PATRIOT TRANSPORTATION HOLDING, INC./NEWS
Contact: John D. Milton, Jr.
Chief Financial Officer 904/858-9100
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PATRIOT TRANSPORTATION HOLDING, INC. ANNOUNCES RESULTS FOR THE SECOND QUARTER
ENDED MARCH 31, 2015 IMPACTED BY INTANGIBLE ASSET IMPAIRMENT CHARGE
Jacksonville, Florida; May 6, 2015 - Patriot Transportation Holding, Inc.
(NASDAQ-PATI) reported a net loss of $351,000 or ($.11) per diluted share in
the second quarter of fiscal 2015 primarily as a result of a $2,074,000
intangible asset impairment charge taken in the quarter, a decrease of
$630,000 or $.20 per diluted share compared to net income of $279,000 or $.09
per diluted share in the same period last year. Net income for the first six
months of fiscal 2015 was $751,000 or $.23 per share a decrease of $268,000
or $.08 per diluted share compared to net income of $1,019,000 or $.31 per
diluted share in the same period last year. During the quarter, the Company
recorded an intangible asset impairment charge of $2,074,000, with an after
tax impact to net income of $1,265,000, in its consolidated and combined
financial statements for the quarter ended March 31, 2015, relating to the
Pipeline Transportation acquisition in November 2013. The Company's
conclusion that an impairment charge was necessary is the result of (i) the
loss of a significant Pipeline customer over the course of the first six
months of calendar 2014, and then (ii) the notification from another customer
during this quarter that the Company would not be able to retain a sizeable
piece of the business the Company acquired from Pipeline at the rates the
Company quoted them during a competitive bid process. In both cases,
management was not willing to lower our rates to retain the business and
chose instead to use our assets and manpower to find and service new business.
The following discussion includes certain non-GAAP financial measures
("adjusted") within the meaning of Regulation G promulgated by the Securities
and Exchange Commission ("Regulation G") to supplement the financial results
as reported in accordance with GAAP. The non-GAAP financial measures discussed
below include adjusted net income, adjusted operating profit and adjusted
operating ratio. These non-GAAP financial measures exclude the intangible
asset impairment charge incurred in the quarter. Patriot uses these metrics
to analyze its continuing operations and to monitor, assess, and identify
meaningful trends in its operating and financial performance. These measures
are not, and should not be viewed as, substitutes for GAAP financial measures.
Refer to "Non-GAAP Financial Measures" below in this press release for a more
detailed discussion, including reconciliations of these non-GAAP financial
measures to their most directly comparable GAAP financial measures.
Management believes these adjusted measures better reflect our operating
performance during the periods discussed and reflect how management
evaluates our operational results. These measures are not, and should not
be viewed as substitutes for GAAP reporting measures. The Company's adjusted
net income for the quarter was $914,000, or $.28 per diluted share, an
improvement of $635,000 or $.19 per diluted share as compared to the second
quarter of fiscal 2014. The Company's adjusted net income for the first six
months of fiscal 2015 was $2,016,000, or $.62 per diluted share, an
improvement of $997,000 or $.31 per diluted share
as compared to net income of $1,019,000, or $.31 per diluted share, in the
same period last year.
Second Quarter Adjusted Operating Results. During the second quarter of
fiscal 2015, our total revenue was down $2,163,000 from the same quarter
last year. Our total revenue is comprised of two components (i)
transportation revenue and (ii) fuel surcharges. Transportation revenue was
up $293,000 while fuel surcharge revenue was down $2,456,000, due to the
lower price of diesel fuel this quarter versus the same quarter last year.
Revenue miles in the quarter were 10,588,000 which was down from 10,858,000
in the prior year quarter. During the second quarter of fiscal 2014, one of
the customers acquired during the Pipeline transaction began moving business
to our competitors based primarily on pricing. In line with one of our key
strategies, Management was not willing to lower our prices to retain business
that was not an attractive use of our capital and resources. That loss of
business continued on through the third quarter of fiscal 2014 and, by the
fourth quarter of fiscal 2014, the Company no longer provided any service to
that customer. To date, the Company has successfully replaced most of the
revenue miles previously generated by this customer.
Our adjusted operating profit was $1,521,000 up from $492,000 in the same
quarter last year. This resulted in an adjusted operating ratio of 94.9% this
quarter versus 98.5% in the same quarter last year. The significant items
positively affecting our comparative adjusted operating results this quarter
versus the same quarter last year were:
* $508,000 more on gains on equipment which is the result of an improvement
of $135,000 on losses due to wrecked equipment in this quarter versus the
same quarter last year, gains of $284,000 from the sale of obsolete
trailers this quarter versus no gains from trailer sales in the same
quarter last year and some additional tractor sales this quarter versus
same quarter last year.
* $435,000 less in other operating expenses due mainly to the Company
returning to a normalized level of out-of-town driver related costs this
quarter versus 2014 when the Company was dealing with the effects of
Pipeline driver turnover following the acquisition.
* $330,000 less in fuel expense net of fuel surcharge revenue due to the
lower cost of diesel fuel and the time lag involved in lowering our
customer's fuel surcharges. As diesel prices have stabilized and begun
to rise again, the Company believes this trend will reverse itself in the
near term.
The significant items negatively affecting our comparative adjusted operating
results this quarter versus the same quarter last year were:
* $299,000 more in corporate expenses due mainly to higher accruals for
performance bonuses for corporate executives (as our performance at this
time last year indicated the Company would not meet all of our bonus
targets) and higher than normal corporate employee medical claims.
* $215,000 more in insurance and losses due mainly to higher costs related
to severe non-corporate employee related medical claims in comparison to
our historical experience.
* $182,000 more in SG&A due mainly to higher management performance bonus
accruals.
Six Months Operating Results. During the first six months of fiscal 2015,
our total revenue was down $2,037,000 from the same period last year driven
by the fact that our fuel surcharge
revenue was down $3,132,000 in this same period. Total revenue excluding
fuel surcharge revenue for the first six months of the year was up $1,095,000,
a 2% improvement over the same period last year despite the fact that revenue
miles for the period were down 275,000 from the same period last year. The
Company continues to execute on our strategy of increasing prices on all of
our business and replacing lower priced business with better opportunities as
evidenced by Management's willingness in this period last year, as well as
this most recent period, to let sizeable pieces of former Pipeline business
go rather than lower our quoted rates when we feel to do so would be an
unattractive use of our capital and resources. This strategy may have a
short term negative impact on revenues. However, the Company believes it is
already seeing the success of these strategies evidenced by the $1,095,000 in
higher transportation revenue the Company achieved this quarter on less
revenue miles and an improved adjusted operating ratio of 94.5% versus 97.3%
in the same period last year.
Our adjusted operating profit was $3,354,000, up $1,625,000 over the same
period last year. The significant items positively affecting our comparative
adjusted operating results this period versus the same period last year were:
* $1,095,000 increase on total revenue excluding fuel surcharge revenue.
* $707,000 more on gains on equipment which is the result of an improvement
of $256,000 on losses due to wrecked equipment in this period versus the
same period last year, the sale of $302,000 worth of obsolete trailers
this period versus no trailer sales in the prior year period and some
additional tractor sales this period versus the same period last year.
* $932,000 less in fuel expense net of fuel surcharges due to the lower
cost of diesel fuel and the time lag involved in lowering our customer's
fuel surcharges. As diesel prices stabilized and have begun to rise
again, we believe this trend will reverse itself in the near term.
* $601,000 less in other operating expenses due mainly to the Company
returning to a normalized level of out-of-town driver related costs.
The significant items negatively affecting our comparative adjusted operating
results this six months versus the same period last year were:
* $579,000 more in insurance and losses due mainly to higher costs
related to severe non-corporate employee medical claims in comparison to
our historical experience.
* $507,000 more in corporate expenses due mainly to one-time spin-off
costs ($307,000 versus $53,000 in the first six months of fiscal 2014),
accruals for bonuses for corporate executives, increased director
compensation and higher corporate employee medical claims.
* $344,000 more in compensation and benefits due primarily to the
increased costs of hiring and training new drivers.
* $201,000 more in depreciation expense as the Company continues to
replace tractors and trailers at higher costs.
Summary and Outlook.
Our total revenue, excluding fuel surcharges, was up $1,095,000 in the first
six months of 2015 versus the same period last year on 275,000 less revenue
miles. Our adjusted operating ratio improved to 94.5% in the first six months
of fiscal 2015 versus 97.3% in the same period last year resulting in an
improvement to adjusted operating profit of $1,598,000, a 92% increase over
the first six months of fiscal 2014. This is due in part to the
normalization of out-of-town driver costs and execution of our strategy of
increasing prices on all of our business and replacing lower priced business
with better opportunities. In addition, the positive impacts of lower
diesel prices and the time lag of passing these on to our customers through
reductions in fuel surcharges contributed to our higher adjusted operating
profit but, as prices stabilized and are rising again, we expect this trend
will reverse itself in the near term. High medical claims costs had a
negative impact on our financial results, due in large part to higher than
normal costs related to severe medical claims. Management continues to
monitor our position with respect to the levels of self-insurance we will
carry on medical claims going forward. One-time Spin-off costs also had a
negative impact on our results in the first six months of the year as we
incurred $307,000 of Spin-off related expenses.
Driver turnover is a major factor that may affect our ability to meet our
customer demand and to take on new business. It also increases our driver
hiring and training costs which has a negative impact on our operating ratio
and financial performance. Management is focusing hard to limit the effects
of the driver shortage and driver turnover on our performance and financial
results.
Conference Call. The Company will also host a conference call on
Wednesday afternoon, May 6, 2015 at 3:00 p.m. (EDT). Analysts, stockholders
and other interested parties may access the teleconference live by calling
1-800-593-9034 (pass code 97842) within the United States. International
callers may dial 1-334-323-7224 (pass code 97842). Computer audio live
streaming is available via the Internet through Conference America, Inc.'s
website at http://stream.conferenceamerica.com/pth050615 or via the
Company's website at www.patriottrans.com. You may also click on this link
for the live streaming http://stream.conferenceamerica.com/live. For the
archived audio via the internet, click on the following link
http://archive.conferenceamerica.com/archivestream/pth050615.wma. If using
the Company's website, click on the Investor Relations tab, then select the
earnings conference stream. An audio replay will be available for sixty days
following the conference call. To listen to the audio replay, dial toll free
877-919-4059, international callers dial 334-323-0140. The passcode of the
audio replay is 7720836. Replay options: "1" begins playback, "4" rewind 30
seconds, "5" pause, "6" fast forward 30 seconds, "0" instructions, and "9"
exits recording. There may be a 30-40 minute delay until the archive is
available following the conclusion of the conference call.
Investors are cautioned that any statements in this press release which
relate to the future are, by their nature, subject to risks and uncertainties
that could cause actual results and events to differ materially from those
indicated in such forward-looking statements. These include general economic
conditions; competitive factors; political, economic, regulatory and
climatic conditions; driver availability and cost; the impact of future
regulations regarding the transportation industry; freight demand for
petroleum product and levels of construction activity in the Company's
markets; fuel costs; risk insurance markets; pricing; energy costs and
technological changes. Additional information regarding these and other risk
factors and uncertainties may be found in the Company's filings with the
Securities and Exchange Commission.
Patriot Transportation Holding, Inc. is engaged in the transportation
business. The Company's transportation business is conducted through Florida
Rock & Tank Lines, Inc. which is a Southeastern transportation company
concentrating in the hauling by motor carrier of liquid and dry bulk
commodities.
Continued
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
2015 2014 2015 2014
---- ---- ---- ----
Revenues:
Transportation revenues $ 27,093 26,800 $ 54,385 53,290
Fuel surcharges 2,644 5,100 7,069 10,201
------ ------ ------ ------
Total revenues 29,737 31,900 61,454 63,491
Cost of operations:
Compensation and benefits 11,773 11,816 23,756 23,412
Fuel expenses 4,861 7,647 10,866 14,930
Repairs & tires 1,906 2,031 3,720 3,877
Other operating 988 1,423 2,125 2,726
Insurance and losses 2,778 2,563 5,617 5,038
Depreciation expense 2,124 2,063 4,232 4,031
Rents, tags & utilities 954 1,006 1,895 1,777
Sales, general & admin. 2,314 2,132 4,636 4,518
Corporate expenses 1,132 833 2,051 1,544
Intangible asset impairment 2,074 0 2,074 0
Gain on equipment sales (614) (106) (798) (91)
------ ------ ------ ------
Total cost of operations 30,290 31,408 60,174 61,762
Total operating (loss) profit (553) 492 1,280 1,729
Interest income and other - - - -
Interest expense (23) (35) (49) (58)
------ ------ ------ ------
Income before income taxes (576) 457 1,231 1,671
Provision for income taxes (225) 178 480 652
------ ------ ------ ------
Net (loss) income $ (351) 279 $ 751 1,019
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Comprehensive (loss) income $ (351) 279 $ 751 1,019
====== ====== ====== ======
Earnings(loss) per common share
Net (loss) income-
Basic (0.11) 0.09 0.23 0.31
Diluted (0.11) 0.09 0.23 0.31
Number of shares (in thousands)
used in computing:
-basic earnings per common
share 3,261 3,243 3,261 3,243
-diluted earnings per common
share 3,261 3,243 3,269 3,243
Non-GAAP Financial Measures
To supplement the financial results presented in accordance with GAAP,
Patriot presents certain non-GAAP financial measures within the meaning
of Regulation G promulgated by the Securities and Exchange Commission.
The non-GAAP financial measures included in this press release are adjusted
net income, adjusted operating profit and adjusted operating ratio. Patriot
uses these non-GAAP financial measures to analyze its continuing operations
and to monitor, assess, and identify meaningful trends in its operating and
financial performance. These measures are not, and should not be viewed as,
substitutes for GAAP financial measures.
Adjusted Net Income (Loss)
Adjusted net income (loss) profit excludes the impact of the intangible
asset impairment charge. Adjusted net income (loss) profit is presented
to provide additional perspective on underlying trends in Patriot's core
operating results. A reconciliation between net income (loss) profit and
adjusted net income (loss) is as follows:
Three months ended Six months ended
March 31, 2015 March 31, 2015
------------------ ------------------
Net Income (loss) $ (351) 751
Adjustments:
Intangible asset impairment charge 1,265 1,265
------------------ ------------------
Adjusted net income $ 914 2,016
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Adjusted Operating Ratio
Adjusted operating ratio excludes the impact of the intangible asset
impairment charge. Adjusted operating ratio is presented to provide
additional perspective on underlying trends in Patriot's core operating
results. A reconciliation between operating ratio and adjusted operating
ratio is as follows:
Three months ended Six months ended
March 31, 2015 March 31, 2015
------------------ ------------------
Operating ratio 101.9% 97.9%
Adjustments:
Intangible asset impairment charge (7.0%) (3.4%)
------------------ ------------------
Adjusted operating ratio 94.9% 94.5%
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Adjusted Operating (Loss) Profit
Adjusted operating (loss) profit excludes the impact of the intangible asset
impairment charge. Adjusted operating (loss) profit is presented to provide
additional perspective on underlying trends in Patriot's core operating
results. A reconciliation between operating (loss) profit and adjusted
operating (loss) profit is as follows:
Three months ended Six months ended
March 31, 2015 March 31, 2015
------------------ ------------------
Operating (loss) profit $ (553) 1,280
Adjustments:
Intangible asset impairment charge 2,074 2,074
------------------ ------------------
Adjusted operating profit $ 1,521 3,354
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