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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-17554
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)
904/396-5733
(Registrant's telephone number, including area code)
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 whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act). YES___ NO X
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of April 25, 2005: 2,955,975 shares of
$.10 par value common stock.
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-Q
QUARTER ENDED March 31, 2005
CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 1
Consolidated Statements of Income 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risks 16
Item 4. Controls and Procedures 16
Part II. Other Information
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits 17
Signatures 19
Exhibit 31 Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 24
Exhibit 32 Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 27
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except shares and per share amounts)
(Unaudited)
March 31, September 30,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents $ 268 199
Cash held in escrow - 16,553
Accounts receivable (including related
party of $453 and $344) 9,382 9,761
Less allowance for doubtful accounts (507) (638)
Inventory 659 642
Prepaid tires on equipment 2,180 1,930
Prepaid insurance 1,317 504
Prepaid expenses, other 660 1,115
Total current assets 13,959 30,066
Property, plant and equipment, at cost 242,281 224,230
Less accumulated depreciation and
depletion (78,499) (75,219)
Net property, plant and equipment 163,782 149,011
Goodwill 1,087 1,087
Other assets 5,777 5,230
Total assets $184,605 185,394
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,376 3,072
Federal and state income taxes payable 3,091 6,799
Accrued payroll 2,487 2,757
Accrued insurance reserves 2,484 2,188
Accrued liabilities, other 669 567
Short-term notes payable - 5,914
Long-term debt due within one year 1,867 1,802
Total current liabilities 13,974 23,099
Long-term debt 49,715 41,185
Deferred income taxes 11,413 15,767
Accrued insurance reserves 5,689 5,689
Other liabilities 1,647 1,567
Shareholders' equity:
Preferred stock, no par value;
5,000,000 shares authorized; none issued - -
Common stock, $.10 par value;
25,000,000 shares authorized,
2,955,975 and 2,929,075 shares issued
and outstanding, respectively 296 293
Capital in excess of par value 26,660 25,784
Retained earnings 75,211 72,010
Total shareholders' equity 102,167 98,087
Total liabilities and shareholders' equity $184,605 185,394
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2005 2004 2005 2004
Revenues:
Transportation $ 27,496 24,281 54,531 48,052
Real Estate 4,518 4,105 8,857 8,018
Total revenues (includes related
Party revenue of $1,662, $991
$3,197 and $2,823, respectively) 32,014 28,386 63,388 56,070
Cost of operations:
Transportation 24,289 21,385 47,892 41,996
Real Estate 2,056 1,992 3,910 3,842
Gross profit 5,669 5,009 11,586 10,232
Selling, general and
administrative expense 2,329 2,155 4,729 4,374
Operating profit 3,340 2,854 6,857 5,858
Other income 5 99 15 98
Interest expense (812) (974) (1,625) (1,958)
Income from continuing
operations before income taxes 2,533 1,979 5,247 3,998
Provision for income taxes (988) (733) (2,046) (1,521)
Income from continuing
operations 1,545 1,246 3,201 2,477
Discontinued operations
net of tax - 5,727 - 5,814
Net income $ 1,545 6,973 3,201 8,291
Earnings per common share-basic:
Income from continuing
operations $ .52 .43 1.09 .84
Discontinued operations $ - 1.95 - 1.99
Net income $ .52 2.38 1.09 2.83
Earnings per common share-diluted:
Income from continuing operations $ .51 .42 1.06 .83
Discontinued operations $ - 1.92 - 1.96
Net income $ .51 2.34 1.06 2.79
Number of shares used in computing:
Basic earnings per common share 2,948 2,931 2,940 2,932
Diluted earnings per common share 3,037 2,979 3,019 2,976
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2005 AND 2004
(In thousands)
(Unaudited)
2005 2004
Cash flows from operating activities:
Net income $ 3,201 8,291
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 6,219 6,152
Deferred income taxes (4,099) 2,499
Gain on disposition of property, plant and equipment (382) (9,233)
Tax benefit from stock option exercise 227 244
Net changes in operating assets and liabilities:
Accounts receivable 248 (649)
Prepaid expenses and other current assets (625) 318
Other assets (774) (505)
Accounts payable and accrued liabilities 177 (651)
Federal and state income taxes payable (3,708) -
Accrued insurance reserves and other long-term
liabilities 80 17
Net cash provided by operating activities 564 6,483
Cash flows from investing activities:
Purchase of property and equipment (21,203) (1,824)
Cash held in escrow 16,553 (11,092)
Proceeds from sale of property and equipment 823 13,300
Net cash provided by (used in) investing activities (3,827) 384
Cash flows from financing activities:
Proceeds from issuance of long-term debt 3,776 8,500
Net decrease in revolving debt (219) (13,833)
Repayment of long-term debt (877) (962)
Repurchase of Company Stock - (2,132)
Exercise of employee stock options 652 1,238
Net cash provided by (used in) financing activities 3,332 (7,189)
Net increase (decrease) in cash and cash equivalents 69 (322)
Cash and cash equivalents at beginning of period 199 757
Cash and cash equivalents at end of the period $ 268 435
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
(1) Basis of Presentation. The accompanying consolidated financial
statements include the accounts of Patriot Transportation Holding,
Inc. and its subsidiaries (the "Company"). These statements have
been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial
information and the instructions to Form 10-Q and do not include
all the information and footnotes required by accounting principles
generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments
(primarily consisting of normal recurring accruals) considered
necessary for a fair presentation of the results for the interim
periods have been included. Operating results for the three months
and six months ended March 31, 2005 are not necessarily indicative
of the results that may be expected for the fiscal year ending
September 30, 2005. The accompanying consolidated financial
statements and the information included under the heading
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" should be read in conjunction with the
Company's consolidated financial statements and related notes
included in the Company's Form 10-K for the year ended September
30, 2004.
Certain reclassifications have been made to the Fiscal 2004
financial statements to conform to the presentation adopted in
Fiscal 2005.
(2) Recent Accounting Pronouncements. In December 2004, the FASB
issued a revised Statement No. 123 "Share-Based Payment." (SFAS
123R) This Statement establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments
for goods and services, and affects the Company's accounting for
its stock option plans. The standard is effective for the Company
at the beginning of its next fiscal year (October 1, 2005). The
Company intends to use the modified prospective application, and
therefore at the effective date compensation costs shall be
included in the determination of net income for all new, modified,
repurchased, or cancelled awards and all prior awards whose
requisite service conditions have not been met. Compensation costs
to be expensed upon adoption are the grant-date fair value of the
stock option awards. While we cannot determine the impact on
future net earnings as a result of the adoption of SFAS 123R, the
estimated compensation expense related to prior periods is
presented in Note 8. The compensation expense for future periods
will be dependent on the number of options granted, the market
price of the common stock at the date of grant, the vesting period
and other factors.
(3) 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 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):
Three Months ended Six Months ended
March 31, March 31,__
2005 2004 2005 2004
Revenues:
Transportation $ 27,496 24,281 54,531 48,052
Real estate 4,518 4,105 8,857 8,018
$ 32,014 28,386 63,388 56,070
Operating profit
Transportation $ 1,364 1,121 2,813 2,467
Real estate 2,460 2,112 4,946 4,174
Corporate expenses (484) (379) (902) (783)
$ 3,340 2,854 6,857 5,858
Identifiable assets March 31, September 30,
2005 2004
Transportation $ 45,532 42,479
Real estate 137,474 125,030
Cash items 268 16,752
Unallocated corporate assets 1,331 1,133
$184,605 185,394
(4) Long-Term debt. Long-term debt is summarized as follows (in
thousands):
March 31, September 30,
2005 2004___
Revolving Credit,
Uncollateralized, variable
rate $ 2,982 3,201
Construction loan 6.17% 6,490 2,713
5.7% to 9.5% mortgage notes
payable in installments
through 2020 42,110 42,987
51,582 48,901
Less portion due in one year 1,867 7,716
$49,715 41,185
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
which was 3.84% at March 31, 2005. 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.
(5) Related Party Transactions. The Company, through its
transportation subsidiaries, hauls commodities by tank and flatbed
trucks for Florida Rock Industries, Inc. (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. In addition, the Company outsources certain
administrative functions to FRI. The cost of these administrative
functions was $23,000 and $99,000 for the quarters ending March 31,
2005 and 2004, respectively.
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 $5,655,000 after
income taxes of $3,465,000. The sales price was approved by the
Company's Audit Committee, composed of independent Directors of the
Company, after considering among other factors, an independent
appraisal, the current use of the property and consultation with
management. See Note (6) for further information.
(6) Discontinued operations. During fiscal year 2004, the Company
sold three tracts of land that 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). A summary of discontinued
operations is as follows:
Three Months ended Six Months ended
March 31, March 31,__
2005 2004 2005 2004
Royalties and rents $ - 241 - 444
Operating expenses - 125 - 188
Income before income taxes - 116 - 256
Income taxes - (44) - (97)
Income from discontinued
operations $ - 72 - 159
Gain from sale of
Discontinued properties - 9,120 - 9,120
Income taxes - (3,465) - (3,465)
Net gain from sale of
Discontinued properties $ - 5,655 - 5,655
(7) Earnings per share. The following details the denominators of
the basic and diluted earnings per common share computations.
THREE MONTHS SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2005 2004 2005 2004
Weighted average common shares
outstanding during the
period - shares used for
basic earnings per share 2,947,727 2,930,866 2,939,692 2,932,041
Common shares issuable under
Stock options which are
potentially dilutive 89,605 48,205 78,832 43,658
Common shares used for diluted
earnings per share 3,037,332 2,979,071 3,018,524 2,975,699
Income from continuing operations 1,545,000 1,246,000 3,201,000 2,477,000
Discontinued operations - 5,727,000 - 5,814,000
Net income 1,545,000 6,973,000 3,201,000 8,291,000
Earnings per common share basic
Income from continuing operations $ .52 .43 1.09 .84
Discontinued operations $ - 1.95 - 1.99
Net income $ .52 2.38 1.09 2.83
Earnings per common share diluted
Income from continuing operations $ .51 .42 1.06 .83
Discontinued operations $ - 1.92 - 1.96
Net income $ .51 2.34 $1.06 2.79
For the six months ended March 31, 2004, 7,000 shares attributable
to outstanding stock options were excluded from the calculation of
diluted earnings per share because the exercise prices of the stock
options were greater than the average price of the common shares,
and therefore their inclusion would have been anti-dilutive.
(8) Stock-Based Compensation Plan. The Company accounts for its
stock-based employee compensation plans under the recognition and
measurement principles of APB Opinion No. 25, "Accounting for Stock
Issued to Employees", and related interpretations. No stock-based
employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to
the market value of the underlying common stock on the date of
grant. The following table illustrates the effect on net income and
earnings per share if the company had applied the fair value
recognition provisions of FASB Statement No. 123, "Accounting for
Stock-Based Compensation", to stock-based employee compensation.
Three Months ended Six Months ended
March 31, March 31,
2005 2004 2005 2004
Net income, as reported $ 1,545 6,973 3,201 8,291
Deduct: Total stock-based
employee compensation
expense determined under
fair value based method
for all awards, net of
related tax effects 192 123 471 349
Pro forma net income $ 1,353 6,850 2,730 7,942
Earnings per common share:
Basic, as reported $ .52 2.38 1.09 2.83
Basic, pro forma $ .46 2.34 .93 2.71
Diluted, as reported $ .51 2.34 1.06 2.79
Diluted, pro forma $ .45 2.30 .90 2.67
(9) 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.
The Company maintains a Profit Sharing and Deferred Earnings
Plan (the "Plan") for its employees. Participants in the Plan
may direct their account balances to be invested in a number of
different investment options, including common stock of the
Company that is purchased by the Plan in the open market. The
acquisition by the Plan's trustee for the benefit and at the
direction of Plan participants of shares of Company common stock
have not been registered, and the Company intends to file a Form
S-8 to register the shares of its common stock acquired or to be
acquired by Plan participants.
The Company is subject to claims for rescission of
acquisitions of shares of the Company's common stock occurring
during the one year period following the date of acquisition of
the shares (the statute of limitations period that applies to
claims for rescission), due to the failure to register the shares
in accordance with applicable securities law. Approximately
1,918 shares of the Company's common stock were transferred to
Plan participants during the Plan year ended December 31, 2004
and, if rescinded, would have an aggregate repurchase price of
approximately $68,000, plus interest. The Company may also face
penalties in connection with these matters and could be subject
to claims for rescission for acquisitions prior to the one-year
statute of limitation.
The Company does not believe that any potential rescission
liability would be material to its balance sheet or shareholders'
equity.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview - The Company's operations are influenced by a number of
external and internal factors. External factors include levels of
economic and industrial activity in the United States and the
Southeast, petroleum product usage in the Southeast which is driven
in part by tourism and commercial aviation, fuel costs, driver
availability and cost, regulations regarding driver qualifications
and hours of service, construction activity, FRI's sales from the
Company's mining properties, interest rates and demand for
commercial warehouse space in the Baltimore/Washington area.
Internal factors include revenue mix, capacity utilization, auto
and workers' compensation accident frequencies and severity, other
operating factors, administrative costs, and construction costs of
new projects.
During the first half of fiscal 2005, the transportation segment's
ten largest customers accounted for approximately 43% of the
transportation segment's revenue. One of those customers accounted
for 10.6% of transportation segment's revenues. The loss of any
one of these customers could have an adverse effect on the
Company's revenues and income.
Financial results of the Company for any individual quarter are not
necessarily indicative of results to be expected for the year.
Comparative Results of Operations for the Three Months Ended
March 31, 2005 and 2004
Consolidated Results. - Income from continuing operations for the
second quarter of fiscal 2005 was $1,545,000, an increase of
$299,000 or 24% compared to $1,246,000 for the same period last
year. The second quarter of 2004 included $5,727,000 in income from
discontinued operations resulting in net income of $6,973,000
compared to net income of $1,545,000 for the second quarter of
2005. Fully diluted earnings per share for the second quarter of
fiscal 2005 was $0.51 compared to $2.34 in the second quarter of
fiscal 2004.
Transportation
Three Months Ended March 31
(dollars in thousands) ___2005 % 2004 %_
Transportation revenue $ 25,221 92% 23,288 96%
Fuel surcharges 2,275 8% 993 4%
Revenues 27,496 100% 24,281 100%
Compensation and benefits 10,920 40% 10,080 41%
Fuel expenses 5,025 18% 3,586 15%
Insurance and losses 3,284 12% 2,833 12%
Depreciation expense 2,007 7% 2,000 8%
Other, net 3,053 11% 2,886 12%
Cost of operations 24,289 88% 21,385 88%
Gross profit $ 3,207 12% 2,896 12%
Revenues Second Quarter 2005 vs Second Quarter 2004 -
Transportation segment revenues were $27,496,000 in the second
quarter of 2005, an increase of $3,215,000 over the same quarter
last year. Fuel surcharges accounted for $1,282,000 of the
increase, resulting from higher diesel fuel costs during the
quarter compared to the same quarter last year. Excluding fuel
surcharges, revenue per mile increased 5.2%, reflecting better
pricing for our services. Revenue miles in the current quarter were
up 2.9% compared to the second quarter of 2004.
Expenses Second Quarter 2005 vs Second Quarter 2004 - The
Transportation segment cost of operations in the second quarter of
2005 increased $2,904,000 to $24,289,000, as compared to
$21,385,000 in the same quarter last year. The primary factors for
the increase are higher diesel fuel costs and an increase in risk
and health insurance costs. Our average diesel fuel cost per gallon
increased 30.3% in the second quarter of 2005 compared to the same
quarter last year.
Real Estate
Three Months Ended March 31
(dollars in thousands) ___2005 % 2004 %_
Royalties and rent $ 1,457 32% 1,369 33%
Developed property rentals 3,061 68% 2,736 67%
Total Revenue 4,518 100% 4,105 100%
Mining and land rent expenses 274 7% 513 13%
Developed property management 1,782 39% 1,479 36%
Cost of Operations 2,056 46% 1,992 49%
Gross profit $ 2,462 54% 2,113 51%
Revenues Second Quarter 2005 vs Second Quarter 2004 - Real Estate
segment revenues for the second quarter of fiscal 2005 were
$4,518,000, an increase of $413,000 or 10.1% over the same quarter
last year. Lease revenue from developed properties increased
$325,000 or 11.9%, due to an increase in occupied square feet
resulting from the purchase of two completed buildings in March
2004 and the purchase of one building in early November 2004. These
purchases added 491,000 square feet, of which 339,000 was leased
during the second quarter of fiscal 2005. Royalties from mining
operations increased as a result of increased royalties per ton.
Expenses Second Quarter 2005 vs Second Quarter 2004 - Real estate
segment expenses increased slightly to $2,056,000 during the second
quarter of fiscal 2005, compared to $1,992,000 for the same quarter
last year. Expenses related to development activities increased as
a result of the new building additions.
Consolidated Gross Profit - Consolidated gross profit was
$5,669,000 in the second quarter of fiscal 2005 compared to
$5,009,000 in the same period last year, an increase of 13.2%.
Consolidated selling, general and administrative expense - Selling,
general and administrative expenses were consistent quarter to
quarter. SG&A expense was 7.3% of revenue for the second quarter of
fiscal 2005 compared to 7.6% for the same period last year.
Income from continuing operations - Income from continuing
operations was $1,545,000 or $0.51 per diluted share in the second
quarter of fiscal 2005, an increase of $299,000 or 24.0% compared
to $1,246,000 or $0.42 per diluted share in the same period last
year.
Discontinued Operations - During fiscal 2004 the Company had three
sales of real estate that have been accounted for as discontinued
operations, in accordance with SFAS 144. The income from the
operations of these components have been reflected in the
consolidated income statement as income from discontinued
operations, net of income taxes.
The results of operations of these properties, consisting of
royalty and rental income, operating expenses and depreciation,
have been reclassified to discontinued operations. Income from the
disposed properties, net of income taxes of $44,000 was $72,000 for
the three months ending March 31, 2004.
One of these properties was sold during the quarter ended March 31,
2004 and the gain from sale of $5,655,000 after income taxes of
$3,465,000 has been recorded as discontinued operations.
Net income - Primarily as a result of the property sale in the
second quarter of 2004, net income decreased to $1,545,000 in the
second quarter of fiscal 2005 from $6,973,000 in the same period
last year. Diluted earnings per share decreased to $0.51 in the
second quarter of fiscal 2005 from $2.34 in the same period last
year.
Comparative Results of Operations for the Six Months Ended March
31, 2005 and 2004
Consolidated Results. - Income from continuing operations for the
first six months of fiscal 2005 was $3,201,000, compared to
$2,477,000 for the same period last year. The first six months of
2004 included $5,814,000 in income from discontinued operations
resulting in net income of $8,291,000 compared to net income of
$3,201,000 for the first six months of fiscal 2005. Fully diluted
earnings per share for the first six months of fiscal 2005 was
$1.06 compared to $2.79 for the same period last year.
Transportation
Six Months Ended March 31
(dollars in thousands) ___2005 % 2004 %
Transportation revenue $ 49,896 92% 46,309 96%
Fuel surcharges 4,635 8% 1,743 4%
Revenues 54,531 100% 48,052 100%
Compensation and benefits 21,606 40% 19,995 42%
Fuel expenses 9,924 18% 6,795 14%
Insurance and losses 6,517 12% 5,584 12%
Depreciation expense 3,988 7% 4,025 9%
Other, net 5,857 11% 5,597 12%
Cost of operations 47,892 88% 41,996 87%
Gross profit $ 6,639 12% 6,056 13%
Revenues for the Six Months Ended March 31, 2005 and 2004 - The
Transportation segment revenues were $54,531,000 in the first six
months of 2005, an increase of $6,479,000 over the same period last
year. Fuel surcharges accounted for $2,892,000 of the increase.
Excluding fuel surcharges, revenue per mile increased 5.2%,
reflecting better pricing for our services. Revenue miles for the
six months were up 2.5% compared to the first six months of 2004.
Expenses for the Six Months Ended March 31, 2005 and 2004 - The
Transportation segment cost of operations in the first six months
of 2005 increased $5,896,000 to $47,892,000, as compared to
$41,996,000 in the same period last year. The primary factors for
the increase are higher diesel fuel costs and an increase in risk
and health insurance costs. Our average diesel fuel cost per gallon
increased 35.5% in the first six months of 2005 compared to the
same period last year.
Real Estate
Six Months Ended March 31
(dollars in thousands) ___2005 % 2004 %
Royalties and rent $ 2,882 33% 2,834 35%
Developed property rentals 5,975 67% 5,184 65%
Total Revenue 8,857 100% 8,018 100%
Mining and land rent expenses 631 7% 1,005 13%
Developed property management 3,279 37% 2,837 35%
Cost of Operations 3,910 44% 3,842 48%
Gross profit $ 4,947 56% 4,176 52%
Revenues for the Six Months Ended March 31, 2005 and 2004 - Real
Estate segment revenues for the first six months of fiscal 2005
were $8,857,000, an increase of $839,000 or 10.5% over the same
period last year. Lease revenue from developed properties increased
$791,000 or 15.3%, due to a 25.3% increase in occupied square feet
resulting from the purchase of two completed buildings in March
2004 and the purchase of one building in early November 2004. These
purchases added 491,000 square feet, of which 339,000 was leased
during the first six months of fiscal 2005. Royalties from mining
operations increased as a result of increased royalties per ton.
Expenses for the Six Months Ended March 31, 2005 and 2004 - Real
estate segment expenses increased slightly to $3,910,000 during the
first six months of fiscal 2005, compared to $3,842,000 for the
same period last year. Expenses related to development activities
increased as a result of the new building additions.
Consolidated Gross Profit - Consolidated gross profit was
$11,586,000 in the first six months of fiscal 2005 compared to
$10,232,000 in the same period last year, an increase of 13.2%.
Consolidated selling, general and administrative expense - Selling,
general and administrative expenses were consistent year over year.
SG&A expense was 7.5% of revenue for the first six months of fiscal
2005 compared to 7.8% for the same period last year.
Income from continuing operations - Income from continuing
operations was $3,201,000 or $1.06 per diluted share in the first
six months of fiscal 2005, an increase of $724,000 or 29.2%
compared to $2,477,000 or $0.83 per diluted share in the same
period last year.
Discontinued Operations - During fiscal 2004 the Company had three
sales of real estate that have been accounted for as discontinued
operations, in accordance with SFAS 144. The income from the
operations of these components have been reflected in the
consolidated income statement as income from discontinued
operations, net of income taxes.
The results of operations of these properties, consisting of
royalty and rental income, operating expenses and depreciation,
have been reclassified to discontinued operations. Income from the
disposed properties, net of income taxes of $97,000 was $159,000
for the six months ending March 31, 2004.
One of these properties was sold during the quarter ending March
31, 2004, resulting in a gain of $5,655,000 after income taxes of
$3,465,000 and is included in discontinued operations.
Net income - As a result of the foregoing, net income decreased to
$3,201,000 in the first six months of fiscal 2005 from $8,291,000
in the same period last year. Diluted earnings per share decreased
to $1.06 in the first six months of fiscal 2005 from $2.79 in the
same period last year.
Liquidity and Capital Resources
For the first six months of Fiscal 2005, the Company used cash
provided by operations, cash released from escrow and borrowings
under its construction loan to finance its operating activities and
the purchase of $21,203,000 in property and equipment. At September
30, 2004, the Company had $16,553,000 of cash from the sales of
real estate during fiscal 2004, which were placed in escrow in
anticipation of using the funds in an Internal Revenue Code Section
1031 tax-deferred exchange. A portion of the funds were used to
purchase land and buildings for $7,200,000 in a tax deferred
exchange and the remaining funds were released from escrow.
The Company has a $37,000,000 revolving line of credit (Revolver)
under which $34,018,000 was available at March 31, 2005. During the
first quarter of fiscal 2005, the Company renewed the Revolver with
substantially the same terms and conditions, except that the
termination date was extended to December 31, 2009.
The Company had $11,932,000 of irrevocable letters of credit
outstanding at March 31, 2005. 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 arise. As of March 31, 2005, $3,490,000 was
authorized to repurchase the Company's common stock.
The Company does not currently pay any dividends on common stock.
In December 2003, the Company committed to develop a 145,000 square
foot build-to-suit warehouse/office building pursuant to a 15 year
triple net lease. This project is expected to cost approximately
$14,900,000 and is being financed through a construction loan and
the Company's existing Revolver. 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. Borrowings under the
construction loan totaled $6,490,0000 at March 31, 2005. The
building is scheduled for completion by July 2005.
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.
Management believes that the Company is financially postured to be
able to take advantage of external and internal growth
opportunities in both our real estate and transportation segments.
Recent Accounting Pronouncements. In December 2004, the FASB issued
a revised Statement No. 123 "Share-Based Payment." (SFAS 123R) This
Statement establishes standards for the accounting for transactions
in which an entity exchanges its equity instruments for goods and
services, and affects the Company's accounting for its stock option
plans. The standard is effective for the Company at the beginning
of its next fiscal year (October 1, 2005). The Company intends to
use the modified prospective application, and therefore at the
effective date compensation costs shall be included in the
determination of net income for all new, modified, repurchased, or
cancelled awards and all prior awards whose requisite service
conditions have not been met. Compensation costs to be expensed
upon adoption are the grant-date fair value of the stock option
awards. While we cannot determine the impact on future net
earnings as a result of the adoption of SFAS 123R, the estimated
compensation expense related to prior periods is presented in Note
8. The compensation expense for future periods will be dependent
on the number of options granted, the market price of the common
stock at the date of grant, the vesting period and other factors.
Related Party Transactions. The Company, through its transportation
subsidiaries, hauls commodities by tank and flatbed trucks for
Florida Rock Industries, Inc. (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. In addition, the Company outsources certain administrative
functions to FRI. The cost of these administrative functions was
$23,000 and $99,000 for the quarters ending March 31, 2005 and
2004, respectively.
The Company leases certain mining properties to FRI under long-term
leases. The Company and FRI believe that certain of these
properties, upon completion of mining and subsequent reclamation,
present valuable opportunities for residential or commercial
development. Accordingly, the Company and FRI have decided to
investigate jointly the ultimate market potential for these
properties. The Company expects that the preliminary investigation
will not be completed for several months.
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 $5,655,000 after
income taxes of $3,465,000. The sales price was approved by the
Company's Audit Committee, composed of independent Directors of the
Company, after considering among other factors, an independent
appraisal, the current use of the property and consultation with
management. See Note (6) for further information.
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 others 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 qualification and hours of
service; availability and terms of financing; freight demand for
petroleum products including recessionary and terrorist impacts on
travel in the Company's markets; freight demand for building and
construction materials in the Company's markets; risk insurance
markets; competition; general economic conditions; demand for
flexible warehouse/office facilities in the Baltimore/Washington
area; 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS
There are no material changes to the disclosures made in Form 10-K
for the fiscal year ended September 30, 2004 with respect to this
item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. As required by
Rule 13A-15 under the Exchange Act, as of the end of the period
covered by this report, the Company carried out an evaluation of
the effectiveness of the design and operation of the Company's
disclosure controls and procedures. 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. The evaluation conducted by the Company's President and
Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer has provided them with reasonable assurance 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 rule 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 during the quarter, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
See Note 9 to the Consolidated Financial Statements included in
this Form 10-Q.
Item 4. Submission of Matters to a Vote of Security Holders
On January 26, 2005, the Company held its annual shareholders
meeting. At the meeting, the shareholders elected the following
directors by the vote shown.
Term Votes Votes Broker/
Ending For Withheld Non-Votes
Edward L. Baker 2009 2,816,884 16,420 -
Charles E. Commander III 2009 2,816,886 16,418 -
H. W. Shad III 2008 2,816,884 16 420 -
The directors whose terms of office as a director have continued
after the meeting are John D. Baker II, Thompson S. Baker II,
Luke E. Fichthorn III, James H. Winston, Robert H. Paul III, and
Martin E. Stein, Jr.
Item 6. Exhibits
(a) Exhibits. The response to this item is submitted as a
separate Section entitled "Exhibit Index", starting on
page 20.
SIGNATURES
Pursuant to the requirements 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.
May 12, 2005 PATRIOT TRANSPORTATION HOLDING, INC.
John E. Anderson
John E. Anderson
President and Chief Executive
Officer
Ray M. Van Landingham
Ray M. Van Landingham
Vice President Finance &
Administration and Chief
Financial Officer
John D. Klopfenstein
John D. Klopfenstein
Controller and Chief
Accounting Officer
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2005
EXHIBIT INDEX
(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,
incorporated by reference to an exhibit filed with
Form 10-Q for the quarter ended June 30, 2004. File
No. 33-26115.
(4)(e) 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)(f) 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) 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)(i) 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.
(10)(j) 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.
(10)(k) 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.
(10)(l) Letter of Credit Facility between Patriot
Transportation Holding, Inc. and SunTrust Bank,
N.A. dated February 16, 2005, incorporated by
reference to the Company's Form 8-K dated February
16, 2005. File No. 33-26115.
(10)(m) Summary of compensation arrangements with non-
employee directors.
(10)(n) Summary of compensation arrangements with Named
Executive Officers.
(14) Financial Code of Ethical Conduct applicable to
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. File No. 33-26115.
(31)(a) Certification of John E. Anderson.
(31)(b) Certification of Ray M. Van Landingham.
(31)(c) Certification of John D. Klopfenstein.
(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.
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