Annual Report 1997
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
1997 1996 Change
Revenues $68,844 64,403 + 6.9
Gross profit $14,908 14,615 + 2.0
Operating profit $ 8,977 9,017 - 0.4
Income before income taxes $ 6,984 6,827 + 2.3
Net income $ 4,260 4,165 + 2.3
Per common share:
Net income $1.20 1.13 + 6.2
Stockholders' equity $18.48 17.72 + 4.3
1997 CORPORATE HIGHLIGHTS
Revenues - up 6.9% to $68,844,000
Gross profit - up 2.0% to $14,908,000
Net income - up 2.3% to $4,260,000
Earnings per share - up 6.2% to $1.20
$19,000,000 available under the Company's revolving credit agreement at
September 30, 1997
$20,000,000 of unsecured lines of credit of which $4,000,000 was outstanding
at September 30, 1997
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 1997 was a year of continued progress in major projects and programs
consistent with the short and long-term goals in both the Transportation and
Real Estate businesses.
Results. Revenues for fiscal 1997 were $68,844,000, a 6.9% increase over
$64,403,000 in fiscal 1996. Transportation revenues increased 6.7% due to
continued growth and expansion in both SunBelt Transport, Inc. and Florida
Rock & Tank Lines, Inc. Real estate revenues increased 8.3% principally as
the result of the sale of real estate during the fourth quarter of this
fiscal year.
Gross profit of $14,908,000 increased 2.0% from $14,615,000 in fiscal 1996.
The Transportation Group's gross profit for fiscal 1997 decreased $605,000
from last year as the result of higher insurance costs, increases in
depreciation expense resulting from fleet expansion and modernization and
fewer gains resulting from the sale of equipment. The Real Estate Group's
gross profit was above last year principally because of real estate gains of
$817,000 in fiscal 1997 compared to $93,000 in 1996.
Selling, general and administrative expenses were up 5.9% in 1997 to
$5,931,000 as compared to 1996. Selling, general and administrative expenses
as a percent of total revenue remained level with the prior year.
Interest expense decreased 7.8% to $2,061,000 in 1997 from $2,234,000 last
year. The decrease was due to a lower average interest rate and an increase
in capitalized interest of $206,000 over fiscal 1996.
Net income increased 2.3% to $4,260,000 from $4,165,000 in fiscal 1996.
Earnings per share increased 6.2% to $1.20 from $1.13 last year. The average
number of common shares used in computing earnings per share decreased 3.5%
due to ongoing stock repurchases made by the Company. During the current
fiscal year, the Company purchased and retired 147,951 shares of common
shares while issuing 95,000 shares asa a result of shares exercised under the
Company's non-qualified stock option plans.
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, 1997 99% of the total 574,252
square feet of completed warehouse/office space was leased with only 3,200
square feet available.
The second of two buildings at Preston Court in the Baltimore/Washington
Industrial Park, comprised of 90,405 square feet of flexible warehouse/office
space, was completed during 1997 and is 100% leased.
Lakeside Business Park. The Company continued land development activities on
Lakeside Business Park, a 134 acre site in Harford County, Maryland, north of
Baltimore. It is anticipated that construction of 105,800 square feet of
flexible warehouse/office space will be completed during the first half of
fiscal 1998. This space is 100% pre-leased.
Capital Expenditures. Capital expenditures in 1997 for the transportation
business totaled $7,520,000 versus $13,174,000 in 1996. The 1997 capital
expenditures were approximately 59% for new plant and equipment and
replacements represented 41%. Capital expenditures for the real estate
segment in 1997 approximated $6,226,000 versus $2,782,000 in 1996. Total
depreciation and depletion for fiscal 1997 was $8,205,000 versus $7,456,000
in 1996.
The 1998 planned capital expenditures for the transportation business total
$6,939,000 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 $11,352,000. Total depreciation expense is expected to be
approximately $9,094,000.
Financial Management. The Company's $34,000,000 revolving credit term loan
facility has a final maturity in 2001 of which $15,000,000 was utilized at
the end of 1997. The Company also has $20,000,000 in unsecured short-term
lines of credit of which $4,000,000 was borrowed at the end of fiscal 1997.
$16,065,000 of the Company's total debt is long-term fixed rate mortgages
secured real estate projects. At year end debt was 33% of capital employed.
Stock Repurchase. Pursuant to the Board's authorization, the Company
purchased 147,951 shares of its common stock during the year. Management
remains authorized to repurchase shares of the Company's common stock from
time to time as opportunities may arise.
Annual Meeting. At the Annual Stockholders' Meeting on February 5, 1996, the
stockholders elected John E. Anderson, Thompson S. Baker, David H.
deVilliers, Jr., and Albert D. Ernest, Jr. as directors to serve a four-year
term expiring in the year 2001.
Outlook. Fiscal 1998 is expected to be another year of growth and progress.
The economy is expected to continue its slow growth.
The Transportation Group is expected to continue to expand in 1998 through
the growth of its existing customers as well as entries into new markets.
Industrial real estate markets served by FRP Development Corp. in the
Baltimore 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 substantially fully leased.
The favorable long-term outlook is conducive to market acceptance of the new
Baltimore/Washington Industrial Park building and the multi-year Lakeside
Business Park project.
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.
As reported to you earlier this year, we lost our founder and Chairman
Emeritus, Thompson S. Baker when he passed away on February 24, 1997. No
words can describe the leadership he gave this Company nor the love he had
for its employees. He will be missed.
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 a central
dispatch office in Greenville, South Carolina. During fiscal 1997 the owned
and leased fleet increased from 498 to 521 trucks.
Revenues for miles hauled were up 6.7% due to both continued expansion of
flatbed and tank truck hauling.
Gross profit decreased 6.3% from fiscal 1996 primarily due to higher
insurance costs and depreciation associated with the modernization of the
fleet.
During fiscal 1997, including replacements and growth of SunBelt, the Group
purchased 91 new tractors and 70 new trailers. The fiscal 1998 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 1998 Transportation expects another year of growth in its
existing bulk hauling business resulting from the continued penetration of
targeted market segments. With the anticipated continuing modest economic
growth, the outlook is for increases in the hauling of petroleum, dry bulk
and chemical products. Flatbed hauling is expected to have another year of
good growth in 1998.
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 8.3% from 1996 principally due to the sale
of real estate. The fiscal 1997 real estate revenues, excluding the sale of
real estate, were divided approximately 48% from mining and minimum royalties
and 52% from rental. Excluding land sales for fiscal 1997, real estate
revenues approximated those of last year.
A brief description of FRP Development Corp.'s projects at September 30,
1997 follows:
8230 Preston Court, 72,182 square feet of flexible warehouse/office space.
8240 Preston Court, a 90,405 square foot flexible warehouse/office
building.
810 Oregon Avenue, 113,280 square feet of flexible warehouse/office space.
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 is under development. A 105,800 square
foot speculative warehouse is expected to be completed in the first half of
1998.
The Group during fiscal 1998 will continue to focus on the development of the
property at Lakeside.
At September 30, 1997 the Company owns approximately 574,000 square feet of
rental properties that were 99% leased. The Company's long-term plan is to
gradually build a portfolio of successful rental properties for investment.
Five Year Summary Years ended September 30
(Dollars and shares in thousands except per share amounts)
1997 1996 1995(a) 1994 1993(b)
Summary of Operations
Revenues $ 68,844 64,403 58,273 54,011 46,599
Gross profit(c) $ 14,908 14,615 15,132 12,255 9,773
Operating profit $ 8,977 9,017 9,440 7,264 5,313
Interest expense $ 2,061 2,234 1,933 1,105 897
Income before income taxes $ 6,984 6,827 7,591 6,219 4,432
Provision for income taxes $ 2,724 2,662 2,961 2,425 1,735
Net income $ 4,260 4,165 4,630 3,794 2,697
Per Common Share
Net income $ 1.20 1.13 1.21 .94 .65
Stockholders' equity $ 18.48 17.72 16.74 15.64 14.75
Financial Summary
Current assets $ 8,549 8,003 8,495 7,703 7,247
Current liabilities $ 11,063 9,595 7,117 10,234 8,198
Working capital (deficit) ($ 2,514) (1,592) 1,378 (2,531) (951)
Property, plant and
equipment, net $ 95,018 90,058 83,319 74,697 72,698
Total assets $116,582 107,036 101,357 91,769 89,026
Long-term debt $ 30,647 26,170 25,503 16,108 15,697
Stockholders' equity $ 63,734 61,894 61,622 59,437 59,972
Other Data
Return on ending
stockholders' equity 6.7% 6.7 7.5 6.4 4.5
Return on capital employed 4.0% 5.7 6.2 5.4 4.0
Net cash flow provided from
operating activities $ 13,982 14,681 10,131 10,005 8,452
Additions to property,
plant and equipment $ 13,746 15,970 15,805 9,165 7,450
Depreciation, depletion
and amortization $ 8,356 7,667 7,304 6,945 6,196
Weighted average number
of shares 3,554 3,683 3,832 4,045 4,176
Number of employees at
end of year 721 665 644 556 527
Stockholders of record 873 913 939 975 1,032
(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)Effective October 1, 1992, the Company changed its method of accounting
for employee postretirement benefits in accordance with SFAS 106. The
effect on fiscal 1993 was to reduce net income by $252,000 ($.06 per
share).
(c)Fiscal 1997, 1996, 1995 and 1994 include gains on the sale of real
estate of $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
1997 1996 1997 1996 1997 1996 1997 1996
Revenues $16,398 15,321 16,221 15,949 17,533 16,706 18,692 16,427
Gross profit $ 3,363 3,848 3,244 3,366 4,077 4,050 4,224 3,351
Operating profit $ 1,844 2,391 1,734 1,858 2,573 2,569 2,826 2,199
Income before
income taxes $ 1,369 1,852 1,274 1,304 2,038 1,992 2,303 1,679
Net income $ 835 1,130 777 795 1,243 1,215 1,405 1,025
Per common share:
Net income $ .23 .30 .22 .21 .35 .33 .40 .29
Market price:
High $ 26.00 22.50 28.75 22.00 28.00 21.50 34.00 22.00
Low $20.50 17.00 24.00 19.69 24.50 19.75 25.25 20.50
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 1997 and 1996, revenues increased 7% and 10%, respectively. In the
Transportation segment revenue and miles hauled were up 7% in 1997 and 13% in
1996. In fiscal 1995 the Real Estate segment had revenue from timber sales and
a one-time royalty totaling $1,092,000. Absent these infrequent and one-time
revenues, the Real Estate segment's revenues, exclusive of real estate sales,
would have remained stable in 1997 and increased 8% in 1996. The 1996 increase
was principally due to increases in rents and royalties.
The estimated contribution to Transportation revenues by principal markets
follows:
1997 1996 1995 1994 1993
Petroleum 68% 68 66 45 51
Construction 21% 20 19 26 13
Chemical 6% 7 10 15 12
Other 5% 5 5 14 24
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 last year. The increase was
principally due to real estate sales gross profit of $817,000 in 1997 compared
to $93,000 in 1996, increase development revenues and a 1996 write-off of
$349,000 in connection with the abandonment of certain development costs.
In fiscal 1996, gross profit decreased $517,000 from 1995 and gross profit
margin decreased to 23% from 26%. The Transportation segment's gross profit
increased $366,000, principally due to higher revenues, while the gross profit
margin decreased to 17% from 19% principally due to an increase in risk
insurance cost of approximately $1,760,000 over 1995. In the Real Estate
segment gross profit decreased $897,000 in fiscal 1996 from 1995. The decrease
was principally due to the timber sales and one-time royalty which produced a
gross profit in 1995 of approximately $863,000 and the write-off in 1996 of
$349,000 in connection with the abandonment of certain development costs.
Selling, general and administrative expense increased 6% in 1997 and
decreased 2% in 1996 from 1995. The 1996 decrease was due to a reduction of
$206,000 in profit sharing and incentive compensation.
In 1997 interest expense decreased 8% from 1996 primarily due to increased
capitalization of interest and increased 16% in 1996 over 1995 due to increased
borrowings which was partially offset by a lower average interest rate.
Liquidity and Capital Resources. The following key financial measurements
reflect the Company's sound financial position and capital resources at
September 30 (dollars in thousands):
1997 1996 1995
Cash $ 429 313 392
Total debt $35,065 30,003 27,650
Debt as a percent of
capital employed 33% 31 29
Unused lines of credit $35,000 35,500 38,200
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 borrowing of
$5,400,000 and proceeds from the exercise of stock options of $879,000.
During 1996, net cash flows from operating activities of $14,681,000 more
than covered the $13,220,000 net cash used in investing activities. The excess
cash from operating activities plus additional borrowing was used to buy back
$3,915,000 of the Company's common stock.
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 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 $4,000,000
was outstanding at September 30, 1997.
The Company currently expects its fiscal 1998 capital expenditures to be
approximately $18,291,000 versus depreciation and depletion expense of
$9,094,000. 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.
Consolidated Statement of Income Years ended September 30
(Dollars and shares in thousands except per share amounts)
1997 1996 1995
Revenues:
Transportation $ 59,530 55,801 49,198
Real estate 8,477 8,434 8,877
Sale of real estate 837 168 198
Total revenues (including revenue from
related parties of $6,006, $6,544 and $5,869) 68,844 64,403 58,273
Cost of operations:
Transportation 50,487 46,153 39,916
Real estate 3,429 3,560 3,106
Cost of real estate sold 20 75 119
Gross profit 14,908 14,615 15,132
Selling, general and administrative expense
(including expenses paid to related party
of $1,414, $1,383 and $1,312) 5,931 5,598 5,692
Operating profit 8,977 9,017 9,440
Interest expense (2,061) (2,234) (1,933)
Interest income 46 34 49
Other income, net 22 10 35
Income before income taxes 6,984 6,827 7,591
Provision for income taxes 2,724 2,662 2,961
Net income $ 4,260 4,165 4,630
Earnings per common share $1.20 1.13 1.21
Weighted average number of shares used in
computing earnings per common share 3,554 3,683 3,832
See accompanying notes.
Consolidated Balance Sheet September 30
(Dollars in thousands)
1997 1996
Assets
Current assets:
Cash and cash equivalents $ 429 313
Accounts receivable, less allowance for doubtful
accounts of $258 ($234 in 1996) (including
related party of $283 and $376) 5,531 5,300
Inventory of parts and supplies 469 502
Prepaid expenses and other 2,120 1,888
Total current assets 8,549 8,003
Other assets:
Real estate held for investment, at cost 5,771 5,791
Goodwill, at cost less amortization of $322
($282 in 1996) 1,288 1,328
Other 5,956 1,856
Total other assets 13,015 8,975
Property, plant and equipment, at cost:
Land 55,614 52,888
Buildings 27,485 25,611
Plant and equipment 59,572 54,584
142,671 133,083
Less accumulated depreciation and depletion 47,653 43,025
Net property, plant and equipment 95,018 90,058
$116,582 107,036
Liabilities and Stockholders' Equity
Current liabilities:
Short-term note payable to bank $ 4,000 3,500
Accounts payable (including related party of
$77 and $93) 2,427 1,779
Federal and state income taxes 779 342
Accrued liabilities:
Payroll and benefits 1,154 1,047
Taxes 582 587
Interest 165 106
Insurance reserves 1,538 1,901
Long-term debt due within one year 418 333
Total current liabilities 11,063 9,595
Long-term debt 30,647 26,170
Deferred income taxes 7,243 6,240
Accrued insurance reserves 3,382 2,705
Other liabilities 513 432
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; 3,439,235
shares issued (3,492,186 shares in 1996) 344 349
Capital in excess of par value 17,333 19,748
Retained earnings 46,057 41,797
Total stockholders' equity 63,734 61,894
$116,582 107,036
See accompanying notes.
Consolidated Statement of Cash Flows Years ended September 30
(Dollars in thousands)
1997 1996 1995
Cash flows from operating activities:
Net income $ 4,260 4,165 4,630
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 8,356 7,667 7,304
Net changes in operating assets and liabilities:
Accounts receivable (250) 268 (1,192)
Inventory of parts and supplies 33 (1) 136
Prepaid expenses (261) 157 (191)
Accounts payable and accrued liabilities 732 1,161 (1,001)
Increase in deferred income taxes 1,181 1,622 1,717
Net change in insurance reserves and other
liabilities 759 242 (350)
Gain on sale of real estate, plant and
equipment (792) (550) (749)
Other, net (36) (50) (173)
Net cash provided by operating activities 13,982 14,681 10,131
Cash flows from investing activities:
Purchase of property, plant and equipment (13,470) (14,070)(15,516)
Purchase of real estate held for investment - (32) (43)
Additions to other assets (4,156) (130) (525)
Proceeds from the sale of real estate held for
investment, property, plant and equipment, and
other assets 1,118 1,012 705
Net cash used in investing activities (16,508) (13,220)(15,379)
Cash flows from financing activities:
Proceeds from long-term debt 4,900 3,000 10,750
Net increase (decrease) in short-term debt 500 1,700 (2,200)
Repayment of long-term debt (338) (2,347) (1,277)
Exercise of employee stock options 879 22 22
Repurchase of Company stock (3,299) (3,915) (2,476)
Net cash provided by (used in) financing activities 2,642 (1,540) 4,819
Net increase (decrease) in cash and cash equivalents 116 (79) (429)
Cash and cash equivalents at beginning of year 313 392 821
Cash and cash equivalents at end of year $ 429 313 392
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense, net of amount capitalized $ 1,997 2,257 1,882
Income taxes (received) $ 898 (216) 3,373
Noncash investing and financing activities:
Additions to property, plant and equipment from:
Exchanges $ 276 1,900 526
Issuing accounts payable - - 239
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, 1994 3,800,719 $380 26,055 33,002
Shares purchased and canceled (121,125) (12) (2,464)
Compensation in the form of stock
options 9
Exercise of stock options 2,000 22
Net income 4,630
Balance at September 30, 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
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.
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.
DEPRECIATION, DEPLETION AND AMORTIZATION - Provision for depreciation of plant
and equipment is computed using the straight-line method based on the following
estimated useful lives:
Years
Buildings and improvements 8-32
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.
After a review of actual revenue equipment lives versus the lives used for
depreciation purposes, effective October 1, 1994, for financial reporting
purposes, the Company extended the estimated useful lives of its tractors from
5 to 7 years and substantially all trailers from 5-7 years to 10 years and
reduced the salvage values on such equipment. The effect for fiscal 1995 was
to increase gross profit by $842,000 and net income by $525,000 ($.14 per
share).
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 - Earnings per common share are based on the
weighted average number of common shares outstanding and common stock
equivalents, where applicable.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are
capitalized. Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Estimation of such liabilities is extremely complex.
Some factors that must be assessed are engineering estimates, continually
evolving governmental laws and standards, and potential involvement of other
potentially responsible parties.
NEW ACCOUNTING REQUIREMENTS - Effective October 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123). SFAS 123 establishes a fair value based
method of accounting for stock-based employee compensation plans. However,
it also allows companies to continue to measure cost for such plans using the
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). Under the fair value
based method, compensation is measured at the date of grant on the value of
the award and is recognized over the service period, which is usually the
vesting period. Under the intrinsic value based method, compensation cost is
the excess, if any, of the quoted market price of the stock at the grant date
or other measurement date over the amount an employee must pay to acquire the
stock. The Company has elected to continue to account for its employee stock
compensation plans under APB 25 with pro forma disclosures of net earnings and
earnings per share, as if the fair value based method of accounting defined
in SFAB 123 has been applied.
Effective October 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). SFAS 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles
to be disposed of. Impairment is assessed by comparing the book value of such
assets to the estimated undiscounted future operating cash flows expected to
result from the use of the asset and its final disposition. If the sum of the
expected future cash flow is less than the carrying amount of the asset, an
impairment loss is recognized based on the fair value of the asset. The
Company completed its evaluation of the impact of adoption of SFAS 121 and no
adjustment of the carrying value of long-lived assets was necessary.
In March 1997, the FASB issued SFAS No. 128, "Earnings per Share". SFAS 128
establishes standards for computing earnings per share ("EPS") and applies to
all entities with publicly held common stock or potential common stock. SFAS
128 replaces the presentation of primary EPS and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution, and is computed by dividing income available to common stockholders
by the weighted-average number of common shares outstanding for the period.
Similar to fully diluted EPS, diluted EPS reflects the potential dilution of
securities that could share in the earnings. SFAS 128 will be adopted by the
Company for the fiscal quarter ending December 31, 1997 and earnings per share
for all prior periods will be restated upon adoption. Had the Company adopted
SFAS 128 for the periods presented, basic and diluted earnings per share would
have been $1.22 and $1.20, respectively, for the year ended September 30,
1997.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", effective for fiscal years beginning
after December 15, 1997. SFAS 131 establishes standards for reporting
information about operating segments in annual financial statements and
requires selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS 131 requires reporting segment profit or loss,
certain specific revenue and expense items and 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.
2. Transactions with related parties. As of September 30, 1997 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 40% 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):
1997 1996 1995
Transportation $ 883 1,100 759
Real estate 5,123 5,444 5,110
$6,006 6,544 5,869
Under an agreement extending until September 30, 1999, FRI furnishes the
Company with certain management and related services, including financial,
tax, legal, administrative, accounting and computer. Charges for such
services were $1,414,000 in 1997, $1,383,000 in 1996 and $1,312,000 in 1995.
On October 9, 1996 a wholly owned subsidiary of the Company purchased 134
acres of land from a subsidiary of Florida Rock Industries, Inc. for $500,000
and the assumption of certain reclamation costs and benefits relating to the
site. An appraisal of the property was obtained. The transaction was
approved by the Company's Board of Directors with those directors who are also
directors of Florida Rock Industries, Inc. abstaining.
3. Lines of credit and debt. Long-term debt at September 30 is summarized as
follows (in thousands):
1997 1996
Revolving credit (unsecured) $15,000 15,000
8% to 9.5% mortgage notes payable
in installments through 2015 16,065 11,455
5% unsecured notes payable in 1997 - 48
31,065 26,503
Less portion due within one year 418 333
$30,647 26,170
The aggregate amount of principal payments, excluding the revolving credit,
due subsequent to September 30, 1997 is: 1998 - $418,000; 1999 - $455,000;
2000 - $495,000; 2001 - $538,000; 2002 - $584,000; 2003 and subsequent years -
$13,575,000.
The Company has a revolving credit agreement under which it may borrow from
four banks up to $34,000,000 on term loans payable 25% on November 15, 1999,
25% on November 15, 2000 and the balance on November 15, 2001. Interest is
payable at SunTrust Bank, Central Florida, N.A.'s prime rate until November
15, 1998, 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, 1998.
The revolving credit agreement contains restrictive covenants, including
limitations on paying cash dividends. As of September 30, 1997 $9,309,000 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 $19,358,000 at September 30, 1997.
Certain properties having a carrying value at September 30, 1997 of
$1,720,000 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, 1997 and 1996 were 7.0% and 6.4%, respectively.
During fiscal 1997, 1996 and 1995 the Company capitalized interest cost of
$223,000, $17,000 and $53,000, respectively.
4. Leases. At September 30, 1997, 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 $41,852
Commercial property 31,228
Land and other property 10,296
83,376
Less accumulated depreciation and depletion 18,825
$64,551
The minimum future rentals on noncancelable operating leases as of September
30, 1997 are as follows: 1998 - $4,849,000; 1999 - $3,743,000; 2000 -
$3,459,000; 2001 - $2,600,000; 2002 - $1,973,000; 2003 and subsequent years
$9,011,000.
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, 1997 the number of shares available for issuance
is 85,000 shares. The Company did not issue options during 1996 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:
1997 1996 1995
Average Average Average
Options Price(1) Options Price(1) Options Price(1)
Shares under option:
Beginning of year 245,000 12.78 247,000 12.76 159,000 9.97
Granted - - 90,000 17.67
Exercised (95,000) 8.88 (2,000) 11.00 (2,000) 11.00
End of year 150,000 15.25 245,000 12.78 247,000 12.76
Options exercisable
at end of year 108,600 184,300 161,000
(1) Weighted average exercise price
The following table summarizes information concerning stock options
outstanding at September 30, 1997:
Options Options Weighted-Average
Exercise Price Outstanding Exercisable Remaining Life
11.00 30,000 30,000 .8 years
12.25 30,000 30,000 2.8 years
17.25 15,000 6,000 7.2 years
17.75 75,000 42,600 7.1 years
Remaining non-exercisable options as of September 30, 1997 become exercisable
as follows: 1998 - 19,400, 1999 - 11,000 and 2000 - 11,000.
Options granted have been granted at 72%, 74% and 100% of the fair market
value of the Company's common stock on the dates of grant.
The difference between the fair market value of the Company's common stock
and the option price on the date of grant is recognized as compensation over
the period from the date of grant until the option becomes exercisable. When
the option is exercised the proceeds are credited to stockholders' equity.
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 consisted of the following (in thousands):
1997 1996 1995
Current:
Federal $1,317 892 $1,063
State 226 148 181
1,543 1,040 1,244
Deferred 1,181 1,622 1,717
Total $2,724 2,662 2,961
A reconciliation between the amount of tax shown above and the amount
computed at the statutory Federal income tax rate follows (in thousands):
1997 1996 1995
Amount computed at statutory
Federal rate $2,374 2,321 2,581
State income taxes (net of Federal
income tax benefit) 263 255 283
Other, net 87 86 97
Provision for income taxes $2,724 2,662 2,961
The types of temporary differences and their related tax effects that give
rise to deferred tax assets and deferred tax liabilities at September 30, are
presented below:
1997 1996
Deferred tax liabilities:
Basis difference in property,
plant and equipment $8,014 6,776
Depletion 656 678
Prepaid expenses 833 737
Gross deferred tax liabilities 9,503 8,191
Deferred tax assets:
Insurance reserves 1,614 1,479
Other, net 495 501
Gross deferred tax assets 2,109 1,980
Net deferred tax liability $7,394 6,211
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 $403,000 in 1997, $419,000
in 1996 and $464,000 in 1995.
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):
1997 1996 1995
Accumulated postretirement benefit
obligation:
Retirees $ 117 133 158
Fully eligible active participants 62 62 99
Other active participants 317 307 293
Total APBO 496 502 550
Unrecognized net gain (loss) from
past experience different from
that assumed and from changes in
assumptions 5 (68) (182)
Unrecognized prior service cost 74 133 193
Accrued postretirement benefit cost $575 567 561
Net periodic postretirement benefit cost for fiscal years ended
September 30 includes the following components (in thousands):
1997 1996 1995
Service cost of benefits earned during
the period $ 38 39 49
Interest cost on APBO 32 32 36
Net amortization and deferral (59) (55) (40)
Net periodic postretirement benefit
cost $ 11 16 45
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):
1997 1996 1995
Revenues:
Transportation $59,530 55,801 49,198
Real estate (a) 9,314 8,602 9,075
$68,844 64,403 58,273
Segment profit:
Transportation $ 4,188 4,947 4,525
Real estate (a) 5,799 4,908 5,759
9,987 9,855 10,284
Corporate expenses (942) (794) (760)
Interest expense (2,061) (2,234) (1,933)
Income before income taxes $ 6,984 6,827 7,591
Capital expenditures:
Transportation $ 7,520 13,174 12,621
Real estate 6,226 2,782 3,162
$ 13,746 15,956 15,783
Depreciation, depletion and
amortization:
Transportation $ 6,136 5,558 5,066
Real estate 2,173 2,065 2,195
$ 8,309 7,623 7,261
Identifiable assets at September 30:
Transportation $ 42,895 41,489 35,116
Real estate 73,159 64,972 64,837
General corporate 528 575 1,404
$116,582 107,036 101,357
(a) Fiscal 1997, 1996 and 1995 includes revenue of $837, $168 and $198 and
segment profit of $817, $93 and $79, 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, 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,
1997 the carrying amount and fair value of such other long-term debt was
$16,065,000 and $15,470,000, respectively. At September 30, 1996 the carrying
amount and fair value of such other long-term debt was $11,503,000 and
$11,025,000, 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, 1997, the Company had placed orders and was
committed to purchase tractors and trailers costing approximately $2,306,000
and had entered into various contracts to purchase and develop real estate
with remaining commitments totaling $1,304,000.
12. Fourth quarter financial information (unaudited). In the fourth quarter
of fiscal 1997, the Company increased its risk insurance reserves
approximately $682,000.
13. Subsequent event. At September 30, 1997, $3,777,000 of cash was held in
escrow pending the closing of a parcel of land. The cash is included in other
assets in the accompanying balance sheet. The purchase closed on October 3,
1997 and will not have a material effect on the results of operations.
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, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of FRP Properties, Inc. and
subsidiaries at September 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
December 1, 1997
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)
Executive Vice President of the Company
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 (2)(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 D. Baker II
Executive Vice President
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 4, 1998, 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.