Patriot Transportation Holding, Inc. Announces Results for the Second Quarter and Fiscal Year 2020

JACKSONVILLE, FL / ACCESSWIRE / May 13, 2020 / Patriot Transportation Holding, Inc. (NASDAQ-PATI)

Second Quarter Operating Results

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).

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.

First Six Months Operating Results for Fiscal year 2020

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.

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.

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 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.

Dividend

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.

Subsequent Events

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.

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.

Conference Call

The Company will host a conference call on May 14, 2020 at 10:00 AM (EST). Analysts, shareholders and other interested parties may access the teleconference live by calling 1-877-407-0778 domestic or international at 1-201-689-8565. Computer audio live streaming is available via the Internet through the Company’s website at www.patriottrans.com at the Investor Relations tab or https://www.webcaster4.com/Webcast/page/2058/34838. An audio replay will be available for sixty (60) days following the conference call by dialing toll free 1-877-481-4010 domestic or international 1-919-882-2331 then enter pass code 34838. An audio archive can be accessed through the Company’s website at www.patriottrans.com on the Investor Relations tab or at https://www.webcaster4.com/Webcast/page/2058/34838.

Investors are cautioned that any statements in this press release which relate to the future are, by their nature, subject to risks and uncertainties that could cause actual results and events to differ materially from those indicated in such forward-looking statements. These include the impact of the COVID-19 pandemic on our revenues, operations and financial condition; general economic conditions; competitive factors; political, economic, regulatory and climatic conditions; driver availability and cost; the impact of future regulations regarding the transportation industry; freight demand for petroleum product and levels of construction activity in the Company’s markets; fuel costs; risk insurance markets; pricing; energy costs and technological changes. Additional information regarding these and other risk factors and uncertainties may be found in the Company’s filings with the Securities and Exchange Commission.

Patriot Transportation Holding, Inc. is engaged in the transportation business. The Company’s transportation business is conducted through Florida Rock & Tank Lines, Inc. which is a Southeastern transportation company engaged in the hauling of liquid and dry bulk commodities.

PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(In thousands)
(Unaudited)

 
  THREE MONTHS ENDED     SIX MONTHS ENDED  
 
  MARCH 31,     MARCH 31,  
 
  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  
 
                               

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  
 
               

SOURCE:  Patriot Transportation Holding, Inc.

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