Report of Independent Registered Public
Accounting Firm
The Plan Sponsor, Administrative Committee and Participants
Patriot Transportation Holding, Inc. 401(k)
Jacksonville, Florida
Opinion on the Financial Statements
We have audited
the accompanying statements of net assets available for benefits of the Patriot Transportation Holding, Inc. 401(k) (the
Plan) as of December 31, 2022 and 2021, the related statement of changes in net assets available for benefits for the year ended December
31, 2022, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in
all material respects, the net assets available for benefits of the Plan as of December 31, 2022 and 2021, and the changes in net assets
available for benefits for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United
States of America.
Basis for Opinion
These financial statements are the responsibility
of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included
performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by the Plan’s management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Supplemental Information
The supplemental information in the accompanying
supplemental schedule of assets (held at end of year) as of December 31, 2022, has been subjected to
audit procedures performed in conjunction with the audit of the Plan’s financial statements. The
supplemental information is presented for the purpose of additional analysis and is not a required part of the financial statements but
included supplemental information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental information is the responsibility of the Plan’s management.
Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying
accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented
in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information,
including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and
Disclosure
under the Employee Retirement Income Security
Act of 1974. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements
as a whole.
/s/ Hancock Askew & Co., LLP
We have served as the Plan’s auditor since 2006.
Jacksonville, Florida
June 23, 2023
Patriot Transportation Holding, Inc. 401(k)
Statements of Net Assets Available for Benefits
December 31, 2022 and 2021
|
|
December 31, |
|
|
2022 |
|
2021 |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing cash |
|
$ |
1,072 |
|
|
$ |
920 |
|
|
|
|
|
|
|
|
|
|
Investments, at fair value |
|
|
30,532,754 |
|
|
|
40,053,925 |
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
|
|
|
|
|
|
Employer contributions |
|
|
20,553 |
|
|
|
11,399 |
|
Employee contributions |
|
|
56,697 |
|
|
|
31,722 |
|
Notes receivable from participants |
|
|
729,389 |
|
|
|
792,589 |
|
Total receivables |
|
|
806,639 |
|
|
|
835,710 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
31,340,465 |
|
|
|
40,890,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits |
|
$ |
31,340,465 |
|
|
$ |
40,890,555 |
|
The accompanying notes are an integral part of these
financial statements.
Patriot Transportation Holding, Inc. 401(k)
Statement of Changes in Net Assets Available for
Benefits
For the Year Ended December 31, 2022
Additions to Net Assets Attributed to: |
|
|
|
|
Investment income: |
|
|
|
|
Dividend and interest income |
|
$ |
795,840 |
|
Other income |
|
|
104,014 |
|
Total investment income |
|
|
899,854 |
|
|
|
|
|
|
Interest on notes receivable from participants |
|
|
40,682 |
|
|
|
|
|
|
Contributions: |
|
|
|
|
Employer |
|
|
488,627 |
|
Participants |
|
|
1,711,241 |
|
Rollovers |
|
|
51,332 |
|
Total contributions |
|
|
2,251,200 |
|
|
|
|
|
|
Total additions |
|
|
3,191,736 |
|
|
|
|
|
|
Deductions from Net Assets Attributed to: |
|
|
|
|
Net depreciation in fair value of investments |
|
|
(7,889,167 |
) |
Benefits paid to participants |
|
|
(4,806,539 |
) |
Corrective distributions |
|
|
(2,105 |
) |
Administrative expenses |
|
|
(44,015 |
) |
|
|
|
|
|
Total deductions |
|
|
(12,741,826 |
) |
|
|
|
|
|
Net decrease in net assets available for benefits |
|
|
(9,550,090 |
) |
|
|
|
|
|
Net assets available for benefits: |
|
|
|
|
Beginning of year |
|
|
40,890,555 |
|
End of year |
|
$ |
31,340,465 |
|
The accompanying notes are an integral part of these
financial statements.
Patriot Transportation Holding, Inc. 401(k)
Notes to Financial Statements
December 31, 2022 and 2021
1. Description
of the Plan
The following description of the Patriot Transportation
Holding, Inc. 401(k) (the "Plan") provides only general information. Participants should refer to the Plan document for a more
complete description of the Plan's provisions.
General
The Plan is a defined contribution plan available
to all eligible employees of Patriot Transportation Holding, Inc. (the “Company”), as defined in the Plan agreement. The Plan
is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
The Plan qualifies as a “multiple employer”
plan as described in Section 413(c) of the Internal Revenue Code. The Plan allows other affiliated employers to participate in the Plan
(“Participating Employers”), as it deems appropriate. All Participating Employers must adopt the Plan as written, including
but not limited to, using the same Trustee, incurring the same expense rate, and contributing at the same rates and same times. Participating
Employers are: Patriot Transportation Holding, Inc.; FRP Holdings, Inc.; FRP Development Corporation; Florida Rock & Tank Lines, Inc.
and Florida Rock Properties, Inc.
Employees of the Company and Participating Employers
who have completed 1/12 of a year of service are eligible for participation in the Plan. Entry into the Plan is allowed as soon as all
eligibility requirements are met.
Contributions
Each year, participants may contribute up to 100%
of pretax annual compensation, as defined in the Plan. Participants may also contribute amounts representing distributions from other
qualified defined benefit plans or defined contribution plans. The Company matches 50% of the first 6% of the participant's deferred earnings
contributions. In addition, the Company may make a discretionary contribution to the Plan each year in an amount determined by the Board
of Directors of the Company subject to certain limitations relating to the aggregate compensation of participants. No discretionary contributions
were made by the Company for the 2022 Plan year.
Participant Accounts
Each participant's account is credited with the participant's
contributions, the Company's matching contribution, an allocation of the Company's discretionary contributions (if any) and Plan earnings.
The benefit to which a participant is entitled is the benefit that is available in the participant's vested account.
Participants direct the investment of their contributions
into various investment options offered by the Plan. All participants who have not made an election are deemed to have elected to have
contributions made to their accounts invested in an age appropriate target date Goal Manager funds (GM). The GM funds are modeled after
target date funds and are made up of the other mutual funds offered by the Plan.
Vesting
Participants are fully vested in their voluntary contributions
plus actual earnings thereon. If participants are employed on or after their retirement age, the Company's matching and discretionary
contributions are fully vested. In the event of termination by retirement, death or disability of the participant, 100% of the Company
contributions will be distributed to the participant or the participant's designated beneficiary.
Vesting in the Company's matching and discretionary
contributions plus actual earnings thereon is determined for each plan year based on years of service according to the following schedule.
A year of service is defined by the Plan as any Plan year in which the participant worked more than 1,000 hours.
Matching Contributions
|
|
Vested |
Years of Service |
|
Percentage |
|
|
|
|
Less than 1 |
|
|
|
0% |
|
|
1 |
|
|
|
20% |
|
|
2 |
|
|
|
40% |
|
|
3 |
|
|
|
60% |
|
|
4 |
|
|
|
80% |
|
|
5 |
|
|
|
100% |
|
Discretionary Contributions
|
|
Vested |
Years of Service |
|
Percentage |
|
|
|
|
Less than 2 |
|
|
|
0% |
|
|
2 |
|
|
|
20% |
|
|
3 |
|
|
|
40% |
|
|
4 |
|
|
|
60% |
|
|
5 |
|
|
|
80% |
|
|
6 |
|
|
|
100% |
|
Payment of Benefits
On termination of employment, death or disability
of a participant, severe financial hardship, or upon a participant election for an in-service distribution after age 59 1/2, benefits
for distribution shall be determined based upon the participant's vested account balance on the date of distribution, as provided in the
Plan.
Forfeited Accounts
The non-vested portion of a terminated participant's
account shall be forfeited and may be used to fund the Company’s matching or discretionary contribution, reallocated to the accounts
of the remaining participants in the same manner as Company contributions were originally allocated to such participants or used to pay
administrative expenses. Any forfeiture from a Company discretionary account shall be allocated in the plan year in which the forfeiture
occurs. Any forfeiture from a Company matching account shall be reallocated in the following plan year. The forfeiture balance as of December 31,
2022 and 2021 was $86,525 and $134,516, respectively. During 2022, $136,628 of the forfeitures were used to fund the Company’s matching
contributions.
Revenue Sharing Account
A revenue sharing agreement is in place whereby fees
earned by the mutual fund companies are shared with the recordkeeper based upon a percentage of assets under management. These amounts
are used for the benefit of the Plan to pay administrative expenses and unallocated amounts may be reallocated to participants. During
2022, revenue sharing in the amount of $103,661 is included as other income in the Statement of Changes in Net Assets Available for Benefits.
During the year ended December 31, 2022, $26,000 was used to pay Plan expenses in accordance with the revenue sharing agreement
and was included in administrative expenses in the Statement of Changes in Net Assets Available for Benefits. The revenue sharing balance
as of December 31, 2022 and 2021 was $65,796 and $566, respectively.
Notes Receivable from Participants
Participants may borrow from their accounts a minimum
of $2,000 and a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Loans bear interest at the prevailing rate
used by commercial lending institutions. Participants may have two loans outstanding at any time. Loans are secured by the participant's
remaining vested account balance and bear an interest rate of prime plus 2%. Participant loans outstanding at
December 31, 2022 bear interest ranging from 5.00%
to 9.50%. Loan terms are limited to five years except residential loans, which are payable up to 10 years. Principal and interest will
be deducted from the participant's payroll over the term of the loan. Upon termination of employment with the Company, the outstanding
balance of the loan, including accrued interest, is due immediately and if not repaid, is considered a distribution.
When a participant defaults on a loan obtained from
the Plan, the Plan administrator will report the amount of default to the Internal Revenue Service (“IRS”) as a distribution
from the Plan. A participant’s loan account equals the original principal amount less principal repayments.
2. Summary
of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared
under the accrual method of accounting in conformity with accounting principles generally accepted in the United States of America.
Investments Valuation and Income (Loss) Recognition
Plan investments are reported at fair value. 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 (an exit price). See Note 3 for further discussion of fair value measurements.
Net appreciation or depreciation in fair value of
investments consists of the realized gains or losses and the unrealized appreciation or depreciation on these investments.
Purchases and sales of securities are recorded on
a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the basis of the ex-dividend date.
Notes Receivable
Notes receivable from participants are measured at
their unpaid principal balance plus any accrued but unpaid interest. Interest income is recorded on the accrual basis. Related fees are
recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December
31, 2022 and 2021. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be in default,
the participant loan balance is reduced, and a payment is recorded.
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make significant estimates and assumptions
that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Benefit Payments
Benefits are recorded when paid.
Administrative Expenses
Certain expenses of maintaining the Plan are paid
by the Plan, unless otherwise paid by the Company. Expenses paid by the Company are excluded from these financial statements. Fees related
to participant transactions are charged directly to the participant’s account and are included in administrative expenses.
3. Fair
Value Measurement
The fair value measurement standard establishes a
fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable
inputs (level 3 measurements). The three levels
of the fair value hierarchy are described below:
Level 1 - Unadjusted quoted prices in active markets
that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 - Quoted prices in markets that are not considered
to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;
Level 3 - Prices or valuations that require inputs
that are both significant to the fair value measurement and unobservable.
A financial instrument’s level within the fair
value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The fair values estimated and derived from each fair
value calculation may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes
its valuation methods are appropriate and consistent with those utilized by other market participants, the use of different methodologies
or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the
reporting date.
The following is a description of the valuation methodologies
used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2022 and 2021.
Common Stock - Investments in common stock
are stated at fair value, which equals the exchange quoted market price on the last business day of the Plan year.
Short-term Investments - Cash equivalents and
short-term investments with initial investments of three months or less and are valued at cost, which approximate fair value.
Mutual Funds - Valued at
the quoted market prices of shares held by the Plan at year-end. The fair values of these investments are determined by reference to the
fund’s underlying assets, which are principally marketable equity and fixed income securities. Shares held in mutual funds traded
on national securities exchanges are valued at the net asset value (NAV). It is not probable that the mutual funds will be sold at amounts
that differ materially from the NAV of shares held.
Common Collective Trust Fund
- Valued at the NAV based on the last reported sales price of the underlying investments held. The NAV is used as a practical expedient
to estimate fair value. The Plan’s interest in the common/collect trusts are based on unit values reported by using audited financial
statements of the funds at year-end and are not classified within the valuation hierarchy.
Investments in all common collective
trust funds can be redeemed at the current net asset value based on the fair value of the underlying assets. There are no withdrawal limits,
redemption frequency limits or redemption notice periods. There were no unfunded commitments for these investments as of December 31,
2022 and 2021.
The following tables sets forth by level, within the
fair value hierarchy, the Plan's assets at fair value as of December 31, 2022 and 2021.
|
Investment assets at Fair Value as of December 31, 2022 |
|
|
|
Level 1 |
|
|
|
Level 2 |
|
|
|
Level 3 |
|
|
|
Total |
|
Mutual funds |
$ |
25,230,480 |
|
|
|
— |
|
|
|
— |
|
|
$ |
25,230,480 |
|
Common stock |
|
928,106 |
|
|
|
— |
|
|
|
— |
|
|
|
928,106 |
|
Short-term investments |
|
118 |
|
|
|
— |
|
|
|
— |
|
|
|
118 |
|
Total investments in the fair value hierarchy |
$ |
26,158,704 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
26,158,704 |
|
Common collective trust fund measured at NAV* |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,374,050 |
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
30,532,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment assets at Fair Value as of December 31, 2021 |
|
|
|
Level 1 |
|
|
|
Level 2 |
|
|
|
Level 3 |
|
|
|
Total |
|
Mutual funds |
$ |
34,570,655 |
|
|
|
— |
|
|
|
— |
|
|
$ |
34,570,655 |
|
Common stock |
|
1,066,315 |
|
|
|
— |
|
|
|
— |
|
|
|
1,066,315 |
|
Short-term investments |
|
(2,987 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,987 |
) |
Total investments in the fair value hierarchy |
$ |
35,633,983 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
35,633,983 |
|
Common collective trust fund measured at NAV* |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,419,942 |
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
40,053,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Certain investments that are measured at fair value
using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value
amounts presented in this table are intended to permit reconciliation of the fair value to the amounts presented in the statements of
net assets available for benefits.
4. Related
Party and Party-in-Interest Transactions
The Plan holds an investment in the common stock of
the Company. The Plan held 9,446.33 and 9,615.19 shares of Patriot Transportation stock valued at $66,408 and $77,885 at December 31,
2022 and 2021, respectively. The Plan held 14,530.11 and 15,256.79 shares of FRP Holdings, Inc. stock valued at $782,592 and $881,843
at December 31, 2022 and 2021, respectively.
The plan also issues notes to participants, which
are secured by the balance in the participants’ accounts. These transactions qualify as party-in-interest transactions.
5. Plan
Termination
While the Company has not expressed any intent to
do so, it may cease matching contributions or terminate the Plan at any time. In the event of termination, the accounts of all participants
would become fully vested and the Company, by written notice to the Trustee and the Committee, may direct either complete distribution
of the assets in the Trust Fund to the participants or continue the Trust and the distribution of benefits at such time and in such manner
as though the Plan had not been terminated.
6. Income
Tax Status
Effective January 1, 2022, the Plan uses a pre-approved
plan document sponsored by Merrill Lynch Pierce Fenner & Smith Inc. The Non-standardized Pre-Approved Profit Sharing/Money Purchase/CODA
(the pre-approved plan), upon which the Plan is based, has received an opinion letter dated June 30, 2020. Once qualified, the Plan is
required to operate in conformity with the Internal Revenue Code (the Code) to maintain its qualification. The Plan Administrator believes
that the Plan is designed and being operated in compliance with the applicable requirement of the Code and, therefore, believes the Plan
is qualified and the related trust is tax-exempt.
Accounting principles generally accepted in the United
States of America require Plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of tax
positions are recognized when the position is more likely than not, based on the technical merits, to not be sustained upon examination
by the IRS. The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2022, there
are no uncertain tax positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax
positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax period in
progress.
7. Risks
and Uncertainties
The Plan provides for investment options in various
investment securities. Investment securities are exposed to risks, such as interest rate, market risk and credit risk. Due to the level
of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities,
it is reasonably possible that changes in risks in the near term would materially affect participants' account balances and the amounts
reported in the Statements of Net Assets Available for Benefits.
8. Common
Stock Purchase
The Plan previously allowed as an investment option,
investment in the common stock of Florida Rock Industries, Inc., previously a related party to the Company. In November 2007, Vulcan Materials
Company purchased the common stock of Florida Rock Industries, Inc. All investments in Florida Rock Industries, Inc. common stock were
exchanged for shares of the Vulcan Materials Company common stock and any remaining cash balance was invested in the STI Classic Prime
Quality Money Market Fund. Effective December 31, 2007, the option to invest in Vulcan Materials Common Stock was frozen to new contributions.
Any existing investments in Vulcan common stock may remain until the participant elects to make a transfer to another fund or elects a
distribution.
9. SECURE
Act 2.0
On December 23, 2022, Congress passed the Consolidated
Appropriations Act of 2023 which included SECURE Act 2.0. SECURE Act 2.0 contains over 90 new retirement provisions, with varying effective
dates through 2027. Since SECURE Act 2.0 provisions include both required and optional elements, the plan administrator will determine
the optional provisions to elect and amend the Plan document accordingly. Certain provisions will become effective in 2024 and thereafter.
Accordingly, there is no material impact to the Plan’s 2022 financial statements.
10. Subsequent
event
No subsequent events were identified through June
23, 2023, the date these financial statements were issued.