FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30,quarterly period ended December 31, 2005
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1755433-26115
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)
904/396-5733
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X NoNo___
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition
of "accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer[ ] Accelerated filer[ ] Non-accelerated filer[X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). YES___ NO XNO_X_
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of July 25,December 31, 2005: 2,962,1752,965,075 shares of
$.10 par value common stock.
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-Q
QUARTER ENDED JUNE 30,DECEMBER 31, 2005
CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 1
Consolidated Statements of Income 2
Consolidated Statements of Cash Flows 3
Condensed Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 911
Item 3. Quantitative and Qualitative Disclosures about Market Risks 1817
Item 4. Controls and Procedures 18
Part II. Other Information
Item 6. Exhibits 1918
Signatures 2019
Exhibit 31 Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 2524
Exhibit 32 Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 2827
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and per share amounts)data)
(Unaudited)
June 30,December 31, September 30,
2005 2004
ASSETS2005
Assets
Current assets:
Cash and cash equivalents $ 2,057 199
Cash held in escrow - 16,553371 2,966
Accounts receivable (including related party of
$311$541 and $344) 8,605 9,761
Less$288 and net of allowance for doubtful
accounts (436) (638)of $521 and $525, respectively) 10,570 11,731
Inventory 716 642of parts and supplies 845 799
Prepaid tires on equipment 2,126 1,9302,034 1,959
Prepaid taxes and licenses 952 1,291
Prepaid insurance 1,149 5041,334 259
Prepaid expenses, other 359 1,115556 564
Total current assets 14,576 30,06616,662 19,569
Property, plant and equipment, at cost 244,786 224,230262,246 246,725
Less accumulated depreciation and depletion (79,910) (75,219)(83,180) (81,789)
Net property, plant and equipment 164,876 149,011179,066 164,936
Real estate held for investment, at cost 1,093 1,093
Goodwill 1,087 1,087
Other assets 5,705 5,2307,009 7,030
Total assets $186,244 185,394
LIABILITIES AND SHAREHOLDERS' EQUITY$204,917 193,715
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,457 3,0725,591 5,674
Federal and state income taxes payable 1,240 6,799- 642
Accrued payroll 3,269 2,7571,752 3,247
Accrued insurance reserves 3,013 2,1884,361 3,774
Accrued liabilities, other 375 567
Short-term notes payable - 5,914268 452
Long-term debt due within one year 1,903 1,8022,466 2,432
Total current liabilities 13,257 23,09914,438 16,221
Long-term debt 48,197 41,18559,423 48,468
Deferred income taxes 12,924 15,76714,346 14,394
Accrued insurance reserves 5,689 5,6894,993 4,993
Other liabilities 1,686 1,5671,791 1,738
Commitments and contingencies (Note 9)
Shareholders' equity:
Preferred stock, no par value;
5,000,000 shares authorized; none issued - -
Common stock, $.10 par value;
25,000,000 shares authorized,
2,962,1752,965,075 and 2,929,0752,965,075 shares issued
and outstanding, respectively 296 293297 297
Capital in excess of par value 26,872 25,78427,227 27,100
Retained earnings 77,323 72,01082,402 80,504
Total shareholders' equity 104,491 98,087109,926 107,901
Total liabilities and shareholders' equity $186,244 185,394$204,917 193,715
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
THREE MONTHS
NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,DECEMBER 31,
2005 2004
2005 2004(restated)
Revenues:
Transportation $ 28,638 25,585 83,169 73,63730,300 27,035
Real Estate 4,423 4,085 13,280 12,103estate 5,123 4,384
Total revenues (includes(including revenue from related
Party revenueparties of $1,784, $1,680
$4,981$1,780 and $4,503,$1,535, respectively) 33,061 29,670 96,449 85,74035,423 31,419
Cost of operations:
Transportation 24,396 22,031 72,288 64,02726,124 23,604
Real Estate 1,858 1,650 5,769 5,492estate 2,517 1,853
Gross profit 6,807 5,989 18,392 16,2216,782 5,962
Selling, general and administrative expense 2,561 2,276 7,289 6,6502,809 2,400
(including expenses paid to a related party of
$48 and $67, respectively)
Operating profit 4,246 3,713 11,103 9,571
Other3,973 3,562
Interest income 2 284 17 378and other 15 10
Interest expense (785) (915) (2,410) (2,869)(927) (813)
Income from continuing
operations before income taxes 3,463 3,082 8,710 7,0803,061 2,759
Provision for income taxes (1,351) (1,169) (3,397) (2,690)
Income from continuing
operations 2,112 1,913 5,313 4,390
Discontinued operations
net of tax - 9,041 - 14,855(1,163) (1,075)
Net income $ 2,112 10,954 5,313 19,245
Basic earnings1,898 1,684
Earnings per common share:
Income from continuing
operationsBasic $ .71 .65 1.80 1.50
Discontinued operations.64 .57
Diluted $ - 3.09 - 5.07
Net income $ .71 3.74 1.80 6.57
Diluted earnings per common share:
Income from continuing operations $ .69 .64 1.76 1.47
Discontinued operations $ - 3.04 - 4.99
Net income $ .69 3.68 1.76 6.46.62 .56
Number of shares (in thousands) used in computing:
Basic-basic earnings per common share 2,958 2,929 2,946 2,931
Diluted2,965 2,932
-diluted earnings per common share 3,040 2,979 3,026 2,9773,066 3,000
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINETHREE MONTHS ENDED JUNE 30,DECEMBER 31, 2005 AND 2004
(In thousands)
(Unaudited)
2005 2004
(restated)
Cash flows from operating activities:
Net income $ 5,313 19,2451,898 1,684
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 9,331 9,1733,293 3,095
Deferred income taxes (2,921) 4,342(48) (3,513)
Gain on dispositionsale of property, plant and equipment (584) (23,789)(282) (162)
Tax benefit from stock option exercise 283 288- 73
Stock-based compensation 127 -
Net changes in operating assets and liabilities:
Accounts receivable 954 (765)1,250 886
Inventory of parts and supplies (46) (27)
Prepaid expenses and other current assets (159) 730(803) (1,489)
Other assets (806) (767)(107) (622)
Accounts payable and accrued liabilities 1,608 (828)
Federal and state income(1,175) (489)
Income taxes payable (5,559) 6,106
Accrued(731) (4,695)
Net change in insurance reserves and other long-term
liabilities 119 (64)53 45
Net cash provided by (used in) operating activities 7,579 13,6713,429 (5,214)
Cash flows from investing activities:
Purchase of property and equipment (25,436) (16,870)(17,421) (14,840)
Cash released from (placed in) escrow - 16,553 (16,164)
Proceeds from sale of real estate held for investment
and property and equipment 1,155 30,196407 412
Net cash used in(used in) provided by investing activities (7,728) (2,838)(17,014) 2,125
Cash flows from financing activities:
Proceeds from issuance of long-term debt 5,745 8,500151 2,113
Net decreaseincrease in revolving debt (3,201) (17,512)11,305 1,243
Repayment of long-term debt (1,345) (1,443)
Repurchase of Company Stock - (2,509)(466) (434)
Exercise of employee stock options 808 1,494- 327
Net cash provided by (used in) financing activities 2,007 (11,470)10,990 3,249
Net (decrease) increase (decrease) in cash and cash equivalents 1,858 (637)(2,595) 160
Cash and cash equivalents at beginning of period 2,966 199 757
Cash and cash equivalents at end of the period $ 2,057 120371 359
See accompanying notes.
PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30,DECEMBER 31, 2005
(Unaudited)
(1) Basis of Presentation. The accompanying consolidated financial
statements include the accounts of Patriot Transportation Holding, Inc.
and its subsidiaries (the "Company"). These statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and the
instructions to Form 10-Q and do not include all the information and
footnotes required by accounting principles generally accepted in the
United States of America for complete financial statements. In the
opinion of management, all adjustments (primarily consisting of normal
recurring accruals) considered necessary for a fair statement of the
results for the interim periods have been included. Operating results
for the three months and nine months ended June 30,December 31, 2005 are not necessarily
indicative of the results that may be expected for the fiscal year
ending September 30, 2005.2006. The accompanying consolidated financial
statements and the information included under the heading "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" should be read in conjunction with the Company's
consolidated financial statements and related notes included in the
Company's Form 10-K for the year ended September 30, 2004. Certain reclassifications have been made2005.
(2) Restatement of Prior Financial Information. The Company restated
its consolidated balance sheet as of September 30, 2004 and its
consolidated statement of shareholders' equity for the year then ended.
The Company also restated its consolidated statements of income,
shareholders' equity and cash flows for the year ended September 30,
2003. In addition, the Company restated its quarterly results of
operations for fiscal 2005. The restatement corrects our historical
accounting for recognizing rental revenue for scheduled rate increases
on operating leases. For information with respect to the Fiscal
2004restatement,
see Note 2 to the consolidated financial statements to conform to the presentation adoptedcontained in
Fiscal 2005.
(2) Recent Accounting Pronouncements. In December 2004, the
Financial Accounting Standards Board (FASB) issued a revised
Statement No. 123 "Share-Based Payment" (SFAS 123R). This Statement
establishes standards for the accounting for transactions in which
an entity exchanges its equity instruments for goods and services,
and affects the
Company's accountingAnnual Report on 10-K for its stock option plans.
The standard is effectivefiscal 2005. Throughout this Form
10-Q, all referenced amounts for affected prior periods and prior period
comparisons reflect the Company at the beginning of its
next fiscal year (October 1, 2005). The Company intends to use the
modified prospective application,balances and therefore at the effective
date compensation costs shall be included in the determination of
net income for all new, modified, repurchased, or cancelled awards
and all prior awards whose requisite service conditions have not
been met. Compensation costs to be expensed upon adoption are the
grant-date fair value of the stock option awards. While we cannot
determine the impactamounts on future net earnings asa restated basis. As a
result of this restatement, the adoption of SFAS 123R, the estimated compensation expense related
to prior periods is presentedCompany's financial results have been
adjusted as follows (in thousands, except per share data):
Three Months Ended December 31, 2004
As Previously
Reported__ Adjustments As Restated_
Total revenues $ 31,374 45 31,419
Gross profit 5,917 45 5,962
Operating profit 3,517 45 3,562
Income from continuing
operations before tax 2,714 45 2,759
Provision for income taxes 1,058 17 1,075
Income from continuing
operations 1,656 28 1,684
Net income 1,656 28 1,684
Earnings per common share:
Basic $ .56 .01 .57
Diluted $ .55 .01 .56
Cash flows from
operating activities:
Net income $ 1,656 28 1,684
Deferred income taxes (3,530) 17 (3,513)
Net changes in Note 8. The compensation expense
for future periods will be dependent on the number of options
granted, the market price of the common stock at the date of grant,
the vesting period and other factors.
In December 2004, the FASB issued Statement No. 153, "Exchanges
of Nonmonetary Assets" (SFAS 153). This statement amends the
guidance in APB Opinion No. 29, "Accounting for Nonmonetary
Transactions" to eliminate the exception for nonmonetary
exchanges of similar productiveoperating
assets and replaces it with a
general exception for exchanges of nonmonetaryliabilities:
Other assets that do not
have commercial substance. A nonmonetary exchange has commercial
substance if the future(577) (45) (622)
Net cash flows of the entity are expected to
change significantly as a result of the exchange. The provisions
of SFAS 153 are effective in fiscal periods beginning after June
15, 2005. The adoption of SFAS 153 is not expected to have a
material effect on the Company's consolidated financial
statements.provided by
operating activities 5,214 - 5,214
(3) Recent Accounting Pronouncements. In March 2005, the FASB issued
FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement
Obligations" (FIN 47), which clarifies that the term "conditional asset
retirement obligation" as used in FASB Statement No. 143, "Accounting
for Asset Retirement Obligations", refers to a legal obligation to
perform an asset retirement activity in which the timing and/or method
of settlement are conditional on a future event that may or may not be
within the control of the entity. An entity is required to recognize a
liability for the fair value of a conditional asset retirement
obligation if the fair value of the liability can be reasonably
estimated. FIN 47 becomesis effective for the Company no later than the end of
fiscal years
ending after December 15, 2005.2006. The impact of this new pronouncement is not expected to be
material to the Company's financial statements.
(3)(4) 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):
Three Months ended
Nine Months ended
June 30, June 30,__December 31,
2005 2004
2005 2004(restated)
Revenues:
Transportation $ 28,638 25,585 83,169 73,63730,300 27,035
Real estate 4,423 4,085 13,280 12,1035,123 4,384
$ 33,061 29,670 96,449 85,74035,423 31,419
Operating profit
Transportation $ 2,059 1,641 4,872 4,1081,971 1,450
Real estate 2,565 2,435 7,511 6,6092,606 2,531
Corporate expenses (378) (363) (1,280) (1,146)(604) (419)
$ 4,246 3,713 11,103 9,5713,973 3,562
Identifiable assets June 30,December 31, September 30,
2005 20042005
Transportation $ 44,420 42,47950,456 47,435
Real estate 138,496 125,030152,361 141,646
Cash items 2,057 16,752371 2,966
Unallocated corporate assets 1,271 1,133
$186,244 185,394
(4)1,729 1,668
$204,917 193,715
(5) Long-Term debt. Long-term debt is summarized as follows (in
thousands):
June 30,December 31, September 30,
2005 20042005
Revolving Credit,
Uncollateralized, variable
ratecredit (uncollateralized) $ 11,305 - 3,201
Construction loan 6.17% 8,458 2,7139,867 9,716
5.7% to 9.5% mortgage notes
payabledue in installments through 2020 41,642 42,987
50,100 48,90140,717 41,184
61,889 50,900
Less portion due inwithin one year 1,903 7,716
$48,197 41,1852,466 2,432
$ 59,423 48,468
The Company has a $37,000,000 uncollaterized Revolving Credit Agreement
(the Revolver) with four banks which wasis scheduled to terminate on
December 31, 2004. On November 10, 2004, the Company and the four
banks entered into an Amended and Restated Revolving Credit
Agreement with essentially the same terms and conditions except
that the termination date was extended to December 31, 2009. The Revolver currently bears interest at an initiala rate of 1%
over the selected LIBOR, which would have resulted in a rate of 3.86% at June 30,
2005.LIBOR. The margin rate may change quarterly based on
the Company's ratio of Consolidated Total Debt to Consolidated Total
Capital. An
initialCapital, as defined. A commitment fee of 0.15% per annum is payable
quarterly on the unused portion of the commitment. The commitment fee
may also change quarterly based upon the ratio described above. The
Revolver contains restrictive covenants including limitations on paying
cash dividends.
(5)(6) Related Party Transactions. The Company, through its transportation
subsidiaries, hauls commodities by tank and flatbed trucks for Florida
Rock Industries, Inc. (FRI). Charges for these services are based on
prevailing market prices. Other wholly ownedThe real estate subsidiaries lease certain
construction aggregates mining and other properties to FRI. In
addition, the Company outsources certain administrative functions to
FRI. The cost of these administrative functions was $21,000$48,000 and $91,000$67,000
for the quarters ending June 30,December 31, 2005 and 2004, respectively.
On March 30, 2004, a subsidiary sold a parcel of land and
improvements containing approximately 6,321 acres in Suwannee and
Columbia Counties, near Lake City, Florida to a subsidiary of FRI
for $13,000,000 in cash, resulting in a gain of $5,655,000 after
income taxes of $3,465,000. The sales price was approved by the
Company's Audit Committee, composed of independent Directors of the
Company, after considering among other factors, an independent
appraisal, the current use of the property and consultation with
management.
On May 7, 2004, a subsidiary of the Company sold 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 in cash resulting
in a gain of $8,009,000 after income taxes of $4,909,000. The
sales price 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.
Also on May 7, 2004, a subsidiary of the Company sold a 935 acre
parcel of property in Miami, Florida to FRI for $1,628,000 in cash,
resulting in a gain of $1,000,000, after income taxes of $614,000.
The property is principally composed of mined-out lakes, mitigation
areas, 145 acres of mineable land and 32 acres of roads and
railroad track rights-of-way. The terms of the sale were approved
by the Company's Audit Committee after considering, among other
factors, the terms of the existing lease agreement and consultation
with management.
See Note (6) Discontinued operations for further information.
(6) Discontinued operations. During fiscal year 2004, the Company
sold three tracts of land that were accounted for as discontinued
operations in accordance with Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" (SFAS 144). A summary of discontinued
operations is as follows(in thousands):
Three Months ended Nine Months ended
June 30, June 30,__
2005 2004 2005 2004
Royalties and rents $ - 54 - 498
Operating expenses - 2 - 190
Income before income taxes - 52 - 308
Income taxes - (20) - (117)
Income from discontinued
operations $ - 32 - 191
Gain from sale of
Discontinued operations - 14,532 - 23,652
Income taxes - (5,523) - (8,988)
Net gain from sale of
Discontinued operations - 9,009 - 14,664
Discontinued operations
Net of tax - 9,041 - 14,855
(7) Earnings per share. The following details the denominatorscomputations of the
basic and diluted earnings per common share computations.(In thousands, except per
share amounts).
THREE MONTHS
NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,DECEMBER 31,
2005 2004
2005 2004(restated)
Weighted average common shares
outstanding during the
period - shares used for
basic earnings per share 2,958,124 2,929,107 2,945,836 2,931,0672,965 2,932
Common shares issuable under
Stockstock options which are
potentially dilutive 82,095 49,947 79,961 46,136101 68
Common shares used for diluted
earnings per share 3,040,219 2,979,054 3,025,797 2,977,203
Income from continuing operations 2,112,000 1,913,000 5,313,000 4,390,000
Discontinued operations - 9,041,000 - 14,855,0003,066 3,000
Net income 2,112,000 10,954,000 5,313,000 19,245,000
Basic earnings$ 1,898 1,684
Earnings per common share
Income from continuing operationsBasic $ .71 .65 1.80 1.50
Discontinued operations.64 .57
Diluted $ - 3.09 - 5.07
Net income $ .71 3.74 1.80 6.57
Diluted earnings per common share
Income from continuing operations $ .69 .64 1.76 1.47
Discontinued operations $ - 3.04 - 4.99
Net income $ .69 3.68 $1.76 6.46.62 .56
For the ninethree months ended June 30, 2004 andDecember 31, 2005, all outstanding stock
options were included in the calculation of diluted earnings per share
because the sum of the hypothetical amount of future proceeds from the
exercise price, unrecorded compensation, and tax benefits to be credited
to capital in excess of par for all grants of stock options were lower
than the average price of the common shares, and therefore were
dilutive. For the three months ended December 31, 2004, all outstanding
stock options were included in the calculation of diluted earnings per
share because the exercise prices of the stock options were lower than
the average price of the common shares, and therefore were dilutive.
(8) Stock-Based Compensation Plan. TheEffective October 1, 2005, the
Company accountsadopted SFAS 123R "Share-Based Payment" for its stock-based
employee compensation plans underplans. Under SFAS 123R, compensation expense must
be measured and recognized for all share-based payments at the recognitiongrant
date based on the fair value of the award and measurement principlessuch costs must be
included in the statement of operations over the requisite service
period. Prior to October 1, 2005 the company followed APB Opinion No.
25, "Accounting for Stock Issued to Employees", and related interpretations. No stock-based
employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to.
The Company has elected the market valuemodified prospective application transition
method whereby the provisions of the underlying common stock onstatement will apply going forward
only from the date of adoption to new share based payments, and for the
portion of any previously issued and outstanding stock option awards for
which the requisite service is rendered after the date of adoption. The
Company did not restate prior years for pro forma expense amounts. In
addition, compensation expense must be recognized for any awards
modified, repurchased or cancelled after the date of adoption.
The Company has two Stock Option Plans (the 1995 Stock Option Plan and
the 2000 Stock Option Plan) under which options for shares of common
stock have been granted to directors, officers and key employees.
Currently, only the 2000 Plan has options available for grant. The
options awarded under the two plans have similar characteristics. All
stock options have been non-qualified. All stock options expire ten
years from the date of grant. Options awarded to directors are
exercisable immediately and options awarded to officers and employees
become exercisable in cumulative installments of 20% at the end of each
year following the date of grant. The number of shares authorized for
future issuance was 109,700 at December 31, 2005. When stock options
are exercised the Company issues new shares after receipt of exercise
proceeds and taxes due, if any, from the grantee.
The Company utilized the Black-Scholes valuation model for estimating
fair value of stock compensation with the following weighted-average
assumptions:
Three Months ended
December 31,
2005 2004
Dividend yield - -
Expected volatility 41% - 53% 41% - 53%
Average risk-free interest rate 3.2%-4.9% 3.2%-4.9%
Expected life (in years) 6.2 - 7.0 6.2 - 7.0
The dividend yield of zero is based on the fact that the Company does
not pay cash dividends and has no present intention to pay cash
dividends. Expected volatility is estimated based on the Company's
historical experience over a period equivalent to the expected life in
years. The risk-free interest rate is based on the U.S. Treasury
constant maturity interest rate with a term consistent with the expected
life of the options granted. The expected life calculation is based on
the observed and expected time to exercise options by the employees.
Under provisions of SFAS 123R, the Company recorded $127,000 of stock
compensation expense on its consolidated statement of income for the
three months ended December 31, 2005. Stock compensation expense was
$79,000 after deferred income taxes. This represents three cents per
common share for both basic and diluted earnings per share. There was
no realized tax benefit from options because there were no exercises for
the three months ended December 31, 2005. Total compensation cost of
options granted but not yet vested as of December 31, 2005 was
$1,560,000, which is expected to be recognized over a weighted-average
period of 3.0 years. SFAS 123R also amends FASB Statement No. 95,
Statement of Cash Flows, to require that the benefits associated with
the tax deduction in excess of recognized compensation cost be reported
as financing cash flows, rather than as a reduction of taxes paid. This
requirement will reduce net operating cash flows and increase net
financing cash flows in periods after the effective date.
A summary of option activity under all the Company's plans as of
December 31, 2005 is presented below (in thousands, except per share
amounts):
Shares Weighted Weighted Weighted
Average Average Average
Exercise Remaining Grant Date
Price Term (yrs) Fair Value
_
Outstanding at
October 1, 2005 337,900 $30.72 7.8
Granted 0 $ 0
Exercised 0 $ 0
Forfeited (4,400) $31.90
Outstanding at
December 31, 2005 333,500 $30.70 7.5 $ 5,157
Exerciseable at
December 31, 2005 226,500 $28.94 7.2 $ 3,420
Vested 3 months ending
December 31, 2005 37,500 $ 555
The aggregate intrinsic value of in-the-money options exercisable based
on the market closing price of $66.85 on December 30, 2005 less exercise
prices was $8,587,000. The aggregate intrinsic value of all outstanding
options at December 30, 2005 was $12,056,000. No gains were realized by
option holders during the three months ended December 31, 2005 as no
options were exercised.
SFAS 123R requires the presentation of pro forma information for the
comparative period prior to the adoption as if all employee stock
options had been accounted for under the fair value method of the
original SFAS 123, "Accounting for Stock-Based Compensation." The
following table illustrates the effect on net income and earnings per
common share if the companySFAS 123 had been applied the fair value
recognition provisions of FASB Statement No. 123, "Accounting for
Stock-Based Compensation", to stock-based employee compensation
to the prior-year period (in thousands, except per share amounts).:
Three Monthsmonths ended
Nine Months ended
June 30, June 30,
2005December 31, 2004
2005 2004(restated)
Net income
asAs reported $ 2,112 10,954 5,313 19,245$1,684
Deduct: Total stock-based
employee compensation expense
determined under fair value
based method, for all awards, net of related tax effects 176 138 647 487284
Pro forma net income $ 1,936 10,816 4,666 18,758
Earnings$1,400
Basic earnings per common share:
Basic, asshare
As reported $ .71 3.74 1.80 6.57
Basic, pro.57
Pro forma $ .65 3.69 1.58 6.40.48
Diluted asearnings per common share
As reported $ .69 3.68 1.76 6.46
Diluted, pro.56
Pro forma $ .64 3.63 1.54 6.30.47
(9) Contingent liabilities. Certain of the Company's subsidiaries are
involved in litigation on a number of matters and are subject to certain
claims which arise in the normal course of business. The Company has
retained certain self-insurance risks with respect to losses for third
party liability and property damage. In the opinion of management none
of these matters are expected to have a material adverse effect on the
Company's consolidated financial condition, results of operations or
cash flows.
(10)Customer Concentration. During the first three months of fiscal
2006, the transportation segment's ten largest customers accounted for
approximately 45% of the transportation segment's revenue. One of
these customers accounted for 12.1% 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview - The Company's operations are influenced by a number of
external and internal factors. External factors include levels of
economic and industrial activity in the United States and the Southeast,
petroleum product usage in the Southeast which is driven in part by
tourism and commercial aviation, fuel costs, driver availability and
cost, regulations regarding driver qualifications and hours of service,
construction activity, FRI's sales from the Company's mining properties,
interest rates, market conditions and attendant prices for casualty
insurance, and demand for commercial warehouse space in the
Baltimore/Washington area.area, and ability to obtain zoning and entitlements
necessary for property development. Internal factors include revenue
mix, capacity utilization, auto and workers' compensation accident
frequencies and severity, other operating factors, administrative costs,
group health claims experience, and construction costs of new projects.
During the first ninethree months of fiscal 2005,2006, the transportation
segment's ten largest customers accounted for approximately 44%45% of the
transportation segment's revenue. One of those customers accounted for
11%12.1% of transportation segment's revenues. The loss of any one of
these customers could have a material adverse effect on the Company's
revenues and income.
Financial results of the Company for any individual quarter are not
necessarily indicative of results to be expected for the year.
Restatement of Prior Financial Information - The Company restated its
consolidated balance sheet as of September 30, 2004 and its
consolidated statement of shareholders' equity for the year then
ended. The Company also restated its consolidated statements of
income, shareholders' equity and cash flows for the year ended
September 30, 2003. In addition, the Company restated its quarterly
results of operations for fiscal 2005. The restatement corrects our
historical accounting for recognizing rental revenue for scheduled
rate increases on operating leases. For information with respect to
the restatement, see Note 2 to the consolidated financial statements
contained in the Company's Annual Report on 10-K for fiscal 2005.
Throughout this Form 10Q, all referenced amounts for affected prior
periods and prior period adjustments reflect the balances and amounts
on a restated basis.
Comparative Results of Operations for the Three Months Ended June
30,December
31, 2005 and 2004
Consolidated Results. - Income from continuing operationsNet income for the thirdfirst quarter of fiscal 20052006
was $2,112,000,$1,898,000, an increase of $199,000$214,000 or 10.4%12.7% compared to $1,913,000$1,684,000
for the same period last year. The third quarter of 2004 included $9,041,000 in income from
discontinued operations resulting in net income of $10,954,000
compared to net income of $2,112,000 for the third quarter of 2005.
Diluted earnings common per share for the thirdfirst
quarter of fiscal 20052006 was $0.69$0.62 compared to $3.68$0.56 in the thirdfirst quarter
of fiscal 2004.2005.
Transportation
Three Months Ended June 30December 31
(dollars in thousands) ___2005 % 2004 %_
Transportation revenue $ 25,823 90% 24,258 95%25,962 86% 24,675 91%
Fuel surcharges 2,815 10% 1,327 5%4,338 14% 2,360 9%
Revenues 28,63830,300 100% 25,58527,035 100%
Compensation and benefits 11,187 39% 10,406 41%11,209 37% 10,685 40%
Fuel expenses 5,534 19% 3,805 15%6,394 21% 4,899 18%
Insurance and losses 2,633 9% 2,9143,232 11% 3,233 12%
Depreciation expense 1,9792,066 7% 1,9341,981 7%
Other, net 3,063 11% 2,972 12%3,223 10% 2,806 10%
Cost of operations 24,396 85% 22,03126,124 86% 23,604 87%
Gross profit $ 4,242 15% 3,5544,176 14% 3,431 13%
Transportation segment revenues were $28,638,000$30,300,000 in the thirdfirst quarter of
2005,2006, an increase of $3,053,000$3,265,000 over the same quarter last year. Fuel
surcharges accounted for $1,488,000$1,978,000 of the increase, resulting from
higher diesel fuel costs during the quarter compared to the same quarter
last year. Excluding fuel surcharges, revenue per mile increased 4.5%6.9%,
reflecting better pricing for our services. Revenue miles in the current
quarter were up 1.9%down 1.6% compared to the thirdfirst quarter of 2004 and were constrained
by2005 due to low
driver availability.
The Transportation segmentsegment's cost of operations in the thirdfirst quarter of
20052006 increased $2,365,000$2,520,000 to $24,396,000,$26,124,000, as compared to $22,031,000$23,604,000 in
the same quarter last year. The primary factor for the increase was
higher diesel fuel costs. Average diesel fuel cost per gallon increased
36%25% in the thirdfirst quarter of 20052006 compared to the same quarter last year.
Compensation and benefits waswere higher as a result of increased revenue miles and higher driver pay.
Real Estate
Three Months Ended June 30December 31
(dollars in thousands) ___2005 % 2004 %_
(restated)
Royalties and rent $ 1,687 38% 1,519 37%1,579 31% 1,425 33%
Developed property rentals 2,736 62% 2,566 63%3,544 69% 2,959 67%
Total Revenue 4,4235,123 100% 4,0854,384 100%
Mining and land rent expenses 393446 9% 462 11%357 8%
Developed property expenses 1,465 33% 1,188 29%2,071 40% 1,496 34%
Cost of Operations 1,8582,517 49% 1,853 42% 1,650 40%
Gross profit $ 2,5652,606 51% 2,531 58% 2,435 60%
Real Estate segment revenues for the thirdfirst quarter of fiscal 20052006 were
$4,423,000,$5,123,000, an increase of $338,000$739,000 or 8.3%16.9% over the same quarter last
year. Lease revenue from developed properties increased $170,000$585,000 or
6.6%19.8%, due to an increase in occupied square feet resulting from the
completionleasing of a pre-leased 74,600 square foot building in January 2005 and the
purchasecompletion of a fully leased
188,000pre-leased 145,180 square foot building in October 2004.July 2005.
Royalties from mining operations increased $154,000 as a result of
increased royalties per ton.
Real estate segment expenses increased slightly to $1,858,000$2,517,000 during the thirdfirst
quarter of fiscal 2005,2006, compared to $1,650,000$1,853,000 for the same quarter last
year. Expenses related to development activities increased as a result
of the new building additions.
Consolidated Results
Gross Profit - Consolidated gross profit was $6,807,000$6,782,000 in the thirdfirst
quarter of fiscal 20052006 compared to $5,989,000$5,962,000 in the same period last
year, an increase of 13.7%13.8%. Consolidated selling,Gross profit in the transportation segment
increased $745,000 or 21.7%, primarily due to improved pricing as
compared to the same quarter last year. Gross profit in the real estate
segment increased $75,000 or 3% from the first quarter 2005, due to the
increased revenues mostly offset by increased staffing and professional
fees.
Selling, general and administrative expense - Selling, general and
administrative expenses were consistentincreased $409,000 over the same quarter last
year. The increase included $155,000 of higher incentive compensation
accrual due to quarter.improved earnings and $127,000 from expensing of stock
options as required by SFAS 123R (see Note 8 of Condensed Notes to
Consolidated Financial Statements). SG&A expense was 7.7%7.9% of revenue for
the thirdfirst quarter of fiscal 20052006 compared to 7.7%7.6% for the same period
last year.
Income from continuing operationstaxes - Income from continuing
operations was $2,112,000 or $0.69 per diluted sharetax expense increased $88,000 over the same
quarter last year. This is due to higher earnings before taxes,
partially offset by a decrease in the third
quarter of fiscal 2005, an increase of $199,000 or 10.4% comparedeffective tax rate to $1,913,000 or $0.64 per diluted share in38.0%
versus 39.0% for the same periodquarter last year.
Discontinued Operations - During fiscal 2004 the Company had three
sales of real estate that have been accounted for as discontinued
operations, in accordance with SFAS 144. The income from the
operations of these components have been reflected in the
consolidated income statement as income from discontinued
operations, net of income taxes.
The results of operations of these properties, consisting of
royalty and rental income, operating expenses and depreciation,
have been reclassified to discontinued operations. Income from the
disposed properties, net of income taxes of $20,000 was $32,000 for
the three months ending June 30, 2004.
Two of these properties were sold during the quarter ended June 30,
2004 and the gains from the sales of $9,009,000 after income taxes
of $5,523,000 have been recorded as discontinued operations.
Net income - As a result of the property sales in the third quarter
of 2004, netNet income decreased to $2,112,000 in the third quarter of
fiscal 2005 from $10,954,000 in the same period last year. Diluted
earnings per common share decreased to $0.69 in the third quarter
of fiscal 2005 from $3.68 in the same period last year.
Comparative Results of Operations for the Nine Months Ended June
30, 2005 and 2004
Consolidated Results. - Income from continuing operations for the
first nine months of fiscal 2005 was $5,313,000, an increase of
$923,000$1,898,000 or 21% compared to $4,390,000 for the same period last
year. The first nine months of 2004 included $14,855,000 in income
from discontinued operations resulting in net income of $19,245,000
compared to net income of $5,313,000 for the first nine months of
fiscal 2005. Diluted earnings per common share for the first nine
months of fiscal 2005 was $1.76 compared to $6.46 for the same
period last year.
Transportation
Nine Months Ended June 30
(dollars in thousands) ___2005 % 2004 %
Transportation revenue $ 75,719 91% 70,567 96%
Fuel surcharges 7,450 9% 3,070 4%
Revenues 83,169 100% 73,637 100%
Compensation and benefits 32,793 39% 30,401 41%
Fuel expenses 15,458 19% 10,600 14%
Insurance and losses 9,150 11% 8,499 12%
Depreciation expense 5,967 7% 5,959 8%
Other, net 8,920 11% 8,569 12%
Cost of operations 72,288 87% 64,027 87%
Gross profit $ 10,881 13% 9,610 13%
The Transportation segment revenues were $83,169,000 in the first
nine months of 2005, an increase of $9,532,000 over the same period
last year. Fuel surcharges accounted for $4,380,000 of the
increase. Excluding fuel surcharges, revenue per mile increased
4.9%, reflecting better pricing for our services. Revenue miles for
the nine months were up 2.3% compared to the first nine months of
2004 and were constrained by low driver availability.
The Transportation segment cost of operations in the first nine
months of 2005 increased $8,261,000 to $72,288,000, as compared to
$64,027,000 in the same period last year. The primary factors for
the increase are higher diesel fuel costs and an increase in risk
and health insurance costs. Average diesel fuel cost per gallon
increased 35.7% in the first nine months of 2005 compared to the
same period last year. Compensation and benefits was higher as a
result of increased revenue miles and higher driver pay.
Real Estate
Nine Months Ended June 30
(dollars in thousands) ___2005 % 2004 %
Royalties and rent $ 4,570 34% 4,353 36%
Developed property rentals 8,710 66% 7,750 64%
Total Revenue 13,280 100% 12,103 100%
Mining and land rent expenses 1,025 8% 1,466 12%
Developed property expenses 4,744 36% 4,026 33%
Cost of Operations 5,769 44% 5,492 45%
Gross profit $ 7,511 56% 6,611 55%
Real Estate segment revenues for the first nine months of fiscal
2005 were $13,280,000, an increase of $1,177,000 or 9.7% over the
same period last year. Lease revenue from developed properties
increased $960,000 or 12.4%, due to an 11.2% increase in occupied
square feet resulting from the completion of a pre-leased 74,600
square foot building in January 2005 and the purchase of a fully
leased 188,000 square foot building in October 2004. Royalties from
mining operations increased as a result of increased royalties per
ton.
Real estate segment expenses increased slightly to $5,769,000
during the first nine months of fiscal 2005, compared to $5,492,000
for the same period last year. Expenses related to development
activities increased as a result of the new building additions.
Consolidated Gross Profit - Consolidated gross profit was
$18,392,000 in the first nine months of fiscal 2005 compared to
$16,221,000 in the same period last year, an increase of 13.4%.
Consolidated selling, general and administrative expense - Selling,
general and administrative expenses were consistent year over year.
SG&A expense was 7.6% of revenue for the first nine months of
fiscal 2005 compared to 7.8% for the same period last year.
Income from continuing operations - Income from continuing
operations was $5,313,000 or $1.76$0.62 per diluted share in the
first nine monthsquarter of fiscal 2005,2006, an increase of $923,000$214,000 or 21%12.7% compared
to $4,390,000$1,684,000 or $1.47$0.56 per diluted share in the same period last
year.
Discontinued Operations - During fiscal 2004 the Company had three
sales of real estate that have been accounted for as discontinued
operations, in accordance with SFAS 144. The income from the
operations of these components has been reflected in the
consolidated income statement as income from discontinued
operations, net of income taxes.
The results of operations of these properties, consisting of
royalty and rental income, operating expenses and depreciation,
have been reclassified to discontinued operations. Income from the
disposed properties, net of income taxes of $117,000 was $191,000
for the nine months ending June 30, 2004.
The sale of these properties resulted in a gain of $14,664,000
after income taxes of $8,988,000 and is included in discontinued
operations for the nine months ended June 30, 2004.
Net income - Net income decreased as a result of the property sales
during fiscal year 2004 to $5,313,000 in the first nine months of
fiscal 2005 from $19,245,000 in the same period last year. Diluted
earnings per common share decreased to $1.76 in the first nine
months of fiscal 2005 from $6.46 in the same period last year.
Liquidity and Capital Resources
For the first ninethree months of Fiscal 2005,fiscal 2006, the Company used cash
provided by operations cash released from escrow and borrowings under its Revolver and
construction loan to finance its operating activities and the purchase
of $25,436,000$17,421,000 in property and equipment and to make scheduled payments
on long-term debt. At September 30, 2004, the Company had $16,553,000 of
cash from the sales of real estate during fiscal 2004, which was placed in
escrow in anticipation of using the funds in an Internal Revenue Code
Section 1031 tax-
deferredtax-deferred exchange. A portionOn October 30, 2004, $7,150,000 of
the escrowed funds were used in November
2004 to purchase land and buildings for $7,200,000 in a tax
deferredqualified exchange and the remaining
funds were released from
escrow. The Company also purchased $9,031,000 in transportation
equipment and spent $9,205,000 in construction on new buildings.for general use.
The Company has a $37,000,000 revolving linecredit agreement (the Revolver)
of credit (Revolver)
under which $37,000,000$25,695,000 was available at June 30,December 31, 2005. On November
10, 2004,The Revolver
contains restrictive covenants including limitations on paying cash
dividends. The Revolver will expire on December 31, 2009.
In the quarter ended December 31, 2005, the Company andborrowed $11,305,000
under the four banks entered into an Amended
and Restated Revolving Credit Agreement with essentiallyRevolver, of which $10,105,000 was used to purchase 103 acres
of undeveloped land located in Manassas, Virginia. The balance of the
same
terms and conditions except thatfunds borrowed under the termination dateRevolver was extended
to December 31, 2009used for other investment
activities.
The Company had $13,932,000$16,823,000 of irrevocable letters of credit outstanding
at June 30, 2005.as of January 1, 2006. Most of the letters of credit are irrevocable
for a period of one year and are automatically extended for additional
one-year periods unless notified by the issuing bank not less than
thirty days before the expiration date. Substantially all of these were
issued for workers' compensation and liability insurance retentions. If
these letters of credit are not extended the Company will have to find
alternative methods of collateralizing or funding these obligations.
The Board of Directors has authorized Management to repurchase shares of
the Company's common stock from time to time as opportunities arise. As
of June 30,December 31, 2005, $3,490,000 was authorized to repurchase the
Company's common stock. No shares were repurchased during fiscal 2006.
The Company does not currently pay any dividends on common stock.
In December 2003, the Company committed to develop a 145,000 square foot
build-to-suit warehouse/office building pursuant to a 15 year triple net
lease. This project is expected to cost approximately $14,900,000 and is beinghas been financed
through a construction loan and the Company's cash flows. The terms of
the construction financing are for borrowings not to exceed $11,800,000
for a period not to exceed 18 months converting to a 15 year non-recoursenon-
recourse mortgage of $11,800,000 at project completion. The interest
rate is 6.17% for both the construction and mortgage loans. Borrowings
under the construction loan totaled $8,458,0000$9,867,0000 at June 30,December 31, 2005.
The building is
scheduled for completion by August 2005.has been completed and the Company expects to close on the
15 year mortgage in February 2006. The Company will receive additional
proceeds of approximately $1,933,000 which will be used to reduce the
balance outstanding under the Revolver.
While the Company is affected by environmental regulations, such
regulations are not expected to have a major effect on the Company's
capital expenditures or operating results.
Management believes that the Company is financially postured to be able
to take advantage of external and internal growth opportunities in both
our real estate and transportation segments.
Recent Accounting Pronouncements. In December 2004,Adoption of SFAS 123R. Effective October 1, 2005, the Financial
Accounting Standards Board (FASB) issued a revised Statement No.
123Company adopted
SFAS 123R "Share-Based Payment" (SFAS 123R). This Statement establishes
standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods and services, and
affects the Company's accounting for its stock optionstock-based employee
compensation plans. The
standard is effectiveUnder SFAS 123R, compensation expense must be
measured and recognized for the Companyall share-based payments at the beginninggrant date
based on the fair value of its next
fiscal year (Octoberthe award and such costs must be included in
the statement of operations over the requisite service period. Prior to
October 1, 2005)2005 the company followed APB Opinion No. 25, "Accounting for
Stock Issued to Employees".
The Company intends to usehas elected the modified prospective application transition
method whereby the provisions of the statement will apply going forward
only from the date of adoption to new share based payments, and therefore atfor the
effectiveportion of any previously issued and outstanding stock option awards for
which the requisite service is rendered after the date of adoption. The
Company did not restate prior years for pro forma expense amounts. In
addition, compensation costs shallexpense must be included in the determination of
net incomerecognized for all new,any awards
modified, repurchased or cancelled awards
and all prior awards whose requisite service conditions have not
been met. Compensation costs to be expensed upon adoption areafter the grant-date fair valuedate of the stock option awards. While we cannot
determine the impact on future net earnings as a result of the
adoptionadoption.
Under provisions of SFAS 123R, the estimatedCompany recorded $127,000 of stock
compensation expense related
to prior periods is presented in Note 8. Theon its consolidated statement of income for the
three months ended December 31, 2005. Stock compensation expense was
$79,000 after deferred income taxes. This represents three cents per
common share both basic and diluted. There was no realized tax benefit
from options because there were no exercises for future periods will be dependent on the numberthree months ended
December 31, 2005. Total compensation cost of options granted the market pricebut not
yet vested as of the common stock at the dateDecember 31, 2005 was $1,560,000, which is expected to
be recognized over a weighted-average period of grant,
the vesting period and other factors.
In December 2004, the3.0 years. SFAS 123R
also amends FASB issued Statement No. 153, "Exchanges95, Statement of Nonmonetary Assets" (SFAS 153). This statement amendsCash Flows, to require
that the guidancebenefits associated with the tax deduction in APB Opinion No. 29, "Accounting for Nonmonetary
Transactions" to eliminate the exception for nonmonetary
exchangesexcess of
similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not
have commercial substance. A nonmonetary exchange has commercial
substance if the futurerecognized compensation cost be reported as financing cash flows, of the entity are expected to
change significantlyrather
than as a resultreduction of taxes paid. This requirement will reduce net
financing cash flows in periods after the exchange. The provisions
of SFAS 153 are effective in fiscal periods beginning after June
15, 2005. The adoption of SFAS 153 is not expected to have a
material effect on the Company's consolidated financial
statements.date.
Recent Accounting Pronouncements. In March 2005, the FASB issued FASB
Interpretation No. 47, "Accounting for Conditional Asset Retirement
Obligations" (FIN 47), which clarifies that the term "conditional
asset retirement obligation" as used in FASB Statement No. 143,
"Accounting for Asset Retirement Obligations", refers to a legal
obligation to perform an asset retirement activity in which the
timing and/or method of settlement are conditional on a future event
that may or may not be within the control of the entity. An entity is
required to recognize a liability for the fair value of a conditional
asset retirement obligation if the fair value of the liability can be
reasonably estimated. FIN 47 becomesis effective for the Company no later
than the end of fiscal years
ending after December 15, 2005.2006. The impact of this new pronouncement is
not expected to be material to the Company's financial statements.
Related Party Transactions. The Company, through its transportation
subsidiaries, hauls commodities by tank and flatbed trucks for Florida
Rock Industries, Inc. (FRI). Charges for these services are based on
prevailing market prices. Other wholly owned subsidiaries lease certain
construction aggregates mining and other properties to FRI. In
addition, the Company outsources certain administrative functions to
FRI. The cost of these administrative functions was $21,000$48,000 and $91,000$67,000
for the quarters ending June 30,December 31, 2005 and 2004, respectively.
The CompanyPatriot owns approximately 3,443 acres of land near Brooksville, Florida
that it leases certain mining properties to FRI under a long-term leases. The Companymining lease. FRI also owns
approximately 553 acres of land in Brooksville. Patriot and FRI
management believe that certain of these
properties, upon completion of miningPatriot and subsequent reclamation,
present valuable opportunities for residential or commercial
development.FRI may possibly realize greater
value from the Brooksville property through development rather than
continued mining. Accordingly, the Companyindependent directors of Patriot and
FRI have decidedare considering a proposal to investigate jointlyform a 50-50 joint venture to develop
the ultimate market potential for these
properties. The Company expectsBrooksville property. If this proposal is approved, the joint
venture development will move forward only if zoning and permitting
approvals are obtained that the preliminary investigation
will not be completed for several months.
On March 30, 2004, a subsidiary sold a parcel of land and
improvements containing approximately 6,321 acres in Suwannee and
Columbia Counties, near Lake City, Florida to a subsidiary of FRI
for $13,000,000 in cash, resulting in a gain of $5,655,000 after
income taxes of $3,465,000. The sales price was approved by the
Company's Audit Committee, composed of independent Directors of the
Company, after considering among other factors, an independent
appraisal, the current usepermit development of the property in a
manner acceptable to Patriot and consultation with
management.
On May 7, 2004, a subsidiary ofFRI; otherwise, Patriot intends to
continue to lease the Company sold 108 acres of land
located in the northwest quadrant of I-395 and I-495 at Edsall Road
in Springfield, Virginiaproperty to FRI for $15,000,000 in cash resulting
inmining and related purposes.
If the development proceeds, FRI will continue to conduct mining
operations on at least a gain of $8,009,000 after income taxes of $4,909,000. The
sales price was approved by a committee of independent directorsportion of the Company after review of a development feasibility study and
other materials, consultation with management and advice of
independent counsel.
Also on May 7, 2004, a subsidiary of the Company sold a 935 acre
parcel of property in Miami, Florida to FRI for $1,628,000 in cash,
resulting in a gain of $1,000,000, after income taxes of $614,000.
The property is principally composed of mined-out lakes, mitigation
areas, 145 acres of mineable land and 32 acres of roads and
railroad track rights-of-way. The terms of the sale were approved
by the Company's Audit Committee after considering, among other
factors, the terms of the existing lease agreement and consultation
with management.
See Note (6) Discontinued operations under the Notes to
Consolidated Financial Statements for further information.property.
Summary and Outlook. The Company's real estate development business
continues to benefit from positive inquiry trends from prospective
tenants for its warehouse-office product. The Company continues to
explore opportunities for development of various properties owned by the
Company, including certain properties leased by the Company to FRI.
These properties include a 5.8 acre
parcel and a 2.1 acre parcel in Washington D.C. that are near the
proposed site of the Washington Nationals baseball park and on
which the Company has been exploring a mixed use development.
Notwithstanding favorableFavorable freight-hauling demands for its transportation business the Company's trucking operations remain
challenged to effectively satisfy such demand due toby an industry-
wide,industry-wide, tight driver availability. Continuing
volatile crude oil and diesel fuel price fluctuations remain likely to
impact operating margins.
Forward-Looking Statements. Certain matters discussed in this report
contain forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from
these indicated by such forward-looking statements.
These forward-looking statements relate to, among other things, capital
expenditures, liquidity, capital resources and competition and may be
indicated by words or phrases such as "anticipate", "estimate", "plans",
"projects", "continuing", "ongoing", "expects", "management believes",
"the Company believes", "the Company intends" and similar words or
phrases. The following factors and others discussed in the Company's
periodic reports and filings with the Securities and Exchange Commission
are among the principal factors that could cause actual results to
differ materially from the forward-looking statements: driver
availability and cost; regulations regarding driver qualification and
hours of service; availability and terms of financing; freight demand
for petroleum products including recessionary and terrorist impacts on
travel in the Company's markets; freight demand for building and
construction materials in the Company's markets; risk insurance markets;
competition; general economic conditions; demand for flexible
warehouse/office facilities in the Baltimore/Washington area; ability to
obtain zoning and entitlements necessary for property development;
interest rates; levels of construction activity in FRI's markets; fuel
costs; and inflation. However, this list is not a complete statement of
all potential risks or uncertainties.
These forward-looking statements are made as of the date hereof based on
management's current expectations, and the Company does not undertake an
obligation to update such statements, whether as a result of new
information, future events or otherwise. Additional information
regarding these and other risk factors may be found in the Company's
other filings made from time to time with the Securities and Exchange
Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
There are no materialThe 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
disclosures madeimpact of hypothetical changes in Form 10-K
forinterest rates on the fiscal year ended September 30, 2004 with respect toCompany'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 item.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.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. As required by Rule
13A-15 under the Exchange Act, as of the end of the period covered by
this report, the Company carried out an evaluation of the effectiveness
of the design and operation of the Company's disclosure controls and
procedures. This evaluation was carried out under the supervision and
with the participation of the Company's management, including the
Company's President and Chief Executive Officer, Chief Financial Officer
and Chief Accounting Officer. Based uponon this evaluation the Company's
President and Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer have concluded that the Company's disclosure controls
and procedures are effective in timely alerting them in a timely manner to
material information relating to the Company required to be included in the Company's periodic SEC filings.
Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in
Company reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in
the Securities and Exchange Commission's rule and forms. Disclosure
controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed
in Company reports filed under the Exchange Act is accumulated and
communicated to management, including the Company's Chief Executive
Officer, Chief Financial Officer and Chief Accounting Officer as
appropriate, to allow timely decisions regarding required disclosures.
Changes in internal controls. There have been no changes in the
Company's internal controls or in other factors that could significantly
affect these controlsover financial reporting during the first
quarter including any corrective
actions with regardthat have materially affected, or are reasonably likely to
significant deficiencies and material
weaknesses.materially affect, the Company's internal control over financial
reporting.
PART IIII. OTHER INFORMATION
Item 6. ExhibitsEXHIBITS
(a) Exhibits. The response to this item is submitted as a
separate Section entitled "Exhibit Index", starting on page
21.18.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 3, 2005February 1, 2006 PATRIOT TRANSPORTATION HOLDING, INC.
John E. Anderson
John E. Anderson
President and Chief Executive
Officer
Ray M. Van Landingham
Ray M. Van Landingham
Vice President, Finance &
AdministrationTreasurer,
Secretary and Chief
Financial Officer
John D. Klopfenstein
John D. Klopfenstein
Controller and Chief
Accounting Officer
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30,DECEMBER 31, 2005
EXHIBIT INDEX
(3)(a)(1) Articles of Incorporation of Patriot Transportation
Holding Inc., incorporated by reference to the
corresponding exhibit filed with Form S-4 dated
December 13,1988. File No. 33-26115.
(3)(a)(2) Amendment to the Articles of Incorporation of
Patriot Transportation Holding, Inc. filed with the
Secretary of State of Florida on February 19, 1991
incorporated by reference to the corresponding
exhibit filed with Form 10-K for the fiscal year
ended September 30, 1993. File No. 33-26115.
(3)(a)(3) Amendments to the Articles of Incorporation of
Patriot Transportation Holding, Inc. filed with the
Secretary of State of Florida on February 7,1995,
incorporated by reference to an appendix to the
Company's Proxy Statement dated December 15, 1994.
File No. 33-26115.
(3)(a)(4) Amendment to the Articles of Incorporation of
Patriot Transportation Holding, Inc., filed with
the Florida Secretary of State on May 6, 1999
incorporated by reference to a form of such
amendment filed as Exhibit 4 to the Company's Form
8-K dated May 5, 1999. File No. 33-26115.
(3)(a)(5) Amendment to the Articles of Incorporation of
Patriot Transportation Holding, Inc. filed with the
Secretary of State of Florida on February 21, 2000,
incorporated by reference to the corresponding
exhibit filed with Form 10-Q for the quarter ended
March 31, 2000. File No. 33-26115.
(3)(b)(1) Amended and Restated Bylaws of Patriot
Transportation Holding, Inc. adopted December 1, 1993,August 3,
2005, incorporated by reference to Exhibit 3.1 to
the correspondingCompany'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. An amended
Article III, incorporated by reference to an
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 theAnd Articles of Incorporation of
Patriot Transportation Holding, Inc. filed with the
Secretary of State of State of Florida on February
7, 1995,XIII and
XIV, incorporated by reference to an appendix tofiled
with the Company's Proxy Statement dated December
15, 1994. File No. 33-26115.
(3)(4)(b)(4) Amendment to the Restated Bylaws Specimen stock certificate of Patriot
Transportation Holding, Inc. adopted May 5, 2004,, incorporated by
reference to an exhibit filed with Form 10-Q for the quarter ended June 30, 2004.S-4 dated
December 13, 1988. File No. 33-26115.
(4)(e) The Company and its consolidated subsidiaries have
other long-term debt agreements, none of which
exceed 10% of the total consolidated assets of the
Company and its subsidiaries, and the Company
agrees to furnish copies of such agreements and
constituent documents to the Commission upon
request.
(4)(f)(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)(h) Agreement of Purchase and Sale dated October 21,
2003 between FRP Bird River, LLC and The Ryland
Group, Inc., incorporated by reference to an
exhibit filed with Form 10-K for the year ended
September 30, 2003. File No. 33-26115.
(10)(i) Articles III, VII and XII of the Articles of
Incorporation of Patriot Transportation Holding,
Inc., incorporated by reference to an exhibit filed
with Form S-4 dated December 13, 1988. And
amended Article III, incorporated by reference to
an exhibit filed with Form 10-K for the fiscal year
ended September 30, 1993. And Articles XIII and
XIV, incorporated by reference to an appendix filed
with the Company's Proxy Statement dated December
15, 1994. File No. 33-26115.
(10)(j) Specimen stock certificate of Patriot
Transportation Holding, Inc., incorporated by
reference to an exhibit filed with Form S-4 dated
December 13, 1988. File No. 33-26115.
(10)(k) Amended and Restated Revolving Credit Agreement
dated November 10, 2004 among Patriot
Transportation Holding, Inc. as Borrower, the
Lenders from time to time party hereto and Wachovia
Bank, National Association as Administrative Agent,
incorporated by reference to the Company's Form 8-K
dated November 16, 2004. File No. 33-26115.
(10)(l)(j) 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)(k) Letter of Credit Facility between Patriot
Transportation Holding, Inc. and SunTrust Bank,
N.A. dated February 16, 2005, incorporated by
reference to the Company's Form 8-K dated February
16, 2005. File No. 33-26115.
(10)(m)(l) Summary of compensation arrangements with non-
employee directors, incorporated by reference to
the corresponding exhibit filed with Form 10-Q for
the quarter ended March 31,8-K dated
October 11, 2005. File No. 33-
26115.33-26115.
(10)(n)(m) Summary of compensation arrangements with Named
Executive Officers, incorporated by reference to
the corresponding exhibit filed with Form 10-Q for
the quarter ended March 31, 2005. File No. 33-
26115.
(14) Financial Code of Ethical Conduct applicable tobetween 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. 33-26115.33-
26115.
(31)(a) Certification of John E. Anderson.
(31)(b) Certification of Ray M. Van Landingham.
(31)(c) Certification of John D. Klopfenstein.
(32) Certification of Chief Executive Officer, Chief
Financial Officer, and Chief Accounting Officer
pursuant to 18 U.S.C. Section 1350, adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
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