The irony was pointed out during the company's first-ever conference call with analysts two weeks ago.

"We truly have entered the 21st Century, haven't we?" said David Winters, an analyst at New Jersey investment firm Franklin Mutual Advisers Inc.

"We have indeed," replied Florida East Coast Chairman, President and Chief Executive Officer Robert W. Anestis.

Florida East Coast is emerging not only out of the 20th Century but also -- as a company that was focused on the railroad business until just a few years ago -- out of the 19th Century in some ways. The St. Augustine-based company traces its roots to the late 1800s when Florida pioneer Henry Flagler began building a railroad along the state's east coast.

Now the company is taking advantage of that rail corridor to develop a fiber optics communication network through a newly formed subsidiary called EPIK Communications.

"Henry Flagler's original investment to create the rail corridor along the east coast of Florida from Jacksonville to Miami put in place a strategic asset that opened up the development of much of the major population centers in the state of Florida," said Anestis "Beginning with the same valuable corridor Henry Flagler assembled, EPIK will provide a foundation for 21st Century development in the same way the railroad did for Florida in the 19th and 20th Century," he said.

And it's not just the telecom business that has made the new millennium the start of a new era for Florida East Coast. For the first time since the Great Depression, Florida East Coast is a completely independent company. The St. Joe Co., which had owned 54 percent of Florida East Coast's stock and controlled the company, got rid of its shares in October by distributing them to St. Joe shareholders.

Another sign of change is Anestis and his management team. Anestis, who had been running his own consulting firm, joined Florida East Coast two years ago and has brought in new management at each of its four business units. Besides the Florida East Coast Railway and EPIK, the company also operates commercial real estate company Flagler Development Co. and trucking company Florida Express Carriers Inc.

"It's become a much different company," said James S. Schmitt, an analyst at Westcountry Financial in Somis, Calif., who has followed Florida East Coast since it was solely a railroad business.

While the telecom business has created most of the buzz in the investment community, Anestis is focusing on building profits at each of the four subsidiaries.

"I have interesting days. I've done something in every one of the businesses by 10:30," he said during a recent morning interview at the company's headquarters.

"My objective has been to create independent viable companies that can be leaders in their industries," he said.

Plotting a course

The spin-off of the stock owned by St. Joe was an important step in building up those independent businesses. Not only does it free up Florida East Coast's management to plot its own course for the company but it also gives it more financial flexibility. Because of St. Joe's majority ownership position, Florida East Coast was unable to borrow money to finance its operations and had to use its own cash for new investment.

Using debt to finance operations will create new opportunities for growth and profitability, company officials said.

Debt is "a less expensive form of financing than equity," said chief financial officer Richard G. Smith.

Flagler Development, which has been building office parks under the Gran Park name throughout Florida, will particularly benefit from the new capital structure as the company borrows to finance new development.

"We're going to put some debt on those things, but a prudent amount," said Anestis.

Florida East Coast hasn't been completely free to make its own decisions since 1931, when the railroad hit hard times and was placed into receivership and then into bankruptcy. It didn't emerge from bankruptcy until 1961.

While it was in bankruptcy, St. Joe acquired its majority stake in the company by buying up the railroad bonds at a discount. The Alfred I. duPont Testamentary Trust, which owns a majority stake in St. Joe, ended up with control of Florida East Coast. The trust now owns about a third of all Florida East Coast shares and has the right to elect 30 percent of the company's directors through a complex voting formula which was part of the spin-off plan.

"We were pleased with the spin-off. It left each company focused on its core," said Winfred L. Thornton, chairman of the trust and a former CEO of both Florida East Coast and St. Joe.

"I think it was a great move, and I anticipate both companies will greatly benefit from it," he said.

The shares that were owned by St. Joe are now classified as Class B shares and have the right to elect a total of 80 percent of Florida East Coast's directors. Other than voting for the board, the Class B shares are essentially the same as Class A shares, which consist of the 46 percent of the stock that was owned by other investors before the spin-off.

"There is no real distinction between the two classes of stock," Anestis said.

Fiber-optic tracks

In Thornton's day as CEO, Florida East Coast was mainly a railroad company and had begun to develop its Gran Park business parks on property owned by the railroad along Florida's East Coast. But he does recognize where the company's future now lies.

"EPIK is certainly the side of the company that has just great potential," he said.

The right-of-way along the railroad tracks is a unique asset in that it represents the only direct path between Jacksonville and Miami in which a company could build a continuous communications line. Florida East Coast had begun to recognize that in the 1980s, leasing the space to major communications firms like AT&T.

But once Anestis took over, Florida East Coast decided to exploit the opportunity itself. It formed EPIK in May 1999 and hired a new team of telecommunications experts to run that company and build its own fiber-optics lines. Last September it announced a $237 million investment program to build up EPIK.

"That's more than we've invested in the railroad in 110 years," said Anestis. Winters of Franklin Mutual, which is Florida East Coast's second-largest shareholder, with about 15 percent of the stock, sees the fiber-optic buildup as a no-lose situation but a great opportunity.

"If it doesn't work, you're not going to get killed," he said. "It's essentially a low-risk call on what could be a home run."

Gary H. Yablon, an analyst at Credit Suisse First Boston in New York. described Florida East Coast as "an inexpensive way to play the telecom market" in a report on the company last fall. He estimated that investors were capturing EPIK for about $5 a share at the time but he valued the telecommunications operations at about $21 a share. At that time, Florida East Coast's shares were priced at $41.56 a share in the market, and they have been trading in the mid-$30s recently.

EPIK provides its fiber-optic lines for use by phone companies and Internet service providers not only along the Jacksonville-Miami corridor but also across the country through swapping arrangements with other companies.

"We knew everybody would want to get into Florida," said Anestis. So the company can exchange one of its lines along the coast in exchange for another company's connection to another major city.

Florida East Coast currently has 1,500 miles of fiber lines "lit" throughout Florida and into Atlanta, but it also has arrangements to light up 15,000 miles of lines stretching all the way to Seattle.

With its telecom business heating up this year, Florida East Coast projects revenue from that operation to grow about tenfold this year, from $3.4 million in 2000 to $34 million in 2001.

Running the rails

While EPIK is growing, its revenue still pales in comparison to the company's largest subsidiary, the Florida East Coast Railway. The railroad business accounted for $164.8 million of the company's $276.3 million in total revenue in 2000, and the company continues to work on improving its operations.

The railroad's operating ratio -- that is, its expenses divided by its revenue -- fell from about 77 percent two years ago to 69.8 percent in the fourth quarter of 2000, which Anestis said is one of the best in the country.

"I think there might be one North American railroad that might have been better than that," he said. Because the rail line is relatively small, running only 351 miles, analysts have speculated for years that it would be sold to a larger railroad. But company officials and others see plenty of opportunity for profit in the operation.

"It's serving the east coast of Florida, which itself is bigger than half the states in the country," said Thornton.

The railroad is also building up its business through intermodal operations with Florida East Coast's trucking subsidiary, Florida Express Carriers, or FLX.

"What we're doing with FLX is we're virtually extending the railroad," said Anestis.

Florida East Coast restructured the trucking company, formerly known as International Transit Inc., last year. The company was headquartered in Cincinnati and provided service as far north as Detroit, but under the restructuring it relocated the headquarters to Jacksonville. It narrowed its focus to picking up truckloads in the Southeast along a corridor between Birmingham, Ala., Atlanta and Charlotte, N.C., and connecting to the railroad in Jacksonville for further shipment to South Florida.

FLX lost money in 2000, due in part to restructuring costs, but Smith projects it will be profitable this year.

Finding new real estate

Florida East Coast's real estate subsidiary, Flagler Development, is the last company operation that still has ties to St. Joe. Because St. Joe is a real estate development company and owned a majority of the company, it was running Flagler's real estate operations under a contract arrangement.

"We had no employees in real estate. It was completely outsourced to St. Joe," said Anestis. Flagler, which was formerly known as Gran Central Corp., now has its own real estate group but still has a three-year contract with St. Joe to provide leasing, property management and development management activities. Anestis said the company will probably take on some of those activities when the contract expires, but he still expects to outsource some operations, such as property management.

Flagler, which has 5.3 million square feet of office and industrial space built and 1.8 million square feet under development, has been a successful operation since it started in the 1980s, with occupancy of its properties currently at 93 percent.

The company started by building on land owned by the company in East Coast cities, including three office parks in Jacksonville: Gran Park at Deerwood, Gran Park at the Avenues and Gran Park at Jacksonville in southern Jacksonville. But the company has expanded outside of its railroad area into Orlando and is looking for opportunities in Tampa.

"We see ourselves as a Florida-based company with a Florida advantage" in real estate development, Anestis said, so Tampa is a natural expansion. "It's a conspicuous place where we don't do business," he said.

Keeping it together With its focus on creating four separate independent businesses, some investors will speculate on Florida East Coast breaking up the company by spinning off one or more of its subsidiaries. For years when it was just a railroad and real estate company, analysts talked about a split. And in fact, St. Joe had proposed a deal to acquire the real estate operation and sell off the railroad, but it fell through.

"There is nothing specifically planned," said Anestis, but he acknowledged that there could be some type of spin-off in the future.

"Each [business] has sufficient scale to be a viable and freestanding public entity," he said.

Anestis said there are advantages to keeping the companies together, particularly EPIK while it remains in a development stage and benefits from the stability of its corporate parent.

"If it had been freestanding, it may have had to slow down," Anestis said.

"Clearly there's a possibility there's a spin-off at some point," said Winters, who has confidence that management will make the right decision.

"They want to do the right thing. They want to create value" for shareholders, he said.

Winters and other outside observers gives the new management team high marks for what they've accomplished in the last two years.

"Bob Anestis and his group have really done an excellent job," he said. Thornton, one of Anestis' predecessors, agrees.

"I've been very pleased with what they've been doing. They've brought a lot of positive things to the company," he said.