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Tom and John Baker
Jax Daily Record Monday, Dec. 9, 201312:00 PM EST

Patriot split-up plan going slowly

by: Mark Basch Contributing Writer

Since announcing in June that it was considering a split-up of its two main businesses, Patriot Transportation Holding Inc. has moved very slowly on the plan.

During its quarterly conference call last week, company officials indicated they are in no hurry, which shouldn't be a surprise. Patriot actually first floated the idea in 1999, so a few more months won't make a big difference.

Chief Financial Officer John Milton said Patriot wants to be cautious to avoid any mistakes.

"The first physician's rule is 'do no harm,' so we're trying to be very careful as we approach that," he said.

Jacksonville-based Patriot operates two main businesses: a commercial real estate company that develops properties largely in the Baltimore-Washington-Northern Virginia market and a transportation company that provides trucking services mainly for petroleum companies in the Southeast.

It also has a third segment, mining royalties, which consists of land used by other companies to mine construction materials.

The unrelated businesses were put together into a public company in 1986 when Florida Rock Industries Inc. decided to spin off those operations to focus on its main business, construction materials.

Executive Chairman John Baker said Patriot has had a hard time attracting attention on Wall Street in its current structure.

"It has been difficult to get good analyst coverage with a company that has one foot in the real estate business and one foot in the transportation business," Baker said.

"Our long-term belief is that we do our shareholders a great favor if we can figure out how to do it (split it up)," he said.

Patriot is working on two issues. One is ensuring that a split into two separate public companies would be tax-free for shareholders, and the second is making sure the split creates "two viable long-term companies that can continue to grow and have the capital base to do it," Baker said.

Patriot reported earnings of almost $7 million, or 72 cents a share, for the fourth quarter ended Sept. 30, up from $1.4 million, or 14 cents, the previous year.

However, the fiscal 2013 fourth quarter included after-tax gains of $3.8 million, or 39 cents a share, from the sale of investment properties.

For the entire fiscal year, net income doubled to $15.4 million, or $1.60 a share, including after-tax gains of $4.5 million, or 47 cents, from property sales.

Revenue for the full year rose 10 percent to $139.8 million.

"All three segments of our business performed well during fiscal 2013 and seem to be well situated for fiscal year 2014," CEO Tom Baker said during the conference call.

Patriot last month announced the acquisition of another Jacksonville-based trucking company, Pipeline Transportation Inc. Pipeline produced revenue of $16.5 million in the 12-month period ended June 30.

In response to an analyst's question, Milton said that the Pipeline deal is not the beginning of an acquisition binge for Patriot. He said the company just took advantage of an opportunity.

"We would doubt that it would be a trend just because the availability of opportunities like this have been scarce," he said.

Shoe Carnival raising national profile

You may be seeing more of Shoe Carnival Inc. as you're watching television in the new year.

As the footwear chain controlled by former Jacksonville Jaguars owner Wayne Weaver continues to grow, it expects to put more emphasis on national advertising, CEO Cliff Sifford said during Shoe Carnival's quarterly conference call last week.

"With the new markets we'll be entering next year, we have reached the tipping point of where it would be more advantageous for us to begin a national advertising strategy as opposed to adding additional spot TV in these markets," he said.

Shoe Carnival expects to have 376 stores in 32 states and Puerto Rico at the end of this year. Sifford said the company plans to "aggressively grow our store base" in 2014, adding about 40 stores. That includes an expansion into "two new large markets and one medium-sized market," he said, but he was not ready to name the new markets for competitive reasons.

"National advertising not only delivers the Shoe Carnival message into our new markets and potential new markets in the future, but it also delivers our message into existing markets where we do not currently advertise on TV," Sifford said.

"We believe this strategy will go a long way in introducing the rest of America to our brand and play hand-in-hand with our aggressive real estate strategy," he said.

Shoe Carnival reported earnings of 54 cents a share for the third quarter ended Nov. 2, down from 60 cents the previous year but a penny higher than the average forecast of analysts surveyed by Thomson Financial.

The company projects fourth-quarter earnings of 18 cents to 22 cents a share, which is in line with the average analysts' forecast of 20 cents.

Shoe Carnival's stock rose $1.24 to $28.71 Tuesday after the late Monday earnings report.

"The company is doing all the right things and executing well," Sterne Agee & Leach analyst Sam Poser said in a research note. However, he maintains a "neutral" rating on the stock.

"Results came in better than expected and the outlook is favorable, but the shares are fairly valued," he said.

Weaver is chairman of Shoe Carnival and its largest shareholder, controlling 24.4 percent of the stock, with his wife, Delores.

Fortegra selling two subsidiaries

Fortegra Financial Corp. last week announced an agreement to sell two subsidiaries to Charlotte-based AmWins Group Inc.

The Jacksonville-based insurance services company is selling Bliss & Glennon, a California-based excess and surplus lines wholesale insurance broker and managing general agency, and eReinsure, a Salt Lake City-based online platform for managing the placement of facultative reinsurance.

"Following the sale of our brokerage operations, we will be able to focus our full attention on our payment protection, warranty and service contract products. These products generate our highest margins and provide us a significant opportunity for future growth," Fortegra CEO Richard Kahlbaugh said in a news release.

"While the decision to divest was difficult, we believe this divestiture to be in the best interest of our shareholders and all employees," he said.

Fortegra did not announce terms of the deal in the news release but in a Securities and Exchange Commission filing, the company said it will receive $83.5 million in cash, subject to adjustments.

The company plans to use the proceeds to pay off debt and for general corporate purposes.

Analyst values Fidelity at $31

Fidelity National Financial Inc. reached a 52-week high of $29.42 last week as it closes in on its acquisition of Lender Processing Services Inc. but according to one analyst, the stock is worth a little more.

Goldman Sachs analyst Eric Beardsley initiated coverage of Jacksonville-based Fidelity last week with a "neutral" rating, as part of an overall report on specialty finance companies, but his sum-of-the-parts valuation for Fidelity came up with a slightly higher value.

Fidelity is mainly a title insurance company but also has investments in other business.

Beardsley values the title insurance business at $27 a share. Once Fidelity completes the acquisition of Jacksonville-based LPS, the mortgage processing services business will be worth $8 a share, he said.

Additionally, he values Fidelity's investments in the restaurant business at $2 a share; $1 a share each for its investments in Remy International Inc. and Ceridian Corp.; and 40 cents a share for its Digital Insurance Inc. subsidiary.

Subtracting about $9 for corporate overhead, this brings Fidelity to about $31, Beardsley said in his report.

Beardsley is cautious on Fidelity's stock because of the outlook for housing activity.

"Title insurers are among the most levered stocks to a rebound in total U.S. home sales, as they earn two times the revenue on purchase transactions as they do on refi," he said.

"Despite our expectations for solid home sales growth in 2014 (up 7 percent), we expect a sharp decline in refi activity (down 50 percent) to be a headwind for title transactions," he said.

Beardsley did say that Fidelity's "idiosyncratic catalysts," like the LPS acquisition, make him more favorable on Fidelity than its main title insurance competitor, First American Financial Corp.

Stein Mart sales up again in November

Stein Mart Inc. continued to increase sales in November, the Jacksonville-based fashion retailer said last week.

Total sales for the four weeks ended Nov. 30 rose 7.7 percent to $119.9 million and comparable-store sales – sales at stores open for more than one year – rose 3.1 percent. The company operated 264 stores nationwide at the end of November, up from 263 a year earlier.

Atlantic Coast Financial completes stock sale

Atlantic Coast Financial Corp. last week said it raised $45.2 million, after expenses, as it completed the sale of 12.88 million shares of stock at $3.75 each.

The parent company of Atlantic Coast Bank sold the stock to increase capital to meet regulatory requirements.

The company's ratio of Tier 1 capital to assets was 4.88 percent as of Sept. 30, well below an order from regulators to maintain a ratio of 9 percent.

The stock sale increases Atlantic Coast Financial's Tier 1 capital ratio to nearly 10 percent.

Tier 1 capital, which consists basically of a bank's shareholders' equity, is one of several methods regulators use to measure a bank's capital.

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