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FRP HOLDINGS, INC. - Quarter Report: 2017 March (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 10-Q

_________________

(Mark One)    

 

[X ]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended March 31, 2017

 

or

 

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from_________ to _________

 

 Commission File Number: 001-36769

_____________________

FRP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

_____________________

Florida   47-2449198

(State or other jurisdiction of

incorporation or organization)

  (I.R.S. Employer Identification No.)
     

200 W. Forsyth St., 7th Floor,

Jacksonville, FL

  32202
(Address of principal executive offices)   (Zip Code)

904-396-5733

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  [x]    No  [_]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  [x]    No  [_]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [_]   Accelerated  filer [x]
     
Non-accelerated filer [_]   Smaller reporting company [_]
     
Emerging growth company [_]    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [_] 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  [_]    No  [x]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

  Class       Outstanding at March 31, 2017  
  Common Stock, $.10 par value per share       9,941,098 shares  
1 
 

 

             

 

 

 

 

FRP HOLDINGS, INC.

FORM 10-Q

QUARTER ENDED MARCH 31, 2017

 

 

 

CONTENTS

Page No.

 

Preliminary Note Regarding Forward-Looking Statements     3
           
    Part I.  Financial Information      
           
Item 1.   Financial Statements      
    Consolidated Balance Sheets     4
    Consolidated Statements of Income     5
    Consolidated Statements of Cash Flows     6
    Condensed Notes to Consolidated Financial Statements     7
           
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations     15
           
Item 3.   Quantitative and Qualitative Disclosures about Market Risks     26
           
Item 4.   Controls and Procedures     26
           
    Part II.  Other Information      
           
Item 1A.   Risk Factors     27
           
Item 2.   Purchase of Equity Securities by the Issuer     27
           
Item 6.   Exhibits     27
           
Signatures         28
           
Exhibit 31   Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002     30
           
Exhibit 32   Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     33

 

2 
 

Preliminary Note Regarding Forward-Looking Statements.

 

This Transition Report on Form 10-Q, together with other statements and information publicly disseminated by us, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “anticipate,” “estimate,” ”believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions identify forward-looking statements. Such statements reflect management’s current views with respect to financial results related to future events and are based on assumptions and expectations that may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial or otherwise, may differ, perhaps materially, from the results discussed in the forward-looking statements. Risk factors discussed in Item 1A of this Form 10-Q and other factors that might cause differences, some of which could be material, include, but are not limited to, levels of construction activity in the markets served by our mining properties, demand for flexible warehouse/office facilities in the Baltimore-Washington-Northern Virginia area, our ability to obtain zoning and entitlements necessary for property development, the impact of lending and capital market conditions on our liquidity, our ability to finance projects or repay our debt, general real estate investment and development risks, vacancies in our properties, risks associated with developing and managing properties in partnership with others, competition, our ability to renew leases or re-lease spaces as leases expire, illiquidity of real estate investments, bankruptcy or defaults of tenants, the impact of restrictions imposed by our credit facility, the level and volatility of interest rates, environmental liabilities, inflation risks, cybersecurity risks, as well as other risks listed from time to time in our SEC filings, including but not limited to, our annual and quarterly reports. In addition, if we elect REIT status these risk factors also would include our ability to qualify or to remain qualified as a REIT, our ability to satisfy REIT distribution requirements, the impact of issuing equity, debt or both, and selling assets to satisfy our future distributions required as a REIT or to fund capital expenditures, future growth and expansion initiatives, the impact of the amount and timing of any future distributions, the impact from complying with REIT qualification requirements limiting our flexibility or causing us to forego otherwise attractive opportunities, our lack of experience operating as a REIT, legislative, administrative, regulatory or other actions affecting REITs, including positions taken by the Internal Revenue Service, the possibility that our Board of Directors will unilaterally revoke our REIT election, the possibility that the anticipated benefits of qualifying as a REIT will not be realized, or will not be realized within the expected time period, We have no obligation to revise or update any forward-looking statements, other than as imposed by law, as a result of future events or new information. Readers are cautioned not to place undue reliance on such forward-looking statements.

These forward-looking statements are made as of the date hereof based on management’s current expectations, and the Company does not undertake an obligation to update such statements, whether as a result of new information, future events or otherwise. Additional information regarding these and other risk factors may be found in the Company’s other filings made from time to time with the Securities and Exchange Commission.

3 
 

PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)                                         (In thousands, except share data)

    March 31   December 31  
Assets:   2017   2016  
Real estate investments at cost:                
Land   $ 99,417       99,417  
Buildings and improvements     196,821       195,443  
Projects under construction     14,100       11,779  
     Total investments in properties     310,338       306,639  
Less accumulated depreciation and depletion     84,109       82,392  
     Net investments in properties     226,229       224,247  
                 
Real estate held for investment, at cost     7,176       7,176  
Investments in joint ventures     22,232       22,901  
     Net real estate investments     255,637       254,324  
                 
Cash and cash equivalents     106       —    
Accounts receivable     586       710  
Federal and state income taxes receivable     2,608       —    
Unrealized rents     4,412       4,562  
Deferred costs     5,989       6,786  
Other assets     179       178  
Total assets   $ 269,517       266,560  
                 
Liabilities:                
Lines of credit payable   6,765       6,665  
Secured notes payable, current portion     4,599       4,526  
Secured notes payable, less current portion     28,385       29,554  
Accounts payable and accrued liabilities     4,000       3,747  
Environmental remediation liability     2,037       2,037  
Bank overdraft     —         254  
Federal and state income taxes payable     —         887  
Deferred revenue     648       1,126  
Deferred income taxes     19,547       16,455  
Deferred compensation     1,484       1,475  
Deferred lease intangible, net     5       9  
Tenant security deposits     955       1,005  
    Total liabilities     68,425       67,740  
                 
Commitments and contingencies (Note 8)                 
                 
Equity:                

Common stock, $.10 par value

25,000,000 shares authorized,

9,941,098 and 9,914,054 shares issued

and outstanding, respectively

    994       991  
Capital in excess of par value     53,536       52,647  
Retained earnings     146,548       145,168  
Accumulated other comprehensive income, net     14       14  
     Total shareholders’ equity     201,092       198,820  
Total liabilities and shareholders’ equity   $ 269,517       266,560  
                   

 

See accompanying notes.

4 
 

 

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share amounts)

(Unaudited)

    THREE MONTHS ENDED  
    MARCH 31,  
    2017   2016  
Revenues:                  
     Rental revenue   $ 6,283       6,089    
     Mining Royalty and rents     1,739       1,756    
     Revenue – reimbursements     1,300       1,770    
 Total Revenues     9,322       9,615    
                   
Cost of operations:                  
     Depreciation, depletion and amortization     2,059       1,929    
     Operating expenses     1,001       1,531    
     Property taxes     1,062       1,142    
     Management company indirect     469       496    
     Corporate expenses (Note 4 Related Party)     1,327       1,008    
Total cost of operations     5,918       6,106    
                   
Total operating profit     3,404       3,509    
                   
Interest income     —         1    
Interest expense     (248 )     (415 )  
Equity in loss of joint ventures     (771 )     (86 )  
                   
Income before income taxes     2,385       3,009    
Provision for income taxes     942       1,189    
                   
Net income   $ 1,443       1,820    
                   
Comprehensive income   $ 1,443       1,820    
                   
Earnings per common share:                  
    Basic   0.15       0.18    
    Diluted   0.14       0.18    
                   
Number of shares (in thousands) used in computing:                  
    -basic earnings per common share     9,931       9,853    
    -diluted earnings per common share     10,001       9,893    

 

 

See accompanying notes.

5 
 

 

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2017 AND 2016

(In thousands) (Unaudited)

 

 

    2017       2016  
Cash flows from operating activities:              
 Net income $ 1,443       1,820  
 Adjustments to reconcile net income to net cash              
  provided by operating activities:              
   Depreciation, depletion and amortization   2,136       1,998  
   Deferred income taxes   3,092       (599
   Equity in loss of joint ventures   771       86  
   Gain on sale of equipment and property   —        (1 )
   Stock-based compensation   522       443  
   Net changes in operating assets and liabilities:              
     Accounts receivable   124       (242
     Deferred costs and other assets   559       228  
     Accounts payable and accrued liabilities   (225 )     (227 )
     Income taxes payable and receivable   (3,495 )     (251
     Other long-term liabilities   (45     34  
Net cash provided by operating activities   4,882       3,289  
               
Cash flows from investing activities:              
 Investments in properties   (3,729 )     (956 )
 Investments in joint ventures   (104 )     (145 )
 Cash held in escrow   —        (1 )
Net cash used in investing activities   (3,833 )     (1,102 )
               
Cash flows from financing activities:              
 Increase (decrease) in bank overdrafts   (254 )     549  
 Repayment of long-term debt   (1,096 )     (1,036 )
 Proceeds from borrowing on revolving credit facility   6,007       3,222  
 Payment on revolving credit facility   (5,907 )     (5,106 )
 Repurchase of company stock   (74 )     —   
 Exercise of employee stock options   381       184  
Net cash used in financing activities   (943 )     (2,187 )
               
Net increase in cash and cash equivalents   106       —   
Cash and cash equivalents at beginning of period   —        —   
Cash and cash equivalents at end of the period $ 106       —   

 

 

 

See accompanying notes.

6 
 

FRP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2017

(Unaudited)

 

(1) Description of Business and Basis of Presentation.

 

FRP Holdings, Inc. (“FRP” or the “Company”) is a holding company engaged in the real estate business, namely (i) warehouse/office building ownership, leasing and management, (ii) mining royalty land ownership and leasing and (iii) land acquisition, entitlement and development primarily for future warehouse/office or residential building construction.

 

The accompanying consolidated financial statements include the accounts of FRP Holdings, Inc. (the “Company” or “FRP”) inclusive of our operating real estate subsidiaries, FRP Development Corp. (“Development”) and Florida Rock Properties, Inc. (”Properties”). Our investment in the Brooksville joint venture, BC FRP Realty joint venture and Riverfront Investment Partners I, LLC are accounted for under the equity method of accounting (See Note 12). These statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (primarily consisting of normal recurring accruals) considered necessary for a fair statement of the results for the interim periods have been included. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The accompanying consolidated financial statements and the information included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the Company's consolidated financial statements and related notes included in the Company’s Form 10-K for the year ended September 30, 2016.

 

On December 19, 2016, the Executive Committee of the Board of Directors approved the change in the Company’s fiscal year end from September 30 to December 31. The quarter ended December 31, 2016 was a transition period.

 

(2) Recently Issued Accounting Standards. In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required. Lessors will account for leases using an approach that is substantially equivalent to existing accounting standards. The new standard will become effective for the Company beginning with the first quarter 2020 and requires a modified retrospective transition approach and includes a number of practical expedients. Early adoption of the standard is permitted. As the Company is primarily a lessor the adoption of this guidance is not expected to have a material impact on its financial statements.

 

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions of assets or businesses. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate when an input and a substantive process are present. To be a business without outputs, there will now need to be an organized workforce. ASU 2017-01 further states that when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. The amendments in the update are effective for the Company’s financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the amendments from this Update, but expects it to change the treatment of building acquisitions from being considered a business to being considered an asset. This change will result in acquisition costs being capitalized as part of the asset acquisition, whereas current treatment has them recognized in earnings in the period incurred.

 

7 
 

 

(3) Business Segments. The Company is reporting its financial performance based on three reportable segments, Asset Management, Mining Royalty Lands and Land Development and Construction, as described below.

 

The Asset Management segment owns, leases and manages warehouse/office buildings located predominately in the Baltimore/Northern Virginia/Washington, DC market area.

 

Our Mining Royalty Lands segment owns several properties comprising approximately 15,000 acres currently under lease for mining rents or royalties (this does not include the 4,280 acres owned in our Brooksville joint venture with Vulcan Materials).  Other than one location in Virginia, all of these properties are located in Florida and Georgia. 

 

Through our Land Development and Construction segment, we own and are continuously monitoring for their “highest and best use” several parcels of land that are in various stages of development.  Our overall strategy in this segment is to convert all of our non-income producing lands into income production through (i) an orderly process of constructing new warehouse/office buildings for us to own and operate or (ii) a sale to, or joint venture with, third parties.

 

Operating results and certain other financial data for the Company’s business segments are as follows (in thousands):

  Three Months ended
  March 31,
    2017       2016    
Revenues:                
 Asset management $ 7,285       7,574    
 Mining royalty lands   1,762       1,778    
 Land development and construction   275       263    
  $ 9,322       9,615    
                 
Operating profit:                

 Before corporate expenses:

Asset management

$ 3,501       3,423    
   Mining royalty lands   1,625       1,649    
   Land development and construction   (395 )     (555  
 Corporate expenses:                
  Allocated to asset management   (753 )     (520 )  
  Allocated to mining royalty   (66 )     (75 )  
  Allocated to land development and construction   (508 )     (413 )  
    (1,327 )     (1,008 )  
  $ 3,404       3,509    
                 
Interest expense:                
 Asset management $ 248       415    
                 
Depreciation, depletion and amortization:                
 Asset management $ 1,965       1,835    
 Mining royalty lands   39       31    
 Land development and construction   55       63    
  $ 2,059       1,929    
                 
Capital expenditures:                
 Asset management   2,259       473    
 Mining royalty lands   —         4    
 Land development and construction   1,470       479    
  $ 3,729       956    
8 
 

 

                 
      March 31,       December 31,    
Identifiable net assets   2017       2016    
                 
Asset management $ 168,339       169,736    
Mining royalty lands   39,087       39,259    
Land development and construction   58,901       57,126    
Cash items   106       —      
Unallocated corporate assets   3,084       439    
  $ 269,517       266,560    

 

(4) Related Party Transactions. The Company is a party to a Transition Services Agreement which resulted from our January 30, 2015 spin-off of Patriot Transportation Holding, Inc. (Patriot). The Transition Services Agreement sets forth the terms on which Patriot will provide to FRP certain services that were shared prior to the Spin-off, including the services of certain shared executive officers. The boards of the respective companies amended and extended this agreement for one year effective April 1, 2017.

 

The consolidated statements of income reflect charges and/or allocation from Patriot for these services of $557,000 and $406,000 for the three months ended March 31, 2017 and 2016, respectively. Included in the charges above are amounts recognized for corporate executive stock-based compensation expense. These charges are reflected as part of corporate expenses.

 

To determine these allocations between FRP and Patriot as set forth in the Transition Services Agreement, we generally employed the same methodology historically used by the Company pre Spin-off to allocate said expenses and thus we believe that the allocations to FRP are a reasonable approximation of the costs related to FRP’s operations but any such related-party transactions cannot be presumed to be carried out on an arm’s-length basis as the terms were negotiated while Patriot was still a subsidiary of FRP.

 

(5) Long-Term Debt. Long-term debt is summarized as follows (in thousands):

 

    March 31,   December 31,
    2017   2016
Revolving credit (uncollateralized)   $ 6,765       6,665  
5.6% to 7.9% mortgage notes                
  due in installments through 2027     32,984       34,080  
      39,749       40,745  
Less portion due within one year     4,599       4,526  
    $ 35,150       36,219  

 

On January 30, 2015, the Company entered into a five year credit agreement with Wells Fargo with a maximum facility amount of $20 million (the "Credit Agreement"). The Credit Agreement provides a revolving credit facility (the “Revolver”) with a $10 million sublimit available for standby letters of credit. As of March 31, 2017, there was $5,799,000 outstanding on the revolver, $2,263,000 outstanding under letters of credit and $11,938,000 available for borrowing. The letters of credit were issued to guarantee certain obligations to state agencies related to real estate development. Most of the letters of credit are irrevocable for a period of one year and typically are automatically extended for additional one-year periods. The Revolver bears interest at a rate of 1.4% over the selected LIBOR, which may change quarterly based on the Company’s ratio of Consolidated Total Debt to Consolidated Total Capital, as defined. A commitment fee of 0.15% per annum is payable quarterly on the unused portion of the commitment. The commitment fee may also change quarterly based upon the ratio described above. The credit agreement contains certain conditions and financial covenants, including a minimum $110 million tangible net worth. As of March 31, 2017, the tangible net worth covenant would have limited our ability to pay dividends or repurchase stock with borrowed funds to a maximum of $75.5 million combined. The Company was in compliance with all covenants as of March 31, 2017.

 

9 
 

On July 24, 2015 the Company closed on a five year, $20 million secured revolver with First Tennessee Bank with a twenty-four month window to convert up to the full amount of the facility into a ten year term loan. Interest accrues at 1.90% over one month LIBOR plus an annual commitment fee of 0.10%. As of March 31, 2017, there was $966,000 outstanding on the revolver and $19,034,000 available for borrowing. The Company expects to close on a second facility with First Tennessee Bank with a $20 million ten year term loan secured by to-be-determined collateral from our current pool of unencumbered warehouse/office properties during 2017. The purpose of these loans is to facilitate growth through new construction in the Land Development and Construction segment and/or acquisition of existing, operating buildings to be added to the Asset Management segment.

 

During the three months ended March 31, 2017 and March 31, 2016 the Company capitalized interest costs of $370,000 and $242,000, respectively.

 

(6) Earnings per Share. The following details the computations of the basic and diluted earnings per common share (in thousands, except per share amounts):

  Three Months ended
  March 31,
  2017   2016
Weighted average common shares outstanding      
 during the period – shares used for basic      
 earnings per common share   9,931       9,853  
               
Common shares issuable under share based              
 payment plans which are potentially dilutive   70       40  
               
Common shares used for diluted              
 earnings per common share   10,001       9,893  
               
Net income $ 1,443       1,820  
               
Earnings per common share:              
 Basic $ 0.15       0.18  
 Diluted $ 0.14       0.18  
               

For the three months ended March 31, 2017 and 2016, 23,958 and 72,090 shares attributable to outstanding stock options were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

(7) Stock-Based Compensation Plans. The Company' has two Stock Option Plans (the 2006 Stock Incentive Plan and the 2016 Equity Incentive Option Plan) under which options for shares of common stock were granted to directors, officers and key employees. The 2016 plan permits the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, or stock awards. The options awarded under the plans have similar characteristics. All stock options are non-qualified and expire ten years from the date of grant. Stock based compensation awarded to directors, officers and employees are exercisable immediately or become exercisable in cumulative installments of 20% or 25% at the end of each year following the date of grant. When stock options are exercised the Company issues new shares after receipt of exercise proceeds and taxes due, if any, from the grantee. The number of common shares available for future issuance was 569,917 at March 31, 2017.

 

The Company utilizes the Black-Scholes valuation model for estimating fair value of stock compensation for options awarded to officers and employees. Each grant is evaluated based upon assumptions at the time of grant. The assumptions were no dividend yield, expected volatility between 35% and 46%, risk-free interest rate of .3% to 4.2% and expected life of .25 to 7.0 years.

 

The dividend yield of zero is based on the fact that the Company does not pay cash dividends and has no present

10 
 

intention to pay cash dividends. Expected volatility is estimated based on the Company’s historical experience over a period equivalent to the expected life in years. The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate at the date of grant with a term consistent with the expected life of the options granted. The expected life calculation is based on the observed and expected time to exercise options by the employees.

 

As previously disclosed, Thompson S. Baker II resigned from his position as CEO and from the board of directors on March 13. 2017. In recognition of his outstanding service to the Company, the Board approved the vesting of all of Mr. Baker's outstanding FRP stock options, which will expire 90 days following the termination of his employment. The vesting of Mr. Baker’s outstanding FRP options that were issued prior to the spin-off required Patriot to record modification stock compensation expense of $150,000. FRP reimbursed Patriot for this cost under the transition services agreement. The vesting of Mr. Baker’s outstanding FRP options that were issued subsequent to the spin-off required modified stock compensation expense of $41,000.

 

The Company recorded the following stock compensation expense in its consolidated statement of income (in thousands):

    Three Months ended  
    March 31,  
    2017   2016  
Stock option grants   $ 77       31      
Annual director stock award     445       412      
    $ 522       443      

 

A summary of changes in outstanding options is presented below (in thousands, except share and per share amounts):

 

      Weighted   Weighted   Weighted
  Number   Average   Average   Average
  Of   Exercise   Remaining   Grant Date
Options Shares   Price   Term (yrs)   Fair Value(000's)
Outstanding at                              
  January 1, 2017   236,385     $ 25.35       6.1     $ 2,440  
    Granted   4,555     $ 37.55             $ 75  
    Modification   —       $ 30.21             $ (137 )
    Exercised   (18,561 )   $ 20.48             $ (163 )
Outstanding at                              
  March 31, 2017   222,379     $ 26.00       6.2     $ 2,215  
Exercisable at                              
  March 31, 2017   180,089     $ 24.79       5.7     $ 1,631  
Vested during                              
  three months ended                              
  March 31, 2017   26,839                     $ 223  
                                   

 

The aggregate intrinsic value of exercisable in-the-money options was $2,739,000 and the aggregate intrinsic value of outstanding in-the-money options was $3,113,000 based on the market closing price of $40.00 on March 31, 2017 less exercise prices.

 

The unrecognized compensation cost of options granted to FRP employees but not yet vested as of March 31, 2017 was $409,000, which is expected to be recognized over a weighted-average period of 3.9 years.

 

Gains of $358,000 were realized by option holders during the three months ended March 31, 2017. Patriot realized the tax benefits because these options were exercised by Patriot employees for options granted prior to the spin-off.

 

 

11 
 

(8) Contingent Liabilities. Certain of the Company’s subsidiaries are involved in litigation on a number of matters and are subject to certain claims which arise in the normal course of business. The Company has retained certain self-insurance risks with respect to losses for third party liability and property damage. The liability at any point in time depends upon the relative ages and amounts of the individual open claims. In the opinion of management, none of these matters are expected to have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

 

Preliminary testing on the site of the Company's four phase master development known as RiverFront on the Anacostia in Washington, D.C. indicated the presence of contaminated material that will have to be specially handled upon excavation in conjunction with construction. The Company has agreed with our joint venture partner to bear the cost of handling the contaminated materials on the first phase of this development up to a cap of $1.871 million. As of September 30, 2016, the excavation and foundation work for Phase 1 were substantially complete; thus, the bulk of the remediation expenses have been incurred. Management believes the total cost for remediation on Phase 1 will end up at approximately $1.9 million. During the quarter ending December 31, 2015, management successfully completed negotiations and entered into a $3,000,000 settlement of environmental claims on all four phases against our former tenant at the Riverfront on the Anacostia property and continues to pursue settlement negotiations with other potentially responsible parties. The Company executed a letter of intent with MRP Realty in May 2016 to develop Phase II of the Riverfront on the Anacostia project and recorded an estimated environmental remediation expense of $2.0 million for the Company’s estimated liability under the proposed agreement. The Company has no obligation to remediate this contamination on Phases III and IV of the development until such time as it makes a commitment to commence construction on each phase. The Company's actual expense to address this issue may be materially higher or lower than the expense previously recorded depending upon the actual costs incurred and any reimbursement that we receive from the prior tenant.

 

(9) Concentrations.  With the completion and occupancy of the 3rd build to suit for the same tenant at Patriot Business Park in the first quarter of fiscal 2015 this particular tenant accounted for 11% of the Company’s consolidated revenues during the quarter ending March 31, 2017.  The mining royalty lands segment has a total of four tenants currently leasing mining locations and one lessee that accounted for 13.7% of the Company’s consolidated revenues during the quarter ending March 31, 2017 and $130,124 of accounts receivable at March 31, 2017.  The termination of these lessees’ underlying leases could have a material adverse effect on the Company. The Company places its cash and cash equivalents with Tennessee Bank.  At times, such amounts may exceed FDIC limits.

 

(10) Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 means the use of quoted prices in active markets for identical assets or liabilities. Level 2 means the use of values that are derived principally from or corroborated by observable market data. Level 3 means the use of inputs are those that are unobservable and significant to the overall fair value measurement.

 

As of March 31, 2017 the Company had no assets or liabilities measured at fair value on a recurring or non-recurring basis. At March 31, 2017 and 2016, the carrying amount reported in the consolidated balance sheets for cash and cash equivalents, short-term notes payable and revolving credit approximate their fair value based upon the short-term nature of these items.

 

The fair values of the Company’s other mortgage notes payable were estimated based on current rates available to the Company for debt of the same remaining maturities. At March 31, 2017, the carrying amount and fair value of such other long-term debt was $39,749,000 and $42,823,000, respectively. At December 31, 2016, the carrying amount and fair value of such other long-term debt was $40,745,000 and $43,747,000, respectively.

 

(11) Investments in Joint Ventures.

 

RiverFront. On March 30, 2012 the Company entered into a Contribution Agreement with MRP SE Waterfront Residential, LLC. (“MRP”) to form a joint venture to develop the first phase only of the four phase master development known as RiverFront on the Anacostia in Washington, D.C. The purpose of the Joint Venture is to develop, own, lease

12 
 

and ultimately sell an approximately 300,000 square foot residential apartment building (including approximately 18,000 square feet of retail) on approximately 2 acres of the roughly 5.82 acre site. The joint venture, RiverFront Investment Partners I, LLC (“RiverFront I”) was formed in June 2013 as contemplated. The Company contributed land with an agreed to value of $13,500,000 (cost basis of $6,165,000) and contributed cash of $4,866,000 to the Joint Venture for a 77.14% stake in the venture. MRP contributed capital of $5,553,000 to the joint venture including development costs paid prior to formation of the joint venture. The Joint Venture closed on $17,000,000 of EB5 secondary financing and a nonrecourse construction loan for $65,000,000 on August 8, 2014. Both these financing sources are non-recourse to FRP. At the time of these financings, RiverFront Holdings I, LLC. was formed as a parent to RiverFront Investment Partners I, LLC with EB5 as an equity partner in Riverfront Holdings I, LLC. Construction commenced in October 2014, first occupancy was in August 2016 and the Company anticipates lease up to occur during all of 2017. The joint venture intends to refinance the construction loan before the initial maturity date of August 7, 2018. The Company’s equity interest in the joint venture is accounted for under the equity method of accounting as MRP acts as the administrative agent of the joint venture and oversees and controls the day to day operations of the project. The company and MRP Realty executed a letter of intent in May 2016 and a Contribution Agreement in February 2017 to develop Phase II but the joint venture is not yet formed. Other income for the three months ended March 31, 2017 includes a loss of $762,000 representing the Company’s portion of the loss of this joint venture.

 

Brooksville. In 2006, the Company entered into a Joint Venture Agreement with Vulcan Materials Company to jointly own and develop approximately 4,300 acres of land near Brooksville, Florida. Under the terms of the joint venture, FRP contributed its fee interest in approximately 3,443 acres formerly leased to Vulcan under a long-term mining lease which had a net book value of $2,548,000. Vulcan is entitled to mine a portion of the property until 2022 and pay royalties to the Company. FRP also contributed $3,018,000 for one-half of the acquisition costs of a 288-acre contiguous parcel. Vulcan contributed 553 acres that it owned as well as its leasehold interest in the 3,443 acres that it leased from FRP and $3,018,000 for one-half of the acquisition costs of the 288-acre contiguous parcel. The joint venture is jointly controlled by Vulcan and FRP. Distributions will be made on a 50-50 basis except for royalties and depletion specifically allocated to the Company. Other income for the three months ended March 31, 2017 includes a loss of $9,000 representing the Company’s portion of the loss of this joint venture.

 

BC FRP Realty (Windlass Run). During the quarter ending March 2016, we entered into an agreement with a Baltimore development company (St. John Properties, Inc.) to jointly develop the remaining lands of our Windlass Run Business Park. The 50/50 partnership initially calls for FRP to combine its 25 acres (valued at $7,500,000) with St. John Properties’ adjacent 10 acres fronting on a major state highway (valued at $3,239,536) which resulted in an initial cash distribution of $2,130,232 to FRP in May, 2016. Thereafter, the venture will jointly develop the combined properties into a multi-building business park to consist of approximately 329,000 square feet of single story office space.

 

Investments in Joint Ventures (in thousands):

                            The  
                            Company's  
                Total Assets     Net Loss     Share of Net  
          Total     of the     of the     Loss of the  
    Ownership     Investment     Partnership     Partnership     Partnership  
                               
As of March 31, 2017                              
RiverFront Holdings I, LLC   77.14 %   $9,379     $91,753       $   (987 )   $   (762 )
Brooksville Quarry, LLC   50.00 %   7,512     14,343     (18 )   (9 )
BC FRP Realty, LLC   50.00 %   5,341     10,935     —      —   
   Total         $  22,232     $ 117,031     $  (1,005 )   $  (771 )
                               
As of December 31, 2016                              
RiverFront Holdings I, LLC   77.14 %   $10,151     $90,420       $   (1,446 )   $   (1,115 )
Brooksville Quarry, LLC   50.00 %   7,522     14,341     (8 )   (4 )
BC FRP Realty, LLC   50.00 %   5,228     10,784     —      —   
   Total         $  22,901     $ 115,545     $  (1,454 )   $  (1,119 )

 

13 
 

 

    As of March 31, 2017
    Riverfront   Brooksville   BCF FRP    
    Holdings I, LLC   Quarry, LLC   Realty, LLC   Total
                 
Investments in real estate, net   $ 89,971     $ 14,310     $ 10,920     $ 115,201  
Cash     1,457       24       15       1,496  
Cash held in escrow     133       —         —         133  
Accounts receivable     32       4       —         36  
Prepaid expenses     160       5       —         165  
     Total Assets   $ 91,753     $ 14,343     $ 10,935     $ 117,031  
                                 
Long-term Debt   $ 76,626     $ —       $ —       $ 76,626  
Amortizable debt costs     (955     —         —         (955
Other liabilities     2,049       23       55       2,127  
Capital – FRP     9,379       7,512       5,341       22,232  
Capital - Third Parties     4,654       6,808       5,539       17,001  
     Total Liabilities and Capital   $ 91,753     $ 14,343     $ 10,935     $ 117,031  

 

    As of December 31, 2016
    Riverfront   Brooksville   BCF FRP    
    Holdings I, LLC   Quarry, LLC   Realty, LLC   Total
                 
Cash   $ 1,023     $ 18     $ 21     $ 1,062  
Cash held in escrow     88       —         —         88  
Investments in real estate, net     89,309       14,323       10,763       114,395  
     Total Assets   $ 90,420     $ 14,341     $ 10,784     $ 115,545  
                                 
Other Liabilities   $ 6,348     $ 1     $ 47     $ 6,396  
Long-term Debt     69,042       —        —        69,042  
Capital – FRP     10,151       7,522       5,228       22,901  
Capital - Third Parties     4,879       6,818       5,509       17,206  
     Total Liabilities and Capital   $ 90,420     $ 14,341     $ 10,784     $ 115,545  

 

Income statements for the RiverFront Holdings I, LLC (in thousands):

    Three Months Ended March 31,
    2017   2016
Revenues:                
    Rental Revenue   $ 1,311       —    
    Revenue – Reimbursements     15       —    
Total Revenues     1,326       —    
Cost of operations:                
     Depreciation and amortization     863       22  
     Operating expenses     475       68  
     Property taxes     219       —    
Total cost of operations     1,557       90  
Total operating profit     (231 )     (90 )
Interest expense     (756 )     —    
Net loss of the Partnership   $ (987 )     (90

 

The amount of consolidated accumulated deficit for these joint ventures was $(2,134,000) and $(1,667,000) as of March 31, 2017 and December 31, 2016 respectively.

14 
 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

 

The following discussion includes certain non-GAAP financial measures (“adjusted”) within the meaning of Regulation G promulgated by the Securities and Exchange Commission (“Regulation G”) to supplement the financial results as reported in accordance with GAAP. Post Spin-off we are reporting any net gain/(loss) from the transportation business as “discontinued operations” and we currently have no other discontinued operations being reported. GAAP accounting rules do not allow corporate overhead expenses to be allocated to a discontinued operation of the Company; thus, those corporate expenses attributable to the transportation business prior to the spin-off are charged to the Company as part of continuing operations. The non-GAAP financial measures discussed below are adjusted income from continuing operations and adjusted consolidated operating profit. These non-GAAP financial measures exclude the corporate management fees attributable to the transportation business prior to the spin-off that are not allocable to the transportation business due to it being a discontinued operation. The Company uses these metrics to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. These measures are not, and should not be viewed as, substitutes for GAAP financial measures. Refer to “Non-GAAP Financial Measures” below in this annual report for a more detailed discussion, including reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

 

 

Overview - FRP Holdings, Inc. (“FRP” or the “Company”) is a holding company engaged in the real estate business, namely (i) warehouse/office building ownership, leasing and management, (ii) mining royalty land ownership, leasing and management, and (iii) land acquisition, entitlement, development and construction mainly for warehouse/office buildings.

 

The Company’s operations are influenced by a number of external and internal factors. External factors include levels of economic and industrial activity in the United States and the Southeast, construction activity and costs, aggregates sales by lessees from the Company’s mining properties, interest rates, market conditions in the Baltimore/Northern Virginia/Washington DC area, and our ability to obtain zoning and entitlements necessary for property development. Internal factors include administrative costs and group health claims experience.

 

 

Potential REIT Conversion.

 

Whether through strategic acquisitions, organic growth, joint ventures, or putting our non-income producing land to work, our constant aim is to create and grow shareholder value. To that end, we have for some time explored the possibility of converting this company into a Real Estate Investment Trust (REIT), with the idea that this may be a more efficient structure given the nature of our business. Though no final decision has been made, in order to have the option to convert to a REIT in 2017, the board has already elected to change from our previous fiscal year (ending September 30), to a fiscal year that follows the calendar year as is required of a REIT. This change went into effect January 1, 2017 and will require one-time additional auditing expenses of $120,000 which will be reflected in fiscal year 2017. Thus, this past quarter, and every quarter ended March 31 will now be the first quarter of our fiscal year. Finally, consistent with having the option to elect REIT status, we have contributed our mining reserves into a wholly owned subsidiary. Because the parent company still retains control of the land itself, the portion of the mining royalties’ income that is not attributable to the reserves, but instead more closely resembles ground rents, will be retained by the parent company and will qualify as “REIT-able” income. The subsidiary will receive only the income attributable to the reserves it now controls. This structure is intended to assure that we will meet the asset and income tests applicable to REITs. These preliminary steps will not have a material impact on our operations if the Company does not elect REIT status.

 

 

Asset Management Segment.

 

The Asset Management segment owns, leases and manages warehouse/office buildings located predominately in the

15 
 

Baltimore/Northern Virginia/Washington, DC market area.  We focus primarily on owning flexible type facilities that cater to the maximum number of tenant types. As most of our buildings are less than 150,000 square feet, we focus on local and regional vs. national tenants. Hands-on service provided by our in-house construction and property management teams keeps us close to our tenant base. These practices are the cornerstone of our mission to provide the highest quality product and services at competitive rates resulting in tenant satisfaction and ultimately, retention.

 

These assets create revenue and cash flows through tenant rental payments, lease management fees and reimbursements for building operating costs. The major cash outlays incurred in this segment are for operating expenses, real estate taxes, building repairs, lease commissions and other lease closing costs, construction of tenant improvements, capital to acquire existing operating buildings and closing costs related thereto and personnel costs of our property management team. Of the 42 buildings we own today, 27 were constructed by the Company through what is now known as our Land Development and Construction segment. Additionally, over the years, we have opportunistically acquired 15 existing operating buildings, typically in connection with a deferred like-kind (Section 1031) exchange opportunity.  Today, this segment consists of 3.9 million square feet.

 

Management focuses on several factors to measure our success on a comparative basis in this segment. The major factors we focus on are (1) revenue growth, (2) net operating income, (3) growth in occupied square feet, (4) actual occupancy rate, (5) average annual occupied square feet, (6) average annual occupancy rate (defined as the occupied sf at the end of each month during a fiscal year divided by the number of months to date in that fiscal year as a percentage of the average number of square feet in the portfolio over that same time period), (7) growth of our portfolio (in square feet), and (8) tenant retention success rate (as a percentage of total square feet to be renewed).

 

 

Asset Management segment – three months ended March 31, 2017 March 31, 2016
Revenues $7,285,000 7,574,000
Net Operating Income (Cash Basis) $5,689,000 5,442,000
Occupied square feet 3,525,234 3,348,112
Overall occupancy rate 90.8% 90.7%
Average annual occupied square feet 3,516,598 3,348,112
Average annual occupancy rate 90.6% 90.7%
Portfolio square feet 3,880,365 3,693,377
Retention Success rate 88% 65%

 

 

Mining Royalty Lands Segment.

 

Our Mining Royalty Lands segment owns several properties comprising approximately 15,000 acres currently under lease for mining rents or royalties (this does not include the 4,280 acres owned in our Brooksville joint venture with Vulcan Materials).  Other than one location in Virginia, all of these properties are located in Florida and Georgia.  The typical lease in this segment requires the tenant to pay us a royalty based on the number of tons of mined materials sold from our property during a given fiscal year multiplied by a percentage of the average annual sales price per ton sold. As a result of this royalty payment structure, we do not bear the cost risks associated with the mining operations, however, we are subject to the cyclical nature of the construction markets in these States as both volumes and prices tend to fluctuate through those cycles. In certain locations, typically where the reserves on our property have been depleted but the tenant still has a need for the leased land, we collect a fixed annual rental amount. We believe strongly in the potential for future growth in construction in Florida, Georgia, and Virginia which would positively benefit our profitability in this segment.  Our mining properties had estimated remaining reserves of 415 million tons as of September 30, 2016 after a total of 6.9 million tons were consumed in fiscal 2016.

 

The major expenses in this segment are comprised of collection and accounting for royalties, management’s oversight of the mining leases, land entitlement for post-mining uses and property taxes at our non-leased locations and at our Grandin location which, unlike our other leased mining locations, are not paid by the tenant.  As such, our costs in this business are very low as a percentage of revenue, are relatively stable and are not affected by increases in production at

16 
 

our locations. Our current mining tenants include Vulcan Materials, Martin Marietta and Cemex, among others. 

 

Additionally, these locations provide us with excellent opportunities for valuable “second lives” for these assets through proper land planning and entitlement.

 

Significant “2nd life” Mining Lands: 

 

Location Acreage Status
Brooksville, Fl 4,280 +/- Development of Regional of Impact and County Land Use and Master Zoning in place for 5,800 residential unit, mixed-use development
Ft. Myers, FL 1,993 +/- Approval in place for 105, 1 acre, waterfront residential lots after mining completed.
Gulf Hammock, Fl 1,600 +/- Currently on the market for $4.5 million
Total 7,873 +/-  

 

 

Land Development and Construction Segment.

 

Through our Land Development and Construction segment, we own and are continuously monitoring for their “highest and best use” several parcels of land that are in various stages of development.  Our overall strategy in this segment is to convert all of our non-income producing lands into income production through (i) an orderly process of constructing new warehouse/office buildings for us to own and operate or (ii) a sale to, or joint venture with, third parties.

Revenues in this segment are generated predominately from land sales and interim property rents. The significant cash outlays incurred in this segment are for land acquisition costs, entitlement costs, property taxes, design and permitting, the personnel costs of our in-house management team and horizontal and vertical construction costs.

Since 1990, one of our primary strategies in this segment has been to acquire, entitle and ultimately develop commercial/industrial business parks providing 5–15 building pads which we typically convert into warehouse/office buildings. To date, our management team has converted 27 of these pads into developed buildings that we continue to own and manage through the Asset Management segment. Our typical practice has been to transfer these assets to the Asset Management segment on the earlier to occur of (i) commencement of rental revenue or (ii) issuance of the certificate of occupancy. We have also opportunistically sold several of these pad sites over time to third party “users”. 

 

The remaining pad sites in our inventory today are fully entitled, located in business parks in four different submarkets in the DC/Baltimore/Northern Virginia area, and can support an additional +/- 973,000 sf. of warehouse/office buildings. 

 

Summary of Our Remaining Lot Inventory: 

 

Location Acreage SF +/- Status
Lakeside, MD 20 286,500 Horizontal development completed. Ready for vertical permitting.

Windlass Run

Business Park, MD

17.5

(50%

Interest)

164,500

(50%

Interest)

Company owns a 50% in a joint venture formed in April 2016 with St. John Properties.  The joint venture owns the 35 acres and plans to develop the land into 12 office buildings for a total of 329,000 sq. ft.
Patriot Business Center, Manassas, VA 25 202,448 Construction in progress on a 103,448 sf warehouse/office building which is 83% pre-leased.  Building permit process ongoing for the remaining 99,000 sf.
Hollander 95 Business Park, MD 33 319,950 Horizontal development completed. Building permit process ongoing for 85,500 sf.
Total 95.5 973,398  
17 
 

 

We completed a third build-to-suit building for the same tenant at our Patriot Business Park and transferred that asset to the Asset Management segment on or about November 2014 when the building was approved for occupancy. Having sites ready for vertical construction has rewarded us in the past.  It is the main reason why we were able to convert 3 of our finished pads at Patriot Business Park into build-to-suit opportunities in 2012, 2013 and 2014.  We completed construction on a 79,550 square foot spec building at Hollander Business Park that was put into service in the third quarter of fiscal 2016. Also in the third quarter of fiscal 2016 we started construction on a 103,448 square foot building in Patriot Business Center and pre-leased 85,818 square feet. In April, 2016 we entered into a joint venture agreement to develop 12 office buildings on our remaining lots at Windlass Run and on adjacent frontage property owned by St. John Properties. We will continue to actively monitor these submarkets where we have lots ready for construction and take advantage of the opportunities presented to us.

 

In addition to the inventory of finished building lots, we have several other properties that were either spun-off to us from Florida Rock Industries in 1986 or acquired by us from unrelated 3rd parties. These properties, as a result of our “highest and best use” studies, are being prepared for income generation through sale or joint venture with third parties, and in certain cases we are leasing these properties on an interim basis for an income stream while we wait for the development market to mature.

 

Our strategy when selling parcels outright is to attempt to convert the proceeds into income producing real estate for our Asset Management segment through a Section 1031 tax-deferred exchange. An example of this is the Windlass Run 179 acre tract purchased for $5.2 million in 2002. When purchased, the entire parcel was zoned for commercial/industrial uses. Today, some 70 acres of this original tract makes up our Windlass Run Business Park. We successfully rezoned the remaining acreage for medium density residential development and on April 17, 2013, we entered into a contract to sell the residential portion of the property for $19 million. The first phase of the Windlass Run residential land was sold for $8 million and the proceeds were used in a Section 1031 exchange to acquire our Transit Business Park in 2013. Phase 2 was sold in November, 2015 for $11.1 million and we used $9.9 million of the proceeds to acquire the fully leased Port Capital Building.

 

An example of property in this segment being developed through joint venture is Phase I of our RiverFront on the Anacostia project which was contributed to a joint venture with MRP in 2014 to construct a 305 unit apartment building including 18,000 sf of ground floor retail.

 

Significant Investment Lands Inventory:

 

Location Approx. Acreage Status

 

NBV

RiverFront on the Anacostia Phase I 2.1 Phase I (as of 4/23/17) residential is 71% occupied and 79% leased. $9,380,000
RiverFront on the Anacostia Phases II-IV 3.7 Phase II final design approval hearings ongoing. $10,209,000
Hampstead Trade Center, MD 118 Residential conceptual design program ongoing. $7,074,000
Square 664E,on the Anacostia River in DC 2 Under lease to Vulcan Materials as a concrete batch plant through 2021 with one 5 year renewal option. $8,299,000
Total 126   $34,962,000

 

RIVERFRONT ON THE ANACOSTIA:

This property consists of 5.8 acres on the Anacostia River and is immediately adjacent to the Washington National’s baseball park in the SE Central Business District of Washington, DC. Once zoned for industrial use and under a ground lease, this property is no longer under lease and has been rezoned for the construction of approximately 1.1M square feet of “mixed-use” development in four phases. In 2014, approximately 2.1 acres (Phase I) of the total 5.8 acres was contributed to a joint venture owned by the Company (77%) and our partner, MRP Realty (23%), and construction

18 
 

commenced in October 2014 on a 305 unit residential apartment building with approximately 18,000 sq. ft. of first floor retail space. Lease up commenced in May 2016 and rent stabilization is expected in the third quarter of 2017. Pre-leasing activity for the 305 residential units commenced in late May of 2016 and as of April 23, the residential units were 71% occupied and 79% leased, while retail units remain 80.0% leased with just one space remaining. Phases II, III and IV are slated for residential, office, and hotel/residential buildings, respectively, all with permitted first floor retail uses. The company and MRP Realty executed a letter of intent in May 2016 and a Contribution Agreement in February 2017 to develop Phase II but the joint venture is not yet formed. In February, the D.C. Zoning Commission voted 5-0 in favor of the Planned Unit Development (PUD) of Phase II of our RiverFront on the Anacostia project. After formal publishing of the record and a 35 day appeal period we anticipate formal approval in the second quarter of this calendar year.

 

On August 24, 2015, in anticipation of commencing construction of the new Frederick Douglass bridge at a location immediately to the West of the existing bridge, the District of Columbia filed a Declaration of Taking for a total of 7,390 square feet of permanent easement and a 5,022 square foot temporary construction easement on land along the western boundary of the land that will ultimately hold Phase III and IV. Previously, the Company and the District had conceptually agreed to a land swap with no compensation that would have permitted the proposed new bridge, including construction easements, to be on property wholly owned by the District. As a result, the Planned Unit Development was designed and ultimately approved by the Zoning Commission as if the land swap would occur once the District was ready to move forward with the new bridge construction. In September 2016 the Company received $1,115,400 as settlement for the easement. The Company will continue to seek an agreement from the District that the existing bridge easement will terminate when the new bridge has been placed in service and the existing bridge has been removed. The Company’s position is that otherwise Phase IV will be adversely impacted and additional compensation or other relief will be due the Company.

 

HAMPSTEAD TRADE CENTER: We purchased this 118 acre tract in 2005 for $4.3 million in a Section 1031 exchange with plans of developing it as a commercial business park. The “great recession” caused us to reassess our plans for this property. As a result, Management has determined that the prudent course of action is to attempt to rezone the property for residential uses and sell the entire tract to another developer such that we can redeploy this capital into assets with more near-term income producing potential. In the fourth quarter of fiscal 2016, the Company received approval from the Town of Hampstead and has rezoned the property for residential use.

SQUARE 664E, WASHINGTON, DC

This property sits on the Anacostia River at the base of South Capitol Street in an area named Buzzard Point, approximately 1 mile down river from our RiverFront on the Anacostia property. The Square 664E property consists of approximately 2 acres and is currently under lease to Vulcan Materials for use as a concrete batch plant. The lease terminates on August 31, 2021 and Vulcan has the option to renew for one additional period of five (5) years. In the quarter ending December 31, 2014, the District of Columbia announced that it had selected Buzzard Point for the future site of the new DC United major league soccer stadium. The selected stadium location is separated from our property by just one small industrial lot. In March 2017 reconstruction of the bulkhead was completed at a cost of $4 million in anticipation of future high rise development.

 

Comparative Results of Operations for the Three months ended March 31, 2017 and 2016

 

Consolidated Results

 

  Three months ended        
(dollars in thousands)  March 31,        
  2017   2016   Change   %
Revenues:                              
  Rental Revenue $ 6,283     $ 6,089     $ 194       3.2 %
  Mining Royalty and rents   1,739       1,756       (17     -1.0 %
  Revenue-Reimbursements   1,300       1,770       (470     -26.6 %
 Total Revenues   9,322       9,615       (293     -3.0 %
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Cost of operations:                              
  Depreciation/Depletion/Amortization   2,059       1,929       130       6.7 %
  Operating Expenses   1,001       1,531       (530 )     -34.6 %
  Property Taxes   1,062       1,142       (80     -7.0 %
  Mgmt Co Allocation-In   469       496       (27     -5.4 %
  Corporate Expense   1,327       1,008       319       31.6 %
Total cost of operations   5,918       6,106       (188 )     -3.1 %
                               
Total operating profit   3,404       3,509       (105     -3.0 %
                               
Interest Income and other   —         1       (1 )     -100.0  
Interest Expense   (248 )     (415 )     167       -40.2 %
Equity in loss of joint ventures   (771 )     (86 )     (685 )     796.5 %
                               
Income before income taxes   2,385       3,009       (624     -20.7 %
Provision for income taxes   942       1,189       (247     -20.8 %
                               
Net income $ 1,443     $ 1,820     $ (377 )     -20.7 %
                               

 

Net income for the first quarter of 2017 was $1,443,000 or $.14 per share versus $1,820,000 or $.18 per share in the same period last year. The decrease in income compared to the same period last year is a result of a $685,000 increase in equity in loss of joint ventures, primarily as a result of expenses and depreciation during the lease up of Phase I (Dock 79) of RiverFront. Total revenues were $9,322,000, down 3%, versus the same period last year. Consolidated total operating profit was down 3%.

 

 

Asset Management Segment Results

 

Highlights of the Three Months ended March 31, 2017:

 

  • Rental revenue was up $145,000, or 2.4%

 

    Three Months Ended March 31          
(dollars in thousands)   2017   %   2016   %   Change   %  
                           
Rental revenue   $ 6,103       83.8 %   $ 5,958       78.7 %   $ 145       2.4 %
Revenue-reimbursements     1,182       16.2 %     1,616       21.3 %     (434     -26.9 %
                                                 
Total revenue     7,285       100.0 %     7,574       100.0 %     (289     -3.8 %
                                                 
Depreciation, depletion and amortization     1,965       27.0 %     1,835       24.2 %     130       7.1 %
Operating expenses     895       12.3 %     1,430       18.9 %     (535 )     -37.4 %
Property taxes     737       10.1 %     662       8.7 %     75       11.3 %
Management company indirect     187       2.6 %     224       3.0 %     (37 )     -16.5 %
Corporate expense     753       10.3 %     520       6.9 %     233       44.8 %
                                                 
Cost of operations     4,537       62.3 %     4,671       61.7 %     (134     -2.9 %
                                                 
Operating profit   $ 2,748       37.7 %   $ 2,903       38.3 %   $ (155     -5.3 %
                                                   

 

 

20 
 

Total revenues in this segment were $7,285,000, down $289,000 or 3.8%, over the same period last year. The decrease in revenue is due to lower snow removal reimbursements as a result of a milder 2017 winter. Given its nature as a reimbursement, snow removal is largely a pass through expense, and expenses were down a like amount. Net Operating Income in this segment for the first quarter was $5,689,000, compared to $5,442,000 in the same period last year, an increase of 4.5%. The increase was mainly due to the acquisition of the Gilroy Road building in Hunt Valley, MD in July 2016, and the lease up of previously vacant space at 7010 Dorsey Road in Hillside Business Park in August 2016 and 2201 Lakeside in November and December 2016. We ended the first quarter with total occupied square feet of 3,525,234 versus 3,348,112 at the end of the same period last year, an increase of 5.3% or 177,122 square feet. Our overall occupancy rate was 90.8%.

Depreciation and amortization expense increased primarily because of the aforementioned Gilroy building purchase and the completion of a 79,550 square foot warehouse at Hollander Business Park in April 2016. Corporate expense increased due to stock option modification expense of $191,000 and increased internal and external audit expense incurred as a result of the conversion from the previous fiscal year (ending September 30) to one that follows the calendar year.

 

Mining Royalty Lands Segment Results

 

Highlights of the Three Months ended March 31, 2017:

 

  • Mining Royalty and rents revenue were down $17,000, or 1.0%.

 

    Three Months Ended March 31
(dollars in thousands)   2017   %   2016   %
                 
Mining Royalty and rents   $ 1,739       98.7 %     1,756       98.8 %
Revenue-reimbursements     23       1.3 %     22       1.2 %
                                 
Total revenue     1,762       100.0 %     1,778       100.0 %
                                 
Depreciation, depletion and amortization     39       2.2 %     31       1.8 %
Operating expenses     39       2.2 %     39       2.2 %
Property taxes     59       3.3 %     59       3.3 %
Corporate expense     66       3.8 %     75       4.2 %
                                 
Cost of operations     203       11.5 %     204       11.5 %
                                 
Operating profit   $ 1,559       88.5 %   $ 1,574       88.5 %

 

Total revenues in this segment were $1,762,000, a decrease of 0.9%, versus $1,778,000 in the same period last year. This is largely due to $112,000 decrease in royalties at our Lake Sand location, the consequence of Vulcan having fully depleted our proven reserves there. Further capital expenditures would be required by our tenant to change their mining plan and realize more than three million tons of probable reserves at Lake Sand, which we do not anticipate any time soon. Total operating profit in this segment was $1,559,000, a decrease of $15,000 versus $1,574,000 in the same period last year.

 

Land Development and Construction Segment Results

 

Highlights of the Three Months ended March 31, 2017:

 

  • The Company continues to work with MRP Realty to develop Phase II of the Riverfront on the Anacostia.

 

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    Three Months ended March 31  
(dollars in thousands)   2017   2016   Change  
               
Rental revenue   $ 180       131       49    
Revenue-reimbursements     95       132       (37  
                           
Total revenue     275       263       12    
                           
Depreciation, depletion and amortization     55       63       (8  
Operating expenses     67       62       5    
Property taxes     266       421       (155  
Management company indirect     282       272       10    
Corporate expense     508       413       95    
                           
Cost of operations     1,178       1,231       (53  
                           
Operating loss   $ (903 )     (968 )     65    

 

The Land Development and Construction segment is responsible for (i) seeking out and identifying opportunistic purchases of income producing warehouse/office buildings, and (ii) developing our non-income producing properties into income production.

 

With respect to ongoing projects:

·Our new spec building at Patriot Business Center was placed in service in April 2017 and is 49.9% occupied and 83.0% leased
·In February, the D.C. Zoning Commission voted 5-0 in favor of the Planned Unit Development (PUD) of Phase II of our RiverFront on the Anacostia project. After formal publishing of the record and a 35 day appeal period we anticipate formal approval in the second quarter of this calendar year 
·We are fully engaged in the formal process of seeking PUD entitlements for our 118 acre tract in Hampstead, Md
·We completed construction of the bulkhead at our 664E property on the Anacostia ahead of schedule and under budget.

Finally, it has been eight months since we placed Dock 79 and its 305 residential units “in service.” As of April 23, the residential units were 71% occupied and 79% leased, while retail units remain 80.0% leased with just one space remaining. The project is currently above pro forma in effective rents and leasing absorption with residential stabilization expected in the third quarter of 2017. However, because of operating losses and depreciation during the lease up of Phase I (Dock 79) of RiverFront on the Anacostia this quarter, equity in loss of joint ventures was $771,000 (including a loss of $9,000 in the Brooksville Joint Venture).

 

 

Liquidity and Capital Resources. The growth of the Company’s businesses requires significant cash needs to acquire and develop land or operating buildings and to construct new buildings and tenant improvements. As of March 31, 2017, we had $5,799,000 borrowed under our $20 million Wells Fargo revolver, $2,263,000 outstanding under letters of credit and $11,938,000 available to borrow under the revolver. The Company closed on a $20 million secured revolver with First Tennessee Bank on July 24, 2015 and as of March 31, 2017, we had $966,000 borrowed and $19,034,000 available to borrow under the revolver. First Tennessee has also committed to provide an additional $20 million of secured financing to the Company on a ten year term loan amortizing on a twenty five (25) year basis. We expect to close on this second loan with First Tennessee during 2017.

 

Cash Flows - The following table summarizes our cash flows from operating, investing and financing activities for

22 
 

each of the periods presented (in thousands of dollars):

    Three months  
    Ended March 31,  
    2017   2016  
Total cash provided by (used for):            
Operating activities $ 4,882     3,289  
Investing activities   (3,833 )   (1,102 )
Financing activities   (943   (2,187 )
Increase in cash and cash equivalents $ 106     —   
             
 Outstanding debt at the beginning of the period $ 40,745     42,099  
 Outstanding debt at the end of the period $ 39,749     39,179  

 

Operating Activities - Net cash provided by operating activities increased $1,593,000 to $4,882,000 for the three months ended March 31, 2017. The total of net income plus depreciation, depletion and amortization less gains on sales of property and equipment decreased $238,000 versus the same period last year. These changes are described above under “Comparative Results of Operations”. Equity in the loss of joint ventures was $771,000 in the first quarter of 2017 primarily as a result of expenses and depreciation during the lease up of Dock 79. Deferred income tax liabilities increased by $3,092,000 primarily due to bonus depreciation on Phase I (Dock 79) of RiverFront. Income tax receivable was $2,608,000 at March 31, 2017 compared to income tax payable of $887,000 at December 31. 2016 resulting in a negative impact to net cash provided by operating activities of $3,495,000 also primarily due to the bonus depreciation on Dock 79.

 

Investing Activities - For the three months ended March 31, 2017, cash required by investing activities increased $2,731,000 to $3,833,000.

 

Financing Activities – For the three months ended March 31, 2017, cash required by financing activities was $943,000 versus $2,187,000 in 2016 primarily due to higher borrowing on the revolver.

 

Credit Facilities - On January 30, 2015, in connection with the Spin-off, the Company terminated its $55 million credit facility entered with Wells Fargo Bank, N.A. in 2012 and simultaneously entered into a new five year credit agreement with Wells Fargo with a maximum facility amount of $20 million (the "Credit Agreement"). The Credit Agreement provides a revolving credit facility (the “Revolver”) with a $10 million sublimit available for standby letters of credit. At the time of the Spin-off, the Company refinanced $10,483,000 of borrowings then outstanding on the terminated revolver. As of March 31, 2017, there was $5,799,000 outstanding on the revolver and $2,263,000 outstanding under letters of credit and $11,938,000 available for borrowing. The letters of credit were issued to guarantee certain obligations to state agencies related to real estate development. Most of the letters of credit are irrevocable for a period of one year and typically are automatically extended for additional one-year periods. The Revolver bears interest at a rate of 1.4% over the selected LIBOR, which may change quarterly based on the Company’s ratio of Consolidated Total Debt to Consolidated Total Capital, as defined. A commitment fee of 0.15% per annum is payable quarterly on the unused portion of the commitment. The commitment fee may also change quarterly based upon the ratio described above. The credit agreement contains certain conditions and financial covenants, including a minimum $110 million tangible net worth. As of March 31, 2017, the tangible net worth covenant would have limited our ability to pay dividends or repurchase stock with borrowed funds to a maximum of $75.5 million combined. The Company was in compliance with all covenants as of March 31, 2017.

 

During the first quarter of fiscal 2015, the Company announced the execution of a commitment from First Tennessee Bank to provide up to $40 million dollars of mortgage backed financing in two separate facilities. On July 24, 2015 the Company closed on a five year, $20 million secured revolver with a twenty-four month window to convert up to the full amount of the facility into a ten year term loan. Interest accrues at 1.90% over one month LIBOR plus an annual commitment fee of 0.10%. As of March 31, 2017, there was $966,000 outstanding on the revolver and $19,034,000 available for borrowing. The second facility is a $20 million ten year term loan secured by to-be-determined collateral from our current pool of unencumbered warehouse/office properties expected to close in 2017. The purpose of these loans is to facilitate growth through new construction in the Land Development and Construction segment and/or

23 
 

acquisition of existing, operating buildings to be added to the Asset Management segment.

 

Cash Requirements – The Board of Directors has authorized Management to repurchase shares of the Company’s common stock from time to time as opportunities arise. During the three months ended March 31, 2017 the Company repurchased 2,000 shares of stock. As of March 31, 2017, $4,883,000 was authorized for future repurchases of common stock. The Company does not currently pay any cash dividends on common stock.

 

The Company currently expects its 2017 capital expenditures to include approximately $19,600,000 for real estate development and acquisitions, of which $3,729,000 has been expended to date, which will be funded mostly out of cash generation from operations and property sales or partly from borrowings under our credit facilities.

 

REIT Conversion – If we elect REIT status, we would be required to distribute to our shareholders an amount equal to at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. If we elect REIT status for the 2017 calendar year, we would expect to commence paying regular distributions in 2018. The amount, timing and frequency of future distributions, however, will be at the sole discretion of our Board of Directors and will be declared based upon various factors, many of which are beyond our control, including, our financial condition and operating cash flows, the amount required to maintain REIT status and reduce any income and excise taxes that we otherwise would be required to pay, limitations on distributions in our existing and future debt instruments, limitations on our ability to fund distributions using cash generated through taxable REIT subsidiaries and other factors that our Board of Directors may deem relevant.

 

We currently operate as a C corporation. A REIT is not permitted to retain earnings and profits (“E&P”) accumulated during the periods when the company or its predecessor was taxed as a C corporation. If we elect REIT status for the year ending December 31, 2017, we would issue a special distribution to our shareholders of accumulated earnings and profits on or prior to December 31, 2017 (the “E&P Distribution”). The E&P Distribution would be taxable to our shareholders. We have not yet determined the amount of our accumulated earnings and profits. We anticipate that the E&P Distribution would be made in the form of 75% FRP common stock and 25% cash, although no decision has been made as to the composition of any E&P Distribution. The timing of the planned E&P Distribution, which may or may not occur, may be affected by potential changes in tax law, the completion of various phases of the REIT conversion process and other factors beyond our control.

 

 

Summary and Outlook. We are focused on building shareholder value through our real estate holdings. We accomplish this through the opportunistic acquisition of income producing properties, and the conversion of our non-income producing assets into income production. We have done this by (i) selling land that is not conducive to warehouse/office development (e.g. Windlass Run Residential Phase 2 land) and using the proceeds to acquire existing income producing warehouse/office buildings typically in a Section 1031 exchange (e.g. the Port Capital building purchase) and (ii) the construction of new warehouse/office buildings on existing pad sites in our developed business parks (e.g. new spec building at Patriot). Over the past five years, we have used this approach to convert 172 acres of non-income producing land into 766,216 square feet of income producing properties (excluding the recently completed spec building). This past quarter those properties had Net Operating Income of $1,319,000, accounting for over 23% of Asset Management’s Net Operating Income.

 

The Asset Management segment has an unusually large number of square feet of lease expirations (357,175 square feet) during the quarter ending June 30, 2017 of which 129,891 square feet have renewed.

 

During the remainder of this year, we expect to reach residential stabilization of Phase I (Dock 79) of RiverFront on the Anacostia and continue pre-development activities for Phase II with the expectation that we will break ground in the last quarter of this year or the first quarter of fiscal year 2018. Our biggest decision this year will be whether or not to convert this company into a Real Estate Investment Trust. As mentioned previously, we have taken steps to, at the very least, have the option. Impacting that decision will be weighing the benefits of REIT status against how it will impact our capital structure and any future projects, as well as any changes in the federal tax code.

 

Finally, as announced in March, our CEO Tom Baker resigned in order to become Vulcan Materials Company’s

24 
 

Senior Vice President. We are grateful for his leadership, recognize that this was an opportunity he really couldn’t refuse, and wish him nothing but the best as he starts this new chapter in his professional life. Taking over for Tom is John D Baker II. John was the CEO of this company prior to Tom from 2008-2010, and has been its chairman since. So while Tom will certainly be missed, he leaves your company in great shape and in more than capable hands.

 

Subsequent Events. Subsequent to the end of last quarter, we were informed by Vulcan Materials Company that Lee County issued Vulcan a Mine Operating Permit (MOP) for our section of their operations in Ft. Myers, the last of the permits required to begin mining this property. This action is the culmination of over twenty years of work to get this property fully entitled and allows Vulcan to begin production immediately. Vulcan’s ability to finally realize the reserves at this site should positively impact revenue and income as it creates an opportunity to collect more than the minimums from this location.

 

Non-GAAP Financial Measures.

 

To supplement the financial results presented in accordance with GAAP, FRP presents certain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The non-GAAP financial measure included in this quarterly report are net operating income (NOI). FRP uses these non-GAAP financial measures to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. These measures are not, and should not be viewed as, substitutes for GAAP financial measures.

 

Net Operating Income Reconciliation
Three months ended 03/31/17 (in thousands)
                           
  Asset     Land     Mining       FRP    
  Management     Development     Royalties       Holdings    
  Segment     Segment     Segment       Totals    
                           
Income (loss) from continuing operations 1,512     (1,007 )   938       1,443    
Income Tax Allocation 988     (658 )   612       942    
Inc. (loss) from continuing operations  before income taxes 2,500     (1,665 )   1,550       2,385    
                           
Less:                          
 Lease intangible rents 3     —                    
Plus:                          
 Unrealized rents 39     —                    
 Equity in loss of Joint Venture —       762                  
 Interest Expense 248     —                    
 Depreciation/Amortization 1,965     55                  
 Management Co. Indirect 187     282                  
 Allocated Corporate Expenses 753     508                  
                           
Net Operating Income (loss) 5,689     (58                

 

 

Net Operating Income Reconciliation

Three months ended 03/31/16 (in thousands)
                           
  Asset     Land     Mining       FRP    
  Management     Development     Royalties       Holdings    
  Segment     Segment     Segment       Totals    
                           
Income (loss) from continuing operations 1,505     (631 )   946       1,820    
Income Tax Allocation 983     (410 )   616       1,189    
Inc. (loss) from continuing operations  before income taxes 2,488     (1,041 )   1,562       3,009    
                           
Less:                          
Other income —      1                  
 Lease intangible rents 4     —                    
 Unrealized rents 36     —                    
Plus:                          
 Equity in loss of Joint Venture —       75                  
 Interest Expense 415     —                    
 Depreciation/Amortization 1,835     63                  
 Management Co. Indirect 224     272                  
 Allocated Corporate Expenses 520     413                  
                           
Net Operating Income (loss) 5,442     (219                

 

25 
 

 

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

 

Interest Rate Risk - We are exposed to the impact of interest rate changes through our variable-rate borrowings under Credit Agreements with Wells Fargo and First Tennessee Bank.

 

Under the Wells Fargo Credit Agreement, the applicable spread for borrowings at March 31, 2017 was 1.4% over libor. The applicable spread for such borrowings will be increased in the event that our debt to capitalization ratio as calculated under the Wells Fargo Credit Agreement Facility exceeds a target level.

 

The applicable borrowing spread above libor at March 31, 2017 with First Tennessee Bank was 1.9%.

 

At March 31, 2017 a 1% increase in the current per annum interest rate would result in $57,992 of additional interest expense during the next 12 months under the Wells Fargo Credit Agreement. The foregoing calculation assumes an instantaneous 1% increase in the rates under the Credit Agreement and that the principal amount under the Credit Agreement is the amount outstanding as of March 31, 2017. The calculation, therefore, does not account for the differences in the market rates upon which the interest rates of our indebtedness are based or possible actions, such as prepayment, which we may take in response to any rate increase.

 

ITEM 4. CONTROLS AND PROCEDURES

 

CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

 

The Company also maintains a system of internal accounting controls over financial reporting that are designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

 

All control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving the desired control objectives.

 

As of March 31, 2017, the Company, under the supervision and with the participation of the Company's management, including the CEO, CFO and CAO, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on this evaluation, the Company’s CEO, CFO and CAO concluded that the Company's disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be included in periodic SEC filings.

26 
 

 

There have been no changes in the Company’s internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

 

Item 1A.RISK FACTORS

 

In addition to the other information set forth in this report and the Risks related to our potential REIT election, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2016, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

 

 

Item 2. PURCHASES OF EQUITY SECURITIES BY THE ISSUER

          (c)    
          Total    
          Number of    
          Shares   (d)
          Purchased   Approximate
  (a)       As Part of   Dollar Value of
  Total   (b)   Publicly   Shares that May
  Number of   Average   Announced   Yet Be Purchased
  Shares   Price Paid   Plans or   Under the Plans
Period Purchased   per Share   Programs   or Programs (1)
  January 1                                
  Through                                
  January 31     —       $ —         —       $ 4,957,000  
                                   
  February 1                                
  Through                                
  February 28     —       $ —         —       $ 4,957,000  
                                   
  March 1                                
  Through                                
  March 31     2,000      $ 37.10        —      $ 4,883,000  
                                   
  Total     2,000      $ 37.10        —           

 

(1) On February 4, 2015, the Board of Directors authorized management to expend up to $5,000,000 to repurchase shares of the Company’s common stock from time to time as opportunities arise.

 

 

Item 6. EXHIBITS

 

(a)Exhibits. The response to this item is submitted as a separate Section entitled "Exhibit Index", on page 29.

 

 

27 
 

 

   
   

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

      FRP Holdings, Inc.
         
         
Date:  May 5, 2017   By JOHN D. BAKER II  
      John D. Baker II  
      Chief Executive Officer
      (Principal Executive Officer)
         
         
    By JOHN D. MILTON, JR.  
      John D. Milton, Jr.  
      Executive Vice President, Treasurer,
      Secretary and Chief Financial Officer
      (Principal Financial Officer)
         
         
    By JOHN D. KLOPFENSTEIN  
      John D. Klopfenstein  
      Controller and Chief Accounting
      Officer (Principal Accounting Officer)
28 
 

FRP HOLDINGS, INC.

FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2017

EXHIBIT INDEX

 

 

(14) Financial Code of Ethical Conduct between the Company, Chief Executive Officers and Financial Managers, as revised on January 28, 2004, which is available on the Company’s website at www.frpholdings.com.
(31)(a) Certification of John D. Baker II.
(31)(b) Certification of John D. Milton, Jr.
(31)(c) Certification of John D. Klopfenstein.
(32) Certification of Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
   
101.INS XBRL Instance Document
101.XSD XBRL Taxonomy Extension Schema 
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase

 

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