Patriot Transportation Holding (PATR)

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Fedguy121

Patriot Transportation Holding (PATR) operates trucking services and real estate businesses in the United States. The company's transportation business consists of Florida Rock and Tank Lines, which hauls petroleum and other liquids and dry bulk commodities by tank trailers in the southeastern US. The real estate business consists of mining properties and commercial office/warehouse properties in the southeastern and mid-Atlantic US.

Business Growth

Incorporated in 1988, Patriot Transportation Holding consists of transportation and real estate businesses.

• Florida Rock and Tank Lines, commonly known as Tank Lines, comprises the transportation business.
• The real estate business consists of two segments:

1. The Mining segment owns real estate held for investment, especially for aggregate construction materials
2. The Developed property segment owns offices and warehouses in addition to real estate designated for future development

Trends and Forces

Domestic Real Estate Downturn Drags Bottom Line

The decline in commercial real estate prices in the United States has continued to hurt Patriot Transportation's real estate business. The mining and developed properties businesses had occupancy rates of 72% and 75%, respectively, in 2010. The company aims for an occupany rate of 90%.^[1] Demand for aggregate construction materials is weak, which drags on both the mining real estate and the trucking business.

Cyclical Nature of Transportation Industry

The trucking industry has experienced three cycles over the last twenty years, roughly consistent with the health of the overall economy. The trailer industry generally precedes overall transportation industry cycles.^[2] The most recent cycle peaked in 2006 with overall trucking shipments of 280,000 and bottomed in 2009 with shipments of 79,000 trailers.^[3] Within the year, the season between May and October tends to be better due to increased seasonal shipping and better weather.^[4] Investors should be well aware of these long and short cycles.

Competition

The trucking industry is defined by transporters of goods, generally over 10,000 pounds, shipped by a single customer point-to-point. The industry is divided into several segments by the type of trailer used in transporting the goods. These segments include van, temperature-controlled, flatbed, and tank carriers. Patriot's Tank Lines competes in the tank carrier market. In this market, capital and equipment are readily available and largely fungible. The company believes its superior safety record distinguishes itself from its many competitors.^[1] Tank Lines has from two to six different tank competitors in each of its markets. Price, service, and location are the major factors affecting competition within a given market.

In the real estate business, the company competes with many different Real Estate Investment Trusts in the southeastern and mid-Atlantic US. Price, location, rental space availability, flexibility of design, and property management services contribute to intense competition between firms in a given market.

References

1. ↑ ^{1.0 1.1} PATR 2010 Annual Report, page 2
2. ↑ Wabash, S&P Analyst Report, 28 May 2011
3. ↑ Wabash, TheStreet Analyst Report, 29 May 2011
4. ↑ CGI 10-K 2009, page 8