PATRIOT TRANSPORTATION HOLDING, INC.
1801 Art Museum Drive
Jacksonville, Florida 32207
March 6, 2008
Ms. Claire Erlanger
Division of Corporation Finance
Securities and Exchange Commission
100 F. Street, N.E.
Washington, D.C. 20549
Re: Patriot Transportation Holding, Inc.
Form 10-K for the Year Ended September 30, 2007
Filed December 7, 2007
Filer No. 000-17554
Dear Ms. Erlanger:
This letter responds to the staff's comment letter dated February
21, 2008 (the "Comment Letter") regarding the above-referenced filing.
For your convenience, each of the comments has been duplicated below,
followed by our responses.
Form 10-K for the year ended September 30, 2007
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Note 11. Accrued Vacation Liability
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1. We note from your response to our prior comment that you
concluded that the accrual was not material to prior periods from both a
qualitative and a quantitative perspective. However, it appears that if
you had made the adjustment to begin accruing for vacation at the end of
fiscal 2005 or in either of the first two quarters of fiscal 2006, the
effect on operating profit and pre-tax income would have resulted in more
than a five percent difference. In light of this significance, please
revise your disclosure in future filings to discuss the reasons the
adjustment was not made until the third quarter of fiscal 2006 and to
include disclosure of both the quantitative and qualitative factors used
in your determination that the accrual was not material to prior periods.
Company Response:
The Company will revise its disclosure in future filings to
discuss the reasons the adjustment was not made until the third quarter
of fiscal 2006 and to include disclosure of both the quantitative and
qualitative factors used in its determination that the accrual was not
material to prior periods.
Quarterly Report on Form 10-Q for the quarter ended December 31, 2007
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Note (10) CEO Retirement
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2. We note from the disclosure in Note 10 that in connection
with the CEO's retirement, the Company will pay him approximately $4,700,000
for his accrued benefit under the Management Security Plan, the fair value
of his outstanding stock options and restricted stock and an additional
bonus. We also note that the total impact of these payments on the
Company's earnings for fiscal 2008 is expected to be $2,371,000 which is
included in selling, general and administrative expense. Please tell us
and disclose in the notes to your financial statements the various components
of the $2,371,000 of expense recognized. Your response should specifically
address the amount of expense recognized in connection with accelerated
vesting and repurchase of the CEO's options and restricted shares and should
explain how this amount was calculated. Also, please reconcile the $4,730,643
payment to be made to the CEO as described in Item 4. of the December 5, 2007
agreement with John E. Anderson included as Exhibit 10(1) with the $2,371,000
of expense recognized. We may have further comment upon receipt of your
response.
Company Response:
The letter agreement with Mr. Anderson provides for total payments to
Mr. Anderson of approximately $4,700,000, representing (i) a lump sum payment
equal to his accrued benefits under the Management Security Plan, (ii) a cash
payment to Mr. Anderson for the value of 17,000 vested and 4,000 unvested
stock options, calculated using a twenty day average closing price, (iii) the
repurchase of 600 shares of restricted stock held by Mr. Anderson, calculated
using a twenty day average closing price, and (iv) a cash bonus to Mr. Anderson
so that the aggregate after-tax value of the benefits to Mr. Anderson inclusive
of the bonus, is $3 million.
The first column in the following table sets forth the various
components of the $2,371,000 of estimated expense recognized in the first
quarter of fiscal 2008. The second column in the following table sets forth
the final expense calculations based on the payments actually made to Mr.
Anderson in February 2008. There are small differences in the two columns
due to (i) changes in the Company's stock price from the date the liability
was accrued to the date it was paid and (ii) a change in the bonus paid to Mr.
Anderson based on the final estimate of the tax impact to Mr. Anderson.
These changes will be reflected in the Company's second quarter financial
statements.
Estimated Expense Final Expense
(as reported)
Accelerated vesting of 4,000 unvested
options(1) $182,916 $180,116
Accelerated vesting of restricted
stock(1) 35,692 35,412
Additional Bonus(2) 2,151,993 2,125,325
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Total $2,370,601 $2,340,853
1. The accelerated vesting of these shares resulted in a new measurement
date for accounting purposes and therefore additional compensation
expense was calculated for the fair value of the grant at the new
measurement date. The expense accrual for the accelerated vesting
originally was calculated using a fair market value of $89.23 per
share. The final expense accrual is calculated based on the fair
market value of the stock using the average closing price for the
twenty trading days preceding Mr. Anderson's retirement date.
2. The amount of the bonus changed based on the difference between the
twenty day average stock price and the estimated fair market value
and a change in the anticipated tax liability of Mr. Anderson.
The following table reconciles the payments to Mr. Anderson with the
expense recognized.
Estimated
Estimated Final Expense Final
Payment Payment (as reported) Expense
Payment of Accrued
Management Security
Plan Benefit $1,330,823 $1,330,823 $0(1) $0(1)
Repurchase of Vested
Stock Options(2) 1,011,374 999,474 0 0
Repurchase of
Unvested Stock
Options(2) 182,916 180,1161 82,916 180,116
Repurchase of
Restricted Stock
Vesting on 1/1/2008(3) 17,846 17,706 0 0
Repurchase of Unvested
Restricted Stock(3) 35,692 35,412 35,692 35,412
Additional Bonus 2,151,993 2,125,325 2,151,993 2,125,325
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Total $4,730,644 $4,688,856 $2,370,601 $2,340,853
1. The Company previously accrued and expensed benefits of
$1,330,823 ratably over Mr. Anderson's service period.
2. Mr. Anderson held 11,000 vested stock options exercisable
at an exercise price of $22.23 per share and 6,000 vested and
4,000 unvested stock options exercisable at $43.501 per share.
The estimated payment amount was calculated based on an estimated
market value of $89.23 per share; the final payment was determined
based on the twenty day average stock price of $88.53 per share.
3. Mr. Anderson held 200 shares of restricted stock that became
vested on January 1, 2008 (which were expensed in the ordinary
course) and 600 shares of unvested restricted stock. The Company
repurchased these shares at the twenty day average stock price of
$88.53 per share.
Please contact the undersigned if you have any additional comments
or questions.
Very truly yours,
/s/ Ray M. Van Landingham
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Ray M. Van Landingham
Vice President and Chief
Financial Officer