UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM
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| (Mark One) |
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended |
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
_____________________
(Exact name of registrant as specified in its charter)
_____________________
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | |||
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [_]
Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [_]
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.
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).
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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”, “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 | |
| Emerging growth company |
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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 Act). Yes [_]
The number of shares of the registrant’s
stock outstanding as of December 2, 2021 was . The aggregate market value of the shares of Common Stock held by non-affiliates
of the registrant as of March 31, 2021, the last day of business of our most recently completed second fiscal quarter, was $
+ Solely for purposes of this calculation, the registrant has assumed that all directors, officers and ten percent (10%) shareholders of the Company are affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
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PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
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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 the impact of the COVID-19 pandemic and “stay home” orders, as well as increased vehicle fuel efficiency, other impacts on the COVID-19 pandemic on our operations and financial results; the increased popularity of electric vehicles; 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, including regulations regarding the transportation industry and regulations intended to reduce greenhouse gas emissions; cyber-attacks; 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
Item 1. BUSINESS.
Our Business. Our business, conducted through our subsidiary Florida Rock & Tank Lines, Inc., consists of hauling petroleum related products, dry bulk commodities and liquids. We are one of the largest regional tank truck carriers in North America. We operate terminals in Florida, Georgia, Alabama, and Tennessee. We do not own any of the products we haul; rather, we act as a third-party carrier to deliver our customers’ products from point A to point B, using predominately Company employees and 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 customers’ fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling dry bulk commodities such as cement, lime and various industrial powder products, water and liquid chemicals. As of September 30, 2021, we employed 341 revenue-producing drivers who operated our fleet of 282 Company tractors, 22 owner operators and 420 trailers from our 18 terminals and 6 satellite locations.
Tractors and Trailers. During fiscal 2021, the Company did not purchase any new tractors. Our fiscal 2022 capital budget includes 30 new tractors. We believe maintaining a modern fleet will result in reduced maintenance expenses, improved operating efficiencies and enhanced driver recruitment and retention. At September 30, 2021 the Company operated a fleet of 282 tractors, and 420 tank trailers. The Company owns all of the tank trailers and tractors used to conduct our business, except for 22 tractors owned by owner-operators and 29 full-service leased 2019 model year tractors located in key areas without Company maintenance shops.
Competitors. The tank lines transportation business is extremely competitive and fragmented. We have multiple competitors in each of our markets, consisting of other carriers of varying sizes as well as our customers’ private fleets. Price, service, and location are the major competitive factors in each local market. Some of our competitors have greater financial resources and a more expansive geographic footprint than our company. Some of our competitors periodically reduce their prices to gain business, which may limit our ability to maintain or increase prices, implement new pricing strategies, or maintain significant growth in our business.
Our largest competitors include Kenan Advantage Group, Eagle Transport, and Penn Tank Lines. We also compete with smaller carriers in most of our markets.
Our strategy is to build long-term partnerships with our customers based on the highest level of customer service and reliability. The current trend is that hypermarkets and super regional and national chains have emerged to replace many of the independent convenience stores and service stations historically served by many of our competitors. As this continues, we believe that our size, capabilities, scope of services and geographic reach will provide us a competitive advantage over smaller carriers with fewer resources.
Customers. Approximately 86% of our business consists of hauling petroleum related products. Our petroleum clients include major convenience store and hypermarket accounts, fuel wholesalers and major oil companies. We strive to build long-term relationships with major customers by providing outstanding customer service. During fiscal 2021, the Company’s ten largest customers accounted for approximately 59.8% of revenue. One of these customers
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accounted for 21.4% of revenue. The loss of any one of these customers could have a material adverse effect on the Company’s revenues and income. Nine of our top 10 accounts have been customers for at least 6 years.
Our dry bulk and chemical customers include large industrial companies including cement and concrete accounts and product distribution companies. Our customer relationships are long-standing and have grown over time as a result of consistently high safety and service levels.
In September 2020, we entered into a 3-year contract with a customer to haul spring water in seven food grade trailers. This is the Company’s first venture into the food grade space.
Sales and Marketing. Our marketing activities are focused on building our relationships with existing customers as well as developing new business opportunities. Our senior management team has extensive experience in marketing specialized fuels delivery services. In addition, significant portions of our marketing activities are conducted locally by our regional managers, terminal managers and dispatchers who act as local customer service representatives. These managers and dispatchers maintain regular contact with customers and are well-positioned to identify the changing transportation needs of customers in their respective geographic areas. We also actively participate in various trade associations, including the National Tank Truck Carriers Association, various state trucking and petroleum marketing associations and the Society of Independent Gasoline Marketers Association.
Environmental Matters. Our activities, which involve the transportation, storage and disposal of fuels and other hazardous substances and wastes, are subject to various federal, state and local health and safety laws and regulations relating to the protection of the environment, including, among others, those governing the transportation, management and disposal of hazardous materials, vehicle emissions, underground and above ground storage tanks and the cleanup of contaminated sites. Our operations involve risks of fuel spillage or seepage, hazardous waste disposal and other activities that are potentially damaging to the environment. If we are involved in a spill or other accident involving hazardous substances, or if we are found to be in violation of or liable under applicable laws or regulations, it could significantly increase our cost of doing business.
Most of our truck terminals are located in industrial areas, where groundwater or other forms of environmental contamination may have occurred. Under environmental laws, we could be held responsible for the costs relating to any contamination at those or other of our past or present facilities and at third-party waste disposal sites, including cleanup costs, fines and penalties and personal injury and property damages. Under some of these laws, such as the Comprehensive Environmental Response Compensation and Liability Act (also known as the Superfund law) and comparable state statutes, liability for the entire cost of the cleanup of contaminated sites can be imposed upon any current or former owner or operator, or upon any party who sent waste to the site, regardless of the lawfulness of any disposal activities or whether a party owned or operated a contaminated property at the time of the release of hazardous substances. From time to time, we have incurred remedial costs and/or regulatory penalties with respect to chemical or wastewater spills and releases relating to our facilities or operations, and, notwithstanding the existence of our environmental management program, we may incur such obligations in the future. The discovery of contamination or the imposition of additional obligations or liabilities in the future could result in a material adverse effect on our financial condition, results of operations or our business reputation.
Our operations involve hazardous materials and could result in significant environmental
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liabilities and costs. For a discussion of certain risks of our being associated with transporting hazardous substances see “Risk Factors—Risks Relating to Our Business”
Seasonality. Our business is subject to seasonal trends common in the refined petroleum products delivery industry. We typically face reduced demand for refined petroleum products delivery services during the winter months and increased demand during the spring and summer months. Further, operating costs and earnings are generally adversely affected by inclement weather conditions. These factors generally result in lower operating results during the first and second fiscal quarters of the year and cause our operating results to fluctuate from quarter to quarter. Our operating expenses also have been somewhat higher in the winter months, due primarily to decreased fuel efficiency and increased maintenance costs for tractors and trailers in colder months.
Employees. As of September 30, 2021, the Company employed 508 people.
Financial Information. Financial information about the company is presented in the financial statements included in the accompanying 2021 Annual Report to Shareholders and such information is incorporated herein by reference.
Company Website. The Company’s website may be accessed at www.patriottrans.com. All of our filings with the Securities and Exchange Commission can be accessed through our website promptly after filing. This includes annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports filed or furnished on Form 8-K and all related amendments.
Item 1A. RISK FACTORS.
Our future results may be affected by a number of factors over which we have little or no control. The following issues, uncertainties, and risks, among others, should be considered in evaluating our business and outlook. Also, note that additional risks not currently identified or known to us could also negatively impact our business or financial results.
Risks Relating to the COVID-19 Pandemic
Our business may continue to be adversely affected by the ongoing coronavirus pandemic and other health outbreaks.
The outbreak of the novel coronavirus (“SARS-CoV-2” or “COVID-19”) has evolved into a global pandemic. The coronavirus has spread to many regions of the world, including the areas of the United States where we operate.
Our business relies heavily on the demand for petroleum products. The spread of the coronavirus or other pandemics has had and may continue to have a material economic effect on our business due to government-imposed restrictions on travel and shelter-in-place orders, increased teleworking and a reduction in business travel and tourism.
Should the coronavirus continue to spread, our business operations could be delayed or interrupted. For instance, our operations would be adversely impacted if a number of our administrative personnel, drivers or field personnel are infected and become ill or are quarantined. At this time, we believe that our business would generally be exempted from shelter-in-place orders or other mandated local travel restrictions as an essential service but
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there can be no assurance as to the scope of quarantine orders imposed by local or state governments.
While the potential economic impact brought by and the duration of the pandemic or any new pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common stock.
Risks Relating to Our Business
Our business is subject to general economic and other factors that are largely out of our control and could affect our operations, profitability, and cash flow.
Our business is dependent on various economic factors over which we have little control, that include:
| • | the availability of qualified drivers; | ||
| • | access to the credit and capital markets; | ||
| • | rising healthcare costs; | ||
| • | increases in fuel prices, taxes, and tolls; | ||
| • | increases in costs of equipment; | ||
| • | interest rate fluctuations; | ||
| • | excess capacity in the trucking industry; | ||
| • | changes in laws or regulations or changes in license and regulatory fees; | ||
| • | potential disruptions at U.S. ports of entry and in pipeline operations; | ||
| • | downturns in customers’ business cycles; and | ||
| • | insurance prices and insurance coverage availability. |
As a result, we may experience periods of overcapacity, declining prices, lower profit margins and less availability of cash in the future. The COVID-19 pandemic has had widespread adverse economic impacts, and the ultimate impact of the pandemic on these and other factors affecting our business is highly uncertain. Our revenues and operating income could be materially adversely affected.
Our operations and financial results are subject to the demand for hauling petroleum products in our markets, which is determined by factors outside our control.
We derive approximately 86% of our revenues from the hauling of petroleum products, including gasoline, diesel fuel and ethanol. The demand for these services is determined by motor fuel
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consumption in our markets, which is affected by general economic conditions, employment levels, consumer confidence and spending patterns. Gasoline prices can be highly volatile and are impacted by factors outside of our control (including production decisions made by oil producing nations).
Demand for our petroleum hauling services is also impacted by vehicle fuel efficiency, the increasing popularity of electric, hybrid or alternative fuel vehicles and government regulation relating to ethanol. The Energy Information Administration of the U.S. Department of Energy projects that U.S. motor gasoline consumption will decline at an average rate of 1.1% per year between 2012 and 2040 as improvements in fuel efficiency are expected to outpace increases in miles driven.
Future legislation or regulations adopted to reduce greenhouse gas emissions, such as a carbon tax, may increase our operating costs, require unanticipated capital expenditures and reduce the demand for petroleum products. Developments regarding climate change and the effects of greenhouse gas emissions on climate change in recent years has increased the likelihood of such legislation or regulation. Moreover, attitudes toward gasoline and its relationship to the environment may significantly affect our sales and ability to market our products. Reduced consumer demand for gasoline could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our ability to recruit and retain drivers is critical to our financial results and the ability to grow our business.
Our industry is subject to a shortage of qualified drivers. This shortage is exacerbated during periods of economic expansion, in which attractive employment opportunities, including in the construction and manufacturing industries, may offer better compensation and better hours. We suffer from high turnover. We have implemented driver pay increases to address this shortage in the hopes of reducing turnover, however our efforts to reduce turnover may be unsuccessful.
There is substantial competition for qualified personnel, particularly drivers, in the trucking industry. Supply chain challenges could continue to reduce the number of eligible drivers in our markets. This results in temporary under-utilization of our equipment, difficulty in meeting our customers’ demands and increased compensation levels, each of which could have a material adverse effect on our business, results of operations and financial condition. A decrease in quality drivers could lead to an increased frequency in the number of accidents, potential claims exposure and, indirectly, insurance costs.
Difficulty in attracting qualified drivers limits our ability to accept or service new business opportunities or could require us to increase the wages we pay in order to attract and retain drivers. If we are unable to hire qualified drivers to service new or existing business, we may have to temporarily send drivers from other terminals to those struggling markets, causing us to incur significant costs relating to out-of-town driver pay and expenses.
We may be adversely affected by fluctuations in the price and availability of fuel.
We require large amounts of diesel fuel to operate our tractors. In 2019, 2020 and 2021, cost of fuel (including fuel taxes) represented approximately 14.5%, 11.6%, and 11.8%, respectively, of our total revenue. The market price for fuel can be extremely volatile and can be affected by a number of economic and political factors. In addition, changes in federal or state regulations can impact the price of fuel, as well as increase the amount we pay in fuel taxes.
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We typically incorporate a fuel surcharge provision in all customer contracts. The intended effect of that provision is to neutralize the impacts of fluctuations in the price of diesel fuel on both the Company and our customer. The amount of the fuel surcharge is typically set at the beginning of each month and is based on the actual price of diesel fuel recorded in the preceding month. This provision produces a lag in the timing of the recovery of the price move for both the Company and our customer. However, our customers may be able to negotiate contracts that minimize or eliminate our ability to pass on fuel price increases.
We currently do not hedge our fuel purchases to protect against fluctuations in fuel prices.
Our operations may also be adversely affected by any limit on the availability of fuel. Disruptions in the political climate in key oil producing regions in the world, particularly in the event of wars or other armed conflicts, could severely limit the availability of fuel in the United States. In the event our customers face significant difficulty in obtaining fuel, our business, results of operations and financial condition would be materially adversely affected.
Our business may be adversely affected by seasonal factors and harsh weather conditions.
Our business is subject to seasonal trends common in the refined petroleum products delivery industry. We typically encounter increased demand for fuels delivery services in Florida during the spring months and our other markets during the summer driving season. Further, operating costs and earnings are generally adversely affected by inclement weather conditions. These factors generally result in lower operating results during the first and second fiscal quarters of the year and cause our operating results to fluctuate from quarter to quarter. Our operating expenses also have been somewhat higher in the winter months, primarily due to decreased fuel efficiency, increased utility costs and increased maintenance costs for tractors and trailers in colder months. An occurrence of unusually harsh or long-lasting inclement weather could have an adverse effect on our operations and profitability.
We operate in a highly competitive industry, and competitive pressures may adversely affect our operations and profitability.
The tank lines transportation business is extremely competitive and fragmented. We compete with many other carriers of varying sizes as well as our customers’ private fleets. Numerous competitive factors could impair our ability to maintain our current level of revenues and profitability and adversely affect our financial condition. These factors include the following:
| • | we compete with many other fuels delivery service providers, particularly smaller regional competitors, some of which may have more equipment in, or stronger ties to, the geographic regions in which they operate or other competitive advantages; |
| • | some of our competitors periodically reduce their prices to gain business, which may limit our ability to maintain or increase prices, implement new pricing strategies or maintain significant growth in our business; |
| • | many customers periodically accept bids from multiple carriers, and this process may depress prices or result in the loss of some business to competitors; |
| • | many customers are looking to reduce the number of carriers they use, and in some instances we may not be selected to provide services; |
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| • | consolidation in the fuels delivery industry could create other large carriers with greater financial resources than we have and other competitive advantages relating to their size; |
| • | the development of alternative power sources for cars and trucks could reduce demand for gasoline; and |
| • | advances in technology require increased investments to maintain competitiveness, and we may not have the financial resources to invest in technology improvements or our customers may not be willing to accept higher prices to cover the cost of these investments. |
If we are unable to address these competitive pressures, our operations and profitability may be adversely affected.
Our operations present hazards and risks, which are not fully covered by insurance. If a significant accident happens, for which we are not fully insured, our operations and financial results could be adversely affected.
The primary accident risks associated with our business are:
| • | motor-vehicle related bodily injury and property damage; | ||
| • | workers’ compensation claims; | ||
| • | environmental pollution liability claims; | ||
| • | cargo loss and damage; and | ||
| • | general liability claims. |
We currently maintain insurance for:
| • | motor-vehicle related bodily injury and property damage claims; | ||
| • | workers’ compensation insurance coverage on our employees; and | ||
| • | general liability claims. |
Our insurance program includes a self-insured deductible of $250,000 per incident for bodily injury and property damage. The deductible on workers’ compensation is $500,000. In addition, the Company maintains a minimum of $10 million of insurance coverage which is the largest amount required by any of our customers. The deductible per incident could adversely affect our profitability, particularly in the event of an increase in the frequency or severity of incidents. Additionally, we are self-insured for damage to the equipment that we own and lease, as well as for cargo losses and such self-insurance is not subject to any maximum limitation. In addition, even where we have insurance, our insurance policies may not provide coverage for certain claims against us or may not be sufficient to cover all possible liabilities.
Our self-insured retentions require us to make estimates of expected loss amounts and accrue such estimates as expenses. Changes in estimates may materially and adversely affect our financial results. In addition, our insurance does not cover claims for punitive damages.
We are subject to changing conditions and pricing in the insurance marketplace that in the future could change dramatically the cost or availability of various types of insurance. To the extent these costs cannot be passed on to our customers in increased prices, increases in insurance costs
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could reduce our future profitability and cash flow.
Moreover, any accident or incident involving us, even if we are fully insured or not held to be liable, could negatively affect our reputation among customers and the public, thereby making it more difficult for us to compete effectively, and could significantly affect the cost and availability of insurance in the future. Because we provide “last mile” fuels delivery services, we generally perform our services in more crowded areas, which increases the possibility of an accident involving our trucks.
If our relationship with our employees were to deteriorate, we may be faced with unionization efforts, labor shortages, disruptions or stoppages, which could adversely affect our business and reduce our operating margins and income.
Our operations rely heavily on our employees, and any labor shortage, disruption or stoppage caused by poor relations with our employees could reduce our operating margins and income. None of our employees are subject to collective bargaining agreements, although unions have traditionally been active in the U.S. trucking industry. Our workforce has been subject to union organization efforts from time to time, and we could be subject to future unionization efforts as our operations expand. Unionization of our workforce could result in higher compensation and working condition demands that could increase our operating costs or constrain our operating flexibility. We believe we are exempt from overtime pay rules under regulations of the Department of Transportation (“DOT”). However, our operating costs would increase if this exemption were rescinded or if a court determined that we were not exempt from these overtime pay rules.
If we lose key members of our senior management, our business may be adversely affected.
Our ability to implement our business strategy successfully and to operate profitably depends in large part on the continued employment of our senior management team, led by Robert Sandlin, President and CEO. If Mr. Sandlin or the other members of senior management become unable or unwilling to continue in their present positions, our business or financial results could be adversely affected.
If we fail to develop, integrate or upgrade our information technology systems, we may lose customers or incur costs beyond our expectations.
We rely heavily on information technology and communications systems to operate our business and manage our network in an efficient manner. We have equipped our tractors with various mobile communications systems and electronic logging devices that enable us to monitor our tractors and communicate with our drivers in the field and enable customers to track the location and monitor the progress of their cargo through the Internet.
Increasingly, we compete for customers based upon the flexibility and sophistication of our technologies supporting our services. The failure of hardware or software that supports our information technology systems, the loss of data contained in the systems, or the inability of our customers to access or interact with our website, could significantly disrupt our operations and cause us to lose customers. If our information technology systems are unable to handle additional volume for our operations as our business and scope of service grow, our service levels and operating efficiency will decline. In addition, we expect customers to continue to demand more sophisticated fully integrated information systems. If we fail to hire and retain qualified personnel to implement and maintain our information technology systems or if we fail to upgrade
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or replace these systems to handle increased volumes, meet the demands of our customers and protect against disruptions of our operations, we may lose customers, which could seriously harm our business.
Our business could be negatively impacted by cyberattacks targeting our computer and telecommunications systems and infrastructure, or targeting those of our third-party service providers.
Our business, like other companies in our industry, has become increasingly dependent on digital technologies, including technologies that are managed by third-party service providers on whom we rely to help us collect, host or process information. Such technologies are integrated into our business operations. Use of the internet and other public networks for communications, services, and storage, including "cloud" computing, exposes all users (including our business) to cybersecurity risks.
While we and our third-party service providers commit resources to the design, implementation, and monitoring of our information systems, there is no guarantee that our security measures will provide absolute security. Despite these security measures, we may not be able to anticipate, detect, or prevent cyberattacks, particularly because the methodologies used by attackers change frequently or may not be recognized until launched, and because attackers are increasingly using techniques designed to circumvent controls and avoid detection. We and our third-party service providers may therefore be vulnerable to security events that are beyond our control, and we may be the target of cyber-attacks, as well as physical attacks, which could result in information security breaches and significant disruption to our business.
As cyberattacks continue to evolve, we may be required to expend significant additional resources to respond to cyberattacks, to continue to modify or enhance our protective measures, or to investigate and remediate any information.
We operate in a highly regulated industry, and increased costs of compliance with, or liability for violation of, existing or future regulations could significantly increase our costs of doing business.
As a motor carrier, we are subject to regulation by the Federal Motor Carrier Safety Administration (“FMCSA”) and DOT, and by various federal and state agencies. These regulatory authorities exercise broad powers governing various aspects such as operating authority, safety, hours of service, hazardous materials transportation, financial reporting and acquisitions. There are additional regulations specifically relating to the trucking industry, including testing and specification of equipment, product-handling requirements and drug testing of drivers. In 2003, Florida Rock & Tank Lines, Inc. underwent a compliance review by the FMCSA in which we retained our satisfactory DOT safety rating. Any downgrade in our DOT safety rating (as a result of new regulations or otherwise) could adversely affect our business.
The trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry by requiring changes in operating practices, emissions or by changing the demand for common or contract carrier services or the cost of providing trucking services. Possible changes include:
| • | increasingly stringent environmental regulations, including changes intended to address climate change; | ||
| • | restrictions, taxes or other controls on emissions; |
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| • | regulation specific to the energy market and logistics providers to the industry; | ||
| • | changes in the hours-of-service regulations, which govern the amount of time a driver may drive in any specific period; | ||
| • | driver and vehicle electronic logging requirements; | ||
| • | requirements leading to accelerated purchases of new tractors; | ||
| • | mandatory limits on vehicle weight and size; | ||
| • | driver hiring restrictions; | ||
| • | increased bonding or insurance requirements; and | ||
| • | mandatory regulations imposed by the Department of Homeland Security. |
From time to time, various legislative proposals are introduced, including proposals to increase federal, state, or local taxes, including taxes on motor fuels and emissions, which may increase our operating costs, require capital expenditures or adversely impact the recruitment of drivers.
Restrictions on emissions or other climate change laws or regulations could also affect our customers that use significant amounts of energy or burn fossil fuels in producing or delivering the products we carry. We also could lose revenue if our customers divert business from us because we have not complied with their sustainability requirements.
Our business may be adversely affected by terrorist attacks and anti-terrorism measures.
In the aftermath of the terrorist attacks of September 11, 2001, federal, state and municipal authorities have implemented and are implementing various security measures, including checkpoints and travel restrictions on large trucks and fingerprinting of drivers in connection with new hazardous materials endorsements on their licenses. Such measures may have costs associated with them which we are forced to bear. While we believe we are in compliance with these new regulations, if existing requirements are interpreted differently by governmental authorities or additional new security measures are required, the timing of our deliveries may be disrupted and we may fail to meet the needs of our customers or incur increased expenses to do so. Such developments could have a material adverse effect on our operating results. Moreover, large trucks containing petroleum products are potential terrorist targets, and we may be obligated to take measures, including possible capital expenditures intended to protect our trucks. In addition, the insurance premiums charged for some or all of the coverage maintained by us could continue to increase dramatically or such coverage could be unavailable in the future.
Our operations involve hazardous materials and could result in significant environmental liabilities and costs.
Our activities, which involve the transportation, storage and disposal of fuels and other hazardous substances and wastes, are subject to various federal, state and local health and safety laws and regulations relating to the protection of the environment, including, among others, those governing the transportation, management and disposal of hazardous materials, vehicle emissions, underground and above ground storage tanks and the cleanup of contaminated sites. Our operations involve risks of fuel spillage or seepage, hazardous waste disposal and other activities that are potentially damaging to the environment. If we are involved in a spill or other accident involving hazardous substances, or if we are found to be in violation of or liable under applicable laws or regulations, it could significantly increase our cost of doing business.
Most of our truck terminals are located in industrial areas, where groundwater or other forms of environmental contamination may have occurred. Under environmental laws, we could be held responsible for the costs relating to any contamination at those or other of our past or present
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facilities and at third-party waste disposal sites, including cleanup costs, fines and penalties and personal injury and property damages. Under some of these laws, such as the Comprehensive Environmental Response Compensation and Liability Act (also known as the Superfund law) and comparable state statutes, liability for the entire cost of the cleanup of contaminated sites can be imposed upon any current or former owner or operator, or upon any party who sent waste to the site, regardless of the lawfulness of any disposal activities or whether a party owned or operated a contaminated property at the time of the release of hazardous substances. From time to time, we have incurred remedial costs and/or regulatory penalties with respect to spills and releases in connection with our operations and, notwithstanding the existence of our environmental management program, such obligations may be incurred in the future. The discovery of contamination or the imposition of additional obligations or liabilities in the future could result in a material adverse effect on our financial condition, results of operations or our business reputation.
We have significant ongoing capital requirements.
Our business requires substantial ongoing capital investment, particularly for tractors, trailers, terminals and technology. Our capital expenditures were approximately $9.6 million, $5.0 million and $0.9 million in 2019, 2020 and 2021, respectively, and we expect to make capital expenditures of approximately $6.0 million during fiscal 2022. We expect that cash flow from operations will be our primary sources of financing for capital expenditures.
Financing may not always be available to fund our activities.
We usually must spend and risk a significant amount of capital to fund our activities. Although most capital needs are funded from operating cash flow, the timing of cash flows from operations and capital funding needs may not always coincide, and the levels of cash flow may not fully cover capital funding requirements.
From time to time, we may need to supplement our cash generated from operations with proceeds from financing activities. We currently have a revolving credit facility available to us, for up to $15 million of borrowings, to provide us with available financing for working capital, equipment purchases and other general corporate purposes. This credit facility is intended to meet any ongoing cash needs in excess of internally generated cash flows. The disruption to financial markets caused by the COVID-19 pandemic could adversely impact our ability to obtain financing on terms that are acceptable to us.
Risks Relating to Our Common Stock
Your percentage of ownership in the Company may be diluted in the future.
In the future, your percentage ownership in the Company may be diluted because of equity issuances for acquisitions, capital market transactions or other corporate purposes, including equity awards that we will grant to our directors, officers and employees. Our employees have options to purchase shares of our common stock and we anticipate our compensation committee will grant additional stock options or other stock-based awards to our employees. Such awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock. From time to time, we will issue additional options or other stock-based awards to our employees under our employee benefits plans.
In addition, our amended and restated articles of incorporation authorizes us to issue, without the
| 15 |
approval of our shareholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock respecting dividends and distributions, as our board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, we could grant the holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock.
Certain shareholders have effective control of a significant percentage of our common stock and likely will control the outcome of any shareholder vote.
As of September 30, 2021, two of our directors, Edward L. Baker and Thompson S. Baker II, beneficially own, collectively, approximately 9.03% of the outstanding shares of our common stock (45.97% of such shares are held in trusts under which voting power is shared with family members) and certain of their family members who (i) report their beneficial ownership on Schedule 13D or Schedule 13G, or (ii) are members of their immediate family beneficially own an additional 26.52%. As a result, these individuals effectively may have the ability to direct the election of all members of our board of directors and to exercise a controlling influence over our business and affairs, including any determinations with respect to mergers or other business combinations involving us, our acquisition or disposition of assets, our borrowing of monies, our issuance of any additional securities, our repurchase of common stock and our payment of dividends.
Provisions in our articles of incorporation and bylaws and certain provisions of Florida law could delay or prevent a change in control of us.
The existence of some provisions of our articles of incorporation and bylaws and Florida law could discourage, delay or prevent a change in control of us that a shareholder may consider favorable. These include provisions:
| • | providing that our directors may be removed by our shareholders only for cause; | ||
| • | establishing supermajority vote requirements for our shareholders to approve certain business combinations; | ||
| • | establishing supermajority vote requirements for our shareholders to amend certain provisions of our articles of incorporation and our bylaws; | ||
| • | authorizing a large number of shares of stock that are not yet issued, which would allow our board of directors to issue shares to persons friendly to current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us; | ||
| • | prohibiting shareholders from calling special meetings of shareholders or taking action by written consent; and | ||
| • | imposing advance notice requirements for nominations of candidates for election to our board of directors at the annual shareholder meetings. |
These provisions apply even if a takeover offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our board of directors determines is not in our and our shareholders’ best interests.
| 16 |
Item 1B. UNRESOLVED STAFF COMMENTS.
None.
Item 2. PROPERTIES.
As of September 30, 2021, our terminals and satellite locations were located in the following cities:
|
State |
City |
Terminal or Satellite Location |
Owned/Leased | ||
| Alabama | Mobile | Satellite | Leased | ||
| Alabama | Montgomery | Terminal | Leased | ||
| Florida | Cape Canaveral | Satellite | Leased | ||
| Florida | Ft. Lauderdale | Terminal | Leased | ||
| Florida | Freeport | Satellite | Leased | ||
| Florida | Jacksonville | Terminal | Owned | ||
| Florida | Newberry | Satellite | Leased | ||
| Florida | Orlando | Terminal | Leased | ||
| Florida | Panama City | Terminal | Owned | ||
| Florida | Pensacola | Terminal | Owned | ||
| Florida | Tampa | Terminal | Owned | ||
| Florida | White Springs | Terminal | Owned | ||
| Georgia | Albany | Terminal | Owned | ||
| Georgia | Athens | Satellite | Leased | ||
| Georgia | Augusta | Terminal | Owned | ||
| Georgia | Bainbridge | Terminal | Owned | ||
| Georgia | Columbus | Terminal | Owned | ||
| Georgia | Doraville | Terminal | Owned | ||
| Georgia | Macon | Terminal | Owned | ||
| Georgia | Rome | Satellite | Leased | ||
| Georgia | Savannah | Terminal | Leased | ||
| Tennessee | Chattanooga | Terminal | Leased | ||
| Tennessee | Nashville | Terminal | Leased | ||
| Tennessee | Knoxville | Terminal | Owned |
Item 3. LEGAL PROCEEDINGS.
Note 11 to the Consolidated Financial Statements included in the accompanying 2021 Annual Report to Shareholders is incorporated herein by reference.
Item 4. MINE SAFETY DISCLOSURES.
None.
| 17 |
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
There were approximately 343 holders of record of Patriot Transportation Holding, Inc. common stock, $.10 par value, as of September 30, 2021. The Company's common stock is traded on the Nasdaq Stock Market (Symbol PATI).
Price Range of Common Stock. Information concerning stock prices is included under the caption "Quarterly Results" on page 5 of the Company's 2021 Annual Report to Shareholders, and such information is incorporated herein by reference.
Dividends. On December 4, 2019, the Company’s Board of Directors declared a special cash dividend of $3.00 per share on the Company’s outstanding common stock. This one-time, special dividend was paid on January 30, 2020, to shareholders of record at the close of business on January 15, 2020. The Board of Directors also declared a quarterly dividend of $0.15 per share, paid on January 30, 2020, to shareholders of record on January 15, 2020. On December 4, 2020, the Company’s Board of Directors declared a special cash dividend of $3.00 per share on the Company’s outstanding common stock. This one-time, special dividend was paid on December 30, 2020, to shareholders of record at the close of business on December 17, 2020. Information concerning restrictions on the payment of cash dividends is included in Note 3 to the consolidated financial statements included in the accompanying 2021 Annual Report to Shareholders and such information is incorporated herein by reference.
Securities Authorized for Issuance Under Equity Compensation Plans. Information regarding securities authorized for issuance under equity compensation plans is included in Item 12 of Part III of this Annual Report on Form 10-K and such information is incorporated herein by reference.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers. Share repurchase activity during the three months ended September 30, 2021 was as follows:
| Total | ||||||||||||||||||
| Number of | ||||||||||||||||||
| Shares | ||||||||||||||||||
| Purchased | Approximate | |||||||||||||||||
| As Part of | Dollar Value of | |||||||||||||||||
| Total | 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) | ||||||||||||||
| July 1 through July 31 | — | $ | — | — | $ | 5,000,000 | ||||||||||||
| August 1 through August 31 | — | $ | — | — | $ | 5,000,000 | ||||||||||||
| September 1 through September 30 | — | $ | — | — | $ | 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.
| 18 |
Item 6. SELECTED FINANCIAL DATA.
Information required in response to this Item 6 is included under the caption "Five Year Summary" on page 5 of the Company's 2021 Annual Report to Shareholders and such information is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
Information required in response to Item 7 is included under the caption "Management’s Discussion and Analysis of Financial Condition and Results of Operation" on pages 6 through 10 of the Company’s 2021 Annual Report to Shareholders and such information is incorporated herein by reference.
Item 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Risk. We are exposed to the impact of interest rate changes through our variable-rate borrowings under the Credit Agreement. Under the Wells Fargo revolving credit line, the applicable margin for borrowings at September 30, 2021 was 1.1% over SOFR.
The Company did not have any variable or fixed rate debt outstanding at September 30, 2021, so a sensitivity analysis was not performed to determine the impact of hypothetical changes in interest rates on the Company’s results of operations and cash flows.
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 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. In fiscal 2021 and 2020, a significant portion of fuel costs was recovered through rate and fuel surcharges.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required in response to this Item 8 is included under the caption "Quarterly Results" on page 5 and on pages 11 through 23 of the Company's 2021 Annual Report to Shareholders. Such information is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
| 19 |
Item 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls And Procedures. Under the supervision and with the participation of our management, including our principal executive officer, principal financial officer and chief accounting officer, we conducted an evaluation of our disclosure controls and procedures, as such terms is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer, our principal financial officer and our chief accounting officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.
Management’s Annual Report On Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in the Internal Control-Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of September 30, 2021.
This Annual Report does not include an attestation report of our Independent Registered Public Accounting Firm, Hancock Askew & Co., LLP, regarding internal control over financial reporting. Management’s report was not subject to attestation by our Independent Registered Public Accounting Firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
Change In Internal Control Over Financial Reporting. During the fourth quarter of 2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations Over Internal Controls. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
| i. | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
| ii. | provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
| 20 |
| iii. | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements. |
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
ITEM 9B. OTHER INFORMATION.
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information regarding the Company’s executive officers and directors (including the disclosure regarding audit committee financial experts), required in response to this Item 10, is included under the captions "Board of Directors and Corporate Governance- Our Board of Directors," "Board of Directors and Corporate Governance- Board Leadership," "Board of Directors and Corporate Governance- Board Committees," "Board of Directors and Corporate Governance- Business Conduct Policies,” “Securities Ownership- Section 16(a) Beneficial Ownership Reporting Compliance,” and "Compensation Discussion and Analysis" in the Company's Proxy Statement and such information is incorporated herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission not later than December 31, 2021.
The Company has adopted a Financial Code of Ethical Conduct applicable to its principal executive officers, principal financial officers and principal accounting officers. A copy of this Financial Code of Ethical Conduct is filed as Exhibit 14 to this Form 10-K. The Financial Code of Ethical Conduct is available on our web site at www.patriottrans.com under the heading Corporate Governance.
Item 11. EXECUTIVE COMPENSATION.
Information required in response to this Item 11 is included under the captions "Board of Directors and Corporate Governance- Board Committees- Compensation Committee," "Non-Employee Director Compensation," "Compensation Discussion and Analysis" and "Executive Compensation" in the Company's Proxy Statement and such information is incorporated herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission not later than December 31, 2021.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
| 21 |
Information required in response to this Item 12 is included under the captions "Securities Ownership" in the Company's Proxy Statement and such information is incorporated herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission not later than December 31, 2021.
Equity Compensation Plan Information
| Number of | ||||||||
| Securities | ||||||||
| Remaining | ||||||||
| Available | ||||||||
| Number of | for future | |||||||
| Securities | Weighted | Issuance | ||||||
| to be | Average | under equity | ||||||
| issued upon | exercise | Compensation | ||||||
| exercise of | price of | Plans | ||||||
| Outstanding | outstanding | (excluding | ||||||
| options, | options, | Securities | ||||||
| Warrants | warrants | reflected in | ||||||
| and rights | and rights | column (a)) | ||||||
| Plan Category | (a) | (b) | (c) | |||||
| Equity compensation | ||||||||
| plans approved by | ||||||||
| security holders | 604,005 | $ | 10.80 | 69,820 | ||||
| Equity compensation | ||||||||
| plans not approved | ||||||||
| by security holders | 0 | 0 | 0 | |||||
| Total | 604,005 | $ | 10.80 | 69,820 |
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Information required in response to this Item 13 is included under the caption “Related Party Transactions" and “Board of Directors and Corporate Governance- Director Independence " in the Company's Proxy Statement and such information is incorporated herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission not later than December 31, 2021.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Information required in response to this Item 14 is included under the captions “Independent Registered Public Accounting Firm” in the Company’s Proxy Statement and such information is incorporated herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission not later than December 31, 2021.
| 22 |
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE.
(a) (1) and (2) Financial Statements and Financial Statement Schedule.
The response to this item is submitted as a separate section. See Index to Financial Statements and Financial Statement Schedule on page 26 of this Form 10-K.
(3) Exhibits.
The response to this item is submitted as a separate section. See Exhibit Index on pages 25 of this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: December 14, 2021 | By | ROBERT E. SANDLIN | ||
| Robert E. Sandlin | ||||
| President and Chief Executive Officer | ||||
| (Principal Executive Officer) | ||||
| By | MATTHEW C. MCNULTY | |||
| Matthew C. McNulty | ||||
| Vice President, Chief Operating Officer, Chief | ||||
| Financial Officer and Secretary | ||||
| (Principal Financial Officer) | ||||
| By | JOHN D. KLOPFENSTEIN | |||
| John D. Klopfenstein | ||||
| Controller, Chief Accounting Officer and | ||||
| Treasurer | ||||
| (Principal Accounting Officer) | ||||
| 23 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on December 14, 2020.
|
ROBERT E. SANDLIN |
THOMPSON S. BAKER II | ||
| Robert E. Sandlin | Thompson S. Baker II | ||
| President and Executive Officer | Chairman of the Board | ||
| (Principal Executive Officer) | Director | ||
| MATTHEW C. MCNULTY | JOHN E. ANDERSON | ||
| Matthew C. McNulty | John E. Anderson | ||
| Vice President, Chief Operating Officer, | Director | ||
| Chief Financial Officer and Secretary | |||
| (Principal Financial Officer) | |||
| JOHN D. KLOPFENSTEIN | LUKE E. FICHTHORN | ||
| John D. Klopfenstein | Luke E. Fichthorn III | ||
| Controller, Chief Accounting Officer | Director | ||
| and Treasurer (Principal Accounting Officer) | |||
| EDWARD L. BAKER | CHARLES D. HYMAN | ||
| Edward L. Baker | Charles D. Hyman | ||
| Director, Chairman Emeritus | Director | ||
| 24 |
PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2021
EXHIBIT INDEX
[Item 14(a)(3)]
| 25 |
PATRIOT TRANSPORTATION HOLDING, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
(Item 15(a) (1) and 2))
| Page | ||||
| Consolidated Financial Statements: | ||||
| Consolidated balance sheets at September 30, 2021 and 2020 | 43 | |||
| For the years ended September 30, 2021, 2020 and 2019: | ||||
| Consolidated statements of income | 42 | |||
| Consolidated statements of comprehensive income | 42 | |||
| Consolidated statements of cash flows | 44 | |||
| Consolidated statements of shareholders' equity | 45 | |||
| Notes to consolidated financial statements | 46-58 | |||
| Report of Independent Registered Public Accounting Firm | 60 | |||
| Selected quarterly financial data (unaudited) | 33 | |||
| Consent of Independent Registered Public Accounting Firm | 27 | |||
| Report of Independent Registered Public Accounting Firm | ||||
| on Financial Statement Schedule | 27 | |||
| Consolidated Financial Statement Schedule: | ||||
| II - Valuation and qualifying accounts | 28 | |||
| All other schedules have been omitted, as they are not required under the related instructions, are inapplicable, or because the information required is included in the consolidated financial statements. | ||||
| 26 |
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Patriot Transportation Holding, Inc.
Jacksonville, Florida
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-201791, 333-201792, 333-231421, 333-238294 and 333-252886) of Patriot Transportation Holding, Inc. of our report dated December 14, 2021 relating to the consolidated financial statements which appear in the Annual Report to Shareholders incorporated by reference herein. We also consent to the incorporation by reference of our report dated December 14, 2021, relating to the financial statement schedule, which appears in this Form 10-K.
Respectfully submitted,
Hancock Askew & Co., LLP
Jacksonville, Florida
December 14, 2021
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULE
The Shareholders and Board of Directors
Patriot Transportation Holding, Inc.
Our audit of the consolidated financial statements referred to in our report dated December 14, 2021, appearing in the 2021 Annual Report to Shareholders of Patriot Transportation Holding, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statement schedule based on our audit. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Hancock Askew & Co., LLP
Jacksonville, Florida
December 14, 2021
| 27 |
PATRIOT TRANSPORTATION HOLDING, INC.
SCHEDULE II (CONSOLIDATED) - VALUATION
AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 2021, 2020 AND 2019
| ADDITIONS | ADDITIONS | |||||||||||||||
| BALANCE | CHARGED TO | CHARGED TO | BALANCE | |||||||||||||
| AT BEGIN. | COST AND | OTHER | AT END | |||||||||||||
| OF YEAR | EXPENSES | ACCOUNTS | DEDUCTIONS | OF YEAR | ||||||||||||
| Year Ended | ||||||||||||||||
| September 30, 2021: | ||||||||||||||||
| Allowance for | ||||||||||||||||
| doubtful accounts | $ | 87,174 | $ | 14,080 | $ | — | $ | 15,712 | (a) | $ | 85,542 | |||||
| Accrued risk | ||||||||||||||||
| Insurance: | ||||||||||||||||
| Tanklines | $ | 1,316,459 | (b) | $ | 1,277,790 | $ | — | $ | 1,987,132 | $ | 607,117 | |||||
| Accrued health | ||||||||||||||||
| Insurance | 592,707 | 2,521,874 | — | 2,533,463 | 581,118 | |||||||||||
| Totals - | ||||||||||||||||
| Insurance | $ | 1,909,166 | $ | 3,799,664 | $ | — | $ | 4,520,595 | (c) | $ | 1,188,235 | |||||
| Year Ended | ||||||||||||||||
| September 30, 2020: | ||||||||||||||||
| Allowance for | ||||||||||||||||
| doubtful accounts | $ | 133,413 | $ | (10,538 | ) | $ | — | $ | 35,701 | (a) | $ | 87,174 | ||||
| Accrued risk | ||||||||||||||||
| Insurance: | ||||||||||||||||
| Tanklines | $ | 455,404 | (b) | $ | 1,639,593 | $ | — | $ | 778,538 | $ | 1,316,459 | |||||
| Accrued health | ||||||||||||||||
| Insurance | 619,604 | 3,584,413 | — | 3,611,310 | 592,707 | |||||||||||
| Totals - | ||||||||||||||||
| Insurance | $ | 1,075,008 | $ | 5,224,006 | $ | — | $ | 4,389,848 | (c) | $ | 1,909,166 | |||||
| Year Ended | ||||||||||||||||
| September 30, 2019: | ||||||||||||||||
| Allowance for | ||||||||||||||||
| doubtful accounts | $ | 153,441 | $ | 2,347 | $ | — | $ | 22,375 | (a) | $ | 133,413 | |||||
| Accrued risk | ||||||||||||||||
| Insurance: | ||||||||||||||||
| Tanklines | $ | 207,501 | (b) | $ | 2,199,110 | $ | — | $ | 1,951,207 | $ | 455,404 | |||||
| Accrued health | ||||||||||||||||
| Insurance | 659,416 | 3,343,138 | — | 3,382,950 | 619,604 | |||||||||||
| Totals - | ||||||||||||||||
| Insurance | $ | 866,917 | $ | 5,542,248 | $ | — | $ | 5,334,157 | (c) | $ | 1,075,008 | |||||
(a) Accounts written off less recoveries
(b) Prepaid Insurance Claims
(c) Payments
| 28 |
Annual Report 2021
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years ended September 30
(Amounts in thousands except per share amounts)
| 2021 | 2020 |
% Change |
||||||||||
| Revenues | $ | 81,268 | 88,713 | (8.4 | ) | |||||||
| Operating profit | $ | 880 | 243 | 262.1 | ||||||||
| Income before income taxes | $ | 858 | 347 | 147.3 | ||||||||
| Net income | $ | 625 | 257 | 143.2 | ||||||||
|
Per common share: |
||||||||||||
| Basic | $ | .18 | .08 | 125.0 | ||||||||
| Diluted | $ | .18 | .08 | 125.0 | ||||||||
| Total Assets | $ | 52,560 | 64,669 | (18.7 | ) | |||||||
| Total Debt | $ | — | — | — | ||||||||
| Shareholders' Equity | $ | 36,116 | 45,048 | (19.8 | ) | |||||||
| Common Shares Outstanding | 3,416 | 3,377 | 1.2 | |||||||||
| Book Value Per Common Share | $ | 10.58 | 13.34 | (20.7 | ) |
BUSINESS. The business of the Company, conducted through our wholly owned subsidiary, Florida Rock & Tank Lines, Inc. (Tank Lines), which is a Southeastern U.S. based tank truck company, is to transport petroleum and other liquids and dry bulk commodities.
OBJECTIVES. The Company’s objectives are to continue building a substantial transportation company providing acceptable returns on capital employed and cash generation.
| 29 |
To Our Shareholders:
Fiscal year 2021 was very similar to fiscal year 2020 in that we continued to see our driver count decrease in the face of the on-going driver shortage in the US. The year began with the Company making the decision to downsize an additional ~$6 million of annualized revenue with one customer due to low pricing. From October through March, our driver count dropped by ~50 drivers and we spent the early part of the year making cost reductions in headcount and equipment due to the continued decrease in driver count. In late February and early March, most of our markets experienced an unexpected surge in gasoline demand presumably from pent up travel following COVID and the release of the vaccines. Shortly thereafter, we experienced the Colonial Pipeline cyber-attack which had a short lived, but severe, impact on fuel supply in the eastern United States. These two events quickly highlighted the severity of the lack of driver capacity in our industry and changed the conversation amongst carriers and customers. In April, we were able to announce a 15% increase in driver pay and all but one small customer agreed to absorb the cost of that increase into their freight rates plus an additional 3-5% on average. The result of that pay increase was that we saw our voluntary turnover rate improve and our drivers in training modestly increase. From April through the end of the fiscal year in September, our driver count did decline by ~20 drivers (compared to ~50 in the prior six months). That improvement trend is continuing and we have recently seen more of a flat line in driver count week to week.
We continue to focus on our driver compensation program to remain competitive and attractive in the marketplace. In October 2021, we announced additional significant pay increases in two of our most challenging urban markets and are partnering with a small group of customers on longer term agreements to run more of a dedicated fleet model. Those customers have agreed to cover the cost of that additional driver pay as well. This is a strategy we will be exploring market by market during fiscal 2022 and beyond as it allows us to be more nimble on driver pay/rate increases and provide a higher level of service to fewer customer partners in challenging markets. We will focus on customers that understand the supply chain challenges and our need for a reasonable return as we move forward while seeking new opportunities for diversification. We continue to see growth in our product diversification efforts, we expanded successfully into the water hauling business in late 2020 and foresee additional growth opportunities as this customer is in the midst of expanding their operations in Florida in 2022. We also added a new piece of dry bulk business with an annualized revenue opportunity of ~$1.5 million. We also added business with two new petroleum customers in Florida to help us backfill a portion of the revenue we turned back earlier in the year. We acquired an existing customer’s private fleet of 4 trucks, 5 trailers and hired five drivers in October 2021. We signed a three year agreement to haul 100% of their freight (~$2 million). This acquisition fits nicely into the existing Georgia operations and will add almost no additional overhead to manage.
The auto liability insurance market continued the upward trend on premium expense and resulted in another meaningful increase in our annual premium cost for fiscal 2022. While we were fully able to absorb the cost increase and maintain liability insurance in excess of our customers’ minimum requirements, we believe some of our competitors will struggle to do the same.
Our recent technology investments are paying large dividends. The new mobile capture platform that allows us to deliver bills of lading to our customers within minutes of delivering the load has been a big customer satisfaction success. The SmartDrive on-board camera system installed near the end of 2020 has already paid for itself. We had several incidents in 2021 where the video exonerated us in accidents where the at fault party claimed our driver was at fault, saving us cost of defense and potential settlement money. The camera system is also helping us improve driving habits across the network with the daily driving score and live video coaching platform. Our plan was to implement a new automated dispatch module in FY 2021. However, that project was delayed and we are just now starting that project with a plan to complete during fiscal 2022. This technology should bring significant efficiencies to our operations and customers. We believe these projects are critical to our future success as they provide significant benefits to our drivers, employees and customers.
We are very proud to say that the company beat our preventable accident frequency target for the 3rd straight year in a row. We set a very high standard for ourselves each year and achieving this goal speaks volumes about our drivers as well as our dedicated managers and staff. Achieving this target allows us to hold the annual drawing for a new Chevy Silverado pickup truck to be awarded to one of our accident-free drivers later this year.
Early in fiscal 2022 we sold the Tampa property for $9,600,000 and declared a third special dividend to our
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shareholders of $3.75 per share. Cumulatively, we have declared and paid $9.90 in dividends to our shareholders in just under two years. Immediately after paying the most recent dividend, our balance sheet remains strong with over $6 million in cash and no debt. With the changing perspective we are seeing from many of our customers as it relates to driver pay and rate increases, we are cautiously optimistic as we look to the future and our ability to start achieving an acceptable return on investment for our shareholders. As always, we do not take your investment in our Company lightly and we want to thank you for your continued interest and support.
Respectfully,
Robert E. Sandlin
President & Chief Executive Officer
Thompson S. Baker II
Chairman
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OUR BUSINESS
Our business consists of hauling petroleum related products, dry bulk commodities and liquid chemicals. We are one of the largest regional tank truck carriers in North America. We operate terminals in Florida, Georgia, Alabama, and Tennessee. We do not own any of the products we haul; rather, we act as a third-party carrier to deliver our customers’ products from point A to point B, using predominately Company employees and 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 customers’ fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling dry bulk commodities such as cement, lime and various industrial powder products, water and liquid chemicals. As of September 30, 2021, we employed 341 revenue-producing drivers who operated our fleet of 282 Company tractors, 22 owner operators and 420 trailers from our 18 terminals and 6 satellite locations.
During fiscal 2021, the Company did not purchase any new tractors. Our fiscal 2022 capital budget includes 30 new tractors. We believe maintaining a modern fleet will result in reduced maintenance expenses, improved operating efficiencies and enhanced driver recruitment and retention. The Company owns all of the tank trailers and tractors used to conduct our business, except for 22 tractors owned by owner-operators and 29 full-service leased 2019 model year tractors.
Approximately 86% of our business consists of hauling petroleum related products. Our petroleum clients include major convenience store and hypermarket accounts, fuel wholesalers and major oil companies. We strive to build long-term relationships with major customers by providing outstanding customer service. During fiscal 2021, the Company’s ten largest customers accounted for approximately 59.8% of revenue. One of these customers accounted for 21.4% of revenue. The loss of any one of these customers could have a material adverse effect on the Company’s revenues and income. Nine of our top 10 accounts have been customers for at least 6 years. Our dry bulk and chemical customers include large industrial companies including cement and concrete accounts and product distribution companies. Our customer relationships are long-standing and have grown over time as a result of consistently high safety and service levels.
Financial information about the company is presented in the financial statements included in this Annual Report.
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Five Year Summary-Years ended September 30
(Amounts in thousands except per share amounts)
| 2021 | 2020 | 2019 | 2018 | 2017 | |||||||||||||||||
| Summary of Operations: | |||||||||||||||||||||
| Revenues | $ | 81,268 | 88,713 | 108,716 | 114,065 | 112,165 | |||||||||||||||
| Operating profit | $ | 880 | 243 | 1,979 | 2,046 | 2,372 | |||||||||||||||
| Interest expense | $ | 27 | 31 | 32 | 39 | 80 | |||||||||||||||
| Net income | $ | 625 | 257 | 1,763 | 5,119 | 1,829 | |||||||||||||||
| Per Common Share (a): | |||||||||||||||||||||
| Basic | $ | .18 | .08 | .53 | 1.54 | .55 | |||||||||||||||
| Diluted | $ | .18 | .08 | .53 | 1.54 | .55 | |||||||||||||||
| Financial Summary: | |||||||||||||||||||||
| Current assets | $ | 23,378 | 26,541 | 34,424 | 31,444 | 23,721 | |||||||||||||||
| Current liabilities | $ | 8,835 | 9,675 | 8,827 | 10,163 | 10,028 | |||||||||||||||
| Property and equipment, net | $ | 22,684 | 30,399 | 33,567 | 33,911 | 39,592 | |||||||||||||||
| Total assets | $ | 52,560 | 64,669 | 72,293 | 69,817 | 67,954 | |||||||||||||||
| Long-term debt | $ | — | — | — | — | — | |||||||||||||||
| Shareholders’ equity | $ | 36,116 | 45,048 | 54,797 | 52,406 | 46,583 | |||||||||||||||
| Net Book Value Per common share | $ | 10.58 | 13.34 | 16.35 | 15.75 | 14.10 | |||||||||||||||
| Other Data: | |||||||||||||||||||||
| Weighted average common shares: | |||||||||||||||||||||
| Basic (a) | 3,395 | 3,369 | 3,342 | 3,318 | 3,299 | ||||||||||||||||
| Diluted (a) | 3,408 | 3,370 | 3,343 | 3,320 | 3,302 | ||||||||||||||||
| Number of employees | 508 | 607 | 761 | 783 | 857 | ||||||||||||||||
| Shareholders of record | 343 | 348 | 358 | 383 | 406 | ||||||||||||||||
Quarterly Results (unaudited)
(Dollars in thousands except per share amounts)
| First | Second | Third | Fourth | |||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||
| Revenues | $ | 20,228 | 24,809 | 19,728 | 23,527 | 20,855 | 19,011 | 20,457 | 21,366 | |||||||||||||||
| Operating profit (loss) | $ | (301 | ) | (724 | ) | 671 | (588 | ) | 452 | 794 | 58 | 761 | ||||||||||||
| Income (loss) before income taxes | $ | (307 | ) | (647 | ) | 665 | (553 | ) | 445 | 790 | 55 | 757 | ||||||||||||
| Net income (loss) | $ | (222 | ) | (464 | ) | 484 | (401 | ) | 323 | 573 | 40 | 549 | ||||||||||||
| Earnings per common share (a): | ||||||||||||||||||||||||
| Net income (loss)- | ||||||||||||||||||||||||
| Basic | $ | (.07 | ) | (.14 | ) | .14 | (.12 | ) | .09 | .17 | .01 | .16 | ||||||||||||
| Diluted | $ | (.07 | ) | (.14 | ) | .14 | (.12 | ) | .09 | .17 | .01 | .16 | ||||||||||||
| Market price per common share (b): | ||||||||||||||||||||||||
| High | $ | 12.10 | 20.00 | 11.11 | 20.51 | 13.06 | 10.50 | 12.83 | 9.45 | |||||||||||||||
| Low | $ | 8.60 | 17.25 | 8.61 | 8.61 | 10.53 | 8.20 | 11.20 | 8.25 | |||||||||||||||
(a) Earnings per share of common stock is computed independently for each quarter presented. The sum of the quarterly net earnings per share of common stock for a year may not equal the total for the year due to rounding differences.
(b) All prices represent Nasdaq reported high and low daily closing prices.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Executive 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 customers’ 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 customers’ fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling dry bulk commodities such as cement, lime and various industrial powder products, water and liquid chemicals. As of September 30, 2021, we employed 341 revenue-producing drivers who operated our fleet of 282 Company tractors, 22 owner operators and 420 trailers from our 18 terminals and 6 satellite locations in Florida, Georgia, Alabama, and Tennessee. We experience increased seasonal demand in Florida during 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, liquid 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 shortage of qualified professional drivers with a tenured safe driving career. 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, short driving careers in other lines of trucking, poor safety records and a pattern of job instability in their work history. As a result, in many markets we serve it is difficult to grow the driver count and, in some cases, to even maintain our historical or desired driver counts. 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 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
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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, 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 21 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 cover 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. |
| · | 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 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 (excluding drivers related to terminal closures) 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.
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| ITEM | FY 2021 vs. FY 2020 |
| Total Revenue | Down 8.4% |
| Transportation Revenue | Down 9.8% |
| Revenue Miles | Down by 16.2% |
| Transportation Revenue Per Mile | Up 7.6% |
| PAFR (incidents per 1M miles) goal of 2.1 | Down to 1.68 from 2.00 |
| Operating Ratio | 98.9% vs. 99.7% |
| Driver Turnover Rate | 96.5% vs. 82.3% |
| Avg. Driver Count incl. owner operators | Down 21.5% |
COMPARATIVE RESULTS OF OPERATIONS
| Fiscal Years ended September 30 | ||||||||||||||||||||||||
| (dollars in thousands) | 2021 | % | 2020 | % | 2019 | % | ||||||||||||||||||
| Revenue miles (in thousands) | 23,832 | 28,430 | 35,666 | |||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Transportation revenue | $ | 74,431 | 91.6 | % | 82,503 | 93.0 | % | 98,279 | 90.4 | % | ||||||||||||||
| Fuel surcharges | 6,837 | 8.4 | % | 6,210 | 7.0 | % | 10,437 | 9.6 | % | |||||||||||||||
| Total Revenues | 81,268 | 100 | % | 88,713 | 100 | % | 108,716 | 100 | % | |||||||||||||||
| Cost of operations: | ||||||||||||||||||||||||
| Compensation and benefits | 36,198 | 44.5 | % | 39,426 | 44.5 | % | 47,549 | 43.7 | % | |||||||||||||||
| Fuel expenses | 9,630 | 11.9 | % | 10,297 | 11.6 | % | 15,805 | 14.5 | % | |||||||||||||||
| Repairs & tires | 5,402 | 6.7 | % | 5,940 | 6.7 | % | 7,373 | 6.8 | % | |||||||||||||||
| Other operating | 3,270 | 4.0 | % | 3,575 | 4.0 | % | 4,811 | 4.4 | % | |||||||||||||||
| Insurance and losses | 7,261 | 8.9 | % | 8,640 | 9.7 | % | 9,426 | 8.7 | % | |||||||||||||||
| Depreciation expense | 6,654 | 8.2 | % | 7,383 | 8.3 | % | 7,870 | 7.3 | % | |||||||||||||||
| Rents, tags & utilities | 2,708 | 3.3 | % | 2,933 | 3.3 | % | 3,406 | 3.1 | % | |||||||||||||||
| Sales, general & administrative | 8,764 | 10.8 | % | 8,936 | 10.1 | % | 9,884 | 9.1 | % | |||||||||||||||
| Corporate expenses | 1,936 | 2.4 | % | 2,114 | 2.4 | % | 2,270 | 2.1 | % | |||||||||||||||
| Gain on sale of terminal sites | (1,614 | ) | -2.0 | % | — | 0.0 | % | (866 | ) | -0.8 | % | |||||||||||||
| Loss (gain) on disposition of PP&E | 179 | 0.2 | % | (774 | ) | -0.9 | % | (791 | ) | -0.7 | % | |||||||||||||
| Total cost of operations | 80,388 | 98.9 | % | 88,470 | 99.7 | % | 106,737 | 98.2 | % | |||||||||||||||
| Total operating profit | $ | 880 | 1.1 | % | 243 | 0.3 | % | 1,979 | 1.8 | % | ||||||||||||||
Fiscal Year 2021 versus 2020
The Company reported net income of $625,000, or $.18 per share, compared to $257,000, or $.08 per share last year. Net income this year included $1,170,000, or $.34 per share, from gains on real estate sales net of income taxes.
Total revenues for the period were $81,268,000, down $7,445,000 from the same period last year, of which $5,444,000 resulted from the downsizing of one customer account beginning late first quarter and the remainder of the revenue variance was primarily attributable to the declining driver count. Transportation revenues (excluding fuel surcharges) were $74,431,000, down $8,072,000 or 10%. Revenue miles were down 4,598,000, or 16%, over the same period last year. Transportation revenue per mile was up $.22, or 7.6%, due to an improved business mix and rate increases. Fuel surcharge revenue was $6,837,000, up $627,000 from the same period last year.
Compensation and benefits decreased $3,228,000, mainly due to lower company miles, as well as the elimination of minimum driver pay expense and reductions in non-driver support positions. Gross fuel expense decreased $667,000 due to lower company miles. Repairs and tire expense decreased $538,000 due to lower miles this year. Insurance
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and losses decreased $1,379,000, primarily from lower health care claims. Depreciation expense was down $729,000 as we continue to reduce our fleet size to meet our business levels. SG&A expense was lower by $172,000 resulting primarily from permanent cost reductions. Corporate expenses were down $178,000 due mainly to lower compensation expense, legal and audit fees. Gain on sale of land was $1,614,000 due to the sale of our former terminal location in Pensacola, FL and the sale and partial leaseback of our terminal in Chattanooga, TN. Loss on disposition of assets was $179,000 (primarily due to $243,000 of write offs on the equipment involved in two tractor rollover accidents) versus a gain of $774,000 last year. Total expense associated with the 2 roll over accidents, including the equipment write-offs, was $879,500.
As a result, operating profit was $880,000 compared to $243,000 in the same period last year. Excluding the gain on sale of terminal sites and the negative impacts of the rollover accidents, operating profit for the fiscal year was $145,500. Operating ratio was 98.9 versus 99.7 last year.
Fiscal Year 2020 versus 2019
The Company reported net income of $257,000, or $.08 per share, in fiscal year 2020 compared to net income of $1,763,000, or $.53 per share, in fiscal year 2019. Net income in fiscal year 2019 included $634,000, or $.19 per share, from gains on real estate sales.
Transportation revenues (excluding fuel surcharges) were $82,503,000 in fiscal year 2020, down $15,776,000 on 7,236,000 fewer miles primarily due to the COVID-19 pandemic, the downsizing of certain customer business due to inadequate freight rates, and the closure of our Charlotte terminal in May 2019 and our Wilmington terminal on April 25, 2020. Transportation revenue per mile in fiscal year 2020 was up $.14, or 5.1%, due to an improved business mix and rate increases. Fuel surcharge revenue in fiscal year 2020 was $6,210,000, down $4,227,000, or $.07 per mile, from fiscal year 2019.
Compensation and benefits decreased $8,123,000 in fiscal year 2020 mainly due to lower company miles and lower driver training and minimum pay expense. Gross fuel expense decreased $5,508,000, or $.08 per mile, due to lower company miles and lower cost per gallon. Repair and tire expense decreased $1,433,000 in fiscal year 2020 due to reduced miles. Insurance and losses decreased $786,000 in fiscal year 2020, but were up $.04 per mile, primarily due to higher premiums on risk insurance and several high-cost health claims in the first six months of fiscal year 2020. Gain on disposition of assets was $774,000 in fiscal year 2020 versus $1,657,000 in fiscal year 2019 which included (i) a gain of $866,000 on a land sale and (ii) a gain of $231,000 on a hurricane related insurance settlement.
As a result, operating profit was $243,000 in fiscal year 2020 compared to $1,979,000 in fiscal year 2019. Operating ratio was 99.7 versus 98.2 in fiscal year 2019.
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. Our revolver has a maximum amount available of $15 million and as of September 30, 2021, we had no debt outstanding on this revolver, $1,636,000 letters of credit and $13,364,000 available for additional borrowings. The Company expects our fiscal year 2022 cash generation to cover the cost of our operations and 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):
| Years Ended September 30, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Total cash provided by (used for): | ||||||||||||
| Operating activities | $ | 2,772 | 9,382 | 10,804 | ||||||||
| Investing activities | 2,173 | (4,079 | ) | (6,328 | ) | |||||||
| Financing activities | (10,008 | ) | (10,557 | ) | (559 | ) | ||||||
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| Increase (decrease) in cash and cash equivalents | $ | (5,063 | ) | (5,254 | ) | 3,917 | ||||||
| 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 statement) was $2,772,000 for the year ended September 30, 2021, $9,382,000 in 2020 and $10,804,000 in 2019. The total of net income plus depreciation and amortization less gains on sales of property and equipment decreased $1,184,000 versus last year. These changes are described above under “Comparative Results of Operations”. Prepaid insurance increased $2,007,000 due to collateral payments into our insurance captive reducing our letters of credit. These changes comprise the majority of the decrease in net cash provided by operating activities.
Investing Activities – Investing activities include the purchase of property and equipment, any business acquisitions and proceeds from sales of property and equipment upon retirement. For the year ended September 30, 2021, we received $2,173,000 on investing activities which included the proceeds from retirements net of the purchase of property, plant and equipment. For the year ended September 30, 2020, we spent $4,079,000 on investing activities which included $3,079,000 for the purchase of plant, property and equipment net of proceeds from retirements and $1,000,000 for the acquisition of Danfair Transport.
For the year ended September 30, 2019, net cash used in investing activities was $6,328,000 which included the purchase of plant, property and equipment net of proceeds.
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 and dividends. For the year ended September 30, 2021, cash used in financing activities was $10,008,000 due to dividends paid. For the year ended September 30, 2020, cash used in financing activities was $10,557,000 due to dividends paid in the second quarter. The Company had no outstanding long-term debt on September 30, 2021 or September 30, 2020.
For the year ended September 30, 2019, cash used in financing activities was $559,000 due to bank overdrafts in the prior year, debt issue costs related to a revised and restated revolver credit agreement and stock option exercises.
Credit Facilities - The Company has a five-year credit agreement with Wells Fargo Bank N.A. which provides a $15 million revolving line of credit with a $10 million sublimit for stand-by letters of credit. The amounts outstanding under the credit agreement bear interest at a rate of 1.1% over the Secured Overnight Financing Rate (“SOFR”), which may change quarterly based on the Company’s ratio of consolidated total debt to consolidated total capital. A commitment fee of 0.12% per annum is payable quarterly on the unused portion of the commitment. The credit agreement contains certain conditions and financial covenants, including a minimum tangible net worth. As of September 30, 2021, the tangible net worth covenant would have limited our ability to pay dividends or repurchase stock with borrowed funds to a maximum of $6.7 million combined.
Cash Requirements - The Company currently expects its fiscal 2022 capital expenditures to be approximately $6.0 million for replacement equipment which we expect to be fully funded by our cash generated from our operations. In October 2021, after the close of fiscal 2021 we sold the terminal location in Tampa resulting in approximately $6.9 million of cash, after tax. The $6.3 million net income from this sale increased our ability to pay dividends under our credit agreement’s tangible net worth covenant to approximately $13 million. Our dividends in fiscal 2022 include a special cash dividend of $3.75 per share paid in November 2021, or approximately $12.8 million in the aggregate, on the Company’s outstanding common stock. This was paid out of cash on hand. We have had discussions with Wells Fargo Bank, N.A. about a waiver of the tangible net worth covenant if necessary.
The Company projects that cash flows from operating activities, cash on hand and the funds available under its revolving credit agreement will be adequate to finance its capital expenditures, any dividends paid and its working capital needs for the next 12 months and the foreseeable future.
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OFF-BALANCE SHEET ARRANGEMENTS
Except for the letters of credit described above under “Liquidity and Capital Resources,” the Company does not have any off-balance sheet arrangements that either have, or are reasonably likely to have, a current or future material effect on its financial condition.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Accounting estimates are considered to be critical if (1) the nature of the estimates and assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and (2) the impact of the estimates and assumptions on financial condition or operating performance is material. Actual results could differ from the estimates and assumptions used. Management of the Company considers the following accounting policies critical to the reported operations of the Company:
Accounts Receivable Valuation. The Company is subject to customer credit risk that could affect the collection of outstanding accounts receivable. To mitigate these risks, the Company performs credit reviews on all new customers and periodic credit reviews on existing customers. A detailed analysis of late and slow pay customers is prepared monthly and reviewed by senior management. The overall collectability of outstanding receivables is evaluated, and allowances are recorded as appropriate. Significant changes in customer credit could require increased allowances and affect cash flows.
Property and Equipment and Impairment of Tangible and Intangible Assets. Property and equipment is recorded at cost less accumulated depreciation. Provision for depreciation of property and equipment is computed using the straight-line method based on the following estimated useful lives:
| Years | |
| Buildings and improvements | 7-39 |
| Revenue equipment | 7-10 |
| Other equipment | 3-10 |
The Company periodically reviews property and equipment for potential impairment whenever events or circumstances indicate the carrying amount of a long-lived asset may not be recoverable. The analysis consists of a review of future anticipated results considering business prospects and asset utilization. If the sum of these future cash flows (undiscounted and without interest charges) is less than the carrying amount of the assets, the Company would record an impairment loss based on the fair value of the assets with the fair value of the assets generally based upon an estimate of the discounted future cash flows expected with regards to the assets and their eventual disposition as the measure of fair value. The Company performs an annual impairment test on goodwill and other intangible assets. Changes in estimates or assumptions could have an impact on the Company’s financials.
Claims and Insurance Accruals. The nature of the transportation business subjects the Company to risks arising from workers’ compensation, automobile liability, and general liability claims. The Company retains the exposure on liability claims of $250,000 and $500,000 for worker’s compensation claims and has third party coverage for amounts exceeding the retention up to the amount of the policy limits. The Company expenses during the year an estimate of risk insurance losses based upon independent actuarial analysis, insurance company estimates, and our monthly review of claims reserve changes. In making claim reserve changes we rely upon estimates of our insurance company adjusters, attorney evaluations, and judgment of our management. Our estimates require judgment concerning the nature, severity, comparative liability, jurisdiction, legal and investigative costs of each claim. Claims involving serious injury have greater uncertainty of the eventual cost. In the past, our estimate of the amount of individual claims has increased from insignificant amounts to the full deductible as we learn more information about the claim in subsequent periods. We obtain an independent actuarial analysis at least twice annually to assist in estimating the total loss reserves expected on claims including claim development and incurred but not reported
| 39 |
claims. Payments made under a captive agreement for each year’s loss fund are scheduled in advance using actuarial methodology. The captive agreement provides that we will share in the underwriting results, good or bad, within a $250,000 per occurrence layer of loss through retrospective premium adjustments. Including the potential exposure in the captive we have $4.1 million of estimated insurance liabilities. In the event that actual costs for these claims are different than estimates we will have adjustments in future periods. It is likely that we will experience either gains or losses of 5-10% of prior year estimated insurance liabilities in any year. We also retain exposure on employee health benefits up to $250,000 per covered participant each calendar year plus a $84,500 aggregate deductible for any claims exceeding $250,000. We estimate claim liability using historical payment trends and specific knowledge of larger claims. Health claims are expensed as the health services are rendered so there is only a two-month lag in payments on average. We are usually aware of the larger claims before closing each accounting period reducing the amount of uncertainty of the estimate. Our accrued insurance liabilities for retiree benefits are recorded by actuarial calculation. Our total accrued insurance liabilities as of September 30, 2021, 2020, and 2019 amounted to $2.6 million, $3.1 million, and $2.7 million, respectively.
Income Taxes. The Company accounts for income taxes under the asset-and-liability method. Deferred tax assets and liabilities represent items that will result in taxable income or a tax deduction in future years for which the related tax expense or benefit has already been recorded in our statement of earnings. Deferred tax accounts arise as a result of timing differences between when items are recognized in the consolidated financial statements compared with when they are recognized in the tax returns. The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income. To the extent recovery is not probable, a valuation allowance is established and included as an expense as part of our income tax provision. No valuation allowance was recorded at September 30, 2021, as all deferred tax assets are considered more likely than not to be realized. Significant judgment is required in determining and assessing the impact of complex tax laws and certain tax-related contingencies on the provision for income taxes. As part of the calculation of the provision for income taxes, we assess whether the benefits of our tax positions are at least more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, we accrue the largest amount of the benefit that is more likely than not of being sustained in our financial statements. Such accruals require estimates and judgments, whereby actual results could vary materially from these estimates. Further, a number of years may elapse before a particular matter, for which an established accrual was made, is audited and resolved.
INFLATION
Most of the Company’s operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. During the past three years, inflation has been fairly modest with its impacts mostly related to equipment prices, tire prices and the compensation paid to drivers.
In addition to inflation, fluctuations in fuel prices can affect profitability. Most of the Company’s contracts with customers contain fuel surcharge provisions. Although the Company historically has been able to pass through most long-term increases in fuel prices and operating taxes to customers in the form of surcharges and higher rates, there is no guarantee that this will be possible in the future. See “Risk Factors—We may be adversely impacted by fluctuations in the price and availability of fuel.”
SEASONALITY
Our business is subject to seasonal trends common in the refined petroleum products delivery industry. We typically face reduced demand for refined petroleum products delivery services during the winter months and increased demand during the spring and summer months. Further, operating costs and earnings are generally adversely affected by inclement weather conditions. These factors generally result in lower operating results during the first and second fiscal quarters of the year and cause our operating results to fluctuate from quarter to quarter. Our fuel efficiency is somewhat lower in colder months.
| 40 |
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 the impact of the COVID-19 pandemic and “stay home” orders, as well as increased vehicle fuel efficiency, other impacts of the COVID-19 pandemic on our operations and financial results; the increased popularity of electric vehicles 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, including regulations regarding the transportation industry and regulations intended to reduce greenhouse gas emissions; cyber-attacks; pandemics; availability and terms of financing; competition in our markets; interest rates, 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.
| 41 |
CONSOLIDATED STATEMENTS OF INCOME - Years ended September 30
(In thousands, except per share amounts)
| Years Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||
| Revenues: | |||||||||||||||
| Transportation revenues | $ | ||||||||||||||
| Fuel surcharges | |||||||||||||||
| Total revenues | |||||||||||||||
| Cost of operations: | |||||||||||||||
| Compensation and benefits | |||||||||||||||
| Fuel expenses | |||||||||||||||
| Repairs & tires | |||||||||||||||
| Other operating | |||||||||||||||
| Insurance and losses | |||||||||||||||
| Depreciation expense | |||||||||||||||
| Rents, tags & utilities | |||||||||||||||
| Sales, general & administrative | |||||||||||||||
| Corporate expenses | |||||||||||||||
| Gain on sale of terminal sites | ( |
) | ( |
) | |||||||||||
| Loss (gain) on disposition of PP&E | ( |
) | ( |
) | |||||||||||
| Total cost of operations | |||||||||||||||
| Total operating profit | |||||||||||||||
| Interest income and other | |||||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | |||||||||
| Income before income taxes | |||||||||||||||
| Provision for income taxes | |||||||||||||||
| Net income | $ | ||||||||||||||
| Earnings per common share: | |||||||||||||||
| Net income- | |||||||||||||||
| Basic | $ | ||||||||||||||
| Diluted | $ | ||||||||||||||
| Number of shares (in thousands) used in computing: | |||||||||||||||
| -basic earnings per common share | |||||||||||||||
| -diluted earnings per common share | |||||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - Years ended September 30 (In thousands)
| 2021 | 2020 | 2019 | |||||||||||
| Net income | $ | ||||||||||||
| Other comp. income (loss) net of tax: | |||||||||||||
| Unrealized investment gain (loss), net | |||||||||||||
| Loss on retiree health, net | ( |
) | ( |
) | ( |
) | |||||||
| Reclassification adjust for net investment gains realized in net income | ( |
) | |||||||||||
| Comprehensive income | $ | ||||||||||||
See notes to consolidated financial statements
| 42 |
CONSOLIDATED BALANCE SHEETS - As of September 30
(In thousands, except share data)
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | |||||||
|
Accounts receivable (net of allowance for doubtful accounts of $ |
||||||||
| Inventory of parts and supplies | ||||||||
| Prepaid tires on equipment | ||||||||
| Prepaid taxes and licenses | ||||||||
| Prepaid insurance | ||||||||
| Prepaid expenses, other | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, at cost: | ||||||||
| Land | ||||||||
| Buildings | ||||||||
| Equipment | ||||||||
| Property, plant and equipment, gross | ||||||||
| Less accumulated depreciation | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Other assets, net | ||||||||
| Total assets | $ | |||||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | |||||||
| Federal and state taxes payable | ||||||||
| Accrued payroll and benefits | ||||||||
| Accrued insurance | ||||||||
| Accrued liabilities, other | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Deferred income taxes | ||||||||
| Accrued insurance | ||||||||
| Other liabilities | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| Shareholders' equity: | ||||||||
|
Preferred stock, shares authorized, of which shares are designated Series A Junior Participating Preferred Stock; $ par value; issued and outstanding |
||||||||
|
Common stock, $ par value; ( shares authorized; and shares issued and outstanding, respectively) |
||||||||
| Capital in excess of par value | ||||||||
| (Accumulated deficit) Retained earnings | ( |
) | ||||||
| Accumulated other comprehensive income, net | ||||||||
| Total shareholders' equity | ||||||||
| Total liabilities and shareholders' equity | $ | |||||||
| See notes to consolidated financial statements |
| 43 |
CONSOLIDATED STATEMENTS OF CASH FLOWS - Years ended September 30
| (In thousands) | 2021 | 2020 | 2019 | |||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | |||||||||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
| Depreciation and amortization | ||||||||||||
| Non-cash gain of acquisition-related contingent consideration | ( |
) | ( |
) | ||||||||
| Deferred income taxes | ( |
) | ( |
) | ||||||||
| Gain on asset dispositions | ( |
) | ( |
) | ( |
) | ||||||
| Stock-based compensation | ||||||||||||
| Net changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | ||||||||||||
| Inventory of parts and supplies | ( |
) | ||||||||||
| Prepaid expenses | ( |
) | ( |
) | ||||||||
| Other assets | ( |
) | ||||||||||
| Accounts payable and accrued liabilities | ( |
) | ( |
) | ( |
) | ||||||
| Income taxes payable and receivable | ( |
) | ||||||||||
| Operating lease assets and liabilities, net | ( |
) | ( |
) | ||||||||
|
Long-term insurance liabilities and other long-term liabilities |
( |
) | ||||||||||
| Net cash provided by operating activities | ||||||||||||
| Cash flows from investing activities: | ||||||||||||
| Purchase of property and equipment | ( |
) | ( |
) | ( |
) | ||||||
| Business acquisition | ( |
) | ||||||||||
| Proceeds from the sale of property, plant and equipment | ||||||||||||
| Net cash provided by (used in) investing activities | ( |
) | ( |
) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Dividends paid | ( |
) | ( |
) | ||||||||
| (Decrease) Increase in bank overdrafts | ( |
) | ||||||||||
| Debt issue costs | ( |
) | ||||||||||
| Proceeds from exercised stock options | ||||||||||||
| Net cash (used in) provided by financing activities | ( |
) | ( |
) | ( |
) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( |
) | ( |
) | ||||||||
| Cash and cash equivalents at beginning of year | ||||||||||||
| Cash and cash equivalents at end of the year | $ | |||||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||
| Cash paid during the year for: | ||||||||||||
| Interest | $ | |||||||||||
| Income taxes | $ | |||||||||||
See notes to consolidated financial statements.
| 44 |
CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY - Years ended September 30
(In thousands, except share amounts)
| Retained | Accumulated | |||||||||||||||||||||||||||
| Capital in | Earnings/ | Other | Total | |||||||||||||||||||||||||
| Common Stock | Excess of | (Accumulated) | Comprehensive | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Par Value | Deficit | Income, net | Investment | |||||||||||||||||||||||
| Balance as of October 1, 2018 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||
| Shares granted to Directors | ||||||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Unrealized gain on investment, net | — | |||||||||||||||||||||||||||
| Loss on retiree health, net | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance as of September 30, 2019 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Shares granted to Directors | ||||||||||||||||||||||||||||
| Cash dividends ($ per share) | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Loss on retiree health, net | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Reclassification adjustment of realized gain, net | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance as of September 30, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||
| Shares granted to Directors | ||||||||||||||||||||||||||||
| Cash dividends ($ per share) | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Loss on retiree health, net | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||
| 45 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Accounting Policies. |
DESCRIPTION OF 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 customers’
products from point A to point B predominately using Company employees driving Company owned tractors and tank trailers. Approximately
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts, certain assets, liabilities, and expenses of Patriot and its wholly owned subsidiaries that comprise the Company. All significant intercompany transactions within the consolidated entity have been eliminated.
CASH AND CASH EQUIVALENTS –The Company considers all highly liquid debt instruments with maturities of three months or less at time of purchase and treasury bills to be cash equivalents. Bank overdrafts consist of outstanding checks not yet presented to a bank for settlement, net of cash held in accounts with right of offset.
INVENTORY - Inventory of parts and supplies is valued at the lower of cost (first-in, first-out) or net realizable value.
TIRES ON EQUIPMENT - The value of tires on tractors and trailers is accounted for as a prepaid expense and amortized over the life of the tires as a function of miles driven.
REVENUE AND EXPENSE RECOGNITION – Transportation revenue, including fuel surcharges, is recognized when the services have been rendered to customers or delivery has occurred, the pricing is fixed or determinable and collectibility is reasonably assured. Transportation expenses are recognized as incurred.
The Company adopted ASU No. 2014-09, “Revenue from Contracts with Customers” on October 1, 2018. 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 and there are no significant performance obligations after delivery. 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’s adoption of this guidance did not result in a material impact on its financial statements.
ACCOUNTS RECEIVABLE - Accounts receivable are recorded net of discounts and provisions for estimated allowances. We estimate allowances on an ongoing basis by considering historical and current trends. We record estimated bad debts expense as a selling, general and administrative expense. We estimate the net collectibility of our accounts receivable and establish an allowance for doubtful accounts based upon this assessment. Specifically, we analyze the aging of accounts receivable balances, historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms. Any trade accounts receivable balances written off are charged against the allowance for doubtful accounts. The Company has not experienced any significant credit-related losses in the past three years.
PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost less accumulated depreciation. Provision for depreciation of property and equipment is computed using the straight-line method based on the
| 46 |
following Estimated useful lives:
| Years | |||
| Building and improvements | |||
| Revenue equipment | |||
| Other equipment |
The Company recorded depreciation expenses
for 2021, 2020 and 2019 of $
IMPAIRMENT OF LONG-LIVED ASSETS - The Company periodically reviews its long-lived assets, which include property and equipment and purchased intangible assets subject to amortization, for potential impairment whenever events or circumstances indicate the carrying amount of a long-lived asset may not be recoverable. The analysis consists of a review of future anticipated results considering business prospects and asset utilization. If the sum of these future cash flows (undiscounted and without interest charges) is less than the carrying amount of the assets, the Company would record an impairment loss based on the fair value of the assets with the fair value of the assets generally based upon an estimate of the discounted future cash flows expected with regards to the assets and their eventual disposition.
GOODWILL – Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in the acquisition of a business. Goodwill is not amortized, but rather is tested for impairment annually and when events or changes in circumstances indicate that the fair value of a reporting unit with goodwill has been reduced below carrying value. The impairment test requires allocating goodwill and other assets and liabilities to reporting units. The Company’s operations are comprised of one operating segment and therefore one reporting unit. The fair value of each reporting unit is determined and compared to the book value of the reporting unit. If the fair value of the reporting unit is less than the book value, including goodwill, then the recorded goodwill is impaired to its implied fair value with a charge to operating expense.
INSURANCE - The Company has a
INCOME TAXES - Deferred tax assets and liabilities are recognized based on differences between financial statement and tax bases of assets and liabilities using presently enacted tax rates. Deferred income taxes result from temporary differences between pre-tax income reported in the financial statements and taxable income. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit. The second step is to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the amounts rely upon the determination of the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law and expiration of statutes of limitations, effectively settled issues under audit, and audit activity. Such a
| 47 |
change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision. It is the Company’s policy to recognize as additional income tax expense the items of interest and penalties directly related to income taxes.
PENSION PLAN - The Company has a defined benefit plan for certain key employees, See note 9 discussion of MSP Plan, and accounts for its pension plan following the requirements of FASB ASC Topic 715, “Compensation – Retirement Benefits”, which requires an employer to: (a) recognize in its statement of financial position the funded status of a benefit plan; (b) measure defined benefit plan assets and obligations as of the end of the employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise but are not recognized as components of net periodic benefit costs pursuant to prior existing guidance.
USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Certain accounting policies and estimates are of more significance in the financial statement preparation process than others. The most critical accounting policies and estimates include the economic useful lives and salvage values of our vehicles and equipment, provisions for uncollectible accounts receivable, estimates of exposures related to our insurance claims plans, and estimates for taxes. To the extent that actual, final outcomes are different than these estimates, or that additional facts and circumstances result in a revision to these estimates, earnings during that accounting period will be affected.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are capitalized. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded for the estimated amount of expected environmental assessments and/or remedial efforts. Estimation of such liabilities includes an assessment of engineering estimates, continually evolving governmental laws and standards, and potential involvement of other potentially responsible parties.
COMPREHENSIVE INCOME – Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) refers to expenses, gains, and losses that are not included in net income, but rather are recorded directly in shareholder’s equity.
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
| 48 |
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 liability for the obligation to make lease
payments measured at the present value of the lease payments for all leases with terms greater than twelve months. The provisions of this
update and additional guidance in subsequent ASUs became effective for us beginning October 1, 2019. In July 2018, the FASB issued ASU
No. 2018-11, “Leases” which provides an optional transition method allowing entities to initially apply the new leases standard
at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption,
with no restatement of comparative prior periods required. We adopted the standard using this optional transition method. Upon adoption
as of October 1, 2019, the Company recognized $
| 2. | 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 April 1, 2021.
The consolidated statements of income reflect charges
and/or allocation to FRP Holdings, Inc. for these services of $
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.
| 3. | Debt. |
On July 6, 2021, Patriot Transportation Holding,
Inc. (the “Company”) entered into the 2021 Amended and Restated Credit
Agreement (the “The Amended and Restated Credit Agreement”) with Wells
Fargo Bank, N.A. (“Wells Fargo”). The Amended and Restated Credit
Agreement modifies the Company's prior Credit Agreement with Wells Fargo, dated January 30, 2015, as amended by that certain First
Amendment dated December 28, 2018. The Amended and Restated Credit Agreement establishes a
revolving credit facility with a maximum facility amount of $
| 49 |
This credit agreement contains certain
conditions, affirmative financial covenants and negative covenants including a minimum tangible net worth.
| 4. | Leases. |
The Company leases certain assets under operating
leases, which primarily consist of real estate leases for the corporate office and some of our terminal locations and
| Asset (Liability) Balance | ||||||||
| As of September 30, | ||||||||
| 2021 | 2020 | |||||||
| Right-of-use assets | $ | |||||||
| Lease liabilities, current | $ | ( |
) | ( |
) | |||
| Lease liabilities, long-term | $ | ( |
) | ( |
) | |||
As the Company’s operating leases do not provide an implicit rate, the Company utilized its incremental borrowing rate determined by obtaining a quote from their lender and applied to the individual leases. The assumptions underlying the calculation of the Company’s right-of-use assets and lease liabilities are disclosed below.
| September 30, 2021 | ||||||
| Weighted-average | Weighted-average | |||||
| Remaining lease term | Discount rate | |||||
| Revenue equipment and other leases | % | |||||
| Real estate leases | % | |||||
Future minimum annual lease payments for assets under operating leases as of September 30, 2021 are as follows (in thousands):
| Fiscal Year | Total | ||||
| 2022 | |||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| Thereafter | |||||
| Total future minimum lease payments | $ | ||||
| Less: Imputed interest | ( |
) | |||
| Present value of operating lease liabilities | $ | ||||
Aggregate expense under operating leases
was $
| 50 |
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.
| Years Ended September 30 | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Common shares: | ||||||||||||
|
Weighted average common shares outstanding during the period – shares used for basic earnings per common share |
||||||||||||
|
Common shares issuable under share based payment plans which are potentially dilutive |
||||||||||||
|
Common shares used for diluted earnings per common share |
||||||||||||
| Net income | $ | |||||||||||
| Earnings per common share: | ||||||||||||
| Basic | $ | |||||||||||
| Diluted | $ | |||||||||||
For 2021 and 2020, and shares, respectively, attributable to outstanding stock options were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
Participation in FRP Plans
Prior to the Company’s spin-off from FRP Holdings, Inc. (FRP) in January 2015, the Company's directors, officers and key employees previously were 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.
Post Spin-Off Patriot Incentive Stock Plan
As part of the spin-off transaction, the Board of Directors of the Company adopted the Patriot Transportation Holding, Inc. Incentive Stock Plan. (“Patriot Plan”) in January 2015. In exchange for all outstanding FRP options held on January 30, 2015, existing Company directors, officers and key employees holding option grants in the FRP Stock Option Plan(s) were issued new grants in the Patriot and FRP Plans based upon the relative value of Patriot and FRP immediately following the completion of the spin-off with the same remaining terms. All related compensation expense has been allocated to the Company (rather than FRP) and included in corporate expenses. The number of common shares available for future issuance in the Patriot Plan was at September 30, 2021.
On December 30, 2020, the Company paid an extraordinary dividend of $ per share to all shareholders of record. In accordance with Section 4.2 of the 2006 Stock Incentive Plan, Section 11 of the 2014 Equity Incentive
| 51 |
Plan, and Section 409A of the Internal Revenue Code, the Company has adjusted the terms of all stock option grants outstanding and the stock appreciation rights as of the close of business on December 30, 2020.
On January 30, 2020, the Company paid an extraordinary dividend of $ per share to all shareholders of record. In accordance with Section 4.2 of the 2006 Stock Incentive Plan, Section 11 of the 2014 Equity Incentive Plan, and Section 409A of the Internal Revenue Code, the Company has adjusted the terms of all stock option grants outstanding and the stock appreciation rights as of the close of business on January 30, 2020.
Patriot utilizes the Black-Scholes valuation model for estimating fair value of stock compensation for options awarded to officers and employees. Each grant is evaluated based upon assumptions at the time of grant or modification. The revised assumptions due to the revaluation are dividend yield of %, expected volatility between % and %, risk-free interest rate of to % and expected life of to years.
The dividend yield of % was based on no anticipated regular quarterly dividend at the date of modification for the extraordinary dividend. Expected volatility is estimated based on historical experience over a period equivalent to the expected life in years. The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate at the date of grant or modification with a term consistent with the expected life of the options granted. The expected life calculation is based on the observed and expected time to exercise options by the employees.
In December 2016, the Company approved and
issued a long-term performance incentive to an officer in the form of stock appreciation rights. As adjusted for the extraordinary dividend
the Company granted stock appreciation rights. The adjusted market price of the grant was $, and the executive will get a
cash award at age 65 based upon the stock price at that date compared to the adjusted market price of $ but in no event will the
award be less than $
The annual director stock grant was shares in fiscal 2021 at $, shares in fiscal 2020 at $, and shares in fiscal 2019 at $, based on the market prices indicated on the date of the grants.
| Years Ended September 30 | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Stock option grants | $ | |||||||||||
| Annual director stock award | ||||||||||||
| $ | ||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||
| Number | Average | Average | Average | |||||||||||||
| Of | Exercise | Remaining | Grant Date | |||||||||||||
| Options | Shares | Price | Term (yrs) | Fair Value | ||||||||||||
| Outstanding at October 1, 2018 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||
| Forfeited | ( | ) | ( | ) | ||||||||||||
| Outstanding at September 30, 2019 | $ | $ | ||||||||||||||
| Dividend Adjustment | ||||||||||||||||
| Granted | ||||||||||||||||
| 52 |
| Forfeited | ( | ) | ( | ) | ||||||||||||
| Outstanding at September 30, 2020 (a) | $ | $ | ||||||||||||||
| Dividend Adjustment | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||
| Forfeited | ( | ) | ( | ) | ||||||||||||
| Outstanding at September 30, 2021 (b) | $ | $ | ||||||||||||||
| Exercisable at September 30, 2021 | $ | $ | ||||||||||||||
| Vested during twelve months ended September 30, 2021 | $ |
| (a) |
| (b) |
| Shares | Weighted | Weighted | ||||||||||||
| Range of Exercise | Under | Average | Average | |||||||||||
| Prices per Share | Option | Exercise Price | Remaining Life | |||||||||||
| Non-exercisable: | ||||||||||||||
| $7.60 – $10.26 | ||||||||||||||
| $10.27 - $13.86 | ||||||||||||||
| $ | Years | |||||||||||||
| Exercisable: | ||||||||||||||
| $7.60 - $10.26 | ||||||||||||||
| $10.27 - $13.86 | ||||||||||||||
| $13.87 - $18.73 | ||||||||||||||
| $ | Years | |||||||||||||
| Total (a) | $ | Years | ||||||||||||
| (a) |
The aggregate intrinsic value of exercisable Company options was $ and the aggregate intrinsic value of all outstanding in-the-money options was $ based on the Company’s market closing price of $ on September 30, 2021 less exercise prices.
The realized tax benefit from option exercises during fiscal 2021 was $ of which $ pertained to FRP options exercised that were granted to persons employed by Patriot. The unrecognized compensation expense of Patriot options granted as of September 30, 2021 was $, which is expected to be recognized over a weighted-average period of years.
7. Income Taxes.
The Provision for or benefit from income taxes for continuing operations for fiscal years ended September 30 consists of the following (in thousands):
| 53 |
| 2021 | 2020 | 2019 | |||||||||||
| Current: | |||||||||||||
| Federal | $ | ||||||||||||
| State | |||||||||||||
| Deferred | ( | ) | ( | ) | |||||||||
| Total | $ | ||||||||||||
A reconciliation between the amount of tax shown above and the amount computed at the statutory Federal income tax rate follows (in thousands):
| 2021 | 2020 | 2019 | ||||||||||
| Amount computed at statutory | ||||||||||||
| Federal rate | $ | |||||||||||
State income taxes (net of Federal income tax benefit) |
||||||||||||
| Other, net | ||||||||||||
| Provision for income taxes | $ |
In this reconciliation, the category “Other, net” consists of changes in permanent tax differences related to non-deductible expenses, goodwill tax amortization, interest and penalties, and adjustments to prior year estimates.
The types of temporary differences and their related tax effects that give rise to Deferred tax assets and deferred tax liabilities at September 30, are presented below (in thousands):
| 2021 | 2020 | ||||||
| Deferred tax liabilities: | |||||||
| Property and equipment | $ | ||||||
| Prepaid expenses | |||||||
| Gross deferred tax liabilities | |||||||
| Deferred tax assets: | |||||||
| Insurance liabilities | |||||||
| Employee benefits and other | |||||||
| Gross deferred tax assets | |||||||
| Net deferred tax liability | $ |
The Company has
Tax returns in the U.S. and various states are subject to audit by taxing authorities. As of September 30, 2021, the earliest tax year that remains open for audit in the Unites States is 2016. We do not have any material unpaid assessments.
8. Accrued Insurance.
The Company has established an accrued liability for the estimated cost in connection with its portion of its risk and health insurance losses incurred and reported. Payments made under a captive agreement for each year’s risk loss fund are scheduled in advance using actuarial methodology. Captive insurance assets available to us to settle risk insurance liabilities are not reported on our balance sheet as we do not control or consolidate the captive.
The Accrued insurance liability at September 30 is summarized as follows (in thousands):
| 54 |
| 2021 | 2020 | |||||||
| Accrued insurance, current portion | $ | |||||||
| Prepaid insurance claims | ( |
) | ( |
) | ||||
| Accrued insurance, non-current | ||||||||
| Total accrued (prepaid) insurance reported on the Company’s balance sheet | $ | ( |
) | |||||
| Captive agreement assets | ||||||||
| Gross insurance liability estimate | $ |
9. Employee Benefits.
The Company and certain subsidiaries and
related entities (FRP) have a savings/profit sharing plan for the benefit of qualified employees. The savings feature of the plan incorporates
the provisions of Section 401(k) of the Internal Revenue Code under which an eligible employee may elect to save a portion (within limits)
of their compensation on a tax deferred basis. Patriot contributes to a participant’s account an amount equal to
The Company has a Management Security Plan
(MSP) for certain key employees. The accruals for future benefits are based upon the remaining years to retirement of the participating
employees and other actuarial assumptions. The expense for fiscal 2021, 2020 and 2019 was $
The Company provides certain health benefits
for retired employees. Employees may become eligible for those benefits if they were employed by the Company prior to December 10, 1992,
meet the service requirements and reach retirement age while working for Patriot. The plan is contributory and unfunded. The Company accrues
its allocated estimated cost of retiree health benefits over the years that the employees render service. The accrued postretirement benefit
obligation for this plan related to the Company as of September 30, 2021 and 2020 was $
10. 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 fiscal year 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 were $
At September 30, 2021 and September 30, 2020, the carrying amount reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and other financial instruments approximate
| 55 |
their fair value based upon the short-term nature of these items.
11. 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.
12. 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
fiscal 2021, the Company’s ten largest customers accounted for approximately
Deposits: Cash and cash equivalents are comprised of cash and an FDIC insured investment account at Wells Fargo Bank, N.A. The balance in the cash account may exceed FDIC limits.
13. Unusual or Infrequent Items Impacting Results.
The Company recorded gains due to the reversal
of the estimated contingent liability related to the Danfair acquisition. The earned payout liability, estimated to be $
Second quarter 2021 net income included
$
First quarter 2019 net income included $
14. Goodwill and Intangible Assets.
The Changes in gross carrying amounts of goodwill are as follows (in thousands):
| Goodwill | ||||
| October 1, 2018 | $ | |||
| No activity | ||||
| September 30, 2019 | ||||
| Danfair Transport acquisition | ||||
| 56 |
| September 30, 2020 | ||||
| No activity | ||||
| September 30, 2021 | $ |
The Company assesses goodwill for impairment on an annual basis in the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
The Company reviews intangible assets, including customer value, trade name and non-compete agreements, for impairment, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of long-lived assets is measured by a comparison of the carrying amount of the asset group to the future undiscounted net cash flows expected to be generated by those assets. If such assets are considered to be impaired, the impairment charge recognized is the amount by which the carrying amounts of the assets exceeds the fair value of the assets.
The gross amounts and accumulated amortization (including impairment) of Identifiable intangible assets are as follows (in thousands):
| September 30, 2021 | September 30, 2020 | |||||||||||||||
| Gross | Accumulated | Gross | Accumulated | |||||||||||||
| Amount | Amortization | Amount | Amortization | |||||||||||||
| Amortizable intangible assets: | ||||||||||||||||
| Customer value | ||||||||||||||||
| Trade name | ||||||||||||||||
| Non-compete | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Amortization expense for intangible assets
was $
Estimated amortization expense for the five succeeding years follows (in thousands):
| Amount | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total | $ | |||
15. Business Acquisition.
The Company acquired certain assets of Danfair Transport out of Americus, GA on November 4, 2019.
The Company has accounted for this acquisition in accordance with the provisions of ASC 805, Business Combinations (ASC 805). The Company has allocated the purchase price of the business based upon the fair value of the assets acquired and liabilities assumed as follows (in thousands):
| Consideration: | ||||
| Fair value of consideration transferred | ( |
) | ||
| 57 |
| Acquisition related costs expensed | $ | |||
| Recognized amounts of identifiable assets acquired and | ||||
| liabilities assumed: | ||||
| Property and equipment | $ | |||
| Prepaid tires | ||||
| Customer relationships | ||||
| Non-compete agreement | ||||
| Vacation liability assumed | ( |
) | ||
| Total identifiable net assets assumed | $ | |||
| Goodwill | ||||
| Total | $ |
The goodwill recorded resulting from the acquisition
is tax deductible. The earned payout liability, estimated to be $
16. Subsequent Events
On October 18, 2021, we completed the
disposition of the Company’s terminal located in Tampa, Florida to Amazon.com Services LLC for a sale price of $
On October 1, 2021 a lease commenced for
property in Tampa to replace our sold terminal location. The minimum lease term is
months and will go on our balance sheet as a right-of-use asset for approximately $
On October 25th, we announced that our Board of Directors
declared a special cash dividend of $ per share, or approximately $
| 58 |
Report of Management
Management's Responsibility for the Financial Statements
Management of the Company is responsible for the preparation and integrity of the consolidated financial statements appearing in our Annual Report on Form 10-K. The financial statements were prepared in conformity with accounting principles generally accepted in the United States appropriate in the circumstances and, accordingly, include certain amounts based on our best judgments and estimates. Financial information in this Annual Report on Form 10-K is consistent with that in the financial statements.
Management of the Company is responsible for establishing and maintaining a system of internal controls and procedures to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements. Our internal control system is supported by a program of internal audits and appropriate reviews by management, written policies and guidelines, careful selection and training of qualified personnel, and a written Code of Business Conduct adopted by our Company's Board of Directors, applicable to all officers and employees of our Company and subsidiaries.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management's Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934 ("Exchange Act"). Management assessed the effectiveness of the Company's internal control over financial reporting as of September 30, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2017 Framework) ("COSO") in Internal Control—Integrated Framework. Based on this assessment, management believes that the Company maintained effective internal control over financial reporting as of September 30, 2021.
The Company's independent auditors, Hancock Askew& Co., LLP, a registered public accounting firm, are appointed by the Audit Committee of the Company's Board of Directors, subject to ratification by our Company's shareholders. Hancock Askew & Co., LLP has audited and reported on the consolidated financial statements of Patriot Transportation Holding, Inc. The report of the independent auditors is contained in this annual report.
Audit Committee's Responsibility
The Audit Committee of our Company's Board of Directors, composed solely of Directors who are independent in accordance with the requirements of the Nasdaq Stock Market listing standards, the Exchange Act, and the Company's Corporate Governance Guidelines, meets with the independent auditors, management and internal auditors periodically to discuss internal controls and auditing and financial reporting matters. The Audit Committee reviews with the independent auditors the scope and results of the audit effort. The Audit Committee also meets periodically with the independent auditors and the chief internal auditor without management present to ensure that the independent auditors and the chief internal auditor have free access to the Audit Committee. Our Audit Committee's Report can be found in the Company's Proxy Statement.
| 59 |
Report of Independent Registered Public Accounting Firm
The Shareholders and Board of Directors
Patriot Transportation Holding, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Patriot Transportation Holding, Inc. (the Company) as of September 30, 2021 and 2020, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2021, 2020, and 2019, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2021, 2020, and 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Auto Liability and Workers’ Compensation Claims Accrual – “Risk Accrual”
Description of the Matter
The Company is self-insured for a portion of its risk related to auto liability and workers’ compensation. The Company retains the exposure on liability claims of $250,000 and $500,000 for worker’s compensation claims and has third-party coverage for amounts exceeding the retention up to the amount of the policy limits.
| 60 |
The Company accrues an expense for the cost of the self-insured portion of unpaid claims by evaluating the nature and severity of reported claims and by estimating future claims development based upon historical development trends. The actual cost to settle self-insured claim liabilities may differ from the Company’s reserve estimates due to legal costs, claims that have been incurred but not reported, and various other uncertainties.
We identified the estimation of auto liability and workers’ compensation claims accruals subject to self-insurance retention of $2.8 million as a critical audit matter. The accrual is included in “Accrued insurance” on the Company’s consolidated balance sheet. Auto liability and workers’ compensation unpaid claim liabilities are determined by projecting the estimated ultimate loss related to a claim, less actual costs paid to date. These estimates rely on the assumption that historical claim patterns are an accurate representation for future claims that have been incurred but not completely paid. The principal considerations for assessing auto liability and workers’ compensation claims as a critical audit matter are the high level of estimation uncertainty related to determining the severity of these types of claims, the inherent subjectivity in management’s judgment in estimating the total costs to settle or dispose of these claims, and high degree of auditor judgement and an increased extent of effort to test the Company’s claims accruals.
How we Addressed the Matter in our Audit
· We tested the effectiveness of controls over auto liability and workers’ compensation claims, including the completeness and accuracy of claim expenses and payments.
· We tested management’s reconciliation of the reported claims data to the data submitted to their third-party actuary.
· We tested management’s process for determining the auto liability and workers’ compensation accrual, including testing the underlying claims data used as the basis for the actuarial analysis and testing current year claims and payment data.
· We tested management’s comparison to selected loss accruals to the range established by management’s third-party actuary and historical trends.
Hancock Askew & Co., LLP
We have served as the Company’s auditor since 2006.
Jacksonville, Florida
December 14, 2021
| 61 |
DIRECTORS AND OFFICERS
Directors
Thompson S. Baker II (1)
Chairman of the Board of the Company
Senior Vice President, Vulcan Materials
Edward L. Baker (1)
Chairman Emeritus
John E. Anderson (2)(3)(4)
Former President and Chief Executive
Officer of Patriot Transportation Holding, Inc.
Luke E. Fichthorn III (2)(3)(4)
Private Investment Banker,
Twain Associates
Charles D. Hyman (2)(3)(4)
President/Founder
Charles D. Hyman & Company
________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Nominating Committee
Officers
Robert E. Sandlin
President and Chief Executive Officer
Matthew C. McNulty
Vice President, Chief Operating Officer, Secretary and Chief Financial Officer
John D. Klopfenstein
Controller, Treasurer and Chief Accounting Officer
James N. Anderson IV
Vice President of Safety and Risk Management
| 62 |
Patriot Transportation Holding, Inc.
200 West Forsyth Street, 7th Floor
Jacksonville, Florida, 32202
Telephone: 904) 396-5733
Annual Meeting
Due to the social distancing guidelines from the CDC, this year our Annual Shareholders meeting will be held virtually at 11 a.m. Eastern Standard Time on Wednesday, February 2, 2022. All shareholders are cordially invited to attend the Annual Shareholders meeting via a weblink titled “2022 Annual Shareholders Meeting” which will be posted on our website at www.patriottrans.com under Investor Relations.
Transfer Agent
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Telephone: 1-800-937-5449
General Counsel
Nelson Mullins Riley & Scarborough LLP
Jacksonville, Florida
Independent Registered Public Accounting Firm
Hancock Askew & Co., LLP
Jacksonville, Florida
Common Stock Listed
The Nasdaq Stock Market
(Symbol: PATI)
Form 10-K
Shareholders may receive without charge a copy of Patriot Transportation Holding, Inc.’s annual report on Form 10-K for the fiscal year ended September 30, 2021 as filed with the Securities and Exchange Commission by writing to the Treasurer at 200 West Forsyth Street, 7th Floor, Jacksonville, Florida 32202. The most recent certifications by our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to our Form 10-K.
Company Website
The Company’s website may be accessed at www.patriottrans.com. All of our filings with the Securities and Exchange Commission can be accessed through our website promptly after filing. This includes annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports filed or furnished on Form 8-K and all related amendments.
| 63 |
2021 AMENDED AND RESTATED CREDIT AGREEMENT
dated as of July 6, 2021
between
PATRIOT TRANSPORTATION HOLDING, INC.
as Borrower
and
WELLS FARGO BANK, N.A.
as Lender
| TABLE OF CONTENTS | |||||
| Page | |||||
| Article 1 DEFINITIONS; CONSTRUCTION | 1 | ||||
| Section 1.1 | Definitions | 1 | |||
| Section 1.2 | Reserved | 13 | |||
| Section 1.3 | Accounting Terms and Determination | 14 | |||
| Section 1.4 | Terms Generally | 14 | |||
| Article 2 AMOUNT AND TERMS OF THE REVOLVING COMMITMENT | 14 | ||||
| Section 2.1 | General Description of Facility | 14 | |||
| Section 2.2 | Revolving Loans | 15 | |||
| Section 2.3 | Procedure for Borrowings | 15 | |||
| Section 2.4 | Reserved | 15 | |||
| Section 2.5 | Loan Management Service | 15 | |||
| Section 2.6 | Funding of Borrowings | 15 | |||
| Section 2.7 | Reserved. | 15 | |||
| Section 2.8 | Optional Reduction and Termination of Revolving Commitment. | 16 | |||
| Section 2.9 | Repayment of Loans | 16 | |||
| Section 2.10 | Evidence of Indebtedness. | 16 | |||
| Section 2.11 | Reserved | 16 | |||
| Section 2.12 | Interest on Loans. | 16 | |||
| Section 2.13 | Fees. | 17 | |||
| Section 2.14 | Computation of Interest and Fees | 18 | |||
| Section 2.15 | Reserved | 18 | |||
| Section 2.16 | Reserved | 18 | |||
| Section 2.17 | Increased Costs. | 18 | |||
| Section 2.18 | Reserved | 19 | |||
| Section 2.19 | Taxes. | 19 | |||
| Section 2.20 | Payments Generally. | 19 | |||
| Section 2.21 | Mitigation of Obligations | 20 | |||
| Section 2.22 | Letter of Credit Commitment | 20 | |||
| Section 2.23 | Procedure for Issuance and Reimbursement of Letters of Credit. | 20 | |||
| Section 2.24 | Increased Cost. | 21 | |||
| Section 2.25 | Obligations Absolute | 21 | |||
| Section 2.26 | Letter of Credit Documents | 22 | |||
| Article 3 CONDITIONS PRECEDENT TO LOANS | 22 | ||||
| Section 3.1 | Conditions To Effectiveness | 22 | |||
| Section 3.2 | Each Credit Event | 24 | |||
| Article 4 REPRESENTATIONS AND WARRANTIES | 24 | ||||
| Section 4.1 | Existence; Power | 24 | |||
| Section 4.2 | Organizational Power; Authorization | 24 | |||
| Section 4.3 | Governmental Approvals; No Conflicts | 25 | |||
| Section 4.4 | Financial Statements | 25 | |||
| Section 4.5 | Litigation and Environmental Matters. | 25 | |||
| Section 4.6 | Compliance with Laws and Agreements | 25 | |||
| i |
| Section 4.7 | Investment Company Act, Etc. | 26 | |||
| Section 4.8 | Taxes | 26 | |||
| Section 4.9 | Margin Regulations | 26 | |||
| Section 4.10 | ERISA | 26 | |||
| Section 4.11 | Ownership of Property. | 26 | |||
| Section 4.12 | Disclosure | 27 | |||
| Section 4.13 | Labor Relations | 27 | |||
| Section 4.14 | Subsidiaries | 27 | |||
| Section 4.15 | Legal Name | 27 | |||
| Section 4.16 | No Restrictions on Dividends | 27 | |||
| Section 4.17 | Solvency | 27 | |||
| Section 4.18 | Insurance | 27 | |||
| Section 4.19 | Outstanding Indebtedness | 28 | |||
| Article 5 AFFIRMATIVE COVENANTS | 28 | ||||
| Section 5.1 | Financial Statements and Other Information | 28 | |||
| Section 5.2 | Notices of Material Events | 29 | |||
| Section 5.3 | Existence; Conduct of Business | 30 | |||
| Section 5.4 | Compliance with Laws, Etc. | 30 | |||
| Section 5.5 | Payment of Obligations | 30 | |||
| Section 5.6 | Books and Records | 31 | |||
| Section 5.7 | Visitation, Inspection, Etc. | 31 | |||
| Section 5.8 | Maintenance of Properties; Insurance | 31 | |||
| Section 5.9 | Use of Proceeds | 31 | |||
| Section 5.10 | Additional Subsidiaries | 31 | |||
| Section 5.11 | Deposit Relationship | 32 | |||
| Article 6 FINANCIAL COVENANTS | 32 | ||||
| Section 6.1 | Reserved | 32 | |||
| Section 6.2 | Fixed Charge Coverage Ratio | 32 | |||
| Section 6.3 | Tangible Net Worth | 32 | |||
| Article 7 NEGATIVE COVENANTS | 32 | ||||
| Section 7.1 | Indebtedness | 32 | |||
| Section 7.2 | Negative Pledge | 33 | |||
| Section 7.3 | Fundamental Changes. | 34 | |||
| Section 7.4 | Investments, Loans, Etc. | 35 | |||
| Section 7.5 | Restricted Payments | 36 | |||
| Section 7.6 | Sale of Assets | 36 | |||
| Section 7.7 | Transactions with Affiliates | 37 | |||
| Section 7.8 | Restrictive Agreements | 37 | |||
| Section 7.9 | Sale and Leaseback Transactions | 37 | |||
| Section 7.10 | Hedging Agreements | 37 | |||
| Section 7.11 | Amendment to Material Documents | 38 | |||
| Section 7.12 | Permitted Subordinated Indebtedness | 38 | |||
| Section 7.13 | Accounting Changes | 38 | |||
| Section 7.14 | Name Changes. | 38 | |||
| Article 8 EVENTS OF DEFAULT | 38 | ||||
| Section 8.1 | Events of Default | 38 | |||
| ii |
| Article 9 RESERVED | 41 | ||||
| Article 10 MISCELLANEOUS | 41 | ||||
| Section 10.1 | Notices. | 41 | |||
| Section 10.2 | Waiver; Amendments. | 42 | |||
| Section 10.3 | Expenses; Indemnification. | 43 | |||
| Section 10.4 | Successors and Assigns. | 44 | |||
| Section 10.5 | Governing Law; Jurisdiction; Consent to Service of Process. | 45 | |||
| Section 10.6 | Arbitration | 45 | |||
| Section 10.7 | Right of Setoff | 48 | |||
| Section 10.8 | Counterparts; Integration | 48 | |||
| Section 10.9 | Survival | 48 | |||
| Section 10.10 | Severability | 48 | |||
| Section 10.11 | Confidentiality | 49 | |||
| Section 10.12 | Interest Rate Limitation | 49 | |||
| Section 10.13 | US PATRIOT Act Notice | 49 | |||
Schedules
| Schedule 4.5 | — | Environmental Matters | ||||
| Schedule 4.14 | — | Subsidiaries | ||||
| Schedule 7.4 | — | Existing Investments |
Exhibits
| Exhibit A | — | Reserved | ||||
| Exhibit B | — | Reserved | ||||
| Exhibit C | — | Reserved | ||||
| Exhibit D | — | Reserved | ||||
| Exhibit 2.3 | — | Notice of Revolving Borrowing |
Annexes
| Annex I | Captive Investment Policy Statement |
| iii |
AMENDED AND RESTATED 2021 CREDIT AGREEMENT
THIS 2021 AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”) is made and entered into as of July 6, 2021, by and among PATRIOT TRANSPORTATION HOLDING, INC., a Florida corporation formerly known as New Patriot Transportation Holding, Inc. (the “Borrower”) and WELLS FARGO BANK, N.A. (the “Lender”).
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to a 2015 Credit Agreement dated as of January 30, 2015, (as amended from time to time prior to the date of this Agreement, the “Existing Credit Agreement”); and
WHEREAS, the Borrower and Lender desire to amend and restate the Existing Credit Agreement, among other things, to renew, extend and modify the revolving credit facility, as more fully set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Borrower and the Lender agree the Existing Credit Agreement is hereby amended and restated in its entirety as follows:
Article
1
DEFINITIONS; CONSTRUCTION
Section 1.1 Definitions
. In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined):
“Affiliate” shall mean, as to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person.
“Applicable Margin” shall mean 1.10%:
“Available Amount” means on the calculation date, the maximum amount available to be drawn under any Letter of Credit.
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“Availability Period” shall mean the period from the Closing Date to the Commitment Termination Date.
“Bank Products” shall mean any of the following services provided to Borrower by Lender (or any Affiliate of a Lender): (a) any treasury or other cash management services, including deposit accounts, automated clearing house (ACH) origination and other funds transfer, depository (including cash vault and check deposit), zero balance accounts and sweeps, return items processing, controlled disbursement accounts, positive pay, lockboxes and lockbox accounts, account reconciliation and information reporting, payables outsourcing, payroll processing, trade finance services, investment accounts and securities accounts, (b) card services, including credit cards (including purchasing cards and commercial cards), prepaid cards, including payroll, stored value and gift cards, merchant services processing, and debit card services and (c) Hedging Agreements entered into with Lender (or an Affiliate of Lender).
“Borrower” shall have the meaning in the introductory paragraph hereof.
“Borrowing” shall mean a borrowing consisting of a Revolving Loan.
“Capital Lease Obligations” of any Person shall mean all obligations of such Person to pay rent or other amounts under any lease (or other arrangement conveying the right to use) of real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
“Change in Control” shall mean the occurrence of one or more of the following events: (a) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of the Borrower to any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder in effect on the date hereof), (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of thirty percent (30%) or more of the outstanding shares of the voting stock of the Borrower; or (c) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the current board of directors or (ii) appointed by directors so nominated.
“Change in Law” shall mean (i) the adoption of any applicable law, rule or regulation after the date of this Agreement, (ii) any change in any applicable law, rule or regulation, or any change in the interpretation or application thereof, by any Governmental Authority after the date of this Agreement, or (iii) compliance by the Lender (or for purposes of Section 2.17(b) or Section 2.24, by the Lender’s holding company, if applicable) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.
“Closing Date” shall mean July 6, 2021.
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“Code” shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time.
“Commitment Termination Date” shall mean the earliest of (i) July 6, 2026, (ii) the date on which the Revolving Commitment is terminated pursuant to Section 2.8 or (iii) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise).
“Consolidated Current Maturities of Long Term Debt” shall mean the portion of Consolidated Long Term Debt of the Borrower and its Subsidiaries, on a consolidated basis determined in accordance with GAAP, paid during the twelve (12) month period ending on the last day of the month prior to the date as of which said determination is to be made, but excluding any amounts paid during such period in respect of Consolidated Long Term Debt that was not in default and which was voluntarily prepaid by the Borrower and its Subsidiaries.
“Consolidated EBITDA” shall mean, for the Borrower and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) to the extent deducted in determining Consolidated Net Income for such period, (i) Consolidated Interest Expense, (ii) Consolidated Income Tax Expense, and (iii) depreciation, depletion and amortization determined on a consolidated basis in accordance with GAAP in each case for such period.
“Consolidated Income Tax Expense” shall mean, for the Borrower and its Subsidiaries for any period determined on a consolidated basis in accordance with GAAP, the aggregate of all present or future taxes, levies, imposts, duties, deductions, charges or withholdings paid in cash to any Governmental Authority.
“Consolidated Interest Expense” shall mean, for the Borrower and its Subsidiaries for any period determined on a consolidated basis in accordance with GAAP, the sum of (i) total cash interest expense, including without limitation the interest component of any payments in respect of Capital Leases Obligations capitalized or expensed during such period (whether or not actually paid during such period) plus (ii) the net amount payable (or minus the net amount receivable) under Hedging Agreements during such period (whether or not actually paid or received during such period).
“Consolidated Long Term Debt” shall mean, for any period, all Indebtedness of the Borrower and its Subsidiaries, or any portion thereof, determined on a consolidated basis and in accordance with GAAP, the maturity of which extends beyond twelve (12) months from the date of calculation of Consolidated Long Term Debt.
“Consolidated Net Income” shall mean, for any period, the net income (or loss) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any extraordinary gains or losses, (ii) any gains attributable to write-ups of assets, (iii) any equity interest of the Borrower or any Subsidiary of the Borrower in the unremitted earnings of any Person that is not a Subsidiary and (iv) any income (or loss) of any Person accrued prior to the date it
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becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary on the date that such Person’s assets are acquired by the Borrower or any Subsidiary.
“Consolidated Net Worth” shall mean, as of any date, the total assets of the Borrower and its Subsidiaries that would be reflected on the Borrower’s consolidated balance sheet as of such date prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries, minus the sum of (i) the total liabilities of the Borrower and its Subsidiaries that would be reflected on the Borrower’s consolidated balance sheet as of such date prepared in accordance with GAAP and (ii) the amount of any write-up in the book value of any assets resulting from a revaluation thereof or any write-up in excess of the cost of such assets acquired reflected on the consolidated balance sheet of the Borrower as of such date prepared in accordance with GAAP.
“Control” shall mean the power, directly or indirectly, either to (i) vote five percent (5%) or more of securities having ordinary voting power for the election of directors (or persons performing similar functions) of a Person or (ii) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling,” “Controlled by,” and “under common Control with” have meanings correlative thereto.
“Covenant Compliance Certificate” shall mean a certificate in such form as may be acceptable to the Lender, containing all the financial covenants and ratios with which the Borrower is required to comply during the term of this Agreement and containing calculations reflecting whether or not the Borrower is in compliance with each such financial covenant or ratio.
“Default” shall mean any condition or event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default.
“Designated Account” shall mean the demand deposit operating account of Borrower or Patriot Transportation, Inc., of Florida designated as the account to be used for the debit or credit of funds in connection with the Loan Management Service pursuant to Section 2.5 or for the funding of Revolving Loan advances pursuant to Section 2.6.
“Dollar(s)” and the sign “$” shall mean lawful money of the United States of America.
“Environmental Laws” shall mean all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters.
“Environmental Liability” shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental investigation and remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) any actual or alleged violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or
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disposal of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute.
“ERISA Affiliate” shall mean any trade or business (whether or not incorporated), which, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for the purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator appointed by the PBGC of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
“Event of Default” shall have the meaning provided in Article 8.
“Excluded Taxes” shall mean with respect to the Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of the Lender, in which its applicable lending office is located and (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located.
“Federal Funds Rate” shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/8th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers for the immediately preceding day, as published by the Federal Reserve Bank of New York; provided that if no such rate is so published on any day, then the Federal Funds Rate for such day shall be the rate most recently published.
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“Fixed Charge Coverage Ratio” shall mean, for any period of four consecutive fiscal quarters of the Borrower, the ratio of (a) Consolidated EBITDA for such period less Consolidated Income Tax Expenses to (b) the sum of Consolidated Interest Expense plus Consolidated Current Maturities of Long Term Debt for such period.
“GAAP” shall mean generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3.
“Governmental Authority” shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
“Guarantee” of or by any Person (the “guarantor”) shall mean any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly and including any obligation, direct or indirect, of the guarantor (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued in support of such Indebtedness or obligation; provided, that the term “Guarantee” shall not include endorsements for collection or deposits in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which the Guarantee is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. The term “Guarantee” used as a verb has a corresponding meaning.
“Guarantors” shall mean Patriot Transportation, Inc., of Florida, and Florida Rock and Tank Lines, Inc., and any future Subsidiary which is required pursuant to Section 5.10 to become a Guarantor.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“Hedging Agreements” shall mean interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts,
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commodity agreements and other similar agreements or arrangements designed to protect against fluctuations in interest rates, currency values or commodity values.
“Indebtedness” of any Person shall mean, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business; provided, that for purposes of Section 8.1(f), trade payables overdue by more than 120 days shall be included in this definition except to the extent that any of such trade payables are being disputed in good faith and by appropriate measures), (iv) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (v) all Capital Lease Obligations of such Person, (vi) all obligations, contingent or otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of credit, (vii) all Guarantees of such Person of the type of Indebtedness described in clauses (i) through (vi) above, (viii) all Indebtedness of a third party secured by any Lien on property owned by such Person, whether or not such Indebtedness has been assumed by such Person, (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any common stock of such Person, and (x) Off-Balance Sheet Liabilities. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor.
“Indemnified Taxes” shall mean Taxes other than Excluded Taxes.
“Indemnity and Contribution Agreement” shall mean the 2015 Indemnity, Subrogation and Contribution Agreement, dated as of January 30, 2015, among the Borrower, the Subsidiary Loan Parties and the Lender, as amended, or modified from time to time.
“Lender” shall have the meaning assigned to such term in the opening paragraph of this Agreement.
“Letter of Credit” shall mean any standby letter of credit (or at the Lender’s discretion, any documentary letter of credit) issued by the Lender pursuant to Section 2.22 hereof, as it may be modified from time to time. The term “Letter of Credit” shall not include any letters of credit issued by the Lender other than pursuant to this Agreement.
“Letter of Credit Documents” shall mean such applications and other agreements as the Lender may require in connection with the issuance of a Letter of Credit, as they may be modified from time to time.
“Letter of Credit Exposure” shall mean the aggregate Available Amount of all outstanding Letters of Credit as to which the Lender is obligated to make Revolving Loan advances pursuant to Section 2.23.
“Letter of Credit Notice” shall have the meaning set forth in Section 2.23.
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“Lien” shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment, deposit arrangement, or other arrangement having the practical effect of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having the same economic effect as any of the foregoing).
“Loan Documents” shall mean, collectively, this Agreement, the Revolving Credit Note, all Notices of Revolving Borrowing, all Letter of Credit Notices, all Letter of Credit Documents, the Subsidiary Guarantee Agreement, the Indemnity and Contribution Agreement, and any and all other instruments, agreements, documents and writings executed in connection with any of the foregoing, as they may be modified from time to time.
“Loan Management Service” shall mean Lender’s proprietary automated loan management program that controls the manner in which funds are transferred between the Designated Account and the Revolving Loan for credit or debit to the Revolving Loan, or any successor service or product that performs similar service.
“Loan Parties” shall mean the Borrower and the Subsidiary Loan Parties.
“Loans” shall mean Revolving Loans.
“London Business Day” means any day that is a day for trading by and between banks in Dollar deposits in the London interbank market.
“LOC Fee Payment Date” shall mean the last day of each March, June, September and December and on the Commitment Termination Date.
“Material Adverse Effect” shall mean, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether individually or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences whether or not related, a material adverse change in, or a material adverse effect on, (i) the business, results of operations, financial condition, assets, liabilities or prospects of the Borrower and of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Loan Parties to perform any of their respective obligations under the Loan Documents, (iii) the rights and remedies of the Lender under any of the Loan Documents or (iv) the legality, validity or enforceability of any of the Loan Documents.
“Material Indebtedness” shall mean Indebtedness (other than the Loans) or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and the Subsidiaries in an aggregate principal amount exceeding $1,000,000.00. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any Subsidiary in respect to any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.
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“Moody’s” shall mean Moody’s Investors Service, Inc.
“Multiemployer Plan” shall have the meaning set forth in Section 4001(a)(3) of ERISA.
“New York Business Day” shall mean any day except a Saturday, Sunday or any other day on which commercial banks in New York are authorized or required by law to close.
“Notice of Revolving Borrowing” shall have the meaning set forth in Section 2.3.
“Obligations” shall mean all amounts owing by the Borrower to the Lender pursuant to or in connection with this Agreement, any other Loan Document or any Bank Products, including without limitation, all principal, interest (including any interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), all reimbursement obligations under the Letter of Credit Documents, fees, expenses, indemnification and reimbursement payments, costs and expenses (including all reasonable fees and expenses of counsel to the Lender incurred pursuant to this Agreement or any other Loan Document), whether direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising hereunder or thereunder, together with all renewals, extensions, modifications or refinancings thereof.
“Off-Balance Sheet Liabilities” of any Person shall mean (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability of such Person under any sale and leaseback transactions which do not create a liability on the balance sheet of such Person, (iii) any liability of such Person under any so-called “synthetic” lease transaction or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person.
“Other Taxes” shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
“Participant” shall have the meaning set forth in Section 10.4(b).
“Payment Office” shall mean the office of the Lender located at One Independent Drive, 25th Floor, Jacksonville, Florida 32202, or such other location as to which the Lender shall have given written notice to the Borrower.
“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, and any successor entity performing similar functions.
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“Permitted Encumbrances” shall mean:
(a) Liens imposed by law for taxes not yet delinquent or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP;
(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;
(e) judgment and attachment Liens not giving rise to an Event of Default or Liens created by or existing from any litigation or legal proceeding that are currently being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP;
(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of the Borrower and its Subsidiaries taken as a whole; and
(g) Liens arising under ERISA which could not reasonably be expected to have a Material Adverse Effect;
provided, that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.
“Permitted Investments” shall mean:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof;
(b) commercial paper having the highest rating, at the time of acquisition thereof, of S&P or Moody’s and in either case maturing within six months from the date of acquisition thereof;
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(c) certificates of deposit, bankers’ acceptances and time deposits maturing within 180 days of the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000.00;
(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above;
(e) investments in money market mutual funds that are registered with the SEC and subject to Rule 2a-7 of the Investment Company Act of 1940 and have a net asset value of $1.00;
(f) municipal obligations issued by any state of the United States of America or any municipality or other political subdivision of any such state rated at least AAA by S&P, Aaa by Moody’s or AAA by Fitch at the time of purchase; in each case maturing within one year from the date of acquisition thereof;
(g) fixed income mutual funds that provide next day liquidity and have a duration of one year or less; and
(h) with respect to the investments of captive loss funds, investments in accordance with the investment policy set forth on Annex I.
“Permitted Subordinated Debt” shall mean any Indebtedness of the Borrower or any Subsidiary (i) that is expressly subordinated to the Obligations on terms reasonably satisfactory to the Lender, and (ii) that is evidenced by an indenture or other similar agreement that is in a form reasonably satisfactory to the Lender.
“Person” shall mean any individual, partnership, firm, corporation, association, joint venture, limited liability company, trust or other entity, or any Governmental Authority.
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations.
“Related Parties” shall mean, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.
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“Release” means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture.
“Responsible Officer” shall mean any of the president, the chief executive officer, the chief operating officer, the chief financial officer, the treasurer or a vice president of the Borrower or such other representative of the Borrower as may be designated in writing by any one of the foregoing with the consent of the Lender; and, with respect to the financial covenants only, the chief financial officer or the treasurer of the Borrower.
“Restricted Payment” shall have the meaning set forth in Section 7.5.
“Revolving Commitment” shall mean the obligation of the Lender, subject to the terms and conditions hereof, and notwithstanding the face amount of the Revolving Credit Note, to make Revolving Loans to or for the account of the Borrower in an aggregate principal amount not exceeding Fifteen Million no/100 Dollars ($15,000,000.00); provided, however, that Borrower may at any time and from time to time request an increase of the Revolving Commitment to Twenty Five Million no/100 Dollars ($25,000,000.00) by providing written notice to Lender, which notice shall be irrevocable once given; provided further, that any such increase of the Revolving Commitment shall be subject to the prior written approval of Lender, which may be granted or withheld by Lender in its sole and absolute discretion. Effecting an increase in the Revolving Commitment is subject to the following conditions precedent: (x) no Event of Default (as defined herein), and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist, (y) the representations and warranties made or deemed made by the Borrower in this Agreement and the other Loan Documents shall be true and correct in all material respects on the effective date of such increase except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct on and as of such earlier date), and (z) if requested, Lender shall have received copies certified by the Secretary or Assistant Secretary of Borrower of all corporate action taken by Borrower to authorize such increase and the borrowing of Revolving Loans thereunder, in form and substance satisfactory to Lender. In the event Lender shall approve Borrower’s request for an increase in the Revolving Commitment, Borrower shall execute and deliver such documents and agreements as Lender shall reasonably require. Any additional credit extended by Lender as a result of an approved increase in the Revolving Commitment shall be secured by, and entitled to the benefits of, the guaranties made by the Guarantors, and the Guarantors shall so reaffirm at the time of, and as a condition precedent to, any such increase in the Revolving Commitment.
“Revolving Credit Exposure” shall mean, at any time, the sum of the outstanding principal amount of Revolving Loan plus the Letter of Credit Exposure.
“Revolving Credit Note” shall mean a promissory note of the Borrower payable to the order of the Lender in the principal amount of the Revolving Commitment, as it may be modified from time to time, in form acceptable to Lender.
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“Revolving Loan” shall mean a loan made by the Lender to the Borrower under its Revolving Commitment.
“S&P” shall mean Standard & Poor’s.
“SPE Subsidiary” shall mean a special purpose Subsidiary of the Borrower established solely for the purpose of owning a parcel of real property for permanent financing purposes.
“Subordinated Debt Documents” shall mean any indenture, agreement or similar instrument governing any Permitted Subordinated Debt.
“Subsidiary” shall mean, with respect to any Person (the “parent”), any corporation, partnership, joint venture, limited liability company, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, partnership, joint venture, limited liability company, association or other entity (i) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power, or in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (ii) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise indicated, all references to “Subsidiary” hereunder shall mean a Subsidiary of the Borrower.
“Subsidiary Guarantee Agreement” shall mean the Subsidiary Guarantee Agreement, dated as of January 30, 2015, made by the Subsidiary Loan Parties in favor of the Lender, as amended, or modified from time to time.
“Subsidiary Loan Party” shall mean any Subsidiary that is not a Foreign Subsidiary or an SPE Subsidiary.
“Taxes” shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.
“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.2 Reserved.
Section 1.3 Accounting Terms and Determination. Unless otherwise defined or specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time, applied on a basis consistent (except for such changes approved by the Borrower’s independent public accountants) with the most recent audited consolidated financial statement of the Borrower delivered pursuant to Section 5.1(a); provided, that if the Borrower notifies the Lender that
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the Borrower wishes to amend any covenant in Article 6 to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Lender notifies the Borrower that the Lender wishes to amend Article 6 for such purpose), then the Borrower’s compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Lender.
Section 1.4 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the word “to” means “to but excluding”. Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as it was originally executed or as it may from time to time be amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns, (iii) the words “hereof”, “herein” and “hereunder” and words of similar import shall be construed to refer to this Agreement as a whole and not to any particular provision hereof, (iv) all references to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v) all references to a specific time shall be construed to refer to the time in the city and state of the Lender’s principal office, unless otherwise indicated.
Article
2
AMOUNT AND TERMS OF THE REVOLVING COMMITMENT
Section 2.1 General Description of Facility. Subject to and upon the terms and conditions herein set forth, (i) the Lender hereby establishes in favor of the Borrower a revolving credit facility pursuant to which the Lender agrees (up to the Revolving Commitment) to make Revolving Loans to the Borrower in accordance with Section 2.2, and (ii) the Lender agrees to issue Letters of Credit in accordance with Section 2.22 hereof; provided, that in no event shall the aggregate principal amount of all outstanding Revolving Loans plus the aggregate Available Amounts of all outstanding Letters of Credit exceed at any time the Revolving Commitment from time to time in effect.
Section 2.2 Revolving Loans. Subject to the terms and conditions set forth herein, the Lender agrees to make Revolving Loans to or for the account of the Borrower, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time that will not result in the Lender’s Revolving Credit Exposure exceeding the Revolving Commitment. During the Availability Period, the Borrower shall be entitled to
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borrow, prepay and reborrow Revolving Loans in accordance with the terms and conditions of this Agreement; provided, that the Borrower may not borrow or reborrow should there exist a Default or Event of Default.
Section 2.3 Procedure for Borrowings. Provided that Lender has expressly prohibited the Borrower from using the Loan Management Service, the Borrower shall give the Lender written notice (or telephonic notice promptly confirmed in writing) of each Borrowing substantially in the form of Exhibit 2.3 attached hereto (a “Notice of Revolving Borrowing”) (x) prior to 11:00 a.m. one (1) New York Business Day prior to the requested date of each Borrowing. Each Notice of Revolving Borrowing shall be irrevocable and shall specify: (i) the aggregate principal amount of such Borrowing, and (ii) the date of such Borrowing (which shall be a New York Business Day). .
Section 2.4 Reserved.
Section 2.5 Loan Management Service. If Lender has separately agreed that Borrower may use the Loan Management Service, Borrower shall not request and Lender shall no longer honor a Notice of Revolving Borrowing in accordance with Section 2.3 and all Borrowings will instead be initiated by Lender and credited to the Designated Account as Borrowings as of the end of each Business Day in an amount sufficient to maintain an agreed upon ledger balance in the Designated Account. If Lender terminates Borrower’s access to the Loan Management Service, Borrower may continue to request advances as provided in Section 2.3, subject to the other terms and conditions of this Agreement. Lender shall have no obligation to make a Revolving Loan advance through the Loan Management Service after the occurrence of a Default or Event of Default, or in an amount that would result in the Lender’s Revolving Credit Exposure exceeding the Revolving Commitment as set forth in Section 2.2 of this Agreement.
Section 2.6 Funding of Borrowings. If Lender has not separately agreed that Borrower may use the Loan Management Service, the Lender will make available each Loan to be made by it hereunder on the proposed date thereof by crediting the amount of such Loan, in immediately available funds, by the close of business on such proposed date, to the Designated Account or, at the Borrower’s option, by effecting a wire transfer of such amounts to an account designated by the Borrower to the Lender.
Section 2.7 Reserved.
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Section 2.8 Optional Reduction and Termination of Revolving Commitment.
(a) Unless previously terminated, the Revolving Commitment shall terminate on the Commitment Termination Date.
(b) Upon at least three (3) New York Business Days prior written notice (or telephonic notice promptly confirmed in writing) to the Lender (which notice shall be irrevocable), the Borrower may reduce the Revolving Commitment in part or terminate the Revolving Commitment in whole; provided, that (i) any partial reduction pursuant to this Section 2.8 shall be in an amount of at least $1,000,000.00 and any larger multiple of $500,000.00, and (ii) no such reduction shall be permitted which would reduce the Revolving Commitment to an amount less than the outstanding Revolving Credit Exposure of the Lender.
Section 2.9 Repayment of Loans. The outstanding principal amount of all Revolving Loans shall be due and payable (together with accrued and unpaid interest thereon) on the Commitment Termination Date.
Section 2.10 Evidence of Indebtedness.
(a) The Lender shall maintain in accordance with its usual practice appropriate records evidencing the indebtedness of the Borrower to the Lender resulting from each Loan made by the Lender from time to time, including (i) the amounts of principal and interest payable thereon and paid to the Lender from time to time under this Agreement, (ii) the Revolving Commitment of the Lender, (iii) the amount of each Loan made hereunder by the Lender, (iv) [reserved], (v) [reserved], (vi) the date and amount of any principal or interest due and payable or to become due and payable from the Borrower to the Lender hereunder in respect of such Loans, (vii) the date, stated amount, Available Amount and expiration or termination of each outstanding Letter of Credit, and (viii) both the date and amount of any sum received by the Lender hereunder from the Borrower in respect of the Loans. The entries made in such records shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, that the failure or delay of the Lender in maintaining or making entries into any such record or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans (both principal and unpaid accrued interest) in accordance with the terms of this Agreement.
(b) The Borrower agrees that it will execute and deliver to the Lender the Revolving Credit Note, payable to the order of the Lender.
Section 2.11 Reserved
.
Section 2.12 Interest on Loans.
(a) The outstanding principal balance of each Revolving Loan shall bear interest at the rate of interest set forth in the Revolving Credit Note.
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(b) Interest shall be payable at the times and place set forth in the Revolving Credit Note.
(c) Interest on the principal amount of all Loans shall accrue from and including the date such Loans are made to but excluding the date of any repayment thereof.
(d) Reserved.
Section 2.13 Fees.
(a) Intentionally omitted.
(b) Commitment Fee. The Borrower agrees to pay to the Lender a commitment fee, which shall accrue at 0.12% on the daily amount of the unused Revolving Loan portion of the Revolving Commitment of the Lender during the Availability Period; provided, that if the Lender continues to have any Revolving Credit Exposure after the Commitment Termination Date, then the commitment fee shall continue to accrue on the amount of the Lender’s unused Revolving Loan portion of the Revolving Commitment from and after the Commitment Termination Date to the date that all of the Lender’s Revolving Credit Exposure has been paid in full. Accrued commitment fees shall be payable quarterly, in arrears on the last day of each March, June, September and December of each year and on the Commitment Termination Date, commencing on the first such date after the Closing Date; provided further, that any commitment fees accruing after the Commitment Termination Date shall be payable on demand. For purposes of computing commitment fees with respect to the Revolving Commitment, the Revolving Commitment shall be deemed used to the extent of the sum of (i) the outstanding Revolving Loans, plus (ii) the Letter of Credit Exposure.
(c) Upfront Fee. The Borrower shall pay to the Lender a one-time upfront fee equal to $15,000.00. The upfront fee shall be due and payable on the Closing Date.
(d) Letter of Credit Fee. On each LOC Fee Payment Date, the Borrower shall pay, in arrears, to the Lender, a Letter of Credit fee for each Letter of Credit equal to the greater of (i) Lender’s minimum letter of credit fee, determined in accordance with Lender’s standard fees and charges then in effect, and (ii) (A) the average daily outstanding Available Amount of such Letter of Credit since the most recent LOC Fee Payment Date (or the date of issuance if later) times (B) 1.0% on a per annum basis. In addition to the foregoing Letter of Credit fees, the Lender may charge for its own account, fees for drawings, transfers, amendments and other fees and charges as may be required under the Letter of Credit Documents.
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Section 2.14 Computation of Interest and Fees. All computations of interest and fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable (to the extent computed on the basis of days elapsed) except that Letter of Credit Fees shall be calculated in accordance with the Letter of Credit Documents. Each determination by the Lender of an interest amount or fee hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes.
Section 2.15 Reserved.
Section 2.16 Reserved.
Section 2.17 Increased Costs.
(a) If any Change in Law shall:
(i) impose on the Lender a condition affecting this Agreement;
and the result of the foregoing is to reduce the amount received or receivable by the Lender hereunder (whether of principal, interest or any other amount), then the Borrower shall promptly pay, upon written notice from and demand by the Lender on the Borrower, to the Lender, within five (5) New York Business Days after the date of such notice and demand, additional amount or amounts sufficient to compensate the Lender for such additional costs incurred or reduction suffered.
(b) If the Lender shall have determined that on or after the date of this Agreement any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on the Lender’s capital (or on the capital of the Lender’s parent corporation) as a consequence of its obligations hereunder to a level below that which the Lender or the Lender’s parent corporation could have achieved but for such Change in Law (taking into consideration the Lender’s policies or the policies of the Lender’s parent corporation with respect to capital adequacy) then, from time to time, within five (5) New York Business Days after receipt by the Borrower of written demand by the Lender, the Borrower shall pay to the Lender such additional amounts as will compensate the Lender or the Lender’s parent corporation for any such reduction suffered.
(c) A certificate of the Lender setting forth the amount or amounts necessary to compensate the Lender or the Lender’s parent corporation, as the case may be, specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive, absent manifest error. The Borrower shall pay any the Lender such amount or amounts within 10 days after receipt thereof.
(d) Failure or delay on the part of the Lender to demand compensation pursuant to this Section shall not constitute a waiver of the Lender’s right to demand such compensation; provided, however, that Lender shall waive any right to demand any such compensation if notice
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is not provided to Borrower within one hundred eighty (180) days of a Change in Law giving rise to such demand for additional compensation.
Section 2.18 Reserved.
Section 2.19 Taxes.
(a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided, that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Lender shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Lender, within five (5) New York Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Lender on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by the Lender shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.
Section 2.20 Payments Generally.
(a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees, or of amounts payable under Section 2.17, or Section 2.19, or otherwise) prior to 11:00 a.m., Jacksonville, Florida time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Lender, be deemed to have been received on the next succeeding New York Business Day for purposes of calculating interest thereon. All such payments shall be made to the Lender at the Payment Office. If any payment hereunder shall be due on a day that is not a New York Business Day, the date for payment shall be extended to the next succeeding New
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York Business Day, and, in the case of any payment accruing interest, interest thereon shall be made payable for the period of such extension. All payments hereunder shall be made in Dollars.
(b) If at any time insufficient funds are received by and available to the Lender to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.
Section 2.21 Mitigation of Obligations. If the Lender requests compensation under Section 2.17, or if the Borrower is required to pay any additional amount to the Lender or any Governmental Authority for the account of the Lender pursuant to Section 2.19, then the Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the sole judgment of the Lender, such designation or assignment (i) would eliminate or reduce amounts payable under Section 2.17 or Section 2.19, as the case may be, in the future and (ii) would not subject the Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to the Lender. The Borrower hereby agrees to pay all costs and expenses incurred by the Lender in connection with such designation or assignment.
Section 2.22 Letter of Credit Commitment. Subject to the terms and conditions set forth herein and provided no Default exists, the Lender agrees to issue Letters of Credit from time to time during the Availability Period; provided, however, that (a) no Letter of Credit shall have a stated expiration date later than five (5) New York Business Days prior to the Commitment Termination Date, as it may be extended, (b) the aggregate Available Amount of all Letters of Credit outstanding at any time shall not exceed the lesser of (i) $5,000,000.00 and (ii) the difference between the Revolving Commitment and the Revolving Credit Exposures of the Lender.
Section 2.23 Procedure for Issuance and Reimbursement of Letters of Credit.
(a) The Borrower shall give the Lender a written request for the issuance of a Letter of Credit (a “Letter of Credit Notice”), and shall provide to the Lender such Letter of Credit Documents as it may require.
(b) Should there occur any drawing under a Letter of Credit, such drawing shall constitute a Notice of Revolving Borrowing from the Borrower (which the Borrower hereby irrevocably authorizes) requesting the Lender to make a Revolving Loan on the date of such drawing in an amount equal to the amount of such drawing. The proceeds of such Revolving Loan, to be funded in accordance with Section 2.6, shall be used exclusively for the reimbursement of such drawing.
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(c) If for any reason, a Revolving Loan may not be (as determined in the sole discretion of the Lender) or is not, made in accordance with the provisions of Subsection (b) above, then the Lender shall be considered to have made a Revolving Loan to the Borrower in the amount of such drawing and such Revolving Loan shall be payable on demand and shall be an Obligation hereunder.
Section 2.24 Increased Cost.
(a) If a Change of Law or compliance by the Lender with any request or directive (whether or not having the force of law) of any Governmental Authority either: (i) shall subject the Lender to any tax, duty or other charge with respect to any Letter of Credit or its obligations hereunder or under any Letter of Credit Documents, or (ii) shall impose, modify or deem applicable any reserve, special deposit insurance or similar requirement (including, without limitation, any such requirements imposed by the Board of Governors of the Federal Reserve System) against assets of, deposits with or for the account of, or credit extended by, the Lender or its parent; or (iii) shall impose on the Lender or its parent any other similar condition relating to the Letter of Credit or its obligations hereunder or under any Letter of Credit Documents; and the result of any of the foregoing is to increase the cost to the Lender or its parent of making or maintaining the Letter of Credit or its obligations hereunder or under any Letter of Credit Documents, or to reduce the amount received or receivable by the Lender or its parent under this Agreement, under the Letter of Credit or hereunder or under the other Loan Documents with respect thereto, by an amount deemed by the Lender to be material, the Lender shall notify the Borrower in writing describing such circumstances and the amount needed to compensate the Lender or its parent. Within ten (10) days after demand by the Lender, Borrower shall pay to the Lender such additional amount or amounts as will compensate the Lender or its parent for such increased cost or reduction.
(b) If the Lender shall have determined that a Change of Law or compliance by the Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any Authority, has or would have the effect of reducing the rate of return on the Lender’s (or its parent’s) capital as a consequence of the issuance or continuance of any Letter of Credit or its ability to make Loans upon the occurrence of draws under any Letter of Credit (taking into consideration the Lender’s (or its parent’s) policies with respect to capital adequacy), by an amount deemed by the Lender to be material, then from time to time, the Lender shall notify the Borrower in writing describing such circumstances and the amount needed to compensate the Lender or its parent. Within ten (10) days after demand by the Lender, Borrower shall pay to the Lender such additional amount or amounts as will compensate the Lender (or its parent’s) for such reduction.
(c) In determining amounts owing pursuant to Subsections (a) and (b), the Lender may use any reasonable averaging, allocation and attribution methods.
Section 2.25 Obligations Absolute. The obligations of Borrower under the Letter of Credit Documents and this Agreement with respect to reimbursement for drawings under Letters of Credit shall be absolute, unconditional and irrevocable, and shall be paid
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strictly in accordance with the terms of this Agreement and the Letter of Credit Documents, under all circumstances whatsoever, including, without limitation, the following circumstances:
(a) any lack of validity or enforceability of the Letter of Credit, any of the Loan Documents or any other agreement or instrument related thereto;
(b) any amendment or waiver of or any consent to departure from the terms of the Letter of Credit, any of the Loan Documents or any other agreement or instrument related thereto;
(c) the existence of any claim, setoff, defense or other right which Borrower may have at any time against the Lender, any beneficiary or any transferee of the Letter of Credit (or any Person for whom the Lender, any such beneficiary or any such transferee may be acting), or any other Person, whether in connection with this Agreement, the Loan Documents, the Letter of Credit, or any unrelated transaction;
(d) any statement, draft or other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect, or any statement therein being untrue or inaccurate in any respect whatsoever; or
(e) the surrender or impairment of any security for the performance or observance of any of the terms of this Agreement, or any of the other Loan Documents.
Section 2.26 Letter of Credit Documents. The obligations of the Borrower and rights of the Lender herein with respect to Letters of Credit shall be in addition to the obligations of the Borrower and rights of the Lender under the Letter of Credit Documents.
Article
3
CONDITIONS PRECEDENT TO LOANS
Section 3.1 Conditions To Effectiveness. The obligation of the Lender to make Loans and/or issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2).
(a) The Lender shall have received all fees and other amounts due and payable on or prior to the Closing Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Lender) required to be reimbursed or paid by the Borrower hereunder, under any other Loan Document and under any agreement with the Lender.
(b) The Lender (or its counsel) shall have received the following:
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(i) a counterpart of this Agreement signed by or on behalf of each party thereto or written evidence satisfactory to the Lender (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement;
(ii) a duly executed Revolving Credit Note payable to the Lender;
(iii) a duly executed affirmation of the Subsidiary Guarantee Agreement and a duly executed affirmation of the Indemnity and Contribution Agreement;
(iv) a certificate of the Secretary or Assistant Secretary of each Loan Party, attaching and certifying copies of its bylaws and of the resolutions of its boards of directors, authorizing the execution, delivery and performance of the Loan Documents to which it is a party and certifying the name, title and true signature of each officer of such Loan Party executing the Loan Documents to which it is a party;
(v) certified copies of the articles of incorporation or other charter documents of each Loan Party, together with certificates of good standing or existence from the Secretary of State of the jurisdiction of incorporation of such Loan Party and each other jurisdiction where such Loan Party is required to be qualified to do business as a foreign corporation;
(vi) [Reserved];
(vii) a certificate dated the Closing Date and signed by a Responsible Officer, confirming compliance with the conditions set forth in paragraphs (a), (b) and (c) of Section 3.2;
(viii) duly executed Notice of Revolving Borrowing, Letter of Credit Notices and Letter of Credit Documents, if applicable;
(ix) a duly executed Closing Statement;
(x) certified copies of all consents, approvals, authorizations, registrations or filings, if any, required to be made or obtained by each Loan Party in connection with the Loans; and
(xi) all other documents deemed reasonably necessary by the Lender.
(c) Reserved.
(d) Nothing has come to the attention of the Lender regarding (i) pending or threatened litigation involving the Borrower or any Subsidiary or (ii) compliance by the Borrower and each Subsidiary with environmental, OSHA and other public health, safety or welfare laws and regulations, employee benefit plans or insurance coverages that would be reasonably likely to have a Material Adverse Effect.
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Section 3.2 Each Credit Event. The obligation of the Lender to make a Loan or issue a Letter of Credit is subject to the satisfaction of the following conditions:
(a) at the time of and immediately after giving effect to such Borrowing or issuance of a Letter of Credit, no Default or Event of Default shall exist;
(b) all representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or issuance of a Letter of Credit, in each case before and after giving effect thereto;
(c) since the date of the most recent financial statements of the Borrower described in Section 5.1(a), there shall have been no change which has had or could reasonably be expected to have a Material Adverse Effect;
(d) the Lender shall have received such other documents, certificates, information or legal opinions as the Lender may reasonably request, all in form and substance reasonably satisfactory to the Lender; and
(e) with respect to each issuance of a Letter of Credit, the Lender shall have received all LOC Documents it may require.
Each Borrowing or issuance of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section 3.2.
Article
4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 4.1 Existence; Power. The Borrower and each of the Guarantors (i) is duly organized, validly existing and in good standing as a corporation under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business as now conducted, and (iii) is duly qualified to do business, and is in good standing, in each jurisdiction where such qualification is required, except where a failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect.
Section 4.2 Organizational Power; Authorization. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party are within such Loan Party’s organizational powers and have been duly authorized by all necessary organizational, and if required, stockholder action. This Agreement has been duly executed and delivered by the Borrower, and constitutes, and each other Loan Document to which any Loan Party is a party, when executed and delivered by such Loan Party, will constitute, valid and binding obligations of the Borrower or such Loan Party (as the case may be), enforceable against it in accordance with their respective terms, except as may be limited by applicable
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bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
Section 4.3 Governmental Approvals; No Conflicts.
The execution, delivery and performance by the Borrower of this Agreement, and by each Loan Party of the other Loan Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority, except those as have been obtained or made and are in full force and effect or where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (b) will not violate any applicable law or regulation or the charter, bylaws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, material agreement or other material instrument binding on the Borrower or any of its Subsidiaries or any of their assets or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries, except Liens (if any) created under the Loan Documents.
Section 4.4 Financial Statements.
The Borrower has furnished to the Lender the audited consolidated balance sheet of Borrower and its Subsidiaries as of September 30, 2020. Such financial statements fairly present the consolidated financial condition of Borrower and its Subsidiaries as of such dates and the consolidated results of operations for such periods in conformity with GAAP consistently applied. Since the date of the financial statements described above, there have been no changes with respect to Borrower and its Subsidiaries which have had or could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect.
Section 4.5 Litigation and Environmental Matters.
(a) No litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect or (ii) which in any manner draws into question the validity or enforceability of this Agreement or any other Loan Document.
(b) Except for the matters set forth on Schedule 4.5, neither the Borrower nor any of its Subsidiaries (i) to the best of its actual knowledge, has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) to the best of its actual knowledge, has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.
Section 4.6 Compliance with Laws and Agreements.
To the best of its actual knowledge, the Borrower and each Subsidiary is in compliance with (a) all applicable laws, rules, regulations and orders of any Governmental Authority, and (b) all indentures,
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agreements or other instruments binding upon it or its properties, except where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
Section 4.7 Investment Company Act, Etc.
Neither the Borrower nor any of its Subsidiaries is (a) an “investment company,” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, (b) a “holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended or (c) otherwise subject to any other regulatory scheme limiting its ability to incur debt.
Section 4.8 Taxes.
The Borrower and its Subsidiaries and each other Person for whose taxes the Borrower or any Subsidiary could become liable have timely filed or caused to be filed all Federal income tax returns and all other material tax returns that are required to be filed by them, and have paid all taxes shown to be due and payable on such returns or on any assessments made against it or its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except (i) to the extent the failure to do so would not have a Material Adverse Effect or (ii) where the same are currently being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as the case may be, has set aside on its books adequate reserves. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of such taxes are adequate, and no tax liabilities that could be materially in excess of the amount so provided are anticipated.
Section 4.9 Margin Regulations.
None of the proceeds of any of the Loans will be used for “purchasing” or “carrying” any “margin stock” with the respective meanings of each of such terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the applicable Margin Regulations.
Section 4.10 ERISA.
No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans.
Section 4.11 Ownership of Property.
(a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all of its real and personal property material to the operation of its business.
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(b) Each of the Borrower and its Subsidiaries owns, or is licensed, or otherwise has the right, to use, all patents, trademarks, service marks, trade names, copyrights and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe on the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not have a Material Adverse Effect.
Section 4.12 Disclosure.
The Borrower has disclosed to the Lender all agreements, instruments, and corporate or other restrictions to which the Borrower or any of its Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports (including without limitation all reports that the Borrower is required to file with the Securities and Exchange Commission), financial statements, certificates or other information furnished by or on behalf of the Borrower to the Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by any other information so furnished) contain any material misstatement of fact or omits to state any material fact necessary to make the statements therein, taken as a whole, in light of the circumstances under which they were made, not misleading.
Section 4.13 Labor Relations.
There are no strikes, lockouts or other material labor disputes or grievances against the Borrower or any of its Subsidiaries, or, to the Borrower’s knowledge, threatened against or affecting the Borrower or any of its Subsidiaries, and no significant unfair labor practice, charges or grievances are pending against the Borrower or any of its Subsidiaries, or to the Borrower’s knowledge, threatened against any of them before any Governmental Authority. All payments due from the Borrower or any of its Subsidiaries pursuant to the provisions of any collective bargaining agreement have been paid or accrued as a liability on the books of the Borrower or any such Subsidiary, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.
Section 4.14 Subsidiaries.
Schedule 4.14 sets forth the name of, the ownership interest of the Borrower in, the jurisdiction of incorporation of, and the type of, each Subsidiary and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Closing Date.
Section 4.15 Legal Name.
The exact legal name of the Borrower, including spelling and punctuation, as such name appears in its articles of incorporation, is as set forth in the preamble hereof. The Borrower’s state issued organizational identification number is P14000065418.
Section 4.16 No Restrictions on Dividends.
There are no restrictions on dividends or repayment of intercompany loans in any agreements of any Subsidiary Loan Party.
Section 4.17 Solvency.
The fair saleable value of the Borrower’s assets, measured on a going concern basis, exceeds all probable liabilities, including those to be incurred pursuant to this Agreement. Neither the Borrower nor any Subsidiary has incurred,
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or believes that it will incur after giving effect to the transactions contemplated by this Agreement, debts beyond its ability to pay such debts as they become due.
Section 4.18 Insurance.
The property and liability insurance maintained by the Borrower and its Subsidiaries on and as of the date hereof complies in all respects with the requirements set forth in Section 5.8. All such insurance policies are in full force and effect. All premiums (if any) due on such insurance policies or renewals thereof have been paid and there is no default under any of such insurance policies. Neither the Borrower nor its Subsidiaries have received any notice or other communication from any issuer of such insurance policies canceling or materially amending any such insurance policies, any deductibles or retained amounts thereunder, or the annual or other premiums payable thereunder, and no such cancellation or material amendment is threatened.
Section 4.19 Outstanding Indebtedness.
On the date of this Agreement, the Borrower has no outstanding Indebtedness except (i) as reflected on the financial statements of the Borrower which have been provided to the Lender or disclosed in Schedule 7.1 attached hereto and (ii) Indebtedness incurred in the ordinary course of business subsequent to the date of such financial statements.
Article
5
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as the Lender has a Revolving Commitment hereunder or the principal of and interest on any Loan or any fee remains unpaid:
Section 5.1 Financial Statements and Other Information.
The Borrower will deliver to the Lender:
(a) as soon as available and in any event within 90 days after the end of each fiscal year of Borrower, (i) a copy of the annual audited report for such fiscal year for the Borrower and its Subsidiaries, containing a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, stockholders’ equity and cash flows (together with all footnotes thereto) of the Borrower and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and reported on by Hancock Askew & Co. LLP or other independent certified public accountants of nationally recognized standing chosen by Borrower and acceptable to the Lender (without a “going concern” or like qualification, exception or explanation and without any qualification or exception as to scope of such audit), to the effect that such financial statements present fairly in all material respects the financial condition and the results of operations of the Borrower and its Subsidiaries for such fiscal year on a consolidated basis in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards and (ii) annual unaudited consolidating balance sheets and income statements for the Borrower and its Subsidiaries;
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(b) as soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, (i) an unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal quarter with comparative information for the previous year end, (ii) the related unaudited consolidated statements of income of the Borrower and its Subsidiaries for such fiscal quarter and the then elapsed portion of such fiscal year, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Borrower’s previous fiscal year, and (iii) consolidated statements of cash flow for the then elapsed portion of such fiscal year with comparative information for the corresponding portion of the previous fiscal year, all certified by the chief financial officer or treasurer of the Borrower as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes;
(c) concurrently with the delivery of the financial statements or information referred to in clauses (a) and (b) above, (i) a certificate of a Responsible Officer, (1) certifying, to the best of his actual knowledge, as to whether there exists a Default or Event of Default on the date of such certificate, and if a Default or an Event of Default then exists, specifying the details thereof and the action which the Borrower has taken or proposes to take with respect thereto and (2) stating whether any change in GAAP or the application thereof has occurred since the date of the Borrower’s audited financial statements referred to in Section 4.4 and, if any change has occurred, specifying the effect of such change on the financial statements accompanying such certificate and (ii) a Covenant Compliance Certificate;
(d) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be;
(e) not later than sixty days prior to the beginning of each fiscal year following the Closing Date, an operating budget for the succeeding fiscal year in form and substance reasonably acceptable to the Lender; and
(f) promptly following any request therefor, such other information regarding the results of operations, business affairs and financial condition of the Borrower or any Subsidiary as the Lender may reasonably request.
Section 5.2 Notices of Material Events.
The Borrower will furnish to the Lender prompt written notice of the following:
(a) the occurrence of any Default or Event of Default;
(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of the Borrower, affecting
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the Borrower or any Subsidiary which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any event or any other development by which the Borrower or any of its Subsidiaries (i) fails to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability, (iii) receives notice of any claim with respect to any Environmental Liability, or (iv) becomes aware of any basis for any Environmental Liability and in each of the preceding clauses, which individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;
(d) the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;
(e) the acquisition or formation of a new Subsidiary;
(f) transfers of assets to non-Material Subsidiaries outside the ordinary course of business; and
(g) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a written statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
Section 5.3 Existence; Conduct of Business.
The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence and its respective rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business and will continue to engage in substantially the same business as presently conducted or such other businesses that are reasonably related thereto; provided, that nothing in this Section shall prohibit any merger, consolidation, liquidation or dissolution permitted under Section 7.3.
Section 5.4 Compliance with Laws, Etc.
The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and requirements of any Governmental Authority applicable to its properties, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
Section 5.5 Payment of Obligations.
The Borrower will, and will cause each of its Subsidiaries to, pay and discharge at or before maturity, all of its obligations and liabilities (including without limitation all tax liabilities and claims that could result in a statutory Lien) before the same shall become delinquent or in default, except where (a) the
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validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.
Section 5.6 Books and Records.
The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of Borrower in conformity with GAAP.
Section 5.7 Visitation, Inspection, Etc.
The Borrower will, and will cause each of its Subsidiaries to, permit any representative of the Lender, on reasonable advance written notice, to visit and inspect its properties, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of its officers and with its independent certified public accountants, all at such reasonable times and as often as the Lender may reasonably request after reasonable prior notice to the Borrower.
Section 5.8 Maintenance of Properties; Insurance.
The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear except where the failure to do so, either individually or it the aggregate, could not reasonably be expected to result in a Material Adverse Effect and (b) maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds and at least in the amounts as maintained by the Borrower and the Subsidiaries on the date of this Agreement; provided that such amounts shall be appropriately adjusted for inflation and for changes in the nature and volume of the business conducted by the Borrower and its Subsidiaries; provided further, however, that for purposes of this Section 5.8, the self-insurance program of the Borrower and its Subsidiaries with respect to comprehensive and collision damage to its highway vehicles, comprehensive general and automotive liability and property damage and as in effect on the date hereof is hereby deemed adequate insurance against losses.
Section 5.9 Use of Proceeds.
The Borrower will use the proceeds of the Loans for working capital, for capital expenditures, to support the issuance of standby letters of credit, for stock repurchase, to finance acquisitions and for other general corporate purposes. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that would violate any rule or regulation of the Board of Governors of the Federal Reserve System, including Regulations T, U or X.
Section 5.10 Additional Subsidiaries.
If any additional Subsidiary is acquired or formed after the Closing Date, the Borrower will, within ten (10) New York Business Days after such Subsidiary is acquired or formed, notify the Lender thereof. From time to time at Lender’s request, Borrower will cause any Subsidiary that is not at the time of such request a Guarantor (other than a Subsidiary that is a Foreign Subsidiary or a SPE Subsidiary) to
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become a Subsidiary Loan Party by executing agreements in form and substance satisfactory to the Lender, and will cause each such Subsidiary to deliver simultaneously therewith similar documents applicable to such Subsidiary required under Section 3.1 as reasonably requested by the Lender.
Section 5.11 Deposit Relationship. The Borrower will, and will cause each of its Subsidiaries to, maintain its primary depository and treasury management services with the Lender.
Article
6
FINANCIAL COVENANTS
The Borrower covenants and agrees that so long as the Lender has a Revolving Commitment hereunder or the principal of or interest on or any Loan remains unpaid or any fee remains unpaid:
Section 6.1 Reserved.
Section 6.2 Fixed Charge Coverage Ratio.
The Borrower will have, as of the end of each fiscal quarter of the Borrower, a Fixed Charge Coverage Ratio of not less than 2.25:1.0, calculated based on a rolling four quarter basis.
For purposes of this Article 6, notwithstanding anything in this Agreement to the contrary, for purposes of calculating the Fixed Charge Coverage Ratio, the Indebtedness of any Person shall include non-recourse indebtedness of such Person and of any partnership or joint venture in which such Person is a general partner or a joint venturer.
Section 6.3 Tangible Net Worth.
The Borrower will, at all times, maintain a Tangible Net Worth of not less than $25,000,000. This covenant shall be tested quarterly. “Tangible Net Worth” shall mean Consolidated Net Worth, provided that the aggregate amount of any intangible assets, including, without limitation, merchant contracts, goodwill, franchises, licenses, patents, trademarks, trade names, copyrights, service marks, and brand names, shall be subtracted from total assets.
Article
7
NEGATIVE COVENANTS
The Borrower covenants and agrees that so long as the Lender has a Revolving Commitment hereunder or the principal of or interest on any Loan remains unpaid or any fee remains unpaid:
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Section 7.1 Indebtedness.
The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except:
(a) Indebtedness created pursuant to the Loan Documents;
(b) Indebtedness existing on the date hereof and set forth on Schedule 7.1 (including unborrowed portions of any lines of credit shown thereon) and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof;
(c) Capital Lease Obligations of the Borrower and its Subsidiaries which do not exceed $10,000,000.00 in the aggregate;
(d) Indebtedness of the Borrower or any Subsidiary in a principal amount which, when combined with Indebtedness permitted by Section 7.1(h) and Section 7.1(i), does not exceed $10,000,000.00 in the aggregate and which is incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations (other than Capital Lease Obligations described in Section 7.1(c)) and any Indebtedness assumed in connection with the acquisition of any such assets secured by a Lien on any such assets prior to the acquisition thereof; provided, that such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvements or extensions, renewals, and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof;
(e) Permitted Subordinated Debt;
(f) Indebtedness in respect of obligations under Hedging Agreements permitted by Section 7.10;
(g) current Indebtedness incurred in the ordinary course of business, trade letters of credit and Indebtedness arising in connection with letters of credit obtained in the ordinary course of business;
(h) other unsecured Indebtedness outstanding at any time which, when added to Indebtedness permitted by Section 7.1(d) and (i), does not exceed $10,000,000.00 in the aggregate; and
(i) Indebtedness of the Borrower or any Subsidiary in a principal amount which, when combined with Indebtedness permitted by Section 7.1(d) and (h), does not exceed $10,000,000.00 in the aggregate, which is secured by a Lien on any fixed or capital assets, including Capital Lease Obligations, and which does not otherwise qualify as Indebtedness permitted under the terms of Section 7.1(d).
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Section 7.2 Negative Pledge.
The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired except:
(a) Permitted Encumbrances;
(b) any Liens on any property or assets of the Borrower or any Subsidiary existing on the Closing Date set forth on Schedule 7.2; provided, that such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary;
(c) purchase money Liens upon or in any fixed or capital assets to secure the purchase price or the cost of construction or improvement of such fixed or capital assets or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of such fixed or capital assets (including Liens securing any Capital Lease Obligations); provided, that (i) such Lien secures Indebtedness permitted by Section 7.1(d), (ii) such Lien attaches to such asset concurrently or within 90 days after the acquisition, improvement or completion of the construction thereof; (iii) such Lien does not extend to any other asset; and (iv) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets;
(d) any Lien (i) existing on any asset of any Person at the time such Person becomes a Subsidiary of the Borrower, (ii) existing on any asset of any Person at the time such Person is merged with or into the Borrower or any Subsidiary of the Borrower or (iii) existing on any asset prior to the acquisition thereof by the Borrower or any Subsidiary of the Borrower; provided, that any such Lien was not created in the contemplation of any of the foregoing and any such Lien secures only those obligations which it secures on the date that such Person becomes a Subsidiary or the date of such merger or the date of such acquisition;
(e) Liens securing Indebtedness permitted under Section 7.1;
(f) Liens or pledges of securities of the Borrower or any Subsidiary to governmental agencies pursuant to the Borrower’s or any Subsidiary’s insurance program;
(g) Rights reserved or vested in governmental authority which do not materially impair the use of such property; and
(h) extensions, renewals, or replacements of any Lien referred to in paragraphs (a) through (g) of this Section; provided, that the principal amount of the Indebtedness secured thereby is not increased and that any such extension, renewal or replacement is limited to the assets originally encumbered thereby.
Section 7.3 Fundamental Changes.
(a) Except as permitted by Section 7.6, the Borrower will not, and will not permit any Subsidiary to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, lease, transfer or otherwise dispose of (in a
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single transaction or a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired) or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided, that if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing (i) the Borrower or any Subsidiary may merge with a Person if the Borrower (or such Subsidiary if the Borrower is not a party to such merger) is the surviving Person, (ii) any Subsidiary may merge into another Subsidiary; provided, that if any party to such merger is a Subsidiary Loan Party, the Subsidiary Loan Party shall be the surviving Person, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Borrower or to a Subsidiary Loan Party, and (iv) any Subsidiary (other than a Subsidiary Loan Party) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lender; provided, that any such merger involving a Person that is not a wholly-owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 7.4. Notwithstanding the foregoing, the Borrower and the Guarantors shall be permitted to transfer real properties to SPE Subsidiaries for the purpose of permanent financing of such properties.
(b) The Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of substantially the same type conducted by the Borrower and its Subsidiaries on the date hereof and businesses reasonably related thereto.
Section 7.4 Investments, Loans, Etc.
The Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly-owned Subsidiary prior to such merger), any common stock, evidence of indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person (all of the foregoing being collectively called “Investments”), or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person (“Acquisitions”), except:
(a) Investments (other than Permitted Investments) existing on the date hereof and set forth on Schedule 7.4;
(b) Permitted Investments;
(c) Guarantees constituting Indebtedness permitted by Section 7.1; provided, that the aggregate principal amount of Indebtedness of Subsidiaries that are not Subsidiary Loan Parties that is Guaranteed by any Loan Party shall be subject to the limitation set forth in clause (d) hereof;
(d) Investments made by the Borrower in or to any Subsidiary and by any Subsidiary to the Borrower or in or to another Subsidiary;
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(e) loans or advances to employees, officers or directors of the Borrower or any Subsidiary in the ordinary course of business for travel, relocation and related expenses;
(f) Hedging Agreements permitted by Section 7.10;
(g) Joint ventures that are typical in the Borrower’s ordinary course of business;
(h) Other Investments which in the aggregate do not exceed $5,000,000.00 in any fiscal year of the Borrower; and
(i) Acquisitions not to exceed $10,000,000 in the aggregate in any fiscal year of the Borrower; provided that Acquisitions in excess of $10,000,000 in the aggregate in any fiscal year of the Borrower may be made after delivery to the Lender of pro forma consolidated financial statements, certified by the Borrower and reasonably acceptable to the Lender, showing that after giving effect to such Acquisitions (i) Borrower shall remain in compliance with the financial covenants set forth in Article 6 hereof on a pro forma basis, and (ii) no Default or Event of Default would exist.
Section 7.5 Restricted Payments.
After the date of this Agreement, the Borrower will not, and will not permit its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any dividend on any class of its stock, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement, defeasance or other acquisition of, any Indebtedness subordinated to the Obligations of the Borrower or any options, warrants, or other rights to purchase such Indebtedness, whether now or hereafter outstanding (each, a “Restricted Payment”), unless if, immediately before and after giving effect thereto, (i) no Event of Default shall have occurred and be continuing and (ii) the Borrower is in compliance with the financial covenants set forth in Article 6 on a pro forma basis after giving effect thereto.
Section 7.6 Sale of Assets.
The Borrower will not, and will not permit any of its Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of, any of its assets, business or property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary’s common stock to, any Person other than the Borrower or any wholly-owned Subsidiary of the Borrower (or to qualify directors if required by applicable law), except:
(a) the sale or other disposition for fair market value of obsolete or worn out property or other property not necessary for operations disposed of in the ordinary course of business;
(b) the sale of assets and Permitted Investments in the ordinary course of the transportation business of the Borrower and its Subsidiaries; and
(c) without the prior written consent of the Lender, the sale or other disposition of such other assets in an aggregate amount not to exceed $10,000,000.00 during the term of this Agreement; provided, however, that such amount shall not include (i) intercompany mergers of
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Subsidiaries, (ii) sales, leases or transfers of assets of any Subsidiary to the Borrower or any other Subsidiary, and (iii) mergers or consolidations with the Borrower or any Subsidiary so long as the Borrower or such Subsidiary shall be the surviving corporation and no Default or Event of Default shall then exist.
Section 7.7 Transactions with Affiliates.
The Borrower will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties including, without limitation, those affiliate transactions disclosed in the Borrower’s Form 10-K as on file with the Securities and Exchange Commission on the date hereof, (b) transactions between or among the Borrower and the Guarantors not involving any other Affiliates and (c) any Restricted Payment permitted by Section 7.5.
Section 7.8 Restrictive Agreements.
The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to its common stock, to make or repay loans or advances to the Borrower or any other Subsidiary, to Guarantee Indebtedness of the Borrower or any other Subsidiary or to transfer any of its property or assets to the Borrower or any Subsidiary of the Borrower; provided, that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Agreement or any other Loan Document, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is sold and such sale is permitted hereunder, (iii) clause (a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness and (iv) clause (a) shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.
Section 7.9 Sale and Leaseback Transactions.
The Borrower will not, and will not permit any of the Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred.
Section 7.10 Hedging Agreements.
The Borrower will not, and will not permit any of the Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct of its business or the management of
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its liabilities. Solely for the avoidance of doubt, the Borrower acknowledges that a Hedging Agreement entered into for speculative purposes or of a speculative nature (which shall be deemed to include any Hedging Agreement under which the Borrower or any of the Subsidiaries is or may become obliged to make any payment (i) in connection with the purchase by any third party of any common stock or any Indebtedness or (ii) as a result of changes in the market value of any common stock or any Indebtedness) is not a Hedging Agreement entered into in the ordinary course of business to hedge or mitigate risks.
Section 7.11 Amendment to Material Documents.
The Borrower will not, and will not permit any Subsidiary to, amend, modify or waive any of its rights in a manner materially adverse to the Lender under its certificate of incorporation, bylaws or other organizational documents.
Section 7.12 Permitted Subordinated Indebtedness
(a) The Borrower will not (i) prepay, redeem, repurchase or otherwise acquire for value any Permitted Subordinated Debt, or (ii) make any principal, interest or other payments on any Permitted Subordinated Debt that is not expressly permitted by the subordination provisions of the Subordinated Debt Documents.
(b) The Borrower will not agree to or permit any amendment, modification or waiver of any provision of any Subordinated Debt Document if the effect of such amendment, modification or waiver is to (i) increase the interest rate on such Permitted Subordinated Debt for change (to earlier dates) the dates upon which principal and interest are due thereon; (ii) alter the redemption, prepayment or subordination provisions thereof; (iii) alter the covenants and events of default in a manner that would make such provisions more onerous or restrictive to the Borrower; or (iv) otherwise increase the obligations of the Borrower in respect of such Permitted Subordinated Debt or confer additional rights upon the holders thereof which individually or in the aggregate would be adverse to the Borrower or to the Lender.
Section 7.13 Accounting Changes.
The Borrower will not, and will not permit any Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required or preferred by GAAP, or change the fiscal year of the Borrower or of any Subsidiary, except to change the fiscal year of a Subsidiary to conform its fiscal year to that of the Borrower.
Section 7.14 Name Changes.
The Borrower will not, and will not permit any Guarantor to, without thirty (30) days prior written notice, change its name, its place of business or, if more than one, chief executive office, or its mailing address or organizational identification number if it has one.
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Article
8
EVENTS OF DEFAULT
Section 8.1 Events of Default.
If any of the following events (each an “Event of Default”) shall occur:
(a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or otherwise; or
(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount payable under clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of ten (10) days; or
(c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any other Loan Document (including the Schedules attached thereto) and any amendments or modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other document submitted to the Lender by any Loan Party or any representative of any Loan Party pursuant to or in connection with this Agreement or any other Loan Document shall prove to be false or misleading when made or deemed made or submitted; or
(d) the Borrower shall fail to observe or perform any covenant or agreement contained in Sections 5.1 or 5.10 or Articles 6 or 7 (other than in Section 7.14) and such failure shall continue unremedied for a period of thirty (30) days; or
(e) any Loan Party shall fail to observe or perform any covenant or agreement contained in Section 5.9; or
(f) any Loan Party shall fail to observe or perform any covenant or agreement contained in this Agreement or any other Loan Document (other than those referred to in clauses (a), (b), (d) and (e) above), and such failure shall remain unremedied for 30 days after the earlier of (i) any officer of the Borrower becomes aware of such failure, or (ii) written notice thereof shall have been given to the Borrower by the Lender; or
(g) the Borrower, any Subsidiary Loan Party or any other Subsidiary subject to any Material Indebtedness other than non-recourse Indebtedness (a “Recourse Subsidiary”) (whether as primary obligor or as guarantor or other surety) shall fail to pay any principal of or premium or interest on such Material Indebtedness that is outstanding, when and as the same shall become due and payable (whether at scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument evidencing such Material Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Material Indebtedness and shall continue after the applicable grace period, if any, specified in such
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agreement or instrument, if the effect of such event or condition is to accelerate, or permit the acceleration of, the maturity of such Material Indebtedness; or any such Material Indebtedness shall be declared to be due and payable; or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase or defease such Material Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or
(h) the Borrower, any Subsidiary Loan Party or any Recourse Subsidiary shall (i) commence a voluntary case or other proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) of this Section, (iii) apply for or consent to the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower, any such Subsidiary Loan Party or any Recourse Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take any action for the purpose of effecting any of the foregoing; or
(i) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower, any Subsidiary Loan Party or any Recourse Subsidiary or its debts, or any substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower, any Subsidiary Loan Party or any Recourse Subsidiary or for a substantial part of its assets, and in any such case, such proceeding or petition shall remain undismissed for a period of 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or
(j) the Borrower, any Subsidiary Loan Party or any Recourse Subsidiary shall become unable to pay, shall admit in writing its inability to pay, or shall fail to pay, its debts as they become due; or
(k) an ERISA Event shall have occurred that, in the opinion of the Lender, when taken together with other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or
(l) any judgment or order for the payment of money in excess of $1,000,000.00 (after application of net insurance proceeds, if any) in the aggregate or that could reasonably be expected to have a Material Adverse Effect shall be rendered against the Borrower, any Subsidiary Loan Party or any Recourse Subsidiary, and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
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(m) any non-monetary judgment or order shall be rendered against the Borrower, any Subsidiary Loan Party or any Recourse Subsidiary that could reasonably be expected to have a Material Adverse Effect, and there shall be a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(n) a Change in Control shall occur or exist; or
(o) any provision of any Subsidiary Guarantee Agreement shall for any reason cease to be valid and binding on, or enforceable against, any Subsidiary Loan Party, or any Subsidiary Loan Party shall so state in writing, or any Subsidiary Loan Party shall seek to terminate its Subsidiary Guarantee Agreement;
then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Section) and at any time thereafter during the continuance of such event, the Lender may, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Revolving Commitment; (ii) declare the principal of and any accrued interest on the Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) exercise all remedies contained in any other Loan Document; and (iv) demand payment of an amount equal to 100% of the aggregate Available Amount under all outstanding Letters of Credit, to be held by the Lender as collateral for the Borrower’s reimbursement obligations; and that, if an Event of Default specified in either clause (h) or (i) shall occur, the Revolving Commitment shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon, an amount equal to the aggregate Available Amount under all outstanding Letters of Credit, and all fees, and all other Obligations shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.
Article
9
RESERVED
Article
10
MISCELLANEOUS
Section 10.1 Notices.
(a) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications to any party herein to be effective
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shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:
To the Borrower: Patriot Transportation Holding, Inc.
200 W. Forsyth Street, 7th Floor
Jacksonville, Florida 32202
Attention: Matthew C. McNulty
To the Lender: Wells Fargo Bank, N.A.
One Independent Drive, 25th Floor
Jacksonville, Florida 32202
Attention: John B. Duce, III
Telephone No: (904) 351-7310
With a copy to: Danielle R. Whitley, Esq.
Foley & Lardner LLP
One Independent Drive, Suite 1300
Jacksonville, Florida 32202-5017
Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or if mailed, upon the third New York Business Day after the date deposited into the mails or if delivered, upon delivery; provided, that notices delivered to the Lender shall not be effective until actually received by such Person at its address specified in this Section 10.1.
(b) Any agreement of the Lender herein to receive certain notices by telephone is solely for the convenience and at the request of the Borrower. The Lender shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower to give such notice and the Lender shall not have any liability to the Borrower or other Person on account of any action taken or not taken by the Lender in reliance upon such telephonic notice. The obligation of the Borrower to repay the Loans and all other Obligations hereunder shall not be affected in any way or to any extent by any failure of the Lender to receive written confirmation of any telephonic notice or the receipt by the Lender of a confirmation which is at variance with the terms understood by the Lender to be contained in any such telephonic notice.
Section 10.2 Waiver; Amendments.
(a) No failure or delay by the Lender in exercising any right or power hereunder or any other Loan Document, and no course of dealing between the Borrower and the Lender, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power hereunder or thereunder. The rights and remedies of the Lender hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies provided by law. No waiver of any provision of
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this Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Lender may have had notice or knowledge of such Default or Event of Default at the time.
(b) No amendment or waiver of any provision of this Agreement or the other Loan Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Lender and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
Section 10.3 Expenses; Indemnification.
(a) The Borrower shall pay (i) all reasonable, out-of-pocket costs and expenses of the Lender and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Lender and its Affiliates, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents and any amendments, modifications or waivers thereof (whether or not the transactions contemplated in this Agreement or any other Loan Document shall be consummated) and (ii) all reasonable out-of-pocket costs and expenses (including, without limitation, the reasonable fees, charges and disbursements of outside counsel and the allocated cost of inside counsel) incurred by the Lender in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.
(b) The Borrower shall indemnify the Lender, and each Related Party of the Lender (each, an “Indemnitee”) against, and hold each of them harmless from, any and all costs, losses, liabilities, claims, damages and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, which may be incurred by or asserted against any Indemnitee arising out of, in connection with or as a result of (i) the execution or delivery of this Agreement or any other agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of any of the transactions contemplated hereby, (ii) any Loan or any actual or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned by the Borrower or any Subsidiary or any Environmental Liability related in any way to the Borrower or any Subsidiary or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided, that the Borrower shall not be obligated to indemnify any Indemnitee for any of the foregoing arising out of such Indemnitee’s gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and nonappealable judgment.
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(c) The Borrower shall pay, and hold the Lender harmless from and against, any and all present and future stamp, documentary, and other similar taxes with respect to this Agreement and any other Loan Documents, any collateral described therein, or any payments due thereunder, and save the Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes.
(d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out of, in connection with or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated therein, any Loan or the use of proceeds thereof.
(e) All amounts due under this Section shall be payable promptly after written demand therefor.
Section 10.4 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights hereunder without the prior written consent of Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void).
(b) The Lender may at any time, without the consent of the Borrower, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of the Lender’s rights and obligations under this Agreement (including all or a portion of the Revolving Commitment and the Loans owing to it); provided, that (i) the Lender’s obligations under this Agreement shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of its obligations hereunder, and (iii) the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender’s rights and obligations under this Agreement and the other Loan Documents. Any agreement between the Lender and the Participant with respect to such participation shall provide that the Lender shall retain the sole right and responsibility to enforce this Agreement and the other Loan Documents and the right to approve any amendment, modification or waiver of this Agreement and the other Loan Documents; provided, that such participation agreement may provide that the Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver of this Agreement that would (i) increase the Revolving Commitment of the Participant without the written consent of such Participant, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Participant affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of the Revolving Commitment, without the written consent of each Participant affected thereby, (iv) release any guarantor or limit the liability of any such guarantor under any guaranty agreement
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without the written consent of such Participant; or (v) release all or substantially all collateral (if any) securing any of the Obligations without the written consent of such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Section 2.17, to the same extent as if it were a Lender hereunder and had acquired its interest by assignment pursuant to paragraph (b). To the extent permitted by law, the Borrower agrees that each Participant shall be entitled to the benefits of Section 2.20 as though it were the Lender, provided, that such Participant agrees to share with the Lender the proceeds thereof in accordance with Section 2.20 as fully as if it were the Lender hereunder.
(c) The Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement and the Revolving Credit Note to secure its obligations to a Federal Reserve Bank without complying with this Section; provided, that no such pledge or assignment shall release the Lender from any of its obligations hereunder or substitute any such pledgee or assignee for the Lender as a party hereto.
Section 10.5 Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement and the other Loan Documents shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of Florida.
(b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the Circuit Court of Duval County, Florida, the United States District Court of the Middle District of Florida, and of any state court of the State of Florida and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Florida state court or, to the extent permitted by applicable law, such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction.
(c) The Borrower irrevocably and unconditionally waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding described in paragraph (b) of this Section and brought in any court referred to in paragraph (b) of this Section. Each of the parties hereto irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
Section 10.6 Arbitration.
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(a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise in any way arising out of or relating to (i) any credit subject hereto, or any of the Loan Documents, and their negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit. In the event of a court ordered arbitration, the party requesting arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within 30 days of the abatement order or the time specified by the court. Failure to timely file the demand for arbitration as ordered by the court will result in that party’s right to demand arbitration being automatically terminated.
(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in Florida selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Florida or a neutral retired judge of the state or federal judiciary of Florida, in either
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case with a minimum of ten years’ experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Florida and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Florida Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.
(e) Discovery. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations. No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed any Loan Document, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.
(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.
(h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.
(i) Small Claims Court. Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court’s jurisdiction.
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Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.
Section 10.7 Right of Setoff.
In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, the Lender shall have the right, at any time or from time to time upon the occurrence and during the continuance of an Event of Default, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, to set off and apply against all deposits (general or special, time or demand, provisional or final) of the Borrower at any time held or other obligations at any time owing by the Lender to or for the credit or the account of the Borrower against any and all Obligations held by the Lender, irrespective of whether the Lender shall have made demand hereunder and although such Obligations may be unmatured. the Lender agrees promptly to notify the Borrower after any such set off and any application made by the Lender; provided, that the failure to give such notice shall not affect the validity of such set-off and application.
Section 10.8 Counterparts; Integration.
This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement, the other Loan Documents, and any separate letter agreement(s) relating to any fees payable to the Lender constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements and understandings, oral or written, regarding such subject matters.
Section 10.9 Survival.
All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Revolving Commitment has not expired or terminated. The provisions of Sections 2.17, 2.19 and 10.3 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Revolving Commitment or the termination of this Agreement or any provision hereof. All representations and warranties made herein, in the certificates, reports, notices, and other documents delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement and the other Loan Documents, and the making of the Loans.
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Section 10.10 Severability.
Any provision of this Agreement or any other Loan Document held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 10.11 Confidentiality.
The Lender agrees to take normal and reasonable precautions to maintain the confidentiality of any information designated in writing as confidential and provided to it by the Borrower or any Subsidiary, except that such information may be disclosed (i) to any Related Party of the Lender, including without limitation accountants, legal counsel and other advisors, (ii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iii) to the extent requested by any regulatory agency or authority, (iv) to the extent that such information becomes publicly available other than as a result of a breach of this Section, or which becomes available to the Lender or any Related Party of any of the foregoing on a nonconfidential basis from a source other than the Borrower, (v) in connection with the exercise of any remedy hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, and subject to provisions substantially similar to this Section 10.11, to any actual or prospective assignee or Participant, or (vi) with the consent of the Borrower. Any Person required to maintain the confidentiality of any information as provided for in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such information as such Person would accord its own confidential information.
Section 10.12 Interest Rate Limitation.
Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which may be treated as interest on such Loan under applicable law (collectively, the “Charges”), shall exceed the maximum lawful rate of interest (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to the Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by the Lender.
Section 10.13 US PATRIOT Act Notice.
Notwithstanding anything herein to the contrary, Lender hereby notifies the Borrower that, pursuant to the requirements of Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act) Act of 2001 (Public Law 107–56, signed into law October 26, 2001) and regulations promulgated thereunder (collectively, the
| 49 |
“Patriot Act”), Lender is required to obtain, verify and record information that identifies the Loan Parties, including without limitation the name, address and identification number of each Loan Party.
[Remainder of Page Intentionally Left Blank]
| 50 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, under seal in the case of the Borrower, by their respective authorized officers as of the day and year first above written.
PATRIOT TRANSPORTATION HOLDING, INC.
By: ___________________________________
Name: Matthew C. McNulty
Title: Vice President, Chief Financial Officer and Secretary
WELLS FARGO BANK, N.A.
By: ___________________________________
Name: John B. Duce, III
Title: Senior Vice President
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SCHEDULE 4.5
ENVIRONMENTAL MATTERS
None
| 52 |
SCHEDULE 4.14
Patriot Transportation Holding, Inc.
Subsidiaries
As of July 6, 2021
Patriot Transportation, Inc., of Florida
FRTL, Inc., a Florida corporation
Florida Rock & Tank Lines, Inc., a Florida corporation
STI Holding, Inc., formerly known as SunBelt Transport,
Inc., a Florida corporation
| 53 |
SCHEDULE 7.4
EXISTING INVESTMENTS
| 54 |
EXHIBIT A
RESERVED
| 55 |
EXHIBIT B
RESERVED
| 56 |
EXHIBIT C
RESERVED
| 57 |
EXHIBIT D
RESERVED
| 58 |
EXHIBIT 2.3
NOTICE OF REVOLVING BORROWING
[Date]
Wells Fargo Bank, N.A.
One Independent Drive, 25th Floor
Jacksonville, Florida 32202
Dear Sirs:
Reference is made to the 2021 Amended and Restated Credit Agreement dated as of July 6, 2021 (as amended and in effect on the date hereof, the “Credit Agreement”), between the undersigned, as Borrower, and Wells Fargo Bank, N.A., as Lender. Terms defined in the Credit Agreement are used herein with the same meanings. This notice constitutes a Notice of Revolving Borrowing, and the Borrower hereby requests a Revolving Loan Borrowing under the Credit Agreement, and in that connection the Borrower specifies the following information with respect to the Revolving Loan Borrowing requested hereby:
(A) Aggregate principal amount of Revolving Loan Borrowing[1]:
| (B) | Date of Revolving Loan Borrowing (which is a New York Business Day): |
(C) Location and number of Borrower’s account to which proceeds of Revolving Loan Borrowing are to be disbursed:
[1] Not less than $100,000.00 and an integral multiple of $50,000.00.
| 59 |
The Borrower hereby represents and warrants that the conditions specified in paragraphs (a), (b) and (c) of Section 3.2 of the Credit Agreement are satisfied.
Very truly yours,
PATRIOT TRANSPORTATION HOLDING, INC.
By:
Name:___________________________
Title:____________________________
| 60 |
Annex I
Captive Investment Policy Statement
The primary criteria for investments shall be safety of principal and liquidity. Return on investment shall not take precedence over safety of principal.
1. Investments may be either in fixed or floating rate instruments denominated in U. S. dollars.
2. Investments can include U.S. Treasury Securities, U.S Government Agency securities, U.S. Agency mortgage-backed securities and collateralized mortgage obligations and U.S. Corporate Bonds. Investments in certificates of deposit and time deposits in U.S. banks may also be made.
3. Investments will be made in various issuers to ensure proper diversification.
4. The fixed income portfolio shall be laddered to meet the cash flow needs of the program. Generally ten to twenty percent of the portfolio will be invested in securities having maturities of two years or less from the date of purchase. For this purpose, floating rate certificates of deposit and notes, irrespective of final maturity, are deemed to be mature on the next coupon-reset date. The portfolio will generally invest in securities that mature in ten years or less from the date of purchase.
5. In order for the securities of an issuer to qualify for investment of assets, they must have either a Moody’s, S&P or Fitch rating of “A-” or better or such issues must be unconditionally guaranteed by a company or entity with a Moody’s, S&P or Fitch rating of “A-” or better or, in the event of an issue not being subject to such a guarantee or rating, the equivalent as determined by the investment manager.
National Interstate Insurance retains the final right of approval for all investment transactions.
CERTIFICATIONS Exhibit 31(a)
I, Robert E. Sandlin, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Patriot Transportation Holding, Inc.; |
| 2. | Based on my knowledge, this annual 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 annual report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls to be designed under our supervision, 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) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | 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 |
| d) | disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal annual 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: December 14, 2021 | /s/Robert E. Sandlin | ||
| President and Chief Executive Officer |
CERTIFICATIONS Exhibit 31(b)
I, Matthew C. McNulty., certify that:
| 1. | I have reviewed this annual report on Form 10-K of Patriot Transportation Holding, Inc.; |
| 2. | Based on my knowledge, this annual 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 annual report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls to be designed under our supervision, 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) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | 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 |
| d) | disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal annual 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: December 14, 2021 | /s/Matthew C. McNulty | ||
| Vice President, Chief Operating Officer, Chief Financial Officer and | |||
| Secretary |
CERTIFICATIONS Exhibit 31(c)
I, John D. Klopfenstein, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Patriot Transportation Holding, Inc.; |
| 2. | Based on my knowledge, this annual 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 annual report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls to be designed under our supervision, 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) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | 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 |
| d) | disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal annual 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: December 14, 2021 | /s/John D. Klopfenstein | ||
| Controller, Chief Accounting Officer and | |||
| Treasurer | |||
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. | |||
| December 14, 2021 | ROBERT E. SANDLIN | ||
| Robert E. Sandlin | |||
| President and Chief Executive Officer | |||
| MATTHEW C. MCNULTY | |||
| Matthew C. McNulty | |||
| Executive Vice President, Chief Operating Officer, | |||
| Chief Financial Officer and Secretary | |||
| JOHN D. KLOPFENSTEIN | |||
| John D. Klopfenstein | |||
| Controller, Chief Accounting Officer and Treasurer |
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 Annual Report on Form 10-K and is not filed as provided in SEC Release Nos. 33-8212, 34-4751 and IC-25967, dated June 30, 2003.
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Patriot Transportation Holding, Inc.
Jacksonville, Florida
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-201791, 333-201792, 333-231421, 333-238294 and 333-252886) of Patriot Transportation Holding, Inc. of our report dated December 14, 2021 relating to the consolidated financial statements which appear in the Annual Report to Shareholders incorporated by reference herein. We also consent to the incorporation by reference of our report dated December 14, 2021, relating to the financial statement schedule, which appears in this Form 10-K.
Respectfully submitted,
Hancock Askew & Co., LLP
Jacksonville, Florida
December 14, 2021
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Income Statement [Abstract] | |||
| Net income | $ 625 | $ 257 | $ 1,763 |
| Unrealized investment gain (loss), net | 0 | 0 | 14 |
| Loss on retiree health, net | (16) | (18) | (51) |
| Reclassification adjust for net investment gains realized in net income | 0 | (5) | 0 |
| Comprehensive income | $ 609 | $ 234 | $ 1,726 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Allowance for doubtful accounts | $ 86 | $ 87 |
| Preferred shares authorized | 5,000,000 | 5,000,000 |
| Series A Junior Participating Preferred Stock | 250,000 | 250,000 |
| Preferred stock, par value | $ 0.01 | $ 0.01 |
| Preferred Stock, Shares Outstanding | 0 | 0 |
| Preferred stock, issued | 0 | 0 |
| Common stock, par value | $ 0.10 | $ 0.10 |
| Common stock, authorized | 25,000,000 | 25,000,000 |
| Common stock, outstanding | 3,415,643 | 3,377,279 |
| Common stock, issued | 3,415,643 | 3,377,279 |
Consolidated Statements of Shareholder's Equity (Parenthetical) - $ / shares |
12 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Statement of Stockholders' Equity [Abstract] | ||
| Dividends paid | $ 3.00 | $ 3.15 |
Accounting Policies. |
12 Months Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||
| Accounting Policies. |
DESCRIPTION OF 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 customers’ 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 customers’ fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling our customers’ dry bulk commodities such as cement, lime and various industrial powder products, water and liquid chemicals. Our operations are comprised of one reportable segment.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts, certain assets, liabilities, and expenses of Patriot and its wholly owned subsidiaries that comprise the Company. All significant intercompany transactions within the consolidated entity have been eliminated.
CASH AND CASH EQUIVALENTS –The Company considers all highly liquid debt instruments with maturities of three months or less at time of purchase and treasury bills to be cash equivalents. Bank overdrafts consist of outstanding checks not yet presented to a bank for settlement, net of cash held in accounts with right of offset.
INVENTORY - Inventory of parts and supplies is valued at the lower of cost (first-in, first-out) or net realizable value.
TIRES ON EQUIPMENT - The value of tires on tractors and trailers is accounted for as a prepaid expense and amortized over the life of the tires as a function of miles driven.
REVENUE AND EXPENSE RECOGNITION – Transportation revenue, including fuel surcharges, is recognized when the services have been rendered to customers or delivery has occurred, the pricing is fixed or determinable and collectibility is reasonably assured. Transportation expenses are recognized as incurred.
The Company adopted ASU No. 2014-09, “Revenue from Contracts with Customers” on October 1, 2018. 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 and there are no significant performance obligations after delivery. 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’s adoption of this guidance did not result in a material impact on its financial statements.
ACCOUNTS RECEIVABLE - Accounts receivable are recorded net of discounts and provisions for estimated allowances. We estimate allowances on an ongoing basis by considering historical and current trends. We record estimated bad debts expense as a selling, general and administrative expense. We estimate the net collectibility of our accounts receivable and establish an allowance for doubtful accounts based upon this assessment. Specifically, we analyze the aging of accounts receivable balances, historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms. Any trade accounts receivable balances written off are charged against the allowance for doubtful accounts. The Company has not experienced any significant credit-related losses in the past three years.
PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost less accumulated depreciation. Provision for depreciation of property and equipment is computed using the straight-line method based on the following Estimated useful lives:
The Company recorded depreciation expenses for 2021, 2020 and 2019 of $7,014,000, $7,780,000 and $8,317,000, respectively. Gains and losses upon disposition are reflected in operating results in the period of disposition. Direct internal and external costs to implement computer systems and internal-use software are capitalized. Capitalized costs are depreciated over the estimated useful life of the system or software, generally 5 years, beginning when site installation or module development is complete and ready for use.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company periodically reviews its long-lived assets, which include property and equipment and purchased intangible assets subject to amortization, for potential impairment whenever events or circumstances indicate the carrying amount of a long-lived asset may not be recoverable. The analysis consists of a review of future anticipated results considering business prospects and asset utilization. If the sum of these future cash flows (undiscounted and without interest charges) is less than the carrying amount of the assets, the Company would record an impairment loss based on the fair value of the assets with the fair value of the assets generally based upon an estimate of the discounted future cash flows expected with regards to the assets and their eventual disposition.
GOODWILL – Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in the acquisition of a business. Goodwill is not amortized, but rather is tested for impairment annually and when events or changes in circumstances indicate that the fair value of a reporting unit with goodwill has been reduced below carrying value. The impairment test requires allocating goodwill and other assets and liabilities to reporting units. The Company’s operations are comprised of one operating segment and therefore one reporting unit. The fair value of each reporting unit is determined and compared to the book value of the reporting unit. If the fair value of the reporting unit is less than the book value, including goodwill, then the recorded goodwill is impaired to its implied fair value with a charge to operating expense.
INSURANCE - The Company has a $250,000 to $500,000 self-insured retention per occurrence in connection with certain of its workers’ compensation, automobile liability, and general liability insurance programs (“risk insurance”). The Company is also self-insured for its employee health insurance benefits and carries stop loss coverage for losses over $250,000 per covered participant per year plus a $84,500 aggregate. The Company has established an accrued liability for the estimated cost in connection with its portion of its risk and health insurance losses incurred and reported. Claims paid by the Company are charged against the liability. Additionally, the Company maintains an accrued liability for incurred but not reported claims based on historical analysis of such claims. Payments made under a captive agreement for each year’s loss fund are scheduled in advance using actuarial methodology. The captive agreement provides that we will share in the underwriting results, good or bad, within a $250,000 per occurrence layer of loss through retrospective premium adjustments. The method of calculating the accrual liability is subject to inherent uncertainty. If actual results are less favorable than the estimates used to calculate the liabilities, the Company would have to record expenses in excess of what has been accrued.
INCOME TAXES - Deferred tax assets and liabilities are recognized based on differences between financial statement and tax bases of assets and liabilities using presently enacted tax rates. Deferred income taxes result from temporary differences between pre-tax income reported in the financial statements and taxable income. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit. The second step is to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the amounts rely upon the determination of the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law and expiration of statutes of limitations, effectively settled issues under audit, and audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision. It is the Company’s policy to recognize as additional income tax expense the items of interest and penalties directly related to income taxes.
PENSION PLAN - The Company has a defined benefit plan for certain key employees, See note 9 discussion of MSP Plan, and accounts for its pension plan following the requirements of FASB ASC Topic 715, “Compensation – Retirement Benefits”, which requires an employer to: (a) recognize in its statement of financial position the funded status of a benefit plan; (b) measure defined benefit plan assets and obligations as of the end of the employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise but are not recognized as components of net periodic benefit costs pursuant to prior existing guidance.
USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Certain accounting policies and estimates are of more significance in the financial statement preparation process than others. The most critical accounting policies and estimates include the economic useful lives and salvage values of our vehicles and equipment, provisions for uncollectible accounts receivable, estimates of exposures related to our insurance claims plans, and estimates for taxes. To the extent that actual, final outcomes are different than these estimates, or that additional facts and circumstances result in a revision to these estimates, earnings during that accounting period will be affected.
ENVIRONMENTAL - Environmental expenditures that benefit future periods are capitalized. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded for the estimated amount of expected environmental assessments and/or remedial efforts. Estimation of such liabilities includes an assessment of engineering estimates, continually evolving governmental laws and standards, and potential involvement of other potentially responsible parties.
COMPREHENSIVE INCOME – Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) refers to expenses, gains, and losses that are not included in net income, but rather are recorded directly in shareholder’s equity.
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 liability for the obligation to make lease payments measured at the present value of the lease payments for all leases with terms greater than twelve months. The provisions of this update and additional guidance in subsequent ASUs became effective for us beginning October 1, 2019. In July 2018, the FASB issued ASU No. 2018-11, “Leases” which provides an optional transition method allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, with no restatement of comparative prior periods required. We adopted the standard using this optional transition method. Upon adoption as of October 1, 2019, the Company recognized $3,873,000 in operating lease right-of-use assets, a reduction of $231,000 of other long-term liabilities related to straight-lined leases and $4,104,000 in operating lease liabilities.
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Related Party Agreements |
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| Related Party Transactions [Abstract] | ||||
| 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 April 1, 2021.
The consolidated statements of income reflect charges and/or allocation to FRP Holdings, Inc. for these services of $1,207,000, $1,283,000, and $1,398,000 for fiscal 2021, 2020 and 2019, respectively. Included in the charges above are amounts recognized for corporate executive stock-based compensation expense. These charges are reflected as a reduction to Patriot 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. |
Debt |
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| Debt Disclosure [Abstract] | ||||
| Debt |
On July 6, 2021, Patriot Transportation Holding, Inc. (the “Company”) entered into the 2021 Amended and Restated Credit Agreement (the “The Amended and Restated Credit Agreement”) with Wells Fargo Bank, N.A. (“Wells Fargo”). The Amended and Restated Credit Agreement modifies the Company's prior Credit Agreement with Wells Fargo, dated January 30, 2015, as amended by that certain First Amendment dated December 28, 2018. The Amended and Restated Credit Agreement establishes a revolving credit facility with a maximum facility amount of $15 million, with a separate sublimit for standby letters of credit. The credit facility limit may be increased to $25 million upon request by the Company, subject to the lender's discretion and the satisfaction of certain conditions. The interest rate under the Amended and Restated Credit Agreement is 1.10% over the Secured Overnight Financing Rate (“SOFR”). A commitment fee of 0.12% per annum is payable quarterly on the unused portion of the commitment. The Amended and Restated Credit Agreement contains certain conditions, affirmative financial covenants and negative covenants including a minimum tangible net worth of $25 million. As of September 30, 2021, we had no outstanding debt borrowed on this revolver, $1,636,000 in commitments under letters of credit and $13,364,000 available for additional borrowings. The letter of credit fee is 1% and the applicable interest rate for borrowings would have been 1.15% on September 30, 2021.
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 September 30, 2021. As of September 30, 2021, the tangible net worth covenant would have limited our ability to pay dividends or repurchase stock with borrowed funds to a maximum of $6.7 million combined. |
Leases |
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| Leases |
The Company leases certain assets under operating leases, which primarily consist of real estate leases for the corporate office and some of our terminal locations and 29 full-service leased 2019 model year tractors. Certain operating leases provide for renewal options, which can vary by lease and are typically offered at their fair rental value. The Company has not made any residual value guarantees related to its operating leases. Operating leases with an initial term of more than 12 months are included in our Consolidated Balance Sheets as discounted liabilities and corresponding right-of-use assets consisting of the following (in thousands):
As the Company’s operating leases do not provide an implicit rate, the Company utilized its incremental borrowing rate determined by obtaining a quote from their lender and applied to the individual leases. The assumptions underlying the calculation of the Company’s right-of-use assets and lease liabilities are disclosed below.
Future minimum annual lease payments for assets under operating leases as of September 30, 2021 are as follows (in thousands):
Aggregate expense under operating leases was $1,097,000, $1,216,000 and $1,549,000 for 2021, 2020 and 2019, respectively. Certain operating leases include rent escalation provisions, which are recognized as expense on a straight-line basis.
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Earnings Per Share |
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| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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.
For 2021 and 2020, and shares, respectively, attributable to outstanding stock options 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 |
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| Stock-Based Compensation Plans |
Participation in FRP Plans Prior to the Company’s spin-off from FRP Holdings, Inc. (FRP) in January 2015, the Company's directors, officers and key employees previously were 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.
Post Spin-Off Patriot Incentive Stock Plan As part of the spin-off transaction, the Board of Directors of the Company adopted the Patriot Transportation Holding, Inc. Incentive Stock Plan. (“Patriot Plan”) in January 2015. In exchange for all outstanding FRP options held on January 30, 2015, existing Company directors, officers and key employees holding option grants in the FRP Stock Option Plan(s) were issued new grants in the Patriot and FRP Plans based upon the relative value of Patriot and FRP immediately following the completion of the spin-off with the same remaining terms. All related compensation expense has been allocated to the Company (rather than FRP) and included in corporate expenses. The number of common shares available for future issuance in the Patriot Plan was at September 30, 2021.
On December 30, 2020, the Company paid an extraordinary dividend of $ per share to all shareholders of record. In accordance with Section 4.2 of the 2006 Stock Incentive Plan, Section 11 of the 2014 Equity Incentive Plan, and Section 409A of the Internal Revenue Code, the Company has adjusted the terms of all stock option grants outstanding and the stock appreciation rights as of the close of business on December 30, 2020.
On January 30, 2020, the Company paid an extraordinary dividend of $ per share to all shareholders of record. In accordance with Section 4.2 of the 2006 Stock Incentive Plan, Section 11 of the 2014 Equity Incentive Plan, and Section 409A of the Internal Revenue Code, the Company has adjusted the terms of all stock option grants outstanding and the stock appreciation rights as of the close of business on January 30, 2020.
Patriot utilizes the Black-Scholes valuation model for estimating fair value of stock compensation for options awarded to officers and employees. Each grant is evaluated based upon assumptions at the time of grant or modification. The revised assumptions due to the revaluation are dividend yield of %, expected volatility between % and %, risk-free interest rate of to % and expected life of to years.
The dividend yield of % was based on no anticipated regular quarterly dividend at the date of modification for the extraordinary dividend. Expected volatility is estimated based on historical experience over a period equivalent to the expected life in years. The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate at the date of grant or modification with a term consistent with the expected life of the options granted. The expected life calculation is based on the observed and expected time to exercise options by the employees.
In December 2016, the Company approved and issued a long-term performance incentive to an officer in the form of stock appreciation rights. As adjusted for the extraordinary dividend the Company granted stock appreciation rights. The adjusted market price of the grant was $, and the executive will get a cash award at age 65 based upon the stock price at that date compared to the adjusted market price of $ but in no event will the award be less than $500,000. The Company is expensing the fair value of the award over the vesting period to the officer’s attainment of age 65, with periodic adjustments to the liability estimate based upon changes in the assumptions used to calculate the liability. The accrued liability under this plan as of September 30, 2021 and 2020 was $ and $, respectively.
The annual director stock grant was shares in fiscal 2021 at $, shares in fiscal 2020 at $, and shares in fiscal 2019 at $, based on the market prices indicated on the date of the grants.
The aggregate intrinsic value of exercisable Company options was $ and the aggregate intrinsic value of all outstanding in-the-money options was $ based on the Company’s market closing price of $ on September 30, 2021 less exercise prices.
The realized tax benefit from option exercises during fiscal 2021 was $ of which $ pertained to FRP options exercised that were granted to persons employed by Patriot. The unrecognized compensation expense of Patriot options granted as of September 30, 2021 was $, which is expected to be recognized over a weighted-average period of years.
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| Income Taxes | 7. Income Taxes.
The Provision for or benefit from income taxes for continuing operations for fiscal years ended September 30 consists of the following (in thousands):
A reconciliation between the amount of tax shown above and the amount computed at the statutory Federal income tax rate follows (in thousands):
In this reconciliation, the category “Other, net” consists of changes in permanent tax differences related to non-deductible expenses, goodwill tax amortization, interest and penalties, and adjustments to prior year estimates.
The types of temporary differences and their related tax effects that give rise to Deferred tax assets and deferred tax liabilities at September 30, are presented below (in thousands):
The Company has no unrecognized tax benefits.
Tax returns in the U.S. and various states are subject to audit by taxing authorities. As of September 30, 2021, the earliest tax year that remains open for audit in the Unites States is 2016. We do not have any material unpaid assessments.
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| Accrued Insurance | 8. Accrued Insurance.
The Company has established an accrued liability for the estimated cost in connection with its portion of its risk and health insurance losses incurred and reported. Payments made under a captive agreement for each year’s risk loss fund are scheduled in advance using actuarial methodology. Captive insurance assets available to us to settle risk insurance liabilities are not reported on our balance sheet as we do not control or consolidate the captive.
The Accrued insurance liability at September 30 is summarized as follows (in thousands):
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Employee Benefits |
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| Retirement Benefits [Abstract] | |
| Employee Benefits | 9. Employee Benefits.
The Company and certain subsidiaries and related entities (FRP) have a savings/profit sharing plan for the benefit of qualified employees. The savings feature of the plan incorporates the provisions of Section 401(k) of the Internal Revenue Code under which an eligible employee may elect to save a portion (within limits) of their compensation on a tax deferred basis. Patriot contributes to a participant’s account an amount equal to 50% (with certain limits) of the participant’s contribution. Additionally, the Company may make an annual discretionary contribution to the plan as determined by the Board of Directors, with certain limitations. The plan provides for deferred vesting with benefits payable upon retirement or earlier termination of employment. The Company’s cost was $482,000 in 2021, $534,000 in 2020 and $780,000 in 2019.
The Company has a Management Security Plan (MSP) for certain key employees. The accruals for future benefits are based upon the remaining years to retirement of the participating employees and other actuarial assumptions. The expense for fiscal 2021, 2020 and 2019 was $17,000, $19,000 and $20,000, respectively. The accrued benefit related to the Company under this plan as of September 30, 2021 and 2020 was $468,000 and $518,000, respectively.
The Company provides certain health benefits for retired employees. Employees may become eligible for those benefits if they were employed by the Company prior to December 10, 1992, meet the service requirements and reach retirement age while working for Patriot. The plan is contributory and unfunded. The Company accrues its allocated estimated cost of retiree health benefits over the years that the employees render service. The accrued postretirement benefit obligation for this plan related to the Company as of September 30, 2021 and 2020 was $252,000 and $236,000, respectively. The net periodic postretirement benefit credit or cost allocated to the Company was $(8,000), $(12,000) and $(58,000) for fiscal 2021, 2020 and 2019, respectively. The discount rate used in determining the Net Periodic Postretirement Benefit Cost was 3.0% for 2021, 3.0% for 2020 and 3.7% for 2019. The discount rate used in determining the Accumulated Postretirement Benefit Obligation (APBO) was 3.0% for 2021, 3.0% for 2020, and 3.73% for 2019. No medical trend is applicable because the Company’s share of the cost is frozen.
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Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | |
| Fair Value Measurements | 10. 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 fiscal year 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 were $14,000 in 2019. The unrealized gains and losses are recorded as part of comprehensive income and based on the market value (Level 1). The amortized cost of the investments was $5,977,000 and the carrying amount and fair value was $5,983,000 as of September 30, 2019.
At September 30, 2021 and September 30, 2020, 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 |
12 Months Ended |
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Sep. 30, 2021 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Contingent Liabilities | 11. 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 |
12 Months Ended |
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Sep. 30, 2021 | |
| Risks and Uncertainties [Abstract] | |
| Concentrations | 12. 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 fiscal 2021, the Company’s ten largest customers accounted for approximately 59.8% of our revenue and one of these customers accounted for 21.4% of our revenue. Accounts receivable from the ten largest customers was $2,843,000 and $3,121,000 at September 30, 2021 and September 30, 2020, respectively. The loss of one or more of our major customers could have a material adverse effect on the Company’s revenues and income. Deposits: Cash and cash equivalents are comprised of cash and an FDIC insured investment account at Wells Fargo Bank, N.A. The balance in the cash account may exceed FDIC limits.
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Unusual or Infrequent Items Impacting Results |
12 Months Ended |
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Sep. 30, 2021 | |
| Unusual or Infrequent Items, or Both [Abstract] | |
| Unusual or Infrequent Items Impacting Results | 13. Unusual or Infrequent Items Impacting Results.
The Company recorded gains due to the reversal of the estimated contingent liability related to the Danfair acquisition. The earned payout liability, estimated to be $425,000 on the date of acquisition, was later determined to be $69,000 based upon the total revenues for the 12 months following the acquisition. Changes in the estimated earned payout liability, up to the total contractual amount, were reflected in our results of operations in the periods in which they are identified. The Company recorded gains during fiscal years 2021 and 2020 of $16,000 and $340,000, respectively.
Second quarter 2021 net income included $1,037,000, or $ per share, from gains on the sale of our former terminal location in Pensacola, FL. Third quarter 2021 net income included $133,000, or $ per share, from gains on the sale and partial leaseback of our terminal in Chattanooga, TN.
First quarter 2019 net income included $634,000, or $ per share, from gains on real estate sales. Second quarter 2019 net income included $179,000 or $ per share, from a gain of $247,000 on the insurance settlement for hurricane damages and losses sustained at our Panama City, Florida location.
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Goodwill and Intangible Assets |
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| Goodwill and Intangible Assets | 14. Goodwill and Intangible Assets.
The Changes in gross carrying amounts of goodwill are as follows (in thousands):
The Company assesses goodwill for impairment on an annual basis in the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
The Company reviews intangible assets, including customer value, trade name and non-compete agreements, for impairment, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of long-lived assets is measured by a comparison of the carrying amount of the asset group to the future undiscounted net cash flows expected to be generated by those assets. If such assets are considered to be impaired, the impairment charge recognized is the amount by which the carrying amounts of the assets exceeds the fair value of the assets.
The gross amounts and accumulated amortization (including impairment) of Identifiable intangible assets are as follows (in thousands):
Amortization expense for intangible assets was $200,000 for 2021 and it is included in sales, general and administrative expense. The trade names are amortized on a straight-line basis over the estimated useful life of three and a half years. Customer values are amortized based on the straight-line basis over the estimated remaining useful lives of ten to eleven years. Non-compete agreements are amortized based on a straight-line basis over the term of the non-compete agreement, typically three to five years.
Estimated amortization expense for the five succeeding years follows (in thousands):
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Business Acquisition |
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| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisition | 15. Business Acquisition.
The Company acquired certain assets of Danfair Transport out of Americus, GA on November 4, 2019.
The Company has accounted for this acquisition in accordance with the provisions of ASC 805, Business Combinations (ASC 805). The Company has allocated the purchase price of the business based upon the fair value of the assets acquired and liabilities assumed as follows (in thousands):
The goodwill recorded resulting from the acquisition is tax deductible. The earned payout liability, estimated to be $425,000 on the date of acquisition, was later determined to be $69,000 based upon the total revenues for the 12 months following the acquisition. Changes in the estimated earned payout liability, up to the total contractual amount, were reflected in our results of operations in the periods in which they are identified. During fiscal years 2021 and 2020 the Company recorded gains on the contingent consideration of $16,000 and $340,000, respectively.
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Subsequent Events |
12 Months Ended |
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Sep. 30, 2021 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | 16. Subsequent Events
On October 18, 2021, we completed the disposition of the Company’s terminal located in Tampa, Florida to Amazon.com Services LLC for a sale price of $9,600,000. The Company anticipates that the sale will result in an after-tax gain of approximately $6,287,000. The $ net income from this sale increased our ability to pay dividends under our credit agreement’s tangible net worth covenant to approximately $13 million. We have had discussions with Wells Fargo Bank, N.A. about a waiver for the tangible net worth covenant if necessary.
On October 1, 2021 a lease commenced for property in Tampa to replace our sold terminal location. The minimum lease term is months and will go on our balance sheet as a right-of-use asset for approximately $1.45 million and a lease liability of approximately $1.53 million. Monthly rental payment commence in June 2022 at $13,250 and escalate 3% annually.
On October 25th, we announced that our Board of Directors declared a special cash dividend of $ per share, or approximately $12,800,000 in the aggregate, on the Company’s outstanding common stock. This one-time, special dividend was paid on November 15, 2021, to shareholders of record at the close of business on November 8, 2021.
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Accounting Policies. (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||
| DESCRIPTION OF BUSINESS | DESCRIPTION OF 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 customers’ 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 customers’ fuel storage tanks for ultimate sale to the retail consumer. The remaining 14% of our business consists of hauling our customers’ dry bulk commodities such as cement, lime and various industrial powder products, water and liquid chemicals. Our operations are comprised of one reportable segment.
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| PRINCIPLES OF CONSOLIDATION | PRINCIPLES OF CONSOLIDATION - The consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts, certain assets, liabilities, and expenses of Patriot and its wholly owned subsidiaries that comprise the Company. All significant intercompany transactions within the consolidated entity have been eliminated.
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| CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS –The Company considers all highly liquid debt instruments with maturities of three months or less at time of purchase and treasury bills to be cash equivalents. Bank overdrafts consist of outstanding checks not yet presented to a bank for settlement, net of cash held in accounts with right of offset.
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| INVENTORY | INVENTORY - Inventory of parts and supplies is valued at the lower of cost (first-in, first-out) or net realizable value.
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| TIRES ON EQUIPMENT | TIRES ON EQUIPMENT - The value of tires on tractors and trailers is accounted for as a prepaid expense and amortized over the life of the tires as a function of miles driven.
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| REVENUE AND EXPENSE RECOGNITION | REVENUE AND EXPENSE RECOGNITION – Transportation revenue, including fuel surcharges, is recognized when the services have been rendered to customers or delivery has occurred, the pricing is fixed or determinable and collectibility is reasonably assured. Transportation expenses are recognized as incurred.
The Company adopted ASU No. 2014-09, “Revenue from Contracts with Customers” on October 1, 2018. 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 and there are no significant performance obligations after delivery. 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’s adoption of this guidance did not result in a material impact on its financial statements.
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| ACCOUNTS RECEIVABLE | ACCOUNTS RECEIVABLE - Accounts receivable are recorded net of discounts and provisions for estimated allowances. We estimate allowances on an ongoing basis by considering historical and current trends. We record estimated bad debts expense as a selling, general and administrative expense. We estimate the net collectibility of our accounts receivable and establish an allowance for doubtful accounts based upon this assessment. Specifically, we analyze the aging of accounts receivable balances, historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms. Any trade accounts receivable balances written off are charged against the allowance for doubtful accounts. The Company has not experienced any significant credit-related losses in the past three years.
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| PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost less accumulated depreciation. Provision for depreciation of property and equipment is computed using the straight-line method based on the following Estimated useful lives:
The Company recorded depreciation expenses for 2021, 2020 and 2019 of $7,014,000, $7,780,000 and $8,317,000, respectively. Gains and losses upon disposition are reflected in operating results in the period of disposition. Direct internal and external costs to implement computer systems and internal-use software are capitalized. Capitalized costs are depreciated over the estimated useful life of the system or software, generally 5 years, beginning when site installation or module development is complete and ready for use.
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| IMPAIRMENT OF LONG-LIVED ASSETS | IMPAIRMENT OF LONG-LIVED ASSETS - The Company periodically reviews its long-lived assets, which include property and equipment and purchased intangible assets subject to amortization, for potential impairment whenever events or circumstances indicate the carrying amount of a long-lived asset may not be recoverable. The analysis consists of a review of future anticipated results considering business prospects and asset utilization. If the sum of these future cash flows (undiscounted and without interest charges) is less than the carrying amount of the assets, the Company would record an impairment loss based on the fair value of the assets with the fair value of the assets generally based upon an estimate of the discounted future cash flows expected with regards to the assets and their eventual disposition.
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| GOODWILL | GOODWILL – Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in the acquisition of a business. Goodwill is not amortized, but rather is tested for impairment annually and when events or changes in circumstances indicate that the fair value of a reporting unit with goodwill has been reduced below carrying value. The impairment test requires allocating goodwill and other assets and liabilities to reporting units. The Company’s operations are comprised of one operating segment and therefore one reporting unit. The fair value of each reporting unit is determined and compared to the book value of the reporting unit. If the fair value of the reporting unit is less than the book value, including goodwill, then the recorded goodwill is impaired to its implied fair value with a charge to operating expense.
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| INSURANCE | INSURANCE - The Company has a $250,000 to $500,000 self-insured retention per occurrence in connection with certain of its workers’ compensation, automobile liability, and general liability insurance programs (“risk insurance”). The Company is also self-insured for its employee health insurance benefits and carries stop loss coverage for losses over $250,000 per covered participant per year plus a $84,500 aggregate. The Company has established an accrued liability for the estimated cost in connection with its portion of its risk and health insurance losses incurred and reported. Claims paid by the Company are charged against the liability. Additionally, the Company maintains an accrued liability for incurred but not reported claims based on historical analysis of such claims. Payments made under a captive agreement for each year’s loss fund are scheduled in advance using actuarial methodology. The captive agreement provides that we will share in the underwriting results, good or bad, within a $250,000 per occurrence layer of loss through retrospective premium adjustments. The method of calculating the accrual liability is subject to inherent uncertainty. If actual results are less favorable than the estimates used to calculate the liabilities, the Company would have to record expenses in excess of what has been accrued.
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| INCOME TAXES | INCOME TAXES - Deferred tax assets and liabilities are recognized based on differences between financial statement and tax bases of assets and liabilities using presently enacted tax rates. Deferred income taxes result from temporary differences between pre-tax income reported in the financial statements and taxable income. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit. The second step is to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the amounts rely upon the determination of the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law and expiration of statutes of limitations, effectively settled issues under audit, and audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision. It is the Company’s policy to recognize as additional income tax expense the items of interest and penalties directly related to income taxes.
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| PENSION PLAN | PENSION PLAN - The Company has a defined benefit plan for certain key employees, See note 9 discussion of MSP Plan, and accounts for its pension plan following the requirements of FASB ASC Topic 715, “Compensation – Retirement Benefits”, which requires an employer to: (a) recognize in its statement of financial position the funded status of a benefit plan; (b) measure defined benefit plan assets and obligations as of the end of the employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise but are not recognized as components of net periodic benefit costs pursuant to prior existing guidance.
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| EARNINGS PER COMMON SHARE |
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| USE OF ESTIMATES | USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Certain accounting policies and estimates are of more significance in the financial statement preparation process than others. The most critical accounting policies and estimates include the economic useful lives and salvage values of our vehicles and equipment, provisions for uncollectible accounts receivable, estimates of exposures related to our insurance claims plans, and estimates for taxes. To the extent that actual, final outcomes are different than these estimates, or that additional facts and circumstances result in a revision to these estimates, earnings during that accounting period will be affected.
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| ENVIRONMENTAL | ENVIRONMENTAL - Environmental expenditures that benefit future periods are capitalized. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded for the estimated amount of expected environmental assessments and/or remedial efforts. Estimation of such liabilities includes an assessment of engineering estimates, continually evolving governmental laws and standards, and potential involvement of other potentially responsible parties.
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| COMPREHENSIVE INCOME | COMPREHENSIVE INCOME – Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) refers to expenses, gains, and losses that are not included in net income, but rather are recorded directly in shareholder’s equity.
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| RECENTLY ISSUED ACCOUNTING STANDARDS | 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 liability for the obligation to make lease payments measured at the present value of the lease payments for all leases with terms greater than twelve months. The provisions of this update and additional guidance in subsequent ASUs became effective for us beginning October 1, 2019. In July 2018, the FASB issued ASU No. 2018-11, “Leases” which provides an optional transition method allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, with no restatement of comparative prior periods required. We adopted the standard using this optional transition method. Upon adoption as of October 1, 2019, the Company recognized $3,873,000 in operating lease right-of-use assets, a reduction of $231,000 of other long-term liabilities related to straight-lined leases and $4,104,000 in operating lease liabilities. |
Accounting Policies. (Tables) |
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| Estimated useful lives | following Estimated useful lives:
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| Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Compensation |
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| Summary of Stock Options |
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| Options summarized by exercise price range |
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Income Taxes (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for or benefit from income taxes for continuing operations | The Provision for or benefit from income taxes for continuing operations for fiscal years ended September 30 consists of the following (in thousands):
|
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| Income tax reconciliation | A reconciliation between the amount of tax shown above and the amount computed at the statutory Federal income tax rate follows (in thousands):
|
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| Deferred tax assets and deferred tax liabilities | The types of temporary differences and their related tax effects that give rise to Deferred tax assets and deferred tax liabilities at September 30, are presented below (in thousands):
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Accrued Insurance (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued Insurance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued insurance liability | The Accrued insurance liability at September 30 is summarized as follows (in thousands):
|
Goodwill and Intangible Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Changes in gross carrying amounts of goodwill | The Changes in gross carrying amounts of goodwill are as follows (in thousands):
|
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| Identifiable intangible assets | The gross amounts and accumulated amortization (including impairment) of Identifiable intangible assets are as follows (in thousands):
|
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| Estimated amortization expense for the five succeeding years follows (in thousands): | Estimated amortization expense for the five succeeding years follows (in thousands):
|
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Business Acquisition (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Danfair Transport acquisition | The Company has accounted for this acquisition in accordance with the provisions of ASC 805, Business Combinations (ASC 805). The Company has allocated the purchase price of the business based upon the fair value of the assets acquired and liabilities assumed as follows (in thousands):
The goodwill recorded resulting from the acquisition is tax deductible. The earned payout liability, estimated to be $425,000 on the date of acquisition, was later determined to be $69,000 based upon the total revenues for the 12 months following the acquisition. Changes in the estimated earned payout liability, up to the total contractual amount, were reflected in our results of operations in the periods in which they are identified. During fiscal years 2021 and 2020 the Company recorded gains on the contingent consideration of $16,000 and $340,000, respectively.
|
Estimated useful lives (Details) |
12 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Building and Building Improvements [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Estimate useful life | 7-39 |
| Transportation Equipment [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Estimate useful life | 7-10 |
| Other Machinery and Equipment [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Estimate useful life | 3-10 |
Accounting Policies. (Details Narrative) - USD ($) |
1 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Oct. 31, 2019 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Product Information [Line Items] | ||||
| Depreciation | $ 7,014,000 | $ 7,780,000 | $ 8,317,000 | |
| Self-insurance retention per occurance | $250,000 to $500,000 | |||
| Stop loss coverage | $ 250,000 | |||
| Self insured aggregate | 84,500 | |||
| Operating lease right-of-use assets | $ 3,873,000 | |||
| Straight line lease liability adjustment | 231,000 | |||
| Operating lease liabilities | $ 4,104,000 | $ 1,879,000 | ||
| Petroleum Products [Member] | ||||
| Product Information [Line Items] | ||||
| Percent of business | 86.00% | |||
| Other Products [Member] | ||||
| Product Information [Line Items] | ||||
| Percent of business | 14.00% | |||
Related Party Agreements (Details Narrative) - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Related Party Transactions [Abstract] | |||
| Related party transactions | $ 1,207,000 | $ 1,283,000 | $ 1,398,000 |
Debt (Details Narrative) - Revolving Credit Facility [Member] - USD ($) |
1 Months Ended | 12 Months Ended |
|---|---|---|
Jul. 31, 2021 |
Sep. 30, 2021 |
|
| Line of Credit Facility [Line Items] | ||
| Term of credit agreement | 5 years | |
| Maximum facility amount | $ 15,000,000 | |
| Increase limit | $ 25,000,000 | |
| Interest rate over SOFR | 1.10% | |
| Commitment fee | 0.12% | |
| Minimum tangible net worth | $ 25,000,000 | |
| Outstanding debt | 0 | |
| Letters of credit commitments | 1,636,000 | |
| Available for borrowing | $ 13,364,000 | |
| Letter of credit fee | 1.00% | |
| Applicable interest rate for borrowings | 1.15% | |
| Compliance | The Company was in compliance with all of its loan covenants as of September 30, 2021 | |
| Maximum net worth | $ 6,700,000 |
Lease liabilities and right-of-use assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Leases [Abstract] | ||
| Right-of-use assets | $ 1,949 | $ 2,964 |
| Lease liabilities, current | (928) | (1,065) |
| Lease liabilities, long-term | $ (1,131) | $ (2,073) |
Lease liability assumptions (Details) |
Sep. 30, 2021 |
|---|---|
| Revenue Equipment And Other [Member] | |
| Weighted average remaining lease term | 2 years 1 month 5 days |
| Weighted average discount rate | 3.50% |
| Real Estate [Member] | |
| Weighted average remaining lease term | 2 years 7 months 6 days |
| Weighted average discount rate | 3.25% |
Future minimum annual lease payments for operating leases (Details) - USD ($) |
Sep. 30, 2021 |
Oct. 31, 2019 |
|---|---|---|
| Leases [Abstract] | ||
| 2022 | $ 983,000 | |
| 2023 | 797,000 | |
| 2024 | 294,000 | |
| 2025 | 7,000 | |
| 2026 | 0 | |
| Thereafter | 0 | |
| Total future minimum lease payments | 2,081,000 | |
| Less: Imputed interest | (202,000) | |
| Present value of operating lease liabilities | $ 1,879,000 | $ 4,104,000 |
Leases (Details Narrative) |
12 Months Ended | ||
|---|---|---|---|
|
Sep. 30, 2021
USD ($)
Count
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2019
USD ($)
|
|
| Aggregate expense under operating leases | $ | $ 1,097,000 | $ 1,216,000 | $ 1,549,000 |
| Leased Tractor [Member] | |||
| Leased tractors | Count | 29 | ||
Earnings per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Earnings Per Share [Abstract] | |||
| Weighted average common shares outstanding during the period – shares used for basic earnings per common share | 3,395 | 3,369 | 3,342 |
| Common shares issuable under share based payment plans which are potentially dilutive | 13 | 1 | 1 |
| Common shares used for diluted earnings per common share | 3,408 | 3,370 | 3,343 |
| Net income | $ 625 | $ 257 | $ 1,763 |
| Basic | $ 0.18 | $ 0.08 | $ 0.53 |
| Diluted | $ 0.18 | $ 0.08 | $ 0.53 |
Earnings Per Share (Details Narrative) - shares |
12 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Earnings Per Share [Abstract] | ||
| Antidilutive shares | 500,950 | 380,829 |
Stock Compensation (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
| Stock-based compensation | $ 467 | $ 574 | $ 590 |
| Share-based Payment Arrangement, Option [Member] | |||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
| Stock-based compensation | 248 | 239 | 227 |
| Director Stock Award [Member] | |||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
| Stock-based compensation | $ 219 | $ 335 | $ 363 |
Summary of Stock Options (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|||||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
| Shares outstanding | 604,005,000 | |||||||||
| Weighted average exercise price | $ 10.80 | |||||||||
| Weighted average remaining term | 6 years 5 months 30 days | |||||||||
| Shares exercisable | 303,711,000 | |||||||||
| Weighted average exercise price, exercisable | $ 12.10 | |||||||||
| Weighted average remaining term, exercisable | 4 years 10 months 23 days | |||||||||
| Share-based Payment Arrangement, Option [Member] | ||||||||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
| Shares outstanding | 604,005 | [1] | 400,722 | [2] | 189,015 | 173,095 | ||||
| Weighted average exercise price | $ 10.80 | [1] | $ 14.96 | [2] | $ 21.49 | $ 21.49 | ||||
| Weighted average remaining term | 6 years 5 months 30 days | [1] | 6 years 7 months 5 days | [2] | 6 years 3 months 18 days | 6 years 3 months 18 days | ||||
| Weighted average grant date fair value, outstanding | $ 1,931 | [1] | $ 1,749 | [2] | $ 1,531 | $ 1,398 | ||||
| Shares granted | 78,345 | 68,865 | 29,920 | |||||||
| Weighted average exercise price, granted | $ 10.00 | $ 18.40 | $ 20.10 | |||||||
| Weighted average grant date fair value, granted | $ 275 | $ 275 | $ 240 | |||||||
| Shares exercised | (13,497) | (4,000) | ||||||||
| Weighted average exercise price, exercised | $ 9.17 | $ 18.84 | ||||||||
| Weighted average grant date fair value, exercised | $ (45) | $ (31) | ||||||||
| Shares forfeited | (9,632) | (6,035) | (10,000) | |||||||
| Weighted average exercised price, forfeited | $ 13.88 | $ 23.99 | $ 18.24 | |||||||
| Weighted average grant date fair value, forfeited | $ (48) | $ (57) | $ (76) | |||||||
| Dividend adjustment | 148,067 | 148,877 | ||||||||
| Shares exercisable | 303,711 | |||||||||
| Weighted average exercise price, exercisable | $ 12.10 | |||||||||
| Weighted average remaining term, exercisable | 4 years 10 months 23 days | |||||||||
| Weighted average grant date fair value, exercisable | $ 1,150 | |||||||||
| Shares vested | 77,845 | |||||||||
| Weighted average grant date fair value, vested | $ 242 | |||||||||
| ||||||||||
Provision for or benefit from income taxes for continuing operations (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Income Tax Disclosure [Abstract] | |||
| Federal | $ 955 | $ 952 | $ 227 |
| State | 297 | 280 | 92 |
| 1,252 | 1,232 | 319 | |
| Deferred | (1,019) | (1,142) | 311 |
| Total | $ 233 | $ 90 | $ 630 |
Income tax reconciliation (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Income Tax Disclosure [Abstract] | |||
| Federal rate | $ 179 | $ 75 | $ 474 |
| State income taxes (net of Federal income tax benefit) | 38 | 14 | 146 |
| Other, net | 16 | 1 | 10 |
| Provision for income taxes | $ 233 | $ 90 | $ 630 |
Deferred tax assets and deferred tax liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Income Tax Disclosure [Abstract] | ||
| Property and equipment | $ 4,547 | $ 6,302 |
| Prepaid expenses | 1,149 | 520 |
| Gross deferred tax liabilities | 5,696 | 6,822 |
| Insurance liabilities | 583 | 711 |
| Employee benefits and other | 1,051 | 1,024 |
| Gross deferred tax assets | 1,634 | 1,735 |
| Net deferred tax liability | $ 4,062 | $ 5,087 |
Income Taxes (Details Narrative) |
Sep. 30, 2021
USD ($)
|
|---|---|
| Income Tax Disclosure [Abstract] | |
| Unrecognized tax benefits | $ 0 |
Accrued insurance liability (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Accrued Insurance | ||
| Accrued insurance, current portion | $ 1,105 | $ 1,210 |
| Prepaid insurance claims | (3,088) | (1,182) |
| Accrued insurance, non-current | 1,537 | 1,886 |
| Total accrued (prepaid) insurance reported on the Company’s balance sheet | (446) | 1,914 |
| Captive agreement assets | 4,021 | 2,233 |
| Gross insurance liability estimate | $ 3,575 | $ 4,147 |
Employee Benefits (Details Narrative) - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Retirement Benefits [Abstract] | |||
| Patriot 401k contribution | 50.00% | ||
| Company contribution expense | $ 482,000 | $ 534,000 | $ 780,000 |
| MSP expense | 17,000 | 19,000 | 20,000 |
| Accrued benefit liability | 468,000 | 518,000 | |
| Accrued post retirement benefit obligation | 252,000 | 236,000 | |
| Net periodic postretirement benefit credit or cost | $ (8,000) | $ (12,000) | $ (58,000) |
| Discount rate | 3.00% | 3.00% | 3.70% |
| APBO discount rate | 3.00% | 3.00% | 3.73% |
Fair Value Measurements (Details Narrative) |
12 Months Ended |
|---|---|
|
Sep. 30, 2019
USD ($)
| |
| Fair Value Disclosures [Abstract] | |
| Unrealized gains on treasury bills | $ 14,000 |
| Amortized cost of treasury bills | 5,977,000 |
| Carrying amount of treasury bills | 5,983,000 |
| Fair value of treasury bills | $ 5,983,000 |
Concentrations (Details Narrative) - USD ($) |
12 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Top Ten Customers [Member] | ||
| Concentration Risk [Line Items] | ||
| Top customer revenue percentage | 59.80% | |
| Top Customers [Member] | ||
| Concentration Risk [Line Items] | ||
| Top customer revenue percentage | 21.40% | |
| Top Ten Custpmers [Member] | ||
| Concentration Risk [Line Items] | ||
| AR ten largest customers | $ 2,843,000 | $ 3,121,000 |
Changes in gross carrying amounts of goodwill (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Goodwill | $ 3,637 | $ 3,637 | $ 3,431 | $ 3,431 |
| Goodwill acquired | $ 0 | $ 206 | $ 0 | |
Identifiable intangible assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | $ 4,586 | $ 4,586 |
| Accumulated amortization | 3,830 | 3,630 |
| Customer Relationships [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | 4,440 | 4,440 |
| Accumulated amortization | 3,689 | 3,492 |
| Trademarks and Trade Names [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | 72 | 72 |
| Accumulated amortization | 72 | 72 |
| Noncompete Agreements [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | 74 | 74 |
| Accumulated amortization | $ 69 | $ 66 |
Estimated amortization expense for the five succeeding years follows (in thousands): (Details) $ in Thousands |
Sep. 30, 2021
USD ($)
|
|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| 2022 | $ 201 |
| 2023 | 197 |
| 2024 | 133 |
| 2025 | 44 |
| 2026 | 44 |
| Total | $ 619 |
Goodwill and Intangible Assets (Details Narrative) |
12 Months Ended |
|---|---|
|
Sep. 30, 2021
USD ($)
| |
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| Amortization expense for intangible assets | $ 200,000 |
Danfair Transport acquisition (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||
|---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2021 |
Nov. 04, 2019 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
| Business Acquisition [Line Items] | |||||
| Goodwill acquired | $ 3,637 | $ 3,637 | $ 3,431 | $ 3,431 | |
| Danfair Transport [Member] | |||||
| Business Acquisition [Line Items] | |||||
| Fair value of consideration transferred | (1,425) | ||||
| Acquisition related costs | $ 38 | ||||
| Property and equipment acquired | $ 759 | ||||
| Prepaid tires acquired | 25 | ||||
| Customer relationships acquired | 436 | ||||
| Noncompete agreement | 12 | ||||
| Vacation liability assumed | (13) | ||||
| Net assets assumed | 1,219 | ||||
| Goodwill acquired | 206 | ||||
| Assets, liabilities and goodwill acquired | $ 1,425 |
Business Acquisition (Details Narrative) - USD ($) |
12 Months Ended | ||||
|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2020 |
Nov. 04, 2019 |
|
| Business Acquisition [Line Items] | |||||
| Contingent consideration gain | $ 16,000 | $ 340,000 | $ 0 | ||
| Danfair Transport [Member] | |||||
| Business Acquisition [Line Items] | |||||
| Earned payout liability | $ 69,000 | $ 425,000 | |||
| Contingent consideration gain | $ 16,000 | $ 340,000 | |||
Subsequent Events (Details Narrative) - USD ($) |
1 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Oct. 25, 2021 |
Jun. 30, 2022 |
Oct. 18, 2021 |
Oct. 01, 2021 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Oct. 31, 2019 |
|
| Subsequent Event [Line Items] | |||||||
| Right of use asset | $ 1,949,000 | $ 2,964,000 | |||||
| Lease liability | $ 1,879,000 | $ 4,104,000 | |||||
| Subsequent Event [Member] | |||||||
| Subsequent Event [Line Items] | |||||||
| Tampa terminal | $ 9,600,000 | ||||||
| After tax gain on sale of Tamp | 6,287,000 | ||||||
| Banking Regulation, Mortgage Banking, Net Worth, Actual | $ 13,000,000 | ||||||
| Tampa lease term | 128 months | ||||||
| Right of use asset | $ 1,450,000 | ||||||
| Lease liability | $ 1,530,000 | ||||||
| Rental payments | $ 13,250 | ||||||
| Escalation | 300.00% | ||||||
| Dividends declared | $ 3.75 | ||||||
| Dividends payable | $ 12,800,000 |