Patriot Transportation Holding Inc (PATI) 2016 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Patriot Transportation first-quarter 2016 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Mr. John Milton, Executive Vice President and CFO of Patriot Transportation Holding Incorporated. Sir, you may begin.

Thank you and good afternoon to all of you and thank you for your interest in Patriot Transportation. As she stated, I am John Milton; I'm the Executive Vice President and CFO. And with me today are Rob Sandlin, our Vice President; and John Klopfenstein, our Chief Accounting Officer.

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 risks and uncertainties 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.

Total revenues for the first quarter of fiscal 2016 were $29,371,000, which was down $2,346,000 over the same quarter last year, due to lower fuel surcharges of $3,063,000 as the price of diesel fuel was significantly lower this quarter versus the same quarter last year. Unfortunately, our fuel cost savings were only $2,180,000, leaving us a negative impact quarter over quarter of $883,000.

Net income for the quarter was $1,500,000 or $0.46 per share, which included $1,029,000 or $0.31 per share of net income from the settlement of a Deepwater Horizon lawsuit claim in this year's first quarter. Net income for last year's first quarter was $1,102,000 or $0.34 per share.

We are very disappointed with our first-quarter operating profit and are working diligently to improve future results.

Let me turn the call over to Rob Sandlin so he can walk us through the numbers in greater detail. Rob?

Thank you, John. And thank you all for being on the call. I will now take you through the operating results of our Company for our first quarter, ended December 31, 2015. Transportation revenue excluding fuel surcharge increased $717,000 on 368,000 fewer miles, a 6.3% increase on a per-mile basis versus the first quarter of last year. The miles and transportation revenue results reflect the successful effort of our sales and operations team to replace business that we chose to let go during the second quarter of last year.

Despite the improvement in transportation revenues, operating profit for the quarter was $817,000 versus $1,833,000 in the first quarter last year, namely due to two factors: higher net fuel costs and higher costs related to hiring and retaining drivers. Fuel surcharge revenues were down $3,063,000, as John stated earlier, versus the comparable quarter last year, while fuel cost only declined $2,180,000, resulting in an $883,000 or $0.085 per mile negative impact on the quarter.

The first quarter of 2015 benefited from the rapidly declining price of fuel due to the time lag involved in adjusting fuel surcharges. The first quarter of this year was negatively impacted by the very low price of diesel fuel as, over time, some degree of margin was built into our fuel surcharges at higher prices. Over the past 10 to 15 years the large customers in our industry have played a significant role in formulating their specific pricing matrix for transportation rate and fuel surcharges.

As the price of fuel has continued to decline over the past several quarters, resulting in margin compression, we have and will continue to work with our customers to adjust their individual expectations with regard to a pricing matrix that reflects more accurately the cost of doing business.

Compensation and benefits costs were up $589,000 as we continued to experience cost increases associated with hiring and retaining drivers. SG&A was up $77,000 despite $171,000 lower bonus accrual as we have invested in more resources to help better manage and support our people in the field, to resolve issues with driver hiring and turnover and to support our safety performance.

As a result, we grew our driver account for this quarter to 704 drivers versus 686 in the first quarter last year and reduced annualized driver turnover from 81% in the fourth quarter of last year to 65% during this period. Management believes we will be able to capitalize on this increased driver capacity as seasonal demand increases starting in the latter part of the second quarter.

Our summary and outlook -- as stated earlier, one headwind to our financial improvement is the negative impact of the low diesel fuel price on margins. We will continue to work on improving our base rates to recover the compression where the market allows, but it will take some time to recover fully the lost margin, so long as we remain at very low diesel fuel prices.

The other major headwind is the difficulty in hiring and retaining qualified drivers in this type driver market. On that front, we will continue to focus on better hiring techniques, improved dispatch process and various aspects of driver pay including our new minimum pay scale implemented in October. A new hiring module has been added to our application process that will help local management determine the best driver applicants and hire them at a faster pace. We have rolled out a new dispatch procedure and training plan that is focused on more positive dispatcher interaction with the driver and the customer.

Management believes we are seeing the benefits of all these investments as we raised our driver account back over 700 and reduced the turnover rate this quarter versus the fourth quarter last year.

We continue to seek additional petroleum hauling opportunities with existing and new customers that are willing to compensate us for our ability to provide superior, safe and reliable service. We will also look for opportunities to expand our dry bulk and chemical hauling at our existing terminals as a way to leverage our fixed costs and add margin. Provided that the strong market demand for transportation services and the shortage of drivers continue, management believes we will eventually see an increase in the industry pricing that will allow improved margins on our business.

Thank you again for your interest in our Company. And I will now hand it back over to John Milton.

Thank you, Rob. That's a nice report on a tough quarter.

As Rob pointed out, we have several headwinds and we must battle to get our margins back to levels we expect. We are making good progress on hiring and retaining drivers and think we will be successful in adding business late in the second quarter as our historically busy spring break season starts and the driver shortage continues to worsen, thus making it tough on the whole industry.

Our focus is on raising our transportation rates in trying to get them to levels such that the loss of fuel surcharge revenue is negated. While the competitive environment is tough right now, I'm confident this management team will be successful.

We thank you again for your interest in the Company. We love our markets. We appreciate our customers. And most of all we appreciate our shareholders and those of you who are on this call. We will be glad to entertain your questions at this time.

(Operator Instructions) And I am showing no questions at this time.

Well, thank you and thanks to all of you on the call. Thanks for your interest in Patriot, and we look very much forward to talking to you again at the end of next quarter with, hopefully, better results. Thanks again.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may now disconnect. Everyone have a great day.