Q1 2021 Patriot Transportation Holding Inc Earnings Call
Greetings and welcome to Patriot Transportation Holding's, Inc. Second quarter conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the call.
Over to your host CEO and President Rob Sandlin.
Good afternoon, and thank you all for being on the call today and for your interest in Patriot transportation.
I am Rob Sandlin CEO of Patriot transportation and with me today are Matt Mcnulty, our Chief Financial Officer, and John Klopfenstein, Our Chief Accounting Officer before we get into our results. Let me caution you that any statements made during this call that relate to the future are by their nature subject to risks and uncertainties that could cause actual results on a day.
On the differ materially from those indicated by such forward looking statements additional information regarding these and other risk factors and uncertainties maybe found on the Companys filings with the Securities and Exchange Commission.
From a first quarter results.
Today, the company reported a first quarter net loss of $222000 or a negative <unk> <unk> per share compared to a net loss of $464000 or 14th or loss of <unk> 14 per share.
Last year's quarter.
Total revenues were $20 million and $228000 a decrease of $4.581 million from the same quarter last year, primarily due to the downsizing of two large customers and the closing of our Wilmington, North Carolina terminal.
The remaining revenue decline is attributable to the negative impacts of COVID-19 on petroleum demand and the lower driver count.
Our transportation revenue increased by 14 cents per mile or four 9% versus last year's same quarter due to rate increases on eliminating lower rated business.
Surcharge revenue was down $1 billion $199000.
Compensation and benefits decreased $1.947 million, mainly due to lower company miles less minimum pay expense and reduction of non driver staff dip.
Depreciation expense decreased by $205000 as we continued to rightsize the fleet.
Insurance on losses decreased $647000 due to lower health client health care claims.
And repair entire expense decreased due to lower miles for loss of disposition of assets was $93000 due to a non preventable accident or a newer model tractor.
SG&A was $345000 lower due to management's decision to lower cost.
As a result operating loss for the quarter was 301000 on negative $301000 compared to an operating loss of $724000 in last year's first quarter from an operating ratio of 101, five compared to 102.9 during last year's quarter.
For a summary and outlook during 2020, we downsized certain customers, resulting in lower revenue. This first quarter with additional decreased revenue due to COVID-19 related business declines and a shortage of drivers in some markets.
Rob a shortage in related hiring and turnover challenge continues to be a problem for us in the trucking industry as a whole management made some adjustments to our new hire driving driver pay during the quarter and have seen some improvements in January but it is too soon to tell if that will last we have also seen one major convenience store company began to add.
A private fleet and some of our markets, which is impacting driver availability in those markets.
Thus, putting putting a strain on our ability to grow our revenue and increasing the cost of hiring and training.
We continue making changes to our business by eliminating lower rated freight and reducing overhead.
Our intention is to continue to push rates higher to offset the rising costs of driver hiring and retention and auto liability insurance premiums and to partner with those customers that understand the difficulty of the market presents at this time.
COVID-19 pandemic continues to challenge us due to lower volume and an increase on the number of employees that have tested positive thus decreasing our ability to meet demand at certain times.
During last fiscal year, we made a number of permanent layoffs of hourly and salaried staff and we eliminated all of our driver pay driver pay minimums and we continue to review our operating cost for additional opportunities to lower expenses.
During January 2021, we sold a group of tractors and trailers that will further reduce depreciation expense and maintenance.
Fortunately, we have zero debt on our balance sheet on all of our tractors and trailers, except for 30 leased tractors and have over $7 million of cash we do not have plans to purchase any replacement equipment until the last quarter of 2021, and we anticipate our capital expenditures for fiscal 2021 will be approximately 3 million.
Looking ahead, we are fortunate to be on a strong position to continue to operate our business and we'll focus revenue growth on accounts willing to pay a price that allows for a reasonable return on investment and longer term partnership.
On the water business that we mentioned last quarter started producing revenue in December approximately $80000 and we're working through some startup issues and expect to have a strong year of demand from this new business opportunity, we are focusing on growing our dry bulk business by leveraging our relationships in markets, where we can add capacity to current petroleum.
Terminals, but again the challenge is adding driver capacity.
Finally, I will say the same thing that I said last quarter I've been pleased with the response of our management team on our employees. Our management team has taken the necessary steps to meet the safety guidelines established by the CDC for our boys are drivers, while central with the U S. Economy have taken are taken on earnings hit during this crisis they have react.
Positively for the most part.
I appreciate their dedication to providing the transportation needs for all of us and for their loyalty to Patriot I am fortunate to be part of such a great group of people. Thank you again for your interest in our company and I'll be happy to entertain any questions.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Okay.
Okay.
Yeah.
And our first question comes from Steve Rudd with Blackwell.
Please state your question.
Sure Chris.
Well done in managing multiple crises.
It's really quite impressive.
I have a few few questions I'll try to run through all of them. The first is in a rising fuel cost environment in Europe, you tend to have a better margin on your fuel surcharges as opposed to a decline in fuel cost environment.
So the way it works is honest honest way up as it's moving upwards, our fuel surcharges lag so it actually hurts us to some degree.
And then the opposite on the way down so as the price drops we're getting a little more fuel surcharge until they get adjusted until the price essentially settles out and then it kind of just Washington itself out on the on the other side, Steve I think Rob I think I think to answer the other part of that there really isn't.
Much if any margin benefit.
It just really depends on whether its a real short haul or long haul and I think all of that washes out in the end and over time those things have become pretty neutral, yes, it's more of a timing thing on anything.
Yeah.
Okay, we all wash out in the law.
Yeah.
No.
And my second question is your properties when you look at folks on your type of business.
Asset to a degree and also part liability because of the environmental issue.
Issues are and if you had to dispose of your properties and I'm not talking about the tractor is in the line component.
Plans are in effect.
On the disposal you at least in book I mean, that's.
I'm trying to just gauge what what our asset value this year.
Yeah, I mean, I think I mean, it's.
I think the easiest way to answer that question would be to say for sure we would be able to get book value over book value on a sale of all of our properties because we don't have a lot on the books for the properties.
Okay.
Right now we're working on.
Disposing excess fleet, which will take down our depreciation.
Let me start with that my analysis in a broad brush of the current business year in and Youre doing a good job of transitioning to carrying other products. If you look at the carrying fuel to a two two year customers theoretically that business has a sunset to it as well.
Lean energy comes on board and maybe it's a 30 year, San said or maybe its 50.
So what I Wonder is you have got depreciation is running even if you adjusted down to roughly 6 million on your Capex is about $3 million by the way I'll just pause is that about right for 2021 I know you gave the Capex number again.
We don't know exactly what it is but it's close it on.
Right Okay.
So is the thought process going forward to generate the cash and then at the end of the year see where you are on dividend out what you can dividend out like we did this year.
I would say on the first part of your question to two.
Oh gosh.
Oh I would say on the first part of your question, Yes, I mean, our plan is to run the business. This year and again try to make improvements to the operating profit and make money as far as the cash at this point, we don't have any current plans with respect any more cash.
Well basically in the year, where we end and we'll probably revisit it at that time would be my thought.
I think as far as as far as just the sunset of fuel.
I agree with you that I think thats pretty far out in time, and we continue to see those convenience store companies building.
Building and growing and I think we've got a little longer tail, but certainly that is something that we're thinking about and what are what do we do on what's our strategy on other products as we go forward right.
No I think youre planning on well and by the way the Sunset itself is a barrier to competition, because who want to enter with the sensor.
Pricing may actually be as wanted to let you know.
In 20 years from now you're the last one of the last few standing your actual margins may not be that bad at that point, it's just what we do with the cash and returning it to shareholders is always.
There always are favored.
To me as a shareholder a favorite of that alright, that's all I've got for non May revisit with you guys a little bit after I read.
It's more about the company that I appreciate it great I appreciate your questions. Thank you.
And our next question is from John to share with Pinnacle.
Good afternoon, everyone Hello, Hello.
Just curious how you're managing the business responsibly and in a tough market.
But I'm a bit concerned with the comment on the convenient store operator, who is migrating to a private fleet.
Ooh Ooh is that convenience store, operator, or the customer of yours.
Why would they think about.
Developing a captive fleet.
Going forward.
Yeah, I don't really.
I have no idea why they would be.
Going to a private fleet I can't I don't on.
What we don't say, it's our first question in this market, we don't we don't understand it.
No.
I don't know.
I don't know if I should say, who it is or not so I probably shouldn't but.
It kind of surprises us, but it's been done before and listen oil companies over the when I started in this business 30, 36 years ago, most of the oil companies hold their own freight and then the carriers did dedicated work behind them and overflow. So I would say that that's been a cycle.
Over time and you sometimes you just get a.
A company that likes you may get new management in place and Thats the business they want to be in but that's a that is a huge capital investment.
For a large convenience store company to go out and gear up for with all new equipment to get into that business.
Okay.
It's a business on a scale so it sounds like it's one of the nationwide operators or certainly at least a strong regional player.
I would probably say global glut of large.
It's a very large yes, it's a very large company okay.
And do you know if they're if they're trying this out.
Nationwide or just.
Higher salaries on it I don't know I don't know what their strategy is because they haven't shared that was but but it's on a pretty large scale. It's fairly widespread okay and then their market. So it's pressuring you in terms of.
Our recruiting drivers Okay got it could you share with us the the water business and the dry bulk business.
I haven't seen a lot in print.
From you all but.
What are each of those businesses.
Why are you <unk>.
Turning them on it so the water is the.
The water is something new in the way we think about this going forward is if we can enter a segment of let's call. It tank truck business of some sort whether thats chemical will dry bulk food grade water whatever the case may be and we can do that within our footprint, where we have.
<unk>.
People in place and facilities in place and we can add that revenue and volume.
We feel pretty comfortable about that whether it's a food grade water.
Or whether it's so Matt.
Your line products that we've held for a long time, we've always had a small segment of our business, which was in the Drybulk world and as you know.
Depending on the building economy.
That business can be the really good or it can be marginal.
And we think that for the foreseeable future.
Infrastructure spending maybe some pent up demand coming out of Covid that that business is going to be pretty good.
See the backlog of loads that don't get covered with our current customer base.
Some of that being driven by the driver shortage and some of that being driven by their demand all of a sudden kicking up coming out of COVID-19, a little bit more and maybe some jobs that have been delayed.
But we think that it's an.
<unk> for us to add those types of businesses at the terminals that we already own and where we have dispatchers and personnel in place.
And really do it without adding any overhead.
Do you have dry bulk customers in place right now that you're serving yes, yes, yes.
Okay is it significant in terms of revenue.
What do we say that our drybulk businesses on the our petroleum is roughly 80 80, 888% on what we do.
And of that other 12, Drybulk has the largest percentage of that.
It's 80% of that remaining.
12%. So we've always had a nice book of business and we can grow which is what we're doing right now.
It's limited by the number of drivers. So we can hire it's a challenge, but we've done some of that already and we can just expand with the customer base that we already know and then we start to call on the customers that we are not doing business with our potential customers and growth that way.
Okay. So this is.
A new focus for you in terms of growing that the dry bulk business, yes, Sir okay.
Okay.
Need separate.
Tractors and trailers to service the drybulk versus the.
Gasoline don't you do not need separate tractors.
You just need a different you need it's an off loading system called a blower that you put on there, but you do need a pneumatic drybulk trailer, we we do have some of those.
In our asset base right now that would allow us some growth.
And they are pretty inexpensive to acquire because you can also haul fracking sand with those trailers and that business is down considerably and probably.
If our new administration has anything to do with it will be down considerably from the next four four or however, many years and so they are pretty readily available out there at a good price, okay and the water business. What is that business exactly that is that is just solid business from a from a wellhead to a bottling plant.
And Thats, just a growing business and we were given an opportunity to quote on to several pieces of that business, but we were actually awarded two of those which gave US an introduction to this nationwide company to start hauling product for them.
It fits it's the same model, we were able to do that at two of our existing locations and we're not going to have to add any overhead or personnel to manage that business. We do it with the folks that are in place. Yes. The only thing we had to deal with by the trailers because they are totally different trailers through great trailers. So we did that last year and and got the <unk>.
Go on in late November and it was going pretty pretty well in December and we're just continuing to try to expand that hauling because it is.
It's a good it's a good expansion opportunity for us okay.
Tim networks team driver requirements.
Farmers, who are literally driver requirements are a little easier because it's just non hazardous water right. So we could all of driver similar to the dry bulk business, they're not going to require nearly as much training as water petroleum driver.
Okay, well, what do you think that business could ramp up to in terms of revenues.
We're just really learned in that market, so I'd be I'd be hesitant to say right now but.
We have for this book of business. We bought we put on are we put.
We bought seven trailers to put to work on this business. So.
We're going to see if we can't if we like the business, which we're just getting started so I can't I can't pass judgment on it just yet but it would be something we would try to expand if we do okay and it does the same sales force handle all three lines.
Yes, Okay, So alright, gotcha alright good.
That's helpful. Thank you great. Thank you Jamie.
Yes.
And our next and final question is from Jason <unk> with Bumbershoot Holdings.
Hey, Jay Good afternoon, good afternoon guys.
Just wanted to follow up on the first question in terms of the properties and the book value or there are any.
That might be significant in terms of.
A different alternative use relative to what you guys are using in terms of book and then kind of with that is there any update on the Tampa property, which I'm, assuming kind of would fit that bill.
On that.
We've got a couple of properties that I'd say the answer on most of them is no most of them of our terminal properties are small and they are built for what we are using them for so theres not a huge amount of value there and they're older.
Jacksonville comes to mind, we did have quite a bit of land in Jacksonville.
That would have some value because it's near the port.
But thats really about it other than the ones you already know about Tampa, the excess decent Pensacola.
Most of them are not a not a reuse type thing like Tampa, we don't have any other campus.
Tampa update as we are still in kind of constant negotiations on the property with a handful of potential buyers.
But nothing nothing solid right now.
But we do plan to close on Pensacola property on the 15th of February is the scheduled closing date.
Okay, and just what is kind of the index.
What are the next steps on Tampa.
As you look out over there.
I mean, my real my real goal is to get it under contract pretty quickly.
And.
Honestly, our goal would be to get a contract that has a shorter closing periods.
What we're focused on but just going back and forth with a couple of different types of buyers and so they each have their own greenough requirements.
We just haven't been able to reach a deal just yet but is it just the buyer deciding at the right time to do it in the right price or is there any other structural impediments at this point with no idled in or anything like that.
No. It's really just we're just negotiating on price.
Timeline, yes.
We've gotten all of that behind us.
Okay.
I appreciate it guys. Thanks, great. Thank you.
And we actually have Steve Rudd with another question with Blackwell.
Hi.
So just as a follow up on actually the series of questions that came from the other two folks.
The first is on that.
Nationwide retail operators, starting their own fleet or are they a customer and if so what percentage of your business.
I guess its fuel do they represent.
They are a customer.
And it is.
As of.
Ongoing business, it's less than.
Five or four 5%.
Yes.
I'm, sorry on that range somewhere in that range with that without having all the stuff right in front of me, but they have been a larger customer in the past.
Okay Alright.
And if we're not we're not necessarily worried about the book of business, we have today with them with them with regard to private fleet because thats in some markets, where it probably doesn't make a lot of sense.
Okay, Gotcha, and secondly, and I apologize that I am not up to speed on the property. So from me on the Pensacola property, what your sales price and I'm looking at cash so what day.
Net cash out of that $1 five on Pensacola.
Okay.
Youre in the middle of negotiations on.
On the Tampa property.
How big is or give me some parameters like how big it is and again I apologize I normally like to do the homework, but I just knew that the company. So I haven't done it. So appeal that's okay. It would be the crib notes yeah, I'll give you the Kermit adjusted 25 acre parcel in South Tampa.
The easiest way for me to tell you.
Some kind of a way to give you some valuation is a contract we were under most recently.
Was that $10 5 million.
After COVID-19 hit that pricing wasn't going to work.
Because of all the uncertainties with retail et cetera. So.
We'll have to just continue to negotiate and see how high we can get on a purchase price based on what's happening in the world.
Okay, and lower interest rates are always a help so that kind of valuation, but I'm sure you guys will do what we can do it.
Okay.
All those answers are very helpful. I appreciate it.
Great. Thank you. Thanks for your interest just for further information on Pensacola, we moved out of town and built a location.
Years ago years ago in order to take advantage of this sale.
<unk>.
And our last and final question is with John <unk> with Pinnacle.
Just a quick follow up to a million five on the Pensacola is that cash yes.
Yes.
Okay. Good.
The Tampa property 25 acres.
Or is it zone, what is it zone for what what's the potential use of that property.
It has been zoned and actually we took the steps to get on approved site plan for a big box anchored retail development the easiest way I can describe it.
Okay. So it's retail it's not mixed use.
It is it is mixed use there is that there is a hotel and commercial but not not house residential non residential.
You broke up there is a hotel on what else there.
<unk> retail there's no ratchet no residential.
Okay and back to the.
The national convenience store operator, when you say, we're not worried about the market because it doesn't make a lot of sense.
That implies.
The business was close to breakeven or why does it why does it I think it's in line I would think just the markets and the VAT and the size of the business, but really to put in a private fleet. Most of the time you want some scale and what's left is pretty small in each of the markets, where we're operating so it.
Doesn't say that they wouldn't do it but it's not the most appealing locations. It's not on a not an efficient way for them to run that business because theyre terminal would be very small for the sites. They have in those locations.
Okay.
4% to 5% of revenues I mean have they.
Sent to you that we're going to be rolling off of this business or what's been their discussion with you no no no no. We've already we've already rolled off a good percentage of their business.
What's left of 4% to 5% is just just begun a new a new contract as of February one.
And how long is that contract last for three years, Okay, alright, so the four to five okay. Okay.
That's helpful.
That's all I have thanks, okay, great. Thank you.
Ladies and gentlemen, we've reached the end of the question and answer session and I'd now like to turn the call back over to Rob Sandlin for any closing remarks.
Thank you all.
For being on the call today and we appreciate your interest in Patriot transportation to have a good day.
Thank you. This concludes today's web conference you may disconnect. Your lines at this time. Thank you for your participation and have a great evening.