Annual Report 2006
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
2006 2005 Change
Revenues $147,374 131,036 12.5
Gross profit $ 29,152 24,993 16.6
Operating profit $ 17,055 15,191 12.3
Income before income taxes $ 13,249 11,945 10.9
Net income $ 8,078 7,609 6.2
Per common share:
Basic $ 2.71 2.58 5.0
Diluted $ 2.62 2.50 4.8
Total Assets $219,215 193,715 13.2
Total Debt $ 63,124 50,900 24.0
Shareholders' Equity $118,052 107,901 9.4
Common Shares Outstanding 3,012 2,965 1.6
Book Value Per Common Share $ 39.20 36.39 7.7
BUSINESS. The Company is engaged in the transportation and real estate
businesses. The Company's transportation business is conducted through two
wholly owned subsidiaries. Florida Rock & Tank Lines, Inc. (Tank Lines) is
a Southeastern U.S. based transportation company concentrating in the
hauling of primarily petroleum products but also other liquid and dry bulk
commodities by tank trucks. SunBelt Transport, Inc. (SunBelt) serves the
flatbed portion of the trucking industry in the Southeastern U.S., hauling
primarily construction materials. The Company's real estate group,
comprised of FRP Development Corp. and Florida Rock Properties, Inc.,
acquires, constructs, leases, operates and manages land and buildings to
generate both current cash flows and long-term capital appreciation. The
real estate group also owns real estate which is leased under mining
royalty agreements or held for investment.
OBJECTIVES. The Company's dual objectives are to continue building a
substantial transportation company and a real estate company providing
sound long-term growth, cash generation and asset appreciation.
TRANSPORTATION
Internal growth is accomplished by a dedicated and competent work
force emphasizing superior service to customers in existing markets,
developing new transportation services for customers in current
market areas and expanding into new market areas.
External growth is designed to broaden the Company's geographic
market area and delivery services by acquiring related businesses.
REAL ESTATE
The growth plan is based on the acquisition, development and management of
commercial warehouse/office rental properties located in appropriate sub-
markets in order to provide long-term positive cash flows and capital
appreciation.
TO OUR SHAREHOLDERS
Fiscal 2006 represented another positive chapter of Patriot progress.
Good results were achieved in both transportation and real estate,
though tempered somewhat at the beginning of the fourth quarter from a
plunging residential construction market.
Consolidated revenues increased 12.5% over last fiscal year to
$147,374,000. Operating profit climbed 12.3%, and income from
continuing operations advanced 6.2% to $8,078,000. Diluted earnings
per common share for fiscal 2006 were $2.62, and book value per common
share increased 7.7% from the previous year to $39.20.
The Company continued to maintain a strong balance sheet. Patriot
completed Fiscal 2006 with a consolidated debt to equity ratio of
about 53%. The Transportation Group carried no debt at year-end, and
approximately 80% of total debt (all real estate-related) was long-
term, fixed-rate non-recourse. Total debt to total consolidated
capital employed was 32% at fiscal year-end.
Transportation Group
Just as in 2005 the Transportation Group began the year with a clear
focus on safety, pricing, manning and utilization.
The Group translates "safety" to mean "accident prevention", and its
key performance metric remains Preventable Accident Frequency Ratio
("AFR"), or incidents per million miles traveled. The companion AFR
for workers compensation lost-time injuries is also employed. AFR's
at both subsidiaries, Florida Rock & Tank Lines, Inc, and SunBelt
Transport, Inc. declined significantly over the prior year.
Substantial portions of the annual cash incentive compensation at all
levels, including CEO of Patriot Transportation Holding, Inc., will
remain linked to targeted AFR performance. AFR goals for Fiscal 2007
at both subsidiaries reflect continuing improvement compared to 2006.
Appropriate increases for freight rates, including fuel surcharges,
were consistently pursued and implemented at both companies. Spiking
diesel fuel prices set even higher records during 2006, and the Group
was able to substantially neutralize most of this expense threat.
Florida Rock & Tank Lines, Inc. continued to address consolidation
among its customer base, especially including petroleum jobbers and
convenience store/retail gasoline distribution. Tank Lines made
substantial progress leveraging its top-quality customer service
reputation with effective regional organization focus and equipment
capacity allocation. As fuel prices across the country hit new highs
during the year, driving mileage responded and gasoline demand
moderated. Such pullbacks led to occasional retail market softness
and slackened hauling across Tank Lines' system. Notwithstanding
periods of weaker demand, tanker revenues remained mostly constrained
as the result of driver recruitment/retention challenges.
On the other hand, freight demand, utilization disruptions and
corresponding pricing softness seemingly went into free-fall for the
Company's flatbed subsidiary, SunBelt Transport, as work resumed
following the Fourth of July holiday. Hauling demand had remained
excellent for the first three fiscal quarters.
The culprit was the sudden, severe contraction in residential
construction in the wake of the national housing bubble collapse.
During the Company's third fiscal quarter, the nation's annualized
rate of single-family housing starts fell over 40%. By the end of
fiscal 2006, the median price of a new, single-family home had
suffered its worst year-over-year decline in more than 35 years.
Earlier in the year SunBelt had opened two new satellite terminals in
Mobile, Alabama and Selma, North Carolina. These new locations served
to anchor and augment efficient freight traffic lanes serving
generally low-cost building materials manufacturers. Excellent
customer service, well-situated operating locations and attendant
flexibilities for truck positioning all are helping SunBelt counter
the headwinds from a sharp market contraction. Simply being able to
locate, service and price freight is acting as a powerful tool for
driver recruitment/retention, another competitive plus.
Consistent driver manning remained challenging throughout 2006 for
both subsidiaries. Driver recruitment and retention will continue a
critical limiting factor for the national trucking industry, and
Patriot's companies are no exception. Both subsidiaries maintain
quite competitive pay and benefits packages while providing safe,
continually updated tractors with safety-related on-board technology.
Our drivers represent our primary sales force, and Patriot believes
great service and concern for the customer first spring from an
atmosphere inside the Company of trust, respect and support for the
individual.
Notwithstanding end-of-year flatbed challenges and diminished national
gasoline consumption, both companies saw equipment utilization
improve. Annual revenue per tractor and per driver increased over the
prior year. Significant replacement and expansion tractor capacity
was received and employed by the Group during 2006.
Credit for such a successful year belongs to the quality and
dedication of the men and women who comprise Florida Rock & Tank Lines
and SunBelt Transport. Deliberate priority on developing superior
organizations to effectively lead, adapt and compete will remain the
mission of each company's senior leadership. The fruits of their
labors will continue providing a foundation for success.
Real Estate Group
Patriot's real estate business completed another busy year.
Beginning the first quarter the Group purchased a 101-acre expansion
site adjacent to the Prince William Parkway near Manassas, Virginia.
Following horizontal development work and related jurisdictional
permitting, the site should accommodate a future build-out of
approximately 1.0 million square feet of office/warehouse product.
This new park, Patriot Business Park, is located with excellent access
to Dulles International Airport and Interstates 66 and 95. Land
development should begin during the spring of 2008.
Feasibility studies and value engineering remain on-going for
Commonwealth Avenue, Jacksonville, Florida. Commonwealth is a 50-
acre, rail-served site very near Jacksonville's western beltway,
Interstate 295. The property should be able to accommodate about
500,000 square feet of warehouse/office build-out.
Patriot announced on August 2 the formation of a 50-50 joint venture
between a subsidiary and Florida Rock Industries, Inc. to develop
approximately 4,400 acres of land near Brooksville, Florida (north of
Tampa). Most of this property had been the focus of a long-term
mining lease with Florida Rock Industries, Inc. However, managements
at both companies believe their respective companies will eventually
realize greater value from real estate development than from mining.
The property will need appropriate regulatory entitlements for real
estate development to occur, and it is likely this entitlement process
could take several years.
Another important event occurred on October 23, 2006. Maryland State
Road 43 ("White Marsh Boulevard") was formally opened, connecting
White Marsh/Interstate 95 to Martin State Airport/Eastern Boulevard.
The Real Estate Group's Windlass Run Business Park, a 179-acre
property near Bird River in southeastern Baltimore County, will have
direct access to the new Route 43. The site is zoned for both
residential and commercial use for 104 developable acres. Plans call
for a commercial build-out of about 515,000 square feet of
warehouse/office product on the 42 developable acres zoned commercial.
Meanwhile plans are being pursued to obtain residential zoning upgrade
to permit optimal development of the remaining 62 developable acres.
Amidst these expansion efforts, progress continued for the group's
existing warehouse/office portfolio. The most recent expansion, 7020
Dorsey Road, was completed and placed in service during the fourth
quarter. This newest addition, comprising 84,760 square feet, is
located in the Group's Hillside Business Park within two miles to the
Baltimore-Washington International Thurgood Marshall Airport. The
building is now 55% leased and increases the Group's total developed
portfolio by about 4% to 2,417,000 square feet, which was 93.3%
occupied at year-end.
Regarding existing business parks, a new building, 2204 Lakeside
Boulevard, is now under construction. This new building will comprise
73,200 square feet. About 342,990 square feet of build-out still
remains at the Group's Lakeside Business Park. Another 40,000 square
feet of build-out is left at Hillside Business Park.
Finally, planning and zoning-related efforts affecting the Group's 5.8
acre undeveloped site in Washington, D.C. along the Anacostia River
have progressed rapidly as construction continues for the new
Washington Nationals Baseball Stadium. The new stadium is located
across the street from Patriot's site and is scheduled to open for
play in 2008.
The Real Estate Group has been steadfastly pursuing a modified Planned
Unit Development ("PUD") zoning for the site that would allow up to
440,000 square feet of residential development and 625,000 square feet
of commercial build-out. The Stadium's proximity to the Patriot
tract, together with construction actively underway on the Stadium
site, should serve as positive catalysts for eventual urban planning
to crystallize for the immediate area, not to mention the greater
Anacostia waterfront. The Company also owns a nearby 2.1 acre
undeveloped site also on the same side and fronting the Anacostia
River.
Conclusion
We at Patriot remain encouraged and excited by progress achieved
across our businesses during 2006.
While keeping a careful eye on developing regional and national
economic fall-out from the housing contraction, we intend to continue
prospecting actively for attractive growth opportunities.
We again express our thanks to the great folks who make Patriot go, to
our customers and to our shareholders for your loyal support.
Respectfully yours,
Edward L. Baker
Chairman
John E. Anderson
President & Chief Executive Officer
OPERATING PROPERTIES
Transportation. During fiscal 2006, the Company's transportation group
operated through two wholly owned subsidiaries. Florida Rock & Tank
Lines, Inc. (Tank Lines) is engaged in hauling petroleum and other
liquid and dry bulk commodities in tank trucks. SunBelt Transport, Inc.
(SunBelt) is engaged primarily in hauling building and construction
materials on flatbed trailers.
Tank Lines operates from terminals in Jacksonville, Orlando, Panama
City, Pensacola, Tampa and White Springs, Florida; Albany, Atlanta,
Augusta, Bainbridge, Columbus, Dalton, Macon and Savannah, Georgia;
Knoxville, Tennessee; Montgomery, Alabama; and Wilmington, North
Carolina. SunBelt's flatbed fleet is based in Jacksonville and Tampa,
Florida; Atlanta and Savannah, Georgia; South Pittsburg, Tennessee;
Mobile, Alabama; and Selma, North Carolina and operates primarily in
the Southeastern U.S.
At September 30, 2006, the transportation group owned and operated a
fleet of 680 trucks and 997 trailers.
During fiscal 2006, the transportation group purchased 198 new tractors
and 89 new trailers and had commitments to purchase an additional 60
tractors and 4 trailers at September 30, 2006. Starting in January
2007, more stringent engine emissions standards mandated by the
Environmental Protection Agency become effective for all newly
manufactured trucks. The Company expects that the engines produced
under the 2007 standards will be less fuel-efficient and have a higher
cost than the current engines. The company accelerated its normal
tractor replacement cycle so that the fiscal 2007 capital expenditure
plan only includes the 60 tractors on order at September 30, 2006 to be
received before January 1, 2007. The fiscal 2007 plan also includes 20
new trailers. The fleet modernization program has resulted in reduced
maintenance expenses, improved operating efficiencies and enhanced
driver recruitment and retention.
Real Estate. The real estate group operates the Company's real estate
and property development activities through subsidiaries.
The Company owns real estate in Florida, Georgia, Virginia, Maryland,
Delaware and Washington, D.C. The real estate owned generally falls
into one of three categories: (i) land and/or buildings leased under
rental agreements or being developed for rental; (ii) land with
construction aggregates deposits, substantially all of which is leased
to Florida Rock Industries, Inc. (FRI) under mining royalty
agreements, whereby the Company is paid a percentage of the revenues
generated or annual minimums; and, (iii) land held for future
appreciation or development.
At September 30, 2006, the Company owned 10 parcels of land containing
219 usable acres in the Mid-Atlantic region of the United States as
follows:
1) Hillside Business Park in Anne Arundel County, Maryland consists of 49
usable acres near the Baltimore-Washington International Airport.
Infrastructure work on the site is substantially completed and four
buildings with a total of 504,740 square feet are completed. Of the four
existing buildings, three are 100% leased/occupied and the fourth,
completed in September 2006 is 55% leased. Upon occupancy of the 55%
tenant in November 2006, this park will be 92% occupied. The Company
plans to develop the final building with a minimum of 40,000 square feet.
2) Lakeside Business Park in Harford County, Maryland consists of 83
usable acres. Seven warehouse/office buildings, totaling 671,241 square
feet, have been constructed and are 100% leased. A 73,200 square foot
building is under construction with completion scheduled for the summer
of 2007. The remaining 26 acres are available for future development
and will have the potential to offer an additional 343,000 square feet
of comparable product.
3) 6920 Tudsbury Road in Baltimore County, Maryland contains 5.3 acres
with 86,100 square feet of warehouse/office space that is 100% leased.
4) 8620 Dorsey Run Road in Howard County, Maryland contains 5.8 acres
with 85,100 square feet of warehouse/office space that is 100% leased.
5) Rossville Business Center in Baltimore County, Maryland contains
approximately 10 acres with 190,517 square feet of warehouse/office
space and is 100% leased.
6) 34 Loveton Circle in suburban Baltimore County, Maryland contains
8.5 acres with 29,921 square feet of office space, which is 100%
leased. The Company occupies 23% of the space and 23% is leased to FRI.
7) Oregon Business Center in Anne Arundel County, Maryland contains
approximately 17 acres with 195,615 square feet of warehouse/office
space, which is 85% leased.
8) Arundel Business Center in Howard County, Maryland contains
approximately 11 acres with 162,796 square feet of warehouse/office
space, which is 86% leased.
9) 100-400 Interchange Boulevard in New Castle County, Delaware contains
approximately 17 acres with 303,006 square feet of warehouse/office
space, which is 92% leased. The remaining 8.8 acres are available for
future development and have the potential to offer an additional 88,000
square feet of comparable product.
10) 1187 Azalea Garden Road in Norfolk, Virginia contains approximately
12 acres with 188,093 square feet of warehouse/office space, which is
100% leased.
Future Planned Developments. At September 30, 2006 the Company owned the
following future development parcels:
1) Windlass Run Business Park, formerly referred to as Bird River,
located in southeastern Baltimore County, Maryland, is a 179-acre tract
of land that will have direct access to Maryland State Road 43 which was
completed in October 2006 and will connect I-95 with Martin State
Airport. This property is currently zoned for residential and commercial
use with 104 developable acres. The Company plans to develop and lease
approximately 515,000 square feet of multiple warehouse/office buildings
on the 42 developable acres zoned for commercial use. Land development
efforts will commence in the spring of 2007. Meanwhile plans are being
pursued to obtain residential zoning upgrade and eventual maximization of
the remaining 62 acres.
As previously reported, a subsidiary of the Company entered into an
agreement to develop and sell to a homebuilder a minimum of 292
residential lots on the residential portion of the future Windlass Run
Business Park. The agreement was subject to a number of contingencies,
including a zoning upgrade followed by an approval by Baltimore County of
a Planned Unit Development (PUD) by July 1, 2006 allowing the development
of a minimum of 292 residential lots. The Company was unable to obtain
the necessary approval by July 1, 2006 and, therefore, has terminated the
agreement with the homebuilder. The Company continues to pursue the
zoning upgrade and to explore development strategies that will ultimately
maximize the market value of this residential property.
2) Patriot Business Park, located in Prince William County, Virginia, is
a 101-acre tract of land which is immediately adjacent to the Prince
William Parkway providing access to I-66. The Company plans to develop
and lease approximately 1,000,000 square feet of multiple
warehouse/office buildings on the property. Land development efforts
will commence in the spring of 2008.
3) Brooksville Quarry LLC. On October 4, 2006, a subsidiary of the
Company (FRP) entered into a Joint Venture Agreement with Florida Rock
Industries, Inc. (FRI) to develop approximately 4,400 acres of land near
Brooksville, Florida. Under the terms of the joint venture, FRP has
contributed its fee interest in approximately 3,500 acres that it leased
to FRI under a long-term mining lease. FRI will continue to mine the
property and pay royalties to FRP for as long as mining does not
interfere with the development of the property.
FRP also reimbursed FRI approximately $3 million for one-half of the
acquisition costs of a 288-acre contiguous parcel recently acquired by
FRI from a third party. The 288-acre parcel was contributed to the Joint
Venture. FRI contributed 553 acres that it owns as well as its leasehold
interest in the 3,500 acres that it leased from FRP.
The joint venture will be jointly controlled by FRI and FRP. Each party
has a mandatory obligation to fund additional capital contributions of up
to $2 million. Distributions will be made on a 50-50 basis.
The property does not yet have the necessary entitlements for real estate
development. Approval to develop real property in Florida entails an
extensive entitlements process involving multiple and overlapping
regulatory jurisdictions and the outcome is inherently uncertain. The
Company currently expects that the entitlement process may take several
years to complete.
4) Anacosta River. The Company owns a 5.8 acre parcel of undeveloped real
estate in Washington D.C. that fronts the Anacostia River and is one
block from the construction site for the new Washington Nationals
Baseball Stadium which is scheduled for completion in 2008. The Company
also owns a nearby 2.1 acre tract on the same bank of the Anacostia
River. Currently, these properties are leased to Florida Rock
Industries, Inc., on a month-to-month basis.
The Company has been pursuing development efforts with respect to the
5.8-acre parcel for several years. The Company previously obtained a
Planned Unit Development (PUD) Zoning approval for development of the
property and has been working to obtain approval of a modified PUD that
would allow up to 625,000 square feet of commercial development and up to
440,000 square feet of residential development. Consideration of a
proposed action by the Zoning Commission is anticipated at their
scheduled public meeting on January 8, 2007. The Company remains
optimistic that its zoning application will be approved while at the same
time recognizing that there is inherent uncertainty in any zoning
approval process.
5) Commonwealth Avenue in Jacksonville, Florida is a 50-acre, rail
accessible site near the western beltway of Interstate-295 capable of
supporting approximately 500,000 square feet of eventual warehouse/office
build-out.
Five Year Summary-Years ended September 30
(Amounts in thousands except per share amounts)
2006 2005 2004 2003 2002
Summary of Operations:
Revenues $147,374 131,036 115,789 102,561 95,898
Gross profit $ 29,152 24,993 22,482 17,590 20,008
Operating profit $ 17,055 15,191 13,430 9,437 11,879
Interest expense $ 3,955 3,276 3,907 3,497 3,164
Income from continuing
operations $ 8,078 7,609 6,096 3,627 5,332
Per Common Share:
Basic $ 2.71 2.58 2.08 1.19 1.70
Diluted $ 2.62 2.50 2.05 1.18 1.68
Discontinued
operations $ - - 14,644 1,023 516
Net income $ 8,078 7,609 20,740 4,650 5,848
Per Common Share:
Basic $ 2.71 2.58 7.08 1.53 1.86
Diluted $ 2.62 2.50 6.97 1.51 1.85
Financial Summary:
Current assets $ 17,412 19,569 30,066 13,965 11,490
Current liabilities $ 18,192 16,221 23,099 11,220 11,972
Property and
equipment, net $192,073 164,936 149,011 139,379 138,367
Total assets $219,215 193,715 186,821 166,643 156,769
Long-term debt $ 60,548 48,468 41,185 57,816 47,290
Shareholders' equity $118,052 107,901 98,972 78,914 79,970
Net Book Value
Per common Share $ 39.20 36.39 33.79 26.91 25.31
Other Data:
Weighted average common
shares - basic 2,980 2,950 2,931 3,033 3,143
Weighted average common
shares - diluted 3,087 3,039 2,976 3,066 3,165
Number of employees 981 925 908 845 861
Shareholders of record 634 679 702 745 767
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
First Second Third Fourth
2006 2005 2006 2005 2006 2005 2006 2005
Revenues $35,423 31,419 35,561 32,059 37,611 33,106 38,779 34,452
Gross profit $ 6,782 5,962 6,837 5,714 7,340 6,852 8,193 6,465
Net income $ 1,898 1,684 1,705 1,573 1,844 2,140 2,631 2,212
Earnings per common share:
Basic $ .64 .57 .57 .53 .62 .72 .88 .75
Diluted $ .62 .56 .56 .52 .59 .70 .85 .72
Market price per common share(a):
High $70.58 44.99 70.71 53.92 93.98 52.76 85.45 68.70
Low $65.92 32.15 62.64 42.46 67.74 42.70 63.07 52.45
(a) All prices represent high and low daily closing prices as
reported by NASDAQ.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Executive Overview
Patriot Transportation Holding, Inc. (the Company) is a holding
company engaged in the transportation and real estate businesses
through wholly owned subsidiaries.
The Company's transportation business operates through two
subsidiaries: Florida Rock & Tank Lines, Inc. (Tank Lines) is engaged
in hauling primarily petroleum related bulk liquids and dry bulk
commodities in tank trailers. SunBelt Transport, Inc. (SunBelt) is
engaged in hauling primarily building and construction materials on
flatbed trailers.
The Company's real estate business is operated through two
subsidiaries: Florida Rock Properties, Inc. and FRP Development Corp.
The Company owns real estate in Florida, Georgia, Virginia, Maryland,
Delaware and Washington, D.C. The real estate owned generally falls
into one of three categories: (i) land and/or buildings leased under
rental agreements or being developed for rental; (ii) land with
construction aggregates deposits, substantially all of which is
leased to Florida Rock Industries, Inc. under mining royalty
agreements; and, (iii) land held for future appreciation or
development.
The Company is a related party to Florida Rock Industries, Inc. (FRI)
because four of the Company's directors are also directors of FRI and
such directors own approximately 25.6% of the stock of FRI and 45.9%
of the stock of the Company. The Company derived 5.6% of its
consolidated revenue from FRI in fiscal 2006.
Net income was $8,078,000 or $2.62 per diluted share in fiscal 2006,
an increase of 6.2% compared to $7,609,000 or $2.50 per diluted share
in fiscal 2005. This increase was generated primarily from the
revenue growth in both the transportation segment and developed
properties while fixed expenses remained steady.
Transportation. The Company generates transportation revenue by
providing over the road hauling services for customers primarily in
the petroleum products (Tank Lines) and building construction
materials industry (SunBelt). The majority of our petroleum products
customers are major oil companies and convenience store chains, who
sell gasoline or diesel fuel directly to the retail market. Our
customers in the building construction industries are generally the
manufacturer of the products who contract with us to deliver goods to
their customers or within their distribution systems.
Our customers generally pay for services based on miles driven. We
also bill for other services that may include stop-offs, pump-offs,
and load tarping. Additionally, we may bill customers a fuel
surcharge that relates to the fluctuations in diesel fuel costs.
Miles hauled and rates per mile are the primary factors impacting
transportation revenue. Generally, changes in miles or rates will
affect revenue. Given the large increases in diesel fuel costs over
the past 30 months, fuel surcharges have become a critical factor
affecting overall transportation revenue.
On long-haul trips we generally bill for miles driven while under
load. We calculate and monitor weekly a loaded mile factor, which is
the ratio of loaded miles to total miles. A decrease in the loaded
mile factor will have a negative effect on operating profit. SunBelt
is acutely affected by the loaded mile factors, as the majority of
its trips are medium-haul (approximately 350 miles). Tank Lines, on
the other hand, primarily engages in short-haul (approximately 95
miles) out-and-back deliveries and generally is paid for round trip
miles.
Operating safely, efficient equipment utilization, appropriate
freight rates, and driver retention are the most critical factors in
maintaining profitable operations. Statistics related to these
factors are monitored weekly and monthly. Operating expenses are
generally split evenly between variable (driver pay, fuel, and
maintenance) and fixed costs (overhead, insurance and depreciation).
As a result, increases in revenue will generally improve our
operating ratios.
The Company's transportation segment faces on-going challenges from
tight driver availability and high diesel fuel expenses. Particular
concerns focus on threats to profitability for its flatbed subsidiary
as the result of poor freight demand, utilization disruption and
pricing softness primarily resulting from the effects of the regional
and national housing contraction.
Real Estate. The Company owns real estate in Florida, Georgia,
Virginia, Maryland, Delaware, and Washington, D.C. The real estate
owned generally falls into one of three categories: (i) land and/or
buildings leased under rental agreements or being developed for
rental; (ii) land with construction aggregates deposits; and (iii)
land held for future appreciation or development.
Revenue from land and/or buildings under rental agreements is
generated primarily from leasing our portfolio of flex
office/warehouse buildings. Our flex office/warehouse product is a
functional warehouse with the ability to configure portions as office
space as required by our tenants. We lease space to tenants who
generally sign multiple year agreements. Growth is achieved by
increasing occupancy and lease rates in existing buildings and by
developing or acquiring new warehouses. We attempt to develop or
purchase properties in areas that have high growth potential and are
accessible to major interstates or other distribution lanes.
The following table shows the total developed square footage and occupancy
rates of our flex office/warehouse parks at September 30, 2006:
Total
Development Location Sq. feet % Occupied
Hillside (1) Anne Arundel Co., MD 504,740 83.2%
Lakeside Harford Co., MD 671,241 100.0%
Tudsbury Baltimore Co., MD 86,100 100.0%
Dorsey Run Howard Co., MD 85,100 100.0%
Rossville Baltimore Co., MD 190,517 100.0%
Loveton Baltimore Co., MD 29,921 100.0%
Oregon Anne Arundel Co., MD 195,615 85.1%
Arundel Howard Co., MD 162,796 85.7%
Interchange New Castle Co., DE 303,006 91.9%
Azalea Garden Norfolk, VA 188,093 100.0%
2,417,129 93.3%
(1) An agreement has been executed to lease 46,650 square feet to
commence on or around November 15, 2006.
In addition to the completed buildings, land is available to
construct additional buildings at Hillside Business Park (40,000
square feet), Lakeside Business Park (416,200 square feet of which
73,200 square feet was under construction on September 30, 2006) and
Interchange (88,000 square feet).
We also own a portfolio of mineable land, substantially all of which
is leased to FRI under long-term mining royalty agreements, whereby
we are paid a percentage of the revenues generated from mined product
sold or annual minimum rents. The mines primarily consist of
construction aggregates, such as stone and sand and calcium deposits.
Properties held for future development include:
Windlass Run Business Park, formerly referred as Bird River, located
in southeastern Baltimore County, Maryland, is a 179-acre tract of
land that will have direct access to Maryland State Road 43 which was
completed in October 2006 and will connect I-95 with Martin State
Airport. This property is currently zoned for residential and
commercial use with 104 developable acres. The Company plans to
develop and lease approximately 515,000 square feet of multiple
warehouse/office buildings on the 42 developable acres zoned for
commercial use. Land development efforts will commence in the spring
of 2007.
The Company owns a 5.8 acre parcel of undeveloped real estate in the
southeast quadrant of Washington, D.C. that fronts the Anacostia River
and a nearby 2.1 acre tract on the same bank of the Anacostia River.
Currently, these properties are leased to FRI on a month-to-month basis.
For several years, the Real Estate Group has been pursuing development
efforts with respect to the 5.8-acre parcel. The Company previously
obtained Planned Unit Development (PUD) Zoning approval for development
of the property and has been working to obtain approval of a modified
PUD that would allow up to 625,000 square feet of commercial development
and up to 440,000 square feet of residential development. If the
modified PUD is approved, the Company would have up to two years to
commence development in accordance with the modified PUD.
The development of this property will be impacted, at least to some
degree, by the proposed construction on nearby property of a new
baseball stadium for the Washington Nationals baseball team scheduled
for completion in early 2008. The Company will monitor ongoing
developments relating to the stadium while continuing to pursue its
existing plans to develop the property.
Commonwealth Avenue is a 50-acre, rail accessible site in
Jacksonville, Florida near the western beltway of Interstate-295
capable of supporting approximately 500,000 square feet of
warehouse/office build-out.
COMPARATIVE RESULTS OF OPERATIONS
Transportation
Fiscal Years ended September 30
(dollars in thousands) ___2006 % _2005 % 2004 %
Transportation revenue $108,800 86% 101,934 90% 94,786 95%
Fuel surcharges 17,452 14% 10,890 10% 4,638 5%
Revenues 126,252 100% 112,824 100% 99,424 100%
Compensation and benefits 48,281 38% 44,185 39% 40,779 41%
Fuel expenses 27,444 22% 21,555 19% 14,779 15%
Insurance and losses 11,107 9% 11,925 11% 11,462 12%
Depreciation expense 8,563 7% 7,920 7% 7,875 8%
Other, net 13,338 10% 12,499 11% 11,317 11%
Cost of operations 108,733 86% 98,084 87% 86,212 87%
Gross profit $ 17,519 14% 14,740 13% 13,212 13%
The Transportation group's goals for 2006 were to operate safely,
improve freight rates and fuel surcharges, recruit and retain
qualified drivers and maximize equipment utilization.
Revenues 2006 vs 2005 - Transportation segment revenues were
$126,252,000, an increase of $13,428,000 or 11.9% over 2005. The
average price paid per gallon of diesel fuel increased $0.45 over
2005 and as a result fuel surcharge revenue increased $6,562,000.
Excluding fuel surcharges, revenue per mile increased 5.0%,
reflecting better pricing for our services. Revenue miles in the
current year were up 1.5% compared to 2005 and were constrained by
low driver availability.
Revenues 2005 vs 2004 - Transportation segment revenues were
$112,824,000, an increase of $13,400,000 or 13.5% over 2004. The
average price paid per gallon of diesel fuel increased $0.55 over
2004 and as a result fuel surcharge revenue increased $6,252,000.
Excluding fuel surcharges, revenue per mile increased 5.1%,
reflecting better pricing for our services. Revenue miles in the
current year were up 2.3% compared to 2004 and were constrained by
low driver availability.
Expenses 2006 vs 2005 - Transportation's cost of operations increased
$10,649,000 to $108,733,000 in 2006, compared to $98,084,000 in 2005.
The primary factors for the increase were increased miles and higher
diesel fuel costs. Average diesel fuel cost per gallon increased
21.9% in 2006 compared to 2005. Compensation and benefits were
higher as a result of increased revenue miles, higher driver pay, and
vacation expense not previously accrued. Insurance and losses for
the year decreased $818,000 primarily due to lower than expected
development of prior year claims. As a percent of revenue cost of
operations decreased slightly.
Expenses 2005 vs 2004 - Transportation's cost of operations increased
$11,872,000 to $98,084,000 in 2005, compared to $86,212,000 in 2004.
The primary factors for the increase were increased miles, higher
diesel fuel costs and an increase in risk insurance costs. Average
diesel fuel cost per gallon increased 36.2% in 2005 compared to 2004.
Compensation and benefits were higher as a result of increased
revenue miles and higher driver pay. As a percent of revenue cost of
operations remained constant.
Real Estate
Fiscal Years ended September 30
(dollars in thousands) ___2006 % 2005 % 2004 %
Royalties and rent $ 6,643 31% 6,143 34% 5,822 36%
Developed property rentals 14,479 69% 12,069 66% 10,543 64%
Total revenue 21,122 100% 18,212 100% 16,365 100%
Mining and land rent expenses 1,633 8% 1,378 8% 1,887 12%
Developed property management 7,856 37% 6,581 36% 5,208 32%
Cost of operations 9,489 45% 7,959 44% 7,095 43%
Gross profit $ 11,633 55% 10,253 56% 9,270 57%
Revenues 2006 vs 2005 - Real Estate revenues increased $2,910,000 or
16.0% in 2006 to $21,122,000. Lease revenues from developed
properties increased $2,410,000 or 20.0% due to an increase in
occupied square footage along with higher rental rates on new leases.
Royalties from mining operations increased as a result of increased
royalties per ton.
Revenues 2005 vs 2004 - Real Estate revenues increased $1,847,000 or
11.3% in 2005 to $18,212,000. Lease revenues from developed
properties increased $1,526,000 or 14.5% due to an increase in
occupied square feet resulting from the completion of a pre-leased
74,600 square foot building in January 2005, the purchase of a fully
leased 188,000 square foot building in October 2004, and the
completion of a pre-leased 145,180 square foot building in July 2005.
Royalties from mining operations increased 5.5% during 2005 as a
result of increased royalties per ton.
Expenses 2006 vs 2005 - Real Estate segment expenses increased to
$9,489,000 in 2006, compared to $7,959,000 in 2005. Expenses related
to development activities increased as a result of new building
additions, increased staffing and professional fees to facilitate
continuing portfolio expansion.
Expenses 2005 vs 2004 - Real Estate segment expenses increased
slightly to $7,959,000 in 2005, compared to $7,095,000 in 2004.
Expenses related to development activities increased as a result of
the new building additions.
Consolidated Results
Gross Profit - Consolidated gross profit was $29,152,000 in 2006
compared to $24,993,000 in 2005, an increase of 16.6%. Consolidated
gross profit was $24,993,000 in 2005 compared to $22,482,000 in 2004,
an increase of 11.2%.
Selling, general and administrative expense - Selling, general and
administrative expenses for 2006 increased $2,295,000 to $12,097,000
or 23.4%. The increase included $968,000 from stock compensation
expense as required by SFAS 123R (see Note 8 to the Consolidated
Financial Statements), $336,000 of audit fees and Sarbanes-Oxley
compliance work and $269,000 of vacation expense not previously
accrued (see Note 12 to the Consolidated Financial Statements). SG&A
expense was 8.2% of revenue for fiscal 2006 compared to 7.5% for
fiscal 2005.
Selling, general and administrative expenses for 2005 increased
$750,000 or 8.3% to $9,802,000 or 7.5% of consolidated revenues. The
increase was due to professional fees, management incentive
compensation, and additional staffing.
Interest expense - Interest expense for 2006 increased $679,000 to
$3,955,000 due to increased long-term debt and higher borrowings
under the revolving credit agreement supporting recent capital
additions in real estate and new truck purchases. Interest expense
decreased $631,000 in 2005 from 2004 due to prepayment in 2004 of
high rate long-term debt and lower average borrowings under the
revolving credit agreement.
Income taxes - Income tax expense increased $835,000 to $5,171,000
compared to $4,336,000 in 2005. This is due to higher earnings
before taxes and an increase in the effective tax rate to 39.0%
versus 36.3% last year. Income tax expense increased $457,000 to
$4,336,000 in 2005 compared to $3,879,000 in 2004 due to higher
earnings in 2005 partially offset by a decrease in the effective tax
rate to 36.3% in 2005 versus 39.0% in 2004. The decrease in the
effective tax rate in 2005 over 2004 was due to a $203,000 reduction
in state income tax reserves from the expiration of certain
contingencies.
Income from continuing operations - Income from continuing operations
was $8,078,000 or $2.62 per diluted share in fiscal 2006, an increase
of 6.2% compared to $7,609,000 or $2.50 per diluted share in fiscal
2005. Income from continuing operations increased 24.8% in 2005 from
$6,096,000 or $2.05 per diluted share in fiscal 2004.
Discontinued Operations - The Company had three sales of real estate
in 2004 which have been accounted for as discontinued operations, in
accordance with SFAS 144. The income from the operations and gains on
sale of these components have been reflected in the consolidated
income statement as income from discontinued operations, net of
income taxes. The after-tax gain from the sale of the properties in
2004 was $14,456,000. The after-tax net income from the operations of
the sold properties was $188,000 for 2004.
Net income - Net income increased to $8,078,000 in fiscal 2006 from
$7,609,000 in 2005 as a result of revenue growth in both the
transportation segment and developed properties while fixed expenses
remained steady. Fiscal 2005 net income was down from $20,740,000 in
2004 as a result of the gains from property sales in 2004 classified
as discontinued operations. Diluted earnings per share increased to
$2.62 in fiscal 2006 from $2.50 in 2005, and were $6.97 in 2004.
LIQUIDITY AND CAPITAL RESOURCES
For fiscal 2006, the Company used cash provided by operating
activities of $22,772,000, borrowings of $12,452,000 under its
Revolver, additional long-term debt of $2,084,000 and proceeds of
$1,688,000 from the sales of property and equipment to purchase
$40,601,000 in property and equipment and to make scheduled payments
of $2,312,000 of long-term debt.
For fiscal 2005, the Company used cash provided by operating
activities of $10,535,000, proceeds of $1,377,000 from the sales of
property and equipment, $16,553,000 of cash released from escrow,
$877,000 in stock options exercised and $7,003,000 in additional
long-term borrowings to fund the $28,574,000 purchase of property and
equipment, and the $5,004,000 reduction in revolving debt and
amortization of long-term debt.
During 2004 the Company sold three properties for $29,628,000 in
cash, resulting in before tax gains of $23,652,000. The net proceeds
of $29,471,000 from the sale of these properties were placed in
escrow in anticipation of utilizing the funds to purchase replacement
property in tax deferred exchanges under IRC Section 1031. Due to a
competitive real estate market for suitable exchange properties, not
all of the gains resulting from the property sales could be utilized
under Section 1031. During fiscal 2004, $11,417,000 was used in
qualified exchanges and $3,265,000 was released from escrow for
general use leaving a balance in escrow of $16,553,000 at September
30, 2004. On October 1, 2004, $7,150,000 of the escrowed funds were
used in a qualified exchange and the remaining funds of $9,340,000
were released for general use.
During fiscal 2006 the Company converted a construction loan into a
15-year non-recourse mortgage of $11,800,000 with an interest rate of
6.12%. The construction loan was used to develop a 145,000 square
foot build-to-suit warehouse/office building pursuant to a 15-year
triple net lease.
The Company has a $37,000,000 revolving credit agreement (the
Revolver) of which $24,548,000 was available at fiscal year end. The
Revolver contains restrictive covenants including limitations on
paying cash dividends. Under these restrictions, as of September 30,
2006, $24,260,000 of consolidated retained earnings was available for
payment of dividends.
The Company had $18,887,000 of irrevocable letters of credit
outstanding at September 30, 2006. Most of the letters of credit are
irrevocable for a period of one year and are automatically extended
for additional one-year periods unless notified by the issuing bank
not less than thirty days before the expiration date. Substantially
all of these were issued for workers' compensation and liability
insurance retentions. If these letters of credit are not extended the
Company will have to find alternative methods of collateralizing or
funding these obligations.
The Board of Directors has authorized management to repurchase shares
of the Company's common stock from time to time as opportunities may
arise. No shares were repurchased during fiscal 2006 or fiscal 2005.
During fiscal 2004, the company repurchased 77,533 shares for
approximately $2,510,000 at an average price of $32.37 per share. At
September 30, 2006 the Company had $3,490,000 authorized for
repurchase of shares.
The Company has committed to make an additional capital contribution
of up to $2 million dollars to Brooksville Quarry, LLC in connection
with a joint venture with FRI (see Transactions with Related
Parties).
The Company currently expects its fiscal 2007 capital expenditures to
be approximately $29,000,000 ($21,000,000 for real estate development
expansion and $8,000,000 for transportation segment expansion and
replacement equipment). Depreciation and depletion expense is
expected to be approximately $13,617,000.
The Company expects that cash flows from operating activities,
secured financing on existing and planned real estate projects, and
the funds available under its revolving credit agreement will be
adequate to finance these capital expenditures and its working
capital needs for the next 12 months and the foreseeable future.
OFF-BALANCE SHEET ARRANGEMENTS
Except for the letters of credit described above under "Liquidity and
Capital Resources," the Company does not have any off balance sheet
arrangements that either have, or are reasonably likely to have, a
current or future material effect on its financial condition.
CRITICAL ACCOUNTING POLICIES
Management of the Company considers the following accounting policies
critical to the reported operations of the Company:
Accounts Receivable Valuation. The Company is subject to customer
credit risk including bankruptcies that could affect the collection
of outstanding accounts receivable and straight-lined rents. To
mitigate these risks, the Company performs credit reviews on all new
customers and periodic credit reviews on existing customers. A
detailed analysis of late and slow pay customers is prepared monthly
and reviewed by senior management. The overall collectibility of
outstanding receivables and straight-lined rents is evaluated and
allowances are recorded as appropriate.
Revenue and Expense Recognition. Transportation revenue, including
fuel surcharges, is recognized when there is an agreement in place,
the services have been rendered to customers or delivery has
occurred, the pricing is fixed or determinable and collectibility is
reasonably assured. Transportation expenses are recognized as
incurred.
Real estate rental revenue and mining royalties are generally
recognized when earned under the leases. Rental income from leases
with scheduled increases during their term is recognized on a
straight-line basis over the term of the lease. Reimbursements of
expenses, when provided in the lease, are recognized in the period
that the expenses are incurred.
Sales of real estate are recognized when the collection of the sales
price is reasonably assured and when the Company has fulfilled
substantially all of its obligations, which are typically as of the
closing date.
Property and Equipment. Property and equipment is recorded at cost
less accumulated depreciation. Provision for depreciation of
property, plant and equipment is computed using the straight-line
method based on the following estimated useful lives:
Years
Buildings and improvements 7-39
Revenue equipment 7-10
Other equipment 3-10
Depletion of sand and stone deposits is computed on the basis of
units of production in relation to estimated reserves.
The Company periodically reviews property and equipment and
intangible assets for potential impairment. If this review
indicated that the carrying amount of the asset may not be
recoverable, the Company would estimate the future cash flows
expected with regards to the asset and its eventual disposition.
If the sum of these future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the assets,
the Company would record an impairment loss based on the fair value
of the asset. The Company performs an annual impairment test on
goodwill.
All direct and indirect costs, including interest and real estate
taxes, associated with the development, construction, leasing or
expansion of real estate investments are capitalized as a cost of
the property. Included in indirect costs is an estimate of
internal costs associated with development and rental of real
estate investments. Changes in estimates or assumptions could have
impact on financials.
Risk Insurance. The nature of the Transportation business subjects
the Company to risks arising from workers' compensation, automobile
liability, and general liability claims. The Company retains the
exposure on certain claims of $250,000 to $500,000 and has third
party coverage for amounts exceeding the retention. The Company
expenses during the year an estimate of risk insurance losses.
Periodically, an analysis is performed, using historical and
projected data, to determine exposure for claims incurred and
reported but not yet settled and for claims incurred but not
reported. On an annual basis the Company obtains an independent
actuarial analysis to assist in estimating the losses expected on
such claims. The Company attempts to mitigate losses from insurance
claims by maintaining safe operations and providing mandatory safety
training. Significant changes in assumptions or claims history could
have a material impact on our operations.
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations as of
September 30, 2006:
Payments due by period
Less than 1-3 3-5 More than
Total 1 year years years 5 years
Mortgages Including Interest $77,278 6,363 11,938 11,938 47,039
Revolving Debt 12,452 - - 12,452 -
Operating Leases 287 287 - - -
Purchase Commitments 8,188 8,188 - - -
Other Long-Term Liabilities 1,003 75 167 158 603
Total obligations $99,208 14,913 12,105 24,548 47,642
INFLATION
Historically, the Company has been able to recover inflationary cost
increases in the transportation group through increased freight rates.
It is expected that over time, justifiable and necessary rate
increases will be obtained. Substantially all of the Company's royalty
agreements are based on a percentage of the sales price of the related
mined items. Minimum royalties and substantially all lease agreements
provide escalation provisions.
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 these 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 other risk factors 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: driver availability
and cost; the impact of future regulations regarding the
transportation industry; availability and terms of financing; freight
demand for petroleum products including recessionary and terrorist
impacts on travel in the Company's markets; freight demand for
building and construction materials in the Company's markets; risk
insurance markets; competition; general economic conditions; demand
for flexible warehouse/office facilities in the Baltimore/Washington
area; ability to obtain zoning and entitlements necessary for property
development; interest rates; levels of construction activity in FRI's
markets; fuel costs; and inflation. 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
Annual Report on Form 10-K and in other filings made from time to time
with the Securities and Exchange Commission.
CONSOLIDATED STATEMENTS OF INCOME - Years ended September 30
(In thousands except per share amounts)
2006 2005 2004
Revenues:
Transportation $126,252 112,824 99,424
Real estate 21,122 18,212 16,365
Total revenues (including revenue from
related parties of $8,321, $6,728, and
$7,623, respectively) 147,374 131,036 115,789
Cost of operations:
Transportation 108,733 98,084 86,212
Real estate 9,489 7,959 7,095
Gross profit 29,152 24,993 22,482
Selling, general and administrative expense
(including expenses paid to related party
of $191, $174, and $372, respectively) 12,097 9,802 9,052
Operating profit 17,055 15,191 13,430
Interest income and other 149 30 452
Interest expense (3,955) (3,276) (3,907)
Income from continuing operations
before income taxes 13,249 11,945 9,975
Provision for income taxes 5,171 4,336 3,879
Income from continuing operations 8,078 7,609 6,096
Discontinued operations (Note 3):
Income from operations, net of tax - - 188
Gain on sale of properties, net of tax - - 14,456
Discontinued operations - - 14,644
Net income $ 8,078 7,609 20,740
Basic earnings per common share:
Income from continuing operations $ 2.71 2.58 2.08
Discontinued operations - - 5.00
Net income $ 2.71 2.58 7.08
Diluted earnings per common share:
Income from continuing operations $ 2.62 2.50 2.05
Discontinued operations - - 4.92
Net income $ 2.62 2.50 6.97
Number of weighted average shares (in thousands) used in computing:
- basic earnings per common share 2,980 2,950 2,931
- diluted earnings per common share 3,087 3,039 2,976
See accompanying notes.
CONSOLIDATED BALANCE SHEETS - As of September 30
(In thousands, except share data)
2006 2005
Assets
Current assets:
Cash and cash equivalents $ 154 2,966
Accounts receivable (including related party of
$546 and $288 and net of allowance for doubtful
accounts of $359 and $525, respectively) 11,761 11,731
Inventory of parts and supplies 854 799
Deferred income taxes 870 392
Prepaid tires on equipment 2,230 1,959
Prepaid taxes and licenses 1,216 1,291
Prepaid insurance 260 259
Prepaid expenses, other 67 172
Total current assets 17,412 19,569
Property and equipment, at cost:
Land 76,239 62,304
Buildings 103,498 97,455
Equipment 89,778 79,167
Construction in progress 8,120 7,799
277,635 246,725
Less accumulated depreciation and depletion 85,562 81,789
192,073 164,936
Real estate held for investment, at cost 1,093 1,093
Goodwill 1,087 1,087
Unrealized rents 2,201 1,608
Other assets 5,349 5,422
Total assets $219,215 193,715
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 5,670 5,674
Federal and state income taxes payable 20 642
Accrued payroll and benefits 5,160 3,247
Accrued insurance reserves 4,297 3,774
Accrued liabilities, other 469 452
Long-term debt due within one year 2,576 2,432
Total current liabilities 18,192 16,221
Long-term debt 60,548 48,468
Deferred income taxes 14,968 14,394
Accrued insurance reserves 5,104 4,993
Other liabilities 2,351 1,738
Commitments and contingencies (Notes 14 and 15)
Shareholders' equity:
Preferred stock, no par value;
5,000,000 shares authorized; none issued - -
Common stock, $.10 par value;
25,000,000 shares authorized; 3,011,629
and 2,965,075 shares issued and
outstanding, respectively 301 297
Capital in excess of par value 29,169 27,100
Retained earnings 88,582 80,504
Total shareholders' equity 118,052 107,901
Total liabilities and shareholders' equity $219,215 193,715
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Years ended September 30
(In thousands)
Cash flows from operating activities: 2006 2005 2004
Net income $ 8,078 7,609 20,740
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 13,510 12,479 12,230
Deferred income taxes 96 (2,421) 4,916
Gain on sale of equipment and real estate (1,172) (757) (24,055)
Tax benefit from stock option exercise - 443 339
Stock-based compensation 968 - -
Net changes in operating assets and liabilities:
Accounts receivable (30) (2,608) (1,791)
Inventory of parts and supplies (55) (157) 28
Prepaid expenses and other current assets (92) (132) (138)
Other assets (1,082) (1,916) (883)
Accounts payable and accrued liabilities 2,449 4,677 (994)
Income taxes payable (622) (6,157) 6,793
Long-term insurance reserves and other
long-term liabilities 724 (525) (135)
Net cash provided by operating activities 22,772 10,535 17,050
Cash flows from investing activities:
Purchase of transportation group property
and equipment (19,806) (11,063) (4,350)
Purchase of real estate group property
and equipment (20,795) (17,511) (17,619)
Cash held in escrow - 16,553 (14,758)
Proceeds from the sale of real estate held for
investment and property and equipment 1,688 1,377 30,600
Net cash used in investing activities (38,913) (10,644) (6,127)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 2,084 7,003 11,213
Net increase (decrease) in revolving debt 12,452 (3,201) (16,799)
Repayment of long-term debt (2,312) (1,803) (4,874)
Excess tax benefits from exercise of
stock options 406 - -
Exercise of employee stock options 699 877 1,489
Repurchase of Company stock - - (2,510)
Net cash provided by (used in)
financing activities 13,329 2,876 (11,481)
Net (decrease) increase in
cash and cash equivalents (2,812) 2,767 (558)
Cash and cash equivalents at beginning of year 2,966 199 757
Cash and cash equivalents at end of year $ 154 2,966 199
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 3,916 3,272 3,977
Income taxes $ 5,941 12,472 1,159
See accompanying notes.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY - Years ended September 30
(In thousands, except share amounts)
Capital in
Common Stock Excess of Retained
Shares Amount Par Value Earnings
Balance at October 1, 2003 2,932,708 $293 $24,614 $54,007
Shares purchased and retired (77,533) (7) (651) (1,852)
Exercise of stock options 73,900 7 1,821 -
Net income - - - 20,740
Balance at September 30, 2004 2,929,075 293 25,784 72,895
Exercise of stock options 36,000 4 1,316 -
Net income - - - 7,609
Balance at September 30, 2005 2,965,075 297 27,100 80,504
Exercise of stock options 26,454 3 696 -
Excess tax benefits from
exercise of stock options - - 406 -
Stock option compensation - - 525 -
Shares granted to Directors 4,500 - 286 -
Restricted stock awards 15,960 1 (1) -
Restricted stock forfeitures (360) - - -
Restricted stock expense - - 157 -
Net income - - - 8,078
Balance at September 30, 2006 3,011,629 $301 $29,169 $88,582
See accompanying notes.
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
1. Accounting Policies.
ORGANIZATION - Patriot Transportation Holding, Inc. (Company) is engaged in
the transportation and real estate businesses. The Company's transportation
business is conducted through two wholly owned subsidiaries. Florida Rock &
Tank Lines, Inc. (Tank Lines) is a Southeastern transportation company
concentrating in the hauling by motor carrier of primarily petroleum related
bulk liquids and dry bulk commodities. SunBelt Transport, Inc. (SunBelt)
serves the flatbed portion of the trucking industry primarily in the
Southeastern U.S., hauling primarily construction materials. The Company's
real estate group, through subsidiaries, acquires, constructs, leases,
operates and manages land and buildings to generate both current cash flows
and long-term capital appreciation. The real estate group also owns real
estate that is leased under mining royalty agreements or held for investment.
CONSOLIDATION - The consolidated financial statements include the accounts of
the Company and its subsidiaries, all of which are wholly owned. All
significant intercompany transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments with maturities of three months or less at time of purchase to be
cash equivalents.
INVENTORY - Inventory of parts and supplies is valued at the lower of cost
(first-in, first-out) or market.
TIRES ON EQUIPMENT - The value of tires on tractors and trailers is accounted
for as a prepaid expense and amortized over the life of the tires as a
function of miles driven.
REVENUE AND EXPENSE RECOGNITION - Transportation revenue, including fuel
surcharges, is recognized when the services have been rendered to customers
or delivery has occurred, the pricing is fixed or determinable and
collectibility is reasonably assured. Transportation expenses are recognized
as incurred.
Real estate rental revenue and mining royalties are generally recognized when
earned under the leases. Rental income from leases with scheduled increases
during their term is recognized on a straight-line basis over the term of the
lease. Reimbursements of expenses, when provided in the lease, are recognized
in the period that the expenses are incurred.
Sales of real estate are recognized when the collection of the sales price is
reasonably assured and when the Company has fulfilled substantially all of
its obligations, which are typically as of the closing date.
Sales are recorded net of discounts and provisions for estimated allowances.
We estimate allowances on an ongoing basis by considering historical and
current trends. We record these costs as a reduction to net revenue. We
estimate the net collectibility of our accounts receivable and establish an
allowance for doubtful accounts based upon this assessment. Specifically, we
analyze the aging of accounts receivable balances, historical bad debts,
customer concentrations, customer credit-worthiness, current economic trends
and changes in customer payment terms.
PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost less
accumulated depreciation. Provision for depreciation of property, plant and
equipment is computed using the straight-line method based on the following
estimated useful lives:
Years
Buildings and improvements 7-39
Revenue equipment 7-10
Other equipment 3-10
Depletion of sand and stone deposits is computed on the basis of units of
production in relation to estimated reserves.
The Company recorded depreciation and depletion expenses for 2006, 2005 and
2004 of $12,948,000, $12,029,000 and $11,712,000, respectively.
The Company periodically reviews property and equipment and intangible
assets for potential impairment. If this review indicated that the
carrying amount of the asset might not be recoverable, the Company would
estimate the future cash flows expected with regards to the asset and its
eventual disposition. If the sum of these future cash flows (undiscounted
and without interest charges) is less than the carrying amount of the
assets, the Company would record an impairment loss based on the fair value
of the asset. The Company performs an annual impairment test on goodwill.
All direct and indirect costs, including interest and real estate taxes,
associated with the development, construction, leasing or expansion of real
estate investments are capitalized as a cost of the property. Included in
indirect costs is an estimate of internal costs associated with development
and rental of real estate investments.
The cost of routine repairs and maintenance to property and equipment is
expensed as incurred.
INSURANCE - The Company has a $250,000 to $500,000 self-insured retention
per occurrence in connection with certain of its workers' compensation,
automobile liability, and general liability insurance programs ("risk
insurance"). The Company is self-insured for its employee health insurance
benefits and carries stop loss coverage of $200,000 per covered participant
per year. The Company accrues monthly the estimated cost in connection with
its portion of its risk and health insurance losses. Claims paid by the
Company are charged against the reserve. Additionally, the Company
maintains a reserve for incurred but not reported claims based on
historical analysis of such claims.
INCOME TAXES - Deferred tax assets and liabilities are recognized based on
differences between financial statement and tax bases of assets and
liabilities using presently enacted tax rates. Deferred income taxes result
from temporary differences between pre-tax income reported in the financial
statements and taxable income.
STOCK BASED COMPENSATION - In December 2004, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 123(R), Share-Based Payments
("SFAS No. 123(R)"), revising SFAS No. 123, Accounting for Stock Based
Compensation; superseding Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock Issued to Employees and its related implementation
guidance; and amending SFAS No. 95, Statement of Cash Flows. SFAS No.
123(R) requires companies to recognize the grant date fair value of stock
options and other equity-based compensation issued to employees in its
income statement. We adopted this statement effective October 1, 2005. Our
adoption of SFAS No. 123(R) impacted our results of operations by
increasing salaries, wages, and related expenses, increasing additional
paid-in capital, and increasing deferred income taxes. See Footnote 8 for
current year impact to the Company.
EARNINGS PER COMMON 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 only difference between basic and diluted
shares used for the calculation is the effect of employee and director
stock options and restricted stock.
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United State requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are
capitalized. Expenditures that relate to an existing condition caused by
past operations, and which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Estimation of such liabilities includes an
assessment of engineering estimates, continually evolving governmental laws
and standards, and potential involvement of other potentially responsible
parties.
NEW ACCOUNTING PRONOUNCEMENTS - In March 2005, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation No. 47, Accounting for
Conditional Asset Retirement Obligations (FIN 47) which clarifies that the
term "conditional asset retirement obligation" as used in FASB Statement No.
143, Accounting for Asset Retirement Obligations (SFAS 143), refers to a
legal obligation to perform an asset retirement activity in which the timing
and/or method of settlement are conditioned on a future event that may or
may not be within the control of the entity. An entity is required to
recognize a liability for the fair value of a conditional asset retirement
obligation if the fair value of the liability can be reasonably estimated.
All underground storage tanks were considered to have indeterminable lives
when the Company adopted SFAS 143. The Company was required to adopt FIN 47
in fiscal 2006 and has recorded an estimated liability of $120,000 and a
corresponding increase to the carrying value of the related long-lived
assets of $120,000 for the future cost of removal of the underground storage
tanks in accordance with the provisions of SFAS No. 143 and will recognize
the cost over the tank's estimated useful life. The cumulative effect of
this accounting change resulted in a one-time pretax charge of $112,000
($68,000 net of deferred tax benefit). This represents $.02 for both
diluted and basic earnings per common share. The Company will depreciate
the balance of $8,000 over the remaining estimated life of the tanks. The
$112,000 cost of this accounting change was included in cost of operations.
In May 2005, the FASB issued Statement No. 154, Accounting Changes and Error
Corrections ("SFAS 154"). This Statement requires retrospective application
for voluntary changes in accounting principles unless it is impracticable to
do so. SFAS 154's retrospective application requirement replaces APB Opinion
No. 20's, Accounting Changes, requirement to recognize most voluntary
changes in accounting principle by including in net income of the period of
the change the cumulative effect of changing to the new accounting
principle. SFAS 154 is effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. We do not
expect the adoption of Statement 154 to have a material impact on our
financial statements.
In July 2006, the FASB issued Interpretation No. 48 (FIN 48) "Accounting for
Uncertainty in Income Taxes" which prescribes a recognition threshold and
measurement process for recording in the financial statements uncertain tax
positions taken or expected to be taken in a tax return. Additionally, FIN
48 provides guidance on derecognition, classification, accounting in interim
periods and disclosure requirements for uncertain tax positions. The
accounting provisions of FIN 48 will be effective for the Company beginning
October 1, 2007. The Company is in the process of determining the effect, if
any, the adoption of FIN 48 will have on its financial statements.
In September 2006, the FASB issued Statement No. 157, Fair Value Measurement
(SFAS 157). The Statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP), and
expands disclosures about fair value measurements. This Statement is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. Management
believes that the adoption of SFAS 157 will only require additional
disclosure on the fair value of its goodwill, asset retirement obligations,
and long-term mortgages and as such will not have a material impact on the
consolidated financial results of the Company.
In September 2006, the FASB issued Statement No. 158, Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans (SFAS 158). The
statement requires employers to recognize on their balance sheets the funded
status of pension and other postretirement benefit plans. In addition,
employers will recognize actuarial gains and losses, prior service cost and
unrecognized transition amounts as a component of accumulated other
comprehensive income. Furthermore, SFAS 158 will also require fiscal year
end measurements of plan assets and benefit obligations, eliminating the use
of earlier measurement dates currently permissible. The disclosure
requirements for SFAS 158 are effective as of the end of the fiscal year
ending after December 15, 2006. The requirement to measure plan assets and
benefit obligations as of the date of the fiscal year end statement of
financial position is effective for fiscal years ending after December 15,
2008. The Company is currently evaluating the impact of SFAS 158, but the
adoption of SFAS 158 is not expected to have a material effect on the
Company's consolidated financial statements.
In September 2006, the Securities and Exchange Commission's Office (SEC)
announced Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 addresses how
to quantify financial statement errors that arose in prior periods for
purposes of assessing their materiality in the current period. It requires
analysis of misstatements using both an income statement (rollover) approach
and a balance sheet (iron curtain) approach in assessing materiality. It
clarifies that immaterial financial statement errors in a prior SEC filing
can be corrected in subsequent filings without the need to amend the prior
filing. In addition, SAB 108 provides transitional relief for correcting
errors that would have been considered immaterial before its issuance. The
Company is in the process of determining the effect, if any, the adoption of
SAB 108 will have on its financial statements.
RECLASSIFICATIONS - Certain reclassifications have been made to 2005 and
2004 financials to conform to the presentation adopted in 2006.
2. Transactions with Related Parties.
As of September 30, 2006, four of the Company's directors were also
directors of Florida Rock Industries, Inc. ("FRI"). Such directors own
approximately 25.6% of the stock of FRI and 45.9% of the stock of the
Company. Accordingly, FRI and the Company are considered related parties.
The Company, through its transportation subsidiaries, hauls commodities by
tank and flatbed trucks for FRI. Charges for these services are based on
prevailing market prices. The real estate subsidiaries lease certain
construction aggregates mining and other properties to FRI.
A summary of revenues derived from FRI follows (in thousands):
2006 2005 2004
Transportation $ 1,976 1,217 1,711
Real estate 6,345 5,511 5,912
$ 8,321 6,728 7,623
Included in the 2004 revenues are $498,000 of Real Estate revenues derived
from FRI that have been reclassified to discontinued operations on the
Consolidated Statements of Income.
The Company outsources certain functions to FRI, including some
administrative, and property management. Charges for services provided by
FRI were $191,000 in 2006, $174,000 in 2005, and $372,000 in 2004.
During 2004, the Company closed on previously announced agreements to sell
several tracts of land to FRI as follows:
Lake City, Florida. On March 30, 2004, a subsidiary sold a parcel of land and
improvements containing approximately 6,321 acres in Suwannee and Columbia
Counties, near Lake City, Florida to a subsidiary of FRI for $13,000,000 in
cash, resulting in a gain of $5,574,000 after income taxes of $3,546,000. The
sales price was approved by the Company's Audit Committee after considering
among other factors, an independent appraisal, and the current use of the
property and consultation with management.
Springfield, Virginia. On May 7, 2004 a subsidiary of the Company sold 108
acres of land located in the northwest quadrant of I-395 and I-495 at Edsall
Road in Springfield, Virginia to FRI for $15,000,000 in cash resulting in a
gain of $7,895,000, after income taxes of $5,023,000. The sales price was
approved by a committee of independent directors of the Company after review
of a development feasibility study and other materials, consultation with
management and advice of independent counsel.
Miami, Florida. Also on May 7, 2004, a subsidiary of the Company sold a 935
acre parcel of property in Miami, Florida to FRI for $1,628,000 in cash,
resulting in a gain of $987,000, after income taxes of $627,000. The property
is principally composed of mined-out lakes, mitigation areas, 145 acres of
mineable land and 32 acres of roads and railroad track rights-of-way. The
terms of the sale were approved by the Company's Audit Committee after
considering, among other factors, the terms of the existing lease agreement
and consultation with management.
See Note 3 for further information regarding the accounting for the sales of
these properties as discontinued operations.
On October 4, 2006, a subsidiary of the Company (FRP) entered into a Joint
Venture Agreement with Florida Rock Industries, Inc. (FRI) to form Brooksville
Quarry, LLC, a real estate joint venture to develop approximately 4,400 acres
of land near Brooksville, Florida. Under the terms of the joint venture, FRP
has contributed its fee interest in approximately 3,500 acres that it leased
to FRI under a long-term mining lease. FRI will continue to mine the property
and pay royalties for the benefit of FRP for as long as mining does not
interfere with the development of the property.
FRP also reimbursed FRI approximately $3 million for one-half of the
acquisition costs of a 288-acre contiguous parcel recently acquired by FRI
from a third party. The 288-acre parcel was contributed to the Joint Venture.
FRI contributed 553 acres that it owns as well as its leasehold interest in
the 3,500 acres that it leased from FRP. The joint venture will be jointly
controlled by FRI and FRP, and they will each have a mandatory obligation to
fund additional capital contributions of up to $2 million. Distributions will
be made on a 50-50 basis.
The property does not yet have the necessary entitlements for real estate
development. Approval to develop real property in Florida entails an
extensive entitlements process involving multiple and overlapping regulatory
jurisdictions and the outcome is inherently uncertain. The Company currently
expects that the entitlement process may take several years to complete.
In connection with the Joint Venture, the independent directors of the Company
also approved certain extensions of lease agreements between FRP and FRI on
FRI's corporate headquarters in Jacksonville, Florida, the Astatula and Marion
Sand mining properties, also in Florida. The Company and FRI also agreed that
a 2,500 acre tract of the Grandin mining property, in Florida, due to be
released will remain subject to the lease and available for future mining.
3. Discontinued Operations.
As discussed in Note 2, during the fiscal year ended September 30, 2004,
the Company sold several tracts of land, which were accounted for as
discontinued operations in accordance with Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" (SFAS 144). Fiscal 2004 has been restated accordingly.
A summary of discontinued operations is as follows (in thousands):
2004
Royalty and rental income $ 498
Operating expenses 190
Income before income taxes 308
Income taxes (120)
Income from discontinued operations $ 188
Gain from sale of
discontinued properties $23,652
Income taxes (9,196)
Net gain from sale of
discontinued properties $14,456
4. Debt.
Debt at September 30 is summarized as follows (in thousands):
2006 2005
Revolving credit (uncollateralized) $12,452 -
Construction loan - 9,716
5.7% to 8.6% mortgage notes,
due in installments through 2020 50,672 41,184
63,124 50,900
Less portion due within one year 2,576 2,432
$60,548 48,468
The aggregate amount of principal payments, excluding the revolving credit,
due subsequent to September 30, 2006 is: 2007 - $2,576,000; 2008 - $2,761,000;
2009 - $2,959,000; 2010 - $3,172,000; 2011 - $3,400,000; 2012 and subsequent
years - $35,804,000.
The Company has a $37,000,000 uncollaterized Revolving Credit Agreement with
four banks, which is scheduled to terminate on December 31, 2009. The Revolver
bears interest at a rate of 1% over the selected LIBOR, which may change
quarterly based on the Company's ratio of Consolidated Total Debt to
Consolidated Total Capital, as defined. A commitment fee of 0.15% per annum is
payable quarterly on the unused portion of the commitment. The commitment fee
may also change quarterly based upon the ratio described above. The Revolver
contains restrictive covenants including limitations on paying cash dividends.
Under these restrictions, as of September 30, 2006, $24,260,000 of
consolidated retained earnings would be available for payment of dividends.
The Company is in compliance with all restrictive covenants as of September
30, 2006.
During fiscal 2006 the Company converted a construction loan into a 15-year
non-recourse mortgage of $11,800,000 with an interest rate of 6.12%. The
construction loan was used to develop a 145,000 square foot build-to-suit
warehouse/office building pursuant to a 15-year triple net lease.
The non-recourse fully amortizing mortgage notes payable are collateralized
by real estate having a carrying value of approximately $56,933,000 at
September 30, 2006.
Certain properties having a carrying value at September 30, 2006 of
$103,000 are encumbered by $1,300,000 of industrial revenue bonds that are
the liability of FRI. FRI has agreed to pay such debt when due (or sooner
if FRI cancels its lease of such property) and further has agreed to
indemnify and hold harmless the Company.
During fiscal 2006, 2005 and 2004 the Company capitalized interest costs of
$219,000, $305,000 and $10,000, respectively.
The Company had $18,887,000 of irrevocable letters of credit outstanding at
September 30, 2006. Most of the letters of credit are irrevocable for a
period of one year and are automatically extended for additional one-year
periods unless notified by the issuing bank not less than thirty days before
the expiration date. Substantially all of these were issued for workers'
compensation and liability insurance retentions.
5. Leases.
At September 30, 2006, the total carrying value of property owned by the
Company which is leased or held for lease to others is summarized as
follows (in thousands):
Construction aggregates property $ 31,277
Commercial property 152,133
183,410
Less accumulated depreciation and depletion 33,557
$149,853
The minimum future straight-lined rentals due the Company on noncancelable
leases as of September 30, 2006 are as follows: 2007 - $13,808,000; 2008 -
$12,512,000; 2009 - $10,869,000; 2010 - $9,256,000; 2011 - $7,494,000; 2012
and subsequent years $40,401,000.
6. Preferred Shareholder Rights Plan.
On May 5, 1999, the Board of Directors of the Company declared a dividend
of one preferred share purchase right (a "Right") for each outstanding
share of common stock. The dividend was payable on June 2, 1999. Each
Right entitles the registered holder to purchase from the Company one one-
hundredth of a share of Series A Junior Participating Preferred Stock of
the Company, par value $.01 per share (the "Preferred Shares"), at a price
of $96 per one one-hundredth of a Preferred Share, subject to adjustment.
In the event that any Person or group of affiliated or associated Persons
(an "Acquiring Person") acquires beneficial ownership of 15% or more of the
Company's outstanding common stock, each holder of a Right, other than
Rights beneficially owned by the Acquiring Person (which will thereafter be
void), will thereafter have the right to receive upon exercise that number
of Common Shares having a market value of two times the exercise price of
the Right. An Acquiring Person excludes any Person or group of affiliated
or associated Persons who were beneficial owners, individually or
collectively, of 15% or more of the Company's Common Shares on May 4, 1999.
The Rights initially trade together with the Company's common stock and are
not exercisable. However, if an Acquiring Person acquires 15% or more of
the Company's common stock, the Rights may become exercisable and trade
separately in the absence of future board action. The Board of Directors
may, at its option, redeem all Rights for $.01 per right, at any time prior
to the Rights becoming exercisable. The Rights will expire September 30,
2009 unless earlier redeemed, exchanged or amended by the Board.
7. Earnings Per Share.
The following details the computations of the basic and diluted earnings per
common share. (Dollars in thousands, except per share amounts.)
Years Ended September 30
2006 2005 2004
Common shares:
Weighted average common shares
outstanding during the period -
shares used for basic earnings
per common share 2,980 2,950 2,931
Common shares issuable under share
based payment plans which are
potentially dilutive 107 89 45
Common shares used for diluted
earnings per common share 3,087 3,039 2,976
Income from continuing operations $ 8,078 7,609 6,096
Discontinued operations - - 14,644
Net income $ 8,078 7,609 20,740
Basic earnings per common share:
Income from continuing operations $2.71 2.58 2.08
Discontinued operations - - 5.00
Net income $2.71 2.58 7.08
Diluted earnings per common share:
Income from continuing operations $2.62 2.50 2.05
Discontinued operations - - 4.92
Net income $2.62 2.50 6.97
For 2006, 2005 and 2004, all outstanding stock options were included in the
calculation of diluted earnings per share because the exercise prices of the
stock options were lower than the average price of the common shares, and
therefore were dilutive. In 2006, all outstanding restricted stock was
included in the calculation of diluted earnings per share.
8. Stock-Based Compensation Plans.
Effective October 1, 2005, the Company adopted SFAS 123R "Share-Based Payment"
for its stock-based employee compensation plans. Under SFAS 123R, compensation
expense must be measured and recognized for all share-based payments based on
the fair value of the award at the grant date and such costs must be included
in the statement of operations over the requisite service period. Prior to
October 1, 2005 the company followed APB Opinion No. 25, "Accounting for Stock
Issued to Employees".
The Company has elected the modified prospective application transition method
whereby the provisions of the statement will apply going forward only from the
date of adoption to new share based payments, and for the portion of any
previously issued and outstanding stock option awards for which the requisite
service is rendered after the date of adoption. The Company did not restate
prior years for pro forma expense amounts. In addition, compensation expense
must be recognized for any awards modified, repurchased or cancelled after the
date of adoption. The straight-line attribution model is used to measure
compensation expense.
Prior to February 2006, the Company had two Stock Option Plans (the 1995 Stock
Option Plan and the 2000 Stock Option Plan) under which options for shares of
common stock were granted to directors, officers and key employees. The
options awarded under the two plans have similar characteristics. All stock
options are non-qualified and expire ten years from the date of grant. Options
awarded to directors are exercisable immediately and options awarded to
officers and employees become exercisable in cumulative installments of 20% at
the end of each year following the date of grant. When stock options are
exercised the Company issues new shares after receipt of exercise proceeds and
taxes due, if any, from the grantee.
In February 2006, the Shareholders approved the 2006 Stock Incentive Plan which
replaced the 2000 Stock Option Plan. The 2006 plan permits the grant of stock
options, stock appreciation rights, restricted stock awards, restricted stock
units, or stock awards. In February 2006, 15,960 shares of restricted stock
were granted subject to forfeiture restrictions, tied to continued employment,
that lapse 25% annually beginning on January 1, 2007. The number of common
shares available for future issuance was 279,900 at September 30, 2006.
The Company utilized the Black-Scholes valuation model for estimating fair
value of stock compensation for options awarded to officers and employees in
prior periods. Each grant was evaluated based upon assumptions at the time of
grant. The assumptions were no dividend yield, expected volatility between 41%
and 53%, risk-free interest rate of 3.2% to 4.9% and expected life of 6.2 to
7.0 years.
The dividend yield of zero is based on the fact that the Company does not pay
cash dividends and has no present intention to pay cash dividends. Expected
volatility was estimated based on the Company's historical experience over a
period equivalent to the expected life in years. The risk-free interest rate
was based on the U.S. Treasury constant maturity interest rate at the date of
grant with a term consistent with the expected life of the options granted.
The expected life calculation was based on the observed and expected time to
exercise options by the employees.
Under provisions of SFAS 123R, the Company recorded $968,000 of stock
compensation expense in its consolidated statement of income for fiscal 2006.
This consisted of $525,000 for stock options issued in prior years, $286,000
for an annual stock award to non-employee directors, and $157,000 for
restricted stock awards granted in fiscal 2006. Stock compensation expense was
$590,000 net of deferred income tax benefits. This represents $.20 for basic
earnings per common share and $.19 for diluted earnings per common share.
SFAS 123R also amends FASB Statement No. 95, Statement of Cash Flows, to
require that the benefits associated with the tax deduction in excess of
recognized compensation cost be reported as financing cash flows, rather than
as a reduction of taxes paid. This requirement will reduce net operating cash
flows and increase net financing cash flows in periods after the effective
date. Financing cash flows for fiscal 2006 included $406,000 of excess tax
benefits from the exercise of stock options.
A summary of changes in outstanding options is presented below (in thousands,
except per share amounts):
Weighted Weighted Weighted
Number Average Average Average
Of Exercise Remaining Grant Date
Options Shares Price Term (yrs) Fair Value
Outstanding at
September 30, 2003 299,500 $21.85
Granted 51,000 $31.20
Exercised (73,900) $20.15
Forfeited (9,400) $22.23
Outstanding at
September 30, 2004 267,200 $23.99
Granted 116,000 $44.38
Exercised (36,000) $24.38
Forfeited (9,300) $32.52
Outstanding at
October 1, 2005 337,900 $30.72 7.8
Granted 0 $ 0 $ 0
Exercised (26,454) $26.41 $ 359
Forfeited (6,700) $33.53
Outstanding at
September 30, 2006 304,746 $31.03 6.9 $ 4,760
Exerciseable at
September 30, 2006 201,546 $29.76 6.6 $ 3,086
Vested during
Twelve months ended
September 30, 2006 39,000 $ 579
The aggregate intrinsic value of exercisable in-the-money options was
$9,230,000 and the aggregate intrinsic value of all outstanding options was
$13,503,000 based on the market closing price of $75.56 on September 30, 2006
less exercise prices. Gains of $1,404,000 were realized by option holders
during the twelve months ended September 30, 2006. The realized tax benefit
from options exercised for the twelve months ended September 30, 2006 was
$528,000. Total compensation cost of options granted but not yet vested as of
September 30, 2006 was $1,161,000, which is expected to be recognized over a
weighted-average period of 2.2 years.
A summary of changes in restricted stock awards is presented below (in
thousands, except per share amounts):
Weighted Weighted Weighted
Number Average Average Average
Of Grant Remaining Grant Date
Restricted Stock Shares Price Term (yrs) Fair Value
Outstanding at
October 1, 2005 0
Granted 15,960 $63.64 $ 1,016
Vested 0 $ 0
Forfeited (360) $63.54
Outstanding at
September 30, 2006 15,600 $63.64 3.3 $ 993
Total compensation cost of restricted stock granted but not yet vested as of
September 30, 2006 was $706,000 which is expected to be recognized over a
weighted-average period of 3.3 years.
SFAS 123R requires the presentation of pro forma information for the
comparative periods prior to its adoption as if all employee stock options had
been accounted for under the fair value method of the original SFAS 123,
"Accounting for Stock-Based Compensation." The following table illustrates the
effect on net income and earnings per common share if SFAS 123 had been applied
to stock-based employee compensation to the prior-year periods (in thousands,
except per share amounts):
2005 2004
Net income:
As reported $7,609 20,740
Deduct: Total stock-based
employee compensation expense
determined under fair value
based method, net of tax effects 905 626
Pro forma $6,704 20,114
Basic earnings per common share
As reported $2.58 7.08
Pro forma $2.27 6.86
Diluted earnings per common share
As reported $2.50 6.97
Pro forma $2.21 6.76
The following table summarizes information concerning stock options
outstanding at September 30, 2006:
Shares Weighted Weighted
Range of Exercise under Average Average
Prices per Share Option Exercise Price Remaining Life
Non-exercisable:
$22.23 - $43.50 103,200 $33.50 7.3 years
Exercisable:
$15.13 - $22.66 77,396 19.92 5.4
$23.77 - $34.00 81,900 29.68 6.9
$43.50 - $60.40 42,250 47.94 8.4
201,546 $29.76 6.6 years
Total 304,746 $31.03 6.9 years
9. Income Taxes.
The provision for income taxes for continuing operations for fiscal years
ended September 30 consists of the following (in thousands):
2006 2005 2004
Current:
Federal $4,234 5,540 2,720
State 841 1,217 445
5,075 6,757 3,165
Deferred 96 (2,421) 714
Total $5,171 4,336 3,879
A reconciliation between the amount of tax shown above and the amount
computed at the statutory Federal income tax rate follows (in thousands):
2006 2005 2004
Amount computed at statutory
Federal rate $4,528 4,061 3,491
State income taxes (net of Federal
income tax benefit) 553 441 362
Other, net 90 (166) 26
Provision for income taxes $5,171 4,336 3,879
The types of temporary differences and their related tax effects that give
rise to deferred tax assets and deferred tax liabilities at September 30,
are presented below:
2006 2005
Deferred tax liabilities:
Property and equipment $16,279 15,614
Depletion 617 604
Unrealized rents 845 611
Prepaid expenses 1,334 1,206
Gross deferred tax liabilities 19,075 18,035
Deferred tax assets:
Insurance reserves 3,343 3,083
Employee benefits and other 1,634 950
Gross deferred tax assets 4,977 4,033
Net deferred tax liability $14,098 14,002
The accrued liability for uncertain tax positions as of September 30, 2006
and 2005 was $839,000 and $1,180,000 respectively. During Fiscal 2006 the
accrued liability was reduced $341,000 due to the expiration of the
statutes of limitations on certain positions.
10. Employee Benefits.
The Company and certain subsidiaries have a savings/profit sharing plan for
the benefit of qualified employees. The savings feature of the plan
incorporates the provisions of Section 401(k) of the Internal Revenue Code
under which an eligible employee may elect to save a portion (within
limits) of their compensation on a tax deferred basis. The Company
contributes to a participant's account an amount equal to 50% (with certain
limits) of the participant's contribution. Additionally, the Company may
make an annual contribution to the plan as determined by the Board of
Directors, with certain limitations. The plan provides for deferred
vesting with benefits payable upon retirement or earlier termination of
employment. The Company's cost was $698,000 in 2006, $694,000 in 2005 and
$649,000 in 2004.
The Company has a management security plan for certain officers and key
employees. The accruals for future benefits are based upon the remaining
years to retirement of the participating employees and other actuarial
assumptions. Life insurance on the lives of the participants has been
purchased to partially fund this benefit and the Company is the owner and
beneficiary of such policies. The expense for fiscal 2006, 2005 and 2004 was
$347,000, $192,000 and $87,000, respectively. The accrued benefit under this
plan as of September 30, 2006 and 2005 was $1,751,000 and $1,461,000
respectively.
The Company provides certain health benefits for retired employees.
Employees may become eligible for those benefits if they were employed by
the Company prior to December 10, 1992, meet the service requirements and
reach retirement age while working for the Company. The plan is
contributory and unfunded. The Company accrues the estimated cost of
retiree health benefits over the years that the employees render service.
The accrued postretirement benefit obligation for this plan as of September
30, 2006 and 2005 was $503,000 and $536,000, respectively. The net periodic
postretirement benefit cost was $27,000, $10,000 and $2,000 for fiscal
2006, 2005, and 2004, respectively. The discount rate used in determining
the Net Periodic Postretirement Benefit Cost was 5.0% for 2006, 6.0% for
2005 and 5.75% for 2004. The discount rate used in determining the
Accumulated Postretirement Benefit Obligation (APBO) was 6.0% for 2006,
5.0% for 2005 and 6.0% for 2004. No medical trend is applicable because the
Company's share of the cost is frozen.
11. Business Segments.
The Company has identified two business segments, each of which is managed
separately along product lines. The Company's operations are substantially
in the Southeastern and Mid-Atlantic states.
The transportation segment hauls primarily petroleum related bulk liquids,
dry bulk commodities and construction materials by motor carrier. The real
estate segment owns real estate of which a substantial portion is under
mining royalty agreements or leased. The real estate segment also holds
certain other real estate for investment and is developing commercial and
industrial properties.
Operating results and certain other financial data for the Company's business
segments are as follows (in thousands):
2006 2005 2004
Revenues:
Transportation $126,252 112,824 99,424
Real estate 21,122 18,212 16,365
$147,374 131,036 115,789
Operating profit:
Transportation $ 8,875 6,587 5,625
Real estate 11,633 10,253 9,269
Corporate expenses (3,453) (1,649) (1,464)
$ 17,055 15,191 13,430
Capital expenditures:
Transportation $ 19,806 11,063 4,350
Real estate 20,795 17,511 17,619
$ 40,601 28,574 21,969
Depreciation, depletion and
amortization:
Transportation $ 8,769 8,166 8,200
Real estate 4,506 4,086 3,782
Other 235 227 248
$ 13,510 12,479 12,230
Identifiable assets at September 30:
Transportation $ 57,715 47,435 42,479
Real estate 159,134 141,646 126,457
Cash 154 2,966 16,752
Unallocated corporate assets 2,212 1,668 1,133
$219,215 193,715 186,821
12. Accrued Vacation Liability.
In prior years, the Company did not accrue for compensated absences as a
determination had been made that the accrual was not material to the
Company's financial statements. The Company expensed payments of vacation
pay to hourly and salaried employees when paid.
During the third quarter of fiscal 2006, the Company reevaluated the
materiality of such accrual and recorded a liability of $1,055,000 to reflect
the Company's obligation for vacation pay. As of September 30, 2006 the
liability was $1,277,000 which included $173,000 related to a fourth quarter
change in estimate regarding forfeiture rates of unvested vacation. Under
generally accepted accounting principles, compensated absences must be
accrued for both hourly and salaried employees. Under FAS No. 43 "Accounting
for Compensated Absences," the accrual must consist of the vested liability
as well as the portion of the unvested liability that is deemed to be earned.
The Company's policy does not permit vacation to be rolled over from year to
year for salaried employees but permits hourly employees to rollover a
maximum of five days. The impact on the balance sheet of recording this
liability was to increase payroll liability by $1,277,000, to increase the
current portion of deferred tax benefits by $490,000 and to reduce
shareholder's equity by $787,000. These entries did not affect net cash
provided by operations. The impact on the income statement was to increase
transportation cost of operations by $940,000, real estate cost of operations
by $68,000, increase selling, general and administrative expense by $269,000,
decrease the provision for income taxes by $490,000 and to reduce the net
income for 2006 by $787,000.
13. Fair Values of Financial Instruments.
At September 30, 2006 and 2005, the carrying amount reported in the
consolidated balance sheets for cash and cash equivalents, short-term notes
payable and revolving credit approximate their fair value based upon the
short-term nature of these items. The fair values of the Company's other
long-term debt were estimated based on current rates available to the Company
for debt of the same remaining maturities. At September 30, 2006, the
carrying amount and fair value of such other long-term debt was $50,672,000
and $51,895,000, respectively. At September 30, 2005, the carrying amount and
fair value of other long-term debt was $50,900,000 and $52,976,000,
respectively.
14. Contingent Liabilities.
Certain of the Company's subsidiaries are involved in litigation on a number
of matters and are 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. In the
opinion of management none of these matters are expected to have a material
adverse effect on the Company's consolidated financial condition, results of
operations or cash flows.
15. Commitments.
The Company, at September 30, 2006, had entered into various contracts to
develop real estate with remaining commitments totaling $2,824,000, and to
purchase transportation equipment for approximately $5,364,000.
16. Customer Concentration.
The transportation segment primarily serves customers in the petroleum and
building and construction industries. Petroleum customers accounted for
approximately 66% and building and construction customers accounted for
approximately 34% of transportation segment revenues for the year ended
September 30, 2006.
During fiscal 2006, the transportation segment's ten largest customers
accounted for approximately 47.3% of the transportation segment's revenue.
One of these customers accounted for 11.6% of the transportation segment's
revenue. The loss of any one of these customers would have an adverse effect
on the Company's revenues and income.
17. Subsequent Event.
On October 4, 2006, a subsidiary of the Company (FRP) entered into a Joint
Venture Agreement with Florida Rock Industries, Inc. (FRI). See Note 2 to
the Consolidated Financial Statements for further details.
Management's Report on Internal Control Over Financial Reporting
The management of Patriot is responsible for establishing and maintaining
adequate internal control over financial reporting. Patriot's internal
control system was designed to provide reasonable assurance to the Company's
management and Board of Directors regarding the preparation and fair
presentation of published financial statements in accordance with U.S.
generally accepted accounting principles. All internal controls systems, no
matter how well designed have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation. Patriot's
management assessed the effectiveness of the Company's internal control over
financial reporting as of September 30, 2006 based on the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework. Based on this assessment,
management believes that, as of September 30, 2006, the Company's internal
control over financial reporting is effective. Management's assessment of
the effectiveness of the Company's internal control over financial reporting
as of September 30, 2006 has been audited by Hancock Askew & Co., LLP, the
Company's independent registered certified public accounting firm, as stated
in their report, which expresses unqualified opinions on management's
assessment and on the effectiveness of the Company's internal control over
financial reporting as of September 30, 2006.
Report of Independent Registered Certified Public Accounting Firm
The Stockholders and Board of Directors
Patriot Transportation Holding, Inc.
We have audited the accompanying consolidated balance sheet of Patriot
Transportation Holding, Inc. as of September 30, 2006, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Patriot
Transportation Holding, Inc. as of September 30, 2006, and the consolidated
results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States
of America. As discussed in Note 8 to the consolidated financial statements,
the Company adopted Statement of Financial Accounting Standards No. 123
(Revised 2004), Share-based Payment, effective October 1, 2005 for accounting
for share-based payments.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Patriot
Transportation Holding, Inc.'s internal control over financial reporting as of
September 30, 2006, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), and our report dated December 1, 2006
expressed an unqualified opinion on management's assessment of internal
control over financial reporting and an unqualified opinion on the
effectiveness of internal control over financial reporting.
Hancock Askew & Co., LLP
December 1, 2006
Savannah, Georgia
Report of Independent Registered Certified Public Accounting Firm
To the Board of Directors and Stockholders
Patriot Transportation Holding, Inc.
We have audited management's assessment, included in Management's Report on
Internal Control Over Financial Reporting, that Patriot Transportation
Holding, Inc. maintained effective internal control over financial reporting
as of September 30, 2006, based on criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Patriot Transportation Holding, Inc.'s
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion
on management's assessment and an opinion on the effectiveness of the
company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, management's assessment that Patriot Transportation Holding,
Inc. maintained effective internal control over financial reporting as of
September 30, 2006, is fairly stated, in all material respects, based on
criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also
in our opinion, Patriot Transportation Holding, Inc. maintained, in all
material respects, effective internal control over financial reporting as of
September 30, 2006, based on criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet and
the related consolidated statements of operations, stockholders' equity,
comprehensive income, and cash flows of Patriot Transportation Holding, Inc.,
as of September 30, 2006 and for the year then ended and our report dated
December 1, 2006 expressed an unqualified opinion.
Hancock Askew & Co., LLP
December 1, 2006
Savannah, Georgia
Report of Independent Registered Certified Public Accounting Firm
To the Board of Directors and Shareholders of
Patriot Transportation Holding, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of Patriot
Transportation Holding, Inc. and its subsidiaries at September 30, 2005 and
the results of their operations and their cash flows for each of the two
years in the period ended September 30, 2005 in conformity with accounting
principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
December 22, 2005
Jacksonville, Florida
DIRECTORS AND OFFICERS
Directors
John E. Anderson (1)
President and Chief Executive
Officer of the Company
Edward L. Baker (1)
Chairman of the Board of the Company
and of Florida Rock Industries, Inc.
John D. Baker II (1)
President and Chief Executive
Officer of Florida Rock Industries, Inc.
Thompson S. Baker II
Vice President of
Florida Rock Industries, Inc.
Charles E. Commander III (2)(4)
Partner, Jacksonville office
Foley & Lardner
Luke E. Fichthorn III
Private Investment Banker,
Twain Associates and Chairman of the
Board and Chief Executive Officer of
Bairnco Corporation
Robert H. Paul III (2)(3)(4)
Chairman of the Board of
Southeast-Atlantic Beverage Corporation
H. W. Shad III (2)
Management Consulting and Business Valuations
Mike Shad, P.L.
Martin E. Stein, Jr. (3)(4)
Chairman and Chief Executive Officer of
Regency Centers Corporation
James H. Winston (3)
President of LPMC of Jax, Inc.,
Omega Insurance Company and Citadel
Life & Health Insurance Co.
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Nominating Committee
Officers
Edward L. Baker
Chairman of the Board
John E. Anderson
President and Chief Executive Officer
David H. deVilliers, Jr.
Vice President
President, FRP Development Corp. and
Florida Rock Properties, Inc.
Ray M. Van Landingham
Vice President, Treasurer, Secretary
and Chief Financial Officer
John D. Klopfenstein
Controller and Chief Accounting Officer
Terry S. Phipps
President, SunBelt Transport, Inc.
Robert E. Sandlin
President, Florida Rock & Tank Lines, Inc.
Patriot Transportation Holding, Inc.
1801 Art Museum Drive, Suite 300
Jacksonville, Florida 32207
Telephone: (904) 396-5733
Annual Meeting
Shareholders are cordially invited to attend the Annual Shareholders Meeting
which will be held at 2 p.m. local time, on Wednesday, February 1, 2006, at
155 East 21st Street, Jacksonville, Florida, 32206.
Transfer Agent
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Telephone: 1-800-937-5449
General Counsel
McGuireWoods LLP
Jacksonville, Florida
Independent Registered Certified Public Accounting Firm
Hancock Askew & Co., LLP
Savannah, Georgia
Common Stock Listed
The Nasdaq Stock Market
(Symbol: PATR)
Form 10-K
Shareholders may receive without charge a copy of Patriot Transportation
Holding, Inc.'s annual report on Form 10-K for the fiscal year ended
September 30, 2005 as filed with the Securities and Exchange Commission by
writing to the Treasurer at 1801 Art Museum Drive, Suite 300, Jacksonville,
Florida 32207. The most recent certifications by our Chief Executive
Officer, Chief Financial Officer and Chief Accounting Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to our
Form 10-K.
Company Website
The Company's website may be accessed at www.patriottrans.com. All of our
filings with the Securities and Exchange Commission can be accessed through
our website promptly after filing. This includes annual reports on Form 10-
K, quarterly reports on Form 10-Q, current reports filed or furnished on Form
8-K and all related amendments.