As Patriot Transportation Holding Inc. prepares to split up its transportation and real estate businesses into separate public companies, its trucking subsidiary is facing a challenging environment as the industry deals with driver shortages.
According to the American Trucking Association, the industry has a nationwide shortage of about 35,000 drivers.
“The driver shortage is real and the companies that can attract and retain drivers, I believe, will prosper. Our focus is on being one of those companies,” President and CEO Tom Baker said during Patriot’s quarterly conference call last week.
He said Patriot increased its fleet from 619 drivers to 683 during the fiscal year that ended Sept. 30.
The company is planning to spin off its trucking business as a separate company that will retain the Patriot name, while its commercial real estate and mining royalties business will be known as FRP Holdings Inc.
The company completed a reorganization last week, before the split, that officially renamed the entire company FRP. When it enacts the spinoff, which it hopes to do in early 2015, the Patriot trucking company will be spun off from FRP.
FRP is continuing to trade on the Nasdaq market but it expects to change its ticker symbol from “PATR” to “FRPH” in the next few days.
When the new Patriot is spun off, it expects to trade under the ticker “PATI.”
Patriot reported earnings of 26 cents a share for the fourth quarter ended Sept. 30, down from 72 cents the previous year. The company had a big gain from the sale of investment properties that added 39 cents a share to earnings in the fourth quarter of fiscal 2013 but excluding that gain, earnings were still lower this year.
The company said its fiscal 2014 results were impacted by increased insurance and actuarial costs in the trucking business, as well as costs associated with finding enough drivers.
“This was a year where we grew the company but paid the price for protecting customers by hiring drivers to do that in a tight driver market,” Executive Chairman John Baker (Tom Baker’s uncle) said in the conference call.
“We believe this will pay long-term dividends but we’re anything but satisfied by the recent results,” he said.
The transportation company will be by far the bigger of the two companies after the split, as it accounted for $129.2 million of Patriot’s $160.1 million in total revenue in fiscal 2014. However, the trucking business, which hauls petroleum products, chemicals and dry bulk commodities in six Southeastern states, was less profitable, accounting for $6.3 million of Patriot’s total operating profit of $17.8 million.
John Baker expressed confidence about the two companies’ performance after the split.
“While these will be small public companies, they will be focused and will allow us to exploit the values that that are currently locked up into an awkward structure. We believe this is a terrific step for our shareholders both now and into the future,” he said.
Landstar finishing ‘record-setting year’
Jacksonville’s other publicly traded trucking company, Landstar System Inc., is on track for “a record-setting year from just about every metric,” CEO Henry Gerkens said last week during his mid-quarter conference call.
“What’s really encouraging is that the fourth quarter of 2014 operating trends so far are the best we’ve seen in 2014, and that can only bode well for 2015,” said Gerkens, who is retiring at the end of this year.
He said October revenue was 23 percent higher than October 2013, and preliminary results for November show revenue again grew by about 23 percent.
Landstar also announced Thursday it will pay a special $1-a-share dividend to stockholders in January. The company, which has about 45 million shares outstanding, had $178 million in cash and short-term investments on its balance sheet at the end of the third quarter.
Landstar deals with the nationwide driver shortage in a different way than Patriot, as it doesn’t employ drivers itself but contracts with drivers who own their own trucks and with agents who arrange for those drivers to pick up freight for shipment. The company considers the drivers and agents to be individual small businesses.
Gerkens said Landstar has continued to increase capacity and he is optimistic as he leaves the company. “I believe the scale of our small business model is impenetrable and will remain a force in the transportation services business for years to come,” he said.
“The future is very bright.”
Fortegra buyout completed
Tiptree Financial Inc. on Thursday completed its $218 million acquisition of Jacksonville-based Fortegra Financial Corp.
The Jacksonville-based insurance services firm agreed to the buyout in August. New York-based Tiptree intends to keep Fortegra as an independent company headquartered in Jacksonville, where it employs about 300 people.
“This transaction was the culmination of six years of growth and resulted in our shareholders receiving significant value. We are excited to partner with Tiptree as we move on to the next phase of Fortegra’s growth and development,” Fortegra CEO Richard Kahlbaugh said in a news release.
CSX stock drops with oil prices
CSX Corp.’s stock, along with other railroads, had a two-day drop after OPEC announced it would keep its oil production steady.
While that’s good for consumers as prices continue to fall, it made investors worried about the impact on the industry’s crude-by-rail shipments from shale oil fields in the U.S.
Transportation of crude oil on the rails has been a hot topic in the industry, as railroads look for ways to make up for lower shipments of coal. Crude oil is still a relatively small business for railroads, but it is growing.
“Petroleum (a proxy for shale oil) represents only 3 percent of total carloads but it has contributed disproportionately to volume growth. We have viewed crude as a key growth driver over the near- to medium-term” for the rail industry, Goldman Sachs analyst Tom Kim wrote in a report last Monday on the second day of the industry’s stock drop.
Shipments of petroleum from regions including the Bakken oil field in North Dakota are only part of the story, Kim said.
“The shale value chain is more meaningful when taking into consideration shipments of frac sand, pipes and equipment. Petroleum and related products coupled with aggregates (a frac sand proxy) represent an estimated 5 percent of total Class I rail carloads,” he said.
Kim said crude oil has accounted for 9 percent of growth in the industry’s carloads so far this year, and the aggregate shipments accounted for another 11 percent of carload growth.
While that growth may slow, there is an upside to the current state of the oil market as prices fall. “In our view, the market has reacted negatively to topline growth concerns, but does not seem to have discounted the cost savings from lower diesel prices,” Kim said.
Fuel costs represent about 15 percent of revenue for the average large railroad, he said, so a decline in oil prices will help the companies’ earnings.
CSX’s stock fell by $2.85 over two trading days to close at $35.06 last Monday, but it rebounded Tuesday back to $36.46.
It rose another 80 cents to $37.26 Wednesday, as Chief Financial Officer Fredrik Eliasson told an industry conference in New York that CSX’s earnings for the fourth quarter remain on target.
“Fourth-quarter volume is tracking at the level we expected, and we are seeing strength across nearly all markets we serve,” Eliasson said, according to a news release.
Rayonier AM names new CFO
After less than six months on the job, Rayonier Advanced Materials Inc. Chief Financial Officer Benson Woo has left the company.
Rayonier AM announced it was consolidating the position of chief financial officer with its corporate development and strategic planning functions. So Frank Ruperto, who was senior vice president in those areas, is now chief financial officer and senior vice president, finance and strategy.
“The company has embarked on an effort to evaluate opportunities to become more efficient, which includes a review of senior roles within the company. With Frank’s extensive background in financial markets, investor relations, and financial management, this restructuring optimizes our financial team,” CEO Paul Boynton said in a news release.
Woo joined Rayonier AM from Prestolite Electric in June as the performance fibers company was preparing to spin off from Rayonier Inc. The company did not say why he resigned, other than the management consolidation.
Ruperto joined the company in March in anticipation of the spinoff. He has nearly 25 years of investment banking experience and was managing director of mergers and acquisitions for Bank of America Merrill Lynch before joining Rayonier.
Shoe Carnival beats expectations
Shoe Carnival Inc.’s stock jumped higher Tuesday after reporting third-quarter earnings that were better than the company’s forecast.
The footwear chain controlled by former Jacksonville Jaguars owner Wayne Weaver reported earnings of 54 cents a share for the quarter ended Nov. 1, the same as last year’s third quarter but higher than the company’s forecast of 45 cents to 51 cents.
Total sales rose 8 percent to $254.7 million and comparable-store sales (sales at stores open for more than one year) rose 2.3 percent, both better than the company’s forecasts.
Shoe Carnival, which operates 404 stores in 33 states, has opened 30 new stores this year.
“These results reflect strong sales in our fashion boot category and progress in key initiatives we announced last year, mainly national advertising, better brands in our women’s department and a reinvigorated e-commerce presence,” President and CEO Cliff Sifford said in a news release.
Weaver is chairman of the company and its largest shareholder. He and his wife, Delores, control 24.2 percent of Shoe Carnival’s stock.
Shoe Carnival’s stock rose $3.75 to $23.37 Tuesday after the strong earnings report.
“Shoe Carnival has hit a positive inflection point,” Sterne, Agee & Leach analyst Sam Poser said in a research note Tuesday.
“Through national advertising, expanded e-commerce capabilities, and improvement in the functionality of its mobile app, Shoe Carnival should be able to create a strong relationship with its customers, and drive improved sales and margins for some time to come,” he said.
Shoe Carnival forecast fourth-quarter earnings of 6 cents to 10 cents a share, compared with 3 cents a share last year.
The third quarter is typically a bigger quarter for Shoe Carnival because it includes the back-to-school sales period. However, Shoe Carnival is projecting sales growth to improve in the fourth quarter, with comparable-store sales rising by 3 percent to 5 percent.
Stein Mart sales up
Stein Mart Inc.’s biggest quarter is the fourth quarter, as it counts on holiday sales, and the Jacksonville-based fashion retailer got off to a good start in the first month of the quarter.
Stein Mart last week reported total sales for the four weeks ended Nov. 29 rose 6.7 percent to $127.9 million, while comparable-store sales rose 4.8 percent.
The company had 269 stores in operation at the end of November, compared with 264 a year
Stein Mart said sales were strongest in Florida and Texas, while stores in the Northeast, Midwest and West performed lower than the rest of the chain.