FRP HOLDINGS, INC./NEWS
Contact: John D. Milton, Jr.
Chief Financial Officer 904/858-9100
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FRP HOLDINGS, INC. (NASDAQ: FRPH) ANNOUNCES RESULTS FOR THE THREE
MONTH TRANSITION PERIOD ENDED DECEMBER 31, 2016.
FRP Holdings, Inc. (NASDAQ-FRPH) Jacksonville, Florida; February 1, 2017 --
Please note the Company recently changed its fiscal year from September 30 to
December 31, and, as a result, throughout this press release, we refer to the
three month period ended December 31, 2016 as the transition period.
Potential REIT Conversion
Whether through strategic acquisitions, organic growth, joint ventures, or
putting our non-income producing land to work, our constant aim is to create
and grow shareholder value. To that end, we have for some time explored the
possibility of converting this company into a Real Estate Investment Trust
(REIT), with the idea that this may be a more efficient structure given the
nature of our business. Though no final decision has been made, in order to
have the option to convert to a REIT in 2017, the board has elected to change
from our previous fiscal year (ending September 30), to a fiscal year that
follows the calendar year as is required of a REIT. This change went into
effect January 1, 2017 and will require one-time additional auditing expenses
of $120,000 which will be reflected in fiscal year 2017. Thus, the transition
period ended December 31, 2016 will be known as just that and will not be a
part of any fiscal year, not even retroactively. Finally, consistent with
having the option to elect REIT status, we have contributed our mining
reserves into a wholly owned subsidiary. Because the parent company still
retains control of the land itself, the portion of the mining royalties
income that is not attributable to the reserves, but instead more closely
resembles ground rents, will be retained by the parent company and will
qualify as "REIT-able" income. The subsidiary will receive only the income
attributable to the reserves it now controls. This structure is intended to
assure that we will meet the asset and income tests applicable to REITs.
These preliminary steps will not have a material impact on our operations if
FRP does not elect REIT status.
Three month transition period ended December 31, 2016 Consolidated Results of
Operations.
Net income for the transition period ended December 31, 2016 was $1,560,000
or $.16 per share versus $7,473,000 or $.76 per share in the same period last
year. The prior year benefited from a gain on land sale of $6,286,000 plus
income of $3,000,000 from the settlement of environmental claims resulting in
a positive impact of $.57 per share of income in the prior year. Total
revenues were $9,512,000, up 7.8%, versus the same period last year.
Excluding the positive impact of the environmental settlement in the same
period last year, consolidated total operating profit was up 11.2%.
Three month transition period ended December 31, 2016 Segment Operating
Results.
Asset Management Segment:
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Total revenues in this segment were $7,321,000, up $406,000 or 5.9%, over the
same period last year. Net Operating Income in this segment for the transition
period was $5,689,000, compared to $5,390,000 in the same period last year,
an increase of 5.5%. The increase was mainly due to the acquisition of the
Gilroy Road building in Hunt Valley, MD in July 2016 and a lease commencement
at 7010 Dorsey Road in Hillside Business Park in August 2016. We ended the
transition period with total occupied square feet of 3,488,995 versus
3,364,008 at the end of the same period last year, an increase of 3.7% or
124,947 square feet. Our overall occupancy rate was 89.9%.
Depreciation and amortization expense increased primarily because of the
aforementioned Gilroy building purchase and the completion of a 79,550 square
foot warehouse at Hollander Business Park in April 2016. Corporate expense
increased due to higher professional fees.
Mining Royalty Lands Segment:
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Total revenues in this segment were $1,880,000, an increase of 13.3%, versus
$1,659,000 in the same period last year due to an increase in tons sold at
locations over the minimum. Total operating profit in this segment was
$1,708,000, an increase of $238,000 versus $1,470,000 in the same period last
year.
Land Development and Construction Segment:
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The Land Development and Construction segment is responsible for (i) seeking
out and identifying opportunistic purchases of income producing warehouse/
office buildings, and (ii) developing our non-income producing properties into
income production. Of our ongoing projects, work continues on a spec building
at Patriot Business Center which is now 82% pre-leased; we are fully engaged
in the formal process of seeking (a) final design approval for Phase II of our
RiverFront on the Anacostia project, and (b) Planned Unit Development
entitlements for our 73 acre tract in Hampstead, Md.; and of further note,
construction of the bulkhead at our 664E property on the Anacostia is on time
and within budget. Finally, because of operating losses and depreciation
during the lease up of Phase I (Dock 79) of RiverFront on the Anacostia this
quarter, equity in loss of joint ventures (including a loss of $4,000 in the
Brooksville Joint Venture) was $1,119,000. Phase I pre-leasing activity for
the 305 residential units commenced in late May of 2016 and as of January 22,
the residential units were 49.8% occupied and 59.9% leased, while retail units
remain 80% leased with just one space remaining. The project is currently
above pro forma in effective rents and leasing absorption with residential
stabilization expected in the third quarter of 2017.
Summary and Outlook
We are focused on building shareholder value through our real estate
holdings. We accomplish this through the opportunistic acquisition of income
producing properties, and the conversion of our non-income producing assets
into income production. We have done this by (i) selling land that is not
conducive to warehouse/office development (e.g. Windlass Run Residential
Phase 2 land) and using the proceeds to acquire existing income producing
warehouse/office buildings typically in a Section 1031
exchange (e.g. the Port Capital building purchase) and (ii) the construction
of new warehouse/office buildings on existing pad sites in our developed
business parks (e.g. new spec building at Patriot). Over the past five years,
we have used this approach to convert 172 acres of non-income producing land
into 766,216 square feet of income producing properties (excluding the recently
completed spec building). This past quarter those properties had Net Operating
Income of $1,267,000, accounting for over 22% of Asset Management's Net
Operating Income.
For yet another quarter, mining royalties continue to improve as volumes
increase at most of our locations. This marks the eleventh straight quarter
that mining revenues increased over the same period the year before, and is a
testament to our belief in the long-term growth potential of these assets.
During the coming fiscal year, we expect to complete construction on the new
104,000 square foot spec building at Patriot Business Park, finish construction
on the bulkhead at the Square 664E property in anticipation of future high-rise
development, reach residential stabilization of Phase I (Dock 79) of RiverFront
on the Anacostia, and continue pre-development activities for Phase II and the
Hampstead property. Our biggest decision in the coming year will be whether or
not to convert this company into a Real Estate Investment Trust. As mentioned
previously, we have taken steps to, at the very least, have the option.
Impacting that decision will be weighing the benefits of REIT status against
how it will impact our capital structure and any future projects, as well as
any changes in the federal tax code.
Conference Call.
The Company will host a conference call on Wednesday, February 1, 2017 at
2:00 p.m. (EST). Analysts, stockholders and other interested parties may access
the teleconference live by calling 1-877-804-1916 (pass code 62184) within the
United States. International callers may dial 334-323-7224 (pass code 62184).
Computer audio live streaming is available via the Internet through the
Company's website at www.frpholdings.com. You may also click on this link for
the live streaming http://stream.conferenceamerica.com/FRP020117. For the
archived audio via the internet, click on the following link
http://archive.conferenceamerica.com/archivestream/FRP020117.mp3. 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 30678261. 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.
FRP HOLDINGS, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS ENDED
DECEMBER 31,
2016 2015
-------- --------
Revenues:
Rental revenue $ 6,328 6,027
Mining Royalty and rents 1,857 1,638
Revenue - reimbursements 1,327 1,158
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Total Revenues 9,512 8,823
Cost of operations:
Depreciation, depletion and amortization 2,095 1,896
Operating expenses 994 973
Environmental remediation expense (recovery) - (3,000)
Property taxes 1,089 1,118
Management company indirect 475 504
Corporate expenses 855 732
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Total cost of operations 5,508 2,223
Total operating profit 4,004 6,600
Interest income - 1
Interest expense (306) (481)
Equity in loss of joint ventures (1,119) (54)
Gain on investment land sold - 6,286
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Income before income taxes 2,579 12,352
Provision for income taxes 1,019 4,879
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Net income $ 1,560 7,473
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Comprehensive net income $ 1,560 7,473
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Earnings per common share:
Basic $ 0.16 0.76
Diluted $ 0.16 0.76
Number of shares (in thousands) used in computing:
-basic earnings per common share 9,879 9,802
-diluted earnings per common share 9,923 9,853
Asset Management Segment
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Three months ended December 31
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(dollars in thousands) 2016 % 2015 % Change %
-------- ------- -------- ------- -------- -------
Rental revenue $ 6,148 84.0% $ 5,908 85.4% $ 240 4.1%
Revenue-reimbursements 1,173 16.0% 1,007 14.6% 166 16.5%
-------- ------- -------- ------- -------- -------
Total revenue 7,321 100.0% 6,915 100.0% 406 5.9%
Depreciation, depletion and amortization 2,005 27.4% 1,798 26.0% 207 11.5%
Operating expenses 885 12.1% 839 12.1% 46 5.5%
Property taxes 729 10.0% 659 9.5% 70 10.6%
Management company indirect 193 2.6% 231 3.4% (38) -16.5%
Corporate expense 485 6.6% 378 5.5% 107 28.3%
-------- ------- -------- ------- -------- -------
Cost of operations 4,297 58.7% 3,905 56.5% 392 10.0%
-------- ------- -------- ------- -------- -------
Operating profit $ 3,024 41.3% $ 3,010 43.5% $ 14 0.5%
======== ======= ======== ======= ======== =======
Mining Royalty Lands Segment:
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Three months ended December 31
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(dollars in thousands) 2016 % 2015 %
-------- ------- -------- -------
Mining Royalty and rents $ 1,857 98.8% 1,638 98.7%
Revenue-reimbursements 23 1.2% 21 1.3%
-------- ------- -------- -------
Total revenue 1,880 100.0% 1,659 100.0%
Depreciation, depletion and amortization 35 1.8% 34 2.0%
Operating expenses 41 2.2% 41 2.5%
Property taxes 54 2.9% 59 3.6%
Corporate expense 42 2.2% 55 3.3%
-------- ------- -------- -------
Cost of operations 172 9.1% 189 11.4%
-------- ------- -------- -------
Operating profit $ 1,708 90.9% $ 1,470 88.6%
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Land Development and Construction Segment:
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Three months ended December 31
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(dollars in thousands) 2016 2015 Change
-------- -------- --------
Rental revenue $ 180 119 61
Revenue-reimbursements 131 130 1
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Total revenue 311 249 62
Depreciation, depletion and amortization 55 64 (9)
Operating expenses 68 93 (25)
Environmental remediation recovery - (3,000) 3,000
Property taxes 306 400 (94)
Management company indirect 282 273 9
Corporate expense 328 299 29
-------- -------- --------
Cost of operations 1,039 (1,871) 2,910
-------- -------- --------
Operating loss $ (728) 2,120 (2,848)
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Non-GAAP Financial Measures.
To supplement the financial results presented in accordance with GAAP, FRP
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 quarterly report are adjusted operating profit and
net operating income (NOI). FRP 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 Operating Profit
Adjusted operating profit excludes the impact of the corporate expense not
allocated to discontinued operations and the environmental remediation
recovery. Adjusted operating profit is presented to provide additional
perspective on underlying trends in FRP's core operating results. A
reconciliation between operating profit and adjusted operating profit is as
follows:
Adjusted Operating Profit
Three months ended
December 31,
--------------------
2016 2015 Change %
-------- -------- -------- -------
Operating profit $ 4,004 6,600 (2,596) -39.3%
Adjustments:
Environmental remediation recovery - (3,000)
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Adjusted Operating profit $ 4,004 3,600 404 11.2%
Net Operating Income Reconciliation
Three months ended 12/31/16 (in thousands)
Asset Land Mining FRP
Management Development Royalties Holdings
Segment Segment Segment Totals
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Income from continuing operations $ 1,644 (1,115) 1,031 1,560
Income Tax Allocation 1,074 (728) 673 1,019
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Inc. from continuing operations
before income taxes 2,718 (1,843) 1,704 2,579
Less:
Lease intangible rents 4 -
Unrealized rents 14 -
Plus:
Equity in loss of Joint Venture - 1,115
Interest Expense 306 -
Depreciation/Amortization 2,005 55
Management Co. Indirect 193 282
Allocated Corporate Expenses 485 328
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Net Operating Income (loss) 5,689 (63)
Net Operating Income Reconciliation
Three months ended 12/31/15 (in thousands)
Asset Land Mining FRP
Management Development Royalties Holdings
Segment Segment Segment Totals
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Income from continuing operations $ 1,535 5,054 884 7,473
Income Tax Allocation 1,003 3,298 578 4,879
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Inc. from continuing operations
before income taxes 2,538 8,352 1,462 12,352
Less:
Gains on investment land sold 9 6,277
Other income - 1
Unrealized rents 13 -
Lease intangible rents 14 -
Plus:
Equity in loss of Joint Venture - 45
Interest Expense 481 -
Depreciation/Amortization 1,798 64
Management Co. Indirect 231 273
Allocated Corporate Expenses 378 299
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Net Operating Income 5,390 2,755