10-K 1 0001.txt 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, 2000 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. [ ] At December 1, 2000 aggregate market value of the shares of Common Stock held by non-affiliates of the registrant was $24,633,328. At such date there were 3,170,566 shares of the registrant's Stock outstanding. Documents Incorporated by Reference Portions of the Patriot Transportation Holding, Inc. 2000 Annual Report to Stockholders are incorporated by reference in Parts I, II, III and IV. Portions of the Patriot Transportation Holding, Inc. Proxy Statement dated December 20, 2000 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 three wholly-owned subsidiaries. Florida Rock & Tank Lines, Inc.("Tank Lines"), SunBelt Transport, Inc. ("SunBelt") and Patriot Transportation, Inc.("Patriot"). Tank Lines is a Southeastern transportation company concentrating in the hauling by motor carrier of liquid and dry bulk commodities. SunBelt serves the flatbed portion of the trucking industry in the Southeast and Mid-Atlantic states, hauling primarily construction materials. Patriot hauls a variety of cargo, throughout the United States, through independent contractors. Another wholly owned subsidiary, 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"). The Company also holds certain other real estate for investment. Other wholly owned subsidiaries of the Company own and are developing certain industrial 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 major business segments: transportation and real estate. Industry segment information is presented in Notes 2 and 9 to the consolidated financial statements included in the accompanying 2000 Annual Report to Stockholders and is incorporated herein by reference. The Board of Directors on August 2, 2000, approved a resolution to delay consummation of the previously approved reorganization 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 in a tax free distribution of a new company which would include the real estate business, while retaining the transportation business in Patriot Transportation Holding, Inc. For additional information, see Note 13 to the Consolidated Financial Statements. FRI accounted for approximately 7.6% of the Company's consolidated revenues for fiscal 2000. 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 liquid and dry bulk commodities in tank trucks. SunBelt is engaged in hauling primarily building and construction materials on flatbed trailers. Patriot is engaged in the hauling of a variety of cargo through independent agents and owner-operators. Information as to Transportation's revenue by principal markets is presented on page 5 of the accompanying 2000 Annual Report to Stockholders under the caption, "Management Analysis" and is incorporated herein by reference. Tank Lines' owned and leased tank truck fleet hauls liquid and dry bulk commodities, including petroleum and chemicals. It 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 Birmingham, Alabama. It also has a central dispatch/office in Montgomery, Alabama. The Company has from 4 to 8 major tank truck competitors in each of its markets. SunBelt's owned flatbed fleet is based at Jacksonville and Tampa, Florida; Atlanta and Savannah, Georgia; Salisbury, North Carolina and South Pittsburg, Tennessee and hauls primarily building and construction materials in Southeastern and Mid-Atlantic states. There are 10 major competitors in the Company's market area and numerous small competitors in the various states served. Patriot is a non-asset based variable cost transportation company which provides transportation services to shippers through a growing network of independent sales agents and independent contractors. Patriot's business is such that a significant portion of its operating costs vary directly with revenue. Independent sales agents and independent contractors are compensated based on a percentage of revenue generated by them. Patriot hauls a variety of cargo including metal products, building materials, dry freight and machinery and equipment throughout the United States. Trailers are hauled exclusively by tractors belonging to the independent contractors and independent fleet owners. Patriot markets its transportation services through 64 independent commissioned sales agents and operates in highly competitive markets. At September 30, 2000, the Company was not committed to purchasing additional tractors and/or trailers. Price, service, and location are the major factors which affect competition within a given market. During fiscal 2000 the transportation segment's ten largest customers accounted for approximately 36% of transportation'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 several wholly owned subsidiaries. The Company owns real estate in Florida, Georgia, Virginia, Maryland, and Washington, D.C. The real estate owned falls generally into one of three categories. The first is construction aggregates properties with stone or sand and gravel deposits, of which substantially all is leased to Florida Rock Industries, Inc. under mining royalty agreements. 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. The second is land and/or buildings leased under rental agreements or which are being developed for rental. The third is land which 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 Note 9 to the consolidated financial statements included in the accompanying 2000 Annual Report to stockholders and is incorporated herein by reference. The Company's real estate strategy of developing high quality, flexible warehouse/office space in the Baltimore-Washington markets continues to be successful. Ninety-five percent of the warehouse/office portfolio of approximately 1.2 million square feet was leased at September 30, 2000. Price, location, rental space availability, structural design, property management services and flexibility are the major factors which affect competition in the warehouse rental market. The Company experiences considerable competition in all of its markets. In fiscal 2000 real estate revenues, excluding the sale of real estate, were divided approximately 42% from mining and minimum royalties and 58% from rentals. FRI accounted for approximately 52% of such revenue. 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. Additional information concerning environmental matters is presented in Note 11 to the consolidated financial statements included in the accompanying 2000 Annual Report to Stockholders and in Item 3 "Legal Proceedings" of this Form 10-K, and such information is incorporated herein by reference. Employees. The Company employed approximately 818 people in its Transportation Group, 9 people in its Real Estate Group, and 2 people in its Corporate offices at September 30, 2000. Item 2. PROPERTIES. The Company's principal properties are located in Florida, Georgia, Virginia, Washington, D.C., and Maryland. Transportation Properties. At September 30, 2000, the Company operated and owned a fleet of 547 trucks, two of which were leased, and owned a fleet of 926 trailers. The Company has 19 sites for its trucking terminals in Florida, Georgia, Alabama and Tennessee totaling approximately 90 acres. Of these acres, the Company owned approximately 79 and leased approximately 11. The Company also leases a central dispatch/office in Montgomery, Alabama which is leased year-to-year. Construction Aggregates Properties. The following table summarizes the Company's principal construction aggregates locations and estimated reserves at September 30, 2000, substantially all of which are leased to FRI. Tons of Tons Mined Estimated in Year Reserves Ended at 9/30/00 9/30/00 Approximate (000's) (000's) Acres Owned The Company owns fifteen locations currently being mined in Brooksville, Astatula, Miami, Grandin, Gulf Hammock, Keuka, Lake Lake Wales, Newberry and in Marion and Lake Counties, Florida; Forest Park, Macon and Tyrone, Georgia; St. Mary's County, Maryland; and Manassas, Virginia. 14,395 540,000 18,686 The Company owns four locations being leased but not currently being mined, in Ft. Myers and Grandin, Florida; Rome and Columbus, Georgia. - 180,000 2,461 Other Properties. The Company owns approximately 120 acres of land in Virginia and Washington, D.C. and an office building and approximately 6 acres in Florida which are leased to FRI. The Company owns eight parcels of land near Baltimore, Maryland. One contains approximately 11 acres with a commercial warehouse and office space (162,587 square feet), which at November 1, 2000 was 100% leased. The second contains approximately 17 acres with 195,615 square feet of commercial warehouse and office space of which at November 1, 2000 was 100% leased. The third contains approximately 10 acres with 189,212 square feet of commercial/warehouse space that was 100% leased at November 1, 2000. The fourth contains 8.5 acres with an office building (28,533 square feet) which is 6% occupied by the Company with the balance 100% leased, including a portion leased to FRI. The fifth site contains 5.285 acres with 83,100 square feet of warehouse space that was 100% leased at November 1, 2000. The sixth site contains 5.849 acres with 85,100 square feet of warehouse space that was 75% leased at November 1, 2000. The seventh site is a 134 acre tract of land in Harford County, Maryland. The site is being used for the development of the Lakeside Business Park. A 5.2 acre section has been developed with 110,875 square feet of commercial warehouse space that was 100% leased on November 1, 2000. Two sections of 4.25 acres each have been developed with 132,484 square feet of commercial warehouse space that was 100% leased at November 1, 2000. A 6.11 acre section has been developed with 96,800 square feet of warehouse space that was 100% leased at November 1, 2000. An 8.28 acre site is being developed with 93,340 square feet of commercial warehouse space under construction at September 30, 2000. A 13.91 acre site is being developed with 99,100 square feet of commercial warehouse space under construction at September 30, 2000 that is 100% pre-leased. The eighth site is a 59 acre tract in Anne Arundel County, Maryland near the Baltimore-Washington International Airport. The project, Hillside Business Park, will provide the Company an opportunity to develop 575,000 square feet of warehouse/office space. Grading and infrastructure work on the site began in the spring of 2000, and construction of the first building is anticipated to commence during the spring of 2001. In addition to the development, mining and rental sites, the Company owns approximately 9,267 acres of investment and other real estate, of which approximately 6,326 acres are in Suwannee County and Columbia County, Florida. As part of the Company's ongoing asset management activities, it made application before the Zoning Commission of the District of Columbia to re-zone its 5.8 acre site on the banks of the Anacostia River from industrial to Planned Unit Development(PUD). Approval of the application would allow the development of a 1.5 million square foot commercial office component together with associated waterfront enhancements in the Washington DC area. In November 1999, the Zoning Commission approved the Company's application. At September 30, 2000 certain property, plant and equipment having a carrying value of $26,778,000 was pledged on certain notes and contracts with an outstanding principal balance totaling $22,496,000. In addition, certain properties having a carrying value at September 30, 2000 of $1,118,000 were encumbered by industrial revenue bonds which 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. Item 3. LEGAL PROCEEDINGS. Note 11 to the Consolidated Financial Statements included in the accompanying 2000 Annual Report to Stockholders 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 STOCKHOLDER MATTERS. There were approximately 796 holders of record of Patriot Transportation Holding, Inc. common stock, $.10 par value, as of December 1, 2000. 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 4 the Company's 2000 Annual Report to stockholders, and such information is incorporated herein by reference. The Company has not paid a cash dividend during the past two years. 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 3 to the consolidated financial statements included in the accompanying 2000 Annual Report to Stockholders and such information is incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA. Information required in response to this Item 6 is included under the caption "Five Year Summary" on page 4 of the Company's 2000 Annual Report to Stockholders 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 this Item 7 is included under the caption "Management Analysis" on pages 5 and 6; under the caption "Capital Expenditures" on page 1; and in Notes 1 through 13 to the consolidated financial statements included in the accompanying 2000 Annual Report to Stockholders and in Item 3 "Legal Proceedings" of this Form 10-K. Such information is incorporated herein by reference. Item 7.A QUANTITIVE 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 changes in interest rates affect the amount of interest expense incurred. The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates: Interest rate sensitivity 2001 2002 2003 2004 2005 Thereafter Total Fair Value Liabilities: Bank lines of credit $ 5,600 5,600 5,600 Weighted average Interest rate 7.2% Long-term debt at Fixed rates $ 796 862 933 1,010 1,030 18,180 22,810 22,555 Weighted average Interest rate 7.8% 7.8 7.8 7.8 7.8 7.8 Bank Revolving Credit Variable interest $20,000 20,000 20,000 Rate Weighted average Interest 7.2% Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Information required in response to this Item 8 is included under the caption "Quarterly Results" on page 4 and on pages 7 through 15 of the Company's 2000 Annual Report to Stockholders. Such information is incorporated herein by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. No reportable events. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. EXECUTIVE OFFICERS OF THE COMPANY Name Age Office Position Since Edward L. Baker 65 Chairman of the Board May 3, 1989 John E. Anderson 55 President & Chief Feb. 17, 1989 Executive Officer James B. Shephard 63 Vice President and Feb. 2, 2000 Secretary David H. deVilliers, Jr. 49 Vice President June 1, 1989 James J. Gilstrap 53 Treasurer, Assistant Aug. 6, 1997 Secretary and Chief Financial Officer Wallace A. Patzke, 53 Controller and Chief Aug. 6, 1997 Jr. Accounting Officer All of the above officers have been employed in their respective positions for the past five years, except James B.Shephard, James J. Gilstrap and Wallace A. Patzke,Jr. James B. Shephard was President and Chief Executive Officer of Landstar Ranger from 1989 to 1998, Senior Vice President of Landstar from 1998 to March 1999, Chairman of the Board of Florida Rock & Tank Lines, Inc. from March 1999 to November 1999 when he was appointed President of the Company's Transportation Group. James J. Gilstrap joined FRI in March 1997 and was elected Vice President and Chief Financial Officer in May 1997. In August 1997 Mr. Gilstrap was elected Treasurer of FRI. From 1993 to 1997 he was self-employed as a private investor. He resigned his positions with the Company and FRI effective January 1, 2001. Wallace A. Patzke, Jr. has been Vice President, Administration and Chief Accounting Officer of FRI since January 2000, Vice President and Chief Accounting Officer, from August 1999 to January 2000, Vice President, Controller and Chief Accounting Officer from August 1997 to August 1999 Vice President and Controller from October 1996 to August 1997 and Controller from December 1991 to October 1996. 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 annually by the Board of Directors. Information concerning directors, 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 dated December 20, 2000; and such information is incorporated herein by reference. 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 dated December 20, 2000; 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 dated December 20, 2000; and such information is incorporated herein by reference. 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 dated December 20, 2000 and in Note 2 captioned "Transactions with Related Parties" in the Company's 2000 Annual Report to Stockholders; and such information is incorporated herein by reference. PART IV Item 14. 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 18 of this Form 10-K. (3)Exhibits. The response to this item is submitted as a separate section. See Exhibit Index on pages 14 through 17 of this Form 10-K. (b) Reports on Form 8-K. During the three months ended September 30, 2000, no reports on Form 8-K were filed by 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 6, 2000 By JAMES J. GILSTRAP James J. Gilstrap Treasurer, Assistant Secretary and Chief Financial Officer By WALLACE A. PATZKE JR. Wallace A. Patzke Jr. Controller and Chief 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 6, 2000. JOHN E. ANDERSON DAVID H. deVILLIERS JR. John E. Anderson David H. deVilliers Jr. Director, President, and Chief Director Executive Officer (Principal Executive Officer) LUKE E.FICHTHORN III LUKE E. FICHTHORN III JAMES J. GILSTRAP Director James J. Gilstrap Treasurer, Assistant Secretary FRANCIS X. KNOTT and Chief Financial Officer Francis X. Knott (Principal Financial Officer) Director WALLACE A. PATZKE JR. RADFORD D. LOVETT Wallace A. Patzke Jr. Radford D. Lovett Controller and Chief Accounting Director Officer (Principal Accounting Officer) ROBERT H. PAUL III Robert H. Paul III EDWARD L. BAKER Director Edward L. Baker Director JAMES B. SHEPHARD James B. Shephard JOHN D. BAKER II Director John D. Baker II Director MARTIN E. STEIN Martin E. Stein THOMPSON S. BAKER II Director Thompson S. Baker II Director JAMES H. WINSTON James H. Winston Director PATRIOT TRANSPORTATION HOLDING, INC. FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000 EXHIBIT INDEX [Item 14(a)(3)] (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. Previously 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. 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. 33-26115. (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. (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 Agreement, 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 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)(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 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. (13) The Company's 2000 Annual Report to stockholders, portions of which are incorporated by reference in this Form 10-K. Those portions of the 2000 Annual Report to stockholders which are not incorporated by reference shall not be deemed to be filed as part of this Form 10-K. (22) Subsidiaries of Registrant at September 30, 2000: 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 Limited Partnership (a Maryland limited partnership) FRTL, Inc. (a Florida corporation)SunBelt Transport, Inc. (a Florida Corporation)Oz Limited Partnership (a Maryland limited partnership) FRP Delaware, Inc. (a Delaware corporation) FRP Lakeside L.P. (a Maryland limited partnership) FRP Lakeside L.L.C. #1 (a Maryland limited company) FRP Lakeside L.L.C. #2 (a Maryland limited liability corporation), FRP Lakeside L.L.C. #3 (a Maryland limited liability company), FRP Lakeside L.L.C. #4 (a Maryland limited liability company), FRP Lakeside L. L.C.#5 (a Maryland limited liability company), FRP Hillside L.L.C. (a Maryland limited liability company) FRP Windsor LLC (a Maryland limited liability company), FRP Dorsey L.L.C. (a Maryland limited liability company) Patriot Transportation, Inc.(a Florida corporation) (23)(a) Consent of Deloitte & Touche LLP, Independent Certified Public Accountants, appears on page 16 of this Form 10-K. (27) Financial Data Schedule PATRIOT TRANSPORTATION HOLDING, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14(a) (1) and 2)) Page Consolidated Financial Statements: Consolidated balance sheet at September 30, 2000 and 1999 8(a) For the years ended September 30, 2000, 1999 and 1998: Consolidated statement of income 7(a) Consolidated statement of stockholders' equity 10(a) Consolidated statement of cash flows 9(a) Notes to consolidated financial statements 11-15(a) Independent Auditors' Report 16(a) Selected quarterly financial data (unaudited) 4(a) Consent of Independent Certified Public Accountants 19(b) Independent Auditors' Report 20(b) Consolidated Financial Statement Schedules: II - Valuation and qualifying accounts 21(b) III - Real estate and accumulated depreciation and depletion 22-23(b) (a) Refers to the page number in the Company's 2000 Annual Report to Stockholders. 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. Independent Auditors' Consent We consent to the incorporation by reference in Registration Statement (Form S-8 No. 33-43215) pertaining to the Patriot Transportation Holding, Inc. 1989 Stock Option Plan and in the related Prospectus of our report dated December 8, 2000, appearing in and incorporated by reference in this Annual Report (Form 10-K) for the year ended September 30, 2000. DELOITTE & TOUCHE LLP Jacksonville, Florida December 15, 2000 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Patriot Transportation Holding, Inc. Jacksonville, Florida We have audited the consolidated financial statements of Patriot Transportation Holding, Inc. and subsidiaries ("Patriot") as of September 30, 2000 and 1999, and for each of the three years in the period ended September 30, 2000, and have issued our report thereon dated December 8, 2000; such consolidated financial statements and report are included in your 2000 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedules of Patriot, listed in Item 14. These financial statement schedules are the responsibility of Patriot's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Certified Public Accountants Jacksonville, Florida December 8, 2000 PATRIOT TRANSPORTATION HOLDING, INC. SCHEDULE II (CONSOLIDATED) - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998 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, 2000: Allowance for doubtful accounts $ 284,318 $ 858,629 - $ 274,406(a) $ 868,541 Accrued risk insurance $5,385,393 $4,452,376 - $4,440,327(b) $5,397,442 Accrued health insurance 913,377 2,187,462 - 2,111,231(b) 989,608 Totals - insurance $6,298,770 $6,639,838 $0 $6,551,558 $6,387,050 September 30, 1999: Allowance for doubtful accounts $272,318 $12,000 - $284,318 Accrued risk insurance $4,545,457 $4,016,846 - $3,176,910(b) $5,385,393 Accrued health insurance 841,789 1,480,947 - 1,409,359(b) 913,377 Totals - insurance $5,387,246 $5,497,793 $0 $4,586,269 $6,298,770 Year Ended September 30, 1998: Allowance for doubtful accounts $257,952 $12,000 - ($2,366)(a) $272,318 Accrued risk insurance $4,217,714 $4,401,537 - $4,073,794(b)$4,545,457 Accrued health insurance 964,698 1,340,998 - 1,463,907(b) 841,789 Totals - insurance $5,182,412 $5,742,535 $0 $5,537,701 $5,387,246 (a) Accounts written off less recoveries (b) Payments PATRIOT TRANSPORTATION HOLDING, INC. SCHEDULE III(CONSOLIDATED)-REAL ESTATE & ACCUMULATED DEPRECIATION AND DEPLETION SEPTEMBER 30, 2000
Cost capi- Gross amount Date Deprecia- Encumb Initial cost talized at which Accumulated Of Date tion Life County State rances to subsequent carried at DepreciationConstr-Acquired Computed Company to acquisitionend of period tion on: (a) Construction Aggregates Alachua Florida $1,442,011 0 1 ,442,011 59,592 n/a 4/86 unit Clay Florida 518,741 0 518,741 - n/a 4/86 unit Clayton Georgia 381,787 0 381,787 4,506 n/a 4/86 unit Dade Florida 9,374,660 0 9,374,660 8,075,374 n/a 4/86 unit Fayette Georgia 97,646 400,872 0 400,872 44,847 n/a 4/86 unit Hernando Florida 3,174,084 0 3,174,084 933,701 n/a 4/86 unit Lake Florida 1,464,625 20,528 1,485,153 1,034,694 n/a 4/86 unit Lee Florida 4,690,269 5,937 4,696,206 2,226 n/a 4/86 unit Floyd Georgia 300,000 0 300,000 - n/a 4/86 unit Levy Florida 1,280,643 83,365 1,364,008 402,523 n/a 4/86 unit Marion Florida 1,180,366 0 1,180,366 599,478 n/a 4/86 unit Monroe Florida 840,442 0 840,442 216,726 n/a 4/86 unit Muscogee Georgia 368,674 0 368,674 45,000 n/a 4/86 unit Polk Florida 120,502 0 120,502 75,285 n/a 4/86 unit Prince Wil.Virginia 298,464 0 298,464 273,330 n/a 4/86 unit Putnam Florida 15,014,681 36,114 15,050,795 2,573,875 n/a 4/86 unit St. MarysMaryland 1,269,878 5,140 1,275,018 519,162 n/a 4/86 unit 97,646 42,120,699 151,084 42,271,783 14,860,319 Land Rental Property District of Columb 6,712,973 2,645,097 9,358,070 909,128 n/a 4/86 15 yr. Fairfax Virginia 2,035,014 0 2,035,014 - n/a 4/86 - Putnam Florida 360,241 0 360,241 290,549 n/a 4/86 10 yr. Spalding Georgia 19,572 0 19,572 - n/a 4/86 - Suwannee Florida 217,468 1,337,429 0 1,337,429 814,658 n/a 4/86 10 yr. 217,468 10,465,229 2,645,097 13,110,326 2,014,335 Commercial Property BaltimoreMaryland1,560,631 439,120 2,836,019 3,285,139 1,063,263 1990 10/89 31 yr. BaltimoreMaryland2,015,100 453,834 2,908,345 3,362,179 839,724 1992 12/91 31 yr. BaltimoreMaryland 690,222 2,846,549 3,526,771 57,989 2000 7/99 31 yr. BaltimoreMaryland2,404,896 507,545 2,859,841 3,367,386 608,530 1994 12/91 31yr. Duval Florida 2,804,344 191,237 2,995,581 2,004,000 n/a 4/86 20 yr. Harford Maryland3,018,942 109,226 3,747,294 3,856,520 300,563 1996 8/95 31 yr. Harford Maryland 1,467,555 8,332,294 9,799,849 - n/a 8/95 31 yr. Harford Maryland4,909,528 177,518 5,434,607 5,612,125 277,066 1999 8/95 31 yr. Howard Maryland1,820,131 2,414,284 262,828 2,677,112 865,442 1987 9/88 31 yr. Howard Maryland2,730,196 655,000 2,921,263 3,576,263 402,931 1996 9/88 31 yr. Howard Maryland 2,473,277 310,392 2,783,669 48,306 n/a 2/00 31 yr. Anne ArunMaryland 4,036,288 911,060 6,487,732 7,398,792 2,581,575 1989 9/88 31 yr. Anne ArunMaryland 950,000 1,237,444 2,187,444 0 n/a 5/98 31 yr. Orange Florida 57,047 1,647 58,694 12,223 n/a 4/86 10 yr. 22,495,712 14,110,032 40,377,492 54,487,524 9,061,612 Investment Property Caroline Virginia 212,876 6,857 219,733 - n/a 4/86 unit Duval Florida 684,695 0 684,695 - n/a 4/86 - Fairfax Virginia 273,198 0 273,198 - n/a 4/86 - Fayette Georgia 283,875 0 283,875 - n/a 4/86 - Bartow Florida 121,493 0 121,493 - n/a 4/86 - Putnam Florida 151,959 0 151,959 31,773 n/a 4/86 - Suwannee Florida 3,258,243 0 3,258,243 - n/a 4/86 unit 4,986,339 6,857 4,993,196 31,773 Miscellaneous 365,920 0 365,920 - GRAND TOTALS $22,810,826 72,048,219 43,180,530 115,228,749 25,968,039 (a) The aggregate cost for Federal income tax purposes is $105,327,346.
PATRIOT TRANSPORTATION HOLDING, INC. SCHEDULE III (CONSOLIDATED) - REAL ESTATE AND ACCUMULATED DEPRECIATION AND DEPLETION YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998 2000 1999 1998 Gross Carrying Cost of Real Estate: Balance at beginning of period $106,930,861 98,302,279 86,939,335 Additions during period: Other acquisitions 9,550,781 9,663,944 2,241,837 Improvements, etc. - - 5,480,287 Other (transfers) - - 3,811,104 Deductions during period: Cost of real estate sold 742,939 704,062 170,284 Other (abandonments) 509,954 - - Other (transfers to Transportation) - 331,300 - Balance at close of period $115,228,749 106,930,861 98,302,279 Accumulated Depreciation & Depletion: Balance at beginning of period $ 23,676,964 21,655,393 19,463,097 Additions during period: Charged to cost & expense 2,535,438 2,446,115 2,278,379 Deductions during period: Cost of real estate sold 244,365 233,134 86,083 Other(transfer to Transp.) - 191,410 - Balance at close of period $25,968,037 23,676,964 21,655,393 Annual Report 2000 CONSOLIDATED FINANCIAL HIGHLIGHTS Years ended September 30 (Dollars in thousands except per share amounts) % 2000 1999 Change Revenues $93,862 82,019 +14.4 Gross profit $16,239 19,994 -18.8 Operating profit $ 6,840 12,380 -44.7 Income before income taxes $ 3,435 10,093 -66.0 Net income $ 2,044 6,157 -66.8 Per common share: Basic earnings per share $ .61 1.79 -65.9 Diluted earnings per share $ .61 1.78 -65.7 Stockholders' equity $ 22.06 21.53 + 2.5 2000 CORPORATE HIGHLIGHTS Revenues - up 14.4% to $93,862,000 Gross profit - down 18.8% to $16,239,000 Net income - down 66.8% to $2,044,000 Diluted earnings per share - down 65.7% to $ .61 per share Gains from sale of real estate of $1,533,000 $23,400,000 of borrowing capacity is available under the Company's credit agreements at September 30, 2000 BUSINESS. The Company is engaged in the transportation and real estate businesses. The Company's transportation business is conducted through three wholly owned subsidiaries. Florida Rock & Tank Lines, Inc. is a Southeastern transportation company concentrating in the hauling by motor carrier of liquid and dry bulk commodities. SunBelt Transport, Inc. serves the flatbed portion of the trucking industry in the Southeast and Mid-Atlantic States, hauling primarily construction materials. Patriot Transportation, Inc. hauls a variety of cargo, primarily in the United States, through independent sales agents and owner/operators. 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. 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, competent and loyal work force along with a growing network of third party sales agents and owner/operators, emphasizing superior service to customers in existing markets, developing new transportation services for customers in current market areas as well as expansion into new market areas. External growth, through the acquisition program, 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, management and retention of real estate assets and the development of industrial rental properties to provide long-term positive cash flows and capital appreciation. To Our Stockholders: As your Company began Fiscal 2000 expectations were focused to achieve the previously announced Plan of Reorganization formally separating the transportation and real estate operations. Consequently the Company changed its name to Patriot Transportation Holding, Inc. on March 1 following shareholder approval at the February 2 Annual Meeting. But as the year unfolded the Transportation Group began to rapidly encounter challenges related to both operating conditions and information system/administrative support. Chronic driver shortages retarded hauling capacity, pressured labor costs, and increased turnover. Mushrooming diesel fuel prices severely inflated fuel expenses beyond the industry's ability to offset via surcharges. Trucking operating ratios suffered accordingly. Transition to new electronic information software in Transportation billing proved costly to the Group, with associated disruptions in personnel costs and productivity. Notwithstanding these adversities, important progress was achieved in the first full year of operations for the new variable-cost, third party subsidiary, Patriot Transportation, Inc. This new growth engine favorably tracked its business plan considering industry conditions and software hurdles. Also in positive contrast to transportation difficulties, the Company's Real Estate Group enjoyed another year of encouraging performance. The Group's expanding portfolio of income producing, flexible office warehouses continued on plan regarding square-footage growth and ahead of plan for occupancy. Strategic progress in asset management will assist in structuring an expanding asset foundation for the future. Nevertheless, continuing turbulence within the trucking industry and the need to complete an internal information system for its Transportation Group led the Company on August 2, 2000 to announce a delay of its reorganization (spin-off) until some date beyond July 1, 2001 and subject to reauthorization by its Board of Directors. Consolidated Results. Consolidated revenues for fiscal 2000 increased 14.4% to $93,862,000. Transportation revenues increased 19.5% to $80,152,000 primarily aided by growth at Patriot Transportation, Inc. Modest increases in both miles hauled and prices were contributed by Florida Rock & Tank Lines and SunBelt Transport. Total real estate revenues declined 8.4% due primarily to lower property and timber sales while revenues from the Company's development activities increased 20.3%. Property sales in fiscal 2000 were $2,260,000 compared to $3,788,000 the previous year. Gross profit in 2000 declined 18.8% to $16,239,000 from $19,994,000 in 1999. The Transportation Group's gross profit in fiscal 2000 experienced an 18.2% decrease to $7,892,000 driven mainly by increases in direct labor and fuel expense in the face of only modest price increases. The Group also incurred approximately $600,000 in unanticipated health claims expense occurring substantially in the fourth quarter. Real estate gross profit fell 19.3% to $8,347,000. Gross profit from development operations increased 17.3% but lower property sales in 2000 caused a 52.6% decline from related gains to $1,533,000 in 2000 from $3,236,000 in 1999. Selling, general and administrative expenses increased 23.4% from $7,614,000 to $9,399,000 in 2000. This increase stemmed chiefly from increased legal expenses and bad debt losses and other expenses at Florida Rock & Tank Lines related to information software transition. The total increase in selling, general and administrative expenses was also impacted by administrative costs to support the new subsidiary, Patriot Transportation, Inc., which was not in operation the previous fiscal year. Net interest expense increased 48.9% from $2,311,000 in 1999 to $3,415,000 in 2000 as the result of higher levels of debt and higher interest rates. Net income decreased 66.8% from $6,157,000 in 1999 to $2,044,000 in 2000. Diluted earnings per share also decreased 65.7% to $0.61 in 2000 from $1.78 the previous year. Capital Expenditures. Capital expenditures in 2000 for the transportation business totaled $12,091,000 versus $12,010,000 in 1999. Capital expenditures for the real estate segment in 2000 totalled $9,762,000 versus $9,344,000 in 1999. Total depreciation and depletion for fiscal 2000 was $11,144,000 versus $10,065,000 in 1999. The fiscal 2001 capital expenditure plan for the transportation business is $6,934,000 primarily for continued modernization of the tank truck and flatbed fleets. The capital budget for the real estate segment for fiscal 2001 is $19,065,000 mainly for continued office/warehouse development. Total depreciation and depletion expense is expected to be approximately $11,212,000 on a consolidated basis. Financial Management. The Company's $34,000,000 unsecured revolver and term facility has a final maturity of November 15, 2003. At September 30, 2000, $20,000,000 was outstanding leaving a balance of $14,000,000 in availability under this committed facility. The Company also has $15,000,000 of unsecured short term lines of credit under which $5,600,000 was outstanding at the end of fiscal 2000. In addition, $22,496,000 of the Company's total debt outstanding is non-recourse, long-term fixed rate mortgages secured primarily by the Company's flex warehouse/office projects. At September 30, 2000 the Company's percentage of total funded debt to equity was 66%. Annual Meeting. At the Annual Stockholders Meeting on February 2, 2000, the stockholders elected John D. Baker II, Luke E. Fichthorn III, Robert H. Paul III, and James B. Shephard as directors to serve a four-year term expiring in the year 2004. Real Estate Group. Continuing healthy demand for well-located distribution capacity, effective marketing, as well as a growing reputation for quality design and follow-up property management, combined to produce another year of noteworthy progress. The Group can be proud of a record of achievement toward the key objective of developing flexible warehouse/office square footage in targeted, distribution-friendly markets. Evidence of such progress occurred during 2000 in four different sub-markets within the greater Baltimore, Maryland area. A new 83,100 square-foot build-to-suit office/warehouse, 6920 Tudsbury Road, was completed, occupied and long-term financed. This property is located near the beltway on Baltimore's western fringe. Development also continued at Lakeside Business Park, a 134-acre development adjacent to Interstate 95 north of Baltimore in Harford County. A 96,440 square-foot offering, 1504 Quarry Drive, was completed and occupied. At 8620 Dorsey Run Road, 85,100 square feet, was purchased, renovated and is now 75% occupied and financed. Finally, active site grading is underway at Hillside Business Park, a 59-acre property in Anne Arundel County, Maryland near both the Baltimore-Washington International Airport and the new regional Arundel Mall. Hillside Business Park is projected for a final total build-out of about 575,000 square feet. The Group's total portfolio of developed buildings at September 30, 2000 was comprised approximately 1.2 million square feet with a combined occupancy of 95%. Final build-out at Lakeside and Hillside Business Parks will bring the Group's total developed building capacity to approximately 2.77 million square feet. Turning to the Group's other long-term focus, asset management, much activity also occurred. Plans were finalized to construct a bulkhead along the shoreline of the Group's 5.8 acre site on the banks of the Anacostia River in the District of Columbia. This site, located about one mile from the United States Capitol Building, was successfully re-zoned by the Group early in fiscal 2000 from industrial to Planned Unit Development(PUD). The new PUD zoning permits development of up to 1.5 million square feet of commercial office space together with related public amenities and waterfront enhancements. Bulkhead construction will secure the site by adding a "hard edge" along the waterfront to prevent further shoreline erosion and provide foundation stability for anchoring vertical construction. Asset management focus was also directed toward the Group's raw land portfolio in Georgia and Florida. These holdings range from leased long-term mining properties, which could offer future development potential, to timberland, to scattered tracts with potential warehouse distribution possibilities. Finally, the Group made important progress toward implementing its own in-house information software system tailored to its real estate core business. Such progress will enable the Group to better define and conduct itself as a distinct business unit. Transportation Group. In contrast to the Real Estate Group the Company's Transportation Group battled a chorus of adversities the full year, both from within and external. Several months before fiscal 2000 began the Transportation Group initiated a planned program to achieve a level of cost-effective administrative sufficiency. Previously it had depended wholly on outsourcing for administrative support. Year 2000 (Y2K) compliance weighed heavily on information software considerations, and the Group had earlier selected core business support software. But serious system transition problems unrelated to Y2K developed which caused tank truck billing/credit issues. Unfortunately, the tank truck area suffered approximately $760,000 in bad debt losses during the transition. The Group elected to implement its own in-house capability. Start-up for the new software package is slated for about April 2001. The Group anticipates that system shortcomings will be cured. Turning to external conditions, the trucking industry confronted very tight labor markets and high diesel fuel costs that keep operating ratios under great pressure. To combat these forces both Florida Rock & Tank Lines and SunBelt Transport are aggressively raising their permanent freight rates while imposing fuel price surcharges to essentially halt further profit erosion. If over the coming year operating expenses continue under such pressure, each company is notifying its customer base that additional permanent rate increases will be forthcoming. In further response to industry conditions the Group began directing emphasis in its tank and flatbed companies to non-asset, owner/operator hauling capacity. This should reduce average capital employed, add variable cost protection and encourage improved returns in the future. Regarding owner/operators and third-party, independent freight agents, Patriot Transportation, Inc. achieved good progress during the year. Patriot successfully organized and launched into the industry despite the operating climate. The new company continues to expand satisfactorily with agents distributed in every geographic region of the United States along with progress aimed at freight movements across borders into Canada and Mexico. Patriot continues its expansion program as planned with only modest capital outlays. Collateral traffic lane and customer service efficiencies are developing with both Florida Rock & Tank Lines and SunBelt Transport. Related Developments and Outlook. Operating results for the Transportation Group are clearly unacceptable. Our responses to challenges within the trucking industry have been described, and they will be executed vigorously. The Real Estate Group should enjoy another year of momentum subject as always to continued strength in our domestic economy. Finally, the Company has recently employed a Vice President, Finance and Administration with broad multi-industry seasoning. We extend our gratitude for your support. And we again salute the enthusiasm, commitment and loyalty of the employees who represent the core strength of this enterprise. Respectfully yours, Edward L. Baker Chairman John E. Anderson President & Chief Executive Officer Operating Review Transportation. During fiscal 2000 the Company's Transportation Group operated through three wholly owned subsidiaries. Florida Rock & Tank Lines, Inc. is engaged in hauling liquid and dry bulk commodities in tank trucks. SunBelt Transport, Inc. is engaged in hauling mostly building and construction materials on flatbed trailers. Patriot Transportation, Inc. is engaged in hauling a variety of cargo through third party independent freight agents and owner/operators. The tank trucks operate 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 Birmingham, Alabama and has a central dispatch office in Montgomery, Alabama. SunBelt operates in the Southeast and Mid-Atlantic states where as Patriot operates through the United States. Revenues and miles hauled were up 19.5% and 15.1%, respectively, in 2000 as a result of expansion of flatbed and tank truck hauling and the start up of the independent agent and owner/operator business. Gross profit decreased 18.2% from fiscal 1999 primarily as a result of increased labor costs due to driver shortages, increased fuel costs and increased health claims. During fiscal 2000, the Group purchased new tractors and new trailers. The fiscal 2001 capital expenditure plan is based on maintaining a modernized tank and flatbed fleet. The fleet modernization program has resulted in reduced maintenance expenses and improved operating efficiencies. Transportation labor, fuel and now risk insurance pressures are expected to remain key factors. More comprehensive fuel price sucharges are now in place at Florida Rock & Tank Lines and SunBelt Transport. Assertive steps are underway at both carriers to significantly boost permanent freight rates. The Transportation Group is now well on its way to implementing new information systems specific to its core businesses. Patriot Transportation, Inc., the Company's new third party agent/owner-operator startup, should see its expansion momentum continue. 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, and Washington, D.C. The real estate owned generally falls into one of three categories. The first is 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. The second is land and/or buildings leased under rental agreements or being developed for future rentals, and the third is land and/or buildings which are being developed for future rental or held for future appreciation or development. Real estate revenues, excluding property sales, increased 2.4% over fiscal 1999 as a result increased royalties and rental revenue on the Company's real estate projects partially offset by a decrease in timber sales. The fiscal 2000 real estate revenues, excluding the sale of real estate and timber, were divided approximately 42% from mining and minimum royalties and 58% from rental. A brief description of FRP Development Corp.'s projects at September 30, 2000 follows: 8230 Preston Court, 72,182 square feet of flexible warehouse/office space and 59% leased. 8240 Preston Court, 90,405 square feet of flexible warehouse/office space and 100% leased. 810 Oregon Avenue, 113,280 square feet of flexible warehouse/office space and 100% leased. 812 Oregon Avenue, 82,335 square feet of flexible warehouse/office space and 100% leased. Rossville Business Center, a two building complex consisting of 189,212 square feet of flexible warehouse/office space and 100% leased. 34 Loveton Center, a 28,533 square foot suburban office building and 100% leased. 1502 Quarry Drive, 110,875 square feet of flexible warehouse/office space and 100% leased. 1504 Quarry Drive, 96,800 square feet of flexible warehouse/office space completed during fiscal 2000 and 100% leased. 1506 Quarry Drive, 93,340 square feet of flexible warehouse/office space under construction. 2206 Lakeside Boulevard, 66,964 square feet of flexible warehouse/office space completed during fiscal 1999 and 100% leased. 2208 Lakeside Boulevard, 65,520 square feet of flexible warehouse/office space completed during fiscal 1999 and 100% leased. 6920 Tudsbury Road, 83,100 square feet, built to suit warehouse/office under construction to be completed during fiscal 2000 and 100% pre-leased. 8620 Dorsey Run Road, 85,100 square feet, warehouse/office completed during fiscal 2000 and 75% leased. 2203 Lakeside Boulevard, 99,100 square feet of flexible warehouse/office space currently under construction and 100% pre-leased. Lakeside Business Park is a 134 acre site capable of supporting 1,160,000 square feet of warehouse/office space. At September 30, 2000, 192,440 square feet was under construction and expected to be completed during fiscal 2001. Approximately 42 acres remain available for development and are capable of supporting 631,000 square feet of new development. Hillside Business Park, is a 59 acre site located in Anne Oriental County, Maryland and capable of supporting 575,000 square feet of warehouse/office space. The Real Estate Group during fiscal 2001 will continue to focus on buildings under construction and the continued development of the property at Lakeside Business Park. Planning, development and permitting for Hillside Business Park development will also continue. At September 30, 2000 the Company owned approximately 1,200,000 square feet of developed building capacity that was 95% leased. The Real Estate Group will continue its asset management functions for the benefit of the Company's land portfolio. These activities will also include but not be limited to the Company's site on the Anacostia River in the District of Columbia. The Company's long-term plan is to gradually build and own a portfolio of successful rental properties. Five Year Summary Years ended September 30 (Dollars and shares in thousands except per share amounts) 2000 1999 1998 1997 1996 Summary of Operations Revenues $ 93,862 82,019 73,974 68,844 64,403 Gross profit(a) $ 16,239 19,994 16,493 14,908 14,615 Operating profit $ 6,840 12,380 9,625 8,977 9,017 Interest expense $ 3,438 2,357 2,300 2,061 2,234 Income before income taxes $ 3,435 10,093 7,343 6,984 6,827 Provision for income taxes $ 1,391 3,936 2,863 2,724 2,662 Net income $ 2,044 6,157 4,480 4,260 4,165 Per Common Share Basic EPS $ .61 1.79 1.30 1.22 1.16 Diluted EPS $ .61 1.78 1.28 1.21 1.14 Stockholders' equity $ 22.06 21.53 19.83 18.53 17.72 Financial Summary Current assets $ 15,089 14,161 10,073 8,549 8,003 Current liabilities $ 17,498 13,555 9,479 11,063 9,595 Working capital (deficit) $ (2,409) 606 594 (2,514) (1,592) Property, plant and equipment, net $124,026 115,369 104,970 95,018 90,058 Total assets $148,011 138,655 123,965 116,582 107,036 Long-term debt $ 42,015 37,936 33,299 30,647 26,170 Stockholders' equity $ 73,813 72,692 68,755 63,734 61,894 Other Data Return on average stockholders' equity 2.8% 8.7 6.7 6.8 6.7 Return on average capital employed 1.6% 5.2 4.1 4.2 5.8 Net cash flow provided from operating activities $ 9,566 15,032 13,557 13,982 14,681 Additions to property, plant and equipment $ 21,861 21,359 19,901 13,746 15,970 Depreciation, depletion and amortization $ 11,144 10,065 9,146 8,356 7,667 Weighted average number of shares - basic 3,334 3,444 3,452 3,490 3,588 Weighted average number of shares - diluted 3,348 3,468 3,496 3,530 3,647 Number of employees at end of year 829 877 753 721 665 Stockholders of record 801 834 850 873 913 (a) Fiscal 2000, 1999, 1998, 1997 and 1996 include gains on the sale of real estate of $1,533,000, $3,236,000, $358,000, $817,000 and $93,000, respectively. Quarterly Results (unaudited) (Dollars in thousands except per share amounts)
First Second Third Fourth 2000 1999 2000 1999 2000 1999 2000 1999 Revenues $20,150 19,031 21,566 21,016 24,258 19,854 27,888 22,118 Gross profit $ 3,607 4,393 3,819 5,539 4,685 4,382 4,128 5,680 Operating profit $ 1,645 2,299 1,655 3,868 2,351 2,470 1,189 3,743 Income before income taxes $ 902 1,743 818 3,352 1,418 1,874 297 3,124 Net income $ 550 1,063 499 2,045 865 1,143 130 1,906 Per common share: Basic EPS $.16 .31 .15 .59 .26 .33 .04 .56 Diluted EPS $.16 .30 .15 .59 .26 .33 .04 .56 Market price: High $25.00 30.00 26.88 28.88 23.50 26.00 20.00 26.00 Low $20.00 19.50 16.38 23.00 17.19 21.25 15.50 21.63
Management Analysis Operating Results. 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, fuel costs, driver availability and cost, construction activity, Florida Rock Industries, Inc.'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, safety records, other operating factors, administrative costs, and construction costs of new projects. In fiscal 2000 and 1999, revenues increased 14.4% and 10.9%, respectively. In the Transportation segment revenues and miles hauled were up 19.5% and 15.1%, respectively, in 2000 were up 4.7% and 4.7%, respectively, in 1999. The Real Estate segment's revenues, exclusive of real estate sales, increased 2.4% and 17.3% in 2000 and 1999, respectively. The estimated contribution to Transportation revenues by principal markets follows: 2000 1999 1998 1997 1996 Petroleum 60% 65 67 68 68 Construction 22% 24 21 21 20 Chemical 6% 7 7 6 7 Other 12% 4 5 5 5 Gross profit for fiscal 2000 decreased $3,755,000 and gross margin decreased to 17% from 24%. The Transportation segment's gross profit decreased $1,760,000 and gross margin decreased to 10% from 14%. These decreases were primarily attributable to sharply higher fuel costs, a tight labor market for drivers resulting in increased costs to hire and retain personnel, unanticipated health claims, higher depreciation expense resulting from an expanded and upgraded tractor fleet and start up costs associated with owner/operator business. Gross profit for the real estate segment decreased $1,955,000 primarily as a result of lower real estate and timber sales in 2000 partially offset by increased rental income. Gross profit on real estate sales was $1,533,000 as compared to $3,236,000 in 1999. Gross profit for fiscal 1999 increased $3,501,000 and gross margin increased to 24% from 22%. The Transportation segment gross profit decreased $360,000 and gross margin decreased to 14% from 15%. These decreases were due to increased costs to attract and retain qualified drivers and increased depreciation expense partially offset by reduced fuel costs. Gross profit for the real estate segment increased $3,861,000 primarily as a result of real estate sales, increased royalty income and increased rental income. Gross profit on real estate sales was $3,236,000 in 1999 and $358,000 in 1998. Selling, general and administrative expense increased 23.4% in 2000 and increased 10.9% in 1999. The 2000 increase was due to additional staffing for the owner/operator business, professional fees associated with the proposed spin-off of the real estate business, increased bad debt expense and other legal expenses. The 1999 increase was attributable to non-recurring retirement and severance and systems upgrades for Year 2000 compliance. Interest expense in 2000 increased 45.9% or $1,081,000 from 1999. This increase was primarily as a result of an increase in the average debt outstanding and an increase in the average interest rate. Interest expense in 1999 increased 2.5% or $57,000 from 1998. Liquidity and Capital Resources. The following key financial measurements reflect the Company's financial position and capital resources at September 30 (dollars in thousands): 2000 1999 1998 Cash $ 633 2,593 663 Total debt $48,411 41,561 35,432 Debt as a percent of capital employed 37% 34 32 Unused lines of credit $23,400 31,000 37,400 During 2000, net cash flows from operating activities were $9,566,000 which along with issuing additional long and short-term debt funded the Company's investing activities of $17,453,000 and the repurchase of common stock of $1,468,000. During 1999, net cash flows from operating activities were $15,032,000 which along with exercise of stock options and issuing of debt funded the Company's investing activities of $16,746,000. The Company is financially postured to be able to take advantage of external and internal growth opportunities in real estate development and in the motor carrier industry that may occur. The Board of Directors has authorized management to repurchase shares of the Company's common stock from time to time as opportunities may arise. Currently the Company has approximately $4,177,000 available under this authorization. The Company has a $34,000,000 revolving credit agreement of which $14,000,000 was available at fiscal year end. In addition, it has unsecured short-term lines of credit under which it may borrow up to $15,000,000 of which $5,600,000 was outstanding at September 30, 2000. The Company currently expects its fiscal 2001 capital expenditures to be approximately $26,000,000 and depreciation and depletion expense to be $11,212,000. The expenditures are expected to be financed from the cash flow from operating activities, financing of new real estate projects, and the $14,000,000 unused and available under its revolving credit agreement. The Company believes it will be able to renegotiate its present credit facilities or obtain similar replacement credit facilities when necessary in the future. 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 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. For additional information, see Note 13 to the Consolidated Financial Statements. Inflation. Historically, the Company has been able to recover inflationary cost increases through increased freight rates. It is expected that over time justifiable and necessary rate increases will be obtained in the future. 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 various 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 are among the principal factors that could cause actual results to differ materially from the forward-looking statements: driver availability and cost; availability and terms of financing; competition; levels of construction activity in FRI's markets; fuel costs; and inflation. Consolidated Statement of Income Years ended September 30 (Dollars and shares in thousands except per share amounts) 2000 1999 1998 Revenues: Transportation $ 80,152 67,048 64,014 Real estate 11,450 11,183 9,534 Sale of real estate 2,260 3,788 426 Total revenues (including revenue from related parties of $7,178, $6,999 and $6,256) 93,862 82,019 73,974 Cost of operations: Transportation 72,260 57,396 54,002 Real estate 4,636 4,077 3,411 Cost of real estate sold 727 552 68 Gross profit 16,239 19,994 16,493 Selling, general and administrative expense (including expenses paid to related party of $582, $1,656 and $1,515) 9,399 7,614 6,868 Operating profit 6,840 12,380 9,625 Interest expense (3,438) (2,357) (2,300) Interest income 24 46 13 Other income, net 9 24 5 Income before income taxes 3,435 10,093 7,343 Provision for income taxes 1,391 3,936 2,863 Net income $ 2,044 6,157 4,480 Earnings per share: Basic $ .61 1.79 1.30 Diluted $ .61 1.78 1.28 Number of shares used in computing: Basic earnings per share 3,334 3,444 3,452 Diluted earnings per share 3,348 3,468 3,496 See accompanying notes. Consolidated Balance Sheet September 30 (Dollars in thousands) 2000 1999 Assets Current assets: Cash and cash equivalents $ 633 2,593 Accounts receivable, less allowance for doubtful accounts of $869 ($284 in 1999) (including related party of $233 and $399) 10,770 8,451 Inventory of parts and supplies 650 503 Prepaid expenses and other 3,036 2,614 Total current assets 15,089 14,161 Other assets: Real estate held for investment, at cost 5,216 5,674 Goodwill, at cost less amortization of $443 ($403 in 1999) 1,167 1,207 Other 2,513 2,244 Total other assets 8,896 9,125 Property, plant and equipment, at cost: Land 60,886 56,937 Buildings 44,213 35,971 Plant and equipment 70,161 67,677 Construction in progress 9,323 12,162 184,583 172,747 Less accumulated depreciation and depletion 60,557 57,378 Net property, plant and equipment 124,026 115,369 $148,011 138,655 Liabilities and Stockholders' Equity Current liabilities: Short-term note payable to bank $ 5,600 3,000 Accounts payable (including related party of $569 and $166) 5,572 5,565 Federal and state income taxes 1,162 499 Accrued liabilities: Payroll and benefits 1,670 1,415 Taxes 1,040 604 Interest 154 193 Insurance reserves 1,504 1,654 Long-term debt due within one year 796 625 Total current liabilities 17,498 13,555 Long-term debt 42,015 37,936 Deferred income taxes 8,628 8,820 Accrued insurance reserves 4,884 4,644 Other liabilities 1,173 1,008 Commitments and contingent liabilities (Notes 11 and 12) Stockholders' equity: Preferred stock, no par value; 5,000,000 shares authorized - - Common stock, $.10 par value; 25,000,000 shares authorized; 3,346,351 shares issued and outstanding (3,375,817 shares in 1999) 335 338 Capital in excess of par value 14,740 15,660 Retained earnings 58,738 56,694 Total stockholders' equity 73,813 72,692 $148,011 138,655 See accompanying notes. Consolidated Statement of Cash Flows Years ended September 30 (Dollars in thousands) Cash flows from operating activities: 2000 1999 1998 Net income $ 2,044 6,157 4,480 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 11,144 10,065 9,146 Net changes in operating assets and liabilities: Accounts receivable (3,177) (1,953) (993) Inventory of parts and supplies (147) 49 (83) Prepaid expenses (423) (265) (228) Accounts payable and accrued liabilities 1,219 2,659 492 Increase in deferred income taxes (238) 1,089 620 Net change in insurance reserves and other liabilities 405 876 879 Gain on sale of real estate, plant and equipment (2,220) (3,638) (778) Other, net 959 (7) 22 Net cash provided by operating activities 9,566 15,032 13,557 Cash flows from investing activities: Purchase of property, plant and equipment (21,041) (20,475)(15,323) Purchase of real estate held for investment - (315) - Additions to other assets (777) (737) (451) Proceeds from the sale of real estate held for investment, property, plant and equipment, and other assets 4,365 4,781 1,542 Net cash used in investing activities (17,453) (16,746)(14,232) Cash flows from financing activities: Proceeds from long-term debt 5,000 5,000 3,200 Net increase (decrease) in short-term debt 2,600 1,400 (2,400) Repayment of long-term debt (750) (535) (432) Exercise of employee stock options 545 - 574 Repurchase of Company stock (1,468) (2,221) (33) Net cash provided by financing activities 5,927 3,644 909 Net increase (decrease) in cash and cash equivalents(1,960) 1,930 234 Cash and cash equivalents at beginning of year 2,593 663 429 Cash and cash equivalents at end of year $ 633 2,593 663 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest expense, net of amount capitalized $ 3,477 2,340 2,288 Income taxes $ 920 3,459 1,759 Noncash investing and financing activities: Additions to property, plant and equipment from: Exchanges $ 820 620 767 Other assets $ - - 3,811 Issuance of debt $ - 264 - For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments with maturities of three months or less at time of purchase to be cash equivalents. See accompanying notes. Consolidated Statement of Stockholders' Equity Years ended September 30 (Dollars in thousands) Capital in Common Stock Excess of Retained Shares Amount Par Value Earnings Balance at September 30, 1997 3,439,235 $344 17,333 46,057 Shares purchased and canceled (1,010) - (33) - Exercise of stock options 30,000 3 571 - Net income - - - 4,480 Balance at September 30, 1998 3,468,225 347 17,871 50,537 Shares purchased and canceled (92,408) (9) (2,211) - Net income - - - 6,157 Balance at September 30, 1999 3,375,817 338 15,660 56,694 Shares purchased and canceled (69,466) (7) (1,461) - Exercise of stock options 40,000 4 541 - Net income - - - 2,044 Balance at September 30, 2000 3,346,351 $335 14,740 58,738 See accompanying notes. Notes to Consolidated Financial Statements 1. Accounting policies. 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. INVENTORY - Inventory of parts and supplies is valued at the lower of cost (first-in, first-out) or market. REVENUE AND EXPENSE RECOGNITION - Substantially all 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 due under the leases. The straight-line method is used to recognize rental revenues under leases which provide for varying rents over their term. Sales of real estate are recognized when the collection of the sales price is reasonably assured and when the Company has fulfilled its obligation which is typically as of the closing date. PROPERTY, PLANT AND EQUIPMENT - Provision for depreciation of plant and equipment is computed using the straight-line method based on the following estimated useful lives: Years Buildings and improvements 8-32 Revenue equipment 5-10 Other equipment 3- 5 Furniture and fixtures 5-10 Depletion of sand and stone deposits is computed on the basis of units of production in relation to estimated reserves. Goodwill is amortized over forty years using the straight-line method. The Company periodically reviews property and equipment 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. RISK INSURANCE - The Company has a $100,000 to $500,000 self-insured retention per occurrence in connection with its workers' compensation, automobile liability, and general liability insurance programs ("Risk Insurance"). The Company accrues monthly the estimated cost in connection with its portion of its Risk 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. EARNINGS PER COMMON SHARE - Basic earnings per share are based on the weighted average number of common shares outstanding during the periods. Diluted earnings per 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 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 is extremely complex. Some factors that must be assessed are engineering estimates, continually evolving governmental laws and standards, and potential involvement of other potentially responsible parties. NEW ACCOUNTING REQUIREMENTS - In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", effective for fiscal years beginning after June 15, 1999. In June 1999, the FASB issued SFAS No. 137 "Accounting for Derivative Instruments and Hedging Activities - Deferral of Effective Date SFAS No. 133" which deferred the effective date to fiscal years beginning after June 15, 2000. SFAS 133 requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivatives and whether it qualifies for hedge accounting. The Company will adopt this statement effective October 1, 2000 and it will have no impact. 2. Transactions with related parties. As of September 30, 2000 six of the Company's directors were also directors of Florida Rock Industries, Inc. ("FRI"). Such directors own approximately 30% of the stock of FRI and 44% of the stock of the Company. Accordingly, FRI and the Company are considered related parties. The Company, through its transportation subsidiaries, hauls construction aggregates for FRI and customers of FRI. It also hauls diesel fuel and other supplies for FRI. Charges for these services are based on prevailing market prices. Other wholly owned subsidiaries lease certain construction aggregates mining and other properties and provide construction management services to FRI. A summary of revenues derived from FRI follows (in thousands): 2000 1999 1998 Transportation $1,202 931 839 Real estate 5,976 6,068 5,417 $7,178 6,999 6,256 Prior to October 1, 1999, FRI furnished certain management and related services, including financial, tax, legal, administrative, accounting and computer to the Company and its subsidiaries under an agreement expiring September 30, 2000. Effective October 1, 1999, the Company and FRI agreed to amend the agreement. Under the amended agreement, Patriot assumed responsibility for accounting, credit and certain computer functions. Charges for services provided by FRI were $582,000 in 2000, $1,656,000 in 1999 and $1,515,000 in 1998. 3. Lines of credit and debt. Long-term debt at September 30 is summarized as follows (in thousands): 2000 1999 Revolving credit (unsecured) $20,000 20,000 6.9% to 9.5% mortgage notes payable in installments through 2015 22,811 18,561 42,811 38,561 Less portion due within one year 796 625 $42,015 37,936 The aggregate amount of principal payments, excluding the revolving credit, due subsequent to September 30, 2000 is: 2001 - $796,000; 2002 - $862,000; 2003 - $933,000; 2004 - $1,010,000; 2005-$1,030,000; 2006 and subsequent years - $18,180,000. The Company has a revolving credit agreement as amended on October 31, 2000 under which it may borrow from three banks up to $34,000,000 on term loans payable 25% on November 15, 2002 and the balance on November 15, 2003. Interest is payable at SunTrust Bank, Central Florida, N.A.'s prime rate until November 15, 2001, and at 1/4 of 1% above such prime rate thereafter. Alternative interest rates based on the London interbank rate and/or the reserve-adjusted certificate of deposit rate are available at the Company's option. A commitment fee of 1/4 of 1% is payable on the unused amount of the commitment until November 15, 2001. The revolving credit agreement contains restrictive covenants, including limitations on paying cash dividends. As of September 30, 2000 $14,924,000 of consolidated retained earnings was not restricted as to payment of cash dividends. The mortgage notes payable are collateralized by real estate having a carrying value of approximately $26,778,000 at September 30, 2000. Certain properties having a carrying value at September 30, 2000 of $1,118,000 were encumbered by industrial revenue bonds which 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. The Company also has short-term lines of credit totaling $15,000,000 from two banks. At September 30, 2000, $5,600,000 was borrowed. Under these lines the Company can borrow funds for a period from one to ninety days. There is no commitment fee and the banks can terminate the lines at any time. The interest rate is determined at the time of each borrowing. The weighted average interest rates of such borrowings on September 30, 2000 and 1999 were 7.2% and 5.6%, respectively. During fiscal 2000, 1999 and 1998 the Company capitalized interest cost of $279,000, $315,000 and $331,000, respectively. 4. Leases. At September 30, 2000, 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 $ 42,272 Commercial property 54,487 Land and other property 13,110 109,869 Less accumulated depreciation and depletion 25,936 $ 83,933 The minimum future rentals on noncancelable operating leases as of September 30, 2000 are as follows: 2001 - $6,541,000; 2002 - $6,173,000; 2003 - $5,739,000; 2004 - $5,301,000; 2005 - $4,424,000; 2006 and subsequent years $16,455,000. 5. 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 will initially trade together with the Company's common stock and will not be 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. 6. Stock option plan. The Company has a Stock Option Plan under which options for shares of common stock may be granted to directors, officers and key employees. At September 30, 2000 the number of shares available for issuance is 560,400 shares. Option transactions for the fiscal years ended September 30 are summarized as follows: 2000 1999 1998 Average Average Average Options Price(1) Options Price(1) Options Price(1) Shares under option: Beginning of year 144,600 17.62 120,000 16.31 150,000 15.25 Issued - - 24,600 24.00 - - Cancelled (2,000) 24.00 - - - - Exercised (40,000) 13.63 - - (30,000) 11.00 End of year 102,600 19.05 144,600 17.62 120,000 16.31 Options exercisable at end of year 84,520 109,000 98,000 (1) Weighted average exercise price The following table summarizes information concerning stock options outstanding at September 30, 2000: Options Options Weighted-Average Exercise Price Outstanding Exercisable Remaining Life 17.25 15,000 15,000 4.2 years 17.75 65,000 65,000 4.1 years 24.00 22,600 4,520 8.2 years Remaining non-exercisable options as of September 30, 2000 become exercisable 4,520 shares each year through 2004. The options expire ten years from the date of grant and become exercisable in cumulative installments of 20% to 33% each year after a one year waiting period from date of grant. 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 granted subsequent to October 1, 1996 consistent with the provisions of SFAS No. 123, the Company's 2000 net income, basic and diluted earnings per share would have been $2,001,000, $.60 and $.60, respectively, and 1999 net income, basic and diluted earnings per share would have been $6,121,000, $1.78 and $1.76, respectively. The SFAS 123 method has not been applied to options granted prior to October 1, 1996, and the pro forma compensation expense may not be indicative of pro forma expense in future years. The fair value of options granted in 1999 was estimated to be $14.40 on the date of grant using the following assumptions; no dividends yield, expected volatility of 54.8%, risk-free interest rates of 4.3% and expected lives of 7 years. 7. Income taxes. The provision for income taxes for fiscal years ended September 30 consists of the following (in thousands): 2000 1999 1998 Current: Federal $1,399 2,445 1,914 State 236 402 329 1,635 2,847 2,243 Deferred (244) 1,089 620 Total $1,391 3,936 2,863 A reconciliation between the amount of tax shown above and the amount computed at the statutory Federal income tax rate follows (in thousands): 2000 1999 1998 Amount computed at statutory Federal rate $1,168 3,432 2,497 State income taxes (net of Federal income tax benefit) 135 370 277 Other, net 88 134 89 Provision for income taxes $1,391 3,936 2,863 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: 2000 1999 Deferred tax liabilities: Basis difference in property, plant and equipment $10,333 10,241 Depletion 592 630 Prepaid expenses 1,079 980 Gross deferred tax liabilities 12,004 11,851 Deferred tax assets: Insurance reserves 2,168 2,107 Other, net 972 641 Gross deferred tax assets 3,140 2,748 Net deferred tax liability $ 8,864 9,103 8. 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 $433,000 in 2000, $458,000 in 1999 and $429,000 in 1998. 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 following table sets forth the plan's status reconciled with the accrued postretirement benefit cost included in the Company's consolidated balance sheet at September 30 (in thousands): 2000 1999 Change in benefit obligation Balance beginning of year $ 449 471 Service cost 23 30 Interest cost 26 29 Plan participants contribution 16 - Actuarial gain (109) (76) Benefits paid (25) (5) Balance end of year $ 380 449 Change in plan assets Balance beginning of year $ 0 0 Employer contributions 9 5 Plan participants contribution 16 - Benefits paid (25) (5) Balance end of year $ 0 0 Funded status $(380) (449) Unrecognized net gain (224) (136) Unrecognized prior service cost - - Accrued postretirement benefit costs $(604) (585) Net periodic postretirement benefit cost for fiscal years ended September 30 includes the following components (in thousands): 2000 1999 1998 Service cost of benefits earned during the period $ 23 30 33 Interest cost on APBO 26 29 30 Net amortization and deferral (20) (23) (62) Net periodic postretirement benefit cost $ 29 36 1 The discount rate used in determining the Net Periodic Postretirement Benefit Cost and the APBO was 7.75% for 2000 and 7.25% for 1999 and 1998. 9. Business segments. On September 30, 1999, the Company adopted SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information". SFAS 131 established standards for reporting information about segments in annual financial statements and requires selected information about segments in interim financial reports issued to stockholders. In addition, SFAS 131 established standards for related disclosures about products and services, and geographic areas. Segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in accessing performance. 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. 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): 2000 1999 1998 Revenues: Transportation $ 80,152 67,048 64,014 Real estate (a) 13,710 14,971 9,960 $ 93,862 82,019 73,974 Operating profit(b): Transportation $ 118 3,589 4,371 Real estate (a) 8,258 10,177 6,357 Corporate expenses (1,536) (1,386) (1,103) Operating profit $ 6,840 12,380 9,625 Capital expenditures: Transportation $ 12,091 12,010 8,368 Real estate 9,762 9,344 11,504 Other 8 5 29 $ 21,861 21,359 19,901 Depreciation, depletion and amortization: Transportation $ 8,191 7,398 6,740 Real estate 2,897 2,612 2,356 Other 56 55 50 $ 11,144 10,065 9,146 Identifiable assets at September 30: Transportation $ 54,836 49,816 43,976 Real estate 92,166 85,720 78,807 Cash items 633 2,593 663 Unallocated corporate assets 376 526 519 $148,011 138,655 123,965 (a) Fiscal 2000, 1999 and 1998 includes revenue of $2,260,000, $3,788,000 and $426,000 and operating profit of $1,533,000, $3,236,000 and $358,000, respectively, from the sale of real estate. (b) Operating profit is earnings before interest expense, other income, interest income and income taxes. 10. Fair values of financial instruments. At September 30, 2000 and 1999, the carrying amount reported in the 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 using discounted cash flow analysis, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. At September 30, 2000 the carrying amount and fair value of such other long-term debt was $22,811,000 and $22,555,000, respectively. At September 30, 1999 the carrying amount and fair value of such other long-term debt was $18,562,000 and $18,033,000, respectively. 11. 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 materially adverse effect on the Company's consolidated financial statements. One of the Company's subsidiaries is potentially a responsible party in connection with a Superfund Site. It is the policy of the Company to accrue environmental contamination cleanup costs when it is probable that a liability has been incurred and the amount of such liability is reasonably estimable. The Company has made an estimate of its likely costs in connection with this site and a liability has been recorded. Such liability is not material to the financial statements of the Company. 12. Commitments. At September 30, 2000, the Company had entered into various contracts to purchase and develop real estate and to purchase computer software with remaining commitments totaling $3,192,000 and $69,000, respectively. 13. 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. For information concerning selected information concerning the real estate business, see Note 9. Independent Auditors' Report To the Board of Directors and Stockholders Patriot Transportation Holding, Inc. We have audited the accompanying consolidated balance sheets of Patriot Transportation Holding, Inc. and subsidiaries as of September 30, 2000 and 1999, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2000. 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 in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Patriot Transportation Holding, Inc. and subsidiaries at September 30, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2000 in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Certified Public Accountants Jacksonville, Florida December 8, 2000 Directors and Officers Directors John E. Anderson (1) President and Chief Executive Officer of the Company Edward L. Baker (1) Chairman of the Board of the Company 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. David H. deVilliers, Jr. Vice President of the Company and President of FRP Development Corp., the Company's northern real estate operations Luke E. Fichthorn III (2) Private Investment Banker, Twain Associates and Chairman of the Board and Chief Executive Officer of Bairnco Corporation Francis X. Knott (2) Chief Executive Officer of Partners Realty Trust, Inc. Radford D. Lovett (2)(3) Chairman of the Board of Commodores Point Terminal Corp. Robert H. Paul III (3) Chairman of the Board, President and Chief Executive Officer of Southeast-Atlantic Beverage Corporation James B. Shephard Vice President and Secretary of the Company Martin E. Stein Jr. (3) Chairman and Chief Executive Officer of Regency Realty Corporation James H. Winston (2) President of LPMC of Jax, Inc. and President of Omega Insurance Company ________________ (1) Member of the Executive Committee (2) Member of the Audit Committee (3) Member of the Compensation Committee Officers Edward L. Baker Chairman of the Board John E. Anderson President and Chief Executive Officer James B.Shephard Vice President and Secretary David H. deVilliers Jr. Vice President President, FRP Development Corp., the Company's northern real estate operations James J. Gilstrap Treasurer and Chief Financial Officer Wallace A. Patzke Jr. Controller and Chief Accounting Officer Patriot Transportation Holding, Inc. General Office: 1801 Art Museum Drive Jacksonville, Florida 32207 Telephone: (904) 396-5733 Annual Meeting Shareholders are cordially invited to attend the Annual Stockholders Meeting which will be held at 2 p.m. local time, on Wednesday, February 7, 2001, 155 East 21st Street, Jacksonville, Florida. Transfer Agent First Union Customer Information Center Corporate Trust Client Services NC-1153 1525 West W. T. Harris Boulevard - 3C3 Charlotte, NC 28288-1153 Telephone: 1-800-829-8432 General Counsel Lewis S. Lee, Esquire McGuireWoods LLP Jacksonville, Florida Independent Auditors Deloitte & Touche LLP Jacksonville, Florida Common Stock Listed The Nasdaq Stock Market (Symbol: PATR) Form 10-K Stockholders may receive without charge a copy of Patriot Transporation Holding, Inc.'s annual report to the Securities and Exchange Commission on Form 10-K by writing to the Treasurer at P.O. Box 4667, Jacksonville, Florida 32201.