-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FrlSZTwJeYifgujxHFLR8KDZ/unj1iKEh6ePNyVy+k1i5AeY4FjcKSiNbtEc1yVw W+9lLLtvGmaAsMu05tphKg== 0000844059-02-000009.txt : 20021220 0000844059-02-000009.hdr.sgml : 20021220 20021220172929 ACCESSION NUMBER: 0000844059-02-000009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATRIOT TRANSPORTATION HOLDING INC CENTRAL INDEX KEY: 0000844059 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING & COURIER SERVICES (NO AIR) [4210] IRS NUMBER: 592924957 STATE OF INCORPORATION: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17554 FILM NUMBER: 02865810 BUSINESS ADDRESS: STREET 1: 801 ART MUSEUM DRIVE CITY: JACKSONVILLE STATE: FL ZIP: 32207 BUSINESS PHONE: 9043965733 MAIL ADDRESS: STREET 1: 155 E 21ST ST CITY: JACKSONVILLE STATE: FL ZIP: 32206 FORMER COMPANY: FORMER CONFORMED NAME: FRP PROPERTIES INC DATE OF NAME CHANGE: 19920703 10-K 1 pattext.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, 2002 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 9, 2002 aggregate market value of the shares of Common Stock held by non-affiliates of the registrant was $37,221,956. At such date there were 3,049,708 shares of the registrant's stock outstanding. Documents Incorporated by Reference Portions of the Patriot Transportation Holding, Inc. 2002 Annual Report to Shareholders are incorporated by reference in Parts I and II. Portions of the Patriot Transportation Holding, Inc. Proxy Statement dated December 23, 2002 are incorporated by reference in Part III. PART I Item 1. BUSINESS. Patriot Transportation Holding, Inc., which was incorporated in Florida in 1988, and its subsidiaries (the "Company") are engaged in the transportation and real estate businesses. The Company's transportation business is conducted through two wholly owned subsidiaries, Florida Rock & Tank Lines, Inc.("Tank Lines"),and SunBelt Transport, Inc. ("SunBelt"). Tank Lines is a Southeastern transportation company concentrating in the hauling of liquid and dry bulk commodities by tank trucks. SunBelt serves the flatbed portion of the trucking industry in the Southeast, Midwest and Mid-Atlantic states, hauling primarily construction materials. A third transportation subsidiary, Patriot Transportation, Inc. ("PTI") closed operations in September 2001. The Company's real estate activities are conducted through several wholly owned subsidiaries. Florida Rock Properties, Inc. ("Properties") owns real estate of which a substantial portion is under mining royalty agreements or leased to Florida Rock Industries, Inc. ("FRI"), a related party. FRI accounted for approximately 41% of the Company's real estate revenues, excluding property sales, for Fiscal 2002. Properties 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 and Jacksonville, Florida. Substantially all of the real estate operations are conducted within the Southeastern and Mid-Atlantic United States. The Company has two business segments: transportation and real estate. Industry segment information is presented in Notes 2 and 10 to the consolidated financial statements included in the accompanying 2002 Annual Report to Shareholders and is incorporated herein by reference. Revenues from royalties and from a portion of the trucking operations are subject to factors affecting the level of general construction activity. A decrease in the level of general construction activity in any of the Company's market areas may have an adverse effect on such revenues and income derived therefrom. Transportation. Tank Lines is engaged in hauling liquid and dry bulk commodities by tank trucks. SunBelt is engaged in hauling primarily building and construction materials on flatbed trailers. Before closing its operations in September 2001, PTI was engaged in the hauling of a variety of cargo through independent agents and owner-operators. Tank Lines' truck fleet hauls liquid and dry bulk commodities, primarily 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; Charlotte and Wilmington, North Carolina; Charleston, South Carolina; and Birmingham, Alabama. Tank Lines has from two to six major tank truck competitors in each of its markets. SunBelt's owned and leased flatbed fleet is based in Jacksonville and Tampa, Florida; Atlanta and Savannah, Georgia; Salisbury, North Carolina; and South Pittsburg, Tennessee and hauls primarily building and construction materials in Southeastern, Midwestern and Mid-Atlantic states. There are ten major competitors in the SunBelt's market area and numerous small competitors in the various states served. On August 10, 2001 the Company announced it was discontinuing the operation of its third-party agent/owner-operator subsidiary, PTI. PTI hauled a variety of cargo, throughout the United States, through independent contractors until it ceased operations in September 2001. PTI began operations in December 1999. PTI was a non-asset based variable cost transportation company that provided transportation services to shippers through a network of independent sales agents and contractors. Independent sales agents and contractors were compensated based on a percentage of revenue generated by them. The Company decided to close PTI due to declining operating margins from the continuing high administrative costs to support this start up business, sharply higher liability insurance costs and an adverse economic climate. Additional information is presented in Note 3 to the consolidated financial statements included in the accompanying 2002 Annual Report to Shareholders and is incorporated herein by reference. On May 30, 2002, the Company acquired substantially all of the operating assets of Infinger Transportation Company, Inc. (Infinger), a regional tank truck carrier based in Charleston, South Carolina. The acquisition was accounted for as a purchase. The purchase price was approximately $3,698,000, including costs associated with the acquisition. The purpose of the acquisition was to enable the Company to expand into new markets and increase capacity in existing markets. At September 30, 2002, the Company was committed to purchase 67 additional tractors and expects to continue its routine fleet replacement and modernization program during 2003. Price, service, and location are the major factors which affect competition in the transportation segment within a given market. During Fiscal 2002, the transportation segment's ten largest customers accounted for approximately 45.5% of the transportation segment's revenue. The loss of any one of these customers could have an adverse effect on the Company's revenues and income. During the fourth quarter, the Company reported that one of its ten largest customers indicated it is moving a majority of the business it is currently doing with the Company to other carriers. This decision was reached after a lengthy competitive bid process resulting in the business being awarded to the lowest bidder. The Company estimates lost revenues from this customer to be approximately 6% of the transportation segment's revenues for Fiscal 2002. The loss of this revenue will have an adverse effect on the Company's operating income, at least in the short term. The Company anticipates this lost revenue will be offset by revenues generated from the acquisition of the operating assets of Infinger Transportation, Inc. which was acquired by the Company on May 30, 2002. The transportation segment primarily serves customers in the petroleum and building and construction industries. Petroleum customers accounted for approximately 67% and building and construction customers accounted for approximately 21% of transportation segment revenues for the year ended September 30, 2002. The Company hauls construction aggregates, diesel fuel and supplies for FRI. Revenues from services provided to FRI accounted for 1.2% of the transportation segment's revenues. 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 category is land and/or buildings leased under rental agreements or being developed for rental. The second is construction aggregates properties with stone or sand and gravel deposits, of which substantially all is leased to FRI 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 third category is land that is being held for future appreciation or development. Additional information about the Company's real estate segment is contained on page 1 under the captions "Real Estate Group" and in Notes 2 and 10 to the consolidated financial statements included in the accompanying 2002 Annual Report to Shareholders and is incorporated herein by reference. The Company's real estate strategy of developing high quality, flexible warehouse/office space continues to be successful as 91% of the warehouse/office portfolio of approximately 1.4 million square feet was leased at September 30, 2002. Price, location, rental space availability, flexibility of design, and property management services are the major factors that affect competition in the flexible warehouse/office rental market. The Company experiences considerable competition in all of its markets. In Fiscal 2002, real estate revenues, excluding the sale of real estate, were divided approximately 67% from rentals and 33% from mining and minimum royalties. FRI accounted for approximately 41% of such revenue. Tenants of our flexible warehouse/office properties are not concentrated in any one particular industry. In February 2002, a subsidiary of the Company signed an Agreement to sell 108 acres of land located in Springfield, Virginia to FRI for $15,000,000. Closing is subject to a title search and surveys and may occur within 45 days of the Company giving notice to FRI to close or, subsequent to June 30, 2003, within 45 days of either party giving notice to close. If FRI fails to close by December 31, 2003, at no fault of the Company, the Company may retain the $100,000 binder deposit and be under no further obligation to close. FRI has the right to terminate this Agreement prior to receiving the Company's notice to close if the consummation of the sale would cause a default in the Credit Agreement among FRI and Wachovia Bank, N.A., et. al. The Agreement was approved by a committee of independent directors of the company after review of a development feasibility study and other materials, consultation with management, and advice of independent counsel. Environmental Matters. While the Company is affected by environmental regulations, such regulations are not expected to have a major effect on the Company's capital expenditures or operating results. Employees. The Company employed approximately 846 people in its transportation group, 11 people in its real estate group, and 4 people in its corporate offices at September 30, 2002. EXECUTIVE OFFICERS OF THE COMPANY Name Age Office Position Since Edward L. Baker 67 Chairman of the Board May 3, 1989 John E. Anderson 57 President & Chief Feb. 17, 1989 Executive Officer David H. DeVilliers, Jr. 51 Vice President Feb. 28, 1994 Ray M.Van Landingham 59 Vice President, Finance Dec. 6, 2000 and Administration and Chief Financial Officer Gregory B. Lechwar 35 Controller Oct. 2, 2002 Rick J. Copley 45 President of SunBelt Sept 16, 2002 Transport, Inc. John R. Mabbett III 43 President of Florida Jan. 1, 1993 Rock & Tank Lines, Inc. All of the above officers have been employed in their respective positions for the past five years except as follows: Ray Van Landingham was Vice President, Finance and Administration of the Jacksonville Port Authority from December 1991 to November 2000; Gregory B. Lechwar has been employed by the Company in various accounting positions since October 1999, and from August 1991 until October 1999, Mr. Lechwar was employed as a certified public accountant with PricewaterhouseCoopers LLP; and Rick J. Copley has been a Vice President of SunBelt since 1993. John D. Baker II, who is the brother of Edward L. Baker, and Thompson S. Baker II, who is the son of Edward L. Baker, are on the Board of Directors of the Company. All executive officers of the Company are elected by the Board of Directors. Item 2. PROPERTIES. The Company's principal properties are located in Florida, Georgia, Virginia, Washington, D.C., and Maryland. Transportation Properties. At September 30, 2002, the Company operated and owned a fleet of approximately 595 trucks, two of which were leased, and owned a fleet of approximately 836 trailers. The Company has 22 sites for its trucking terminals in Florida, Georgia, Alabama, North Carolina, South Carolina and Tennessee. Of these sites, the Company owned 12 and leased 10. Development Properties. The Company owns approximately 120 acres of land in Virginia and Washington, D.C. and an office building and approximately 6 acres in Jacksonville, Florida, all of which are leased to FRI. At September 30, 2002, the Company owned eight parcels of land totaling 251 acres near Baltimore, Maryland as follows: Hillside Business Park in Anne Arundel County is a 59 acre tract near the Baltimore-Washington International Airport. The project will provide the Company an opportunity to develop 575,000 square feet of warehouse/office space. Grading and infrastructure work on the site is nearing completion and the first two buildings within the park are under construction and are scheduled to be completed during 2003 totaling 274,800 square feet of leaseable warehouse/office space. One building with 200,200 square feet is pre-leased to one tenant for 15 years. The other building is not pre-leased. Lakeside Business Park in Harford County consists of 134 acres. Seven warehouse/office buildings, totaling 671,918 square feet, have been constructed and are 86% leased. 32.8 acres remain for future development of an additional 485,200 square feet of comparable product. 6920 Tudsbury Road in Baltimore County contains 5.3 acres with 83,100 square feet of warehouse space that is 100% leased. 8620 Dorsey Run Road in Howard County contains 5.8 acres with 84,600 square feet of warehouse space that is 100% leased. Rossville Center in Baltimore County contains approximately 10 acres with 190,517 square feet of commercial/warehouse space and is 87% leased. 34 Loveton Circle in Baltimore County contains 8.5 acres with 29,722 square feet of office space which is 11% occupied by the Company with the balance 100% leased, including 23% leased to FRI. Oregon Center in Anne Arundel County contains approximately 17 acres with 195,615 square feet of commercial warehouse and office space which is 100% leased. Arundel Center in Howard County contains approximately 11 acres with 162,796 square feet of commercial warehouse and office space, which is 89% leased. At September 30, 2002 certain developed real estate properties having a carrying value of $40,975,000 were pledged on long- term non-recourse notes with an outstanding principal balance totaling $36,101,000. In addition, certain other properties having a carrying value at September 30, 2002 of $981,000 were encumbered by industrial revenue bonds that are the liability of FRI. FRI has agreed to pay such debt when due (or sooner if FRI cancels its lease of such property), and further has agreed to indemnify and hold harmless the Company on account of such debt. The Company owns a 5.8 acre site in the Southeast quadrant of Washington, D.C. on the banks of the Anacostia River which was rezoned in November 1999 from industrial to a Planned Unit Development ("PUD") that permitted the development of 1.5 million square feet of commercial office space together with associated waterfront enhancements. As a condition to the PUD the Company was required to proffer a nearby 2.1 acre site it owns thereby eliminating any potential for development of the 2.1 acre site by the Company. In May of 2002 the District of Columbia Zoning Commission voted 3-2 against extending until 2004 the previously approved PUD that allowed for the development of up to 1.5 million square feet of commercial office space on the Company's 5.8 acre site. The Company has filed the appropriate documentation with the Zoning Commission seeking a reconsideration of their decision not to extend the PUD. There is also a recently adopted "overlay" of new zoning for a substantial area of the Southwest and Southeast quadrants of the District of Columbia west of the Anacostia River which includes both the 5.8 acre site and the nearby 2.1 acre site owned by the Company. Under this "overlay" the Company would be permitted to develop on the two sites approximately 1.38 million square feet, divided roughly in half between commercial office/retail space and residential (including hotel) space. The "overlay" requires a larger residential component and more "open space" than the PUD would have permitted. The two sites are currently leased to FRI under leases expiring in April 2006. The Company will continue to explore opportunities for eventual development of this property. Construction Aggregates Properties. The following table summarizes the Company's principal construction aggregates locations and estimated reserves at September 30, 2002, substantially all of which are leased to FRI. Tons of Tons Sold Estimated in Year Reserves Ended at 9/30/02 9/30/02 Approximate (000's) (000's) Acres Owned The Company owns eleven locations currently being mined in Brooksville, Grandin, Gulf Hammock, Keuka, Newberry and Airgrove/ Lake County, Florida; Columbus, Macon, Forest Park and Tyrone, Georgia; and Manassas, Virginia. 9,058 518,394 17,135 The Company owns six locations not currently being mined in Ft. Myers, Miami(mining ceased Feb 2002), Marion County, Astatula/Lake County and Sandland/Polk County, Florida and St. Mary's County, Maryland 1,458 32,891 4,145 Other Properties. In addition to the development, mining and rental sites, the Company owns approximately 8,373 acres of investment and other real estate, of which approximately 6,321 acres are in Suwannee County and Columbia County, Florida and are leased to FRI. The Company continues permitting and preliminary horizontal development work for a 50-acre, rail-served site on Commonwealth Avenue in Jacksonville, Florida near the western beltway of Interstate-295. This site is planned for roughly 500,000 square feet of eventual build-out. Item 3. LEGAL PROCEEDINGS. Note 13 to the Consolidated Financial Statements included in the accompanying 2002 Annual Report to Shareholders is incorporated herein by reference. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No reportable events. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. There were approximately 767 holders of record of Patriot Transportation Holding, Inc. common stock, $.10 par value, as of December 9, 2002. The Company's common stock is traded on the Nasdaq Stock Market (Symbol PATR). Information concerning stock prices is included under the caption "Quarterly Results" on page 5 of the Company's 2002 Annual Report to Shareholders, and such information is incorporated herein by reference. The Company has not paid a cash dividend in the past and it is the present policy of the Board of Directors not to pay cash dividends. Information concerning restrictions on the payment of cash dividends is included in Note 4 to the consolidated financial statements included in the accompanying 2002 Annual Report to Shareholders and such information is incorporated herein by reference. Information regarding securities authorized for issuance under equity compensation plans is included in Item 12 of Part III of this Annual Report on Form 10-K and such information is incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA. Information required in response to this Item 6 is included under the caption "Five Year Summary" on page 5 of the Company's 2002 Annual Report to Shareholders and such information is incorporated herein by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Information required in response to Item 7 is included under the caption "Management Analysis" on pages 6 and 7; under the caption "Capital Expenditures" on page 1; and in Notes to Consolidated Financial Statements included in the accompanying 2002 Annual Report to Shareholders. Such information is incorporated herein by reference. Item 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk from changes in interest rates. For its cash and cash equivalents, a change in interest rates affects the amount of interest income that can be earned. For its debt instruments with variable interest rates, changes in interest rates affect the amount of interest expense incurred. The Company prepared a sensitivity analysis of its variable rate borrowings to determine the impact of hypothetical changes in interest rates on the Company's results of operations and cash flows. The interest-rate analysis assumed a 50 basis point adverse change in interest rates on all borrowings under the credit agreement. However, the interest-rate analysis did not consider the effects of the reduced level of economic activity that could exist in such an environment. A 50 basis point adverse move in interest rates on the Company's outstanding borrowings under the credit agreement would have an immaterial impact on the Company's results of operations and cash flows. The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates (dollars in thousands): 2003 2004 2005 2006 2007 Thereafter Total Fair Value Liabilities: Long-term debt at fixed rates $ 1,311 1,415 1,467 1,587 1,695 28,626 36,101 38,450 Weighted average interest rate 7.6% 7.6 7.6 7.6 7.6 7.6 Bank revolving credit at variable interest $12,500 12,500 12,500 rate Weighted average Interest rate 4.2% Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Information required in response to this Item 8 is included under the caption "Quarterly Results" on page 5 and on pages 8 through 18 of the Company's 2002 Annual Report to Shareholders. Such information is incorporated herein by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. On May 1, 2002, the Board of Directors of the Company, upon recommendation of its Audit Committee, decided to dismiss Deloitte & Touche LLP ("Deloitte & Touche") as the Company's principal public accountants and engaged PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") to serve as the Company's principal public accountants for a three year term beginning with fiscal year 2002. Deloitte & Touche's reports on the consolidated financial statements of the Company and its subsidiaries for the two most recent fiscal years ended September 30, 2001 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During the Company's two fiscal years ended September 30, 2001 and the subsequent interim periods through March 31, 2002, there were no disagreements between the Company and Deloitte & Touche on any matter of accounting prinicples or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Deloitte & Touche's satisfaction, would have caused them to make reference to the subject matter of the disagreement in connection with their reports; and there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K. The Company provided Deloitte & Touche with a copy of the foregoing disclosures. During the Company's two fiscal years ended September 30, 2001, the Company did not consult PricewaterhouseCoopers with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, or any other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding the executive officers of the Company is set forth under the caption "Executive Officers of the Company" in Part I of this Form 10-K. Information concerning directors, required in response to this Item 10, is included under the captions "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement and such information is incorporated herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission not later than December 31, 2002. Item 11. EXECUTIVE COMPENSATION. Information required in response to this Item 11 is included under the captions "Executive Compensation," "Compensation Committee Report," "Compensation Committee Interlocks and Insider Participation," and "Shareholder Return Performance" in the Company's Proxy Statement and such information is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information required in response to this Item 12 is included under the captions "Common Stock Ownership of Certain Beneficial Owners" and "Common Stock Ownership by Directors and Officers" in the Company's Proxy Statement and such information is incorporated herein by reference. Equity Compensation Plan Information Number of Securities remaining available for Number of future Securities Weighted issuance to be Average under equity issued upon exercise compensation exercise of price of plans outstanding outstanding (excluding options, options, securities warrants warrants reflected in and rights and rights column (a) Plan Category (a) (b) (c) Equity compensation plans approved by security holders 141,000 19.78 426,000 Equity compensation pans not approved by security holders 0 0 0 Total 141,000 19.78 426,000 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information required in response to this Item 13 is included under the captions "Compensation Committee Interlocks and Insider Participation" and "Certain Relationships and Related Transactions" in the Company's Proxy Statement and such information is incorporated herein by reference. Item 14. CONTROLS AND PROCEDURES. Evaluation of disclosure controls and procedures. As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to the filing date of this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's President and Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer. Based upon that evaluation, the Company's President and Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer have concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company's periodic SEC filings. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rule and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer as appropriate, to allow timely decisions regarding required disclosures. Changes in internal controls. There have been no changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. PART IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) (1)and(2) Financial Statements and Financial Statement Schedules. The response to this item is submitted as a separate section. See Index to Financial Statements and Financial Statement Schedules on page 25 of this Form 10-K. (3)Exhibits. The response to this item is submitted as a separate section. See Exhibit Index on pages 21 through 24 of this Form 10-K. (b) Reports on Form 8-K. During the three months ended September 30, 2002, 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 19, 2002 By JOHN E. ANDERSON John E. Anderson President and Chief Executive Officer (Principal Executive Officer) By RAY M. VAN LANDINGHAM Ray M. Van Landingham Vice President, Finance & Administration and Chief Financial Officer (Principal Financial Officer) By GREGORY B. LECHWAR Gregory B. Lechwar Controller (Principal Accounting Officer) CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, John E. Anderson, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Patriot Transportation Holding, Inc. on Form 10-K for the fiscal year ended September 30, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Patriot Transportation Holding, Inc. By: JOHN E. ANDERSON_______________ Name: John E. Anderson Title: President and Chief Executive Officer I, Ray M. Van Landingham, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Patriot Transportation Holding, Inc. on Form 10-K for the fiscal year ended September 30, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Patriot Transportation Holding, Inc. By: RAY M. VAN LANDINGHAM__________ Name: Ray M. Van Landingham Title: Vice President, Finance and Administration and Chief Financial Officer I, Gregory B. Lechwar, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Patriot Transportation Holding, Inc. on Form 10-K for the fiscal year ended September 30, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Patriot Transportation Holding, Inc. By: GREGORY B. LECHWAR_____________ Name: Gregory B. Lechwar Title: Controller 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 4, 2002. 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 Director RAY M. VAN LANDINGHAM ___________ FRANCIS X. KNOTT Ray M. Van Landingham Francis X. Knott Vice President, Finance and Director Administration (Principal Financial Officer) ROBERT H. PAUL, III Robert H. Paul, III Director GREGORY B. LECHWAR Gregory B. Lechwar H. JAY SKELTON Controller H. Jay Skelton (Principal Accounting Officer) Director EDWARD L. BAKER MARTIN E. STEIN, JR. Edward L. Baker Martin E. Stein, Jr. Chairman of the Board Director JOHN D. BAKER II JAMES H. WINSTON John D. Baker II James H. Winston Director Director THOMPSON S. BAKER II Thompson S. Baker II Director CERTIFICATIONS I, John E. Anderson, certify that: 1. I have reviewed this annual report on Form 10-K of Patriot Transportation Holding, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 19, 2002 /s/John E. Anderson President and Chief Executive Officer CERTIFICATIONS I, Ray M. Van Landingham, certify that: 1. I have reviewed this annual report on Form 10-K of Patriot Transportation Holding, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 19, 2002 /s/Ray M. Van Landingham Vice President, Finance and Administration and Chief Financial Officer CERTIFICATIONS I, Gregory B. Lechwar, certify that: 1. I have reviewed this annual report on Form 10-K of Patriot Transportation Holding, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 19, 2002 /s/Gregory B. Lechwar Controller (Principal Accounting Officer) PATRIOT TRANSPORTATION HOLDING, INC. FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 EXHIBIT INDEX [Item 14(a)(3)] (3)(a)(1) Articles of Incorporation of Patriot Transportation Holding, Inc., incorporated by reference to the corresponding exhibit filed with Form S-4 dated December 13, 1988. File No. 33- 26115. (3)(a)(2) Amendment to the Articles of Incorporation of Patriot Transportation Holding, Inc. filed with the Secretary of State of Florida on February 19, 1991 incorporated by reference to the corresponding exhibit filed with Form 10-K for the fiscal year ended September 30, 1993. File No. 33- 26115. (3)(a)(3) Amendments to the Articles of Incorporation of Patriot Transportation Holding, Inc. filed with the Secretary of State of Florida on February 7, 1995, incorporated by reference to an appendix to the Company's Proxy Statement dated December 15, 1994. File No. 33-26115. (3)(a)(4) Amendment to the Articles of Incorporation of Patriot Transportation Holding, Inc., filed with the Florida Secretary of State on May 6, 1999 incorporated by reference to a form of such amendment filed as Exhibit 4 to the Company's Form 8-K dated May 5, 1999. File No. 33-26115. (3)(a)(5) Amendment to the Articles of Incorporation of Patriot Transportation Holding, Inc. filed with the Secretary of State of Florida on February 21, 2000, incorporated by reference to the corresponding exhibit filed with Form 10-Q for the quarter ended March 31, 2000. File No. 33-26115. (3)(b)(1) Restated Bylaws of Patriot Transportation Holding, Inc. adopted December 1, 1993, incorporated by reference to the corresponding exhibit filed with Form 10-K for the fiscal year ended September 30, 1993. File No. 33-26115. (3)(b)(2) Amendment to the Bylaws of Patriot Transportation Holding, Inc. adopted August 3, 1994, incorporated by reference to the corresponding exhibit filed with Form 10-K for the fiscal year ended September 30, 1994. File No. 33- 26115. (3)(b)(3) Amendments to the Articles of Incorporation of Patriot Transportation Holding, Inc. filed with the Secretary of State of State of Florida on February 7, 1995, incorporated by reference to an appendix to the Company's Proxy Statement dated December 15, 1994. File No. 33-26115. (4)(a) Articles III, VII and XII of the Articles of Incorporation of Patriot Transportation Holding, Inc, incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. And amended Article III, incorporated by reference to an exhibit filed with Form 10-K for the fiscal year ended September 30, 1993. And Articles XIII and XIV, incorporated by reference to an appendix filed with the Company's Proxy Statement dated December 15, 1994. File No. 33-26115. (4)(b) Specimen stock certificate of Patriot Transportation Holding, Inc, incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. File No. 33-26115. (4)(c) Revolving Credit Agreement dated as of January 9, 2002 among Patriot Transportation Holding, Inc. as Borrower, the Lenders from time to time party hereto and SunTrust Bank as Administrative Agent, incorporated by reference to an exhibit filed with Form 10-Q for the quarter ended December 31, 2001. File No. 33-26115. (4)(d) The Company and its consolidated subsidiaries have other long-term debt agreements which do not exceed 10% of the total consolidated assets of the Company and its subsidiaries, and the Company agrees to furnish copies of such agreements and constituent documents to the Commission upon request. (4)(e) Rights Agreement, dated as May 5, 1999 between the Company and First Union National Bank, incorporated by reference to Exhibit 4 to the Company's Form 8-K dated May 5, 1999. File No. 33-26115. (10)(a) Various lease backs and mining royalty agreements with Florida Rock Industries, Inc., none of which are presently believed to be material individually, except for the Mining Lease Agreement dated September 1, 1986, between Florida Rock Industries Inc. and Florida Rock Properties, Inc., successor by merger to Grandin Land, Inc. (see Exhibit (10)(c)), but all of which may be material in the aggregate, incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(b) License Agreement, dated June 30, 1986, from Florida Rock Industries, Inc. to Florida Rock & Tank Lines, Inc. to use "Florida Rock" in corporate names, incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(c) Mining Lease Agreement, dated September 1, 1986, between Florida Rock Industries, Inc. and Florida Rock Properties, Inc., successor by merger to Grandin Land, Inc., incorporated by reference to an exhibit previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(d) Summary of Medical Reimbursement Plan of Patriot Transportation Holding, Inc., incorporated by reference to an exhibit filed with Form 10-K for the fiscal year ended September 30, 1993. File No. 33-26115. (10)(f) Summary of Management Incentive Compensation Plans, incorporated by reference to an exhibit filed with Form 10-K for the fiscal year ended September 30, 1994. File No. 33- 26115. (10)(g) Management Security Agreements between the Company and certain officers, incorporated by reference to a form of agreement previously filed (as Exhibit (10)(I)) with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(h)(1) Patriot Transportation Holding, Inc. 1989 Employee Stock Option Plan, incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. File No. 33-26115 (10)(h)(2) Patriot Transportation Holding, Inc. 1995 Stock Option Plan, incorporated by reference to an appendix to the Company's Proxy Statement dated December 15, 1994. File No. 33-26115. (10)(h)(3) Patriot Transportation Holding, Inc. 2000 Stock Option Plan, incorporated by reference to an appendix to the Company's Proxy Statement dated December 15, 1999. File No. 33-26115. (10)(i) Purchase and Sale Agreement dated February 6, 2002 between Florida Rock Industries, Inc. and Florida Rock Properties, Inc., incorporated by reference to and exhibit filed with Form 10-Q for the quarter ended December 31, 2001. File No. 33-26115. (11) Computation of Earnings Per Common Share. (13) The Company's 2002 Annual Report to shareholders, portions of which are incorporated by reference in this Form 10-K. Those portions of the 2002 Annual Report to Shareholders 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, 2002: Florida Rock & Tank Lines, Inc. (a Florida corporation); Florida Rock Properties, Inc. (a Florida corporation); FRP Development Corp. (a Maryland corporation); FRP Maryland, Inc. (a Maryland corporation); 34 Loveton Center LLC (a Maryland limited liability company); FRTL, Inc. (a Florida corporation); SunBelt Transport, Inc. (a Florida Corporation); Oz LLC(a Maryland limited liability company); FRP Delaware, Inc. (a Delaware corporation); 1502 Quarry, LLC(a Maryland limited liability company); FRP Lakeside LLC #1 (a Maryland limited company); FRP Lakeside LLC #2 (a Maryland limited liability company); FRP Lakeside LLC #3 (a Maryland limited liability company); FRP Lakeside LLC #4 (a Maryland limited liability company); FRP Lakeside LLC #5 (a Maryland limited liability company); FRP Hillside LLC (a Maryland limited liability company); FRP Windsor LLC (a Maryland limited liability company); FRP Dorsey LLC (a Maryland limited liability company); Patriot Transportation, Inc.(a Florida corporation). (23)(a) Consent of PricewaterhouseCoopers LLP, Independent Certified Public Accountants, appears on page 26 of this Form 10-K. (23)(b) Consent of Deloitte & Touche LLP, Independent Certified Public Accountants, appears on page 26 of this Form 10-K. PATRIOT TRANSPORTATION HOLDING, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14(a) (1) and 2)) Page Consolidated Financial Statements: Consolidated balance sheets at September 30, 2002 and 2001 10(a) For the years ended September 30, 2002, 2001 and 2000: Consolidated statements of income 9(a) Consolidated statements of cash flows 11(a) Consolidated statements of shareholders' equity 12(a) Notes to consolidated financial statements 12-18(a) Independent Auditors' Reports 19(a) Selected quarterly financial data (unaudited) 5(a) Consents of Independent Certified Public Accountants 25(b) Independent Auditors' Reports on Financial Statement Schedules 26(b) Consolidated Financial Statement Schedules: II - Valuation and qualifying accounts 27(b) III - Real estate and accumulated depreciation and Depletion 28-29(b) (a) Refers to the page number in the Company's 2002 Annual Report to Shareholders. Such information is incorporated by reference in Item 8 of this Form 10-K. (b) Refers to the page number in this Form 10-K. All other schedules have been omitted, as they are not required under the related instructions, are inapplicable, or because the information required is included in the consolidated financial statements. CONSENTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Exhibit 23(a) We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-43215, 33-18878 and 33- 55132) of Patriot Transportation Holding, Inc. of our report dated November 15, 2002 relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated November 15, 2002 relating to the financial statement schedules, which appears in this Form 10-K. PricewaterhouseCoopers LLP Jacksonville, Florida December 19, 2002 ____________________ INDEPENDENT AUDITORS' CONSENT Exhibit 23(b) We consent to the incorporation by reference in Registration Statement Nos. 33-43215, 33-18878 and 33-55132 of Patriot Transportation Holding, Inc. on Form S-8 of our report dated December 10, 2001, appearing in this Annual Report on Form 10-K of Patriot Transportation Holding, Inc. for the year ended September 30, 2002. DELOITTE & TOUCHE LLP Jacksonville, Florida December 19, 2002 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors Patriot Transportation Holding, Inc.: Our audit of the consolidated financial statements as of and for the year ended September 30, 2002 referred to in our report dated November 15, 2002 appearing in the 2002 Annual Report to Shareholders of Patriot Transportation Holding, Inc., (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed in Item 15 of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP Jacksonville, Florida November 15, 2002 ____________________ 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, 2001 and 2000, and for each of the two years in the period ended September 30, 2001, and have issued our report thereon dated December 10, 2001; such consolidated financial statements and report are included in your 2002 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedules of Patriot, listed in Item 15. 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 10, 2001 PATRIOT TRANSPORTATION HOLDING, INC. SCHEDULE II (CONSOLIDATED) - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000 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, 2002: Allowance for Doubtful accounts $1,160,051 $ 140,000 $ - $ 826,051(a)$ 474,000 Accrued risk insurance $6,032,351 $5,162,666 - $4,868,611(b)$ 6,326,406 Accrued health Insurance 1,078,152 2,834,763 - 2,801,107(b) 1,111,808 Totals - insurance $7,110,503 $7,997,429 $ 0 $7,669,718 $ 7,438,214 Year Ended September 30, 2001: Allowance for doubtful accounts $ 868,541 $1,177,379 - $ 885,869(a) $1,160,051 Accrued risk insurance $5,397,442 $6,221,228 - $5,586,319(b) $6,032,351 Accrued health insurance 989,608 2,517,708 - 2,429,164(b) 1,078,152 Totals - insurance $6,387,050 $8,738,936 $ 0 $8,015,483 $7,110,503 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 (a) Accounts written off less recoveries (b) Payments PATRIOT TRANSPORTATION HOLDING, INC. SCHEDULE III(CONSOLIDATED)-REAL ESTATE & ACCUMULATED DEPRECIATION AND DEPLETION SEPTEMBER 30, 2002
Cost capi- Gross amount Year Deprecia- Encumb- Initial cost talized at which Accumulated Of Date tion Life County State rances to subsequent carried at Depreciation Constr- Acquired Computed Company to acquisition end of period tion on: (a) Construction Aggregates Alachua Florida 1,442,012 0 1 ,442,012 77,354 n/a 4/86 unit Clayton Georgia 369,317 0 369,317 4,677 n/a 4/86 unit Dade Florida 9,374,661 0 9,374,661 9,374,660 n/a 4/86 unit Fayette Georgia 70,815 684,747 0 684,747 49,131 n/a 4/86 unit Hernando Florida 3,174,084 324,852 3,498,936 953,095 n/a 4/86 unit Lake Florida 1,485,153 0 1,485,153 1,048,903 n/a 4/86 unit Lee Florida 4,690,268 5,937 4,696,205 3,414 n/a 4/86 unit Levy Florida 1,280,643 83,366 1,364,009 449,362 n/a 4/86 unit Marion Florida 1,180,365 0 1,180,365 599,478 n/a 4/86 unit Monroe Georgia 840,442 0 840,442 235,088 n/a 4/86 unit Muscogee Georgia 368,674 0 368,674 62,039 n/a 4/86 unit Polk Florida 120,501 0 120,501 75,285 n/a 4/86 unit Prince Wil. Virginia 298,464 0 298,464 286,662 n/a 4/86 unit Putnam Florida 15,002,258 48,537 15,050,795 2,860,125 n/a 4/86 unit St. Marys Maryland 1,269,818 12,160 1,281,978 541,761 n/a 4/86 unit 70,815 41,581,407 474,852 42,056,259 16,621,034 Other Rental Property District of Columbia 6,767,875 6,034,629 12,802,504 937,251 n/a 4/86 15 yr. Fairfax Virginia 2,035,014 22,789 2,057,803 0 n/a 4/86 - Putnam Florida 326,128 51,327 377,455 323,168 n/a 4/86 10 yr. Spalding Georgia 19,572 0 19,572 0 n/a 4/86 - Suwannee Florida 115,572 4,528,748 343,013 4,871,761 897,411 n/a 4/86 10 yr. 115,572 13,677,337 6,451,758 20,129,095 2,157,830 Commercial Property Baltimore Maryland 1,438,193 439,121 2,953,384 3,392,503 1,312,231 1990 10/89 31 yr. Baltimore Maryland 4,084,133 950,000 5,779,565 6,729,565 1,883,230 1994 12/91 31 yr. Baltimore Maryland2,596,902 690,219 2,836,549 3,526,770 256,808 2000 7/99 31 yr. Duval Florida 2,415,989 529,074 2,945,063 2,209,241 n/a 4/86 25 yr. Harford Maryland 2,832,703 30,834 3,825,685 3,856,519 558,189 1998 8/95 31 yr. Harford Maryland 179,460 7,203,884 7,383,344 135,874 n/a 8/95 31 yr. Harford Maryland 4,667,192 50,112 5,562,014 5,612,126 542,736 1999 8/95 31 yr. Harford Maryland6,375,178 84,837 6,580,316 6,665,153 465,540 2001 8/95 31 yr. Harford Maryland3,628,947 154,758 4,946,150 5,100,908 266,083 2001 8/95 31 yr. Howard Maryland4,273,307 2,859,157 3,539,851 6,399,008 1,670,262 1996 9/88 31 yr. Howard Maryland2,346,847 2,473,277 331,660 2,804,937 226,575 2000 3/00 31 yr. Anne Arun Maryland 3,671,088 715,000 6,691,743 7,406,743 3,057,763 1989 9/88 31 yr. Anne Arun Maryland 950,000 7,848,500 8,798,500 0 n/a 5/98 31 yr. 35,914,490 11,992,764 58,628,375 70,621,139 12,584,532 Investment Property 1,022,867 96,101 1,118,968 31,887 GRAND TOTALS $36,100,877 68,274,375 65,651,086 133,925,461 31,395,283 (a) The aggregate cost for Federal income tax purposes is $115,155,869.
PATRIOT TRANSPORTATION HOLDING, INC. SCHEDULE III (CONSOLIDATED) - REAL ESTATE AND ACCUMULATED DEPRECIATION AND DEPLETION YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000 2002 2001 2000 Gross Carrying Cost of Real Estate: Balance at beginning of period $127,174,081 115,228,749 106,930,861 Additions during period: Other acquisitions 7,053,480 13,037,271 9,550,781 Improvements, etc. - - - Other (transfers) - - - Deductions during period: Cost of real estate sold 302,100 - 742,939 Other (abandonments) - 1,091,939 509,954 Balance at close of period $133,925,461 127,174,081 115,228,749 Accumulated Depreciation & Depletion: Balance at beginning of period $ 28,934,011 25,968,037 23,676,964 Additions during period: Charged to cost & expense 2,532,738 2,965,974 2,535,438 Deductions during period: Cost of real estate sold 71,466 - 244,365 Balance at close of period $31,395,283 28,934,011 25,968,037 28 EX-11 3 pateps.txt EXHIBIT 11 PATRIOT TRANSPORTATION HOLDING, INC. COMPUTATION OF EARNINGS PER COMMON SHARE Years Ended September 30 2002 2001 2000 Net income $5,655,000 2,703,000 2,044,000 Common shares: Weighted average shares outstanding during the period - shares used for basic earnings per share 3,142,742 3,157,317 3,334,332 Shares issuable under stock options which are potentially dilutive 22,667 449 13,707 Shares used for diluted earnings per share 3,165,409 3,157,766 3,348,039 Basic earnings per common share $1.80 $ .86 $ .61 Diluted earnings per common share $1.79 $ .86 $ .61 1 EX-13 4 patar.txt Annual Report 2002 CONSOLIDATED FINANCIAL HIGHLIGHTS Years ended September 30 (Dollars in thousands except per share amounts) % 2002 2001 Change Revenues $ 96,949 121,258 -20.0 Gross profit $ 20,542 21,792 - 5.7 Operating profit $ 12,413 7,878 +57.6 Income before income taxes $ 9,270 4,506 +105.7 Net income $ 5,655 2,703 +109.2 Per common share: Basic earnings $ 1.80 .86 +109.3 Diluted earnings $ 1.79 .86 +108.1 Total Assets $155,463 152,759 +1.8 Total Debt $ 48,601 55,874 -13.0 Shareholders' Equity $ 79,160 73,112 +8.3 Net book value per share $ 25.06 23.28 +7.6 BUSINESS. The Company is engaged in the transportation and real estate businesses. The Company's transportation business is conducted through two wholly owned subsidiaries. Florida Rock & Tank Lines, Inc. is a Southeastern transportation company concentrating in the hauling of liquid and dry bulk commodities by tank trucks. SunBelt Transport, Inc. serves the flatbed portion of the trucking industry in the Southeast, Midwest and Mid-Atlantic states, hauling primarily construction materials. The Company's real estate group, through subsidiaries, acquires, constructs, leases, operates and manages land and buildings to generate both current cash flows and long-term capital appreciation. The real estate group also owns real estate which is leased under mining royalty agreements or held for investment. 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, 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 SHAREHOLDERS We are pleased to report improved operating results compared to a year ago. Fiscal 2002 produced operating profit and net income of $12,413,000 and $5,655,000, respectively. Operating profit and net income for Fiscal 2001 were $7,878,000 and $2,703,000, respectively. Based on essentially level diluted total shares outstanding, the Company earned $1.79 per share compared to $.86 for the previous year. When comparing to Fiscal 2001 it should be noted that operating performance for Fiscal 2001 was negatively impacted by closure in the fourth quarter of the Company's third-party, non-asset based transportation subsidiary, Patriot Transportation, Inc. The Company experienced a net loss after-tax of $3,786,000 associated with this subsidiary in 2001. Comparisons to Fiscal 2001 should also address a significant variance in net after-tax profits from property sales. After-tax profits from property sales were $1,732,000 in Fiscal 2001 compared to $194,000 in Fiscal 2002. If after-tax losses from Fiscal 2001 closure of the transportation subsidiary are eliminated together with after-tax profits in both years from property sales, Fiscal 2002 net income advanced approximately 11.1% ahead of the previous year. Transportation Group. Notwithstanding a continuing soft, uncertain economy together with further escalating health costs and liability insurance premiums, the Company's transportation group managed improved operating performance compared to the previous year. Though revenue miles (excluding the May 30, 2002 acquisition of Infinger Transportation Company, Inc. by Florida Rock & Tank Lines, Inc.) were slightly down for the Group year-over-year, bottom-line comparisons were favorable primarily as the result of modestly improved pricing and good expense control. Capital spending for the Group totaled about $11,430,000 (including the purchase of Infinger assets) compared to $5,011,000 during Fiscal 2001. Demand for hauling services was somewhat uneven between the Company's petroleum tank operation and its flatbed subsidiary. The general economic downturn was made worse for petroleum hauling as the result of continuing fall-out from the September 11, 2001 national tragedy. Travel patterns and petroleum consumption, especially jet fuel used by airlines, decreased following September 11. Decreased business and leisure travel have continued, and demand for petroleum hauling has remained depressed. Continuing consolidation within the multi-national integrated oil companies has continued to exert pressure on hauling rates as companies have combined and been driven to seek operating cost savings. Growth throughout the country of non-traditional retail gasoline outlets, so-called "hyper-markets", has also brought new pressures and market structural changes, driving further consolidation. Florida Rock & Tank Lines, Inc. achieved additional growth when it purchased, on May 30, 2002, the operating assets of Infinger Transportation Company, Inc. Infinger was based in Charleston, South Carolina and had been operated by the Infinger family as a regional tank truck carrier since 1946. The acquisition included 111 trailers and 57 tractors operating primarily from terminals in Charleston and North Augusta, South Carolina; Charlotte and Wilmington, North Carolina; Savannah, Georgia; and Jacksonville and Tampa, Florida. The acquisition is intended to produce operating efficiencies at existing Florida Rock & Tank Lines terminals and to facilitate growth into new hauling markets in the Carolinas. The prevailing low interest rate environment and continuing homebuilding boom provided fairly consistent demand for construction materials hauling. SunBelt Transport, Inc., the Company's flatbed trucking subsidiary, experienced a reasonably steady market for its services. Driver recruitment and retention remain challenging, and un- manned power units still plague the flatbed sector as well as the broader industry. Margin pressures have been unrelenting as health, liability insurance and general operating expenses continue to squeeze against revenue rates. Real Estate Group. The Company's real estate business enjoyed another year of progress. Encouraging momentum continued within the Group's core industrial development business. Asset management opportunities and challenges also characterized the year. The Group completed and placed in service in March, 2002 a 130,200 square foot flexible office-warehouse, 2202 Lakeside Boulevard. This building is currently 67% occupied and represents additional progress toward build-out at the Group's 134-acre Lakeside Business Park adjacent to Interstate 95 northeast of Baltimore in Harford County, Maryland. A major anchor tenant executed a lease for a 200,200 square-foot build-to-suit office-warehouse at the Group's new 59-acre Hillside Business Park in Anne Arundel County, Maryland near the Baltimore- Washington International Airport. Occupancy should occur late fourth quarter of Fiscal 2003. This new project represents 35% of final build- out for Hillside Business Park. A speculative office-warehouse, 7010 Dorsey Road, is also scheduled for completion at Hillside in January, 2003. This building will offer 74,600 square feet. Horizontal development continues at the Group's Commonwealth Avenue 50-acre site on the western perimeter of Jacksonville, Florida. This rail-served tract is located just west of Interstate 295 and is slated at build-out for approximately 500,000 square feet of product. Total developed building portfolio at September 30, 2002 stood at about 1.4 million square feet. Combined occupancy for all developed buildings except those in service less than twelve months (2202 Lakeside Boulevard) was 93.2% at year-end. Final build-out at Lakeside, Hillside and Commonwealth will produce a developed portfolio of approximately 3.0 million square feet. In order to further facilitate the Company's long-term plan to build and own a portfolio of successful rental properties, an agreement was executed during Fiscal 2002 second quarter to sell to Florida Rock Industries, Inc. ("FRI") 108 acres of land located in Springfield, Virginia. The selling price is $15.0 million and will produce a net after-tax gain of approximately $7,722,000 at closing. The Company expects to re-invest the proceeds and structure the transaction as a tax-deferred exchange under Section 1031 of the United States Internal Revenue Code. Asset management activities continued with a focus on the Group's 5.8-acre and 2.1-acre sites on the banks of the Anacostia River in the District of Columbia. The sites are currently occupied by and leased to FRI. A $3.8 million waterfront bulkhead was substantially completed on- time on-budget at the 5.8 acre site. This significant asset enhancement will prevent shoreline erosion and enable foundation stability for future vertical development. The 5.8 acre site had been successfully re-zoned in Fiscal 2000 from Industrial to Planned Unit Development ("PUD") permitting development of up to 1.5 million square feet of commercial office space. As a condition of the PUD the 2.1 acre site was proffered away as part of an amenity package. Although the Group had formally applied to the District's Zoning Commission during Fiscal 2002 for a two-year extension of the original PUD zoning, the Zoning Commission voted on May 13, 2002, 3-2 against granting a two-year extension thereby relegating the property to a recently adopted zoning classification that allows for an equal amount of residential and commercial development on both sites totaling 1.38 million square feet. In response to this denial, the Group has submitted an appeal to the Zoning Commission for reconsideration. While awaiting a response from the Commission to its request for re-consideration, the Group is continuing to explore options for eventual development. Other asset management activities continue by the Group in support of its raw land portfolio ranging from Maryland to South Florida. Real estate group capital expenditures in Fiscal 2002 were approximately $7,179,000. This compares to outlays in Fiscal 2001 of approximately $12,920,000. Outlook. Continued real estate progress should occur assuming a low interest rate outlook and a sustainable national economic recovery. However, current manufacturing sector weakness coupled with deteriorating consumer and business confidence could undermine a sufficiently strong uptrend. The Company's real estate outlook must also be tempered by lower future mining royalties. Two locations completed stone mining operations during Fiscal 2002. Transportation business results, in addition to being similarly impacted by uncertainties surrounding the national economy, will also be affected by industry consolidation among both shippers and carriers. Carrier consolidation will result from industry profit margin pressures. The trucking industry is experiencing sharply rising health and risk insurance expenses. Volume purchasing efficiencies (equipment, tires, fuel, supplies, etc.) together with fixed cost benefits from operating leverage will accelerate consolidation among trucking firms. And continuing competition for drivers will favor companies whose size enables superior benefits packages. Notwithstanding these challenges, your Company remains focused on operating efficiently and effectively while remaining alert for appropriate strategic opportunities. We also want to pause along the journey to thank you as well as the men and women of your Company for your collective loyalty and support. Respectfully yours, Edward L. Baker Chairman John E. Anderson President & Chief Executive Officer OPERATING REVIEW Transportation. During Fiscal 2002, the Company's transportation group operated through two wholly owned subsidiaries. Florida Rock & Tank Lines, Inc. is engaged in hauling petroleum and other liquid and dry bulk commodities in tank trucks. SunBelt Transport, Inc. is engaged primarily in hauling building and construction materials on flatbed trailers. In September 2001, the Company closed the operations of Patriot Transportation, Inc. (PTI) which was 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; Charlotte and Wilmington, North Carolina; Charleston, South Carolina; and Birmingham, Alabama. SunBelt's flatbed fleet is based in Jacksonville and Tampa, Florida; Atlanta and Savannah, Georgia; Salisbury, North Carolina; and South Pittsburg, Tennessee and operates primarily in the Southeastern, Midwestern and Mid-Atlantic states. Transportation revenues, excluding the closed operations, were up 1.7% in 2002 as a result of expansion of tank truck hauling through the purchase of the assets of Infinger Transportation, Inc. (Infinger) on May 30, 2002 and modest price increases. Gross profit increased 9.0% from Fiscal 2001 due to the expansion and price increases. During Fiscal 2002, the transportation group purchased 96 new tractors and 25 new trailers and had commitments to purchase an additional 67 tractors at September 30, 2002. These purchases do not include the 57 tractors and 111 trailers purchased from Infinger in May 2002. The Fiscal 2003 capital expenditure plan is based on maintaining a modernized tank and flatbed fleet and includes the purchase of approximately 40 new tractors and 70 new trailers in addition to the 67 tractors under commitment at September 30, 2002. The fleet modernization program has resulted in reduced maintenance expenses, improved operating efficiencies and enhanced driver recruitment and retention. Transportation labor, fuel and risk insurance pressures are expected to remain key factors. Comprehensive fuel price surcharges are now in place and assertive steps continue at both carriers to boost permanent freight rates. 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 and/or buildings leased under rental agreements or being developed for rental. The second category 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, and the third category is land held for future appreciation or development. Real estate revenues excluding property sales increased 2.7% over Fiscal 2001. Royalty revenue declined by 12.8% in 2002 primarily due to completion of mining at the Miami property but was offset by an increase of 13.9% in rental revenues. The Fiscal 2002 real estate revenues, excluding the sale of real estate, were divided approximately 33% from mining and minimum royalties and 67% from rental revenues. At September 30, 2002, the Company owned approximately 1.4 million square feet of developed buildings that were 91% leased and approximately 92 acres of developed land ready for building construction. Brief descriptions of FRP Development Corp.'s projects in the Baltimore, Maryland area at September 30, 2002 are as follows: Hillside Business Park in Anne Arundel County is a 59 acre tract near the Baltimore-Washington International Airport. The project will provide the Company an opportunity to develop 575,000 square feet of warehouse/office space. Grading and infrastructure work on the site is nearing completion and the first two buildings are under construction and scheduled to be completed during 2003 with 274,800 square feet of leaseable warehouse/office space. One building with 200,200 square feet is pre-leased. Lakeside Business Park in Harford County consists of 134 acres. Seven warehouse/office buildings, totaling 671,918 square feet have been constructed and are 86% leased. 32.8 acres remain for future development of an additional 485,200 square feet of comparable product. 6920 Tudsbury Road in Baltimore County contains 5.3 acres with 83,100 square feet of warehouse space that is 100% leased. 8620 Dorsey Run Road in Howard County contains 5.8 acres with 84,600 square feet of warehouse space that is 100% leased. Rossville Center in Baltimore County contains approximately 10 acres with 190,517 square feet of commercial/warehouse space and is 87% leased. 34 Loveton Circle in Baltimore County contains 8.5 acres with 29,722 square feet of office space which is 11% occupied by the Company with the balance 100% leased, including 23% leased to FRI. Oregon Center in Anne Arundel County contains approximately 17 acres with 195,615 square feet of commercial warehouse and office space which is 100% leased. Arundel Center in Howard County contains approximately 11 acres with 162,796 square feet of commercial warehouse and office space which is 89% leased. The Company owns a 50-acre, rail-served site on Commonwealth Avenue in Jacksonville, Florida near the western beltway of Interstate-295 capable of supporting roughly 500,000 square feet of eventual build-out. Current efforts include permitting and preliminary horizontal development work. During Fiscal 2003 the real estate group will continue to focus on buildings under construction and the continued development of the property at Lakeside and Hillside Business Parks near Baltimore and the Commonwealth site in Jacksonville while continuing a strict preventative maintenance program on its existing facilities. The real estate group will also continue its asset management functions for the benefit of the Company's land portfolio. These activities will 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 continue to gradually expand its portfolio of successful rental properties. Five Year Summary Years ended September 30 (Dollars and shares in thousands except per share amounts) 2002 2001 2000 1999 1998 Summary of Operations Revenues(a) $ 96,949 121,258 93,862 82,019 73,974 Gross profit(b) $ 20,542 21,792 16,239 19,994 16,493 Operating profit $ 12,413 7,878 6,840 12,380 9,625 Interest expense $ 3,164 3,394 3,438 2,357 2,300 Income before income taxes $ 9,270 4,506 3,435 10,093 7,343 Provision for income taxes $ 3,615 1,803 1,391 3,936 2,863 Net income $ 5,655 2,703 2,044 6,157 4,480 Per Common Share: Basic EPS $ 1.80 .86 .61 1.79 1.30 Diluted EPS $ 1.79 .86 .61 1.78 1.28 Shareholders' equity $ 25.06 23.28 22.06 21.53 19.83 Financial Summary Current assets $ 11,490 16,248 15,089 14,161 10,073 Current liabilities $ 11,972 16,728 17,498 13,555 9,479 Working capital (deficit) $ (482) (480) (2,409) 606 594 Property, plant and equipment, net $138,367 131,170 124,026 115,369 104,970 Total assets $155,463 152,759 148,011 138,655 123,965 Long-term debt $ 47,290 47,097 42,015 37,936 33,299 Shareholders' equity $ 79,160 73,112 73,813 72,692 68,755 Other Data Return on average Shareholders' equity 7.4% 3.7 2.8 8.7 6.7 Net cash flow provided from operating activities $ 24,947 9,626 9,566 15,032 13,557 Additions to property, plant and equipment $ 18,609 18,428 21,861 21,359 19,901 Depreciation, depletion and amortization $ 11,086 11,471 11,144 10,065 9,146 Weighted average number of shares - basic 3,143 3,157 3,334 3,444 3,452 Weighted average number of shares - diluted 3,165 3,158 3,348 3,468 3,496 Number of employees 861 850 829 877 753 Shareholders of record 767 788 801 834 850 (a) Fiscal 2001 and 2000 include revenues of $22,623,000 and $7,689,000 and operating losses of $6,309,000 and $361,000, respectively, attributed to Patriot Transportation, Inc. which ceased operations in September, 2001. (b) Fiscal 2002, 2001, 2000, 1999 and 1998 include gains on the sale of real estate of $323,000, $2,886,000, $1,533,000, $3,236,000 and $358,000, respectively. Quarterly Results (unaudited) (Dollars in thousands except per share amounts)
First Second Third Fourth 2002 2001 2002 2001 2002 2001 2002 2001 Revenues $23,492 30,700 23,008 31,392 24,876 31,652 25,573 27,514 Gross profit $ 5,067 7,008 4,966 5,552 5,458 5,238 5,051 3,994 Operating profit $ 3,023 4,466 3,172 2,112 3,432 2,775 2,786 (1,475) Income before income taxes $ 2,243 3,548 2,373 1,250 2,629 1,929 2,025 (2,221) Net income $ 1,346 2,129 1 424 750 1,577 1,157 1,308 (1,333) Per common share: Basic EPS $.43 .66 .45 .24 .50 .37 .42 (.42) Diluted EPS $.43 .66 .45 .24 .50 .37 .41 (.42) Market price: High $20.55 17.19 35.00 22.00 34.00 21.00 30.00 20.00 Low $16.70 14.63 20.44 15.00 26.15 15.00 21.30 15.50 Included in income before taxes in the fourth quarter of 2001 are restructuring and other one-time charges of $3,435,000 resulting from the decision to terminate the operations of the third-party agent owner-operator subsidiary, Patriot Transportation, Inc.
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 which is driven in part by tourism and commercial aviation, 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. During Fiscal 2002, the transportation segment's ten largest customers accounted for approximately 45.5% of the transportation segment's revenue. The loss of any one of these customers could have an adverse effect on the Company's revenues and income. During the fourth quarter, one of these customers indicated it is moving a majority of the business it is currently doing with the Company to other carriers. This decision was reached after a lengthy competitive bid process resulting in the business being awarded to the lowest bidder. The Company estimates lost revenues from this customer to be approximately 6% of the transportation segment's revenues for Fiscal 2002. The loss of this revenue will have an adverse effect on the Company's operating income, at least in the short term. Fiscal 2002 as Compared to Fiscal 2001. Revenues. Consolidated revenues for Fiscal 2002 decreased $24,309,000 or 20.0% to $96,949,000 from $121,258,000 for the previous year. Transportation revenues decreased 20.6% to $81,921,000 driven mainly by the closure of the PTI subsidiary in September 2001. Excluding PTI's revenues in 2001, Transportation revenues increased $1,354,000 or 1.7%, due to modest price increases and expansion in Florida Rock & Tank Lines by the purchase on May 30, 2002 of the Infinger assets, offset by a slight reduction in miles driven (0.5%). The reduction in miles resulted from lower demand for petroleum products due to decreased tourism and reduced air travel. Total Real Estate revenues excluding property sales increased 2.7% primarily due to an increase in revenue from developed properties partially offset by a decrease in royalties. Revenues from the company's development operations climbed 16.5%, while royalty revenues from mining operations decreased 10.1% because of completion of stone mining at two sites. We expect royalty revenues to continue to decrease, as mining assets are depleted. Property sales in Fiscal 2002 were $554,000 versus $3,978,000 in Fiscal 2001. Gross Profit. Consolidated gross profit for Fiscal 2002 decreased 5.7% to $20,542,000 from $21,792,000 for the previous year. Transportation gross profits increased $1,456,000 or 14.2% in 2002 as compared to 2001. Excluding PTI's gross loss of $498,000 in 2001, gross profit increased $958,000 or 9.0% primarily due to the increased revenues and control of expenses in the tankline operation for 2002. This was partially offset by a reduction in gross profit of the flatbed operations due to increased operating expenses and increased insurance and casualty losses. Real Estate gross profit excluding property sales decreased $144,000 due to a $1,058,000 reduction in royalty gross profit mostly offset by an increase in rental income. Gross profit from property sales in Fiscal 2002 was only $323,000 compared to $2,886,000 in Fiscal 2001. Operating Expenses. Selling, general and administrative expenses decreased 33.2% from $12,310,000 in Fiscal 2001 to $8,229,000 for Fiscal 2002, almost entirely due to the closure of PTI which had administrative expenses of $4,208,000 in 2001. During Fiscal 2001, the Company recorded $1,604,000 in restructuring charges related to its decision to shut down the operations of this subsidiary. In Fiscal 2002, a recovery of $100,000 in amounts previously charged to restructuring was recorded due to a better than anticipated disposition of owned and leased trailers, partially offset by higher severance costs. Income Taxes. The Company recorded an income tax provision of $3,615,000 in 2002, compared to a provision of $1,803,000 in 2001. The effective tax rate decreased 1% to 39% in 2002 primarily due to a lower level of non-deductible expenses and higher levels of earnings. Net Income. As a result of the foregoing, net income increased 109.2% from $2,703,000 in 2001 to $5,655,000 in Fiscal 2002. Diluted earnings per share increased 108.6% to $1.79 in Fiscal 2002 from $.86 in 2001. Diluted total shares outstanding increased .2% from 3,158,000 in 2001 to 3,165,000 in 2002 as a result of the issuance of stock options during the year. Fiscal 2001 as Compared to Fiscal 2000. Revenues. In Fiscal 2001, revenues increased 29.2% from Fiscal 2000. In the transportation segment, revenues and miles hauled were up 28.7% and 22.0%, respectively, in 2001. The Company's closed subsidiary, PTI, accounted for 64.8% and 80.4% of the increase in revenues and miles hauled, respectively, for Fiscal 2001. The balance of the growth in miles hauled came mainly from the Company's tank line operations which also benefited from modest price increases. The real estate segment's revenues, exclusive of real estate sales, increased 22.4% in 2001. Gross Profit. Consolidated gross profit for Fiscal 2001 increased $5,553,000 and the gross profit margin increased to 18.0% from 17.3%. The transportation segment's gross profit increased $2,330,000 and the gross margin increased to 9.9% from 9.8% in Fiscal 2000. The increase in gross profit for the transportation segment in Fiscal 2001 was primarily attributable to the increase in miles hauled, improved margins due to price increases and improved fuel surcharges in the tank line business partially offset by increased losses in the now closed third-party subsidiary. Gross profit in the real estate segment increased $3,224,000 over Fiscal 2000 due to property sales, increased royalties from mining properties and additional rental income from newly developed and existing properties. Gross profit on real estate sales was $2,886,000 as compared to $1,533,000 in 2000. Operating Expenses. Selling, general and administrative expense increased 31.0% in Fiscal 2001 compared to 2000. This increase was primarily due to administrative support costs associated with the third-party agent/owner-operator transportation subsidiary prior to its ceasing operations in September 2001 and non-recurring charges of $1,805,000 due primarily to asset write-offs associated with its closing. Fiscal 2001 also included non-recurring charges of $1,604,000 related to the closed subsidiary (See note 3 of Notes to the Consolidated Financial Statements). Income Taxes. Income tax expense increased $412,000 for Fiscal 2001 as a result of increased income before income taxes. Income tax expense is 40% of income before income tax expense for 2001 and 40.5% for 2000. SUMMARY OF CRITICAL ACCOUNTING POLICIES. Management of the Company considers the following accounting policies critical to the reported operations of the Company: Accounts Receivable Valuation. The Company is subject to customer credit risk including bankruptcies, primarily in the Transportation segment, that could affect the collection of outstanding accounts receivable. To mitigate these risks, the Company performs credit reviews on all new customers and periodically on existing customers. A detailed analysis of late and slow pay customers is prepared monthly and reviewed by senior management. The overall collectibility of outstanding receivables is evaluated and allowances are recorded as appropriate. Risk Insurance. The nature of the Transportation business subjects the Company to risks arising from workers' compensation, automobile liability, and general liability claims. The Company retains the exposure on certain claims of $100,000 to $500,000 and has third party coverage for amounts exceeding the retention. The Company expenses during the year an estimate of risk insurance losses. Periodically, an analysis is performed, using historical and projected data, to determine exposure for claims incurred but not reported. On an annual basis the Company obtains an independent actuarial analysis. The Company attempts to mitigate losses from insurance claims by maintaining safe operations and providing mandatory safety training. Real Estate Investments. All direct and indirect costs, including interest and real estate taxes associated with the development, construction, leasing or expansion of real estate investments are capitalized as a cost of the property. Included in indirect costs is an estimate of internal costs associated with development and rental of real estate investments. All external costs associated with the acquisition of real estate investments are capitalized as a cost of the property. Tires on Equipment. The Company accounts for the tires on its tractors and trailers separately from fixed assets. The value of the tires is accounted for as a prepaid expense and amortized over the estimated life of the tires as a function of miles driven. The mile factors used differ by geographic location and are determined based on historical experience. Tires that are damaged due to road hazards are expensed immediately using an estimated value based on remaining tread life. LIQUIDITY AND CAPITAL RESOURCES. The following key financial measurements reflect the Company's financial position and capital resources at September 30 (dollars in thousands): 2002 2001 2000 Cash $ 529 440 633 Total debt $48,601 55,874 48,411 Unused lines of credit $24,500 20,200 23,400 During 2002, net cash flow from operating activities was $24,947,000 which funded the Company's investing activities of $17,978,000 and the reduction of debt. During 2001, net cash flow from operating activities was $9,626,000 which along with issuing additional long and short-term debt funded the Company's investing activities of $13,878,000 and the repurchase of common stock of $3,404,000. The Company has a $37,000,000 revolving credit agreement (the Revolver) of which $24,500,000 was available at fiscal year end. The Revolver contains restrictive covenants including limitations on paying cash dividends. Under these restrictions, as of September 30, 2002, $5,632,000 of consolidated retained earnings would be available for payment of dividends or repurchase of common stock. The Board of Directors has authorized management to repurchase shares of the Company's common stock from time to time as opportunities may arise. During Fiscal 2002, the company repurchased 1,658 shares for approximately $32,000. At September 30, 2002 the Company had approximately $3,628,000 available under this authorization. The aggregate amounts due in each fiscal year on long-term debt outstanding at September 30, 2002 is: 2003 - $1,311,000; 2004 - $1,415,000; 2005 - $1,467,000; 2006 - $1,587,000; 2007 - $1,695,000; and thereafter - $28,626,000. In addition to the above the $12,500,000 balance outstanding under the Revolver at September 30, 2002 will be due in January 2005 unless the Revolver is renewed or replaced. The Company has a $7,500,000 Letter of Credit facility with SunTrust Bank, N.A. under which the Company may issue letters of credit to various beneficiaries. Each letter of credit is generally irrevocable for a period of one year and is automatically extended for additional one-year periods unless notified not less than thirty days before the expiration dates. At September 30, 2002, $7,353,000 of irrevocable letters of credit were outstanding. Substantially all of these were issued for workers' compensation and liability insurance retentions. If these letters of credit are not extended the Company will have to find alternative methods of collateralizing or funding these obligatons. The Company currently expects its Fiscal 2003 capital expenditures to be approximately $28,410,000 ($16,494,000 for real estate development expansion and $11,916,000 for transportation segment expansion) and depreciation and depletion expense to be approximately $11,711,000. The expenditures are expected to be financed from the cash flow from operating activities, financing of new real estate projects, and the funds available under its revolving credit agreement. The Company has obtained a commitment for a first mortgage loan of $8,500,000 to be secured by a 200,200 square foot building that is currently under construction and is pre-leased to one tenant. The loan which is subject to building completion and other normal conditions is for a period of 15 years with level monthly payments of principal and interest at 5.69%. In February 2002, a subsidiary of the Company signed an Agreement to sell 108 acres of land to FRI for $15,000,000. Closing is subject to a title search and surveys and my occur within 45 days of the Company giving notice to FRI to close, or subsequent to June 30, 2003, within 45 days of either party giving notice to close. If FRI fails to close by December 31, 2003, at no fault of the Company, the Company may retain the $100,000 binder deposit and be under no further obligation to close. FRI has the right to terminate this Agreement prior to receiving the Company's notice to close if there shall exist or the consummation of the sale would cause a default in the Credit Agreement among FRI and Wachovia Bank, et. al. The Company intends to structure this transaction as a tax deferred exchange under Section 1031 of the United States Internal Revenue Code and the Treasury Regulations promulgated thereunder. If the transaction closes, the Company will recognize a gain on the sale of approximately $7,772,000 net of income taxes, or $2.45 per diluted share. The tract has been rented to a subsidiary of FRI and the Company received rental income of approximately $650,000 for the 2002 fiscal year. Management believes that 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 arise. INFLATION. Historically, the Company has been able to recover inflationary cost increases in the transportation group through increased freight rates. It is expected that over time, justifiable and necessary rate increases will be obtained. Substantially all of the Company's royalty agreements are based on a percentage of the sales price. Minimum royalties and substantially all lease agreements provide escalation provisions. FORWARD-LOOKING STATEMENTS. Certain matters discussed in this report contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from these indicated by such forward-looking statements. These forward-looking statements relate to, among other things, capital expenditures, liquidity, capital resources and competition and may be indicated by words or phrases such as "anticipate," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "management believes," "the Company believes," "the Company intends" and similar words or phrases. The following factors and other risk factors discussed in the Company's periodic reports and filings with the Securities and Exchange Commission are among the principal factors that could cause actual results to differ materially from the forward- looking statements: driver availability and cost; availability and terms of financing; freight demand; risk insurance markets; competition; general economic conditions; demand for flexible warehouse/office facilities; restructuring charges; interest rates; levels of construction activity in FRI's markets; fuel costs; and inflation. However, this list is not a complete statement of all potential risks or uncertainties. These forward-looking statements are made as of the date hereof based on management's current expectations, and the Company does not undertake an obligation to update such statements, whether as a result of new information, future events or otherwise. Additional information regarding these and other risk factors may be found in the Company's other filings made from time to time with the Securities and Exchange Commission. Consolidated Statements of Income Years ended September 30 (Dollars and shares in thousands except per share amounts) 2002 2001 2000 Revenues: Transportation $ 81,921 103,189 80,152 Real estate 14,474 14,091 11,450 Sale of real estate 554 3,978 2,260 Total revenues (including revenue from related parties of $6,944, $10,693 and $7,178, respectively) 96,949 121,258 93,862 Cost of operations: Transportation 70,243 92,968 72,260 Real estate 5,933 5,406 4,636 Cost of real estate sold 231 1,092 727 Gross profit 20,542 21,792 16,239 Selling, general and administrative expense (including expenses paid to related party of $463, $527 and $582, respectively) 8,229 12,310 9,399 Non-recurring charges (recoveries) related to closed subsidiary (100) 1,604 - Operating profit 12,413 7,878 6,840 Interest expense (3,164) (3,394) (3,438) Interest income 21 22 24 Other income, net - - 9 Income before income taxes 9,270 4,506 3,435 Provision for income taxes 3,615 1,803 1,391 Net income $ 5,655 2,703 2,044 Earnings per share: Basic $ 1.80 .86 .61 Diluted $ 1.79 .86 .61 Number of shares used in computing: Basic earnings per share 3,143 3,157 3,334 Diluted earnings per share 3,165 3,158 3,348 See accompanying notes. Consolidated Balance Sheets September 30 (Dollars in thousands) 2002 2001 Assets Current assets: Cash and cash equivalents $ 529 440 Accounts receivable (including related party of $107 and $276, less allowance for doubtful accounts of $474 and $1,160, respectively) 7,343 8,477 Income taxes receivable 8 1,002 Inventory of parts and supplies 633 570 Prepaid expenses and other 2,977 4,568 Assets held for sale - 1,191 Total current assets 11,490 16,248 Property, plant and equipment, at cost: Land 66,380 65,622 Buildings 55,420 50,372 Plant and equipment 72,489 67,847 Construction in progress 14,986 13,507 209,275 197,348 Less accumulated depreciation and depletion 70,908 66,178 138,367 131,170 Real estate held for investment, at cost 1,047 1,260 Goodwill, at cost less amortization of $523 and $483, respectively 1,087 1,127 Other assets 3,472 2,954 Total Assets $155,463 152,759 Liabilities and Shareholders' Equity Current liabilities: Short-term note payable to bank $ - 7,800 Accounts payable including related party of $39 and $114, respectively 5,771 3,627 Accrued liabilities: Payroll and benefits 2,229 2,115 Other accrued expenses 554 366 Accrued Insurance reserves 2,107 1,843 Long-term debt due within one year 1,311 977 Total current liabilities 11,972 16,728 Long-term debt 47,290 47,097 Deferred income taxes 10,062 9,280 Accrued insurance reserves 5,331 5,268 Other liabilities 1,648 1,274 Commitments and contingencies (Notes 12 and 13) Shareholders' equity: Preferred stock, no par value; 5,000,000 shares authorized - - Common stock, $.10 par value; 25,000,000 shares authorized; 3,159,008 and 3,140,066 shares issued and outstanding, respectively 316 314 Capital in excess of par value 11,748 11,357 Retained earnings 67,096 61,441 Total shareholders' equity 79,160 73,112 Total Liabilities and Shareholders' equity $155,463 152,759 See accompanying notes. Consolidated Statements of Cash Flows Years ended September 30 (Dollars in thousands) Cash flows from operating activities: 2002 2001 2000 Net income $ 5,655 2,703 2,044 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 11,086 11,471 11,144 Non-cash portion of restructuring charge - 968 - Deferred income taxes 889 332 (238) Gain on sale of real estate, plant and equipment (612) (3,008) (2,220) Net changes in operating assets and liabilities: Accounts receivable 1,133 2,293 (2,319) Income taxes receivable 994 (1,002) - Inventory of parts and supplies (63) 80 (147) Prepaid expenses and other 1,509 (1,815) (423) Assets held for sale 1,191 - - Accounts payable and accrued liabilities 2,686 (2,915) 1,219 Net change in insurance reserves and other liabilities 437 485 405 Other, net 42 34 101 Net cash provided by operating activities 24,947 9,626 9,566 Cash flows from investing activities: Purchase of property, plant and equipment (18,046) (18,438)(21,041) Additions to other assets (942) (734) (777) Proceeds from the sale of real estate held for investment, property, plant and equipment, and other assets 1,010 5,294 4,365 Net cash used in investing activities (17,978) (13,878)(17,453) Cash flows from financing activities: Proceeds from long-term debt 10,200 6,140 5,000 Net (decrease) increase in short-term debt (7,800) 2,200 2,600 Repayment of long-term debt (9,673) (877) (750) Exercise of employee stock options 425 - 545 Repurchase of Company stock (32) (3,404) (1,468) Net cash (used in) provided by financing activities(6,880) 4,059 5,927 Net increase(decrease)in cash and cash equivalents 89 (193) (1,960) Cash and cash equivalents at beginning of year 440 633 2,593 Cash and cash equivalents at end of year $ 529 440 633 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 3,179 3,480 3,477 Income taxes $ 1,720 3,399 920 Non cash investing and financing activities: Additions to property, plant and equipment from: Exchanges $ 563 - 820 See accompanying notes. Consolidated Statements of Shareholders' Equity Years ended September 30 (Dollars in thousands) Capital in Common Stock Excess of Retained Shares Amount Par Value Earnings Balance at October 1, 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 Shares purchased and canceled (206,285) (21) (3,383) - Net income - - - 2,703 Balance at September 30, 2001 3,140,066 314 11,357 61,441 Shares purchased and canceled (1,658) - (32) - Exercise of stock options 20,600 2 423 - Net income - - - 5,655 Balance at September 30, 2002 3,159,008 $316 $11,748 $67,096 See accompanying notes. Notes to Consolidated Financial Statements 1. Accounting policies. ORGANIZATION - Patriot Transportation Holding, Inc. is engaged in the transportation and real estate businesses. The Company's transportation business is conducted through two wholly owned subsidiaries. Florida Rock & Tank Lines, Inc. 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, Midwest and Mid-Atlantic States, hauling primarily construction materials. The Company's real estate group, through subsidiaries, acquires, constructs, leases, operates and manages land and buildings to generate both current cash flows and long-term capital appreciation. The real estate group also owns real estate which is leased under mining royalty agreements or held for investment. CONSOLIDATION - The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All significant intercompany transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt instruments with maturities of three months or less at time of purchase to be cash equivalents. INVENTORY - Inventory of parts and supplies is valued at the lower of cost (first-in, first-out) or market. TIRES ON EQUIPMENT - The value of tires on tractors and trailers is accounted for as a prepaid expense and amortized over the life of the tires as a function of miles driven. REVENUE AND EXPENSE RECOGNITION - Transportation revenue is recognized when shipment is complete and transportation expenses are recognized as incurred. Real estate rental revenue and mining royalties are generally recognized when due under the leases. Rental income from leases with scheduled increases during their term is recognized when due under the leases, except when increases are deemed material (greater that 3% per annum), in which case, rents are recognized on a straight-line basis. Sales of real estate are recognized when the collection of the sales price is reasonably assured and when the Company has fulfilled its obligations, which are typically as of the closing date. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is recorded at cost less accumulated depreciation. Provision for depreciation of property, plant and equipment is computed using the straight-line method based on the following estimated useful lives: Years Buildings and improvements 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. The Company periodically reviews property, plant 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. All direct and indirect costs, including interest and real estate taxes associated with the development, construction, leasing or expansion of real estate investments are capitalized as a cost of the property. Included in indirect costs is an estimate of internal costs associated with development and rental of real estate investments. All external costs associated with the acquisition of real estate investments are capitalized as a cost of the property. INSURANCE - The Company has a $100,000 to $500,000 self-insured retention per occurrence in connection with certain of its workers' compensation, automobile liability, and general liability insurance programs ("risk insurance"). The Company is self-insured for its employee health insurance benefits and carries a stop loss coverage of $200,000 per covered participant per year. The Company accrues monthly the estimated cost in connection with its portion of its risk and health insurance losses. Claims paid by the Company are charged against the reserve. Additionally, the Company maintains a reserve for incurred but not reported claims based on historical analysis of such claims. INCOME TAXES - The Company uses an asset and liability approach to financial reporting for income taxes. Under this method, deferred tax assets and liabilities are recognized based on differences between financial statement and tax bases of assets and liabilities using presently enacted tax rates. Deferred income taxes result from temporary differences between pre-tax income reported in the financial statements and taxable income. STOCK OPTION AWARDS - The Company accounts for its employee stock compensation plans under APB Opinion No. 25 with pro forma disclosures of net earnings and earnings per share, as if the fair value based method of accounting defined in SFAS No. 123 had been applied. EARNINGS PER COMMON SHARE - Basic earnings per 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 and director stock options. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ENVIRONMENTAL - Environmental expenditures that benefit future periods are capitalized. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the costs can be reasonably estimated. Estimation of such liabilities includes an assessment of engineering estimates, continually evolving governmental laws and standards, and potential involvement of other potentially responsible parties. NEW ACCOUNTING REQUIREMENTS - In June 2001, the FASB issued Statement No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). This statement addresses the accounting for intangible assets. The Company adopted SFAS No. 142 on October 1, 2002. In accordance with this statement, the Company is not required to complete the transitional goodwill impairment test until March 31, 2003. Management has evaluated the effects of adopting this statement and does not believe that adoption will result in an impairment of goodwill. Management estimates that goodwill amortization required under previous accounting standards of $40,000 will not be charged to the income statement in 2003. Goodwill amortization for 2002, 2001, and 2000, was $40,000, $40,000 and $40,000, respectively. In June 2001, the FASB issued Statement No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143), which addresses financial accounting and reporting for obligations with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) normal use of the asset. The Company will adopt the provisions of SFAS 143 for the quarter ending December 31, 2002. The Company is currently reviewing the effects of adopting this statement, but does not believe that it will have a material affect on its financial statements. In August 2001, the FASB issued Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144). This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". SFAS 144 retains the fundamental provisions of SFAS 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. SFAS 144 is effective for fiscal years beginning after December 15, 2001. The Company adopted this statement October 1, 2002 with no impact on the financial statements. In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (SFAS 146). The provisions of SFAS 146 are effective for exit or disposal activities initiated after December 31, 2002. RECLASSIFICATIONS - Certain reclassifications have been made to the 2001 and 2000 financial statements to conform to the presentation adopted in 2002. 2. Transactions with related parties. As of September 30, 2002, six of the Company's directors were also directors of Florida Rock Industries, Inc. ("FRI"). Such directors own approximately 27.6% of the stock of FRI and 44.6% of the stock of the Company. Accordingly, FRI and the Company are considered related parties. The Company, through its transportation subsidiaries, hauls commodities in tank trucks 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 provides construction management services to FRI. A summary of revenues derived from FRI follows (in thousands): 2002 2001 2000 Transportation $ 986 950 1,202 Real estate 5,958 9,743 5,976 $ 6,944 10,693 7,178 The Company outsources certain functions to FRI, including some administrative, human resources, legal and risk management. Charges for services provided by FRI were $463,000 in 2002, $527,000 in 2001, and $582,000 in 2000. During Fiscal 2001, the Company sold two parcels of land to FRI, for $2,607,000 and recognized a pre-tax gain of $2,034,000. The transactions including the purchase price were reviewed and approved on behalf of the Company by a committee of independent directors after obtaining independent appraisals. In February 2002, a subsidiary of the Company signed an Agreement to sell 108 acres of land located in the northwest quadrant of I-395 and I-495 at Edsall Road in Springfield, Virginia to FRI for $15,000,000. Closing is subject to a title search and surveys and may occur within 45 days of the Company giving notice to FRI to close or, subsequent to June 30, 2003, within 45 days of either party giving notice to close. If FRI fails to close by December 31, 2003, at no fault of the Company, the Company may retain the $100,000 binder deposit and be under no further obligation to close. FRI has the right to terminate this Agreement prior to receiving the Company's notice to close if there shall exist or the consummation of the sale would cause a default in the Credit Agreement among FRI and Wachovia Bank, et. al. The Agreement was approved by a committee of independent directors of the Company after review of a development feasibility study and other materials, consultation with management and advice of independent counsel. The Company intends to structure this transaction as a tax deferred exchange under Section 1031 of the United States Internal Revenue Code and the Treasury Regulations promulgated thereunder. If the transaction closes, the Company will recognize a gain on the sale of approximately $7,772,000 net of income taxes, or $2.45 per diluted share. The tract has been rented to a subsidiary of FRI and the Company received rental income of approximately $650,000 for the 2002 fiscal year. 3. Non-recurring charges related to closed subsidiary. In the quarter ended September 30, 2001, the Company recorded restructuring and other one- time charges of $3,435,000 from continuing operations, resulting from the decision to shut down its third party agent/owner-operator subsidiary, Patriot Transportation, Inc., which began operation in Fiscal 2000. The shutdown charge was comprised of $2,051,000 for asset write-offs, $968,000 for fixed asset impairments, $285,000 for employee severance and termination benefit costs, $90,000 for remaining lease obligations and $41,000 for additional costs associated with exiting the third party agent/owner-operator business. The $3,435,000 charge was recorded in the Consolidated Statement of Income as cost of operations of $26,000, selling, general and administrative expense of $1,805,000 and restructuring and other charges of $1,604,000. During 2002, the Company completed a substantial portion of its activities related to the closure of the subsidiary. As a result, a recovery of restructuring charges of $100,000 was recorded. The recovery was due to better than expected disposition of owned and leased trailers, partially offset by higher severance costs. A $194,000 recovery in amounts previously charged to administrative expense was also recorded in 2002, primarily due to recovery of accounts receivable in excess of amounts anticipated. At September 30, 2002 and 2001, $113,000 and $356,000 was included in accounts payable and accrued liabilities, representing the portion of various charges not yet expended. Revenue and operating profit (loss) related to Patriot Transportation, Inc. for the years ended September 30 are as follows: 2002 2001 2000 Revenue $ 0 $22,623,000 7,689,000 Operating profit (loss) $294,000 $(6,309,000) (361,000) 4. Long-term debt. Long-term debt at September 30 is summarized as follows (in thousands): 2002 2001 Revolving credit (unsecured) $12,500 21,000 6.5% to 9.5% mortgage notes payable in installments through 2020 36,101 27,074 48,601 48,074 Less portion due within one year 1,311 977 $47,290 47,097 The aggregate amount of principal payments, excluding the revolving credit, due subsequent to September 30, 2002 is: 2003 - $1,311,000; 2004 - $1,415,000; 2005 - $1,467,000; 2006-$1,587,000; 2007-$1,695,000; 2008 and subsequent years - $28,626,000. On January 9, 2002, the Company and four banks signed a $37,000,000 uncollateralized revolving credit agreement (the Revolver) for a term of three years. The Revolver currently bears interest at an initial margin rate of 1.50% over the selected LIBOR or alternatively, 0.25% over the prime rate of SunTrust Bank, N.A. The margin rate may change quarterly based on the Company's ratio of consolidated adjusted debt to earnings before interest, taxes, depreciation, amortization and rent for the previous four quarters. The Revolver contains a $5,000,000 swing line which may be used for daily borrowings. An annual commitment fee of one-quarter of one percent per annum is payable on the unused amount of the commitment during the term of the loan. The commitment fee may also change quarterly based upon the ratio described above. The Revolver contains restrictive covenants including limitations on paying cash dividends. Under these restrictions, as of September 30, 2002, $5,632,000 of consolidated retained earnings would be available for payment of dividends or repurchase of common stock. The non-recourse mortgage notes payable are collateralized by real estate having a carrying value of approximately $40,975,000 at September 30, 2002. Certain properties having a carrying value at September 30, 2002 of $981,000 were encumbered by industrial revenue bonds that are the liability of FRI. FRI has agreed to pay such debt when due (or sooner if FRI cancels its lease of such property) and further has agreed to indemnify and hold harmless the Company. During Fiscal 2002, 2001 and 2000 the Company capitalized interest cost of $194,000, $412,000 and $279,000, respectively. 5. Leases. At September 30, 2002, 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 $ 42,056 Commercial property 60,312 Land and other property 20,130 122,498 Less accumulated depreciation and depletion 31,363 $ 91,135 The minimum future rentals due the Company on noncancelable leases as of September 30, 2002 are as follows: 2003 - $9,027,000; 2004 - $8,730,000; 2005 - $7,993,000; 2006 - $5,817,000; 2007 - $4,097,000; 2008 and subsequent years $13,359,000. 6. Preferred Shareholder Rights Plan. On May 5, 1999, the Board of Directors of the Company declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock. The dividend was payable on June 2, 1999. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock of the Company, par value $.01 per share (the "Preferred Shares"), at a price of $96 per one one- hundredth of a Preferred Share, subject to adjustment. In the event that any Person or group of affiliated or associated Persons (an "Acquiring Person") acquires beneficial ownership of 15% or more of the Company's outstanding common stock, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereafter be void), will thereafter have the right to receive upon exercise that number of Common Shares having a market value of two times the exercise price of the Right. An Acquiring Person excludes any Person or group of affiliated or associated Persons who were beneficial owners, individually or collectively, of 15% or more of the Company's Common Shares on May 4, 1999. The Rights initially trade together with the Company's common stock and are not exercisable. However, if an Acquiring Person acquires 15% or more of the Company's common stock, the Rights may become exercisable and trade separately in the absence of future board action. The Board of Directors may, at its option, redeem all Rights for $.01 per right, at any time prior to the Rights becoming exercisable. The Rights will expire September 30, 2009 unless earlier redeemed, exchanged or amended by the Board. 7. Stock Option 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, 2002, the number of shares available for issuance is 426,000 shares. Option transactions for the fiscal years ended September 30 are summarized as follows: 2002 2001 2000 Average Average Average Options Price(1) Options Price(1) Options Price(1) Shares under option: Beginning of year 131,600 $18.67 102,600 $19.05 144,600 $17.62 Issued 37,000 22.99 29,000 17.31 - - Canceled (7,000) 21.29 - - (2,000) 24.00 Exercised (20,600) 17.93 - - (40,000) 13.63 End of year 141,000 $19.78 131,600 $18.67 102,600 $19.05 Options exercisable at end of year 133,560 118,040 84,520 (1) Weighted average exercise price The following table summarizes information concerning stock options outstanding at September 30, 2002: Options Options Weighted-Average Exercise Price Outstanding Exercisable Remaining Life $ 17.25 15,000 15,000 2.2 years 17.75 45,000 45,000 2.1 years 24.00 18,000 10,560 6.2 years 17.41 (Average) 42,000 42,000 8.7 years 27.06 (Average) 21,000 21,000 9.6 years Remaining non-exercisable options as of September 30, 2002 become exercisable by 3,720 shares each year through 2004. The options expire ten years from the date of grant. The options issued in 2001 and 2002 are exercisable immediately and certain prior year options become exercisable in cumulative installments of 20% 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 net income, basic and diluted earnings per share would have been (in thousands, except per share amounts): 2002 2001 2000 Net income As reported $5,655 2,703 2,044 Pro forma 5,307 2,500 2,001 Basis earnings per share: As reported 1.80 0.86 0.61 Pro forma 1.69 0.79 0.60 Diluted earnings per share As reported 1.79 0.86 0.61 Pro forma 1.68 0.79 0.60 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 2002 was estimated to be $13.51 on the date of grant using the following assumptions; no dividend yield, expected volatility of 52.6%, risk-free interest rates of 4.5% and expected lives of 7 years. The weighted average fair value of options granted in 2001 was estimated to be $9.21 on the dates of grant using the following weighted average assumptions; no dividend yield, expected volatility of 43.2%, risk-free interest rates of 5.1% and expected lives of 7 years. 8. Income taxes. The provision for income taxes for fiscal years ended September 30 consists of the following (in thousands): 2002 2001 2000 Current: Federal $2,366 1,260 1,399 State 360 211 230 2,726 1,471 1,629 Deferred Federal 728 284 (205) State 161 48 (33) 889 332 (238) Total $3,615 1,803 1,391 A reconciliation between the amount of tax shown above and the amount computed at the statutory Federal income tax rate follows (in thousands): 2002 2001 2000 Amount computed at statutory Federal rate $3,152 1,532 1,168 State income taxes (net of Federal income tax benefit) 338 169 135 Other, net 125 102 88 Provision for income taxes $3,615 1,803 1,391 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: 2002 2001 Deferred tax liabilities: Property, plant and equipment $11,944 11,001 Depletion 570 588 Prepaid expenses 1,000 1,184 Gross deferred tax liabilities 13,514 12,773 Deferred tax assets: Insurance reserves 2,573 2,350 Other, net 855 1,226 Gross deferred tax assets 3,428 3,576 Net deferred tax liability $10,086 9,197 9. Employee benefits. The Company and certain subsidiaries have a savings/profit sharing plan for the benefit of qualified employees. The savings feature of the plan incorporates the provisions of Section 401(k) of the Internal Revenue Code. Under the savings feature of the plan, an eligible employee may elect to save a portion (within limits) of their compensation on a tax deferred basis. The Company contributes to a participant's account an amount equal to 50% (with certain limits) of the participant's contribution. Additionally, the Company may make an annual contribution to the plan as determined by the Board of Directors, with certain limitations. The plan provides for deferred vesting with benefits payable upon retirement or earlier termination of employment. The Company's cost was $545,000 in 2002, $517,000 in 2001 and $433,000 in 2000. 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): 2002 2001 Change in benefit obligation: Balance beginning of year $ 424 380 Service cost 19 24 Interest cost 24 29 Plan participants' contribution 11 13 Actuarial loss(gain) (69) 17 Benefits paid (35) (39) Balance end of year $ 374 424 Change in plan assets: Balance beginning of year $ - - Employer contributions 24 26 Plan participants' contribution 11 13 Benefits paid (35) (39) Balance end of year $ 0 0 Funded status $(374) (424) Unrecognized net gain (227) (186) Unrecognized prior service cost - - Accrued postretirement benefit costs $(601) (610) Net periodic postretirement benefit cost for fiscal years ended September 30 includes the following components (in thousands): 2002 2001 2000 Service cost of benefits earned during the period $ 19 24 23 Interest cost on APBO 24 29 26 Net amortization and deferral (28) (21) (20) Net periodic postretirement benefit cost $ 15 32 29 The discount rate used in determining the Net Periodic Postretirement Benefit Cost and the APBO was 7.0% for 2002, 7.5% for 2001 and 7.75% for 2000. No medical trend is applicable because the Company's share of the cost is frozen. 10. Business segments. The Company has identified two business segments, each of which is managed separately along product lines. The Company's operations are substantially in the Southeastern and Mid-Atlantic states. The transportation segment hauls liquid and dry bulk commodities by motor carrier. The real estate segment owns real estate of which a substantial portion is under mining royalty agreements or leased. The real estate segment also holds certain other real estate for investment and is developing commercial and industrial properties. Operating results and certain other financial data for the Company's business segments are as follows (in thousands): 2002 2001 2000 Revenues: Transportation (a) $ 81,921 103,189 80,152 Real estate (b) 15,028 18,069 13,710 $ 96,949 121,258 93,862 Operating profit: Transportation (a) $ 5,057 (2,248) 118 Real estate (b) 8,864 11,550 8,258 Corporate expenses (1,508) (1,424) (1,536) Operating profit $ 12,413 7,878 6,840 Capital expenditures: Transportation $ 11,430 5,011 12,091 Real estate 7,179 12,920 9,762 Other 0 497 8 $ 18,609 18,428 21,861 Depreciation, depletion and amortization: Transportation $ 7,876 8,175 8,191 Real estate 2,961 3,259 2,897 Other 249 37 56 $ 11,086 11,471 11,144 Identifiable assets at September 30: Transportation $ 47,519 48,987 54,836 Real estate 105,850 101,274 92,166 Cash 529 440 633 Unallocated corporate assets 1,565 2,058 376 $155,463 152,759 148,011 (a) Fiscal 2001 and 2000 include revenues of $22,623,000 and $7,689,000 and operating of losses of $6,309,000 and $361,000, respectively attributed to Patriot Transportation, Inc. which ceased operations in September, 2001. (b) Fiscal 2002, 2001 and 2000 includes revenue of $554,000, $3,978,000, and $2,260,000 and operating profit of $323,000, $2,886,000, and $1,533,000, respectively, from the sale of real estate. 11. Acquisition. On May 30, 2002, the Company acquired substantially all of the operating assets of Infinger Transportation Company, Inc. (Infinger), a regional tank truck carrier based in Charleston, South Carolina. The acquisition was accounted for as a purchase. The purchase price was approximately $3,698,000, including costs associated with the acquisition. The purchase price, which was financed through the revolving credit facility, has been allocated to the assets acquired based on their respective fair values. The purpose of the acquisition was to enable the Company to expand into new markets and increase capacity in existing markets. No goodwill was recorded in the transaction. 12. Fair values of financial instruments. At September 30, 2002 and 2001, the carrying amount reported in the consolidated balance sheet for cash and cash equivalents, short-term notes payable to bank and revolving credit approximate their fair value. The fair values of the Company's other long- term debt are estimated based on current rates available to the Company for debt of the same remaining maturities. At September 30, 2002, the carrying amount and fair value of such other long term debt was $36,101,000 and $38,450,000, respectively. 13. 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. 14. Commitments. At September 30, 2002, the Company had entered into various contracts to purchase and develop real estate with remaining commitments totaling $8,727,000, and to purchase transportation equipment for approximately $4,722,000. Report of Independent Certified Public Accountants To the Board of Directors and Shareholders of Patriot Transportation Holding, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, shareholders' equity, and cash flows present fairly, in all material respects, the financial position of Patriot Transportation Holding, Inc. and its subsidiaries at September 30, 2002, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. PricewaterhouseCoopers LLP November 15, 2002 Jacksonville, Florida Independent Auditors' Report To the Board of Directors and Shareholders Patriot Transportation Holding, Inc. We have audited the accompanying consolidated balance sheet of Patriot Transportation Holding, Inc. and subsidiaries as of September 30, 2001, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the two years in the period ended September 30, 2001. 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, 2001, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche, LLP Certified Public Accountants Jacksonville, Florida December 10, 2001 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 and of Florida Rock Industries, Inc. John D. Baker II (1) President and Chief Executive Officer of Florida Rock Industries, Inc. Thompson S. Baker II Vice President of Florida Rock Industries, Inc. 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 (3) Private Investment Banker, Twain Associates and Chairman of the Board and Chief Executive Officer of Bairnco Corporation Francis X. Knott (2) Chairman of Partner Management Co., LLC and of Partners Realty Trust, Inc. Robert H. Paul III (2)(3) Chairman of the Board, President and Chief Executive Officer of Southeast-Atlantic Beverage Corporation H. Jay Skelton (2) President and Chief Executive Officer of DDI, Inc. Martin E. Stein, Jr. (3) Chairman and Chief Executive Officer of Regency Centers Corporation and Chairman of the Regency Group, Inc. James H. Winston (3) President of LPMC of Jax, Inc., Omega Insurance Company and Citadel Life & Health Insurance Co. ________________ (1) Member of the Executive Committee (2) Member of the Audit Committee (3) Member of the Compensation Committee Officers Edward L. Baker Chairman of the Board John E. Anderson President and Chief Executive Officer David H. deVilliers, Jr. Vice President President, FRP Development Corp., the Company's northern real estate operations Ray M. Van Landingham Vice President, Finance and Administration and Chief Financial Officer Gregory B. Lechwar Controller Rick J. Copley President, SunBelt Transport, Inc. John R. Mabbett III President, Florida Rock & Tank Lines, Inc. 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 Shareholders Meeting which will be held at 2 p.m. local time, on Wednesday, February 5, 2003, 155 East 21st Street, Jacksonville, Florida, 32206. Transfer Agent Wachovia Bank, N.A. Corporate Trust Client Services NC-1153 1525 West W. T. Harris Boulevard - 3C3 Charlotte, NC 28288-1153 Telephone: 1-800-829-8432 General Counsel Lewis S. Lee, Esquire McGuireWoods LLP Jacksonville, Florida Independent Auditors PricewaterhouseCoopers LLP Jacksonville, Florida Common Stock Listed The Nasdaq Stock Market (Symbol: PATR) Form 10-K Shareholders may receive without charge a copy of Patriot Transportation Holding, Inc.'s annual report on Form 10-K for the fiscal year ended September 30, 2002 as filed with the Securities and Exchange Commission by writing to the Treasurer at 1801 Art Museum Drive Suite 300, Jacksonville, Florida 32207. 34 EX-23 5 patconsent.txt CONSENTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Exhibit 23(a) We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-43215, 33-18878 and 33- 55132) of Patriot Transportation Holding, Inc. of our report dated November 15, 2002 relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated November 15, 2002 relating to the financial statement schedules, which appears in this Form 10-K. PricewaterhouseCoopers LLP Jacksonville, Florida December 19, 2002 ____________________ INDEPENDENT AUDITORS' CONSENT Exhibit 23(b) We consent to the incorporation by reference in Registration Statement Nos. 33-43215, 33-18878 and 33-55132 of Patriot Transportation Holding, Inc. on Form S-8 of our report dated December 10, 2001, appearing in this Annual Report on Form 10-K of Patriot Transportation Holding, Inc. for the year ended September 30, 2002. DELOITTE & TOUCHE LLP Jacksonville, Florida December 19, 2002 -----END PRIVACY-ENHANCED MESSAGE-----