Florida East Coast Industries Inc. (FECI) has announced that it is discontinuing its regional long-haul trucking operations through its subsidiary, Florida Express Carriers Inc., (FLX)
and will replace company drivers with third-party contractors to provide the drayage services.
Florida East Coast Railway, L.L.C. (FECR) will now provide existing and future customers with intermodal services via its rail assets along the East Coast of Florida. These include the Hurricane Train, a joint marketing alliance with Norfolk Southern from Atlanta to Jacksonville, and intermodal drayage, serving customers within a 250-mile radius of FECR's terminal operations in Atlanta, Jacksonville and Miami.
Robert W. Anestis, chairman, president and chief executive officer of FECI said, "Over the last four years, FLX has increased its interchange loads with the rail from 14,000 to an estimated 20,000 for 2002. FLX has facilitated the ongoing success of the Hurricane Train and will deliver in excess of 4,000 interchange loads to the train in Atlanta in 2002. However, over the last few years, the long-haul trucking business has incurred losses due to a poor economy, over capacity, higher insurance costs and rate compression. We are confident that the benefits from this new service strategy will result in lower overall operating expenses for our transportation business, while enabling FECR to compete in the higher margin Southeast intermodal market."
"Eliminating the stand-alone regional long-haul trucking operation, retaining the drayage operation, and reorganizing FECR's intermodal department, will provide the railway with a platform to grow our intermodal business in the future while continuing to serve our customers with a highly efficient service," said John D. McPherson, president of FECR.
"FECR will continue its focus on increasing interchange loads through other carriers as South Florida's increasing population continues to require a cost-efficient intermodal solution. FECR's intermodal service eliminates the need for companies to back-haul empty containers and avoids congested roads. Companies using FECR intermodal services can expand their market reach without the expense of tractors and drivers in this market. We are building a brand that allows our customers to market South Florida through FECR," McPherson concluded.
In the second half of 2002, FECI expects to incur exit costs related to FLX's previous operations estimated at $5 million to $5.4 million before taxes, or $0.14 to $0.15 per diluted share. Of that, $4.2 million to $4.6 million is expected to be cash charges related to severance, tractor dispositions and facilities' shutdown. As a result of these actions, FECI will account for its former trucking business segment as a discontinued operation and, going forward, the drayage operation will be reported as part of FECI's Railway business segment.