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 March 31, 2012
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.)
200 W. Forsyth St., 7th Floor, Jacksonville, FL 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[X] 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 March 31, 2012 there were 9,372,551 shares of
Common Stock,
$.10 par value per share, outstanding.
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 2012
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 15
Item 3. Quantitative and Qualitative Disclosures about Market Risks 27
Item 4. Controls and Procedures 28
Part II. Other Information
Item 1A. Risk Factors 29
Item 2. Purchase of Equity Securities by the Issuer 29
Item 6. Exhibits 29
Signatures 39
Exhibit 31 Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 32
Exhibit 32 Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 35
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)
March 31, September 30,
Assets 2012 2011
Current assets:
Cash and cash equivalents $ 20,037 21,026
Accounts receivable (net of allowance for
doubtful accounts of $112 and $111, respectively) 8,961 6,702
Federal and state income taxes receivable 958 93
Inventory of parts and supplies 1,050 1,121
Deferred income taxes 493 201
Prepaid tires on equipment 1,521 1,381
Prepaid taxes and licenses 862 1,860
Prepaid insurance 1,125 2,111
Prepaid expenses, other 114 85
Assets of discontinued operations 107 114
Total current assets 35,228 34,694
Property, plant and equipment, at cost 318,791 313,930
Less accumulated depreciation and depletion 108,630 104,942
Net property, plant and equipment 210,161 208,988
Real estate held for investment, at cost 6,848 6,848
Investment in joint venture 7,470 7,412
Goodwill 1,087 1,087
Unrealized rents 3,967 3,604
Other assets 3,782 3,757
Total assets $268,543 266,390
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,590 3,948
Accrued payroll and benefits 3,882 4,992
Accrued insurance 3,115 3,303
Accrued liabilities, other 1,165 1,053
Long-term debt due within one year 5,068 4,902
Liabilities of discontinued operations 31 34
Total current liabilities 16,851 18,232
Long-term debt, less current portion 59,794 62,370
Deferred income taxes 18,147 16,919
Accrued insurance 2,154 2,548
Other liabilities 1,949 1,874
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,
9,372,551 and 9,288,023 shares issued
and outstanding, respectively 937 929
Capital in excess of par value 40,378 38,845
Retained earnings 128,302 124,642
Accumulated other comprehensive income, net 31 31
Total shareholders' equity 169,648 164,447
Total liabilities and shareholders' equity $268,543 266,390
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2012 2011 2012 2011
Revenues:
Transportation $25,449 23,036 50,290 46,027
Mining royalty land 1,025 918 2,002 2,013
Developed property rentals 4,852 4,636 9,393 8,813
Total revenues 31,326 28,590 61,685 56,853
Cost of operations:
Transportation 23,659 21,034 47,057 42,037
Mining royalty land 323 352 616 691
Developed property rentals 3,341 3,499 6,503 6,645
Unallocated corporate 559 521 851 1,108
Total cost of operations 27,882 25,406 55,027 50,481
Operating profit:
Transportation 1,790 2,002 3,233 3,990
Mining royalty land 702 566 1,386 1,322
Developed property rentals 1,511 1,137 2,890 2,168
Unallocated corporate (559) (521) (851) (1,108)
Total operating profit 3,444 3,184 6,658 6,372
Gain on termination of sale contract - - 1,039 -
Interest income and other 12 99 21 201
Equity in loss of joint venture (1) (2) (8) (2)
Interest expense (794) (838) (1,598) (1,744)
Income before income taxes 2,661 2,443 6,112 4,827
Provision for income taxes (1,022) (938) (2,348) (1,854)
Income from continuing operations 1,639 1,505 3,764 2,973
Income from discontinued
operations, net 4 178 3 5,105
Net income $ 1,643 1,683 3,767 8,078
Comprehensive Income $ 1,643 $ 1,683 $ 3,767 $ 8,078
Earnings per common share:
Income from continuing operations -
Basic $ .18 .16 .40 .32
Diluted $ .17 .16 .40 .31
Discontinued operations (Note 11) -
Basic $ - .02 - .55
Diluted $ - .02 - .54
Net income - basic $ .18 .18 .40 .87
Net income - diluted $ .17 .18 .40 .85
Number of shares (in thousands)
used in computing:
-basic earnings per common share 9,353 9,272 9,321 9,272
-diluted earnings per common share 9,471 9,453 9,446 9,457
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2012 AND 2011
(In thousands)
(Unaudited)
2012 2011
Cash flows from operating activities:
Net income $ 3,767 8,078
Adjustments to reconcile net income to net cash
provided by continuing operating activities:
Depreciation, depletion and amortization 6,306 6,161
Deferred income taxes 936 (476)
Equity in loss of joint venture 8 2
Gain on sale of equipment and property (1,536) (233)
Income from discontinued operations, net (3) (5,105)
Stock-based compensation 547 545
Net changes in operating assets and liabilities:
Accounts receivable (9) (687)
Inventory of parts and supplies 71 (450)
Prepaid expenses and other current assets 1,815 1,887
Other assets (737) 218
Accounts payable and accrued liabilities (1,544) (1,629)
Income taxes payable and receivable (865) 1,324
Long-term insurance liabilities and other long-term
liabilities (319) 135
Net cash provided by operating activities of
continuing operations 8,437 9,770
Net cash provided by (used in) operating activities of
discontinued operations 7 (593)
Net cash provided by operating activities 8,444 9,177
Cash flows from investing activities:
Purchase of transportation group property and equipment (5,403) (3,159)
Investments in developed property rentals segment (4,046) (5,010)
Investment in joint venture (70) (114)
Proceeds from the sale of property, plant and equipment 1,609 416
Proceeds received on note for sale of SunBelt - 1,064
Net cash used in investing activities (7,910) (6,803)
Cash flows from financing activities:
Repayment of long-term debt (2,410) (2,256)
Repurchase of Company Stock (137) (1,145)
Excess tax benefits from exercises of stock options
and vesting of restricted stock 353 249
Exercise of employee stock options 671 251
Net cash used in financing activities (1,523) (2,901)
Net decrease in cash and cash equivalents (989) (527)
Cash and cash equivalents at beginning of period 21,026 17,151
Cash and cash equivalents at end of the period $ 20,037 16,624
The Company recorded non-cash transactions in fiscal 2012 for a $2,250
receivable on previously capitalized real estate taxes on the Anacostia
property and in fiscal 2011 from an exchange of real estate of $4,941 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
MARCH 31, 2012
(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 six months ended March 31,
2012 are not necessarily indicative of the results that may be
expected for the fiscal year ending September 30, 2012. 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, 2011.
(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 $.10 per share. All share and
per share information presented has been adjusted to reflect this
stock split.
(3) Recent Accounting Pronouncements. In June 2011, accounting
guidance was issued which requires an entity to present the total
of comprehensive income, the components of net income, and the
components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but
consecutive statements. This guidance eliminates the option to
present the components of other comprehensive income as part of the
statement of equity. This standard was adopted by the Company on
January 1, 2012. As the new adoption relates to presentation only,
the adoption of this standard did not have a material effect on the
Company's financial position or results of operations.
(4) 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.
Operating results and certain other financial data for the
Company's business segments are as follows (in thousands):
Three Months ended Six Months ended
March 31,___ March 31,___
2012 2011 2012 2011
Revenues:
Transportation $ 25,449 23,036 50,290 46,027
Mining royalty land 1,025 918 2,002 2,013
Developed property rentals 4,852 4,636 9,393 8,813
$ 31,326 28,590 61,685 56,853
Operating profit:
Transportation $ 2,186 2,392 4,024 4,769
Mining royalty land 865 718 1,713 1,627
Developed property rentals 1,757 1,365 3,381 2,625
Corporate expenses:
Allocated to transportation (396) (390) (791) (779)
Allocated to mining land (163) (152) (327) (305)
Allocated to developed property (246) (228) (491) (457)
Unallocated (559) (521) (851) (1,108)
(1,364) (1,291) (2,460) (2,649)
$ 3,444 3,184 6,658 6,372
Interest expense:
Mining royalty land $ 9 9 19 18
Developed property rentals ___785 _ 829 1,579 1,726
$ 794 838 1,598 1,744
Capital expenditures:
Transportation $ 614 1,363 5,403 3,159
Mining royalty land - - - -
Developed property rentals:
Capitalized interest 284 316 578 583
Internal labor 117 149 258 260
Real estate taxes (a) (90) 269 (1,697) 572
Other costs (b) 939 1,557 2,657 3,595
$ 1,864 3,654 7,199 8,169
(a)Includes $2,250 receivable on previously capitalized real estate taxes
on the Anacostia property for the 6 months ended March 31, 2012.
(b)Net of 1031 exchange of $4,941 for the 3 and 6 months ending March
31, 2011.
Depreciation, depletion and
amortization:
Transportation $ 1,720 1,563 3,328 3,098
Mining royalty land 27 26 59 51
Developed property rentals 1,373 1,316 2,714 2,617
Other 103 48 205 395
$ 3,223 2,953 6,306 6,161
March 31, September 30,
2012 2011
Identifiable net assets
Transportation $ 39,947 39,001
Discontinued transportation operations 107 114
Mining royalty land 28,215 28,295
Developed property rentals 176,847 175,618
Cash items 20,037 21,026
Unallocated corporate assets 3,390 2,336
$268,543 266,390
(5) Long-Term debt. Long-term debt is summarized as follows (in
thousands):
March 31, September 30,
2012 2011
5.6% to 8.6% mortgage notes
due in installments through 2027 64,862 67,272
Less portion due within one year 5,068 4,902
$ 59,794 62,370
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 $12,082,000 were issued under the
Revolver. As of March 31, 2012, $24,918,000 was available for
borrowing and $53,947,000 of consolidated retained earnings would
be available for payment of dividends. The Company was in
compliance with all covenants as of March 31, 2012.
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 March 31, 2012, the carrying
amount and fair value of such other long-term debt was $64,862,000
and $67,717,000, respectively.
(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 SIX MONTH
ENDED MARCH 31, ENDED MARCH 31,
2012 2011 2012 2011
Weighted average common shares
outstanding during the period
- shares used for basic
earnings per common share 9,353 9,272 9,321 9,272
Common shares issuable under
share based payment plans
which are potentially dilutive 118 181 125 185
Common shares used for diluted
earnings per common share 9,471 9,453 9,446 9,457
Net income $ 1,643 1,683 3,767 8,078
Earnings per common share
Basic $ .18 .18 .40 .87
Diluted $ .17 .18 .40 .85
For the three and six months ended March 31, 2012, 164,560 and
172,060 shares attributable to outstanding stock options,
respectively, were excluded from the calculation of diluted
earnings per share because their inclusion would have been anti-
dilutive. For the three and six months ended March 31, 2011,
132,870 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, 2011, 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
603,560 at March 31, 2012.
The Company recorded the following stock compensation expense in
its consolidated statements of income (in thousands):
Three Months ended Six Months ended
March 31, March 31,_
2012 2011 2012 2011
Stock option grants $ 91 79 227 211
Annual director stock award 320 334 320 334
411 413 547 545
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, 2011 606,025 $14.96 3.5 $ 4,216
Granted 31,690 $22.25 $ 281
Exercised 76,541 $ 8.77 $ 363
Forfeited 3,000 $ 5.78 $
10
Outstanding at
March 31, 2012 558,174 $16.27 3.8 $ 4,124
Exercisable at
March 31, 2012 467,930 $14.48 2.9 $ 3,159
Vested during
six months ended
March 31, 2012 23,274 $ 212
The aggregate intrinsic value of exercisable in-the-money options
was $4,446,000 and the aggregate intrinsic value of all outstanding
in-the-money options was $4,471,000 based on the market closing
price of $23.29 on March 30, 2012 less exercise prices. Gains of
$976,000 were realized by option holders during the six months
ended March 31, 2012. The realized tax benefit from options
exercised for the six months ended March 31, 2012 was $374,000.
Total compensation cost of options granted but not yet vested as of
March 31, 2012 was $752,000, which is expected to be recognized
over a weighted-average period of 3.2 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 six months of fiscal 2012, the transportation
segment's ten largest customers accounted for approximately 53.7%
of the transportation segment's revenue. One of these customers
accounted for 19.2% 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 $2,961,000 and
$3,115,000 at March 31, 2012 and September 30, 2011 respectively.
The mining royalty land segment has one lessee that accounted for
82.0% of the segment's revenues and $134,000 of accounts
receivable. The loss of this customer would have an adverse effect
on the segment.
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 March 31, 2012 the Company had no assets or liabilities
measured at fair value on a recurring basis or non-recurring basis.
During fiscal 2011 the corporate aircraft was placed back into
service and depreciation was recommenced. Prior to that it was
recorded at fair value based on level 2 inputs for similar assets
in the current market on a non-recurring basis as it was deemed to
be other-than-temporarily impaired. The first quarter of fiscal
2011 included $300,000 for the impairment to estimated fair value
of the corporate aircraft.
The fair value of all other financial instruments with the
exception of mortgage notes (see Note 5) 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 Pittsburg, 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 Pittsburg 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. As of
September 30, 2011 the note receivable was fully paid and the
option to purchase the South Pittsburg facility was completed. 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., closed a bargain sale of approximately 1,777
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 $5,599,000 primarily for the value of
minerals and aggregates and recognized a $2,126,000 permanent tax
benefit. The $2,126,000 permanent tax benefit was recorded to
income taxes receivable for $303,000 and offset to long-term
deferred tax liabilities of $1,823,000. Actual realization of the
$1,823,000 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.
A summary of discontinued operations is as follows (in thousands):
Three months Six months
Ended March 31, Ended March
31,
2012 2011 2012 2011
Revenue $ 15 15 30 30
Operating expenses 9 (274) 25 (260)
Gain on sale before taxes - - - 4,665
Income before income taxes $ 6 289 5 4,955
Permanent tax benefit - - - 2,126
Provision for income taxes (2) (111) (2) (1,976)
Income from discontinued operations $ 4 178 3 5,105
The amounts included in the above totals for the bargain sale is as
follows (in thousands):
Three months Six months
Ended March 31, Ended March
31,
2012 2011 2012 2011
Revenue $ - - - -
Operating expenses - - - -
Gain on sale before taxes - - - 4,665
Income before income taxes $ - - - 4,665
Permanent tax benefit - - - 2,126
Provision for income taxes - - - (1,792)
Income from discontinued operations $ - - - 4,999
The components of the balance sheet are as follows:
March 31, September 30,
2012 2011
Accounts receivable $ - 3
Deferred income taxes 5 4
Property and equipment, net 102 107
Assets of discontinued operations $ 107 114
Accounts payable $ 1 -
Accrued payroll and benefits 2 2
Accrued liabilities, other - 3
Insurance liabilities 28 29
Liabilities of discontinued operations $ 31 34
(12) Unusual or Infrequent Items Impacting Quarterly Results.
Income from continuing operations for the first quarter of fiscal
2012 included a gain on termination of sale contract in the amount
of $1,039,000 before income taxes for the receipt of non-refundable
deposits related to the termination of an agreement to sell the
Company's Windlass Run Residential property
Discontinued operations, net for the first quarter of fiscal 2011
included a book gain on the exchange of property of $4,926,000
after tax (see note 11).
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.
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 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 Pittsburg, 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 Pittsburg 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. As of
September 30, 2011 the note receivable has been fully paid and the
option to purchase the South Pittsburg facility was completed. 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., closed a bargain sale of approximately 1,777
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 $5,599,000 primarily for the value of
minerals and aggregates and recognized a $2,126,000 permanent tax
benefit. The $2,126,000 permanent tax benefit was recorded to
income taxes receivable for $303,000 and offset to long-term
deferred tax liabilities of $1,823,000. Actual realization of the
$1,823,000 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.
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
March 31, 2012 and 2011
Consolidated Results - Net income for the second quarter of fiscal
2012 was $1,643,000 compared to $1,683,000 for the same period last
year. Diluted earnings per common share for the second quarter of
fiscal 2012 were $.17 compared to $.18 for the same quarter last
year. Transportation segment results were lower due to increased
workers compensation claim costs along with a sharp rise in fuel
costs, higher vehicle repairs, increased tire prices and cost of
growth initiatives partially offset by higher gains on equipment
sales and incremental profits on increased revenues. The mining
royalty land segment's results were higher due to an increase in
timber sales and reduced allocation of indirect management company
costs to this segment. The Developed property rentals segment's
results were higher due to higher occupancy and lower real estate
taxes partially offset by higher maintenance costs, professional
fees and allocation of indirect management company costs.
Transportation Results
Three months ended March 31
(dollars in thousands) ___2012 % 2011 %_
Transportation revenue $ 20,656 81% 18,885 82%
Fuel surcharges 4,793 19% 4,151 18%
Revenues 25,449 100% 23,036 100%
Compensation and benefits 9,280 37% 8,460 37%
Fuel expenses 6,216 24% 5,381 23%
Insurance and losses 1,601 6% 1,237 5%
Depreciation expense 1,677 7% 1,535 7%
Other, net 2,406 9% 2,157 9%
Sales, general & administrative 2,083 8% 1,874 8%
Allocated corporate expenses _____396 2% ___390 2%
Cost of operations 23,659 93% 21,034 91%
Operating profit $ 1,790 7% 2,002 9%
Transportation segment revenues were $25,449,000 in the second
quarter of 2012, an increase of $2,413,000 over the same quarter
last year. Revenue miles in the current quarter were up 6.4%
compared to the second quarter of fiscal 2011 due to business
growth and a longer average haul length. Fuel surcharge revenue
increased $642,000. Excluding fuel surcharges, revenue per mile
increased 3.0% over the same quarter last year. The average price
paid per gallon of diesel fuel increased by $.39 or 11.7% over the
same quarter in fiscal 2011.
The Transportation segment's cost of operations was $23,659,000 in
the second quarter of 2012, an increase of $2,625,000 over the same
quarter last year. The Transportation segment's cost of operations
in the second quarter of 2012 as a percentage of revenue was 93%
compared to 91% in the second quarter of 2011. Compensation and
benefits increased $820,000 or 9.7% compared to the same quarter
last year primarily due to a driver pay increase, the increase in
miles driven, and expenses associated with increased driver hiring.
Fuel surcharge revenue increased $642,000 while fuel cost
increased by $835,000 leaving a negative impact to operating profit
of $193,000. There is a time lag between changes in fuel prices
and surcharges and often fuel costs change more rapidly than the
market indexes used to determine fuel surcharges. Insurance and
losses increased $364,000 compared to the same quarter last year
primarily due to lower than expected workers compensation claim
costs in the same quarter last year. Depreciation expense
increased $142,000 due to more trucks in service. Other expense
increased $249,000 due to higher vehicle repair costs, increased
tire prices, increased miles driven, and growth initiatives
partially offset by higher gains on equipment sales and incremental
profits on increased revenues. Selling general and administrative
costs increased $209,000 or 11.1% compared to the same quarter last
year due to higher staffing and professional fees. Allocated
corporate expenses increased $6,000.
Mining Royalty Land Results
Three months ended March 31
(dollars in thousands) ___2012 % 2011 %_
Mining royalty land revenue $ 1,025 100% 918 100%
Property operating expenses 130 13% 133 14%
Depreciation and depletion 27 3% 26 3%
Management Company indirect 3 0% 41 4%
Allocated corporate expense 163 16% 152 17%
Cost of operations 323 32% 352 38%
Operating profit $ 702 68% 566 62%
Mining royalty land segment revenues for the second quarter of
fiscal 2012 were $1,025,000, an increase of $107,000 or 11.7% over
the same quarter last year due primarily to a $62,000 increase in
timber sales.
The mining royalty land segment's cost of operations was $323,000
in the second quarter of 2012, a decrease of $29,000 over the same
quarter last year due primarily to reduced allocation of indirect
management company costs to this segment. Allocated corporate
expenses increased $11,000.
Developed Property Rentals Results
Three months ended March 31
(dollars in thousands) ___2012 % 2011 %_
Developed property rentals revenue $ 4,852 100% 4,636 100%
Property operating expenses 1,228 26% 1,591 34%
Depreciation and amortization 1,373 28% 1,316 28%
Management Company indirect 494 10% 364 8%
Allocated corporate expense 246 5% 228 5%
Cost of operations 3,341 69% 3,499 75%
Operating profit $ 1,511 31% 1,137 25%
Developed property rentals segment revenues for the second quarter
of fiscal 2012 were $4,852,000, an increase of $216,000 or 4.7% due
to higher occupancy. Occupancy at March 31, 2012 was 86.0% as
compared to 77.2% at March 31, 2011.
Developed property segment's cost of operations was $3,341,000 in
the second quarter of 2012, a decrease of $158,000 or 4.5% over the
same quarter last year. Property operating expenses decreased
$363,000 due to lower real estate taxes and snow removal costs
partially offset by higher maintenance costs and professional fees.
Depreciation and amortization increased $57,000 primarily due to
tenant improvements. Management Company indirect expenses
(excluding internal allocations for lease related property
management fees) increased $130,000 due to increased allocation to
this segment and growth initiatives. Allocated corporate expenses
increased $18,000.
Consolidated Results
Operating Profit - Consolidated operating profit was $3,444,000 in
the second quarter of fiscal 2012, an increase of $260,000 or 8.2%
compared to $3,184,000 in the same period last year. Operating
profit in the transportation segment decreased $212,000 or 10.6%
primarily due to increased workers compensation claim costs along
with a sharp rise in fuel costs, higher vehicle repairs, increased
tire prices, and cost of growth initiatives partially offset by
higher gains on equipment sales and incremental profits on
increased revenues. Operating profit in the mining royalty land
segment increased $136,000 or 24.0% due to an increase in timber
sales and reduced allocation of indirect management company costs
to this segment. Operating profit in the Developed property
rentals segment increased $374,000 or 32.9% due to higher occupancy
and lower real estate taxes partially offset by higher maintenance
costs, professional fees and allocation of indirect management
company costs. Consolidated operating profit includes corporate
expenses not allocated to any segment in the amount of $559,000 in
the second quarter of fiscal 2012, an increase of $38,000 compared
to the same period last year.
Interest income and other - Interest income and other decreased
$87,000 over the same quarter last year due to the prepayment of
notes receivable from the sale of SunBelt Transport.
Interest expense - Interest expense decreased $44,000 over the same
quarter last year due to declining mortgage interest expense and
higher capitalized interest.
Income taxes - Income tax expense increased $84,000 over the same
quarter last year due to higher earnings from continuing
operations.
Income from continuing operations - Income from continuing
operations was $1,639,000 or $.17 per diluted share in the second
quarter of fiscal 2012, an increase of 8.9% compared to $1,505,000
or $.16 per diluted share for the same period last year. The
$134,000 increase was primarily due to the $260,000 increase in
operating profits offset by higher income taxes.
Discontinued operations - The after tax income from discontinued
operations for the second quarter of fiscal 2012 was $4,000 versus
income of $178,000 for the same period last year. Diluted earnings
per share on discontinued operations for the second quarter of
fiscal 2012 was $.00 compared to $.02 in the second quarter of
fiscal 2011. The discontinued operations results are primarily due
to lower than expected retained liabilities and losses from prior
year operations.
Net income - Net income for the second quarter of fiscal 2012 was
$1,643,000 compared to $1,683,000 for the same period last year.
Diluted earnings per common share for the second quarter of fiscal
2012 were $.17 compared to $.18 for the same quarter last year.
Transportation segment results were lower due to increased workers
compensation claim costs along with a sharp rise in fuel costs,
higher vehicle repairs, increased tire prices and cost of growth
initiatives partially offset by higher gains on equipment sales and
incremental profits on increased revenues. The mining royalty land
segment's results were higher due to an increase in timber sales
and reduced allocation of indirect management company costs to this
segment. The Developed property rentals segment's results were
higher due to higher occupancy and lower real estate taxes
partially offset by higher maintenance costs, professional fees and
allocation of indirect management company costs.
Comparative Results of Operations for the Six months ended March
31, 2012 and 2011
Consolidated Results - Net income for the first six months of
fiscal 2012 was $3,767,000 compared to $8,078,000 for the same
period last year. Diluted earnings per common share for the first
six months of fiscal 2012 were $.40 compared to $.85 in the first
six months of fiscal 2011. Income from continuing operations
increased $791,000 primarily due to a gain of $1,039,000 on the
receipt of non-refundable deposits related to the termination of an
agreement to sell the Company's Windlass Run Residential property.
Income from discontinued operations favorably impacted net income
in fiscal 2011 due to a book gain on the exchange of property of
$4,926,000 after tax or $.52 per diluted share. Transportation
segment results were lower due to increased workers compensation
and health insurance claims along with a sharp rise in fuel costs,
higher vehicle repairs, increased tire prices and cost of growth
initiatives partially offset by higher gains on equipment sales and
incremental profits on increased revenues. The mining royalty land
segment's results were higher due to reduced allocation of indirect
management company costs to this segment. The Developed property
rentals segment's results were higher due to higher occupancy and
lower real estate taxes partially offset by higher maintenance
costs and professional fees.
Transportation Results
Six months ended March 31
(dollars in thousands) ___2012 % 2011 %_
Transportation revenue $ 40,972 81% 38,509 84%
Fuel surcharges 9,318 19% 7,518 16%
Revenues 50,290 100% 46,027 100%
Compensation and benefits 18,062 36% 16,914 36%
Fuel expenses 12,096 24% 10,127 22%
Insurance and losses 3,596 7% 2,886 6%
Depreciation expense 3,252 7% 3,041 7%
Other, net 5,170 10% 4,407 10%
Sales, general & administrative 4,090 8% 3,883 8%
Allocated corporate expenses _____791 2% ___779 2%
Cost of operations 47,057 94% 42,037 91%
Operating profit $ 3,233 6% 3,990 9%
Transportation segment revenues were $50,290,000 in the first six
months of fiscal 2012, an increase of $4,263,000 over the same
period last year. Revenue miles in the first six months of fiscal
2012 were up 4.1% compared to the first six months of fiscal 2011
due to business growth and a longer average haul length. Fuel
surcharge revenue increased $1,800,000. Excluding fuel surcharges,
revenue per mile increased 2.1% over the same period last year.
The average price paid per gallon of diesel fuel increased by $.54
or 17.1% over the same period in fiscal 2011.
The Transportation segment's cost of operations was $47,057,000 in
the first six months of fiscal 2012, an increase of $5,020,000 over
the same period last year. The Transportation segment's cost of
operations in the first six months of fiscal 2012 as a percentage
of revenue was 94% compared to 91% in the first six months of
fiscal 2011. Compensation and benefits increased $1,148,000 or
6.8% compared to the same period last year primarily due to a
driver pay increase, the increase in miles driven and expenses
associated with increased driver hiring. Fuel surcharge revenue
increased $1,800,000 while fuel cost increased by $1,969,000
leaving a negative impact to operating profit of $169,000. There is
a time lag between changes in fuel prices and surcharges and often
fuel costs change more rapidly than the market indexes used to
determine fuel surcharges. Insurance and losses increased $710,000
compared to the same period last year primarily due to lower than
expected workers compensation and health insurance claims in the
same period last year. Depreciation expense increased $211,000 due
to more trucks in service. Other expense increased $763,000 due to
higher vehicle repair costs, increased tire prices, increased miles
driven, and growth initiatives partially offset by higher gains on
equipment sales and incremental profits on increased revenues.
Selling general and administrative costs increased $207,000
compared to the same period last year. Allocated corporate
expenses increased $12,000.
Mining Royalty Land Results
Six months ended March 31
(dollars in thousands) ___2012 % 2011 %_
Mining royalty land revenue $ 2,002 100% 2,013 100%
Property operating expenses 229 12% 257 13%
Depreciation and depletion 59 3% 51 2%
Management Company indirect 1 0% 78 4%
Allocated corporate expense 327 16% 305 15%
Cost of operations 616 31% 691 34%
Operating profit $ 1,386 69% 1,322 66%
Mining royalty land segment revenues for the first six months of
fiscal 2012 were $2,002,000, a decrease of $11,000 or .5% over the
same period last year, due to a shift in production at two
locations reducing the share of mining on the property owned by the
Company offset by higher timber sales.
The mining royalty land segment's cost of operations was $616,000
in the first six months of fiscal 2012, a decrease of $75,000 over
the same period last year due primarily to reduced allocation of
indirect management company costs to this segment. Allocated
corporate expenses increased $22,000.
Developed Property Rentals Results
Six months ended March 31
(dollars in thousands) ___2012 % 2011 %_
Developed property rentals revenue $ 9,393 100% 8,813 100%
Property operating expenses 2,444 26% 2,872 32%
Depreciation and amortization 2,714 29% 2,617 30%
Management Company indirect 854 9% 699 8%
Allocated corporate expense 491 5% 457 5%
Cost of operations 6,503 69% 6,645 75%
Operating profit $ 2,890 31% 2,168 25%
Developed property rentals segment revenues for the first six
months of fiscal 2012 were $9,393,000, an increase of $580,000 or
6.6% due to higher occupancy. Occupancy at March 31, 2012 was
86.0% as compared to 77.2% at March 31, 2011.
Developed property segment's cost of operations was $6,503,000 in
the first six months of fiscal 2012, a decrease of $142,000 or 2.1%
over the same period last year. Property operating expenses
decreased $428,000 due to lower real estate taxes and snow removal
costs partially offset by higher maintenance costs and professional
fees. Depreciation and amortization increased $97,000 primarily
due to tenant improvements. Management Company indirect expenses
(excluding internal allocations for lease related property
management fees) increased $155,000 due to increased allocation to
this segment and growth initiatives. Allocated corporate expenses
increased $34,000.
Consolidated Results
Operating Profit - Consolidated operating profit was $6,658,000 in
the first six months of fiscal 2012, an increase of $286,000 or
4.5% compared to $6,372,000 in the same period last year.
Operating profit in the transportation segment decreased $757,000
or 19.0% primarily due to increased workers compensation and health
insurance claims along with a spike in fuel costs, higher vehicle
repairs, increased tire prices and cost of growth initiatives
partially offset by higher gains on equipment sales and incremental
profits on increased revenues. Operating profit in the mining
royalty land segment increased $64,000 or 4.8% primarily due to
reduced allocation of indirect management company costs to this
segment. Operating profit in the Developed property rentals
segment increased $722,000 or 33.3% due to higher occupancy and
lower real estate taxes partially offset by increased maintenance
costs and professional fees. Consolidated operating profit
includes corporate expenses not allocated to any segment in the
amount of $851,000 in the first six months of fiscal 2012, a
decrease of $257,000 compared to the same period last year which
included an adjustment to the fair value of the corporate aircraft
of $300,000.
Gain on termination of sale contract - The first six months of
fiscal 2012 includes a gain of $1,039,000 on the receipt of non-
refundable deposits related to the termination of an agreement to
sell the Company's Windlass Run Residential property.
Interest income and other - Interest income and other decreased
$180,000 over the same period last year due to the prepayment of
notes receivable from the sale of SunBelt Transport.
Interest expense - Interest expense decreased $146,000 over the
same period last year due to declining mortgage interest expense
and higher capitalized interest.
Income taxes - Income tax expense increased $494,000 over the same
period last year due to higher earnings from continued operations.
Income from continuing operations - Income from continuing
operations was $3,764,000 or $.40 per diluted share in the first
six months of fiscal 2012, an increase of 26.6% compared to
$2,973,000 or $.31 per diluted share for the same period last year.
The $791,000 increase was primarily due to a pretax gain of
$1,039,000 on the receipt of non-refundable deposits related to the
termination of an agreement to sell the Company's Windlass Run
Residential property.
Discontinued operations - The after tax income from discontinued
operations for the first six months of fiscal 2012 was $3,000
versus income of $5,105,000 for the same period last year. Diluted
earnings per share on discontinued operations for the first six
months of fiscal 2012 was $.00 compared to $.54 in the first six
months of fiscal 2011. The first six months 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 six months of fiscal 2012 was
$3,767,000 compared to $8,078,000 for the same period last year.
Diluted earnings per common share for the first six months of
fiscal 2012 were $.40 compared to $.85 in the first six months of
fiscal 2011. Income from continuing operations increased $791,000
primarily due to a gain of $1,039,000 on the receipt of non-
refundable deposits related to the termination of an agreement to
sell the Company's Windlass Run Residential property. Income from
discontinued operations favorably impacted net income in fiscal
2011 due to a book gain on the exchange of property of $4,926,000
after tax or $.52 per diluted share. Transportation segment
results were lower due to increased workers compensation and health
insurance claims along with a sharp rise in fuel costs, higher
vehicle repairs, increased tire prices and cost of growth
initiatives partially offset by higher gains on equipment sales and
incremental profits on increased revenues. The mining royalty land
segment's results were higher due to reduced allocation of indirect
management company costs to this segment. The Developed property
rentals segment's results were higher due to higher occupancy and
lower real estate taxes partially offset by higher maintenance
costs and professional fees.
Liquidity and Capital Resources. For the first six months of fiscal
2012, the Company used cash provided by operating activities of
continuing operations of $8,437,000, proceeds from the sale of
plant, property and equipment of $1,609,000, proceeds from the
exercise of employee stock options of $671,000, excess tax benefits
from the exercise of stock options of $353,000, and cash balances
to purchase $5,403,000 in transportation equipment, to expend
$4,046,000 in real estate development, to invest $70,000 in the
Brooksville Joint Venture, to make $2,410,000 scheduled payments on
long-term debt and to repurchase Company stock for $137,000. Cash
provided by the operating activities of discontinued operations was
$7,000. Cash decreased $989,000.
Cash flows from operating activities for the first six months of
fiscal 2012 were $733,000 lower than the same period last year
primarily due to increased income tax payments.
Cash flows used in investing activities for the first six months of
fiscal 2012 were $1,107,000 higher reflecting the increased
purchase of transportation equipment for growth and replacement
partially offset by a pretax gain of $1,039,000 on the receipt of
non-refundable deposits related to the termination of an agreement
to sell the Company's Windlass Run Residential property.
Cash flows used in financing activities for the first six months of
fiscal 2012 were $1,378,000 lower than the same period last year
due to lower repurchases of Company stock.
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. As of September 30, 2011 the note
receivable was fully paid and the option to purchase the South
Pittsburg facility was completed. 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., closed a bargain sale of approximately 1,777
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 $5,599,000 primarily for the value of
minerals and aggregates and recognized a $2,126,000 permanent tax
benefit. The $2,126,000 permanent tax benefit was recorded to
income taxes receivable for $303,000 and offset to long-term
deferred tax liabilities of $1,823,000. Actual realization of the
$1,823,000 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 (33.8% 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).
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 $12,082,000 were issued under the
Revolver. As of March 31, 2012, $24,918,000 was available for
borrowing and $53,947,000 of consolidated retained earnings would
be available for payment of dividends. The Company was in
compliance with all covenants as of March 31, 2012.
The Company had $12,082,000 of irrevocable letters of credit
outstanding as of March 31, 2012. 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 six months of fiscal 2012
the Company repurchased 7,013 shares for $137,000. As of March 31,
2012, $4,093,000 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 $86,000 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
were 4.1% higher than last year. The Company continues to succeed
in adding drivers and customers and anticipates increasing segment
miles during fiscal 2012.
Developed property rentals occupancy has increased from 79.8% to
86.0% over last fiscal year end as the market for new tenants has
improved and traffic for vacant space has increased. Occupancy at
March 31, 2012 and 2011 included 104,226 square feet or 3.6% and
118,156 square feet or 4.0% respectively for temporary storage
under a less than full market lease rate. Occupancy at March 31,
2012 was unfavorably impacted by vacancies representing 10.7% of
the entire portfolio at two buildings in Delaware which were
impacted by automobile plant closings and the residential housing
downturn and the two parks that each has only one building
completed. The Company has resumed development of Patriot Business
Park effective April 1, 2012 due to two recent developments. On
February 15, 2012, the Company signed an agreement to sell 15.18
acres of land at the site for a purchase price of $4,774,577 which
would result in a profit on the sale if completed. The Company also
entered into a build to suit lease signed April 2 for a 117,600
square foot building.
With cap rates at historically low levels we have engaged the
real estate brokerage firm of Jones, Lang, LaSalle to explore
the market value of our existing office/warehouse portfolio in
the investment community. We have no preconceived decision
regarding the outcome of this exploration but will analyze
the results we receive and make our decision at the time in
keeping with our continuing effort to manage this Company's
capital in the most efficient manner possible for the longer
term.
Windlass Run Residential (previously Bird River), located in
southeastern Baltimore County, Maryland, is a 121 acre tract of
land adjacent to and west of our Windlass Run Business Park. The
property was rezoned in September 2007 to allow for additional
density and plans are being pursued to obtain an appropriate
product mix. In July 2008, the Company entered into an agreement
to sell the property at a purchase price of $25,075,000 and closing
was scheduled to occur in the first quarter of calendar 2012. The
purchaser had placed non-refundable deposits of $1,000,000 under
this contract in escrow. Preliminary approval for the development
as originally contemplated was previously received and the time for
any appeals from that approval has expired. In October 2011 the
purchaser terminated its agreement to purchase the property and
released the $1,000,000 escrow deposit to the company's subsidiary,
FRP Bird River, LLC. along with all permits, engineering work,
plans and other development work product with regards to the
property. The Company intends to continue to complete the
entitlement process for this parcel of land for residential
development and will market it appropriately as the demand for
residential property in this area improves in the future.
In March 30, 2012 the Company entered into a Contribution Agreement
with MRP SE Waterfront Residential, LLC. ("MRP") to form a joint
venture to develop the phase I of the four phase master development
known as RiverFront on the Anacostia in Washington, D.C. The
purpose of the Joint Venture is to develop, own, lease and
ultimately sell an approximately 300,000 square foot residential
apartment building (including some retail) on a portion of the
roughly 5.82 acres of land owned by FRP adjacent to the Washington
Nationals baseball stadium. The Contribution Agreement provides
that the formation of the Joint Venture will be subject to
customary conditions precedent, including approval of a planned
unit development zoning modification and extension of the existing
PUD to provide for approximately 300,000 square feet of residential
development (including some retail) on the Property in lieu of
250,000 square feet of commercial office space (including some
retail) as currently approved for phase 1 of the master
development. If these conditions are satisfied, the parties will
enter into a formal joint venture agreement wherein the Company
will contribute the land comprising phase I to the joint venture in
return for approximately a fifty percent (50%) interest in the
venture. MRP will contribute capital of $4,500,000 to the joint
venture. MRP will raise any additional equity capital (currently
estimated to be $9,000,000, subject to revision based on various
factors) and obtain a nonrecourse loan for the balance of the
estimated construction and lease up costs. At this point the
Company anticipates commencement of construction in early 2014 with
lease up scheduled between late 2015 and all of 2016.
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 March 31, 2012, 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 six 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, 2011, 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)
January 1
through
January 31 0 $ - 0 $ 4,093,000
February 1
through
February 29 0 $ - 0 $ 4,093,000
March 1
through
March 31 0 $ - 0 $ 4,093,000
Total 0 $ - 0
(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 31.
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.
May 2, 2012 PATRIOT TRANSPORTATION HOLDING, INC.
Thompson S. Baker II
Thompson S. Baker II
President and Chief Executive
Officer
John D. Milton, Jr.
John D. Milton, Jr.
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 MARCH 31, 2012
EXHIBIT INDEX
(10)(r) Joint Venture Agreement between Florida Rock
Properties, Inc. and MRP SE Waterfront Residential, Inc.,
incorporated by reference to an exhibit filed with Form 10-Q
for the quarter ended March 31, 2012. File No. 000-17554.
(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.
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