UNITED STATES SECURITIES AND EXCHANGE COMMISSION

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, 2005

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.

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.

FLORIDA EAST COAST INDUSTRIES, INC.

INDEX

(Prior year’s results have been reclassified to conform to current year’s presentation.)
See accompanying notes to consolidated financial statements (unaudited).

2

(Prior year’s results have been reclassified to conform to current year’s presentation, including discontinued operations.)
See accompanying notes to consolidated financial statements (unaudited).

3

(Prior year’s results have been reclassified to conform to current year’s presentation.)
See accompanying notes to consolidated financial statements (unaudited).

4

FLORIDA EAST COAST INDUSTRIES, INC.

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, 2005 and December 31, 2004, and the results of operations and cash flows for the three-month periods ended March 31, 2005 and 2004. Results for interim periods are not necessarily indicative of the results to be expected for the year. The consolidated balance sheet as of December 31, 2004 included herein has been derived from the Company’s audited consolidated financial statements for the year ended December 31, 2004. These interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange Commission.

Certain prior year amounts have been reclassified to conform to the current year’s presentation, including discontinued operations.

Note 2. Discontinued Operations

Real Estate

In accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144), components of Flagler Development Company (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 statement of income as discontinued operations, net of applicable income taxes.

Discontinued operations for 2004 include the gains on the sales and the related operations of an office building and an industrial building.

Note 3. Commitments and Contingencies

Florida East Coast Industries, Inc. (the Company or FECI) 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, LLC. (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.

5

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 be substantially completed by the end of 2005. It is possible that the remediation costs could be higher than anticipated, however, 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.

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.

On February 24, 2004, the Broward County Commission approved the negotiated termination of a long-term ground lease between the County and the Company. The settlement terminated all agreements affecting the Company in respect to the leased premises including a claim by the city of Hollywood for payments in-lieu of taxes. During the third quarter of 2003, the Company recorded a charge of $16.4 million ($10.1 million after tax), reflecting management’s estimate of the cost of terminating the ground lease. Final costs of terminating the ground lease, including the settlement with the city, were $16.9 million. The additional costs of $0.5 million are included in the 2004 second quarter operating results.

Note 4. 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 775,041 shares and 665,797 shares at March 31, 2005 and 2004, respectively. “Out-of-the-money” shares were 544,943 shares and 1,433,854 shares at March 31, 2005 and 2004, respectively.

Note 5. Dividends and Stock Repurchase

On February 17, 2005, the Company declared a dividend of $.05 per share on all issued and outstanding common stock, payable March 18, 2005 to shareholders of record as of March 4, 2005. The determination of the amount of future cash dividends, if any, to be declared and paid by the Company will depend upon, among other things, the Company’s financial condition, funds from operations, level of capital expenditures, future business prospects and other factors deemed relevant by the Board of Directors.

On August 13, 2004, the Company purchased 5.5 million shares of common stock from The Alfred I. duPont Testamentary Trust and The Nemours Foundation for $34.50 per share or approximately $191 million. These repurchased shares are shown on the Consolidated Balance Sheets as Treasury Stock. This transaction used the remaining $72 million that existed under the previous $75 million

6

stock repurchase authorization. As a result, on August 4, 2004, the Board of Directors authorized the expenditure of $40 million to repurchase common stock from time to time through a program of open market purchases and/or privately negotiated transactions. As of March 31, 2005, $0.1 million of stock had been repurchased through this program.

Note 6. Other Income

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. Included in first quarter 2005 results is one-time income associated with the sale of air rights and related surface and sub-surface easements and licenses on approximately 300 feet of the Railway’s right-of-way.

Note 7. Debt

Flagler has issued $352 million of mortgage notes due on varying dates from 2008 through 2011. At March 31, 2005, approximately $342 million was outstanding on these notes. The notes are collateralized by buildings and properties having a carrying value at March 31, 2005 of $297.3 million, net of accumulated depreciation of $133.0 million. The mortgage notes carry both fixed rates (various ranging from 5.27% — 7.39%) and variable rates (1.0% over the 90 day LIBOR index – 3.91% at March 31, 2005). Repayments of principal and interest are payable monthly based upon a thirty-year amortization schedule.

The fair value of the Company’s mortgage notes is estimated based on current rates available to the Company for debt of the same remaining maturities. At March 31, 2005, the Company considers the estimated fair market value of the mortgage notes to be $361.1 million.

On February 22, 2005, the Company entered into a new unsecured $150 million, 5-year revolving credit agreement with a syndication of banks. The new credit facility provides a more favorable interest rate and terms and replaces the Company’s previous $200 million credit agreement. The Company will pay (quarterly) commitment fees, as applicable under the agreement, at a range of 12.5 - - 25.0 basis points. The Company’s new revolving credit agreement requires the maintenance of certain financial ratios (interest coverage and leverage) and maintenance of minimum established levels of net worth. In addition there are various established limitations (dollars and otherwise) on certain types of liens, investments (including loans and advances) and acquisitions, limitation on transactions with affiliates, merger and sales of all or substantially all of the assets; and use of proceeds. 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 at any time by the borrower, or at the conclusion of the facility’s term. At March 31, 2005, there were no borrowings outstanding on this facility.

7

Note 8. 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.

In a first quarter 2004 transaction (the “Transaction”) initiated at the request of the Board of Directors, the Company cancelled vested, in-the-money stock options (the “Options”) to acquire 144,000 shares of the Company’s common stock held by the Company’s former Chief Executive Officer (“CEO”), Robert W. Anestis. The embedded value of the Options (fair market value less strike price) was $2 million. The embedded value, less applicable tax withholding, was paid in common stock. The CEO was issued 36,407 shares (valued at $35.06 per share, which was the closing price on February 27, 2004). Because the original stock option award was cancelled and the Company replaced this award with FECI common stock, in accordance with FASB Interpretation No. 44, the Company was required to recognize compensation expense in the amount of $2 million with respect to the Transaction.

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” (SFAS 123), to stock-based employee compensation:

During the quarter, Mr. Adolfo Henriques was appointed Chairman, President, and Chief Executive Officer of the Company succeeding Mr. Robert Anestis. Mr. Robert Anestis received termination benefits related to the termination provisions of his employment agreement. These benefits totaled $7.7 million in the quarter and included $4.2 million of additional equity compensation ($1.9 million due to the accelerated vesting of equity compensation), $3.3 million of severance payments and $0.2 million of other benefits. Mr. Adolfo Henriques received grants of 25,500 shares (immediate vesting) and 80,000 shares (3-year vesting) of stock, which were issued from Treasury stock.

Note 9. Realty Acquisitions, Land Sales, and Associated Costs

Flagler utilizes Statement of Financial Accounting Standard No. 141, “Business Combinations” (SFAS 141) to account for the costs of acquiring buildings. This statement provides a framework for allocating the costs of acquisition to tangible assets, financial assets, and separately identifiable intangible assets, less acquired liabilities, using the purchase method of accounting.

During the first quarter of 2005, Flagler purchased two buildings: one for $41.5 million with approximately 240,000 rentable square feet and 5.1 acres of land and one for $19.5 million with

8

approximately 107,000 rentable square feet and 8.0 acres of land. The majority ($50.1 million) of acquisition costs of these buildings were allocated to various tangible assets (including land, land improvements, building and parking decks) with the remaining costs allocated to financial assets (e.g. above or below market value of in-place leases) and intangible assets (e.g. customer relationship intangible). Financial assets and intangible assets are generally amortized over the remaining life (approximately 3.5 to 8 years) of the underlying tenant leases.

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

The net book value of buildings and land is presented separately in the Consolidated Balance Sheets when assets meet the criteria for classification as “assets held for sale” in accordance with SFAS 144 (i.e., a sales contract is executed and significant non-refundable monies are provided by the buyer.) Not all building and land sales, particularly less significant dispositions, meet the criteria described above. At March 31, 2005, a large land parcel and several small land parcels under contract for sale are included in this category.

The Company capitalizes all infrastructure costs (including costs of infrastructure assets deeded to governmental authorities) into the basis of the properties benefiting from such infrastructure and allocates these costs to individual parcels 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.” (SFAS 67)

Note 10. Segment Information

The Company follows Statement of Financial Accounting Standards No. 131, “Disclosure about Segments of an Enterprise and Related Information” (SFAS 131). SFAS 131 provides guidance for reporting information about operating segments and other geographic information based on a management approach. The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies. 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 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, as well as undeveloped land.

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 in the accompanying statement of operations.

In addition, 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.

9

Information by industry segment: