FRP Holdings Inc (FRPH) 2016 Q1 法說會逐字稿

Excuse me everyone, we now have Tom Baker, CEO of FRP Holdings, Inc., in conference. (Operator Instructions). I would now like to turn the conference call over to Mr. Tom Baker. Sir, you may now begin.

Good afternoon to you all. As mentioned, I am Tom Baker, CEO of FRP Holdings. And with me are John Baker, our Chairman; John Milton, our CFO; David deVilliers, our President; and John Klopfenstein, our Treasurer and CAO.

Before we get into our results let me caution you that any statements made on this call that relate to the future are, by their nature, subject to risk and uncertainty that could cause actual results and events to differ materially from those indicated in such forward-looking statements. Additional information regarding these and other risk factors and uncertainties may be found in the Company's filings with the Securities and Exchange Commission.

Revenues for the first quarter of fiscal 2016 were $8,823,000 which is an increase of $521,000, or 6.3%, versus last year's first quarter. Income from continuing operations for this year's first quarter was $7,473,000 or $0.76 per share versus $1,131,000 or $0.12 per share in last year's first quarter.

This year's first quarter benefited from a gain on land sale on $6,286,000 plus income of $3 million from the settlement of an environmental claim. These two events contributed $0.57 per share to income from continuing operations to this year's first quarter.

The landfill was Phase 2 of our Windlass Run residential property and was another good example of our team executing our strategy of turning non-income producing assets into income producing assets. It also highlights their ability to find property and entitle it such that we can great shareholder value.

Now I will turn the call over to David deVilliers to discuss first-quarter operating results in our three operating segments. David?

Thank you, Tom. And good day to those on the call with us this afternoon. I will now take you through our results for the first quarter of 2016. As Tom had stated previously, we had positive results from all three of our business segments. The real performer in this quarter was the Mining and Royalty segment. Due to an increase in tons mined revenues were up in this year's first quarter by a healthy 23.4% or $315,000 to $1,659,000.

We periodically analyze the amount of corporate management company time spent on each of our three business segments. In the most recent analysis it was determined that less time was being spent on the Mining and Royalty segment versus prior years when we were working on mining-related transactions such as the Lake Louisa acquisition and the spinoff. So as a result we reduced the allocation of corporate management company expenses for this quarter and reallocated some $263,000 to our other two business segments.

The increase in tons mined combined with the reallocation of corporate management company expenses resulted in operating profits of $1,470,000, which is an increase of 66.7%, or $558,000 over the same quarter last year. We believe that volumes will continue to increase at our locations for the foreseeable future as construction activity in Florida and Georgia improves and Vulcan maintains its shift of most of their production at our property in Virginia.

Relative to our Asset Management segment, rental revenues for our building platform for the first quarter were $6,915,000, up 2.3% over last year's first quarter due mostly to an increase in occupied square feet. Operating profit for this quarter was $3,010,000, down $76,000 or 2.5% due mainly to the reallocation of those corporate and management company expenses from the Mining and Royalty segment, and the loss of a major tenant in January 2015 due to its our growing of the building it occupied.

The acquisition of the 7700 Port Capital property during the first quarter in a Section 1031 exchange was the main factor behind our occupied square feet showing a net increase of 0.6% or 21,219 square feet over last year's first quarter. Occupancy at December 31, 2015 for the building platform was 91.1%, down slightly from 92.8% at December 31, 2014.

Due to the relatively small size of our building platform of 3.6 (technical difficulty) square feet there can be volatility in our occupancies from one month to the next. So we put a bit more emphasis on average annual occupancies in the metric. Through the first quarter this fiscal year the average occupancy increased to 91.1% from 90.8% in the previous quarter ended September 30, 2015. Relative to renewals, our success rate was 68% for the 59,416 square feet that came up during the first quarter.

And finally, to our Land Development and Construction segment, as I've previously stated, this segment is responsible for seeking opportunistic purchases of income producing properties and managing and developing our non-income producing assets into income production. Thus, this segment generates minimal revenues but incurs significant cost to accomplish these objectives.

With this in mind, excluding the $3 million settlement of the environmental claim Tom mentioned in his opening remarks, revenues were $249,000, up $48,000 from last year's first quarter due to higher real estate tax imbursement from the ground lease at our Square 664E property in DC.

Costs of operating this segment were $1,129,000 for the quarter. The increase in operating costs of $224,000 over the same period last year was driven by: one, higher property taxes due to the increase in the assessed value of our future Riverfront Phases Two through Four land at our Anacostia property in DC. And two, the reallocation of corporate and management company expenses from the Mining and Royalty Land segment.

The Land Development segment is the main driver behind our growth. To this end we spent $1,302,000 during the first quarter on capital projects in this segment towards: one, completion of all horizontal infrastructure and commencement of the spec building construction at our Hollander Business Park.

Two, evaluation and permitting for the reconstruction of the bulkhead along the Anacostia River at our Square 664E property in anticipation of a few -- future high-rise mixed-use developments similar to our Riverfront project located less than a mile up the river.

And finally number three, working with our joint venture partner on the management of the ongoing construction of Phase One at Riverfront on the Anacostia now called Dock 79.

Relative to the progress of Phase One, or Dock 79, construction is on time, within budget and still on schedule for the completion in early fall of 2016. So in summary, with the successful completion of the spinoff but a distant memory, we are focused on building shareholder value by: one, seeking out opportunistic purchases; two, converting non-income producing assets into income production; and three, pushing for higher average occupancy and rental rates. So thanks and I will now turn it back to you, Tom.

Thank you, David. That was a good report. As David mentioned, all three segments of our business showed improvement and we feel are positioned well for the remainder of fiscal 2016. Our Riverfront project in DC is on track for completion in the fall of 2016, as David mention. We have just entered into a joint venture agreement with a partner in Baltimore to develop the balance of our Windlass Business Park. And we have begun negotiations with our current partner on Phase Two of Dock 79.

We have a number of opportunities in front of us to continue to add value to the Company and are busy working on them. And we are excited about what the balance of 2016 holds for us. We'd be glad to entertain your questions at this time.

(Operator Instructions). Craig Bibb, CJS Securities.

That was a great quarter and you are moving along and turning non-income into income. On the Mining segment, the 29% increase in tons mined, how much of that is kind of same-store versus just a shift from bulk energy at the Virginia mine?

Most of that increase was actually same-store. The shift in Virginia wasn't as significant as we hope it will be in the future, which is the good news, (technical difficulty) cement plant.

That's tremendous. And how much then -- if there is more to go in Virginia, how much more could that pop up?

I would hate to hazard a guess. I am not sure exactly what their timetable is. I thought it was going to be a little quicker than it actually has been. I thought we would have seen some of them, we have not. So I don't know exactly when they are going to get over there, I haven't communicated with them here in the last 60 days or so.

Okay. And could you give us -- since I am still relatively new to the story can you give us some background on the remediation settlement?

Sure, this is John Milton. What we did basically is worked out a settlement with our prior tenant to pay the $3 million and release them from any other claims. That does not cover the full cost of estimated cost of remediation for all four phases. But it is -- it did cover the cost of the Phase One that we have incurred thus far in this project with a little left over.

We will probably incur another expense when we commit fully to Phase Two of a similar amount of about $1.8 million as a minimum item that we will book as an expense whether it is this quarter or the next quarter when we make our final commitment on Phase Two. We are also at the same time pursuing three other parties for recovery of the balance of the remediation cost from other -- three other parties.

Okay and the remediation cost that you have incurred or expensed so far is also about $1.8 million?

No, it is a little over -- it is like $2 million to $2.1 million, we are still trying to finalize that exact amount.

Great. I will let someone else ask a question.

(Operator Instructions). Myron Cohn, Stifel.

Very nice quarter. I don't understand why we need a joint partner in the Windlass Run.

Myron, I think the message is that that area has changed somewhat since we first acquired this property. And that warehouse development there is slow. The one warehouse we have constructed, it took us quite a while to get it occupied. It is now 100% leased.

This gentleman that we are partnering with in the meantime is a land neighbor and has developed -- because of the growth of residential properties in the area he has grown the demand or seen the demand and built to it of these small office buildings. And he presents to us the opportunity to convert that land into income producing property at a much faster rate than we could hope to expect if we kept it as industrial warehouse.

And, Myron, also just one little teeny other piece of flavor as to why -- he is the guy that has kind of created this project which is exciting to us. And he owns the frontage on our property too. So he also matches up well with us in terms of making our property as a joint venture we think more valuable than it would have been by ourselves.

Okay, thank you. Keep up the good work.

Robert Anderson, Rutabaga Capital Management.

Could you just give us a general sense of where Dock 79 stands now because I haven't seen it? So can you just sort of describe how many stories it is now and what has to be done between now and the fall?

This is David deVilliers. And basically we are -- the building has topped out at nine floors, the windows -- exterior windows and doors are all going in, interior framing. So as it relates to percentage of completion, it is about 51%. So we are on schedule, as I said, on time. We look to begin the leasing effort in March and then final occupancy is scheduled for sometime in the middle of September 2016.

Excellent, thank you very much.

I am showing no further questions in the queue at this time.

Well, thank you very much for your interest in the Company. We look forward to updating you next quarter. Thanks.

Thank you, ladies and gentlemen, this concludes today's teleconference. You may now disconnect.