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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
For the fiscal year ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-26115
FRP PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2924957
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
155 East 21st Street, Jacksonville, Florida 32206
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 904/355-1781
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.10 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K. [ ]
At December 1, 1998 aggregate market value of the shares of Common Stock
held by non-affiliates of the registrant was $49,572,000. At such date
there were 3,463,225 shares of the registrant's Stock outstanding.
Documents Incorporated by Reference
Portions of the FRP Properties, Inc. 1998 Annual Report to stockholders
are incorporated by reference in Parts I, II, III and IV.
Portions of the FRP Properties, Inc. Proxy Statement dated December 14,
1998 are incorporated by reference in Part III.
PART I
Item 1. BUSINESS.
FRP Properties, Inc., which was incorporated in Florida in 1988,
and its subsidiaries (the "Company") are engaged in the
transportation and real estate businesses. Florida Rock & Tank
Lines, Inc.("Tank Lines") and SunBelt Transport, Inc. ("SunBelt"),
wholly owned subsidiaries, are southeastern transportation
companies concentrating in the hauling, by motor carrier, of liquid
and dry bulk commodities and materials on flatbed trailers.
Another wholly owned subsidiary, Florida Rock Properties, Inc.
("Properties"), owns real estate of which a substantial portion is
under mining royalty agreements or leased to Florida Rock
Industries, Inc. ("FRI"). The Company also holds certain other
real estate for investment. Other wholly owned subsidiaries of the
Company, own and are developing certain industrial rental
properties near Baltimore, Maryland. Substantially all of the
Company's operations are conducted within the Southeastern and
Mid-Atlantic United States.
The Company has two major business segments: transportation and
real estate. Industry segment information is presented in Notes 2
and 8 to the consolidated financial statements included in the
accompanying 1998 Annual Report to stockholders and is incorporated
herein by reference.
FRI accounted for approximately 8.5% of the Company's consolidated
revenues for fiscal 1998.
Revenues from royalties and from the dump and flatbed truck fleet
operations are subject to factors affecting the level of general
construction activity. A decrease in the level of general
construction activity in any of the Company's market areas may have
an adverse effect on such revenues and income derived therefrom.
Transportation. Tank Lines is engaged in hauling liquid and dry
bulk commodities in tank and dump trucks. SunBelt is engaged in
hauling building and construction materials on flatbed trailers.
Information as to the Transportation operations' revenue by
principal markets is presented on page 6 of the accompanying 1998
Annual Report to stockholders under the caption, "Management
Analysis" and is incorporated herein by reference.
The Company's owned and leased dump truck fleet hauls principally
construction aggregates from terminals in Fort Myers, and Orlando,
Florida. There are from 8 to 12 major competitors in each of the
Company's markets and numerous small competitors in all markets.
The Company normally experiences considerable competition in all of
its markets.
The Company's owned and leased tank truck fleet hauls liquid and
dry bulk commodities, including petroleum and chemicals. It
operates from terminals in Jacksonville, Ft. Myers, Orlando, Panama
City, Pensacola, Port Everglades, Tampa and White Springs, Florida;
Albany, Atlanta, Augusta, Bainbridge, Columbus, Macon and Savannah,
Georgia; Knoxville and Nashville, Tennessee; and Birmingham,
Alabama. It also has a central dispatch/offices in Greenville,
South Carolina and Dalton, Georgia. The Company has from 4 to 8
major tank truck competitors in each of its markets.
The Company's owned flatbed fleet is based at Jacksonville and
Tampa, Florida and Savannah, Georgia and hauls building and
construction materials in 12 southeastern states. There are 10
major competitors in the Company's market area and numerous small
competitors in the various states served.
At September 30, 1998, the Company had placed orders and was
committed to purchasing tractors and trailers costing approximately
$9,900,000.
Price, service, and terminal location are the major factors which
affect competition within a given market.
During fiscal 1998 the transportation segment's ten largest
customers accounted for approximately 33% of transportation's
revenue. The loss of any one of these customers could have an
adverse effect on the Company's revenues and income.
Real Estate. The Company's real estate and property development
activities are conducted through several wholly owned subsidiaries.
The Company owns real estate in Florida, Georgia, Virginia,
Maryland, and Washington, D.C. The real estate owned falls
generally into one of three categories. The first is land with
stone or sand and gravel deposits, of which substantially all is
leased to Florida Rock Industries, Inc. under mining royalty
agreements whereby the Company is paid a percentage of the revenues
generated by the material mined and sold, or minimum royalties
where there is no current, or only limited, mining activity. The
second is land and/or buildings leased under rental agreements, and
the third is land and/or buildings which are being developed for
rental or held for future appreciation.
Additional information about the Company's Real Estate segment is
contained on page 2 under the captions "FRP Development Corp." and
in Note 11 to the consolidated financial statements included in the
accompanying 1998 Annual Report to stockholders and is incorporated
herein by reference.
The Company's real estate strategy of developing high quality,
flexible warehouse/office space in the Baltimore-Washington markets
continued to be successful. One hundred percent of the
warehouse/office space built by the Company over the last several
years was leased at September 30, 1998.
Price, location, rental space availability, structural design and
flexibility are the major factors which affect competition in the
warehouse rental market. The Company experiences considerable
competition in all of its markets.
In fiscal 1998 real estate revenues, excluding the sale of real
estate, were divided approximately 49% from mining and minimum
royalties and 51% from rentals. FRI accounted for approximately
57% of such revenue.
Environmental Matters. While the Company is affected by
environmental regulations, such regulations are not expected to
have a major effect on the Company's capital expenditures or
operating results. Additional information concerning environmental
matters is presented in Note 10 to the consolidated financial
statements included in the accompanying 1998 Annual Report to
stockholders and in Item 3 "Legal Proceedings" of this Form 10-K,
and such information is incorporated herein by reference.
Employees. The Company employed approximately 732 people in its
Transportation Group, 19 people in its Real Estate Group, and 2
people in its Corporate offices at September 30, 1998.
Item 2. PROPERTIES.
The Company's principal properties are located in Florida, Georgia,
Virginia, Washington, D.C., and Maryland.
Transportation Properties. At September 30, 1998 the Company
operated an owned (541) and leased (5) fleet of 546 trucks and had
18 sites for its trucking terminals in Florida, Georgia, Alabama
and Tennessee totaling approximately 80 acres. Of these acres, the
Company owned approximately 74 and leased approximately 6. The
Company also leases central dispatch/offices in Greenville, South
Carolina and Dalton, Georgia. The lease terms run from
year-to-year.
Construction Aggregates Properties. The following table summarizes
the Company's principal construction aggregates locations and
estimated reserves at September 30, 1998, substantially all of
which are leased to FRI.
Tons of
Tons Mined Estimated
in Year Reserves
Ended at
9/30/98 9/30/98 Approximate
(000's) (000's) Acres Owned
The Company owns fourteen
locations currently being
mined located at
Brooksville, Astatula,
Miami, Grandin, Gulf
Hammock, Keuka, Lake Wales,
and in Marion and Lake
Counties, Florida; Forest
Park, Macon and Tyrone,
Georgia; St. Mary's County,
Maryland; and Manassas,
Virginia. 8,614 311,000 17,113
The Company owns three locations
being leased but not currently
being mined, located at Ft.
Myers and Newberry, Florida
and Columbus, Georgia. - 136,000 3,363
Other Properties. The Company owns approximately 120 acres of land
in Virginia and Washington, D.C. and an office building and
approximately 6 acres in Florida which are leased to FRI. The
Company owns four parcels of land near Baltimore, Maryland. One
contains approximately 11 acres with a commercial warehouse and
office space (162,587 square feet), which at November 1, 1998 was
100% leased. The second contains approximately 17 acres with
195,615 square feet of commercial warehouse and office space of
which at November 1, 1998 was 100% leased. The third contains
approximately 10 acres with 187,517 square feet of
commercial/warehouse space that was 100% leased at November 1,
1998. The fourth contains 8.5 acres with an office building
(28,533 square feet) which is 6% occupied by the Company with the
balance 100% leased, including a portion leased to FRI. In October
1996, the Company purchased 134 acres of land in Harford County,
Maryland. The site is being used for the development of the
Lakeside Business Park. A 5.2 acre section has been developed with
105,803 square feet of commercial warehouse space that was 100%
leased on November 1, 1998. Two sections of 4.15 acres each with
approximately 133,000 square feet were under construction at
September 30, 1998. The first section with 65,520 square feet was
100% pre-leased at year end. In addition, the Company owns
approximately 11,183 acres of investment and other real estate, of
which approximately 7,738 acres are in Suwannee and Columbia
Counties, Florida.
The Company purchased a 59 acre tract in Anne Arundel County,
Maryland near the Baltimore-Washington International Airport in May
1998. The project, Hillside Business Park, will provide the
Company an opportunity to develop 600,000 square feet of
warehouse/office space. Grading and infrastructure work on the
site will begin in the spring of 1999, and construction of the
first building is anticipated to commence during the fall of 1999.
As part of the Company's ongoing asset management activities, it
has made application before the Zoning Commission of the District
of Columbia to re-zone its 5.8 acre site on the banks of the
Anacostia River from industrial to Plan Unit Development(PUD).
Approval of the application would allow the development of a 1.5
million square foot commercial office component together with
associated waterfront enhancements. The Company expects that a
final zoning order will be issued in early 1999.
At September 30, 1998 certain property, plant and equipment having
a carrying value of $22,415,000 was pledged on certain notes and
contracts with an outstanding principal balance totaling
$18,832,000 on such date.
In addition, certain properties having a carrying value at
September 30, 1998 of $1,620,000 were encumbered by industrial
revenue bonds which are the liability of FRI. FRI has agreed to
pay such debt when due (or sooner if FRI cancels its lease of such
property), and further has agreed to indemnify and hold harmless
the Company.
Item 3. LEGAL PROCEEDINGS.
Note 10 to the Consolidated Financial Statements included in the
accompanying 1998 Annual Report to stockholders is incorporated
herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No reportable events.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
There were approximately 846 holders of record of FRP Properties,
Inc. common stock, $.10 par value, as of December 1, 1998. The
Company's common stock is traded on the Nasdaq Stock Market (Symbol
FRPP). Information concerning stock prices is included under the
caption "Quarterly Results" on page 5 the Company's 1998 Annual
Report to stockholders, and such information is incorporated herein
by reference. The Company has not paid a cash dividend during the
past two years. It is the present policy of the Board of Directors
not to pay cash dividends. Information concerning restrictions on
the payment of cash dividends is included in Note 3 to the
consolidated financial statements included in the accompanying 1998
Annual Report to stockholders and such information is incorporated
herein by reference.
Item 6. SELECTED FINANCIAL DATA.
Information required in response to this Item 6 is included under
the caption "Five Year Summary" on page 5 of the Company's 1998
Annual Report to stockholders and such information is incorporated
herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Information required in response to this Item 7 is included under
the caption "Management Analysis" on page 5, 6 and 7; under the
caption "Capital Expenditures" on page 2; and in Notes 1 through 11
to the consolidated financial statements included in the
accompanying 1998 Annual Report to stockholders and in Item 3
"Legal Proceedings" of this Form 10-K. Such information is
incorporated herein by reference.
Item 7.A QUANTITIVE AND QUALITATIVE ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest
rates. For its cash and cash equivalents a change in interest
rates effects the amount of interest income that can be earned.
For its debt instruments changes in interest rates effect the
amount of interest expense incurred.
The following table provides information about the Company's
financial instruments that are sensitive to changes in interest
rates:
Interest rate sensitivity
1999 2000 2001 2002 2003 Thereafter Total Fair Value
Liabilities:
Bank lines of credit $ 1,600 1,600 1,600
Weighted average
Interest rate 6.1%
Long-term debt at
Fixed rates $ 533 579 628 681 738 15,673 18,832 19,996
Weighted average
Interest rate 8.1% 8.1 8.1 8.1 8.1 8.1
Bank Revolving Credit
Variable interest $15,000 15,000 15,000
Rate
Weighted average
Interest 6.2%
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required in response to this Item 8 is included under
the caption "Quarterly Results" on page 5 and on pages 8 through 17
of the Company's 1998 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.
EXECUTIVE OFFICERS OF THE COMPANY
Name Age Office Position Since
Edward L. Baker 63 Chairman of the Board May 3, 1989
John E. Anderson 53 President & Chief Feb. 17, 1989
Executive Officer
John R. Mabbett III 39 Vice President and Feb. 4, 1993
Secretary
Ish Copley 65 President of SunBelt Aug. 9, 1992
Transport, Inc., the
Company's flatbed
trucking operation
David H.
deVilliers, Jr. 47 Vice President June 1, 1989
James J. Gilstrap 51 Treasurer, Assistant Aug. 6, 1997
Secretary and Chief
Financial Officer
Wallace A. Patzke, 51 Controller and Chief Aug. 6, 1997
Jr. Accounting Officer
All of the above officers have been employed in their respective
positions for the past five years, except James J. Gilstrap and
Wallace A. Patzke,Jr.
James J. Gilstrap joined FRI in March 1997 and was elected Vice
President and Chief Financial Officer in May 1997. In August 1997
Mr. Gilstrap was elected Treasurer of FRI. From 1993 to 1997 he
was self-employed as a private investor. From 1984 to 1993 he was
a Partner and Executive Vice President and Chief Financial Officer
for The Regency Group, Inc., a holding company with interests and
operations in commercial real estate development, asset management,
brokerage and financial services.
Wallace A. Patzke, Jr. has been Vice President, Controller and
Chief Accounting Officer of FRI since August 1997. He was elected
Vice President of FRI in October 1996 and has served as controller
since December 1991.
John D. Baker II, who is the brother of Edward L. Baker, and
Thompson S. Baker II, who is the son of Edward L. Baker, are on the
Board of Directors of the Company.
All executive officers of the Company are elected annually by the
Board of Directors.
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 14, 1998; and such
information is incorporated herein by reference.
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 14, 1998; 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 14, 1998; 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 14,
1998 and in Note 2 captioned "Transactions with related parties" in
the Company's 1998 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 14 of this Form 10-K.
(3)Exhibits.
The response to this item is submitted as a
separate section. See Exhibit Index on pages 11
through 13 of this Form 10-K.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the three
months ended September 30, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FRP PROPERTIES, INC.
Date: December 2, 1998 By JAMES J. GILSTRAP
James J. Gilstrap
Treasurer, Assistant Secretary and
Chief Financial Officer
By WALLACE A. PATZKE, JR.
Wallace A. Patzke, Jr.
Controller and Chief Accounting
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on December 2, 1998.
JOHN E. ANDERSON DAVID H. deVILLIERS, JR.
John E. Anderson David H. deVilliers, Jr.
Director, President, and Chief Director
Executive Officer
(Principal Executive Officer) ALBERT D. ERNEST, JR.
Albert D. Ernest, Jr.
JAMES J. GILSTRAP Director
James J. Gilstrap
Treasurer, Assistant Secretary LUKE E. FICHTHORN III
and Chief Financial Officer Luke E. Fichthorn III
(Principal Financial Officer) Director
WALLACE A. PATZKE, JR. FRANCIS X. KNOTT
Wallace A. Patzke, Jr. Francis X. Knott
Controller and Chief Accounting Director
Officer
(Principal Accounting Officer) RADFORD D. LOVETT
Radford D. Lovett
EDWARD L. BAKER Director
Edward L. Baker
Director JOHN R. MABBETT III
John R. Mabbett III
JOHN D. BAKER II Director
John D. Baker II
Director ROBERT H. PAUL III
Robert H. Paul III
THOMPSON S. BAKER II Director
Thompson S. Baker II
Director MARTIN E. STEIN
Martin E. Stein
ISH COPLEY Director
Ish Copley
Director JAMES H. WINSTON
James H. Winston
Director
FRP PROPERTIES, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
EXHIBIT INDEX
[Item 14(a)(3)]
Page No. in
Sequential
Numbering
(3)(a)(1) Articles of Incorporation of FRP Properties,
Inc. Previously filed with Form S-4 dated
December 13, 1988. Filed No. 33-26155.
(3)(a)(2) Amendment to the Articles of Incorporation of
FRP Properties, Inc. filed with the Secretary
of State of Florida on February 19, 1991.
Previously filed with Form 10-K for the fiscal
year ended September 30, 1993. Filed No.
33-26115.
(3)(a)(3) Amendments to the Articles of Incorporation of
FRP Properties, Inc. filed with the Secretary
of State of Florida on February 7, 1995.
Previously filed as appendix to the Company's
Proxy Statement dated December 15, 1994.
(3)(b)(1) Restated Bylaws of FRP Properties, Inc.
adopted December 1, 1993. Previously filed
with Form 10-K for the fiscal year ended
September 30, 1993. File No. 33-26115.
(3)(b)(2) Amendment to the Bylaws of FRP Properties,
Inc. adopted August 3, 1994. Previously
filed with Form 10-K for the fiscal year ended
September 30, 1994. File No. 33-26115.
(4)(a) Articles III, VII and XII of the Articles of
Incorporation of FRP Properties, Inc.
Previously filed with Form S-4 dated December
13, 1988. And amended Article III filed with
Form 10-K for the fiscal year ended September
30, 1993. And Articles XIII and XIV
previously filed as appendix to the Company's
Proxy Statement dated December 15, 1994. File
No. 33-26115.
(4)(b) Specimen stock certificate of FRP Properties,
Inc. Previously filed with Form S-4 dated
December 13, 1988. File No. 33-26115.
(4)(c) Credit Agreement dated as of November 15, 1995
among FRP Properties, Inc.; SunTrust Bank,
Central Florida, National Association; Bank of
America Illinois; Barnett Bank of
Jacksonville, N.A.; and First Union National
Bank of Florida. Previously filed with Form
10-Q for the quarter ended December 31, 1995.
File No. 33-26115.
(4)(c)(1) First Amendment dated as of September 30, 1998
to the Credit Agreement dated as of November
15, 1995.
Page No. in
Sequential
Numbering
(4)(d) The Company and its consolidated
subsidiaries have other long-term debt
agreements which do not exceed 10% of the
total consolidated assets of the Company
and its subsidiaries, and the Company
agrees to furnish copies of such
agreements and constituent documents to
the Commission upon request.
(10)(a) Post Distribution Agreement, dated May 7,
1986, by and between Florida Rock
Industries, Inc. and Florida Rock & Tank
Lines, Inc. and amendments thereto dated
July 1, 1987 and September 27, 1988.
Previously filed with Form S-4 dated
December 13, 1988. File No. 33-26115.
(10)(b) Tax Sharing Agreement, dated May 7, 1986,
between Florida Rock Industries, Inc. and
Florida Rock & Tank Lines, Inc.
Previously filed with Form S-4 dated
December 13, 1988. File No. 33-26115.
(10)(c) Various lease backs and mining royalty
agreements with Florida Rock Industries,
Inc., none of which are presently believed
to be material individually, except for
the Mining Lease Agreement dated September
1, 1986, between Florida Rock Industries
Inc. and Florida Rock Properties, Inc.,
successor by merger to Grand in Land, Inc.
(see Exhibit (10)(e)), but all of which
may be material in the aggregate.
Previously filed with Form S-4 dated
December 13, 1988. File No. 33-26115.
(10)(d) License Agreement, dated June 30, 1986,
from Florida Rock Industries, Inc. to
Florida Rock & Tank Lines, Inc. to use
"Florida Rock" in corporate names.
Previously filed with Form S-4 dated
December 13, 1988. File No. 33-26115.
(10)(e) Mining Lease Agreement, dated September 1,
1986, between Florida Rock Industries,
Inc. and Florida Rock Properties, Inc.,
successor by merger to Grand in Land, Inc.
Previously filed with Form S-4 dated
December 13, 1988. File No. 33-26115.
(10)(f) Summary of Medical Reimbursement Plan of
FRP Properties, Inc. Previously filed
with Form 10-K for the fiscal year ended
September 30, 1993. File No. 33-26115.
Page No. in
Sequential
Numbering
(10)(g) Split Dollar Agreement dated October 3, 1984,
between Edward L. Baker and Florida Rock
Industries, Inc. and assignment of such
agreement, dated January 31, 1986 from Florida
Rock Industries, Inc. to Florida Rock & Tank
Lines, Inc. Previously filed with Form S-4
dated December 13, 1988. File No. 33-26115.
(10)(h) Summary of Management Incentive Compensation
Plans. Previously filed with Form 10-K for
the
fiscal year ended September 30, 1994. File
No. 33-26115.
(10)(i) Management Security Agreements between the
Company and certain officers. Form of
agreement previously filed (as Exhibit
(10)(I)) with Form S-4 dated December 13,
1988. File No. 33-26115.
(10)(i)(1) FRP Properties, Inc. 1989 Employee Stock
Option Plan. Previously filed with Form S-4
dated December 13, 1988. File No. 33-26115
(10)(i)(2) FRP Properties, Inc. 1995 Stock Option Plan.
Previously filed as an appendix to the
Company's Proxy Statement dated December 15,
1994.
(11) Computation of Earnings Per Common Share.
(13) The Company's 1998 Annual Report to
stockholders, portions of which are
incorporated by reference in this Form 10-K.
Those portions of the 1998 Annual Report to
stockholders which are not incorporated by
reference shall not be deemed to be filed as
part of this Form 10-K.
(22) Subsidiaries of Registrant at September 30,
1998: Florida Rock & Tank Lines, Inc. (a
Florida corporation) Florida Rock Properties,
Inc. (a Florida corporation) FRP Development
Corp. (a Maryland corporation) FRP Maryland,
Inc. (a Maryland corporation) 34 Loveton
Center Limited Partnership (a Maryland limited
partnership) FRTL, Inc. (a Florida
corporation)SunBelt Transport, Inc. (a Florida
Corporation)Oz Limited Partnership (a Maryland
limited partnership) FRP Delaware, Inc. (a
Delaware corporation) FRP Lakeside L.P. (a
Maryland limited partnership) FRP Lakeside
L.L.P. (a Maryland limited partnership) FRP
Hillside L.L.C. (a Maryland limited liability
corporation)
(23)(a) Consent of Deloitte & Touche LLP,
Independent Certified Public Accountants,
appears on page 16 of this Form 10-K.
(27) Financial Data Schedule
FRP PROPERTIES, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a) (1) and 2))
Page
Consolidated Financial Statements:
Consolidated balance sheet at September 30, 1998
and 1997 9(a)
For the years ended September 30, 1998, 1997 and 1996:
Consolidated statement of income 8(a)
Consolidated statement of stockholders' equity 11(a)
Consolidated statement of cash flows 10(a)
Notes to consolidated financial statements 12-16(a)
Selected quarterly financial data (unaudited) 5(a)
Independent Auditors' Report 17(a)
Consent of Independent Certified Public Accountants 18(b)
Consolidated Financial Statement Schedules:
Independent Auditors' Report 19(b)
II - Valuation and qualifying accounts 20(b)
III - Real estate and accumulated depreciation and
depletion 21-22(b)
(a) Refers to the page number in the Company's
1998 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 Registration Statement
(Form S-8 No. 33-43215) pertaining to the FRP Properties, Inc. 1989
Stock Option Plan and in the related Prospectus of our report dated
December 1, 1998, appearing in and incorporated by reference in this
Annual Report (Form 10-K) for the year ended September 30, 1998.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 10, 1998
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
FRP Properties, Inc.
Jacksonville, Florida
We have audited the consolidated financial statements of FRP
Properties, Inc. and subsidiaries ("FRP") as of September 30, 1998 and
1997, and for each of the three years in the period ended September 30,
1998, and have issued our report thereon dated December 1, 1998; such
consolidated financial statements and report are included in your 1998
Annual Report to Stockholders and are incorporated herein by reference.
Our audits also included the financial statement schedules of FRP,
listed in Item 14. These financial statement schedules are the
responsibility of FRP's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 1, 1998
FRP PROPERTIES, INC.
SCHEDULE II (CONSOLIDATED) - VALUATION
AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
ADDITIONS ADDITIONS
BALANCE CHARGED TO CHARGED TO BALANCE
AT BEGIN. COST AND OTHER AT END
OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
Year Ended
September 30, 1998:
Allowance for
doubtful accounts $257,952 $12,000 - ($2,366)(a) $272,318
Accrued risk
insurance $4,217,714 $4,401,537 - $4,073,794(b) $4,545,457
Accrued health
insurance $964,698 1,340,998 - 1,463,907(b) 841,789
Totals -
insurance $5,182,412 $5,742,535 $0 $5,537,701 $5,387,246
Year Ended
September 30, 1997:
Allowance for
doubtful accounts $233,537 $18,000 - ($6,415)(a) $257,952
Accrued risk
insurance $3,828,654 $3,113,219 - $2,724,159(b)$4,217,714
Accrued health
insurance $777,199 1,246,760 - 1,059,261(b) 964,698
Totals -
insurance $4,605,853 $4,359,979 $0 $3,783,420 $5,182,412
Year Ended
September 30, 1996:
Allowance for
doubtful accounts $218,474 $18,000 - $2,937(a) $233,537
Accrued risk
insurance $2,736,665 $3,240,572 - $2,148,583(b) $3,828,654
Accrued health
insurance $817,487 750,842 - 791,130(b) 777,199
Totals -
insurance $3,554,152 $3,991,414 $0 $2,939,713 $4,605,853
(a) Accounts written off less recoveries
(b) Payments
FRP PROPERTIES, INC.
SCHEDULE III(CONSOLIDATED)-REAL ESTATE & ACCUMULATED DEPRECIATION AND
DEPLETION
SEPTEMBER 30, 1998
Cost capi- Gross amount Date Deprecia-
Encumb- Initial cost talized at which Accumulated Of Date tion Life
County State rances to subsequent carried at Depreciation Constr- Acquired Computed
Company to acquisition end of period tion on:
(a)
Construction Aggregates
Alachua Florida $1,588,458 $ 7,509 $1,595,967 $53,748 n/a 4/86 unit
Clay Florida 964,972 15,666 980,638 - n/a 4/86 unit
Clayton Georgia 381,787 0 381,787 2,597 n/a 4/86 unit
Dade Florida 9,374,660 0 9,374,660 6,284,975 n/a 4/86 unit
Fayette Georgia 120,023 400,872 0 400,872 39,474 n/a 4/86 unit
Hernando Florida 2,127,533 1 2,127,553 1,096,089 n/a 4/86 unit
Lake Florida 1,464,625 20,528 1,485,153 1,011,808 n/a 4/86 unit
Lee Florida 4,690,269 0 4,690,269 - n/a 4/86 unit
Floyd Georgia 300,000 0 300,000 - n/a 4/86 unit
Levy Florida 1,280,643 83,365 1,364,008 352,520 n/a 4/86 unit
Marion Florida 1,180,366 0 1,180,366 599,478 n/a 4/86 unit
Monroe Florida 840,442 0 840,442 174,573 n/a 4/86 unit
Muscogee Georgia 368,674 0 368,674 45,000 n/a 4/86 unit
Polk Florida 120,502 0 120,502 75,285 n/a 4/86 unit
Prince Wil.Virginia 298,463 0 298,463 236,246 n/a 4/86 unit
Putnam Florida 15,014,681 86,752 15,101,433 2,180,058 n/a 4/86 unit
St. Marys Maryland 1,269,878 0 1,269,878 497,437 n/a 4/86 unit
120,023 41,666,825 213,821 41,880,646 12,649,288
Land Rental Property
District of Columbia 2,901,869 1,555,992 4,457,861 869,422 n/a 4/86 unit
Fairfax Virginia 2,035,013 0 2,035,013 - n/a 4/86 unit
Putnam Florida 193,584 (23,772) 169,812 116,580 n/a 4/86 unit
Spalding Georgia 19,572 0 19,572 - n/a 4/86 unit
Suwannee Florida 4,252,091 293,018 4,545,109 691,545 n/a 4/86 unit
0 9,402,129 1,825,238 11,227,367 1,677,547
Commercial Property
Baltimore Maryland 1,662,968 439,120 2,390,803 2,829,923 843,558 1990 10/89 31 yr.
Baltimore Maryland 4,707,763 961,379 9,584,490 10,545,869 1,006,076 1992 12/91 31 yr.
Duval Florida 2,804,344 140,519 2,944,863 1,750,625 n/a 4/86 20 yr.
Harford Maryland 1,754,300 10,006,229 11,760,529 42,937 1996 8/95 31 yr.
Jessup Maryland 7,981,784 3,069,284 2,971,684 6,040,968 1,237,734 1987 9/88 31 yr.
Linthicum Maryland 4,359,779 911,060 6,539,375 7,450,435 1,780,342 1989 9/88 31 yr.
Orange Florida 57,047 0 57,047 12,046 n/a 4/86 10 yr.
18,712,294 9,996,534 31,633,100 41,629,634 6,673,318
Investment Property
Caroline Virginia 212,876 6,856 219,732 - n/a 4/86 unit
Duval Florida 693,553 26,889 720,442 - n/a 4/86 -
Fairfax Virginia 273,198 0 273,198 - n/a 4/86 -
Fayette Georgia 283,875 0 283,875 - n/a 4/86 -
HillsboroughFlorida 187,161 0 187,161 - n/a 4/86 -
Lee Florida 270,641 1,950 272,591 138,527 n/a 4/86 unit
Suwannee Florida 557,694 (68,216) 489,478 138,224 n/a 4/86 unit
0 2,478,998 (32,521) 2,446,477 276,751
Miscellaneous 1,056,454 61,701 1,118,155 378,489
GRAND TOTALS $18,832,317 $64,600,940 $33,701,339 $98,302,279$21,655,393
(a) The aggregate cost for Federal income tax purposes is $96,628,277.
FRP PROPERTIES, INC.
SCHEDULE III (CONSOLIDATED) - REAL ESTATE AND
ACCUMULATED DEPRECIATION AND DEPLETION
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
1998 1997 1996
Gross Carrying Cost of Real Estate:
Balance at beginning of period $86,939,335 $80,950,619 $78,633,725
Additions during period:
Acquisitions through foreclosure - - -
Other acquisitions 2,241,837 3,500,646 2,016,371
Improvements, etc. 5,480,287 2,725,828 2,811,488
Reclassification of deposit - - -
Other (transfers) 3,811,104 - -
Deductions during period:
Cost of real estate sold 170,284 237,758 510,965
Other (abandonments) - - -
Other (transfers
to Transportation) - - -
Balance at close of period $98,302,279 $86,939,335 $80,950,619
Accumulated Depreciation & Depletion:
Balance at beginning of period $19,463,097 $17,440,035 $15,521,665
Additions during period:
Charged to cost & expense 2,278,379 2,108,105 1,994,854
Other (transfers from
Transportation) - - -
Deductions during period:
Cost of real estate sold 86,083 85,043 76,484
Other (abandonments) - - -
Balance at close of period $21,655,393 $19,463,097 $17,440,035
Annual Report 1998
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1998 1997 Change
Revenues $73,974 68,844 + 7.5
Gross profit $16,493 14,908 +10.6
Operating profit $ 9,625 8,977 + 7.2
Income before income taxes $ 7,343 6,984 + 5.1
Net income $ 4,480 4,260 + 5.2
Per common share:
Basic earnings per share $ 1.30 1.22 + 6.6
Diluted earnings per share $ 1.28 1.21 + 5.8
Stockholder's equity $ 19.83 18.53 + 7.0
1998 CORPORATE HIGHLIGHTS
Revenues - up 7.5% to $73,974,000
Gross profit - up 10.6% to $16,493,000
Net income - up 5.2% to $4,480,000
Diluted earnings per share - up 5.8% to $1.28 per share
$37,400,000 of borrowing capacity is available under the Company's
credit agreements at September 30, 1998
BUSINESS. The Company is engaged in the transportation and real
estate businesses. The Company's transportation business is
conducted through two wholly owned subsidiaries. Florida Rock &
Tank Lines, Inc. is a Southeastern transportation company
concentrating in the hauling by motor carrier of liquid and dry
bulk commodities. SunBelt Transport, Inc. serves the flatbed
portion of the trucking industry in the Southeast, hauling
primarily construction materials. The Company's Real Estate Group,
through subsidiaries, acquires, constructs, leases, operates and
manages land and buildings to generate both current cash flows and
long-term capital appreciation.
OBJECTIVES. The Company's dual objectives are to build a major
Southeastern transportation company and a real estate company
which provides sound long-term growth, cash generation and asset
appreciation.
Transportation
Internal growth is accomplished by a dedicated, competent and
loyal work force emphasizing superior service to customers in
existing markets, developing new transportation services for
customers in current market areas and opening new terminals in
other market areas.
External growth, through the acquisition program, is designed
to broaden the Company's geographic market area and delivery
services by acquiring related businesses in the Southeast.
Real Estate
The growth plan is based on the acquisition, management and
retention of real estate assets and the development of
industrial rental properties to provide long-term positive
cash flows and capital appreciation.
To Our Stockholders:
Fiscal 1998 was a year of continued progress with our corporate
initiatives which remained consistent to the short and long-term
goals in both the Transportation and Real Estate businesses.
Results. Revenues for fiscal 1998 were $73,974,000, a 7.5% increase
over $68,844,000 in fiscal 1997. Transportation revenues increased
7.5% due to continued growth and expansion in both SunBelt
Transport, Inc. and Florida Rock & Tank Lines, Inc. Real estate
revenues increased 6.9% principally as the result of increased
rental income and timber sales. Real estate property sales
approximated $426,000 in fiscal 1998 versus $837,000 in 1997.
Gross profit of $16,493,000 increased 10.6% from $14,908,000 in
fiscal 1997. The Transportation Group's gross profit for fiscal
1998 increased 10.7% from last year as result of higher miles
hauled. The Real Estate Group's gross profit was 10.5% above last
year principally because of increased rental income.
Selling, general and administrative expenses were up 15.8% in
1998 to $6,868,000 as compared to $5,931,000 in 1997. The increase
is primarily attributed to non-recurring costs incurred for various
projects, incentive compensation, staffing and expenses associated
with system upgrades necessary for Year 2000 compliance.
Net income increased 5.2% to $4,480,000 from $4,260,000 in
fiscal 1997. Diluted earnings per share increased 5.8% to $1.28
from $1.21 last year.
FRP Development Corp. The Company's real estate strategy of
developing high quality, flexible warehouse/office space in
carefully selected markets continued to be successful. At September
30, 1998 the Company's operating properties totaling 680,000 square
feet were fully leased. In addition, approximately 133,000 square
feet is currently under construction of which 49% has been pre-leased.
The Company continued with its land development activities at
Lakeside Business Park, a 134 acre site in Harford County, Maryland
north of Baltimore where the Company is developing warehouse/office
space. During fiscal 1998, 105,800 square feet of property under
construction was completed. All of the operating properties are
fully leased. Two additional buildings approximating 133,000
square feet are under construction and will be completed during the
fiscal 1999. In addition to the Lakeside Business Park development,
the Company purchased a 59 acre tract in Anne Arundel County,
Maryland near the Baltimore-Washington International Airport in May
1998. The project, Hillside Business Park, will provide the Company
an opportunity to develop 600,000 square f As part of the Company's
ongoing asset management activities, it has made application before
the Zoning Commission of the District of Columbia to re-zone its 5.8
acre site on the banks of the Anacostia River from industrial to
Planned Unit Development (PUD). Approval of the application would
allow the development of a 1.5 million square foot commercial office
component together with associated waterfront enhancements. The
Company expects that a final zoning order will be issued in early
1999.
Capital Expenditures. Capital expenditures in 1998 for the
transportation business totaled $8,368,000 versus $7,520,000 in
1997. The 1998 capital expenditures were approximately 35% for new
plant and equipment and 65% for replacements. Capital expenditures
for the real estate segment in 1998 approximated $11,504,000 versus
$6,226,000 in 1997. Total depreciation and depletion for fiscal
1998 was $8,987,000 versus $8,205,000 in 1997.
The 1999 planned capital expenditures for the transportation
business total $10,774,000 for continued expansion of both the
flatbed and tank truck fleets and to maintain the modernized fleet.
The capital budget for the real estate segment is $12,087,000.
Total depreciation and depletion expense is expected to be
approximately $10,220,000.
Financial Management. The Company's $34,000,000 unsecured revolver
and term facility was extended this past year and has a final
maturity in November 2003. At September 30, 1998, $15,000,000 was
outstanding leaving a balance of $19,000,000 of availability under
the facility. The Company also has facilitated $20,000,000 in
unsecured demand credit of which $1,600,000 was borrowed at the end
of fiscal 1998. $18,832,000 of the Company's total debt is
long-term fixed rate mortgages secured by real estate projects. As
of September 30, 1998, funded debt approximated 30% of capital
employed.
Annual Meeting. At the Annual Stockholders Meeting on February 4,
1998, the stockholders elected Edward L. Baker, Thompson S. Baker
II, Radford D. Lovett, and Martin E. Stein, Jr. as directors to
serve a four-year term expiring in the year 2002.
Outlook. Fiscal 1999 is expected to be another year of growth and
progress for the Company.
The Transportation Group is expected to continue to expand in
1999 through the growth of its business with existing customers as
well as entries into new markets.
Industrial real estate markets served by FRP Development Corp.
in the Baltimore-Washington area remain in good condition with low
vacancy rates and steady rent levels. The Company's high quality
buildings combined with good market locations have enabled the
properties to remain fully leased. In addition to the Lakeside
Business Park development, the Hillside Business Park provides the
Company additional development opportunities for 1999.
Management intends to continue its careful blend of prudence
coupled with an aggressive search for new opportunities to grow both
the transportation and real estate segments of the business. The
Company plans to build on its financial strength and sound market
positions.
The dedication and support of our employees will continue to be
the key to the Company's future success. We extend our sincere
thanks to these loyal men and women for their efforts.
Respectfully yours,
Edward L. Baker
Chairman of the Board
John E. Anderson
President and Chief Executive Officer
Operating Review
Transportation. The Company's Transportation Group operates through
two wholly owned subsidiaries, Florida Rock & Tank Lines, Inc.,
engaged in hauling liquid and dry bulk commodities primarily in tank
trucks, and SunBelt Transport, Inc., engaged in flatbed hauling.
The Group operates from terminals in Jacksonville, Ft. Myers,
Orlando, Panama City, Pensacola, Port Everglades, Tampa and White
Springs, Florida; Albany, Atlanta, Augusta, Bainbridge, Columbus,
Macon and Savannah, Georgia; Knoxville and Nashville, Tennessee; and
Birmingham, Alabama and has central dispatch offices in Greenville,
South Carolina and Dalton, Georgia. During fiscal 1998 the owned
and leased fleet increased from 521 to 546 trucks.
Revenues for miles hauled were up 6.9% due to both continued
expansion of flatbed and tank truck hauling.
Gross profit increased 10.7% from fiscal 1997 primarily as a
result of increased miles hauled due to the Company's continued
growth and expansion in both SunBelt Transport, Inc. and Florida
Rock & Tank Lines, Inc. during fiscal 1998.
During fiscal 1998, including replacements and growth of SunBelt,
the Group purchased 70 new tractors and 104 new trailers. The
fiscal 1999 capital expenditure plan is based on maintaining a
modernized tank fleet and also expanding the tank truck and flatbed
fleets. The fleet modernization program has resulted in reduced
maintenance expenses and improved operating efficiencies.
For fiscal 1999 Transportation expects another year of growth in
its existing bulk hauling business resulting from the continued
penetration of targeted market segments. The near term outlook is
for increases in the hauling of petroleum, dry bulk and chemical
products given modest economic growth. Flatbed hauling is expected
to have a year of strong growth during fiscal 1999.
Real Estate. The Real Estate Group operates the Company's real
estate and property development activities through subsidiaries.
The Company owns real estate in Florida, Georgia, Virginia,
Maryland, and Washington, D.C. The real estate owned generally
falls into one of three categories. The first is land with stone or
sand and gravel deposits, substantially all of which is leased to
Florida Rock Industries, Inc. under mining royalty agreements,
whereby the Company is paid a percentage of the revenues generated
or annual minimums. The second is land and/or buildings leased
under rental agreements, and the third is land and/or buildings
which are being developed for future rental or held for future
appreciation or development.
Real estate revenues increased 6.9% over fiscal 1997 as a result
of higher rental income and timber sales. The fiscal 1998 real
estate revenues, excluding the sale of real estate and timber, were
divided approximately 49% from mining and minimum royalties and 51%
from rental.
A brief description of FRP Development Corp.'s projects at
September 30, 1998 follows:
8230 Preston Court, 72,182 square feet of flexible
warehouse/office space.
8240 Preston Court, 90,405 square feet of flexible
warehouse/office space.
810 Oregon Avenue, 113,280 square feet of flexible
warehouse/office space.
1502 Quarry Drive, 105,803 square feet of flexible
warehouse/office space completed during fiscal 1998.
812 Oregon Avenue, 82,335 square feet of flexible warehouse/office
space.
Rossville Business Center, a two building complex consisting of
187,517 square feet of flexible warehouse/office space.
TESSCO Center, a 28,533 square foot suburban office building.
Lakeside Business Park is a 134 acre site capable of supporting
1,400,000 square feet of warehouse/office space. At September 30,
1998, 133,000 square feet is under construction of which 49% has
been pre-leased. Approximately 72 acres remain available for
development.
Hillside Business Park, is a 59 acre site located in Anne Arundel
County, Maryland and capable of supporting 600,000 square feet of
warehouse/office space.
The Group during fiscal 1999 will continue to focus on the
development of the property at Lakeside Business Park. In addition,
land development and planning for Hillside Business Park will
commence.
At September 30, 1998 the Company owns approximately 680,000
square feet of rental properties that were fully leased. The Real
Estate Group will continue its asset management functions for the
benefit of the Company's land portfolio. These activities will also
include but not be limited to the pending re-zoning application for
the Company's site on the Anacostia River in the District of
Columbia. The Company's long-term plan is to gradually build and
own a portfolio of successful rental properties.
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1998 1997 1996 1995(a) 1994
Summary of Operations
Revenues $ 73,974 68,844 64,403 58,273 54,011
Gross profit(b) $ 16,493 14,908 14,615 15,132 12,255
Operating profit $ 9,625 8,977 9,017 9,440 7,264
Interest expense $ 2,300 2,061 2,234 1,933 1,105
Income before income taxes
$ 7,343 6,984 6,827 7,591 6,219
Provision for income taxes
$ 2,863 2,724 2,662 2,961 2,425
Net income $ 4,480 4,260 4,165 4,630 3,794
Per Common Share
Basic EPS $ 1.30 1.22 1.16 1.24 .95
Diluted EPS $ 1.28 1.21 1.14 1.22 .94
Stockholders' equity
$ 19.83 18.53 17.72 16.74 15.64
Financial Summary
Current assets $ 10,073 8,549 8,003 8,495 7,703
Current liabilities
$ 9,479 11,063 9,595 7,117 10,234
Working capital (deficit)
$ 594 (2,514) (1,592) 1,378 (2,531)
Property, plant and
equipment, net $104,970 95,018 90,058 83,319 74,697
Total assets $123,965 116,582 107,036 101,357 91,769
Long-term debt $ 33,299 30,647 26,170 25,503 16,108
Stockholders' equity
$ 68,755 63,734 61,894 61,622 59,437
Other Data
Return on average
stockholders' equity
6.7% 6.8 6.7 7.6 6.4
Return on average capital
employed 4.1% 4.2 5.8 6.6 5.5
Net cash flow provided from
operating activities
$ 13,557 13,982 14,681 10,131 10,005
Additions to property,
plant and equipment
$ 19,901 13,746 15,970 15,805 9,165
Depreciation, depletion
and amortization
$ 9,146 8,356 7,667 7,304 6,945
Weighted average number
of shares - basic 3,452 3,490 3,588 3,742 3,977
Weighted average number
of shares - diluted 3,496 3,530 3,647 3,798 4,019
Number of employees at
end of year 753 721 665 644 556
Stockholders of record
850 873 913 939 975
(a) Effective October 1, 1994, the Company changed depreciation
lives on revenue equipment which resulted in an increase in
gross profit of $842,000 and net income of $525,000 ($.14 per
share) for fiscal 1995.
(b) Fiscal 1998, 1997, 1996, 1995 and 1994 include gains on the
sale of real estate of $358,000, $817,000, $93,000, $79,000
and $1,167,000, respectively.
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
First Second Third Fourth
1998 1997 1998 1997 1998 1997 1998 1997
Revenues $17,671 16,398 17,831 16,221 19,002 17,533 19,470 18,692
Gross profit $ 3,974 3,363 3,776 3,244 4,337 4,077 4,406 4,224
Operating profit $ 2,458 1,844 2,104 1,734 2,512 2,573 2,551 2,826
Income before
income taxes $ 1,894 1,369 1,555 1,274 1,943 2,038 1,951 2,303
Net income $ 1,155 835 949 777 1,185 1,243 1,191 1,405
Per common share:
Basic EPS $.34 .24 .28 .22 .34 .36 .34 .41
Diluted EPS $.33 .23 .27 .22 .34 .35 .34 .40
Market price:
High $38.00 26.00 33.75 28.75 37.25 28.00 33.00 34.00
Low $31.37 20.50 30.00 24.00 32.00 24.50 20.50 25.25
Management Analysis
Operating Results. The Company's operations are influenced by a
number of external and internal factors. External factors include
levels of economic and industrial activity in the Southeast, petroleum
product usage in the Southeast, fuel costs, construction activity in
certain Georgia and Florida markets, Florida Rock Industries, Inc.'s
sales from the Company's mining properties, interest rates and demand
for commercial warehouse space in the Baltimore/Washington area.
Internal factors include revenue mix, capacity utilization, safety
record, other operating factors, and construction costs of new
projects.
In fiscal 1998 and 1997, revenues increased 7.5% and 6.9%,
respectively. In the Transportation segment revenues and miles hauled
were up 7.5% and 6.9% in 1998, respectively, and 6.7% and 2.3%,
respectively in 1997. The Real Estate segment's revenues, exclusive
of real estate sales, increased 12.5% in 1998 and remained level with
1997. The increase in real estate revenues is the result of increase
rental income and timber sales.
The estimated contribution to Transportation revenues by principal
markets follows:
1998 1997 1996 1995 1994
Petroleum 67% 68 68 66 45
Construction 21% 21 20 19 26
Chemical 7% 6 7 10 15
Other 5% 5 5 5 14
Gross profit for fiscal 1998 increased $1,585,000 and gross margin
remained stable from last year. The Transportation segment gross
profit increased $969,000 principally as a result of higher miles
hauled. Gross margin remained stable. In the Real Estate segment,
gross profit increased $616,000 primarily as a result of increased
rental income and timber sales partially offset by a decrease in
property sales. In fiscal 1997, gross profit increased $293,000 from
1996 and gross margin decreased to 22% from 23%. The Transportation
segment's gross profit decreased $605,000, principally due to higher
insurance costs, increased depreciation expense and lower gains on the
sale of equipment. Gross margin decreased to 15% from 17% principally
due to reduced gains on the sale of equipment, increased depreciation
expense and higher operating costs. In the Real Estate segment gross
profit increased $898,000 in fiscal 1997 from 1996. The increase was
principally due to real estate sales gross profit of $817,000 in 1997
compared to $93,000 in 1996, increased development revenues and a 1996
write-off of $349,000 in connection with the abandonment of certain
development costs.
Selling, general and administrative expense increased 15.8% in
1998 and increased 6% in 1997. The 1998 increase is primarily
attributed to non-recurring costs incurred for various projects,
business development opportunities related to Transportation incentive
compensation, staffing and consulting related to systems upgrades
necessary for Year 2000 compliance.
Interest expense in 1998 increased 12% or $239,000 from 1997
primarily as a result of an increase in the average debt outstanding
and an increase in the average interest rate. These increases were
partially offset by an increase in the amount of interest capitalized.
In 1997 interest expense decreased 8% from 1996 primarily due to
increased capitalization of interest.
Year 2000 Conversion. The Company, like most entities relying on
automated data processing is faced with the task of modifying systems
to become Year 2000 compliant. The Company has analyzed its Year
2000 exposure and has developed plans for addressing the Year 2000
exposure as well as reengineering selective systems to enhance their
functionality.
The Company is in various stages of modifying or replacing both
internally developed and purchased software. The Company has
purchased new software and hardware for its truck dispatching and
maintenance system that is represented to be Year 2000 compliant to
replace its existing systems. The Company will begin to phase in
this software in January 1999 and have the total system installed in
June 1999.
The Company purchases from an affiliate, Florida Rock Industries, Inc.
(FRI) certain administrative services including automated data
processing (Purchased Services). FRI is in the process of updating
its systems to be Year 2000 compliant. The Company has reviewed
FRI's plan and is monitoring the progress of this plan as it relates
to the Purchased Services.
The Company is in the process of identifying operating equipment which
may be effected by Year 2000. Once the equipment has been identified
testing will begin to determine if such equipment is Year 2000
compliant.
Vendors, suppliers and customers that are critical to the Company's
operations are in the process of being identified. Questionnaires
will be sent to these entities to determine their state of readiness
for Year 2000. The Company will identify alternative vendors and
suppliers if any of the current suppliers do not appear to be taking
corrective actions and as a contingency in case these entities are not
Year 2000 compliant.
The costs associated with the purchase and installation of the truck
dispatching and maintenance software and hardware will be capitalized
and amortized over the estimated useful life of the software or
equipment. Other costs associated such as selection, training and
reengineering of the existing processing are being expensed as
incurred. Based on current information, the expected costs of the
systems are not expected to be material to the financial condition or
results of operations of the Company.
The Company feels it is addressing in a timely manner the major issues
related to the Year 2000 and any significant disruptive problems in
its ability to conduct its business as a result are unlikely. The
Company's contingency plans will be finalized during the second
quarter of calendar 1999. This plan will assess the risks and
possible countermeasures. However, despite efforts and initiatives
undertaken by the Company, total assurances can not be given that
absolute compliance can be achieved. There can be no guarantees that
the computer systems of other entities on which the Company relies
will be converted in a timely manner or that their failure to convert,
or a conversion that is incompatible with the Company's system, will
not have an adverse effect on the Company's business, financial
condition and results of operations.
Liquidity and Capital Resources. The following key financial
measurements reflect the Company's financial position and capital
resources at September 30 (dollars in thousands):
1998 1997 1996
Cash $ 663 429 313
Total debt $35,432 35,065 30,003
Debt as a percent of
capital employed 32% 33 31
Unused lines of credit $37,400 35,500 35,500
During 1998, net cash flows from operating activities were
$13,557,000 which along with exercise of stock options and issuing of
debt funded the Company's investing activities of $14,232,000.
During 1997, net cash flows from operating activities were
$13,982,000, net cash used in investing activities were $16,508,000
and common stock repurchased was $3,299,000. These activities were
funded by additional borrowings of $5,400,000 and proceeds from the
exercise of stock options of $879,000.
The Company is financially postured to be able to take advantage of
external and internal growth opportunities in real estate development
and in the motor carrier industry that may occur in the Southeast.
The Board of Directors has authorized management to repurchase
shares of the Company's common stock from time to time as
opportunities may arise.
The Company has a $34,000,000 revolving credit agreement of which
$19,000,000 was available at fiscal year end. In addition, it has
unsecured short-term lines of credit under which it may borrow up to
$20,000,000 of which $1,600,000 was outstanding at September 30, 1998.
The Company currently expects its fiscal 1999 capital expenditures
to be approximately $22,861,000 and depreciation and depletion expense
to be $10,220,000. The expenditures are expected to be financed from
the cash flow from operating activities and the $19,000,000 unused and
available under its revolving credit agreement.
The Company believes it will be able to renegotiate its present
credit facilities or obtain similar replacement credit facilities when
necessary in the future.
Inflation. Historically, the Company has been able to recover
inflationary cost increases through increased freight rates. It is
expected that over time justifiable and necessary rate increases will
be obtained in the future, although deregulation of intrastate
trucking rates has made this more difficult in the past three years.
Substantially all of the Company's royalty agreements are based on a
percentage of the sales price. Minimum royalties and substantially
all lease agreements provide various escalation provisions.
Forward-Looking Statements. Certain matters discussed in this
report contain forward-looking statements that are subject to risks
and uncertainties that could cause actual results to differ materially
from these indicated by such forward-looking statements. These
forward-looking statements relate to, among other things, capital
expenditures, liquidity, capital resources, competition and the Year
2000 and may be indicated by words or phrases such as "anticipate,"
"estimate," "plans," "projects," "continuing," "ongoing," "expects,"
"management believes," "the Company believes," "the Company intends"
and similar words or phrases. The following factors are among the
principal factors that could cause actual results to differ materially
from the forward-looking statements: Year 2000 technology issues;
availability and terms of financing; competition; levels of
construction activity in the FRI's markets; fuel costs; and
inflation.
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1998 1997 1996
Revenues:
Transportation $ 64,014 59,530 55,801
Real estate 9,534 8,477 8,434
Sale of real estate 426 837 168
Total revenues (including revenue from
related parties of $6,256, $6,006, and
$6,544) 73,974 68,844 64,403
Cost of operations:
Transportation 54,002 50,487 46,153
Real estate 3,411 3,429 3,560
Cost of real estate sold 68 20 75
Gross profit 16,493 14,908 14,615
Selling, general and administrative expense
(including expenses paid to related party
of $1,515, $1,414 and $1,383) 6,868 5,931 5,598
Operating profit 9,625 8,977 9,017
Interest expense (2,300) (2,061) (2,234)
Interest income 13 46 34
Other income, net 5 22 10
Income before income taxes 7,343 6,984 6,827
Provision for income taxes 2,863 2,724 2,662
Net income $ 4,480 4,260 4,165
Earnings per share:
Basic $ 1.30 1.22 1.16
Diluted $ 1.28 1.21 1.14
Number of shares used in computing:
Basic earnings per share 3,452 3,490 3,588
Diluted earnings per share 3,496 3,530 3,647
See accompanying notes.
Consolidated Balance Sheet September 30
(Dollars in thousands)
1998 1997
Assets
Current assets:
Cash and cash equivalents $ 663 429
Accounts receivable, less allowance for doubtful
accounts of $272 ($258 in 1997) (including
related party of $380 and $283) 6,510 5,531
Inventory of parts and supplies 552 469
Prepaid expenses and other 2,348 2,120
Total current assets 10,073 8,549
Other assets:
Real estate held for investment, at cost 5,703 5,771
Goodwill, at cost less amortization of $362
($322 in 1997) 1,248 1,288
Other 1,971 5,956
Total other assets 8,922 13,015
Property, plant and equipment, at cost:
Land 55,284 55,614
Buildings 30,953 27,485
Plant and equipment 62,134 53,563
Construction in progress 9,712 6,009
158,083 142,671
Less accumulated depreciation and depletion 53,113 47,653
Net property, plant and equipment 104,970 95,018
$123,965 116,582
Liabilities and Stockholders' Equity
Current liabilities:
Short-term note payable to bank $ 1,600 4,000
Accounts payable (including related party of
$85 and $77) 2,776 2,427
Federal and state income taxes 1,224 779
Accrued liabilities:
Payroll and benefits 1,500 1,154
Taxes 412 582
Interest 176 165
Insurance reserves 1,258 1,538
Long-term debt due within one year 533 418
Total current liabilities 9,479 11,063
Long-term debt 33,299 30,647
Deferred income taxes 7,656 7,243
Accrued insurance reserves 4,129 3,382
Other liabilities 647 513
Commitments and contingent liabilities (Notes 10 and 11)
Stockholders' equity:
Preferred stock, no par value;
5,000,000 shares authorized - -
Common stock, $.10 par value;
25,000,000 shares authorized; 3,468,225
shares issued (3,439,235 shares in 1997) 347 344
Capital in excess of par value 17,871 17,333
Retained earnings 50,537 46,057
Total stockholders' equity 68,755 63,734
$123,965 116,582
See accompanying notes.
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1998 1997 1996
Cash flows from operating activities:
Net income $ 4,480 4,260 4,165
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 9,146 8,356 7,667
Net changes in operating assets and liabilities:
Accounts receivable (993) (250) 268
Inventory of parts and supplies (83) 33 (1)
Prepaid expenses (228) (261) 157
Accounts payable and accrued liabilities 492 732 1,161
Increase in deferred income taxes 620 1,181 1,622
Net change in insurance reserves and other
liabilities 879 759 242
Gain on sale of real estate, plant and
equipment (778) (792) (550)
Other, net 22 (36) (50)
Net cash provided by operating activities 13,557 13,982 14,681
Cash flows from investing activities:
Purchase of property, plant and equipment (15,323) (13,470)(14,070)
Purchase of real estate held for investment - -
(32)
Additions to other assets (451) (4,156) (130)
Proceeds from the sale of real estate held for
investment, property, plant and equipment, and
other assets 1,542 1,118 1,012
Net cash used in investing activities (14,232) (16,508)(13,220)
Cash flows from financing activities:
Proceeds from long-term debt 3,200 4,900 3,000
Net increase (decrease) in short-term debt (2,400) 500 1,700
Repayment of long-term debt (432) (338) (2,347)
Exercise of employee stock options 574 879 22
Repurchase of Company stock (33) (3,299) (3,915)
Net cash provided by (used in) financing activities 909 2,642 (1,540)
Net increase (decrease) in cash and cash equivalents 234 116 (79)
Cash and cash equivalents at beginning of year 429 313 392
Cash and cash equivalents at end of year $ 663 429 313
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 2,288 1,997 2,257
Income taxes (received) $ 1,759 898 (216)
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 767 276 1,900
Other assets $ 3,811 - -
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with maturities of three months or less at
time of purchase to be cash equivalents.
See accompanying notes.
Consolidated Statement of Stockholders' Equity Years ended September 30
(Dollars in thousands)
Capital in
Common Stock Excess of
Retained Shares Amount Par Value
Earnings
Balance at October 1, 1995 3,681,594 $368 23,622 37,632
Shares purchased and canceled (191,408) (19) (3,896)
Exercise of stock options 2,000 22
Net income 4,165
Balance at September 30, 1996 3,492,186 349 19,748 41,797
Shares purchased and canceled (147,951) (14) (3,285)
Exercise of stock options 95,000 9 870
Net income 4,260
Balance at September 30, 1997 3,439,235 344 17,333 46,057
Share purchased and canceled (1,010) - (33) -
Exercise of stock options 30,000 3 571 -
Net income - - - 4,480
Balance at September 30, 1998 3,468,225 $347 17,871 50,537
See accompanying notes.
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. Certain amounts for 1997 have been reclassified to
conform to presentation in 1998.
INVENTORY - Inventory of parts and supplies is valued at the lower of cost
(first-in, first-out) or market.
REVENUE AND EXPENSE RECOGNITION - Substantially all transportation
revenue is recognized when shipment is complete and transportation expenses
are recognized as incurred.
Real estate rental revenue and mining royalties are generally recognized
when due under the leases. The straight-line method is used to recognize
rental revenues under leases which provide for varying rents over their term.
PROPERTY, PLANT AND EQUIPMENT - Provision for depreciation of plant and
equipment is computed using the straight-line method based on the following
estimated useful lives:
Years
Buildings and improvements 8-32
Revenue equipment 5-10
Other equipment 3- 5
Furniture and fixtures 5-10
Depletion of sand and stone deposits is computed on the basis of units
of production in relation to estimated reserves. Goodwill is amortized
over forty years using the straight-line method.
The Company periodically reviews property and equipment for potential
impairment. If this review indicates that the carrying amount of the
asset may not be recoverable, the Company estimates the future cash flows
expected with regards to the asset and its eventual disposition. If the
sum of these future cash flows (undiscounted and without interest charges)
is less than the carrying amount of the assets, the Company records an
impairment loss based on the fair value of the asset.
RISK INSURANCE - The Company has a $250,000 to $500,000 self-insured
retention per occurrence in connection with its workers' compensation,
automobile liability, and general liability insurance programs ("Risk
Insurance"). The Company accrues monthly the estimated cost in connection
with its portion of its Risk Insurance losses. Claims paid by the Company
are charged against the reserve. Additionally, the Company maintains a
reserve for incurred but not reported claims based on historical analysis
of such claims.
INCOME TAXES - The Company uses an asset and liability approach to
financial reporting for income taxes. Under this method, deferred tax
assets and liabilities are recognized based on differences between
financial statement and tax bases of assets and liabilities using presently
enacted tax rates. Deferred income taxes result from temporary
differences between pre-tax income reported in the financial statements and
taxable income.
EARNINGS PER COMMON SHARE - Effective December 31, 1997, the Company
adopted Statement of Financial Accounting Standard No. 128, "Earnings per
Share" ("SFAS 128"). SFAS 128 replaced the presentation of primary
earnings per share (EPS) and fully diluted EPS with a presentation of basic
and diluted EPS. Basic earnings per share are based on the weighted
average number of common shares outstanding during the periods. Diluted
earnings per share are based on the weighted average number of common
shares and potential dilution of securities that could share in earnings.
Earnings per share for all prior periods have been restated.
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 - In June 1997, the FASB issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information",
effective for fiscal years beginning after December 15, 1997. SFAS 131
establishes standards for reporting information about operating segments in
annual financial statements and requires selected information about
operating segments in interim financial reports issued to shareholders. It
also establishes standards for related disclosures about products and
services, geographic areas and major customers. Operating segments are
defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. SFAS 131 requires reporting segment profit or loss, certain
specific revenue and expense items and segment assets. It also requires
reconciliations of total segment revenues, total segment profit or loss,
total segment assets, and other amounts disclosed for segments to
corresponding amounts reported in the financial statements. Restatement of
comparative information for earlier periods presented is required in the
initial year of application. Interim information is not required until the
second year of application, at which time comparative information is
required. The Company has not determined the impact that the adoption of
this new accounting standard will have on its financial statement
disclosures. The Company will adopt this accounting standard on October 1,
1998, as required.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", effective for fiscal year beginning after December 15, 1997.
SFAS 130 requires that all items recognized under accounting standards as
components of comprehensive earnings be reported in an annual financial
statement that is displayed with the same prominence as other annual
financial statements. This statement also requires that an entity classify
items of other comprehensive earnings may include foreign currency
translation adjustments, minimum pension liability adjustments, and
unrealized gains and losses on marketable securities classified as
available-for-sale. Restatement of disclosures for earlier periods is
required. This statement is not expected to have a material effect on the
Company's financial statements.
In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures
about Pensions and Other Postretirement Benefits", effective for fiscal
years beginning after December 15, 1997. SFAS 132 revised employer
disclosures about pension and other postretirement benefit plans. It does
not change the measurement or recognition of those plans. This statement
standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan
assets that will facilitate financial analysis, and eliminates certain
disclosures. Restatement of disclosures for earlier periods is required.
The Company will adopt this accounting standard on October 1, 1998, as
required.
In March 1998, the AICPA issued SOP 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", effective for
fiscal years beginning after December 15, 1998. This SOP provides
guidance on accounting for the costs of computer software developed or
obtained for internal use. This SOP requires that entities capitalize
certain internal-use software costs once certain criteria are met.
Adoption of this standard is not expected to have a material effect on the
Company's financial statements.
2. Transactions with related parties. As of September 30, 1998 seven of
the Company's directors were also directors of Florida Rock Industries,
Inc. ("FRI"). Such directors own approximately 30% of the stock of FRI and
41% of the stock of the Company. Accordingly, FRI and the Company are
considered related parties.
The Company, through its transportation subsidiaries, hauls construction
aggregates for FRI and customers of FRI. It also hauls diesel fuel and
other supplies for FRI. Charges for these services are based on prevailing
market prices. Other wholly owned subsidiaries lease certain construction
aggregates mining and other properties and provide construction management
services to FRI.
A summary of revenues derived from FRI follows (in thousands):
1998 1997 1996
Transportation $ 839 883 1,100
Real estate 5,417 5,123 5,444
$6,256 6,006 6,544
Under an agreement extending until September 30, 2000, FRI furnishes
the Company with certain management and related services, including
financial, tax, legal, administrative, accounting and computer. Charges
for such services were $1,515,000 in 1998, $1,414,000 in 1997 and
$1,383,000 in 1996.
3. Lines of credit and debt. Long-term debt at September 30 is summarized
as follows (in thousands):
1998 1997
Revolving credit (unsecured) $15,000 15,000
6.9% to 9.5% mortgage notes payable
in installments through 2015 18,832 16,065
33,832 31,065
Less portion due within one year 533 418
$33,299 30,647
The aggregate amount of principal payments, excluding the revolving
credit, due subsequent to September 30, 1998 is: 1999 - $533,000; 2000 -
$579,000; 2001 - $628,000; 2002 - $681,000; 2003 - $738,000; 2004 and
subsequent years - $15,673,000.
The Company has a revolving credit agreement under which it may borrow
from three banks up to $34,000,000 on term loans payable 25% on November
15, 2001, 25% on November 15, 2002 and the balance on November 15, 2003.
Interest is payable at SunTrust Bank, Central Florida, N.A.'s prime rate
until November 15, 2000, and at 1/4 of 1% above such prime rate thereafter.
Alternative interest rates based on the London interbank rate and/or the
reserve-adjusted certificate of deposit rate are available at the Company's
option. A commitment fee of 1/4 of 1% is payable on the unused amount of
the commitment until November 15, 2000.
The revolving credit agreement contains restrictive covenants,
including limitations on paying cash dividends. As of September 30, 1998
$12,593,000 of consolidated retained earnings was not restricted as to
payment of cash dividends.
The mortgage notes payable are collateralized by real estate having a
carrying value of approximately $22,415,000 at September 30, 1998.
Certain properties having a carrying value at September 30, 1998 of
$1,620,000 were encumbered by industrial revenue bonds which are the
liability of FRI. FRI has agreed to pay such debt when due (or sooner if
FRI cancels its lease of such property) and further has agreed to indemnify
and hold harmless the Company.
The Company also has short-term lines of credit totaling $20,000,000
from three banks. Under these lines the Company can borrow funds for a
period from one to ninety days. There is no commitment fee and the banks
can terminate the lines at any time. The interest rate is determined at
the time of each borrowing. The weighted average interest rates of such
borrowings on September 30, 1998 and 1997 were 6.1% and 7.0%, respectively.
During fiscal 1998, 1997 and 1996 the Company capitalized interest
cost of $331,000, $223,000 and $17,000, respectively.
4. Leases. At September 30, 1998, the total carrying value of property
owned by the Company which is leased or held for lease to others is
summarized as follows (in thousands):
Construction aggregates property $41,881
Commercial property 41,630
Land and other property 11,227
94,738
Less accumulated depreciation and depletion 21,000
$73,738
The minimum future rentals on noncancelable operating leases as of
September 30, 1998 are as follows: 1999 - $4,208,000; 2000 - $3,936,000;
2001 - $3,082,000; 2002 - $2,461,000; 2003 - $1,948,000; 2004 and
subsequent years $10,121,000.
5. Stock option plan. The Company has a Stock Option Plan under which
options for shares of common stock may be granted to directors, officers
and key employees. At September 30, 1998 the number of shares available
for issuance is 85,000 shares. The Company did not issue options during
1998 and 1997, therefore, SFAS No. 123 pro forma disclosures are not
presented.
Option transactions for the fiscal years ended September 30 are
summarized as follows:
1998 1997 1996
Average Average Average
Options Price(1) Options Price(1) Options Price(1)
Shares under option:
Beginning of year 150,000 15.25 245,000 12.78 247,000 12.76
Exercised (30,000) 11.00 (95,000) 8.88 (2,000) 11.00
End of year 120,000 16.31 150,000 15.25 245,000 12.78
Options exercisable
at end of year 98,000 108,600 184,300
(1) Weighted average exercise price
The following table summarizes information concerning stock options
outstanding at September 30, 1998:
Options Options Weighted-Average
Exercise Price Outstanding Exercisable Remaining Life
12.25 30,000 30,000 1.8 years
17.25 15,000 9,000 6.2 years
17.75 75,000 59,000 6.1 years
Remaining non-exercisable options as of September 30, 1998 become
exercisable as follows: 1999 - 11,000 and 2000 - 11,000.
The options expire ten years from the date of grant and become
exercisable in cumulative installments of 20% to 33% each year after a one
year waiting period from date of grant.
6. Income taxes. The provision for income taxes for fiscal years ended
September 30 consists of the following (in thousands):
1998 1997 1996
Current:
Federal $1,914 1,317 892
State 329 226 148
2,243 1,543 1,040
Deferred 620 1,181 1,622
Total $2,863 2,724 2,662
A reconciliation between the amount of tax shown above and the amount
computed at the statutory Federal income tax rate follows (in thousands):
1998 1997 1996
Amount computed at statutory
Federal rate $2,497 2,374 2,321
State income taxes (net of Federal
income tax benefit) 277 263 255
Other, net 89 87 86
Provision for income taxes $2,863 2,724 2,662
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:
1998 1997
Deferred tax liabilities:
Basis difference in property,
plant and equipment $8,758 8,014
Depletion 630 656
Prepaid expenses 930 833
Gross deferred tax liabilities 10,318 9,503
Deferred tax assets:
Insurance reserves 1,798 1,614
Other, net 505 495
Gross deferred tax assets 2,303 2,109
Net deferred tax liability $8,015 7,394
7. Employee benefits. The Company and certain subsidiaries have a
savings/profit sharing plan for the benefit of qualified employees. The
savings feature of the plan incorporates the provisions of Section 401(k)
of the Internal Revenue Code. Under the savings feature of the plan, an
eligible employee may elect to save a portion (within limits) of their
compensation on a tax deferred basis. The Company contributes to a
participant's account an amount equal to 50% (with certain limits) of the
participant's contribution. Additionally, the Company may make an annual
contribution to the plan as determined by the Board of Directors, with
certain limitations. The plan provides for deferred vesting with benefits
payable upon retirement or earlier termination of employment. The
Company's cost was $429,000 in 1998, $403,000 in 1997 and $419,000 in 1996.
The Company provides certain health benefits for retired employees.
Employees may become eligible for those benefits if they were employed by
the Company prior to December 10, 1992, meet the service requirements and
reach retirement age while working for the Company. The plan is
contributory and unfunded. The Company accrues the estimated cost of
retiree health benefits over the years that the employees render service.
The following table sets forth the plan's status reconciled with the
accrued postretirement benefit cost included in the Company's consolidated
balance sheet at September 30 (in thousands):
1998 1997 1996
Accumulated postretirement benefit
obligation (APBO):
Retirees $ 87 117 133
Fully eligible active participants 109 62 62
Other active participants 275 317 307
Total APBO 471 496 502
Unrecognized net gain (loss) from
past experience different from
that assumed and from changes in
assumptions 68 5 (68)
Unrecognized prior service cost 15 74 133
Accrued postretirement benefit cost $ 554 575 567
Net periodic postretirement benefit cost for fiscal years ended September
30 includes the following components (in thousands):
1998 1997 1996
Service cost of benefits earned during
the period $ 33 38 39
Interest cost on APBO 30 32 32
Net amortization and deferral (62) (59) (55)
Net periodic postretirement benefit
cost $ 1 11 16
The discount rate used in determining the Net Periodic Postretirement
Benefit Cost and the APBO was 7.25%.
8. Industry segments. The Company has two major business segments:
transportation and real estate, both operated principally within the
Mid-Atlantic and Southeastern United States. The transportation segment is
operated through two wholly owned subsidiaries which are engaged in the
hauling of liquid and dry commodities by motor carrier. The real estate
segment is operated through wholly owned subsidiaries that own real estate
of which a substantial portion is under mining royalty agreements or
leased. They also hold certain other real estate for investment and are
developing commercial and industrial properties. The Company grants credit
to customers who are in the petroleum, chemical, convenience store,
construction materials and agricultural industries.
Financial data for industry segments is as follows (in thousands):
1998 1997 1996
Revenues:
Transportation $ 64,014 59,530 55,801
Real estate (a) 9,960 9,314 8,602
$ 73,974 68,844 64,403
Segment profit:
Transportation $ 4,371 4,188 4,947
Real estate (a) 6,362 5,799 4,908
10,733 9,987 9,855
Corporate expenses (1,090) (942) (794)
Interest expense (2,300) (2,061) (2,234)
Income before income taxes $ 7,343 6,984 6,827
Capital expenditures:
Transportation $ 8,368 7,520 13,174
Real estate 11,504 6,226 2,782
$ 19,872 13,746 15,956
Depreciation, depletion and
amortization:
Transportation $ 6,740 6,136 5,558
Real estate 2,356 2,173 2,065
$ 9,096 8,309 7,623
Identifiable assets at September 30:
Transportation $ 44,054 42,895 41,489
Real estate 79,393 73,159 64,972
General corporate 518 528 575
$123,965 116,582 107,036
(a) Fiscal 1998, 1997 and 1996 includes revenue of $426,000, $837,000 and
$168,000 and segment profit of $358,000, $817,000 and $93,000,
respectively, from the sale of real estate.
General corporate assets consist principally of cash, receivables,
investments and equipment.
9. Fair values of financial instruments. At September 30, 1998 and 1997,
the carrying amount reported in the balance sheet for cash and cash
equivalents, short-term notes payable to bank and revolving credit
approximate their fair value. The fair values of the Company's other
long-term debt are estimated using discounted cash flow analysis, based on
the Company's current incremental borrowing rates for similar types of
borrowing arrangements. At September 30, 1998 the carrying amount and fair
value of such other long-term debt was $18,832,000 and $19,996,000,
respectively. At September 30, 1997 the carrying amount and fair value of
such other long-term debt was $16,065,000 and $15,470,000, respectively.
10. Contingent liabilities. Certain of the Company's subsidiaries are
involved in litigation on a number of matters and are subject to certain
claims which arise in the normal course of business. The Company has
retained certain self-insurance risks with respect to losses for third
party liability and property damage. In the opinion of management, none of
these matters are expected to have a materially adverse effect on the
Company's consolidated financial statements.
One of the Company's subsidiaries is a potentially responsible party in
connection with a Superfund Site. It is the policy of the Company to
accrue environmental contamination cleanup costs when it is probable that a
liability has been incurred and the amount of such liability is reasonably
estimable. The Company has made an estimate of its likely costs in
connection with this site and a liability has been recorded. Such
liability is not material to the financial statements of the Company.
11. Commitments. At September 30, 1998, the Company had placed orders and
was committed to purchase tractors and trailers costing approximately
$9,900,000 and had entered into various contracts to purchase and develop
real estate with remaining commitments totaling $2,000,000.
12. Fourth quarter financial information (unaudited). In the fourth
quarter of fiscal 1997, the Company increased its risk insurance reserves
approximately $682,000.
Independent Auditors' Report
To the Board of Directors and Stockholders
FRP Properties, Inc.
We have audited the accompanying consolidated balance sheets of FRP
Properties, Inc. and subsidiaries as of September 30, 1998 and 1997, and
the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended September 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of FRP Properties, Inc. and
subsidiaries at September 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1998 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 1, 1998
Directors and Officers
Directors
John E. Anderson (1)
President and Chief Executive
Officer of the Company
Edward L. Baker (1)
Chairman of the Board of the Company
John D. Baker, II (1)
President and Chief Executive
Officer of Florida Rock Industries,
Inc.
Thompson S. Baker II
Vice President of
Florida Rock Industries, Inc.
Ish Copley
President of SunBelt Transport, Inc.,
the Company's flatbed
trucking operations
David H. deVilliers, Jr.
Vice President of the Company and
President of FRP Development Corp.,
the Company's northern
real estate operations
Albert D. Ernest, Jr. (2)(3)
President of Albert Ernest Enterprises
Luke E. Fichthorn III (2)
Private Investment Banker,
Twain Associates and Chairman of the
Board and Chief Executive Officer of
Bairnco Corporation
Francis X. Knott (2)
Chief Executive Officer of
Partners Management Company
Radford D. Lovett (3)
Chairman of the Board of
Commodores Point Terminal Corp.
John R. Mabbett III
Vice President and Secretary
of the Company and President of
Florida Rock & Tank Lines, Inc.,
the Company's tank and dump
trucking operations
Robert H. Paul III (3)
Chairman of the Board, President
and Chief Executive Officer of
Southeast-Atlantic Beverage Corporation
Martin E. Stein, Jr.
Chairman and Chief Executive Officer of
Regency Realty Corporation
James H. Winston (2)
President of LPMC of Jax, Inc.
and President of
Omega Insurance Company
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Officers
Edward L. Baker
Chairman of the Board
John E. Anderson
President and Chief Executive Officer
John R. Mabbett III
Vice President and Secretary
President, Florida Rock & Tank Lines, Inc.
David H. deVilliers, Jr.
Vice President
President, FRP Development Corp.,
the Company's northern real estate
operations
James J. Gilstrap
Treasurer and Chief Financial Officer
Wallace A. Patzke, Jr.
Controller and Chief Accounting Officer
FRP PROPERTIES, Inc.
General Office: 155 East 21st Street
Jacksonville, Florida 32206
Telephone: (904) 355-1781
Annual Meeting
Shareholders are cordially invited to attend the Annual Stockholders Meeting
which will be held at 2 p.m. local time, on Wednesday, February 3, 1999, at
the general offices of the Company, 155 East 21st Street, Jacksonville,
Florida.
Transfer Agent
First Union Customer Information Center
Corporate Trust Client Services NC-1153
1525 West W. T. Harris Boulevard - 3C3
Charlotte, NC 28288-1153
Telephone: 1-800-829-8432
General Counsel
Lewis S. Lee, Esquire
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Jacksonville, Florida
Independent Auditors
Deloitte & Touche LLP
Jacksonville, Florida
Common Stock Listed
The Nasdaq Stock Market
(Symbol: FRPP)
Form 10-K
Stockholders may receive without charge a copy of FRP Properties, Inc.'s
annual report to the Securities and Exchange Commission on Form 10-K by
writing to the Treasurer at P.O. Box 4667, Jacksonville, Florida 32201.