10-Q 1 mar10q04.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-17554 PATRIOT TRANSPORTATION HOLDING, INC. (Exact name of registrant as specified in its charter) Florida 59-2924957 (State or other jurisdiction of (I.R.S. Employer) incorporation or organization) Identification No.) 1801 Art Museum Drive, Jacksonville, Florida 32207 (Address of principal executive offices) (Zip Code) 904/396-5733 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ________ No _X______. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 27, 2004: 2,929,108 shares of $.10 par value common stock. PATRIOT TRANSPORTATION HOLDING, INC. FORM 10-Q QUARTER ENDED MARCH 31, 2004 CONTENTS Page No. Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Income 2 Condensed Consolidated Statements of Cash Flows 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis 8 Item 3. Quantitative and Qualitative Disclosures about Market Risks 13 Item 4. Controls and Procedures 13 Part II. Other Information Item 1. Legal Proceedings 14 Item 2. Changes in Securities and Use of Proceeds 14 Item 4. Submission of Matters To a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 Exhibit 11 Computation of Earnings Per Share 21 Exhibit 31 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 22 Exhibit 32 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 25 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) March 31, September 30, 2004 2003 ASSETS Current assets: Cash and cash equivalents $ 435 757 Cash held in escrow 12,887 1,795 Accounts receivable (including related party of $221 and $359) 8,563 7,898 Less allowance for doubtful accounts (590) (566) Inventory 587 670 Prepaid expenses and other 3,184 3,411 Total current assets 25,066 13,965 Property, plant and equipment, at cost 217,263 216,640 Less accumulated depreciation and depletion (80,161) (75,290) Net property, plant and equipment 137,102 141,350 Assets held for sale - 3,912 Other assets 6,259 5,989 Total assets $168,427 165,216 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,075 4,734 Accrued liabilities 4,798 4,941 Liabilities associated with assets held for sale - 60 Long-term debt due within one year 8,090 1,485 Total current liabilities 16,963 11,220 Long-term debt 44,976 57,816 Deferred income taxes 13,410 10,760 Accrued insurance reserves 5,722 5,722 Other liabilities 1,686 1,669 Commitments and contingencies (Note 9) Shareholders' equity: Preferred stock, no par value; 5,000,000 shares authorized - - Common stock, $.10 par value; 25,000,000 shares authorized, 2,929,108 and 2,932,708 shares issued and outstanding, respectively 293 293 Capital in excess of par value 5,414 6,065 Retained earnings 79,963 71,671 Total shareholders' equity 85,670 78,029 Total liabilities and shareholders' equity $168,427 165,216 See accompanying notes. PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share amounts) (Unaudited) THREE MONTHS SIX MONTHS ENDED MARCH 31, ENDED MARCH 31, 2004 2003 2004 2003 Revenues: Related parties $ 1,959 1,668 3,995 3,275 Non-related parties 26,667 23,405 52,518 45,840 28,626 25,073 56,513 49,115 Cost of operations 23,503 21,158 46,027 40,870 Gross profit 5,123 3,915 10,486 8,245 Selling, general and administrative expense 2,155 2,010 4,375 3,988 Recovery of non-recurring charges related to closed subsidiary - - - (25) Operating profit 2,968 1,905 6,111 4,282 Other income 95 - 95 - Interest expense, net (969) (886) (1,954) (1,725) Income before income taxes 2,094 1,019 4,252 2,557 Provision for income taxes (774) (397) (1,616) (997) Income from continuing operations 1,320 622 2,636 1,560 Discontinued operations: Gain on sale of rental property, net of tax 5,655 - 5,655 - Net Income $ 6,975 622 8,291 1,560 Earnings per common share: Income from continuing operations - basic $ .45 .20 .90 .50 - diluted $ .44 .20 .89 .50 Gain on disposition of dis- continued operations - basic $ 1.93 - 1.93 - - diluted $ 1.90 - 1.90 - Net income-basic $ 2.38 .20 2.83 .50 Net income-diluted $ 2.34 .20 2.79 .50 Average shares outstanding - basic 2,931 3,053 2,932 3,093 - diluted 2,979 3,077 2,976 3,118 See accompanying notes. PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED MARCH 31, 2004 AND 2003 (In thousands) (Unaudited) 2004 2003 Cash flows from operating activities: Net income $8,291 1,560 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation, depletion and amortization 6,152 5,993 Deferred income taxes 2,499 171 Gain on disposition of property, plant and equipment (9,233) (124) Net changes in operating assets and liabilities: Accounts receivable (649) (416) Prepaid expenses and other current assets 318 145 Accounts payable and accrued liabilities (651) (2,813) Net change in insurance reserve and other liabilities 17 12 Other, net 114 24 Net cash provided by operating activities 6,858 4,552 Cash flows from investing activities: Purchase of property, plant and equipment (1,824) (14,759) Additions to other assets (619) (422) Cash held in escrow (11,092) - Proceeds from sale of property, plant and equipment, and other assets 13,300 977 Net cash used in investing activities (235) (14,204) Cash flows from financing activities: Proceeds from issuance of long-term debt 8,500 - Net (decrease) increase in revolving debt (13,833) 12,800 Repayment of long-term debt (962) (607) Repurchase of Company stock (2,132) (2,485) Exercise of employee stock options 1,482 102 Net cash (used in) provided by financing activities (6,945) 9,810 Net (decrease) increase in cash and cash equivalents (322) 158 Cash and cash equivalents at beginning of year 757 529 Cash and cash equivalents at end of the period $ 435 687 See accompanying notes. PATRIOT TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 (Unaudited) (1) Basis of Presentation. The accompanying condensed consolidated financial statements include the accounts of Patriot Transportation Holding, Inc. and its subsidiaries (the "Company"). These statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included. Operating results for the three months and six months ended March 31, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ended September 30, 2004. The accompanying condensed consolidated financial statements and the information included under the heading "Management's Discussion and Analysis" should be read in conjunction with the Company's consolidated financial statements and related notes included in the Company's Form 10-K for the year ended September 30, 2003. Certain reclassifications have been made to the Fiscal 2003 financial statements to conform to the presentation adopted in Fiscal 2004. (2) Recent Accounting Pronouncements. In December of 2003, the FASB revised Statement No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits." This Statement retains the disclosure requirements of the original Statement, which it replaces, and requires additional disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The annual financial statement disclosures are effective for the Company for the fiscal year ended September 30, 2004. For the three and six months ended March 31, 2004 and 2003, no postretirement benefit income or expense was recorded. Based on current estimates, there is no requirement to make cash contributions for fiscal 2004. (3) Business Segments. The Company has identified two business segments each of which is managed separately along product lines. The Company's operations are substantially in the Southeastern and Mid-Atlantic states. The transportation segment hauls liquid and dry commodities by motor carrier. The real estate segment owns real estate of which a substantial portion is under mining royalty agreements or leased. The real estate segment also holds certain other real estate for investment and is developing commercial and industrial properties. Operating results and certain other financial data for the Company's business segments are as follows (in thousands): Three Months ended Six Months ended March 31, March 31, 2004 2003 2004 2003 Revenues: Transportation $24,280 21,312 48,052 41,978 Real estate 4,346 3,761 8,461 7,137 $28,626 25,073 56,513 49,115 Operating profit Transportation $ 1,121 323 2,467 1,068 Real estate 2,226 1,978 4,430 3,976 Corporate expenses (379) (396) (786) (762) $ 2,968 1,905 6,111 4,282 Identifiable assets: March 31, Sept. 30, 2004 2003 Transportation $ 42,200 45,055 Real estate 124,453 116,269 Cash items 435 2,552 Unallocated corporate assets 1,339 1,340 $168,427 165,216 (4) Long-Term debt. Long-term debt is summarized as follows (in thousands): March 31, September 30, 2004 2003 Revolving Credit, Uncollateralized, payable in 2005 $ 6,167 20,000 5.7% to 9.5% mortgage note payable in installments through 2020 46,899 39,361 53,066 59,361 Less portion due in one year 8,090 1,545 $44,976 57,816 (5) Related Party Transactions. The Company, through its transportation subsidiaries, hauls commodities by tank and flatbed trucks for Florida Rock Industries, Inc. (FRI). Charges for these services are based on prevailing market prices. Other wholly owned subsidiaries lease certain construction aggregates mining and other properties to FRI. In addition, the Company outsources certain functions to FRI, including some administrative, human resources, legal and risk management services. On March 30, 2004, a subsidiary sold a parcel of land and improvements containing approximately 6,321 acres in Suwannee and Columbia Counties, near Lake City, Florida to a subsidiary of FRI for $13,000,000 in cash, resulting in a gain of $5,655,000 after income taxes. The sales price was approved by the Company's Audit Committee, composed of independent Directors of the Company, after considering among other factors, an independent appraisal, the current use of the property and consultation with management. See Note (6) for further information. A subsidiary of the Company has an agreement to sell a 935 acre parcel of property in Miami, Florida to FRI for $1,638,000. The property is principally composed of mined-out lakes, mitigation areas, 145 acres of mineable land and 32 acres of roads and railroad track right-of-ways. Closing of the sale is scheduled to occur in early May, 2004. The Company will place the proceeds of this transaction in escrow in anticipation of identifying suitable exchange properties under Section 1031 of the United States Internal Revenue Code. The terms of the agreement were approved by the Company's Audit Committee, which is comprised of independent directors, after considering, among other factors, the terms of the existing lease agreement and consultation with management. When this transaction closes, the Company will recognize a gain from discontinued operations of approximately $999,000, net of income taxes, or $.34 per diluted common share. A subsidiary of the Company has an Agreement to sell 108 acres of land located in the northwest quadrant of I-395 and I-495 at Edsall Road in Springfield, Virginia to FRI for $15,000,000. Closing is scheduled to occur by May 10, 2004. The Agreement was approved by a committee of independent directors of the Company after review of a development feasibility study and other materials, consultation with management and advice of independent counsel. The Company will place the proceeds of this transaction in escrow in anticipation of identifying suitable exchange properties under Section 1031 of the United States Internal Revenue Code. Upon closing, the Company will recognize a gain from discontinued operations on the sale of approximately $7,772,000 net of income taxes, or $2.61 per diluted common share. The tract is rented to a subsidiary of FRI and the Company recorded rental income of approximately $325,000 for the first half of Fiscal 2004. (6) Discontinued operations. On March 31, 2004, a subsidiary of the Company sold a parcel of land and improvements to FRI for $13,000,000 in cash. The property was leased to FRI under an operating lease. The property is considered a component of the entity and therefore its disposition is treated as a discontinued operation. A gain on disposal of $5,655,000, net of income taxes of $3,465,000, has been recorded as a gain from discontinued operations. Prior to the sale, FRI was financially responsible for all operations of the property and therefore, rental revenue and expenses from the discontinued operations are not material. The proceeds from the sale have been placed in an escrow account to facilitate an IRC Section 1031 exchange. In April 2004, $11,350,000 of the escrowed funds were used to purchase two existing commercial warehouse/distribution buildings totaling 303,000 square feet and an adjacent 8.75 acre lot located in Newark, Delaware. One of the buildings is fully leased and the other is available for lease. The adjacent lot will be held for future development. (7) Repurchase of Company Stock. During the second quarter of Fiscal 2004, the Company repurchased and retired 66,500 shares of its common stock for $2,132,000, under a plan approved by the Board of Directors. (8) Stock-Based Compensation Plan. The Company accounts for its stock-based employee compensation plans under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation", to stock-based employee compensation. Three Months ended Six Months ended (Amounts in thousands) March 31, March 31, 2004 2003 2004 2003 Net income, as reported $ 6,975 622 8,291 1,560 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes 121 136 338 294 Pro forma net income $ 6,854 486 7,953 1,266 Earnings per share: Basic as reported $ 2.38 .20 2.83 .50 Basic pro forma $ 2.34 .16 2.71 .41 Diluted as reported $ 2.34 .20 2.79 .50 Diluted pro forma $ 2.30 .16 2.67 .41 (9) Contingencies and Commitments. Certain of the Company's subsidiaries are involved in litigation on a number of matters and are subject to certain claims that 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. In the opinion of management and advice of legal counsel, none of these matters are expected to have a materially adverse effect on the Company's consolidated financial condition, results of operations or cash flows. In December 2003, the Company committed to develop a 145,000 square foot build to suit warehouse/office building for a NYSE listed company pursuant to a 15 year triple net lease. This project is expected to cost approximately $14,900,000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING RESULTS. The Company's operations are influenced by a number of external and internal factors. External factors include levels of economic and industrial activity in the United States and the Southeast, petroleum product usage in the Southeast which is driven in part by tourism and commercial aviation, fuel costs, driver availability and cost, regulations regarding driver qualifications and hours of service, construction activity, FRI sales from the Company's mining properties, interest rates and demand for commercial warehouse/office space in the Baltimore/Washington area. Internal factors include revenue mix, capacity utilization, auto and workers' compensation accident frequencies and severity, other operating factors, administrative costs, and construction costs of new projects. During Fiscal 2003, the transportation segment's ten largest customers accounted for approximately 38% of the transportation segment's revenue. The loss of any one of these customers could have an adverse effect on the Company's revenues and income. Financial results of the Company for any individual quarter are not necessarily indicative of the results to be expected for the year. Three Months Operating Results For the second quarter of Fiscal 2004, consolidated revenues were $28,626,000, an increase of $3,553,000 or 14.2% over the same quarter last year. The transportation segment's revenues for the second quarter of Fiscal 2004 were $24,280,000, an increase of $2,968,000 or 13.9% over the same quarter last year. This increase was a result of a 12.8% increase in miles hauled over the same quarter last year. The increase in miles hauled resulted primarily from a 9.3% increase in miles hauled in the tankline division and a 19.7% increase in miles hauled in the flatbed division, reflecting higher customer demand. Real estate revenues were $4,346,000 for the second quarter of Fiscal 2004, an increase of $585,000 or 15.6% from the second quarter of Fiscal 2003. Royalties from mining contracts increased $219,000 or 15.7% primarily due to a 23.6% increase in tons mined. Revenues from flex office-warehouse properties increased $432,000 or 18.8%, primarily due to a 16.4% increase in average leased square feet and, to a lesser extent, minimal price increases. Real estate revenues included property sales of $65,000 in the second quarter of 2003 and no property sales in the second quarter of 2004. Consolidated gross profit for the second quarter of 2004 was $5,123,000, an increase of $1,208,000 or 30.9% from the second quarter of last year. Gross profit in the transportation segment increased $959,000 or 49.5% achieved by the increased revenue and a steady level of fixed costs. Gross profit in the real estate segment increased $249,000 or 12.6% from the second quarter of 2003 due to increased royalties from mining operations and additional gross profit from newly developed commercial properties. Selling, general and administrative expense increased $145,000 or 7.2% for the second quarter of 2004 compared to the same period last year. On a comparative basis, selling, general and administrative expense as a percent of consolidated revenues, was 7.8% as compared to 8.0% last year. Income from continuing operations was $1,320,000 or $.44 per diluted share for the second quarter of Fiscal 2004, an increase of $698,000 from the same quarter last year. A gain from discontinued operations of $5,655,000 net of income taxes was recorded during the quarter, as a result of the sale of land and improvements to a related party for $13,000,000. Net income was $6,975,000 or $2.34 per diluted share for the second quarter of Fiscal 2004 compared to $622,000 or $.20 per diluted share for the same quarter last year. Six Month's Operating Results. For the first half of Fiscal 2004, consolidated revenues were $56,513,000, an increase of $7,398,000 or 15.1% over the same period last year. The transportation segment's revenues for the first half of Fiscal 2004 were $48,052,000, an increase of $6,074,000 or 14.5% over the same period last year. The revenue increase is primarily due to a 7.9% increase in miles hauled in the tankline division and a 27.1% increase in miles for the flatbed division. These increases reflect higher customer demand over the same period last year. Real estate revenues were $8,461,000 for the first half of 2004, an increase of $1,324,000 or 18.6% from the first half of 2003. Royalties from mining contracts increased $457,000 or 16.2% primarily resulting from a 38.2% increase in tons sold. Revenues from flex office-warehouse properties increased $933,000 or 21.9%, primarily due to a 16.3% increase in average leased square feet and, to a lesser extent, price increases. Real estate revenues included property sales of $65,000 in the first half of 2003 and no property sales during the first half of 2004. Consolidated gross profit increased $2,241,000 or 27.2% for the first half as compared to the same period last year. Gross profit in the transportation segment increased $1,788,000 or 41.9% as a result of the increased revenue and steady level of fixed costs. Gross profit in the real estate segment increased $453,000 or 11.4% from the first half of 2004 due to increased royalties from mining operations, as well as additional gross profits from newly developed commercial properties. Selling, general and administrative expense increased $387,000 or 9.7% for the first half of 2004 compared to the same period last year. On a comparative basis, selling, general and administrative expense as a percent of consolidated revenues, was 7.7% compared to 8.1% last year. The Company recorded an income tax provision of $1,616,000 in the first half of 2004 compared to $997,000 in the same period last year. The effective tax rate decreased to 38% in 2004 from 39% in 2003. Income from continuing operations was $2,636,000 or $.89 per diluted share for the first half of Fiscal 2004 compared to $1,560,000 or $.50 per diluted share for the first half of last year. Discontinued operations reflects a gain of $5,655,000 net of income taxes, as a result of the sale of land and improvements to a related party for $13,000,000. Net income was $8,291,000 or $2.79 per diluted share for the first half of Fiscal 2004 compared to $1,560,000 or $.50 per diluted share for the same period last year. Summary and Outlook The Company's real estate and transportation businesses are both experiencing an improved economic climate as the result of a strengthening regional and national economy. While low interest rates continue to enhance overall business conditions, the Company's real estate development operations are encountering stronger levels of inquiry from prospective tenants for the Company's flexible office/warehouse product. Demand for hauling services has also strengthened for the Company's transportation business. Improved demand and pricing is especially occurring for the Company's flatbed trucking operations which haul primarily construction materials. Adverse impacts from escalating diesel fuel costs, driver availability, and burdensome health and liability insurance costs will continue to challenge the trucking industry. Liquidity and Capital Resources For the first six months of Fiscal 2004, operating cash flow allowed the Company to repay $6,295,000 in long term debt and to repurchase Company stock for $2,132,000. At March 31, 2004, $30,833,000 was available under the Revolver. The Board of Directors has authorized Management to repurchase shares of the Company's common stock from time to time as opportunities arise. During the second quarter of Fiscal 2004, the Company repurchased 66,500 shares for $2,132,000. The Company has approximately $3,868,000 available for the repurchase of the Company's common stock as of March 31, 2004. On March 30, 2004, a subsidiary of the Company sold a parcel of land and improvements to FRI for $13,000,000 in cash, the proceeds from which were placed in escrow in anticipation of utilizing the funds for an IRS Section 1031 exchange. In April 2004, a subsidiary of the Company purchased two existing commercial warehouse/distribution buildings totaling 303,000 square feet and an adjacent 8.75 acre building lot located in Newark, Delaware. The purchase used $11,350,000 of the amounts held in escrow. The Company plans to use the remaining escrowed funds for additional 1031 exchange property, as yet undetermined. If a suitable exchange property cannot be found the funds will be made available for general use. During the second quarter of 2004, approximately $1,795,000 in funds held in escrow received from the sale of a mining property in September 2003 became unrestricted, as a suitable 1031 exchange property was not found. The cash was used to repay amounts due under the Revolver. In December 2003, the Company committed to develop a 145,000 square foot build to suit warehouse/office building for a NYSE listed company pursuant to a 15 year triple net lease. This project is expected to cost approximately $14,900,000. Construction costs will be funded through the Company's Revolver. The Company expects to obtain permanent non-recourse financing of approximately $11,000,000 upon completion of the project to be fully amortized over 15 years with level monthly payments of principal and interest. While the Company is affected by environmental regulations, such regulations are not expected to have a major effect on the Company's capital expenditures or operating results. Based on current expectations, management believes that its internally generated cash flow and access to existing credit facilities are sufficient on a current and long term basis to meet the liquidity requirements necessary to fund operations, capital requirements and debt service. A subsidiary of the Company signed an agreement to sell land to FRI for $15,000,000. The Company will recognize a gain on the sale of approximately $7,722,000, net of income taxes, or $2.61 per diluted common share. A subsidiary of the Company has also agreed to sell a parcel of land to FRI for $1,638,000. The Company will recognize a gain on the sale of approximately $999,000, net of income taxes, or $.34 per diluted common share. Both of these transactions are expected to close in May 2004. Proceeds from the sale will be placed in escrow in anticipation of redeploying the proceeds in a tax deferred exchange under Section 1031 of the Internal Revenue Code. Reinvestment of the proceeds from these transactions is expected to facilitate the Company's long term plan to build and own a portfolio of successful rental properties. For additional information see Note 5 of Notes to Condensed Consolidated Financial Statements. 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 these 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: driver availability and cost; regulations regarding driver qualification and hours of service; availability and terms of financing; freight demand for petroleum products including recessionary and terrorist impacts on travel in the Company's markets; freight demand for building and construction materials in the Company's markets; risk insurance markets; competition; general economic conditions; demand for flexible warehouse/office facilities in the Baltimore/Washington D.C. area; interest rates; levels of construction activity in FRI's markets; fuel costs; and inflation. 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS There are no material changes to the disclosures made in Form 10-K for the fiscal year ended September 30, 2003 with respect to this item. ITEM 4. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures. As required by Rule 13A-15 under the Exchange Act, as of the end of the period covered by this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's President and Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. The evaluation conducted by the Company's President and Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer has provided them with reasonable assurance that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company's periodic SEC filings. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rule and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer as appropriate, to allow timely decisions regarding required disclosures. Changes in internal controls. There have been no changes in internal controls or in other factors that could significantly affect these controls during the quarter, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II OTHER INFORMATION Item 1. Legal Proceedings See Note 9 to the Condensed Consolidated Financial Statements included in this Form 10-Q. Item 2. Changes in Securities and use of Proceeds Purchases of Equity Securities by the Issuer and Affiliated Purchasers (c) Total Number of Shares (d) Purchased Approximate (a) As Part of Dollar Value of Total (b) Publicly Shares that May Number of Average Announced Yet Be Purchased Shares Price Paid Plans or Under the Plans Period Purchased per Share Programs or Programs January 1 through January 31 - - - - February 1 through February 29 62,900 32.093 62,900 $3,981,000 March 1 through March 31 3,600 31.534 3,600 $3,868,000 Total 66,500 32.062 66,500 (1) In December, 2003, the Board of Directors authorized management to expend up to $6,000,000 to repurchase shares of the Company's common stock from time to time as opportunities arise. Item 4. Submission of Matters to a Vote of Security Holders On February 4, 2004, the Company held its annual shareholders meeting. At the meeting, the shareholders elected the following directors by the vote shown. Term Votes Votes Broker/ Ending For Withheld Non-Votes H. Jay Skelton 2008 2,710,051 30,995 - John D. Baker II 2008 2,713,446 27,600 - Luke E. Fichthorn 2008 2,710,051 30 995 - Charles E. Commander III 2005 2,713,446 27,600 - The directors whose terms of office as a director have continued after the meeting are Edward L. Baker, Thompson S. Baker II, James H. Winston, Robert H. Paul III, and Martin E. Stein, Jr. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The response to this item is submitted as a separate Section entitled "Exhibit Index", starting on page 18. (b) Reports on Form 8-K. On January 29, 2004, the Company filed a Form 8-K reporting under Items 7, 9 and 12, a press release announcing its earnings for the first quarter of the Fiscal year ending September 30, 2004. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. April 29, 2004 PATRIOT TRANSPORTATION HOLDING, INC. John E. Anderson John E. Anderson President and Chief Executive Officer Ray M. Van Landingham_ Ray M. Van Landingham Vice President Finance & Administration and Chief Financial Officer Gregory B. Lechwar Gregory B. Lechwar Controller and Chief Accounting Officer PATRIOT TRANSPORTATION HOLDING, INC. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2004 EXHIBIT INDEX (3)(a)(1) Articles of Incorporation of Patriot Transportation Holding Inc., incorporated by reference to the corresponding exhibit filed with Form S-4 dated December 13,1988. File No. 33-26115. (3)(a)(2) Amendment to the Articles of Incorporation of Patriot Transportation Holding, Inc. filed with the Secretary of State of Florida on February 19, 1991 incorporated by reference to the corresponding exhibit filed with Form 10-K for the fiscal year ended September 30, 1993. File No. 33-26115. (3)(a)(3) Amendments to the Articles of Incorporation of Patriot Transportation Holding, Inc. filed with the Secretary of State of Florida on February 7,1995, incorporated by reference to an appendix to the Company's Proxy Statement dated December 15, 1994. File No. 33-26115. (3)(a)(4) Amendment to the Articles of Incorporation of Patriot Transportation Holding, Inc., filed with the Florida Secretary of State on May 6, 1999 incorporated by reference to a form of such amendment filed as Exhibit 4 to the Company's Form 8-K dated May 5, 1999. File No. 33-26115. (3)(a)(5) Amendment to the Articles of Incorporation of Patriot Transportation Holding, Inc. filed with the Secretary of State of Florida on February 21, 2000, incorporated by reference to the corresponding exhibit filed with Form 10-Q for the quarter ended March 31, 2000. File No. 33-26115. (3)(b)(1) Restated Bylaws of Patriot Transportation Holding, Inc. adopted December 1, 1993, incorporated by reference to the corresponding exhibit filed with Form 10-K for the fiscal year ended September 30, 1993. File No. 33-26115. (3)(b)(2) Amendment to the Bylaws of Patriot Transportation Holding, Inc. adopted August 3, 1994, incorporated by reference to the corresponding exhibit filed with Form 10-K for the fiscal year ended September 30, 1994. File No. 33-26115. (3)(b)(3) Amendment to the Articles of Incorporation of Patriot Transportation Holding, Inc. filed with the Secretary of State of State of Florida on February 7, 1995, incorporated by reference to an appendix to the Company's Proxy Statement dated December 15, 1994. File No. 33-26115. (4)(a) Articles III, VII and XII of the Articles of Incorporation of Patriot Transportation Holding, Inc., incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. And amended Article III, incorporated by reference to an exhibit filed with Form 10-K for the fiscal year ended September 30, 1993. And Articles XIII and XIV, incorporated by reference to an appendix filed with the Company's Proxy Statement dated December 15, 1994. File No. 33-26115. (4)(b) Specimen stock certificate of Patriot Transportation Holding, Inc., incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. File No. 33-26115. (4)(c) Revolving Credit Agreement dated as of January 9, 2002 among Patriot Transportation Holding, Inc. as Borrower, the Lenders from time to time party thereto and SunTrust Bank as Administrative Agent, incorporated by reference to an exhibit filed with Form 10-Q for the quarter ended December 31, 2001. File No. 33-26115. (4)(d) The Company and its consolidated subsidiaries have other long-term debt agreements none of which exceed 10% of the total consolidated assets of the Company and its subsidiaries, and the Company agrees to furnish copies of such agreements and constituent documents to the Commission upon request. (4)(e) Rights Agreement, dated as May 5, 1999 between the Company and First Union National Bank, incorporated by reference to Exhibit 4 to the Company's Form 8-K dated May 5, 1999. File No. 33-26115. (10)(a) Various lease backs and mining royalty agreements with Florida Rock Industries, Inc., none of which are presently believed to be material individually, except for the Mining Lease Agreement dated September 1, 1986, between Florida Rock Industries Inc. and Florida Rock Properties, Inc., successor by merger to Grandin Land, Inc. (see Exhibit (10)(c)), but all of which may be material in the aggregate, incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(b) License Agreement, dated June 30, 1986, from Florida Rock Industries, Inc. to Florida Rock & Tank Lines, Inc. to use "Florida Rock" in corporate names, incorporated by reference to an exhibit filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(c) Mining Lease Agreement, dated September 1, 1986, between Florida Rock Industries, Inc. and Florida Rock Properties, Inc., successor by merger to Grandin Land, Inc., incorporated by reference to an exhibit previously filed with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(d) Summary of Medical Reimbursement Plan of Patriot Transportation Holding, Inc., incorporated by reference to an exhibit filed with Form 10-K for the fiscal year ended September 30, 1993. File No. 33-26115. (10)(e) Summary of Management Incentive Compensation Plans, incorporated by reference to an exhibit filed with Form 10-K for the fiscal year ended September 30, 1994. File No. 33-26115. (10)(f) Management Security Agreements between the Company and certain officers, incorporated by reference to a form of agreement previously filed (as Exhibit (10)(I)) with Form S-4 dated December 13, 1988. File No. 33-26115. (10)(g)(1) Patriot Transportation Holding, Inc. 1995 Stock Option Plan, incorporated by reference to an appendix to the Company's Proxy Statement dated December 15, 1994. File No. 33-26115. (10)(g)(2) Patriot Transportation Holding, Inc. 2000 Stock Option Plan, incorporated by reference to an appendix to the Company's Proxy Statement dated December 15, 1999. File No. 33-26115. (10)(h) Purchase and Sale Agreement dated February 6, 2002 between Florida Rock Industries, Inc. and Florida Rock Properties, Inc., incorporated by reference to an exhibit filed with Form 10-Q for the quarter ended December 31, 2001. (10)(i) Purchase and Sale Agreement dated August 25, 2003 between Florida Rock Properties, Inc. and Florida Rock Industries, Inc., incorporated by reference to an exhibit filed with Form 10-K for the year ended September 30, 2003. (10)(j) Agreement of Purchase and Sale dated October 21, 2003 between FRP Bird River, LLC and The Ryland Group, Inc., incorporated by reference to an exhibit filed with form 10-K for the year ended September 30, 2003. (10)(k) Purchase and Sale Agreement dated March 30, 2004 between Florida Rock Properties, Inc. and Mule Pen Quarry Corporation. (11) Computation of Earnings Per Common Share. (14) Financial Code of Ethical Conduct between the Company, Chief Executive Officers and Financial Managers, adopted December 4, 2002, incorporated by reference to an exhibit filed with Form 10-K for the year ended September 30, 2003. (31)(a) Certification of John E. Anderson. (31)(b) Certification of Ray M. Van Landingham. (31)(c) Certification of Gregory B. Lechwar. (32) Certification of Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.