10-Q

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, 2019.

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)

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	March 31, 2019
Common Stock	3,347,329

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PATRIOT TRANSPORTATION HOLDING, INC.

FORM 10-Q

QUARTER ENDED MARCH 31, 2019

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
	Condensed Notes to consolidated  financial statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risks	21
Item 4.	Controls and Procedures	21
	Part II.  Other Information
Item 1A.	Risk Factors	22
Item 2.	Purchase of Equity Securities by the Issuer	22
Item 6.	Exhibits	22
Signatures		23
Exhibit 31	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	25
Exhibit 32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	28

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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 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 regarding the transportation industry; 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.

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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		2019		2018
Current assets:
Cash and cash equivalents	$	222		1
Treasury bills available for sale		18,863		17,298
Accounts receivable (net of allowance for
doubtful accounts of $154 and $153, respectively)		8,390		7,866
Federal and state taxes receivable		163		547
Inventory of parts and supplies		907		895
Prepaid tires on equipment		1,666		1,746
Prepaid taxes and licenses		338		609
Prepaid insurance		2,115		2,348
Prepaid expenses, other		187		134
Total current assets		32,851		31,444
Property and equipment, at cost		93,044		94,710
Less accumulated depreciation		59,414		60,799
Net property and equipment		33,630		33,911
Goodwill		3,431		3,431
Intangible assets, net		778		855
Other assets, net		190		176
Total assets	$	70,880		69,817
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	3,397		3,271
Bank overdraft		—		625
Accrued payroll and benefits		3,764		3,963
Accrued insurance		2,169		1,896
Accrued liabilities, other		231		408
Total current liabilities		9,561		10,163
Deferred income taxes		5,950		5,940
Accrued insurance		204		204
Other liabilities		1,099		1,104
Total liabilities		16,814		17,411
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; 3,347,329 and 3,328,466 shares issued
and outstanding, respectively)		335		333
Capital in excess of par value		37,909		37,436
Retained earnings		15,645		14,472
Accumulated other comprehensive income, net		177		165
Total shareholders’ equity		54,066		52,406
Total liabilities and shareholders’ equity	$	70,880		69,817

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,
	2019			2018			2019			2018
Revenues:
Transportation revenues	$	24,537			25,376		$	49,517			50,946
Fuel surcharges		2,471			2,603			5,545			4,934
Total revenues		27,008			27,979			55,062			55,880
Cost of operations:
Compensation and benefits		11,852			12,043			23,890			23,916
Fuel expenses		4,004			4,304			8,280			8,426
Repairs & tires		2,006			1,685			3,671			3,258
Other operating		1,189			1,063			2,321			2,106
Insurance and losses		2,002			3,169			4,944			5,885
Depreciation expense		1,976			2,223			3,946			4,553
Rents, tags & utilities		891			887			1,738			1,742
Sales, general & administrative		2,561			2,442			5,029			4,764
Corporate expenses		867			790			1,399			1,277
Gain on disposition of PP&E		(633	)		(335	)		(1,556	)		(499	)
Total cost of operations		26,715			28,271			53,662			55,428
Total operating profit (loss)		293			(292	)		1,400			452
Interest income and other		113			31			214			33
Interest expense		(7	)		(9	)		(17	)		(19	)
Income (loss) before income taxes		399			(270	)		1,597			466
Provision for (benefit from) income taxes		110			(82	)		424			(2,938	)
Net income (Loss)	$	289			(188	)	$	1,173			3,404
Unrealized investment gains, net		10			—			12			—
Tax reform gain on retiree health		—			—			—			32
Comprehensive income (loss)	$	299			(188	)	$	1,185			3,436
Earnings per common share:
Net Income (loss) -
Basic	$	0.09			(0.06	)		0.35			1.03
Diluted	$	0.09			(0.06	)		0.35			1.03
Number of shares (in thousands) used in computing:
-basic earnings per common share		3,342			3,316			3,335			3,310
-diluted earnings per common share		3,343			3,316			3,336			3,311

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, 2019 AND 2018

(In thousands)

(Unaudited)

	Six months ended March 31,
		2019		2018
Cash flows from operating activities:
Net income	$	1,173		3,404
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		4,243		4,925
Deferred income taxes		10		(3,629	)
Gain on asset dispositions		(1,556	)	(499	)
Stock-based compensation		475		478
Net changes in operating assets and liabilities:
Accounts receivable		(524	)	548
Inventory of parts and supplies		(12	)	(54	)
Prepaid expenses		531		47
Other assets		(199	)	38
Accounts payable and accrued liabilities		23		(2,380	)
Income taxes payable and receivable		384		612
Long-term insurance liabilities and other long-term
Liabilities		(5	)	2
Net cash provided by operating activities		4,543		3,492
Cash flows from investing activities:
Purchase of property and equipment		(4,702	)	(1,812	)
Purchase of Treasury bills		(8,361	)	—
Maturities of Treasury bills		7,000		—
Proceeds from the sale of property, plant and equipment		2,375		1,093
Net cash used in investing activities		(3,688	)	(719	)
Cash flows from financing activities:
Decrease in bank overdrafts		(625	)	—
Debt issue costs		(9	)	—
Net cash used in financing activities		(634	)	—
Net increase in cash and cash equivalents		221		2,773
Cash and cash equivalents at beginning of period		1		11,289
Cash and cash equivalents at end of the period	$	222		14,062

See notes to consolidated financial statements.

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PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(Unaudited)

(1) Description of Business and Basis of Presentation.

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 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 customer’s 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 customer’s fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling our customer’s dry bulk commodities such as cement, lime and various industrial powder products and liquid chemicals. As of March 31, 2019, we employed 541 revenue-producing drivers who operated our fleet of 370 company tractors (excluding 9 being placed in service and 8 being prepared for sale), 20 owner operators and 528 trailers from our 20 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, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2019. 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, 2018.

(2) Recently Issued Accounting Standards. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” which replaces existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. The new standard requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. It may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts with remaining performance obligations as of the effective date. Management has identified that a legally enforceable contract with its customers is executed by both parties at the point of pickup of the shipper’s product, as evidenced by the bill of lading. Although the Company may have master agreements with its customers, these master agreements only

7 

establish terms. There is no financial obligation to the shipper until the Company takes possession of the load. Revenue is recognized for each individual load and the amount of revenue in progress at the end of each quarter is insignificant. There is no significant amount of judgment or uncertainty in recording revenue. The Company adopted this standard on October 1, 2018, and its adoption of this guidance did not result in a material impact on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required. The new standard will become effective for the Company beginning with the first quarter 2020 and requires a modified retrospective transition approach and includes a number of practical expedients. Early adoption of the standard is permitted. The Company is currently evaluating the impacts the adoption of this accounting guidance will have on the consolidated financial statements. The Company has relatively few leases extending over 12 months, primarily the corporate office and 30 leased tractors. The total gross contractual obligation for leases with commitments greater than 12 months at September 30, 2018 was $3,875,000.

(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 October 1, 2018.

The consolidated statements of income reflect charges and/or allocation to FRP Holdings, Inc. for these services of $301,000 and $358,000 for the three months ended March 31, 2019 and 2018, and $723,000 and $710,000 for the six months ended March 31, 2019 and 2018, 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, 2019 and September 30, 2018. 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. The Credit Agreement contains certain conditions, affirmative financial covenants and negative covenants. As

8 

of March 31, 2019, we had no outstanding debt borrowed on this revolver, $3,043,000 in commitments under letters of credit and $31,957,000 available for additional borrowings. The letter of credit fee is 1% and the applicable interest rate would have been 3.498% on March 31, 2019. 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, 2019.

(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,
	2019		2018			2019		2018
Weighted average common shares
outstanding during the period
- shares used for basic
earnings per common share		3,342		3,316			3,335		3,310
Common shares issuable under
share based payment plans
which are potentially dilutive		1		-			1		1
Common shares used for diluted
earnings per common share		3,343		3,316			3,336		3,311
Net income (loss)	$	289		(188	)		1,173		3,404
Earnings (loss) per common share:
-basic	$	0.09		(0.06	)		0.35		1.03
-diluted	$	0.09		(0.06	)		0.35		1.03

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. For the three and six months ended March 31, 2018, 159,398 and 168,519 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

The Company's directors, officers and key employees are eligible to participate in FRP's 2000 Stock

9 

Option Plan and the 2006 Stock Option Plan under which options for shares of common stock were granted to directors, officers and key employees. All related compensation expense has been fully allocated to the Company (rather than FRP) and included in corporate expenses.

Patriot Incentive Stock Plan

In January, 2015 the Board of Directors of the Company adopted the Patriot Transportation Holding, Inc. Incentive Stock Plan. Grants were issued based upon all outstanding FRP options held by company directors, officers and key employees on January 30, 2015 with the same remaining terms. The number of common shares available for future issuance was 11,043 at March 31, 2019.

The realized tax benefit pertaining to options exercised and the remaining compensation cost of options previously granted are recognized by FRP or Patriot based on the employment location of the related employee or director.

In December 2016, the Company approved and issued a long-term performance incentive to an officer in the form of stock appreciation rights. The Company granted 80,000 stock appreciation rights. The market price was $23.13 on the date of grant 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 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,
	2019		2018		2019		2018
Stock option grants	$	57		55		112		110
Annual director stock award		363		368		363		368
	$	420		423		475		478

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, 2018	173,095	$	21.49	6.3	$	1,398
Granted	29,920		20.10			240
Outstanding at
March 31, 2019	203,015	$	21.28	6.4	$	1,638
Exercisable at
March 31, 2019	118,084	$	21.97	4.8	$	961
Vested during
six months ended
March 31, 2019	19,724				$	174

The aggregate intrinsic value of exercisable Company options was $22,000 and the aggregate

10 

intrinsic value of all outstanding in-the-money options was $42,000 based on the Company’s market closing price of $18.80 on March 29, 2019 less exercise prices.

The realized tax benefit from option exercises during the first six months of fiscal 2019 was $28,000 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, 2019 was $602,000, 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, 2019 and September 30, 2018, 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 2019, the Company’s ten largest customers accounted for approximately 62.8% of our revenue and one of these customers accounted for 18.5% of our revenue. Accounts receivable from the ten largest customers was $5,353,000 and $4,875,000 at March 31, 2019 and September 30, 2018 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.

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(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 this year’s first quarter.

First quarter 2018 net income included $3,041,000, or $.92 per share, due to a deferred tax benefit resulting from revaluing the company’s net deferred tax liabilities per the Tax Cuts and Jobs Act of 2017. As the Company has a September 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 24.28% for our fiscal year ending September 30, 2018, and 21% for subsequent fiscal years. The effective tax rate including the effect of state income taxes, but not including excess tax benefits from stock option exercises, decreased from 39.5% to 30.5% for fiscal 2018 and is projected to be 27.5% for subsequent years.

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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 customer’s 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 customer’s fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling our customer’s dry bulk commodities such as cement, lime and various industrial powder products and liquid chemicals. As of March 31, 2019, we employed 541 revenue-producing drivers who operated our fleet of 370 company tractors (excluding 9 being placed in service and 8 being prepared for sale), 20 owner operators and 528 trailers from our 20 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

13 

identify, communicate with and ultimately hire qualified drivers.

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.

14 

· 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 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 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 2019 vs. 2018
Total Revenue	Down 1.5%
Transportation Revenue	Down 2.8%
Revenue Miles	Down 1.9%
PAFR	Improved from 2.15 to 1.92
Operating Ratio	Improved from 99.2% to 97.5%
Driver Turnover Rate	Increased from 60.6% to 72.6%
Avg. Driver Count incl. owner operators	Down 7.7%

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Highlights of the Second quarter of Fiscal 2019

· The Company reported net income of $289,000, or $.09 per share, compared to a net loss of ($188,000), or ($.06) per share, in the same quarter last year.

· Transportation revenues (excludes fuel surcharges) were down $839,000 on 379,000 fewer miles due primarily to one of our customers moving into one of our markets with their private fleet and the closure of our Spartanburg satellite location.

· Insurance and losses decreased $1,167,000 primarily due to settlement of prior year liability claims for less than the actuarial estimates and lower health claims.

Comparative Results of Operations for the Three Months ended March 31, 2019 and 2018

	Three months ended March 31
(dollars in thousands)		2019		%		2018		%
Revenue miles (in thousands)		8,975				9,354
Revenues:
Transportation revenue	$	24,537		90.9	%	25,376		90.7	%
Fuel surcharges		2,471		9.1	%	2,603		9.3	%
Total Revenues		27,008		100.0	%	27,979		100.0	%
Cost of operations:
Compensation and benefits		11,852		43.9	%	12,043		43.0	%
Fuel expenses		4,004		14.8	%	4,304		15.4	%
Repairs & tires		2,006		7.4	%	1,685		6.0	%
Other operating		1,189		4.4	%	1,063		3.8	%
Insurance and losses		2,002		7.4	%	3,169		11.3	%
Depreciation expense		1,976		7.3	%	2,223		8.0	%
Rents, tags & utilities		891		3.3	%	887		3.2	%
Sales, general & administrative		2,561		9.5	%	2,442		8.7	%
Corporate expenses		867		3.2	%	790		2.8	%
Gain on disposition of PP&E		(633	)	-2.3	%	(335	)	-1.2	%
Total cost of operations		26,715		98.9	%	28,271		101.0	%
Total operating profit (loss)	$	293		1.1	%	(292	)	-1.0	%

Total revenues for the quarter were $27,008,000, down $971,000 from the same quarter last year. Transportation revenues (excludes fuel surcharges) were $24,537,000, down $839,000 due to a decrease of 379,000 miles over the same quarter last year. The decrease in miles was due primarily to one of our customes moving into one of our markets with their private fleet and the closure of our Spartanburg sattelite location. Despite an average longer haul length, transportation revenue per mile was up $.02 due to increased freight rates. Fuel surcharge revenue was $2,471,000, down $132,000 from the same quarter last year.

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Compensation and benefits decreased $191,000 mainly due to lower company miles and lower payroll taxes partially offset by higher owner operator pay (the average owner operator count increased by 6 versus the same quarter last year). Fuel expenses decreased $300,000 due primarily to lower company miles. Repair and tire expense increased $321,000 due to several high dollar repairs and the expensing of prepaid tires as we purchased more tractors in this quarter versus the same quarter last year. Other operating expenses were up $126,000 due to increased tolls, driver hiring and driver travel expense. Insurance and losses decreased $1,167,000 primarily due to settlement of prior year liability claims for less than the actuarial estimates and lower health claims. Depreciation expense was down $247,000 as a result of down sizing our fleet and placing twenty three full service lease trucks in certain markets where we do not have maintenance shops. Sales, general & administrative costs increased $119,000 due mainly to increased driver recruiting efforts, higher IT expense (on-going system upgrades) and higher payroll expense (to support changes to driver pay). Gain on disposition of assets increased $298,000 to $633,000 this quarter due primarily to a gain of $247,000 on the insurance settlement for hurricane damages and losses sustained at our Panama City, Florida location in this year’s first quarter.

As a result, operating profit this quarter was $293,000 compared to an operating loss of ($292,000) in the same quarter last year. Operating ratio was 98.9 this quarter versus 101.0 in the same quarter last year.

Comparative Results of Operations for the Six Months ended March 31, 2019 and 2018

	Six months ended March 31
(dollars in thousands)		2019		%		2018		%
Revenue miles (in thousands)		18,252				18,606
Revenues:
Transportation revenue	$	49,517		89.9	%	50,946		91.2	%
Fuel surcharges		5,545		10.1	%	4,934		8.8	%
Total Revenues		55,062		100.0	%	55,880		100.0	%
Cost of operations:
Compensation and benefits		23,890		43.4	%	23,916		42.8	%
Fuel expenses		8,280		15.0	%	8,426		15.1	%
Repairs & tires		3,671		6.7	%	3,258		5.8	%
Other operating		2,321		4.2	%	2,106		3.8	%
Insurance and losses		4,944		9.0	%	5,885		10.5	%
Depreciation expense		3,946		7.2	%	4,553		8.2	%
Rents, tags & utilities		1,738		3.2	%	1,742		3.1	%
Sales, general & administrative		5,029		9.1	%	4,764		8.5	%
Corporate expenses		1,399		2.5	%	1,277		2.3	%
Gain on disposition of PP&E		(1,556	)	-2.8	%	(499	)	-0.9	%
Total cost of operations		53,662		97.5	%	55,428		99.2	%
Total operating profit	$	1,400		2.5	%	452		.8	%

17 

The Company reported net income of $1,173,000, or $.35 per share, compared to net income of $3,404,000, or $1.03 per share in the same period last year. The first six months of 2018 net income included $3,041,000, or $.92 per share, due to a deferred tax benefit resulting from revaluing the company’s net deferred tax liabilities per the Tax Cuts and Jobs Act of 2017. The first six months of 2019 net income included $634,000, or $.19 per share, from gains on real estate sales.

Total revenues for the first six months were $55,062,000, down $818,000 from the same period last year. Transportation revenues (excludes fuel surcharges) were $49,517,000, down $1,429,000. Miles declined by 354,000 to 18,252,000 versus 18,606,000 in the same period last year.

Net fuel expense (i.e. gross fuel expenses less fuel surcharges) decreased by $757,000 due to fewer miles driven and higher fuel surcharges in the early part of the period. Repair and tire expense increased $413,000 due to several high dollar repairs and the expensing of prepaid tires as we purchased more tractors and trailers in this period versus the same period last year. Other operating expenses were up $215,000 due to increased tolls, driver hiring and driver travel expense. Insurance and losses were down $941,000 due to lower claims. Depreciation expense was down $607,000 as we sold excess equipment to right size our fleet. Sales, general & administrative costs increased $265,000 due mainly to increased driver recruiting efforts, higher IT expense (on-going system upgrades) and higher payroll expense (to support changes to driver pay). Gain on disposition of assets increased $1,057,000 due primarily to 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 and losses sustained at our Panama City, Florida location.

As a result, operating profit was $1,400,000 compared to $452,000 in the same period last year. Operating ratio was 97.5 versus a 99.2 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, 2019, we had no debt outstanding on this revolver, $3,043,000 letters of credit and $31,957,000 available for additional borrowings. The Company expects our fiscal year 2019 cash generation to cover the cost of our operations and all our budgeted capital expenditures.

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,
	2019			2018
Total cash provided by (used for):
Operating activities	$	4,543			3,492
Investing activities		(3,688	)		(719	)
Financing activities		(634	)		—
Increase in cash and cash equivalents	$	221			2,773
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

18 

statement) was $4,543,000 for the six months ended March 31, 2019, compared to $3,492,000 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 $3,970,000 versus the same period last year. These changes are described above under "Comparative Results of Operations." Trade accounts receivable increased $524,000 compared to a decrease of $548,000 in the same period last year. Deferred income tax decreased $3,629,000 in the same period last year primarily due to a reduction in income tax expense related to the enactment of the Tax Cuts and Jobs Act. Accounts Payable and Accrued Liabilities decreased $2,380,000 in the same period last year due to the timing of payments related to equipment purchases and lower bonus payments paid during the quarter for the prior fiscal year. These changes comprise the majority of the increase in net cash provided by operating activities.

Investing Activities – Investing activities include the purchase of property and equipment, purchase and maturity of Treasury bills, any business acquisitions and proceeds from sales of property and equipment upon retirement. For the six months ended March 31, 2019, we spent $3,688,000 on investing activities which included $4,702,000 for the purchase of plant, property and equipment net of proceeds from retirements and $8,361,000 for the purchase of Treasury bills offset by $7,000,000 in proceeds on maturities of Treasury bills. For the six months ended March 31, 2018 we spent $719,000 on equipment net of 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 $634,000 versus no financing activities for the six months ended March 31, 2018 due to bank overdrafts in the prior year and debt issue costs related to a revised and restated revolver credit agreement. We had no outstanding long-term debt on March 31, 2019 or March 31, 2018.

Credit Facilities - 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. The credit agreement contains certain conditions, affirmative financial covenants and negative covenants, including a minimum tangible net worth. As of March 31, 2019, the tangible net worth covenant would have limited our ability to pay dividends or repurchase stock with borrowed funds to a maximum of $21.6 million combined.

Cash Requirements - The Company currently expects its fiscal 2019 capital expenditures to be approximately $10 million for the replacement equipment which we expect to be fully funded by our cash generated from our operations. The Company does not currently pay any cash dividends on common stock

Summary and Outlook. Our balance sheet remains solid with $19,000,000 of cash and investments

19 

and zero debt.  This quarter was negatively impacted by the decrease in transportation revenue on the lower revenue miles but we are having success adding business in certain markets. One of our primary focuses, together with driver retention, is improving our freight rates. The past few years, the rate environment has been difficult but recently we have seen positive improvement in the market as customers are finding it more difficult to get their freight delivered. With improved numbers of drivers in training, the other key focus today is retention. Our turnover year to date has increased slightly over fiscal 2018. However, we did see a meaningful improvement to driver turnover in the month of March. Our new driver advocate position is still in its infancy but so far, the feedback has been very positive. The decrease in equipment is producing significant recurring savings as are the recent changes we made to our pharmacy and wellness plans. We will continue to pursue relationships with those customers who are willing to properly compensate us for the safe, reliable service we provide, particularly during this severe driver shortage. We are optimistic that the strategic plan we have in place will lead to improved operating profits.

The company owns a 25-acre parcel of land in Tampa, Florida where we maintain our terminal facility on approximately 5 acres of the property. The property is not currently being used for its highest and best use and we intend to sell the property and relocate our Tampa terminal to a more suitable location. During the quarter, we filed all the required applications and plans to the City of Tampa for approval of a commercial mixed-use master site plan for the property. We anticipate obtaining all those approvals over the next few months and being in a position to market a fully entitled site later this year.

Subsequent Event. On Monday, April 22nd, 2019 the Company announced plans to exit the Charlotte, NC petroleum hauling market. Our intentions are to continue hauling petroleum products on a transitory basis for our current customers through May 22, 2019. Charlotte has continually proven to be a very difficult driver hiring and retention market coupled with a customer rate structure that does not afford Patriot Transportation the opportunity to make an acceptable return on our capital. We believe we will be able to retain some of our Charlotte drivers to run a new dry bulk opportunity that will be managed from another one of our terminals. Any excess equipment remaining after the closure will be sold. The closure will result in the loss of approximately $2.5 M of revenue (prior to the addition of the dry bulk opportunity) and a slight improvement to the Company’s operating profit.

20 

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 agreements. Under the Wells Fargo revolving credit line of credit, the applicable spread for borrowings at March 31, 2019 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 certain thresholds.

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, 2019, 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.

21 

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, 2018, 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.

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 28		—	$	—		—	$	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.

Item 6. EXHIBITS

(a) Exhibits. The response to this item is submitted as a separate Section entitled "Exhibit Index", on page 24.

22 

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 13, 2019	By	ROBERT E. SANDLIN
		Robert E. Sandlin
		President and Chief Executive Officer
		(Principal Executive Officer)
	By	MATTHEW C. MCNULTY
		Matthew C. McNulty
		Vice President, Secretary and Chief Financial Officer
		(Principal Financial Officer)
	By	JOHN D. KLOPFENSTEIN
		John D. Klopfenstein
		Controller, Treasurer and Chief Accounting
		Officer (Principal Accounting Officer)

23 

PATRIOT TRANSPORTATION HOLDING, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2019

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

24 

EX-31

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 13, 2019                                                                             /s/Robert E. Sandlin

                                                                                                        President and Chief Executive Officer

EX-31

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 13, 2019                                                         /s/Matthew C. McNulty

                                                                                  Vice President, Secretary and Chief Financial Officer

EX-31

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 13, 2019                                                            /s/John D. Klopfenstein

                                                                                     Controller, Treasurer and Chief Accounting Officer

EX-32

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 13, 2019	By	/s/ROBERT E. SANDLIN
		Robert E. Sandlin
		President and Chief Executive Officer
	By	/s/MATTHEW C. MCNULTY
		Matthew C. McNulty
		Vice President, Secretary and Chief Financial Officer
	By	/s/JOHN D. KLOPFENSTEIN
		John D. Klopfenstein
		Controller, Treasurer and Chief Accounting Officer

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.

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Document and Entity Information	6 Months Ended
	Mar. 31, 2019 shares
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, 2019
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Filer	true
Emerging Growth Company	false
Entity Common Stock, Shares Outstanding	3,347,329
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019

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Consolidated and Combined Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2019	Sep. 30, 2018
Current assets:
Cash and cash equivalents	$ 222	$ 1
Treasury bills available for sale	18,863	17,298
Accounts receivable, net of allowance for doubtful accounts of $154 and $153, respectively	8,390	7,866
Federal and state taxes receivable	163	547
Inventory of parts and supplies	907	895
Prepaid tires on equipment	1,666	1,746
Prepaid taxes and licenses	338	609
Prepaid insurance	2,115	2,348
Prepaid expenses, other	187	134
Total current assets	32,851	31,444
Property and equipment, at cost	93,044	94,710
Less accumulated depreciation	59,414	60,799
Net property and equipment	33,630	33,911
Goodwill	3,431	3,431
Intangible assets, net	778	855
Other assets, net	190	176
Total assets	70,880	69,817
Current liabilities:
Accounts payable	3,397	3,271
Bank overdraft	0	625
Accrued payroll and benefits	3,764	3,963
Accrued insurance	2,169	1,896
Accrued liabilities, other	231	408
Total current liabilities	9,561	10,163
Deferred income taxes	5,950	5,940
Accrued insurance	204	204
Other liabilities	1,099	1,104
Total liabilities	16,814	17,411
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; 3,347,329 and 3,328,466 shares issued and outstanding, respectively)	335	333
Capital in excess of par value	37,909	37,436
Retained earnings	15,645	14,472
Accumulated other comprehensive income, net	177	165
Total shareholders' equity	54,066	52,406
Total liabilties and shareholders' equity	$ 70,880	$ 69,817

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Consolidated and Combined Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2019	Sep. 30, 2018
Statement of Financial Position [Abstract]
Accounts receivable allowance for doubtful accounts	$ 154	$ 153
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	3,347,329	3,328,466

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Consolidated and Combined Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Revenues:
Total revenues	$ 27,008	$ 27,979	$ 55,062	$ 55,880
Cost of operations:
Compensation and benefits	11,852	12,043	23,890	23,916
Fuel expenses	4,004	4,304	8,280	8,426
Repairs & tires	2,006	1,685	3,671	3,258
Other operating	1,189	1,063	2,321	2,106
Insurance and losses	2,002	3,169	4,944	5,885
Depreciation expense	1,976	2,223	3,946	4,553
Rents, tags & utilities	891	887	1,738	1,742
Sales, general & administrative	2,561	2,442	5,029	4,764
Corporate expenses	867	790	1,399	1,277
Gain on disposition of PP&E	(633)	(335)	(1,556)	(499)
Total cost of operations	26,715	28,271	53,662	55,428
Total operating profit (loss)	293	(292)	1,400	452
Interest income and other	113	31	214	33
Interest expense	(7)	(9)	(17)	(19)
Income (loss) before income taxes	399	(270)	1,597	466
Provision for (benefit from) income taxes	110	(82)	424	(2,938)
Net income (loss)	289	(188)	1,173	3,404
Unrealized investment gains, net	10	0	12	0
Tax reform gain on retiree health	0	0	0	32
Comprehensive Income (loss)	$ 299	$ (188)	$ 1,185	$ 3,436
Earnings per common share:
Net income (loss)- basic	$ 0.09	$ (0.06)	$ 0.35	$ 1.03
Net income (loss)- diluted	$ 0.09	$ (0.06)	$ 0.35	$ 1.03
Number of shares (in thousands) used in computing:
-basic earnings per common share	3,342	3,316	3,335	3,310
-diluted earnings per common share	3,343	3,316	3,336	3,311
Transportation [Member]
Revenues:
Revenues	$ 24,537	$ 25,376	$ 49,517	$ 50,946
Fuel Surcharges [Member]
Revenues:
Revenues	$ 2,471	$ 2,603	$ 5,545	$ 4,934

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Consolidated and Combined Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities:
Net income	$ 1,173	$ 3,404
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,243	4,925
Deferred income taxes	10	(3,629)
Gain on asset dispositions	(1,556)	(499)
Stock-based compensation	475	478
Net changes in operating assets and liabilities:
Accounts receivable	(524)	548
Inventory of parts and supplies	(12)	(54)
Prepaid expenses	531	47
Other assets	(199)	38
Accounts payable and accrued liabilities	23	(2,380)
Income taxes payable and receivable	384	612
Long-term insurance liabilities and other long-term liabilities	(5)	2
Net cash provided by operating activities	4,543	3,492
Cash flows from investing activities:
Purchase of property and equipment	(4,702)	(1,812)
Purchase of Treasury bills	(8,361)	0
Maturities of Treasury bills	7,000	0
Proceeds from the sale of property, plant and equipment	2,375	1,093
Net cash used in investing activities	(3,688)	(719)
Cash flows from financing activities:
Decrease in bank overdrafts	(625)	0
Debt issue costs	(9)	0
Net cash used in financing activities	(634)	0
Net increase in cash and cash equivalents	221	2,773
Cash and cash equivalents at beginning of period	1	11,289
Cash and cash equivalents at end of the period	$ 222	$ 14,062

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Description of Business and Basis of Presentation

6 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Description of Business and Basis of Presentation

(1) Description of Business and Basis of Presentation.

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 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 customer’s 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 customer’s fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling our customer’s dry bulk commodities such as cement, lime and various industrial powder products and liquid chemicals. As of March 31, 2019, we employed 541 revenue-producing drivers who operated our fleet of 370 company tractors (excluding 9 being placed in service and 8 being prepared for sale), 20 owner operators and 528 trailers from our 20 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, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2019. 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, 2018.

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Recently Issued Accounting Standards

6 Months Ended

Mar. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Recently Issued Accounting Standards

(2) Recently Issued Accounting Standards. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” which replaces existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. The new standard requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. It may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts with remaining performance obligations as of the effective date. Management has identified that a legally enforceable contract with its customers is executed by both parties at the point of pickup of the shipper’s product, as evidenced by the bill of lading. Although the Company may have master agreements with its customers, these master agreements only establish terms. There is no financial obligation to the shipper until the Company takes possession of the load. Revenue is recognized for each individual load and the amount of revenue in progress at the end of each quarter is insignificant. There is no significant amount of judgment or uncertainty in recording revenue. The Company adopted this standard on October 1, 2018, and its adoption of this guidance did not result in a material impact on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required. The new standard will become effective for the Company beginning with the first quarter 2020 and requires a modified retrospective transition approach and includes a number of practical expedients. Early adoption of the standard is permitted. The Company is currently evaluating the impacts the adoption of this accounting guidance will have on the consolidated financial statements. The Company has relatively few leases extending over 12 months, primarily the corporate office and 30 leased tractors. The total gross contractual obligation for leases with commitments greater than 12 months at September 30, 2018 was $3,875,000.

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Related Party Agreements

6 Months Ended

Mar. 31, 2019

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 October 1, 2018.

The consolidated statements of income reflect charges and/or allocation to FRP Holdings, Inc. for these services of $301,000 and $358,000 for the three months ended March 31, 2019 and 2018, and $723,000 and $710,000 for the six months ended March 31, 2019 and 2018, 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.

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Long-Term Debt

6 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

Long-Term Debt

(4) Long-Term debt. The Company had no long-term debt outstanding at March 31, 2019 and September 30, 2018. 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. The Credit Agreement contains certain conditions, affirmative financial covenants and negative covenants. As of March 31, 2019, we had no outstanding debt borrowed on this revolver, $3,043,000 in commitments under letters of credit and $31,957,000 available for additional borrowings. The letter of credit fee is 1% and the applicable interest rate would have been 3.498% on March 31, 2019. 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, 2019.

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Earnings per share

6 Months Ended

Mar. 31, 2019

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,
	2019		2018			2019		2018
Weighted average common shares
outstanding during the period
- shares used for basic
earnings per common share		3,342		3,316			3,335		3,310
Common shares issuable under
share based payment plans
which are potentially dilutive		1		-			1		1
Common shares used for diluted
earnings per common share		3,343		3,316			3,336		3,311
Net income (loss)	$	289		(188	)		1,173		3,404
Earnings (loss) per common share:
-basic	$	0.09		(0.06	)		0.35		1.03
-diluted	$	0.09		(0.06	)		0.35		1.03

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. For the three and six months ended March 31, 2018, 159,398 and 168,519 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.

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Stock-Based Compensation Plans

6 Months Ended

Mar. 31, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation Plans

(6) Stock-Based Compensation Plans.

Participation in FRP Plans

The Company's directors, officers and key employees are 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. All related compensation expense has been fully allocated to the Company (rather than FRP) and included in corporate expenses.

Patriot Incentive Stock Plan

In January, 2015 the Board of Directors of the Company adopted the Patriot Transportation Holding, Inc. Incentive Stock Plan. Grants were issued based upon all outstanding FRP options held by company directors, officers and key employees on January 30, 2015 with the same remaining terms. The number of common shares available for future issuance was 11,043 at March 31, 2019.

The realized tax benefit pertaining to options exercised and the remaining compensation cost of options previously granted are recognized by FRP or Patriot based on the employment location of the related employee or director.

In December 2016, the Company approved and issued a long-term performance incentive to an officer in the form of stock appreciation rights. The Company granted 80,000 stock appreciation rights. The market price was $23.13 on the date of grant 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 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,
	2019		2018		2019		2018
Stock option grants	$	57		55		112		110
Annual director stock award		363		368		363		368
	$	420		423		475		478

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, 2018	173,095	$	21.49	6.3	$	1,398
Granted	29,920		20.10			240
Outstanding at
March 31, 2019	203,015	$	21.28	6.4	$	1,638
Exercisable at
March 31, 2019	118,084	$	21.97	4.8	$	961
Vested during
six months ended
March 31, 2019	19,724				$	174

The aggregate intrinsic value of exercisable Company options was $22,000 and the aggregate intrinsic value of all outstanding in-the-money options was $42,000 based on the Company’s market closing price of $18.80 on March 29, 2019 less exercise prices.

The realized tax benefit from option exercises during the first six months of fiscal 2019 was $28,000 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, 2019 was $602,000, which is expected to be recognized over a weighted-average period of 3.5 years.

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Fair Value Measurements

6 Months Ended

Mar. 31, 2019

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, 2019 and September 30, 2018, 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.

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Contingent liabilities

6 Months Ended

Mar. 31, 2019

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.

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Concentrations

6 Months Ended

Mar. 31, 2019

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 2019, the Company’s ten largest customers accounted for approximately 62.8% of our revenue and one of these customers accounted for 18.5% of our revenue. Accounts receivable from the ten largest customers was $5,353,000 and $4,875,000 at March 31, 2019 and September 30, 2018 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.

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Unusual or Infrequent Items Impacting Quarterly Results

6 Months Ended

Mar. 31, 2019

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 this year’s first quarter.

First quarter 2018 net income included $3,041,000, or $.92 per share, due to a deferred tax benefit resulting from revaluing the company’s net deferred tax liabilities per the Tax Cuts and Jobs Act of 2017. As the Company has a September 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 24.28% for our fiscal year ending September 30, 2018, and 21% for subsequent fiscal years. The effective tax rate including the effect of state income taxes, but not including excess tax benefits from stock option exercises, decreased from 39.5% to 30.5% for fiscal 2018 and is projected to be 27.5% for subsequent years.

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Earnings per share (Tables)

6 Months Ended

Mar. 31, 2019

Earnings Per Share

Earnings per share (in thousands, except per share amounts)

	Three Months ended					Six months ended
	March 31,					March 31,
	2019		2018			2019		2018
Weighted average common shares
outstanding during the period
- shares used for basic
earnings per common share		3,342		3,316			3,335		3,310
Common shares issuable under
share based payment plans
which are potentially dilutive		1		-			1		1
Common shares used for diluted
earnings per common share		3,343		3,316			3,336		3,311
Net income (loss)	$	289		(188	)		1,173		3,404
Earnings (loss) per common share:
-basic	$	0.09		(0.06	)		0.35		1.03
-diluted	$	0.09		(0.06	)		0.35		1.03

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Stock-Based Compensation Plans (Tables)

6 Months Ended

Mar. 31, 2019

Share-based Payment Arrangement [Abstract]

Stock Compensation Expense (in thousands)

	Three Months ended				Six months ended
	March 31,				March 31,
	2019		2018		2019		2018
Stock option grants	$	57		55		112		110
Annual director stock award		363		368		363		368
	$	420		423		475		478

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, 2018	173,095	$	21.49	6.3	$	1,398
Granted	29,920		20.10			240
Outstanding at
March 31, 2019	203,015	$	21.28	6.4	$	1,638
Exercisable at
March 31, 2019	118,084	$	21.97	4.8	$	961
Vested during
six months ended
March 31, 2019	19,724				$	174

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Earnings per share - Earnings per common share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Weighted average common shares outstanding during the period - shares used for basic earnings per common share	3,342	3,316	3,335	3,310
Common shares issuable under share based payment plans which are potentially dilutive	1	0	1	1
Common shares used for diluted earnings per common share	3,343	3,316	3,336	3,311
Net income (loss)	$ 289	$ (188)	$ 1,173	$ 3,404
Earnings (loss) per common share:
Earnings (loss) per share-basic	$ 0.09	$ (0.06)	$ 0.35	$ 1.03
Earnings (loss) per share-diluted	$ 0.09	$ (0.06)	$ 0.35	$ 1.03

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Stock-Based Compensation Plans - Summary of Stock Options (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Mar. 31, 2019 USD ($) yr $ / shares shares	Sep. 30, 2018 USD ($) yr $ / shares shares
Share-based Payment Arrangement [Abstract]
Options outstanding | shares	203,015	173,095
Options granted | shares	29,920
Options outstanding weighted average exercise price | $ / shares	$ 21.28	$ 21.49
Options outstanding weighted average exercise price - Granted | $ / shares	$ 20.10
Options outstanding weighted average remaining term | yr	6.4	6.3
Options outstanding weighted average grant date fair value | $	$ 1,638	$ 1,398
Options granted weighted average grant date fair value | $ / shares	$ 240
Options exercisable | shares	118,084
Options exerciseable weighted average exercise price | $ / shares	$ 21.97
Options exerciseable weighted average remaining term | yr	4.8
Options exerciseable weighted average grant date fair value | $	$ 961
Options vested | shares	19,724
Options vested weighted average grant date fair value | $	$ 174

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Stock-Based Compensation Plans - Stock Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Share-based Payment Arrangement [Abstract]
Stock option grants	$ 57	$ 55	$ 112	$ 110
Annual director stock award	363	368	363	368
Stock based compensation expense	$ 420	$ 423	$ 475	$ 478

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Description of Business and Basis of Presentation (Details Narrative)	Mar. 31, 2019
Revenue Producing Drivers	541
Fleet of Tractors	370
Tractors being placed in service	9
Tractors being prepared for sale	8
owner operators	20
Fleet of Trailers	528
Terminal locations	20
Satellite locations	6
Petroleum Products
Percentage of Business	86.00%
Dry Bulk Commodities
Percentage of Business	14.00%

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Recently Issued Accounting Standards (Details Narrative) $ in Thousands	Sep. 30, 2018 USD ($)
Recently Issued Accounting Standards Details Narrative Abstract
Contractual obligation for lease payments greater than 12 months	$ 3,875

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Related Party Agreements (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
FRP
Charges/allocations	$ 301	$ 358	$ 723	$ 710

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Long-Term Debt (Details Narrative) - USD ($) $ in Thousands	1 Months Ended	6 Months Ended
	Dec. 31, 2018	Mar. 31, 2019	Dec. 14, 2018	Sep. 30, 2018
Wells Fargo
Revolving Credit facility			$ 35,000
Credit facility increase maximum			$ 50,000
Borrowed under the revolver		$ 0
Commitments under letters of credit		3,043
Amount available for additional borrowings		$ 31,957
Credt agreement term	5 years
Compliance with loan covenants		All
Letter of credit fee		1.00%
Interest rate		3.498%
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%

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Earnings per share (Details Narrative) - shares	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Anti-dilutive shares	181,983	159,398	175,373	168,519

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Stock-Based Compensation Plans (Details Narrative) $ / shares in Units, $ in Thousands	6 Months Ended
	Mar. 31, 2019 USD ($) yr shares	Mar. 29, 2019 $ / shares	Dec. 21, 2016 USD ($) yr $ / shares shares
Shares available for future issuance | shares	11,043
Stock appreciation rights issued | shares			80,000
Minimum award for stock appreciation rights			$ 500
Stock appreciation rights vesting period | yr			9.1
Aggregate intrinsic value of exercisable options	$ 22
Aggregate intrinsic value of outstanding in-the-money options	42
Market close price | $ / shares		$ 18.80	$ 23.13
Total unrecognized compensation cost of options granted	$ 602
Weighted average period for compensation to be recognized | yr	3.5
FRP
Realized tax benefit from options exercised	$ 28

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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

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Concentrations (Details Narrative) - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2019	Sep. 30, 2018
Top Ten Customers
Customer revenue concentration	62.80%
Accounts receivable concentration	$ 5,353	$ 4,875
Top Customer
Customer revenue concentration	18.50%

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Unusual or Infrequent Items Impacting Quarterly Results (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended			6 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Mar. 31, 2019	Sep. 30, 2018	Sep. 30, 2017
US statutory federal rate				21.00%	24.28%
Effective tax rate				27.50%	30.50%	39.50%
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
Tax Reform
Deferred tax benefit			$ 3,041
Deferred tax benefit per share			$ 0.92