UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 10-Q

_________________

(Mark One)    

 

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended March 31, 2020.

 

or

 

[_]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_________ to _________

 

 Commission File Number: 001-36605

 

_____________________

PATRIOT TRANSPORTATION HOLDING, INC.

(Exact name of registrant as specified in its charter)

_____________________

 

Florida   47-2482414

(State or other jurisdiction of

incorporation or organization)

  (I.R.S. Employer Identification No.)
     

200 W. Forsyth St., 7th Floor,

Jacksonville, FL

  32202
(Address of principal executive offices)   (Zip Code)

904-396-5733

(Registrant’s telephone number, including area code)

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Common Stock, $.10 par value   PATI   NASDAQ  

 

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 whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  [x]    No  [_]Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [_]   Accelerated  filer [_]
     
Non-accelerated filer [ ]   Smaller reporting company [x]
     
Emerging growth company [_]    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [_] 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  [_]    No  [x]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 

  Class       April 30, 2020  
  Common Stock       3,377,279  
1 
 

 

 

 

 

PATRIOT TRANSPORTATION HOLDING, INC.

FORM 10-Q

QUARTER ENDED MARCH 31, 2020

 

 

 

CONTENTS

Page No.

 

Preliminary Note Regarding Forward-Looking Statements     3
           
    Part I.  Financial Information      
           
Item 1.   Financial Statements      
    Consolidated Balance Sheets     4
    Consolidated Statements of Income     5
    Consolidated Statements of Cash Flows     6
    Consolidated Statements of Shareholders’ Equity     7
    Condensed Notes to consolidated  financial statements     8
           
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations     15
           
Item 3.   Quantitative and Qualitative Disclosures about Market Risks     23
           
Item 4.   Controls and Procedures     23
           
    Part II.  Other Information      
           
Item 1A.   Risk Factors     24
           
Item 2.   Purchase of Equity Securities by the Issuer     27
           
Item 6.   Exhibits     28
           
Signatures         29
           
Exhibit 31   Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002     31
           
Exhibit 32   Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     34

 

2 
 

 

 

Preliminary Note Regarding 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 those 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: freight demand for petroleum products including the impact of the COVID-19 pandemic and “stay home” orders, as well as increased vehicle fuel efficiency, other impacts on the COVID-19 pandemic on our operations and financial results; the increased popularity of electric vehicles recessionary and terrorist impacts on travel in the Company’s markets; fuel costs and the Company’s ability to recover fuel surcharges; accident severity and frequency; risk insurance markets; driver availability and cost; the impact of future regulations, including regulations regarding the transportation industry and regulations intended to reduce greenhouse gas emissions; cyber-attacks; availability and terms of financing; competition in our markets; interest rates, and inflation and general economic conditions. 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.

 

3 
 

 

PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS

PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

      March 31,     September 30,
Assets     2020       2019  
Current assets:                
  Cash and cash equivalents   $ 11,345       21,216  
  Accounts receivable (net of allowance for                
  doubtful accounts of $112 and $133, respectively)     5,670       6,588  
  Federal and state taxes receivable     156       290  
  Inventory of parts and supplies     945       949  
  Prepaid tires on equipment     1,524       1,616  
  Prepaid taxes and licenses     309       536  
  Prepaid insurance     1,493       2,895  
  Prepaid expenses, other     354       334  
    Total current assets     21,796       34,424  
                 
Property and equipment, at cost     88,597       91,332  
Less accumulated depreciation     54,756       57,765  
Net property and equipment     33,841       33,567  
                 
Operating lease right-of-use assets     3,750       —    
Goodwill     3,637       3,431  
Intangible assets, net     1,057       701  
Other assets, net     180       170  
Total assets   $ 64,261       72,293  
                 
Liabilities and Shareholders’ Equity                
Current liabilities:                
  Accounts payable   $ 2,950       3,184  
  Accrued payroll and benefits     3,461       3,906  
  Accrued insurance     1,413       1,339  
  Accrued liabilities, other     659       398  
  Operating lease liabilities, current portion     1,166       —    
    Total current liabilities     9,649       8,827  
                 
Operating lease liabilities less current portion     2,785       —    
Deferred income taxes     5,783       6,237  
Accrued insurance     1,339       1,339  
Other liabilities     881       1,093  
    Total liabilities     20,437       17,496  
Commitments and contingencies                
Shareholders’ Equity:                
  Preferred stock, 5,000,000 shares authorized,                
   of which 250,000 shares are designated Series A                
   Junior Participating Preferred Stock; $0.01 par                
   value; none issued and outstanding     —         —    
  Common stock, $.10 par value; (25,000,000 shares                
   authorized; 3,377,279 and 3,351,329 shares issued                  
   and outstanding, respectively)     338       335  
  Capital in excess of par value     38,550       38,099  
  Retained earnings     4,813       16,235  
  Accumulated other comprehensive income, net     123       128  
    Total shareholders’ equity     43,824       54,797  
Total liabilities and shareholders’ equity   $ 64,261       72,293  
                 

See notes to consolidated financial statements.

 

 

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PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands)

(Unaudited)

 

    THREE MONTHS ENDED   SIX MONTHS ENDED
    MARCH 31,   MARCH 31,
    2020   2019   2020   2019
Revenues:                                
  Transportation revenues   $ 21,560       24,537      $ 44,159       49,517  
  Fuel surcharges     1,967       2,471       4,177       5,545  
Total revenues     23,527       27,008       48,336       55,062  
                                 
Cost of operations:                                
  Compensation and benefits     10,381       11,852       21,379       23,890  
  Fuel expenses     2,946       4,004       6,409       8,280  
  Repairs & tires     1,571       2,006       3,322       3,671  
  Other operating     975       1,189       1,931       2,321  
  Insurance and losses     2,555       2,002       5,324       4,944  
  Depreciation expense     1,839       1,976       3,789       3,946  
  Rents, tags & utilities     753       891       1,503       1,738  
  Sales, general & administrative     2,609       2,561       5,090       5,029  
  Corporate expenses     814       867       1,351       1,399  
  Gain on disposition of PP&E     (328     (633     (450     (1,556
Total cost of operations     24,115       26,715       49,648       53,662  
                                 
Total operating profit (loss)     (588     293       (1,312     1,400  
                                 
Interest income and other     42       113       127       214  
Interest expense     (7     (7     (15     (17
                                 
Income (loss) before income taxes     (553     399       (1,200     1,597  
Provision for (benefit from) income taxes     (152     110       (335     424  
                                 
Net income (Loss)   $ (401     289     (865     1,173  
                                 
Unrealized investment gains, net     —         10       —         12  
Reclassification adjust for net investment gains realized in net income     —         —         (5     —    
                                 
Comprehensive income (loss)   $ (401     299     (870     1,185  
                                 
Earnings per common share:                                
  Net Income (loss) -                                
    Basic   (0.12     0.09       (0.26     0.35  
    Diluted   (0.12 )     0.09       (0.26     0.35  
                                 
Number of shares (in thousands) used in computing:        
-basic earnings per common share     3,354       3,342       3,352       3,335  
-diluted earnings per common share     3,354       3,343       3,352       3,336  
                                   

 

 

 

 

 

See notes to consolidated financial statements.

 

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PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED MARCH 31, 2020 AND 2019

(In thousands)

(Unaudited)

  Six months ended March 31,  
    2020       2019  
Cash flows from operating activities:              
 Net income (loss) $ (865     1,173  
 Adjustments to reconcile net income to net cash              
  provided by operating activities:              
   Depreciation and amortization   4,629       4,243  
   Deferred income taxes   (454 )     10  
   Gain on asset dispositions   (450 )     (1,556 )
   Stock-based compensation   454       475  
   Net changes in operating assets and liabilities:              
     Accounts receivable   918       (524 )
     Inventory of parts and supplies   4       (12 )
     Prepaid expenses   1,726       531  
     Other assets   (17 )     5  
     Accounts payable and accrued liabilities   (782 )     23  
     Income taxes payable and receivable   134       384  
     Operating lease assets and liabilities, net   (571 )     —    
     Long-term insurance liabilities and other long-term              
     Liabilities   19       (5 )
Net cash provided by operating activities   4,745       4,747  
               
Cash flows from investing activities:              
 Purchase of property and equipment   (4,279 )     (4,702 )
 Business acquisition   (1,000 )     —    
 Proceeds from the sale of property, plant and equipment   1,220       2,375  
Net cash used in investing activities   (4,059 )     (2,327 )
               
Cash flows from financing activities:              
 Dividends paid   (10,557 )     —    
 Decrease in bank overdrafts   —         (625 )
 Debt issue costs   —         (9 )
Net cash used in financing activities   (10,557 )     (634 )
               
Net (decrease) increase in cash and cash equivalents   (9,871     1,786  
Cash and cash equivalents at beginning of period   21,216       17,299  
Cash and cash equivalents at end of the period $ 11,345       19,085  

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

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PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

SIX MONTHS ENDED MARCH 31, 2020 AND 2019

(In thousands)

(Unaudited)

 

 

 

                      Accumulated    
            Capital in         Other   Total
      Common Stock     Excess of   Retained     Comprehensive   Stockholders'
      Shares       Amount     Par Value   Earnings     Income, net   Investment
Balance as of October 1, 2019     3,351,329     $ 335     $ 38,099     $ 16,235       $ 128     $ 54,797  
                                                   
Stock-based compensation                     119                         119  
Director grant     25,950       3       332                         335  
Cash dividends ($3.15 per share)                             (10,557 )               (10,557 )
Net income (loss)                             (865               (865
Reclassification adjustment of realized gain, net                                       (5 )     (5 )
Balance as of March 31, 2020     3,377,279     $ 338     $ 38,550     $ 4,813       $ 123     $ 43,824  
                                                   
                                                   
Balance as of October 1, 2018     3,328,466     $ 333     $ 37,436     $ 14,472       $ 165     $ 52,406  
Stock-based compensation                     112                         112  
Director grant     18,863       2       361                         363  
Net income                             1,173                 1,173  
Unrealized gain on investment, net                                       12       12  
Balance as of March 31, 2019     3,347,329     $ 335     $ 37,909     $ 15,645       $ 177     $ 54,066  
                                                   

 

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PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(Unaudited)

 

(1) Description of Business, Basis of Presentation and Accounting Policy Change.

 

Description of Business

 

Company’s Business. The business of the Company, conducted through our wholly owned subsidiary, Florida Rock & Tank Lines, Inc., is to transport petroleum related products and dry bulk commodities and liquid chemicals. We do not own any of the products we haul; rather, we act as a third party carrier to deliver our customers’ products from point A to point B, using predominately Company employees and Company-owned tractors and tank trailers. Approximately 86% of our business consists of hauling liquid petroleum products (mostly gas and diesel fuel) from large scale fuel storage facilities to our customers’ retail outlets (e.g. convenience stores, truck stops and fuel depots) where we off-load the product into our customers’ fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling dry bulk commodities such as cement, lime and various industrial powder products and liquid chemicals. As of March 31, 2020, we employed 529 drivers who operated our fleet of 350 company tractors, 22 owner operators and 474 trailers from our 19 terminals and 6 satellite locations in Florida, Georgia, Alabama, North Carolina and Tennessee.  

 

Basis of Presentation

 

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 six months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2020. 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 audited financial statements and notes for the year ended September 30, 2019.

 

Accounting Policy Change

 

Cash and cash equivalents –The Company considers all Treasury bills available for sale regardless of maturity and other highly liquid debt instruments with maturities of three months or less at time of purchase to be cash equivalents. Bank overdrafts consist of outstanding checks not yet presented to a bank for settlement, net of cash held in accounts with right of offset. Treasury bills of $5,983,000 at September 30, 2019 have been reclassified as cash equivalents in these financial statements.

 

(2) Recently Issued Accounting Standards. In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which requires lessees to recognize a right-to-use asset and a lease liability for the obligation to make lease payments measured at the present value of the lease payments for all leases with terms greater than twelve months. The provisions of this update and additional guidance in

8 
 

subsequent ASUs became effective for us beginning October 1, 2019. In July 2018, the FASB issued ASU No. 2018-11, “Leases” which provides an optional transition method allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, with no restatement of comparative prior periods required. We adopted the standard using this optional transition method. Upon adoption as of October 1, 2019, the Company recognized $3,873,000 in operating lease right-of-use assets, a reduction of $231,000 of other long-term liabilities related to straight-lined leases and $4,104,000 in operating lease liabilities. As of March 31, 2020, the Company has 8 property leases with an expected life over 12 months and 30 leased tractors and recognized $3,750,000 in operating lease right-of-use assets and $3,951,000 in operating lease obligations.

 

(3) Related Party Agreements. The Company provides FRP Holdings, Inc. (FRP) certain services including the services of certain shared executive officers. FRP may be considered a related party due to common significant shareholder ownership and shared common officers. A written agreement exists outlining the terms of such services and the boards of the respective companies amended and extended this agreement for one year effective April 1, 2020.

 

The consolidated statements of income reflect charges and/or allocation to FRP Holdings, Inc. for these services of $290,000 and $301,000 for the three months ended March 31, 2020 and 2019, and $703,000 and $723,000 for the six months ended March 31, 2020 and 2019, respectively. Included in the charges above are amounts recognized for corporate executive stock-based compensation expense. These charges are reflected as a reduction to corporate expenses.

 

We employ an allocation method to allocate said expenses and thus we believe that the allocations to FRP are a reasonable approximation of the costs related to FRP’s operations, but any such related-party transactions cannot be presumed to be carried out on an arm’s-length basis.

 

(4) Long-Term debt. The Company had no long-term debt outstanding at March 31, 2020 and September 30, 2019. On December 28, 2018 the Company entered into a First Amendment to the 2015 Credit Agreement (the "Credit Agreement") with Wells Fargo Bank, N.A. ("Wells Fargo"), effective December 14, 2018. The Credit Agreement modifies the Company's prior Credit Agreement with Wells Fargo, dated January 30, 2015. The Credit Agreement establishes a five year revolving credit facility with a maximum facility amount of $35 million, with a separate sublimit for standby letters of credit. The credit facility limit may be increased to $50 million upon request by the Company, subject to the lender's discretion and the satisfaction of certain conditions. The interest rate under the Credit Agreement will be a maximum of 1.50% over LIBOR, which may be reduced quarterly to 1.25% or 1.0% over LIBOR if the Company meets a specified ratio of consolidated total debt to consolidated total capital. A commitment fee of 0.144% per annum is payable quarterly on the unused portion of the commitment but the amount may be reduced to 0.1145% or 0.086% if the Company meets a specified ratio of consolidated total debt to consolidated total capital. As of March 31, 2020, we had no outstanding debt borrowed on this revolver, $3,073,000 in commitments under letters of credit and $31,927,000 available for additional borrowings. The letter of credit fee is 1% and the applicable interest rate would have been 1.989% on March 31, 2020. This credit agreement contains certain conditions, affirmative financial covenants and negative covenants including a minimum tangible net worth. The Company was in compliance with all of its loan covenants as of March 31, 2020.

 

(5) Earnings per share. Basic earnings per common share are based on the weighted average number of common shares outstanding during the periods. Diluted earnings per common share are

9 
 

based on the weighted average number of common shares and potential dilution of securities that could share in earnings. The differences between basic and diluted shares used for the calculation are the effect of employee and director stock options.

 

The following details the computations of the basic and diluted earnings per common share (dollars and shares in thousands, except per share amounts):

 

    Three Months ended   Six months ended
    March 31,   March 31,
    2020   2019   2020   2019
Weighted average common shares                
outstanding during the period                
- shares used for basic                
 earnings per common share     3,354       3,342       3,352       3,335  
                                 
Common shares issuable under                                
 share based payment plans                                
 which are potentially dilutive     —         1       —         1  
                                 
Common shares used for diluted                                
 earnings per common share     3,354       3,343       3,352       3,336  
                                 
Net income (loss)   $ (401 )     289       (865     1,173  
                                 
Earnings (loss) per common share:                                
-basic   $ (0.12 )     0.09       (0.26     0.35  
-diluted   $ (0.12 )     0.09       (0.26     0.35  

 

 

For the three and six months ended March 31, 2020, 400,722 shares attributable to outstanding stock options were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. For the three and six months ended March 31, 2019, 181,983 and 175,373 shares attributable to outstanding stock options, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

 

(6) Stock-Based Compensation Plans.

 

Participation in FRP Plans

Prior to the Company’s spin-off from FRP Holdings, Inc. (FRP) in January 2015, the Company's directors, officers and key employees previously were eligible to participate in FRP's 2000 Stock Option Plan and the 2006 Stock Option Plan under which options for shares of common stock were granted to directors, officers and key employees.

 

Post Spin-Off Patriot Incentive Stock Plan

As part of the spin-off transaction, the Board of Directors of the Company adopted the Patriot Transportation Holding, Inc. Incentive Stock Plan (“Patriot Plan”) in January, 2015. In exchange for all outstanding FRP options held on January 30, 2015, existing Company directors, officers and key employees holding option grants in the FRP Stock Option Plan(s) were issued new grants in the Patriot and FRP Plans based upon the relative value of Patriot and FRP immediately following the

10 
 

completion of the spin-off with the same remaining terms. All related compensation expense has been allocated to the Company (rather than FRP) and included in corporate expenses. The number of common shares available for future issuance in the Patriot Plan was 163,400 at March 31, 2020.

 

On January 30, 2020, the Company paid an extraordinary dividend of $3.00 per share to all shareholders of record. In accordance with Section 4.2 of the 2006 Stock Incentive Plan, Section 11 of the 2014 Equity Incentive Plan, and Section 409A of the Internal Revenue Code, the Company has adjusted the terms of all stock option grants outstanding and the stock appreciation rights as of the close of business on January 30, 2020.

 

In December 2016, the Company approved and issued a long-term performance incentive to an officer in the form of stock appreciation rights. As adjusted for the extraordinary dividend the Company granted 132,286 stock appreciation rights. The adjusted market price of the grant was $16.82, and the executive will get a cash award at age 65 based upon the stock price at that date compared to the stock price at the date of grant but in no event will the award be less than $500,000. The Company plans to expense the fair value of the award over the 9.1 year vesting period to the officer’s attainment of age 65. The accrued liability under this plan as of March 31, 2020 and 2019 was $297,000 and $207,000, respectively.

 

The Company recorded the following stock compensation expense in its consolidated statements of income (in thousands):

    Three Months ended   Six months ended
    March 31,   March 31,
    2020   2019   2020   2019
Stock option grants   $ 60       57       119       112  
Annual director stock award     335       363       335       363  
    $ 395       420       454       475  

 

A summary of Company stock options is presented below (in thousands, except share and per share amounts):

            Weighted       Weighted       Weighted  
    Number       Average       Average       Average  
    of       Exercise       Remaining       Grant Date  
Options   Shares       Price       Term (yrs)       Fair Value  
                               
Outstanding at                              
 October 1, 2019   189,015     $ 21.49       6.3     $ 1,531  
  Term Adjustment   148,877                          
  Granted   68,865       18.40               275  
  Forfeited   (6,035 )     23.99               (57 )
Outstanding at                              
 March 31, 2020   400,722     $ 14.96       7.1     $ 1,749  
Exercisable at                              
 March 31, 2020   191,597     $ 16.09       5.3     $ 1,002  
Vested during                              
 six months ended                              
 March 31, 2020   39,070                     $ 204  

 

 

11 
 

There were no exercisable or outstanding in-the-money options based on the Company’s market closing price of $9.25 on March 31, 2020.

 

The realized tax benefit from option exercises during the first six months of fiscal 2020 was $11,000 which pertained to FRP options exercised that were granted to persons employed by Patriot. The unrecognized compensation expense of Patriot options granted as of March 31, 2020 was $660,000, which is expected to be recognized over a weighted-average period of 3.5 years.

 

(7) Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 means the use of quoted prices in active markets for identical assets or liabilities. Level 2 means the use of values that are derived principally from or corroborated by observable market data. Level 3 means the use of inputs are those that are unobservable and significant to the overall fair value measurement.

 

During the six months ending March 31, 2019, the Company invested in treasury bills with maturities at time of purchase of 3 months to 1 year. The unrealized gains on these investments of $12,000 was recorded as part of comprehensive income and was based on the market value (Level 1). The amortized cost of the investments was $18,860,000 and the carrying amount and fair value was $18,863,000 as of March 31, 2019.

 

At March 31, 2020 and September 30, 2019, the carrying amount reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and other financial instruments approximate their fair value based upon the short-term nature of these items.

 

(8) Contingent liabilities. The Company is involved in litigation on a number of matters and is 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. There is a reasonable possibility that the Company’s estimate of vehicle and workers’ compensation liability may be understated or overstated but the possible range cannot be estimated. The liability at any point in time depends upon the relative ages and amounts of the individual open claims. In the opinion of management none of these matters are expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

 

(9) Concentrations.

 

Market: The Company primarily serves customers in the petroleum industry in the Southeastern U.S. Significant economic disruption or downturn in this geographic region or within these industries could have an adverse effect on our financial statements.

 

Customers: During the first six months of fiscal 2020, the Company’s ten largest customers accounted for approximately 63.0% of our revenue and one of these customers accounted for 21.0% of our revenue. Accounts receivable from the ten largest customers was $3,259,000 and $4,264,000 at March 31, 2020 and September 30, 2019 respectively. The loss of any one of these customers could have a material adverse effect on the Company’s revenues and income.

 

Deposits: Cash and cash equivalents are comprised of cash at Wells Fargo Bank, N.A.  The balances may exceed FDIC limits.

12 
 

 

(10) Unusual or Infrequent Items Impacting Quarterly Results.

 

First quarter 2019 net income included $634,000, or $.19 per share, from gains on real estate sales. Second quarter 2019 net income included $179,000 or $.05 per share, from a gain of $247,000 on the insurance settlement for hurricane damages and losses sustained at our Panama City, Florida location in first quarter 2019.

 

(11) Business Acquisition.

 

The Company acquired certain assets of Danfair Transport out of Americus, GA on November 4, 2019. Danfair had total revenues of approximately $2,300,000 in 2018.

 

The Company has accounted for this acquisition in accordance with the provisions of ASC 805, Business Combinations (ASC 805). The Company has allocated the purchase price of the business based upon the fair value of the assets acquired and liabilities assumed as follows (in thousands):

 

Consideration:        
         
Fair value of consideration transferred     (1,425 )
         
Acquisition related costs expensed   $ 38  
         
Recognized amounts of identifiable assets acquired and        
liabilities assumed:        
Property and equipment   $ 759  
Prepaid tires     25  
Customer relationships     436  
Non-compete agreement     12  
Vacation liability assumed     (13 )
Total identifiable net assets assumed   $ 1,219  
Goodwill     206  
Total   $ 1,425  

 

The goodwill recorded resulting from the acquisition is tax deductible. The earned payout liability currently estimated at $425,000 will be determined based upon the total revenues for the 12 months following the acquisition. The potential range of the earned payout is zero to $800,000.

 

(12) Subsequent Events.

 

COVID-19. The outbreak of the novel coronavirus (“SARS-CoV-2” or “COVID-19”) has evolved into a global pandemic. The extent to which the coronavirus impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted. We derive approximately 86% of our revenues from the hauling of petroleum products, and “stay home” orders issued by state and local governments to mitigate the spread of COVID-19 has dramatically reduced consumption of petroleum products and the resulting demand for our services. These measures resulted in a reduction of 240,000 revenue miles in the second quarter of

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fiscal 2020 and will have an even greater impact in the third quarter.

Should the coronavirus continue to spread, our business operations could be delayed or interrupted. For instance, our operations would be adversely impacted if a number of our administrative personnel, drivers or field personnel are infected and become ill or are quarantined. In response to the pandemic, we have arranged for certain administrative employees to work remotely outside of our offices or to work in shifts. At this time, we believe that our business will continue to be exempted from shelter-in-place orders or other mandated local travel restrictions as an essential service but there can be no assurance as to the scope of quarantine orders imposed by local or state governments.  

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, or the economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the situation closely.

 

Wilmington Closure. On April 25th, the Company closed the operation of our Wilmington, NC terminal and transitioned the business to another operator that has a larger presence and more scale in the North Carolina chemical marketplace. This terminal has underperformed for the past several quarters mainly due to the closure of a large chemical customer in the area coupled with rate compression in the short haul, commodity chemical market. Revenues at the Wilmington terminal YTD were $1,352,000. We transferred over many of our employees, subleased the terminal, leased some trailers for a few months and eventually will sell all unneeded equipment and other facility assets on which we anticipate a gain.

 

Tampa Property. On May 8, 2020, the City of Tampa, and all other required agencies, officially approved the Site Plan for the proposed mixed use development on our property located on Dale Mabry Highway in Tampa, Florida. As a result, the 120 day study period for the Buyer commenced that same day. Assuming the buyer is satisfied that all contingencies have been met, we anticipate a closing sometime late this calendar year.

 

 

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with the consolidated financial information and related notes that appear in Part I, Item 1 of this Quarterly Report on Form 10-Q.

 

Overview

The business of the Company, conducted through our wholly owned subsidiary, Florida Rock & Tank Lines, Inc., is to transport petroleum and other liquids and dry bulk commodities. We do not own any of the products we haul, rather, we act as a third party carrier to deliver our customers’ products from point A to point B predominately using Company employees driving Company owned tractors and tank trailers. Approximately 86% of our business consists of hauling liquid petroleum products (mostly gas and diesel fuel) from large scale fuel storage facilities to our customers’ retail outlets (e.g. convenience stores, truck stops and fuel depots) where we off-load the product into our customers’ fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling dry bulk commodities such as cement, lime and various industrial powder products and liquid chemicals. As of March 31, 2020, we employed 529 revenue-producing drivers who operated our fleet of 350 company tractors, 22 owner operators and 474 trailers from our 19 terminals and 6 satellite locations in Florida, Georgia, Alabama, North Carolina and Tennessee. We experience increased seasonal demand in Florida in the spring and in most of our other locations during the summer months.

Our industry is characterized by such barriers to entry as the time and cost required to develop the capabilities necessary to handle hazardous material, the resources required to recruit, train and retain drivers, substantial industry regulatory and insurance requirements and the significant capital investments required to build a fleet of equipment, establish a network of terminals and, in recent years, the cost to build and maintain sufficient information technology resources to allow us to interface with and assist our customers in the day-to-day management of their product inventories.

 

Our ability to provide superior customer service at competitive rates and to operate safely and efficiently is important to our success in growing our revenues and increasing profitability. Our focus is to grow our profitability by executing on our key strategies of (i) increasing our business with existing and new customers, particularly hypermarket and large convenience store chains, that are willing to compensate us for our ability to provide superior, safe and reliable service, (ii) expanding our service offerings with respect to dry bulk and chemical products particularly in markets where we already operate terminals, (iii) earning the reputation as the preferred employer for tank truck drivers in all the markets in which we operate and (iv) pursuing strategic acquisitions. Our ability to execute this strategy depends on continuing our dedicated commitments to customer service and safety and continuing to recruit and retain qualified drivers.

 

Our industry is experiencing a severe driver shortage. As the need to hire drivers has risen across our industry the trend we are seeing is that more and more of the applicants are drivers with little to no experience in the tank truck business. Our management team is keenly focused on continuing to grow our driver count in markets where there are opportunities for us to grow our business and to retain all of our drivers at the levels we have historically achieved while balancing the aforementioned trends and associated risks of the “new to the industry” driver applicant pool. Through the implementation of a software program, we have enhanced our ability to quickly identify, communicate with and ultimately hire qualified drivers.

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There are several opportunities available today in our markets that will allow us to execute on our strategy so long as we can find, hire and retain qualified drivers to meet the demands of these opportunities. We believe the tighter driver market has and will continue to provide us with opportunities to capture new business. As these opportunities arise, we are willing to let certain lower priced business go in this environment to grow our business with customers willing to pay for our reliability and superior customer service.

 

We generate both transportation based revenue as well as fuel surcharge revenue. Our transportation revenue consists of base revenue for each delivery which is generally calculated by multiplying a negotiated mileage-based rate by the quantity of product delivered plus any fees for extra stops to load or unload, powered product unloading and toll cost reimbursements. These negotiated transportation rates compensate us both for transporting the products as well as for loading and unloading time. While our base rates include a fixed amount to cover our cost of fuel using an assumed price for diesel, we have fuel surcharges in place with our customers that allow us to obtain additional compensation for fuel expense incurred when the price of diesel rises above that assumed price. Likewise, for some customers, the fuel surcharge system allows the customer to receive a lower cost from us when the price of diesel drops below that assumed price. There is a time lag between fuel price fluctuations and changes to fuel surcharges to our customers. In a rapidly rising price environment this time lag can negatively impact the Company’s financial results as we must pay the higher fuel cost immediately but in most cases aren’t able to adjust fuel surcharges to our customers until the end of the month.

 

The main factors that affect our total revenue are the number of revenue miles driven, rates per mile, quantity of products hauled and the amount of fuel surcharges.

 

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, driver availability and cost, government regulations regarding driver qualifications and limitations on the hours drivers can work, petroleum product demand in the Southeast which is driven in part by tourism and commercial aviation, and fuel costs. Internal factors include revenue mix, equipment utilization, Company imposed restrictions on hiring drivers under the age of 23 or drivers without at least one year of driving experience, auto and workers’ compensation accident frequencies and severity, administrative costs, and group health claims experience.

 

Our operating costs primarily consist of the following:

·Compensation and Benefits - Wages and employee benefits for our drivers and terminal support personnel is the largest component of our operating costs. These costs are impacted by such factors as miles driven, driver pay increases, driver turnover and training costs and additional driver pay due to temporary out-of-town deployments to serve new business;
·Fuel Expenses - Our fuel expenses will vary depending on miles driven as well as such factors as fuel prices (which can be highly volatile), the fuel efficiency of our fleet and the average haul length;
·Repairs and Tires – This category consists of vehicle maintenance and repairs (excluding shop personnel) and tire expense (including amortization of tire cost and road repairs). These expenses will vary based on such factors as miles driven, the age of our fleet, and tire prices.
·Other Operating Expenses – This category consists of tolls, hiring costs, out-of-town driver travel cost, terminal facility maintenance and other operating expenses. These expenses will
16 
 

vary based on such factors as, driver availability and out-of-town driver travel requirements, business growth and inflation among others;

·Insurance and Losses – This category includes costs associated with insurance premiums, and the self-insured portion of liability, worker’s compensation, health insurance and cargo claims and wreck repairs. We work very hard to manage these expenses through our safety and wellness programs, but these expenses will vary depending on the frequency and severity of accident and health claims, insurance markets and deductible levels;
·Depreciation Expense – Depreciation expense consists of the depreciation of the cost of fixed assets such as tractors and trailers over the life assigned to those assets. The amount of depreciation expense is impacted by equipment prices and the timing of new equipment purchases. We expect the cost of new tractors and trailers to continue to increase, impacting our future depreciation expense;
·Rents, Tags and Utilities Expenses – This category consists of rents payable on leased facilities and leased equipment, federal highway use taxes, vehicle registrations, license and permit fees and personal property taxes assessed against our equipment, communications, utilities and real estate taxes;
·Sales, General and Administrative Expenses - This category consists of the wages, bonus accruals, benefits, travel, vehicle and office costs for our administrative personnel as well as professional fees and amortization charges for intangible assets purchased in acquisitions of other businesses;
·Corporate Expenses – Corporate expenses consist of wages, bonus accruals, insurance and other benefits, travel, vehicle and office costs for corporate executives, director fees, stock option expense and aircraft expense;
·Gains/Loss on Disposition of Property, Plant & Equipment - Our financial results for any period may be impacted by any gain or loss that we realize on the sale of used equipment, losses on wrecked equipment, and disposition of other assets. We periodically sell used equipment as we replace older tractors and trailers. Gains or losses on equipment sales can vary significantly from period to period depending on the timing of our equipment replacement cycle, market prices for used equipment and losses on wrecked equipment.

 

To measure our performance, management focuses primarily on transportation revenue growth, revenue miles, our preventable accident frequency rate (“PAFR”), our operating ratio (defined as our operating expenses as a percentage of our operating revenue), turnover rate (excluding drivers related to Charlotte closure) and average driver count (defined as average number of revenue producing drivers including owner operators (O.O.) under employment over the specified time period) as compared to the same period in the prior year.

 

ITEM Six months 2020 vs. 2019
Total Revenue Down 12.2%
Transportation Revenue Down 10.8%
Revenue Miles Down 15.8%
PAFR (incidents per 1M miles) Up to 1.95 from 1.92
Operating Ratio 102.7% vs. 97.5%
Driver Turnover Rate 77.8% vs. 72.6%
Avg. Driver Count incl. owner operators Down 6.4%

 

17 
 

 

 

Comparative Results of Operations for the Three Months ended March 31, 2020 and 2019

 

  Three months ended March 31
(dollars in thousands)   2020       %       2019       %  
                               
Revenue miles (in thousands)   7,410               8,975          
                               
Revenues:                              
 Transportation revenue $ 21,560       91.6 %     24,537       90.9 %
 Fuel surcharges   1,967       8.4 %     2,471       9.1 %
Total Revenues   23,527       100.0 %     27,008       100.0 %
                               
Cost of operations:                              
 Compensation and benefits   10,381       44.1 %     11,852       43.9 %
 Fuel expenses   2,946       12.5 %     4,004       14.8 %
 Repairs & tires   1,571       6.7 %     2,006       7.4 %
 Other operating   975       4.1 %     1,189       4.4 %
 Insurance and losses   2,555       10.9 %     2,002       7.4 %
 Depreciation expense   1,839       7.8 %     1,976       7.3 %
 Rents, tags & utilities   753       3.2 %     891       3.3 %
 Sales, general & administrative   2,609       11.1 %     2,561       9.5 %
 Corporate expenses   814       3.5 %     867       3.2 %
 Gain on disposition of PP&E   (328 )     -1.4 %     (633 )     -2.3 %
Total cost of operations   24,115       102.5 %     26,715       98.9 %
                               
Total operating profit (loss) $ (588 )     -2.5 %     293       1.1 %

 

The Company reported a net loss of ($401,000), or ($.12) per share, compared to net income of $289,000, or $.09 per share, in the same quarter last year.

 

Transportation revenues (excluding fuel surcharges) were $21,560,000, down $2,977,000 from the same quarter last year. Revenue miles were down 1,565,000 miles, or 17.4%, over the same quarter last year primarily due to the closure of our Charlotte terminal in May 2019,the recent downsizing of certain customer business due to freight rates, and the COVID-19 pandemic beginning in the middle of March (~240,000 miles)). Transportation revenue per mile was up $.18, or 6.6%, which has helped to offset the negative impact of fewer miles. Fuel surcharge revenue was $1,967,000, down $504,000 from the same quarter last year.

 

Compensation and benefits decreased $1,471,000 mainly due to lower company miles and lower driver training pay. Gross fuel expense decreased $1,058,000 due to lower company miles and lower cost per gallon. Repair and tire expense decreased $435,000 due to lower miles this quarter and several high dollar repairs in the 2nd quarter last year. Insurance and losses increased $553,000 primarily due to a high number of expensive health care claims and a smaller gain from risk insurance this quarter vs. the prior year’s same quarter. Depreciation expense was down $137,000 in the quarter as we adjusted our fleet size to meet our business levels. Gain on disposition of assets was $328,000 this quarter versus $633,000 in the same quarter last year (last year included a gain of $247,000 on an insurance settlement for hurricane damages and losses).

 

18 
 

As a result, operating loss this quarter was ($588,000) compared to operating profit of $293,000 in the same quarter last year. Operating ratio was 102.5 this quarter versus 98.9 in the same quarter last year.

 

Comparative Results of Operations for the Six Months ended March 31, 2020 and 2019

 

  Six months ended March 31
(dollars in thousands)   2020       %       2019       %  
                               
Revenue miles (in thousands)   15,370               18,252          
                               
Revenues:                              
 Transportation revenue $ 44,159       91.4 %     49,517       89.9 %
 Fuel surcharges   4,177       8.6 %     5,545       10.1 %
Total Revenues   48,336       100.0 %     55,062       100.0 %
                               
Cost of operations:                              
 Compensation and benefits   21,379       44.2 %     23,890       43.4 %
 Fuel expenses   6,409       13.3 %     8,280       15.0 %
 Repairs & tires   3,322       6.9 %     3,671       6.7 %
 Other operating   1,931       4.0 %     2,321       4.2 %
 Insurance and losses   5,324       11.0 %     4,944       9.0 %
 Depreciation expense   3,789       7.8 %     3,946       7.2 %
 Rents, tags & utilities   1,503       3.1 %     1,738       3.2 %
 Sales, general & administrative   5,090       10.5 %     5,029       9.1 %
 Corporate expenses   1,351       2.8 %     1,399       2.5 %
 Gain on disposition of PP&E   (450 )     -0.9 %     (1,556 )     -2.8 %
Total cost of operations   49,648       102.7 %     53,662       97.5 %
                               
Total operating profit (loss) $ (1,312 )     -2.7 %     1,400       2.5 %

 

 

The Company reported a net loss of ($865,000), or ($.26) per share, compared to net income of $1,173,000, or $.35 per share, in the same period last year. Net income in the first six months of 2019 included $634,000, or $.19 per share, from gains on real estate sales.

 

Transportation revenues (excluding fuel surcharges) were $44,159,000, down $5,358,000 or 10.8% on 2,882,000 fewer miles. Transportation revenue per mile was up $.16 due to increased freight rates which has helped to offset the negative impact of fewer miles. Fuel surcharge revenue was $4,177,000, down $1,368,000 from the same period last year.

 

Compensation and benefits decreased $2,511,000 mainly due to lower company miles and lower driver training pay. Gross fuel expenses decreased $1,871,000 due to lower company miles and lower cost per gallon. Repair and tire expense decreased $349,000 due to reduced miles in the first six months of this year and several high dollar repairs in the same period last year. Insurance and losses increased $380,000 primarily due to higher health claims. Gain on disposition of assets was $450,000 this period versus $1,556,000 in the same period last year which included a gain of $866,000 on the sale of a prior terminal site in Ocoee, Florida and a gain of $247,000 on the insurance settlement for hurricane damages sustained at our Panama City, Florida location.

 

19 
 

As a result, operating loss was ($1,312,000) compared to operating profit of $1,400,000 in the same period last year. Operating ratio was 102.7 in the first six months versus 97.5 in the same period last year.

 

Liquidity and Capital Resources. The Company maintains its operating accounts with Wells Fargo Bank, N.A. and these accounts directly sweep overnight against the Wells Fargo revolver. As of March 31, 2020, we had no debt outstanding on this revolver, $3,073,000 letters of credit and $31,927,000 available for additional borrowings. The Company expects our fiscal year 2020 cash generation to cover the cost of our operations, our budgeted capital expenditures and dividends.

 

Cash Flows - The following table summarizes our cash flows from operating, investing and financing activities for each of the periods presented (in thousands of dollars):

 

    Six months
    Ended March 31,
    2020   2019
Total cash provided by (used for):                
Operating activities   $ 4,745       4,747  
Investing activities     (4,059 )     (2,327 )
Financing activities     (10,557     (634
Increase (decrease) in cash and cash equivalents   $ (9,871 )     1,786  
                 
Outstanding debt at the beginning of the period     —         —    
Outstanding debt at the end of the period     —         —    

 

Operating Activities - Net cash provided by operating activities (as set forth in the cash flow statement) was $4,745,000 for the six months ended March 31, 2020, compared to $4,747,000 in the same period last year. The total of net income plus depreciation and amortization and less gains on sales of property and equipment decreased $546,000 versus the same period last year. These changes are described above under "Comparative Results of Operations." This decrease was mostly offset by a decrease in prepaid insurance due to refunds from our captive upon closing out three prior years. These changes comprise the majority of the decrease in net cash provided by operating activities.

 

Investing Activities – Investing activities include the purchase of property and equipment, any business acquisitions and proceeds from sales of property and equipment upon retirement. For the six months ended March 31, 2020, we spent $4,059,000 on investing activities which included $3,059,000 for the purchase of plant, property and equipment net of proceeds from retirements and $1,000,000 for the acquisition of Danfair Transport. For the six months ended March 31, 2019, we spent $2,327,000 on investing activities for the purchase of plant, property and equipment net of proceeds from retirements.

 

Financing Activities – Financing activities primarily include net changes to our outstanding revolving debt and proceeds from the sale of shares of common stock through employee equity incentive plans. For the six months ended March 31, 2019, cash used in financing activities was $10,557,000 due to dividends paid in the second quarter. For the six months ended March 31, 2019, cash used in financing activities was $634,000 due to bank overdrafts and debt issue costs related to a revised and restated revolver credit agreement. We had no outstanding long-term debt on March 31, 2020 or March 31, 2019.

 

20 
 

Credit Facilities - The Company has a five-year credit agreement with Wells Fargo Bank N.A. which provides a $35 million revolving line of credit with a $10 million sublimit for stand-by letters of credit. The amounts outstanding under the credit agreement bear interest at a rate of 1.0% over LIBOR, which may change quarterly based on the Company’s ratio of consolidated total debt to consolidated total capital. A commitment fee of 0.15% per annum is payable quarterly on the unused portion of the commitment, which fee may change quarterly based on our ratio of consolidated total debt to consolidated total capital. The credit agreement contains certain conditions and financial covenants, including a minimum $40 million tangible net worth. As of March 31, 2020, the tangible net worth covenant would have limited our ability to pay dividends or repurchase stock with borrowed funds to a maximum of $10.3 million combined.

 

Cash Requirements - The Company currently expects its fiscal 2020 capital expenditures to be approximately $5 million revised down from $7 million in the first quarter for replacement equipment which we expect to be fully funded by our cash generated from our operations. The amount of capital expenditures through March 31, 2020 were $4,279,000, we have no tractors or trailer purchases planned for the remainder of the fiscal year.

 

In December, we announced that our Board of Directors declared a special cash dividend of $3.00 per share, or approximately $10 million in the aggregate, on the Company’s outstanding common stock. This one-time, special dividend was paid on January 30, 2020, to shareholders of record at the close of business on January 15, 2020. In December, the Board also declared a quarterly dividend of $0.15 per share, paid on January 30, 2020, to shareholders of record on January 15, 2020. Due to the negative impact of the COVID-19 pandemic on the financial performance of the company and the uncertainty of when the markets we serve will recover, the Board voted to suspend the quarterly dividend until further notice.

 

Impact of the COVID-19 Pandemic. The COVID-19 pandemic is having an unprecedented impact on demand for oil and petroleum products. The Petroleum Status Report from the Energy Information Administration shows just how dramatic the impact has been on U.S. gasoline demand. For the week that ended 4/3/20, gasoline demand fell to 5.065 million barrels per day (BPD), a 48% decline in gasoline demand versus the same period a year ago.

 

As an essential business, we have continued to operate throughout the pandemic in accordance with White House guidance and orders issued by state and local authorities. We have implemented social distancing and other measures to protect the health of our employees and customers. While we recognize the importance of social distancing to protect human health, these measures will adversely affect petroleum sales and therefore the demand for our products as long as they remain in place.

 

 

Summary and Outlook. Prior to the outbreak of the COVID pandemic, Management was encouraged about the rate environment in light of an increase of $.18 per mile, or 6.6%, on transportation revenue this quarter versus the same quarter last year. Our intent was to continue to push rates higher to offset the rising costs associated with the on-going driver shortage and rising risk insurance premiums while exiting customer relationships that did not allow us to earn an acceptable profit on our services. During the 1st quarter, the Company renegotiated one of our largest customer contracts resulting in the Company turning back ~$3.5M of annualized revenue on marginally rated business while receiving a ~4.5% rate increase on a substantially larger volume of business we retained. Those rate increases were fully in effect as of February 1, 2020. We also walked away from some smaller accounts due to freight rates. As a result, we had capacity in our

21 
 

system as we headed into the busy season which typically begins in late February and were heavily focusing our sales efforts to gain meaningful volume with customers with whom we felt we could partner. January and February suffered as a result of this lost revenue but we were starting to see success on new revenue gains and operating results in early March until the outbreak of COVID-19.

 

As of mid-March, following the start of the impacts from COVID-19, our focus has shifted to managing the business through the crisis, dealing with reduced volumes and controlling costs. We are deemed an essential service and have and will continue to haul freight through the crisis. Our petroleum miles have been averaging ~35-40% lower due to the reduced demand associated with the “shelter in place” mandates. We expect that trend will continue in the near term and will begin to reverse gradually while the Southeastern US economy reopens over the next several months. As it relates to our employees, we immediately put social distancing and hygiene protocols in place plus work from home mandates for many employees. We eliminated the vast majority of our “minimum pay” program and we anticipate this will save us ~$75,000 per month going forward. Unfortunately, we were also forced to lay off several positions, cut our hourly paid staffs’ hours and furloughed over 30 drivers. We will continue to monitor our business closely and adjust our staffing accordingly.

 

Our balance sheet remains solid with $11.3 million of cash and investments and no outstanding debt as of March 31, 2020. We will not order additional replacement tractors during the remainder of this fiscal year which cuts our planned purchases by 50%. Our depreciation and amortization is approximately $2 million each quarter. In addition, we will have other non-cash expenses of approximately $1 million in the June quarter such as real estate taxes and deferrals of employer FICA taxes as allowed by the CARES Act.

 

Looking ahead, with freight volumes down significantly across the country, there is an enormous amount of excess driver capacity. Additionally, we are also seeing a rapidly rising unemployment rate across the US. A sustained higher unemployment rate coming out of this crisis could result in the loosening of the tight driver market we have faced for several years. That would have a positive impact on reducing the Company’s expenses associated with hiring, training and retaining drivers. We are anxious to see what our business will look like once we return to a reopened economy. We anticipate that tanker companies like ours with no debt, lots of depreciation and plenty of cash reserves will find themselves at an advantage as petroleum customers begin to reevaluate their options in the marketplace.

 

On May 8, 2020, the City of Tampa, and all other required agencies, officially approved the Site Plan for the proposed mixed use development on our property located on Dale Mabry Highway in Tampa, Florida. As a result, the 120 day study period for the Buyer commenced that same day. Assuming the buyer is satisfied that all contingencies have been met, we anticipate a closing sometime late this calendar year.

22 
 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

 

Interest Rate Risk - We are exposed to the impact of interest rate changes through our variable-rate borrowings under the credit agreement. Under the Wells Fargo revolving credit line of credit, the applicable spread for borrowings at March 31, 2020 was 1.0% over LIBOR. The applicable margin for such borrowings will be increased in the event that our debt to capitalization ratio as calculated under the credit agreement exceeds a target level.

 

Commodity Price Risk - The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, global politics and other market factors. Historically, we have been able to recover a significant portion of fuel price increases from our customers in the form of fuel surcharges. The typical fuel surcharge table provides some margin contribution at higher diesel fuel prices but also results in some margin erosion at the lower diesel fuel prices. The price and availability of diesel fuel can be unpredictable as well as the extent to which fuel surcharges can be collected to offset such increases.

 

 

ITEM 4. 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”) and Chief Financial Officer (“CFO”), 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 March 31, 2020, 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 our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

23 
 

 

PART II. OTHER INFORMATION

 

Item 1A.RISK FACTORS

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2019, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

The following risk factors set forth below are in addition or changes to the risk factors discussed under Part I, Item 1A (Risk Factors) of our most recent annual report on Form 10-K

Our business may be adversely affected by the ongoing coronavirus pandemic. 

The outbreak of the novel coronavirus (“SARS-CoV-2” or “COVID-19”) has evolved into a global pandemic. The coronavirus has spread to many regions of the world, including the areas of the United States where we operate. The extent to which the coronavirus impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the coronavirus and the actions to contain the coronavirus or treat its impact, among others. 

Should the coronavirus continue to spread, our business operations could be delayed or interrupted. For instance, our operations would be adversely impacted if a number of our administrative personnel, drivers or field personnel are infected and become ill or are quarantined. In response to the pandemic, we have arranged for certain administrative employees to work remotely outside of our offices or to work in shifts. At this time, we believe that our business would generally be exempted from shelter-in-place orders or other mandated local travel restrictions as an essential service but there can be no assurance as to the scope of quarantine orders imposed by local or state governments.  

The spread of the coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, will have a material economic effect on our business for some period of time as our business depends heavily on the demand for petroleum products. Despite relatively low fuel prices, gasoline sales have fallen sharply due to individual, business and government-imposed travel restrictions and a sharp reduction in tourism. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common stock. 

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, or the economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the situation closely.

24 
 

 

Our business is subject to general economic and other factors that are largely out of our control and could affect our operations, profitability and cash flow.

 

Our business is dependent on various economic factors over which we have little control, that include:

 

·the availability of qualified drivers;
·access to the credit and capital markets;
·rising healthcare costs;
·increases in fuel prices, taxes and tolls;
·increases in costs of equipment;
·interest rate fluctuations;
·excess capacity in the trucking industry
·changes in laws or regulations or changes in license and regulatory fees;
·potential disruptions at U.S. ports of entry and in pipeline operations;
·downturns in customers’ business cycles; and
·insurance prices and insurance coverage availability.

  

As a result, we may experience periods of overcapacity, declining prices, lower profit margins and less availability of cash in the future. The COVID-19 pandemic has had widespread adverse economic impacts, and the ultimate impact of the pandemic on these and other factors affecting our business is highly uncertain. Our revenues and operating income could be materially adversely affected.

 

We would be adversely affected by a decline in demand for hauling petroleum products in our markets.

 

We derive approximately 86% of our revenues from the hauling of petroleum products, including gasoline, diesel fuel and ethanol. The demand for these services is determined by motor fuel consumption in our markets, which is affected by general economic conditions, employment levels, consumer confidence, spending patterns and gasoline prices. In response to the spread of COVID-19, businesses and governments have imposed restrictions on travel, quarantine and “shelter-in-place” policies which have caused a significant decline in demand for petroleum products. Despite relatively low fuel prices, gasoline sales have fallen sharply as a result of these restrictions and a sharp reduction in tourism. While we anticipate that stringent travel restrictions and “stay-at-home” orders will be temporary, a continuing public health crisis or recession could continue to impact the demand for petroleum products.

 

Demand for our petroleum hauling services is also impacted by vehicle fuel efficiency, the increasing popularity of electric, hybrid or alternative fuel vehicles and government regulation relating to ethanol. The Energy Information Administration of the U.S. Department of Energy projects that U.S. motor gasoline consumption will decline at an average rate of 1.1% per year between 2012 and 2040 as improvements in fuel efficiency are expected to outpace increases in miles driven.

 

Future legislation or regulations adopted to reduce greenhouse gas emissions, such as a carbon tax, may increase our operating costs, require unanticipated capital expenditures and reduce the demand

25 
 

for petroleum products. Developments regarding climate change and the effects of greenhouse gas emissions on climate change in recent years has increased the likelihood of such legislation or regulation. Moreover, attitudes toward gasoline and its relationship to the environment may significantly affect our sales and ability to market our products. Reduced consumer demand for gasoline could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

Difficulty in attracting and retaining drivers could negatively affect our operations and limit our growth.

 

There is substantial competition for qualified personnel, particularly drivers, in the trucking industry. We operate in many geographic areas where there is currently a shortage of drivers. Regulatory requirements, including electronic logging, could continue to reduce the number of eligible drivers in our markets. Any shortage of drivers could result in temporary under-utilization of our equipment, difficulty in meeting our customers’ demands and increased compensation levels, each of which could have a material adverse effect on our business, results of operations and financial condition. A loss of qualified drivers could lead to an increased frequency in the number of accidents, potential claims exposure and, indirectly, insurance costs.

 

Difficulty in attracting qualified drivers could also require us to limit our growth. Our strategy is to grow in part by expanding existing customer relationships into new markets. However, we may have difficulty finding qualified drivers on a timely basis when presented with new customer opportunities, which could result in our inability to accept or service this business or could require us to increase the wages we pay in order to attract drivers. If we are unable to hire qualified drivers to service business opportunities in new markets, we may have to temporarily send drivers from existing terminals to those new markets, causing us to incur significant costs relating to out-of-town driver pay and expenses. In making acquisitions and converting private fleets, some of the drivers in those fleets may not meet our standards, which would require us to find qualified drivers to replace them. If we are unable to find and retain such qualified drivers on terms acceptable to us, we may be forced to forego opportunities to expand or maintain our business.

 

We have significant ongoing capital requirements.

 

Our business requires substantial ongoing capital investment, particularly for tractors, trailers, terminals and technology. Our capital expenditures were approximately $6.3 million, $4.7 million and $9.6 million in 2017, 2018 and 2019, respectively, and we expect to make capital expenditures of approximately $5.0 million during fiscal 2020. We expect that cash flow from operations and borrowings under our revolving credit facility will be our primary sources of financing for capital expenditures. We anticipate that the broad impacts of the COVID-19 pandemic, including the sharp decline in demand for petroleum products and the significant disruption of financial markets, could have a material adverse impact on our cash flow from operations and our ability to access capital on favorable terms. If we are unable to generate sufficient cash from operations or borrow sufficient funds on terms that are acceptable to us, we may be forced to limit our growth and operate existing equipment for significant periods of time, each of which could have a material adverse effect on our business, results of operations and financial condition.

 

We may face difficulty in purchasing new equipment on a timely basis. Any delay in delivery of equipment could impair our ability to serve our customers, and, to the extent that we must obtain equipment from alternative sources at increased prices, could result in a significant increase in our

26 
 

anticipated capital expenditures and, accordingly, have a material adverse effect on our business, results of operations and financial condition.

 

Financing may not always be available to fund our activities.

 

We usually must spend and risk a significant amount of capital to fund our activities. Although most capital needs are funded from operating cash flow, the timing of cash flows from operations and capital funding needs may not always coincide, and the levels of cash flow may not fully cover capital funding requirements. Additionally, we anticipate that the broad impacts of the COVID-19 pandemic, including the sharp decline in demand for petroleum products, could materially reduce our cash flow from operations.

 

From time to time, we may need to supplement our cash generated from operations with proceeds from financing activities. We currently have a revolving credit facility available to us, for up to $35 million of borrowings, to provide us with available financing for working capital, equipment purchases and other general corporate purposes. This credit facility is intended to meet any ongoing cash needs in excess of internally generated cash flows. The disruption to financial markets caused by the COVID-19 pandemic could adversely impact our ability to obtain financing on terms that are acceptable to us.

 

 

Item 2. PURCHASES OF EQUITY SECURITIES BY THE ISSUER

          (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)
  January 1                                
  Through                                
  January 31     —       $ —         —       $ 5,000,000  
                                   
  February 1                                
  Through                                
  February 29     —       $ —         —       $ 5,000,000  
                                   
  March 1                                
  Through                                
  March 31     —       $ —         —       $ 5,000,000  
                                   
  Total     —       $         —            

 

(1) On February 4, 2015, the Board of Directors authorized management to expend up to $5,000,000 to repurchase shares of the Company’s common stock from time to time as opportunities arise. To date, the Company has not repurchased any common stock of the Company.

 

27 
 

Item 6. EXHIBITS

 

(a)Exhibits. The response to this item is submitted as a separate Section entitled "Exhibit Index", on page 30.
28 
 

 

 

 

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.

 

 

      PATRIOT TRANSPORTATION HOLDING, INC.
         
         
Date:  May 14, 2020   By ROBERT E. SANDLIN  
      Robert E. Sandlin  
      President and Chief Executive Officer
      (Principal Executive Officer)
         
         
    By MATTHEW C. MCNULTY  
      Matthew C. McNulty  
      Vice President, Chief Financial Officer and  
      Secretary
      (Principal Financial Officer)
         
         
    By JOHN D. KLOPFENSTEIN  
      John D. Klopfenstein  
      Controller, Chief Accounting Officer and
      Treasurer
      (Principal Accounting Officer)

 

 

 

 

29 
 

PATRIOT TRANSPORTATION HOLDING, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2020

EXHIBIT INDEX

 

 

(14)

Financial Code of Ethical Conduct between the Company, Chief Executive Officers, and Financial Managers (incorporated by reference to Form 8-K filed February 2, 2015).

(31)(a)Certification of Robert E. Sandlin
(31)(b)Certification of Matthew C. McNulty
(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.

 

101.INS XBRL Instance Document
101.XSD XBRL Taxonomy Extension Schema 
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
30 
 

 

CERTIFICATIONS                                                                                                                Exhibit 31(a)

 

I, Robert E. Sandlin, certify that:

 

1.I have reviewed this report on Form 10-Q of Patriot Transportation Holding, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosures controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial report; and
5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 14, 2020                                                                                                 /s/Robert E. Sandlin

                                   President and Chief

Executive Officer

CERTIFICATIONS                                                                                                            Exhibit 31(b)

 

I, Matthew C. McNulty, certify that:

 

1.I have reviewed this report on Form 10-Q of Patriot Transportation Holding, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosures controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial report; and
5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 14, 2020                                                                            /s/Matthew C. McNulty

                                                                                                       Vice President, Chief Financial Officer

                                                                                                        and Secretary

CERTIFICATIONS                                                                                                              Exhibit 31(c)

 

I, John D. Klopfenstein, certify that:

 

1.I have reviewed this report on Form 10-Q of Patriot Transportation Holding, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosures controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial report; and
5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 14, 2020                                                                                                /s/John D. Klopfenstein

                                                                                                                                   Controller, Chief Accounting Officer and

            Treasurer

 

 

 

Exhibit 32

 

 

CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies that this periodic report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this periodic report fairly presents, in all material respects, the financial condition and results of operations of Patriot Transportation Holding, Inc.

 

      PATRIOT TRANSPORTATION HOLDING, INC.
         
         
Date:  May 14, 2020   By /s/ROBERT E. SANDLIN  
      Robert E. Sandlin  
      President and Chief Executive Officer
       
         
         
    By /s/MATTHEW C. MCNULTY  
      Matthew C. McNulty  
      Vice President, Chief Financial Officer and
      Secretary
         
         
    By /s/JOHN D. KLOPFENSTEIN  
      John D. Klopfenstein  
      Controller, Chief Accounting Officer and Treasurer
       

 

 

 

A signed original of this written statement required by Section 906 has been provided to Patriot Transportation Holding, Inc. and will be retained by Patriot Transportation Holding, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

The foregoing certification accompanies the issuer’s Quarterly report on Form 10-Q and is not filed as provided in SEC Release Nos. 33-8212, 34-4751 and IC-25967, dated June 30, 2003.

 

 

v3.20.1
Earnings per share - Earnings per common share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Earnings Per Share [Abstract]        
Weighted average common shares outstanding during the period - shares used for basic earnings per common share 3,354 3,342 3,352 3,335
Common shares issuable under share based payment plans which are potentially dilutive 0 1 0 1
Common shares used for diluted earnings per common share 3,354 3,343 3,352 3,336
Net income (loss) $ (401) $ 289 $ (865) $ 1,173
Earnings (loss) per common share:        
Earnings (loss) per share-basic $ (0.12) $ 0.09 $ (0.26) $ 0.35
Earnings (loss) per share-diluted $ (0.12) $ 0.09 $ (0.26) $ 0.35
v3.20.1
Description of Business and Basis of Presentation (Details Narrative)
$ in Thousands
6 Months Ended
Mar. 31, 2020
USD ($)
Revenue Producing Drivers 529
Fleet of Tractors 350
owner operators 22
Fleet of Trailers 474
Terminal locations 19
Satellite locations 6
Treasury bills reclassified as cash and cash equivalents $ 5,983
Petroleum Products  
Percentage of Business 86.00%
Dry Bulk Commodities  
Percentage of Business 14.00%
v3.20.1
Consolidated and Combined Statements of Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Revenues:        
Total revenues $ 23,527 $ 27,008 $ 48,336 $ 55,062
Cost of operations:        
Compensation and benefits 10,381 11,852 21,379 23,890
Fuel expenses 2,946 4,004 6,409 8,280
Repairs & tires 1,571 2,006 3,322 3,671
Other operating 975 1,189 1,931 2,321
Insurance and losses 2,555 2,002 5,324 4,944
Depreciation expense 1,839 1,976 3,789 3,946
Rents, tags & utilities 753 891 1,503 1,738
Sales, general & administrative 2,609 2,561 5,090 5,029
Corporate expenses 814 867 1,351 1,399
Gain on disposition of PP&E (328) (633) (450) (1,556)
Total cost of operations 24,115 26,715 49,648 53,662
Total operating profit (loss) (588) 293 (1,312) 1,400
Interest income and other 42 113 127 214
Interest expense (7) (7) (15) (17)
Income (loss) before income taxes (553) 399 (1,200) 1,597
Provision for (benefit from) income taxes (152) 110 (335) 424
Net income (loss) (401) 289 (865) 1,173
Unrealized investment gains, net 0 10 0 12
Reclassification adjust for net investment gains realized in net income 0 0 (5) 0
Comprehensive Income (loss) $ (401) $ 299 $ (870) $ 1,185
Earnings per common share:        
Net income (loss)- basic $ (0.12) $ 0.09 $ (0.26) $ 0.35
Net income (loss)- diluted $ (0.12) $ 0.09 $ (0.26) $ 0.35
Number of shares (in thousands) used in computing:        
-basic earnings per common share 3,354 3,342 3,352 3,335
-diluted earnings per common share 3,354 3,343 3,352 3,336
Transportation [Member]        
Revenues:        
Revenues $ 21,560 $ 24,537 $ 44,159 $ 49,517
Fuel Surcharges [Member]        
Revenues:        
Revenues $ 1,967 $ 2,471 $ 4,177 $ 5,545
v3.20.1
Description of Business and Basis of Presentation and Accounting Policy Change
6 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Description of Business and Basis of Presentation

(1) Description of Business, Basis of Presentation and Accounting Policy Change.

 

Description of Business

 

Company’s Business. The business of the Company, conducted through our wholly owned subsidiary, Florida Rock & Tank Lines, Inc., is to transport petroleum related products and dry bulk commodities and liquid chemicals. We do not own any of the products we haul; rather, we act as a third party carrier to deliver our customers’ products from point A to point B, using predominately Company employees and Company-owned tractors and tank trailers. Approximately 86% of our business consists of hauling liquid petroleum products (mostly gas and diesel fuel) from large scale fuel storage facilities to our customers’ retail outlets (e.g. convenience stores, truck stops and fuel depots) where we off-load the product into our customers’ fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling dry bulk commodities such as cement, lime and various industrial powder products and liquid chemicals. As of March 31, 2020, we employed 529 drivers who operated our fleet of 350 company tractors, 22 owner operators and 474 trailers from our 19 terminals and 6 satellite locations in Florida, Georgia, Alabama, North Carolina and Tennessee.  

 

Basis of Presentation

 

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 six months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2020. 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 audited financial statements and notes for the year ended September 30, 2019.

 

Accounting Policy Change

 

Cash and cash equivalents –The Company considers all Treasury bills available for sale regardless of maturity and other highly liquid debt instruments with maturities of three months or less at time of purchase to be cash equivalents. Bank overdrafts consist of outstanding checks not yet presented to a bank for settlement, net of cash held in accounts with right of offset. Treasury bills of $5,983,000 at September 30, 2019 have been reclassified as cash equivalents in these financial statements.

v3.20.1
Business Acquisition (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2018
Revenue $ 23,527 $ 27,008 $ 48,336 $ 55,062  
Danfair Transport          
Revenue         $ 2,300
Estimated earned payout liability 425   425    
Potential high range of earned payout 800   800    
Potential low range of earned payout $ 0   $ 0    
v3.20.1
Stock-Based Compensation Plans (Details Narrative)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Mar. 31, 2020
USD ($)
$ / shares
shares
Mar. 31, 2020
USD ($)
$ / shares
shares
Mar. 31, 2019
USD ($)
Dec. 21, 2016
USD ($)
yr
$ / shares
shares
Shares available for future issuance | shares 163,400 163,400    
Stock appreciation rights issued | shares       132,286
Minimum award for stock appreciation rights       $ 500
Stock appreciation rights vesting period | yr       9.1
Aggregate intrinsic value of exercisable options $ 0 $ 0    
Aggregate intrinsic value of outstanding in-the-money options $ 0 $ 0    
Market close price | $ / shares $ 9.25 $ 9.25   $ 16.82
Total unrecognized compensation cost of options granted $ 660 $ 660    
Compensation cost not yet vested recognition period   3 years 6 months    
Stock appreciation rights accrued liability $ 297 $ 297 $ 207  
Special Cash Dividend        
Dividends paid | $ / shares $ 3.00      
FRP        
Realized tax benefit from options exercised   $ 11    
v3.20.1
Subsequent Events
6 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events

(12) Subsequent Events.

COVID-19. The outbreak of the novel coronavirus (“SARS-CoV-2” or “COVID-19”) has evolved into a global pandemic. The extent to which the coronavirus impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted. We derive approximately 86% of our revenues from the hauling of petroleum products, and “stay home” orders issued by state and local governments to mitigate the spread of COVID-19 has dramatically reduced consumption of petroleum products and the resulting demand for our services. These measures resulted in a reduction of 240,000 revenue miles in the second quarter of fiscal 2020 and will have an even greater impact in the third quarter.

Should the coronavirus continue to spread, our business operations could be delayed or interrupted. For instance, our operations would be adversely impacted if a number of our administrative personnel, drivers or field personnel are infected and become ill or are quarantined. In response to the pandemic, we have arranged for certain administrative employees to work remotely outside of our offices or to work in shifts. At this time, we believe that our business will continue to be exempted from shelter-in-place orders or other mandated local travel restrictions as an essential service but there can be no assurance as to the scope of quarantine orders imposed by local or state governments.  

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, or the economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the situation closely.

 

Wilmington Closure. On April 25th, the Company closed the operation of our Wilmington, NC terminal and transitioned the business to another operator that has a larger presence and more scale in the North Carolina chemical marketplace. This terminal has underperformed for the past several quarters mainly due to the closure of a large chemical customer in the area coupled with rate compression in the short haul, commodity chemical market. Revenues at the Wilmington terminal YTD were $1,352,000. We transferred over many of our employees, subleased the terminal, leased some trailers for a few months and eventually will sell all unneeded equipment and other facility assets on which we anticipate a gain.

 

Tampa Property. On May 8, 2020, the City of Tampa, and all other required agencies, officially approved the Site Plan for the proposed mixed use development on our property located on Dale Mabry Highway in Tampa, Florida. As a result, the 120 day study period for the Buyer commenced that same day. Assuming the buyer is satisfied that all contingencies have been met, we anticipate a closing sometime late this calendar year.

v3.20.1
Long-Term Debt
6 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Long-Term Debt

(4) Long-Term debt.

 

The Company had no long-term debt outstanding at March 31, 2020 and September 30, 2019. On December 28, 2018 the Company entered into a First Amendment to the 2015 Credit Agreement (the "Credit Agreement") with Wells Fargo Bank, N.A. ("Wells Fargo"), effective December 14, 2018. The Credit Agreement modifies the Company's prior Credit Agreement with Wells Fargo, dated January 30, 2015. The Credit Agreement establishes a five year revolving credit facility with a maximum facility amount of $35 million, with a separate sublimit for standby letters of credit. The credit facility limit may be increased to $50 million upon request by the Company, subject to the lender's discretion and the satisfaction of certain conditions. The interest rate under the Credit Agreement will be a maximum of 1.50% over LIBOR, which may be reduced quarterly to 1.25% or 1.0% over LIBOR if the Company meets a specified ratio of consolidated total debt to consolidated total capital. A commitment fee of 0.144% per annum is payable quarterly on the unused portion of the commitment but the amount may be reduced to 0.1145% or 0.086% if the Company meets a specified ratio of consolidated total debt to consolidated total capital. As of March 31, 2020, we had no outstanding debt borrowed on this revolver, $3,073,000 in commitments under letters of credit and $31,927,000 available for additional borrowings. The letter of credit fee is 1% and the applicable interest rate would have been 1.989% on March 31, 2020. This credit agreement contains certain conditions, affirmative financial covenants and negative covenants including a minimum tangible net worth. The Company was in compliance with all of its loan covenants as of March 31, 2020.

 

v3.20.1
Contingent liabilities
6 Months Ended
Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Contingent liabilities

(8) Contingent liabilities.

 

The Company is involved in litigation on a number of matters and is 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. There is a reasonable possibility that the Company’s estimate of vehicle and workers’ compensation liability may be understated or overstated but the possible range cannot be estimated. The liability at any point in time depends upon the relative ages and amounts of the individual open claims. In the opinion of management none of these matters are expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

v3.20.1
Subsequent Events (Details Narrative)
$ in Thousands
3 Months Ended 6 Months Ended
Mar. 31, 2020
USD ($)
Units
Mar. 31, 2019
USD ($)
Mar. 31, 2020
USD ($)
Mar. 31, 2019
USD ($)
Revenues $ 23,527 $ 27,008 $ 48,336 $ 55,062
Covid 19        
Reduction in revenue miles | Units 240      
Wilmington        
Revenues     $ 1,352  
Petroleum Products        
Percentage of Business 86.00%   86.00%  
v3.20.1
Fair Value Measurements (Details Narrative)
$ in Thousands
6 Months Ended
Mar. 31, 2019
USD ($)
Fair Value Disclosures [Abstract]  
Unrealized gains on treasury bills $ 12
Amortized cost of investments in treasury bills 18,860
Carrying amount of investments in treasury bills 18,863
Fair value of investments in treasury bills $ 18,863
v3.20.1
Related Party Agreements
6 Months Ended
Mar. 31, 2020
Related Party Transactions [Abstract]  
Related Party Agreements

(3) Related Party Agreements.

 

The Company provides FRP Holdings, Inc. (FRP) certain services including the services of certain shared executive officers. FRP may be considered a related party due to common significant shareholder ownership and shared common officers. A written agreement exists outlining the terms of such services and the boards of the respective companies amended and extended this agreement for one year effective April 1, 2020.

 

The consolidated statements of income reflect charges and/or allocation to FRP Holdings, Inc. for these services of $290,000 and $301,000 for the three months ended March 31, 2020 and 2019, and $703,000 and $723,000 for the six months ended March 31, 2020 and 2019, respectively. Included in the charges above are amounts recognized for corporate executive stock-based compensation expense. These charges are reflected as a reduction to corporate expenses.

 

We employ an allocation method to allocate said expenses and thus we believe that the allocations to FRP are a reasonable approximation of the costs related to FRP’s operations, but any such related-party transactions cannot be presumed to be carried out on an arm’s-length basis.

v3.20.1
Fair Value Measurements
6 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

(7) Fair Value Measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 means the use of quoted prices in active markets for identical assets or liabilities. Level 2 means the use of values that are derived principally from or corroborated by observable market data. Level 3 means the use of inputs are those that are unobservable and significant to the overall fair value measurement.

 

During the six months ending March 31, 2019, the Company invested in treasury bills with maturities at time of purchase of 3 months to 1 year. The unrealized gains on these investments of $12,000 was recorded as part of comprehensive income and was based on the market value (Level 1). The amortized cost of the investments was $18,860,000 and the carrying amount and fair value was $18,863,000 as of March 31, 2019.

 

At March 31, 2020 and September 30, 2019, the carrying amount reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and other financial instruments approximate their fair value based upon the short-term nature of these items.

 

v3.20.1
Business Acquisition
6 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Business Acquisition

(11) Business Acquisition.

 

The Company acquired certain assets of Danfair Transport out of Americus, GA on November 4, 2019. Danfair had total revenues of approximately $2,300,000 in 2018.

 

The Company has accounted for this acquisition in accordance with the provisions of ASC 805, Business Combinations (ASC 805). The Company has allocated the purchase price of the business based upon the fair value of the assets acquired and liabilities assumed as follows (in thousands):

 

 

Fair value of consideration transferred     (1,425 )
         
Acquisition related costs expensed   $ 38  
         
Recognized amounts of identifiable assets acquired and        
liabilities assumed:        
Property and equipment   $ 759  
Prepaid tires     25  
Customer relationships     436  
Non-compete agreement     12  
Vacation liability assumed     (13 )
Total identifiable net assets assumed   $ 1,219  
Goodwill     206  
Total   $ 1,425  

 

The goodwill recorded resulting from the acquisition is tax deductible. The earned payout liability currently estimated at $425,000 will be determined based upon the total revenues for the 12 months following the acquisition. The potential range of the earned payout is zero to $800,000.

 

v3.20.1
Business Acquisition (Tables)
6 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Acquisition purchase price allocation
Fair value of consideration transferred     (1,425 )
         
Acquisition related costs expensed   $ 38  
         
Recognized amounts of identifiable assets acquired and        
liabilities assumed:        
Property and equipment   $ 759  
Prepaid tires     25  
Customer relationships     436  
Non-compete agreement     12  
Vacation liability assumed     (13 )
Total identifiable net assets assumed   $ 1,219  
Goodwill     206  
Total   $ 1,425  
v3.20.1
Business Acquisition - Acquisition purchase price allocation (Details) - USD ($)
$ in Thousands
6 Months Ended
Mar. 31, 2020
Nov. 04, 2019
Sep. 30, 2019
Prepaid tires $ 1,524   $ 1,616
Danfair Transport      
Fair value of consideration transferred (1,425)    
Acquisition related costs expensed $ 38    
Property and equipment   $ 759  
Prepaid tires   25  
Customer relationships   436  
Non-compete agreement   12  
Vacation liability assumed   (13)  
Total identifiable net assets assumed   1,219  
Goodwill   206  
Total   $ 1,425  
v3.20.1
Recently Issued Accounting Standards
6 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Recently Issued Accounting Standards

(2) Recently Issued Accounting Standards.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which requires lessees to recognize a right-to-use asset and a lease liability for the obligation to make lease payments measured at the present value of the lease payments for all leases with terms greater than twelve months. The provisions of this update and additional guidance in subsequent ASUs became effective for us beginning October 1, 2019. In July 2018, the FASB issued ASU No. 2018-11, “Leases” which provides an optional transition method allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, with no restatement of comparative prior periods required. We adopted the standard using this optional transition method. Upon adoption as of October 1, 2019, the Company recognized $3,873,000 in operating lease right-of-use assets, a reduction of $231,000 of other long-term liabilities related to straight-lined leases and $4,104,000 in operating lease liabilities. As of March 31, 2020, the Company has 8 property leases with an expected life over 12 months and 30 leased tractors and recognized $3,750,000 in operating lease right-of-use assets and $3,951,000 in operating lease obligations.

 

 

v3.20.1
Consolidated and Combined Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Cash flows from operating activities:    
Net income (loss) $ (865) $ 1,173
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 4,629 4,243
Deferred income taxes (454) 10
Gain on asset dispositions (450) (1,556)
Stock-based compensation 454 475
Net changes in operating assets and liabilities:    
Accounts receivable 918 (524)
Inventory of parts and supplies 4 (12)
Prepaid expenses 1,726 531
Other assets (17) 5
Accounts payable and accrued liabilities (782) 23
Income taxes payable and receivable 134 384
Operating lease assets and liabilities, net (571) 0
Long-term insurance liabilities and other long-term liabilities 19 (5)
Net cash provided by operating activities 4,745 4,747
Cash flows from investing activities:    
Purchase of property and equipment (4,279) (4,702)
Business acquisition (1,000) 0
Proceeds from the sale of property, plant and equipment 1,220 2,375
Net cash used in investing activities (4,059) (2,327)
Cash flows from financing activities:    
Decrease in bank overdrafts 0 (625)
Debt issue costs 0 (9)
Dividends paid (10,557) 0
Net cash used in financing activities (10,557) (634)
Net (decrease) increase in cash and cash equivalents (9,871) 1,786
Cash and cash equivalents at beginning of period 21,216 17,299
Cash and cash equivalents at end of the period $ 11,345 $ 19,085
v3.20.1
Document and Entity Information - shares
6 Months Ended
Mar. 31, 2020
Apr. 30, 2020
Document And Entity Information    
Entity Registrant Name PATRIOT TRANSPORTATION HOLDING, INC.  
Entity Central Index Key 0001616741  
Document Type 10-Q  
Document Period End Date Mar. 31, 2020  
Amendment Flag false  
Current Fiscal Year End Date --09-30  
Entity Incorporation State Country FL  
Entity File Number 001-36605  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business Filer true  
Emerging Growth Company false  
Interactive data current Yes  
Shell Company false  
Security title Common stock, $.10 par value  
Trading symbol PATI  
Name of exchange on which registered NASDAQ  
Entity Common Stock, Shares Outstanding   3,377,279
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2020  
v3.20.1
Earnings per share
6 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Earnings per share

(5) Earnings per share.

 

Basic earnings per common share are based on the weighted average number of common shares outstanding during the periods. Diluted earnings per common share are based on the weighted average number of common shares and potential dilution of securities that could share in earnings. The differences between basic and diluted shares used for the calculation are the effect of employee and director stock options.

 

The following details the computations of the basic and diluted earnings per common share (dollars and shares in thousands, except per share amounts):

 

    Three Months ended   Six months ended
    March 31,   March 31,
    2020   2019   2020   2019
Weighted average common shares                
outstanding during the period                
- shares used for basic                
 earnings per common share     3,354       3,342       3,352       3,335  
                                 
Common shares issuable under                                
 share based payment plans                                
 which are potentially dilutive     —         1       —         1  
                                 
Common shares used for diluted                                
 earnings per common share     3,354       3,343       3,352       3,336  
                                 
Net income (loss)   $ (401 )     289       (865     1,173  
                                 
Earnings (loss) per common share:                                
-basic   $ (0.12 )     0.09       (0.26     0.35  
-diluted   $ (0.12 )     0.09       (0.26     0.35  

 

 

For the three and six months ended March 31, 2020, 400,722 shares attributable to outstanding stock options were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. For the three and six months ended March 31, 2019, 181,983 and 175,373 shares attributable to outstanding stock options, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

 

v3.20.1
Concentrations
6 Months Ended
Mar. 31, 2020
Risks and Uncertainties [Abstract]  
Concentrations

(9) Concentrations.

 

Market: The Company primarily serves customers in the petroleum industry in the Southeastern U.S. Significant economic disruption or downturn in this geographic region or within these industries could have an adverse effect on our financial statements.

 

Customers: During the first six months of fiscal 2020, the Company’s ten largest customers accounted for approximately 63.0% of our revenue and one of these customers accounted for 21.0% of our revenue. Accounts receivable from the ten largest customers was $3,259,000 and $4,264,000 at March 31, 2020 and September 30, 2019 respectively. The loss of any one of these customers could have a material adverse effect on the Company’s revenues and income.

 

Deposits: Cash and cash equivalents are comprised of cash at Wells Fargo Bank, N.A.  The balances may exceed FDIC limits.

 

v3.20.1
Unusual or Infrequent Items Impacting Quarterly Results (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2019
Dec. 31, 2018
Real Estate Sales    
Gain included in net income   $ 634
Per share gain included in net income   $ 0.19
Insurance Settlement    
Gain included in net income $ 179  
Per share gain included in net income $ .05  
Gain included in income statement $ 247  
v3.20.1
Earnings per share (Details Narrative) - shares
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Earnings Per Share [Abstract]        
Anti-dilutive shares 400,722 181,983 400,722 175,373
v3.20.1
Recently Issued Accounting Standards (Details Narrative)
$ in Thousands
6 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
Units
Sep. 30, 2019
USD ($)
Right to use assets $ 3,750 $ 3,873
Operating lease obligations $ 3,951 4,104
Straight lined lease liabilities   $ 231
Leased Tractors    
Leased units | Units 30  
Property Leases    
Leased units | Units 8  
v3.20.1
Earnings per share (Tables)
6 Months Ended
Mar. 31, 2020
Earnings Per Share  
Earnings per share (in thousands, except per share amounts)

    Three Months ended   Six months ended
    March 31,   March 31,
    2020   2019   2020   2019
Weighted average common shares                
outstanding during the period                
- shares used for basic                
 earnings per common share     3,354       3,342       3,352       3,335  
                                 
Common shares issuable under                                
 share based payment plans                                
 which are potentially dilutive     —         1       —         1  
                                 
Common shares used for diluted                                
 earnings per common share     3,354       3,343       3,352       3,336  
                                 
Net income (loss)   $ (401 )     289       (865     1,173  
                                 
Earnings (loss) per common share:                                
-basic   $ (0.12 )     0.09       (0.26     0.35  
-diluted   $ (0.12 )     0.09       (0.26     0.35  

v3.20.1
Stock-Based Compensation Plans - Summary of Stock Options (Details) - USD ($)
$ / shares in Units, $ in Thousands
6 Months Ended 12 Months Ended
Mar. 31, 2020
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]    
Options outstanding 400,722 189,015
Term adjustment 148,877  
Options granted 68,865  
Options forfeited (6,035)  
Options outstanding weighted average exercise price $ 14.96 $ 21.49
Options outstanding weighted average exercise price - Granted 18.40  
Options outstanding weighted average exercise price - forfeited $ 23.99  
Options outstanding weighted average remaining term 7 years 1 month 7 days 6 years 3 months 18 days
Options outstanding weighted average grant date fair value $ 1,749 $ 1,531
Options granted weighted average grant date fair value $ 275  
Options forfeited weighted average grant date fair value $ (57)  
Options exercisable 191,597  
Options exerciseable weighted average exercise price $ 16.09  
Options exercisable weighted average remaining term 5 years 3 months 20 days  
Options exerciseable weighted average grant date fair value $ 1,002  
Options vested 39,070  
Options vested weighted average grant date fair value $ 204  
v3.20.1
Shareholders Equity (Parenthetical) - $ / shares
6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement of Stockholders' Equity [Abstract]    
Cash dividends per share $ 3.15 $ 0
v3.20.1
Consolidated and Combined Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2020
Mar. 31, 2019
Statement of Financial Position [Abstract]    
Accounts receivable allowance for doubtful accounts $ 112 $ 133
Preferred stock, par value $ .01 $ .01
Preferred stock, shares authorized 5,000,000 5,000,000
Series A Junior Participating Preferred Stock 250,000 250,000
Preferred stock, shares issued 0 0
Common stock, par value $ .10 $ .10
Common stock, shares authorized 25,000,000 25,000,000
Common stock, shares issued 3,377,279 3,351,329
v3.20.1
Stock-Based Compensation Plans (Tables)
6 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock Compensation Expense (in thousands)

    Three Months ended   Six months ended
    March 31,   March 31,
    2020   2019   2020   2019
Stock option grants   $ 60       57       119       112  
Annual director stock award     335       363       335       363  
    $ 395       420       454       475  

Summary of Stock Options (in thousands, except share and per share amounts)

            Weighted       Weighted       Weighted  
    Number       Average       Average       Average  
    of       Exercise       Remaining       Grant Date  
Options   Shares       Price       Term (yrs)       Fair Value  
                               
Outstanding at                              
 October 1, 2019   189,015     $ 21.49       6.3     $ 1,531  
  Term Adjustment   148,877                          
  Granted   68,865       18.40               275  
  Forfeited   (6,035 )     23.99               (57 )
Outstanding at                              
 March 31, 2020   400,722     $ 14.96       7.1     $ 1,749  
Exercisable at                              
 March 31, 2020   191,597     $ 16.09       5.3     $ 1,002  
Vested during                              
 six months ended                              
 March 31, 2020   39,070                     $ 204  

v3.20.1
Stock-Based Compensation Plans - Stock Compensation Expense (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Share-based Payment Arrangement [Abstract]        
Stock option grants $ 60 $ 57 $ 119 $ 112
Annual director stock award 335 363 335 363
Stock based compensation expense $ 395 $ 420 $ 454 $ 475
v3.20.1
Related Party Agreements (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
FRP        
Charges/allocations $ 290 $ 301 $ 703 $ 723
v3.20.1
Shareholders Equity (Unaudited) - USD ($)
$ in Thousands
Common Stock
Additional Paid-In Capital
Retained Earnings / Accumulated Deficit
Other Comprehensive Income / Loss
Total
Beginning balance, shares at Sep. 30, 2018 3,328,466        
Beginning balance, amount at Sep. 30, 2018 $ 333 $ 37,436 $ 14,472 $ 165 $ 52,406
Stock-based compensation   112     112
Exercise of stock options, shares 18,863        
Exercise of stock options, amount $ 2 361     363
Net income (loss)     1,173   1,173
Unrealized gain on investment, net       12 12
Realized gain on investment, net         0
Ending balance, shares at Mar. 31, 2019 3,347,329        
Ending balance, amount at Mar. 31, 2019 $ 335 37,909 15,645 177 54,066
Beginning balance, shares at Sep. 30, 2019 3,351,329        
Beginning balance, amount at Sep. 30, 2019 $ 335 38,099 16,235 128 54,797
Stock-based compensation   119     119
Exercise of stock options, shares 25,950        
Exercise of stock options, amount $ 3 332     335
Cash dividends     (10,557)   (10,557)
Net income (loss)     (865)   (865)
Unrealized gain on investment, net         0
Realized gain on investment, net       (5) (5)
Ending balance, shares at Mar. 31, 2020 3,377,279        
Ending balance, amount at Mar. 31, 2020 $ 338 $ 38,550 $ 4,813 $ 123 $ 43,824
v3.20.1
Consolidated and Combined Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2020
Sep. 30, 2019
Current assets:    
Cash and cash equivalents $ 11,345 $ 21,216
Accounts receivable, net of allowance for doubtful accounts of $112 and $133, respectively 5,670 6,588
Federal and state taxes receivable 156 290
Inventory of parts and supplies 945 949
Prepaid tires on equipment 1,524 1,616
Prepaid taxes and licenses 309 536
Prepaid insurance 1,493 2,895
Prepaid expenses, other 354 334
Total current assets 21,796 34,424
Property and equipment, at cost 88,597 91,332
Less accumulated depreciation 54,756 57,765
Net property and equipment 33,841 33,567
Operating lease right-of-use assets 3,750 0
Goodwill 3,637 3,431
Intangible assets, net 1,057 701
Other assets, net 180 170
Total assets 64,261 72,293
Current liabilities:    
Accounts payable 2,950 3,184
Accrued payroll and benefits 3,461 3,906
Accrued insurance 1,413 1,339
Accrued liabilities, other 659 398
Operating lease liabilities, current portion 1,166 0
Total current liabilities 9,649 8,827
Operating lease liabilities less current portion 2,785 0
Deferred income taxes 5,783 6,237
Accrued insurance 1,339 1,339
Other liabilities 881 1,093
Total liabilities 20,437 17,496
Commitments and contingencies
Shareholders' Equity:    
Preferred stock, 5,000,000 shares authorized, of which 250,000 shares are designated Series A Junior Participating Preferred Stock; $0.01 par value; none issued and outstanding 0 0
Common stock, $.10 par value; (25,000,000 shares authorized; 3,377,279 and 3,351,329 shares issued and outstanding, respectively) 338 335
Capital in excess of par value 38,550 38,099
Retained earnings 4,813 16,235
Accumulated other comprehensive income, net 123 128
Total shareholders' equity 43,824 54,797
Total liabilties and shareholders' equity $ 64,261 $ 72,293
v3.20.1
Stock-Based Compensation Plans
6 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation Plans

(6) Stock-Based Compensation Plans.

 

Participation in FRP Plans

Prior to the Company’s spin-off from FRP Holdings, Inc. (FRP) in January 2015, the Company's directors, officers and key employees previously were eligible to participate in FRP's 2000 Stock Option Plan and the 2006 Stock Option Plan under which options for shares of common stock were granted to directors, officers and key employees.

 

Post Spin-Off Patriot Incentive Stock Plan

As part of the spin-off transaction, the Board of Directors of the Company adopted the Patriot Transportation Holding, Inc. Incentive Stock Plan (“Patriot Plan”) in January, 2015. In exchange for all outstanding FRP options held on January 30, 2015, existing Company directors, officers and key employees holding option grants in the FRP Stock Option Plan(s) were issued new grants in the Patriot and FRP Plans based upon the relative value of Patriot and FRP immediately following the completion of the spin-off with the same remaining terms. All related compensation expense has been allocated to the Company (rather than FRP) and included in corporate expenses. The number of common shares available for future issuance in the Patriot Plan was 163,400 at March 31, 2020.

 

On January 30, 2020, the Company paid an extraordinary dividend of $3.00 per share to all shareholders of record. In accordance with Section 4.2 of the 2006 Stock Incentive Plan, Section 11 of the 2014 Equity Incentive Plan, and Section 409A of the Internal Revenue Code, the Company has adjusted the terms of all stock option grants outstanding and the stock appreciation rights as of the close of business on January 30, 2020.

 

In December 2016, the Company approved and issued a long-term performance incentive to an officer in the form of stock appreciation rights. As adjusted for the extraordinary dividend the Company granted 132,286 stock appreciation rights. The adjusted market price of the grant was $16.82, and the executive will get a cash award at age 65 based upon the stock price at that date compared to the stock price at the date of grant but in no event will the award be less than $500,000. The Company plans to expense the fair value of the award over the 9.1 year vesting period to the officer’s attainment of age 65. The accrued liability under this plan as of March 31, 2020 and 2019 was $297,000 and $207,000, respectively.

 

The Company recorded the following stock compensation expense in its consolidated statements of income (in thousands):

    Three Months ended   Six months ended
    March 31,   March 31,
    2020   2019   2020   2019
Stock option grants   $ 60       57       119       112  
Annual director stock award     335       363       335       363  
    $ 395       420       454       475  

 

 

A summary of Company stock options is presented below (in thousands, except share and per share amounts):

            Weighted       Weighted       Weighted  
    Number       Average       Average       Average  
    of       Exercise       Remaining       Grant Date  
Options   Shares       Price       Term (yrs)       Fair Value  
                               
Outstanding at                              
 October 1, 2019   189,015     $ 21.49       6.3     $ 1,531  
  Term Adjustment   148,877                          
  Granted   68,865       18.40               275  
  Forfeited   (6,035 )     23.99               (57 )
Outstanding at                              
 March 31, 2020   400,722     $ 14.96       7.1     $ 1,749  
Exercisable at                              
 March 31, 2020   191,597     $ 16.09       5.3     $ 1,002  
Vested during                              
 six months ended                              
 March 31, 2020   39,070                     $ 204  

 

There were no exercisable or outstanding in-the-money options based on the Company’s market closing price of $9.25 on March 31, 2020.

 

The realized tax benefit from option exercises during the first six months of fiscal 2020 was $11,000 which pertained to FRP options exercised that were granted to persons employed by Patriot. The unrecognized compensation expense of Patriot options granted as of March 31, 2020 was $660,000, which is expected to be recognized over a weighted-average period of 3.5 years.

 

v3.20.1
Unusual or Infrequent Items Impacting Quarterly Results
6 Months Ended
Mar. 31, 2020
Unusual or Infrequent Items, or Both [Abstract]  
Unusual or Infrequent Items Impacting Quarterly Results

(10) Unusual or Infrequent Items Impacting Quarterly Results.

 

First quarter 2019 net income included $634,000, or $.19 per share, from gains on real estate sales. Second quarter 2019 net income included $179,000 or $.05 per share, from a gain of $247,000 on the insurance settlement for hurricane damages and losses sustained at our Panama City, Florida location in first quarter 2019.

v3.20.1
Concentrations (Details Narrative) - USD ($)
$ in Thousands
6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Top Ten Customers    
Customer revenue concentration 63.00%  
Accounts receivable concentration $ 3,259 $ 4,264
Top Customer    
Customer revenue concentration 21.00%  
v3.20.1
Long-Term Debt (Details Narrative) - USD ($)
$ in Thousands
1 Months Ended 6 Months Ended
Mar. 31, 2019
Mar. 31, 2020
Sep. 30, 2019
Dec. 14, 2018
Wells Fargo        
Revolving Credit facility       $ 35,000
Credit facility increase maximum       $ 50,000
Borrowed under the revolver   $ 0    
Commitments under letters of credit   3,073    
Amount available for additional borrowings   $ 31,927    
Credt agreement term 5 years      
Compliance with loan covenants   All    
Letter of credit fee   1.00%    
Interest rate   1.989%    
Long-term debt   $ 0 $ 0  
Level I        
Interest rate over LIBOR   1.50%    
Commitment fee   0.144%    
Level II        
Interest rate over LIBOR   1.25%    
Commitment fee   0.1145%    
Level III        
Interest rate over LIBOR   1.00%    
Commitment fee   0.086%