JACKSONVILLE, Fla., May 4, 2016 /PRNewswire/ --

Fiscal 2016 Second Quarter Consolidated Results of Continuing Operations.

Income from continuing operations for the second quarter of fiscal 2016 was $1,820,000 or $.18 per share versus $845,000 or $.09 per share in the second quarter last year.  Total revenues were up $667,000, or 7.5%, versus the same quarter last year with total cost of operations down $683,000, or 10.1%.  Consolidated total operating profit increased by $1,350,000, or 62.5%, to $3,509,000 this quarter. 

The Company enjoyed another successful quarter in both of our income producing segments.  Compared to last year's 2^nd quarter, our Mining Royalty Lands segment grew operating profit (excluding the benefit from the Reallocation¹) by 68.9% while our Asset Management segment grew operating profit by 7.9%.

Second Quarter Segment Operating Results.

Asset Management Segment:

Total revenues in this segment were $7,574,000, up $244,000 or 3.3%, over the same quarter last year. Net Operating Income in this segment for the 2^nd quarter was $5,442,000, compared to $5,095,000 in the 2nd quarter last year, an increase of 6.8%.  The increase was mainly due to the completion of the third build-to-suit at Patriot Business Park in the middle of the 2^nd quarter last year and the acquisition of the Port Capital building in Baltimore in October of 2015.  We ended this quarter with total occupied square feet of 3,348,112 versus 3,198,200 at the end of the 2^nd quarter last year, an increase of 4.7% or 149,912 square feet. 

During the quarter, the Company identified an opportunistic purchase opportunity and entered into a purchase agreement to buy the Gilroy Road building located in Hunt Valley, MD, for a purchase price of $8,850,000.  The Gilroy Road building is a 113,386 sq.ft. warehouse that is currently 100% occupied.  The contract is in the feasibility study phase and is subject to multiple contingencies before the parties are obligated to close.

Mining Royalty Lands Segment:

Total revenues in this segment were $1,778,000, an increase of 33.2%, versus $1,335,000 in the same quarter last year due to an increase in tons shipped.  Total operating profit in this segment was $1,574,000, an increase of $909,000 (inclusive of a $451,000 benefit from the Reallocation), versus $665,000 in the second quarter of last year.

Land Development and Construction Segment:

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.  Construction of the 79,550 square foot spec warehouse at Hollander Business Park will be completed during the third quarter of this fiscal year and, upon receipt of a Certificate of Occupancy, will be transferred to the Asset Management segment for lease-up.

During the 2^nd quarter, we entered into an agreement with a substantial 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) resulting in an initial cash distribution of $2,130,232 to FRP on or about 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.

Fiscal 2016 First Six Months Consolidated Results of Continuing Operations.

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.  For the six months ended March 31, 2016 we received no benefit to after tax net income versus a $2,179,000 benefit in the same period last year.  Additionally, GAAP accounting rules do not allow corporate overhead expense to be allocated to a discontinued operation of the Company which resulted in the first six months of fiscal 2015 including $1,081,000 of corporate overhead expense to the Company that was associated with the discontinued transportation operations.

Income from continuing operations for the first six months of fiscal 2016 was $9,293,000 or $.94 per share versus $1,976,000 or $.20 per share in the first six months last year.  The first six months of fiscal 2016 included $.57 per share from a gain on land sale of $6,286,000 and income of $3,000,000 from the settlement of environmental claims.  The first six months of 2015 was negatively impacted by $.07 per share as a result of $1,081,000 of corporate costs not allocable to discontinued operations.

Total revenues were up $1,188,000, or 6.9%, versus the same period last year. 

Consolidated adjusted total operating profit in the first six months of the year (excluding the positive impacts of the environmental settlement and the corporate expense not allocable to discontinued operations in the prior year) was up 27.3% over the same period last year (see table "Non-GAAP Financial Measures).

First Six Months Segment Operating Results.

Asset Management Segment:

Total revenues in this segment were $14,489,000, up $402,000 or 2.9%, over the same period last year. Net operating income in this segment for the period was $10,832,000, compared to $10,453,000 in the 2nd quarter last year, an increase of 3.6%.  The increase was due mainly to completion of the third build-to-suit in the middle of the 2^nd quarter  last year and the acquisition of the Port Capital building in October of 2015. 

Mining Royalty Lands Segment:

Total revenues in this segment were $3,437,000, an increase of 28.3%, versus $2,679,000 in the same period last year due to an increase in tons shipped.  Total operating profit in this segment was $3,044,000, an increase of $1,497,000 (inclusive of a $714,000 benefit from the Reallocation), versus $1,547,000 in the first six months of last year. 

Land Development and Construction Segment:

In addition to the items occurring in the 2^nd quarter outlined above, during the first six months of fiscal 2016 this segment successfully closed on the sale of Phase II of the Windlass Run residential land (a non-income producing property) for $11,288,000.   Using $9,900,000 of the proceeds from that sale in a Section 1031 exchange, the Asset Management segment acquired the Port Capital building, a 91,218 square foot, 100% occupied warehouse with first full year projected rental revenue of $594,000.  Management successfully completed negotiations and entered into a $3,000,000 settlement of environmental claims against our former tenant at the Riverfront on the Anacostia property and continues to pursue settlement negotiations with other potentially responsible parties. 

Summary and Outlook.  We are focused on building shareholder value through our real estate holdings - mainly by growing our portfolio through the opportunistic purchase of income producing warehouse/office buildings, and the conversion of our non-income producing assets into income production through a two pronged approach  that  includes (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 Hollander Business Park).  Over the past five years, we have converted 172 acres of non-income producing land into 766,216 square feet of income producing properties with estimated FY 2016 rental revenues of $5,133,000.

We saw another quarter of real improvement in mining royalties due mainly to increased volumes at most of our locations.

During the quarter, we began the process of designing and permitting for the construction of a 104,000 sq.ft. spec building at our Patriot Business Park.   Subject to further market analysis and Board approval, we anticipate construction commencing in the 3^rd quarter of this year with completion in the 4^th quarter of next fiscal year.  We anticipate commencing the capital improvement work on the bulkhead at Square 664E in southeast Washington, D.C. during the 3rd quarter of this fiscal year with an estimated total cost to complete of $4,200,000 of which $397,000 has already been incurred to date.  In the event the Company commits to develop Phase II of the Riverfront on the Anacostia project during this fiscal year we will likely book a liability for the estimated incremental cost of remediation similar to what we booked with regards to Phase I.

The construction of Dock 79 at Riverfront on the Anacostia is on budget and nearing completion on schedule.  As a result, through our property management agent (Kettler Management, Inc.)  we commenced leasing activities on the residential and retail units.  The initial activity has been positive and we anticipate our first residential occupancies to begin in August of this year.  For more detail on the units and rental rates at Dock 79 please visit www.dock79.com.

Conference Call.  

The Company will host a conference call on Wednesday, May 4, 2016 at 1:00 p.m. (EDT).  Analysts, stockholders and other interested parties may access the teleconference live by calling 1-888-207-9997 (pass code 97341) within the United States.  International callers may dial 334-323-7224 (pass code 97341).  Computer audio live streaming is available via the Internet through the Company's website at www.frpholdings.com. You may also click on this link for the live streaming http://stream.conferenceamerica.com/FRP050416http://stream.conferenceamerica.com/frp120215.  For the archived audio via the internet, click on the following link http://archive.conferenceamerica.com/archivestream/FRP050416.mp3. If using the Company's website, click on the Investor Relations tab, then select the earnings conference stream.  An audio replay will be available for sixty days following the conference call. To listen to the audio replay, dial toll free 877-919-4059, international callers dial 334-323-0140.  The passcode of the audio replay is 28893867.  Replay options: "1" begins playback, "4" rewind 30 seconds, "5" pause, "6" fast forward 30 seconds, "0" instructions, and "9" exits recording.  There may be a 30-40 minute delay until the archive is available following the conclusion of the conference call.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 measures included in this press release are adjusted operating profit and 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.

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.

Adjusted Operating Profit

Adjusted operating profit excludes the impact of the corporate expense not allocated to discontinued operations and the environmental remediation recovery. Adjusted operating profit is presented to provide additional perspective on underlying trends in FRP's core operating results. A reconciliation between operating profit and adjusted operating profit is as follows:

 

 

 

 

 

 

 

 

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SOURCE FRP Holdings, Inc.