UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 10-Q

_________________

(Mark One)  

 

[X]

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


For the quarterly period ended June 30,December 31, 2022

 

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: 001-36605

 

_____________________

PATRIOT TRANSPORTATION HOLDING, INC.

(Exact name of registrant as specified in its charter)

_____________________

 

Florida 47-2482414

(State or other jurisdiction of

incorporation or organization)

 (I.R.S. Employer Identification No.)
   

200 W. Forsyth St., 7th Floor,

Jacksonville, florida

 32202
(Address of principal executive offices) (Zip Code)

904-396-5733

(Registrant’s telephone number, including area code)

 

Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $.10 par value PATI NASDAQ 

 

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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  [x]    No  [_]Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated  filer [ ]
   
Non-accelerated filer [ ]  Smaller reporting company [x]
   
Emerging growth company [ ]   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [_] 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  [_]    No  [x]

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

 Class   August 4, 2022February 10, 2023 
 Common Stock   3,484,0043,526,489 
1 
 

 

 

 

 

PATRIOT TRANSPORTATION HOLDING, INC.

FORM 10-Q

QUARTER ENDED JUNE 30,DECEMBER 31, 2022

 

 

 

CONTENTS

Page No.

 

Preliminary Note Regarding Forward-Looking Statements  3
      
  Part I.  Financial Information   
      
Item 1. Financial Statements   
  Consolidated Balance Sheets  4
  Consolidated Statements of Income & Comprehensive Income  5
  Consolidated Statements of Cash Flows  6
  Consolidated Statements of Shareholders’ Equity  7
  Condensed Notes to Consolidated Financial Statements  8
      
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations  13
      
Item 3. Quantitative and Qualitative Disclosures about Market Risks  2017
      
Item 4. Controls and Procedures  2017
      
  Part II.  Other Information   
      
Item 1A. Risk Factors  2118
      
Item 2. Purchase of Equity Securities by the Issuer  2118
      
Item 6. Exhibits  2118
      
Signatures    2219
      
Exhibit 31 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  2421
      
Exhibit 32 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  2724

 

Preliminary Note Regarding Forward-Looking Statements.

 

Certain matters discussed in this report contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those indicated by such forward-looking statements.

 

These forward-looking statements relate to, among other things, capital expenditures, liquidity, capital resources and competition and may be indicated by words or phrases such as “anticipate”, “estimate”, “plans”, “projects”, “continuing”, “ongoing”, “expects”, “management believes”, “the Company believes”, “the Company intends” and similar words or phrases. The following factors and others discussed in the Company’s periodic reports and filings with the Securities and Exchange Commission are among the principal factors that could cause actual results to differ materially from the forward-looking statements: freight demand for petroleum products including the impact of the COVID-19 pandemic and “stay home” orders, as well as increased vehicle fuel efficiency, other impacts on the COVID-19 pandemic on our operations and financial results; the increased popularity of electric vehicles; recessionary and terrorist impacts on travel in the Company’s markets; fuel costs and the Company’s ability to recover fuel surcharges; accident severity and frequency; risk insurance markets; driver availability and cost; the impact of future regulations, including regulations regarding the transportation industry and regulations intended to reduce greenhouse gas emissions; cyber-attacks; availability and terms of financing; competition in our markets; interest rates, and inflation and general economic conditions. However, this list is not a complete statement of all potential risks or uncertainties.

 

These forward-looking statements are made as of the date hereof based on management’s current expectations, and the Company does not undertake an obligation to update such statements, whether as a result of new information, future events or otherwise. Additional information regarding these and other risk factors may be found in the Company’s other filings made from time to time with the Securities and Exchange Commission.

 

 

PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS

PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 June 30, September 30, December 31, September 30,
Assets  2022  2021   2022  2022 
Current assets:          
Cash and cash equivalents $9,949 10,899  $7,808 8,302 

Accounts receivable (net of allowance for

doubtful accounts of $66 and $86, respectively)

 5,504 4,930 

Accounts receivable (net of allowance for

doubtful accounts of $71 and $68, respectively)

 5,737 5,296 
Inventory of parts and supplies 1,228  871  1,037  1,006 
Prepaid tires on equipment 1,400 1,317  1,555 1,486 
Prepaid taxes and licenses 111 448  287 378 
Prepaid insurance 3,100 4,614  3,538 3,927 
Prepaid expenses, other  202  299   148  163 
Total current assets  21,494  23,378   20,110  20,558 
          
Property and equipment, at cost 73,602 77,181  74,183 72,816 
Less accumulated depreciation  53,968  54,497   53,215  52,567 
Net property and equipment  19,634  22,684   20,968  20,249 
          
Operating lease right-of-use assets 2,660 1,949  3,422 2,424 
Goodwill 3,637 3,637  3,637 3,637 
Intangible assets, net 606 756  506 556 
Other assets, net  146  156   139  142 
Total assets $48,177  52,560  $48,782  47,566 
          
Liabilities and Shareholders’ Equity          
Current liabilities:          
Accounts payable $2,539 1,858  $2,057 1,964 
Federal and state taxes payable 1,675 263  791 594 
Accrued payroll and benefits 2,878 2,939  3,047 3,208 
Accrued insurance 1,198 1,105  986 1,053 
Accrued liabilities, other 980 1,742  300 1,010 
Operating lease liabilities, current portion  928  928   890  884 
Total current liabilities  10,198  8,835   8,071  8,713 
          
Operating lease liabilities, less current portion 1,928 1,131  2,918 1,705 
Deferred income taxes 2,976 4,062  3,631 3,631 
Accrued insurance 1,537 1,537  1,476 1,476 
Other liabilities  862  879   848  854 
Total liabilities  17,501  16,444   16,944  16,379 
Commitments and contingencies — —  — — 
Shareholders’ Equity:  

Preferred stock, 5,000,000 shares authorized, of which

250,000 shares are designated Series A Junior

Participating Preferred Stock; $0.01 par value;

None issued and outstanding

 0   0    —   —   

Common stock, $.10 par value; (25,000,000 shares

authorized; 3,484,004 and 3,415,643 shares issued

and outstanding, respectively)

 348 342 

Common stock, $.10 par value; (25,000,000 shares

authorized; 3,501,289 and 3,484,004 shares issued

and outstanding, respectively)

 350 348 
Capital in excess of par value 39,906 39,257  40,118 39,958 
Accumulated deficit (9,660) (3,572) (8,705) (9,190)
Accumulated other comprehensive income, net  82  89   75  71 
Total shareholders’ equity  30,676  36,116   31,838  31,187 
Total liabilities and shareholders’ equity $48,177  52,560  $48,782  47,566 

 

See notes to consolidated financial statements.

4 
 

 

 

PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

                 
  THREE MONTHS ENDED NINE MONTHS ENDED
  JUNE 30, JUNE 30,
  2022 2021 2022 2021
         
Operating revenues $ 23,501   20,855   65,000   60,811 
                 
Cost of operations:                
  Compensation and benefits  9,774   9,200   27,820   26,938 
  Fuel expenses  3,965   2,568   9,843   7,130 
  Repairs & tires  1,502   1,316   4,163   4,033 
  Other operating  739   734   2,193   2,302 
  Insurance and losses  1,918   1,789   6,302   5,840 
  Depreciation expense  1,363   1,662   4,246   5,078 
  Rents, tags & utilities  651   653   2,032   2,052 
  Sales, general & administrative  2,328   2,284   6,945   6,561 
  Corporate expenses  511   426   1,613   1,516 
  Gain on sale of terminal sites  0     (183)  (8,330)  (1,614)
  (Gain) loss on disposition of PP&E  (163)   (46)   (642)   153 
Total cost of operations  22,588   20,403   56,185   59,989 
                 
Total operating profit  913   452   8,815   822 
                 
Interest income and other  13   1   17   4 
Interest expense  (4)   (8)   (13)   (23) 
                 
Income before income taxes  922   445   8,819   803 
Provision for income taxes  151   122   2,099   218 
                 
Net income $771   323  $ 6,720   585 
                 
Unrealized investment losses, net  (4)   0     (7)   0   
                 
Comprehensive income $767   323  $ 6,713   585 
                 
Earnings per common share:                
  Net income -                
    Basic $ 0.22   0.09   1.95   0.17 
    Diluted $ 0.22   0.09   1.85   0.17 
                 
Number of shares (in thousands) used in computing:    
-basic earnings per common share  3,483   3,402   3,453   3,391 
-diluted earnings per common share  3,504   3,420   3,628   3,401 

         
  THREE MONTHS ENDED
  DECEMBER 31,
  2022 2021
         
Operating revenues $22,850   20,571 
         
Cost of operations:        
  Compensation and benefits  10,205   9,084 
  Fuel expenses  3,320   2,718 
  Repairs & tires  1,354   1,216 
  Other operating  689   744 
  Insurance and losses  1,984   1,810 
  Depreciation expense  1,274   1,477 
  Rents, tags & utilities  648   673 
  Sales, general & administrative  2,327   2,465 
  Corporate expenses  495   533 
  Gain on sale of terminal sites  —     (8,330)
  Gain on disposition of PP&E  (66)  (360)
Total cost of operations  22,230   12,030 
         
Total operating income  620   8,541 
         
Interest income and other  65   1 
Interest expense  (4)  (5)
         
Income before income taxes  681   8,537 
Provision for income taxes  196   2,098 
         
Net income $485   6,439 
         
Unrealized investment gain, net  4   —  
         
Comprehensive income $489   6,439 
         
         
Earnings per common share:        
  Net income -        
    Basic  0.14   1.88 
    Diluted  0.14   1.74 
         
Number of shares (in thousands) used in computing:        
 -basic earnings per common share  3,490   3,419 
 -diluted earnings per common share  3,532   3,701 

 

 

 

 

 

 

See notes to consolidated financial statements.

5 

 

 

PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINETHREE MONTHS ENDED JUNE 30,DECEMBER 31, 2022 AND 2021

(In thousands)

(Unaudited)

 

        
 Nine months ended June 30, 
  2022   2021 
Cash flows from operating activities:       
 Net income$6,720   585 

 Adjustments to reconcile net income to net cash

provided by operating activities:

       
   Depreciation and amortization 5,390   6,259 
   Non-cash gain of acquisition-related contingent consideration 0     (16)
   Deferred income taxes (1,086)  (1,483)
   Gain on asset dispositions (9,033)  (1,476)
   Stock-based compensation 340   404 
   Net changes in operating assets and liabilities:       
     Accounts receivable (574)  (303)
     Inventory of parts and supplies (357)  10 
     Prepaid expenses 1,865   1,000 
     Other assets 2   41 
     Accounts payable and accrued liabilities (49)  (1,064)
     Income taxes payable and receivable 1,412   425 
     Operating lease assets and liabilities, net (638)  (820)

     Long-term insurance liabilities and other long-term

liabilities

 (17)   (15) 
Net cash provided by operating activities 3,975   3,547 
        
Cash flows from investing activities:       
 Purchase of property and equipment (2,859)  (739)
 Proceeds from the sale of property, plant and equipment 10,427   2,529 
 Cash held in escrow 0     (581)
Net cash provided by investing activities 7,568   1,209 
        
Cash flows from financing activities:       
 Dividends paid (12,808)  (10,132)
 Proceeds from exercised stock options 315   0   
Net cash used in financing activities (12,493)  (10,132)
        
Net decrease in cash and cash equivalents (950)   (5,376)
Cash and cash equivalents at beginning of period 10,899   15,962 
Cash and cash equivalents at end of the period$9,949   10,586 
        
Supplemental disclosures of cash flow information:       
Cash paid during the period for:       
   Interest$12   21 
   Income taxes 1,770   1,276 
 Non-cash investing and financing activities:       
   Right-of-use assets obtained in exchange for operating lease liabilities 1,453   0   
        

        
 Three months ended December 31, 
  2022   2021 
Cash flows from operating activities:       
 Net income$485   6,439 

 Adjustments to reconcile net income to net cash

provided by operating activities:

       
   Depreciation and amortization 1,422   1,615 
   Non-cash lease expense 230   273 
   Gain on asset dispositions (66)  (8,717)
   Stock-based compensation 45   57 
   Net changes in operating assets and liabilities:       
     Accounts receivable (441)  551 
     Inventory of parts and supplies (31)  (72)
     Prepaid expenses 426   566 
     Other assets 7   3 
     Accounts payable and accrued liabilities (845)  (956)
     Income taxes payable and receivable 197   2,097 
     Operating lease liabilities (9)  (243)

     Long-term insurance liabilities and other long-term

liabilities

 (6)   (8) 
Net cash provided by operating activities 1,414   1,605 
        
Cash flows from investing activities:       
 Purchase of property and equipment (2,132)  (948)
 Proceeds from the sale of property, plant and equipment 107   9,840 
Net cash (used in) provided by investing activities (2,025)  8,892 
        
Cash flows from financing activities:       
 Dividends paid —    (12,808)
 Expired stock options (10)  —  
 Proceeds from exercised stock options 127   112 
Net cash provided by (used in) financing activities 117   (12,696)
        
Net decrease in cash and cash equivalents (494)   (2,199)
Cash and cash equivalents at beginning of period 8,302   10,899 
Cash and cash equivalents at end of the period$7,808   8,700 
        
        
Supplemental disclosures of cash flow information:        
 Cash paid during the period for:       
   Interest$4   4 
   Income taxes —    2 
 Non-cash investing and financing activities:       
   Right-of-use assets obtained in exchange for operating lease liabilities 1,228   1,453 
        
              

 

 

See notes to consolidated financial statements.

 

 

 

PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

THREE AND NINE MONTHS ENDED JUNE 30,DECEMBER 31, 2022 AND 2021

(In thousands)

(Unaudited)

 

                          
        (Accum.   Accumulated  
      Capital in Deficit)   Other Total
   Common Stock  Excess of Retained  Comprehensive Shareholders'
   Shares   Amount  Par Value Earnings  Income, net Equity
                  
                          
Balance as of October 1, 2021  3,415,643  $342  $39,257  $(3,572)   $89  $36,116 
                          
Stock-based compensation  —     —     57   —     —    57 
Exercise of stock options  16,253   1   111   —     —    112 
Expired stock options                   —    —  
Cash dividends paid ($3.75 per share)  —    —    —    (12,808)   —    (12,808)
Net income  —     —    —    6,439    —    6,439 
UR investments gains, net                   —    —  
Balance as of December 31, 2021  3,431,896  $343  $39,425  $(9,941)   $89  $29,916 
                          
Balance as of October 1, 2022  3,484,004  $348  $39,958  $(9,190)   $71  $31,187 
                          
Stock-based compensation  —    —    45   —     —    45 
Exercise of stock options  17,285   2   125   —     —    127 
Expired stock options  —    —    (10)  —     —    (10)
Cash dividends                         
Net income  —    —    —    485     —    485 
Unrealized investment gains, net  —    —    —    —     4   4 
Balance as of December 31, 2022  3,501,289  $350  $40,118  $(8,705)   $75  $31,838 
                          

 

 

                  
        (Accum.   Accumulated  
      Capital in Deficit)   Other Total
   Common Stock  Excess of Retained  Comprehensive Shareholders'
   Shares   Amount  Par Value Earnings  Income, net Equity
                  
Balance as of October 1, 2020  3,377,279  $338  $38,670  $5,935   $105  $45,048 
                          
Stock-based compensation  —   0   185   0    0   185 
Exercise of stock options                        
Director grant  24,867   2   217   0    0   219 
Cash dividends paid ($3.00 per share)  —   0   0   (10,132)   0   (10,132)
Net income  —   0   0   585    0   585 
Unrealized investment loss, net                    
Balance as of June 30, 2021  3,402,146  $340  $39,072  $(3,612)   $105  $35,905 
                          
Balance as of October 1, 2021  3,415,643  $342  $39,257  $(3,572)   $89  $36,116 
                          
Stock-based compensation  —   0   160   0    0   160 
Exercise of stock options  46,377   4   311   0    0   315 
Director grant  21,984   2   178   0    0   180 
Cash dividends paid ($3.75 per share)  —   0   0   (12,808)   0   (12,808)
Net income  —   0   0   6,720    0   6,720 
Unrealized investment losses, net  —   0   0   0    (7)  (7)
Balance as of June 30, 2022  3,484,004  $348  $39,906  $(9,660)   $82  $30,676 
                          
Balance as of April 1, 2021  3,402,146  $340  $39,009  $(3,935)   $105  $35,519 
                          
Stock-based compensation  —   0   63   0    0   63 
Exercise of stock options                    
Director grant                         
Cash dividends                         
Net income  —   0   0   323    0   323 
Unrealized investment loss, net                         
Balance as of June 30, 2021  3,402,146  $340  $39,072  $(3,612)   $105  $35,905 
                          
Balance as of April 1, 2022  3,480,920  $348  $39,831  $(10,431)   $86  $29,834 
                          
Stock-based compensation  —   0   51   0    0   51 
Exercise of stock options                         
Director grant  3,084   0   24   0    0   24 
Cash dividends                         
Net income  —   0   0   771    0   771 
Unrealized investment losses, net  —   0   0   0    (4)  (4)
Balance as of June 30, 2022  3,484,004  $348  $39,906  $(9,660)   $82  $30,676 
                          

 

 

 

 

 

 

7 
 

PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30,DECEMBER 31, 2022

(Unaudited)

 

(1) Description of Business and Basis of Presentation.

 

Description of Business

 

Company’s Business. The business of the Company, conducted through our wholly owned subsidiary, Florida Rock & Tank Lines, Inc., is to transport petroleum and other liquids and dry bulk commodities. We do not own any of the products we haul; rather, we act as a third party carrier to deliver our customers’ products from point A to point B, using predominantly Company employees driving Company owned tractors and tank trailers. Approximately 8586% of our business consists of hauling liquid petroleum products (mostly gas and diesel fuel) from large scale fuel storage facilities to our customers’ retail outlets (e.g., convenience stores, truck stops and fuel depots) where we off-load the product into our customers’ fuel storage tanks for ultimate sale to the retail consumer. The remaining 1514% of our business consists of hauling dry bulk commodities such as cement, lime and various industrial powder products, water and liquid chemicals. In JuneDecember 2022, we employed 316 revenue-producing drivers who operated our fleet of 270268 Company tractors (excluding 3 being placed in service)prepared for sale), 3243 owner operators and 410419 trailers from our 17 terminals and 6 satellite locations in Florida, Georgia, Alabama, and Tennessee.

 

Basis of Presentation

 

These statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (primarily consisting of normal recurring accruals) considered necessary for a fair statement of the results for the interim periods have been included. Operating results for the ninethree months ended June 30,December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2022.2023. The accompanying consolidated financial statements and the information included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the audited financial statements and notes for the year ended September 30, 2021.2022.

 

Operating Revenues

 

Our revenues are primarily based on a set rate per volume of product hauled to arrive at a desired rate per mile traveled. The rate also incorporates the cost of fuel at an assumed price plus fuel surcharges to address the fluctuation in fuel prices. Over time, the fuel surcharge tables in the industry have become so numerous and varied, both by carriers and customers, that they have simply become a part of the overall rating structure to arrive at that desired price per mile by market. We consider fuel surcharge revenue to be revenue from services rather than other revenues. As a result, the Company determined there is no reason to report fuel surcharges as a separate revenue line item and fuel surcharges are reported as part of Operating revenues.

 

 

8 
 

(2) Recently Issued Accounting Standards. None.

 

(3) Related Party Agreements. The Company provides FRP Holdings, Inc. (FRP) certain services including the services of certain shared executive officers. FRP may be considered a related party due to common significant shareholder ownership and shared common officers. A written agreement exists outlining the terms of such services and the boards of the respective companies amended and extended this agreement for one year effective April 1, 2022.

 

The consolidated statements of income reflect charges and/or allocation to FRP Holdings, Inc. for these services of $224,000223,000 and $256,000253,000 for the three months ended June 30, 2022 and 2021, and $700,000 and $947,000 for the nine months ended June 30,December 31, 2022 and 2021, respectively. These charges to FRP are reflected as a reduction to the Company’s corporate expenses.

 

We employ an allocation method to allocate said expenses and thus we believe that the allocations to FRP are a reasonable approximation of the costs related to FRP’s operations, but any such related-party transactions cannot be presumed to be carried out on an arm’s-length basis.

 

(4) Long-Term debt. The Company had 0no long-term debt outstanding at June 30,December 31, 2022 and September 30, 2021.2022. On July 6, 2021, Patriot Transportation Holding, Inc. (the “Company”) entered into the 2021 Amended and Restated Credit Agreement (the “The Amended and Restated Credit Agreement”) with Wells Fargo Bank, N.A. (“Wells Fargo”). The Amended and Restated Credit Agreement modifies the Company's prior Credit Agreement with Wells Fargo, dated January 30, 2015, as amended by that certain First Amendment dated December 28, 2018. The Amended and Restated Credit Agreement establishes a five-year revolving credit facility with a maximum facility amount of $15 million, with a separate sublimit for standby letters of credit. The credit facility limit may be increased to $25 million upon request by the Company, subject to the lender's discretion and the satisfaction of certain conditions. The interest rate under the Amended and Restated Credit Agreement is 1.10% over the Secured Overnight Financing Rate (“SOFR”). A commitment fee of 0.12% per annum is payable quarterly on the unused portion of the commitment. The Amended and Restated Credit Agreement contains certain conditions, affirmative financial covenants and negative covenants including a minimum tangible net worth of $25 million. As of June 30,December 31, 2022, we had 0no outstanding debt borrowed on this revolver, $1,461,0001,854,000 in commitments under letters of credit and $13,539,00013,146,000 available for additional borrowings. The letter of credit fee is 1% and the applicable interest rate for borrowings would have been 2.625.4% on June 30,December 31, 2022.

 

This credit agreement contains certain conditions, affirmative financial covenants and negative covenants including a minimum tangible net worth. The Company was in compliance with all of its loan covenants as of June 30,December 31, 2022. As of June 30,December 31, 2022, the tangible net worth covenant would have limited our ability to pay dividends or repurchase stock with borrowed funds to a maximum of $1,433,000$2,690,000 combined.

 

(5) Earnings per share. Basic earnings per common share are based on the weighted average number of common shares outstanding during the periods. Diluted earnings per common share are based on the weighted average number of common shares and potential dilution of securities that could share in earnings. The differences between basic and diluted shares used for the calculation are the effect of employee and director stock options.

 

The following details the computations of the basic and diluted Earnings per common share (dollars and shares in thousands, except per share amounts):

9 

              
 Three months ended Nine months ended Three Months ended
 June 30, June 30, December 31,
 2022 2021 2022 2021 2022 2021
Weighted average common shares outstanding during the period – shares used for basic earnings per common share  3,483   3,402   3,453   3,391 

Weighted average common shares outstanding

during the period - shares used for basic

earnings per common share

  3,490   3,419 
              
Common shares issuable under share based payment plans which are potentially dilutive  21  18  175  10   42  282 
              
Common shares used for diluted earnings per common share  3,504  3,420  3,628  3,401   3,532  3,701 
              
Net income $771   323   6,720  585  $485  6,439 
              
Earnings per common share:              
-basic $0.22   0.09   1.95  0.17  $0.14  1.88 
-diluted $0.22   0.09   1.85  0.17  $0.14  1.74 

 

 

For the three and nine months ended June 30,December 31, 2022, 529,213 and 27,082241,188 shares attributable to outstanding stock options, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. For the three and nine months ended June 30,December 31, 2021, 424,908 and 500,950no shares attributable to outstanding stock options, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

 

(6) Stock-Based Compensation Plans.

 

Participation in FRP Plans

Prior to the Company’s spin-off from FRP Holdings, Inc. (FRP) in January 2015, the Company's directors, officers and key employees previously were eligible to participate in FRP's 2000 Stock Option Plan and the 2006 Stock Option Plan under which options for shares of common stock were granted to directors, officers and key employees.

 

Post Spin-Off Patriot Incentive Stock Plan

As part of the spin-off transaction, the Board of Directors of the Company adopted the Patriot Transportation Holding, Inc. Incentive Stock Plan (“Patriot Plan”) in January, 2015. In exchange for all outstanding FRP options held on January 30, 2015, existing Company directors, officers and key employees holding option grants in the FRP Stock Option Plan(s) were issued new grants in the Patriot and FRP Plans based upon the relative value of Patriot and FRP immediately following the completion of the spin-off with the same remaining terms. All related compensation expense has been allocated to the Company (rather than FRP) and included in corporate expenses. The number of common shares available for future issuance in the Patriot Plan was 35,811 at June 30,December 31, 2022.

 

On November 15, 2021, the Company paid an extraordinary dividend of $3.75 per share to all shareholders of record. In accordance with Section 4.2 of the 2006 Stock Incentive Plan, Section 11

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of the 2014 Equity Incentive Plan, and Section 409A of the Internal Revenue Code, the Company has adjusted the terms of all stock option grants outstanding and the stock appreciation rights as of the close of business on November 15, 2021.

On December 30, 2020, the Company paid an extraordinary dividend of $3.00 per share to all shareholders of record. In accordance with Section 4.2 of the 2006 Stock Incentive Plan, Section 11 of the 2014 Equity Incentive Plan, and Section 409A of the Internal Revenue Code, the Company has adjusted the terms of all stock option grants outstanding and the stock appreciation rights as of the close of business on December 30, 2020.November 15, 2021.

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In December 2016, the Company approved and issued a long-term performance incentive to an officer in the form of stock appreciation rights. As adjusted for the extraordinary dividend the Company granted 257,009 stock appreciation rights. The adjusted market price of the grant was $8.66, and the executive will get a cash award at age 65 based upon the stock price at that date compared to the adjusted market price of $8.66 but in no event will the award be less than $500,000. The Company is expensing the fair value of the award over the 9.1 year vesting period to the officer’s attainment of age 65, with periodic adjustments to the liability estimate based upon changes in the assumptions used to calculate the liability. The accrued liability under this plan as of June 30,December 31, 2022 and 2021 was $394,000409,000 and $365,000379,000, respectively.

 

The Company recorded the following Stock compensation expense in its consolidated statements of income (in thousands):

 

             
 Three Months ended Nine months ended Three Months ended
 June 30, June 30, December 31,
 2022 2021 2022 2021 2022 2021
Stock option grants $51   63   160   185  $45  57 
Annual director stock award  24  0    180  219   —    —   
Stock based compensation  $75  63  340  404  $45  57 

 

A summary of Company stock options is presented below (in thousands, except share and per share amounts):Summary of stock options

      Weighted   Weighted   Weighted 
  Number   Average   Average   Average 
  of   Exercise   Remaining   Grant Date 
Options Shares   Price   Term (yrs)   Fair Value 
                
Outstanding at October 1, 2021 604,005  $10.80   6.5  $1,931 
  Forfeited (67,975)  6.19       (112)
  Exercised (46,377)  6.81       (88)
  Dividend Adjustment 288,099             
Outstanding at June 30, 2022 (a) 777,752  $7.44   5.5  $1,731 
                
Exercisable at June 30, 2022 534,529  $7.95   4.6  $1,314 
                
Vested during nine months ended June 30, 2022 132,331          $251 
      Weighted   Weighted   Weighted 
  Number   Average   Average   Average 
  of   Exercise   Remaining   Grant Date 
Options Shares   Price   Term (yrs)   Fair Value 
                
Outstanding at October 1, 2022 777,752  $7.44   5.3  $1,731 
  Expired (10,174)  7.31       (22)
  Exercised (17,285)  7.31       (50)
Outstanding at December 31, 2022 750,293  $7.44   5.2  $1,659 
                
Exercisable at December 31, 2022 599,867  $7.77   4.7  $1,413 
                
Vested during three months ended December 31, 2022 100,104          $185 

 

(a)The Company stock option intrinsic values were adjusted as of November 15, 2021, the date of the extraordinary dividend. Stock option activity, including the weighted average exercise price, was not retroactively adjusted.

The aggregate intrinsic value of exercisable Company options was $279,000306,000 and the aggregate intrinsic value of all outstanding in-the-money options was $556,000446,000 based on the Company’s market closing price of $7.447.03 on JuneDecember 30, 2022 less exercise prices.

 

The realized tax benefit from option exercises during the ninethree months ended June 30,December 31, 2022 was $18,0004,000. The unrecognized compensation expense of Patriot options granted as of June 30,December 31, 2022 was $407,000310,000, which is expected to be recognized over a weighted-average period of 2.62.3 years.

 

 

(7) Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to

11 

measure fair value into three broad levels. Level 1 means the use of quoted prices in active markets for identical assets or liabilities. Level 2 means the use of values that are derived principally from or corroborated by observable market data. Level 3 means the use of inputs of those that are unobservable and significant to the overall fair value measurement.

 

At June 30,December 31, 2022 and September 30, 2021,2022, the carrying amount reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and other financial instruments approximate their fair value based upon the short-term nature of these items.

 

 

(8) Contingent liabilities. The Company is involved in litigation on a number of matters and is subject to certain claims which arise in the normal course of business. The Company has retained certain self-insurance risks with respect to losses for third party liability and property damage. There is a reasonable possibility that the Company’s estimate of vehicle and workers’ compensation liability may be understated or overstated but the possible range cannot be estimated. The liability at any point in time depends upon the relative ages and amounts of the individual open claims. In the opinion of management none of these matters are expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

 

(9) Concentrations.

 

Market: The Company primarily serves customers in the petroleum industry in the Southeastern U.S. Significant economic disruption or downturn in this geographic region or within the industry could have an adverse effect on our financial statements.

 

Customers: During the first ninethree months of fiscal 2022,2023, the Company’s ten largest customers accounted for approximately 58.459.5% of our revenue and one of these customers accounted for 18.318.2% of our revenue. Accounts receivable from the ten largest customers was $3,350,0002,990,000 and $2,843,0002,861,000 at June 30,December 31, 2022 and September 30, 20212022 respectively. The loss of any one of these customers could have a material adverse effect on the Company’s revenues and income.

 

Deposits: Cash and cash equivalents are comprised of cash and an FDIC insured investment account at Wells Fargo Bank, N.A. and U.S. Treasury bills. The balance in the cash account may exceed FDIC limits.

 

(10) Unusual or Infrequent Items Impacting Results. On October 18, 2021, we completed the disposition of the Company’s terminal located in Tampa, Florida to Amazon.com Services LLC for a sale price of $9,600,000. The Company reported an after-tax gain of $6,281,000 on the sale. The $6.3 million net income from this sale increased our ability to pay dividends under our credit agreement’s tangible net worth covenant to approximately $13 million.

On November 9, 2022, we extended our corporate headquarters’ lease for five years starting 5/1/23 and recorded the net modification of $1,087,000 in operating lease right-of-use assets, $1,233,000 in operating lease liabilities and $146,000 in receivables for tenant improvement allowance.

 

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

 

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our annual report on Form 10-K. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including the risks and uncertainties described in “Forward-Looking Statements” below and “Risk Factors” on page 7 of our annual report on Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements. We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this quarterly report on Form 10-Q, unless required by law.

 

Overview

The business of the Company, conducted through our wholly owned subsidiary, Florida Rock & Tank Lines, Inc., is to transport petroleum and other liquids and dry bulk commodities. We do not own any of the products we haul, rather, we act as a third party carrier to deliver our customers’ products from point A to point B predominately using Company employees driving Company owned tractors and tank trailers. Approximately 85%86% of our business consists of hauling liquid petroleum products (mostly gas and diesel fuel) from large scale fuel storage facilities to our customers’ retail outlets (e.g., convenience stores, truck stops and fuel depots) where we off-load the product into our customers’ fuel storage tanks for ultimate sale to the retail consumer. The remaining 15%14% of our business consists of hauling dry bulk commodities such as cement, lime and various industrial powder products, water and liquid chemicals. In JuneDecember 2022, we employed 316 revenue-producing drivers who operated our fleet of 270268 Company tractors (excluding 3 being placed in service)prepared for sale), 3243 owner operators and 410419 trailers from our 17 terminals and 6 satellite locations in Florida, Georgia, Alabama, and Tennessee. We experience increased seasonal demand in Florida in the spring and in most of our other locations during the summer months.

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Our industry is characterized by such barriers to entry as the time and cost required to develop the capabilities necessary to handle hazardous material, the resources required to recruit, train and retain drivers, substantial industry regulatory and insurance requirements and the significant capital investments required to build a fleet of equipment, establish a network of terminals and, in recent years, the cost to build and maintain sufficient information technology resources to allow us to interface with and assist our customers in the day-to-day management of their product inventories.

Our industry is experiencing a severe shortage of qualified professional drivers with a tenured safe driving career. The trend we are seeing is that more and more of the applicants are drivers with little to no experience in the tank truck business, short driving careers in other lines of trucking, poor safety records and a pattern of job instability in their work history. As a result, in many markets we serve it is difficult to grow the driver count and, in some cases, to even maintain our historical or desired driver counts.

 

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The Company’s operations are influenced by a number of external and internal factors. External factors include levels of economic and industrial activity in the United States and the Southeast, driver availability and cost, government regulations regarding driver qualifications and limitations on the hours drivers can work, petroleum product demand in the Southeast which is driven in part by tourism and commercial aviation, and fuel costs. Internal factors include revenue mix, equipment utilization, Company imposed restrictions on hiring drivers under the age of 21 or drivers without at least one year of driving experience, auto and workers’ compensation accident frequencies and severity, administrative costs, and group health claims experience.

 

To measure our performance, management focuses primarily on revenue growth, revenue miles, operating revenue per mile, our preventable accident frequency rate (“PAFR”), our operating ratio (defined as our operating expenses as a percentage of our operating revenue), turnover rate (excluding drivers related to terminal closures) and average driver count (defined as average number of revenue producing drivers including owner operators under employment over the specified time period) as compared to the same period in the prior year.

 

 

ITEMNineThree months ended December 31, 2022 vs. 2021
Operating RevenuesUp 6.9%11.1%
Revenue MilesDown 12.1%5.5%
Revenue Per MileUp 21.7%17.5%
PAFR (incidents per 1M miles) goal of 2.01.871.611.55 vs. 1.682.93
Operating Ratio86.4%97.3% vs. 98.6%58.5%
Driver Turnover Rate77.0%73.7% vs. 100.4%80.0%
Avg. Driver Count incl. owner operatorsDown 10.0%2.0%

 

 

ThirdFirst Quarter Highlights

 

·Operating revenue per mile was up $.86,$.66, or 24.2%17.5%, due to rate increases and an improved business mix.

 

Comparative Results of Operations for the Three Months ended December 31, 2022 and 2021

 Three months ended December 31
(dollars in thousands) 2022   %   2021   % 
                
Revenue miles (in thousands) 5,158       5,457     
                
Operating revenues 22,850   100.0%  20,571   100.0%
                
Cost of operations:               
 Compensation and benefits 10,205   44.7%  9,084   44.2%
 Fuel expenses 3,320   14.5%  2,718   13.2%
 Repairs & tires 1,354   5.9%  1,216   5.9%
 Other operating 689   3.0%  744   3.6%
 Insurance and losses 1,984   8.7%  1,810   8.8%
 Depreciation expense 1,274   5.6%  1,477   7.2%
 Rents, tags & utilities 648   2.8%  673   3.3%
14 
 

 

Comparative Results of Operations for the Three Months ended June 30, 2022 and 2021

 Three months ended June 30
(dollars in thousands) 2022   %   2021   % 
                
Revenue miles (in thousands) 5,334       5,869     
                
Operating revenues 23,501   100.0%  20,855   100.0%
                
Cost of operations:               
 Compensation and benefits 9,774   41.6%  9,200   44.1%
 Fuel expenses 3,965   16.9%  2,568   12.3%
 Repairs & tires 1,502   6.4%  1,316   6.3%
 Other operating 739   3.1%  734   3.5%
 Insurance and losses 1,918   8.1%  1,789   8.6%
 Depreciation expense 1,363   5.8%  1,662   8.0%
 Rents, tags & utilities 651   2.8%  653   3.1%
 Sales, general & administrative 2,328   9.9%  2,284   11.0%
 Corporate expenses 511   2.2%  426   2.0%
 Gain on sale of terminal sites —     0.0%  (183)  -0.9%
 Gain on disposition of PP&E (163)  -0.7%  (46)  -0.2%
Total cost of operations 22,588   96.1%  20,403   97.8%
                
Total operating profit$913   3.9%  452   2.2%
 Sales, general & administrative 2,327   10.2%  2,465   12.0%
 Corporate expenses 495   2.2%  533   2.6%
 Gain on sale of terminal sites —     0.0%  (8,330)  -40.5%
 Gain on disposition of PP&E (66)  -0.3%  (360)  -1.8%
Total cost of operations 22,230   97.3%  12,030   58.5%
                
Total operating profit$620   2.7%  8,541   41.5%

 

The Company reported net income of $771,000,$485,000, or $.22$.14 per share for the quarter ended June 30,December 31, 2022, compared to $323,000,$6,439,000, or $.09$1.74 per share, in the same quarter last year. Net income in the prior year third quarterwhich included $133,000,$6,281,000, or $.04$1.70 per share, from after tax gains on real estate sales net of income taxes.sales.

 

Revenue miles were down 535,000,299,000, or 9%5.5%, over the same quarter last year due to a lower average driver count partially resulting primarily from the closure of our Nashville location and turnover (down ~25 drivers from the 3rd quarter of last year).location. Operating revenues for the quarter were $23,501,000,$22,850,000, up $2,646,000$2,279,000 from the same quarter last year due to rate increases, higher fuel surcharges and an improved business mix. Operating revenue per mile was up $.86,$.66, or 24.2%17.5%.

 

Compensation and benefits increased $574,000,$1,121,000, mainly due to the recent increases in driver compensation mostly offset by a lower driver count and non-driver personnel reductions. Gross fuelFuel expense increased $1,397,000$602,000 due to higher diesel prices. Insurance and losses increased $129,000, primarily due to the negative development of a fiscal year 2020 auto liability claim.$174,000. Depreciation expense was down $299,000$203,000 in the quarter. In this quarter the gain on sale of terminal sites was $0 versus $8,330,000 from the sale of Tampa in last year’s 1st quarter. Gain on the sale of assets was $163,000$66,000 versus $46,000$360,000 in the same quarter last year.

 

As a result, operating profit this quarter was $913,000$620,000 compared to $452,000 in the same quarter last year. Excluding the gain on sale of land, the adjusted operating profit was $269,000$8,541,000 in last year’s third1st quarter.

15 

Comparative Results of Operations for the Nine Months ended June 30, 2022 and 2021

 Nine months ended June 30
(dollars in thousands) 2022   %   2021   % 
                
Revenue miles (in thousands) 16,105       18,312     
                
Operating revenues 65,000   100.0%  60,811   100.0%
                
Cost of operations:               
 Compensation and benefits 27,820   42.8%  26,938   44.3%
 Fuel expenses 9,843   15.1%  7,130   11.7%
 Repairs & tires 4,163   6.4%  4,033   6.6%
 Other operating 2,193   3.4%  2,302   3.8%
 Insurance and losses 6,302   9.7%  5,840   9.6%
 Depreciation expense 4,246   6.5%  5,078  ��8.3%
 Rents, tags & utilities 2,032   3.1%  2,052   3.4%
 Sales, general & administrative 6,945   10.7%  6,561   10.8%
 Corporate expenses 1,613   2.5%  1,516   2.5%
 Gain on sale of terminal sites (8,330)  -12.8%  (1,614)  -2.7%
 Loss (gain) on disposition of PP&E (642)  -1.0%  153   0.3%
Total cost of operations 56,185   86.4%  59,989   98.6%
                
Total operating profit$8,815   13.6%  822   1.4%

The Company reported net income of $6,720,000, or $1.85 per share, compared to $585,000, or $.17 per share, in the same period last year. The first nine months’ net income included $6,281,000, or $1.73 per share, from gains on real estate sales net of income taxes. Net income in the prior year nine months included $1,170,000, or $.34 per share, from gains on real estate sales net of income taxes.

Revenue miles were down 2,207,000, or 12%, over the same period last year due to a lower average driver count (down ~49 drivers from the first nine months of last year). Operating revenues for the period were $65,000,000, up $4,189,000 from the same period last year. Operating revenue per mile was up $.72, or 21.7% due to rate increases, higher fuel surcharges and an improved business mix.

Compensation and benefits increased $882,000, mainly due to the increased driver compensation package offset by a lower driver count and non-driver personnel reductions. Gross fuel expense increased $2,713,000 as a result of higher diesel prices. Insurance and losses increased $462,000, primarily as a result of a maximum limit COVID claim ($372,500) and the negative workers’ compensation adjustment from a prior year claim ($380,000). Depreciation expense was down $832,000 in the period. SG&A expense was higher by $384,000 mainly due to a one-time transaction bonus following the sale of the Tampa property for certain members of the management team ($312,000 in SG&A and $82,000 in Corporate for a total of $394,000) and higher legal fees. Gain on the sale of land was $8,330,000 due to the sale of our former terminal location in Tampa, FL compared to $1,614,000 in the same period last year due to the sale of our former terminal location in Pensacola, FL and the sale and partial leaseback of our terminal in Chattanooga, TN. Gain on the sale of assets was $642,000 versus a loss of ($153,000) in the same period last year.

As a result, operating profit this period was $8,815,000 compared to $822,000 in the same period last year. Operating ratio was 86.4 in the first nine months versus 98.6 the same period last year. Excluding

16 

the gain on sale of terminal sites and the one-time transaction bonus, adjusted operating profit for the first nine months was $879,000 as compared to an adjusted operating loss of ($792,000) in the same period last year. The COVID medical claim and the prior year workers’ compensation claim resulted in a total charge of $752,500 in the first nine months of fiscal 2022.

Non-GAAP Financial Measures

To supplement the financial results presented in accordance with GAAP, Patriot presents certain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Patriot uses these non-GAAP financial measures to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. These measures are not, and should not be viewed as, substitutes for GAAP financial measures.

Adjusted Operating Profit

Adjusted operating profit excludes the impact of the gain on sale of terminal sites and the one-time transaction bonus related to the sale. Adjusted operating profit is presented to provide additional perspective on underlying trends in Patriot’s core operating results. A reconciliation between operating profit and adjusted operating profit is as follows:

  Three months ended Nine months ended
  June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Operating profit $913   452   8,815   822 
Adjustments:                
  Gain on sale of terminal sites  —     (183)   (8,330)  (1,614) 
  One-time transaction bonus  —     —     394   —   
Adjusted operating profit (loss) $913   269   879   (792)

 

 

Liquidity and Capital Resources. The Company maintains its operating accounts with Wells Fargo Bank, N.A. and these accounts directly sweep overnight against the Wells Fargo revolver. As of June 30,December 31, 2022, we had no debt outstanding on this revolver, $1,461,000$1,854,000 letters of credit and $13,539,000$13,146,000 available for additional borrowings. The Company expects our fiscal year 20222023 cash generation to cover the cost of our operations and our budgeted capital expendituresexpenditures.

 

Cash Flows - The following table summarizes our cash flows from operating, investing and financing activities for each of the periods presented (in thousands of dollars):

 

  Nine months
  Ended June 30,
  2022 2021
Total cash provided by (used for):        
Operating activities $3,975   3,547 
Investing activities  7,568   1,209 
Financing activities  (12,493)   (10,132) 
Decrease in cash and cash equivalents $(950)  (5,376)
         
Outstanding debt at the beginning of the period  —     —   
Outstanding debt at the end of the period  —     —   
17 
  Three months
  Ended December 31,
  2022 2021
Total cash provided by (used for):        
Operating activities $1,414   1,605 
Investing activities  (2,025)  8,892 
Financing activities  117   (12,696) 
Decrease in cash and cash equivalents $(494)  (2,199)
         
Outstanding debt at the beginning of the period  —     —   
Outstanding debt at the end of the period  —     —   

 

Operating Activities - Net cash provided by operating activities (as set forth in the cash flow statement) was $3,975,000$1,414,000 for the ninethree months ended June 30,December 31, 2022, compared to $3,547,000 $1,605,000

15 

in the same period last year. The total of net income plus depreciation and amortization and less gains on sales of property and equipment decreased $2,291,000increased $2,231,000 versus the same period last year. These changes are described above under "Comparative Results of Operations." Fluctuations in prepaid expenses, accounts payable, and income taxes payable added $2,867,000 in cash provided by operating activities. These changes comprise the majority of the increase in net cash provided by operating activities.

 

Investing Activities – Investing activities include the purchase of property and equipment, any business acquisitions and proceeds from sales of property and equipment upon retirement. For the ninethree months ended June 30,December 31, 2022, cash provided byused in investing activities was $7,568,000$2,025,000 which included the proceeds from retirements net of the purchase of plant, property and equipment.equipment net of the proceeds from retirements. For the ninethree months ended June 30,December 31, 2021, cash provided by investing activities was $1,209,000$8,892,000 which included the proceeds from retirements net of the purchase of plant, property and equipment.

 

Financing Activities – Financing activities primarily include net changes to our outstanding revolving debt, proceeds from the sale of shares of common stock through employee equity incentive plans, and dividends. For the ninethree months ended June 30,December 31, 2022, cash used inprovided by financing activities was $12,493,000$117,000 due to dividends paid offset by proceeds from exercised stock options offset by expired stock options. For the ninethree months ended June 30,December 31, 2021, cash used in financing activities was $10,132,000$12,696,000 primarily due to dividends paid. We had no outstanding long-term debt on June 30,December 31, 2022 or 2021.

 

 

Credit Facilities - The Company has a five-year credit agreement with Wells Fargo Bank N.A. which provides a $15 million revolving line of credit with a $10 million sublimit for stand-by letters of credit. The amounts outstanding under the credit agreement bear interest at a rate of 1.1% over the Secured Overnight Financing Rate (“SOFR”), which may change quarterly based on the Company’s ratio of consolidated total debt to consolidated total capital. A commitment fee of 0.12% per annum is payable quarterly on the unused portion of the commitment. The credit agreement contains certain conditions and financial covenants, including a minimum tangible net worth. As of June 30,December 31, 2022, the tangible net worth covenant would have limited our ability to pay dividends or repurchase stock with borrowed funds to a maximum of $1,433,000$2,690,000 combined.

 

 

Cash Requirements - The Company currently expects its fiscal 20222023 capital expenditures to be approximately $6.0$12.0 million for replacement equipment which we expect to be fully funded by our cash generated from our operations. The amount of capital expenditures through June 30,December 31, 2022 were $2,859,000.

Impact of the COVID-19 Pandemic. The COVID-19 pandemic continues to have some impact on demand for oil and petroleum products in certain markets but that impact was far less in this quarter than had been experienced since the beginning of the pandemic. As an essential business, we have continued to operate throughout the pandemic in accordance with CDC guidance and orders issued by state and local authorities.$2,132,000.

 

 

Summary and Outlook. Since announcing the first significantThe goal in FY 2022 remained on increasing revenues to allow us to raise driver pay, improve our retention and increase backour margins, all of which were accomplished. We were able to add some quality new business with both existing and new customers in April of 2021,

18 

our driver count has stabilized and we have been holding steady at +/- 355 revenue producing drivers. Duringa few markets throughout the first quarter of 2022 we announced additional driver pay increases in all of our markets, with the majority effective February 4, 2022. Driver turnover has fallen to 77% through the first nine months of this year versus 100% in last fiscal year. We continueand hope to see steady activity on driver applicationsthat trend continue in 2023. Inflation continues to challenge us and the average number of drivers in training. In July, we announced additional driver pay increases effective August 5, 2022 in about half of our markets. These increases require drivers to meet certain criteria each month in order to qualify, including minimum average log hours worked and zero unexcused absences to help drive productivity.

We continue to successfully negotiate additional rate increases with most of our customers as we adjust driver pay. These additionalon our existing book of business and will seek to replace business where the rate increases will fully offset the additional driver pay. We continuenegotiations do not allow us to focus on diversifyingcover our product mix with more water and dry bulk drivers.higher expenses.

 

Our balance sheet remained stable with $9.9$7.8 million of cash and cash equivalents as of June 30,December 31, 2022, with no outstanding debt. We replaced 109 tractors during the quarter. For the remainder of fiscal 2023 we are planning to replace 64 tractors (29 are replacing lease units) and ~10 trailers and anticipate a total capital expenditure of ~$12 million in the first half of this fiscal year with plans to buy an additional 20 replacement tractors and a handful of trailers in Q4 putting our current planned capital expenditures at ~$6,000,000 for fiscal year 2022.

2023.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

 

Interest Rate Risk - We are exposed to the impact of interest rate changes through our variable-rate borrowings under the credit agreement. Under the Wells Fargo revolving credit line, the applicable spread for borrowings at June 30,December 31, 2022 was 1.1% over SOFR.

 

Commodity Price Risk - The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, global politics and other market factors. Historically, we have been able to recover a significant portion of fuel price increases from our customers in the form of fuel surcharges. The typical fuel surcharge table provides some margin contribution at higher diesel fuel prices but also results in some margin erosion at the lower diesel fuel prices. The price and availability of diesel fuel can be unpredictable as well as the extent to which fuel surcharges can be collected to offset such increases.

 

 

ITEM 4. CONTROLS AND PROCEDURES

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

 

The Company also maintains a system of internal accounting controls over financial reporting that are designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

 

All control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving the desired control objectives.

 

As of June 30,December 31, 2022, the Company, under the supervision and with the participation of the Company's management, including the CEO, CFO and CAO, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on this evaluation, the Company’s CEO, CFO and CAO concluded that the Company's disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be included in periodic SEC filings.

 

There have been no changes in the Company’s internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

2017 
 

 

PART II. OTHER INFORMATION

 

Item 1A.RISK FACTORS

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2021,2022, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

Item 2. PURCHASES OF EQUITY SECURITIES BY THE ISSUER

 

      (c)  
      Total  
      Number of  
      Shares (d)
      Purchased Approximate
  (a)   As Part of Dollar Value of
  Total (b) Publicly Shares that May
  Number of Average Announced Yet Be Purchased
  Shares Price Paid Plans or Under the Plans
Period Purchased per Share Programs or Programs (1)
 April 1 through April 30   —    $—     —    $5,000,000 
                   
 May 1 through May 31   —    $—     —    $5,000,000 
                   
 June 1 through June 30   —    $—     —    $5,000,000 
                   
 Total   —    $ —     —       
      (c)  
      Total  
      Number of  
      Shares (d)
      Purchased Approximate
  (a)   As Part of Dollar Value of
  Total (b) Publicly Shares that May
  Number of Average Announced Yet Be Purchased
  Shares Price Paid Plans or Under the Plans
Period Purchased per Share Programs or Programs (1)
 October 1 through October 31   —    $—     —    $5,000,000 
                   
 November 1 through November 30   —    $—     —    $5,000,000 
                   
 December 1 through December 31   —    $—     —    $5,000,000 
                   
 Total   —    $ —     —       

 

 

(1)On February 4, 2015, the Board of Directors authorized management to expend up to $5,000,000 to repurchase shares of the Company’s common stock from time to time as opportunities arise. To date, the Company has not repurchased any common stock of the Company.

 

 

Item 6. EXHIBITS

 

(a)Exhibits. The response to this item is submitted as a separate Section entitled "Exhibit Index", on page 23.20.
2118 
 

 

 

SIGNATURES

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.

 

 

   PATRIOT TRANSPORTATION HOLDING, INC.
     
     
Date:  August 8, 2022February 14, 2023 ByROBERT E. SANDLIN 
   Robert E. Sandlin 
   President and Chief Executive Officer
   (Principal Executive Officer)
     
     
  ByMATTHEW C. MCNULTY 
   Matthew C. McNulty 
   Vice President, Chief Operating Officer,  
   Chief Financial Officer and Secretary
   (Principal Financial Officer)
     
     
  ByJOHN D. KLOPFENSTEIN 
   John D. Klopfenstein 
   Controller, Chief Accounting Officer and
   Treasurer
   (Principal Accounting Officer)

 

 

 

 

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PATRIOT TRANSPORTATION HOLDING, INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30,DECEMBER 31, 2022

EXHIBIT INDEX

 

 

(31)(a)Certification of Robert E. Sandlin
(31)(b)Certification of Matthew C. McNulty
(31)(c)Certification of John D. Klopfenstein

 

(32)Certification of Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.XSDXBRL Taxonomy Extension Schema 
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase
104.Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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