Report of Independent Registered
Certified Public Accounting Firm
The Plan Sponsor, Administrative Committee and Participants
Patriot Transportation Holding, Inc. Profit Sharing and Deferred
Earnings Plan
Jacksonville, Florida
Opinion on the Financial Statements
We have audited
the accompanying statements of net assets available for benefits of the
Patriot Transportation Holding, Inc. Profit Sharing
and Deferred Earnings Plan
(the Plan) as of December 31, 2018 and 2017, the related statement of changes
in net assets available for benefits for the year ended December 31, 2018, and the related notes (collectively, the financial statements).
In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the
Plan as of December 31, 2018 and 2017, and the changes in net assets available for benefits for the year ended December 31, 2018,
in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or
fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
As part of our audits we are
required to obtain an understanding
of internal control over financial reporting
but not for the purpose
of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express
no such opinion.
Our audits
included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks.
Such procedures included
examining,
on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by the Plan’s management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Supplemental Information
The supplemental information in the
accompanying supplemental schedule of assets (held at end of year) as of December 31, 2018 and supplemental schedule of delinquent
participant contributions for the year ended December 31, 2018 has been subjected to audit procedures performed in conjunction
with the audit of the Plan’s financial statements.
The supplemental information is presented for
the purpose of additional analysis and is not a required part of the financial statements but included supplemental information
required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental information is the responsibility of the Plan’s management. Our audit procedures included
determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other
records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental
information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including
its form and content, is presented in
conformity
with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security
Act of 1974. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial
statements as a whole.
/s/ Hancock Askew & Co., LLP
We have served as the Plan’s auditor since 2006.
Norcross, Georgia
June 27, 2019
Patriot Transportation Holding, Inc.
Profit Sharing and Deferred Earnings Plan
Statements of Net Assets Available for Benefits
December 31, 2018 and 2017
|
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Investments, at fair value
|
|
$
|
29,418,989
|
|
|
$
|
31,501,193
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
22,760
|
|
|
|
15,605
|
|
|
Employee contributions
|
|
|
53,164
|
|
|
|
41,085
|
|
|
Notes receivable from participants
|
|
|
1,182,502
|
|
|
|
1,353,179
|
|
|
Total receivables
|
|
|
1,258,426
|
|
|
|
1,409,869
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
30,677,415
|
|
|
|
32,911,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits
|
|
$
|
30,677,415
|
|
|
$
|
32,911,062
|
|
The accompanying notes are an integral part
of these financial statements.
Patriot Transportation Holding, Inc.
Profit Sharing and Deferred Earnings Plan
Statement of Changes in Net Assets Available
for Benefits
For the Year Ended December 31, 2018
|
Additions to (Deductions from) Net Assets Attributed to:
|
|
|
|
|
|
Investment income (loss):
|
|
|
|
|
|
Dividend and interest income
|
|
$
|
1,557,340
|
|
|
Net depreciation in fair value of investments
|
|
|
(2,559,629
|
)
|
|
Other income
|
|
|
104,342
|
|
|
Total investment loss
|
|
|
(897,947
|
)
|
|
|
|
|
|
|
|
Interest on notes receivable from participants
|
|
|
58,052
|
|
|
|
|
|
|
|
|
Contributions:
|
|
|
|
|
|
Employer
|
|
|
833,782
|
|
|
Employee
|
|
|
2,009,037
|
|
|
Rollovers
|
|
|
29,463
|
|
|
Total contributions
|
|
|
2,872,282
|
|
|
|
|
|
|
|
|
Total additions
|
|
|
2,032,387
|
|
|
|
|
|
|
|
|
Other Deductions:
|
|
|
|
|
|
Benefits paid to participants
|
|
|
(4,116,811
|
)
|
|
Deemed distributions
|
|
|
(3,063
|
)
|
|
Administrative expenses
|
|
|
(146,160
|
)
|
|
|
|
|
|
|
|
Total deductions
|
|
|
(4,266,034
|
)
|
|
|
|
|
|
|
|
Decrease in net assets available for benefits
|
|
|
(2,233,647
|
)
|
|
|
|
|
|
|
|
Net assets available for benefits:
|
|
|
|
|
|
Beginning of year
|
|
|
32,911,062
|
|
|
End of year
|
|
$
|
30,677,415
|
|
The accompanying notes are an integral part
of these financial statements.
Patriot Transportation Holding, Inc.
Profit Sharing and Deferred Earnings Plan
Notes to Financial Statements
December 31, 2018 and 2017
1.
Description
of the Plan
The following description of the Patriot Transportation
Holding, Inc. Profit Sharing and Deferred Earnings Plan (the "Plan") provides only general information. Participants
should refer to the Plan agreement for a more complete description of the Plan's provisions.
General
The Plan is a defined contribution plan available
to all eligible employees of Patriot Transportation Holding, Inc. (the “Company”), as defined in the Plan agreement.
The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
The Plan qualifies as a “multiple employer”
plan as described in Section 413(c) of the Internal Revenue Code. The Plan allows other affiliated employers to participate in
the Plan (“Participating Employers”), as it deems appropriate. All Participating Employers must adopt the Plan as written,
including but not limited to, using the same Trustee, incurring the same expense rate, and contributing at the same rates and same
times. Participating Employers are: FRP Holdings, Inc.; FRP Development Corporation; Florida Rock & Tank Lines, Inc. and Florida
Rock Properties, Inc.
Contributions
Each year, participants may contribute up to
100% of pretax annual compensation, as defined in the Plan. Participants may also contribute amounts representing distributions
from other qualified defined benefit plans or defined contribution plans. The Company matches 50% of the first 6% of the participant's
deferred earnings contributions. In addition, the Company may make a discretionary contribution to the Plan each year in an amount
determined by the Board of Directors of the Company subject to certain limitations relating to the aggregate compensation of participants.
No discretionary contributions were made by the Company for the 2018 Plan year.
Participant Accounts
Each participant's account is credited with
the participant's contributions, the employer's matching contribution, an allocation of the employer's discretionary contributions
(if any) and Plan earnings. The benefit to which a participant is entitled is the benefit that is available in the participant's
vested account.
Participants direct the investment of their
contributions into various investment options offered by the Plan. All participants who have not made an election are deemed to
have elected to have contributions made to their accounts invested in the T. Rowe Price Retirement 2010 R Fund.
Vesting
Participants are fully vested in their voluntary
contributions plus actual earnings thereon. If participants are employed on or after their retirement age, the Company's matching
and discretionary contributions are fully vested. In the event of termination by retirement, death or disability of the participant,
100% of the employer contributions will be distributed to the participant or the participant's designated beneficiary.
Vesting in the Company's matching and discretionary
contributions plus actual earnings thereon is determined for each plan year based on years of service according to the following
schedule. A year of service is defined by the Plan as any Plan year in which the participant worked more than 1,000 hours.
Matching Contributions
|
|
|
Vested
|
|
Years of Service
|
|
Percentage
|
|
|
|
|
|
|
Less than 1
|
|
|
|
0%
|
|
|
|
1
|
|
|
|
20%
|
|
|
|
2
|
|
|
|
40%
|
|
|
|
3
|
|
|
|
60%
|
|
|
|
4
|
|
|
|
80%
|
|
|
|
5
|
|
|
|
100%
|
|
Discretionary Contributions
|
|
|
Vested
|
|
Years of Service
|
|
Percentage
|
|
|
|
|
|
|
Less than 2
|
|
|
|
0%
|
|
|
|
2
|
|
|
|
20%
|
|
|
|
3
|
|
|
|
40%
|
|
|
|
4
|
|
|
|
60%
|
|
|
|
5
|
|
|
|
80%
|
|
|
|
6
|
|
|
|
100%
|
|
Payment of Benefits
On termination of employment, death or disability
of a participant, or upon a participant election for an in-service distribution after age 59 1/2, benefits for distribution shall
be determined based upon the participant's vested account balance on the date of distribution, as provided in the Plan.
Forfeited Accounts
The non-vested portion of a terminated participant's
account shall be forfeited and reallocated to the accounts of the remaining participants in the same manner as employer contributions
were originally allocated to such participants. Any forfeiture from an employer discretionary account shall be allocated in the
plan year in which the forfeiture occurs. Any forfeiture from an employer matching account shall be reallocated in the following
plan year. Unallocated forfeitures totaled $113,685 and $85,363 at December 31, 2018 and 2017, respectively. $85,346 was reallocated
to eligible participants in 2018.
Revenue Sharing Account
A revenue sharing agreement is in place whereby
fees earned by the mutual fund companies are shared with the recordkeeper based upon a percentage of assets under management. These
amounts are used for the benefit of the Plan to pay administrative expenses. During 2018, revenue sharing in the amount of $104,193
is included as other income in the Statement of Changes in Net Assets Available for Benefits. This entire balance was used to pay
Plan expenses in accordance with the revenue sharing agreement and was included in administrative expenses in the Statement of
Changes in Net Assets Available for Benefits.
Notes Receivable from Participants
Participants may borrow from their accounts
a minimum of $1,000 and a maximum equal to the lesser of $25,000 or 50% of their vested account balance. Loans bear interest at
the prevailing rate used by commercial lending
institutions.
Participants may have two loans outstanding at any time. Loans are secured by the participant's remaining vested account balance
and bear interest at a rate commensurate with local prevailing rates, ranging from 4.25% to 6.25% at December 31, 2018, as determined
by the Plan’s administrator. Loan terms are limited to five years except residential loans, which are payable up to 15 years.
Principal and interest will be deducted from the participant's payroll over the term of the loan. Upon termination of employment
with the Company, the outstanding balance of the loan, including accrued interest, is due immediately and if not repaid, is considered
a distribution.
When a participant defaults on a loan obtained
from the Plan, the Plan administrator will report the amount of default to the Internal Revenue Service (“IRS”) as
a distribution from the Plan. A participant’s loan account equals the original principal amount less principal repayments.
2. Summary
of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared
under the accrual method of accounting in conformity with accounting principles generally accepted in the United States of America.
Investments Valuation and Income Recognition
Plan investments are reported at fair value.
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 (an exit price). See Note 3 for further discussion of fair value measurements.
Investments in common stock are stated at fair
value based upon quoted market prices at year-end. Units or shares of mutual funds (registered investment companies) are stated
at fair value based upon the net asset value of shares held by the Plan at year-end. Cash equivalents and short-term investments
are valued at cost, which approximate fair value.
Net appreciation or depreciation in fair value
of investments consists of the realized gains or losses and the unrealized appreciation or depreciation on these investments.
Purchases and sales of securities are recorded
on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the basis of the ex-dividend
date.
Notes Receivable
Notes receivable from participants are measured
at their unpaid principal balance plus any accrued but unpaid interest. Interest income is recorded on the accrual basis. Related
fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded
as of December 31, 2018 and 2017. If a participant ceases to make loan repayments and the plan administrator deems the participant
loan to be in default, the participant loan balance is reduced, and a payment is recorded.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make significant
estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent
assets and liabilities. Actual results could differ from those estimates.
Benefit Payments
Benefits are recorded when paid.
Recent Accounting Pronouncements
In August 2018, FASB issued Accounting Standards
Update (ASU) 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements
for Fair Value Measurement
. The
amendments
in this ASU modify the disclosure requirements on fair value measurements in Topic 820, including the removal, modification to,
and addition of certain disclosure requirements. The ASU is effective for fiscal years, beginning after December 15, 2019. Early
adoption is permitted for any removed or modified disclosures. The Plan is currently assessing the timing and impact of adopting
the updated provisions.
3. Fair
Value Measurement
The fair value measurement standard establishes
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the
lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 - Unadjusted quoted prices in active
markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 - Quoted prices in markets that are
not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;
Level 3 - Prices or valuations that require
inputs that are both significant to the fair value measurement and unobservable.
A financial instrument’s level within
the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The fair values estimated and derived from
each fair value calculation may not be indicative of net realizable value or reflective of future fair values. Furthermore, while
the Plan believes its valuation methods are appropriate and consistent with those utilized by other market participants, the use
of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different
fair value measurement at the reporting date.
The following tables sets forth by level, within
the fair value hierarchy, the Plan's assets at fair value as of December 31, 2018 and December 31, 2017.
|
|
Investment assets at Fair Value as of December 31, 2018
|
|
|
|
|
Level 1
|
|
|
|
Level 2
|
|
|
|
Level 3
|
|
|
|
Total
|
|
|
Mutual funds
|
$
|
24,143,943
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
24,143,943
|
|
|
Interest bearing cash
|
|
3,989,813
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,989,813
|
|
|
Common stock
|
|
1,285,233
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,285,233
|
|
|
Total assets
|
$
|
29,418,989
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29,418,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment assets at Fair Value as of December 31, 2017
|
|
|
|
|
Level 1
|
|
|
|
Level 2
|
|
|
|
Level 3
|
|
|
|
Total
|
|
|
Mutual funds
|
$
|
25,356,704
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
25,356,704
|
|
|
Interest bearing cash
|
|
4,733,668
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,733,668
|
|
|
Common stock
|
|
1,410,821
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,410,821
|
|
|
Total assets
|
$
|
31,501,193
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,501,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. Related
Party and Party-in-Interest Transactions
Certain Plan investments are managed by SunTrust.
SunTrust is the trustee as defined by the Plan, and therefore, these transactions qualify as party-in-interest transactions. Fees
to the trustee are deducted from investment income. Additionally, the Plan holds an investment in the common stock of the Company.
The plan also issues
notes
to participants, which are secured by the balance in the participants’ accounts. These transactions qualify as party-in-interest
transactions.
5. Plan
Termination
While the Company has not expressed any intent
to do so, it may cease matching contributions or terminate the Plan at any time. In the event of termination, the accounts of all
participants would become fully vested and the Company, by written notice to the Trustee and the Committee, may direct either complete
distribution of the assets in the Trust Fund to the participants or continue the Trust and the distribution of benefits at such
time and in such manner as though the Plan had not been terminated.
6. Income
Tax Status
The Prototype Non-standardized Profit Sharing
Plan with CODA (the prototype plan), upon which the Plan is based, has received an opinion letter dated March 31, 2014. Subsequent
to the date of the letter, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Internal
Revenue Code (the Code) to maintain its qualification. To the extent operational errors in the Plan have been identified or are
identified in the future, the Plan Administrator has indicated that it will take the necessary steps, if any, to correct these
errors. Otherwise, the Plan Administrator believes that the Plan is designed and being operated in compliance with the applicable
requirement of the Code and, therefore, believes the Plan, as amended, is qualified and the related trust is tax-exempt.
Accounting principles generally accepted in
the United States of America require Plan management to evaluate uncertain tax positions taken by the Plan. The financial statement
effects of tax positions are recognized when the position is more likely than not, based on the technical merits, to not be sustained
upon examination by the IRS. The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as
of December 31, 2018, there are no uncertain tax positions taken or expected to be taken. The Plan has recognized no interest or
penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are
currently no audits for any tax period in progress.
7. Risks
and Uncertainties
The Plan provides for investment options in
various investment securities. Investment securities are exposed to risks, such as interest rate, market risk and credit risk.
Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value
of investment securities, it is reasonably possible that changes in risks in the near term would materially affect participants'
account balances and the amounts reported in the Statements of Net Assets Available for Benefits.
8. Common
Stock Purchase
The Plan previously allowed as an investment
option, investment in the common stock of Florida Rock Industries, Inc., previously a related party to the Company. In November
2007, Vulcan Materials Company purchased the common stock of Florida Rock Industries, Inc. All investments in Florida Rock Industries,
Inc. common stock were exchanged for shares of the Vulcan Materials Company common stock and any remaining cash balance was invested
in the STI Classic Prime Quality Money Market Fund. Effective December 31, 2007, the option to invest in Vulcan Materials Common
Stock was frozen to new contributions. Any existing investments in Vulcan common stock may remain until the participant elects
to make a transfer to another fund or elects a distribution.
9. Nonexempt
Transactions
As reported on the supplemental schedule of
delinquent participant contributions (Schedule H, Line 4a), certain Plan contributions were not remitted to the trust within the
time frame specified by the Department of Labor’s Regulation 29(CFR 2510.3-102), thus constituting nonexempt transactions
between the Plan and the Company for
the
year ended December 31, 2018.
10. Subsequent
event
In preparing the financial statements, management
of the Plan has performed an evaluation of material events that have occurred through the date of issuance, June 27, 2019, and
has determined that no significant events occurred after December 31, 2018, but prior to the issuance of these financial statements,
that would have a material impact on its financial statements.
Patriot Transportation Holding, Inc.
Profit Sharing and Deferred Earnings Plan
Schedule H, Line 4i: Schedule of Assets
(Held at End of Year)
December 31, 2018
Plan Number 001, EIN 59-2924957