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 June 30, 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 June 30, 2012 there were 9,383,156 shares of
Common Stock,
$.10 par value per share, outstanding.
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 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 28
Item 4. Controls and Procedures 28
Part II. Other Information
Item 1A. Risk Factors 30
Item 2. Purchase of Equity Securities by the Issuer 30
Item 6. Exhibits 30
Signatures 31
Exhibit 31 Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 33
Exhibit 32 Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 36
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)
June 30, September 30,
Assets 2012 2011
Current assets:
Cash and cash equivalents $ 11,838 21,026
Accounts receivable (net of allowance for
doubtful accounts of $136 and $111, respectively) 9,345 6,702
Federal and state income taxes receivable - 93
Inventory of parts and supplies 970 1,121
Deferred income taxes 723 201
Prepaid tires on equipment 1,556 1,381
Prepaid taxes and licenses 232 1,860
Prepaid insurance 688 2,111
Prepaid expenses, other 119 85
Assets of discontinued operations 101 114
Total current assets 25,572 34,694
Property, plant and equipment, at cost 333,610 313,930
Less accumulated depreciation and depletion 110,525 104,942
Net property, plant and equipment 223,085 208,988
Real estate held for investment, at cost 6,848 6,848
Investment in joint venture 7,523 7,412
Goodwill 1,087 1,087
Unrealized rents 4,022 3,604
Other assets 4,215 3,757
Total assets $272,352 266,390
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 5,225 3,948
Federal and state income taxes payable 939 -
Accrued payroll and benefits 4,421 4,992
Accrued insurance 2,986 3,303
Accrued liabilities, other 634 1,053
Long-term debt due within one year 5,152 4,902
Liabilities of discontinued operations 20 34
Total current liabilities 19,377 18,232
Long-term debt, less current portion 58,474 62,370
Deferred income taxes 17,939 16,919
Accrued insurance 2,071 2,548
Other liabilities 1,989 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,
9,383,156 and 9,288,023 shares issued
and outstanding, respectively 938 929
Capital in excess of par value 40,686 38,845
Retained earnings 130,847 124,642
Accumulated other comprehensive income, net 31 31
Total shareholders' equity 172,502 164,447
Total liabilities and shareholders' equity $272,352 266,390
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2012 2011 2012 2011
Revenues:
Transportation $26,907 26,182 77,197 72,209
Mining royalty land 1,101 1,180 3,103 3,193
Developed property rentals 5,022 4,585 14,415 13,398
Total revenues 33,030 31,947 94,715 88,800
Cost of operations:
Transportation 24,621 23,738 71,678 65,775
Mining royalty land 307 334 923 1,025
Developed property rentals 3,117 3,267 9,620 9,912
Unallocated corporate 94 167 945 1,275
Total cost of operations 28,139 27,506 83,166 77,987
Operating profit:
Transportation 2,286 2,444 5,519 6,434
Mining royalty land 794 846 2,180 2,168
Developed property rentals 1,905 1,318 4,795 3,486
Unallocated corporate (94) (167) (945) (1,275)
Total operating profit 4,891 4,441 11,549 10,813
Gain on termination of sale contract - - 1,039 -
Interest income and other (expense)
income, net (10) 70 11 271
Equity in loss of joint venture - (14) (8) (16)
Interest expense (537) (789) (2,135) (2,533)
Income before income taxes 4,344 3,708 10,456 8,535
Provision for income taxes (1,668) (1,349) (4,016) (3,203)
Income from continuing operations 2,676 2,359 6,440 5,332
Income from discontinued
operations, net 8 20 11 5,125
Net income $ 2,684 2,379 6,451 10,457
Comprehensive Income $ 2,684 $ 2,379 $ 6,451 $10,457
Earnings per common share:
Income from continuing operations -
Basic $ .29 .25 .69 .57
Diluted $ .28 .25 .68 .56
Discontinued operations (Note 11) -
Basic $ - .01 - .56
Diluted $ - - - .55
Net income - basic $ .29 .26 .69 1.13
Net income - diluted $ .28 .25 .68 1.11
Number of shares (in thousands)
used in computing:
-basic earnings per common share 9,382 9,291 9,341 9,279
-diluted earnings per common share 9,482 9,443 9,458 9,453
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2012 AND 2011
(In thousands)
(Unaudited)
2012 2011
Cash flows from operating activities:
Net income $ 6,451 10,457
Adjustments to reconcile net income to net cash
provided by continuing operating activities:
Depreciation, depletion and amortization 9,502 9,126
Deferred income taxes 498 (813)
Equity in loss of joint venture 8 16
Gain on sale of equipment and property (1,639) (245)
Income from discontinued operations, net (11) (5,125)
Stock-based compensation 633 624
Net changes in operating assets and liabilities:
Accounts receivable (393) (1,848)
Inventory of parts and supplies 151 (373)
Prepaid expenses and other current assets 2,842 2,997
Other assets (1,431) 54
Accounts payable and accrued liabilities (30) 628
Income taxes payable and receivable 1,032 2,917
Long-term insurance liabilities and other long-term
liabilities (362) 159
Net cash provided by operating activities of
continuing operations 17,251 18,574
Net cash provided by (used in) operating activities of
discontinued operations 10 (605)
Net cash provided by operating activities 17,261 17,969
Cash flows from investing activities:
Purchase of transportation group property and equipment (6,605) (4,660)
Investments in developed property rentals segment (7,911) (8,365)
Investments in mining royalty land (11,039) -
Investment in joint venture (125) (114)
Proceeds from the sale of property, plant and equipment 1,906 528
Proceeds received on note for sale of SunBelt - 3,947
Net cash used in investing activities (23,774) (8,664)
Cash flows from financing activities:
Repayment of long-term debt (3,646) (3,412)
Repurchase of Company Stock (315) (1,145)
Excess tax benefits from exercises of stock options
and vesting of restricted stock 452 323
Exercise of employee stock options 834 538
Net cash used in financing activities (2,675) (3,696)
Net increase/(decrease) in cash and cash equivalents (9,188) 5,609
Cash and cash equivalents at beginning of period 21,026 17,151
Cash and cash equivalents at end of the period $ 11,838 22,760
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
JUNE 30, 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 nine months ended
June 30, 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 Nine months ended
June 30,___ June 30,___
2012 2011 2012 2011
Revenues:
Transportation $ 26,907 26,182 77,197 72,209
Mining royalty land 1,101 1,180 3,103 3,193
Developed property rentals 5,022 4,585 14,415 13,398
$ 33,030 31,947 94,715 88,800
Operating profit:
Transportation $ 2,682 2,834 6,706 7,603
Mining royalty land 958 999 2,671 2,626
Developed property rentals 2,150 1,547 5,531 4,172
Corporate expenses:
Allocated to transportation (396) (390) (1,187) (1,169)
Allocated to mining land (164) (153) (491) (458)
Allocated to developed property (245) (229) (736) (686)
Unallocated (94) (167) (945) (1,275)
(899) (939) (3,359) (3,588)
$ 4,891 4,441 11,549 10,813
Interest expense:
Mining royalty land $ 10 9 29 27
Developed property rentals ___527 _ 780 2,106 2,506
$ 537 789 2,135 2,533
Capital expenditures:
Transportation $ 1,202 1,501 6,605 4,660
Mining royalty land 11,039 - 11,039 -
Developed property rentals:
Capitalized interest 533 345 1,111 928
Internal labor 173 190 431 450
Real estate taxes (a) 243 303 (1,454) 875
Other costs (b) 2,916 2,517 5,573 6,112
$ 16,106 4,856 23,305 13,025
(a)Includes a $2,250 adjustment related to a receivable on previously
capitalized real estate taxes on the Anacostia property for the 9 months
ended June 30, 2012.
(b)Net of 1031 exchange of $4,941 for the 3 and 9 months ending June 30,
2011.
Depreciation, depletion and
amortization:
Transportation $ 1,690 1,582 5,018 4,680
Mining royalty land 27 29 86 80
Developed property rentals 1,382 1,300 4,096 3,917
Other 97 54 302 449
$ 3,196 2,965 9,502 9,126
June 30, September 30,
2012 2011
Identifiable net assets
Transportation $ 38,854 39,001
Discontinued transportation operations 101 114
Mining royalty land 39,469 28,295
Developed property rentals 179,532 175,618
Cash items 11,838 21,026
Unallocated corporate assets 2,558 2,336
$272,352 266,390
(5) Long-Term debt. Long-term debt is summarized as follows (in thousands):
June 30, September 30,
2012 2011
5.6% to 8.6% mortgage notes
due in installments through 2027 63,626 67,272
Less portion due within one year 5,152 4,902
$ 58,474 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 $8,953,000 were issued under the Revolver. As of
June 30, 2012, $28,047,000 was available for borrowing and $55,735,000 of
consolidated retained earnings would be available for payment of
dividends. The Company was in compliance with all covenants as of June
30, 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 June 30, 2012, the carrying amount and fair
value of such other long-term debt was $63,626,000 and $67,968,000,
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 NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2012 2011 2012 2011
Weighted average common shares
outstanding during the period
- shares used for basic
earnings per common share 9,382 9,291 9,341 9,279
Common shares issuable under
share based payment plans
which are potentially dilutive 100 152 117 174
Common shares used for diluted
earnings per common share 9,482 9,443 9,458 9,453
Net income $ 2,684 2,379 6,451 10,457
Earnings per common share
Basic $ .29 .26 .69 1.13
Diluted $ .28 .25 .68 1.11
For the three and nine months ended June 30, 2012, 172,060 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 and nine months ended June 30,
2011, 140,370 and 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 June 30, 2012.
The Company recorded the following stock compensation expense in its
consolidated statements of income (in thousands):
Three Months ended Nine months ended
June 30, June 30,_
2012 2011 2012 2011
Stock option grants $ 86 79 313 290
Annual director stock award - - 320 334
86 79 633 624
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 96,041 $ 8.68 $ 452
Forfeited 3,000 $ 5.78 $ 10
Outstanding at
June 30, 2012 538,674 $16.56 3.7 $ 4,035
Exercisable at
June 30, 2012 463,430 $15.13 2.9 $ 3,238
Vested during
nine months ended
June 30, 2012 30,774 $ 319
The aggregate intrinsic value of exercisable in-the-money options was
$4,243,000 and the aggregate intrinsic value of all outstanding in-the-
money options was $4,274,000 based on the market closing price of $23.53
on June 29, 2012 less exercise prices. Gains of $1,235,000 were realized
by option holders during the nine months ended June 30, 2012. The
realized tax benefit from options exercised for the nine months ended
June 30, 2012 was $474,000. Total compensation cost of options granted
but not yet vested as of June 30, 2012 was $665,000, which is expected to
be recognized over a weighted-average period of 2.7 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 nine months of fiscal 2012, the transportation segment's
ten largest customers accounted for approximately 53.4% 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 $3,068,000 and $3,115,000 at June 30, 2012 and
September 30, 2011 respectively.
The mining royalty land segment has one lessee that accounted for 76.0%
of the segment's revenues and $147,000 of accounts receivable at June 30,
2012. 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 June 30, 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 Nine months
Ended June 30, Ended June 30,
2012 2011 2012 2011
Revenue $ 15 15 45 45
Operating expenses 2 (18) 27 (278)
Gain on sale before taxes - - - 4,665
Income before income taxes $ 13 33 18 4,988
Permanent tax benefit - - - 2,053
Provision for income taxes (5) (13) (7) (1,916)
Income from discontinued operations $ 8 20 11 5,125
The amounts included in the above totals for the bargain sale is as
follows (in thousands):
Three months Nine months
Ended June 30, Ended June 30,
2012 2011 2012 2011
Revenue $ - - - -
Operating expenses - - - -
Gain on sale before taxes - - - 4,665
Income before income taxes $ - - - 4,665
Permanent tax benefit - - - 2,053
Provision for income taxes - - - (1,792)
Income from discontinued operations $ - - - 4,926
The components of the balance sheet are as follows:
June 30, September 30,
2012 2011
Accounts receivable $ - 3
Deferred income taxes 2 4
Property and equipment, net 99 107
Assets of discontinued operations $ 101 114
Accrued payroll and benefits 2 2
Accrued liabilities, other - 3
Insurance liabilities 18 29
Liabilities of discontinued operations $ 20 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 June 30,
2012 and 2011
Consolidated Results - Net income for the third quarter of fiscal 2012
was $2,684,000 compared to $2,379,000 for the same period last year.
Diluted earnings per common share for the third quarter of fiscal 2012
were $.28 compared to $.25 for the same quarter last year. Transportation
segment results were lower due to increased health insurance and workers
compensation claim costs along with higher vehicle repairs, increased
tire prices, and cost of growth initiatives partially offset by increased
gains on equipment sales and incremental profits on increased revenues.
The mining royalty land segment's results were lower due to reduced tons
mined on property owned by the Company partially offset by reduced
allocation of indirect management company costs to this segment. The
Developed property rentals segment's results were higher due to higher
occupancy, lower real estate taxes, maintenance costs and professional
fees partially offset by higher allocation of indirect management company
costs.
Transportation Results
Three months ended June 30
(dollars in thousands) ___2012 % 2011 %_
Transportation revenue $ 22,052 82% 20,806 79%
Fuel surcharges 4,855 18% 5,376 21%
Revenues 26,907 100% 26,182 100%
Compensation and benefits 9,348 35% 9,047 35%
Fuel expenses 6,002 23% 6,256 24%
Insurance and losses 2,175 8% 1,799 7%
Depreciation expense 1,642 6% 1,554 6%
Other, net 2,965 11% 2,765 11%
Sales, general & administrative 2,093 8% 1,927 7%
Allocated corporate expenses _____396 1% ___390 1%
Cost of operations 24,621 92% 23,738 91%
Operating profit $ 2,286 8% 2,444 9%
Transportation segment revenues were $26,907,000 in the third quarter of
2012, an increase of $725,000 over the same quarter last year. Revenue
miles in the current quarter were up .4% compared to the third quarter of
fiscal 2011 due to business growth partially offset by a shorter average
haul length. Revenue per mile increased 2.4% over the same quarter last
year due to rate increases, a lower average haul length partially offset
by lower fuel surcharges. Fuel surcharge revenue decreased $521,000 due
to lower fuel costs and changes to certain customer rates to incorporate
fuel surcharges into base rates. The average price paid per gallon of
diesel fuel decreased by $.06 or 1.7% over the same quarter in fiscal
2011. 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. Excluding fuel surcharges, revenue per mile
increased 5.6% over the same quarter last year.
The Transportation segment's cost of operations was $24,621,000 in the
third quarter of 2012, an increase of $883,000 over the same quarter last
year. The Transportation segment's cost of operations in the third
quarter of 2012 as a percentage of revenue was 92% compared to 91% in the
third quarter of 2011. Compensation and benefits increased $301,000 or
3.3% compared to the same quarter last year primarily due to a driver pay
increase and the increase in miles driven. Fuel cost decreased by
$254,000 due to lower cost per gallon and improved miles per gallon.
Insurance and losses increased $376,000 compared to the same quarter last
year primarily due to higher health insurance and workers compensation
claims. Insurance costs were higher than expected during the third
quarter of 2012 while lower than expected in the same quarter last year.
Depreciation expense increased $88,000 due to more trucks in service.
Other expense increased $200,000 due to higher vehicle repair costs,
increased tire prices, increased miles driven, and growth initiatives
partially offset by higher gains on equipment sales. Selling general and
administrative costs increased $166,000 or 8.6% 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 June 30
(dollars in thousands) ___2012 % 2011 %_
Mining royalty land revenue $ 1,101 100% 1,180 100%
Property operating expenses 116 11% 113 10%
Depreciation and depletion 27 2% 30 2%
Management Company indirect - 0% 38 3%
Allocated corporate expense 164 15% 153 13%
Cost of operations 307 28% 334 28%
Operating profit $ 794 72% 846 72%
Mining royalty land segment revenues for the third quarter of fiscal 2012
were $1,101,000, a decrease of $79,000 or 6.7% over the same quarter last
year due to reduced tons mined on property owned by the Company partially
offset by royalties on new mining property.
The mining royalty land segment's cost of operations was $307,000 in the
third quarter of 2012, a decrease of $27,000 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 June 30
(dollars in thousands) ___2012 % 2011 %_
Developed property rentals revenue $ 5,022 100% 4,585 100%
Property operating expenses 1,079 21% 1,392 30%
Depreciation and amortization 1,382 28% 1,300 28%
Management Company indirect 411 8% 346 8%
Allocated corporate expense 245 5% 229 5%
Cost of operations 3,117 62% 3,267 71%
Operating profit $ 1,905 38% 1,318 29%
Developed property rentals segment revenues for the third quarter of
fiscal 2012 were $5,022,000, an increase of $437,000 or 9.5% due to
higher occupancy. Occupancy at June 30, 2012 was 87.0% as compared to
82.2% at June 30, 2011.
Developed property segment's cost of operations was $3,117,000 in the
third quarter of 2012, a decrease of $150,000 or 4.6% over the same
quarter last year. Property operating expenses decreased $313,000 due to
lower real estate taxes, maintenance costs and professional fees.
Depreciation and amortization increased $82,000 primarily due to tenant
improvements. Management Company indirect expenses (excluding internal
allocations for lease related property management fees) increased $65,000
due to increased allocation to this segment and growth initiatives.
Allocated corporate expenses increased $16,000.
Consolidated Results
Operating Profit - Consolidated operating profit was $4,891,000 in the
third quarter of fiscal 2012, an increase of $450,000 or 10.1% compared
to $4,441,000 in the same period last year. Operating profit in the
transportation segment decreased $158,000 or 6.5% primarily due to
increased health insurance and workers compensation claim costs along
with higher vehicle repairs, increased tire prices, and cost of growth
initiatives partially offset by increased gains on equipment sales and
incremental profits on increased revenues. Operating profit in the
mining royalty land segment decreased $52,000 or 6.1% due to reduced tons
mined on property owned by the Company partially offset by reduced
allocation of indirect management company costs to this segment.
Operating profit in the Developed property rentals segment increased
$587,000 or 44.5% due to higher occupancy, lower real estate taxes,
maintenance costs and professional fees partially offset by higher
allocation of indirect management company costs. Consolidated operating
profit includes corporate expenses not allocated to any segment in the
amount of $94,000 in the third quarter of fiscal 2012, a decrease of
$73,000 compared to the same period last year.
Interest income and other (expense) income, net - Interest income and
other (expense) income, net decreased $80,000 over the same quarter last
year due to the prepayment of notes receivable from the sale of SunBelt
Transport.
Interest expense - Interest expense decreased $252,000 over the same
quarter last year due to declining mortgage interest expense and higher
capitalized interest.
Income taxes - Income tax expense increased $319,000 over the same
quarter last year due to higher earnings from continuing operations and a
lower than usual tax rate in the same quarter last year caused by tax
credits and reductions in uncertain tax positions.
Income from continuing operations - Income from continuing operations was
$2,676,000 or $.28 per diluted share in the third quarter of fiscal 2012,
an increase of 13.4% compared to $2,359,000 or $.25 per diluted share for
the same period last year. The $317,000 increase was primarily due to
the $636,000 increase in operating profits offset by higher income taxes.
Discontinued operations - The after tax income from discontinued
operations for the third quarter of fiscal 2012 was $8,000 versus income
of $20,000 for the same period last year. Diluted earnings per share on
discontinued operations for the third quarter of fiscal 2012 and fiscal
2011 was $.00. The discontinued operations results are primarily due to
SunBelt Transport, Inc. risk reserve adjustments.
Net income - Net income for the third quarter of fiscal 2012 was
$2,684,000 compared to $2,379,000 for the same period last year. Diluted
earnings per common share for the third quarter of fiscal 2012 were $.28
compared to $.25 for the same quarter last year. Transportation segment
results were lower due to increased health insurance and workers
compensation claim costs along with higher vehicle repairs, increased
tire prices, and cost of growth initiatives partially offset by increased
gains on equipment sales and incremental profits on increased revenues.
The mining royalty land segment's results were lower due to reduced tons
mined on property owned by the Company partially offset by reduced
allocation of indirect management company costs to this segment. The
Developed property rentals segment's results were higher due to higher
occupancy, lower real estate taxes, maintenance costs and professional
fees partially offset by higher allocation of indirect management company
costs.
Comparative Results of Operations for the Nine months ended June 30,
2012 and 2011
Consolidated Results - Net income for the first nine months of fiscal
2012 was $6,451,000 compared to $10,457,000 for the same period last
year. Diluted earnings per common share for the first nine months of
fiscal 2012 were $.68 compared to $1.11 in the first nine months of
fiscal 2011. Income from continuing operations increased $1,108,000
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 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
Nine months ended June 30
(dollars in thousands) ___2012 % 2011 %_
Transportation revenue $ 63,024 82% 59,315 82%
Fuel surcharges 14,173 18% 12,894 18%
Revenues 77,197 100% 72,209 100%
Compensation and benefits 27,410 36% 25,961 36%
Fuel expenses 18,098 23% 16,383 23%
Insurance and losses 5,771 7% 4,685 6%
Depreciation expense 4,894 6% 4,595 6%
Other, net 8,135 11% 7,172 10%
Sales, general & administrative 6,183 8% 5,810 8%
Allocated corporate expenses ___1,187 2% _1,169 2%
Cost of operations 71,678 93% 65,775 91%
Operating profit $ 5,519 7% 6,434 9%
Transportation segment revenues were $77,197,000 in the first nine months
of fiscal 2012, an increase of $4,988,000 over the same period last year.
Revenue miles in the first nine months of fiscal 2012 were up 2.8%
compared to the first nine months of fiscal 2011 due to business growth
and a slightly longer average haul length. Revenue per mile increased
4.2% over the period last year due to rate increases and higher fuel
surcharges. Fuel surcharge revenue increased $1,279,000 due to higher
fuel costs partially offset by changes to certain customer rates to
incorporate fuel surcharges into base rates. The average price paid per
gallon of diesel fuel increased by $.26 or 7.7% over the same period in
fiscal 2011. 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. Excluding fuel surcharges,
revenue per mile increased 3.4% over the same quarter last year.
The Transportation segment's cost of operations was $71,678,000 in the
first nine months of fiscal 2012, an increase of $5,903,000 over the same
period last year. The Transportation segment's cost of operations in the
first nine months of fiscal 2012 as a percentage of revenue was 93%
compared to 91% in the first nine months of fiscal 2011. Compensation
and benefits increased $1,449,000 or 5.6% 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 cost
increased by $1,715,000 due to higher cost per gallon. Insurance and
losses increased $1,086,000 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 $299,000 due to more trucks in service. Other expense increased
$963,000 due to higher vehicle repair costs, increased tire prices,
increased miles driven, and growth initiatives partially offset by higher
gains on equipment sales. Selling general and administrative costs
increased $373,000 compared to the same period last year due to higher
staffing and professional fees. Allocated corporate expenses increased
$18,000.
Mining Royalty Land Results
Nine months ended June 30
(dollars in thousands) ___2012 % 2011 %_
Mining royalty land revenue $ 3,103 100% 3,193 100%
Property operating expenses 345 11% 370 12%
Depreciation and depletion 86 3% 81 2%
Management Company indirect 1 0% 116 4%
Allocated corporate expense 491 16% 458 14%
Cost of operations 923 30% 1,025 32%
Operating profit $ 2,180 70% 2,168 68%
Mining royalty land segment revenues for the first nine months of fiscal
2012 were $3,103,000, a decrease of $90,000 or 2.8% 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 partially offset by
new property royalties and higher timber sales.
The mining royalty land segment's cost of operations was $923,000 in the
first nine months of fiscal 2012, a decrease of $102,000 over the same
period last year due primarily to reduced allocation of indirect
management company costs to this segment. Allocated corporate expenses
increased $33,000.
Developed Property Rentals Results
Nine months ended June 30
(dollars in thousands) ___2012 % 2011 %_
Developed property rentals revenue $ 14,415 100% 13,398 100%
Property operating expenses 3,523 25% 4,264 32%
Depreciation and amortization 4,096 28% 3,917 29%
Management Company indirect 1,265 9% 1,045 8%
Allocated corporate expense 736 5% 686 5%
Cost of operations 9,620 67% 9,912 74%
Operating profit $ 4,795 33% 3,486 26%
Developed property rentals segment revenues for the first nine months of
fiscal 2012 were $14,415,000, an increase of $1,017,000 or 7.6% due to
higher occupancy. Occupancy at June 30, 2012 was 87.0% as compared to
82.2% at June 30, 2011.
Developed property segment's cost of operations was $9,620,000 in the
first nine months of fiscal 2012, a decrease of $292,000 or 2.9% over the
same period last year. Property operating expenses decreased $741,000
due to lower real estate taxes and snow removal costs partially offset by
higher maintenance costs and professional fees. Depreciation and
amortization increased $179,000 primarily due to tenant improvements.
Management Company indirect expenses (excluding internal allocations for
lease related property management fees) increased $220,000 due to
increased allocation to this segment and growth initiatives. Allocated
corporate expenses increased $50,000.
Consolidated Results
Operating Profit - Consolidated operating profit was $11,549,000 in the
first nine months of fiscal 2012, an increase of $736,000 or 6.8%
compared to $10,813,000 in the same period last year. Operating profit
in the transportation segment decreased $915,000 or 14.2% primarily due
to increased workers compensation and health insurance claims along with
an increase 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 $12,000 or .6%
primarily due to reduced allocation of indirect management company costs
to this segment. Operating profit in the Developed property rentals
segment increased $1,309,000 or 37.6% 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 $945,000 in the
first nine months of fiscal 2012, a decrease of $330,000 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 nine 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 (expense) income, net - Interest income and
other (expense) income, net decreased $260,000 over the same period last
year due to the prepayment of notes receivable from the sale of SunBelt
Transport.
Interest expense - Interest expense decreased $398,000 over the same
period last year due to declining mortgage interest expense and higher
capitalized interest.
Income taxes - Income tax expense increased $813,000 over the same period
last year due to higher earnings from continued operations.
Income from continuing operations - Income from continuing operations was
$6,440,000 or $.68 per diluted share in the first nine months of fiscal
2012, an increase of 20.8% compared to $5,332,000 or $.56 per diluted
share for the same period last year. The $1,108,000 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 nine months of fiscal 2012 was $11,000 versus
income of $5,125,000 for the same period last year. Diluted earnings per
share on discontinued operations for the first nine months of fiscal 2012
was $.00 compared to $.55 in the first nine months of fiscal 2011. The
first nine 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 nine months of fiscal 2012 was
$6,451,000 compared to $10,457,000 for the same period last year.
Diluted earnings per common share for the first nine months of fiscal
2012 were $.68 compared to $1.11 in the first nine months of fiscal 2011.
Income from continuing operations increased $1,108,000 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 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 nine months of fiscal
2012, the Company used cash provided by operating activities of
continuing operations of $17,251,000, proceeds from the sale of plant,
property and equipment of $1,906,000, proceeds from the exercise of
employee stock options of $834,000, excess tax benefits from the exercise
of stock options of $452,000, and cash balances to purchase $6,605,000 in
transportation equipment, to expend $7,911,000 in real estate
development, to expend $11,039,000 on mining royalty land, to invest
$125,000 in the Brooksville Joint Venture, to make $3,646,000 scheduled
payments on long-term debt and to repurchase Company stock for $315,000.
Cash provided by the operating activities of discontinued operations was
$10,000. Cash decreased $9,188,000.
Cash flows from operating activities for the first nine months of fiscal
2012 were $708,000 lower than the same period last year primarily due to
increased income tax payments.
Cash flows used in investing activities for the first nine months of
fiscal 2012 were $15,110,000 higher reflecting the increased purchase of
transportation equipment for growth and replacement and the purchase of
mining royalty land of $11,039,000 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 nine months of
fiscal 2012 were $1,021,000 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
$8,953,000 were issued under the Revolver. As of June 30, 2012,
$28,047,000 was available for borrowing and $55,735,000 of consolidated
retained earnings would be available for payment of dividends. The
Company was in compliance with all covenants as of June 30, 2012.
The Company had $8,953,000 of irrevocable letters of credit outstanding
as of June 30, 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 nine months of fiscal 2012 the Company repurchased
15,908 shares for $315,000. As of June 30, 2012, $3,915,000 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 $31,000 to Brooksville Quarry, LLC in connection with a joint venture
with Vulcan Materials Company.
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
2.8% higher than last year. The Company continues to succeed in adding
drivers and customers and anticipates increasing segment miles during
fiscal 2012.
In May 2012 the Company acquired approximately 1,200 acres near Orlando,
Florida for a purchase price of $11 million. The Company simultaneously
executed a long-term royalty lease under which it receives a minimum
monthly royalty payment until the tenant receives the necessary permits
and begins mining sand.
Developed property rentals occupancy has increased from 79.8% to 87.0%
over last fiscal year end as the market for new tenants has improved and
traffic for vacant space has increased. Occupancy at June 30, 2012 and
2011 included 104,226 square feet or 3.4% and 118,156 square feet or 3.9%
respectively for temporary storage under a less than full market lease
rate. 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 which is
currently under construction.
With cap rates at historically low levels we recently consulted 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 similarly consulted Eastdil Secured for a similar estimate of present
market value. While both valuation estimates were substantially in
excess of book value, the Company has decided not to market the
developed buildings portfolio at this time but to focus on increasing
that value through improved occupancy over the ensuing year.
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 June 30, 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 nine 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)
April 1
through
April 30 0 $ - 0 $ 4,093,000
May 1
through
May 31 8,775 $ 19.99 0 $ 3,917,000
June 1
through
June 30 120 $ 20.04 0 $ 3,915,000
Total 8,895 $ 19.99 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 32.
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.
August 1, 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 JUNE 30, 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.