News Column

PATRIOT TRANSPORTATION HOLDING INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

May 7, 2014

CONDITION AND RESULTS OF OPERATIONS

Overview - Patriot Transportation Holding, Inc. (the Company) is a holding company engaged in the transportation and real estate businesses.

The Company's transportation business, Florida Rock & Tank Lines, Inc. is engaged in hauling primarily petroleum and other liquids and dry bulk commodities in tank trailers.

The Company's transportation segment acquired certain assets of Pipeline Transportation, Inc. on November 7, 2013 for $10,023,000. Pipeline's operations have been conducted in the Florida and Alabama markets. For the twelve month period ending June 30, 2013, Pipeline had gross revenues of just over $16,500,000. 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, through the use of a third party valuations and management estimates, based upon the fair value of the assets acquired and liabilities assumed. In connection with the Pipeline acquisition, the Company assumed certain vehicle leases. These non-cancellable operating leases will require minimum annual rentals approximating $2,838,000 over the next 3.5 fiscal years.

The Company's real estate operations consist of two reportable segments. The Mining royalty land segment owns real estate including construction aggregate royalty sites and parcels held for investment. The Developed property rentals segment acquires, constructs, leases, operates and manages office/warehouse buildings primarily in the Baltimore/Northern Virginia/Washington area, and holds real estate for future development or related to its developments. Substantially all of the real estate operations are conducted within the Southeastern and Mid-Atlantic United States.

On May 7, 2014, the Company announced that it planned to separate its transportation business into an independent publicly traded company through a tax free spin-off of the transportation business to Patriot shareholders. The separation, which is subject to a number of conditions including final Board approval, receipt of an opinion of tax counsel and effectiveness of a registration statement on Form 10, is expected to be completed in the next 12 months.

The Company's operations are influenced by a number of external and internal factors. External factors include levels of economic and industrial activity in the United States and the Southeast, driver availability and cost, regulations regarding driver qualifications and hours of service, petroleum product usage in the Southeast which is driven in part by tourism and commercial aviation, fuel costs, construction activity, aggregates sales by lessees from the Company's mining properties, interest rates, market conditions and attendant prices for casualty insurance, demand for commercial warehouse space in the Baltimore-Washington-Northern Virginia area,

15



and ability to obtain zoning and entitlements necessary for property development. Internal factors include revenue mix, capacity utilization, auto and workers' compensation accident frequencies and severity, other operating factors, administrative costs, group health claims experience, and construction costs of new projects. There is a reasonable possibility that the Company's estimate of vehicle and workers' compensation liability for the transportation group may be understated or overstated but the possible range can not be estimated. The liability at any point in time depends upon the relative ages and amounts of the individual open claims. Financial results of the Company for any individual quarter are not necessarily indicative of results to be expected for the year.

Comparative Results of Operations for the Three months ended March 31, 2014 and 2013

Consolidated Results - Net income for the second quarter of fiscal 2014 was $1,703,000 compared to $2,271,000 for the same period last year. Diluted earnings per common share for the second quarter of fiscal 2014 were $.18 compared to $.24 for the same quarter last year. Although revenues for the Transportation segment were up 17% quarter over quarter, Transportation segment operating profit was impacted by a $303,000 increase ($121,000 out-of-town driver pay and $182,000 driver travel costs) in out-of-town driver cost to service new business and to address unexpected driver attrition in the acquired Pipeline business, a $128,000 increase in driver hiring and testing, a $102,000 loss on wrecked equipment, and a $225,000 reduction in equipment sale gains. The Company expects the out-of-town driver and driver recruitment costs to continue to exceed prior periods until an adequate number of local drivers are hired to service the business opportunities. The mining royalty land segment's results were lower due to a shift in production at one location decreasing the share of mining on property owned by the Company. The Developed property rentals segment's results improved due to higher occupancy and new buildings added partially offset by higher property taxes and professional fees.

Transportation Results Three months ended March 31 (dollars in thousands) 2014 % 2013 % Transportation revenue $ 26,800 84.0 % 22,460 82.6 % Fuel surcharges 5,100 16.0 % 4,716 17.4 % Revenues 31,900 100.0 % 27,176 100.0 % Compensation and benefits 11,816 37.0 % 9,733 35.8 % Fuel expenses 7,647 24.0 % 6,470 23.8 % Operating & repairs 3,454 10.8 % 2,457 9.0 % Insurance and losses 2,563 8.0 % 2,193 8.1 % Depreciation expense 2,063 6.5 % 1,781 6.6 % Rents, tags & utilities 1,006 3.2 % 624 2.3 %



Sales, general & administrative 2,133 6.7 % 2,023 7.5 % Allocated corporate expenses 427 1.3 % 407 1.5 % (Gain) Loss on equipment sales (106 ) -0.3 % (433 ) -1.7 %

Cost of operations 31,003 97.2 % 25,255 92.9 % Operating profit $ 897 2.8 % 1,921 7.1 % 16



Transportation segment revenues were $31,900,000 in the second quarter of 2014, an increase of $4,724,000 over the same quarter last year. Revenue miles increased 19.7% compared to the second quarter of fiscal 2013 due to the Pipeline acquisition on November 7, 2013, additional business growth and a longer average haul length. Revenue per mile decreased 2.0% over the same quarter last year due to a longer average haul length, a change in the mix of business and lower rates on the business acquired in the Pipeline acquisition.

Fuel surcharge revenue increased $384,000 due to the increase in miles offset by the lower cost of fuel and an increase in the mix of customers with lower surcharges. Fuel surcharges decreased as a percentage of total revenues due to an increase in the mix of customers with lower fuel surcharges. It is not meaningful to compare the amount of fuel surcharge revenue or the change in fuel surcharge revenue between reporting periods as a significant portion of fuel costs are included in transportation revenue.

The Transportation segment's cost of operations was $31,003,000 in the second quarter of 2014, an increase of $5,748,000 over the same quarter last year. The Transportation segment's cost of operations as a percentage of revenue increased to 97.2% compared to 92.9% in the second quarter of 2013 primarily due to the following reasons:

• Compensation and benefits increased 1.2% as a percentage of revenues due primarily to a driver pay increase implemented on March 2, 2013, a $121,000 increase in out-of-town driver pay to service new business and to address unexpected driver attrition in the acquired Pipeline business.

• Operating and repairs expenses increased 1.8% as a percentage of revenues due primarily to a $182,000 increase in driver travel costs to service new business and to address unexpected driver attrition in the acquired Pipeline business as well as a $128,000 increase in driver hiring costs and higher repair costs.

• Rents, tags and utilities increased .9% as a percentage of revenues due primarily to the addition of leased tractors in the Pipeline acquisition.

• Gains on equipment sales decreased 1.4% as a percentage of revenues during the quarter due to fewer equipment sales and a $102,000 loss in the quarter on wrecked equipment.

17



These expense increases were partially mitigated by lower sales, general and administrative expense as a percentage of revenue due to lower bonus compensation accruals.

Mining Royalty Land Results

Three months ended March 31



(dollars in thousands) 2014 % 2013 %

Mining royalty land revenue $ 1,226 100 % 1,244 100 %

Property operating expenses 124 10 % 122 10 % Depreciation and depletion 28 2 % 23 2 % Management Company indirect 6 0 % (3 ) 0 % Allocated corporate expenses 189 16 % 176 14 %

Cost of operations 347 28 % 318 26 % Operating profit $ 879 72 % 926 74 %



Mining royalty land segment revenues for the second quarter of fiscal 2014 were $1,226,000, a decrease of $18,000 or 1.4% over the same quarter last year due to a shift in production at one location decreasing the share of mining on property owned by the Company.

The mining royalty land segment's cost of operations was $347,000 in the second quarter of 2014, an increase of $29,000 over the same quarter last year due primarily to higher allocated corporate and management expenses.

Developed Property Rentals Results

Three months ended March 31 (dollars in thousands) 2014 % 2013 %



Developed property rentals revenue $ 6,781 100 % 5,448 100 %

Property operating expenses 2,222 33 % 1,240 23 % Depreciation and amortization 1,685 25 % 1,421 26 % Management Company indirect 397 6 % 393 7 % Allocated corporate expenses 283 4 % 264 5 % Cost of operations 4,587 68 % 3,318 61 % Operating profit $ 2,194 32 % 2,130 39 %



Developed property rentals segment revenues for the second quarter of fiscal 2014 were $6,781,000, an increase of $1,333,000 or 24.5% due to higher occupancy, snow removal reimbursements, revenue on the 125,550 square foot build to suit building completed and occupied during the quarter and revenue on the 5 buildings added June 2013 related to the purchase of Transit Business Park. Occupancy at March 31, 2014 was 89.8% as compared to 88.5% at March 31, 2013.

18



Developed property rentals segment's cost of operations was $4,587,000 in the second quarter of 2014, an increase of $1,269,000 or 38.2% over the same quarter last year. Property operating expenses increased $982,000 due to higher occupancy, property taxes ($258,000), snow removal costs ($625,000), professional fees ($58,000), and the new buildings placed in service. Depreciation and amortization increased $264,000 primarily due to the newly completed build to suit building and the purchase of Transit Business Park reduced by certain tenant improvements becoming fully depreciated. Management Company indirect expenses (excluding internal allocations for lease related property management and construction fees) increased $4,000. Allocated corporate expenses increased $19,000.

Consolidated Results



Operating Profit - Consolidated operating profit was $3,146,000 in the second quarter of fiscal 2014, a decrease of $1,162,000 or 27.0% compared to $4,308,000 in the same period last year. Operating profit in the transportation segment decreased $1,024,000 or 53.3%. Although revenues for the Transportation segment were up 17% quarter over quarter, Transportation segment operating profit was impacted by a $303,000 increase ($121,000 out-of-town driver pay and $182,000 driver travel costs) in out-of-town driver cost to service new business and to address unexpected driver attrition in the acquired Pipeline business, a $128,000 increase in driver hiring and testing, a $102,000 loss on wrecked equipment, and a $225,000 reduction in equipment sale gains. The Company expects the out-of-town driver and driver recruitment costs to continue to exceed prior periods until an adequate number of local drivers are hired to service the business opportunities. Operating profit in the mining royalty land segment decreased $47,000 or 5.1% primarily due to a shift in production at one location decreasing share of mining on property owned by the Company. Operating profit in the Developed property rentals segment increased $64,000 or 3.0% due to higher occupancy, the 125,550 square foot build to suit building completed and occupied during the second quarter 2014, and the addition of Transit Business Park offset by higher property taxes and professional fees. Consolidated operating profit includes corporate expenses not allocated to any segment in the amount of $824,000 in the second quarter of fiscal 2014, an increase of $155,000 compared to the same period last year primarily due to the higher market value associated with the annual director stock grant.

Gain on investment land sold - Gain on investment land sold for the second quarter of fiscal 2014 included $22,000 of deferred profits on prior year land sales.

Interest income and other (expense) income, net - Interest income and other (expense) income, net decreased $5,000 over the same quarter last year.

19



Interest expense - Interest expense decreased $234,000 over the same quarter last year due to a declining mortgage principal balance and higher capitalized interest. The amount of interest capitalized on real estate projects under development was $60,000 higher than the same quarter in fiscal 2013.

Income taxes - Income tax expense decreased $363,000 over the same quarter last year due to lower earnings compared to the same quarter last year.

Net income - Net income for the second quarter of fiscal 2014 was $1,703,000 compared to $2,271,000 for the same period last year. Diluted earnings per common share for the second quarter of fiscal 2014 were $.18 compared to $.24 for the same quarter last year. Although revenues for the Transportation segment were up 17% quarter over quarter, Transportation segment operating profit was impacted by a $303,000 increase ($121,000 out-of-town driver pay and $182,000 driver travel costs) in out-of-town driver cost to service new business and to address unexpected driver attrition in the acquired Pipeline business, a $128,000 increase in driver hiring and testing, a $102,000 loss on wrecked equipment, and a $225,000 reduction in equipment sale gains. The Company expects the out-of-town driver and driver recruitment costs to continue to exceed prior periods until an adequate number of local drivers are hired to service the business opportunities. The mining royalty land segment's results were lower due to a shift in production at one location decreasing the share of mining on property owned by the Company. The Developed property rentals segment's results improved due to higher occupancy and new buildings added partially offset by higher property taxes and professional fees.

Comparative Results of Operations for the Six months ended March 31, 2014 and 2013

Consolidated Results - Net income for the first six months of fiscal 2014 was $4,044,000 compared to $5,394,000 for the same period last year. Diluted earnings per common share for the first six months of fiscal 2014 were $.42 compared to $.56 for the same period last year.

Although revenues for the Transportation segment were up 18% year over year, Transportation segment operating profit was impacted by a $569,000 increase ($246,000 out-of-town driver pay and $323,000 driver travel costs) in out-of-town driver cost to service new business and to address unexpected driver attrition in the acquired Pipeline business, a $187,000 increase in driver hiring and testing, a $223,000 loss on wrecked equipment, and a $345,000 reduction in equipment sale gains. The Company expects the out-of-town driver and driver recruitment costs to continue to exceed prior periods until an adequate number of local drivers are hired to service the business opportunities. The mining royalty land segment's results were lower due to a shift in production at one location decreasing the share of mining on property owned by the Company. The Developed property rentals segment's results improved due to higher occupancy and new buildings added partially offset by higher property taxes and professional fees.

20 Transportation Results Six months ended March 31 (dollars in thousands) 2014 % 2013 % Transportation revenue $ 53,290 83.9 % 44,451 82.6 % Fuel surcharges 10,201 16.1 % 9,364 17.4 % Revenues 63,491 100.0 % 53,815 100.0 % Compensation and benefits 23,412 36.9 % 19,167 35.6 % Fuel expenses 14,930 23.5 % 12,726 23.7 % Operating & repairs 6,603 10.4 % 4,910 9.1 % Insurance and losses 5,038 7.9 % 4,081 7.6 % Depreciation expense 4,031 6.4 % 3,488 6.5 % Rents, tags & utilities 1,777 2.8 % 1,176 2.2 %



Sales, general & administrative 4,519 7.1 % 4,330 8.0 % Allocated corporate expenses 919 1.4 % 878 1.6 % (Gain) Loss on equipment sales (91 ) -.1 % (659 ) -1.2 %

Cost of operations 61,138 96.3 % 50,097 93.1 % Operating profit $ 2,353 3.7 % 3,718 6.9 %



Transportation segment revenues were $63,491,000 in the first six months of 2014, an increase of $9,676,000 over the same period last year. Revenue miles in the first six months of fiscal 2014 were up 21.0% compared to the first six months of fiscal 2013 due to the Pipeline acquisition on November 7, 2013, business growth and a longer average haul length. Revenue per mile decreased 2.7% over the same period last year due to a longer average haul length and lower rates on the business acquired in the Pipeline acquisition.

Fuel surcharge revenue increased $837,000 due to the increase in miles offset by the lower cost of fuel and an increase in the mix of customers with lower surcharges. Fuel surcharges decreased as a percentage of total revenues due to an increase in the mix of customers with lower fuel surcharges. It is not meaningful to compare the amount of fuel surcharge revenue or the change in fuel surcharge revenue between reporting periods as a significant portion of fuel costs are included in transportation revenue.

The Transportation segment's cost of operations was $61,138,000 in the first six months of 2014, an increase of $11,041,000 over the same period last year. The Transportation segment's cost of operations in the first six months of 2014 as a percentage of

21



revenue increased to 96.1% compared to 93.1% in the first six months of 2013 primarily due to the following reasons:

• Compensation and benefits increased 1.3% as a percentage of revenues due primarily to a driver pay increase implemented on March 2, 2013, a $246,000 increase in out-of-town driver pay to service new business and to address unexpected driver attrition in the acquired Pipeline business.

• Operating and repairs expenses increased 1.3% as a percentage of revenues due primarily to a $323,000 increase in driver travel costs to service new business and to address unexpected driver attrition in the acquired Pipeline business as well as a $187,000 increase in driver hiring costs and $104,000 in rigging and rebranding costs related to the Pipeline acquisition.

• Insurance and losses increased .3% as a percentage of revenues due primarily to higher health and risk insurance claims.

• Rents, tags and utilities increased .6% as a percentage of revenues due primarily to the addition of leased tractors in the Pipeline acquisition.

• Gains on equipment sales decreased 1.1% as a percentage of revenues during the quarter due to fewer equipment sales and a $223,000 loss in the quarter on wrecked equipment.

These expense increases were partially mitigated by lower sales, general and administrative expense as a percentage of revenue due to lower bonus compensation accruals.

Mining Royalty Land Results

Six months ended March 31



(dollars in thousands) 2014 % 2013 %

Mining royalty land revenue $ 2,494 100 % 2,575 100 %

Property operating expenses 242 10 % 234 9 % Depreciation and depletion 56 2 % 48 2 % Management Company indirect - 0 % (8 ) 0 % Allocated corporate expenses 378 15 % 352 13 %

Cost of operations 676 27 % 626 24 % Operating profit $ 1,818 73 % 1,949 76 %



Mining royalty land segment revenues for the first six months of fiscal 2014 were $2,494,000, a decrease of $81,000 or 3.1% over the same period last year due to a shift in production at one location decreasing the share of mining on property owned by the Company.

22



The mining royalty land segment's cost of operations was $676,000 in the first six months of 2014, an increase of $50,000 over the same period last year due primarily to higher property taxes and an increase in allocated corporate expenses.

Developed Property Rentals Results

Six months ended March 31 (dollars in thousands) 2014 % 2013 %



Developed property rentals revenue $ 12,742 100 % 10,535 100 %

Property operating expenses 3,831 30 % 2,357 22 % Depreciation and amortization 3,284 26 % 2,851 27 % Management Company indirect 784 6 % 818 8 % Allocated corporate expenses 566 4 % 528 5 % Cost of operations 8,465 66 % 6,554 62 % Operating profit $ 4,277 34 % 3,981 38 %



Developed property rentals segment revenues for the first six months of fiscal 2014 were $12,742,000, an increase of $2,207,000 or 20.9% due to higher occupancy, snow removal reimbursements, revenue on the 117,600 square foot build to suit building completed and occupied during the quarter ended March 2013, revenue on the 5 buildings added June 2013 related to the purchase of Transit Business Park and revenue on the 125,550 square foot build to suit building completed and occupied during the quarter ended March 2014. Occupancy at March 31, 2014 was 89.8% as compared to 88.5% at March 31, 2013.

Developed property rentals segment's cost of operations was $8,465,000 in the first six months of 2014, an increase of $1,911,000 or 29.2% over the same period last year. Property operating expenses increased $1,474,000 due to higher occupancy, property taxes ($511,000), snow removal costs ($702,000), professional fees ($136,000) and the new buildings placed in service. Depreciation and amortization increased $433,000 primarily due to the recently completed build to suit buildings and the purchase of Transit Business Park reduced by certain tenant improvements becoming fully depreciated. Management Company indirect expenses (excluding internal allocations for lease related property management and construction fees) decreased $34,000 due to lower health insurance costs partially offset by higher professional fees. Allocated corporate expenses increased $38,000.

Consolidated Results



Operating Profit - Consolidated operating profit was $7,270,000 in the first six months of fiscal 2014, a decrease of $1,446,000 or 16.6% compared to $8,716,000 in the same period last year. Operating profit in the transportation segment decreased $1,365,000

23



or 36.7%. Although revenues for the Transportation segment were up 18% year over year, Transportation segment operating profit was impacted by a $569,000 increase ($246,000 out-of-town driver pay and $323,000 driver travel costs) in out-of-town driver cost to service new business and to address unexpected driver attrition in the acquired Pipeline business, a $187,000 increase in driver hiring and testing, a $223,000 loss on wrecked equipment, and a $345,000 reduction in equipment sale gains. The Company expects the out-of-town driver and driver recruitment costs to continue to exceed prior periods until an adequate number of local drivers are hired to service the business opportunities. Operating profit in the mining royalty land segment decreased $131,000 or 6.7% primarily due a shift in production at one location decreasing share of mining on property owned by the Company. Operating profit in the Developed property rentals segment increased $296,000 or 7.4% due to higher occupancy, the 117,600 square foot build to suit building completed and occupied during the second quarter 2013, the addition of Transit Business Park and the 125,550 square foot build to suit building completed and occupied during the second quarter 2014 offset by higher property taxes and professional fees. Consolidated operating profit includes corporate expenses not allocated to any segment in the amount of $1,178,000 in the first six months of fiscal 2014, an increase of $246,000 compared to the same period last year primarily due to the higher market value associated with the annual director stock grant.

Gain on investment land sold - Gain on investment land sold for the first six months of fiscal 2014 included $78,000 of deferred profits on prior year land sales. Gain on investment land sold for the first six months of fiscal 2013 included a gain on the sale of the developed property rentals Commonwealth property of $1,116,000 before income taxes. The book value of the property was $723,000.

Interest income and other (expense) income, net - Interest income and other (expense) income, net decreased $36,000 over the same period last year due to funds received in consideration for the conveyance of easement property in the prior year.

Interest expense - Interest expense decreased $351,000 over the same period last year due to a declining mortgage principal balance offset by lower capitalized interest. The amount of interest capitalized on real estate projects under development was $15,000 lower than the same period in fiscal 2013.

Income taxes - Income tax expense decreased $863,000 over the same period last year due to lower earnings compared to the same period last year.

Net income - Net income for the first six months of fiscal 2014 was $4,044,000 compared to $5,394,000 for the same period last year. Diluted earnings per common share for the first six months of fiscal 2014 were $.42 compared to $.56 for the same period last year. Although revenues for the Transportation segment were up 18%

24



year over year, Transportation segment operating profit was impacted by a $569,000 increase ($246,000 out-of-town driver pay and $323,000 driver travel costs) in out-of-town driver cost to service new business and to address unexpected driver attrition in the acquired Pipeline business, a $187,000 increase in driver hiring and testing, a $223,000 loss on wrecked equipment, and a $345,000 reduction in equipment sale gains. The Company expects the out-of-town driver and driver recruitment costs to continue to exceed prior periods until an adequate number of local drivers are hired to service the business opportunities. The mining royalty land segment's results were lower due to a shift in production at one location decreasing the share of mining on property owned by the Company. The Developed property rentals segment's results improved due to higher occupancy and new buildings added partially offset by higher property taxes and professional fees.

Liquidity and Capital Resources. The growth of the Company's businesses requires significant cash needs. The Company expects to meet short-term liquidity requirements generally through working capital, net cash provided by operations, and, if necessary, borrowings on its unsecured revolving credit facility. The Company intends to meet long-term funding requirements for transportation equipment and acquisitions, property acquisitions and development, debt service, and share repurchases through net cash from operations, long-term secured and unsecured indebtedness, including borrowings under its unsecured revolving credit facility, and proceeds from sales of strategically identified assets.

For the first six months of fiscal 2014, the Company used cash provided by operating activities of $8,623,000, borrowings of $20,145,000 under its Revolver, proceeds from the sale of plant, property and equipment of $500,000, proceeds from the exercise of employee stock options of $669,000, excess tax benefits from the exercise of stock options of $539,000, and cash balances to purchase $5,744,000 in transportation equipment, to expend $4,798,000 in real estate development, to invest $10,023,000 in the Pipeline Transportation business acquisition, to invest $210,000 in joint ventures, to make $2,120,000 in payments on long-term debt, and to make payments of $8,300,000 under the Revolver. Cash held in escrow decreased $1,349,000. Cash increased $630,000.

Cash flows from operating activities for the first six months of fiscal 2014 were $760,000 lower than the same period last year primarily due to higher insurance liability payments in the prior year offset by increased receivables resulting from transportation revenue increases. Accrued insurance liabilities were higher in the prior year due to payment in settlement of three unusually large prior year liability and health claims.

Cash flows used in investing activities for the first six months of fiscal 2014 were $8,632,000 higher primarily due to the acquisition of Pipeline Transportation, Inc. in November 2013. The prior year included larger sales of equipment and land while the current year included lower purchases of transportation equipment exclusive of the Pipeline Transportation, Inc. acquisition.

25



Cash flows provided by financing activities for the first six months of fiscal 2014 were $12,208,000 higher than the same period last year due to borrowing on the Revolver.

On December 21, 2012, the Company entered into a five year credit agreement with Wells Fargo Bank, N.A. with a maximum facility amount of $55 million (the "Credit Agreement"). The Credit Agreement provides a revolving credit facility (the "Revolver") with a maximum facility amount of $40 million, with a $20 million sublimit for standby letters of credit, and a term loan facility of $15 million. As of March 31, 2014, $11,845,000 was borrowed under the Revolver, $7,423,000 in letters of credit was outstanding, and $35,732,000 was available for additional borrowing. The letters of credit were issued for insurance retentions and to guarantee certain obligations to state agencies related to real estate development. Most of the letters of credit are irrevocable for a period of one year and typically are automatically extended for additional one-year periods. The Revolver bears interest at a rate of 1.0% over the selected LIBOR, which may change quarterly based on the Company's ratio of Consolidated Total Debt to Consolidated Total Capital, as defined. A commitment fee of 0.15% per annum is payable quarterly on the unused portion of the commitment. The commitment fee may also change quarterly based upon the ratio described above. The Credit Agreement contains certain conditions, affirmative financial covenants and negative covenants including limitations on paying cash dividends. As of March 31, 2014, $69,578,000 of consolidated retained earnings would be available for payment of dividends. The Company was in compliance with all covenants as of March 31, 2014.

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 first six months of fiscal 2014 the Company did not repurchase any shares of stock. As of March 31, 2014, $3,682,000 was authorized for future repurchases of common stock. The Company does not currently pay any cash dividends on common stock.

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.

Summary and Outlook. Transportation revenues for the first six months of fiscal 2014 increased $9,676,000 or 18.0% over the first six months of 2013. The bottom line contribution of these additional revenues was not achieved as duplicate expense of temporarily transferred drivers and extra driving and training pay nullified any return on the added revenues. The company has been adding approximately five net new drivers a month, exclusive of the Pipeline acquisition, for the last nine months and anticipates

26



continuing a similar addition of drivers. As permanent drivers are added to our employment rolls the company expects that the added revenues will become contributory to our profitability.

Developed property rentals occupancy has increased from 88.5% to 89.8% over March 31, 2013 as the market for new tenants has improved and traffic for vacant space has increased. Occupancy at March 31, 2014 and 2013 included 8,200 square feet or .2% and 25,660 square feet or .9% respectively for temporary leases under a less than full market lease rate. In November 2013 the Company signed an agreement to sell 4.4 acres at Patriot Business Park for $2,000,000. The book value of the property at March 31, 2014 was $1,319,000. The sale closed April 21, 2014.

The Company anticipates commencement of construction of the first phase of the four phase Anacostia development in mid 2014 with lease up scheduled between late 2015 and all of 2016.

On May 7, 2014, the Company announced that it planned to separate its transportation business into an independent publicly traded company through a tax free spin-off of the transportation business to Patriot shareholders. The separation, which is subject to a number of conditions including final Board approval, receipt of an opinion of tax counsel and effectiveness of a registration statement on Form 10, is expected to be completed in the next 12 months. The Company expects to incur significant transaction related expenses in connection with the separation.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters