##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-Q

(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended
March 31, 2003


OR

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from

to


Commission File Number
001-08728

Florida East Coast Industries, Inc.

---

(Exact name of Registrant as specified in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Florida                                                        |  | 59-2349968                       
|                                                               |  |                                  
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer
Identification No.)

|                                          |  |           
|----------------------------------------- |  | ----------
|One Malaga Street, St. Augustine, Florida |  | 32084     
|                                          |  |           
|(Address of principal executive offices)  |  | (Zip Code)

Registrants telephone number,
including area code - (904) 829-3421

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 by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). YES (X) NO (  )

Indicate the number of shares outstanding of each of the issuers classes of
common stock as of the latest practicable date.

|                                                                    |  |                                    
|------------------------------------------------------------------- |  | -----------------------------------
|Class                                                               |  | Outstanding at March 31, 2003      
|                                                                    |  |                                    
|Class A Common Stock-no par value
Class B Common Stock-no par value |  | 17,035,511 shares
19,609,216 shares





---



##### 



FLORIDA EAST COAST INDUSTRIES, INC.

|                                                                                              |                                                                                |  |              |       | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ |  | ------------ | ----- | 
|                                                                                              |                                                                                |  | Page Numbers
|                                                                                              |                                                                                |  |             
|PART I                                                                                        |                                                                                |  |              |      
|FINANCIAL INFORMATION                                                                         |                                                                                |  |              |      
|Item 1. Financial Statements                                                                  |                                                                                |  |              |      
|                                                                                              | Consolidated Balance Sheets -
March 31, 2003 and December 31, 2002             |  |              | 2     | 
|                                                                                              | Consolidated Statements of Income -
Quarters Ended March 31, 2003 and 2002     |  |              | 3     | 
|                                                                                              | Consolidated Statements of Cash Flows -
Quarters Ended March 31, 2003 and 2002 |  |              | 4     | 
|                                                                                              | Notes to Consolidated Financial Statements                                     |  |              | 5-12  | 
|Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations |                                                                                |  |              |      
|                                                                                              | Comparison of First Quarter 2003 versus First Quarter 2002                     |  |              | 13-16 | 
|                                                                                              | Changes in Financial Condition, Liquidity and Capital Resources                |  |              | 16-17 | 
|                                                                                              | Other Matters                                                                  |  |              | 17-18 | 
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                |  | 18           |      
|Item 4. Controls and Procedures                                                               |                                                                                |  | 18           |      
|PART II                                                                                       |                                                                                |  |              |      
|OTHER INFORMATION                                                                             |                                                                                |  |              |      
|Item 1. Legal Proceedings                                                                     |                                                                                |  | 19           |      
|Item 5. Other Information                                                                     |                                                                                |  | 19-20        |      
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                |  | 20           |      

1



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##### 



FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS

(dollars in thousands)


|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |         |         | 
|---------------------------------------------- | ------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ----------- | ------- | ----------- | --------- | ------- | ------- | 
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           | March 31    |         | December 31
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           | 2003        |         | 2002       
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |            
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           | (unaudited) |         |             |           |        
|Assets                                         |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |        
|Current Assets:                                |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |        
|                                               | Cash and cash equivalents                               |                                                                                                                                                                                                                                                                                                                                                                                         |           | 26,849      |         |             |           | 83,872  |        
|                                               | Accounts receivable (net)                               |                                                                                                                                                                                                                                                                                                                                                                                         |           | 23,108      |         |             |           | 20,538  |        
|                                               | Income tax receivable                                   |                                                                                                                                                                                                                                                                                                                                                                                         |           | 74,572      |         |             |           | 74,572  |        
|                                               | Materials and supplies                                  |                                                                                                                                                                                                                                                                                                                                                                                         |           | 3,850       |         |             |           | 1,710   |        
|                                               | Assets related to discontinued operations (Note 3)      |                                                                                                                                                                                                                                                                                                                                                                                         |           | 1,310       |         |             |           | 2,224   |        
|                                               | Land held for sale (Note 10)                            |                                                                                                                                                                                                                                                                                                                                                                                         |           | 3,884       |         |             |           |        |        
|                                               | Deferred income taxes                                   |                                                                                                                                                                                                                                                                                                                                                                                         |           | 15,400      |         |             |           | 15,400  |        
|                                               | Other current assets                                    |                                                                                                                                                                                                                                                                                                                                                                                         |           | 7,669       |         |             |           | 6,760   |        
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |         |        
|                                               |                                                         | Total current assets                                                                                                                                                                                                                                                                                                                                                                    |           |             | 156,642 |             |           |         | 205,076 | 
|Properties, Less Accumulated Depreciation      |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         | 815,948   |             |         |             | 795,650   |        
|Other Assets and Deferred Charges              |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         | 44,879    |             |         |             | 50,510    |        
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |         |        
|Total Assets                                   |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         | 1,017,469 |             |         |             | 1,051,236 |        
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |         |        
|Liabilities and Shareholders Equity           |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |        
|Current Liabilities:                           |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |        
|                                               | Accounts payable and accrued expenses                   |                                                                                                                                                                                                                                                                                                                                                                                         |           | 24,730      |         |             |           | 30,901  |        
|                                               | Short-term debt (Note 8)                                |                                                                                                                                                                                                                                                                                                                                                                                         |           | 2,689       |         |             |           | 2,641   |        
|                                               | Accrued casualty and other liabilities                  |                                                                                                                                                                                                                                                                                                                                                                                         |           | 2,135       |         |             |           | 2,047   |        
|                                               | Liabilities related to discontinued operations (Note 3) |                                                                                                                                                                                                                                                                                                                                                                                         |           | 1,847       |         |             |           | 2,464   |        
|                                               | Other accrued liabilities                               |                                                                                                                                                                                                                                                                                                                                                                                         |           | 18,621      |         |             |           | 12,343  |        
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |         |        
|                                               |                                                         | Total current liabilities                                                                                                                                                                                                                                                                                                                                                               |           |             | 50,022  |             |           |         | 50,396  | 
|Deferred Income Taxes                          |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         | 126,577   |             |         |             | 122,103   |        
|Long-Term Debt, net of current portion(Note 8) |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         | 249,452   |             |         |             | 294,143   |        
|Accrued Casualty and Other Liabilities         |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         | 10,799    |             |         |             | 11,278    |        
|Shareholders Equity:                          |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |        
|                                               | Common Stock:                                           |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |         |        
|                                               |                                                         | Class A common stock; no par value; 50,000,000 shares authorized; 17,834,595
shares issued and 17,035,511 shares outstanding at March 31, 2003, and
17,827,299 shares issued and 17,028,215 shares outstanding at December 31, 2002
Class B common stock; no par value; 100,000,000 shares authorized; 19,609,216
shares issued and outstanding at March 31, 2003 and December 31, 2002 |           |             | 69,510  |             |           |         | 68,888  | 
|                                               | Retained earnings                                       |                                                                                                                                                                                                                                                                                                                                                                                         |           | 522,938     |         |             |           | 516,937 |        
|                                               | Restricted stock deferred compensation                  |                                                                                                                                                                                                                                                                                                                                                                                         |           | (2,474      | )       |             |           | (3,154  | )      
|                                               | Treasury stock at cost (799,084 shares)                 |                                                                                                                                                                                                                                                                                                                                                                                         |           | (9,355      | )       |             |           | (9,355  | )      
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |         |        
|                                               |                                                         | Total shareholders equity                                                                                                                                                                                                                                                                                                                                                              |           |             | 580,619 |             |           |         | 573,316 | 
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |         |        
|Total Liabilities and Shareholders Equity     |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         | 1,017,469 |             |         |             | 1,051,236 |        
|                                               |                                                         |                                                                                                                                                                                                                                                                                                                                                                                         |           |             |         |             |           |         |        

(Prior years results have been reclassified to conform to current years
presentation.)

See accompanying notes to unaudited condensed consolidated financial
statements.

2



---



##### 



FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share amounts)
(unaudited)


|                                                                       |  |                         |            |      |  |  |            |  
|---------------------------------------------------------------------- |  | ----------------------- | ---------- | ---- |  |  | ---------- | -
|                                                                       |  | Quarters Ended March 31
|                                                                       |  |                        
|                                                                       |  | 2003                    |            | 2002
|                                                                       |  |                         |            |     
|Operating revenues                                                     |  |                         | 76,265     |      |  |  | 59,968     |  
|Operating expenses                                                     |  |                         | (63,018    | )    |  |  | (47,837    | )
|                                                                       |  |                         |            |      |  |  |            |  
|Operating profit                                                       |  |                         | 13,247     |      |  |  | 12,131     |  
|Interest income                                                        |  |                         | 157        |      |  |  | 74         |  
|Other income (Note 7)                                                  |  |                         | 2,251      |      |  |  | 3,841      |  
|Interest expense                                                       |  |                         | (4,297     | )    |  |  | (4,791     | )
|                                                                       |  |                         |            |      |  |  |            |  
|                                                                       |  |                         | (1,889     | )    |  |  | (876       | )
|Income before income taxes                                             |  |                         | 11,358     |      |  |  | 11,255     |  
|Provision for income taxes                                             |  |                         | (4,373     | )    |  |  | (4,333     | )
|                                                                       |  |                         |            |      |  |  |            |  
|Income from continuing operations                                      |  |                         | 6,985      |      |  |  | 6,922      |  
|DISCONTINUED OPERATIONS(Note 3)                                        |  |                         |            |      |  |  |            |  
|Income (loss) from operation of discontinued operations (net of taxes) |  |                         | 119        |      |  |  | (7,338     | )
|Loss on disposition of discontinued operations (net of taxes)          |  |                         | (187       | )    |  |  |           |  
|                                                                       |  |                         |            |      |  |  |            |  
|Loss from discontinued operations                                      |  |                         | (68        | )    |  |  | (7,338     | )
|Net income (loss)                                                      |  |                         | 6,917      |      |  |  | (416       | )
|                                                                       |  |                         |            |      |  |  |            |  
|EARNINGS PER SHARE                                                     |  |                         |            |      |  |  |            |  
|Income from continuing operations - basic and diluted                  |  |                         | 0.19       |      |  |  | 0.19       |  
|Loss
from operation of discontinued operations  basic and diluted     |  |                         |           |      |  |  | (0.20      | )
|Loss on disposition of discontinued operations - basic and diluted     |  |                         |           |      |  |  |           |  
|                                                                       |  |                         |            |      |  |  |            |  
|Net income (loss) - basic and diluted                                  |  |                         | 0.19       |      |  |  | (0.01      | )
|Average shares outstanding  basic                                     |  |                         | 36,487,969 |      |  |  | 36,439,329 |  
|Average shares outstanding  diluted                                   |  |                         | 36,696,988 |      |  |  | 36,588,932 |  

(Prior years results have been reclassified to conform to current years
presentation, including discontinued operations.)

See accompanying notes to unaudited condensed consolidated financial
statements.

3



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##### 



FLORIDA EAST COAST INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)
(unaudited)


|                                                  |                                                                                |                                                   |         |                         |        |      |         |         |        |  
|------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------- | ------- | ----------------------- | ------ | ---- | ------- | ------- | ------ | -
|                                                  |                                                                                |                                                   |         | Quarters Ended March 31
|                                                  |                                                                                |                                                   |         |                        
|                                                  |                                                                                |                                                   |         | 2003                    |        | 2002
|                                                  |                                                                                |                                                   |         |                         |        |     
|Cash Flows from Operating Activities:             |                                                                                |                                                   |         |                         |        |      |         |        
|                                                  | Net income (loss)                                                              |                                                   |         | 6,917                   |        |      |         | (416    | )     
|                                                  | Adjustments to reconcile net income to cash generated by operating activities: |                                                   |         |                         |        |      |         |         |       
|                                                  |                                                                                | Depreciation and amortization                     |         |                         | 11,860 |      |         |         | 16,410 |  
|                                                  |                                                                                | Gain on sales and other disposition of properties |         |                         | (6,264 | )    |         |         | (1,973 | )
|                                                  |                                                                                | Other                                             |         |                         | 681    |      |         |         | 138    |  
|                                                  |                                                                                | Deferred taxes                                    |         |                         | 4,474  |      |         |         | (589   | )
|                                                  |                                                                                |                                                   |         |                         |        |      |         |         |       
|                                                  |                                                                                |                                                   | 17,668  |                         |        |      | 13,570  |        
|Changes in operating assets and liabilities:      |                                                                                |                                                   |         |                         |        |      |         |        
|                                                  | Accounts receivable                                                            |                                                   |         | (1,758                  | )      |      |         | (1,034  | )     
|                                                  | Other current assets                                                           |                                                   |         | (3,571                  | )      |      |         | (628    | )     
|                                                  | Other assets and deferred charges                                              |                                                   |         | (3,147                  | )      |      |         | 1,787   |       
|                                                  | Accounts payable                                                               |                                                   |         | (6,695                  | )      |      |         | (12,463 | )     
|                                                  | Income taxes receivable/payable                                                |                                                   |         |                        |        |      |         | 2,542   |       
|                                                  | Other current liabilities                                                      |                                                   |         | 6,222                   |        |      |         | 3,688   |       
|                                                  | Accrued casualty and other long-term liabilities                               |                                                   |         | (357                    | )      |      |         | (1,556  | )     
|                                                  |                                                                                |                                                   |         |                         |        |      |         |         |       
|                                                  |                                                                                |                                                   | (9,306  | )                       |        |      | (7,664  | )      
|Net cash generated by operating activities        |                                                                                |                                                   | 8,362   |                         |        |      | 5,906   |        
|Cash Flows from Investing Activities:             |                                                                                |                                                   |         |                         |        |      |         |        
|                                                  | Purchases of properties                                                        |                                                   |         | (35,302                 | )      |      |         | (14,101 | )     
|                                                  | Proceeds from disposition of assets                                            |                                                   |         | 14,897                  |        |      |         | 3,116   |       
|                                                  |                                                                                |                                                   |         |                         |        |      |         |         |       
|Net cash used in investing activities             |                                                                                |                                                   | (20,405 | )                       |        |      | (10,985 | )      
|Cash Flows from Financing Activities:             |                                                                                |                                                   |         |                         |        |      |         |        
|                                                  | Proceeds from exercise of options                                              |                                                   |         | 640                     |        |      |         |        |       
|                                                  | Purchase of common stock                                                       |                                                   |         | (61                     | )      |      |         | (46     | )     
|                                                  | Payments of mortgage debt                                                      |                                                   |         | (643                    | )      |      |         | (598    | )     
|                                                  | Net payments of line of credit                                                 |                                                   |         | (44,000                 | )      |      |         | (5,000  | )     
|                                                  | Payment of dividends                                                           |                                                   |         | (916                    | )      |      |         | (913    | )     
|                                                  |                                                                                |                                                   |         |                         |        |      |         |         |       
|Net cash used in financing activities             |                                                                                |                                                   | (44,980 | )                       |        |      | (6,557  | )      
|Net Decrease in Cash and Cash Equivalents         |                                                                                |                                                   | (57,023 | )                       |        |      | (11,636 | )      
|Cash and Cash Equivalents at Beginning of Period  |                                                                                |                                                   | 83,872  |                         |        |      | 14,089  |        
|                                                  |                                                                                |                                                   |         |                         |        |      |         |         |       
|Cash and Cash Equivalents at End of Period        |                                                                                |                                                   | 26,849  |                         |        |      | 2,453   |        
|                                                  |                                                                                |                                                   |         |                         |        |      |         |         |       
|Supplemental Disclosure of Cash Flow Information: |                                                                                |                                                   |         |                         |        |      |         |        
|                                                  | Cash received for income taxes                                                 |                                                   |         |                        |        |      |         | (2,542  | )     
|                                                  |                                                                                |                                                   |         |                         |        |      |         |         |       
|                                                  | Cash paid for interest                                                         |                                                   |         | 4,564                   |        |      |         | 4,690   |       
|                                                  |                                                                                |                                                   |         |                         |        |      |         |         |       

See accompanying notes to unaudited condensed consolidated financial
statements.

4



---



##### 



FLORIDA EAST COAST INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1.General

In the opinion of management, the accompanying unaudited consolidated financial
statements reflect all accruals and adjustments considered necessary to present
fairly the Companys financial position as of March 31, 2003 and December 31,
2002, and the results of operations and cash flows for the three-month periods
ended March 31, 2003 and 2002. Results for interim periods are not necessarily
indicative of the results to be expected for the year. These interim financial
statements should be read in conjunction with the Companys Annual Report on
Form 10-K and Form 10-K/A for the year ended December 31, 2002 filed with the
Securities and Exchange Commission.

Certain prior year amounts have been reclassified to conform to the current
years presentation.

Note 2.Recapitalization

On February 27, 2003, FECIs Board of Directors approved the submission of a
proposal to shareholders in the definitive Proxy Statement for the Companys
2003 Annual Meeting of Shareholders for the elimination of its dual-class
structure by reclassifying the Companys Class A common stock and Class B
common stock into a new single class of common stock on a one-for-one basis.
The reclassification proposal is subject to the approval of a majority of the
outstanding shares of each of the Class A common stock and the Class B common
stock voting as separate classes and will be presented at the upcoming Annual
Meeting of Shareholders scheduled to be held on May 28, 2003. The
reclassification is subject to certain other conditions, including receipt of a
private letter ruling from the Internal Revenue Service that the
reclassification will not affect the tax-free distribution by The St. Joe
Company (NYSE: JOE) in October 2000 of the Class B shares to its shareholders.
The reclassification is intended to simplify FECIs capital structure, increase
the liquidity and trading efficiencies of the common stock and reduce the
administrative costs associated with the dual-class structure.

Note 3.Discontinued Operations

Trucking

During the third quarter of 2002, the Company adopted a plan to discontinue and
ceased operations of its regional long-haul trucking operations. The Company
largely completed its operational shut down and disposition activities for the
trucking operation during the fourth quarter of 2002. Based on the latest
information available, which could be subject to change during the wind down,
management believes these assets and liabilities to be stated at their net
realizable value.

Accordingly, the Company reported the results of the trucking operations and
the estimated disposition loss as discontinued operations under the provisions
of SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
and all periods have been restated.

|                                                    |                                                            |      |          |        |             |  |        |        |  
|--------------------------------------------------- | ---------------------------------------------------------- | ---- | -------- | ------ | ----------- |  | ------ | ------ | -
|                                                    |                                                            |      | March 31 |        | December 31
|(dollars in thousands)                              |                                                            | 2003 |          | 2002  
|                                                    |                                                            |      |          |        |            
|Net Assets (Liabilities) of Discontinued Operations |                                                            |      |          |        |             |  |        |       
|Assets                                              |                                                            |      |          |        |             |  |        |       
|                                                    | Accounts receivable (net)                                  |      |          | 13     |             |  |        | 825    |  
|                                                    | Other current assets                                       |      |          | 1,189  |             |  |        | 1,253  |  
|                                                    | Properties, less accumulated depreciation and amortization |      |          | 72     |             |  |        | 101    |  
|                                                    | Other assets and deferred charges                          |      |          | 36     |             |  |        | 45     |  
|                                                    |                                                            |      |          |        |             |  |        |        |  
|Total Assets                                        |                                                            |      | 1,310    |        |             |  | 2,224  |       
|Liabilities                                         |                                                            |      |          |        |             |  |        |       
|                                                    | Accounts payable                                           |      |          | (548   | )           |  |        | (1,114 | )
|                                                    | Other liabilities                                          |      |          | (1,299 | )           |  |        | (1,350 | )
|                                                    |                                                            |      |          |        |             |  |        |        |  
|Total Liabilities                                   |                                                            |      | (1,847   | )      |             |  | (2,464 | )     
|                                                    |                                                            |      |          |        |             |  |        |        |  
|Net Liabilities of Discontinued Operations          |                                                            |      | (537     | )      |             |  | (240   | )     
|                                                    |                                                            |      |          |        |             |  |        |        |  

5



---



##### 



|                                                                   |  |                |      |      |  |  |        |  
|------------------------------------------------------------------ |  | -------------- | ---- | ---- |  |  | ------ | -
|                                                                   |  | Three Months  
|                                                                   |  | Ended March 31
|                                                                   |  |               
|(dollars in thousands)                                             |  | 2003           |      | 2002
|                                                                   |  |                |      |     
|Summary of Operating Results of Discontinued Operations            |  |                |      |      |  |  |        |  
|Trucking revenues                                                  |  |                |     |      |  |  | 9,118  |  
|Trucking expenses                                                  |  |                | (259 | )    |  |  | 10,875 |  
|                                                                   |  |                |      |      |  |  |        |  
|Income (loss) before income taxes                                  |  |                | 259  |      |  |  | (1,757 | )
|Income taxes                                                       |  |                | (100 | )    |  |  | 676    |  
|                                                                   |  |                |      |      |  |  |        |  
|Income (loss) from discontinued operations                         |  |                | 159  |      |  |  | (1,081 | )
|                                                                   |  |                |      |      |  |  |        |  
|Loss on disposition of discontinued operations, net of tax of $118 |  |                | (187 | )    |  |  |       |  
|                                                                   |  |                |      |      |  |  |        |  

During the third quarter of 2002, the Company adopted a plan to discontinue its
trucking operations. Certain liabilities were accrued related to this exit
plan. A roll-forward of the liabilities through March 31, 2003 is as follows:

|                          |  |           |      |                   |  |       |     |        |  |  |     |   |  |  |       |  
|------------------------- |  | --------- | ---- | ----------------- |  | ----- | --- | ------ |  |  | --- | - |  |  | ----- | -
|                          |  | Employee  |      |                   |  |       |     |        |  |  |     |   |  | 
|                          |  | Severance |      | Tractor/Trailer   |  |       |     |        |  |  |     |  
|(000's)                   |  | Costs     |      | Disposition Costs |  | Other |     | Totals
|                          |  |           |      |                   |  |       |     |       
|Accruals @ 12/31/02       |  |           | 694  |                   |  |       |    |        |  |  | 461 |   |  |  | 1,155 |  
|Additions & Adjustments** |  |           |     |                   |  |       | 351 |        |  |  | (46 | ) |  |  | 305   |  
|Utilization               |  |           | (150 | )                 |  |       |    |        |  |  | (25 | ) |  |  | (175  | )
|                          |  |           |      |                   |  |       |     |        |  |  |     |   |  |  |       |  
|Ending Balance @ 3/31/03  |  |           | 544  |                   |  |       | 351 |        |  |  | 390 |   |  |  | 1,285 |  
|                          |  |           |      |                   |  |       |     |        |  |  |     |   |  |  |       |  

** -  Any additions and adjustments to the liabilities that resulted from
changes in estimates or final determinations are accounted for as gain or loss
on disposition of discontinued operations on the consolidated financial
statements.

Real Estate

At December 31, 2002, Flagler owned a 101,000-rentable sq. ft. commercial
office building located at its Beacon Station business park that was classified
as held for sale. In accordance with SFAS 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, operations of this building were classified
as discontinued operations. However, during the first quarter of 2003, the
Company terminated negotiations with the prospective buyer of the building and
the building is no longer being marketed for sale.

Accordingly, this building is no longer classified as a discontinued operation
and it has been reclassified into continuing operations. All prior periods have
been reclassified to conform to the current presentation. Revenues of $0.3
million and $0.4 million for the quarters ended March 31, 2003 and March 31,
2002, respectively, and expenses of $0.2 million and $0.2 million for the
quarters ended March 31, 2003 and March 31, 2002, respectively, have been
reclassified to continuing operations. This building is currently stated at its
original net book value, which is considered to be at or below market value.

During the third quarter 2002, Flagler sold an industrial building totaling
approximately 300,000 sq. ft. located in its Beacon Station business park. This
disposed property is accounted for as a discontinued operation under the
provisions of SFAS 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, and all periods presented have been restated for the
discontinued operation of this property.

|                                                        |  |                |   |      |  |  |      |  
|------------------------------------------------------- |  | -------------- | - | ---- |  |  | ---- | -
|                                                        |  | Three Months  
|                                                        |  | Ended March 31
|                                                        |  |               
|(dollars in thousands)                                  |  | 2003           |   | 2002
|                                                        |  |                |   |     
|Summary of Operating Results of Discontinued Operations |  |                |   |      |  |  |      |  
|Flagler realty rental revenues                          |  |                |  |      |  |  | 518  |  
|Flagler realty rental expenses                          |  |                |  |      |  |  | 214  |  
|                                                        |  |                |   |      |  |  |      |  
|Income before income taxes                              |  |                |  |      |  |  | 304  |  
|Income taxes                                            |  |                |  |      |  |  | (117 | )
|                                                        |  |                |   |      |  |  |      |  
|Income from discontinued operations                     |  |                |  |      |  |  | 187  |  
|                                                        |  |                |   |      |  |  |      |  

Telecommunications

FECI completed the sale of its wholly owned telecommunications subsidiary,
EPIK, to Odyssey Telecorp,

6



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Inc. (Odyssey), a privately held holding company specializing in telecom
network assets during the fourth quarter of 2002. In accordance with SFAS 144,
EPIKs results from operations and the estimated disposition gain have been
reported as discontinued operations for all years presented.

|                                                        |  |                |     |      |  |  |         |  
|------------------------------------------------------- |  | -------------- | --- | ---- |  |  | ------- | -
|                                                        |  | Three Months  
|                                                        |  | Ended March 31
|                                                        |  |               
|(dollars in thousands)                                  |  | 2003           |     | 2002
|                                                        |  |                |     |     
|Summary of Operating Results of Discontinued Operations |  |                |     |     
|EPIK revenues                                           |  |                |    |      |  |  | 5,441   |  
|EPIK expenses                                           |  |                | 65  |      |  |  | 15,925  |  
|                                                        |  |                |     |      |  |  |         |  
|Operating loss                                          |  |                | (65 | )    |  |  | (10,484 | )
|Other income                                            |  |                |    |      |  |  | 6       |  
|                                                        |  |                |     |      |  |  |         |  
|Loss before income taxes                                |  |                | (65 | )    |  |  | (10,478 | )
|Income taxes                                            |  |                | 25  |      |  |  | 4,034   |  
|                                                        |  |                |     |      |  |  |         |  
|Loss from discontinued operations                       |  |                | (40 | )    |  |  | (6,444  | )
|                                                        |  |                |     |      |  |  |         |  

At the time of EPIKs sale, the Company accrued certain liabilities (primarily
employee severance) related to the sale. A roll-forward of the liabilities through March 31, 2003
is as follows:

|                          |  |           |        |       |  |        |      |   |  |  |        |  
|------------------------- |  | --------- | ------ | ----- |  | ------ | ---- | - |  |  | ------ | -
|                          |  | Employee  |        |       |  |        |      |   |  | 
|                          |  | Severance |        |       |  |        |      |   |  | 
|(000s)                   |  | Costs     |        | Other |  | Totals
|                          |  |           |        |       |  |       
|Accruals @ 12/31/02       |  |           | 2,279  |       |  |        | 531  |   |  |  | 2,810  |  
|Additions & Adjustments** |  |           |       |       |  |        |     |   |  |  |       |  
|Utilization               |  |           | (1,295 | )     |  |        | (145 | ) |  |  | (1,440 | )
|                          |  |           |        |       |  |        |      |   |  |  |        |  
|Ending Balance @ 3/31/03  |  |           | 984    |       |  |        | 386  |   |  |  | 1,370  |  
|                          |  |           |        |       |  |        |      |   |  |  |        |  

** - Any additions and adjustments to the liabilities that resulted from
changes in estimates or final determinations are accounted for as gain or loss
on disposition of discontinued operations on the consolidated financial
statements

Also, FECI is a guarantor on certain leases (primarily office space) and could
be contingently liable if EPIK were to default on certain lease obligations.
Estimates for these guarantees were approximately $2.5 million
at the time of the sale. These amounts
could be subject to change in subsequent periods.

Note 4.  Commitments and Contingencies

The Company is the defendant and plaintiff in various lawsuits resulting from
its operations. In the opinion of management, appropriate provision has been
made in the financial statements for the estimated liability that may result
from disposition of such matters. The Company maintains comprehensive liability
insurance for bodily injury and property claims, but is self-insured or
maintains a significant self-insured retention for these exposures,
particularly at Florida East Coast Railway, L.L.C. (FECR or Railway). These
lawsuits are related to alleged bodily injuries sustained by Railway employees
or third parties, employment related matters such as alleged wrongful
termination and commercial or contract disputes.

The Company is subject to proceedings and consent decrees arising out of its
historic disposal of fuel and oil used in the transportation business. It is
the Companys policy to accrue environmental cleanup costs
when it is probable that a liability has been incurred and an amount can be
reasonably estimated. As assessments and cleanups proceed, these accruals are
reviewed and adjusted.

The Company is participating, together with several other potentially
responsible parties (PRPs), in the remediation of a site in Jacksonville,
Florida, pursuant to an agreement with the United States Environmental
Protection Agency (USEPA). The site previously accepted waste oil from many
businesses. The Company has accrued $250,000, which is its estimated share of
the total estimated cleanup costs for the site. The cleanup is expected to take
approximately five years.
Based upon managements evaluation of the PRPs which include the City of
Jacksonville, CSX Transportation, Inc. and the federal government, the Company
does not expect to incur additional material amounts, even though the Company
may have joint and several liability. It is possible that the remediation
costs could be higher than anticipated, but the Company is not aware of any
facts or circumstances which indicate that the costs are expected to be
materially higher than currently anticipated.

FECR is investigating sites where contaminants from its historic railroad
operations may have migrated off-site through the movement of groundwater or
contaminated soil. FECR, if required as a result of the

7



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investigation, will
develop an appropriate plan of remediation, with possible alternatives
including natural attenuation and groundwater pumping and treatment. Historic
railroad operations at the Companys main
rail facilities have resulted in soil and groundwater impacts. In consultation
with the Florida Department of Environmental Protection (FDEP), the Company
operates and maintains groundwater treatment systems at its primary facilities.

FECR is one of several PRPs alleged to have contributed to the environmental
contamination at and near the Miami International Airport. The allegations are
contained in a lawsuit filed by Miami-Dade County. The Company does not
currently possess sufficient information to reasonably estimate the amount of
remediation liability, if any, it may have in regard to this matter. While the
ultimate results of the claim against FECR cannot be predicted with certainty,
based on information presently available, management does not expect that
resolution of this matter will have a material adverse effect on the Companys
financial position, liquidity or results of operation.

The Company monitors a small number of sites leased to others, or acquired by
the Company or its subsidiaries. Based on managements ongoing review and
monitoring of the sites, and the ability to seek contribution or
indemnification from the PRPs, the Company does not expect to incur material
additional costs, if any.

It is difficult to quantify future environmental costs as many issues relate to
actions by third parties or changes in environmental regulations. However,
based on information presently available, management
believes that the ultimate disposition of currently known matters will not have
a material effect on the financial position, liquidity or results of operations
of the Company.

Note 5.  Earnings Per Share

The diluted weighted-average number of shares includes the net shares that
would be issued upon the exercise of in-the-money stock options using the
treasury stock method. Applying the treasury stock method, the in-the-money
stock options resulted in the dilution of 209,019 shares and 149,603 shares at
March 31, 2003 and 2002, respectively.
Out-of-the-money shares were 2,237,480
shares and 2,138,494 shares at March 31, 2003 and 2002, respectively.

Note 6.  Dividends

On February 27, 2003, the Company declared a dividend of $.025 (2 1/2 cents)
per share on its outstanding common stock, payable March 27, 2003, to
shareholders of record March 13, 2003.

Note 7.Other Income

|                                 |  |                |       |      |  |  |       |  
|-------------------------------- |  | -------------- | ----- | ---- |  |  | ----- | -
|                                 |  | Three Months  
|                                 |  | Ended March 31
|                                 |  |               
|(dollars in thousands)           |  | 2003           |       | 2002
|                                 |  |                |       |     
|Pipe & wire crossings/signboards |  |                | 761   |      |  |  | 2,451 |  
|Fiber lease income               |  |                | 1,645 |      |  |  | 1,534 |  
|Other (net)                      |  |                | (155  | )    |  |  | (144  | )
|                                 |  |                |       |      |  |  |       |  
|                                 |  |                | 2,251 |      |  |  | 3,841 |  
|                                 |  |                |       |      |  |  |       |  

FECR generates income from the grant of licenses and leases to use railroad
property and rights-of-way for outdoor advertising, parking lots and lateral
crossings of wires and pipes by municipalities and utility and
telecommunications companies. This income is recorded in other income as pipe
and wire crossings/signboards as it is earned. FECR generates other income
from leases to telecommunications companies for the installation of fiber optic
and other facilities on the railroad right-of-way. This income is recorded in
other income as fiber lease income as it is earned.

Note 8.  Debt

The Company maintains a $200 million revolving credit agreement with certain
financial institutions, for which the Company presently pays (quarterly)
commitment fees, as applicable under the agreement, at a range of 20-37.5 basis
points. The borrowings under the credit agreement had been secured by the
capital securities of FECR and FLX. During the quarter, these securities were
released to the Company as a result of its meeting certain pre-determined
financial covenant thresholds over the prior two quarters and need not be
re-pledged, provided the Company continues to meet certain financial covenant
tests in the

8



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##### 



future. The Companys revolving credit agreement contains various
covenants which, among other things, require the maintenance of certain
financial ratios related to fixed charge coverage and maximum leverage;
establish minimum levels of net worth; establish limitations on indebtedness,
certain types of payments, including dividends, liens and investments; and
limit the use of proceeds of asset sales. Some of the above covenants provide
specific exclusion of certain financing and investing activities at Flagler.
Borrowings under the credit agreement bear interest at variable rates linked to
the LIBOR Index. Interest on borrowings is due and payable on the rollover
date for each draw. Outstanding borrowings can be paid off at any time and
become due at the conclusion of the facilitys term on March 31, 2005. At March
31, 2003, there were $9 million of direct borrowings outstanding under the
facility at an average interest rate of approximately 2.09%. The fair market
value of the Companys revolving credit agreement is estimated based on current
rates available to the Company for debt of the same remaining maturities.

During 2001, Flagler issued $247 million of mortgage notes with $160 million
due July 1, 2011 and $87 million due October 1, 2008. At March 31, 2003, $243.1
million was outstanding on these notes. These notes are collateralized by
certain buildings and properties of Flagler. Blended interest and principal
repayment on the notes is payable monthly based on a fixed 7.39% and 6.95%
weighted-average interest
rate, respectively, for each note offering, on the outstanding principal amount
of the mortgage notes and assuming a thirty-year amortization period. The net
proceeds in 2001 were used to repay existing indebtedness under the Companys
revolving credit facility. At March 31, 2003, the Company
considers the estimated fair market value of the mortgage notes to be
$269.3 million.

Note 9.  Stock-Based Compensation

The Company applies the intrinsic value-based method of accounting prescribed
by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB Opinion No. 25), and related interpretations in accounting for
stock options. As such, compensation expenses would be recorded on the date of
the grant only if the current market price of the underlying stock exceeded the
exercise price. Compensation expenses for grants of restricted stock are
recognized over the applicable vesting period.

The following table illustrates the effect on net income and earnings per share
as if the Company had applied the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation, to stock-based
employee compensation:

|                                                                                                                                                             |                                  |      |                |      |  |  |        |       |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------- | ---- | -------------- | ---- |  |  | ------ | ----- | -
|                                                                                                                                                             |                                  |      | Three Months  
|                                                                                                                                                             |                                  |      | Ended March 31
|                                                                                                                                                             |                                  |      |               
|(dollars in thousands, except per share amounts)                                                                                                             |                                  | 2003 |                | 2002
|                                                                                                                                                             |                                  |      |                |      | 
|Net income (loss) - as reported                                                                                                                              |                                  |      | 6,917          |      |  |  | (416   | )    
|Deduct: Total stock-based employee compensation expense
determined under the fair value based method for all
stock option awards,
net of related tax effects |                                  |      | (558           | )    |  |  | (1,102 | )    
|                                                                                                                                                             |                                  |      |                |      |  |  |        |      
|Pro forma net income (loss)                                                                                                                                  |                                  |      | 6,359          |      |  |  | (1,518 | )    
|                                                                                                                                                             |                                  |      |                |      |  |  |        |      
|Earnings per share:                                                                                                                                          |                                  |      |                |      |  |  |        |      
|                                                                                                                                                             | Earnings per share  as reported |      |                | 0.19 |  |  |        | (0.01 | )
|                                                                                                                                                             | Earnings per share  pro forma   |      |                | 0.17 |  |  |        | (0.04 | )
|                                                                                                                                                             | Diluted  as reported            |      |                | 0.19 |  |  |        | (0.01 | )
|                                                                                                                                                             | Diluted  pro forma              |      |                | 0.17 |  |  |        | (0.04 | )

Note 10.  Realty Land Sales and Associated Cost

In accordance with Statement of Financial Accounting Standard No. 66,
Accounting for Sale of Real Estate, revenue for realty land sales is
recognized upon the closing of sales contracts and when collection of the sales
proceeds is assured. During the current period, all sales proceeds were
received in cash at closing.

The book basis of pending land sales is classified as land held for sale in
the Consolidated Balance Sheets when a sale is considered probable and expected
to close within one year (i.e., a sales contract is executed and significant
non-refundable monies are provided by the buyer.) Not all land sales,
especially smaller parcels, will contain the criteria described above.

9



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The Company capitalizes all infrastructure costs (including costs of
infrastructure assets deeded to governmental authorities) into the basis of the
commercial real estate parks benefiting from such infrastructure and allocates
these costs to the individual parcels within parks on a relative fair value
basis as required by Statement of Financial Accounting Standard No. 67,
Accounting for Costs and Initial Rental Operations of Real Estate Projects.

Note 11.  Business Combination

On January 24, 2002, the Company acquired four commercial buildings for $23.3
million, three of which were owned 50% in joint ventures with a third party.
The total purchase price has been allocated to the acquired land, building,
identifiable intangibles and liabilities assumed based on their estimated fair
values at the date of acquisition.

Note 12.  Segment Information

The Company follows Statement of Financial Accounting Standards No. 131,
Disclosure about Segments of an Enterprise and Related Information (SFAS
131). Under the provisions of SFAS 131, the Company has two reportable
operating segments, both within the same geographic area. These are the
railway and realty segments.

The railway segment provides rail freight transportation along the east coast
of Florida between Jacksonville and Miami.

The realty segment is engaged in the development, leasing, management,
operation and selected sale of commercial and industrial property. The
Companys real estate subsidiary, Flagler Development Company, had investments
of $18.3 million and $26.3 million at March 31,
2003 and December 31, 2002, respectively, in 50%-owned joint ventures, the
business of which is the development and leasing of commercial real
estate. Equity income recognized from these joint ventures was $0.3 million and
$0.6 million for the three months ended March 31, 2003 and 2002, respectively,
and was included in Flaglers realty rental and services revenues.

FECR generates other income from leases to telecommunications companies for the
installation of fiber optic and other facilities on the railroad right-of-way.
In addition, FECR generates revenues from the grant of licenses and leases to
use railroad property and rights-of-way for outdoor advertising, parking lots
and lateral crossings of wires and pipes by municipalities and utility and
telecommunications companies. These miscellaneous rents are included in other
income.

Also, FECI and FECR generate revenues and expenses from the rental, leasing,
and sale of buildings and properties that are ancillary to the railroads
operations. These revenues and expenses are included in the realty segment.

The Companys reportable segments are strategic business units that offer
different products and services and are managed separately.

10



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Information by industry segment:

|                                                          |                                         |                                        |        |        |                |  |        |        |        |   | 
|--------------------------------------------------------- | --------------------------------------- | -------------------------------------- | ------ | ------ | -------------- |  | ------ | ------ | ------ | - | 
|                                                          |                                         |                                        |        |        | Three Months  
|                                                          |                                         |                                        |        |        | Ended March 31
|                                                          |                                         |                                        |        |        |               
|(dollars in thousands)                                    |                                         | 2003                                   |        | 2002  
|                                                          |                                         |                                        |        |       
|Operating Revenues                                        |                                         |                                        |        |        |                |  |        |       
|                                                          | Railway operations                      |                                        |        | 44,271 |                |  |        | 40,938 |       
|                                                          | Realty:                                 |                                        |        |        |                |  |        |        |       
|                                                          |                                         | Flagler realty rental and services (a) |        |        | 16,350         |  |        |        | 15,157 |  
|                                                          |                                         | Flagler realty sales                   |        |        | 12,259         |  |        |        | 2,551  |  
|                                                          |                                         | Other rental                           |        |        | 747            |  |        |        | 795    |  
|                                                          |                                         | Other sales                            |        |        | 2,638          |  |        |        | 565    |  
|                                                          |                                         |                                        |        |        |                |  |        |       
|                                                          | Total realty                            |                                        |        | 31,994 |                |  |        | 19,068 |       
|                                                          |                                         |                                        |        |        |                |  |        |       
|                                                          | Total revenues (segment)                |                                        |        | 76,265 |                |  |        | 60,006 |       
|                                                          |                                         | Intersegment revenues                  |        |        |               |  |        |        | (38    | )
|                                                          |                                         |                                        |        |        |                |  |        |       
|                                                          | Total revenues (consolidated)           |                                        |        | 76,265 |                |  |        | 59,968 |       
|Operating Expenses                                        |                                         |                                        |        |        |                |  |        |       
|                                                          | Railway operations (a)                  |                                        |        | 35,440 |                |  |        | 31,236 |       
|                                                          | Realty:                                 |                                        |        |        |                |  |        |        |       
|                                                          |                                         | Flagler realty rental and services     |        |        | 14,935         |  |        |        | 12,404 |  
|                                                          |                                         | Flagler realty sales                   |        |        | 8,633          |  |        |        | 1,143  |  
|                                                          |                                         | Other rental                           |        |        | 1,094          |  |        |        | 1,159  |  
|                                                          |                                         |                                        |        |        |                |  |        |       
|                                                          | Total realty                            |                                        |        | 24,662 |                |  |        | 14,706 |       
|                                                          | Corporate general & administrative (a)  |                                        |        | 2,916  |                |  |        | 1,933  |       
|                                                          |                                         |                                        |        |        |                |  |        |       
|                                                          | Total expenses (segment)                |                                        |        | 63,018 |                |  |        | 47,875 |       
|                                                          |                                         | Intersegment expenses                  |        |        |               |  |        |        | (38    | )
|                                                          |                                         |                                        |        |        |                |  |        |       
|                                                          | Total expenses (consolidated)           |                                        |        | 63,018 |                |  |        | 47,837 |       
|Operating Profit (Loss)                                   |                                         |                                        |        |        |                |  |        |       
|                                                          | Railway operations                      |                                        |        | 8,831  |                |  |        | 9,702  |       
|                                                          | Realty                                  |                                        |        | 7,332  |                |  |        | 4,362  |       
|                                                          | Corporate general & administrative      |                                        |        | (2,916 | )              |  |        | (1,933 | )     
|                                                          |                                         |                                        |        |        |                |  |        |       
|                                                          | Segment & consolidated operating profit |                                        |        | 13,247 |                |  |        | 12,131 |       
|Interest income                                           |                                         |                                        | 157    |        |                |  | 74     |       
|Other income                                              |                                         |                                        | 2,251  |        |                |  | 3,841  |       
|Interest expense                                          |                                         |                                        | (4,297 | )      |                |  | (4,791 | )     
|                                                          |                                         |                                        |        |        |                |  |        |       
|                                                          |                                         |                                        | (1,889 | )      |                |  | (876   | )     
|Income before taxes                                       |                                         |                                        | 11,358 |        |                |  | 11,255 |       
|Provision for income taxes                                |                                         |                                        | (4,373 | )      |                |  | (4,333 | )     
|                                                          |                                         |                                        |        |        |                |  |        |       
|Income from continuing operations                         |                                         |                                        | 6,985  |        |                |  | 6,922  |       
|Discontinued Operations                                   |                                         |                                        |        |        |                |  |        |       
|Income (loss) from discontinued operations (net of taxes) |                                         |                                        | 119    |        |                |  | (7,338 | )     
|Loss on disposition of discontinued operations            |                                         |                                        | (187   | )      |                |  |       |       
|                                                          |                                         |                                        |        |        |                |  |        |       
|Net income (loss)                                         |                                         |                                        | 6,917  |        |                |  | (416   | )     
|                                                          |                                         |                                        |        |        |                |  |        |       

(Prior year results have been reclassified to conform to current
years presentation.)

(a)  Included intersegment revenues and expenses of $0 and $38 for the
three months ended March 31, 2003 and 2002, respectively.

11



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Note 13.  Stock Purchase Loans

Certain directors, officers and senior management acquired stock pursuant to
grants made by the Compensation Committee in 2000 and executed promissory notes
therefor. The current indebtedness is $1.8 million. These notes bear interest,
compounded annually, at a rate of 6.10% for notes executed in December 2000 and
5.9% for notes executed in January 2001, must be paid within three years and
are secured by a pledge of the shares purchased.

Note 14.  The St. Joe Company

Flagler Development Company, a wholly owned subsidiary, owns, develops, leases
and manages commercial and industrial properties throughout Florida. Effective
as of January 1, 1998, The St. Joe Company and Flagler entered into a
management agreement, pursuant to which Flagler appointed St. Joe as its agent
to provide property management, property development and construction
coordination services for Flaglers real estate business. Prior to October 9,
2000, St. Joe owned 54% of the Companys stock, which it distributed to its
shareholders on that date. St. Joe continues to provide property management,
leasing and development services for certain Flagler properties under contracts
which expire in October 2003. Under the revised agreement, St. Joe was required
to pay Flagler $6 million in three annual installments commencing on October 9,
2000. Flagler paid St. Joe and certain of its affiliates the following amounts
during the first quarter of 2003 and 2002, respectively: property management
services of $0.7 million and $0.7 million, development fees of $0 and $0.1
million, construction coordination fees of $0.1 million and $0 and leasing
commissions of $0.8 million and $0.1 million.

12



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Item 2.

Managements Discussion and Analysis of the Consolidated
Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
include the Companys present expectations or beliefs concerning future events.
The Company cautions that such statements are necessarily based on certain
assumptions, which are subject to risks and uncertainties that could cause
actual results to materially differ from those contained in these
forward-looking statements. Such forward-looking statements may include,
without limitation, statements that the Company does not expect that lawsuits,
environmental costs, commitments, including future contractual obligations,
contingent liabilities, financing availability, labor negotiations or other
matters will have a material adverse effect on its consolidated financial
condition, statements concerning future capital needs and sources of such
capital funding, future growth potential of the Companys lines of business,
performance of the Companys product offerings, other similar expressions
concerning matters that are not historical facts, and projections relating to
the Companys financial results. The Company cautions that such statements are
necessarily based on certain assumptions, which are subject to risks and
uncertainties that could cause actual results to materially differ from those
contained in these forward-looking statements. Important factors that could
cause such differences include, but are not limited to, the changing general
economic conditions (particularly in the state of Florida) as they relate to
economically sensitive products in freight service and building rental
activities; ability to manage through economic recessions or downturns in
customers business cycles; industry competition; possible future changes in
the Companys structure, lines of business, business and investment strategies,
and related implementation; legislative or regulatory changes; technological
changes; volatility of fuel prices (including volatility caused by military
actions); changes in depreciation rates resulting from future railway right-of-
way and equipment life studies; the ability of the Company to complete its
financing plans, settle future contractual obligations as estimated in time and
amount and conclude labor negotiations in a satisfactory
way; changes in insurance markets, including increases in insurance premiums
and deductibles; the availability and costs of attracting and retaining
qualified independent third party contractors; liability for environmental
remediation and changes in environmental laws and regulations; the ultimate
outcome of environmental investigations or proceedings and other types of
claims and litigation; natural events such
as weather conditions, floods, earthquakes and forest fires; discretionary
government decisions affecting the use of land and delays resulting from
weather conditions and other natural occurrences that may affect construction
or cause damage to assets; the ability of the buyers to terminate contracts to
purchase real estate from the Company prior to the expiration of inspection
periods; failure or inability of third parties to fulfill their commitments or
to perform their obligations under agreements; costs and availability of land
and construction materials; buyers ability to close transactions; the
Companys future taxable income and other factors that may affect the
availability and timing of utilization of the Companys deferred tax assets;
uncertainties, changes or litigation related to tax laws, regulations and the
application thereof that could limit the tax benefits of the EPIK sale or of
other possible transactions involving the Company; and other risks inherent in
the real estate and other businesses of the Company.

As a result of these and other factors, the Company may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect its business, financial condition,
operating results and stock price.

Readers should not place undue reliance on forward-looking statements, which
reflect managements view only as of the date thereof. The Company undertakes
no obligation to publicly release revisions to the forward-looking statements
in this Report that reflect events or circumstances after the date hereof or
reflect the occurrence of unanticipated events.

13



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##### 



Results of Operations

Consolidated Results

FECI reported consolidated revenues of $76.3 million for the first quarter of
2003 compared to $60.0 million in the first quarter of 2002, an increase of
27.2%. The Company reported income from continuing operations of $7.0 million
and $6.9 million for the quarters ended March 31, 2003 and 2002, respectively.
The Company reported net income of $6.9 million, or $0.19 per diluted share,
compared with a net loss of $0.4 million, or $0.01 per diluted share, in the
first quarter of 2002.

Railway

Railway segments operating revenues were up $3.4 million at $44.3 million for
2003 versus $40.9 million for 2002. In late 2002, FECR began managing dray
operations as a result of discontinuing the trucking division. This increased
the railway segments reported 2003 first quarter revenues $2.4 million over
2002. In addition, revenues increased $0.4 million in 2003 due to fuel
surcharges offsetting higher fuel costs. Other increases were from additional
aggregate rock traffic increasing $0.7 million in 2003 due to the increase in
construction demand throughout the state of Florida. Revenues from the new unit
coal train increased revenue $0.2 million. Metals revenue increased $0.3
million over 2002. Intermodal revenues were down $0.1 million from 2002 with
intermodal haulage revenues from a connecting carrier down $0.5 million and
other intermodal revenues up $0.4 million.

Operating expenses increased $4.2 million to $35.4 million for 2003, compared
with $31.2 million for first quarter 2002. In late 2002, FECR began managing
the dray operations for intermodal shipments to the Railway, increasing direct
expenses in first quarter $2.5 million over 2002 and also increasing overheads
somewhat. Wages and benefits increased $0.2 million or 1.4% to $12.7 million
for 2003 due primarily to general wage increases. Insurance expense increased
$0.1 million over 2002 due to increased premiums. Repairs billed by others
increased $0.3 million due to work performed on our rail cars by outside repair
shops, such as Watco and other railroads during the first quarter. Fuel costs
increased $0.6 million in the quarter due to increased fuel prices.
Depreciation increased $0.6 million due to prior capital programs. Per diem
expenses increased $0.5 million.
General and administrative expenses increased $0.4 million
primarily due to the Railway assuming certain
allocated overheads previously borne by FLX.

Purchased services decreased $0.6 million due
to in sourcing trailer repairs and chassis management. Other decreases were
$0.2 million in derailments and storms and write-off expense.

The Railways continuing
right-of-way and equipment life study is
expected to conclude during 2003. This study will potentially adjust
the estimated remaining useful lives of the Railways major
property, plant and equipment assets and thereby potentially affect
future depreciation rates and expenses.

Realty

Results from Continuing Operations

Flaglers rental revenues increased $1.2 million to $16.4 million in first
quarter 2003 from $15.2 million in first quarter 2002. Revenues from operating
properties rents increased $1.4 million, with $0.9 million of the increase
attributable to properties acquired at the end of January 2003. These
properties included a 59,000-sq. ft. suburban office building, and a 50%
interest in three warehouse buildings totaling 540,000 sq. ft. previously held
in partnership with Duke Realty. Same store revenues increased slightly
quarter-to-quarter, while occupancy decreased from 89% to 86%. Newer projects
contributed a $0.4 million revenue increase. Income from equity investments
decreased $0.3 million due to the buy-out of the previously mentioned
partnership interest.

Flagler held 60 finished buildings with 6.6 million sq. ft. and occupancy of
86% at quarter end. Same store properties include 5.7 million sq. ft. and 86%
occupancy compared to 89% in prior
year. Flagler held eight projects with 994,000 sq. ft. in various stages of development at quarter end.
These projects include 290,000 sq. ft. of build-to-suit projects and a
113,000-sq. ft. office project that is 53% preleased.

Flaglers sales revenues increased from $2.6 million in 2002 to $12.3 million
in 2003, including the March 2003 sale of 32 acres at its Flagler Center park
to Southern Baptist Hospital of Florida, Inc. for $9.5 million. In accounting
for this sale, the Company fully burdened its cost with the parcels
proportionate share of Flagler Centers estimated infrastructure costs,
including the estimated cost of an interchange at I-95. The cost was not
reduced by future anticipated reimbursements based on incremental property
taxes

14



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##### 



not yet due, which the Company expects to receive pursuant to an
agreement with the City of Jacksonville that is intended to reimburse the
Company over time its cost of constructing the interchange, plus interest.

Flaglers operating expenses increased $2.5 million to $14.9 million in first
quarter 2003 from $12.4 million in first quarter 2002. Properties acquired
contributed $0.6 million of the increase. Same store and newly constructed
operating properties expenses increased $1.6 million mainly due to real estate
taxes, insurance, repairs and maintenance and depreciation and amortization.
Real estate taxes on undeveloped land increased $0.2 million. Corporate
overhead expenses increased $0.3 million mainly due to staff-up related costs
and bad debt expenses.

Flaglers realty sales expenses were $8.6 million in first quarter 2003 versus
$1.1 million in first quarter 2002, the increase reflecting higher land sales
activity.

Flaglers operating profit from operating properties rent was $3.7 million for
the quarter ended March 31, 2003 versus $4.5 million for the same period 2002.
Operating properties EBITDA remained consistent with the prior year at $9.7
million.

Results from Discontinued Operations

In accordance with SFAS 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, effective for financial statements issued for fiscal years
beginning after December 15, 2001, components of Flagler that meet certain
criteria have been accounted for as discontinued operations. Therefore, income
or loss attributable to the operations and sale of the components classified as
discontinued operations are presented in the summary of operating results as
discontinued operations, net of applicable income taxes.

During the third quarter 2002, Flagler sold an industrial building totaling
approximately 300,000 sq. ft. located in its Beacon Station business park. The
buildings results are presented as discontinued operations as follows:

|                                                        |  |                |   |      |  |  |      |  
|------------------------------------------------------- |  | -------------- | - | ---- |  |  | ---- | -
|                                                        |  | Three Months  
|                                                        |  | Ended March 31
|                                                        |  |               
|(dollars in thousands)                                  |  | 2003           |   | 2002
|                                                        |  |                |   |     
|Summary of Operating Results of Discontinued Operations |  |                |   |     
|Flagler realty rental revenues                          |  |                |  |      |  |  | 518  |  
|Flagler realty rental expenses                          |  |                |  |      |  |  | 214  |  
|                                                        |  |                |   |      |  |  |      |  
|Income before income taxes                              |  |                |  |      |  |  | 304  |  
|Income taxes                                            |  |                |  |      |  |  | (117 | )
|                                                        |  |                |   |      |  |  |      |  
|Income from discontinued operations                     |  |                |  |      |  |  | 187  |  
|                                                        |  |                |   |      |  |  |      |  

Corporate Expenses

Corporate general and administrative expenses were $2.9 million and $1.9
million for the first quarters of 2003 and 2002, respectively. Increases
primarily relate to costs associated with professional services and increased
compensation expenses. During the third quarter of 2002, restricted stock
awards (pursuant to which restrictions lapse pro rata over four years) were
granted to senior executives. The stock grants also provide for accelerated
lapsing of restrictions
based on the Companys performance to pre-established targets. In the first
quarter of 2003, the Compensation Committee of the Board of Directors approved
performance acceleration of 25% of the grant. These grants result in the recognition of
compensation expense in the current quarter.

Interest Expense

Interest expense for the quarter was $4.3 million compared to $4.8 million in
the first quarter of 2002. The lower interest expense resulted primarily from
decreased borrowings on the revolver and lower interest rates.

Other Income

Other income was $2.3 million and $3.8 million for the first quarters of 2003
and 2002, respectively. First quarter 2002 included $1.9 million of income from
a pipe and wire crossing transaction.

15



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Provision for Income Taxes

Income tax expense represented an effective rate of 38.5% for first quarters
2003 and 2002, respectively. Cash taxes received for first quarter 2002 were
$2,542, and were primarily refunds from 2001s estimated tax payments.

EBITDA by industry segment:

|                                                                                |  |                |        |      |  |  |        | 
|------------------------------------------------------------------------------- |  | -------------- | ------ | ---- |  |  | ------ | 
|                                                                                |  | Three Months  
|                                                                                |  | Ended March 31
|                                                                                |  |               
|(dollars in thousands)                                                          |  | 2003           |        | 2002
|                                                                                |  |                |        |     
|Railway EBITDA                                                                  |  |                |        |      |  |  |        | 
|Railway segment operating profit                                                |  |                | 8,831  |      |  |  | 9,702  | 
|Depreciation expense                                                            |  |                | 4,844  |      |  |  | 4,234  | 
|                                                                                |  |                |        |      |  |  |        | 
|Railway segment EBITDA                                                          |  |                | 13,675 |      |  |  | 13,936 | 
|                                                                                |  |                |        |      |  |  |        | 
|Total FECR legal entity income before taxes                                     |  |                | 14,353 |      |  |  | 14,651 | 
|Depreciation expense  legal entity                                             |  |                | 4,891  |      |  |  | 4,282  | 
|Interest (income) expense                                                       |  |                | (105   | )    |  |  | 28     | 
|                                                                                |  |                |        |      |  |  |        | 
|Total FECR legal entity EBITDA                                                  |  |                | 19,139 |      |  |  | 18,961 | 
|                                                                                |  |                |        |      |  |  |        | 
|Realty EBITDA(All years have been restated to reflect
discontinued operations.) |  |                |        |      |  |  |        | 
|Flagler operating profit from operating properties rents                       |  |                | 3,736  |      |  |  | 4,492  | 
|Depreciation and amortization expense  rental operating properties             |  |                | 5,944  |      |  |  | 5,177  | 
|                                                                                |  |                |        |      |  |  |        | 
|Flagler EBITDA from operating properties rents                                 |  |                | 9,680  |      |  |  | 9,669  | 
|                                                                                |  |                |        |      |  |  |        | 

The Company reports certain non-GAAP
EBITDA measures for the Companys railway
business and a portion of its real estate business. The Company believes these
measures to be performance measures that investors commonly use to value the
relevant businesses and evaluate the ongoing performance. The Company operates
in two distinctly different lines of businesses, railway and realty, which many
investors value and evaluate separately, using metrics similar to the non-GAAP
financial measures provided by the Company. The Company also uses certain such
measures internally as part of its incentive compensation plans for management
employees.

Financial Condition, Liquidity and Capital Resources

Net cash generated by operating activities was $8.4 million and $5.9 million in
the three months ended March 31, 2003 and 2002, respectively. The year-to-year
fluctuations in net cash generated by operating activities include significant
working capital fluctuations. Net cash generated by operating activities is
expressed net of gains on asset disposals, primarily building and land sales
which also fluctuate. Asset dispositions for the three months ended March 31,
2003 and 2002 generated pretax gains of $6.3 million and $2.0 million,
respectively.

As a result primarily of the Companys sale of EPIK in late 2002, the Company
claimed a cash federal income tax refund of $74.5 million for that year, which
was refunded to the Company subsequent to the end of the first quarter of 2003.
Additionally, as a result primarily of the EPIK sale, the Company expects to
carry forward losses of $75 million (pretax), which are expected to be
deductible from taxable income on the Companys federal tax returns in future
years. However, the Company cannot guarantee its realization of these expected
future tax benefits, which are subject to possible future changes in federal
income tax laws and differing interpretations thereof, among other factors.

Although in recent years the Company has not increased its rate of per share
dividend payments and has not undertaken material stock repurchases, the
Company may do so in the future.

During the three months ended March 31, 2003 and 2002, respectively, the
Company invested approximately $32 million and $7 million at Flagler. For the
three months ended March 31, 2003 and 2002, the Companys capital investments
at FECR were approximately $3 million and $7 million.

At March 31, 2003, the Company had in place a $200 million revolving credit
facility pursuant to an

16



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agreement, as amended from time to time, between the
Company and certain banking institutions (the
Credit Facility Agreement). The description herein of the revolving credit
facility is qualified in its entirety by reference to the Credit Facility
Agreement, which is incorporated as Exhibit 10(b) to the Companys Reports on
Form 10-K for years ended December 31, 2000, 2001 and 2002. On February 7,
2003, the Credit Facility Agreement was extended for an additional year to
March 31, 2005 and amended to reduce the Facilitys size to $200 million,
increase the stock repurchase and special dividend limit from $50 to $150
million (which may be increased in 2004 to $200 million if certain financial
ratio tests are met), increase the non-recourse mortgage financing limit from
$250 million to $325 million, and make other miscellaneous modifications. At
March 31, 2003, the Company had $9.0 million drawn on the revolving credit
facility. Pursuant to the Credit Facility Agreement, the Company has agreed,
among other
things, to maintain certain financial ratios. The Company believes the most
restrictive of such ratios is the Group Debt/EBITDA ratio (as defined in the
Credit Facility Agreement). The Credit Facility Agreement provides that at
March 31, 2003, the Companys Group Debt/EBITDA ratio shall be no greater than
2.75. At March 31, 2003, the Companys actual Group Debt/EBITDA ratio was 0.10.
Pursuant to the Credit Facility Agreement, the required Group Debt/EBITDA ratio
is 2.75 through December 31, 2003, and 2.50 from January 1, 2004 to March 31,
2005, all as more particularly set forth in the Credit Facility Agreement.
Although no assurances can be given as to the Companys future compliance with
the Group Debt/EBITDA ratio covenant or other financial covenants, the Company
has complied with the terms of the Credit Facility Agreement in the past and
expects to continue to comply with them in the future.

OTHER MATTERS

Critical Accounting Policies

The Company has reviewed its accounting policies to identify those that are
very important to the portrayal of the Companys financial condition and
results, and that require managements most difficult, subjective or complex
judgments (the Critical Accounting Policies). The Company has determined that
its accounting policies governing impairment of long-lived assets, income tax
provisions, realty rental revenue recognition, and real estate infrastructure
costs, may be considered Critical Accounting Policies.

Impairment of Long-lived Assets  The Company reviews the carrying value of its
property, plant and equipment for impairment whenever events or changes in
circumstances indicate the carrying value of an asset or asset grouping may not
be recoverable from the undiscounted future net cash flows expected to be
generated over its remaining useful life. Detecting these events or changes in
circumstances can be difficult. At March 31, 2003, management had not
identified indicators of an impairment of value for any significant asset group
of the Companys. However, events or changes in circumstances could develop or
occur that would cause the Company to evaluate the recovery of its long-lived
assets and potentially record an impairment, the amount of which could be
material. Assets that are deemed impaired are recorded at the lower of carrying
amount or fair value.

Income Tax Provisions - FECIs net deferred tax liability was $111.2 million
and $106.7 million at March 31, 2003 and December 31, 2002, respectively.
Included in these net liabilities is a tax asset of approximately $38
million and $49
million (federal and state), respectively, associated with net operating loss carry
forwards. The net deferred tax liability is estimated based on the expected
future tax consequences of items recognized in the financial statements.
Management must use judgment when estimating the future timing and
deductibility of expenses and loss carry forwards in the Companys tax
returns. A valuation allowance is required to be recorded if management
expects that it is more likely than not that its deferred tax assets will not
be realized. As of March 31, 2003 and December 31, 2002, FECI has no
valuation allowance since it expects to realize its deferred tax assets. This
expectation is primarily based upon FECIs expectation that future operations
will be sufficiently profitable to utilize the operating loss carry forwards,
as well as the existence of various tax, business and other planning
strategies available to the Company. However, the Company cannot guarantee
that it will realize this tax asset or that future valuation allowances will
not be required. Failure to utilize the tax asset could materially affect the
Companys financial results and financial position.

Revenue Recognition  Realty
Rental Revenues -  Revenues from realty rentals are
primarily contractual base rents from leases of commercial property. The
Company recognizes revenues from these base rents evenly over the lease term in
accordance with SFAS No. 13, Accounting for Leases. SFAS No. 13 requires
rental income from an operating lease be recognized on a straight-line basis
over the non-cancelable lease term. Accordingly, total contractual minimum
lease payments, including scheduled rent

17



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##### 



increases, are recognized as rental
revenue evenly over the lease term. Accrued revenues from contractually
scheduled rent increases in excess of amounts currently due amounted to $10.7
million and
$9.3 million at March 31, 2003 and December 31, 2002, respectively, which is
reported in other assets. The Company monitors this asset for collection risk
and establishes reserves for any amounts deemed not collectible. However,
amounts collected in future periods may vary from the Companys expectations.

Real Estate Infrastructure Costs  The Company periodically constructs road,
road structures and general infrastructure related to the development of
commercial real estate. Certain of these infrastructure assets may be deeded,
upon completion, to applicable governmental authorities. The Company believes
these deeded items (like roads) benefit and increase the value of the parcels
within and adjacent to the related commercial real estate park. The Company
capitalizes all infrastructure costs (including costs of infrastructure assets
deeded to government authorities) into the basis of the commercial real estate
park and allocates these costs to the individual parcels within the park on a
relative fair value basis as required by SFAS 67, Accounting for Costs and
Initial Rental Operations of Real Estate Projects.

In connection with infrastructure assets deeded to government authorities,
certain government authorities may agree to reimburse the Company certain of
its construction costs for the deeded assets based on and to the extent of such
annual incremental taxes (such as property taxes) as may be raised by the
government authority from the applicable park properties over a stipulated
period of time. Prior to and at the date of deeding the infrastructure asset to
the government authority, reimbursements are accounted for as a reduction in
the allocated costs described above to the extent the Companys receipt of such
reimbursements has become fixed and determinable, based
upon the related incremental taxes having been assessed and become payable. The
Company does not recognize expected future tax reimbursements even though they
may be probable and estimable, until they become fixed and determinable.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change to the disclosures made under the heading
Quantitative and Qualitative Disclosures about Market Risk on page 31 of the
Companys 2001 Annual Report on Form 10-K.

Item 4.

CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

As of April 22, 2003, under the supervision and with the participation of the
Companys Chief Executive Officer (CEO) and the Chief Financial Officer (CFO),
management has evaluated the effectiveness of the design and operation of the
Companys disclosure controls and procedures (as defined in Exchange Act Rules
13a-14(c) and 15-d-14(c)). Based on that evaluation, the CEO and CFO concluded
that the Companys disclosure controls and procedures were effective as of
April 22, 2003.

(b) Changes in Internal Controls

There were no significant changes in the Companys internal controls or in the
other factors that could significantly affect those controls subsequent to the
date of the evaluation.

18



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##### 



PART II

Item 1.

LEGAL PROCEEDINGS

There are no new legal or regulatory proceedings pending or known to be
contemplated which, in managements opinion, are other than normal and
incidental to the kinds of businesses conducted by the Company.

Item 5.

OTHER INFORMATION

FECRs traffic volume and revenues for the three months ended March 31, 2003
and 2002, respectively, are shown below. Also, FECRs and Flaglers quarterly
operating expenses are presented below.

TRAFFIC
Three Months Ended March 31
(dollars and units in thousands)

|              |                        |       |      |       |      |          |         |          |      |          |      |          |         |  |        |        |  |  |        |        |  |  |      |       |  
|------------- | ---------------------- | ----- | ---- | ----- | ---- | -------- | ------- | -------- | ---- | -------- | ---- | -------- | ------- |  | ------ | ------ |  |  | ------ | ------ |  |  | ---- | ----- | -
|              |                        |       | 2003 |       | 2002 |          | Percent |          | 2003 |          | 2002 |          | Percent
|              |                        |       |      |       |      |          |         |          |      |          |      |          |        
|Commodity     |                        | Units |      | Units |      | Variance |         | Revenues |      | Revenues |      | Variance
|              |                        |       |      |       |      |          |         |          |      |          |      |         
|Rail Carloads |                        |       |      |       |      |          |         |          |      |          |      |          |         |  |        |        |  |  |        |        |  |  |      |      
|              | Crushed stone          |       |      | 28.9  |      |          |         | 28.1     |      |          |      | 2.8      |         |  |        | 12,999 |  |  |        | 12,260 |  |  |      | 6.0   |  
|              | Construction materials |       |      | 1.3   |      |          |         | 1.3      |      |          |      |         |         |  |        | 736    |  |  |        | 757    |  |  |      | (2.8  | )
|              | Vehicles               |       |      | 6.2   |      |          |         | 6.0      |      |          |      | 3.3      |         |  |        | 4,612  |  |  |        | 4,570  |  |  |      | 0.9   |  
|              | Foodstuffs             |       |      | 3.0   |      |          |         | 3.1      |      |          |      | (3.2     | )       |  |        | 2,153  |  |  |        | 2,317  |  |  |      | (7.1  | )
|              | Chemicals              |       |      | 0.9   |      |          |         | 0.9      |      |          |      |         |         |  |        | 969    |  |  |        | 1,080  |  |  |      | (10.3 | )
|              | Paper                  |       |      | 2.1   |      |          |         | 1.6      |      |          |      | 31.3     |         |  |        | 2,050  |  |  |        | 1,671  |  |  |      | 22.7  |  
|              | Other                  |       |      | 4.2   |      |          |         | 3.9      |      |          |      | 7.7      |         |  |        | 2,437  |  |  |        | 2,331  |  |  |      | 4.5   |  
|              |                        |       |      |       |      |          |         |          |      |          |      |          |         |  |        |        |  |  |        |        |  |  |      |      
|              | Total Carload          |       |      | 46.6  |      |          |         | 44.9     |      |          |      | 3.8      |         |  |        | 25,956 |  |  |        | 24,986 |  |  |      | 3.9   |  
|Intermodal    |                        |       | 62.2 |       |      |          | 64.1    |          |      |          | (3.0 | )        |         |  | 14,967 |        |  |  | 15,044 |        |  |  | (0.5 | )    
|              |                        |       |      |       |      |          |         |          |      |          |      |          |         |  |        |        |  |  |        |        |  |  |      |      
|              | Total Freight Revenue  |       |      | 108.8 |      |          |         | 109.0    |      |          |      | (0.2     | )       |  |        | 40,923 |  |  |        | 40,030 |  |  |      | 2.2   |  
|              |                        |       |      |       |      |          |         |          |      |          |      |          |         |  |        |        |  |  |        |        |  |  |      |      
|Drayage       |                        |       | 11.2 |       |      |          |        |          |      |          |     |          |         |  | 2,449  |        |  |  |       |        |  |  |     |      
|              |                        |       |      |       |      |          |         |          |      |          |      |          |         |  |        |        |  |  |        |        |  |  |      |      

(Prior year results have been reclassified to conform to current years
presentation.)

RAILWAY OPERATING EXPENSES

|                                  |  |                |        |      |  |  |        |  
|--------------------------------- |  | -------------- | ------ | ---- |  |  | ------ | -
|                                  |  | THREE MONTHS  
|                                  |  | ENDED MARCH 31
|                                  |  |               
|(dollars in thousands)            |  | 2003           |        | 2002
|                                  |  |                |        |     
|Compensation & benefits           |  |                | 12,749 |      |  |  | 12,568 |  
|Fuel                              |  |                | 3,573  |      |  |  | 3,020  |  
|Equipment rents (net)             |  |                | 758    |      |  |  | 835    |  
|Car hire (net)                    |  |                | (271   | )    |  |  | (781   | )
|Depreciation                      |  |                | 4,844  |      |  |  | 4,234  |  
|Purchased services                |  |                | 2,274  |      |  |  | 2,832  |  
|Repairs to/by others (net)        |  |                | (518   | )    |  |  | (834   | )
|Load/unload                       |  |                | 1,780  |      |  |  | 1,848  |  
|Casualty & insurance              |  |                | 1,177  |      |  |  | 1,115  |  
|Property taxes                    |  |                | 1,244  |      |  |  | 1,185  |  
|Materials                         |  |                | 2,305  |      |  |  | 2,047  |  
|General & administrative expenses |  |                | 2,455  |      |  |  | 2,170  |  
|Drayage                           |  |                | 2,468  |      |  |  |       |  
|Other                             |  |                | 602    |      |  |  | 997    |  
|                                  |  |                |        |      |  |  |        |  
|Total operating expenses          |  |                | 35,440 |      |  |  | 31,236 |  
|                                  |  |                |        |      |  |  |        |  

19



---



##### 



REALTY SEGMENT EXPENSES

|                                                  |                                         |      |                |        |  |  |        |        | 
|------------------------------------------------- | --------------------------------------- | ---- | -------------- | ------ |  |  | ------ | ------ | 
|                                                  |                                         |      | THREE MONTHS  
|                                                  |                                         |      | ENDED MARCH 31
|                                                  |                                         |      |               
|(dollars in thousands)                            |                                         | 2003 |                | 2002  
|                                                  |                                         |      |                |       
|Realty Operating Expenses - Continuing Operations |                                         |      |                |        |  |  |        |       
|Real estate taxes  developed                     |                                         |      | 2,165          |        |  |  | 1,773  |       
|Repairs & maintenance  recoverable               |                                         |      | 598            |        |  |  | 414    |       
|Services, utilities, management costs             |                                         |      | 2,923          |        |  |  | 2,450  |       
|                                                  |                                         |      |                |        |  |  |        |       
|                                                  | Subtotal - expenses subject to recovery |      |                | 5,686  |  |  |        | 4,637  | 
|Realty sales expense                              |                                         |      | 8,633          |        |  |  | 1,143  |       
|Real estate taxes - undeveloped land              |                                         |      | 1,106          |        |  |  | 864    |       
|Repairs & maintenance - non-recoverable           |                                         |      | 150            |        |  |  | 115    |       
|Depreciation & amortization                       |                                         |      | 6,207          |        |  |  | 5,449  |       
|SG&A - non-recoverable                            |                                         |      | 2,880          |        |  |  | 2,498  |       
|                                                  |                                         |      |                |        |  |  |        |       
|                                                  | Subtotal - non-recoverable expenses     |      |                | 18,976 |  |  |        | 10,069 | 
|Total operating expenses                          |                                         |      | 24,662         |        |  |  | 14,706 |       
|                                                  |                                         |      |                |        |  |  |        |       

(Prior year results have been reclassified to conform to current years presentation.)

Item 6.

EXHIBITS AND REPORTS ON FORM 8-K

Reports on Form 8-K

1.     The Registrant furnished information under Item 9 on Form 8-K on March 13,
2003, reporting information the Registrant elected to disclose through Form 8-K
pursuant to Regulation FD. The information advised that Mr. Robert W. Anestis,
Chief Executive Officer, and Mr. Richard G. Smith, Chief Financial Officer,
Florida East Coast Industries, Inc., had made certifications pursuant to 18
U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, which accompanied FECIs Annual Report on Form 10-K for the year ended
December 31, 2002.

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.

|                     |  |                                                                                                | 
|-------------------- |  | ---------------------------------------------------------------------------------------------- | 
|                     |  | FLORIDA EAST COAST INDUSTRIES, INC.                                                            | 
|                     |  |                                                                                                | 
|                     |  | (Registrant)                                                                                   | 
|                     |  |                                                                                                | 
|Date: April 22, 2003 |  | /s/ Mark A. Leininger

Mark A. Leininger, Vice President and Controller                        | 
|                     |  |                                                                                                | 
|Date: April 22, 2003 |  | /s/ Richard G. Smith

Richard G. Smith, Executive Vice President and   Chief
Financial Officer | 

20



---



##### 



CERTIFICATIONS

I, Robert W. Anestis, certify that:



| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | 1. I have reviewed this quarterly report on Form 10-Q of Florida East
Coast Industries, Inc.;



| |                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;



| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;



| |                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;



| |                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and



| |                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

| |                       |  |     |  |                                                                  
| | --------------------- |  | --- |  | -----------------------------------------------------------------
| | Dated: April 22, 2003 |  | By: |  | /s/ Robert W. Anestis

Robert W. Anestis, Chief Executive Officer

21



---



##### 



I, Richard G. Smith, certify that:



| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | 1. I have reviewed this quarterly report on Form 10-Q of Florida East
Coast Industries, Inc.;



| |                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;



| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;



| |                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;



| |                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and



| |                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

| |                       |  |     |  |                                                                                                       | 
| | --------------------- |  | --- |  | ----------------------------------------------------------------------------------------------------- | 
| | Dated: April 22, 2003 |  | By: |  | /s/ Richard G. Smith

Richard G. Smith, Executive Vice President          and
Chief Financial Officer | 

22