Patriot Transportation Holding Inc (PATI) 2017 Q2 法說會逐字稿

Excuse me, everyone. We now have all of our speakers in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. (Operator Instructions)

I would now like to turn the conference over to Mr. Rob Sandlin, CEO of Patriot Transportation Holdings, Inc. Mr. Sandlin, you may begin.

Thank you. Good afternoon, and thank you all for being on the call today and for your interest in Patriot Transportation. As mentioned, I am Rob Sandlin, CEO of Patriot Transportation. And with me today are John Milton, our CFO; and John Klopfenstein, our CAO.

I want to take a moment to thank my predecessor, Tom Baker, for his many years of valuable service to the Company. In March of this year Tom resigned to accept a position as Executive Vice President with Vulcan Materials Company. I'm very pleased that Tom will remain as our Chairman and wish him the best in his new venture with Vulcan.

Before we get into our results, let me caution you that any statement made during 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 that -- indicated by such forward-looking statement. Additional information regarding these and other risk factors and uncertainties may be found in the Company's filings with the Securities and Exchange Commission.

Now for our second quarter results: total revenues for the quarter were $27,393,000, down $1,655,000 from $29,048,000 in the same quarter last year. Transportation revenues, excluding fuel surcharges, were down $2,821,000 to $25,693,000 as a result of the lower revenue miles. However, as a result of improved pricing and effective utilization of our equipment, our transportation revenue per mile increased by 3.3% over the same quarter last year.

Fuel surcharge revenues were up $1,166,000 to $1,700,000 due to higher diesel prices and the positive benefits of renegotiating fuel surcharge tables with several key customers last year. As a result we have seen a much more neutral margin impact from net fuel expense, and we expect that trend to continue into the future.

The Company reported net income of $260,000 or $0.08 per share, inclusive of $81,000 or $0.02 per share due to the reduced tax expense in accordance with the newly adopted accounting guidance on stock option exercises, compared to the net income of $863,000 or $0.26 per share in the same quarter last year.

Miles and revenue were impacted negatively during the quarter as petroleum volumes in the Southeastern United States were down compared to the same quarter last year, approximately 3% to 5% overall. Volumes increased near the end of the quarter, and petroleum demand has improved since. In addition, we had a large customer bid in several of our markets, resulting in lost volume with that customer at some of our locations.

Compensation and benefits costs decreased $1,297,000 due to fewer miles driven and lower driver training pay, reflecting the lack of qualified driver applicants and extreme difficulty of hiring qualified drivers during this period compared to last year's quarter.

Toward the end of this quarter, we experienced an increase in applicant flow and have been able to increase the number of drivers in training to more normal levels. Management continues to evaluate the driver market and has made several changes to our marketing, recruiting, on-boarding efforts to assist in attracting more qualified applicants.

Insurance and losses were up $678,000 versus the same quarter last year, due mainly to increased workers' compensation and health claims. Depreciation expense increased $272,000 but was mostly offset by decreased repair and equipment leasing costs as we continue to eliminate leased tractors.

Our operating profit for the quarter was down $1,222,000, to $325,000 compared to $1,447,000 in the same quarter last year. Our operating ratio was 98.8 versus 95.0.

For the first six months the Company reported net income of $1,172,000 or $0.35 per share compared to net income of $2,238,000 or $0.68 per share in the same period last year. The prior year included $1,029,000 or $0.31 per share of net income from the settlement of a claim with BP in connection with the 2010 Deepwater Horizon event.

Our revenue miles declined 1,956,000 miles or 9.3% to 19,185,000 miles versus the same period last year due to lower demand on petroleum and the loss of business in a few markets. Total revenues were $56,161,000, down $2,268,000 versus last year's period. And transportation revenues were down $3,571,000 to $52,952,000 as a result of lower revenue miles.

We did experience an increase in the revenue per mile by 3.2% over the same period. Fuel surcharge revenues increased $1,303,000 due to higher diesel prices and the positive benefit of renegotiating fuel surcharge tables with several key customers last year. As a result, operating profit was down $473,000 to $1,573,000 and an operating ratio of 97.2 versus 96.5 for the first six months of last year.

Summary and outlook: as mentioned in our last call, Patriot and the industry face some very challenging headwinds in the immediate future, the most formidable being the shortage of qualified drivers. We have and will continue to search for ways to make Patriot the preferred employer for qualified drivers as well as preferred carrier for our customers. These challenges are also opportunities, and I feel confident in our team's ability to perform in such a manner.

Management made a number of changes during the quarter, including driver marketing, driver qualification, increasing the recruitment of owner/operators, and others that we believe will increase the available driver pool. Along with attracting new drivers, we continue to focus on driver retention and what we can do to make improvements there. Management also understands that regardless of what changes we make to attract and retain drivers, we must maintain the safety culture and performance that has made us successful in the past.

As mentioned earlier, we experienced some business loss due to a competitive bid process by one of our large customers. As in the past, we evaluate the pricing of any business when an opportunity is presented, and in some cases have chosen not to meet the low price required to retain business. Management will continue to monitor market conditions and evaluate each opportunity prior to making a pricing decision.

We have been successful adding back business at better prices in some markets. However, this generally does not happen simultaneously with any business loss. We continue to believe that tight driver demand, increased cost of replacement capital, the pending electronic log mandate in December 2017, and tightening capacity will eventually lead to higher prices and better returns.

During this quarter, two of our terminals installed our new onboard computer system using an Android tablet and improved workflow. We are excited to have this new hardware and simplified software in our tractors so that we simplify the drivers' data entry during loading and unloading, and to also supply improved delivery information and invoicing for our customers.

The enhanced safety awareness provided by these new systems will provide real-time exception data for our managers and allow us to improve driver feedback and performance reviews. The feedback from our drivers has been very positive, and we look forward to rolling out the remainder of our fleet by year-end.

Management is disappointed with the recent loss of business and this quarter's results. In my 30-plus years with this Company, we have experienced business loss and tough markets before, and our management team will do as we have done in the past: build the business back. To do this, we will rely on our lack of debt and strong balance sheet, our industry-recognized safety and service record, and experienced management team to work through this difficult market and return to the profit levels and returns we have come to expect.

Thank you again for your interest in our Company, and we will be happy to entertain any of your questions.

At this time we will open the floor for questions. (Operator Instructions) We have no questions in queue.

All right. Thank you again for your interest, and we look forward to talking with you next quarter.

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