDON
CHARLES H. DENNY III C. J. Shepherdson
Charles H. Denny III Director
Director
FLORIDA ROCK INDUSTRIES, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
EXHIBIT INDEX
[Item 14(a)(3)]
Page No. in
Sequential
Numbering
(2)(a) Agreement and Plan of Reorganization entered into as of
March 5, 1986 between the Company and Florida Rock & Tank
Lines, Inc. ("FRTL") pursuant to the distribution pro rata
to the Company's stockholders of 100% of the outstanding
stock of FRTL has previously been filed as Appendix I to the
Company's Proxy Statement dated June 11, 1986. File No. 1-7159.
(3)(a)(1) Restated Articles of Incorporation of Florida Rock Industries,
Inc., filed with the Secretary of State of Florida on May 9,
1986. 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. Previously filed with Form 10-K for the
fiscal year 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 State of Florida
on February 7, 1995. Previously filed as appendix to the
Company's Proxy Statement dated December 15, 1994.
(3)(b)(1) Restated Bylaws of Florida Rock Industries, Inc., adopted
December 1, 1993. 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. Previously filed with Form 10-K for
the fiscal year ended September 30, 1994. File No. 1-7159.
(4)(a) Articles III, VII, and XIII of the Articles of Incorporation
of Florida Rock Industries, Inc. 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 previously filed as appendix to the Company's Proxy
Statement dated December 15, 1994. File No. 1-7159.
(4)(b)(1) Amended and Restated Revolving Credit and Term Loan Agreement
dated as of December 5, 1990, among Florida Rock Industries,
Inc.; Continental Bank, N. A.;Barnett Bank of Jacksonville, N.
A.; Sun Bank, National Association; Crestar Bank; First Union
National Bank of Florida; The First National Bank of Maryland;
Southeast Bank, N. A.; and Maryland National Bank. Previously
filed with Form 10-K for the fiscal year ended September 30,
1990. File No. 1-7159.
(4)(b)(2) First Amendment dated as of September 30, 1992 to the Amended
and Restated Revolving Credit and Term Loan Agreement dated as
of December 5, 1990. Previously filed with Form 10-K for the
fiscal year ended September 30, 1992. No. 1-7159.
Page No. in
Sequential
Numbering
(4)(b)(3) Second Amendment dated as of June 30, 1994 to the Amended and
Restated Revolving Credit and Term Loan Agreement dated as of
December 5, 1990. Previously filed with Form 10-Q for the
quarter ended June 30, 1994. File No. 1-7159.
(4)(b)(4) Third Amendment dated as of June 30, 1997 to the Amended and
Restated Revolving Credit and Term Loan Agreement dated as of
December 5, 1990. Previously filed with Form 10-Q for the
quarter ended June 30, 1997. File No. 1-7159.
(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.
(10)(a) Retirement Benefits Agreement between Florida Rock Products
Corporation and Thompson S. Baker dated September 30, 1964.
Previously filed with Form S-1 dated June 29, 1972. File No.
2-44839.
(10)(b) Retirement Benefits Agreement between Shands & Baker, Inc.,
and Thompson S. Baker dated September 30, 1964 and amendment
thereto dated September 22, 1970. Previously filed with Form
S-1 dated June 29, 1972. File No. 2-44839.
(10)(c) Employment Agreement dated June 12, 1972 between Florida Rock
Industries, Inc. and Charles J. Shepherdson, Sr. and form of
Addendum thereto. Previously filed with Form S-1 dated June
29, 1972. File No. 2-44839
(10)(d) 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. Previously
filed with Form 10-K for the fiscal year ended September 30,
1975. File No. 1-7159.
(10)(e) Florida Rock Industries, Inc. 1981 Stock Option Plan.
Previously filed with Form S-8 dated March 3, 1982. File No.
2-76407.
(10)(f) Amended Medical Reimbursement Plan of Florida Rock Industries,
Inc., effective May 24, 1976. Previously filed with Form 10-K
for the fiscal year ended September 30, 1980. File No. 1-7159.
(10)(g) Amendment No. 1 to Amended Medical Reimbursement Plan of
Florida Rock Industries, Inc. effective July 16, 1976.
Previously filed with Form 10-K for the fiscal year ended
September 30, 1980. File No. 1-7159
Page No. in
Sequential
Numbering
(10)(h) Tax Service Reimbursement Plan of Florida Rock Industries,
Inc. effective October 1, 1976. Previously filed with Form
10-K for the fiscal year ended September 30, 1980. File No.
1-7159.
(10)(i) Amendment No. 1 to Tax Service Reimbursement Plan of Florida
Rock Industries, Inc. Previously filed with Form
10-K for the fiscal year ended September 30, 1981.
File No. 1-7159.
(10)(j) Amendment No. 2 to Tax Service Reimbursement Plan of Florida
Rock Industries, Inc. Previously filed with Form 10-K for the
fiscal year ended September 30, 1985. File No. 1-7159.
(10)(k) 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)(l) Florida Rock Industries, Inc. Management Security Plan.
Previously filed with Form 10-K for the fiscal year ended
September 30, 1985. File No. 1-7159.
(10)(m) Various mining royalty agreements with FRTL or its subsidiary,
none of which are presently believed to be material
individually, but all of which may be material in the
aggregate. Previously filed with Form 10-K for the fiscal
year ended September 30, 1986. File No. 1-7159.
(10)(n) Florida Rock Industries, Inc. 1991 Stock Option Plan.
Previously filed with Form 10-K for the fiscal year ended
September 30, 1992. And February 1, 1995 Amendment to Florida
Rock Industries, Inc. 1991 Stock Option Plan. Previously
filed as appendix to the Company's Proxy Statement dated
December 15, 1994. File No. 1-7159.
(10)(o) Split Dollar Insurance Agreement and Assignment of Life
Insurance Policy as collateral between Florida Rock
Industries, Inc. and each of Edward L. Baker and John D. Baker
II with aggregate face amounts of $5.4 million and $8.0
million, respectively. Previously filed with Form 10-Q for
the quarter ended December 31, 1996.
(10)(p) Florida Rock Industries, Inc. 1996 Stock Option Plan.
Previously filed as appendix to the Company's Proxy Statement
dated December 18, 1995.
File No. 1-7159.
(11) Computation of Earnings Per Common Share.
(13) The Company's 1997 Annual Report to stockholders, portions of
which are incorporated by reference in this Form 10-K. Those
portions of the 1997 Annual Report to stockholders which are
not incorporated by reference shall not be deemed to be filed
as part of this Form 10-K.
Page No. in
Sequential
Numbering
(22) Subsidiaries of the Company. Previously filed with Form 10-K
for the fiscal year ended September 30, 1993. File No. 1-7159.
(23) Consent of Deloitte & Touche LLP, Independent Certified Public
Accountants, appears on page 17 of this Form 10-K.
(27) Financial Data Schedule
FLORIDA ROCK INDUSTRIES, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a)(1)and (2))
Page
Consolidated Financial Statements:
Consolidated balance sheet at September 30, 1997 and 1996 12(a)
For the years ended September 30, 1997, 1996 and 1995:
Consolidated statement of income 11(a)
Consolidated statement of stockholders' equity 14(a)
Consolidated statement of cash flows 13(a)
Notes to consolidated financial statements 15-20(a)
Selected quarterly financial data (unaudited) 10(a)
Independent Auditors' Report 10(a)
Consent of Independent Certified Public Accountants 16(b)
Consolidated Financial Statement Schedules:
Independent Auditors' Report 17(b)
II - Valuation and qualifying accounts 18(b)
(a) Refers to the page number in the Company's 1997 Annual Report to
stockholders. Such information is incorporated by reference in Item 8 of
this Form 10-K.
(b) Refers to the page number in this Form 10-K.
All other schedules have been omitted as they are not required under the related
instructions, are inapplicable, or because the information required is included
in the consolidated financial statements.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Post Effective Amendments
No. 1 to the Registration Statements (Form S-8 Numbers 2-68961 and 2-76407)
pertaining to the Florida Rock Industries, Inc. ("FRI") 1980 Employee Stock
Purchase Plan and 1981 Stock Option Plan and the Registration Statements
(Forms S-8 Numbers 33-56322, 33-56428, and 33-56430) pertaining to the
Florida Rock Industries, Inc. 1991 Stock Option Plan, Amended and Restated
Profit Sharing Plan and Trust including the Deferred Earnings Plan and Tax
Reduction Act Employee Stock Ownership Plan and in the related Prospectuses
of our report dated December 1, 1997, appearing in and incorporated by
reference in this Annual Report on Form 10-K of FRI for the year ended
September 30, 1997.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 12, 1997
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Florida Rock Industries, Inc.
Jacksonville, Florida
We have audited the consolidated financial statements of Florida Rock
Industries, Inc. and its subsidiary companies ("FRI") as of September 30, 1997
and 1996, and for each of the three years in the period ended September 30,
1997, and have issued our report thereon dated December 1, 1997; such
consolidated financial statements and report are included in your 1997 Annual
Report to Stockholders and are incorporated herein by reference. Our audits
also included the financial statement schedules of FRI, listed in Item 14.
These financial statement schedules are the responsibility of FRI's management.
Our responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 1, 1997
FLORIDA ROCK INDUSTRIES, INC.
SCHEDULE II (CONSOLIDATED) - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
Additions
Balance at Charged to Charged Balance
Beginning Costs and to Other at end
Description of Year Expenses Accounts Deductions of Year
Year ended
September 30,
1997:
Allowance for
doubtful
accounts $1,393,203 $ 278,809 $ 545,779a $1,126,233
Accrued risk
insurance
reserves $7,084,194 $3,620,504 $2,471,713b $8,232,985
Accrued risk
reclamation
costs $5,257,813 $1,887,118 $ 358,649b $6,786,282
Year ended
September 30,
1996:
Allowance for
doubtful
accounts $1,725,828 $ 34,635 $ 367,260a $1,393,203
Accrued risk
insurance
reserves $5,377,141 $4,831,427 $3,124,374b $7,084,194
Accrued
reclamation
costs $3,982,624 $1,507,923 $ 232,734b $5,257,813
Year ended
September 30,
1995:
Allowance for
doubtful
accounts $1,627,273 $ 222,737 $ 124,182a $1,725,828
Accrued risk
insurance
reserves $5,514,485 $3,168,566 $3,305,910b $5,377.141
Accrued
reclamation
costs $3,151,611 $ 939,680 $ 108,667b $3,982,624
a) Accounts written off less recoveries
b) Payments
THOMPSON S. BAKER, 1905 - 1997
This Annual Report is dedicated to Thompson S. Baker, founder and former
Chairman of the Board of Florida Rock Industries, Inc., who passed away on
February 24, 1997.
Born in 1905 in Jacksonville, Florida, Tom graduated from Georgia Military
Academy and then from Davidson College. At Davidson, he was president of the
student body and an All Southern Conference football player. The toughness and
determination that made "Pinky" Baker a standout tackle at 165 pounds (wringing
wet) was his trademark-not only in college, but throughout his business career.
After graduation from Davidson, he went to work for his father at Baker &
Holmes Company, then the largest building materials company in Florida. Within
four years, however, the great Florida "boom" went "bust", and the company went
out of business. Soon thereafter, Tom convinced bank officials he could run
the defunct Interlachen Sand Company, which was heavily laden with debt,
better than they could, and they turned it over to him. That transaction
marked the beginning of what has grown to become Florida Rock. The company
was so small at the outset that it consisted essentially of Tom Baker and
two other men loading sand into rail cards with wheelbarrows.
In 1931, he joined forces with Jim Shands to form Shands & Baker. When Jim
Shands died in a tragic accident, his brother, Bill, assumed his place in the
company. The firm grew rapidly in the 1930's, both as a sales agent for sand
plants throughout Florida and as a ready mix concrete supplier to many of the
major military build-up projects taking place prior to World War II.
No sooner than the Japanese had bombed Pearl Harbor, the business was put
in mothballs and the Marines had a 37 year old Second Lieutenant. Four long
years later, Lt. Colonel Baker returned from the Pacific highly decorated and
fully ready to reassume his leadership role at Shands & Baker.
Under that leadership, the Company began a dramatic growth movement,
entering the crushed stone business and opening new mines almost yearly
throughout the 1950's and 1960's. In the late 1960's, Tom named his son, Ted,
as President of the Company, and together they took Shands & Baker public and
continued to acquire aggregate and concrete operations throughout the southeast
to build what is now Florida Rock Industries, Inc.
Tom's activities were not limited to business, and he always found time to
share his talents with his community. He has been Chairman of the Community
Chest and of the Boy Scouts in North Florida. He has been a board member of St.
Luke's Hospital, YMCA, Rotary Club of Jacksonville, and the Jacksonville Port
Authority. He has served on the Florida Council of 100 and has been a
political advisor to most of Florida's governors and senators for the last 30
years.
His footprints in Florida's sands are clearly seen but his imprint is even
deeper on the employees that he worked so closely with throughout his career.
From those two co-workers at Interlachen, in the early days, to the hundreds of
others that he knew far more than by name, Tom Baker has been the heart and soul
of both Florida Rock Industries, Inc. and its employees.
We honor Tom Baker at his death with the dedication of this Annual Report.
He will be missed.
Director Emeritus
In December 1997, two of Florida Rock's long-serving distinguished Directors
have been named Director Emeritus by the Company's Board of Directors. Mr.
Frank M. Hubbard, a Director since 1972 and Mr. W. Thomas Rice, a Director
since 1974, have been honored for their years of faithful, dedicated service to
the Company. The Company is proud to recognize these gentlemen in this
year's Annual Report.
Frank M. Hubbard
Mr. Hubbard has served on the Florida Rock's Board of Directors since April
4, 1972. He was born in Florence, South Carolina. Mr. Hubbard attended
Clemson University studying Civil Engineering and Rollins College majoring in
Business Administration. Mr. Hubbard's college program was interrupted by
World War II. Mr. Hubbard served in the United States Army Corps of Engineers
in the European Theater of Operations from 1942 to 1945 where he attained the
rank of Captain and was awarded the Bronze star. He later received an honorary
Doctor of Laws degree from Rollins College, an honorary Doctor of Public Service
degree from the University of Central Florida and an honorary Doctor of Business
Administration from Orlando College.
Mr. Hubbard spent his career with Hubbard Construction Company, which was
founded by his father. He served in a number of positions achieving the
position of President and Chairman of the company. Throughout his career Mr.
Hubbard has been involved in many professional, industry, civic and charitable
organizations where he has received numerous awards for service. Mr. Hubbard
is currently Chairman of the A Friends Foundation Trust.
W. Thomas Rice
Mr. Rice has served on Florida Rock's Board of Directors since February
1974. He was born in Hague (Westmoreland County), Virginia. He graduated from
Virginia Polytechnic Institute in June 1934, with a BS degree in Civil
Engineering, and later received an honorary LLD degree from Stetson University
in May 1959, and an honorary DMS degree from The Citadel in May 1980.
Mr. Rice was employed by Pennsylvania Railroad in the Operating Department
from 1934 until called to active duty in the U.S. Army in 1942, with rank of
First Lieutenant. He served three years in European and Asiatic Theaters;
subsequently served in active U.S. Army Reserve, attaining rank of Major
General(now retired). Decorations include Legion of Merit with two Oak Leaf
Clusters.
Mr. Rice entered service of the Richmond, Fredericksburg & Potomac Railroad
Company (RF&P) in February 1946, and held several managerial positions. He was
elected President of RF&P January 1, 1955. In 1957 he became President of
Atlantic Coast Line Railroad Company (ACL). When ACL merged with Seaboard Air
Line Railroads in 1967 to form Seaboard Coast Line Railroad Company, he was
elected President and Director. He was elected Chairman Chief Executive
Officer in 1970. In 1978 he became Chairman Emeritus of Seaboard Coast Line
Industries,
Inc.
Annual Report 1997
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1997 1996 Change
Net sales $456,803 398,673 + 14.6
Gross profit $ 99,174 79,103 + 25.4
Operating profit $ 56,078 42,335 + 32.5
Income before income taxes $ 56,370 41,110 + 37.1
Net income $ 37,142 27,000 + 37.6
Per common share:
Net income $ 1.98 1.43 + 38.5
Stockholders' equity $ 14.09 12.30 + 14.6
Cash dividend $ .25 .25
Return on ending stockholders' equity 14.0% 11.8
On October 1, 1997, the Board of Directors declared a 2 for 1 stock split.
The number of shares and per share amounts included in this report have been
restated to reflect this stock split.
1997 CORPORATE HIGHLIGHTS
Sales increased - 15%
Net income increased - 38%
Volumes increased
Continuing expense control and higher productivity
Construction commenced on Portland Cement facility on April
7, 1997
$47,296,000 invested in additional property, plant and
equipment
$18,433,000 of cash on hand at year end
$75,000,000 revolving credit agreement all of which was
available at year end
Short-term unsecured lines of credit aggregating $30,000,000
of which $29,700,000 was unused at year end
BUSINESS. The Company is a major basic construction
materials company concentrating in the Southeastern and Mid-Atlantic states.
MISSION STATEMENT. Be an excellent construction materials
company providing long-term growth and superior return on
investment
VISION. Through employees committed to continuous
improvement, we will provide quality materials and superb
service for our customers; operate safe, environmentally
responsible facilities that are well maintained and
cost effective; and develop mutually beneficial
relationships with our suppliers and the communities
within which we operate.
To Our Stockholders:
Fiscal 1997 was a record year for the Company. Net income increased 37.6%
on a 14.6% increase in sales. The excellent results were due to a combination
of factors and were driven by increased demand resulting from a healthy economy
and favorable weather, modest price increases, management's control of expenses
and the achievement of higher productivity within our business units.
Results. Sales for fiscal 1997 were $456,803,000 up 14.6% from
$398,673,000 in fiscal 1996. The increase in sales was due to increased volume
and prices. The increased demand was attributable to growth in non-residential
construction and infrastructure programs with residential construction
remaining about level.
Selling, general and administrative expense increased 17.2% primarily
as the result of both higher sales and increased profit sharing and incentive
compensation due to improved profits. Underlying expense levels for fiscal
1997 increased, but remained comparable as a percent of sales to last year.
In fiscal 1997 operating profit increased 32.5% to $56,078,000
from $42,335,000 last year. Profit margins improved as the result of
increased sales, improved efficiencies from ongoing cost containment programs
and the volume leverage inherent in our business.
Income before income taxes increased 37.1% to $56,370,000 from
$41,110,000 in 1996. Net income was $37,142,000 a 37.6% increase from fiscal
1996's net income of $27,000,000. Earnings per share for 1997 were $1.98 a
38.5% increase over $1.43 last year. Earnings per share are adjusted to
reflect the 2 for 1 stock split that was effective October 31, 1997.
The weighted average number of shares used in the calculation of
earnings per share, as adjusted for the 2 for 1 stock split, decreased to
18,794,000 for fiscal 1997 from 18,876,690 last year. The decrease is the
result of common share repurchases during fiscal 1997 and those which
occurred in the last half of fiscal 1996.
New Cement Plant. On April 7, 1997, the Company commenced its planned
construction of a 750,000 ton per year capacity Portland Cement production
facility. It will be located on 1,500 acres owned and leased near the town
of Newberry in Alachua County, Florida and is scheduled for completion
mid-1999. The project is further discussed under the Operating Review
section of this Annual Report.
Capital Expenditures. Fiscal 1997 capital expenditures totaled
$47,296,000. The capital expenditures were divided approximately 54% for
replacements, including modernizing, safety and environmental, and 46% for
expansion, land and aggregates deposits to be used in current and future
operations. Depreciation, depletion and amortization for the fiscal year was
$30,688,000.
The fiscal 1998 total capital expenditure plan approximates
$114,170,000. Estimated depreciation and depletion is projected at
$33,064,000. Approximately 28% of the planned expenditures is for plant and
equipment replacements and modernization, 67% is for expansion and new
projects, and 5% is for new plant sites and deposits. The expansion and new
project portion of the capital expenditure plan includes $46,198,000 for the
new cement plant. Expenditures for capital investments are subject to review
and modification as market conditions and the economic picture evolve.
Financial Management. Cash flow from operations of $69,501,000 enabled
the Company to fund its major capital expenditure program for fiscal 1997,
reduce debt and repurchase common stock and increase its net cash position.
During 1997 total debt was reduced from $20,776,000 to $13,606,000 at
September 30, 1997, while the cash on hand increased from $4,995,000 to
$18,433,000.
At September 30, 1997, the entire balance of $75,000,000 under the
revolving credit agreement facility was available to the Company. During the
past year the facility was extended until June 30, 2003. In addition, the
Company has $30,000,000 in unsecured short-term bank lines of which $300,000
was utilized at year end.
The Company is currently evaluating and pursuing additional financing
alternatives that are available to meet its long term capital expenditure
needs.
Dividends. The Board of Directors maintained the semiannual dividend
of $.125 per share. Consequently, cash dividends of $.25 per share were paid
during the year to stockholders.
Subsequent to fiscal year end, the Board declared the semiannual cash
dividend of $.125 per share payable on January 2, 1998 to stockholders of
record on December 16, 1997.
The Board of Directors, on October 1, 1997, declared a 2 for 1 common
stock split to shareholders of record on October 15, 1997, effective October
31, 1997.
Stock Repurchase. The Board of Directors has authorized management to
repurchase shares of the Company's common stock from time to time as
opportunities may arise.
Stockholders Meeting. On February 5, 1997, the Annual Stockholders
Meeting was held in Jacksonville, Florida. The stockholders elected Thompson
S. Baker and Frank M. Hubbard as directors to terms expiring in 2001.
Safety, Environment and Community. Management continues its emphasis
on a safe, drug-free work place. Four of the Company's quarries have each
amassed more than 1,000,000 man-hours without experiencing a lost time
accident.
Annually the Company receives a number of awards recognizing operations
in the aggregates industry for their pursuit of excellence. Maryland Rock
Industries in Leonardtown, Maryland received national recognition in 1997 for
winning the prestigious Environmental Eagle Gold Award from the National Stone
Association. The award signifies superior performance in the maintenance of
the environment in and around the operations with a corporate commitment to the
full use of environmental controls systems. The Brooksville Quarry in Florida
received a Community Relations Gold Medallion, the National Stone Association's
highest honor for community relations, for involvement and support activities
in the Brooksville, Florida community. Their participatio n in Project
HELP-"Helping the Earth and Loving Nature with Protective Kids" led to
certification as a wildlife habitat by the Wildlife Habitat Council. The Keuka
Industrial Sand Plant in Interlachen, Florida won national acclaim as the Small
Quarry of the Year in the National Stone Association's About Face Program.
Created in 1975, the program recognizes and rewards aggregate producers who
have made constructive and positive efforts to enhance the aesthetic appearance
of their quarrying operations. About Face has received commendations from the
private sector-sponsored Keep America Beautiful Program and the U. S.
Department of Interior's Take Pride in America Program.
During 1997 the Company continued to make both capital and operating
expenditures in accordance with its goal to be not only in compliance with
environmental regulations but also to be a model member of each community in
which it has a presence.
Business Process Improvement. The Company continues to place significant
emphasis on and expand its initiative in total quality management. Since 1994
the company has been training its employees in the principles of quality and
process improvement. This program is referred to as "Business Process
Improvement (BPI)" and places significant emphasis in training our employees
on customer satisfaction, employee involvement, teamwork and process
improvement.
During the fiscal year, the program was expanded to focus and train our
employees in the essential elements of business planning processes. This phase
of the total quality management initiative will define each business units
goals and objectives in relation to the Company's overall mission.
Recognitions. As mentioned in the dedication of this Annual Report,
we lost our founder and Chairman Emeritus, Thompson S. Baker when he passed
away on February 24, 1997. No words can describe the leadership he gave this
Company nor the love he had for its employees.
In December 1997, two of the Company's long-serving and
distinguished Directors, Frank M. Hubbard and W. Thomas Rice were named
Director Emeritus by the Company's Board of Directors. The Company is grateful
for their years of faithful, dedicated service and is pleased to recognize them
in this year's Annual Report.
The Company also wishes to acknowledge the retirement of Donald L.
Bloebaum, Ruggles B. Carlson and Robert C. Peace. The Company thanks them for
their many years of service as part of the Company's senior management team.
Their efforts contributed immeasurably toward the growth and success of the
Company.
Summary and Outlook. Sales in 1997 were excellent and better than
anticipated because of the unexpected favorable weather conditions experienced
in our markets. Increased volumes and prices, combined with continued cost
containment resulted in improved earnings. The capital expenditure program
continued to focus on higher than normal replacements and equipment to
meetincreased demand and to improve efficiencies and expansion.
In 1998 management expects moderate economic growth. The Federal
Reserve's dedication to inflation containment is expected to result in fairly
constant interest rates if not slightly higher rates in the coming year.
Although mortgage interest rates have declined during 1997, single family home
construction remains flat and unchanged from last year. Non-residential
construction is moving with local supply and demand with evidence that more
speculative construction is underway. Commercial industrial construction
markets remain driven by capacity utilization and is near equilibrium. Federal
and state infrastructure requirements are strong but will remain constrained by
each respective state's ability to fund its programs. Higher funding levels
between 1999 and 2004 are being proposed under a new Intermodal Surface
Transportation Efficiency Act(ISTEA) bill that is scheduled for legislative
action this year. The proposals under the new bill appear to have an excellent
chance of passing and if passed should benefit our markets. Fiscal 1998 sales
should remain in step with the Southeastern economy given continued reasonable
economic prospects and the absence of over built conditions.
Management continues to explore new opportunities to further expand and
develop the Company in its existing and contiguous geographical markets. The
Southeastern and Mid-Atlantic markets served by Florida Rock are among the prime
long-term growth markets in the United States. Management's long-term operating
plans remain based on the forecasted secular growth in the Company's markets and
a belief in the fundamental strength of the U.S. economy.
The continuing dedication and excellent performance of our managers and
employees have been critical in improving profitability and will be the key to
Florida Rock's growth and success in the future.
Respectfully yours,
Edward L. Baker
Chairman of the Board
John D. Baker II
President and Chief Executive Officer
Operating Review
Operations. The Company is a basic construction materials manufacturing
company concentrating in the Southeastern and Mid-Atlantic states. Its main
lines of business are construction aggregates(sand, gravel and crushed stone),
ready mixed concrete, concrete block and prestressed concrete. It also
markets other building materials. The Company will also manufacture portland
cement and calcium products upon construction of new facilities for these
purposes over the next two years.
Sales increased in fiscal 1997 with continued growth in Florida,
Georgia, Virginia and Maryland. Increased sales combined with improved
operating efficiencies and ongoing cost containment programs generated record
operating profits for the current fiscal year.
The Company's construction aggregates group currently operates seven
crushed stone plants, nine sand plants and one industrial sand plant in
Florida. It operates five crushed stone plants in Georgia; two sand and
gravel plants and three crushed stone plants in Maryland; and two crushed
stone plants and one sand and gravel plant in Virginia. The Company also
operates aggregates distribution terminals in Northern Virginia;
Norfolk/Virginia Beach, Virginia; Baltimore, Maryland, the Eastern Shore of
Maryland and Washington D.C. In Florida, the Company has two aggregates
distribution terminals which are served by unit trains. The terminals serve
Central Florida, including the Orlando and Polk County markets. The Company
maintains substantial long-term reserves of sand and stone in Florida,
Georgia, Maryland and Virginia which are owned or under long-term mining
leases with terms generally commensurate with the extent of the deposits at
current rates of extraction.
Ready mixed concrete is produced and sold throughout peninsular
Florida; South Georgia; Richmond, Norfolk/Virginia Beach, and Northeastern
Virginia; Central Maryland; and Washington, D.C. At the end of fiscal 1997
the Company had 87 ready mixed concrete plants and 10 concrete block plants,
and a delivery fleet of 962 ready mix and block trucks.
Prestressed concrete products for commercial developments and bridge
and highway construction are produced in Wilmington, North Carolina.
Cement Plant. The manufacture of Portland Cement by the Company will
broaden the Company's product line. The Company has received all necessary
building, zoning and environmental permits to construct of a 750,000 ton
capacity cement plant near Newberry, Florida and began construction on April
7, 1997. The contractor has moved equipment and initial manpower to the
premises and the Company has placed orders on significant lead time
equipment. The plant's completion is scheduled for mid-1999.
Certain appeals to the zoning and air permits issued to the Company
have been filed and are still in the courts. In addition, there is other
litigation which could limit the emissions of the plant beyond practical
limits. The Company is challenging these various forms of litigation and
believes they are without merit and will be denied and resolved to the favor
of the Company.
When completed the cement plant will employ state-of-the-art technology
for optimum energy consumption and pollution control technology. At
capacity it is expected to be the low cost producer in its market area. The
raw materials will be supplied from property presently owned and leased and
zoned for mining and from nearby electric power plants.
The cement will be shipped in bulk and bags in trucks and rail cars to
ready mixed concrete plants, contractors and a variety of customers engaged
in construction activities. It will also produce masonry cement which will
be shipped in bags to distributors, such as building supply dealers.
Consistent with the Company's high environmental standard, all
materials which enter the process will be converted into a saleable product,
avoiding any need to handle solid or liquid waste.
New Developments. Management continues to modernize and expand
operations where cost savings, higher productivity and long-term growth plans
are warranted.
The vast majority of capital expenditures during 1997 were for
equipment replacements, expansions at existing facilities and construction
of the new cement plant. During the current fiscal year, the Company
completed the construction of an additional ready mixed concrete plant at
the Universal Studio's construction site near Orlando, Florida and a ready
mixed concrete plant was purchased and upgraded in Naples, Florida allowing
the old plant site to be placed for sale. In the Northwest Dade County area
of Florida, a ready mixed concrete plant was added which also serves a
growing Southwest Broward County Florida market. The Company also
constructed facilities and moved its precast lintel operations to Kissimmee,
Florida.
The Company has commenced construction of a calcium products plant in
Brooksville, Florida which is expected to be operational in April 1998. An
aggregate plant in Paulding County, Georgia is also being constructed which,
when completed, will better serve our customers in Northwest Georgia.
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1997 1996 1995 1994 1993
Summary of Operations
Net sales $456,803 398,673 368,959 336,526 294,431
Gross profit $ 99,174 79,103 73,752 59,431 41,704
Operating profit $ 56,078 42,335 39,231 27,461 11,403
Interest expense $ 934 1,980 2,060 2,223 2,850
Income before income $ 56,370 41,110 36,372 25,533 12,185
taxes
Provision for income $ 19,228 14,110 12,460 8,317 4,408
taxes
Net income $ 37,142 27,000 23,912 17,216 7,777
Per Common Share
Net income $ 1.98 1.43 1.25 .91 .42
Stockholders' equity $ 14.09 12.30 11.14 10.12 9.33
Cash dividend $ .25 .25 .25 .25 .25
Financial Summary
Current assets $104,194 87,082 78,788 75,720 73,017
Current liabilities $ 55,676 51,857 57,614 49,298 52,033
Working capital $ 48,518 35,225 21,174 26,422 20,984
Property, plant and
equipment, net $250,005 233,858 220,325 208,076 210,110
Total assets $382,616 346,709 326,029 310,590 312,384
Long-term debt $ 10,859 16,862 9,653 23,116 43,877
Stockholders' equity $264,615 228,150 211,255 192,090 171,594
Other Data
Return on ending
stockholders' equity 14.0% 11.8 11.3 9.0 4.5
Return on ending capital
employed 12.5% 10.3 9.6 7.4 3.7
Additions to property,
plant and equipment $ 47,296 45,544 40,374 23,121 33,558
Depreciation, depletion
and amortization $ 30,688 28,766 26,518 25,419 26,168
Weighted average number
of shares 18,794 18,876 19,050 18,970 18,394
Number of employees at
end of year 2,448 2,310 2,201 2,203 2,142
Stockholders of record 1,122 1,174 1,228 1,279 1,335
(a) Effective October 1, 1992, the Company changed its method of accounting
for employee postretirement benefits in accordance with SFAS 106. The effect
on fiscal 1993 was to reduce net income by $1,252,000 ($.07 per share).
(b) In 1997, 1996, 1995, 1994 and 1993 the Company reported a gain(loss) on
the sale and/or write down of assets of $14,000, ($286,000), ($2,018,000),
($313,000) and $2,766,000, respectively. See Note 10 to the Consolidated
Financial Statements.
(C) In 1993 the Company charged its provision for income taxes $748,000 to
reflect the impact on the deferred income tax liability of the increase in the
top Federal corporate income tax rate.
Management Analysis
Operating Results. The Company's 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 and inflation.
Internal factors include sales mix, plant location, quality and quantities of
aggregates reserves, capacity utilization and other operating factors.
Fiscal 1997 and 1996 sales increased 14.6% and 8.1% respectively, due to
both volume and price increases. In 1997, volumes were higher due to a very
mild winter in our non-Florida markets and growth in non-residential and
infrastructure programs. Much of the 1997 price increases were in response
to higher cement and other cost increases.
The contribution made to net sales from the sale of construction
materials by the principal classes of products and services for the five years
ended September 30 is as follows:
1997 1996 1995 1994 1993
Ready mixed concrete 59% 58 58 56 56
Construction aggregates 37% 41 40 41 42
Other concrete products and
building materials 10% 10 10 11 10
Less intercompany (6%) (9 ) (8 ) (8 ) (8 )
100% 100 100 100 100
The estimated contribution to revenues from the sale of construction
materials by major markets follows:
1997 1996 1995 1994 1993
Commercial and industrial 44% 45 37 36 45
Residential 32% 35 40 42 29
Highway and
governmental 24% 20 23 22 26
In fiscal 1997 gross profit increased 25.4% while the gross profit
margin increased to 21.8% from 19.8%. The increase in gross profit is a
function of higher revenues and the strong marginal contribution due to the
high fixed cost nature of the business. The improvement in gross profit
margin was due primarily to increased volumes as sales price increases were
substantially offset by higher cement and other cost increases.
In fiscal 1996 gross profit increased 7.3% while the gross profit margin
decreased slightly to 19.8% from 20.0%. The increase in gross profit was
principally due to the increased sales. In the fourth quarter of fiscal 1996
the Company increased its risk insurance reserves for incurred but unreported
claims approximately $1,000,000. Without this adjustment the 1996 gross
profit margin would have been approximately level with fiscal 1995.
The 17.2% and 6.5% increase in selling, general and administrative
expense in 1997 and 1996 over the prior year, respectively, was primarily due
to an increase in basic expense levels due to increased sales and an increase
in profit sharing and incentive compensation which are linked to
profitability.
Interest income in 1997 remained stable with 1996. In 1996, interest
income increased over 1995 due principally to an increase in the average rate.
See Note 10 to the Consolidated Financial Statements for information
concerning the gain (loss) on the sale and/or write down of assets.
Liquidity and Capital Resources. The following key financial
measurements reflect the Company's sound financial position and substantial
capital resources at September 30 (dollars in thousands):
1997 1996 1995
Cash and cash
equivalents $ 18,433 4,995 925
Total debt $ 13,606 20,776 23,224
Current ratio 1.9 to 1 1.7 to 1 1.4 to 1
Debt as a percent of
capital employed 4.5% 7.6 8.9
Unused revolving credit $ 75,000 69,000 75,000
Unused short-term lines $ 29,700 28,600 20,600
In fiscal 1997 cash flows from operations of $69,501,000 covered the cash
required for capital expenditures and other investing activities, the net debt
repayment of $8,137,000, the paying of the regular dividend and the repurchase
of $4,632,000 of common stock. In fiscal 1996 cash flows from operations of
$55,716,000 covered the cash required for capital expenditures and other
investing activities, the net debt repayment of $3,007,000, the paying of the
regular dividend and the repurchase of $5,389,000 of common stock.
The Company expects its 1998 expenditures for property, plant and
equipment to be approximately $114,000,000 versus depreciation and depletion of
$33,000,000. Approximately $46,000,000 of the budget is for the cement plant.
Management believes that the necessary funds will be obtained through internal
generation, borrowing under existing loan agreements and other sources of
borrowing. In November 1997, the Company borrowed $14,000,000 under an
Industrial Revenue Bond facility for financing a portion of the cement plant.
The Company has available $75,000,000 under the revolving credit agreement which
was unused and available at September 30, 1997. The Company's normal capital
expenditures are by and large discretionary and not contractual commitments
until the actual orders are placed. However, over time it is desirable and
necessary to both replace equipment due to wear and tear and to make capital
expenditures to improve efficiencies and expand capacity where warranted. At
September 30, 1997, the Company had placed orders and was committed, subject to
certain cancellation provisions, to construction contracts and equipment for the
cement plant costing approximately $64,673,000.
The Company expects that the Purchase and Put Agreements covering
$7,550,000 of the Industrial Revenue Bonds (See Note 5 to the Consolidated
Financial Statements) will continue to be amended until the earlier of the final
maturity date of the respective bonds or until the project financed by the bonds
is terminated. To the extent that the bonds mature or the Purchase and Put
Agreements are not extended, the Company will repurchase and/or repay the bonds
with borrowings under its revolving credit agreement. The Company believes it
will be able to renegotiate its present credit facilities or obtain similar
replacement credit facilities when necessary in the future.
Inflation. In the past four years price increases have generally offset
inflation. In prior years price increases failed to equal inflation and in
certain markets prices declined due to competition.
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
First Second Third Fourth
1997 1996 1997 1996 1997 1996 1997 1996
Net sales $ 106,383 92,265 101,611 85,801 123,907 110,331 124,902 110,276
Gross profit $ 22,101 16,899 20,792 13,465 29,307 25,571 26,974 23,168
Operating
profit $ 12,653 8,578 10,061 4,472 18,301 15,473 15,063 13,812
Income before
income taxes $ 12,440 8,390 10,058 4,268 18,465 13,800 15,407 14,652
Net income $ 8,086 5,495 6,537 2,796 12,003 9,039 10,516 9,670
Per common share:
Net income $ .43 .29 .35 .15 .65 .48 .55 .52
Cash dividend $ .125 .125 - - .125 .125 - -
Market price:
High $ 16.88 14.63 17.44 14.75 20.94 13.38 30.00 14.69
Low $ 14.31 13.12 15.66 12.50 15.12 12.18 20.38 11.63
See Note 14 to the Consolidated Financial Statements.
Independent Auditors' Report
To the Board of Directors and Stockholders
Florida Rock Industries, Inc.
We have audited the accompanying consolidated balance sheets of Florida Rock
Industries, Inc. and subsidiaries as of September 30, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended September 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Florida Rock Industries, Inc. and
subsidiaries at September 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 1, 1997
Florida Rock Industries, Inc.
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1997 1996 1995
Net sales $456,803 398,673 368,959
Cost of sales 357,629 319,570 295,207
Gross profit 99,174 79,103 73,752
Selling, general and administrative expense 43,096 36,768 34,521
Operating profit 56,078 42,335 39,231
Interest expense (934) (1,980) (2,060)
Interest income 712 713 616
Gain (loss) on sale and/or write down of assets
($1,248 related party loss in 1995) 14 (286) (2,018)
Other income, net 500 328 603
Income before income taxes 56,370 41,110 36,372
Provision for income taxes 19,228 14,110 12,460
Net income $ 37,142 27,000 23,912
Earnings per common share $1.98 1.43 1.25
Weighted average number of shares used in 18,794 18,876 19,050
computing earnings per common share
See accompanying notes.
Florida Rock Industries, Inc.
Consolidated Balance Sheet September 30
(Dollars in thousands)
1997 1996
Assets
Current assets:
Cash and cash equivalents $ 18,433 4,995
Accounts receivable, less allowance for
doubtful accounts of $1,126 ($1,393 in 1996) 56,723 52,436
Inventories 22,587 23,475
Prepaid expenses and other 6,451 6,176
Total current assets 104,194 87,082
Other assets 28,417 25,769
Property, plant and equipment, at cost:
Land 111,643 107,644
Plant and equipment 440,928 411,882
552,571 519,526
Less accumulated depreciation and depletion 302,566 285,668
Net property, plant and equipment 250,005 233,858
$ 382,616 346,709
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable to banks $ 300 1,400
Accounts payable 32,867 28,602
Federal and state income taxes 0 3,507
Accrued payroll and benefits 11,483 7,710
Accrued insurance reserves 2,230 2,679
Accrued liabilities, other 6,349 5,445
Long-term debt due within one year 2,447 2,514
Total current liabilities 55,676 51,857
Long-term debt 10,859 16,862
Deferred income taxes 28,387 29,699
Accrued employee benefits 11,531 10,726
Long-term accrued insurance reserves 6,153 4,985
Other accrued liabilities 5,395 4,430
Commitments and contingent liabilities
(Notes 9, 12 and 13)
Stockholders' equity:
Preferred stock, no par value;
10,000,000 shares authorized, none issued - -
Common stock, $.10 par value;
50,000,000 shares authorized, 18,974,618
shares issued 1,897 1,897
Capital in excess of par value 18,053 16,452
Retained earnings 247,733 215,195
Less cost of treasury stock; 195,434 shares
(425,856 shares in 1996) (3,068) (5,394)
Total stockholders' equity 264,615 228,150
$382,616 346,709
See accompanying notes.
Florida Rock Industries, Inc.
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1997 1996 1995
Cash flows from operating activities:
Net income $ 37,142 27,000 23,912
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 30,688 28,766 26,518
Net changes in operating assets and
liabilities:
Accounts receivable (4,398) (4,532) 820
Inventories 1,249 849 (3,709)
Prepaid expenses and other (465) (89) (100)
Accounts payable and accrued liabilities 7,922 7,539 6,339
Decrease in deferred income taxes (1,184) (1,777) (150)
Gain on disposition of property, plant and
equipment (1,886) (1,977) (1,006)
Other, net 433 (63) 2,074
Net cash provided by operating activities 69,501 55,716 54,698
Cash flows from investing activities:
Purchase of property, plant and equipment (46,493) (44,872) (40,218)
Proceeds from the sale of property, plant and
equipment 3,436 5,259 1,393
Additions to other assets (9,775) (1,641) (2,232)
Proceeds from the disposition of other assets 218 2,585 80
Collection of notes receivable 5,364 135 507
Net cash used in investing activities (47,250) (38,534) (40,470)
Cash flows from financing activities:
Proceeds from long-term debt - 6,000 -
Net increase (decrease) in short-term debt (1,100) (8,000) 2,700
Repayment of long-term debt (7,037) (1,007) (12,060)
Exercise of employee stock options 8,560 - -
Repurchase of Company stock (4,632) (5,389) (3)
Payment of dividends (4,604) (4,716) (4,744)
Net cash used in financing activities (8,813) (13,112) (14,107)
Net increase in cash and cash equivalents 13,438 4,070 121
Cash and cash equivalents at beginning of year 4,995 925 804
Cash and cash equivalents at end of year $18,433 4,995 925
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 948 1,926 2,144
Income taxes $23,255 15,435 11,425
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 294 412 49
Issuing debt $ 509 260 107
Additions to inventory from issuing debt $ 360 - -
Additions to prepaid expenses from issuing
debt $ 96 - -
Additions to other assets from issuing debt $ - 300 -
Addition to notes receivable from the sale of
property, plant and equipment $ 200 6 -
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with maturities of three months or less at
the time of purchase to be cash equivalents.
See accompanying notes.
Florida Rock Industries, Inc.
Consolidated Statement of Stockholders' Equity Years ended September 30
(Dollars in thousands except per share amounts)
Capital in
Common Stock Excess of Retained Treasury Stock
Shares Amount Par Value Earnings Shares Amount
Balance at October 1,
1994 18,974,618 $1,897 16,452 173,743 (174) (2)
Shares purchased for
treasury (188) (3)
Net income 23,912
Cash dividends
( $.25 per share) (4,744)
Balance at September
30, 1995 18,974,618 1,897 16,452 192,911 (362) (5)
Shares purchased for
treasury (425,494) (5,389)
Net income 27,000
Cash dividends
($.25 per share) (4,716)
Balance at September
30, 1996 18,974,618 1,897 16,452 215,195 (425,856) (5,394)
Shares purchased for
treasury (296,278) (4,632)
Exercise of stock
options 126 526,700 6,958
Tax benefits on stock
options exercised 1,475
Net income 37,142
Cash dividends
($.25 per share) (4,604)
Balance at September
30, 1997 18,974,618 $1,897 18,053 247,733 (195,434) (3,068)
See accompanying notes.
Florida Rock Industries, Inc.
Notes to Consolidated Financial Statements
1. Accounting polices. CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are
wholly owned. All significant intercompany transactions have been eliminated
in consolidation.
INVENTORIES - Inventories are valued at the lower of cost or market. Cost
for parts and supplies inventory is determined under the first-in, first-out
(FIFO) method. Cost for other inventories is determined under the last-in,
first-out (LIFO) and average cost methods.
DEPRECIATION, DEPLETION AND AMORTIZATION - Provision for depreciation of
plant and equipment is computed using the straight-line method based on the
following estimated useful lives:
Years
Buildings and improvements 8-30
Machinery and equipment 3-15
Automobiles, trucks and mobile equipment 3-8
Furniture and fixtures 3-10
Depletion of sand and stone deposits is computed on the basis of units of
production in relation to estimated reserves. Substantially all goodwill is
being amortized over forty years using the straight-line method.
INCOME TAXES - The Company uses an asset and liability approach to financial
reporting for income taxes. Under this method, deferred tax assets and
liabilities are recognized based on differences between financial statement
and tax bases of assets and liabilities using presently enacted tax rates.
Deferred income taxes result from temporary differences between pre-tax income
reported in the financial statements and taxable income.
EARNINGS PER COMMON SHARE - Earnings per common share are based on the
weighted average number of common shares outstanding and common stock
equivalents, where applicable.
CONCENTRATIONS OF CREDIT RISK - The Company's operations are located within
the Southeastern United States. It sells construction materials and grants
credit to customers, substantially all of whom are related to the construction
industry.
RECLAMATION - The Company accrues the estimated cost of reclamation over the
life of the deposit based on tons sold in relation to total estimated tons of
reserves. Expenses paid by the Company are charged to the reserve.
RISK INSURANCE - The Company has a $500,000 self-insured retention per
occurrence in connection with its workers' compensation, automobile liability,
and general liability insurance programs ("Risk Insurance"). The Company
accrues monthly its estimated cost in connection with its portion of its Risk
Insurance losses. Claims paid by the Company are charged against the reserve.
Additionally, the Company maintains a reserve for incurred but not reported
claims based on historical analysis of such claims.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are
capitalized. Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Estimation of such liabilities is extremely complex.
Some factors that must be assessed are engineering estimates, continually
evolving governmental laws and standards, and potential involvement of other
potentially responsible parties.
NEW ACCOUNTING REQUIREMENTS - Effective October 1, 1996, the Company
adopted Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 establishes a fair value based method of
accounting for stock-based employee compensation plans. However, it also
allows companies to continue to measure cost for such plans using the
intrinsic value method of accounting prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). Under
the fair value based method, compensation cost is measured at the date of
grant on the value of the award and is recognized over the service period,
which is usually the vesting period. Under the intrinsic value based method,
compensation cost is the excess, if any, of the quoted market price of the
stock at the grant date or other measurement date over the amount an employee
must pay to acquire the stock. The Company has elected to continue to
account for its employee stock compensation plans under APB 25 with pro forma
disclosures of net earnings and earnings per share, as if the fair value based
method of accounting defined in SFAS 123 had been applied.
Effective October 1, 1996, the Company adopted Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" (SFAS 121). SFAS 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. Impairment is assessed by comparing the book value of such
assets to the estimated undiscounted future operating cash flows expected to
result from the use of the asset and its final disposition. If the sum of the
expected future cash flow is less than the carrying amount of the asset, an
impairment loss is recognized based on the fair value of the asset. The
Company completed its evaluation of the impact of adoption of SFAS 121 and no
adjustment of the carrying value of long-lived assets was necessary.
In March 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings per Share". SFAS 128 establishes standards for computing
earnings per share ("EPS") and applies to all entities with publicly held
common stock or potential common stock. SFAS 128 replaces the presentation
of primary EPS and fully diluted EPS with a presentation of basic EPS and
diluted EPS, respectively. Basic EPS excludes dilution, and is computed by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Similar to fully diluted
EPS, diluted EPS reflects the potential dilution of securities that could
share in the earnings. SFAS 128 will be adopted by the Company for the
fiscal quarter ending December 31, 1997 and earnings per share for all prior
periods will be restated upon adoption. Had the Company adopted SFAS 128 for
the periods presented, basic and diluted earnings per share would have been
$2.01 and $1.98, respectively, for the year ended September 30, 1997.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," effective for fiscal years beginning
after December 15, 1997. SFAS 131 establishes standards for reporting
information about operating segments in annual financial statements and
requires selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS 131 requires reporting segment profit or loss,
certain specific revenue and expense items and segments assets. It also
requires reconciliations of total segment revenues, total segment profit or
loss, total segment assets, and other amounts disclosed for segments to
corresponding amounts reported in the financial statements. Restatement of
comparative information for earlier periods presented is required in the
initial year of application. Interim information is not required until the
second year of application, at which time comparative information is required.
The Company has not determined the impact that the adoption of this new
accounting standard will have on its financial statement disclosures. The
Company will adopt this accounting standard October 1, 1998, as required.
2. Transactions with related parties. As of September 30, 1997 seven of the
Company's directors were also directors of FRP Properties, Inc. ("FRPP").
Such directors own approximately 40% of the stock of FRPP and 30% of the stock
of the Company. Accordingly, FRPP and the Company are considered related
parties.
FRPP, through its transportation subsidiaries, hauls construction
aggregates for the Company and customers of the Company. It also hauls diesel
fuel and other supplies for the Company. Charges for these services are based
on prevailing market prices.
Other wholly owned subsidiaries of FRPP lease certain construction
aggregates mining and other properties and provide construction management
services to the Company.
The Company paid rents, royalties and transportation charges to subsidiaries
of FRPP totaling $6,006,000 in 1997, $6,544,000 in 1996 and $5,869,000 in
1995.
At September 30, 1997 and 1996 the Company had a net account payable due to
subsidiaries of FRPP totaling $206,000 and $283,000, respectively.
Under an agreement extending until September 30, 1999, the Company furnishes
certain management and related services, including financial, tax, legal,
administrative, accounting and computer, to FRPP and its subsidiaries.
Charges for such services were $1,414,000 in 1997, $1,383,000 in 1996, and
$1,312,000 in 1995.
On September 30, 1995 a wholly owned subsidiary of the Company entered into
a contract to sell 134 acres of land to a subsidiary of FRP Properties, Inc.
for $500,000 and the assumption of certain reclamation costs and benefits
relating to the site. An appraisal of the property was obtained. The
transaction was approved by the Company's Board of Directors with the
directors who are also directors of FRP Properties, Inc. abstaining. The
Company recorded a write down of $1,248,000 in the carrying value of this land
on September 30, 1995. The transaction closed on October 9, 1996.
3. Inventories. Inventories at September 30 consisted of the following (in
thousands):
1997 1996
Finished products $ 18,151 18,719
Raw materials 3,630 3,825
Parts and supplies 806 931
$ 22,587 23,475
The excess of current cost over the LIFO stated values of inventories was
$4,984,000 at September 30, 1997 and $5,438,000 at September 30, 1996.
4. Other assets. Other assets at September 30 consisted of the following (in
thousands):
1997 1996
Real estate $ 2,101 2,321
Notes receivable 118 5,271
Goodwill at cost less accumulated
amortization of $3,446
($3,116 in 1996) 9,470 9,799
Other 16,728 8,378
$ 28,417 25,769
5. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
1997 1996
Unsecured notes:
8%-10% notes $ 2,057 1,678
Revolving credit - 6,000
Industrial development
revenue bonds 9,569 10,249
7% - 12% secured notes
and contracts 1,680 1,449
13,306 19,376
Less portion due within
one year 2,447 2,514
$ 10,859 16,862
Of the industrial development revenue bonds at September 30, 1997, $7,550,000
is due between 2004 and 2021. The bonds provide for quarterly interest payments
between 68.0% and 71.5% of prime rate (8.5% at September 30, 1997). The bonds
are subject to Purchase and Put Agreements with several banks whereby the
bondholders may, at their option, sell the bonds to the Company during the
following fiscal years: $400,000 in 1998; $2,675,000 in 1999; $2,875,000 in
2000; $700,000 in 2001; and $900,000 in 2002. The balance of the industrial
development revenue bonds totaling $2,019,000 at September 30, 1997 is at
floating rates of interest and matures through 1999. The bonds are
collateralized by certain property, plant and equipment having a carrying value
of $5,330,000 at September 30, 1997.
The secured notes and contracts are collateralized by certain real estate
having a carrying value of approximately $3,779,000 at September 30, 1997 and
are payable in installments through 2011.
The aggregate amount of principal payments, excluding the revolving credit,
due subsequent to September 30, 1997, assuming that all of the industrial
development revenue bondholders exercise their options to sell the bonds to
the Company is: 1998 - $2,447,000; 1999 - $4,307,000; 2000 - $3,927,000; 2001
- - $946,000; 2002 - $1,402,000 and
subsequent years - $277,000.
The Company has a revolving credit agreement under which it may borrow up
to $75,000,000 on term loans payable in consecutive quarterly installments of
5% of the original amount commencing September 30, 2000 and a final payment of
the unpaid balance on June 30, 2003. Interest is payable at the prime rate
until June 30, 2000 and at 3/8 of 1% above such prime rate thereafter.
Alternative interest rates based on the London interbank rate and/or the
reserve-adjusted certificate of deposit rate are available at the Company's
option. An annual commitment fee of 3/16 of 1% is payable on the unused
amount of the commitment.
The Company also has available short-term lines of credit from three banks
aggregating $30,000,000. Under these lines the Company may borrow funds for a
period of one to ninety days. There is no commitment fee and the banks can
terminate the lines at any time. The interest rate is determined at the time
of each borrowing. The weighted average interest rates on such borrowings at
September 30, 1997 and 1996 were 6.0% and 6.3%, respectively.
The various loan agreements contain restrictive covenants, including a
requirement to maintain a consolidated current ratio and consolidated tangible
net worth (as defined) at certain levels, limitations on paying cash
dividends, and other restrictions. As of September 30, 1997, under the most
restrictive of the agreements, $81,452,000 of consolidated retained earnings
was not restricted as to payment of cash dividends.
The Company capitalized interest cost of $176,000 in 1997 and $32,000 in
1996.
6. Stock option plan. The Company has a stock option plan under which options
for shares of common stock may be granted to directors, officers and key
employees. At September 30, 1997, 82,000 shares of common stock were
available for future grants.
Option transactions for the fiscal years ended September 30 are summarized as
follows:
1997 1996 1995
Average Average Average
Options Price(1) Options Price(1) Options Price(1)
Shares under option:
Outstanding at
beginning of year 1,086,200 13.32 1,092,700 13.32 1,069,200 13.29
Granted 918,000 16.41 - - 35,000 13.97
Exercised (526,700) 13.45 - - - -
Canceled (8,700) 13.89 (6,500) 12.56 (11,500) 12.56
Outstanding at end of
year 1,468,800 15.20 1,086,200 13.32 1,092,700 13.32
Options exercisable at
end of year 522,000 896,760 743,020
(1) Weighted average exercise price
The following table summarizes information concerning stock options
outstanding at September 30, 1997.
Options Options Remaining
Exercise Price Outstanding Exercisable Life
$ 12.375 27,000 16,200 4.7 years
12.5625 371,800 371,800 4.7 years
13.96875 35,000 14,000 4.3 years
15.1875 120,000 120,000 1.3 years
16.4063 915,000 - 9.5 years
Total 1,468,800 522,000
Remaining non-exercisable options as of September 30, 1997 become exercisable
as follows:
1998-195,400; 1999-195,400; 2000-190,000; 2001-183,000 and 2002-183,000.
Options granted have been at a price equal to the fair market value of the
Company's common stock on the dates of grant. The options expire from seven
to ten years from the date of grant and become exercisable in cumulative
installments of 20% each year after a one year waiting period from the date of
grant.
If compensation cost for stock option grants had been determined based on
the Black-Scholes option pricing model value at the grant date for the 1997
awards consistent with the provisions of SFAS No. 123, the Company's 1997 net
income and earnings per share would have been $36,839,000 and $1.96 per share,
respectively. The SFAS 123 method has not been applied to options granted
prior to October 1, 1996, and the pro forma compensation expense may not be
indicative of pro forma expense in future years. The fair value of options
granted is estimated to be $6.01 on the date of grant using the following
assumptions; dividend yield of 1.5%, expected volatility of 25.9%, risk-free
interest rates of 6.8% and expected lives of 7 years.
7. Income taxes. The provision for income taxes for the fiscal years ended
September 30 consisted of the following (in thousands):
1997 1996 1995
Current:
Federal $ 17,211 13,421 10,507
State 3,201 2,466 2,103
20,412 15,887 12,610
Deferred ( 1,184) (1,777) (150)
Total $ 19,228 14,110 12,460
A reconciliation between the amount of reported income tax provision and the
amount computed at the statutory Federal income tax rate follows (in
thousands):
1997 1996 1995
Amount computed at statutory
Federal rate $19,730 14,389 12,731
Effect of percentage depletion (2,144) (1,890) (1,599)
State income taxes (net of Federal
income tax benefit) 1,998 1,419 1,219
Other, net (356) 192 109
Provision for income taxes $19,228 14,110 12,460
The types of temporary differences and their related tax effects that give
rise to deferred tax assets and deferred tax liabilities at September 30 are
presented below:
1997 1996
Deferred tax liabilities:
Basis difference in property,
plant and equipment $ 36,383 36,441
Other 901 735
Gross deferred tax liabilities 37,284 37,176
Deferred tax assets:
Insurance reserves 3,300 2,899
Other accrued liabilities 9,002 7,946
Other 643 810
Gross deferred tax assets 12,945 11,655
Net deferred tax liability $ 24,339 25,521
8. Employee benefits. The Company and its subsidiaries have a number of
retirement plans which cover substantially all employees.
Certain of the Company's subsidiaries have a noncontributory defined benefit
retirement plan covering certain employees. The benefits are based on years of
service and the employee's highest average compensation for any five (or in the
case of one subsidiary three) consecutive years of service. Plan assets are
invested in mutual funds, listed stocks and bonds and cash equivalents. The
Company's funding policy is to fund annually within the limits imposed by the
Employee Retirement Income Security Act.
Net periodic pension cost (income) for fiscal years ended September 30
included the following components (in thousands):
1997 1996 1995
Service cost-benefits earned during
the period $ 291 328 377
Interest cost on projected benefit
obligation 1,178 1,131 1,132
Actual return on assets (4,088) (2,984) (2,501)
Net amortization and deferral 2,302 1,429 1,094
Curtailment gain - (184) -
Cost of early retirement program 194 - -
Net periodic pension cost (income) ($ 123) ( 280) 102
Assumptions used in determining the net periodic pension cost are discount
rate of 7.25%, rate of increase in compensation levels of 5% and expected
long-term rate of return on assets of 9%.
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet at September 30 (in
thousands):
1997 1996
Assets Assets
Exceed Exceed
Accumulated Accumulated
Benefits Benefits
Actuarial present value of vested
benefit obligations ($16,261) (15,250)
Accumulated benefit obligation ($16,306) (15,317)
Projected benefit obligation ($17,205) (16,561)
Plan assets at fair value 21,887 18,772
Plan assets in excess of
projected benefit obligation 4,682 2,211
Unrecognized net gain (4,393) (1,952)
Unrecognized transition asset (605) (691)
Unrecognized prior service cost (2) (9)
Accrued pension cost ($ 318) ( 441)
Union employees are covered by multi-employer plans not administered by the
Company. Payments of $427,000, $202,000 and $219,000 were made to these plans
during fiscal 1997, 1996 and 1995, respectively.
Additionally, the Company and certain subsidiaries have savings/profit
sharing plans for the benefit of qualified employees. The savings feature of
the plans incorporates the provisions of Section 401(k) of the Internal Revenue
Code. Under the savings feature of the plans, eligible employees may elect to
save a portion (within limits) of their compensation on a tax deferred basis.
The Company contributes to a participant's account an amount equal to 50% (with
certain limits) of the participant's contribution. Additionally, the Company
and certain subsidiaries may make annual contributions to the plans as
determined by the Board of Directors, with certain limitations. The plans
provide for deferred vesting with benefits payable upon retirement or earlier
termination of employment. The total cost of the plans was $4,938,000 in 1997;
$3,927,000 in 1996 and $3,510,000 in 1995.
The Company has a management security plan for certain officers and key
employees. The accruals for future benefits are based upon the remaining years
to retirement of the participating employees. The Company has purchased life
insurance on the lives of the participants and it is the owner and beneficiary
of such policies. The expense for fiscal 1997, 1996 and 1995 was $1,814,000,
$1,593,000 and $1,296,000, respectively.
The Company and one of its subsidiaries provide certain health care
benefits for retired employees. Employees may become eligible for those
benefits if they were employed by the Company prior to December 10, 1992, meet
service requirements and reach retirement age while working for the Company.
The plans are contributory and unfunded. The Company accrues the estimated cost
of retiree health benefits over the years that the employees render service.
The following table sets forth the plans' combined status reconciled with
the accrued postretirement benefit cost included in the Company's consolidated
balance sheet at September 30 (in thousands):
1997 1996 1995
Accumulated postretirement benefit
obligations:
Retirees $ 1,122 1,310 1,424
Fully eligible active participants 436 517 616
Other active participants 1,077 1,094 874
Total APBO 2,635 2,921 2,914
Unrecognized net loss from past
experience different from that
assumed and from changes in
assumptions (490) (1,011) (1,221)
Unrecognized prior service costs 299 473 684
Accrued postretirement benefit cost $ 2,444 2,383 2,377
Net periodic postretirement benefit cost for fiscal years ended September
30 includes the following components (in thousands):
1997 1996 1995
Service cost of benefits earned
during the period $ 129 134 133
Interest cost on APBO 178 197 206
Net amortization and deferral (176) (130) (101)
Net periodic postretirement benefit
cost $ 131 201 238
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.25%.
9. Leases. Certain plant sites, office space and equipment are rented under
operating leases. Total rental expense, excluding mineral leases, for fiscal
1997, 1996 and 1995 was $4,176,000, $3,867,000 and $4,231,000, respectively.
Future minimum lease payments under operating leases with an initial or
remaining noncancelable term in excess of one year, exclusive of mineral leases,
at September 30, 1997 are as follows: 1998-$1,497,000; 1999-$1,445,000;
2000-$1,349,000; 2001-$1,329,000; 2002-1,324,000 after 2002-$8,053,000. Certain
leases include options for renewal. Most leases require the Company to pay for
utilities, insurance and maintenance.
The Company has a long-term lease, which may not be canceled prior to September
1, 1998, with FRPP for sand reserves near Grandin, Florida. Under the lease the
Company will pay minimum royalties of $1,000,000 per year.
10. Gain (loss) on sale and/or write down of assets. In fiscal 1997 the Company
recorded a gain on the sale certain real estate totaling $14,000 . In fiscal
1996 the Company recorded a loss on the sale and write down of the carrying
value of certain real estate totaling $1,619,000 and a gain on the sale of a
lease of $1,333,000. In fiscal 1995 the Company recorded a loss on the write
down of the carrying value of certain real estate totaling $2,018,000.
11. Fair values of financial instruments. At September 30, 1997 and 1996 the
carrying amount reported in the balance sheet for cash and cash equivalents,
notes receivable, short-term notes payable to banks, revolving credit and
industrial development revenue bonds approximate their fair value. The fair
values of the Company's other long-term debt are estimated using discounted cash
flow analysis, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements. At September 30, 1997 the carrying
amount and fair value of such other long-term debt was $3,737,000 and
$3,863,000, respectively. At September 30, 1996 the carrying amount and fair
value of such other long-term debt was $3,127,000 and $3,240,000, respectively.
12. Contingent liabilities. The Company and its subsidiaries are involved in
litigation on a number of 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.
13. Commitments. At September 30, 1997, the Company had placed orders and was
committed to purchase equipment costing approximately $14,608,000. In addition,
the Company had placed orders and was committed, subject to certain cancellation
provisions, to construction contracts and equipment for the cement plant costing
approximately $64,673,000.
14. Fourth quarter financial information (unaudited). In the fourth quarter of
1996, the Company strengthened its risk insurance reserves approximately
$1,000,000.
15. Subsequent events. On October 1, 1997, the Company's Board of Directors
declared a 2 for 1 stock split. On October 31, 1997, one share of common stock
was distributed for each common share held on October 15, 1997. The stock
split is reflected in all periods in the accompanying financial statements.
At September 30, 1997, $8,792,000 of cash was held in escrow pending the
closing of an acquisition of a quarry and distribution yard. The cash is
included in other assets in the accompanying balance sheet. The acquisition
closed on October 3, 1997 and will not have a material effect on the results of
operation.
Directors and Officers
Directors
Edward L. Baker (1)(4)
Chairman of the Board
of the Company
John D. Baker II (1)(4)
President and Chief Executive Officer
of the Company
Thompson S. Baker II
Vice President of the Company
Alvin R. (Pete) Carpenter (3)(4)
President and Chief Executive Officer
of CSX Transportation, Inc.
Charles H. Denny III (2)
Investments
Albert D. Ernest, Jr. (3)(4)
President of Albert Ernest Enterprises
Luke E. Fichthorn III (2)(4)
Private Investment Banker,
Twain Associates and Chairman of the
Board and Chief Executive Officer of
Bairnco Corporation
Frank M. Hubbard (2)(3)
Chairman of the Board of
A. Friends' Foundation Trust
Francis X. Knott (2)
Chief Executive Officer
of Partners Management Company
Radford D. Lovett (3)(4)
Chairman of the Board of
Commodores Point Terminal Corp.
W. Thomas Rice (2)(3)
Chairman Emeritus of Seaboard
Coast Line Industries, Inc.
C. J. Shepherdson
Vice President of the Company
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Long Range Planning Committee
Officers
Edward L. Baker
Chairman of the Board
John D. Baker II
President and Chief Executive Officer
H. B. Horner
Executive Vice President
C. J. Shepherdson
Vice President
Chairman, Northern Concrete Group
S. Robert Hays
Vice President
President, Florida Concrete Group
Fred W. Cohrs
Vice President
President, Cement Group
Clarron E. Render, Jr.
Vice President
President, Northern Concrete Group
Thompson S. Baker II
Vice President
President, Aggregates Group
James J. Gilstrap
Vice President, Treasurer and
Chief Financial Officer
Wallace A. Patzke, Jr.
Vice President, Controller and
Chief Accounting Officer
Dennis D. Frick
Secretary
Corporate Counsel
John W. Green
Assistant Secretary
Director of Corporate Credit
Florida Rock Industries, Inc.
General Office: 155 East 21st Street
Jacksonville, Florida 32206
Telephone: (904) 355-1781
Annual Meeting
Shareholders are cordially invited to attend the Annual Stockholders Meeting
which will be held at 9 a.m. local time, on Wednesday, February 4, 1998, at the
general offices of the Company, 155 East 21st Street, Jacksonville, Florida.
Transfer Agent
First Union National Bank of North Carolina
230 South Tryon Street, 11th Floor
Charlotte, NC 28288-1154
Telephone: 1-800-829-8432
General Counsel
Lewis S. Lee, Esquire
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Jacksonville, Florida
Independent Auditors
Deloitte & Touche LLP
Jacksonville, Florida
Common Stock Listed
American Stock Exchange
(Symbol: FRK)
Form 10-K
Stockholders may receive without charge a copy of Florida Rock Industries,
Inc.'s annual report to the Securities and Exchange Commission on Form 10-K by
writing to the Treasurer at P.O. Box 4667, Jacksonville, Florida 32201.