Florida East Coast Industries Reports Record Fourth Quarter and Full Year 2004 Results
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Thursday February 10, 8:00 am ET
Railway
-- Railway posted record fourth quarter segment revenues of $55.8 million, up 19% compared to the 2003 fourth quarter, driven by a strong economy, hurricane rebuilding efforts, improved pricing and new business. -- Railway segment operating profit increased 29% to $15.7 million compared to the prior year period. The operating ratio improved to 71.8% from 74.0%. -- Intermodal revenues grew 27%, recording six consecutive quarters of improvement.
Realty Operations
-- Fourth quarter 2004 Flagler Development Company's (Flagler) rental and services' revenues increased 14% to $18.1 million, compared to the prior year period. -- Occupancy continues to improve with "overall" occupancy increasing to 95% at the end of the fourth quarter 2004, from 88% in the prior year period and up sequentially from 94% at the end of the third quarter 2004.
Realty Sales and Investments
-- During the fourth quarter, Flagler closed on the sale of a 460-acre land parcel located in Doral, Florida for $80 million. As a result, realty sales proceeds totaled $84.8 million in the fourth quarter and $121.5 million for the twelve months ended December 31, 2004, compared to $51.5 million and $124.2 million in prior year periods, respectively. -- Cash on hand at the end of the quarter was $126.2 million, which includes $91.4 million of land sales proceeds held in escrow for reinvestment into land and/or buildings as 1031 exchanges.
ST. AUGUSTINE, Fla., Feb. 10 /PRNewswire-FirstCall/ -- Florida East Coast Industries, Inc. today announced results for the fourth quarter and year ended December 31, 2004.
Robert W. Anestis, Chairman, President and Chief Executive Officer of Florida East Coast Industries, stated, "During the fourth quarter our Railway and Realty businesses delivered record results. The Railway quickly rebounded from the third quarter hurricanes, and delivered strong fourth quarter revenues and operating profit. Loadings of aggregate and intermodal units were particularly strong in the quarter. Flagler's record performance was driven by strong leasing efforts, which resulted in improved occupancy. During the quarter Flagler started construction on an additional office building in SouthPark, located in Orlando, and signed a long-term lease for 81% of a build-to-suit 150,000 square-foot-warehouse at Flagler Center, located in Jacksonville. Lastly, Flagler closed on the sale of 460 acres in Doral, Florida for $80 million and is in active pursuit of replacement properties in addition to the recent $41 million purchase of a 241,000 square- foot office building in Miami to continue to strategically add to Flagler's asset base."
Mr. Anestis continued, "For the full year 2004, both businesses exceeded the Company's full year expectations, even with the impact of the hurricanes. The Railway grew revenue and operating profit to record levels, and Flagler increased occupancy at all of its business parks. With business parks nearing "full occupancy" Flagler initiated construction of six buildings, representing over 940,000 square feet, and virtually completed the required infrastructure at all the major business parks in preparation of future growth. I am proud of the management team and employees for their dedication and focus on the businesses and delivering record results during a year in which we experienced an unprecedented number of hurricanes. We enter 2005 stronger than ever with the Railway and Real Estate businesses firing on all cylinders."
For the fourth quarter, FECI reported consolidated revenues of $159.5 million, compared to $103.5 million for the fourth quarter 2003. Revenues for the fourth quarter 2004 included realty sales of $84.8 million, compared to $40.0 million for the fourth quarter 2003. Income from continuing operations was $53.3 million, or $1.65 per diluted share, for the fourth quarter 2004 (which includes $45.8 million of after-tax profit from land sales), compared to income of $25.1 million, or $0.68 per diluted share, for the fourth quarter 2003 (which includes $20.7 million of after-tax profit from land sales). FECI reported consolidated fourth quarter 2004 net income of $53.4 million, or $1.65 per diluted share, compared to $26.0 million, or $0.70 per diluted share, for the prior year quarter.
For the full year 2004, FECI reported consolidated revenues of $378.2 million, compared to $338.3 million for 2003. Revenues included realty sales of $104.8 million for 2004, compared to $90.5 million for 2003. Income from continuing operations for the year was $77.9 million, or $2.21 per diluted share, for 2004 (which includes $54.3 million of after-tax profit from land sales), compared to $41.3 million, or $1.12 per diluted share, in the prior year period (which includes $34.8 million of after-tax profit from land sales and $10.1 million of after-tax expense for the estimated cost of ending a long-term ground lease). FECI reported full year 2004 net income of $80.6 million, or $2.29 per diluted share, compared to $43.2 million, or $1.17 per diluted share, in the prior year.
Mr. Anestis continued, "In 2005, we expect continued strong performance in the Company's businesses. The Railway's aggregate, intermodal and other commodities, in particular, should benefit from Florida's strong economy. We plan to invest capital dollars on efforts to improve productivity and capacity. In addition, we will continue our focus on deriving, enhancing and monetizing value from core and non-core realty and other uses of the Railway's right-of-way."
Mr. Anestis added, "Flagler begins 2005 with 1.3 million square feet in the development pipeline (which includes 5 buildings under construction) and substantially all infrastructure in place at all its major business parks. Additionally, Flagler enters the year focused on reinvestment opportunities, utilizing some or all of the remaining proceeds from 2004 sales, to create future value and scale for its real estate portfolio. The purchase of the 240,000-square-foot office building at Doral Concourse was a perfect addition to the Flagler portfolio. The building, located in the same sub-market as the award-winning Flagler Station, will allow Flagler to add value through lease- up and stabilization. In 2005, Flagler will continue to focus on demand- driven expansion at all its major parks. We believe the demand for Florida office and industrial space will continue to improve and we are positioned to take full advantage."
The Company's expectations for full year 2005 operating results assume continuing improvement in the national and Florida economies. For 2005, the Company expects Railway segment revenues to range between $211 and $218 million, an increase of 5% to 9% over 2004. Railway segment operating profit is expected to range between $52 and $54 million, an increase of 10% to 14% over 2004. Capital expenditures for the Railway, before the purchase of any strategic land parcels to be inventoried for future Railway customers, are expected to range from $30 to $36 million.
The Company expects Flagler's 2005 rental and services' revenues to range between $79 and $83 million, an increase of 14% to 19% over 2004. Flagler's rental properties' operating profit before depreciation and amortization expense is expected to range between $53 and $55 million in 2005, or 18% to 23% over 2004. Operating profit from operating properties' rents is expected to range between $26 and $28 million. Capital investment at Flagler for 2005 is expected to be between $150 and $170 million, which includes $75 to $85 million for acquisitions of land and/or finished buildings utilizing proceeds from third and fourth quarter 2004 realty sales. The Company's expectations for Flagler's 2005 results include realty and land purchases that have closed as of the date of this release.
Also announced today, Adolfo Henriques will succeed Robert W. Anestis as Chairman, President and Chief Executive Officer of Florida East Coast Industries, effective on or about March 28, 2005 (Effective Date). Related to Mr. Anestis' departure, 2005 corporate general and administrative expenses will include costs of approximately $7.0 - $7.5 million, which include $4.0 - $4.5 million of non-cash charges related to stock compensation. Mr. Henriques will receive inducement awards of 80,000 shares of restricted stock that will vest over a three-year term and will be subjected to earlier vesting under certain circumstances and a grant of 25,500 shares of stock, which will vest and be expensed on the Effective Date. A summary of Mr. Henriques' employment agreement and Mr. Anestis' separation agreement is contained in a form 8-K filed today.
Railway Fourth Quarter Results
Florida East Coast Railway (Railway) segment's revenues in the fourth quarter 2004 increased 19.2% to $55.8 million from $46.8 million in the prior year period. Included in the fourth quarter 2004 revenues were $1.5 million of fuel surcharges, compared to $0.6 million in 2003.
Total carload revenues grew 14.2% primarily driven by a 14.6% increase in aggregate revenues, reflecting a combination of strong construction demand, new business from existing customers, improved pricing and increased volume from the hurricane rebuilding effort.
Intermodal revenues (which include drayage) increased 26.5% compared to the prior year period, reflecting improved pricing, addition of new customers, increased revenue from international shippers, the "Hurricane Train" and the retail customers, which were partially offset by lower revenues from a connecting carrier.
Railway segment's operating profit increased 29.3% to $15.7 million in the fourth quarter 2004 versus $12.2 million in the fourth quarter of 2003. Improvement in operating profit was attributable primarily to higher revenues and a $1.0 million reimbursement of hurricane-related expenses from governmental agencies. These increases were partially offset by higher salary and wage expense, an additional $0.8 million of hurricane-related costs and increased expenses in support of higher revenue. As a result, the Railway's operating ratio was 71.8% compared to 74.0% in the prior year quarter.
Realty Fourth Quarter Results
Rental Portfolio Results
Flagler's rental and services' revenues increased 13.8% to $18.1 million for the fourth quarter 2004 from $15.9 million in the fourth quarter of 2003. The increased revenues resulted primarily from higher "same store" occupancy rates and properties that began operations in 2004 ("new in 2004").
Rental properties' operating profit was $6.3 million for the fourth quarter versus $4.7 million in the prior year period. Rental properties' operating profit before depreciation and amortization expense for the quarter increased 16.5% to $11.8 million, compared to $10.1 million in the fourth quarter 2003. Rental properties' operating profit before depreciation and amortization expense benefited primarily from improvements in "same store" occupancy and "new in 2004" properties.
Flagler's "same store" occupancy rates increased to 94% in the fourth quarter, compared to 87% in the fourth quarter 2003, and comparable to the third quarter 2004.
Development and Sales Activity
At quarter end, Flagler had nine projects, totaling 1,321,100 square feet, in various stages of development (803,500 square feet in the construction stage, which includes a 239,000-square-foot build-to-suit; and 517,600 square feet in pre-development).
During the fourth quarter, Flagler commenced development and construction of SouthPark Center II Building 1200, a four-story, 137,000- square-foot, Class-A office building located in Orlando, shortly after leasing all of SouthPark Center Building 1000 to Starwood Vacation Ownership.
On December 1, the Company announced the closing on the sale of 460 undeveloped acres located in Doral, Florida for $80 million.
Property under sale contracts at December 31, 2004 totaled $27.0 million and other property was listed for sale at asking prices totaling $22.5 million. The Company expects full year 2005 realty sales of $20 to $30 million.
Subsequent Events
On January 13, Flagler announced Marriott Vacations Club International renewed its current lease of 70,800 square feet in Building 600 SouthPark Center located in Orlando. SouthPark has achieved 97% occupancy at year-end and Marriott is the last major lease scheduled to expire in 2005.
On January 19, Ryder System, Inc.'s lease commenced for the 239,000- square-foot build-to-suit office building located in Flagler Station.
On January 20, Flagler announced the execution of a long-term lease with Baker Distributing Company for 122,000 square feet of a 150,000-square-foot build-to-suit warehouse located at Flagler Center.
On February 7, Flagler announced the purchase of a 240,000-square-foot Class-A office building located in Miami, Florida for $41 million. Tax- deferred proceeds from the sale of Section 8 were used to purchase the building.
Capitalization
The Company's cash balance on December 31, 2004 was $126.2 million (which includes $91.4 million held as deposits to be used in 1031 exchanges). Debt on December 31, 2004 was $342.9 million, composed of non-recourse real estate mortgages.
Flagler anticipates utilizing a substantial part of the proceeds from realty sales currently held in escrow accounts to acquire land and buildings to which it can add future value for its real estate portfolio through its core management and development strength. The Company will seek to accomplish any such acquisition transactions in qualified like-kind exchanges for tax purposes. |
