FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended December 31, 2010
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-26115
PATRIOT TRANSPORTATION HOLDING, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2924957
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Riverside Ave., Suite 500, Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
904/396-5733
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No___
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes[ ] No[ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of "accelerated filer and large
accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer[ ] Accelerated filer[X] Non-
accelerated filer[ ]
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
YES[ ] NO[X]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
On December 31, 2010 there were 9,262,728 shares of
Common Stock,
$.10 par value per share, outstanding (adjusted for 3-for-1 stock split).
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-Q
QUARTER ENDED DECEMBER 31, 2010
CONTENTS
Page No.
Preliminary Note Regarding Forward-Looking Statements 3
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 4
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6
Condensed Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures about Market Risks 21
Item 4. Controls and Procedures 22
Part II. Other Information
Item 1A. Risk Factors 23
Item 2. Purchase of Equity Securities by the Issuer 23
Item 6. Exhibits 23
Signatures 24
Exhibit 31 Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 26
Exhibit 32 Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 29
Preliminary Note Regarding Forward-Looking Statements.
Certain matters discussed in this report contain forward-looking statements
that are subject to risks and uncertainties that could cause actual results
to differ materially from those indicated by such forward-looking statements.
These forward-looking statements relate to, among other things, capital
expenditures, liquidity, capital resources and competition and may be
indicated by words or phrases such as "anticipate", "estimate", "plans",
"projects", "continuing", "ongoing", "expects", "management believes", "the
Company believes", "the Company intends" and similar words or phrases. The
following factors and others discussed in the Company's periodic reports and
filings with the Securities and Exchange Commission are among the principal
factors that could cause actual results to differ materially from the
forward-looking statements: freight demand for petroleum products including
recessionary and terrorist impacts on travel in the Company's markets; levels
of construction activity in the markets served by our mining properties; fuel
costs and the Company's ability to recover fuel surcharges; accident severity
and frequency; risk insurance markets; driver availability and cost; the
impact of future regulations regarding the transportation industry;
availability and terms of financing; competition in our markets; interest
rates, inflation and general economic conditions; demand for flexible
warehouse/office facilities in the Baltimore-Washington-Northern Virginia
area; and ability to obtain zoning and entitlements necessary for property
development. However, this list is not a complete statement of all potential
risks or uncertainties.
These forward-looking statements are made as of the date hereof based on
management's current expectations, and the Company does not undertake an
obligation to update such statements, whether as a result of new information,
future events or otherwise. Additional information regarding these and other
risk factors may be found in the Company's other filings made from time to
time with the Securities and Exchange Commission.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except share data)
December 31, September 30,
Assets 2010 2010
Current assets:
Cash and cash equivalents $ 15,419 17,151
Accounts receivable (net of allowance for
doubtful accounts of $99 and $83, respectively) 6,479 5,940
Federal and state income taxes receivable 519 930
Notes receivable 1,259 1,238
Inventory of parts and supplies 969 665
Prepaid tires on equipment 1,272 1,246
Prepaid taxes and licenses 1,290 1,813
Prepaid insurance 1,696 2,185
Prepaid expenses, other 73 62
Assets of discontinued operations 533 542
Total current assets 29,509 31,772
Property, plant and equipment, at cost 304,094 294,752
Less accumulated depreciation and depletion 99,581 96,636
Net property, plant and equipment 204,513 198,116
Real estate held for investment, at cost 6,848 7,124
Investment in joint venture 7,456 7,344
Goodwill 1,087 1,087
Notes receivable, less current portion 4,052 4,382
Unrealized rents 3,400 3,357
Other assets 3,966 4,530
Total assets $260,831 257,712
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 2,926 3,384
Deferred income taxes 174 174
Accrued payroll and benefits 3,159 5,255
Accrued insurance 2,817 2,373
Accrued liabilities, other 1,038 994
Long-term debt due within one year 4,664 4,588
Liabilities of discontinued operations 1,610 1,327
Total current liabilities 16,388 18,095
Long-term debt, less current portion 66,077 67,272
Deferred income taxes 16,165 16,084
Accrued insurance 2,483 2,483
Other liabilities 1,776 1,722
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock, no par value;
5,000,000 shares authorized; none issued - -
Common stock, $.10 par value;
25,000,000 shares authorized,
9,262,728 and 9,278,088 shares issued
and outstanding, respectively 926 928
Capital in excess of par value 37,809 37,511
Retained earnings 119,187 113,597
Accumulated other comprehensive income, net 20 20
Total shareholders' equity 157,942 152,056
Total liabilities and shareholders' equity $260,831 257,712
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS
ENDED DECEMBER 31,
2010 2009
Revenues:
Transportation $ 22,991 22,081
Mining royalty land 1,095 987
Developed property rentals 4,177 4,432
Total revenues 28,263 27,500
Cost of operations:
Transportation 21,003 20,437
Mining royalty land 339 317
Developed property rentals 3,146 3,215
Unallocated corporate 587 489
Total cost of operations 25,075 24,458
Operating profit:
Transportation 1,988 1,644
Mining royalty land 756 670
Developed property rentals 1,031 1,217
Unallocated corporate (587) (489)
Total operating profit 3,188 3,042
Interest income and other 102 115
Equity in loss of joint venture - (1)
Interest expense (906) (1,026)
Income before income taxes 2,384 2,130
Provision for income taxes (916) (818)
Income from continuing operations 1,468 1,312
Income from discontinued operations, net 4,927 24
Net income $ 6,395 1,336
Earnings per common share:
Income from continuing operations -
Basic $ .16 .15
Diluted $ .16 .14
Discontinued operations (Note 11) -
Basic $ .53 .00
Diluted $ .52 .00
Net income - basic $ .69 .15
Net income - diluted $ .68 .14
Number of shares (in thousands)
used in computing:
-basic earnings per common share 9,273 9,153
-diluted earnings per common share 9,460 9,411
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2010 AND 2009
(In thousands)
(Unaudited)
2010 2009
Cash flows from operating activities:
Net income $ 6,395 1,336
Adjustments to reconcile net income to net cash
provided by continuing operating activities:
Depreciation, depletion and amortization 3,208 2,920
Equity in loss of joint venture - 1
(Gain) on sale of equipment (12) (43)
(Income) from discontinued operations, net (4,927) (24)
Stock-based compensation 132 247
Net changes in operating assets and liabilities:
Accounts receivable (539) (626)
Inventory of parts and supplies (304) (66)
Prepaid expenses and other current assets 975 1,288
Other assets 363 (42)
Accounts payable and accrued liabilities (2,066) (2,907)
Income taxes payable and receivable 753 (1,007)
Long-term insurance liabilities and other long-term
liabilities 54 (110)
Net cash provided by operating activities of
continuing operations 4,032 967
Net cash provided (used in) by operating activities of
discontinued operations 293 (239)
Net cash provided by operating activities 4,325 728
Cash flows from investing activities:
Purchase of transportation group property and equipment (1,796) (2,479)
Investments in mining royalty land segment - (11)
Investments in developed property rentals segment (2,719) (942)
Investment in joint venture (114) (235)
Proceeds from the sale of property, plant and equipment 23 47
Proceeds received on note for sale of SunBelt 309 289
Net cash used in investing activities (4,297) (3,331)
Cash flows from financing activities:
Repayment of long-term debt (1,119) (1,046)
Repurchase of Company Stock (955) -
Excess tax benefits from exercises of stock options
and vesting of restricted stock 155 39
Exercise of employee stock options 159 87
Net cash used in financing activities (1,760) (920)
Net (decrease) in cash and cash equivalents (1,732) (3,523)
Cash and cash equivalents at beginning of period 17,151 15,803
Cash and cash equivalents at end of the period $ 15,419 12,280
The Company recorded a non-cash transaction from an exchange of real estate of
$4,941 in December 2010 along with a related deferred tax liability of $1,792
and a $2,053 permanent tax benefit on the value of donated minerals and
aggregates which was recorded as a $342 receivable and $1,711 deferred tax.
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(Unaudited)
(1) Basis of Presentation. The accompanying consolidated financial
statements include the accounts of Patriot Transportation Holding,
Inc. and its subsidiaries (the "Company"). Investment in the 50%
owned Brooksville Joint Venture is accounted for under the equity
method of accounting. These statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America for interim financial information and the
instructions to Form 10-Q and do not include all the information and
footnotes required by accounting principles generally accepted in the
United States of America for complete financial statements. In the
opinion of management, all adjustments (primarily consisting of normal
recurring accruals) considered necessary for a fair statement of the
results for the interim periods have been included. Operating results
for the three months ended December 31, 2010 are not necessarily
indicative of the results that may be expected for the fiscal year
ending September 30, 2011. The accompanying consolidated financial
statements and the information included under the heading
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" should be read in conjunction with the
Company's consolidated financial statements and related notes included
in the Company's Form 10-K for the year ended September 30, 2010.
In connection with the presentation adopted in March, 2010 of our real
estate operations as two reportable segments, two properties in
Washington, D.C. and two properties in Duval County, Florida were
reclassified out of the Royalties and rent division and the division
was renamed the Mining royalty land segment. Historical results have
been reclassified to conform to the new segment presentation.
(2) Stock Split. On December 1, 2010, the board of directors
declared a 3-for-1 stock split of the Company's common stock in the
form of a stock dividend. The record date for the split was January
3, 2011 and the new shares were issued on January 17, 2011. The total
authorized shares remained 25 million and par value of common stock
remained unchanged at $0.10 per share. All share and per share
information presented has been adjusted to reflect this stock split.
(3) Business Segments. The Company operates in three reportable
business segments. The Company's operations are substantially in the
Southeastern and Mid-Atlantic states. The transportation segment
hauls petroleum and other liquids and dry bulk commodities by tank
trailers. The Company's real estate operations consist of two
reportable segments. The Mining royalty land segment owns real estate
including construction aggregate royalty sites and parcels held for
investment. The Developed property rentals segment acquires,
constructs, and leases office/warehouse buildings primarily in the
Baltimore/Northern Virginia/Washington area and holds real estate for
future development or related to its developments.
The Company's transportation and real estate groups operate
independently and have minimal shared overhead except for corporate
expenses. Corporate expenses are allocated in fixed quarterly amounts
based upon budgeted and estimated proportionate cost by segment.
Unallocated corporate expenses primarily include stock compensation
and corporate aircraft expenses. Reclassifications to prior period
amounts have been made to be comparable to the current presentation.
Operating results and certain other financial data for the Company's
business segments are as follows (in thousands):
Three Months ended
December 31, ___
2010 2009
Revenues:
Transportation $ 22,991 22,081
Mining royalty land 1,095 987
Developed property rentals 4,177 4,432
$ 28,263 27,500
Operating profit:
Transportation $ 2,377 1,991
Mining royalty land 909 812
Developed property rentals 1,260 1,429
Corporate expenses:
Allocated to transportation (389) (347)
Allocated to mining land (153) (142)
Allocated to developed property (229) (212)
Unallocated (587) (489)
(1,358) (1,190)
$ 3,188 3,042
Interest expense:
Mining royalty land $ 9 12
Developed property rentals ___897 _1,014
$ 906 1,026
Capital expenditures:
Transportation $ 1,796 2,479
Mining royalty land - 11
Developed property rentals:
Capitalized interest 267 224
Internal labor 111 44
Real estate taxes 303 212
Other costs (a) 2,038 462
$ 4,515 3,432
(a)Net of 1031 exchange of $4,941
Depreciation, depletion and
amortization:
Transportation $ 1,535 1,561
Mining royalty land 25 23
Developed property rentals 1,301 1,277
Other 347 59
$ 3,208 2,920
Identifiable assets (less depreciation) December 31, September 30,
2010 2010
Transportation $ 42,939 43,100
Discontinued Transportation Operations 533 542
Mining royalty land 28,303 28,651
Developed property rentals 170,622 164,601
Cash items 15,419 17,151
Unallocated corporate assets 3,015 3,667
$260,831 257,712
(4) Long-Term debt. Long-term debt is summarized as follows (in
thousands):
December 31, September 30,
2010 2010
5.6% to 8.6% mortgage notes
due in installments through 2027 70,741 71,860
Less portion due within one year 4,664 4,588
$ 66,077 67,272
The Company has a $37,000,000 uncollateralized Revolving Credit
Agreement with three banks, which matures on December 13, 2013. The
Revolver bears interest at a rate of 1.00% 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
limitations on availability and restrictive covenants including
limitations on paying cash dividends. Letters of credit in the amount
of $13,294,000 were issued under the Revolver. As of December 31,
2010, $23,706,000 was available for borrowing and $46,321,000 of
consolidated retained earnings would be available for payment of
dividends. The Company was in compliance with all covenants as of
December 31, 2010.
The fair values of the Company's mortgage notes payable were estimated
based on current rates available to the Company for debt of the same
remaining maturities. At December 31, 2010, the carrying amount and
fair value of such other long-term debt was $70,741,000 and
$72,360,000, respectively.
(5) Related Party Transactions. The Company previously may have been
considered a related party to Vulcan Materials Company (Vulcan). One
director of the Company was employed by Vulcan until September 17,
2010 and is related to two other Company directors. The Company,
through its transportation subsidiaries, hauls commodities by tank
trucks for Vulcan. Charges for these services are based on prevailing
market prices. The real estate subsidiaries lease certain
construction aggregates mining and other properties to Vulcan.
Revenue from Vulcan for the first quarter of fiscal 2011 was
$1,712,000 compared to $1,471,000 for the same period last year.
A subsidiary of the Company (FRP) has a Joint Venture Agreement with
Vulcan Materials Company (formerly Florida Rock Industries, Inc.),
Brooksville Quarry, LLC, to develop approximately 4,300 acres of land
near Brooksville, Florida. The joint venture is jointly controlled by
Vulcan and FRP, and they each have a mandatory obligation to fund
additional capital contributions of up to $2.15 million. Capital
contributions of $2,109,000 have been made by each party as of
December 31, 2010. Distributions will be made on a 50-50 basis except
for royalties and depletion specifically allocated to FRP. Other
income for the three months ended December 31, 2009 includes a loss of
$1,000, representing the Company's equity in the loss of the joint
venture.
(6) Earnings per share. The following details the computations of the
basic and diluted earnings per common share (dollars in thousands,
except per share amounts):
THREE MONTHS
ENDED DECEMBER 31,
2010 2009
Weighted average common shares
outstanding during the period
- shares used for basic
earnings per common share 9,273 9,153
Common shares issuable under
share based payment plans
which are potentially dilutive 187 258
Common shares used for diluted
earnings per common share 9,460 9,411
Net income $ 6,395 1,336
Earnings per common share
Basic $ .69 .15
Diluted $ .68 .14
For the three months ended December 31, 2010, 132,870 shares
attributable to outstanding stock options were excluded from the
calculation of diluted earnings per share because their inclusion
would have been anti-dilutive. For the three months ended December 31
2009, 111,210 shares attributable to outstanding stock options were
excluded from the calculation of diluted earnings per common share
because their inclusion would have been anti-dilutive.
(7) Stock-Based Compensation Plans. As more fully described in Note 7
to the Company's notes to the consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended September 30,
2010, the Company's stock-based compensation plan permits the grant of
stock options, stock appreciation rights, restricted stock awards,
restricted stock units, and stock awards. The number of common shares
available for future issuance was 654,750 at December 31, 2010.
The Company recorded the following stock compensation expense in its
consolidated statements of income (in thousands):
Three Months ended
December 31,
2010 2009
Stock option grants $ 132 199
Restricted stock awards granted in 2006 - 48
132 247
A summary of changes in outstanding options is presented below (in
thousands, except share and per share amounts):
Weighted Weighted Weighted
Number Average Average Average
Of Exercise Remaining Grant Date
Options Shares Price Term (yrs) Fair Value
Outstanding at
October 1, 2010 633,900 $14.00 4.1 $ 4,206
Granted 29,160 $25.60 $ 293
Exercised 20,640 $ 7.63 $ 86
Forfeited - $ - $ -
Outstanding at
December 31, 2010 642,420 $14.73 4.2 $ 4,413
Exercisable at
December 31, 2010 543,792 $12.53 3.4 $ 3,307
Vested during
three months ended
December 31, 2010 11,442 $ 113
The aggregate intrinsic value of exercisable in-the-money options was
$10,049,000 and the aggregate intrinsic value of all outstanding in-
the-money options was $10,473,000 based on the market closing price of
$30.99 on December 31, 2010 less exercise prices. Gains of $405,000
were realized by option holders during the three months ended December
31, 2010. The realized tax benefit from options exercised for the
three months ended December 31, 2010 was $155,000. Total compensation
cost of options granted but not yet vested as of December 31, 2010 was
$935,000, which is expected to be recognized over a weighted-average
period of 3.0 years.
(8) 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. There is a
reasonable possibility that the Company's estimate of vehicle and
workers' compensation liability for the transportation group or
discontinued operations may be understated or overstated but the
possible range can not be estimated. The liability at any point in
time depends upon the relative ages and amounts of the individual open
claims. In the opinion of management none of these matters are
expected to have a material adverse effect on the Company's
consolidated financial condition, results of operations or cash flows.
(9) Concentrations. The transportation segment primarily serves
customers in the industries in the Southeastern U.S. Significant
economic disruption or downturn in this geographic region or these
industries could have an adverse effect on our financial statements.
During the first three months of fiscal 2011, the transportation
segment's ten largest customers accounted for approximately 56.6% of
the transportation segment's revenue. One of these customers
accounted for 20.9% 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. Accounts receivable from the
transportation segment's ten largest customers was $3,051,000 and
$2,797,000 at December 31, 2010 and September 30, 2010 respectively.
The Company places its cash and cash equivalents with high credit
quality institutions. At times such amounts may exceed FDIC limits.
(10) Fair Value Measurements. Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement
date. The fair value hierarchy prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels. Level
1 means the use of quoted prices in active markets for identical
assets or liabilities. Level 2 means the use of values that are
derived principally from or corroborated by observable market data.
Level 3 means the use of inputs that are unobservable and significant
to the overall fair value measurement.
As of December 31, 2010 the Company had no assets or liabilities
measured at fair value on a recurring basis and only one asset
recorded at fair value on a non-recurring basis as it was deemed to be
other-than-temporarily impaired. The fair value of the corporate
aircraft of $1,550,000 is based on level 2 inputs for similar assets
in the current market. The first quarter of fiscal 2011 includes
$300,000 for the impairment to estimated fair value of the corporate
aircraft due to indications of a decrease in value over the past
quarter. The Company's decision to discontinue its regular use
requires adjustment to the current estimated value as necessary.
The fair value of note receivable (see Note 11) approximates the
unpaid principal balance based upon the interest rate and credit risk
of the note. The fair value of all other financial instruments with
the exception of mortgage notes (see Note 4) approximates the carrying
value due to the short-term nature of such instruments.
(11) Discontinued operations. In August 2009 the Company sold its
flatbed trucking company, SunBelt Transport, Inc. ("SunBelt"). Under
the agreement, the Buyer purchased all of SunBelt's tractors and
trailers, leased the SunBelt terminal facilities in Jacksonville,
Florida for 36 months at a rental of $5,000 per month and leased the
terminal facilities in South Pittsburgh, Tennessee for 60 months at a
rental of $5,000 per month with an option to purchase the Tennessee
facilities at the end of the lease for payment of an additional
$100,000. The South Pittsburgh lease was recorded as a sale under
bargain purchase accounting. The purchase price received for the
tractors and trailers and inventories was a $1 million cash payment
and the delivery of a Promissory Note requiring 60 monthly payments of
$130,000 each including interest at 7%, secured by the assets of the
business conveyed. In the quarter ending September 30, 2009 the
Company recognized $283,000 in severance costs related to a change-in-
control agreement triggered by the sale of SunBelt. The Company
retained all pre-closing receivables and liabilities.
SunBelt has been accounted for as discontinued operations in
accordance with ASC Topic 205-20 Presentation of Financial Statements
- - Discontinued Operations. All periods presented have been restated
accordingly.
In December 2010, a subsidiary of the Company, Florida Rock
Properties, Inc., sold approximately 1,844 acres of land in Caroline
County, Virginia, to the Commonwealth of Virginia, Board of Game and
Inland Fisheries. The purchase price for the property was $5,200,000,
subject to certain deductions. The Company also donated the
$5,402,000 value of minerals and aggregates and recognized a
$2,053,000 permanent tax benefit. The Company's book value of the
property was $276,000.
A summary of discontinued operations is as follows (in thousands):
Three months
Ended December 31,
2010 2009
Revenue $ 15 44
Operating expenses 14 6
Gain on property sale before taxes 4,665 -
Income before taxes $ 4,666 38
Income taxes 261 (14)
Income from
Discontinued operations $ 4,927 24
The components of the balance sheet are as follows:
December 31, September 30,
2010 2010
Accounts receivable $ 2 8
Deferred income taxes 417 417
Property and equipment, net 114 117
Assets of discontinued operations $ 533 542
Accounts payable $ 436 154
Accrued payroll and benefits 2 2
Accrued liabilities, other 62 61
Insurance liabilities 1,110 1,110
Liabilities of discontinued operations $ 1,610 1,327
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview - Patriot Transportation Holding, Inc. (the Company) is a
holding company engaged in the transportation and real estate
businesses.
The Company's transportation business, Florida Rock & Tank Lines, Inc.
is engaged in hauling primarily petroleum and other liquids and dry
bulk commodities in tank trailers.
The Company's real estate operations consist of two reportable
segments. The Mining royalty land segment owns real estate including
construction aggregate royalty sites and parcels held for investment.
The Developed property rentals segment acquires, constructs, and
leases office/warehouse buildings primarily in the Baltimore/Northern
Virginia/Washington area and holds real estate for future development
or related to its developments. Substantially all of the real estate
operations are conducted within the Southeastern and Mid-Atlantic
United States.
In prior filings the Company's real estate operations were aggregated
and reported as a single segment. The prior filings additionally
included results by division. In connection with the new presentation
of our real estate operations as two reportable segments, two
properties in Washington, D.C. and two properties in Duval County,
Florida were reclassified out of the Royalties and rent division and
the division was renamed the Mining royalty land segment. Historical
results have been reclassified to conform to the new segment
presentation.
On December 1, 2010, the board of directors declared a 3-for-1 stock
split of the Company's common stock in the form of a stock dividend.
The record date for the split was January 3, 2011 and the new shares
were issued on January 17, 2011. All share and per share information
presented has been adjusted to reflect this stock split.
The Company's operations are influenced by a number of external and
internal factors. External factors include levels of economic and
industrial activity in the United States and the Southeast, driver
availability and cost, regulations regarding driver qualifications and
hours of service, petroleum product usage in the Southeast which is
driven in part by tourism and commercial aviation, fuel costs,
construction activity, aggregates sales by lessees from the Company's
mining properties, interest rates, market conditions and attendant
prices for casualty insurance, demand for commercial warehouse space
in the Baltimore-Washington-Northern Virginia area, and ability to
obtain zoning and entitlements necessary for property development.
Internal factors include revenue mix, capacity utilization, auto and
workers' compensation accident frequencies and severity, other
operating factors, administrative costs, group health claims
experience, and construction costs of new projects. There is a
reasonable possibility that the Company's estimate of vehicle and
workers' compensation liability for the transportation group or
discontinued operations may be understated or overstated but the
possible range can not be estimated. The liability at any point in
time depends upon the relative ages and amounts of the individual open
claims. Financial results of the Company for any individual quarter
are not necessarily indicative of results to be expected for the year.
Discontinued Operation. In August 2009 the Company sold its flatbed
trucking company, SunBelt Transport, Inc. ("SunBelt"). Under the
agreement, the buyer purchased all of SunBelt's tractors and trailers,
leased the SunBelt terminal facilities in Jacksonville, Florida for 36
months at a rental of $5,000 per month and leased the terminal
facilities in South Pittsburgh, Tennessee for 60 months at a rental of
$5,000 per month with an option to purchase the Tennessee facilities
at the end of the lease for payment of an additional $100,000. The
South Pittsburgh lease was recorded as a sale under bargain purchase
accounting. The purchase price received for the tractors and trailers
and inventories was a $1 million cash payment and the delivery of a
Promissory Note requiring 60 monthly payments of $130,000 each
including interest at 7%, secured by the assets of the business
conveyed. The Company retained all pre-closing receivables and
liabilities. SunBelt has been accounted for as discontinued
operations in accordance with ASC Topic 205-20 Presentation of
Financial Statements - Discontinued Operations. All periods presented
have been restated accordingly.
In December 2010, a subsidiary of the Company, Florida Rock
Properties, Inc., sold approximately 1,844 acres of land in Caroline
County, Virginia, to the Commonwealth of Virginia, Board of Game and
Inland Fisheries. The purchase price for the property was $5,200,000
and expenses of the sale were $259,000. The Company also donated the
$5,402,000 value of minerals and aggregates and recognized a
$2,053,000 permanent tax benefit. The Company's book value of the
property was $276,000. Caroline County has been accounted for as
discontinued operations in accordance with ASC Topic 205-20
Presentation of Financial Statements - Discontinued Operations. All
periods presented have been restated accordingly.
Comparative Results of Operations for the Three Months Ended
December 31, 2010 and 2009
Consolidated Results - Net income for the first quarter of fiscal 2011
was $6,395,000 compared to $1,336,000 for the same period last year.
Diluted earnings per common share for the first quarter of fiscal 2011
were $0.68 compared to $0.14 for the same quarter last year. Income
from discontinued operations favorably impacted net income due to an
after tax gain of $4,926,000 from the exchange of property included in
the first quarter of fiscal 2011. Transportation segment results were
higher due to reduced health benefit claims. The mining royalty land
segment's results were higher due to an increase in mined tons. The
Developed property rentals segment's results were lower due to
increased professional fees and property taxes.
Transportation Results
Three Months Ended December 31
(dollars in thousands) ___2010 % 2009 %_
Transportation revenue $ 19,624 85% 19,467 88%
Fuel surcharges 3,367 15% 2,614 12%
Revenues 22,991 100% 22,081 100%
Compensation and benefits 8,454 37% 8,319 38%
Fuel expenses 4,746 20% 3,905 18%
Insurance and losses 1,649 7% 2,265 10%
Depreciation expense 1,506 6% 1,523 7%
Other, net 2,250 10% 2,218 10%
Sales, general & administrative 2,009 9% 1,860 8%
Allocated corporate expenses _____389 2% ___347 2%
Cost of operations 21,003 91% 20,437 93%
Operating profit $ 1,988 9% 1,644 7%
Transportation segment revenues were $22,991,000 in the first quarter
of 2011, an increase of $910,000 over the same quarter last year.
Revenue miles in the current quarter were up 5.7% compared to the
first quarter of fiscal 2010 due to business growth and a longer
average haul length. Fuel surcharge revenue increased $753,000.
Excluding fuel surcharges, revenue per mile decreased 4.5% over the
same quarter last year due to a longer average haul length and lower
revenue per mile on certain replacement business. The average price
paid per gallon of diesel fuel increased by $0.39 or 15.7% over the
same quarter in fiscal 2010.
The Transportation segment's cost of operations was $21,003,000 in the
first quarter of 2011, an increase of $566,000 over the same quarter
last year. The Transportation segment's cost of operations in the
first quarter of 2011 as a percentage of revenue was 91% compared to
93% in the first quarter of 2010. Compensation and benefits increased
$135,000 or 1.6% compared to the same quarter last year primarily due
to the increase in miles driven. Fuel surcharge revenue increased
$753,000 while fuel cost increased by $841,000 leaving a negative
impact to operating profit of $88,000 due to the increase in miles
driven. Insurance and losses decreased $616,000 compared to the same
quarter last year due to lower health claims. Depreciation expense
decreased $17,000 due to fewer trucks in service and existing trailers
becoming fully depreciated. Other expense increased $32,000 primarily
due to lower gains on equipment sales. Selling general and
administrative costs increased $149,000 or 8.0% compared to the same
quarter last year. Allocated corporate expenses increased $42,000.
Mining Royalty Land Results
Three Months Ended December 31
(dollars in thousands) ___2010 % 2009 %_
Mining royalty land revenue $ 1,095 100% 987 100%
Property operating expenses 124 11% 109 11%
Depreciation and depletion 25 2% 23 2%
Management Company indirect 37 4% 43 4%
Allocated corporate expense 153 14% 142 15%
Cost of operations 339 31% 317 32%
Operating profit $ 756 69% 670 68%
Mining royalty land segment revenues for the first quarter of fiscal
2011 were $1,095,000, an increase of $108,000 or 10.9% over the same
quarter last year, due to an increase in mined tons.
The mining royalty land segment's cost of operations was $339,000 in
the first quarter of 2011, an increase of $22,000 over the same
quarter last year. Property operating expenses increased $15,000 due
to higher property taxes. Depreciation and depletion expenses
increased $2,000 due to an increase in mined tons. Management Company
indirect expenses (excluding internal allocations for lease related
property management fees) decreased $6,000. Allocated corporate
expenses increased $11,000.
Developed Property Rentals Results
Three Months Ended December 31
(dollars in thousands) ___2010 % 2009 %_
Developed property rentals revenue $ 4,177 100% 4,432 100%
Property operating expenses 1,281 31% 1,343 30%
Depreciation and amortization 1,301 31% 1,277 29%
Management Company indirect 335 8% 383 9%
Allocated corporate expense 229 5% 212 5%
Cost of operations 3,146 75% 3,215 73%
Operating profit $ 1,031 25% 1,217 27%
Developed property rentals segment revenues for the first quarter of
fiscal 2011 were $4,177,000, a decrease of $255,000 or 5.8% due to
reduced tenant reimbursements for snow removal.
Developed property segment's cost of operations was $3,146,000 in the
first quarter of 2011, a decrease of $69,000 or 2.1% over the same
quarter last year. Property operating expenses decreased $62,000 due
to a $201,000 reduction in snow removal costs offset by higher
professional fees. Depreciation and amortization increased $24,000
due to the purchase of a building. Management Company indirect
expenses (excluding internal allocations for lease related property
management fees) decreased $48,000. Allocated corporate expenses
increased $17,000.
Consolidated Results
Operating Profit - Consolidated operating profit was $3,188,000 in the
first quarter of fiscal 2011, an increase of $146,000 or 4.8% compared
to $3,042,000 in the same period last year. Operating profit in the
transportation segment increased $344,000 or 20.9% primarily due to
lower health benefit claims. Operating profit in the mining royalty
land segment increased $86,000 or 12.8% due to an increase in mined
tons. Operating profit in the Developed property rentals segment
decreased $186,000 or 15.3% due to higher professional fees and
property taxes. Consolidated operating profit includes corporate
expenses not allocated to any segment in the amount of $587,000 in the
first quarter of fiscal 2011, an increase of $98,000 compared to the
same period last year due to adjustment to the fair value of the
corporate aircraft of $300,000 partially offset by lower stock
compensation and professional fees.
Interest expense - Interest expense decreased $120,000 over the same
quarter last year due to declining mortgage interest expense and
higher capitalized interest.
Income taxes - Income tax expense increased $98,000 over the same
quarter last year due to higher earnings.
Income from continuing operations - Income from continuing operations
was $1,468,000 or $0.16 per diluted share in the first quarter of
fiscal 2011, an increase of 11.9% compared to $1,312,000 or $.14 per
diluted share for the same period last year. The $156,000 increase
was primarily due to the $146,000 increase in operating profits and
$120,000 reduction in interest expense offset by higher income taxes.
Discontinued operations - The after tax income from discontinued
operations for the first quarter of fiscal 2011 was $4,927,000 versus
$24,000 for the same period last year. Diluted earnings per share on
discontinued operations for the first quarter of fiscal 2011 was $.52
compared to $.00 in the first quarter of fiscal 2010. The first
quarter of fiscal 2011 included a book gain on the exchange of
property of $4,926,000 after tax or $.52 per diluted share.
Net income - Net income for the first quarter of fiscal 2011 was
$6,395,000 compared to $1,336,000 for the same period last year.
Diluted earnings per common share for the first quarter of fiscal 2011
were $0.68 compared to $0.14 for the same quarter last year. Income
from discontinued operations favorably impacted net income due to an
after tax gain of $4,926,000 from the exchange of property included in
the first quarter of fiscal 2011. Transportation segment results were
higher due to reduced health benefit claims. The mining royalty land
segment's results were higher due to an increase in mined tons. The
Developed property rentals segment's results were lower due to
increased professional fees and property taxes.
Liquidity and Capital Resources. For the first three months of fiscal
2011, the Company used cash provided by operating activities of
continuing operations of $4,032,000, proceeds received on notes of
$309,000, proceeds from the sale of plant, property and equipment of
$23,000, proceeds from the exercise of employee stock options of
$159,000, excess tax benefits from the exercise of stock options of
$155,000 and cash balances to purchase $1,796,000 in transportation
equipment, to purchase Hollander 95 Business Park $1,222,000 (net of
1031 exchange of $4,941,000), to expend $1,497,000 in real estate
development, to invest $114,000 in the Brooksville Joint Venture, to
make $1,119,000 scheduled payments on long-term debt and to repurchase
Company stock for $955,000. Cash provided by the operating activities
of discontinued operations was $293,000. Cash decreased $1,732,000.
In August 2009 the Company sold its flatbed trucking company, SunBelt
Transport, Inc. ("SunBelt"). The purchase price received for the
tractors and trailers and inventories was a $1 million cash payment
and the delivery of a Promissory Note requiring 60 monthly payments of
$130,000 each including 7% interest, secured by the assets of the
business conveyed. The Company retained all pre-closing receivables
and liabilities. SunBelt has been accounted for as discontinued
operations. All periods presented have been restated accordingly.
In December 2010, a subsidiary of the Company, Florida Rock
Properties, Inc., sold approximately 1,844 acres of land in Caroline
County, Virginia, to the Commonwealth of Virginia, Board of Game and
Inland Fisheries. The purchase price for the property was $5,200,000
and expenses of the sale were $259,000. The Company also donated the
$5,402,000 value of minerals and aggregates and recognized a
$2,053,000 permanent tax benefit. The $2,053,000 permanent tax
benefit was recorded to income taxes receivable for $342,000 and
offset to long-term deferred tax liabilities of $1,711,000. Actual
realization of the $1,711,000 in deferred taxes will depend on taxable
income, income tax rates, and income tax regulations over the 5 year
carry forward period. The Company's book value of the property was
$276,000. The Caroline County property has been accounted for as a
discontinued operation and all periods presented have been restated
accordingly. The Company used all the proceeds in a 1031 exchange to
purchase Hollander 95 Business Park in a foreclosure sale auction
through a qualified intermediary. Hollander 95 Business Park, in
Baltimore City, Maryland, closed on October 22, 2010 by a 1031
intermediary for a purchase price totaling $5,750,000. This property
consists of an existing 82,800 square foot warehouse building (52.9%
occupied) with an additional 42 acres of partially developed land with
a development capacity of 490,000 square feet (a mix of warehouse,
office, hotel and flex buildings).
Cash flows from operating activities for the first three months of
fiscal 2011 were $3,597,000 higher than the same period last year
primarily due to large income tax payments in the same quarter last
year related to the sale of SunBelt and lower insurance payments.
Cash flows used in investing activities for the first three months of
fiscal 2011 were $966,000 higher primarily reflecting the purchase of
Hollander 95 Business Park (net of 1031 exchange of $4,941,000).
Cash flows used in financing activities for the first three months of
fiscal 2011 were $840,000 higher than the same period last year due to
repurchases of Company stock for $955,000 partially offset by
increased stock options exercised.
The Company has a $37,000,000 uncollateralized Revolving Credit
Agreement with three banks, which matures on December 13, 2013. The
Revolver contains limitations on availability and restrictive
covenants including limitations on paying cash dividends. Letters of
credit in the amount of $13,294,000 were issued under the Revolver.
As of December 31, 2010, $23,706,000 was available for borrowing and
$46,321,000 of consolidated retained earnings would be available for
payment of dividends. The Company was in compliance with all
covenants as of December 31, 2010.
The Company had $13,942,000 of irrevocable letters of credit
outstanding as of December 31, 2010. Most of the letters of credit
are irrevocable for a period of one year and are automatically
extended for additional one-year periods until notice of non-renewal
is received from the issuing bank not less than thirty days before the
expiration date. These were issued for insurance retentions and to
guarantee certain obligations to state agencies related to real estate
development. The Company issued replacement letters of credit through
the Revolver to reduce fees.
The Board of Directors has authorized Management to repurchase shares
of the Company's common stock from time to time as opportunities
arise. During the first three months of fiscal 2011 the Company
repurchased 36,000 shares for $955,000. As of December 31, 2010,
$4,669,000 was authorized for future repurchases of common stock. The
Company does not currently pay any cash dividends on common stock.
The Company has committed to make additional capital contributions of
up to $41,000 over the next 12 months to Brooksville Quarry, LLC in
connection with a joint venture with Vulcan.
While the Company is affected by environmental regulations, such
regulations are not expected to have a major effect on the Company's
capital expenditures or operating results.
Summary and Outlook. Transportation segment miles for this year's
first quarter were 5.7% higher than the same quarter last year. The
Company continues to succeed in replacing customers from the non-
renewed contracts announced January 6, 2010 and has basically
recovered from new customers substantially all the lost revenue miles,
albeit at lower rates per mile for longer average hauls.
Operating profit from the leasing of developed buildings has been
unfavorably impacted by three newer buildings brought into service
since September 2008 along with two nearly vacant buildings in
Delaware impacted by automobile plant closings and the residential
housing downturn. Occupancy increased from 72.0% to 76.5% over last
quarter as the market for new tenants appears to have bottomed and
traffic for vacant space has increased. The Company is not presently
engaged in the construction of any new buildings.
In July 2008, a subsidiary of the Company, FRP Bird River, LLC,
entered into an agreement to sell approximately 121 acres of land in
Baltimore County, Maryland to Mackenzie Investment Group, LLC. The
purchase price for the property is $25,075,000, subject to certain
potential purchase price adjustments. The agreement of sale is
subject to certain contingencies including additional government
approvals and closing may be one or more years away. The cost of the
property of $5,808,000 is included in Real estate held for investment
rather than held for sale because of the original and current
expectation that the sale would not be completed within one year. The
purchaser has placed non-refundable deposits of $1,000,000 under this
contract in escrow including $650,000 in March 2009. Preliminary
approval for the development as originally contemplated under the
agreement's pricing contingencies has now been received and the time
for any appeals from that approval has expired.
In May 2008, the Company received final approval from the Zoning
Commission of the District of Columbia of its planned unit development
application for the Company's 5.8 acre undeveloped waterfront site on
the Anacostia River in Washington, D.C. This site is located adjacent
to the recently opened Washington Nationals Baseball Park. The site
currently is leased to Vulcan Materials Company on a month-to-month
basis. The approved planned unit development permits the Company to
develop a four building, mixed use project, containing approximately
545,800 square feet of office and retail space and approximately
569,600 square feet of additional space for residential and hotel
uses. The approved development would include numerous publicly
accessible open spaces and a waterfront esplanade along the Anacostia
River. In November 2009, the Company received a two-year extension
for commencement of this project, moving the construction commencement
date to June 2013. The Company sought this extension because of
negative current market indications.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is exposed to market risk from changes in interest rates.
For its cash and cash equivalents, a change in interest rates affects
the amount of interest income that can be earned. For its debt
instruments with variable interest rates, changes in interest rates
affect the amount of interest expense incurred. The Company prepared
a sensitivity analysis of its cash and cash equivalents to determine
the impact of hypothetical changes in interest rates on the Company's
results of operations and cash flows. The interest-rate analysis
assumed a 50 basis point adverse change in interest rates on all cash
and cash equivalents. However, the interest-rate analysis did not
consider the effects of the reduced level of economic activity that
could exist in such an environment. Based on this analysis,
management has concluded that a 50 basis point adverse move in
interest rates on the Company's cash and cash equivalents would have
an immaterial impact on the Company's results of operations and cash
flows.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the
Company's reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and
forms, and that such information is accumulated and communicated to
management, including the Company's Chief Executive Officer ("CEO"),
Chief Financial Officer ("CFO"), and Chief Accounting Officer ("CAO"),
as appropriate, to allow timely decisions regarding required
disclosure.
The Company also maintains a system of internal accounting controls
over financial reporting that are designed to provide reasonable
assurance to the Company's management and Board of Directors regarding
the preparation and fair presentation of published financial
statements.
All control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance of achieving the desired control
objectives.
As of December 31, 2010, the Company, under the supervision and with
the participation of the Company's management, including the CEO, CFO
and CAO, carried out an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures.
Based on this evaluation, the Company's CEO, CFO and CAO concluded
that the Company's disclosure controls and procedures are effective in
alerting them in a timely manner to material information required to
be included in periodic SEC filings.
There have been no changes in the Company's internal controls over
financial reporting during the first three months that have materially
affected, or are reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1A. RISK FACTORS
In addition to the other information set forth in this report, you
should carefully consider the factors discussed in Part I, "Item 1A.
Risk Factors" in our Annual Report on Form 10-K for the year ended
September 30, 2010, which could materially affect our business,
financial condition or future results. The risks described in our
Annual Report on Form 10-K are not the only risks facing our
Company. Additional risks and uncertainties not currently known to
us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition and/or operating
results.
Item 2. PURCHASES OF EQUITY SECURITIES BY THE ISSUER
(c)
Total
Number of
Shares (d)
Purchased Approximate
(a) As Part of Dollar Value of
Total (b) Publicly Shares that May
Number of Average Announced Yet Be Purchased
Shares Price Paid Plans or Under the Plans
Period Purchased per Share Programs or Programs (1)
October 1
through
October 31 0 $ 0 0 $ 5,625,000
November 1
through
November 30 0 $ 0 0 $ 5,625,000
December 1
through
December 31 36,000 $ 26.53 36,000 $ 4,670,000
Total 36,000 $ 26.53 36,000
(1) In December, 2003, the Board of Directors authorized management
to expend up to $6,000,000 to repurchase shares of the Company's
common stock from time to time as opportunities arise. On February
19, 2008, the Board of Directors authorized management to expend up
to an additional $5,000,000 to repurchase shares of the Company's
common stock from time to time as opportunities arise.
Item 6. EXHIBITS
(a) Exhibits. The response to this item is submitted as a
separate Section entitled "Exhibit Index", on page 25.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
February 2, 2011 PATRIOT TRANSPORTATION HOLDING, INC.
Thompson S. Baker II
Thompson S. Baker II
President and Chief Executive
Officer
John D. Milton, Jr.
John D. Milton
Executive Vice President, Treasurer,
Secretary and Chief
Financial Officer
John D. Klopfenstein
John D. Klopfenstein
Controller and Chief
Accounting Officer
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2010
EXHIBIT INDEX
(14) Financial Code of Ethical Conduct between the
Company, Chief Executive Officers and Financial
Managers, as revised on January 28, 2004, which
is available on the Company's website at
www.patriottrans.com.
(31)(a) Certification of Thompson S. Baker II.
(31)(b) Certification of John D. Milton, Jr.
(31)(c) Certification of John D. Klopfenstein.
(32) Certification of Chief Executive Officer, Chief
Financial Officer, and Chief Accounting Officer
under Section 906 of the Sarbanes-Oxley Act of
2002.