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 FIRST QUARTER
OF 2017.
FRP Holdings, Inc. (NASDAQ-FRPH) Jacksonville, Florida; May 2, 2017 -
Please note the Company recently changed its fiscal year from September 30 to
December 31, and as a result, this past quarter, and every quarter ended
March 31 will now be the first quarter of our fiscal year.
First Quarter Consolidated Results of Operations.
Net income for the first quarter of 2017 was $1,443,000 or $.14 per share
versus $1,820,000 or $.18 per share in the same period last year. The decrease
in income compared to the same period last year is a result of a $771,000
increase in equity in loss of joint ventures, primarily as a result of
expenses and depreciation during the lease up of Phase I (Dock 79) of
RiverFront. Total revenues were $9,322,000, down 3%, versus the same period
last year. Consolidated total operating profit was down 3%.
First Quarter Segment Operating Results.
Asset Management Segment:
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Total revenues in this segment were $7,285,000, down $289,000 or 3.8%, over
the same period last year. The decrease in revenue is due to lower snow
removal reimbursements as a result of a milder 2017 winter. Given its nature
as a reimbursement, snow removal is largely a pass through expense, and
expenses were down a like amount. Net Operating Income in this segment for
the first quarter was $5,689,000, compared to $5,442,000 in the same period
last year, an increase of 4.5%. The increase was mainly due to the
acquisition of the Gilroy Road building in Hunt Valley, MD in July 2016,
and the lease up of previously vacant space at 7010 Dorsey Road in Hillside
Business Park in August 2016 and 2201 Lakeside in November and December
2016. We ended the first quarter with total occupied square feet of 3,525,234
versus 3,348,112 at the end of the same period last year, an increase of 5.3%
or 177,122 square feet. Our overall occupancy rate was 90.8%.
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 stock option modification expense of $191,000 and increased
internal and external audit expense incurred as a result of the conversion
from the previous fiscal year (ending September 30) to one that follows the
calendar year.
Mining Royalty Lands Segment:
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Total revenues in this segment were $1,762,000, a decrease of 0.9%, versus
$1,778,000 in the same period last year. This is largely due to $112,000
decrease in royalties at our Lake Sand location, the consequence of Vulcan
having fully depleted our proven reserves there. Further capital expenditures
would be required by our tenant to change their mining plan and realize more
than three million tons of probable reserves at Lake Sand, which we do not
anticipate any time soon. Total operating profit in this segment was
$1,559,000, a decrease of $15,000 versus $1,574,000 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.
With respect to ongoing projects:
* Our new spec building at Patriot Business Center was placed in service in
April 2017 and is 49.9% occupied and 83.0% leased
* In February, the D.C. Zoning Commission voted 5-0 in favor of the Planned
Unit Development (PUD) of Phase II of our RiverFront on the Anacostia
project. After formal publishing of the record and a 35 day appeal period
we anticipate formal approval in the second quarter of this calendar year
* We are fully engaged in the formal process of seeking PUD entitlements
for our 118 acre tract in Hampstead, Md
* We completed construction of the bulkhead at our 664E property on the
Anacostia ahead of schedule and under budget.
Finally, it has been eight months since we placed Dock 79 and its 305
residential units "in service." As of April 23, the residential units were
71% occupied and 79% leased, while retail units remain 80.0% 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. However, 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 was $771,000
(including a loss of $9,000 in the Brooksville Joint Venture).
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 already 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, this past
quarter, and every quarter ended March 31 will now be the first quarter of our
fiscal year. 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 the Company does not elect REIT status.
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 $1,319,000,
accounting for over 23% of Asset Management's Net Operating Income.
During the remainder of this year, we expect to reach residential
stabilization of Phase I (Dock 79) of RiverFront on the Anacostia and continue
pre-development activities for Phase II with the expectation that we will break
ground in the last quarter of this year or the first quarter of fiscal year
2018. Our biggest decision this 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.
Finally, as announced in March, our CEO Tom Baker resigned in order to become
Vulcan Materials Company's Senior Vice President. We are grateful for his
leadership, recognize that this was an opportunity he really couldn't refuse,
and wish him nothing but the best as he starts this new chapter in his
professional life. Taking over for Tom is John D Baker II. John was the CEO of
this company prior to Tom from 2008-2010, and has been its chairman since. So
while Tom will certainly be missed, he leaves your company in great shape and
in more than capable hands.
Subsequent Events
Subsequent to the end of last quarter, we were informed by Vulcan Materials
Company that Lee County issued Vulcan a Mine Operating Permit (MOP) for our
section of their operations in Ft. Myers, the last of the permits required to
begin mining this property. This action is the culmination of over twenty
years of work to get this property fully entitled and allows Vulcan to begin
production immediately. Vulcan's ability to finally realize the reserves at
this site should positively impact revenue and income as it creates an
opportunity to collect more than the minimums from this location.
Conference Call.
The Company will host a conference call on Tuesday, May 2, 2017 at 2:00 p.m.
(EDT). Analysts, stockholders and other interested parties may access the
teleconference live by calling 1-800-859-8150 (pass code 31174) within the
United States. International callers may dial 1-334-323-7224 (pass code 31174).
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/frp050217. For the
archived audio via the internet, click on the following link http://archive.
conferenceamerica.com/archivestream/frp050217.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
1-877-919-4059, international callers dial 1-334-323-0140. The passcode of the
audio replay is 99720831. 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
MARCH 31,
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2017 2016
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Revenues:
Rental revenue $ 6,283 6,089
Mining Royalty and rents 1,739 1,756
Revenue - reimbursements 1,300 1,770
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Total Revenues 9,322 9,615
Cost of operations:
Depreciation, depletion and amortization 2,059 1,929
Operating expenses 1,001 1,531
Property taxes 1,062 1,142
Management company indirect 469 496
Corporate expenses (Note 4 Related Party) 1,327 1,008
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Total cost of operations 5,918 6,106
Total operating profit 3,404 3,509
Interest income - 1
Interest expense (248) (415)
Equity in loss of joint ventures (771) (86)
Gain on investment land sold - -
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Income before income taxes 2,385 3,009
Provision for income taxes 942 1,189
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Net income $ 1,443 1,820
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Earnings per common share:
Basic $ 0.15 0.18
Diluted $ 0.14 0.18
Number of shares (in thousands)
used in computing:
-basic earnings per common share 9,931 9,853
-diluted earnings per common share 10,001 9,893
Asset Management Segment:
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Three months ended March 31
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(dollars in thousands) 2017 % 2016 % Change %
-------- ------- -------- ------- -------- -------
Rental revenue $ 6,103 83.8% $ 5,958 78.7% $ 145 2.4%
Revenue-reimbursements 1,182 16.2% 1,616 21.3% (434) -26.9%
-------- ------- -------- ------- -------- -------
Total revenue 7,285 100.0% 7,574 100.0% (289) -3.8%
Depreciation, depletion and amortization 1,965 27.0% 1,835 24.2% 130 7.1%
Operating expenses 895 12.3% 1,430 18.9% (535) -37.4%
Property taxes 737 10.1% 662 8.7% 75 11.3%
Management company indirect 187 2.6% 224 3.0% (37) -16.5%
Corporate expense 753 10.3% 520 6.9% 233 44.8%
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Cost of operations 4,537 62.3% 4,671 61.7% (134) -2.9%
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Operating profit $ 2,748 37.7% $ 2,903 38.3% $ (155) -5.3%
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Mining Royalty Lands Segment:
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Three months ended March 31
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(dollars in thousands) 2017 % 2016 %
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Mining Royalty and rents $ 1,739 98.7% 1,756 98.8%
Revenue-reimbursements 23 1.3% 22 1.2%
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Total revenue 1,762 100.0% 1,778 100.0%
Depreciation, depletion and amortization 39 2.2% 31 1.8%
Operating expenses 39 2.2% 39 2.2%
Property taxes 59 3.3% 59 3.3%
Corporate expense 66 3.8% 75 4.2%
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Cost of operations 203 11.5% 204 11.5%
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Operating profit $ 1,559 88.5% $ 1,574 88.5%
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Land Development and Construction Segment:
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Three months ended March 31
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(dollars in thousands) 2017 2016 Change
-------- -------- --------
Rental revenue $ 180 131 49
Revenue-reimbursements 95 132 (37)
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Total revenue 275 263 12
Depreciation, depletion and amortization 55 63 (8)
Operating expenses 67 62 5
Property taxes 266 421 (155)
Management company indirect 282 272 10
Corporate expense 508 413 95
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Cost of operations 1,178 1,231 (53)
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Operating loss $ (903) (968) 65
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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
measure included in this quarterly report are 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.
Net Operating Income Reconciliation
Three months ended 03/31/17 (in thousands)
Asset Land Mining FRP
Management Development Royalties Holdings
Segment Segment Segment Totals
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Income (loss) from continuing operations 1,512 (1,007) 938 1,443
Income Tax Allocation 988 (658) 612 942
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Inc. (loss) from continuing operations
before income taxes 2,500 (1,665) 1,550 2,385
Less:
Lease intangible rents 3 -
Plus:
Unrealized rents 39 -
Equity in loss of Joint Venture - 762
Interest Expense 248 -
Depreciation/Amortization 1,965 55
Management Co. Indirect 187 282
Allocated Corporate Expenses 753 508
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Net Operating Income (loss) 5,689 (58)
Net Operating Income Reconciliation
Three months ended 03/31/16 (in thousands)
Asset Land Mining FRP
Management Development Royalties Holdings
Segment Segment Segment Totals
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Income (loss) from continuing operations 1,505 (631) 946 1,820
Income Tax Allocation 983 (410) 616 1,189
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Inc. (loss) from continuing operations
before income taxes 2,488 (1,041) 1,562 3,009
Less:
Other income - 1
Lease intangible rents 4 -
Unrealized rents 36 -
Plus:
Equity in loss of Joint Venture - 75
Interest Expense 415 -
Depreciation/Amortization 1,835 63
Management Co. Indirect 224 272
Allocated Corporate Expenses 520 413
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Net Operating Income (loss) 5,442 (219)