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Edited Transcript of PATI earnings conference call or presentation 4-Dec-19 8:00pm GMT

Q4 2019 Patriot Transportation Holding Inc Earnings Call

JACKSONVILLE Dec 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Patriot Transportation Holding Inc earnings conference call or presentation Wednesday, December 4, 2019 at 8:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Robert E. Sandlin

Patriot Transportation Holding, Inc. - President & CEO

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to your Patriot Transportation Holding's Fourth Quarter 2019 Earnings Call.

(Operator Instructions)

At this time, it is my pleasure to turn the floor over to Mr. Rob Sandlin, CEO. Sir, the floor is yours.

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Robert E. Sandlin, Patriot Transportation Holding, Inc. - President & CEO [2]

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Thank you. Good afternoon, and thank you all for being on the call today and for your interest in Patriot Transportation.

I am Rob Sandlin, CEO of Patriot Transportation. And with me today are Matt McNulty, our Chief Financial Officer; and John Klopfenstein, our Chief Accounting Officer.

Before we get into our results, let me caution you that any statements made during this call that 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 by such forward-looking statements. Additional information regarding these and other risk factors and uncertainties may be found in the company's filings with the Securities and Exchange Commission.

Now for our fourth quarter results.

Total revenue for the quarter decreased $2,653,000 to $26,128,000, while our transportation revenue decreased by $1,885,000 on 1,039,000 less miles as we had 18 fewer drivers quarter-versus-quarter, partly due to our decision to close our Charlotte terminal in late May 2019, which accounted for nearly $1 million of the revenue decline. Our revenue per mile increased by $0.11 per mile versus last year's same quarter due to rate increases.

Compensation and benefits decreased by $288,000 mainly due to lower company miles, an increased number of owner-operators and higher training pay. Depreciation expense decreased by $121,000 on a lower tractor count. While we have effectively rightsized the fleet, we will continue to monitor the driver-to-truck ratio in order to increase our revenue per tractor. Insurance and losses decreased to $959,000 quarter-over-quarter, mainly due to lower health claims, lower wreck repairs and lower losses and damages in this year's fourth quarter.

We continued to be challenged during the quarter with driver hiring, driver training, driver travel and retention-related cost. As a result, operating profit was $156,000 compared to $241,000 in last year's fourth quarter.

Now for our year-to-date results.

Total revenues for the year were $108,716,000, down $5,349,000 from last year. Transportation revenues were down $4,852,000 on 2,258,000 less miles and 42 fewer average drivers.

Net fuel expense decreased by $1,629,000, mainly due to fewer miles. Insurance and losses were down $2,303,000 due to lower auto liability expense resulting from closing of prior year claims and lower health expense. Our repair and tire expense increased due to more high-dollar repairs. We continued to rightsize our fleet, thus depreciation expense decreased $889,000. Year-to-date, our average revenue per tractor was $283,000 versus $268,000 last year.

SG&A increased due to our continued upgrade to our information technology systems, which were completed during the fourth quarter, and higher driver hiring expense.

Gains on disposition of assets increased primarily due to the sale of our Ocoee, Florida property and the hurricane gains -- hurricane insurance gains. As a result, net income for the year was $1,763,000, which included $634,000 from the Ocoee land sale. Income before taxes was $2,393,000 compared to $2,197,000 last year.

For a summary and outlook.

We continue to build a strong balance sheet with $21 million of cash and no outstanding debt, and we grew shareholder equity $2.4 million this year. The year was challenging in many ways. The shortage of qualified driver applicants and the related driver turnover continues to be a huge challenge for our industry. During the year, we were able to increase the number of drivers in training over last year in part due to the implementation of our productivity-based driver pay. However, we did not see an improvement in our retention rate as the first year churn of new drivers continued. In October 2019, we implemented a new driver pay package that included seniority raises, weekly productivity bonuses, a PTO buyback program and several other features that should encourage retention as well as attract new drivers. We will continue to monitor the results on new hires and driver retention, and we'll continue to adjust our plan as needed.

While the first quarter was negatively impacted by health costs mainly due to one large claim, we implemented changes to our wellness plan and specialty drug plan, which produced lower costs for the remainder of the year. During the third quarter, we hired a new health insurance and benefits broker who has already implemented financially beneficial changes to our prescription drug and health plan for next year. We anticipate these health-related initiatives to continue producing the -- savings for us into the future.

While safety results for the year are varied, we did see an improvement in our preventable accident frequency rate and experienced lower risk costs as we closed prior year claims. During the first quarter of fiscal 2020, we will begin pilot testing of 2 vendors of onboard camera systems to provide improved driver safety habits and the potential for exoneration on accidents where third parties are at fault. We will likely make a vendor decision during the second quarter.

We will continue to focus on improving our safety results as the industry continues to see significantly increased costs of auto liability insurance premiums due mainly to nuclear jury awards. Demands for our service is still -- are still high in most of our markets, and we continue to evaluate new and current business based on price, efficiency of -- and efficiency of the daily operation. We continue to see improvements in our ability to gain price increases with most of our customers that are more in line with our expectation, and we will continue to review each account for profitability. Management has contracted with a chemical industry expert veteran to study an expansion of our chemical business, and we'll evaluate this opportunity in the coming months. During the first quarter of 2020, we are evaluating our sales strategy and will develop a plan to expand our marketing efforts and grow our revenue with those customers that will allow us an acceptable return on our investment.

Management made the decision to close our Charlotte, North Carolina terminal in May of this year. We had not been successful growing this business due to a very difficult driver market, which elevated the costs to operate. And the pricing in this market did not allow for a return on our investment.

The company's bottom line operating results were not up to our expectation in fiscal 2019, but we do see some positive momentum in certain areas. Pricing of our business is improving, and our depreciation expense is lower and equipment utilization has improved. The changes to our specialty drug and wellness plan have a positive impact in the final 3 quarters of the year, and we will continue to -- and will continue to benefit us going forward. Finally, management has taken steps to lower costs by eliminating some jobs and consolidating others, most of which took place late in the fourth quarter. We believe that the strategic plan we have in place will lead to improved operating profit more in line with our expectations.

Patriot Transportation Holding's Board of Directors has declared a special cash dividend of $3 per share or approximately $10 million in the aggregate on the company's outstanding common stock. This onetime special dividend is payable on January 30, 2020, to shareholders of record at the close of business on January 15, 2020. The Board of Directors also declared a quarterly dividend of $0.15 per share payable on January 30, 2020, to shareholders of record on January 15, 2020. While the company currently intends to continue the quarterly dividend, the company cannot guarantee future dividends.

I want to thank you for your interest in our company, and we will be happy to entertain any of your questions.

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Operator [3]

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(Operator Instructions) And it does appear we have no questions. Mr. Sandlin, I will turn the conference back over to you, sir, for closing comments.

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Robert E. Sandlin, Patriot Transportation Holding, Inc. - President & CEO [4]

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Great. Thank you all, and thank you again for your interest in our company, and we'll look forward to talking with you next time. Have a good day.

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Operator [5]

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Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your line at this time, and have a great day.