Patriot Transportation Holding, Inc. (NASDAQ:PATI)
Second Quarter Results for Fiscal Year
2016.
The Company reported net income of $863,000, or
$.26 per share, compared to a net loss of $351,000, or ($.11) per
share, in the same quarter of fiscal 2015. The loss in the
2nd quarter of last year was primarily the result of a $2,074,000
intangible asset impairment charge resulting in a negative impact
to net income of $1,265,000, or ($.39) per share, in that
quarter.
Total revenues for the quarter were $29,048,000,
down $689,000 from $29,737,000 in the same quarter last year.
Fuel surcharge revenues were lower by $2,110,000 as the
average price of diesel fuel was significantly lower ($.74 per
gallon) this quarter versus the same quarter last year.
Transportation revenues (excluding fuel surcharges) were up
$1,421,000 (or 5.2%) to $28,514,000 on 117,000 more revenue miles,
an increase of 4.1% revenue per mile versus the same quarter last
year. As of February 2016, we have fully replaced the volumes we
elected to discontinue in the 2nd quarter of last year.
Compensation and benefits costs were up $979,000
(or 9.1 cents per mile) versus the second quarter of fiscal
2015. Given the severe shortage of qualified drivers and the
difficulty and time associated with hiring, training and retaining
them, during the second quarter we strategically invested in
growing our driver count to levels in excess of then current
demands to position ourselves for opportunities we felt would arise
during the seasonally busier spring and summer months. During
the 2nd quarter, we started to see demand increase as we added some
new business opportunities and we are optimistic we will see
continued volume growth as we enter the busy summer months
ahead.
The Company’s gross cost of fuel was down
$1,391,000 over the same quarter last year which was not enough to
off-set the $2,110,000 decline in fuel surcharge revenues resulting
in a negative margin impact of $719,000 (or 6.7 cents per mile)
this quarter. Fuel surcharge tables are customer
specific and can vary considerably from customer to customer.
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 we have been experiencing
the past several quarters. We have been working with several
customers to adjust their fuel surcharge tables in an effort to
eliminate some of this margin erosion and, in this quarter, we had
success with a few larger customers which should have a positive
impact on our margins as we move forward.
Insurance and losses were lower by $560,000 due
mainly to lower medical claims and favorable resolutions to some
prior year liability claims compared to the actuarial reserve
estimates.
Corporate expense was $304,000 lower compared to
the same quarter last year due mainly to the gain on sale of
a 75% interest in the corporate airplane during this
quarter.
Gains on equipment sales this quarter were
$75,000 versus gains of $614,000 in the same quarter last
year.
Operating profit this quarter was $1,447,000
versus a loss of $553,000 in the same quarter last year. The
loss in the 2nd quarter of last year was primarily the result of a
$2,074,000 intangible asset impairment charge. In order to
compare the operating performance for the same quarter last year
excluding the impairment charge, we are required to make the
following disclosure regarding certain non-GAAP financial measures
(“adjusted”) within the meaning of Regulation G promulgated by the
Securities and Exchange Commission (“Regulation G”) to supplement
the financial results as reported in accordance with GAAP.
“The non-GAAP financial measures discussed below include adjusted
net income and adjusted operating profit. These non-GAAP financial
measures exclude the intangible asset impairment charge incurred in
the second quarter of fiscal 2015. Management believes these
adjusted measures better reflect our operating performance during
the periods discussed and reflect how management evaluates our
operational results. These measures are not, and should not
be viewed as, substitutes for GAAP reporting measures. Refer to
“Non-GAAP Financial Measures” below in this press release for a
more detailed discussion, including reconciliations of these
non-GAAP financial measures to their most directly comparable GAAP
financial measures”.
The Company’s net income in the 2nd quarter was
$863,000, or $.26 per share, versus adjusted net income of
$914,000, or $.28 per share, in the 2nd quarter of fiscal
2015. Operating profit in this quarter was $1,447,000 versus
adjusted operating profit of $1,521,000 in the 2nd quarter of
fiscal 2015.
On April 1, 2016, the Company acquired 7
tractors and 16 drivers from a private fleet in central Florida
together with the contractual right to service 73 locally owned
convenience stores controlled by the seller. We are
integrating this acquisition into our everyday business and are
thus far pleased with the results. Other small acquisition
opportunities of this type could well become available in the near
term as insurance markets tighten and electronic log requirements
become effective.
First Six Months’ Results
for Fiscal Year 2016.
The Company reported net income of $2,238,000,
or $.68 per share (which included $1,029,000, or $0.31 per share,
of net income from the settlement of a claim in connection with the
2010 Deepwater Horizon event) compared to adjusted[1] net income of
$2,016,000 or $.62 per share, in the same period last
year.
Total revenues were $58,419,000 down $3,035,000
from $61,454,000 last year as a result of $5,173,000 lower fuel
surcharges. Fuel surcharge revenues were down as the average price
of diesel fuel was significantly lower this period ($.90 per
gallon) versus the same period last year, plus, the first few
months of fiscal 2015 benefited greatly from the time lag involved
in reducing fuel surcharges during a rapidly declining diesel fuel
price environment. Transportation revenues (excluding fuel
surcharges) were up $2,138,000 to $56,523,000 on 251,000 fewer
revenue miles, an increase of 5.1% revenue per mile versus the same
period last year.
The Company’s gross cost of fuel was down
$3,571,000 over the same period last year which was not enough to
off-set the $5,173,000 reduction in fuel surcharge revenues
resulting in a negative margin impact of $1,602,000 (or 7.6 cents
per mile) this period versus the same period last
year.
Compensation and benefits costs were up
$1,568,000 (or 7.4 cents per mile) versus the first six months of
fiscal 2015 due mainly to the difficulty and time associated with
hiring, training and retaining drivers in this severe driver
shortage.
Insurance and losses were lower by $381,000 due
mostly to lower medical claims and favorable resolutions to some
prior year liability claims compared to the actuarial reserve
estimates.
Corporate expense was lower by $265,000 compared
to the same period last year due mainly to the gain on sale of a
75% interest in the corporate airplane.
We had $727,000 less in gains on equipment sales
this period versus the same period last year.
As a result, operating profit this period was
$2,046,000 versus an adjusted1 operating profit of $3,354,000 in
the same period last year.
Summary and Outlook.
We have been successful the past several
quarters in growing our per mile transportation revenue while
adding revenue miles through new business opportunities.
Given the severe shortage of qualified drivers and the difficulty
and time associated with hiring, training and retaining them,
during the second quarter of this year we strategically invested in
growing our driver count to levels in excess of then current
demands to position ourselves for opportunities we felt would arise
during the seasonally busier spring and summer months. Our
driver turnover rate in this 2nd quarter was down to 60.7%,
compared to 66.9% in the same quarter last year, and our ending
driver count was 728 versus 696 in the same quarter last
year. This is a front-loaded strategy that has driven our
compensation and benefits cost significantly higher and it will
take us an extended period of time to realize the benefits of this
investment. During the 2nd quarter, we were successful in
adding some new business opportunities, obtaining commitments on
others and closing on an acquisition effective April 1, 2016 that
provides the Company 73 additional locations to service. All
of these confirm that there are opportunities out there and that
the Company is well positioned to take advantage of these
opportunities. We continue to work closely with several of
our larger customers in an effort to neutralize the negative margin
effects of lower fuel surcharges but this will also take some time
to resolve as it is an industry wide issue.
We operate in many of the best markets in the
country and are known in those markets, and beyond, as a top rated
carrier for both safety and customer satisfaction. We are
committed to continuing our focus on safety and customer
satisfaction and are confident that execution of that focus will
enable us to continue our growth in our excellent markets. We
plan to maintain a strong balance sheet as we work to achieve our
targeted operating ratio in the low nineties and double digit
returns on capital employed after tax.
Conference Call.
The Company will host a conference call on
Wednesday, April 27, 2016 at 2:00 p.m. (EDT). Analysts,
stockholders and other interested parties may access the
teleconference live by calling 1-800-533-3898 (pass code 54368) for
domestic or 1-334-323-7224 (pass code 54368) for international.
Computer audio live streaming is available via the Internet through
the Company’s website at www.patriottrans.com at the Investor
Relations tab. You may click on this link for the live streaming
http://stream.conferenceamerica.com/pth042716. Click on the
following link
http://archive.conferenceamerica.com/archivestream/pth042716.mp3 to
access the archived internet audio replay. A telephonic audio
replay will be available for sixty days following the conference
call and is accessible by dialing toll free 877-919-4059 domestic
or 334-323-0140 international. The passcode of the audio replay is
15127984. Replay options: “1” begins playback, “4” rewind 30
seconds, “5” pause, “6” fast forward 30 seconds, “0” instructions,
and “9” exits recording. There may be a short delay until the
archive is available following the conclusion of the conference
call.
Investors are cautioned that any statements in
this press release which relate to the future are, by their nature,
subject to risks and uncertainties that could cause actual results
and events to differ materially from those indicated in such
forward-looking statements. These include general economic
conditions; competitive factors; political, economic,
regulatory and climatic conditions; driver availability and cost;
the impact of future regulations regarding the transportation
industry; freight demand for petroleum product and levels of
construction activity in the Company's markets; fuel costs; risk
insurance markets; pricing; energy costs and technological
changes. Additional information regarding these and other
risk factors and uncertainties may be found in the Company’s
filings with the Securities and Exchange Commission.
Patriot Transportation Holding, Inc. is engaged
in the transportation business. The Company’s transportation
business is conducted through Florida Rock & Tank Lines, Inc.
which is a Southeastern transportation company concentrating in the
hauling by motor carrier of liquid and dry bulk commodities.
1 Refer to definition of “adjusted” on page
2 above and see GAAP reconciliations on page 6 below.
|
PATRIOT TRANSPORTATION HOLDING, INC. AND
SUBSIDIARIES |
CONSOLIDATED AND COMBINED STATEMENTS OF
INCOME |
(In thousands) |
(Unaudited) |
|
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
|
MARCH 31, |
|
MARCH 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation revenues |
|
$ |
28,514 |
|
|
|
27,093 |
|
|
$ |
56,523 |
|
|
|
54,385 |
|
Fuel surcharges |
|
|
534 |
|
|
|
2,644 |
|
|
|
1,896 |
|
|
|
7,069 |
|
Total revenues |
|
|
29,048 |
|
|
|
29,737 |
|
|
|
58,419 |
|
|
|
61,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
|
12,752 |
|
|
|
11,773 |
|
|
|
25,324 |
|
|
|
23,756 |
|
Fuel expenses |
|
|
3,470 |
|
|
|
4,861 |
|
|
|
7,295 |
|
|
|
10,866 |
|
Repairs & tires |
|
|
1,936 |
|
|
|
1,906 |
|
|
|
3,745 |
|
|
|
3,720 |
|
Other operating |
|
|
1,179 |
|
|
|
988 |
|
|
|
2,269 |
|
|
|
2,125 |
|
Insurance and losses |
|
|
2,218 |
|
|
|
2,778 |
|
|
|
5,236 |
|
|
|
5,617 |
|
Depreciation expense |
|
|
2,125 |
|
|
|
2,124 |
|
|
|
4,273 |
|
|
|
4,232 |
|
Rents, tags & utilities |
|
|
955 |
|
|
|
954 |
|
|
|
1,904 |
|
|
|
1,895 |
|
Sales, general &
administrative |
|
|
2,213 |
|
|
|
2,314 |
|
|
|
4,612 |
|
|
|
4,636 |
|
Corporate expenses |
|
|
828 |
|
|
|
1,132 |
|
|
|
1,786 |
|
|
|
2,051 |
|
Intangible asset impairment |
|
|
— |
|
|
|
2,074 |
|
|
|
— |
|
|
|
2,074 |
|
Gain on equipment sales |
|
|
(75 |
) |
|
|
(614 |
) |
|
|
(71 |
) |
|
|
(798 |
) |
Total cost of
operations |
|
|
27,601 |
|
|
|
30,290 |
|
|
|
56,373 |
|
|
|
60,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit
(loss) |
|
|
1,447 |
|
|
|
(553 |
) |
|
|
2,046 |
|
|
|
1,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BP claim
settlement |
|
|
— |
|
|
|
— |
|
|
|
1,687 |
|
|
|
— |
|
Interest income and
other |
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
Interest expense |
|
|
(32 |
) |
|
|
(23 |
) |
|
|
(67 |
) |
|
|
(49 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
|
1,415 |
|
|
|
(576 |
) |
|
|
3,669 |
|
|
|
1,231 |
|
Provision for income
taxes |
|
|
552 |
|
|
|
(225 |
) |
|
|
1,431 |
|
|
|
480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) |
|
$ |
863 |
|
|
|
(351 |
) |
|
$ |
2,238 |
|
|
|
751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss) |
|
$ |
863 |
|
|
|
(351 |
) |
|
$ |
2,238 |
|
|
|
751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss)- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
0.26 |
|
|
|
(0.11 |
) |
|
|
0.68 |
|
|
|
0.23 |
|
Diluted |
|
|
0.26 |
|
|
|
(0.11 |
) |
|
|
0.68 |
|
|
|
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares (in thousands)used in
computing: |
|
-basic earnings per common share |
|
|
3,283 |
|
|
|
3,261 |
|
|
|
3,278 |
|
|
|
3,261 |
|
-diluted earnings per common share |
|
|
3,286 |
|
|
|
3,261 |
|
|
|
3,282 |
|
|
|
3,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
To supplement the financial results presented in
accordance with GAAP, Patriot presents certain non-GAAP financial
measures within the meaning of Regulation G promulgated by the
Securities and Exchange Commission. The non-GAAP financial measures
included in this press release are adjusted net income, adjusted
operating profit and adjusted operating ratio. Patriot uses these
non-GAAP financial measures to analyze its continuing operations
and to monitor, assess, and identify meaningful trends in its
operating and financial performance. These measures are not, and
should not be viewed as, substitutes for GAAP financial
measures.
Adjusted Net Income (Loss)
Adjusted net income (loss) profit excludes the
impact of the intangible asset impairment charge. Adjusted net
income (loss) profit is presented to provide additional perspective
on underlying trends in Patriot’s core operating results. A
reconciliation between net income (loss) profit and adjusted net
income (loss) is as follows:
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
Six months ended |
|
|
|
|
March 31, 2015 |
|
|
|
March 31, 2015 |
|
Net Income (loss) |
|
|
$ |
(351 |
) |
|
|
751 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Intangible asset impairment
charge |
|
|
|
1,265 |
|
|
|
|
|
1,265 |
|
Adjusted net
income |
|
|
$ |
914 |
|
|
|
2,016 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Ratio
Adjusted operating ratio excludes the impact of
the intangible asset impairment charge. Adjusted operating ratio is
presented to provide additional perspective on underlying trends in
Patriot’s core operating results. A reconciliation between
operating ratio and adjusted operating ratio is as follows:
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
|
March 31, 2015 |
|
|
March 31, 2015 |
|
|
Operating ratio |
|
|
|
|
101.9 |
% |
|
|
|
|
|
97.9 |
% |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible asset impairment
charge |
|
(7.0 |
%) |
|
|
(3.4 |
%) |
|
|
Adjusted operating
ratio |
|
94.9 |
% |
|
|
94.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating (Loss) Profit
Adjusted operating (loss) profit excludes the
impact of the intangible asset impairment charge. Adjusted
operating (loss) profit is presented to provide additional
perspective on underlying trends in Patriot’s core operating
results. A reconciliation between operating (loss) profit and
adjusted operating (loss) profit is as follows:
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
Six months ended |
|
|
|
|
March 31, 2015 |
|
|
|
March 31, 2015 |
|
Operating (loss)
profit |
|
|
$ |
(553 |
) |
|
|
1,280 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Intangible asset impairment
charge |
|
|
|
2,074 |
|
|
|
2,074 |
|
Adjusted operating
profit |
|
|
$ |
1,521 |
|
|
|
3,354 |
|
|
|
|
|
|
|
|
|
|
|
Contact:
John D. Milton, Jr.
Chief Financial Officer
904/858-9100
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