FRPH - NASDAQ

Good day, everyone, and welcome to the FRP Holdings Third Quarter Earnings Conference Call. [Operator Instructions] Please note this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to John Baker, II, CEO and Chairman of FRP Holdings. Please go ahead.

Thank you, David. Let's now open it up for questions if we might.

[Operator Instructions] Our first question comes from Emerito Quintana of Numantia.

Can you hear me?

Yes, we can.

My name is Emerito Quintana, and I'm calling from Spain because our fund owns 1% of the shares of FRP Holdings, and I hope it will remain so for a long time. I would like to know how do you see the mining business in 10 years? What is your estimate of the growth of the price per ton of aggregates in the long term? And in the Florida quarries, how do you expect natural disasters such as hurricanes to affect the business in the long term?

Emerito, it's nice to meet you, and we're proud to have you as a shareholder. The quarry business in Florida, of course, I have no idea what's going to happen over 10 years. But what we have seen is 2 things. One, the aggregates business throughout the United States has been growing well in excess of inflation even in today's high inflationary times at Vulcan, and Martin Marietta reported, I think, 11% or 12% increase in pricing this last quarter. It's an amazing time for that. With mortgage rates rising, you would expect the homebuilding segment of their business to slow down dramatically. And that, of course, could affect the pricing and certainly the growth of that business. But it's my belief that because rock is simply running out in Florida, it's hard to permit in Georgia and Virginia, that we will continue to see pricing escalate at greater-than-inflationary rates for a period of maybe up to 10 years, certainly for the next 5 years.

Okay. And the last one. I know you guys want to [steal] the stock when you can and be opportunistic with buybacks. But how do you see now the expected return of an eventual buyback?

Okay. We are carefully plotting the usage that we have going forward. And our preference is to invest in projects rather than to invest in our stock unless it just happens to be very low. And so especially with the Steuart joint venture, we will be very careful about buying stock in because we've got the need for that money going forward over the next 10 years. And so while I would never say we wouldn't buy it in, we will if tempted too badly. But I think the prudent thing for us is to keep a good bit of cash available for future projects.

We'll take our next question from Curtis Jensen of Robotti & Company.

Can you hear me okay?

Yes, sir.

Keep up to good work, guys.

[Operator Instructions] We'll take our next question from John Koller of Oppenheimer & Close.

My questions really are going to revolve around the pace at which you'll be developing and how you're thinking about capital allocation between what I consider a large number of balls in the air, so between the industrial, the next phase of Bryant Street, and now the new joint venture. And then that raises the question of what capital might you require? I know buybacks are probably not in the cards, which is fine. But it seems to me like you might actually need to raise capital depending on the pace at which you develop these. And I'm curious if you've considered that at all and how you think about that if it's necessary.

Okay. And then -- this is the last question, I promise. Are you under any timelines being in Opportunity

[Operator Instructions] We'll take our next question from Bill Chen of Rhizome Partners.

Can you guys hear me?

Yes, sir.

I'm driving on the highway, so -- but my main question, I haven't had a chance to digest the press release, but my main question is, the cash on the balance sheet, I believe that's mostly in Treasuries right now. What's the breakdown of the maturity date on that? And as rates have gone up significantly since last time, are we able to take the mature amounts and reinvest that like 1/4 or 1/2 right now in the less than 12 months. Could you give me some color on that?

Bill, it's John Klopfenstein here. So we've got all the cash invested in Treasuries, as you said, the vast majority of it is in 6-month Treasuries, and we've got some that are coming mature every week or 2. So just this week, we've invested at 4.6% for 6 months. So that's our go-forward plan.

Got you. That's great to hear. I thought I read in the disclosure that you have some duration that goes out to as long as 2 years. Like is there like -- is there -- how much of it is like longer than 1 year?

We did do -- early on, we did USD48 million of 2-year Treasuries and those now are set to mature at the end of 2023. Everything else is 6-month Treasuries that's maturing on a biweekly basis, more or less.

And at this time, it appears we have no further questions in queue. I will now turn the floor back over to Mr. Baker for any additional or closing remarks.

Thank you, all, again, for joining us. I really do believe this is a historic moment in the development of our company, which will allow us to add more -- some really immense value by building projects in a slow, and well-timed basis in this great market for decades. And I'd like to comment about -- it sounds like we've got a lot of balls in the air. We're trying -- we have been very meticulous about laying out the timing of these projects, phasing them, whether it's industrial, whether it's mixed use. And we feel very good about our ability over a long period of time to do that without raising money or certainly without getting in trouble. We all know the world has a funny way of changing quickly, and we want to make sure that we have, a, the cash reserves to change with it if it does change, especially in a negative fashion. And you can be assured that while we are enamored by the fact that we can grow this company in an amazing way over a 10- to 15-year period, that's not what -- we're not going to get in a hurry that would ever put us in a financial bind. That's rule number one around here. So I appreciate you all's interest. I think we're all for a good ride, and I look forward to talking to you next quarter.