10-Q 1 0001.txt 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 June 30, 2000. OR [ ] 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 the number of shares outstanding of each of the issuer's classes of common stock, as of August 1, 2000: 3,353,151 shares of $.10 par value common stock. PATRIOT TRANSPORTATION HOLDINGS, INC. CONSOLIDATED CONDENSED BALANCE SHEET (In thousands) (Unaudited) June 30, September 30, 2000 1999 ASSETS Current assets: Cash and cash equivalents $ 1,478 2,593 Accounts receivable: Affiliates 285 399 Other 11,587 8,336 Less allowance for doubtful accounts (498) (284) Inventory of parts and supplies 619 503 Prepaid expenses and other 2,164 2,614 Total current assets 15,635 14,161 Other assets: Real estate held for investment, at cost 5,674 5,674 Goodwill 1,177 1,207 Other 2,488 2,244 Total other assets 9,339 9,125 Property, plant and equipment, at cost 182,254 172,747 Less accumulated depreciation and depletion (59,140) (57,378) Net property, plant and equipment 123,114 115,369 $148,088 138,655 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term note payable to bank $ 7,900 3,000 Accounts payable: Affiliates 335 166 Other 3,123 5,399 Federal and state income taxes 1,100 499 Accrued liabilities 4,354 3,866 Long-term debt due within one year 761 625 Total current liabilities 17,573 13,555 Long-term debt 42,224 37,936 Deferred income taxes 8,653 8,820 Accrued insurance reserves 4,662 4,644 Other liabilities 1,020 1,008 Stockholders' equity: Preferred stock, no par value; 5,000,000 shares authorized - - Common stock, $.10 par value; 25,000,000 shares authorized, 3,353,151 shares issued (3,375,817 at September 30, 1999) 335 338 Capital in excess of par value 15,012 15,660 Retained earnings 58,609 56,694 Total stockholders' equity 73,956 72,692 $148,088 138,655 See accompanying notes. PATRIOT TRANSPORTATION HOLDING, INC. CONSOLIDATED CONDENSED STATEMENT OF INCOME (In thousands except per share amounts) (Unaudited) THREE MONTHS NINE MONTHS ENDED JUNE 30, ENDED JUNE 30, 2000 1999 2000 1999 Revenues: Affiliates $ 1,767 1,726 5,150 5,282 Non-affiliates 22,491 18,128 60,824 54,619 24,258 19,854 65,974 59,901 Cost of operations 19,573 15,472 53,863 45,587 Gross profit 4,685 4,382 12,111 14,314 Selling, general and administrative expense: Affiliates 60 421 346 1,261 Non-affiliates 2,274 1,491 6,114 4,416 2,334 1,912 6,460 5,677 Operating profit 2,351 2,470 5,651 8,637 Interest expense (944) (604) (2,538) (1,697) Interest income 4 4 19 9 Other income, net 7 4 6 20 Income before income taxes 1,418 1,874 3,138 6,969 Provision for income taxes 553 731 1,224 2,718 Net income $ 865 1,143 1,914 4,251 Basic earnings per common share $ .26 .33 .57 1.23 Diluted earnings per common share $ .26 .33 .57 1.22 Number of shares used in computing: Basic earnings per share 3,274 3,431 3,339 3,450 Diluted earnings per share 3,285 3,453 3,357 3,474 See accompanying notes. PATRIOT TRANSPORTATION HOLDING INC. CONSOLIDATED STATEMENT OF CASH FLOWS NINE MONTHS ENDED JUNE 30, 2000 AND 1999 (In thousands) (Unaudited) 2000 1999 Cash flows from operating activities: Net income $1,914 4,251 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation, depletion and amortization 8,304 7,281 Net changes in operating assets and liabilities: Accounts receivable (3,217) (30) Inventory of parts and supplies (115) (240) Prepaid expenses 449 538 Accounts payable and accrued liabilities (935) (208) Increase(decrease) in deferred income taxes (250) 68 Net change in insurance reserve and other liabilities 29 361 Gain on disposition of real estate, property, plant and equipment (954) (1,705) Other, net 382 (17) Net cash provided from operating activities 5,607 10,299 Cash flows from investing activities: Purchase of property, plant and equipment (16,834) (14,258) Additions to other assets (676) (294) Purchase of real estate held for investment - (315) Proceeds from sale of real estate held for investment, property, plant and equipment, and other assets 2,114 2,393 Net cash used in investing activities (15,396) (12,474) Cash flows from financing activities: Proceeds from long-term debt 5,000 - Net increase in short-term debt 4,900 10,000 Repayment of long-term debt (576) (5,400) Repurchase of Company stock (889) (882) Exercise of stock options 239 - Net cash provided from financing activities 8,674 3,718 Net increase (decrease) in cash and cash equivalents (1,115) 1,543 Cash and cash equivalents at beginning of year 2,593 663 Cash and cash equivalents at end of the period $1,478 2,206 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest expense, net of amount capitalized $2,569 1,718 Income taxes $ 790 3,261 Non cash investing activities: Additions to property, plant and equipment from exchanges $ 820 614 See accompanying notes. PATRIOT TRANSPORTATION HOLDING, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2000 (Unaudited) (1) Basis of Presentation. The accompanying consolidated condensed financial statements include the accounts of the Company and its subsidiaries. These statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (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 and nine months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ended September 30, 2000. The accompanying consolidated financial statements and the information included under the heading "Management's Discussion and Analysis" should be read in conjunction with the consolidated financial statements and related notes of Patriot Transportation Holding, Inc. for the year ended September 30, 1999. (2) Industry Segments. The Company has identified two business segments each of which is managed separately along product lines. All the company's operations are 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. They also hold certain other real estate for investment and are 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 Nine Months ended June 30, June 30, 2000 1999 2000 1999 Revenues: Transportation $ 21,303 17,058 57,233 49,750 Real estate 2,955 2,796 8,741 10,151 $ 24,258 19,854 65,974 59,901 Operating profit(a) Transportation $ 919 930 1,887 3,373 Real estate 1,756 1,773 4,920 6,414 Corporate expenses (324) (233) (1,156) (1,150) Operating profit $ 2,351 2,470 5,651 8,637 Identifiable assets, at quarter end Transportation 55,979 48,307 Real estate 90,097 81,375 Cash items 1,478 2,206 Unallocated corporate assets 534 532 148,088 132,420 (a) Operating profit is earnings before interest expense, other income, interest income and income taxes. (3) Spin-off of Real Estate Business. On August 2, 2000, the Board of Directors approved a resolution to delay consummation of the previously approved reorganization of the Company until some date beyond July 1, 2001. The reorganization will require reauthorization by the Board. The reorganization would result in spinning off to its shareholders a new company which would include the real estate business, while retaining the transportation business in Patriot Transportation Holding, Inc. The Company has obtained a tax ruling from the Internal Revenue Service that confirms that the proposed transaction will be tax-free to shareholders. Management has recommended delaying the spin-off due to the turbulent conditions in the trucking industry and the need to complete an internal information system for its Transportation Group. The Company also wants to provide additional time for development of its new agent/owner-operator subsidiary. (4) Name Change Approval. At the annual meeting on February 2, 2000, the shareholders approved a proposal to amend Article I of the Company's Articles of Incorporation to change the name of the Company to Patriot Transportation Holding, Inc. The name change was effective on March 1,2000 upon filing of articles of amendment to Articles of Incorporation with the State of Florida. (5) Contingent Liabilities. The Company and its subsidiaries are subject to legal proceedings and claims arising out of their businesses that cover a wide range of matters. Additional information concerning these matters is presented in Note 11 to the consolidated financial statements included in the Company's 1999 Annual Report to stockholders. Such information is incorporated herein by reference. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating Results For the third quarter and first nine months of fiscal 2000, consolidated revenues increased 22.2% and 10.1%, respectively, over the same period last year. The Transportation segment revenues for the third quarter and first nine months increased 24.9% and 15.0%, respectively, due primarily to an increase in miles hauled, revenues from the new agent/owner-operator operation, and a modest increase in pricing over the same quarter last year. Real estate revenues increased 5.7% for the third quarter and decreased 13.9% for the first nine months. The increase in real estate revenues for the third quarter was due to higher royalties and rental income partially offset by reduced real estate and timber sales. There were $27,000 of real estate and timber sales during the third quarter as compared to $158,000 same quarter last year. The real estate revenue decrease for the nine months was primarily due to reduced sales of real estate and timber sales. During the first nine months of 2000, the Company had revenues from real estate and timber sales of $342,000 as compared to $2,384,000 same period last year. Consolidated gross profit increased $303,000 or 6.9% for the third quarter and decreased $2,203,000 or 15.4% for the first nine months as compared to last year. Gross profit in Transportation increased $357,000 for the third quarter and decreased $608,000 for the first nine months. The decrease in gross profit for the nine months for the Transportation Group was primarily attributable to sharply higher fuel costs, a tight labor market for drivers resulting in increased costs to hire and retain personnel and higher depreciation expense resulting from an expanded and upgraded tractor fleet. Gross profit in the Real Estate segment decreased $54,000 for the third quarter and decreased $1,595,000 for the first nine months. Real estate gross profit excluding real estate sales and timber sales increased $77,000 for the third quarter and $447,000 for the first nine months. Real estate gross profit was negatively impacted by reduced real estate and timber sales discussed above. Selling, general and administrative expense increased $422,000 for the third quarter and increased $783,000 for the first nine months from the same periods last year. Selling, general and administrative expense as a percent of sales was 9.6% for the third quarter as compared to 9.6% last year and 9.8% for the first nine months as compared to 9.5% last year. The increase was primarily attributable to increased administrative expenses related to formation of a third-party agent/owner-operator transportation operation, legal and accounting fees associated with the proposed spin-off of the real estate business, increased bad debt expense and other legal expenses. Interest expense increased $340,000 for the third quarter and increased $841,000 for the first nine months due primarily to an increase in the average debt outstanding and an increase in the average interest rate. Income tax expense decreased $178,000 for the third quarter and $1,494,000 for the first nine months as a result of reduced income before taxes. Income tax expense as a percentage of income before income tax expense was 39% for all periods. Summary and Outlook A tight labor market combined with higher fuel costs and interest rates will continue to make for a challenging transportation environment. Aggressive steps are being taken to increase unit revenues and to counteract increased expenses within the Transportation Group. The Company's third-party agent/owner-operator startup, Patriot Transportation, Inc., continues to make progress against its plan. The Company's operating real estate properties are 94% leased and the industrial market in Baltimore-Washington area remains favorable for development opportunities with low vacancy and steady rent levels. The Real Estate Group continues to actively move forward with its efforts to develop additional properties and secure well-located sites for future development. For information on the proposed reorganization of the Company see Note 3. Financial Condition For first nine months of 2000, net cash flows from operating activities were $5,607,000, which along with issuing additional long and short term debt funded the Company's investing activities of $15,396,000 and the repurchase of shares. For the first nine months of 1999, net cash flows from operating activities were $10,299,000 which along with issuing additional short term debt funded the Company's investing activities of $12,474,000 and the repurchase of shares. The Company continues to maintain its financial condition with sufficient resources to meet anticipated capital expenditures and other operating requirements. The Company's revolving credit facility will convert to a term loan if not modified by November 15, 2000. The Company is negotiating an extension of the revolving and term phase of the existing credit agreement with its bank group and anticipates that it will complete the extension and/or modification of its credit facility before the revolving credit facility converts to a term loan. Other During fiscal 1999, the transportation segment's ten largest customers accounted for approximately 33% of transportation's revenue. The loss of one or more of these customers could have an adverse effect on the Company's revenue and income. 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. Additional information concerning environmental matters is presented in Note 11 to the consolidated financial statements included in the Company's 1999 Annual Report to stockholders. Such information is incorporated herein by reference. 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, 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 are among the principal factors that could cause actual results to differ materially from the forward-looking statements: availability and terms of financing; competition; levels of construction activity in FRI's markets; labor market for drivers; fuel costs; and inflation. 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, 1999 on this matter. PART II OTHER INFORMATION Item 1. Legal Proceedings Note 11 to the consolidated financial statements included in the Company's 1999 Annual Report to stockholders is incorporated herein by reference. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The response to this item is submitted as a separate Section entitled "Exhibit Index", starting on page 11. (b) Reports on Form 8-K. During the three months ended June 30, 2000, no reports on a Form 8-K were filed by the Company. 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. August 9, 2000 PATRIOT TRANSPORTATION HOLDING, INC. JAMES J. GILSTRAP James J. Gilstrap Treasurer and Chief Financial Officer WALLACE A. PATZKE, JR. Wallace A. Patzke, Jr. Controller and Chief Accounting Officer PATRIOT TRANSPORTATION HOLDING, INC. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000 EXHIBIT INDEX (3)(a)(1) Articles of Incorporation of Patriot Transportation Holding, Inc. Previously 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. Previously 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. Previously filed as appendix to the Company's Proxy Statement dated December 15, 1994. (3)(a)(4) Amendment to the Articles of Incorporation, filed with the Florida Secretary of State on May 6, 1999. A form of such amendment was previously 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. (3)(b)(1) Restated Bylaws of Patriot Transportation Holding, Inc. adopted December 1, 1993. Previously 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. Previously filed with Form 10-K for the fiscal year ended September 30, 1994. File No. 33-26115. (4)(a) Articles III, VII and XII of the Articles of Incorporation of Patriot Transportation Holding, Inc. Previously filed with Form S-4 dated December 13, 1988. And amended Article III filed with Form 10-K for the fiscal year ended September 30, 1993. And Articles XIII and XIV previously filed as appendix to the Company's Proxy Statement dated December 15, 1994. File No. 33-026115. (4)(b) Specimen stock certificate of Patriot Transportation Holding, Inc. Previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (4)(c) Credit Agreement dated as of November 15, 1995 among Patriot Transportation Holding, Inc.; SunTrust Bank, Central Florida, National Association; Bank of America Illinois; Barnett Bank of Jacksonville, N.A.; and First Union National Bank of Florida. Previously filed with Form 10-Q for the quarter ended December 31, 1995. File No. 33-26115. (4)(c)(1) First Amendment dated as of September 30, 1998 to the Credit Agreement dated as of November 15, 1995. Previously filed with Form 10-K for the year ended September 30, 1998. File No. 33-26115. (4)(d) The Company and its consolidated subsidiaries have other long-term debt agreements which do not 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 Amendment, dated as May 5, 1999 between the Company and First Union National Bank. Previously filed as Exhibit 4 to the Company's Form 8-K dated May 5, 1999. File No. 33-26115. (10)(a) Post Distribution Agreement, dated May 7, 1986, by and between Florida Rock Industries, Inc. and Florida Rock & Tank Lines, Inc. and amendments thereto dated July 1, 1987 and September 27, 1988. Previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(b) Tax Sharing Agreement, dated May 7,1986, between Florida Rock Industries, Inc. and Florida Rock & Tank Lines, Inc. Previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(c) Various leasebacks 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)(e)), but all of which may be material in the aggregate. Previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(d) License Agreement, dated June 30, 1986, from Florida Rock Industries, Inc. to Florida Rock & Tank Lines, Inc. to use "Florida Rock" in corporate names. Previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(e) Mining Lease Agreement, dated September 1, 1986, between Florida Rock Industries, Inc. and Florida Rock Properties, Inc., successor by merger to Grandin Land, Inc. Previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(f) Summary of Medical Reimbursement Plan of Patriot Transportation Holding, Inc. Previously filed with Form 10-K for the fiscal year ended September 30, 1993. File No. 33-26115. (10)(g) Split Dollar Agreement dated October 3, 1984, between Edward L. Baker and Florida Rock Industries, Inc. and assignment of such agreement, dated January 31, 1986 from Florida Rock Industries, Inc. to Florida Rock & Tank Lines, Inc. Previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(h) Summary of Management Incentive Compensation Plans. Previously filed with Form 10-K for the fiscal year ended September 30, 1994. File No. 33-26115. (10)(I) Management Security Agreements between the Company and certain officers. Form of agreement previously filed as Exhibit (10)(I) with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(I)(1) Patriot Transportation Holding, Inc. 1989 Employee Stock Option Plan. Previously filed with Form S-4 Dated December 13, 1988. File No. 33-26115. (10)(I)(2) Patriot Transportation Holding, Inc. 1995 Employee Stock Option Plan. Previously filed as an appendix to the Company's Proxy Statement dated December 15, 1994. (11) Computation of Earnings Per Common Share. (27) Financial Data Schedule