10-K 1 patr10k06.txt PATRIOT 2006 FORM 10-K UNITED STATES 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, 2006 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: Common Stock $.10 par value (Title of class) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No X Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No X 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 or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definitions of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer[ ] Accelerated filer[X] Non-accelerated filer[ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No X The number of shares of the registrant's stock outstanding as of November 14, 2006 was 3,011,629. The aggregate market value of the shares of Common Stock held by non-affiliates of the registrant as of March 31, 2006, the last day of business of our most recently completed second fiscal quarter, was $87,908,972. Solely for purposes of this calculation, the registrant has assumed that all directors, officers and ten percent (10%) shareholders of the Company are affiliates of the registrant. Documents Incorporated by Reference Portions of the Patriot Transportation Holding, Inc. 2006 Annual Report to Shareholders are incorporated by reference in Parts I and II. Portions of the Patriot Transportation Holding, Inc. Proxy Statement which will be filed with the Securities and Exchange Commission not later than December 31, 2006 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 has two business segments: transportation and real estate. Industry segment information is presented in Notes 2 and 11 to the consolidated financial statements included in the accompanying 2006 Annual Report to Shareholders and is incorporated herein by reference. The Company's transportation business is conducted through two wholly owned subsidiaries, Florida Rock & Tank Lines, Inc. ("Tank Lines"), and SunBelt Transport, Inc. ("SunBelt"). Tank Lines is a Southeastern U.S. based transportation company concentrating in the hauling of primarily petroleum related bulk liquids and dry bulk commodities by tank trailers. SunBelt serves the flatbed portion of the trucking industry primarily in the Southeastern U.S., hauling primarily construction materials. The Company's real estate activities are conducted through two wholly owned subsidiaries. Florida Rock Properties, Inc. ("Properties") and FRP Development Corp. ("Development"). 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 30% of the Company's real estate revenues for fiscal 2006. Properties also owns certain other real estate for investment. Development owns, manages and develops commercial warehouse/office rental properties near Baltimore, Maryland. Substantially all of the real estate operations are conducted within the Southeastern and Mid-Atlantic United States. 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. During fiscal 2006, Tank Lines operated from terminals in Jacksonville, Orlando, Panama City, Pensacola, Tampa and White Springs, Florida; Albany, Atlanta, Augusta, Bainbridge, Columbus, Dalton, Macon and Savannah, Georgia; Knoxville, Tennessee; Montgomery, Alabama; and Wilmington, North Carolina. Tank Lines has from two to six major tank truck competitors in each of its markets. SunBelt's flatbed fleet is based in Jacksonville and Tampa, Florida; Atlanta and Savannah, Georgia; South Pittsburg, Tennessee; Mobile, Alabama; and Selma, North Carolina, and hauls primarily building and construction materials in the Southeastern U.S. There are at least ten major competitors in SunBelt's market area and numerous small competitors in the various states served. During fiscal 2006, the transportation group purchased 198 new tractors and 89 new trailers and had commitments to purchase an additional 60 tractors and 4 trailers at September 30, 2006. Starting in January 2007, more stringent engine emissions standards mandated by the Environmental Protection Agency will become effective for all newly manufactured trucks. The Company expects that the engines produced under the 2007 standards will be less fuel-efficient and have a higher cost than the current engines. The Company accelerated its normal tractor replacement cycle so that the fiscal 2007 capital expenditure plan only includes the 60 tractors on order at September 30, 2006 to be received before January 1, 2007. The fiscal 2007 plan also includes 20 new trailers. The fleet modernization program has resulted in reduced maintenance expenses, improved operating efficiencies and enhanced driver recruitment and retention. At September 30, 2006, the Company owned and operated a fleet of 680 tractors and 997 trailers. The transportation segment primarily serves customers in the petroleum and building and construction industries. Petroleum customers accounted for approximately 66% and building and construction customers accounted for approximately 34% of transportation segment revenues for the year ended September 30, 2006. The Company hauls construction aggregates, diesel fuel and cement for FRI. Revenues from services provided to FRI accounted for 1.6% of the transportation segment's revenues. Price, service, and location are the major factors which affect competition in the transportation segment within a given market. During fiscal 2006, the transportation segment's ten largest customers accounted for approximately 47.3% of the transportation segment's revenue. One of these customers accounted for 11.6% of the transportation segment's revenue. The loss of any one of these customers could have a material adverse effect on the Company's revenues and income. Real Estate. The Company's real estate and property development activities are conducted through wholly owned subsidiaries. The Company owns real estate in Florida, Georgia, Virginia, Maryland, Delaware and Washington, D.C. The real estate owned falls generally into one of three categories: (i) land and/or buildings leased under rental agreements or being developed for rental; (ii) construction aggregates properties with stone or sand and gravel deposits, substantially all of which are leased to FRI in exchange for either a percentage of the revenues generated by the material mined and sold, or minimum royalties; and, (iii) land that is being held for future appreciation or development. The Company's real estate strategy of developing high quality, flexible warehouse/office space continues to be successful as average occupancy for the fiscal year for buildings in service for more than 12 months was 91.7%. At September 30, 2006, 93.3% of the total warehouse/office portfolio of approximately 2.4 million square feet was leased. Price, location, rental space availability, flexibility of design, and property management services are the major factors that affect competition in the flexible warehouse/office rental market. The Company experiences considerable competition in all of its markets. Real estate revenues in fiscal 2006 were divided approximately 69% from rentals on developed properties and 31% from mining royalties. FRI accounted for approximately 30% of total real estate revenues. Tenants of flexible warehouse/office properties are not concentrated in any one particular industry. During 2004, a subsidiary of the Company sold several parcels of property to FRI, a related party. The properties were located in Lake City, FL, Springfield, VA, and Miami, FL and the combined sales price was $29,628,000. See Notes 2 and 3 to the consolidated financial statements for more information. Environmental Matters. While the Company is affected by environmental regulations, such regulations are not expected to have a major effect on the Company's capital expenditures or operating results. Starting in January 2007, more stringent engine emissions standards mandated by the Environmental Protection Agency will become effective for all newly manufactured trucks. The Company expects that the engines produced under the 2007 standards will be less fuel-efficient and have a higher cost than the current engines. Seasonality. The Company's business is subject to limited seasonality due to the cyclical nature of business of our customers, with revenues generally declining slightly during winter months. Employees. The Company employed 955 people in its transportation group, 21 people in its real estate group and 5 people in its corporate offices at September 30, 2006. Company Website. The Company's website may be accessed at www.patriottrans.com. All of our filings with the Securities and Exchange Commission can be accessed through our website promptly after filing. This includes annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports filed or furnished on Form 8-K and all related amendments. EXECUTIVE OFFICERS OF THE REGISTRANT Name Age Office Position Since Edward L. Baker 71 Chairman of the Board May 3, 1989 John E. Anderson 61 President & Chief Feb. 17, 1989 Executive Officer David H. deVilliers, Jr. 55 Vice President of the Feb. 28, 1994 Company and President of the Company's Real Estate Group Ray M. VanLandingham 63 Vice President, Dec. 6, 2000 Treasurer, Secretary and Chief Financial Officer John D. Klopfenstein 43 Controller and Chief Feb. 16, 2005 Accounting Officer Terry S. Phipps 42 President of SunBelt April 5, 2004 Transport, Inc. Robert E. Sandlin 45 President of Florida March 1, 2003 Rock & Tank Lines, Inc. All of the above officers have been employed in their respective positions for the past five years except as follows: John D. Klopfenstein served as Director, Business Development and Planning of the Company, from June 2003 to February 2005, and as Manager, Corporate Development of the Company, from July 1996 to May 2003; Terry S. Phipps was a Vice President of SunBelt from May 2003 to April 2004, and was employed with Coastal Transport, Inc. from 1990 to May 2003; and Robert E. Sandlin was a Vice President of Florida Rock & Tank Lines from 1993 until March 2003. John D. Baker II, who is the brother of Edward L. Baker, and Thompson S. Baker II, who is the son of Edward L. Baker, are directors of the Company. All executive officers of the Company are elected by the Board of Directors annually and serve until their resignation or removal. Item 1A. RISK FACTORS. Our future results may be affected by a number of factors over which we have little or no control. The following issues, uncertainties, and risks, among others, should be considered in evaluating our business and outlook. Also, note that additional risks not currently identified or known to us could also negatively impact our business or financial results. Because certain shareholders have effective control of nearly a majority of our common stock, investors likely will not be able to affect the outcome of any shareholder vote. As of December 1, 2006, three of our directors, Edward L. Baker, John D. Baker II and Thompson S. Baker II, beneficially own approximately 45% of the outstanding shares of our common stock. As a result, these individuals effectively may have the ability to direct the election of all members of our Board of Directors and to exercise a controlling influence over our business and affairs, including any determinations with respect to mergers or other business combinations involving us, our acquisition or disposition of assets, our borrowing of monies, our issuance of any additional securities, our repurchase of common stock and our payment of dividends. Because their interests may differ from other shareholder's interests, actions taken by them with respect to us may not be favorable to all shareholders. Our charter, bylaws and shareholder rights agreement contain anti-takeover provisions that may hinder a takeover or negatively affect our stock price. Our articles of incorporation, bylaws and shareholder rights agreement contain several provisions that may make it more difficult and expensive for a third party to acquire control of us without the approval of our board of directors. Our articles of incorporation and bylaws contain provisions dividing our board of directors into four classes of directors serving four-year terms and providing that directors may only be removed for cause. Our articles of incorporation also provide that our shareholders can take action only at a duly called annual or special meeting of shareholders and require a supermajority vote to approve certain matters. In addition, our board of directors is authorized to issue additional shares of common stock or preferred stock and to determine the rights and preferences of any shares of preferred stock to be issued. Our shareholder rights plan is designed to guard against coercive or unfair tactics to gain control of us. The rights will cause substantial dilution to any person or group who attempts to acquire a significant amount of common stock without approval of our board of directors. Because we can redeem the rights, the rights will not interfere with a merger or other business combination approved by our board. We may be adversely impacted by rising fuels costs and limited availability of fuel. The market price for fuel, which recently rose to its highest price in over a decade, can be extremely volatile and can be affected by a number of economic and political factors. Rising fuel prices adversely impact us in two ways. Our transportation business requires large amounts of diesel fuel to operate our tractors. Historically, we have been able to recover increases in fuel prices from customers through fuel surcharges, but our earnings will be reduced if we are not able to fully offset fuel price increases with surcharges in the future. In addition, increased fuel prices often reduce the consumer demand for the petroleum products hauled by our tank lines subsidiary, adversely impacting revenues. Continued disruptions in the political climate in key oil producing regions in the world could limit the availability of fuel in the United States, increasing our fuel costs and possibly reducing revenues in our transportation business. Our operations may also be adversely affected by any limit on the availability of fuel. Our business may be adversely affected by seasonal factors and harsh weather conditions. Our business is subject to seasonal trends common in the refined petroleum products delivery industry. We typically face increased demand for fuels delivery services in Florida during the spring months. Our real estate group and our flatbed trucking subsidiary are adversely affected by reduced construction activity during periods of inclement weather. These factors can cause our operating results to fluctuate from quarter to quarter. An occurrence of unusually harsh or long-lasting inclement weather such as hurricanes, tornadoes and heavy snowfalls could have an adverse effect on our operations and profitability. Our revenues depend in part on construction sector activity levels, which tend to be cyclical. One of our transportation subsidiaries hauls construction materials. Our real estate group receives part of its revenues from royalties on construction aggregates mined on our properties. Thus, our results depend in part on residential, commercial and infrastructure construction activity and spending levels. The construction industry in our markets tends to be cyclical. Construction activity and spending levels vary across our markets and are influenced by interest rates, inflation, consumer spending habits, demographic shifts, environmental laws and regulations, employment levels and the availability of funds for public infrastructure projects. Economic downturns may lead to recessions in the construction industry, either in individual markets or nationally. We face great difficulty in recruiting and retaining qualified drivers. In recent years the transportation industry has had great difficulty attracting and retaining qualified drivers (including independent contractors), and competition for drivers is increasingly intense. To compete for drivers, we may be forced to increase driver compensation. We cannot be certain that we could pass along the increased compensation costs to our customers. If we are unable to continue to attract drivers and contract with independent contractors, we could be required to suffer downtime and lost revenue miles. New tractors are more expensive and less fuel efficient. New tractors are more expensive, primarily due to higher commodity prices, better pricing power among equipment manufacturers, and government regulations applicable to newly manufactured tractors and diesel engines. Revised EPA regulations decrease the amount of permitted air emissions that can be released by tractor engines and affect tractors produced after the effective date of the regulations. Compliance with these regulations has increased the cost of our new tractors and lowered fuel mileage. This will increase our capital expenses and our operating expenses. These adverse effects combined with the uncertainty as to the reliability of the vehicles equipped with the newly designed diesel engines and the residual values that will be realized from the disposition of these vehicles could increase our costs or otherwise adversely affect our business or operations. We have significant ongoing capital requirements. Our transportation business requires substantial ongoing capital investment, particularly for tractors, trailers, terminals and technology. For the past few years, we have depended on cash from operations and our credit facilities to fund our revenue equipment. We expect to continue to pay for projected capital expenditures with cash flows from operations and borrowings under our line of credit. If we are unable to generate sufficient cash from operations and obtain financing on favorable terms in the future, we may have to limit our growth, enter into less favorable financing arrangements, or operate our revenue equipment for longer periods, any of which could have a material adverse effect on our profitability. The loss of one of our major transportation customers could have a materially adverse effect on our business. A significant portion of our revenue is generated from our major customers. For 2006, our top 10 customers, based on revenue, accounted for approximately 47% of our revenue. A reduction in or termination of our services by one or more of our major customers could have a materially adverse effect on our business and operating results. The trucking industry is extremely competitive and fragmented. The trucking industry is extremely competitive and fragmented. No single truckload carrier has a significant market share. We compete with many other truckload carriers of varying sizes, customers' private fleets, and, to a lesser extent, with railroads which may limit our growth opportunities and reduce profitability. Some of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase freight rates or maintain our profit margins. Many customers reduce the number of carriers they use by selecting so-called "core carriers" as approved transportation service providers, and in some instances we may not be selected. Historically, competition has created downward pressure on the truckload industry's pricing structure. Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties. We are subject to various environmental laws and regulations dealing with the handling of hazardous materials, fuel storage tanks, air emissions from our vehicles and facilities, and engine idling. Our operations involve the risks of fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others. We also maintain bulk fuel storage and fuel islands at several of our facilities. Although we have instituted programs to monitor and control environmental risks and promote compliance with applicable environmental laws and regulations, if we are involved in a spill or other accident involving hazardous substances or if we are found to be in violation of applicable laws or regulations, we could be subject to liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a materially adverse effect on our business and operating results. Uninsured losses could significantly reduce our earnings. We self-insure for a portion of our claims exposure resulting from workers' compensation, auto liability, general liability, cargo and property damage claims, as well as employees' health insurance. We also are responsible for our legal expenses relating to such claims. We maintain insurance above the amounts for which we self-insure with licensed insurance carriers. Although we believe the aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that one or more claims could exceed our aggregate coverage limits. Also, there are some types of losses such as from hurricanes, terrorism, wars, or earthquakes where insurance is limited and/or not economically justifiable. If an uninsured loss occurs, we could lose both the invested capital and anticipated revenues. We reserve currently for anticipated losses and expenses. We periodically evaluate and adjust our claims reserves to reflect our experience. However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts. Rising insurance costs could significantly reduce our earnings. Insurance carriers have raised premiums for many businesses, including trucking companies. As a result, our insurance and claims expense could increase, or we could raise our self-insured retention when our policies are renewed. If we are unable to pass along this cost increase to customers, our earnings may be significantly reduced. Compliance with new or future transportation regulations may significantly reduce earnings. Our transportation operations are regulated and licensed by various U.S. agencies. While the costs of compliance with existing regulations generally is reflected in our prior results, new regulations (such as the new tractor air emissions regulations) and future laws and regulations may be more stringent and require changes in our operating practices, influence the demand for transportation services, or require us to incur significant additional costs. Higher costs incurred by us could adversely affect our results of operations. We may be unable to renew leases or relet space as leases expire. When a lease expires, a tenant may elect not to renew it. We may not be able to relet the property on similar terms. The terms of renewal or re-lease (including the cost of required renovations and/or concessions to tenants) may be less favorable than the prior lease. If we are unable to relet all or a substantial portion of our properties, or if the rental rates upon such reletting are significantly lower than expected rates, our cash generated before debt repayments and capital expenditures may be adversely affected. As of September 30, 2006, leases at our properties representing approximately 16% and 13% of the total square footage of our current portfolio were scheduled to expire in fiscal 2007 and fiscal 2008, respectively. The bankruptcy or insolvency of significant tenants with long- term leases may adversely affect income produced by our properties. We have six buildings in our business parks that are single- tenant occupied representing 34% of Developed property rentals under long-term leases. We have three other tenants with leases in excess of five years. Should tenants default on their obligations, our cash flow would be adversely affected and we may not be able to find another tenant to occupy the space under similar terms or have to make expenditures to retrofit and/or divide the space. In addition we may have to expense a significant amount of deferred rent revenue generated from straight-lining revenues. The bankruptcy or insolvency of a major tenant may also adversely affect the income produced by a property. If any of our tenants becomes a debtor in a case under the U.S. Bankruptcy Code, we cannot evict that tenant solely because of its bankruptcy. The bankruptcy court may authorize the tenant to reject and terminate its lease with us. Our claim against such a tenant for unpaid future rent would be subject to a statutory limitation that might be substantially less than the remaining rent actually owed to us under the tenant's lease. Any shortfall in rent payments could adversely affect our cash flow. Poor Economic Conditions in Baltimore Could Adversely Affect Our Business. All of our office/warehouse properties are located in the Baltimore and Washington, D.C. areas. As a result of our geographic concentration, we depend upon the local conditions in these markets, including local real estate conditions. We are, therefore, subject to increased exposure (positive or negative) to economic and other competitive factors specific to markets in confined geographic areas. Our operations may also be affected if too many competing properties are built in these markets. An economic downturn in these markets could adversely affect our operation. We cannot assure you that these markets will continue to grow or will continue to provide favorable demand for our office/warehouse product. Our inability to obtain necessary approvals for property development could adversely affect our profitability. We may be unable to obtain, or incur delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased costs or abandonment of these projects. Before we can develop a property, we must obtain a variety of approvals from local and state governments with respect to such matters as zoning, density, parking, subdivision, site planning and environmental issues. Legislation could impose moratoriums on new real estate development and/or land-use conversions from mining to development. These factors may reduce our profit or growth. Real estate investments are not as liquid as other types of assets. The illiquid nature of real estate investments may limit our ability to react promptly to changes in economic or other conditions. In addition, significant expenditures associated with real estate investments, such as mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investments. Thus, the illiquid nature of our real estate investments could adversely affect our profitability under certain economic conditions. Our Debt Service Obligation May Have Adverse Consequences on Our Business Operations. We use debt to finance our operations, including acquisitions of properties. Our use of debt may have adverse consequences, including the following: ? Our cash flow from operations may not be sufficient to meet required payments of principal and interest. ? We may be forced to dispose of one or more of our properties, possibly on disadvantageous terms, to make payments on our debt. ? We may default on our debt obligations, and the lenders or mortgages may foreclose on our properties that secure those loans. ? A foreclosure on one of our properties could create taxable income without any accompanying cash proceeds to pay the tax. ? A default under a mortgage loan that has cross default provisions may cause us to automatically default on another loan. ? We may not be able to refinance or extend our existing debt. ? The terms of any refinancing or extension may not be as favorable as the terms of our existing debt. ? We may be subject to a significant increase in the variable interest rates on our unsecured line of credit or unsecured term loan, which could adversely impact our operations. As of September 30, 2006, we had outstanding mortgage indebtedness of $50,672,000, secured by developed real estate properties having a carrying value of $56,933,000, and outstanding debt under our unsecured revolver of $12,452,000. Our Unsecured Revolving Credit Agreement Restricts Our Ability to Engage in Some Business Activities. Our unsecured revolving credit agreement contains customary negative covenants and other financial and operating covenants that, among other things: ? restrict our ability to incur additional indebtedness; ? restrict our ability to make certain investments; ? restrict our ability to merge with another company; ? restrict our ability to pay dividends; ? require us to maintain financial coverage ratios; and ? require us to maintain a pool of unencumbered assets approved by the lenders. These restrictions could cause us to default on our unsecured line of credit or negatively affect our operations. Our real estate segment faces competition from numerous sources. The ownership of flexible warehouse/office space is highly fragmented. We compete with numerous developers, owners and operators of real estate, many of which own properties similar to ours in the same submarkets in which our properties are located. If our competitors offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants, we may lose potential tenants and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants' leases expire. As a result, our financial condition, results of operations, cash flow and ability to satisfy our debt service obligations could be materially adversely affected. Construction costs may be more costly than anticipated. Our business plan includes a number of construction projects. The construction costs of these projects may exceed original estimates and possibly make the completion of a property uneconomical. Building material commodity shortages, construction delays/stoppages and/or rapidly escalating construction costs may out-pace market rents, adversely affecting profits. The market environment and existing lease commitments may not allow us to raise rents to cover these higher costs. Item 2. PROPERTIES. The Company's principal properties are located in Florida, Georgia, Virginia, Washington, D.C., Delaware and Maryland. Real Estate Segment Properties. Principal properties held by the Real Estate segment are discussed below under the captions Developed Properties, Future Planned Development, Construction Aggregates Properties, and Other Properties. At September 30, 2006 certain developed real estate properties having a carrying value of $56,933,000 were pledged on long- term non-recourse notes with an outstanding principal balance totaling $50,672,000. In addition, certain other properties having a carrying value at September 30, 2006 of $103,000 were encumbered by $1,300,000 of industrial revenue bonds that are the liability of FRI. FRI has agreed to pay such debt when due (or sooner if FRI cancels its lease of such property), and further has agreed to indemnify and hold harmless the Company on account of such debt. Developed Properties. At September 30, 2006, the Company owned 10 developed parcels of land containing 219 usable acres in the Mid-Atlantic region of the United States as follows: 1) Hillside Business Park in Anne Arundel County, Maryland consists of 49 usable acres near the Baltimore-Washington International Airport. Infrastructure work on the site is substantially completed and four buildings with a total of 504,740 square feet are completed. Of the four existing buildings, three are 100% leased/occupied and the fourth, completed in September 2006 is 55% leased. Upon occupancy of the 55% tenant in November 2006, this park will be 92% occupied. The Company plans to develop the final building with a minimum of 40,000 square feet. 2) Lakeside Business Park in Harford County, Maryland consists of 83 usable acres. Seven warehouse/office buildings, totaling 671,241 square feet, have been constructed and are 100% leased. A 73,200 square foot building is under construction with completion scheduled for the summer of 2007. The remaining 26 acres are available for future development and have the potential to offer an additional 343,000 square feet of comparable product. 3) 6920 Tudsbury Road in Baltimore County, Maryland contains 5.3 acres with 86,100 square feet of warehouse/office space that is 100% leased. 4) 8620 Dorsey Run Road in Howard County, Maryland contains 5.8 acres with 85,100 square feet of warehouse/office space that is 100% leased. 5) Rossville Business Center in Baltimore County, Maryland contains approximately 10 acres with 190,517 square feet of warehouse/office space and is 100% leased. 6) 34 Loveton Circle in suburban Baltimore County, Maryland contains 8.5 acres with 29,921 square feet of office space, which is 100% leased. The Company occupies 23% of the space and 23% is leased to FRI. 7) Oregon Business Center in Anne Arundel County, Maryland contains approximately 17 acres with 195,615 square feet of warehouse/office space, which is 85% leased. 8) Arundel Business Center in Howard County, Maryland contains approximately 11 acres with 162,796 square feet of warehouse/office space, which is 86% leased. 9) 100-400 Interchange Boulevard in New Castle County, Delaware contains approximately 17 acres with 303,006 square feet of warehouse/office space, which is 92% leased. The remaining 8.8 acres are available for future development and have the potential to offer an additional 88,000 square feet of comparable product. 10) 1187 Azalea Garden Road in Norfolk, Virginia contains approximately 12 acres with 188,093 square feet of warehouse/office space, which is 100% leased. Future Planned Developments. At September 30, 2006 the Company owned the following future development parcels: 1) Windlass Run Business Park, formerly referred as Bird River, located in southeastern Baltimore County, Maryland, is a 179-acre tract of land that will have direct access to Maryland State Road 43 which was completed in October 2006 and will connect I-95 with Martin State Airport. This property is currently zoned for residential and commercial use with 104 developable acres. The Company plans to develop and lease approximately 515,000 square feet of multiple warehouse/office buildings on the 42 developable acres zoned for commercial use. Land development efforts will commence in the spring of 2007. Meanwhile plans are being pursued to obtain residential zoning upgrade and eventual maximization of the remaining 62 acres. 2) Patriot Business Park, located in Prince William County, Virginia, is a 101-acre tract of land which is immediately adjacent to the Prince William Parkway providing access to I-66. The Company plans to develop and lease approximately 1,000,000 square feet of multiple warehouse/office buildings on the property. Land development efforts are expected to commence in the spring of 2008. 3) Brooksville Quarry, LLC. On October 4, 2006, a subsidiary of the Company (FRP) entered into a Joint Venture Agreement with Florida Rock Industries, Inc. (FRI) to develop approximately 4,400 acres of land near Brooksville, Florida. Under the terms of the joint venture, FRP has contributed its fee interest in approximately 3,500 acres that it leased to FRI under a long-term mining lease. FRI will continue to mine the property and pay royalties to FRP for as long as mining does not interfere with the development of the property. The joint venture will be jointly controlled by FRI and FRP. Each party has a mandatory obligation to fund additional capital contributions of up to $2 million. Distributions will be made on a 50-50 basis. The property does not yet have the necessary entitlements for real estate development. Approval to develop real property in Florida entails an extensive entitlements process involving multiple and overlapping regulatory jurisdictions and the outcome is inherently uncertain. The Company currently expects that the entitlement process may take several years to complete. 4) Anacostia River. The Company owns a 5.8 acre parcel of undeveloped real estate in Washington D.C. that fronts the Anacostia River and is adjacent to the construction site for the new Washington Nationals Baseball Stadium which is scheduled for completion in 2008. The Company also owns a nearby 2.1 acre tract on the same bank of the Anacostia River. Currently, these properties are leased to Florida Rock Industries, Inc., on a month-to-month basis. The Company has been pursuing development efforts with respect to the 5.8-acre parcel for several years. The Company previously obtained a Planned Unit Development (PUD) Zoning approval for development of the property and has been working to obtain approval of a modified PUD that would allow up to 625,000 square feet of commercial development and up to 440,000 square feet of residential development. Consideration of a proposed action by the Zoning Commission is anticipated at their scheduled public meeting on January 8, 2007. The Company remains optimistic that its zoning application will be approved while at the same time recognizing that there is inherent uncertainty in any zoning approval process. 5) Commonwealth Avenue in Jacksonville, Florida is a 50-acre, rail accessible site near the western beltway of Interstate-295 capable of supporting approximately 500,000 square feet of eventual warehouse/office build-out. Construction Aggregates Properties. The following table summarizes the Company's principal construction aggregates locations and estimated reserves at September 30, 2006, substantially all of which are leased to FRI. Tons of Tons Sold Estimated in Year Reserves Ended at 9/30/06 9/30/06 Approximate (000's) (000's) Acres Owned The Company owns ten locations currently being mined in Grandin, Gulf Hammock, Keuka, Newberry and Airgrove/ Lake County, Florida; Columbus, Macon, Forest Park and Tyrone, Georgia; and Manassas, Virginia. 11,054(1) 428,129 12,994 The Company owns three locations not currently being mined in Ft. Myers, Marion County, Astatula/Lake County - 32,891 2,881 (1) Tons sold in year ended 9/30/06 include Brooksville tons of 284,000. Tons of estimated reserves and acres owned do not include Brooksville as the property was transferred October 4, 2006 to a joint venture with FRI for development. Other Properties. In addition to the development, mining and rental sites, the Company owns approximately 2,201 acres of investment and other real estate. This includes a 1,844-acre timberland site located in Caroline County, Virginia. The Company owns an office building with approximately 69,000 square feet situated on approximately 6 acres in Jacksonville, Florida, which is leased to FRI. Transportation Segment Properties. The Company has 21 sites for its trucking terminals in Alabama, Florida, Georgia, North Carolina, and Tennessee. The Company owns 13 of these sites and leases 8. Item 3. LEGAL PROCEEDINGS. Note 14 to the Consolidated Financial Statements included in the accompanying 2006 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, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. There were approximately 634 holders of record of Patriot Transportation Holding, Inc. common stock, $.10 par value, as of September 30, 2006. 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 6 of the Company's 2006 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 2006 Annual Report to Shareholders and such information is incorporated herein by reference. Information regarding securities authorized for issuance under equity compensation plans is included in Item 12 of Part III of this Annual Report on Form 10-K and such information is incorporated herein by reference. Purchases of Equity Securities by the Issuer and Affiliated Purchasers (c) Total Number of Shares (d) Purchased Approximate (a) As Part of Dollar Value of Total (b) Publicly Shares that May Number of Average Announced Yet Be Purchased Shares Price Paid Plans or Under the Plans Period Purchased per Share Programs or Programs (1) July 1 through July 31 0 $ 0 0 $ 3,490,000 August 1 through August 31 0 $ 0 0 $ 3,490,000 September 1 through September 30 0 $ 0 0 $ 3,490,000 Total 0 $ 0 0 (1) In December, 2003, the Board of Directors authorized management to expend up to $6,000,000 to repurchase shares of the Company's common stock from time to time as opportunities arise. Item 6. SELECTED FINANCIAL DATA. Information required in response to this Item 6 is included under the caption "Five Year Summary" on page 6 of the Company's 2006 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 OPERATION. Information required in response to Item 7 is included under the caption "Management Analysis" on pages 7 through 11 of the Company's 2006 Annual Report to Shareholders and such information is incorporated herein by reference. Item 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to market risk from changes in interest rates. For its cash and cash equivalents, a change in interest rates affects the amount of interest income that can be earned. For its debt instruments with variable interest rates, changes in interest rates affect the amount of interest expense incurred. The Company prepared a sensitivity analysis of its variable rate borrowings to determine the impact of hypothetical changes in interest rates on the Company's results of operations and cash flows. The interest-rate analysis assumed a 50 basis point adverse change in interest rates on all borrowings under the credit agreement. However, the interest-rate analysis did not consider the effects of the reduced level of economic activity that could exist in such an environment. Based on this analysis, management has concluded that a 50 basis point adverse move in interest rates on the Company's outstanding borrowings under the credit agreement would have an immaterial impact on the Company's results of operations and cash flows. The following table provides information about the Company's long-term debt (dollars in thousands): There Fair Liabilities: 2007 2008 2009 2010 2011 after Total Value Scheduled maturities of long-term debt: Fixed Rate $ 2,576 $2,761 $2,959 $3,172 $3,400 $35,804 $50,672 $51,895 Average interest rate 6.8% 6.9% 6.9% 6.9% 6.9% 6.9% Variable Rate $12,452 Average Interest rate 6.3% Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Information required in response to this Item 8 is included under the caption "Quarterly Results" on page 6 and on pages 12 through 22 of the Company's 2006 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 June 21, 2006, the Audit Committee of the Board of Directors of Patriot Transportation Holding, Inc. (the "Company"), dismissed PricewaterhouseCoopers LLP ("PWC") as the Company's independent registered certified public accounting firm, effective immediately. The Audit Committee also engaged Hancock Askew & Co. ("Hancock Askew") to serve as the Company's principal public accountants effective immediately. PWC's reports on the consolidated financial statements of the Company as of and for the fiscal years ended September 30, 2005 and 2004 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principle. During the fiscal years ended September 30, 2005 and 2004 and through June 21, 2006 there were no disagreements with PWC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to PWC's satisfaction, would have caused them to make reference thereto in their reports on the financial statements for such years; and there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K. During the fiscal years ended September 30, 2005 and 2004 and through June 21, 2006, the Company did not consult Hancock Askew 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. Item 9A. CONTROLS AND PROCEDURES. The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the Company's Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO"), and Chief Accounting Officer ("CAO"), as appropriate, to allow timely decisions regarding required disclosure. The Company also maintains a system of internal accounting controls over financial reporting that are designed to provide reasonable assurance to the Company's management and Board of Directors regarding the preparation and fair presentation of published financial statements. All control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving the desired control objectives. As of September 30, 2006, the Company, under the supervision and with the participation of the Company's management, including the CEO, CFO and CAO, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on this evaluation, the Company's CEO, CFO and CAO concluded that the Company's disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be included in periodic SEC filings. There have been no changes in the Company's internal controls over financial reporting during the fourth quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Management's report on internal control over financial reporting is included on page 23 of the Company's 2006 Annual Report to Shareholders. Such information is incorporated herein by reference. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding the Company's executive officers is set forth under the caption "Executive Officers of the Registrant" in Part I of this Form 10-K. Information concerning directors (including the disclosure regarding audit committee financial experts), required in response to this Item 10, is included under the captions "Election of Directors", "Board Structure and Committee Membership - Audit Committee" 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, 2006. The Company has adopted a Financial Code of Ethical Conduct applicable to its principal executive officers, principal financial officers and principal accounting officers. A copy of this Financial Code of Ethical Conduct is filed as Exhibit 14 to this Form 10-K. The Financial Code of Ethical Conduct is available on our web site at www.patriottrans.com under the heading Investor Relations - Corporate Governance. Item 11. EXECUTIVE COMPENSATION. Information required in response to this Item 11 is included under the captions "Executive Compensation," "Compensation Committee Report," "Board Structure and Committee Membership - Compensation Committee," and "Shareholder Return Performance" 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, 2006. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. 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 Executive Officers" 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, 2006. 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 304,746 $31.03 279,900 Equity compensation plans not approved by security holders 0 0 0 Total 304,746 $31.03 279,900 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information required in response to this Item 13 is included under the caption "Related Party Transactions" 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, 2006. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Information required in response to this Item 14 is included under the captions "Independent Auditor" and "Ratification of Independent Registered Certified Public Accounting Firm" 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, 2006. PART IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (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 29 of this Form 10-K. (3) Exhibits. The response to this item is submitted as a separate section. See Exhibit Index on pages 26 through 28 of this Form 10-K. 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 7, 2006 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, Treasurer, Secretary and Chief Financial Officer (Principal Financial Officer) By JOHN D. KLOPFENSTEIN John D. Klopfenstein Controller and Chief Accounting Officer(Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on December 7, 2006. JOHN E. ANDERSON LUKE E. FICHTHORN III John E. Anderson Luke E. Fichthorn III Director, President, and Chief Director Executive Officer (Principal Executive Officer) CHARLES E. COMMANDER III______ Charles E. Commander III RAY M. VAN LANDINGHAM Director Ray M. Van Landingham Vice President, Treasurer, Secretary and Chief Financial ROBERT H. PAUL III Officer(Principal Financial Officer) Robert H. Paul III Director JOHN D. KLOPFENSTEIN ____________ John D. Klopfenstein H. W. SHAD III_____ Controller and Chief Accounting H. W. Shad III Officer (Principal Accounting Officer) Director EDWARD L. BAKER__________________ ___________________ ____ Edward L. Baker Martin E. Stein, Jr. Chairman of the Board Director JOHN D. BAKER II_________________ JAMES H. WINSTON _________ John D. Baker II James H. Winston Director Director THOMPSON S. BAKER II_____________ Thompson S. Baker II Director PATRIOT TRANSPORTATION HOLDING, INC. FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 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) Amended and Restated Bylaws of Patriot Transportation Holding, Inc. adopted August 3, 2005, incorporated by reference to Exhibit 3.1 to the Company's Form 8-K dated August 3, 2005. 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) Rights Agreement, dated as May 5, 1999 between the Company and First Union National Bank, incorporated by reference to Exhibit 4 to the Company's Form 8-K dated May 5, 1999. File No. 33-26115. (10)(a) Various lease backs and mining royalty agreements with Florida Rock Industries, Inc., none of which are presently believed to be material individually, except for the Mining Lease Agreement dated September 1, 1986, between Florida Rock Industries Inc. and Florida Rock Properties, Inc., successor by merger to Grandin Land, Inc. (see Exhibit (10)(c)), but all of which may be material in the aggregate, incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(b) License Agreement, dated June 30, 1986, from Florida Rock Industries, Inc. to Florida Rock & Tank Lines, Inc. to use "Florida Rock" in corporate names, incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(c) Mining Lease Agreement, dated September 1, 1986, between Florida Rock Industries, Inc. and Florida Rock Properties, Inc., successor by merger to Grandin Land, Inc., incorporated by reference to an exhibit previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(d) Summary of Medical Reimbursement Plan of Patriot Transportation Holding, Inc., incorporated by reference to an exhibit filed with Form 10-K for the fiscal year ended September 30, 1993. File No. 33-26115. (10)(e) Summary of Management Incentive Compensation Plans, incorporated by reference to an exhibit filed with Form 10-K for the fiscal year ended September 30, 1994. File No. 33- 26115. (10)(f) Management Security Agreements between the Company and certain officers, incorporated by reference to a form of agreement previously filed (as Exhibit (10)(I)) with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(g)(1) Patriot Transportation Holding, Inc. 1995 Stock Option Plan, incorporated by reference to an appendix to the Company's Proxy Statement dated December 15, 1994. File No. 33-26115. (10)(g)(2) Patriot Transportation Holding, Inc. 2000 Stock Option Plan, incorporated by reference to an appendix to the Company's Proxy Statement dated December 15, 1999. File No. 33-26115. (10)(g)(3) Patriot Transportation Holding, Inc. 2006 Stock Incentive Plan, incorporated by reference to an appendix to the Company's Proxy Statement dated December 29, 2005. File No. 33-26115. (10)(h) Amended and Restated Revolving Credit Agreement dated November 10, 2004 among Patriot Transportation Holding, Inc. as Borrower, the Lenders from time to time party hereto and Wachovia Bank, National Association as Administrative Agent, incorporated by reference to the Company's Form 8-K dated November 16, 2004. File No. 33-26115. (10)(i) The Company and its consolidated subsidiaries have other long-term debt agreements, none of which exceed 10% of the total consolidated assets of the Company and its subsidiaries, and the Company agrees to furnish copies of such agreements and constituent documents to the Commission upon request. (10)(j) Letter of Credit Facility between Patriot Transportation Holding, Inc. and SunTrust Bank, N.A. dated February 16, 2005, incorporated by reference to the Company's Form 8-K dated February 16, 2005. File No. 33-26115. (10)(k) Joint Venture Agreement between Florida Rock Industries, Inc. and Florida Rock Properties, filed herewith. (13) The Company's 2006 Annual Report to shareholders, portions of which are incorporated by reference in this Form 10-K. Those portions of the 2006 Annual Report to Shareholders which are not incorporated by reference shall not be deemed to be filed as part of this Form 10-K. (14) Financial Code of Ethical Conduct between the Company, Chief Executive Officers and Financial Managers, adopted December 4, 2002, incorporated by reference to an exhibit filed with Form 10-K for the year ended September 30, 2003. File No. 33-26115. (21) Subsidiaries of Registrant at September 30, 2006: Florida Rock & Tank Lines, Inc. (a Florida corporation); Florida Rock Properties, Inc. (a Florida corporation); FRP Development Corp. (a Maryland corporation); FRP Maryland, Inc. (a Maryland corporation); 34 Loveton Center LLC (a Maryland limited liability company); FRTL, Inc. (a Florida corporation); SunBelt Transport, Inc. (a Florida Corporation); Oz LLC(a Maryland limited liability company); 1502 Quarry, LLC(a Maryland limited liability company); FRP Lakeside LLC #1 (a Maryland limited company); FRP Lakeside LLC #2 (a Maryland limited liability company); FRP Lakeside LLC #3 (a Maryland limited liability company); FRP Lakeside LLC #4 (a Maryland limited liability company); FRP Lakeside LLC #5 (a Maryland limited liability company); FRP Hillside LLC (a Maryland limited liability company); FRP Hillside LLC #2 (a Maryland limited liability company); FRP Hillside LLC #3 (a Maryland limited liability company); FRP Windsor LLC (a Maryland limited liability company); FRP Dorsey LLC (a Maryland limited liability company); FRP Bird River LLC (a Maryland limited liability company); FRP Interchange LLC (a Maryland limited liability company); FRP Azalea LLC (a Maryland limited liability company); FRP Manassas LLC (a Maryland limited liability company). (23)(a) Consent of Hancock Askew & Co., Inc., Independent Registered Certified Public Accounting Firm, appears on page 30 of this Form 10-K. (23)(b) Consent of PricewaterhouseCoopers LLP, Independent Registered Certified Public Accounting Firm, appears on page 30 of this Form 10-K. (31)(a) Certification of John E. Anderson. (31)(b) Certification of Ray M. Van Landingham. (31)(c) Certification of John D. Klopfenstein. (32) Certification of Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer under Section 906 of the Sarbanes-Oxley Act of 2002. PATRIOT TRANSPORTATION HOLDING, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 15(a) (1) and 2)) Page Consolidated Financial Statements: Consolidated balance sheets at September 30, 2006 and 2005 13(a) For the years ended September 30, 2006, 2005 and 2004: Consolidated statements of income 12(a) Consolidated statements of cash flows 14(a) Consolidated statements of shareholders' equity 15(a) Notes to consolidated financial statements 15-23(a) Reports of Independent Registered Certified Public Accounting Firms 24-25(a) Selected quarterly financial data (unaudited) 6(a) Consents of Independent Registered Certified Public Accounting Firms 30(b) Reports of Independent Registered Certified Public Accounting Firms on Financial Statement Schedules 31(b) Consolidated Financial Statement Schedules: II - Valuation and qualifying accounts 32(b) III - Real estate and accumulated depreciation and depletion 33-34(b) (a) Refers to the page number in the Company's 2006 Annual Report to Shareholders. Such information is incorporated by reference in Item 8 of this Form 10-K. (b) Refers to the page number in this Form 10-K. All other schedules have been omitted, as they are not required under the related instructions, are inapplicable, or because the information required is included in the consolidated financial statements. Exhibit 23 CONSENTS OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRMS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-18878, 333-55132, 333- 125099 and 333-131475) of Patriot Transportation Holding, Inc. of our report dated December 1, 2006 relating to the consolidated financial statements and the effectiveness of Patriot Transportation Holding, Inc's internal controls over financial reporting as of and for the year ended September 30, 2006, which appears in the Annual Report to Shareholders, which is incorporated by reference. We also consent to the incorporation by reference of our report dated December 1, 2006, relating to the financial statement schedules, which appear in this Form 10-K. Our report dated December 1, 2006 on the consolidated financial statements includes an explanatory paragraph stating that, as discussed in Note 8 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-based Payment, effective October 1, 2005 for accounting for share-based payments. Hancock Askew & Co., LLP Savannah, Georgia December 7, 2006 ____________________ We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-18878, 333-55132, 333- 125099 and 333-131475) of Patriot Transportation Holding, Inc. of our report dated December 22, 2005 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 December 22, 2005, relating to the financial statement schedules, which appear in this Form 10-K. PricewaterhouseCoopers LLP Jacksonville, Florida December 11, 2006 ____________________ REPORTS OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of Patriot Transportation Holding, Inc.: Our audit of the consolidated financial statements referred to in our report dated December 1, 2006 appearing in the 2006 Annual Report to Shareholders of Patriot Transportation Holding, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed in Item 15(a)(2) of this Form 10-K. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audit. 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. Hancock Askew & Co., LLP Savannah, Georgia December 1, 2006 ____________________ To the Board of Directors of Patriot Transportation Holding, Inc.: Our audits of the consolidated financial statements referred to in our report dated December 22, 2005 appearing in the 2005 Annual Report to Shareholders of Patriot Transportation Holding, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed in Item 15(a)(2) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP Jacksonville, Florida December 22, 2005 PATRIOT TRANSPORTATION HOLDING, INC. SCHEDULE II (CONSOLIDATED) - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 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, 2006: Allowance for doubtful accounts $ 525,255 $ (39,910)$ - $ 126,118(a) $ 359,227 Accrued risk insurance $7,576,789 $ 2,381,943 $ - $ 1,750,162(b) $8,208,570 Accrued health insurance 1,196,162 3,100,234 - 3,103,457(b) 1,192,939 Totals - insurance $8,772,951 $ 5,482,177 $ 0 $ 4,853,619 $9,401,509 Year Ended September 30, 2005: Allowance for doubtful accounts $ 638,320 $ 177,000 $ - $ 290,065(a) $ 525,255 Accrued risk insurance $6,653,657 $ 3,710,925 $ - $ 2,787,793(b) $7,576,789 Accrued health insurance 1,205,334 2,938,379 - 2,947,551(b) 1,196,162 Totals - insurance $7,858,991 $ 6,649,304 $ 0 $ 5,735,344 $8,772,951 Year Ended September 30, 2004: Allowance for doubtful accounts $ 565,744 $ 168,000 $ - $ 95,423(a) $ 638,320 Accrued risk insurance $6,779,345 $ 3,562,400 $ - $ 3,688,088(b) $6,653,657 Accrued health insurance 1,256,845 3,075,521 - 3,127,032(b) 1,205,334 Totals - insurance $8,036,190 $ 6,637,921 $ 0 $ 6,815,120 $7,858,991 (a) Accounts written off less recoveries (b) Payments PATRIOT TRANSPORTATION HOLDING, INC. SCHEDULE III (CONSOLIDATED)-REAL ESTATE & ACCUMULATED DEPRECIATION AND DEPLETION (dollars in thousands) SEPTEMBER 30, 2006
Cost capi- Gross amount Year Deprecia- Encumb- Initial talized at which Accumulated Of Date tion Life County rances cost to subsequent carried at Depreciation Constr- Acquired Computed Company to acqui- end of period tion on: sition (a) Construction Aggregates Alachua, FL $ 1,442 $ 0 $ 1,442 $ 102 n/a 4/86 unit Clayton, GA 369 0 369 5 n/a 4/86 unit Fayette, GA 685 0 685 57 n/a 4/86 unit Hernando, FL (b) 3,115 410 3,525 976 n/a 4/86 unit Lake, FL 1,485 0 1,485 1,099 n/a 4/86 unit Lee, FL 4,690 6 4,696 6 n/a 4/86 unit Levy, FL 1,281 104 1,385 515 n/a 4/86 unit Marion, FL 1,180 0 1,180 600 n/a 4/86 unit Monroe, GA 792 0 792 256 n/a 4/86 unit Muscogee, GA 369 0 369 175 n/a 4/86 unit Polk, FL 121 0 121 75 n/a 4/86 unit Prince Wil. VA 298 0 298 298 n/a 4/86 unit Putnam, FL 15,002 49 15,051 3,686 n/a 4/86 unit 0 30,829 569 31,398 7,850 Other Rental Property Wash D.C. 2,957 7,731 10,688 1,935 n/a 4/86 15 yr. Wash D.C. 3,811 0 3,811 0 n/a 10/97 Putnam, FL 326 50 376 347 n/a 4/86 5 yr. Spalding, GA 20 0 20 0 n/a 4/86 0 7,114 7,781 14,895 2,282 Commercial Property Baltimore, MD 0 439 3,710 4,149 1,763 1990 10/89 31.5 yr. Baltimore, MD 1,766 950 6,359 7,309 2,749 1994 12/91 31.5 yr. Baltimore, MD 2,300 690 2,837 3,527 655 2000 7/99 31.5 yr. Baltimore, MD 0 5,634 3,132 8,766 0 2003 12/02 31.5 yr. Duval, FL 0 2,416 529 2,945 2,577 n/a 4/86 25 yr. Harford, MD 2,374 31 3,826 3,857 1,067 1998 8/95 31.5 yr. Harford, MD 4,055 50 5,552 5,602 1,166 1999 8/95 31.5 yr. Harford, MD 5,660 85 6,665 6,750 1,507 2001 8/95 31.5 yr. Harford, MD 0 92 1,506 1,598 0 n/a 8/95 31.5 yr. Harford, MD 4,158 88 7,199 7,287 1,115 n/a 8/95 31.5 yr. Harford, MD 3,222 155 5,013 5,168 1,017 2001 8/95 31.5 yr. Howard, MD 3,568 2,859 3,865 6,724 2,448 1996 9/88 31.5 yr. Howard, MD 2,078 2,473 920 3,393 606 2000 3/00 31.5 yr. Anne Arun, MD 2,741 715 6,710 7,425 3,822 1989 9/88 31.5 yr. Anne Arun, MD 7,325 950 13,055 14,005 1,322 n/a 5/98 31.5 yr. Anne Arun, MD 11,425 1,525 10,762 12,287 397 2001 8/04 31.5 yr. Anne Arun, MD 0 1,307 4,830 6,137 14 2006 1/03 31.5 yr. Norfolk, VA 0 7,512 0 7,512 445 1971 10/04 31.5 yr. Prince Wil. VA 0 10,200 32 10,232 0 n/a 12/05 31.5 yr. Newcastle Co. DE 0 11,559 1,006 12,565 832 n/a 4/04 31.5 yr. 50,672 49,730 87,508 137,238 23,502 Investment Property 1,092 112 1,204 37 n/a 4/86 n/a GRAND TOTALS $50,672 $88,765 $95,970 $184,735 $33,671 (a) The aggregate cost for Federal income tax purposes is $167,825. (b) This property was contributed on October 4, 2006 to the Brooksville Quarry, LLC, a 50% owned joint venture.
PATRIOT TRANSPORTATION HOLDING, INC. SCHEDULE III (CONSOLIDATED) - REAL ESTATE AND ACCUMULATED DEPRECIATION AND DEPLETION YEARS ENDED SEPTEMBER 30, 2006, 2005 AND 2004 (In thousands) 2006 2005 2004 Gross Carrying Cost of Real Estate: Balance at beginning of period $164,233 146,995 145,803 Additions during period: Amounts capitalized 20,502 17,330 17,510 Deductions during period: Cost of real estate sold - 92 16,318 Other (abandonments) - - - Balance at close of period $184,735 164,233 146,995 Accumulated Depreciation & Depletion: Balance at beginning of period $ 29,816 26,328 33,497 Additions during period: Charged to cost & expense 3,855 3,580 3,229 Deductions during period: Real estate sold - 92 10,398 Balance at close of period $33,671 29,816 26,328