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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-26115
PATRIOT TRANSPORTATION HOLDING, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2924957
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1801 Art Museum Drive, Jacksonville, Florida 32207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 904/396-5733
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.10 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act). Yes No X
At December 6, 2004 aggregate market value of the shares of Common
Stock held by non-affiliates of the registrant was $6,733,280. At such
date there were 2,929,075 shares of the registrant's stock outstanding.
Documents Incorporated by Reference
Portions of the Patriot Transportation Holding, Inc. 2004 Annual Report
to Shareholders are incorporated by reference in Parts I and II.
Portions of the Patriot Transportation Holding, Inc. Proxy Statement
dated December 31, 2004 are incorporated by reference in Part III.
PART I
Item 1. BUSINESS.
Patriot Transportation Holding, Inc., which was incorporated in
Florida in 1988, and its subsidiaries (the "Company") are
engaged in the transportation and real estate businesses.
The Company's transportation business is conducted through two
wholly owned subsidiaries, Florida Rock & Tank Lines, Inc.
("Tank Lines"), and SunBelt Transport, Inc. ("SunBelt"). Tank
Lines is a Southeastern U.S. based transportation company
concentrating in the hauling of primarily petroleum related
liquids and other liquids and dry bulk commodities by tank
trucks. SunBelt serves the flatbed portion of the trucking
industry primarily in the Southeastern U.S., hauling primarily
construction materials. A third transportation subsidiary,
Patriot Transportation, Inc. ("PTI") closed operations in
September 2001.
The Company's real estate activities are conducted through two
wholly owned subsidiaries. Florida Rock Properties, Inc.
("Properties") owns real estate of which a substantial portion
is under mining royalty agreements or leased to Florida Rock
Industries, Inc. ("FRI"), a related party. FRI accounted for
approximately 32% of the Company's real estate revenues for
Fiscal 2004. Properties also owns certain other real estate for
investment. FRP Development Corp. ("Development") owns, manages
and develops commercial warehouse/office rental properties near
Baltimore, Maryland. Substantially all of the real estate
operations are conducted within the Southeastern and Mid-
Atlantic United States.
The Company has two business segments: transportation and real
estate. Industry segment information is presented in Notes 2
and 10 to the consolidated financial statements included in the
accompanying 2004 Annual Report to Shareholders and is
incorporated herein by reference.
Revenues from royalties and from a portion of the trucking
operations are subject to factors affecting the level of
general construction activity. A decrease in the level of
general construction activity in any of the Company's market
areas may have an adverse effect on such revenues and income
derived therefrom.
Transportation. Tank Lines is engaged in hauling primarily
petroleum related liquids and other liquid and dry bulk
commodities by tank trucks. SunBelt is engaged primarily in
hauling building and construction materials on flatbed
trailers.
During Fiscal 2004, Tank Lines operated from terminals in
Jacksonville, Orlando, Panama City, Pensacola, Port Everglades,
Tampa and White Springs, Florida; Albany, Atlanta, Augusta,
Bainbridge, Columbus, Dalton, Macon and Savannah, Georgia;
Knoxville, Tennessee; and Charlotte and Wilmington, North
Carolina. Tank Lines has from two to six major tank truck
competitors in each of its markets.
On May 30, 2002, Tank Lines acquired substantially all of the
operating assets of Infinger Transportation Company, Inc.
(Infinger), a regional tank truck carrier based in Charleston,
South Carolina. The purpose of the acquisition was to enable
the Company to expand into new markets and increase capacity in
existing markets.
SunBelt's flatbed fleet is based in Jacksonville and Tampa,
Florida; Atlanta and Savannah, Georgia; and South Pittsburg,
Tennessee and hauls primarily building and construction
materials in the Southeastern U.S. There are at least ten major
competitors in SunBelt's market area and numerous small
competitors in the various states served.
Before closing its operations in September 2001, PTI was
engaged in the hauling of a variety of cargo through
independent agents and owner-operators. The Company decided to
close PTI due to declining operating margins, high
administrative costs to support this start up business, sharply
higher liability insurance costs and an adverse economic
climate.
At September 30, 2004, the Company operated and owned a fleet
of approximately 580 trucks, and owned a fleet of approximately
860 trailers. The Company was committed at September 30, 2004
to purchase 30 trailers and 53 tractors and plans to continue
its routine fleet replacement and modernization program during
2005.
The transportation segment primarily serves customers in the
petroleum and building and construction industries. Petroleum
customers accounted for approximately 72% and building and
construction customers accounted for approximately 28% of
transportation segment revenues for the year ended September
30, 2004.
The Company hauls construction aggregates, diesel fuel and
cement for FRI. Revenues from services provided to FRI
accounted for 1.7% of the transportation segment's revenues.
Price, service, and location are the major factors which affect
competition in the transportation segment within a given
market.
During Fiscal 2004, the transportation segment's ten largest
customers accounted for approximately 39.0% of the
transportation segment's revenue. The loss of any one of these
customers could have an adverse effect on the Company's
revenues and income.
Real Estate. The Company's real estate and property development
activities are conducted through wholly owned subsidiaries.
The Company owns real estate in Florida, Georgia, Virginia,
Maryland, Delaware and Washington, D.C. The real estate owned
falls generally into one of three categories: (i) land and/or
buildings leased under rental agreements or being developed for
rental; (ii) construction aggregates properties with stone or
sand and gravel deposits, substantially all of which is leased
to FRI under mining royalty agreements, as to which the Company
is paid a percentage of the revenues generated by the material
mined and sold, or minimum royalties where there is no current,
or only limited, mining activity; and, (iii) land that is being
held for future appreciation or development.
Additional information about the Company's real estate segment
is contained on page 1 under the captions "Real Estate Group"
and in Notes 2 and 10 to the consolidated financial statements
included in the accompanying 2004 Annual Report to Shareholders
and is incorporated herein by reference.
The Company's real estate strategy of developing high quality,
flexible warehouse/office space continues to be successful as
average occupancy for the fiscal year for buildings in service
for more than 12 months was 90.8%. At September 30, 2004, 84.6%
of the total warehouse/office portfolio of approximately 2
million square feet was leased.
Price, location, rental space availability, flexibility of
design, and property management services are the major factors
that affect competition in the flexible warehouse/office rental
market. The Company experiences considerable competition in all
of its markets.
Real estate revenues in Fiscal 2004 were divided approximately
63% from rentals, 37% from mining and minimum royalties. FRI
accounted for approximately 32% of total real estate revenues.
Tenants of flexible warehouse/office properties are not
concentrated in any one particular industry.
During 2003 and 2004, a subsidiary of the Company sold several
parcels of property to FRI, a related party. The properties
were located in St. Mary's County, MD, Lake City, FL,
Springfield, VA, and Miami, FL and the combined sales price was
$31,464,000. See Notes 2 and 3 to the consolidated financial
statements for more information.
Environmental Matters. While the Company is affected by
environmental regulations, such regulations are not expected to
have a major effect on the Company's capital expenditures or
operating results.
Employees. The Company employed approximately 890 people in its
transportation group, 14 people in its real estate group, and 4
people in its corporate offices at September 30, 2004.
EXECUTIVE OFFICERS OF THE COMPANY
Name Age Office Position Since
Edward L. Baker 69 Chairman of the Board May 3, 1989
John E. Anderson 59 President & Chief Feb. 17, 1989
Executive Officer
David H.
deVilliers, Jr. 53 Vice President of the Feb. 28, 1994
Company and President
of the Company's Real
Estate Group
Ray M. VanLandingham 61 Vice President, Finance Dec. 6, 2000
and Administration
and Chief Financial
Officer
Gregory B. Lechwar 37 Controller and Chief
Accounting Officer Oct. 2, 2002
Terry S. Phipps 40 President of SunBelt April 5, 2004
Transport, Inc.
Robert E. Sandlin 43 President of Florida March 1, 2003
Rock & Tank Lines, Inc.
All of the above officers have been employed in their
respective positions for the past five years except as follows:
Ray Van Landingham was Vice President, Finance and
Administration of the Jacksonville Port Authority from December
1991 to November 2000; Gregory B. Lechwar has been employed by
the Company in various accounting positions since October 1999,
and from August 1991 until October 1999, Mr. Lechwar was
employed as a Certified Public Accountant with
PricewaterhouseCoopers LLP; Terry S. Phipps was a Vice
President of SunBelt from May 2003 to April 2004, Mr. Phipps
was employed with Coastal Transport, Inc. from 1990 to May
2003; and Robert E. Sandlin was a Vice President of Florida
Rock & Tank Lines from 1993 until March 2003.
John D. Baker II, who is the brother of Edward L. Baker, and
Thompson S. Baker II, who is the son of Edward L. Baker, are on
the Board of Directors of the Company.
All executive officers of the Company are elected by the Board
of Directors.
Item 2. PROPERTIES.
The Company's principal properties are located in Florida,
Georgia, Virginia, Washington, D.C., Delaware and Maryland.
Transportation Segment Properties. The Company has 20 sites for
its trucking terminals in Florida, Georgia, North Carolina, and
Tennessee. The Company owns 12 of these sites and leases 8.
Real Estate Segment Properties. Principal properties held by
Real Estate segment are discussed below under the captions
Developed Properties, Future Planned Development, Construction
Aggregates, and Other Properties.
At September 30, 2004 certain developed real estate properties
having a carrying value of $74,196,000 were pledged on long-
term non-recourse notes with an outstanding principal balance
totaling $45,700,000. In addition, certain other properties
having a carrying value at September 30, 2004 of $793,000 were
encumbered by industrial revenue bonds that are the liability
of FRI. FRI has agreed to pay such debt when due (or sooner if
FRI cancels its lease of such property), and further has agreed
to indemnify and hold harmless the Company on account of such
debt.
Developed Properties. At September 30, 2004, the Company owned
ten parcels of land containing 388 usable acres in the Mid-
Atlantic region of the United States as follows:
Hillside Business Park in Anne Arundel County consists of 49
usable acres near the Baltimore-Washington International Airport.
The Company plans to develop approximately 540,000 square feet of
warehouse/office space on this site. Infrastructure work on the
site is substantially completed and the first two planned
buildings with 274,800 square feet are completed and leased. One
building with 200,200 square feet is leased to one tenant for 15
years. The other building is leased to one tenant for a 10-year
term with occupancy to occur in January 2005 when interior tenant
improvements are completed. A third building with 145,000 of
leaseable space is under construction, and is pre-let to a single
tenant for a 15-year lease term. Occupancy is anticipated in
June 2005 when the building is completed.
Lakeside Business Park in Harford County consists of 80 usable
acres. Seven warehouse/office buildings, totaling 671,550
square feet, have been constructed and are 91% leased. The
remaining 32.8 acres are available for future development and
will have the potential to offer an additional 485,200 square
feet of comparable product.
6920 Tudsbury Road in Baltimore County contains 5.3 acres with
86,100 square feet of warehouse/office space that is 100%
leased.
8620 Dorsey Run Road in Howard County contains 5.8 acres with
84,600 square feet of warehouse/office space that is 100%
leased. The lessee at Dorsey Run has provided notice of its
intent to vacate premises at the end of its lease term on
December 31, 2004.
Rossville Business Center in Baltimore County contains
approximately 10 acres with 190,517 square feet of
warehouse/office space and is 88% leased.
34 Loveton Circle in suburban Baltimore County contains 8.5
acres with 29,722 square feet of office space which is 100%
leased. The Company occupies 11% of the space and 23% is leased
to FRI.
Oregon Business Center in Anne Arundel County contains
approximately 17 acres with 195,615 square feet of
warehouse/office space which is 100% leased.
Arundel Business Center in Howard County contains approximately
11 acres with 162,796 square feet of warehouse/office space,
which is 100% leased.
100-400 Interchange Boulevard in New Castle County, Delaware
contains approximately 17 acres with 301,000 square feet of
warehouse/office space which is 50% leased.
Future Planned Developments. Bird River, located in southeastern
Baltimore County, Maryland, is a 179-acre tract of land that
would have direct access to the proposed Maryland State Road 43
intended to connect I-95 with Martin State Airport. This
property is currently zoned for residential and commercial use
with 115.6 developable acres. The Company plans to develop and
lease approximately 502,000 square feet of multiple
warehouse/office buildings on the 42 developable acres zoned for
commercial use.
A subsidiary of the Company has entered into an agreement to
develop and sell to a major home builder a minimum of 292
residential lots on the residential portion of the Bird River
Property. The minimum aggregate purchase price for these lots is
$28,705,000.
The rights and obligations of the subsidiary under this
agreement are specifically contingent upon the approval by
Baltimore County of a Planned Unit Development (PUD) by July 1,
2006 which will permit the development of and use of the
property for a minimum of 292 residential lots. The
subsidiary's rights and obligations are also expressly
contingent upon the construction of the proposed Route 43 and
the subsidiary's ability to have vehicular, water and sewer
connection access to the property by July 1, 2007 at what the
subsidiary deems, in its sole discretion, to be a commercially
reasonable cost. The obligations of the builder under the
agreement also are subject to customary conditions precedent.
The Company owns a 50-acre, rail accessible site on Commonwealth
Avenue in Jacksonville, Florida near the western beltway of
Interstate-295 capable of supporting approximately 500,000 square
feet of eventual warehouse/office build-out. Current efforts
include permitting and preliminary horizontal development
planning work.
The company owns a 5.8 acre parcel of undeveloped real estate in
the southeast quadrant of Washington D.C. that fronts the Anacostia
River and has been working with the District of Columbia Zoning
Commission and the Office of Planning to obtain appropriate zoning
for development. In 2003, the Zoning Commission granted preliminary
approval of the size and use of the Planned Unit Development (PUD)
application and gave the Company until May of 2004 to submit
modified drawings that would conform to an approved set of design
guidelines. The design guidelines provide for a maximum allowable
commercial development of 625,000 square feet and a minimum
residential development of 440,000 square feet. The application for
final approval of the PUD was submitted to the District of Columbia
Zoning Commission in May of 2003. The Company was granted a public
hearing on its final application which is expected to be held in
early 2005. If approval of the redesign is obtained, the Company
will have an additional two years to begin development of the site
in accordance with the approved PUD.
The Company also owns a 2.1 acre tract nearby on the same bank of
the Anacostia River. The two sites are currently leased to FRI
under leases expiring in April 2006. The Company will continue to
explore opportunities for eventual development of these
properties.
Construction Aggregates Properties. The following table
summarizes the Company's principal construction aggregates
locations and estimated reserves at September 30, 2004,
substantially all of which are leased to FRI.
Tons of
Tons Sold Estimated
in Year Reserves
Ended at
9/30/04 9/30/04 Approximate
(000's) (000's) Acres Owned
The Company owns eleven
locations currently being
mined in Brooksville,
Grandin, Gulf Hammock,
Keuka, Newberry and Airgrove/
Lake County, Florida;
Columbus, Macon, Forest Park
and Tyrone, Georgia;
and Manassas, Virginia. 10,673 498,333 17,135
The Company owns four locations
not currently being mined in
Ft. Myers, Marion County,
Astatula/Lake County and
Sandland/Polk County, Florida - 32,891 2,339
Other Properties. In addition to the development, mining and
rental sites, the Company owns approximately 2,045 acres of
investment and other real estate.
The Company owns an office building with approximately 69,000
square feet situated on approximately 6 acres in Jacksonville,
Florida, which is leased to FRI.
Item 3. LEGAL PROCEEDINGS.
Note 14 to the Consolidated Financial Statements included in
the accompanying 2004 Annual Report to Shareholders is
incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No reportable events.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
There were approximately 702 holders of record of Patriot
Transportation Holding, Inc. common stock, $.10 par value, as
of December 6, 2004. The Company's common stock is traded on
the Nasdaq Stock Market (Symbol PATR). Information concerning
stock prices is included under the caption "Quarterly Results"
on page 5 of the Company's 2004 Annual Report to Shareholders,
and such information is incorporated herein by reference. The
Company has not paid a cash dividend in the past and it is the
present policy of the Board of Directors not to pay cash
dividends. Information concerning restrictions on the payment
of cash dividends is included in Note 4 to the consolidated
financial statements included in the accompanying 2004 Annual
Report to Shareholders and such information is incorporated
herein by reference. Information regarding securities
authorized for issuance under equity compensation plans is
included in Item 12 of Part III of this Annual Report on Form
10-K and such information is incorporated herein by reference.
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
(c)
Total
Number of
Shares (d)
Purchased Approximate
(a) As Part of Dollar Value of
Total (b) Publicly Shares that May
Number of Average Announced Yet Be Purchased
Shares Price Paid Plans or Under the Plans
Period Purchased per Share Programs or Programs (1)
July 1
through
July 31 0 $ 0 0 $ 3,491,000
August 1
through
August 31 32 $ 32.500 32 $ 3,490,000
September 1
through
September 31 0 $ 0 0 $ 3,490,000
Total 32 $ 32.500 32
(1) In December, 2003, the Board of Directors authorized management
to expend up to $6,000,000 to repurchase shares of the Company's
common stock from time to time as opportunities arise.
Item 6. SELECTED FINANCIAL DATA.
Information required in response to this Item 6 is included
under the caption "Five Year Summary" on page 5 of the
Company's 2004 Annual Report to Shareholders and such
information is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Information required in response to Item 7 is included under
the caption "Management Analysis" on pages 6 through 10
included in the accompanying 2004 Annual Report to
Shareholders. Such information is incorporated herein by
reference.
Item 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company is exposed to market risk from changes in interest
rates. For its cash and cash equivalents, a change in interest
rates affects the amount of interest income that can be earned.
For its debt instruments with variable interest rates, changes
in interest rates affect the amount of interest expense
incurred. The Company prepared a sensitivity analysis of its
variable rate borrowings to determine the impact of
hypothetical changes in interest rates on the Company's results
of operations and cash flows. The interest-rate analysis
assumed a 50 basis point adverse change in interest rates on
all borrowings under the credit agreement. However, the
interest-rate analysis did not consider the effects of the
reduced level of economic activity that could exist in such an
environment. Based on this analysis, management has concluded
that a 50 basis point adverse move in interest rates on the
Company's outstanding borrowings under the credit agreement
would have an immaterial impact on the Company's results of
operations and cash flows.
The following table provides information about the Company's
financial instruments that are sensitive to changes in interest
rates (dollars in thousands):
There Fair
Liabilities: 2005 2006 2007 2008 2009 after Total Value
Long-term debt:
Fixed Rate $ 4,515 1,936 2,057 2,209 2,372 32,611 45,700 47,859
Average
interest rate 6.5% 7.2 7.1 7.1 7.2 7.1
Variable Rate $ 3,201 3,201 3,201
Average
interest rate 3.1%
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required in response to this Item 8 is included
under the caption "Quarterly Results" on page 5 and on pages 11
through 19 of the Company's 2004 Annual Report to Shareholders.
Such information is incorporated herein by reference.
Item 9A. CONTROLS AND PROCEDURES.
Evaluation of disclosure controls and procedures. As required
by Rule 13a-15 under the Exchange Act, the Company carried out
an evaluation of the effectiveness of the design and operation
of the Company's disclosure controls and procedures as of
September 30, 2004. This evaluation was carried out under the
supervision and with the participation of the Company's
management, including the Company's President and Chief
Executive Officer, Chief Financial Officer and Chief Accounting
Officer. Based upon that evaluation, the Company's President
and Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer have concluded that the Company's disclosure
controls and procedures are effective in timely alerting them
to material information relating to the Company required to be
included in the Company's periodic SEC filings.
Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information
required to be disclosed in Company reports filed or submitted
under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities
and Exchange Commission's rules and forms. Disclosure controls
and procedures include, without limitation, controls and
procedures designed to ensure that information required to be
disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the
Company's Chief Executive Officer, Chief Financial Officer and
Chief Accounting Officer as appropriate, to allow timely
decisions regarding required disclosures.
Changes in internal controls. There have been no changes in
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the executive officers of the Company is
set forth under the caption "Executive Officers of the Company"
in Part I of this Form 10-K.
Information concerning directors (including the disclosure
regarding audit committee financial experts), required in
response to this Item 10, is included under the captions
"Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement and such
information is incorporated herein by reference. The Proxy
Statement will be filed with the Securities and Exchange
Commission not later than December 31, 2004.
The Company has adopted a Financial Code of Ethical Conduct
applicable to its principal executive officers, principal
financial officers and principal accounting officers. A copy of
this Financial Code of Ethical Conduct is filed as an Exhibit
to this Form 10-K.
Item 11. EXECUTIVE COMPENSATION.
Information required in response to this Item 11 is included
under the captions "Executive Compensation," "Compensation
Committee Report," "Compensation Committee Interlocks and
Insider Participation," and "Shareholder Return Performance" in
the Company's Proxy Statement and such information is
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information required in response to this Item 12 is included
under the captions "Common Stock Ownership of Certain
Beneficial Owners" and "Common Stock Ownership by Directors and
Officers" in the Company's Proxy Statement and such information
is incorporated herein by reference.
Equity Compensation Plan Information
Number of
Securities
remaining
available
for
Number of future
Securities Weighted issuance
to be Average under equity
issued upon exercise compensation
exercise of price of plans
outstanding outstanding (excluding
options, options, securities
warrants warrants reflected in
and rights and rights column (a))
Plan Category (a) (b) (c)
Equity compensation
plans approved by
security holders 267,200 23.99 207,000
Equity compensation
plans not approved
by security holders 0 0 0
Total 267,200 23.99 207,000
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required in response to this Item 13 is included
under the captions "Compensation Committee Interlocks and
Insider Participation" and "Certain Relationships and Related
Transactions" in the Company's Proxy Statement and such
information is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required in response to this Item 14 is included
under the caption "Independent Registered Public Accounting
Firm" in the Company's Proxy Statement and such information is
incorporated herein by reference.
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) (1) and (2) Financial Statements and Financial Statement
Schedules.
The response to this item is submitted as a separate
section. See Index to Financial Statements and
Financial Statement Schedules on page 21 of this Form
10-K.
(3) Exhibits.
The response to this item is submitted as a separate
section. See Exhibit Index on pages 17 through 20 of
this Form 10-K.
(b) Reports on Form 8-K.
On July 27, 2004, the Company filed a Form 8-K
reporting under Items 7, 9, and 12, a press release
announcing its earnings for the third quarter of 2004.
On August 6, 2004, the Company filed a Form 8-K
reporting under Item 9, a correction to the press
release issued on July 27, 2004.
On September 30, 2004, the Company filed a Form 8-K
reporting under Item 5.02, the resignation of a
director of the Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Patriot Transportation Holding, Inc.
Date: December 1, 2004 By JOHN E. ANDERSON
John E. Anderson
President and Chief Executive
Officer (Principal Executive Officer)
By RAY M. VAN LANDINGHAM
Ray M. Van Landingham
Vice President, Finance &
Administration and Chief Financial
Officer (Principal Financial Officer)
By GREGORY B. LECHWAR
Gregory B. Lechwar
Controller and Chief Accounting
Officer(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on December 1, 2004.
JOHN E. ANDERSON LUKE E. FICHTHORN III
John E. Anderson Luke E. Fichthorn III
President, and Chief Director
Executive Officer
(Principal Executive Officer)
CHARLES E. COMMANDER III______
Charles E. Commander III
RAY M. VAN LANDINGHAM Director
Ray M. Van Landingham
Vice President, Finance and
Administration ROBERT H. PAUL III
(Principal Financial Officer) Robert H. Paul III
Director
GREGORY B. LECHWAR ______________
Gregory B. Lechwar H. W. SHAD III________________
Controller and Chief Accounting H. W. Shad III
Officer (Principal Accounting Officer) Director
EDWARD L. BAKER__________________ MARTIN E. STEIN, JR.
Edward L. Baker Martin E. Stein, Jr.
Chairman of the Board Director
JOHN D. BAKER II_________________ JAMES H. WINSTON _________
John D. Baker II James H. Winston
Director Director
THOMPSON S. BAKER II_____________
Thompson S. Baker II
Director
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2004
EXHIBIT INDEX
[Item 14(a)(3)]
(3)(a)(1) Articles of Incorporation of Patriot Transportation Holding,
Inc., incorporated by reference to the corresponding exhibit
filed with Form S-4 dated December 13, 1988. File No. 33-
26115.
(3)(a)(2) Amendment to the Articles of Incorporation of Patriot
Transportation Holding, Inc. filed with the Secretary of
State of Florida on February 19, 1991 incorporated by
reference to the corresponding exhibit filed with Form 10-K
for the fiscal year ended September 30, 1993. File No. 33-
26115.
(3)(a)(3) Amendments to the Articles of Incorporation of Patriot
Transportation Holding, Inc. filed with the Secretary of
State of Florida on February 7, 1995, incorporated by
reference to an appendix to the Company's Proxy Statement
dated December 15, 1994. File No. 33-26115.
(3)(a)(4) Amendment to the Articles of Incorporation of Patriot
Transportation Holding, Inc., filed with the Florida
Secretary of State on May 6, 1999 incorporated by reference
to a form of such amendment filed as Exhibit 4 to the
Company's Form 8-K dated May 5, 1999. File No. 33-26115.
(3)(a)(5) Amendment to the Articles of Incorporation of Patriot
Transportation Holding, Inc. filed with the Secretary of
State of Florida on February 21, 2000, incorporated
by reference to the corresponding exhibit
filed with Form 10-Q for the quarter ended
March 31, 2000. File No. 33-26115.
(3)(b)(1) Restated Bylaws of Patriot Transportation Holding, Inc.
adopted December 1, 1993, incorporated by reference to the
corresponding exhibit filed with Form 10-K for the fiscal
year ended September 30, 1993. File No. 33-26115.
(3)(b)(2) Amendment to the Bylaws of Patriot Transportation
Holding, Inc. adopted August 3, 1994, incorporated by
reference to the corresponding exhibit filed with Form 10-K
for the fiscal year ended September 30, 1994. File No. 33-
26115.
(3)(b)(3) Amendments to the Articles of Incorporation of Patriot
Transportation Holding, Inc. filed with the Secretary of
State of State of Florida on February 7, 1995, incorporated
by reference to an appendix to the Company's Proxy Statement
dated December 15, 1994. File No. 33-26115.
(3)(b)(4) Amendment to the Restated Bylaws of Patriot Transportation
Holding, Inc. adopted May 5, 2004.
(4)(a) Articles III, VII and XII of the Articles of Incorporation
of Patriot Transportation Holding, Inc, incorporated by
reference to an exhibit filed with Form S-4 dated December
13, 1988. And amended Article III, incorporated by
reference to an exhibit filed with Form 10-K for the fiscal
year ended September 30, 1993. And Articles XIII and XIV,
incorporated by reference to an appendix filed with the
Company's Proxy Statement dated December 15, 1994. File
No. 33-26115.
(4)(b) Specimen stock certificate of Patriot Transportation
Holding, Inc, incorporated by reference to an exhibit filed
with Form S-4 dated December 13, 1988. File No. 33-26115.
(4)(c) Amended and Restated Revolving Credit Agreement dated
November 10, 2004 among Patriot Transportation Holding, Inc.
as Borrower, the Lenders from time to time party hereto and
Wachovia Bank, National Association as Administrative Agent,
incorporated by reference to the Company's Form 8-K dated
November 16, 2004. File No. 33-26115.
(4)(d) The Company and its consolidated subsidiaries have other
long-term debt agreements, none of which exceed 10% of the
total consolidated assets of the Company and its
subsidiaries, and the Company agrees to furnish copies of
such agreements and constituent documents to the Commission
upon request.
(4)(e) Rights Agreement, dated as May 5, 1999 between the Company
and First Union National Bank, incorporated by reference to
Exhibit 4 to the Company's Form 8-K dated May 5, 1999.
File No. 33-26115.
(10)(a) Various lease backs and mining royalty agreements with
Florida Rock Industries, Inc., none of which are presently
believed to be material individually, except for the Mining
Lease Agreement dated September 1, 1986, between Florida
Rock Industries Inc. and Florida Rock Properties, Inc.,
successor by merger to Grandin Land, Inc. (see Exhibit
(10)(c)), but all of which may be material in the aggregate,
incorporated by reference to an exhibit filed with Form S-4
dated December 13, 1988. File No. 33-26115.
(10)(b) License Agreement, dated June 30, 1986, from Florida Rock
Industries, Inc. to Florida Rock & Tank Lines, Inc. to use
"Florida Rock" in corporate names, incorporated by
reference to an exhibit filed with Form S-4 dated December
13, 1988. File No. 33-26115.
(10)(c) Mining Lease Agreement, dated September 1, 1986, between
Florida Rock Industries, Inc. and Florida Rock Properties,
Inc., successor by merger to Grandin Land, Inc.,
incorporated by reference to an exhibit previously filed
with Form S-4 dated December 13, 1988. File No. 33-26115.
(10)(d) Summary of Medical Reimbursement Plan of Patriot
Transportation Holding, Inc., incorporated by reference to
an exhibit filed with Form 10-K for the fiscal year ended
September 30, 1993. File No. 33-26115.
(10)(e) Summary of Management Incentive Compensation Plans,
incorporated by reference to an exhibit filed with Form 10-K
for the fiscal year ended September 30, 1994. File No. 33-
26115.
(10)(f) Management Security Agreements between the Company and
certain officers, incorporated by reference to a form of
agreement previously filed (as Exhibit (10)(I)) with Form
S-4 dated December 13, 1988. File No. 33-26115.
(10)(g)(1) Patriot Transportation Holding, Inc. 1995 Stock Option Plan,
incorporated by reference to an appendix to the Company's
Proxy Statement dated December 15, 1994. File No. 33-26115.
(10)(g)(2) Patriot Transportation Holding, Inc. 2000 Stock Option Plan,
incorporated by reference to an appendix to the Company's
Proxy Statement dated December 15, 1999. File No. 33-26115.
(10)(h) Purchase and Sale Agreement dated February 6, 2002 between
Florida Rock Industries, Inc. and Florida Rock Properties,
Inc., incorporated by reference to an exhibit filed with
Form 10-Q for the quarter ended December 31, 2001. File No.
33-26115.
(10)(i) Purchase and Sale Agreement dated August 25, 2003 between
Florida Rock Properties, Inc. and Florida Rock Industries,
Inc., incorporated by reference to an exhibit filed with
Form 10-K for the year ended September 30, 2003. File No.
33-26115.
(10)(j) Agreement of Purchase and Sale dated October 21, 2003
between FRP Bird River, LLC and The Ryland Group, Inc.,
incorporated by reference to an exhibit filed with Form 10-K
for the year ended September 30, 2003. File No. 33-26115.
(10)(k) Purchase and Sale Agreement dated March 30, 2004 between
Florida Rock Properties, Inc. and Mule Pen Quarry
Corporation, incorporated by reference to an exhibit filed
with Form 10-Q for the quarter ended March 31, 2004. File
No. 33-26115.
(11) Computation of Earnings Per Common Share.
(13) The Company's 2004 Annual Report to shareholders, portions
of which are incorporated by reference in this Form 10-K.
Those portions of the 2004 Annual Report to Shareholders
which are not incorporated by reference shall not be deemed
to be filed as part of this Form 10-K.
(14) Financial Code of Ethical Conduct between the Company, Chief
Executive Officers and Financial Managers, adopted December
4, 2002, incorporated by reference to an exhibit filed
with Form 10-K for the year ended September 30, 2003.
(22) Subsidiaries of Registrant at September 30, 2003: Florida
Rock & Tank Lines, Inc. (a Florida corporation); Florida
Rock Properties, Inc. (a Florida corporation); FRP
Development Corp. (a Maryland corporation); FRP Maryland,
Inc. (a Maryland corporation); 34 Loveton Center LLC (a
Maryland limited liability company); FRTL, Inc. (a Florida
corporation); SunBelt Transport, Inc. (a Florida
Corporation); Oz LLC(a Maryland limited liability company);
1502 Quarry, LLC(a Maryland limited liability company); FRP
Lakeside LLC #1 (a Maryland limited company); FRP Lakeside
LLC #2 (a Maryland limited liability company); FRP Lakeside
LLC #3 (a Maryland limited liability company); FRP Lakeside
LLC #4 (a Maryland limited liability company); FRP Lakeside
LLC #5 (a Maryland limited liability company); FRP Hillside
LLC (a Maryland limited liability company); FRP Hillside LLC
#2 (a Maryland limited liability company); FRP Hillside LLC
#3 (a Maryland limited liability company); FRP Windsor LLC
(a Maryland limited liability company); FRP Dorsey LLC (a
Maryland limited liability company); FRP Bird River LLC (a
Maryland limited liability company); FRP Interchange LLC (a
Maryland limited liability company).
(23)(a) Consent of PricewaterhouseCoopers LLP, Independent
Registered Certified Public Accounting Firm, appears on page
22 of this Form 10-K.
(31)(a) Certification of John E. Anderson.
(31)(b) Certification of Ray M. Van Landingham.
(31)(c) Certification of Gregory B. Lechwar.
(32) Certification of Chief Executive Officer, Chief Financial
Officer, and Chief Accounting Officer pursuant to 18 U.S.C.
Section 1350, adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
PATRIOT TRANSPORTATION HOLDING, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(Item 15(a) (1) and 2))
Page
Consolidated Financial Statements:
Consolidated balance sheets at September 30, 2004
and 2003 12(a)
For the years ended September 30, 2004, 2003 and 2002:
Consolidated statements of income 11(a)
Consolidated statements of cash flows 13(a)
Consolidated statements of shareholders' equity 14(a)
Notes to consolidated financial statements 14-19(a)
Report of Independent Registered Certified Public
Accounting Firm 20(a)
Selected quarterly financial data (unaudited) 5(a)
Consent of Independent Registered Certified Public
Accounting Firm 22(b)
Reports of Independent Registered Certified Public
Accounting Firm on Financial Statement Schedules 23(b)
Consolidated Financial Statement Schedules:
II - Valuation and qualifying accounts 24(b)
III - Real estate and accumulated depreciation and
Depletion 25-26(b)
(a) Refers to the page number in the Company's 2004 Annual
Report to Shareholders. Such information is incorporated
by reference in Item 8 of this Form 10-K.
(b) Refers to the page number in this Form 10-K.
All other schedules have been omitted, as they are not required
under the related instructions, are inapplicable, or because the
information required is included in the consolidated financial
statements.
Exhibit 23(a)
CONSENT OF INDEPENDENT CERTIFIED REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (Nos. 33-43215, 33-18878, and 33-
55132) of Patriot Transportation Holding, Inc. of our report dated
November 30, 2004 relating to the financial statements and the
financial statement schedules of Patriot Transportation Holding,
Inc., which appears in the 2004 Annual Report to Shareholders, which
is incorporated in this Annual Report on Form 10-K. We also consent
to the incorporation by reference of our report dated November 30,
2004, relating to the financial statement schedules which appear in
this Form 10-K.
PricewaterhouseCoopers LLP
Jacksonville, Florida
November 30, 2004
____________________
REPORT OF REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM ON FINANCIAL
STATEMENT SCHEDULES
To the Board of Directors
Patriot Transportation Holding, Inc.:
Our audits of the consolidated financial statements referred to in
our report dated November 30, 2004 appearing in the 2004 Annual
Report to Shareholders of Patriot Transportation Holding, Inc.,
(which report and consolidated financial statements are incorporated
by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedules listed in Item 15(a)(2)
of this Form 10-K. In our opinion, these financial statement
schedules present fairly, in all material respects, the information
set forth therein when read in conjunction with the related
consolidated financial statements.
PricewaterhouseCoopers LLP
Jacksonville, Florida
November 30, 2004
____________________
PATRIOT TRANSPORTATION HOLDING, INC.
SCHEDULE II (CONSOLIDATED) - VALUATION
AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
ADDITIONS ADDITIONS
BALANCE CHARGED TO CHARGED TO BALANCE
AT BEGIN. COST AND OTHER AT END
OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
Year Ended
September 30, 2004:
Allowance for
doubtful accounts $ 565,744 $ 168,000 - $ 95,423(a) $ 638,320
Accrued risk
insurance $6,779,345 $ 7,968,416 - $ 8,094,104(b) $6,653,657
Accrued health
insurance 1,256,845 3,256,583 - 3,308,094(b) 1,205,334
Totals -
insurance $8,036,190 $11,224,999 $ 0 $11,402,198 $7,858,991
Year Ended
September 30, 2003:
Allowance for
Doubtful accounts $ 474,000 $ 157,537 $ - $ 65,793(a) $ 565,744
Accrued risk
insurance $6,326,406 $ 7,989,574 - $ 7,536,635(b)$ 6,779,345
Accrued health
Insurance 1,111,808 2,755,090 - 2,610,053(b) 1,256,845
Totals -
insurance $7,438,214 $10,744,664 $ 0 $10,146,688 $8,036,190
Year Ended
September 30, 2002:
Allowance for
doubtful accounts $1,160,051 $ 140,000 - $ 826,051(a) $ 474,000
Accrued risk
insurance $6,032,351 $5,162,666 - $4,868,611(b) $6,326,406
Accrued health
insurance 1,078,152 2,834,763 - 2,801,107(b) 1,111,808
Totals -
insurance $7,110,503 $7,997,429 $ 0 $7,669,718 $7,438,214
(a) Accounts written off less recoveries
(b) Payments
PATRIOT TRANSPORTATION HOLDING, INC.
SCHEDULE III (CONSOLIDATED)-REAL ESTATE & ACCUMULATED DEPRECIATION AND
DEPLETION
SEPTEMBER 30, 2004
(dollars in thousands)
Cost capi- Gross amount Year Deprecia-
Encumb- Initial cost talized at which Accumulated Of Date tion Life
County rances to subsequent carried at Depreciation Constr- Acquired Computed
Company to acqui- end of period tion on:
sition (a)
Construction Aggregates
Alachua, FL 1,442 0 1,442 90 n/a 4/86 unit
Clayton, GA 369 0 369 5 n/a 4/86 unit
Fayette, GA 39 685 0 685 53 n/a 4/86 unit
Hernando, FL 3,174 325 3,499 965 n/a 4/86 unit
Lake, FL 1,485 0 1,485 1,072 n/a 4/86 unit
Lee, FL 4,690 6 4,696 5 n/a 4/86 unit
Levy, FL 1,281 104 1,384 489 n/a 4/86 unit
Marion, FL 1,180 0 1,180 599 n/a 4/86 unit
Monroe, GA 792 0 792 246 n/a 4/86 unit
Muscogee, GA 369 0 369 117 n/a 4/86 unit
Polk, FL 121 0 121 75 n/a 4/86 unit
Prince Wil. VA 298 0 298 298 n/a 4/86 unit
Putnam, FL ___ 15,002 49 15,051 3,227 n/a 4/86 unit
39 30,888 484 31,371 7,241
Other Rental Property
Wash D.C. 2,957 6,997 9,953 1,418 n/a 4/86 15 yr.
Wash D.C. 3,811 0 3,811 0 n/a 10/97
Putnam, FL 326 50 376 335 n/a 4/86 5 yr.
Spalding, GA 20 0 20 0
0 7,114 7,047 14,160 1,753
Commercial Property
Baltimore, MD 0 439 3,053 3,492 1,585 1990 10/89 31.5 yr.
Baltimore, MD 2,016 950 5,795 6,745 2,293 1994 12/91 31.5 yr.
Baltimore, MD 2,460 690 2,837 3,527 456 2000 7/99 31.5 yr.
Baltimore, MD 0 5,634 320 5,954 0 2001 8/95 31.5 yr.
Duval, FL 0 2,416 529 2,945 2,425 n/a 4/86 25 yr.
Harford, MD 2,619 31 3,826 3,857 816 1998 8/95 31.5 yr.
Harford, MD 4,385 50 5,564 5,614 855 1999 8/95 31.5 yr.
Harford, MD 6,043 85 6,657 6,741 985 2001 8/95 31.5 yr.
Harford, MD 0 92 1,459 1,551 0 n/a 8/95 31.5 yr.
Harford, MD 4,440 88 5,808 5,896 625 n/a 8/95 31.5 yr.
Harford, MD 3,440 155 4,984 5,138 642 2001 8/95 31.5 yr.
Howard, MD 3,949 2,859 3,570 6,429 2,070 1996 9/88 31.5 yr.
Howard, MD 2,223 2,473 332 2,805 405 2000 3/00 31.5 yr.
Anne Arun, MD 3,243 715 6,662 7,377 3,471 1989 9/88 31.5 yr.
Anne Arun, MD 8,130 950 12,350 13,300 510 n/a 5/98 31.5 yr.
Anne Arun, MD 2,713 6,083 0 6,083 0 2001 8/04 31.5 yr.
Anne Arun, MD 0 1,307 0 1,307 0 n/a 1/03 31.5 yr.
Newcastle Co. DE 0 11,559 0 11,559 161 n/a 4/04 31.5 yr.
45,661 36,576 63,746 100,320 17,299
Investment Property 1,033 112 1,144 35 n/a 4/86 n/a
GRAND
TOTALS $45,700 $75,611 $71,389 $146,995 $26,328
(a) The aggregate cost for Federal income tax purposes is $141,587.
PATRIOT TRANSPORTATION HOLDING, INC.
SCHEDULE III (CONSOLIDATED) - REAL ESTATE AND
ACCUMULATED DEPRECIATION AND DEPLETION
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
(In thousands)
2004 2003 2002
Gross Carrying Cost of Real Estate:
Balance at beginning of period $145,803 133,925 127,174
Additions during period:
Amounts capitalized 17,510 13,319 7,053
Deductions during period:
Cost of real estate sold 16,318 1,441 302
Other (abandonments) - - -
Balance at close of period $146,995 145,803 133,925
Accumulated Depreciation & Depletion:
Balance at beginning of period $ 33,497 31,395 28,934
Additions during period:
Charged to cost & expense 3,229 2,784 2,532
Deductions during period:
Real estate sold 10,398 682 71
Balance at close of period $26,328 33,497 31,395
Annual Report 2004
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Dollars in thousands except per share amounts)
%
2004 2003 Change
Revenues $115,789 102,440 13.0
Gross profit $ 22,482 17,469 28.7
Operating profit $ 13,430 9,316 44.2
Income before income taxes $ 9,975 5,824 71.3
Income from continuing operations $ 6,096 3,552 71.6
Discontinued operations $ 14,644 1,023 1331.5
Net income $ 20,740 4,575 353.3
Per common share:
Income from continuing operations
Basic earnings $ 2.08 1.17 77.8
Diluted earnings $ 2.05 1.16 76.7
Net income
Basic earnings $ 7.08 1.51 368.9
Diluted earnings $ 6.97 1.49 367.8
Total Assets $185,394 165,216 12.2
Total Debt $ 48,901 59,361 -17.6
Shareholders' Equity $ 98,087 78,029 25.7
Book Value Per Share $ 33.47 26.61 25.7
BUSINESS. The Company is engaged in the transportation and real
estate businesses. The Company's transportation business is
conducted through two wholly owned subsidiaries. Florida Rock & Tank
Lines, Inc. (Tank Lines) is a Southeastern U.S. based transportation
company concentrating in the hauling of primarily petroleum products
but also other liquid and dry bulk commodities by tank trucks.
SunBelt Transport, Inc. (SunBelt) serves the flatbed portion of the
trucking industry in the Southeastern U.S., hauling primarily
construction materials. The Company's real estate group, comprised
of FRP Development Corp. and Florida Rock Properties, Inc.,
acquires, constructs, leases, operates and manages land and
buildings to generate both current cash flows and long-term capital
appreciation. The real estate group also owns real estate which is
leased under mining royalty agreements or held for investment.
OBJECTIVES. The Company's dual objectives are to build a major
transportation company and a real estate company which provides
sound long-term growth, cash generation and asset appreciation.
TRANSPORTATION
Internal growth is accomplished by a dedicated and competent
work force, emphasizing superior service to customers in
existing markets, developing new transportation services for
customers in current market areas and expanding into new market
areas.
External growth is designed to broaden the Company's geographic
market area and delivery services by acquiring related
businesses.
REAL ESTATE
The growth plan is based on the acquisition, development,
management and retention of commercial warehouse/office rental
properties to provide long-term positive cash flows and capital
appreciation.
TO OUR SHAREHOLDERS
Your Company's Fiscal 2004 was a period of solid progress both
operationally and financially.
Compared to the previous year, consolidated revenues climbed 13% to
$115,789,000. Operating profit increased 44.2%, and income from
continuing operations after income taxes gained 71.6%. Substantial
gains after taxes were also recorded for land sales occurring during
the year and are reflected in our financial statements as Discontinued
Operations. After tax gains from these discontinued operations were
$14,644,000 in 2004 versus $1,023,000. Consolidated net income was
$20,740,000 compared to $4,575,000 a year ago. This net income
produced consolidated earnings per share on a diluted basis of $6.97
versus $1.49 for Fiscal 2003. Total shareholders' equity increased
25.7% to $98,087,000, or $33.47 per share.
Operational achievement occurred within both the transportation and
real estate segments against the backdrop of a stronger national and
regional economy, notwithstanding continuing challenges focused
primarily on transportation. Short and long-term interest rates stayed
low and our Country's manufacturing sector exhibited signs of recovery
while construction (residential and commercial) contributed to
economic strength. On the negative side, record oil prices produced
all-time high diesel fuel pump prices. Additionally, the supply of
truck drivers across the country became tighter and tighter as
shipment demand increased.
Both subsidiaries within your Company's Transportation Group enjoyed
encouraging progress. Several previous years of anemic economic
activity, burgeoning fuel costs, inflated liability and health
insurance costs as well as a steadily tightening driver pool had
contributed to a gradual decline in industry hauling capacity. The
Fiscal 2004 increased economic activity and shipment demand created a
more favorable pricing and demand outlook.
Florida Rock & Tank Lines, Inc., was able to pass along the increased
diesel fuel expenses in the form of fuel price surcharges while
achieving its plan to increase average annual revenue per tractor by
10%. Annual revenue per driver, another important measure of
productivity, was ahead of plan by almost 3.0% and 4.5% more than the
year before. Total miles were ahead of the previous year by 4.3%, and
total freight revenue was up 8.4%. As tractor capacity continued to
tighten, Florida Rock & Tank Lines was able to increase its unit
revenues to more than offset operating cost pressures. Replacement
tractors and trailers during the year enabled Tank Lines to maintain a
desired level of fleet efficiency. Tank Lines continued throughout the
year its focus on accident prevention, improved equipment utilization
and more aggressive pricing.
SunBelt Transport, Inc., your Company's flatbed subsidiary, was also
able to offset higher diesel costs with fuel price surcharges. Sharply
higher shipper demand within the flatbed truck sector, coupled with a
diminished capacity, produced favorable conditions for improved
pricing and expansion. Accordingly, SunBelt began just after mid-year
a program to add both tractors and trailers as freight activity
improved. Higher freight rates and increased revenue miles from
expansion equipment both contributed to a strong, positive turnaround
in SunBelt's profitability. Total miles climbed 18.1% over the year
before, and total freight revenue increased 27.0%. Annual revenue per
tractor was almost 12.0% ahead of plan and 23.8% more than 2003.
Annual revenue per driver was 9.3% more than plan and 14.5% ahead of
the previous year. And while SunBelt has continued its expansion
momentum, it has also begun a reordering of its traffic lanes to
further improve utilization and return on capital. Enhanced volume
increases, pricing gains and improved profitability should all remain
in SunBelt's operating outlook.
Summarizing, your Company's Transportation Group enjoyed solid
momentum in the form of stronger pricing, better equipment utilization
and increased returns on capital employed. Intense efforts within both
operating subsidiaries will continue on the implementation and
successful execution of comprehensive, professional accident
prevention programs. Absolutely no task or service performed by
Florida Rock & Tank Lines and SunBelt Transport, Inc. is more
important than operating safely. Progress in accident prevention and
related driver turnover will remain challenging in the face of tight
driver supply. Additional freight rate increases will be sought from
our customers and passed along to our driver force as we see the need
to continue to enhance pay and benefits in the interest of maintaining
the very highest quality, productive professional driving force.
Your Company's Real Estate Group also enjoyed a year of continued
growth and profitability. Its completed, developed portfolio of
office/warehouse capacity, located in the greater Baltimore and middle
Atlantic regions, stood at 2 million square feet at the close of
Fiscal 2004. While this total square footage was 84.6% occupied at
September 30, 2004, it also included a 74,600 square foot building
with a signed lease to be effective January 2005. Construction is
scheduled to be completed June 2005 for an additional 145,180 square
foot building for a single tenant, under a 10-year signed lease.
Developed land is also available to construct a total of 650,200
square feet of additional future building capacity at the Group's
Hillside and Lakeside Business Parks.
As part of the Real Estate Group's strategic plan to expand its
developed portfolio of office/warehouse capacity, the Group sold three
parcels of land during the Fiscal Year for a total of $29,628,000,
generating a combined gain net of income taxes of $14,456,000.
Approximately $18,550,000 of the sale proceeds was successfully
redeployed by the Real Estate Group in tax deferred exchanges under
Section 1031 of the Internal Revenue Code, resulting in the
acquisition of an additional 491,099 square feet of existing
office/warehouse capacity in two new sub-markets.
These new markets are Newark, Delaware and Norfolk, Virginia. The
Norfolk property acquisition on October 1, 2004 brings the Real
Estate's Group total, developed portfolio to approximately 2,200,000
square feet. The Newark, Delaware purchase earlier in 2004 added 2
office/warehouse buildings totaling about 303,000 square feet together
with an adjacent 8.75 acre building lot.
Two additional properties held for future development include Bird
River in southeastern Baltimore County, which is currently zoned for
both residential and commercial use with 115.6 developable acres. The
Company has a contract to develop and sell to a major homebuilder a
minimum of 292 residential lots. The approximately 42 developable
acres zoned for commercial use are planned to develop and accommodate
approximately 502,000 square feet of warehouse/office buildings.
The second property held for future development is Commonwealth
Avenue, a 50-acre, rail served site near the western beltway of
Interstate 295 in Jacksonville, Florida. Development capacity for
this site is slated for approximately 500,000 square feet of
warehouse/office completion.
Combining the year-end total completed portfolio of 2 million square
feet with existing construction, the recent Norfolk acquisition and
projected build out at both existing business parks and Bird River and
Commonwealth Avenue produces a total future portfolio of approximately
4 million square feet. This represents a doubling of existing
capacity.
Finally, the Company owns a 5.8 acre undeveloped land parcel in the
southeastern quadrant of Washington, D.C. fronting the Anacostia
River. Following continuous efforts by the Real Estate Group to obtain
appropriate development zoning from the District of Columbia Zoning
Commission, the Company was granted a public hearing on its
application for a modified PUD ("Planned Unit Development"). This
public hearing is expected to occur in early calendar 2005, and
approval of the Company's redesign application would provide 2 years
for development to begin in accordance with the approved, modified
PUD. The design guidelines for the modified PUD provide for a maximum
allowed commercial density of 625,000 square feet and a minimum
residential developed density of 440,000 square feet.
Outlook. A continuing healthy national and regional economy, low
interest rates and trucking capacity shortages all would imply further
progress for both Real Estate and Transportation.
As Fiscal 2005 unfolds the Company intends to maintain a healthy
consolidated balance sheet to guard against surprises in the economy
and to remain positioned to exploit opportunities. At September 30,
2004 the Transportation Group carried no outstanding debt. The Real
Estate Group's balance sheet at the same date reflected primarily
long-term, fixed-rate non-recourse obligations. Finally, the Company
recently renewed and extended for a five-year term its $37.0 million
revolving credit facility with its four member banks.
We want to take this opportunity to express our appreciation to our
customers, employees and shareholders for your continued loyalty and
support.
Respectfully yours,
Edward L. Baker
Chairman
John E. Anderson
President & Chief Executive Officer
OPERATING PROPERTIES
Transportation. During Fiscal 2004, the Company's transportation
group operated through two wholly owned subsidiaries. Florida Rock &
Tank Lines, Inc. (Tank Lines) is engaged in hauling petroleum and
other liquid and dry bulk commodities in tank trucks. SunBelt
Transport, Inc. (SunBelt) is engaged primarily in hauling building
and construction materials on flatbed trailers.
Tank Lines operates from terminals in Jacksonville, Orlando, Panama
City, Pensacola, Port Everglades, Tampa and White Springs, Florida;
Albany, Atlanta, Augusta, Bainbridge, Columbus, Dalton, Macon and
Savannah, Georgia; Knoxville, Tennessee; and Charlotte and
Wilmington, North Carolina. SunBelt's flatbed fleet is based in
Jacksonville and Tampa, Florida; Atlanta and Savannah, Georgia; and
South Pittsburg, Tennessee and operates primarily in the
Southeastern U.S.
At September 30, 2004, the transportation group owned and operated a
fleet of approximately 580 trucks, and owned a fleet of
approximately 860 trailers.
During Fiscal 2004, the transportation group purchased 34 new
tractors and 53 new trailers and had commitments to purchase an
additional 53 tractors and 30 trailers at September 30, 2004. The
Fiscal 2005 capital expenditure plan is based on maintaining a
modernized tank and flatbed fleet and includes the purchase of
approximately 134 new tractors and 86 new trailers in addition to
the equipment under commitment at September 30, 2004. The fleet
modernization program has resulted in reduced maintenance expenses,
improved operating efficiencies and enhanced driver recruitment and
retention.
Real Estate. The real estate group operates the Company's real
estate and property development activities through subsidiaries.
The Company owns real estate in Florida, Georgia, Virginia,
Maryland, Delaware and Washington, D.C. The real estate owned
generally falls into one of three categories: (i) land and/or
buildings leased under rental agreements or being developed for
rental; (ii) land with construction aggregates deposits,
substantially all of which is leased to Florida Rock Industries,
Inc. (FRI) under mining royalty agreements, whereby the Company is
paid a percentage of the revenues generated or annual minimums; and,
(iii) land held for future appreciation or development.
At September 30, 2004, the Company owned ten parcels of land
containing 388 usable acres in the Mid-Atlantic region of the United
States as follows:
Hillside Business Park in Anne Arundel County consists of 49 usable
acres near the Baltimore-Washington International Airport. The Company
plans to develop 540,000 square feet of warehouse/office space at this
site. Infrastructure work on the site is substantially completed and
the first two planned buildings with 274,800 square feet are completed
and leased. One building with 200,200 square feet is leased to one
tenant for 15 years. The other building is leased to one tenant for a
10-year term with occupancy to occur in January 2005 when interior
tenant improvements are completed. A third building with 145,000 of
leaseable space is under construction, and is pre-let to a single
tenant for a 15-year lease term. Occupancy is anticipated in June
2005 when the building is completed.
Lakeside Business Park in Harford County consists of 80 usable
acres. Seven warehouse/office buildings, totaling 671,550 square
feet, have been constructed and are 91% leased. The remaining 32.8
acres are available for future development and will have the
potential to offer an additional 485,200 square feet of comparable
product.
6920 Tudsbury Road in Baltimore County contains 5.3 acres with
86,100 square feet of warehouse/office space that is 100% leased.
8620 Dorsey Run Road in Howard County contains 5.8 acres with 84,600
square feet of warehouse/office space that is 100% leased. The
lessee at Dorsey Run has provided notice of its intent to vacate
premises at the end of its lease term on December 31, 2004.
Rossville Business Center in Baltimore County contains approximately
10 acres with 190,517 square feet of warehouse/office space and is
88% leased.
34 Loveton Circle in suburban Baltimore County contains 8.5 acres
with 29,722 square feet of office space which is 100% leased. The
Company occupies 11% of the space and 23% is leased to FRI.
Oregon Business Center in Anne Arundel County contains approximately
17 acres with 195,615 square feet of warehouse/office space which is
100% leased.
Arundel Business Center in Howard County contains approximately 11
acres with 162,796 square feet of warehouse/office space, which is
100% leased.
100-400 Interchange Boulevard in New Castle County, Delaware contains
approximately 17 acres with 301,000 square feet of warehouse/office
space which is 50% leased.
Future Planned Developments. The Bird River property, located in
southeastern Baltimore County, Maryland, is a 179-acre tract of land
that would have direct access to the proposed Maryland State Road 43
intended to connect I-95 with Martin State Airport. This property is
currently zoned for residential and commercial use with 115.6
developable acres. The Company plans to develop and lease
approximately 502,000 square feet of multiple warehouse/office
buildings on the 42 developable acres zoned for commercial use.
A subsidiary of the Company has entered into an agreement to develop
and sell to a major home builder a minimum of 292 residential lots on
the residential portion of the Bird River Property. The minimum
aggregate purchase price for these lots is $28,705,000.
The rights and obligations of the subsidiary under this agreement
are specifically contingent upon the approval by Baltimore County of
a Planned Unit Development (PUD) by July 1, 2006 which will permit
the development of and use of the property for a minimum of 292
residential lots. The subsidiary's rights and obligations are also
expressly contingent upon the construction of the proposed Route 43
and the subsidiary's ability to have vehicular, water and sewer
connection access to the property by July 1, 2007 at what the
subsidiary deems, in its sole discretion, to be a commercially
reasonable cost. The obligations of the builder under the agreement
also are subject to customary conditions precedent.
The Company owns a 50-acre, rail accessible site on Commonwealth
Avenue in Jacksonville, Florida near the western beltway of
Interstate-295 capable of supporting approximately 500,000 square feet
of eventual warehouse/office build-out. Current efforts include
permitting and preliminary horizontal development planning work.
The company owns a 5.8 acre parcel of undeveloped real estate in the
southeast quadrant of Washington D.C. that fronts the Anacostia River
and has been working with the District of Columbia Zoning Commission
and the Office of Planning to obtain appropriate zoning for
development. In 2003, the Zoning Commission granted preliminary
approval of the size and use of the Planned Unit Development (PUD)
application and gave the Company until May of 2004 to submit modified
drawings that would conform to an approved set of design guidelines.
The design guidelines provide for a maximum allowable commercial
development of 625,000 square feet and a minimum residential
development of 440,000 square feet. The application for final
approval of the PUD was submitted to the District of Columbia Zoning
Commission in May of 2003. The Company was granted a public hearing on
its final application which is expected to be held in early 2005. If
approval of the redesign is obtained, the Company will have an
additional two years to begin development of the site in accordance
with the approved PUD.
The Company also owns a 2.1 acre tract nearby on the same bank of the
Anacostia River. The two sites are currently leased to FRI under
leases expiring in April 2006. The Company will continue to explore
opportunities for eventual development of these properties.
Five Year Summary-Years ended September 30
(Dollars and shares in thousands except per share amounts)
2004 2003 2002 2001 2000
Summary of Operations:
Revenues(a) $115,789 102,440 95,586 118,991 92,055
Gross profit(b) $ 22,482 17,469 19,696 20,635 15,189
Operating profit $ 13,430 9,316 11,567 6,721 5,790
Interest expense $ 3,830 3,492 3,143 3,372 3,438
Income from continuing
operations $ 6,096 3,552 5,139 2,038 1,590
Per Common Share:
Basic $ 2.08 1.17 1.64 .65 .48
Diluted $ 2.05 1.16 1.62 .65 .47
Discontinued
operations $ 14,644 1,023 516 665 454
Net income $ 20,740 4,575 5,655 2,703 2,044
Per Common Share:
Basic $ 7.08 1.51 1.80 .86 .61
Diluted $ 6.97 1.49 1.79 .86 .61
Financial Summary:
Current assets $ 30,066 13,965 11,490 16,248 15,089
Current liabilities
$ 23,099 11,220 11,972 16,728 17,498
Property and
equipment, net $149,011 139,379 138,367 131,170 124,026
Total assets $185,394 165,216 155,463 152,759 148,011
Long-term debt $ 41,185 57,816 47,290 47,097 42,015
Shareholders' equity
$ 98,087 78,029 79,160 73,112 73,813
Other Data:
Weighted average common
shares - basic 2,931 3,033 3,143 3,157 3,334
Weighted average common
shares - diluted 2,976 3,066 3,165 3,158 3,348
Number of employees 908 845 861 850 829
Shareholders of record 702 745 767 788 801
(a) Fiscal 2001 and 2000 include revenues of $22,623,000 and
$7,689,000 and operating losses of $6,309,000 and $361,000,
respectively, attributed to Patriot Transportation, Inc. which
ceased operations in September, 2001.
(b) Fiscal 2003, 2002, 2001, and 2000 include gains on the
sale of real estate of $47,000, $323,000, $2,886,000, and
$1,533,000, respectively.
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
First Second Third Fourth
2004 2003 2004 2003 2004 2003 2004 2003
Revenues $27,684 23,790 28,386 24,869 29,670 26,827 30,049 26,954
Gross profit $ 5,223 4,143 5,008 3,778 5,989 4,977 6,262 4,571
Income from continuing
operations $ 1,231 824 1,248 538 1,913 1,260 1,704 930
Discontinued
operations $ 87 114 5,727 84 9,041 86 (211) 739
Net income $ 1,318 938 6,975 622 10,954 1,346 1,493 1,669
Per common share:
Basic Earnings $.45 .30 2.38 .20 3.74 .45 .51 .57
Diluted Earnings $.44 .30 2.34 .20 3.68 .44 .50 .56
Market price:
High $33.90 28.85 37.50 38.38 37.72 30.00 34.02 33.00
Low $28.65 19.00 30.00 20.00 30.51 21.00 31.74 28.00
Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Executive Overview
Patriot Transportation Holding, Inc. (the Company) is a holding
company engaged in the transportation and real estate businesses
through wholly owned subsidiaries.
The Company's transportation business operates through two
subsidiaries: Florida Rock & Tank Lines, Inc. (Tank Lines) is engaged
in hauling primarily petroleum related liquids and other liquid and
dry bulk commodities in tank trucks. SunBelt Transport, Inc.
(SunBelt) is engaged in hauling primarily building and construction
materials on flatbed trailers.
The Company's real estate business is operated through two
subsidiaries: Florida Rock Properties, Inc. and FRP Development Corp.
The Company owns real estate in Florida, Georgia, Virginia, Maryland,
Delaware and Washington, D.C. The real estate owned generally falls
into one of three categories: (i) land and/or buildings leased under
rental agreements or being developed for rental; (ii) land with
construction aggregates deposits, substantially all of which is
leased to Florida Rock Industries, Inc. under mining royalty
agreements, whereby the Company is paid a percentage of the revenues
generated or annual minimums; and, (iii) land held for future
appreciation or development.
The Company is a related party to Florida Rock Industries, Inc. (FRI)
because four of the Company's directors are also directors of FRI and
such directors own approximately 27.1% of the stock of FRI and 48.0%
of the stock of the Company. The Company derived 6.6% of its
consolidated revenue from FRI in fiscal 2004.
Fiscal 2004 showed significant growth in both income from continuing
operations and net income. Income from continuing operations was
$6,096,000 or $2.05 per diluted share in fiscal 2004, an increase of
71.6% compared to $3,552,000 or $1.16 per diluted share in fiscal
2003. The increase was generated primarily from the revenue growth in
both the transportation segment and developed properties while fixed
expenses remained steady.
Net income increased to $20,740,000 in fiscal 2004 from $4,575,000 in
2003, primarily as a result of the sales of properties classified as
discontinued operations. Three properties were sold to FRI during
2004, which resulted in an after tax gain of $14,456,000.
Transportation. The Company generates transportation revenue by
providing over the road transport services for customers primarily in
the petroleum products and chemical industries (Tank Lines) and the
building construction materials industry (SunBelt). The majority of
our petroleum products customers are major oil companies and
convenience store chains, who sell gasoline or diesel fuel directly
to the retail market. Our customers in the building construction
industries are generally the manufacturer or distributor of the
products who contract with us to deliver goods to their customers.
Our customers generally pay for services based on miles driven. We
also bill for other services that may include stop-offs, pump-offs,
and load tarping. Additionally, we may bill customers a fuel
surcharge that relates to the fluctuations in diesel fuel costs.
Miles hauled and rates per mile are the primary factors impacting
transportation revenue. Generally, changes in miles or rates will
affect revenue. Given the large increases in diesel fuel costs over
the past 18 months, fuel surcharges have become a larger factor
affecting overall transportation revenue.
On long-haul trips we generally only bill for miles driven while
under load. We calculate and monitor weekly a loaded mile factor,
which is the ratio of loaded miles to total miles. A decrease in the
loaded mile factor will have a negative effect on operating profit.
SunBelt is acutely affected by the loaded mile factors as the
majority of its trips are long-haul. Tank Lines, on the other hand,
primarily engages in short-haul deliveries and generally is paid for
round trip miles.
Operating safely, efficient equipment utilization, appropriate
freight rates, and driver retention are the most critical factors in
maintaining profitable operations. Statistics related to these
factors are monitored weekly or monthly. Operating expenses are split
evenly between variable (driver pay, fuel, and maintenance) and fixed
costs (overhead, insurance and depreciation). As a result, increases
in revenue will generally improve our operating ratio.
During Fiscal 2004 we saw record diesel fuel costs as well as a
continuation of rising liability, workers compensation and health
care insurance costs. However, due to decreases in capacity in the
trucking industry resulting from the higher operating costs and
recent recession, we have been successful in increasing freight rates
and fuel surcharges, particularly in the flatbed division. We are
closely monitoring legislative changes affecting the trucking
industry, notably hours-of-service rules and increased driver
qualifications for hazardous material transporting, to determine the
effect on our operations.
Ongoing structural changes within national retail petroleum
distribution channels also challenged the Company's tank truck
operations. Non-traditional retail gasoline outlets, "hyper-markets",
are growing rapidly and bringing new pricing pressures to retail
distribution. This dynamic is contributing to a challenging pricing
environment from petroleum products customers seeking to adapt to
this competitive reality.
Real Estate. The Company owns real estate in Florida, Georgia,
Virginia, Maryland, Delaware, and Washington, D.C. The real estate
owned generally falls into one of three categories: (i) land and/or
buildings leased under rental agreements or being developed for
rental; (ii) land with construction aggregates deposits; and (iii)
land held for future appreciation or development.
Revenue from land and/or buildings under rental agreements is
generated primarily from leasing our portfolio of flex
office/warehouse buildings. Our flex office/warehouse product is a
functional warehouse with the ability to configure portions as office
space as required by our tenants. We lease space to tenants who
generally sign multiple year agreements. Growth is achieved by
increasing occupancy and lease rates in existing buildings and by
developing or acquiring new warehouses. We attempt to develop or
purchase properties in areas that have high growth potential and are
accessible to major interstates or other distribution lanes.
The following table shows the total available square footage and occupancy
rates of our flex office/warehouse parks at September 30, 2004:
Total
Development Location Sq. feet % Occupied
Hillside (1)(2) Anne Arundel Co., MD 274,800 72.9%
Lakeside Harford Co., MD 671,550 91.4%
Tudsbury Baltimore Co., MD 86,100 100.0%
Dorsey Run (3) Howard Co., MD 84,600 100.0%
Rossville Baltimore Co., MD 190,517 87.8%
Loveton Baltimore Co., MD 29,722 100.0%
Oregon Anne Arundel Co., MD 195,615 100.0%
Arundel Howard Co., MD 162,796 100.0%
Interchange New Castle Co., DE 303,006 49.8%
1,998,706 84.6%
1) Hillside includes a 74,600 square foot building is leased and
will be occupied January 2005.
2) A 145,180 square foot building is currently under construction at
Hillside for a tenant who has signed a 10 year lease to begin
upon completion of construction, which is scheduled for June 2005.
3) A current tenant, occupying 100% of the space, will be vacating
the building at December 31, 2004.
In addition to the completed buildings and the building under
construction shown above, land is available to construct additional
buildings at Hillside Business Park (155,000 square feet) and
Lakeside Business Park (485,200 square feet). Current plans are to
begin construction of 168,000 square feet in fiscal 2005 for
completion in fiscal 2006.
On October 1, 2004 the Company purchased a 188,093 square foot
building in Norfolk, Virginia which is fully leased.
We also own a portfolio of mineable land, substantially all of which
is leased to FRI under long-term mining royalty agreements, whereby
we are paid a percentage of the revenues generated from mined product
sold or annual minimum rents. The mines primarily consist of
construction aggregates, such as stone and sand and calcium deposits.
Properties held for future development include:
Bird River in southeastern Baltimore County is a 179 acre tract
currently zoned for residential and commercial use with 115.6
developable acres. The Company has a contract to develop and sell to
a major home builder a minimum of 292 residential lots. The Company
plans to develop and lease approximately 502,000 square feet of
multiple warehouse/office buildings on the 42 developable acres zoned
for commercial use.
Commonwealth Avenue is a 50-acre, rail accessible site in
Jacksonville, Florida near the western beltway of Interstate-295
capable of supporting approximately 500,000 square feet of
warehouse/office build-out.
The Company owns two parcels of undeveloped real estate in the
southeast quadrant of Washington D.C. that fronts the Anacostia River
and has been working with the District of Columbia Zoning Commission
and the Office of Planning to obtain appropriate zoning for
development on one of the sites. In September 2004, the Company was
granted a public hearing on its final application, which is expected
to be held in early 2005. If approval of the redesign is obtained,
the Company will have an additional two years to begin development of
the site in accordance with the approved PUD.
Comparative Results of Operations
Transportation
Fiscal Years ended September 30
(dollars in thousands) ___2004 % 2003 % 2002 %
Transportation revenue $ 94,786 95% 85,028 97% 80,888 99%
Fuel surcharges 4,638 5% 2,968 3% 1,033 1%
Revenues 99,424 100% 87,996 100% 81,921 100%
Compensation and benefits 40,779 41% 37,192 42% 35,652 44%
Fuel expenses 14,779 15% 12,320 14% 9,627 12%
Insurance and losses 11,462 12% 11,144 13% 8,180 10%
Depreciation expense 7,875 8% 8,171 9% 7,504 9%
Other, net 11,317 11% 10,129 12% 9,280 11%
Cost of operations 86,212 87% 78,956 90% 70,243 86%
Gross profit $ 13,212 13% 9,040 10% 11,678 14%
The Transportation group's goals for 2004 were to operate safely,
improve freight rates, maintain fuel surcharges, and improve
equipment utilization.
Revenues 2004 vs 2003 - Transportation segment revenues were
$99,424,000, an increase of $11,428,000 or 13.0% over last year.
Transportation revenues increased $6,937,000 mostly due to an 8.8%
increase in revenue miles, reflecting increased customer demand for
transportation services. The increased demand also allowed better
pricing for our services and as a result, average revenue per mile
excluding fuel surcharge increased 2.5%. The average price paid per
gallon of diesel fuel increased $0.17 and as a result fuel surcharge
revenue increased $1,670,000.
Revenues 2003 vs 2002 - Transportation segment revenues were
$87,996,000 in 2003, an increase of $6,075,000 or 7.4% over 2002.
Transportation revenues increased $3,490,000 due to a 4.7% increase
in revenue miles, mostly offset by the loss of a major customer in
the first quarter of 2003. The increase in miles is primarily due to
the new business generated from the May 2002 acquisition of the
operating assets of Infinger Transportation, Inc. (Infinger) and
internal growth. Of the remaining increase, $1,936,000 was due to an
increase in billed fuel surcharges from 2003 to 2002, as a result of
increased diesel fuel prices.
Expenses 2004 vs 2003 - Transportation's cost of operations increased
$7,256,000 to $86,212,000 in 2004, compared to $78,956,000 in 2003.
The 9.2% increase was primarily due to an increase in driver
compensation and fuel consumption related to the increase in miles.
The increase in fuel cost is also due to a $.17 increase in the
average price paid per gallon of diesel fuel from 2003 to 2004.
Expenses 2003 vs 2002 - Transportation's cost of operations increased
$8,713,000 to $78,956,000 in 2003, compared to $70,243,000 in 2002.
The 12.4% increase is primarily due to an increase in expenses
related to higher insurance premiums and workers compensation claims
expensed in 2003. Additionally, fuel costs increased due to the
increase in miles hauled and a $.23 increase in the average price
paid per gallon of diesel fuel from 2002 to 2003.
Real Estate
Fiscal Years ended September 30
(dollars in thousands) ___2004 % 2003 % 2002 %
Royalties and rent $ 5,822 36% 5,572 39% 5,190 38%
Developed property rentals 10,543 64% 8,804 61% 7,921 58%
Property sales - 0% 68 0% 554 4%
Total Revenue 16,365 100% 14,444 100% 13,665 100%
Mining and land rent expenses 1,887 12% 1,806 13% 1,600 12%
Developed property management 5,208 32% 4,188 29% 3,816 28%
Cost of property sold - 0% 21 0% 231 2%
Cost of Operations 7,095 43% 6,015 42% 5,647 41%
Gross profit $ 9,270 57% 8,429 58% 8,018 59%
Revenues 2004 vs 2003 - Real Estate revenues increased $1,921,000 or
13.3% in 2004 to $16,365,000. Lease revenues from developed
properties increased 19.8% due to the completion of a 200,200 square
foot building at the Hillside Business Park in late fiscal 2003 and
the purchase of a 151,000 square foot building at Interchange
Boulevard in March of 2004. Both were fully leased during the year.
Royalties from mining operations increased 4.5% during 2004.
Revenues 2003 vs 2002 - Real Estate revenues during 2003 were
$14,444,000, an increase of 5.7% over 2002. The increase was
primarily due to an 11.1% increase in rental revenue from developed
properties partially offset by a 2.8% decrease in royalty revenues.
Revenues from the Company's developed operations increased due to a
9.2% increase in average leased square feet, while royalty revenues
from mining operations decreased because of completion of aggregate
mining at two sites. Property sales in Fiscal 2003 were $68,000
versus $554,000 in Fiscal 2002.
Expenses 2004 vs 2003 - Real Estate cost of operations increased
$1,080,000 to $7,095,000 in 2004, compared to $6,015,000 in 2003. The
increase is due primarily to operating expenses related to the
completed building at Hillside and the two purchased buildings at
Interchange.
Expenses 2003 vs 2002 - Real Estate cost of operations increased
$368,000 to $6,015,000 in 2003, compared to $5,647,000 in 2002. The
increase is due to the operating expenses related to two buildings
that were completed in 2003.
Consolidated Gross Profit - Consolidated gross profit was $22,482,000
in 2004 compared to $17,469,000 in 2003, an increase of 28.7%.
Consolidated gross profit was $17,469,000 in 2003 compared to
$19,696,000 in 2002, a decrease of 11.3%.
Selling, general and administrative expense - Selling, general and
administrative expenses for 2004 increased $899,000 to $9,052,000,
primarily due to the accrual of management incentive compensation,
which is based on the Company achieving certain profitability
targets.
Selling, general and administrative expenses for 2003 were comparable
to 2002, increasing 0.3% from $8,129,000 in Fiscal 2002 to $8,153,000
for Fiscal 2003.
Income from continuing operations - Income from continuing operations
was $6,096,000 or $2.05 per diluted share in fiscal 2004, an increase
of 71.6% compared to $3,552,000 or $1.16 per diluted share in fiscal
2003. Income from continuing operations decreased 30.9% in 2003 from
$5,139,000 or $1.62 per diluted share in fiscal 2002.
Discontinued Operations - The Company had one sale of real estate in
2003 and three sales of real estate in 2004 that met certain
requirements and have been accounted for as discontinued operations,
in accordance with SFAS 144. The income from the operations and gains
on sale of these components have been reflected in the consolidated
income statement as income from discontinued operations, net of
income taxes.
The after-tax gain from the sale of the properties in 2004 and 2003
was $14,446,000 and $657,000, respectively. The after-tax net income
from the operations of the sold properties was $188,000, $366,000,
and $516,000 for 2004, 2003, and 2002, respectively.
Net income - As a result of the improved results from continuing
operations and the sales of properties classified as discontinued
operations, net income increased to $20,740,000 in fiscal 2004 from
$4,575,000 in 2003. Fiscal 2003 net income was down from $5,655,000
in fiscal 2002. Diluted earnings per share increased to $6.97 in
fiscal 2004 from $1.49 in 2003, and were $1.79 in 2002.
Liquidity and Capital Resources - Net cash flow from operating
activities in 2004 was $17,050,000, which together with $30,600,000
from the sales of fixed assets and $11,213,000 in additional
borrowings, funded the $21,969,000 purchase of property and
equipment, $21,673,000 in reduction of debt, and the repurchase of
$2,510,000 in Company stock.
Net cash flow from operating activities during 2003 was $15,345,000,
which together with $10,760,000 net cash inflow from long term debt,
funded the $20,413,000 purchase of property and equipment and the
repurchase of $6,118,000 in Company stock.
During 2003 and 2004 the Company sold four properties for $31,464,000
in cash, resulting in before tax gains of $24,729,000. The net
proceeds of $31,172,000 from the sale of these properties were placed
in escrow in anticipation of utilizing the funds to purchase
replacement property in tax deferred exchanges under IRC Section
1031. Due to a tight real estate market, not all of the gains
resulting from the property sales could be utilized under Section
1031. During fiscal 2004, $11,417,000 was used in qualified exchanges
and $3,265,000 was released from escrow for general use leaving a
balance in escrow $16,553,000 at September 30, 2004. On October 1,
2004, $7,150,000 of the escrowed funds were used in a qualified
exchange and the remaining funds of $9,340,000 were released for
general use.
The Company obtained an $8,500,000 mortgage loan secured by a
building completed in 2003 and also obtained construction financing
for an ongoing project. Draws on the construction financing totaled
$2,713,000 at September 30, 2004. These borrowings, combined with
operating cash flows helped the Company reduce amounts borrowed under
the revolver to $3,201,000 and to pay off two 9% mortgage notes for
approximately $3,100,000.
The Company has a $37,000,000 revolving credit agreement (the
Revolver) of which $33,799,000 was available at fiscal year end. The
Revolver contains restrictive covenants including limitations on
paying cash dividends. Under these restrictions, as of September 30,
2004, $ 13,813,000 of consolidated retained earnings was available
for payment of dividends. The Revolver was set to expire on December
31, 2004 but on November 10, 2004 was amended and restated and
extended to December 31, 2009.
The Company had $11,948,000 of irrevocable letters of credit
outstanding at September 30, 2004. Most of the letters of credit are
irrevocable for a period of one year and are automatically extended
for additional one-year periods unless notified by the issuing bank
not less than thirty days before the expiration date. Substantially
all of these were issued for workers' compensation and liability
insurance retentions. If these letters of credit are not extended the
Company will have to find alternative methods of collateralizing or
funding these obligations.
The Board of Directors has authorized management to repurchase shares
of the Company's common stock from time to time as opportunities may
arise. During Fiscal 2004, the company repurchased 77,533 shares for
approximately $2,510,000. At September 30, 2004 the Company had
approximately $3,490,000 authorized for repurchase of shares.
The Company currently expects its Fiscal 2005 capital expenditures to
be approximately $39,000,000 ($24,000,000 for real estate development
expansion and $15,000,000 for transportation segment expansion and
replacement equipment) and depreciation and depletion expense to be
approximately $12,292,000. The Company expects to finance the
expenditures from the cash flows from operating activities, secured
financing on new real estate projects, cash held in escrow, and the
funds available under its revolving credit agreement.
Off-Balance Sheet Arrangements - Except for the letters of credit
described above under "Liquidity and Capital Resources," the Company
does not have any off balance sheet arrangements, such as financing
or variable interest entities, that either have, or are reasonably
likely to have, a current or future material effect on its financial
condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital
resources.
Critical Accounting Policies - Management of the Company considers
the following accounting policies critical to the reported operations
of the Company:
Accounts Receivable Valuation. The Company is subject to customer
credit risk including bankruptcies, primarily in the Transportation
segment, that could affect the collection of outstanding accounts
receivable. To mitigate these risks, the Company performs credit
reviews on all new customers and periodic credit reviews on existing
customers. A detailed analysis of late and slow pay customers is at
least prepared monthly and reviewed by senior management. The
overall collectibility of outstanding receivables is evaluated and
allowances are recorded as appropriate.
Risk Insurance. The nature of the Transportation business subjects
the Company to risks arising from workers' compensation, automobile
liability, and general liability claims. The Company retains the
exposure on certain claims of $250,000 to $500,000 and has third
party coverage for amounts exceeding the retention. The Company
expenses during the year an estimate of risk insurance losses.
Periodically, an analysis is performed, using historical and
projected data, to determine exposure for claims incurred but not
reported. On an annual basis the Company obtains an independent
actuarial analysis. The Company attempts to mitigate losses from
insurance claims by maintaining safe operations and providing
mandatory safety training.
Real Estate Investments. All direct and indirect costs, including
interest and real estate taxes associated with the development,
construction, leasing or expansion of real estate investments are
capitalized as a cost of the property. Included in indirect costs is
an estimate of internal costs associated with development and rental
of real estate investments. All external costs associated with the
acquisition of real estate investments are capitalized as a cost of
the property.
Contractual Obligations - The following table summarizes our
contractual obligations as of September 30, 2004:
Payment due by period
Less than More than
Total 1 year 1-3 years 4-5 years 5 years
Debt 45,700 4,515 6,202 4,744 30,239
Purchase
Commitments 12,222 12,222 - - -
Total obligations 57,922 16,737 6,202 4,744 30,239
INFLATION. Historically, the Company has been able to recover
inflationary cost increases in the transportation group through
increased freight rates. It is expected that over time, justifiable
and necessary rate increases will be obtained. Substantially all of
the Company's royalty agreements are based on a percentage of the
sales price. Minimum royalties and substantially all lease agreements
provide escalation provisions.
FORWARD-LOOKING STATEMENTS. Certain matters discussed in this report
contain forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially
from these indicated by such forward-looking statements. These
forward-looking statements relate to, among other things, capital
expenditures, liquidity, capital resources and competition and may be
indicated by words or phrases such as "anticipate," "estimate,"
"plans," "projects," "continuing," "ongoing," "expects," "management
believes," "the Company believes," "the Company intends" and similar
words or phrases. The following factors and other risk factors
discussed in the Company's periodic reports and filings with the
Securities and Exchange Commission are among the principal factors
that could cause actual results to differ materially from the forward-
looking statements: driver availability and cost; regulations
regarding driver qualifications and hours of service; availability and
terms of financing; freight demand for petroleum products and for
building and construction materials in the Company's markets; risk
insurance markets; competition; general economic conditions; demand
for flexible warehouse/office facilities; interest rates; levels of
construction activity in FRI's markets; fuel costs; and inflation.
However, this list is not a complete statement of all potential risks
or uncertainties. These forward-looking statements are made as of the
date hereof based on management's current expectations, and the
Company does not undertake an obligation to update such statements,
whether as a result of new information, future events or otherwise.
Additional information regarding these and other risk factors may be
found in the Company's other filings made from time to time with the
Securities and Exchange Commission.
Consolidated Statements of Income - Years ended September 30
(In thousands except per share amounts)
2004 2003 2002
Revenues:
Transportation $ 99,424 87,996 81,921
Real estate 16,365 14,376 13,111
Sale of real estate - 68 554
Total revenues (including revenue from
related parties of $7,623, $7,305 and
$6,944, respectively) 115,789 102,440 95,586
Cost of operations:
Transportation 86,212 78,956 70,243
Real estate 7,095 5,994 5,416
Cost of real estate sold - 21 231
Gross profit 22,482 17,469 19,696
Selling, general and administrative expense
(including expenses paid to related party
of $372, $440 and $463, respectively) 9,052 8,153 8,129
Operating profit 13,430 9,316 11,567
Other income 375 - -
Interest expense, net (3,830) (3,492) (3,143)
Income from continuing operations
before income taxes 9,975 5,824 8,424
Provision for income taxes 3,879 2,272 3,285
Income from continuing operations 6,096 3,552 5,139
Discontinued operations (Note 3):
Income from operations, net of tax 188 366 516
Gain on sale of properties, net of tax 14,456 657 -
Net income $20,740 4,575 5,655
Earnings per common share:
Income from continuing
operations - basic $ 2.08 1.17 1.64
- diluted $ 2.05 1.16 1.62
Discontinued operations
- basic $ 5.00 .34 .16
- diluted $ 4.92 .33 .16
Net income-basic $ 7.08 1.51 1.80
Net income-diluted $ 6.97 1.49 1.79
Number of common shares used in computing:
- basic earnings per share 2,931 3,033 3,143
- diluted earnings per share 2,976 3,066 3,165
See accompanying notes.
Consolidated Balance Sheets
As of September 30,
(In thousands)
2004 2003
Assets
Current assets:
Cash and cash equivalents $ 199 757
Cash held in escrow 16,553 1,795
Accounts receivable (including related
party of $344 and $359, less allowance
for doubtful accounts of $638 and $566,
respectively) 9,123 7,332
Inventory of parts and supplies 642 670
Prepaid expenses and other 3,549 3,411
Total current assets 30,066 13,965
Property and equipment, at cost:
Land 56,045 52,679
Buildings 77,924 68,651
Equipment 73,838 72,550
Construction in progress 16,423 11,331
224,230 205,211
Less accumulated depreciation and depletion 75,219 65,832
149,011 139,379
Real estate held for investment, at cost 1,093 1,130
Goodwill 1,087 1,087
Assets held for sale - 5,883
Other assets 4,137 3,772
Total Assets $185,394 165,216
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable 3,072 4,728
Federal and state income taxes payable 6,799 6
Accrued liabilities 3,324 2,627
Accrued insurance reserves 2,188 2,314
Short term notes payable 5,914 -
Long-term debt due within one year 1,802 1,545
Total current liabilities 23,099 11,220
Long-term debt 41,185 57,816
Deferred income taxes 15,767 10,760
Accrued insurance reserves 5,689 5,722
Other liabilities 1,567 1,669
Commitments and contingencies (Notes 14 and 15)
Shareholders' equity:
Preferred stock, no par value;
5,000,000 shares authorized; none issued - -
Common stock, $.10 par value;
25,000,000 shares authorized; 2,929,075
and 2,932,708 shares issued and
outstanding, respectively 293 293
Capital in excess of par value 25,784 24,614
Retained earnings 72,010 53,122
Total shareholders' equity 98,087 78,029
Total Liabilities and Shareholders' equity $185,394 165,216
See accompanying notes.
Consolidated Statements of Cash Flows
Years ended September 30,
(In thousands)
Cash flows from operating activities: 2004 2003 2002
Net income $ 20,740 4,575 5,655
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 12,230 11,956 11,086
Deferred income taxes 4,916 879 889
Gain on sale of real estate and equipment (24,055) (210) (612)
Tax benefit from stock option exercise 339 57 56
Net changes in operating assets and liabilities:
Accounts receivable (1,791) 12 1,133
Income taxes receivable - 8 994
Inventory of parts and supplies 28 (37) (63)
Prepaid expenses and other (138) (435) 1,509
Assets held for sale - - 1,191
Accounts payable and accrued liabilities (994) (1,173) 2,686
Income taxes payable 6,793 6 -
Net change in insurance reserves and other
liabilities (135) 412 437
Other assets (883) (705) (900)
Net cash provided by operating activities 17,050 15,345 24,061
Cash flows from investing activities:
Purchase of property and equipment (21,969) (20,413)(18,046)
Cash held in escrow (14,758) (1,795) -
Proceeds from the sale of real estate held for
investment, property and equipment 30,600 2,094 1,010
Net cash used in investing activities (6,127) (20,114)(17,036)
Cash flows from financing activities:
Proceeds from long-term debt 8,500 4,600 10,200
(Decrease) increase in revolving debt (16,799) 7,500 (8,500)
Net increase (decrease) in short-term debt 2,713 - (7,800)
Repayment of long-term debt (4,874) (1,340) (1,173)
Exercise of employee stock options 1,489 355 369
Repurchase of Company stock (2,510) (6,118) (32)
Net cash (used in) provided
by financing activities (11,481) 4,997 (6,936)
Net (decrease) increase in cash and cash equivalents (558) 228 89
Cash and cash equivalents at beginning of year 757 529 440
Cash and cash equivalents at end of year $ 199 757 529
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 3,977 3,477 3,179
Income taxes $ 1,159 2,004 1,720
Non cash investing and financing activities:
Additions to property and equipment from:
Exchanges $ - - 563
See accompanying notes.
Consolidated Statements of Shareholders' Equity
Years ended September 30
(In thousands, except share amounts)
Capital in
Common Stock Excess of Retained
Shares Amount Par Value Earnings
Balance at September 30, 2001 3,140,066 $314 $25,841 $46,957
Shares purchased and canceled (1,658) - (14) (18)
Exercise of stock options 20,600 2 423 -
Net income - - - 5,655
Balance at September 30, 2002 3,159,008 316 26,250 52,594
Shares purchased and canceled (246,300) (25) (2,046) (4,047)
Exercise of stock options 20,000 2 410 -
Net income - - - 4,575
Balance at September 30, 2003 2,932,708 293 24,614 53,122
Shares purchased and canceled (77,533) (7) (651) (1,852)
Exercise of stock options 73,900 7 1,821 -
Net income - - - 20,740
Balance at September 30, 2004 2,929,075 $293 $25,784 $72,010
See accompanying notes.
Notes to Consolidated Financial Statements
1. Accounting policies. ORGANIZATION - Patriot Transportation Holding, Inc.
(Company) is engaged in the transportation and real estate businesses. The
Company's transportation business is conducted through two wholly owned
subsidiaries. Florida Rock & Tank Lines, Inc. (Tank Lines) is a Southeastern
transportation company concentrating in the hauling by motor carrier of
primarily petroleum related liquids and other liquid and dry bulk
commodities. SunBelt Transport, Inc. (SunBelt) serves the flatbed portion of
the trucking industry primarily in the Southeastern U.S., hauling primarily
construction materials. The Company's real estate group, through
subsidiaries, acquires, constructs, leases, operates and manages land and
buildings to generate both current cash flows and long-term capital
appreciation. The real estate group also owns real estate which is leased
under mining royalty agreements or held for investment.
CONSOLIDATION - The consolidated financial statements include the accounts of
the Company and its subsidiaries, all of which are wholly owned. All
significant intercompany transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments with maturities of three months or less at time of purchase to be
cash equivalents.
INVENTORY - Inventory of parts and supplies is valued at the lower of cost
(first-in, first-out) or market.
TIRES ON EQUIPMENT - The value of tires on tractors and trailers is accounted
for as a prepaid expense and amortized over the life of the tires as a
function of miles driven.
REVENUE AND EXPENSE RECOGNITION - Transportation revenue is recognized when
shipment is complete and transportation expenses are recognized as incurred.
Real estate rental revenue and mining royalties are generally recognized when
earned under the leases. Rental income from leases with scheduled increases
during their term is recognized on a straight-line basis over the term of the
lease.
Sales of real estate are recognized when the collection of the sales price is
reasonably assured and when the Company has fulfilled substantially all of
its obligations, which are typically as of the closing date.
PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost less
accumulated depreciation. Provision for depreciation of property, plant and
equipment is computed using the straight-line method based on the following
estimated useful lives:
Years
Buildings and improvements 7-39
Revenue equipment 7-10
Other equipment 3-10
Depletion of sand and stone deposits is computed on the basis of units of
production in relation to estimated reserves.
The Company periodically reviews property and equipment and intangible
assets for potential impairment. If this review indicates that the
carrying amount of the asset may not be recoverable, the Company estimates
the future cash flows expected with regards to the asset and its eventual
disposition. If the sum of these future cash flows (undiscounted and
without interest charges) is less than the carrying amount of the assets,
the Company records an impairment loss based on the fair value of the
asset.
All direct and indirect costs, including interest and real estate taxes,
associated with the development, construction, leasing or expansion of real
estate investments are capitalized as a cost of the property. Included in
indirect costs is an estimate of internal costs associated with development
and rental of real estate investments. All external costs associated with
the acquisition of real estate investments are capitalized as a cost of the
property.
INSURANCE - The Company has a $250,000 to $500,000 self-insured retention
per occurrence in connection with certain of its workers' compensation,
automobile liability, and general liability insurance programs ("risk
insurance"). The Company is self-insured for its employee health insurance
benefits and carries a stop loss coverage of $200,000 per covered
participant per year. The Company accrues monthly the estimated cost in
connection with its portion of its risk and health insurance losses. Claims
paid by the Company are charged against the reserve. Additionally, the
Company maintains a reserve for incurred but not reported claims based on
historical analysis of such claims.
INCOME TAXES - The Company uses an asset and liability approach to
financial reporting for income taxes. Under this method, deferred tax
assets and liabilities are recognized based on differences between
financial statement and tax bases of assets and liabilities using presently
enacted tax rates. Deferred income taxes result from temporary differences
between pre-tax income reported in the financial statements and taxable
income.
STOCK OPTION AWARDS - The Company accounts for its employee stock
compensation plans under APB Opinion No. 25. See Note 7 for pro forma
disclosures of net earnings and earnings per common share, as if the fair
value based method of accounting defined in SFAS No. 123 had been applied.
EARNINGS PER COMMON SHARE - Basic earnings per common share are based on
the weighted average number of common shares outstanding during the
periods. Diluted earnings per common share are based on the weighted
average number of common shares and potential dilution of securities that
could share in earnings. The only difference between basic and diluted
shares used for the calculation is the effect of employee and director
stock options.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are
capitalized. Expenditures that relate to an existing condition caused by
past operations, and which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Estimation of such liabilities includes an
assessment of engineering estimates, continually evolving governmental laws
and standards, and potential involvement of other potentially responsible
parties.
NEW ACCOUNTING REQUIREMENTS -
In December 2003, the FASB issued FASB Interpretation No. 46 (revised
December 2003) (FIN 46R), Consolidation of Variable Interest Entities
(VIEs), which addresses how a business enterprise should evaluate whether it
has a controlling financial interest in an entity through means other than
voting rights and accordingly should consolidate the entity. The Company has
evaluated the impact of applying FIN 46R and does not believe it has any
interests in VIEs or would be considered a VIE of any other entity and
therefore, FIN 46R did not have a material impact on the financial
statements.
In December 2002, FASB Statement No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123 (SFAS148), was issued. This Statement provides alternative methods of
transition for a voluntary change to the fair value method of accounting for
stock-based employee compensation. Statement 148 also amends the disclosure
requirements of Statement 123 to require prominent disclosures in both
annual and interim financial statements. Disclosures required by this
standard are included in the notes to these consolidated financial
statements.
RECLASSIFICATIONS - Certain reclassifications have been made to the 2003
and 2002 financial statements to conform to the presentation adopted in
2004, including reclassification due to presentation of discontinued
operations.
2. Transactions with related parties. As of September 30, 2004, four of
the Company's directors were also directors of Florida Rock Industries,
Inc. ("FRI"). Such directors own approximately 27.1% of the stock of FRI
and 48.0% of the stock of the Company. Accordingly, FRI and the Company
are considered related parties.
The Company, through its transportation subsidiaries, hauls commodities by
tank and flatbed trucks for FRI. Charges for these services are based on
prevailing market prices. Other wholly owned subsidiaries lease certain
construction aggregates mining and other properties to FRI.
A summary of revenues derived from FRI follows (in thousands):
2004 2003 2002
Transportation $ 1,711 1,367 986
Real estate 5,912 5,938 5,958
$ 7,623 7,305 6,944
Included in the above revenues are $498,000, $863,000, and $1,363,000 of Real
Estate revenues derived from FRI that have been reclassified to discontinued
operations on the Consolidated Statements of Income.
The Company outsources certain functions to FRI, including some
administrative, human resources, legal and risk management. Charges for
services provided by FRI were $372,000 in 2004, $440,000 in 2003, and
$463,000 in 2002.
During 2003 and 2004, the Company closed on previously announced agreements to
sell several tracts of land to FRI as follows:
St. Mary's County, Maryland. On September 30, 2003, a subsidiary sold 796
acres of land located in St. Mary's County, Maryland to FRI for $1,836,000 in
cash resulting in a gain of $657,000, after income taxes of $420,000. A
committee of independent directors of the Company approved the sale after
review of a developed feasibility study and other materials, consultation with
management and advice from independent counsel.
Lake City, Florida. On March 30, 2004, a subsidiary sold a parcel of land and
improvements containing approximately 6,321 acres in Suwannee and Columbia
Counties, near Lake City, Florida to a subsidiary of FRI for $13,000,000 in
cash, resulting in a gain of $5,574,000 after income taxes of $3,546,000. The
sales price was approved by the Company's Audit Committee after considering
among other factors, an independent appraisal, the current use of the property
and consultation with management.
Springfield, Virginia. On May 7, 2004 a subsidiary of the Company sold 108
acres of land located in the northwest quadrant of I-395 and I-495 at Edsall
Road in Springfield, Virginia to FRI for $15,000,000 in cash resulting in a
gain of $7,895,000, after income taxes of $5,023,000. The sales price was
approved by a committee of independent directors of the Company after review
of a development feasibility study and other materials, consultation with
management and advice of independent counsel.
Miami, Florida. Also on May 7, 2004, a subsidiary of the Company sold a 935
acre parcel of property in Miami, Florida to FRI for $1,628,000 in cash,
resulting in a gain of $987,000, after income taxes of $627,000. The property
is principally composed of mined-out lakes, mitigation areas, 145 acres of
mineable land and 32 acres of roads and railroad track rights-of-way. The
terms of the sale were approved by the Company's Audit Committee after
considering, among other factors, the terms of the existing lease agreement
and consultation with management.
See Note 3 for further information regarding the accounting for the sales of
these properties as discontinued operations.
3. Discontinued operations. As discussed in Note 2, during the fiscal years
ended September 30, 2004 and 2003, the Company sold several tracts of land,
which were accounted for as discontinued operations in accordance with
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS 144). All periods
presented have been restated accordingly. A summary of discontinued
operations is as follows:
2004 2003 2002
Royalty and rental income $ 498 863 1,363
Operating expenses 190 264 517
Income before income taxes 308 599 846
Income taxes (120) (233) (330)
Income from discontinued operations $ 188 366 516
Gain from sale of
discontinued properties $23,652 1,077 -
Income taxes (9,196) (420) -
Net gain from sale of
discontinued properties $14,456 657 -
4. Debt. Debt at September 30 is summarized as follows (in thousands):
2004 2003
Revolving credit (unsecured) $ 3,201 20,000
Short term construction loan 2,713 -
5.7% to 9.5% mortgage notes,
due in installments through 2020 42,987 39,361
48,901 59,361
Less portion due within one year 7,716 1,545
$41,185 57,816
The aggregate amount of principal payments, excluding the revolving credit,
due subsequent to September 30, 2004 is: 2005 - $4,515,000; 2006 - $1,936,000;
2007 - $2,057,000; 2008-$2,209,000; 2009-$2,372,000; 2010 and subsequent years
- - $32,611,000.
The Company has a $37,000,000 uncollaterized Revolving Credit Agreement with
four banks which was to terminate on December 31, 2004. On November 10, 2004,
the Company and the four banks entered into an Amended and Restated Revolving
Credit Agreement (the Revolver) which will terminate on December 31, 2009. The
Revolver bears interest at an initial rate of 1% over the selected LIBOR. The
margin rate may change quarterly based on the Company's ratio of Consolidated
Total Debt to Consolidated Total Capital. An initial commitment fee of 0.15%
per annum is payable quarterly on the unused portion of the commitment. The
commitment fee may also change quarterly based upon the ratio described above.
The Revolver contains restrictive covenants including limitations on paying
cash dividends. Under these restrictions, as of September 30, 2004,
$13,813,000 of consolidated retained earnings would be available for payment
of dividends.
During the first quarter of fiscal 2004, a subsidiary of the Company obtained
a first mortgage loan of $8,500,000, collateralized by a building. The
proceeds were used to reduce amounts owed under the Revolver. The mortgage is
payable over 15 years with level monthly payments of principal and interest at
5.69%.
During the fourth quarter of fiscal 2004, a subsidiary of the Company obtained
a construction loan to fund the development of a pre-leased 145,000 square
foot office/warehouse. As of September 30, 2004, $2,713,000 was borrowed under
the loan. The terms of the construction financing are for borrowings not to
exceed $11,800,000 for a period not to exceed 18 months converting to a 15
year non-recourse mortgage at project completion. The interest rate is 6.17%
for both the construction and mortgage loans.
The non-recourse fully amortizing mortgage notes payable are collateralized
by real estate having a carrying value of approximately $57,794,000 at
September 30, 2004.
Certain properties having a carrying value at September 30, 2004 of
$793,000 were encumbered by industrial revenue bonds that are the liability
of FRI. FRI has agreed to pay such debt when due (or sooner if FRI cancels
its lease of such property) and further has agreed to indemnify and hold
harmless the Company.
During Fiscal 2004, 2003 and 2002 the Company capitalized interest costs of
$10,000, $182,000 and $194,000, respectively.
5. Leases. At September 30, 2004, the total carrying value of property
owned by the Company which is leased or held for lease to others is
summarized as follows (in thousands):
Construction aggregates property $ 31,371
Commercial property 114,011
Land and other property 1,613
146,995
Less accumulated depreciation and depletion 26,328
$120,667
The minimum future rentals due the Company on noncancelable leases as of
September 30, 2004 are as follows: 2005 - $10,005,000; 2006 - $7,620,000;
2007 - $5,987,000; 2008 - $5,543,000; 2009 - $4,818,000; 2010 and
subsequent years $19,810,000.
6. Preferred Shareholder Rights Plan. On May 5, 1999, the Board of
Directors of the Company declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of common stock.
The dividend was payable on June 2, 1999. Each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share
of Series A Junior Participating Preferred Stock of the Company, par value
$.01 per share (the "Preferred Shares"), at a price of $96 per one one-
hundredth of a Preferred Share, subject to adjustment.
In the event that any Person or group of affiliated or associated Persons
(an "Acquiring Person") acquires beneficial ownership of 15% or more of the
Company's outstanding common stock, each holder of a Right, other than
Rights beneficially owned by the Acquiring Person (which will thereafter be
void), will thereafter have the right to receive upon exercise that number
of Common Shares having a market value of two times the exercise price of
the Right. An Acquiring Person excludes any Person or group of affiliated
or associated Persons who were beneficial owners, individually or
collectively, of 15% or more of the Company's Common Shares on May 4, 1999.
The Rights initially trade together with the Company's common stock and are
not exercisable. However, if an Acquiring Person acquires 15% or more of
the Company's common stock, the Rights may become exercisable and trade
separately in the absence of future board action. The Board of Directors
may, at its option, redeem all Rights for $.01 per right, at any time prior
to the Rights becoming exercisable. The Rights will expire September 30,
2009 unless earlier redeemed, exchanged or amended by the Board.
7. Stock Option Plans. The Company has two Stock Option Plans (the 1995
Stock Option Plan and the 2000 Stock Option Plan) under which options for
shares of common stock have been granted to directors, officers and key
employees. Currently, only the 2000 Plan has options available for grant.
The options awarded under the two plans have similar characteristics.
All stock options expire ten years from the date of grant. Options awarded
to directors are exercisable immediately and options awarded to officers
and employees become exercisable in cumulative installments of 20% each
year after a one year waiting period from date of grant. Options awarded in
2004 included 10,000 to an officer and 41,000 to directors. Options awarded
in 2003 included 140,000 to officers and key employees. The remaining
options issued in 2003 and all awards in 2002 were to directors.
At September 30, 2004, there were 267,200 shares under option.
Option transactions for the fiscal years ended September 30 are summarized
as follows:
Shares under Weighted Average
Option Exercise Price
Balance at September 30, 2001 131,600 $ 18.67
Granted 37,000 22.99
Cancelled (7,000) 21.29
Exercised (20,600) 17 93
Balance at September 30, 2002 141,000 $ 19.78
Granted 182,000 22.87
Cancelled (3,500) 22.48
Exercised (20,000) 17.75
Balance at September 30, 2003 299,500 $ 21.85
Granted 51,000 31.20
Cancelled (9,400) 22.23
Exercised (73,900) 20.15
Balance at September 30, 2004 267,200 $ 23.99
The following table summarizes information concerning stock options
outstanding at September 30, 2004:
Shares Weighted Weighted
Range of Exercise under Average Average
Prices per Share Option Exercise Price Remaining Life
Non-exercisable:
$22.23 - $31.88 104,240 $ 23.01 8.2
Exercisable:
$15.13 - $22.66 75,560 19.86 7.4
$23.77 - $32.75 87,400 28.75 8.4
162,960 $ 24.63 7.9
If compensation cost for stock option grants had been determined based on
the Black-Scholes option pricing model value at the grant date for the
awards consistent with the provisions of SFAS No. 123, the Company's net
income, basic and diluted earnings per share would have been (in thousands,
except per share amounts):
2004 2003 2002
Net income
As reported $20,740 4,575 5,655
Deduct: Total stock-based
employee compensation expense
determined under fair value based
method, net of tax effects $ 396 483 348
Pro forma $20,344 4,092 5,307
Basic earnings per common share
As reported $ 7.08 1.51 1.80
Pro forma $ 6.94 1.35 1.69
Diluted earnings per common share
As reported $ 6.97 1.49 1.79
Pro forma $ 6.79 1.33 1.62
The fair value of options granted in 2003 was estimated to be $13.51 on the
date of grant using the following assumptions; no dividend yield, expected
volatility of 52.6%, risk-free interest rates of 4.5% and expected lives of
7 years. The weighted average fair value of options granted in 2004 was
estimated to be $16.32 on the date of grant using the following assumptions;
no dividend yield, expected volatility of 45.1%, risk-free interest rates of
3.9% and expected lives of 7 years.
8. Income taxes. The provision for income taxes for continuing operations
for fiscal years ended September 30 consists of the following (in
thousands):
2004 2003 2002
Current:
Federal $2,720 1,592 2,150
State 445 262 327
3,165 1,854 2,477
Deferred
Federal 605 354 662
State 109 64 146
714 418 808
Total $3,879 2,272 3,285
A reconciliation between the amount of tax shown above and the amount
computed at the statutory Federal income tax rate follows (in thousands):
2004 2003 2002
Amount computed at statutory
Federal rate $3,491 1,980 2,864
State income taxes (net of Federal
income tax benefit) 362 211 306
Other, net 26 81 115
Provision for income taxes $3,879 2,272 3,285
The types of temporary differences and their related tax effects that give
rise to deferred tax assets and deferred tax liabilities at September 30,
are presented below:
2004 2003
Deferred tax liabilities:
Property and equipment $17,840 12,839
Depletion 570 570
Prepaid expenses 1,181 1,144
Gross deferred tax liabilities 19,591 14,553
Deferred tax assets:
Insurance reserves 2,745 2,659
Other, net 965 929
Gross deferred tax assets 3,710 3,588
Net deferred tax liability $15,881 10,965
9. Employee benefits. The Company and certain subsidiaries have a
savings/profit sharing plan for the benefit of qualified employees. The
savings feature of the plan incorporates the provisions of Section 401(k)
of the Internal Revenue Code. Under the savings feature of the plan, an
eligible employee may elect to save a portion (within limits) of their
compensation on a tax deferred basis. The Company contributes to a
participant's account an amount equal to 50% (with certain limits) of the
participant's contribution. Additionally, the Company may make an annual
contribution to the plan as determined by the Board of Directors, with
certain limitations. The plan provides for deferred vesting with benefits
payable upon retirement or earlier termination of employment. The
Company's cost was $649,000 in 2004, $591,000 in 2003 and $545,000 in 2002.
The Company provides certain health benefits for retired employees.
Employees may become eligible for those benefits if they were employed by
the Company prior to December 10, 1992, meet the service requirements and
reach retirement age while working for the Company. The plan is
contributory and unfunded. The Company accrues the estimated cost of
retiree health benefits over the years that the employees render service.
The accrued postretirement benefit cost as of September 30, 2004 and 2003
was $564,000 and $595,000, respectively. The net periodic postretirement
benefit cost was $2,000, $5,000, and $15,000 for fiscal 2004, 2003, and
2002, respectively.
The discount rate used in determining the Net Periodic Postretirement Benefit
Cost and the APBO was 5.75% for 2004, 5.75% for 2003 and 7.0% for 2002. No
medical trend is applicable because the Company's share of the cost is
frozen.
10. Business segments. The Company has identified two business segments,
each of which is managed separately along product lines. The Company's
operations are substantially in the Southeastern and Mid-Atlantic states.
The transportation segment hauls liquid and dry bulk commodities by motor
carrier. The real estate segment owns real estate of which a substantial
portion is under mining royalty agreements or leased. The real estate
segment also holds certain other real estate for investment and is developing
commercial and industrial properties.
Operating results and certain other financial data for the Company's business
segments are as follows (in thousands):
2004 2003 2002
Revenues:
Transportation $ 99,424 87,996 81,921
Real estate (a) 16,365 14,444 13,665
$115,789 102,440 95,586
Operating profit:
Transportation $ 5,625 2,360 5,057
Real estate (a) 9,269 8,429 8,018
Corporate expenses (1,464) (1,473) (1,508)
$ 13,430 9,316 11,567
Capital expenditures:
Transportation $ 4,350 7,086 11,430
Real estate 17,619 13,327 7,179
$ 21,969 20,413 18,609
Depreciation, depletion and
amortization:
Transportation $ 8,200 8,510 7,876
Real estate 3,782 3,211 2,961
Other 248 235 249
$ 12,230 11,956 11,086
Identifiable assets at September 30:
Transportation $ 42,479 45,055 47,519
Real estate 125,030 116,269 105,850
Cash 16,752 2,552 529
Unallocated corporate assets 1,133 1,340 1,565
$185,394 165,216 155,463
(a) Fiscal 2003, and 2002 includes revenue of $68,000,and $554,000, and
operating profit of $47,000, and $323,000, respectively, from the sale of
real estate.
11. Cash held in escrow. At September 30, 2004, the Company had $16,553,000 of
cash held in escrow accounts. Proceeds from the sales of certain properties
was placed in the escrow accounts in anticipation of reinvesting these
proceeds in tax-deferred exchanges under Section 1031 of the United States
Internal Revenue Code. Subsequent to the fiscal year end, $7,150,000 of the
escrowed funds was used in a qualified exchange and the remaining funds of
$9,340,000 were released for general use.
12. Acquisition. On May 30, 2002, the Company acquired substantially all of
the operating assets of Infinger Transportation Company, Inc. (Infinger), a
regional tank truck carrier based in Charleston, South Carolina. The
acquisition was accounted for as a purchase. The purchase price was
approximately $3,698,000, including costs associated with the acquisition.
The purchase price, which was financed through the revolving credit facility,
has been allocated to the assets acquired based on their respective fair
values. The purpose of the acquisition was to enable the Company to expand
into new markets and increase capacity in existing markets. No goodwill was
recorded in the transaction.
13. Fair values of financial instruments. At September 30, 2004 and 2003, the
carrying amount reported in the consolidated balance sheet for cash and cash
equivalents, short-term notes payable to bank and revolving credit
approximate their fair value. The fair values of the Company's other long-
term debt are estimated based on current rates available to the Company for
debt of the same remaining maturities. At September 30, 2004, the carrying
amount and fair value of such other long term debt was $45,700,000 and
$47,859,000, respectively. At September 30, 2003, the carrying amount and
fair value of other long term debt was $39,361,000 and $41,795,000,
respectively.
14. Contingent liabilities. Certain of the Company's subsidiaries are
involved in litigation on a number of matters and are subject to certain
claims which arise in the normal course of business. The Company has retained
certain self-insurance risks with respect to losses for third party liability
and property damage. In the opinion of management none of these matters are
expected to have a material adverse effect on the Company's consolidated
financial condition, results of operations or cash flows.
15. Commitments. The Company, at September 30, 2004, had entered into various
contracts to develop real estate with remaining commitments totaling
$6,998,000, and to purchase transportation equipment for approximately
$5,224,000.
A subsidiary of the Company has entered into an agreement to develop and sell
to a major home builder a minimum of 292 residential lots on 73.6 acres of the
Bird River Property currently zoned for residential. The minimum aggregate
purchase price for these lots is $28,705,000.
The rights and obligations of the subsidiary under this agreement are
specifically contingent upon the approval by Baltimore County of a Planned
Unit Development (PUD) by July 1, 2006 which will permit the development of
and use of the property for a minimum of 292 residential lots. The
subsidiary's rights and obligations are also expressly contingent upon the
construction of the proposed Route 43 and the subsidiary's ability to have
vehicular and water and sewer connection access to the property by July 1,
2007, at what the subsidiary deems in its sole discretion to be a commercially
reasonable cost. The obligations of the builder under the agreement also are
subject to customary conditions precedent.
Report of Independent Registered Certified Public Accounting Firm
To the Board of Directors and Shareholders of
Patriot Transportation Holding, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity, and cash flows
present fairly, in all material respects, the financial position of Patriot
Transportation Holding, Inc. and its subsidiaries at September 30, 2004, and
2003, and the results of their operations and their cash flows for each of
the three years in the period ended September 30, 2004 in conformity with
accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements
in accordance with standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
November 30, 2004
Jacksonville, Florida
Directors and Officers
Directors
Edward L. Baker (1)
Chairman of the Board of the Company
and of Florida Rock Industries, Inc.
John D. Baker II (1)
President and Chief Executive
Officer of Florida Rock Industries, Inc.
Thompson S. Baker II
Vice President of
Florida Rock Industries, Inc.
Charles E. Commander III (2)(4)
Partner, Jacksonville office
Foley & Lardner
Luke E. Fichthorn III
Private Investment Banker,
Twain Associates and Chairman of the
Board and Chief Executive Officer of
Bairnco Corporation
Robert H. Paul III (2)(3)(4)
Chairman of the Board, President
and Chief Executive Officer of
Southeast-Atlantic Beverage Corporation
H. W. Shad III (2)
Management Consulting and Business Valuations
Mike Shad, P.L.
Martin E. Stein, Jr. (3)(4)
Chairman and Chief Executive Officer of
Regency Centers Corporation and
Chairman of the Regency Group, Inc.
James H. Winston (3)
President of LPMC of Jax, Inc.,
Omega Insurance Company and Citadel
Life & Health Insurance Co.
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Nominating Committee
Officers
Edward L. Baker
Chairman of the Board
John E. Anderson
President and Chief Executive Officer
David H. deVilliers, Jr.
Vice President
President, FRP Development Corp. and
Florida Rock Properties, Inc.
Ray M. Van Landingham
Vice President, Treasurer, Secretary
and Chief Financial Officer
Gregory B. Lechwar
Controller and Chief Accounting Officer
Terry S. Phipps
President, SunBelt Transport, Inc.
Robert E. Sandlin
President, Florida Rock & Tank Lines, Inc.
Patriot Transportation Holding, Inc.
1801 Art Museum Drive, Suite 300
Jacksonville, Florida 32207
Telephone: (904) 396-5733
Annual Meeting
Shareholders are cordially invited to attend the Annual Shareholders Meeting
which will be held at 2 p.m. local time, on Wednesday, January 26, 2005, at
155 East 21st Street, Jacksonville, Florida, 32206.
Transfer Agent
Wachovia Bank, N.A.
Corporate Trust Client Services NC-1153
1525 West W. T. Harris Boulevard - 3C3
Charlotte, NC 28288-1153
Telephone: 1-800-829-8432
General Counsel
McGuireWoods LLP
Jacksonville, Florida
Independent Registered Certified Public Accounting Firm
PricewaterhouseCoopers LLP
Jacksonville, Florida
Common Stock Listed
The Nasdaq Stock Market
(Symbol: PATR)
Form 10-K
Shareholders may receive without charge a copy of Patriot Transportation
Holding, Inc.'s annual report on Form 10-K for the fiscal year ended
September 30, 2004 as filed with the Securities and Exchange Commission by
writing to the Treasurer at 1801 Art Museum Drive, Suite 300, Jacksonville,
Florida 32207.