UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2012
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number: 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
(ss.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, a non-accelerated filer, or a smaller reporting company.
See definitions of "accelerated filer," "large accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [x ]
Non-accelerated filer [ ] Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [ x ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable
date.
Class Outstanding at December 31, 2012
--------------------------------------- ---------------------------------
Common Stock, $.10 par value per share 9,502,720 shares
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-Q
QUARTER ENDED DECEMBER 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 14
Item 3. Quantitative and Qualitative Disclosures about Market Risks 21
Item 4. Controls and Procedures 21
PART II. OTHER INFORMATION
Item 1A. Risk Factors 23
Item 2. Purchase of Equity Securities by the Issuer 23
Item 6. Exhibits 23
Signatures 24
Exhibit 31 Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 26
Exhibit 32 Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 29
Preliminary Note Regarding Forward-Looking Statements.
Certain matters discussed in this report contain forward-looking statements that
are subject to risks and uncertainties that could cause actual results to differ
materially from those indicated by such forward-looking statements.
These forward-looking statements relate to, among other things, capital
expenditures, liquidity, capital resources and competition and may be indicated
by words or phrases such as "anticipate", "estimate", "plans", "projects",
"continuing", "ongoing", "expects", "management believes", "the Company
believes", "the Company intends" and similar words or phrases. The following
factors and others discussed in the Company's periodic reports and filings with
the Securities and Exchange Commission are among the principal factors that
could cause actual results to differ materially from the forward-looking
statements: freight demand for petroleum products including recessionary and
terrorist impacts on travel in the Company's markets; levels of construction
activity in the markets served by our mining properties; fuel costs and the
Company's ability to recover fuel surcharges; accident severity and frequency;
risk insurance markets; driver availability and cost; the impact of future
regulations regarding the transportation industry; availability and terms of
financing; competition in our markets; interest rates, inflation and general
economic conditions; demand for flexible warehouse/office facilities in the
Baltimore-Washington-Northern Virginia area; and ability to obtain zoning and
entitlements necessary for property development. However, this list is not a
complete statement of all potential risks or uncertainties.
These forward-looking statements are made as of the date hereof based on
management's current expectations, and the Company does not undertake an
obligation to update such statements, whether as a result of new information,
future events or otherwise. Additional information regarding these and other
risk factors may be found in the Company's other filings made from time to time
with the Securities and Exchange Commission.
PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except share data)
December 31, September 30,
ASSETS 2012 2012
---- ----
Current assets:
Cash and cash equivalents $ 1,440 6,713
Accounts receivable (net of allowance for
doubtful accounts of $135 and $129, respectively) 6,315 7,019
Real estate tax refund receivable 2,342 2,311
Federal and state income taxes receivable 426 426
Inventory of parts and supplies 988 843
Prepaid tires on equipment 1,791 1,631
Prepaid taxes and licenses 1,389 2,050
Prepaid insurance 2,199 2,371
Prepaid expenses, other 75 70
Real estate held for sale, at cost 2,754 3,485
------ ------
Total current assets 19,719 26,919
------ ------
Property, plant and equipment, at cost 347,634 338,702
Less accumulated depreciation and depletion 111,909 110,681
------- -------
Net property, plant and equipment 235,725 228,021
------- -------
Real estate held for investment, at cost 3,640 3,640
Investment in joint venture 7,543 7,521
Goodwill 1,087 1,087
Unrealized rents 4,298 4,155
Other assets 4,682 4,362
------- -------
Total assets $276,694 275,705
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,003 5,266
Deferred income taxes 58 58
Federal and state income taxes payable 634 -
Accrued payroll and benefits 3,781 5,164
Accrued insurance 1,968 3,249
Accrued liabilities, other 1,040 1,189
Long-term debt due within one year 5,327 5,239
------ -------
Total current liabilities 17,811 20,165
------ -------
Long-term debt, less current portion 55,766 57,131
Deferred income taxes 18,643 18,199
Accrued insurance 1,659 1,659
Other liabilities 3,907 3,833
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,
9,502,720 and 9,440,620 shares issued
and outstanding, respectively 950 944
Capital in excess of par value 42,794 41,539
Retained earnings 135,132 132,203
Accumulated other comprehensive income, net 32 32
------- -------
Total shareholders' equity 178,908 174,718
------- -------
Total liabilities and shareholders' equity $276,694 275,705
======= =======
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS
ENDED DECEMBER 31,
------------------
2012 2011
---- ----
REVENUES:
Transportation $26,639 24,841
Mining royalty land 1,331 977
Developed property rentals 5,087 4,541
------ ------
Total revenues 33,057 30,359
COST OF OPERATIONS:
Transportation 24,842 23,398
Mining royalty land 308 293
Developed property rentals 3,236 3,162
Unallocated corporate 263 292
------ -------
Total cost of operations 28,649 27,145
OPERATING PROFIT:
Transportation 1,797 1,443
Mining royalty land 1,023 684
Developed property rentals 1,851 1,379
Unallocated corporate (263) (292)
------ ------
Total operating profit 4,408 3,214
Gain on termination of sale contract - 1,039
Gain on investment land sold 1,116 -
Interest income and other 32 9
Equity in loss of joint venture (8) (7)
Interest expense (428) (804)
------ ------
Income before income taxes 5,120 3,451
Provision for income taxes (1,997) (1,326)
------ ------
INCOME FROM CONTINUING OPERATIONS 3,123 2,125
Loss from discontinued
operations, net - (1)
------- ------
NET INCOME $ 3,123 2,124
======= ======
COMPREHENSIVE INCOME $ 3,123 2,124
======= ======
EARNINGS PER COMMON SHARE:
Income from continuing operations -
Basic $ .33 .23
Diluted $ .33 .23
Discontinued operations (Note 11) -
Basic $ - -
Diluted $ - -
Net income - basic $ .33 .23
Net income - diluted $ .33 .23
Number of shares (in thousands)
used in computing:
-basic earnings per common share 9,452 9,290
-diluted earnings per common share 9,549 9,422
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2012 AND 2011
(In thousands)
(Unaudited)
2012 2011
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,123 2,124
Adjustments to reconcile net income to net cash
provided by continuing operating activities:
Depreciation, depletion and amortization 3,271 3,083
Deferred income taxes 444 -
Equity in loss of joint venture 8 7
Gain on sale of equipment and property (1,307) (1,051)
Loss from discontinued operations, net - 1
Stock-based compensation 130 136
Net changes in operating assets and liabilities:
Accounts receivable 704 234
Inventory of parts and supplies (145) 132
Prepaid expenses and other current assets 668 894
Other assets (680) (368)
Accounts payable and accrued liabilities (3,076) (870)
Income taxes payable and receivable 634 1,014
Long-term insurance liabilities and other long-term
liabilities 74 30
------- -------
Net cash provided by operating activities of
continuing operations 3,848 5,366
Net cash provided by operating activities of
discontinued operations - 4
------- -------
Net cash provided by operating activities 3,848 5,370
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of transportation group property and equipment (6,787) (4,789)
Investments in developed property rentals segment (4,164) (2,589)
Investment in joint venture (32) (70)
Proceeds from the sale of property, plant and equipment 2,202 1,069
------- -------
Net cash used in investing activities (8,781) (6,379)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (1,277) (1,195)
Repurchase of Company Stock (233) (137)
Excess tax benefits from exercises of stock options
and vesting of restricted stock 407 145
Exercise of employee stock options 763 220
------- -------
Net cash used in financing activities (340) (967)
------- -------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (5,273) (1,976)
Cash and cash equivalents at beginning of period 6,713 21,026
------- -------
Cash and cash equivalents at end of the period $ 1,440 19,050
======= =======
The Company recorded non-cash transactions for a receivable on previously
capitalized real estate taxes on the Anacostia property of $31 and $2,043 in
first quarter fiscal 2013 and 2012 respectively.
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 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 three months ended December 31, 2012 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 2013. 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, 2012.
(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 that 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
December 31,
----------------------
2012 2011
---- ----
Revenues:
Transportation $ 26,639 24,841
Mining royalty land 1,331 977
Developed property rentals 5,087 4,541
------ ------
$ 33,057 30,359
====== ======
Operating profit:
Transportation $ 2,268 1,838
Mining royalty land 1,199 848
Developed property rentals 2,115 1,624
Corporate expenses:
Allocated to transportation (471) (395)
Allocated to mining land (176) (164)
Allocated to developed property (264) (245)
Unallocated (263) (292)
------ ------
(1,174) (1,096)
------ ------
$ 4,408 3,214
====== ======
Interest expense:
Mining royalty land $ 11 10
Developed property rentals 417 794
------ ------
$ 428 804
====== ======
Capital expenditures:
Transportation $ 6,787 4,789
Mining royalty land - -
Developed property rentals:
Capitalized interest 591 294
Internal labor 110 141
Real estate taxes (a) 251 (1,607)
Other costs 3,212 1,718
------ ------
$ 10,951 5,335
====== ======
(a)Includes $31 and $2,043 receivable on previously capitalized real estate
taxes on the Anacostia property for the three months ended December 31, 2012 and
December 31, 2011, respectively.
Depreciation, depletion and
amortization:
Transportation $ 1,753 1,608
Mining royalty land 25 32
Developed property rentals 1,388 1,341
Other 105 102
------ ------
$ 3,271 3,083
====== ======
December 31, September 30,
2012 2012
---- ----
Identifiable net assets
Transportation $ 47,293 42,642
Mining royalty land 39,436 39,695
Developed property rentals 186,692 184,358
Cash items 1,440 6,713
Unallocated corporate assets 1,833 2,297
------- -------
$276,694 275,705
======= =======
(5) LONG-TERM DEBT. Long-term debt is summarized as follows (in thousands):
December 31, September 30,
2012 2012
---- ----
5.6% to 8.6% mortgage notes
due in installments through 2027 61,093 62,370
Less portion due within one year 5,327 5,239
------ ------
$ 55,766 57,131
====== ======
On December 21, 2012, the Company entered into a modified credit agreement with
Wells Fargo Bank, N.A. (the "Credit Agreement"). The Credit Agreement modifies
the Company's prior Amended and Restated Revolving Credit Agreement with
Wachovia Bank, National Association ("Wachovia"), Bank of America, N.A.,
SunTrust Bank, and Compass Bank dated as of November 10, 2004. The Credit
Agreement is for a 5 year term with a maximum facility amount of $55 million.
The Credit Agreement provides a revolving credit facility (the "Revolver") with
a maximum facility amount of $40 million, with a $20 million sublimit for
standby letters of credit, and a term loan facility of $15 million. Wells Fargo
Bank, N.A. is the sole lender under the modified Credit Agreement. The Credit
Agreement 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 Revolver portion of the credit
agreement. The commitment fee may also change quarterly based upon the ratio
described above. The Credit Agreement contains certain conditions, affirmative
financial covenants and negative covenants including limitations on paying cash
dividends. Letters of credit in the amount of $9,009,000 were issued under the
Revolver. As of December 31, 2012, $45,991,000 was available for borrowing and
$58,719,000 of consolidated retained earnings would be available for payment of
dividends. The Company was in compliance with all covenants as of December 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 December 31, 2012, the carrying amount and fair value of such
other long-term debt was $61,093,000 and $65,892,000, 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
ENDED DECEMBER 31,
------------------
2012 2011
---- ----
Weighted average common shares
outstanding during the period
- shares used for basic
earnings per common share 9,452 9,290
Common shares issuable under
share based payment plans
which are potentially dilutive 97 132
----- -----
Common shares used for diluted
earnings per common share 9,549 9,422
===== =====
Net income $ 3,123 2,124
===== =====
Earnings per common share
Basic $ .33 .23
===== =====
Diluted $ .33 .23
===== =====
For the three months ended December 31, 2012, 173,240 shares attributable to
outstanding stock options were excluded from the calculation of diluted earnings
per share because their inclusion would have been anti-dilutive. For the three
months ended December 31, 2011, 172,060 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, 2012, 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 557,380 at
December 31, 2012.
The Company recorded the following stock compensation expense in its
consolidated statements of income (in thousands):
Three Months ended
December 31,
2012 2011
Stock option grants $ 130 136
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, 2012 481,210 $17.52 3.8 $ 3,782
Granted 46,180 $26.20 $ 489
Exercised 70,800 $10.78 $ 388
-------
Outstanding at
December 31, 2012 456,590 $19.45 4.5 $ 3,883
Exercisable at
December 31, 2012 360,578 $17.81 3.5 $ 2,847
Vested during
three months ended
December 31, 2012 20,612 $ 199
The aggregate intrinsic value of exercisable in-the-money options was $3,910,000
and the aggregate intrinsic value of all outstanding in-the-money options was
$4,213,000 based on the market closing price of $28.43 on December 31, 2012 less
exercise prices. Gains of $1,050,000 were realized by option holders during the
three months ended December 31, 2012. The realized tax benefit from options
exercised for the three months ended December 31, 2012 was $407,000. Total
compensation cost of options granted but not yet vested as of December 31, 2012
was $956,000, which is expected to be recognized over a weighted-average period
of 3.7 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 may be
understated or overstated but the possible range can not be estimated. The
liability at any point in time depends upon the relative ages and amounts of the
individual open claims. In the opinion of management, none of these matters are
expected to have a material adverse effect on the Company's consolidated
financial condition, results of operations or cash flows.
(9) CONCENTRATIONS. The transportation segment primarily serves customers in the
industries in the Southeastern U.S. Significant economic disruption or downturn
in this geographic region or these industries could have an adverse effect on
our financial statements.
During the first three months of fiscal 2013, the transportation segment's ten
largest customers accounted for approximately 55.8% of the transportation
segment's revenue. One of these customers accounted for 21.0% 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 $3,464,000 and
$2,988,000 at December 31, 2012 and September 30, 2012 respectively.
The mining royalty land segment has one lessee that accounted for 73.9% of the
segment's revenues and $151,000 of accounts receivable at December 31, 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 December 31, 2012 the Company had no assets or liabilities measured at
fair value on a recurring basis or non-recurring basis.
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.
A summary of discontinued operations is as follows (in thousands):
Three months
Ended December 31,
------------------
2012 2011
---- ----
Revenue $ - 15
Operating expenses - 16
Gain on sale before taxes - -
----- -----
Income before income taxes $ - (1)
Permanent tax benefit - -
Provision for income taxes - -
----- -----
Loss from discontinued operations $ - (1)
===== =====
(12) REAL ESTATE HELD FOR SALE.
In September 2012 the Company received a non-binding letter of intent to sell
phase 1 of the Windlass Run Residential property located in southeastern
Baltimore County, Maryland. The property is under contract and expected to close
during fiscal 2013 for $7.9 million.
(13) UNUSUAL OR INFREQUENT ITEMS IMPACTING QUARTERLY RESULTS. Income from
continuing operations for the first quarter of fiscal 2013 included a gain on
the sale of the developed property rentals Commonwealth property of $1,116,000
before income taxes. The book value of the property was $723,000.
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.
Accrued insurance liabilities decreased $1,281,000 during the quarter ending
December 31, 2012 due to payments to our new insurer under a captive agreement
along with payment in settlement of three unusually large prior year liability
and health claims. Payments under the captive agreement are for the fiscal 2013
year-to-date loss fund as estimated in advance using actuarial methodology. The
captive agreement provides that we will share in the underwriting results, good
or bad, within a $250,000 per occurrence layer of loss through retrospective
premium adjustments.
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, leases, operates and manages 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.
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 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.
COMPARATIVE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2012
AND 2011
CONSOLIDATED RESULTS - Net income for the first quarter of fiscal 2013 was
$3,123,000 compared to $2,124,000 for the same period last year. Diluted
earnings per common share for the first quarter of fiscal 2013 were $.33
compared to $.23 for the same quarter last year. Transportation segment results
were higher due to incremental profits on increased revenue, higher gains on
equipment sales and lower than expected health insurance claims partially offset
by increased vehicle repairs costs, increased site maintenance, and increased
sales, general and administrative expenses. The mining royalty land segment's
results were higher due to new property royalties partially offset by increased
corporate expense allocation. The Developed property rentals segment's results
were higher due to higher occupancy and lower professional fees partially offset
by higher health insurance claims allocation.
TRANSPORTATION RESULTS
----------------------
Three months ended December 31
------------------------------
(dollars in thousands) 2012 % 2011 %_
--------- --- --------- ----
Transportation revenue $ 21,991 83% 20,316 82%
Fuel surcharges 4,648 17% 4,525 18%
-------- ---- ------ ----
Revenues 26,639 100% 24,841 100%
Compensation and benefits 9,434 35% 8,782 35%
Fuel expenses 6,256 24% 5,880 24%
Insurance and losses 1,888 7% 1,995 8%
Depreciation expense 1,707 6% 1,575 6%
Other, net 3,005 11% 2,767 11%
Sales, general & administrative 2,307 9% 2,007 8%
Allocated corporate expenses 471 2% 395 2%
Gain on equipment sales (226) (1%) (3) 0%
-------- ---- ------ ----
Cost of operations 24,842 93% 23,398 94%
-------- ---- ------ ----
Operating profit $ 1,797 7% 1,443 6%
======== ==== ====== ====
Transportation segment revenues were $26,639,000 in the first quarter of 2013,
an increase of $1,798,000 over the same quarter last year. Revenue miles in the
current quarter were up 3.4% compared to the first quarter of fiscal 2012 due to
business growth. Revenue per mile increased 3.8% over the same quarter last year
due to rate increases and higher fuel surcharges. Fuel surcharge revenue
increased $123,000 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 $.17 or 4.7% over the
same quarter in fiscal 2012. 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 4.6% over the same quarter last year.
The Transportation segment's cost of operations was $24,842,000 in the first
quarter of 2013, an increase of $1,444,000 over the same quarter last year. The
Transportation segment's cost of operations in the first quarter of 2013 as a
percentage of revenue was 93% compared to 94% in the first quarter of 2012.
Compensation and benefits increased $652,000 or 7.4% compared to the same
quarter last year primarily due to a driver pay increase and the increase in
miles driven. Fuel cost increased by $376,000 due to higher cost per gallon and
the increase in miles driven. Insurance and losses decreased $107,000 compared
to the same quarter last year primarily due to lower than expected health
insurance claims. Depreciation expense increased $132,000 due to more trucks in
service. Other expense increased $238,000 due to higher vehicle repair costs,
increased site maintenance, increased tire prices and increased miles driven.
Sales, general and administrative costs increased $300,000 or 14.9% compared to
the same quarter last year due to severance costs, increased bonus compensation
and professional fees. Allocated corporate expenses increased $76,000. Gains on
equipment sales increased $223,000 due to increased sales of tractors and
trailers and higher sales value on used equipment.
MINING ROYALTY LAND RESULTS
---------------------------
Three months ended December 31
------------------------------
(dollars in thousands) 2012 % 2011 %
--------- --- --------- ----
Mining royalty land revenue $ 1,331 100% 977 100%
Property operating expenses 112 8% 99 10%
Depreciation and depletion 25 2% 32 3%
Management Company indirect (5) 0% (2) 0%
Allocated corporate expense 176 13% 164 17%
------- ---- ------ ----
Cost of operations 308 23% 293 30%
------- ---- ------ ----
Operating profit $ 1,023 77% 684 70%
======= ==== ====== ====
Mining royalty land segment revenues for the first quarter of fiscal 2013 were
$1,331,000, an increase of $354,000 or
36.2% over the same quarter last year due to new property royalties and higher
tons mined.
The mining royalty land segment's cost of operations was $308,000 in the first
quarter of 2013, an increase of $15,000 over the same quarter last year due
primarily to the $12,000 increase in allocated corporate expenses.
DEVELOPED PROPERTY RENTALS RESULTS
----------------------------------
Three months ended December 31
------------------------------
(dollars in thousands) 2012 % 2011 %
--------- --- --------- ----
Developed property rentals revenue $ 5,087 100% 4,541 100%
Property operating expenses 1,117 22% 1,216 27%
Depreciation and amortization 1,430 28% 1,341 30%
Management Company indirect 425 9% 360 8%
Allocated corporate expense 264 5% 245 5%
------- ---- ------ ----
Cost of operations 3,236 64% 3,162 70%
------- ---- ------ ----
Operating profit $ 1,851 36% 1,379 30%
======== ==== ====== ====
Developed property rentals segment revenues for the first quarter of fiscal 2013
were $5,087,000, an increase of $546,000 or 12.0% due to higher occupancy.
Occupancy at December 31, 2012 was 86.2% as compared to 82.8% at December 31,
2011.
Developed property rentals segment's cost of operations was $3,236,000 in the
first quarter of 2013, an increase of $74,000 or 2.3% over the same quarter last
year. Property operating expenses decreased $99,000 due to lower professional
fees. Depreciation and amortization increased $89,000 primarily due to tenant
improvements. Management Company indirect expenses (excluding internal
allocations for lease related property management and construction fees)
increased $65,000 due to higher health insurance claims. Allocated corporate
expenses increased $19,000.
CONSOLIDATED RESULTS
OPERATING PROFIT - Consolidated operating profit was $4,408,000 in the first
quarter of fiscal 2013, an increase of $1,194,000 or 37.1% compared to
$3,214,000 in the same period last year. Operating profit in the transportation
segment increased $354,000 or 24.5% due to incremental profits on increased
revenue, higher gains on equipment sales and lower than expected health
insurance claims partially offset by increased vehicle repairs costs, increased
site maintenance, and increased sales, general and administrative expenses.
Operating profit in the mining royalty land segment increased $339,000 or 49.6%
due to new property royalties partially offset by increased corporate expense
allocation. Operating profit in the Developed property rentals segment increased
$472,000 or 34.2% due to higher occupancy and lower professional fees partially
offset by higher health insurance claims allocation. Consolidated operating
profit includes corporate expenses not allocated to any segment in the amount of
$263,000 in the first quarter of fiscal 2013, a decrease of $29,000 compared to
the same period last year.
GAIN ON TERMINATION OF SALE CONTRACT - First quarter 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.
GAIN ON INVESTMENT LAND SOLD - Gain on investment land sold for the first
quarter of fiscal 2013 included a gain on the sale of the developed property
rentals Commonwealth property of $1,116,000 before income taxes. The book value
of the property was $723,000.
Interest income and other (expense) income, net - Interest income and other
(expense) income, net increased $23,000 over the same quarter last year
primarily due to funds received in consideration for the conveyance of easement
property.
Interest expense - Interest expense decreased $376,000 over the same quarter
last year due to higher capitalized interest and declining mortgage principal
balance. The amount of interest capitalized on real estate projects under
development was $297,000 higher than the same quarter in fiscal 2012 primarily
due to resumed development of Patriot Business Park in April 2012.
INCOME TAXES - Income tax expense increased $671,000 over the same quarter last
year due to higher earnings from continuing operations compared to the same
quarter last year.
INCOME FROM CONTINUING OPERATIONS - Income from continuing operations was
$3,123,000 or $.33 per diluted share in the first quarter of fiscal 2013, an
increase of 47.0% compared to $2,125,000 or $.23 per diluted share for the same
period last year. The $998,000 increase was primarily due to the $1,669,000
increase in operating profits offset by higher income taxes.
DISCONTINUED OPERATIONS - The after tax loss from discontinued operations for
the first quarter of fiscal 2012 was $1,000. Diluted earnings per share on
discontinued operations for the first quarter of fiscal 2013 and fiscal 2012 was
$.00.
NET INCOME - Net income for the first quarter of fiscal 2013 was $3,123,000
compared to $2,124,000 for the same period last year. Diluted earnings per
common share for the first quarter of fiscal 2013 were $.33 compared to $.23 for
the same quarter last year. Transportation segment results were higher due to
incremental profits on increased revenue, higher gains on equipment sales and
lower than expected health insurance claims partially offset by increased
vehicle repairs costs, increased site maintenance, and increased sales, general
and administrative expenses. The mining royalty land segment's results were
higher due to new property royalties partially offset by increased corporate
expense allocation. The Developed property rentals segment's results were higher
due to higher occupancy and lower professional fees partially offset by higher
health insurance claims allocation.
LIQUIDITY AND CAPITAL RESOURCES. For the first three months of fiscal 2013, the
Company used cash provided by operating activities of continuing operations of
$3,848,000, proceeds from the sale of plant, property and equipment of
$2,202,000, proceeds from the exercise of employee stock options of $407,000,
excess tax benefits from the exercise of stock options of $763,000, and cash
balances to purchase $6,787,000 in transportation equipment, to expend
$4,164,000 in real estate development, to invest $32,000 in the Brooksville
Joint Venture, to make $1,277,000 scheduled payments on long-term debt and to
repurchase Company stock for $233,000. Cash decreased $5,273,000.
Cash flows from operating activities for the first three months of fiscal 2013
were $1,522,000 lower than the same period last year primarily due to a decrease
in accrued insurance liabilities. Accrued insurance liabilities decreased due to
payments to our new insurer under a captive agreement along with payment in
settlement of three unusually large prior year liability and health claims.
Payments under the captive agreement are for the fiscal 2013 year-to-date loss
fund as estimated in advance using actuarial methodology. The captive agreement
provides that we will share in the underwriting results, good or bad, within a
$250,000 per occurrence layer of loss through retrospective premium adjustments.
Cash flows used in investing activities for the first three months of fiscal
2013 were $2,402,000 higher reflecting the increased purchase of transportation
equipment for growth and replacement and real estate development partially
offset by a pretax gain of $1,116,000 on the sale of the Commonwealth property.
Cash flows used in financing activities for the first three months of fiscal
2013 were $627,000 lower than the same period last year due to higher stock
option exercises.
On December 21, 2012, the Company entered into a modified credit agreement with
Wells Fargo Bank, N.A. (the "Credit Agreement"). The Credit Agreement modifies
the Company's prior Amended and Restated Revolving Credit Agreement with
Wachovia Bank, National Association ("Wachovia"), Bank of America, N.A.,
SunTrust Bank, and Compass Bank dated as of November 10, 2004. The Credit
Agreement is for a 5 year term with a maximum facility amount of $55 million.
The Credit Agreement provides a revolving credit facility (the "Revolver") with
a maximum facility amount of $40 million, with a $20 million sublimit for
standby letters of credit, and a term loan facility of $15 million. The Credit
Agreement contains certain conditions, affirmative financial covenants and
negative covenants including limitations on paying cash dividends. Letters of
credit in the amount of $9,009,000 were issued under the Revolver. As of
December 31, 2012, $45,991,000 was available for borrowing and $58,719,000 of
consolidated retained earnings would be available for payment of dividends. The
Company was in compliance with all covenants as of December 31, 2012.
The Company had $9,009,000 of irrevocable letters of credit outstanding as of
December 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 three months of fiscal 2013 the Company repurchased 8,700 shares for
$233,000. As of December 31, 2012, $3,682,000 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
$130,000 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 3.4% higher
than last year. The Company continues to succeed in adding drivers and customers
and anticipates increasing segment miles during fiscal 2013.
Developed property rentals occupancy has increased from 82.8% to 86.2% over
December 31, 2011 as the market for new tenants has improved and traffic for
vacant space has increased. Occupancy at December 31, 2012 and 2011 included
25,660 square feet or .9% and 104,226 square feet or 3.4% respectively for
temporary storage under a less than full market lease rate. The Company 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, 2012, for a 117,600 square foot building
which is substantially completed and occupancy is anticipated during the quarter
ending March 31, 2013.
Windlass Run Residential (previously Bird River), located in southeastern
Baltimore County, Maryland, is a 121 acre tract of land adjacent to our Windlass
Run Business Park. In September 2012, the Company received a non-binding letter
of intent to sell the property for $18.8 million in two phases. The letter of
intent to sell the property has been converted into 2 executed contracts with a
due diligence period expiring on February 21, 2013. The contracts contemplate
the sale of the phase 1 of the property in the quarter ending June 30, 2013 for
$7.9 million and the balance for $10.9 million approximately 18 months later.
On 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
first phase only 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 approximately 18,000 square feet of retail) on a
portion of the roughly 5.82 acre site. 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 approximately 18,000 square feet of
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 $11,000,000, 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 of Phase I in early 2014 with lease up scheduled between late 2015
and all of 2016. On January 14, 2013, the Company received "Final Action" on the
modification and extension to the previously approved planned unit development
from the District of Columbia Zoning Commission. The appeal period on this
action will expire in early March 2013.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is exposed to market risk from changes in interest rates. For its
cash and cash equivalents, a change in interest rates affects the amount of
interest income that can be earned. For its debt instruments with variable
interest rates, changes in interest rates affect the amount of interest expense
incurred. The Company prepared a sensitivity analysis of its cash and cash
equivalents to determine the impact of hypothetical changes in interest rates on
the Company's results of operations and cash flows. The interest-rate analysis
assumed a 50 basis point adverse change in interest rates on all cash and cash
equivalents. However, the interest-rate analysis did not consider the effects of
the reduced level of economic activity that could exist in such an environment.
Based on this analysis, management has concluded that a 50 basis point adverse
move in interest rates on the Company's cash and cash equivalents would have an
immaterial impact on the Company's results of operations and cash flows.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's reports under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to management, including the Company's Chief Executive Officer
("CEO"), Chief Financial Officer ("CFO"), and Chief Accounting Officer ("CAO"),
as appropriate, to allow timely decisions regarding required disclosure.
The Company also maintains a system of internal accounting controls over
financial reporting that are designed to provide reasonable assurance to the
Company's management and Board of Directors regarding the preparation and fair
presentation of published financial statements.
All control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only
reasonable assurance of achieving the desired control objectives.
As of December 31, 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 three months that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should
carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in
our Annual Report on Form 10-K for the year ended September 30, 2012, which
could materially affect our business, financial condition or future results. The
risks described in our Annual Report on Form 10-K are not the only risks facing
our Company. Additional risks and uncertainties not currently known to us or
that we currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.
ITEM 2. PURCHASES OF EQUITY SECURITIES BY THE ISSUER
(c)
Total
Number of
Shares (d)
Purchased Approximate
(a) As Part of Dollar Value of
Total (b) Publicly Shares that May
Number of Average Announced Yet Be Purchased
Shares Price Paid Plans or Under the Plans
Period Purchased per Share Programs or Programs (1)
------ --------- ---------- ---------- ---------------
October 1
through
October 31 0 $ - 0 $ 3,915,000
November 1
through
November 30 0 $ - 0 $ 3,915,000
December 1
through
December 31 8,700 $ 26.76 0 $ 3,682,000
--------- --------
Total 8,700 $ 26.76 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.
February 6, 2013 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 DECEMBER 31, 2012
EXHIBIT INDEX
(10)(h) Amended and Restated Credit Agreement dated December 21,
2012 between Patriot Transportation Holding, Inc. as Borrower
and Wells Fargo Bank, N.A. as lender. Filed herein.
(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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