Florida Rock Industries, Inc.

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Florida Rock Industries, Inc.

155 East 21st Street
Jacksonville, Florida 32206
U.S.A.
Telephone: (904) 355-1781
Fax: (904) 355-0817

Public Company
Incorporated: 1945
Employees: 3,392
Sales: $715.7 million (2000)
Stock Exchanges: New York
Ticker Symbol: FRK
NAIC: 32732 Ready-Mix Concrete Manufacturing; 212321 Construction Sand and Gravel Mining; 327331 Concrete Block and Brick Manufacturing

Florida Rock Industries, Inc. and its subsidiaries make and market ready-mixed concrete; mine, process, and sell sand, crushed-stone, gravel, and other construction aggregates; and produce and sell concrete block, pre-cast and pre-stressed concrete, Portland and masonry cement, calcium products and other building materials. Although the company owns a 50 percent share in a sand and gravel plant in New Brunswick, Canada, it chiefly operates in the southeastern and mideastern United States, primarily in Florida, Georgia, North Carolina, Virginia, Maryland, and Washington, D.C. In Florida, where it is headquartered, Florida Rock has seven crushed-stone plants, nine sand pits, and one industrial sand plant. The company also maintains a plant in Kissimmee, where it manufactures pre-cast lintels and other construction products, and a Brooksville plant that produces calcium products for the animal feed industry. Outside Florida, the company owns and operates six crushed-stone plants in Georgia as well as two sand and gravel pits and two crushed-stone plants in both Virginia and Maryland. At a plant in Wilmington, North Carolina, the company also manufactures pre-stressed concrete components for highway and bridge construction. In addition, the company’s marine division barges materials throughout the Chesapeake Bay and its principal estuaries. Florida Rock’s chief markets include all of Florida (with the exception of the pan handle region) and areas in and around Atlanta, Richmond, Norfolk, Baltimore, and Washington, D.C. Through its joint venture in Canada, the company also markets products in the Caribbean and Argentina. Although it is a public company, about 29 percent of Florida Rock is owned by the Baker family, descendants of Thompson Baker, one of the company’s two founders. It is also a company that enjoys a solid reputation for good management, fiscal conservatism, and stability.

The Lineage of Florida Rock Industries

Although its operations were temporarily suspended during World War II, Florida Rock Industries, Inc. descended from a business started by Thompson Baker in 1929. Baker bought a sandpit formerly owned by his father, who had defaulted on a bank loan and lost the property through repossession. Three years later, in 1932, Thompson and his partner Jim Shands formed Shands & Baker and began producing ready-mixed concrete. While the company survived the depression, it closed down during the war years, when Baker joined the Army and fought in Europe. He returned in 1945, a decorated veteran, and reopened the business. In the postwar boom, he led Shands & Baker into the crushed-stone business and oversaw the company’s rapid growth throughout the 1950s and 1960s, when, almost annually, the business opened a new mine or quarry. What helped Florida Rock grow was the general population explosion in the company’s market areas, especially Florida, which in the postwar years rapidly became a Mecca for both vacationers and retirees. In 1972, the company went public as Florida Rock Industries.

Throughout much of the history of the company, the Baker family remained the chief owners and managers of the business. Thompson Baker’s son Edward joined the business in the 1960s, becoming president in 1969 and CEO Edward L. Baker, the son of Thompson S. Baker and grandson of founder Thompson Baker, became chairman and CEO in 1989, at which time his younger brother, John D. Baker II, was named president. In 1991, Edward Baker’s son Thompson S. Baker II became vice-president. Thompson S. Baker still remained on the board of directors but retired from active management of the company in 1989. In addition to Florida Rock, the Baker family owned a large share in FRP Properties Inc., a Jacksonville, Florida transportation and real estate company. Originally part of Florida Rock Industries, it was spun off in 1986. Ten years later, the family still owned about 36 percent of FRP.

Florida Rock During the Late 1980s and Early 1990s

An ever-expanding business since it was founded in 1929, Florida Rock continued its growth into the early and middle 1980s. Between 1978 and 1986, the Bakers put $210 million of the company’s earnings back into the business, purchasing property, plants, and equipment, providing it with ever-increasing productivity and flexibility. By 1986, its sales had reached $259 million, and it had begun tapping into new markets by buying out competitors. Among other significant acquisitions, in 1987 it purchased Cement Products, a Florida-based company, and in the next year bought Arundel Corp., a manufacturer of construction materials operating in Maryland. Nevertheless, the company suffered from an industry slowdown that accompanied the nation’s recessive economy in the late 80s and early 90s. Between 1990 and 1992, its sales dropped from $390.5 million to $271.8 million, with its net income falling off from $17.1 million to $3.9 million. Importantly, however, the company stayed profitable, even in its nadir year, 1991, when its net income fell to $2.0 million. Albeit slowly, by 1993 it had begun making what would become a steady recovery.

After the recession in the early 1990s, Florida Rock began to regain lost financial ground. 1994 was a particularly good year for the company. Its revenues rose 14.3 percent to $336.5 million, up from $294.4 million the previous year, and its net income increased to $17.2 million, up from $7.8 million. The improved financial picture resulted from the upward spiral in the company’s Florida and Georgia markets, its increased cost efficiency, and its capital investment programs of the previous five years. The climb back to the 1990 sales level continued in 1995, when the company’s revenues rose to $369.0 million and produced a net income of $17.2 million, which virtually matched the net income figure for 1990.

By the mid 1990s, Florida Rock had well-established operations in four eastern seaboard states—Florida, Georgia, Virginia, and, north of the Mason-Dixon Line, Maryland. Altogether, at the end fiscal 1994, it had 79 ready-mixed concrete and 11 concrete block plants in operation, a fleet of 854 ready-mixed concrete and concrete block delivery trucks, and construction aggregate operations spread across the Southeast. In Florida, it was operating seven crushed- stone plants, eight sand plants, and one industrial sand plant. In addition, it was operating five crushed-stone plants in Georgia, one sand and gravel plant and three crushed-stone plants in Maryland, and one sand and gravel plant and two crushed-stone plants in Virginia. It was also operating aggregate distribution terminals in Norfolk and Virginia Beach, which are located in the northern part of Virginia, and in the Baltimore and Eastern Shore areas of Maryland.

The Fortunes of Florida Rock, 1996 and Beyond

Although the company had garnered many industry awards for its environmental stewardship—including four Gold Environmental Eagle Awards given by the National Stone Association—at various times specific groups targeted the company for operating its construction plants and continuing its quarrying and mining activities on land where developers were building new homes. Historically, part of Florida Rock’s problem arose from the fact that Florida’s explosive post-World War II population growth placed settlements closer and closer to quarries and other operational sites that had once been remote. In Dade County, for example, where Florida Rock had quarried limestone since the mid 1950s, developers moved much closer, and new homeowners, with houses built in fairly close proximity to the company’s quarries, eventually began to complain about the blasting done by Florida Rock. There were also other kinds of complaints. For example, in 1997, the Haile Community Association, a neighborhood group, fought the company over the construction of its $80 million cement plant in Newberry, Florida, west of Gainesville. The group challenged the air pollution permits that the state had issued to Florida Rock, and it tried to enlist the support of the company’s competitors.

Other than providing some negative publicity, such challenges did little to impede the expansion of Florida Rock, which continued to grow through both new construction and acquisitions. A particular boon for Florida Rock was the increased construction activity resulting from the preparation for the 1996 Summer Olympics in Atlanta. (It was also in 1996 that John Baker took the reins as Florida Rock’s CEO. The following year, his grandfather, the company’s founder, died at age 91.) In 1998 the company opened a new calcium products facility, which made calcium-based chemicals for use in animal feeds. Florida Rock also opened a crushed-stone plant in Georgia, and it added a sand and gravel plant to its operations in Maryland.

Company Perspectives:

The company’s mission is to be an excellent construction materials company providing long-term growth and a superior return on investment. Through employees committed to continuous improvement, we will provide quality materials and superb service for our customers; operate safe, environmentally responsible facilities that are well maintained and cost effective; and develop mutually beneficial relationships with our suppliers and the communities within which we operate.

In June 1999, the year in which Florida Rock completed construction of a $100 million Portland cement plant near Brooksville, Florida, the company again expanded through two additional acquisitions. First, at a cost of $87 million, it purchased all the outstanding common stock of Harper Bros., Inc., a leading supplier of aggregates in and around its Ft. Myers home base in southwest Florida. At the time of the purchase, Harper Bros, had just doubled the size of its aggregates finishing plant. It was also engaged in aggregate mining and highway and heavy construction. Under the terms of a consent agreement with the Department of Justice permitting the sale, Florida Rock was required to divest its existing Ft. Myers Alico Road quarry lease and plant operation along with Harper Bros.’s Palmdale sand mine lease and plant operation in Glades County, Florida. Following their deal with Harper Bros.’s, Florida Rock’s next purchase was the outstanding common stock of Custom, Ltd., a ready-mixed concrete producing and sand and gravel mining company headquartered in Williamsburg, Virginia. Custom’s operations, all in Virginia, included four ready-mixed concrete plants in Williamsburg, Hampton, Newport News, and Providence, and a sand and gravel mine in Charles City County. Neither party made the terms of the sale public.

In August of 1999, Florida Rock sold the highway and heavy construction assets and operations of Harper Bros., Inc. to Harper Bros. Construction Inc., a subsidiary of Superfos Construction Inc., a Denmark-based company that, in 1999, was itself acquired by Ashland Inc., the petroleum and chemical conglomerate. Then, in December 1999, Florida Rock complied with its consent arrangement with the Department of Justice by selling off its Ft. Myers Alico Road quarry lease and plant operation as well as the Palmdale Sand Mine and plant operation of its Harper Bros., Inc. subsidiary to CSR Rinker Materials Corp., itself a subsidiary of CSR America Inc. (a holding company for CSR Limited, a global construction and building materials company based in Sydney, Australia). Rinker, in business since 1926, touted itself as “Florida’s Number One Building Supplier.” Statewide, the company had operations at over 100 locations and had been one of Florida Rock’s competitors in Florida’s aggregate and ready-mixed cement and concrete trade.

In April 2000, with its investment in a Canadian granite quarry and aggregate distribution operation located on the St. Croix River in Bay side, New Brunswick, Florida Rock ventured beyond the U.S. border for the first time in its history. The closest Canadian Atlantic port to the United States, Port Bay-side is ice-free and open to navigation year round. The operation, in which Florida Rock bought a 50 percent share, started up in 1998. It quarries granite on a site leased from the Province of New Brunswick, with estimated reserves in excess of 100 million short tons, and sells its aggregates on the East Coast and in the Caribbean. In August of the same year, for $30 million in cash, the company also acquired 12 ready-mixed concrete plants, two concrete block plants, and two sand mines from Southern Construction Company, a private firm located in Albany, Georgia. Eleven of the ready-mix plants were located in southwest Georgia and the other in Tallahassee, Florida. The other operations were also located in southwest Georgia. Subsequently, Florida Rock sold off two of the acquired ready-mix plants to third parties and traded one plant in Georgia for a plant in Florida.

Florida Rock has historically maintained a reputation for being a stable, well-managed enterprise that has never lost its forward momentum, despite the fact that it engages in a weather-dependent, cyclical business sensitive to the state of the nation’s economy. No steps it took in the 1990s seemed destined to change that assessment. It remained well positioned to respond to its industry challenges in the first decade of the new century.

Principal Subsidiaries

Arundel Corp.; Cardinal Concrete Co.; Maryland Rock Industries Inc.; Northern Concrete Group; Sadler Materials Corp.; Southern Concrete Construction; S&G Concrete Co.; S&G Prestress Co.; Tidewater Materials Corp.; Virginia Concrete Co.

Principal Competitors

Ashland Inc.; Hanson PLC; “Holderbank” Financiere Glaris Ltd.; Lafarge Corporation; Lehigh Portland Cement Co.; Martin Marietta Materials, Inc.; Southdown, Inc.; Vulcan Materials Company.

Key Dates:

1929:: Thompson Baker enters building materials business.
1932:: Baker and Jim Shands found Shands & Baker.
1941:: Company is temporarily disbanded because of World War II.
1945:: Shands & Baker is re-founded.
1969:: Baker’s son Edward L. Baker becomes company president.
1972:: Edward Baker is named CEO; company goes public.
1973:: Company name is changed to Florida Rock Industries.
1987:: Company acquires Cement Products.
1997:: Founder Thompson Baker dies.
1998:: Florida Stone opens calcium products plant in Florida and crushed-stone plant in Georgia; company buys sand and gravel plant in Maryland.
1999:: Company finishes construction of $100 million cement plant in Florida and acquires Harper Bros, and Custom LTD.