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Patriot Transportation moving closer to split

By Mark Basch, Contributing Writer

Slowly but surely, Jacksonville-based Patriot Transportation Holding Inc. is moving closer to splitting its transportation and real estate businesses into two separate public companies.

As Patriot announced its quarterly earnings last week, Executive Chairman John Baker told analysts on the company’s conference call that the board of directors approved a measure to go ahead with the regulatory process to separate the companies.

Patriot had announced 11 months ago that it was exploring a split, an idea which it first started talking about in the late 1990s. In the conference call, Chief Financial Officer John Milton admitted the process has been slow.

“You would not believe the number of details we have had to plan to deal with in order to get to this point,” he said.

The company expects to complete the regulatory process in the next year.

Patriot announced that the real estate business, which develops commercial properties mainly in the mid-Atlantic region, will operate under the name FRP Holdings Inc. after the split, while the trucking company will keep the Patriot name.

During the conference call, several analysts wondered if one or both of the companies may be sold off after the split. The company would probably consider a sale if the right offer came along.

“Everything’s for sale, of course, but our intention is to be a buyer,” Baker said.

One acquisition made last year slowed down Patriot’s earnings in the second quarter ended March 31.

Patriot said revenue in the quarter rose 18 percent to $39.9 million, but net income fell 25 percent to $1.7 million, or 18 cents a share. The lower earnings were due mainly to higher costs in the trucking business.

Patriot in November acquired another Jacksonville-based trucking company, Pipeline Transportation Inc. The company said last week that it experienced “significant driver attrition” after the acquisition and also won several new accounts. As a result, it incurred additional expense to temporarily move drivers to serve customers in locations where there were driver shortages.

PHH nearing decision

PHH Corp., another company that has been considering a split of its two business units, is also moving closer to a decision. CEO Glen Messina told investors in the company’s conference call last week that “we expect to reach a conclusion” by the end of the second quarter.

PHH has a mortgage banking and a fleet management services business. The mortgage business operates out of its New Jersey headquarters and a second operations center in Jacksonville.

The company in February said it would consider splitting the company into two or selling one or both of them.

“Since our last earnings call, we have been actively engaged in detailed discussions with several interested parties. The board, management and our advisors are following a thorough and disciplined process, focused on optimizing both near-term and long-term value for our shareholders,” Messina said.

PHH reported a first-quarter net loss of $42 million, or 73 cents a share, due to charges related to the mortgage business.

More losses at Body Central

While company officials tried to offer some positive news in their conference call Wednesday, Body Central Corp. continued to lose money in the first quarter.

The Jacksonville-based fashion retailer reported a net loss of $9.3 million, or 56 cents per share. Sales continued to plummet, with total revenue dropping 26.6 percent to $59.7 million.

“We are making progress, but still have work to do,” CEO Brian Woolf said in the conference call.

“While we continue to face stagnant mall traffic trends in a highly competitive retail environment, we will continue to manage our business cautiously, maintaining lean inventory levels and carefully controlling expenses,” he said.

“This will be a gradual recovery, particularly in light of the challenging environment. So we remain diligent in our efforts to drive the top line, while remaining very disciplined in taking additional steps to preserve cash,” said Chief Financial Officer Tom Stoltz.

Body Central in March said it was putting off a planned move to a new and larger headquarters and distribution facility in North Jacksonville until 2015, as the losses pile up. That move is still on hold.

“We continue to delay further work on our new DC and office facility until the existing business stabilizes and cash from operations returns positive,” Stoltz said.

The company last month announced it had retained investment banking firm Houlihan Lokey Capital Inc. to explore various options which could include a capital injection or a buyout. Body Central officials gave no update on that process in the conference call.

Piper Jaffray & Co. analyst Stephanie Wissink said in a research note that there were some encouraging trends in the quarterly report, but she remains concerned about Body Central’s “cash burn.”

“A recovery remains highly speculative and without a turn in sales or margins in the next 3-6 months, cash needs will mount and dilutive capitalization events may occur,” she said.

Stein Mart sales up again

Jacksonville’s other fashion retailer, Stein Mart Inc., last week reported that comparable-store sales rose 8.9 percent for the four weeks ended May 3.

Stein Mart also said that comparable-store sales for the combined March and April period rose 4.3 percent. That’s significant because Easter, which has a big impact on sales, was in April this year and in March last year, so it’s more relevant to look at the two months combined.

Comparable-store sales are sales at stores open for more than one year and are a key indicator of a retailer’s performance.

Stein Mart’s total sales in the two-month period rose 4.1 percent to $244.4 million. The company had 263 stores in operation at the end of April, one more than the previous year.

Regency Centers reports higher results

Regency Centers Corp. Wednesday said its core funds from operations were 69 cents a share in the first quarter, up from 64 cents the previous year.

Funds from operations are basically earnings excluding depreciation and amortization expenses and are considered the key metric for evaluating real estate companies.

Jacksonville-based Regency beat the average analysts’ forecast of 65 cents a share, according to Thomson Financial. However, SunTrust Robinson Humphrey analyst Ki Bin Kim said in a research note that 3 cents of the increase in funds from operations resulted from a higher level of capitalization.

Kim is maintaining a “neutral” rating on Regency’s stock.

“While we have a favorable view on Regency’s asset quality and management team, at current levels we believe these shares are trading at full value,” he said.

St. Joe earnings soar on land sale

The St. Joe Co. Thursday reported first-quarter earnings of $403 million, or $4.37 a share, which was the result of its sale of 380,000 acres of timberland during the quarter.

St. Joe on April 2 completed the sale of its last remaining tie to Northeast Florida, the 4,057-acre RiverTown community, on April 2. The company said it will recognize a pre-tax gain of about $26 million in the second quarter from that deal.

After those sales, St. Joe is left with 182,000 acres mainly between Tallahassee and Destin, CEO Park Brady said in the company’s conference call. St. Joe moved its headquarters from Jacksonville to WaterSound in the Florida Panhandle in 2010 to be closer to its land holdings.

The land sales also leave the company with more than $700 million in cash on its books.

“We know that the question is, what are you going to do with the money? We are presently working with the board and will consider all options in due time as we assess our future cash needs for our active adult community and other projects,” Brady said.

Excluding the timber sale, St. Joe’s first quarter revenue was $23.2 million, down from $26.8 million the previous year.

CSX volumes rising

CSX Corp.’s freight volume increased 9 percent in the first five weeks of the second quarter, Chief Financial Officer Fredrik Eliasson told investors at a conference in Boston on Thursday.

“With winter behind us, volume growth has picked up strongly, and we have visibility to several million new tons of domestic coal as inventories are normalizing and natural gas prices have risen,” Eliasson said, according to a company news release.

“With the broader economy remaining healthy and with this improved environment for our domestic coal business, we expect to produce modest earnings growth in 2014,” he said.

Interline reports

loss on debt costs

Interline Brands Inc. last week reported a first-quarter net loss of $6.1 million, due to interest expenses and a charge related to the extinguishment of debt.

The Jacksonville-based distributor of maintenance, repair and operations products was acquired by two private equity firms in 2012.

Interline’s sales in the quarter rose 3.1 percent to $392.5 million, despite the impact of bad weather early in the year.

“Weather during the first two months of the year affected customer demand and our ability to ship product, which resulted in lower sales growth in January and February of 1.5 percent and 0.9 percent, respectively,” Chairman and CEO Michael Grebe said in a news release.

“However, revenue growth rebounded nicely in March, increasing 5.1 percent year-over-year, and this momentum carried over into the second quarter with sales in April up over 5 percent,” he said.

FIS acquiring wealth management business

Fidelity National Information Services Inc. (FIS) last week announced an agreement to acquire Atlanta-based Reliance Financial Corp.

Jacksonville-based FIS is paying $110 million in cash to acquire Reliance, which will merge with its FIS Wealth Management Services Inc. subsidiary.

FIS said the deal creates “a full-service wealth management and retirement offering encompassing technology, selective operational functions, full back-office operations outsourcing, and retirement trust and fiduciary services.”

Although FIS is spending a lot of cash on the deal, Robert W. Baird analyst David Koning said in a research note that he estimates the acquisition will add less than 1 percent to total company revenue and add less than a penny per share to earnings.

Koning has been projecting FIS to earn $3.10 a share this year on revenue of more than $6 billion.

Dick’s Wings owner changing name

American Restaurant Concepts Inc., the franchisor of the Dick’s Wings & Grill restaurant chain, is planning to change its name to ARC Holdings Inc.

Shareholders will be asked to vote on the name change at the company’s annual shareholders meeting on June 13, according to its proxy statement. If the name change is approved, the company also plans to change its ticker symbol from “ANPZ” to “ARCH.”

American Restaurant Concepts is officially headquartered in Louisiana but its corporate offices are in Jacksonville and 15 of the 16 Dick’s Wings restaurants in operation are in the Jacksonville area.

The company is seeking to expand by investing in other restaurant brands and in January acquired a 50 percent stake in a Salt Lake City-based restaurant chain called Wing Nutz.

mbasch@baileypub.com

(904) 356-2466

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