FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended December 31, 1998. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-17554 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) 904/355-1781 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of February 1, 1999: 3,454,725 shares of $.10 par value common stock.
FRP PROPERTIES, INC. CONSOLIDATED CONDENSED BALANCE SHEET (In thousands) (Unaudited) December 31, September 30, 1998 1998 ASSETS Current assets: Cash and cash equivalents $ 552 $ 663 Accounts receivable: Affiliates 330 380 Other 6,504 6,402 Less allowance for doubtful accounts (275) (272) Inventory of parts and supplies 540 552 Prepaid expenses and other 2,299 2,348 Total current assets 9,950 10,073 Other assets: Real estate held for investment, at cost 5,703 5,703 Goodwill 1,238 1,248 Other 1,957 1,971 Total other assets 8,898 8,922 Property, plant and equipment, at cost 161,007 158,083 Less accumulated depreciation and depletion (54,130) (53,113) Net property, plant and equipment 106,877 104,970 $125,725 $123,965 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term note payable to bank $ 7,900 $ 1,600 Accounts payable: Affiliates 241 85 Other 2,751 2,691 Federal and state income taxes 1,164 1,224 Accrued liabilities 2,790 3,346 Long-term debt due within one year 538 533 Total current liabilities 15,384 9,479 Long-term debt 28,167 33,299 Deferred income taxes 7,656 7,656 Accrued insurance reserves 4,134 4,129 Other liabilities 664 647 Stockholders' equity: Preferred stock, no par value; 5,000,000 shares authorized - - Common stock, $.10 par value; 25,000,000 shares authorized, 3,463,225 shares issued (3,439,235 at September 30, 1998) 347 347 Capital in excess of par value 17,773 17,871 Retained earnings 51,600 50,537 Total stockholders' equity 69,720 68,755 $125,725 $123,965 See accompanying notes.
FRP PROPERTIES, INC. CONSOLIDATED CONDENSED STATEMENT OF INCOME (In thousands except per share amounts) (Unaudited) THREE MONTHS ENDED DECEMBER 31, 1998 1997 Revenues: Affiliates $ 1,767 1,462 Non-affiliates 17,264 16,209 19,031 17,671 Cost of operations 14,638 13,697 Gross profit 4,393 3,974 Selling, general and administrative expense: Affiliates 420 384 Non-affiliates 1,674 1,132 2,094 1,516 Operating profit 2,299 2,458 Interest expense (559) (569) Interest income 3 5 Other income, net 0 - Income before income taxes 1,743 1,894 Provision for income taxes 680 739 Net income $ 1,063 $1,155 Basic earnings per common share $ .31 .34 Diluted earnings per common share $ .30 .33 Cash dividends NONE NONE Number of shares used in computing: Basic earnings per share 3,464 3,439 Diluted earnings per share 3,490 3,491 See accompanying notes. FRP PROPERTIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997 (In thousands) (Unaudited) 1998 1997 Cash flows from operating activities: Net income $1,063 1,155 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation, depletion and amortization 2,336 2,214 Net changes in operating assets and liabilities: Accounts receivable (52) (283) Inventory of parts and supplies 12 (45) Prepaid expenses 49 (126) Accounts payable and accrued liabilities (400) (777) Net change in insurance reserve and other liabilities 22 20 (Gain) loss on disposition of real estate, plant and equipment (186) (360) Other, net 9 (9) Net cash provided from operating activities 2,853 1,789 Cash flows from investing activities: Purchase of property, plant and equipment (4,280) (2,905) Additions to other assets (26) - Proceeds from sale of real estate held for investment, property, plant and equipment, and other assets 268 954 Net cash used in investing activities (4,038) (1,951) Cash flows from financing activities: Net increase in short-term debt 6,300 100 Repayment of debt (5,127) (99) Repurchase of Company stock (99) (33) Net cash provided from financing activities 1,074 (32) Net increase (decrease) in cash and cash equivalents (111) (194) Cash and cash equivalents at beginning of year 367 429 Cash and cash equivalents at end of the period $ 256 235 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest expense, net of amount capitalized $ 575 233 Income taxes $ 784 550 Non cash investing activities: Additions to property, plant and equipment from exchanges $ 89 - Escrow cash included in other assets used to purchase property, plant and equipment $ - 3,777 See accompanying notes. FRP PROPERTIES, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS DECEMBER 31, 1998 (Unaudited) (1) Basis of Presentation. The accompanying consolidated condensed financial statements include the accounts of the Company and its subsidiaries. These statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included. Operating results for the three months ended December 31, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ended September 30, 1999. The accompanying consolidated financial statements and the information included under the heading "Management's Discussion and Analysis" should be read in conjunction with the consolidated financial statements and related notes of FRP Properties, Inc. for the year ended September 30, 1998. (2) Contingent Liabilities. The Company and its subsidiaries are subject to legal proceedings and claims arising out of their businesses that cover a wide range of matters. Additional information concerning these matters is presented in Note 10 to the consolidated financial statements included in the Company's 1998 Annual Report to stockholders. Such information is incorporated herein by reference. MANAGEMENT'S DISCUSSION AND ANALYSIS Operating Results The following table summarizes the Company's revenues, cost of operations, and gross profit by its business segments (in thousands): Three Months Ended December 31, 1998 1997 Revenues: Transportation $16,445 15,328 Real estate 2,586 2,343 $19,031 17,671 Cost of operations: Transportation $13,595 12,851 Real estate 1,043 846 $14,638 13,697 Gross profit: Transportation $ 2,850 2,477 Real estate 1,543 1,497 $ 4,393 3,974 For the first quarter of fiscal 1999, ended December 31, 1998, consolidated revenues increased 7.7% over the same period last year. The Transportation segment revenues for the first quarter increased 7.3% due primarily to an increase in miles hauled. Real Estate revenues increased 10.4% for the first quarter. The real estate revenue increase was due to higher royalties and rental income. Gross profit increased $419,000 or 10.5% as compared to last year. Gross profit in Transportation increased $373,000 for the first quarter. The increase was primarily due to higher revenues and lower fuel costs. Increases in drivers wages and benefits continue to impact gross profit. Gross profit in the Real Estate segment increased $46,000 for the first quarter. The improvement was primarily due to higher income producing space under management. Gross profit for the first quarter of fiscal 1999 was reduced by lower timber sales this quarter as compared to the same quarter last year. Selling, general and administrative expense increased $578,000 for the first quarter from the same period last year. Selling, general and administrative expense as a percent of sales was 11.6% for the first quarter as compared to 8.6% last year. The increase was primarily attributable to severance compensation and staffing and consulting expenses related to systems upgrades to bring the Company compliant with the Year 2000 issues. Interest expense increased $10,000 for the first quarter, due primarily to an increase in the average debt outstanding. This increase was partially offset by a decrease in average interest rate and a greater capitalization of interest in fiscal 1999. 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. Financial Condition The Company continues to maintain its sound financial condition with sufficient resources to meet anticipated capital expenditures and other operating requirements. Other 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 revenue and income. 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 Company's 1998 Annual Report to stockholders. Such information is incorporated herein by reference. 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. PART II OTHER INFORMATION Item 1. Legal Proceedings Note 10 to the consolidated financial statements included in the Company's 1998 Annual Report to stockholders is incorporated herein by reference. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The response to this item is submitted as a separate Section entitled "Exhibit Index", starting on page 8. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the three months ended December 31, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. February 5, 1999 FRP PROPERTIES, INC. JAMES J. GILSTRAP James J. Gilstrap Treasurer and Chief Financial Officer WALLACE A. PATZKE, JR. Wallace A. Patzke, Jr. Controller and Chief Accounting Officer
FRP PROPERTIES, INC. FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1998 EXHIBIT INDEX (3)(a)(1) Articles of Incorporation of FRP Properties, Inc. Previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (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. file 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. 33-026115. (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. Previously filed with Form 10-K for the year ended September 30, 1998. File No. 33-26115. (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 leasebacks 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 Grandin Land, Inc. (see Exhibit (10)(e)), but all of which maybe 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 Grandin 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. (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. (27) Financial Data Schedule (99)(a) Information Concerning Environmental Matters and Legal Proceedings. Previously filed as Item 3 "Legal Proceedings" of FRP Properties, Inc.'s, Form 10-K for fiscal year ended September 30, 1998. File No. 33-26115. (99)(b) Information Concerning Legal Proceedings. Previously filed as Note 10 to the Consolidated Financial Statements in the Company's 1998 Annual Report to Stockholders. File No. 33-26115.