March 17, 2005
Ms. Linda Cvrkel
Branch Chief
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 03-05
Washington, D.C. 20549
RE: Patriot Transportation Holding, Inc.
Form 10-K for the year ended September 30, 2004
Form 10-Q for the quarter ended December 31, 2004
Commission File #: 000-17554
Dear Ms. Cvrkel:
Thank you for your correspondence dated March 2, 2005.
We appreciate your assistance with compliance with the
applicable disclosure requirements.
Our responses to your comments are set forth below and
have been keyed to your comments.
FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 2004
Statement of Income:
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1. We note your presentation of interest expense, net on
the face of the statements of income. To the extent the
individual amounts are material, please present interest
income and interest expense as separate line items in future
filings, rather than using the net presentation. See Rule 5-
03.7 and 5-03.8 of Regulation S-X.
COMPANY RESPONSE: In future filings, we will present
interest income and interest expense as separate line
items rather than using the net presentation, to the
extent the individual items are material. For your
information, interest income was $77,000, $5,000 and
$21,000 for the fiscal years ended September 30, 2004,
2003 and 2002, respectively.
Notes to the Financial Statements
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Note 1. Accounting Policies
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2. We note that tires are accounted for as a prepaid
expense and amortized over the life of the tires.
Please supplementally tell us what the useful life of
the tires is and if it is greater than one year, please
tell us your basis for classifying the tires as a
current asset.
COMPANY RESPONSE: Tires are amortized based on miles
driven, and we estimate the average useful life of a
tire to be approximately 18 months. We estimate that
at any one time the weighted average life of the tires
is approximately 9 months. During Fiscal year 2004, we
purchased approximately $2,119,000 of tires and
expensed approximately $1,978,000. We began the year
with $1,788,000 in pre-paid tires and ended the year
with $1,930,000 in pre-paid tires. The increase in
prepaid tires is mostly due to an increase in the
number of tractors and trailers owned. For these
reasons we believe our classification of tires as a
current asset is appropriate.
Schedule II. Valuation and Qualifying Accounts
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3. We note from Schedule II that the accrued risk
insurance and accrued health insurance reserve balances at
the beginning of fiscal year 2003 and 2004 were
significantly lower than the expenses incurred during the
year. Based on this trend, please supplementally tell us
how you estimate the accrual recorded each period.
Additionally, tell us why you believe your reserve as of
December 31, 2004 is adequate for the expected costs in
2005.
COMPANY RESPONSE: In Schedule II the accrued risk
insurance reserve balances at the beginning of fiscal
year 2003 and 2004 are significantly lower than the
expenses incurred during the year because the expenses
incurred include insurance premiums of approximately
$3,839,000 in 2003 and $4,406,000 in 2004. In the
future, we will include a footnote to the table
reflecting the amount of the risk insurance premiums
included in the amounts shown on the Schedule.
We accrue for our self-insured retained losses on these
risks based on historical costs and claims development
during the year. The Company uses experienced external
administrators for its claims processing, adjusting and
settlements. Each claim is monitored and reserves are
increased or decreased based on continuing analysis of
claims as they develop. We believe our reserve balance
at December 31, 2004 is adequate based on this on going
analysis of claims and periodic loss reserve analysis
by independent third parties.
The Company is self-insured for its employee health
insurance benefits and carries stop loss insurance
coverage of $200,000 per covered participant per year.
The health benefits program is administered by Blue
Cross Blue Shield (BCBS) through their PPO network.
BCBS processes and pays claims and are reimbursed
by the Company on a weekly basis. Most claims are paid
by BCBS within 30 days after the services are provided.
However, some claims for major surgeries, cancer or
heart conditions may have a lag of 6 months or more.
BCBS provides the Company with a quarterly claims lag
report which shows claims paid each month compared to
date incurred. From this report we can determine the
lag in reporting and paying claims and estimate the
reserves needed for claims incurred but not reported at
the end of each quarter.
FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 2004
4. We note that you present a combined amount for cost of
operations on the face of your statements of income on your
Form 10-Q. In future filings, please break out the amount
related to transportation and that related to real estate,
to be consistent with the presentation of revenues.
COMPANY RESPONSE: In future filings, we will break out
separately the cost of operations related to
transportation and that related to real estate, to be
consistent with the presentation of revenues.
REPORT ON FORM 8-K DATED DECEMBER 14, 2004
5. We note the disclosure indicating that the Company may
be subject to claims for rescission associated with the
acquisition of approximately 1,560 shares of common stock
that were transferred to participants in the Company's
Profit Sharing and Deferred Earnings Plan during the past
twelve months. Please tell us how the shares subject to
possible rescission have been reflected in the Company's
December 31, 2004 balance sheet. If they have been
reflected in stockholders' equity at December 31, 2004,
please explain in detail why you believe this classification
is appropriate. We may have further comment upon receipt of
your response. Also, in future filings, please disclose the
existence of this contingency in the notes to the Company's
financial statements.
COMPANY RESPONSE: The shares of the Company's common
stock which were purchased in the open market by the
Company's Profit Sharing and Deferred Earnings Plan in
the last twelve months are reflected in shareholders'
equity at December 31, 2004. We do not believe that it
is necessary to classify separately the shares subject
to possible rescission because the potential obligation
to repurchase the shares is not material to our balance
sheet or our shareholders' equity.
As of December 31, 2004, approximately 1,918
shares could be subject to possible rescission claims.
This represented approximately 0.07% of the 2,941,475
shares outstanding on such date. The 1,918 shares had
an aggregate market value of $86,291 on December 31,
2004. These shares were purchased at
prices ranging from a low of $30.015 to a high of $44.03.
The closing price of the Company's common stock was $44.99
as of December 31, 2004 and $52.606 as of March 16, 2004.
For these reasons, we do not believe that any potential
rescission liability would be material to our balance
sheet or to our presentation of the shareholders'
equity.
You also have requested that in future filings we
disclose the existence of this contingency in the notes
to the Company's financial statements. We believe we
should only disclose the contingency in future filings
to the extent the effect would be material.
The Company hereby acknowledges that:
* the Company is responsible for the adequacy and
accuracy of the disclosure in the filings;
* staff comments and changes to disclosure in response to
staff comments in the filings reviewed by the staff do not
foreclose the Commission from taking any action with respect
to the filing; and
* the Company may not assert staff comments as a defense
in any proceeding initiated by the Commission or any person
under the federal securities laws of the United States.
If you have any comments or questions regarding our
responses, please contact me at the above-listed address or
by telephone at (904) 396-5733, Ext. 3100.
Sincerely,
/s/ Ray M. Van Landingham
Ray M. Van Landingham
Vice President and
Chief Financial Officer