JACKSONVILLE, F.a — Florida East Coast Industries Inc. put its railroad up for sale six years ago, with analysts saying the relatively short 351-mile rail line from Jacksonville to Miami was too small to continue operating on its own, the Florida Times-Union reports.
But the St. Augustine-based company was unable to make a deal and Chairman and Chief Executive Officer Robert W. Anestis, who joined the company three years ago, has no plans to sell the Florida East Coast Railway now.
“The railroad is a great business stand-alone,” Anestis told shareholders yesterday at the company’s annual meeting.
Florida East Coast also operates commercial real estate developer Flagler Development Co., telecommunications company EPIK Communications Inc. and intermodal trucking company Florida Express Carriers. But the railroad provided more than half of the company’s $299 million in 2001 revenue and is the most significant source of its cash flow, Anestis said.
The company’s other three businesses evolved from what Anestis called the “hidden assets” of the railroad, which are basically the land along and close to the 351-mile right of way. For example, EPIK built a fiber-optics communications network along the right of way and extended the fiber-optic network throughout Florida and to Atlanta.
However, because of weak demand for telecommunications services, Florida East Coast had to write off some of EPIK’s assets, and the subsidiary recorded an operating loss of $151.6 million last year. That caused Florida East Coast to report an overall net loss of $61.4 million.
Anestis told shareholders the company’s $350 million in capital expenditures for EPIK has not affected spending plans for its other businesses. “Nobody has suffered from what we’re doing here,” he said.
Florida East Coast is continuing to look at opportunities to unlock the value of its other hidden assets.
For example, the company has 1,241 acres of land along the east coast of Florida that it is holding for lease, development or sale. That is in addition to 14,300 acres of undeveloped land held by its Flagler subsidiary.
Meanwhile, the railroad continues to do well. “The railroad has had good results even in a tough economy,” Anestis said.
He said the railroad’s operating ratio — expenses divided by revenue — of 74.4 percent in 2001 was the second best in the industry, behind Canadian National, which operates tracks in Canada and the United States.
“We’re holding our own just fine,” he said. “We look forward to an economic recovery in the second half” to help earnings even more.
Besides its freight traffic, Florida East Coast has been working with transportation officials to use its tracks for passenger service, including plans to let Amtrak use the tracks for service between Jacksonville and Miami. The company also is working with officials of the Tri-Rail system that runs from West Palm Beach to Miami to possibly extend that service on Florida East Coast’s tracks to Jupiter.
Anestis said after the meeting that at some point, well off in the future, the Florida East Coast tracks could be used for light-rail commuter service in Jacksonville.
And while Florida East Coast will continue to operate the railroad for the foreseeable future, “that’s not to say it could be more valuable to someone else,” Anestis told shareholders. The company would consider offers to sell the railroad if that would benefit stockholders.
“One never says never,” he said.