Patriot Transportation Holding, Inc. (NASDAQ:PATI) --
Second Quarter Operating Results for
Fiscal Year 2017.
The Company reported net income of $260,000, or
$.08 per share (inclusive of $81,000, or $.02 per share, due to a
reduced tax expense in accordance with newly adopted accounting
guidance on stock option exercises), compared to net income of
$863,000, or $.26 per share, in the same quarter last year.
During most of the quarter, U.S. average weekly
demand for gasoline was down roughly 3-5% versus the same period a
year ago. In addition, a large customer bid several of our
markets which resulted in the Company losing volume with that
customer in some of our locations. As a result, our revenue
miles this quarter declined by 1,371,000, or 12.8%, to 9,334,000
versus the same quarter last year. Total revenues for the
quarter were $27,393,000, down $1,655,000 from $29,048,000 in the
same quarter last year. Transportation revenues (excluding
fuel surcharges) were down $2,821,000 to $25,693,000 as a result of
the lower revenue miles. However, as a result of improved
pricing and effective utilization of our equipment, our
transportation revenue per mile increased by 3.3% over the same
quarter last year. Fuel surcharge revenues were up $1,166,000
to $1,700,000 due to higher diesel prices and the positive benefits
of renegotiating fuel surcharge tables with several key customers
last year.
Compensation and benefits decreased $1,297,000
due to fewer miles driven and lower driver training pay as we
struggled to find qualified drivers to hire and train. Net
fuel expense (i.e. gross fuel expenses less fuel surcharges)
decreased by $852,000 due to fewer miles driven and higher fuel
surcharges. Insurance and losses were up by $678,000 versus
the same quarter last year due mainly to increased self insured
workers’ compensation and health claims. Depreciation
increased $272,000 but was mostly offset by lower repair and
equipment leasing costs as we continue to eliminate leased tractors
from prior acquisitions and replace with Company owned
equipment. Corporate expense was higher by $170,000 mainly
due to a gain on sale of a 75% interest in the corporate aircraft
in last year’s second quarter.
As a result, operating profit this quarter was
down $1,122,000 to $325,000 compared to $1,447,000 in the same
quarter last year. Operating ratio was 98.8 this quarter
versus 95.0 in the same quarter last year.
During this second quarter, our driver turnover
increased and our applicant flow for new qualified drivers declined
compared to last year. We face intense competition for
qualified drivers both from our direct competitors as well as other
industries seeking laborers from the same group that serves the
Company. As a result, we experienced a reduction of our
average driver force down to 645 from 724 in the same quarter last
year. Hiring, training and retaining qualified drivers
remains our number one challenge and priority and we are exploring
several options related to improving (i) our hiring process, (ii)
our compensation structure and (iii) the working environment for
our Company drivers.
Similar to recent history, our strategy
continues to be that we are not willing to reduce our rates to
match unacceptably low bidders and instead will focus on replacing
with new business at acceptable rates. We have already seen
some success in the markets where we lost business this quarter and
are continuing to focus our efforts on completely regaining the
prior business levels.
During the quarter our CEO, Thompson S. Baker,
II, announced his resignation as CEO of the Company to accept an
executive VP position at Vulcan Materials Company. Mr. Baker
will continue to serve as the Chairman of the Company’s Board of
Directors. We want to take this opportunity to thank Mr.
Baker for his excellent leadership over the past several years and
wish him the best in his new endeavors. Robert E. Sandlin,
long time President of our operating subsidiary, Florida Rock &
Tank Lines, Inc., was named to replace Mr. Baker as CEO of the
Company. Mr. Sandlin has spent his entire 30-plus-year career
with the Company and we are very excited to have him lead our
Company.
First Six Months Results for Fiscal Year
2017.
The Company reported net income of $1,172,000,
or $.35 per share (inclusive of $250,000, or $.08 per share, due to
a reduced tax expense in accordance with newly adopted accounting
guidance on stock option exercises), compared to net income of
$2,238,000, or $.68 per share, in the same period last year.
The prior year included $1,029,000, or $0.31 per share, of
net income from the settlement of a claim with BP in connection
with the 2010 Deepwater Horizon event.
Our revenue miles declined by 1,956,000, or
9.3%, to 19,185,000 versus the same period last year due to the
lower demand for gasoline and the loss of business in a few of our
markets. Total revenues were $56,151,000, down $2,268,000
from $58,419,000 last year. Transportation revenues
(excluding fuel surcharges) were down $3,571,000 to $52,952,000 as
a result of the lower revenue miles. However, as a result of
improved pricing and effective utilization of our equipment, our
transportation revenue per mile increased by 3.2% over the same
period last year. Fuel surcharge revenues were up $1,303,000
to $3,199,000 due to higher diesel prices and the positive benefits
of renegotiating fuel surcharge tables with several key customers
last year.
Compensation and benefits decreased $1,785,000
due to fewer miles driven and lower driver training pay. Net
fuel expense (i.e. gross fuel expenses less fuel surcharges)
decreased by $910,000 due to fewer miles driven and higher fuel
surcharges. Insurance and losses were up $365,000 versus the
same period last year due mainly to increased self insured workers'
compensation and health claims. Depreciation increased
$586,000 but was mostly offset by lower repair and equipment
leasing costs. Corporate expense was $171,000 lower than last
year mainly due to a $226,000 reduction in legal fees.
As a result, operating profit was down $473,000
to $1,573,000 compared to $2,046,000 last year. Operating
ratio was 97.2 versus 96.5 last year.
Summary and Outlook.
While the demand for gasoline has been lower for
most of the first half of our fiscal year we have seen volumes
picking up during the month of March as we head into our typically
busy season. We continued to see improvement in our per mile
transportation revenue as well as our net fuel expense following
the implementation of more neutral fuel surcharge tables last
year. The shortage of qualified drivers is the biggest
headwind we face today and is a concern as we head into the
seasonally busier months ahead. We remain focused on both
retention and hiring qualified drivers and are continually
discussing various alternatives with respect to driver marketing,
driver qualifications and increasing the recruitment of
owner-operators that we believe will increase the available driver
pool to accomplish these objectives. This year we are
implementing several new technologies which we believe will enhance
the driver experience, improve customer satisfaction and ultimately
improve our bottom line results. Our largest of these
initiatives, the installation of our new onboard computer system
with improved workflow, will simplify the driver’s data entry
during loading and unloading and also supply improved delivery
information and invoicing for our customer.
During the quarter, we entered into two separate
purchase and sale agreements to sell real property located in South
Tampa, FL ($10M sales price) and Pensacola, FL ($1.5M sales
price). Both contracts are subject to numerous contingencies
as the properties are being acquired for commercial redevelopment
but we are optimistic that these transactions will close in early
FY ‘18 adding significant value for our shareholders.
We operate in many of the best markets in the
country and are known in those markets, and beyond, as a top rated
carrier in both safety and customer satisfaction. We are
committed to continuing our focus on safety, retention and customer
satisfaction and are confident that execution of that focus will
enable us to improve our profitability. We will benefit from
and plan to maintain a strong balance sheet as we work to achieve
our targeted operating ratio in the low nineties and double digit
returns on after tax capital employed.
Conference Call.
The Company will host a conference call on
Wednesday, April 26, 2017 at 2:00 p.m. (EDT). Analysts,
shareholders and other interested parties may access the
teleconference live by calling 1-800-853-3895 (pass code 18776) for
domestic or 1-334-323-7224 (pass code 18776) for international.
Computer audio live streaming is available via the Internet through
the Company’s website at www.patriottrans.com at the Investor
Relations tab. You may click on this link for the live streaming
http://stream.conferenceamerica.com/pth042617. Click on the
following link
http://archive.conferenceamerica.com/archivestream/pth042617.mp3 to
access the archived internet audio replay. A telephonic audio
replay will be available for sixty days following the conference
call and is accessible by dialing toll free 877-919-4059 domestic
or 1-334-323-0140 international. The passcode of the audio replay
is 31705046. Replay options: “1” begins playback, “4” rewind 30
seconds, “5” pause, “6” fast forward 30 seconds, “0” instructions,
and “9” exits recording. There may be a short delay until the
archive is available following the conclusion of the conference
call.
Investors are cautioned that any statements in
this press release which relate to the future are, by their nature,
subject to risks and uncertainties that could cause actual results
and events to differ materially from those indicated in such
forward-looking statements. These include general economic
conditions; competitive factors; political, economic,
regulatory and climatic conditions; driver availability and cost;
the impact of future regulations regarding the transportation
industry; freight demand for petroleum product and levels of
construction activity in the Company's markets; fuel costs; risk
insurance markets; pricing; energy costs and technological
changes. Additional information regarding these and other
risk factors and uncertainties may be found in the Company’s
filings with the Securities and Exchange Commission.
Patriot Transportation Holding, Inc. is engaged
in the transportation business. The Company’s transportation
business is conducted through Florida Rock & Tank Lines, Inc.
which is a Southeastern transportation company engaged in the
hauling of liquid and dry bulk commodities.
PATRIOT TRANSPORTATION HOLDING, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
INCOME |
(In thousands) |
(Unaudited) |
|
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
|
MARCH 31, |
|
MARCH 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation revenues |
|
$ |
25,693 |
|
|
|
28,514 |
|
|
$ |
52,952 |
|
|
|
56,523 |
|
Fuel
surcharges |
|
|
1,700 |
|
|
|
534 |
|
|
|
3,199 |
|
|
|
1,896 |
|
Total revenues |
|
|
27,393 |
|
|
|
29,048 |
|
|
|
56,151 |
|
|
|
58,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
|
11,455 |
|
|
|
12,752 |
|
|
|
23,539 |
|
|
|
25,324 |
|
Fuel
expenses |
|
|
3,784 |
|
|
|
3,470 |
|
|
|
7,688 |
|
|
|
7,295 |
|
Repairs
& tires |
|
|
1,625 |
|
|
|
1,936 |
|
|
|
3,263 |
|
|
|
3,745 |
|
Other
operating |
|
|
976 |
|
|
|
1,179 |
|
|
|
2,010 |
|
|
|
2,269 |
|
Insurance
and losses |
|
|
2,896 |
|
|
|
2,218 |
|
|
|
5,601 |
|
|
|
5,236 |
|
Depreciation expense |
|
|
2,397 |
|
|
|
2,125 |
|
|
|
4,859 |
|
|
|
4,273 |
|
Rents,
tags & utilities |
|
|
860 |
|
|
|
955 |
|
|
|
1,723 |
|
|
|
1,904 |
|
Sales,
general & administrative |
|
|
2,281 |
|
|
|
2,213 |
|
|
|
4,592 |
|
|
|
4,612 |
|
Corporate
expenses |
|
|
998 |
|
|
|
828 |
|
|
|
1,615 |
|
|
|
1,786 |
|
Gain on
equipment sales |
|
|
(204 |
) |
|
|
(75 |
) |
|
|
(312 |
) |
|
|
(71 |
) |
Total cost of
operations |
|
|
27,068 |
|
|
|
27,601 |
|
|
|
54,578 |
|
|
|
56,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
profit |
|
|
325 |
|
|
|
1,447 |
|
|
|
1,573 |
|
|
|
2,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BP claim
settlement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,687 |
|
Interest income and
other |
|
|
1 |
|
|
|
— |
|
|
|
3 |
|
|
|
3 |
|
Interest expense |
|
|
(32 |
) |
|
|
(32 |
) |
|
|
(64 |
) |
|
|
(67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
|
294 |
|
|
|
1,415 |
|
|
|
1,512 |
|
|
|
3,669 |
|
Provision for income
taxes |
|
|
34 |
|
|
|
552 |
|
|
|
340 |
|
|
|
1,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
260 |
|
|
|
863 |
|
|
$ |
1,172 |
|
|
|
2,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income |
|
$ |
260 |
|
|
|
863 |
|
|
$ |
1,172 |
|
|
|
2,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.08 |
|
|
|
0.26 |
|
|
|
0.36 |
|
|
|
0.68 |
|
Diluted |
|
$ |
0.08 |
|
|
|
0.26 |
|
|
|
0.35 |
|
|
|
0.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares (in thousands) used in
computing: |
|
|
|
|
-basic
earnings per common share |
|
|
3,300 |
|
|
|
3,283 |
|
|
|
3,295 |
|
|
|
3,278 |
|
-diluted
earnings per common share |
|
|
3,309 |
|
|
|
3,286 |
|
|
|
3,303 |
|
|
|
3,281 |
|
Contact: John D. Milton, Jr.
Chief Financial Officer
904/858-9100
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