þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Rhode Island | ||
(State or other jurisdiction of | ||
incorporation or organization) | 05-0386287 (IRS Employer Identification No.) |
Title of each class | Name of each exchange on which registered | |
Class A Common Stock, $.01 par value |
Large accelerated filero | Accelerated filer o | Non-accelerated filer (Do not check if a smaller reporting company) | Smaller reporting company |
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September 30, | December 31, | March 31, | ||||||||||||||
2008 | 2007 | 2009 | December 31, | |||||||||||||
(unaudited) | (unaudited) | 2008 | ||||||||||||||
ASSETS | ||||||||||||||||
Properties and equipment (net of accumulated depreciation) | $ | 20,368,000 | $ | 20,717,000 | $ | 20,421,000 | $ | 20,447,000 | ||||||||
Cash and cash equivalents | 3,027,000 | 1,974,000 | 3,407,000 | 3,395,000 | ||||||||||||
Income taxes receivable | — | 12,000 | ||||||||||||||
Prepaid and other | 658,000 | 334,000 | 311,000 | 485,000 | ||||||||||||
$ | 24,053,000 | $ | 23,037,000 | $ | 24,139,000 | $ | 24,327,000 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Liabilities: | ||||||||||||||||
Accounts payable and accrued expenses: | ||||||||||||||||
Property taxes | $ | 238,000 | $ | 276,000 | $ | 295,000 | $ | 238,000 | ||||||||
Environmental remediation | 81,000 | 81,000 | 81,000 | 81,000 | ||||||||||||
Other | 253,000 | 333,000 | 189,000 | 416,000 | ||||||||||||
Deferred leasing revenues | 520,000 | 520,000 | 520,000 | 520,000 | ||||||||||||
Income taxes: | ||||||||||||||||
Current | 292,000 | — | 170,000 | 346,000 | ||||||||||||
Deferred, net | 5,244,000 | 5,151,000 | 5,259,000 | 5,269,000 | ||||||||||||
6,628,000 | 6,361,000 | 6,514,000 | 6,870,000 | |||||||||||||
�� | ||||||||||||||||
Shareholders’ equity: | ||||||||||||||||
Class A common stock, $.01 par; authorized 6,000,000 shares; issued and outstanding 3,299,956 shares | 33,000 | 33,000 | ||||||||||||||
Commitment (Note 4) | ||||||||||||||||
Shareholders’ equity (Note 8): | ||||||||||||||||
Class A common stock, $.01 par; authorized 10,000,000 shares; issued and outstanding, 3,319,034 shares at March 31, 2009 and 3,299,956 shares at December 31, 2008 | 33,000 | 33,000 | ||||||||||||||
Class B common stock, $.01 par; authorized 3,500,000 shares; issued and outstanding 3,280,878 shares March 31, 2009 and 3,299,956 shares at December 31, 2008 | 33,000 | 33,000 | ||||||||||||||
Excess stock, $.01 par; authorized 1,000,000 shares; none issued and outstanding | — | — | ||||||||||||||
Capital in excess of par | 11,795,000 | 11,795,000 | 11,762,000 | 11,762,000 | ||||||||||||
Retained earnings | 5,597,000 | 4,848,000 | 5,797,000 | 5,629,000 | ||||||||||||
17,425,000 | 16,676,000 | 17,625,000 | 17,457,000 | |||||||||||||
$ | 24,053,000 | $ | 23,037,000 | $ | 24,139,000 | $ | 24,327,000 | |||||||||
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Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30 | September 30 | |||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2009 | 2008 | |||||||||||||||||||
Revenues and other income: | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Leasing | $ | 726,000 | $ | 676,000 | $ | 2,254,000 | $ | 2,167,000 | $ | 714,000 | $ | 715,000 | ||||||||||||
Petroleum storage facility | 948,000 | 860,000 | 2,850,000 | 2,745,000 | 936,000 | 951,000 | ||||||||||||||||||
1,674,000 | 1,536,000 | 5,104,000 | 4,912,000 | 1,650,000 | 1,666,000 | |||||||||||||||||||
Other income, interest | 7,000 | 29,000 | 18,000 | 94,000 | — | 7,000 | ||||||||||||||||||
1,681,000 | 1,565,000 | 5,122,000 | 5,006,000 | 1,650,000 | 1,673,000 | |||||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Leasing | 141,000 | 169,000 | 510,000 | 430,000 | 203,000 | 190,000 | ||||||||||||||||||
Petroleum storage facility | 566,000 | 516,000 | 1,626,000 | 1,619,000 | 577,000 | 515,000 | ||||||||||||||||||
General and administrative | 193,000 | 308,000 | 738,000 | 931,000 | 259,000 | 291,000 | ||||||||||||||||||
900,000 | 993,000 | 2,874,000 | 2,980,000 | 1,039,000 | 996,000 | |||||||||||||||||||
Income before income taxes | 781,000 | 572,000 | 2,248,000 | 2,026,000 | 611,000 | 677,000 | ||||||||||||||||||
Income tax expense: | ||||||||||||||||||||||||
Current | 229,000 | 125,000 | 812,000 | 619,000 | 255,000 | 257,000 | ||||||||||||||||||
Deferred | 74,000 | 114,000 | 93,000 | 205,000 | (10,000 | ) | 16,000 | |||||||||||||||||
303,000 | 239,000 | 905,000 | 824,000 | 245,000 | 273,000 | |||||||||||||||||||
Net income | $ | 478,000 | $ | 333,000 | $ | 1,343,000 | $ | 1,202,000 | $ | 366,000 | $ | 404,000 | ||||||||||||
Basic income per common share | $ | .14 | $ | .10 | $ | .41 | $ | .36 | ||||||||||||||||
Basic income per share based upon 6,599,912 shares outstanding (Note 8) | $ | .06 | $ | .06 | ||||||||||||||||||||
Dividends per share on common stock | $ | .06 | $ | .06 | $ | .18 | $ | .16 | ||||||||||||||||
Dividends per share on common stock based upon 6,599,912 shares outstanding (Note 8) | $ | .03 | $ | .03 | ||||||||||||||||||||
4
2008 | 2007 | 2009 | 2008 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 1,343,000 | $ | 1,202,000 | $ | 366,000 | $ | 404,000 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation | 517,000 | 515,000 | 173,000 | 179,000 | ||||||||||||
Deferred income taxes | 93,000 | 205,000 | (10,000 | ) | 16,000 | |||||||||||
Other, principally net changes in prepaids, accounts payable, accrued expenses, deferred leasing revenues and current income taxes | (34,000 | ) | 170,000 | |||||||||||||
Other, principally net changes in prepaids, accounts payable, accrued expenses and current income taxes | (172,000 | ) | 51,000 | |||||||||||||
Net cash provided by operating activities | 1,919,000 | 2,092,000 | 357,000 | 650,000 | ||||||||||||
Cash used in investing activities, payments for properties and equipment, including $116,000 in 2008 relating to 2007 purchases | (272,000 | ) | (443,000 | ) | ||||||||||||
Cash used in investing activities, payments for properties and equipment | (147,000 | ) | (130,000 | ) | ||||||||||||
Cash used in financing activities, payment of dividends | (594,000 | ) | (528,000 | ) | (198,000 | ) | (198,000 | ) | ||||||||
Increase in cash and cash equivalents | 1,053,000 | 1,121,000 | 12,000 | 322,000 | ||||||||||||
Cash and cash equivalents, beginning | 1,974,000 | 2,992,000 | 3,395,000 | 1,974,000 | ||||||||||||
Cash and cash equivalents, ending | $ | 3,027,000 | $ | 4,113,000 | $ | 3,407,000 | $ | 2,296,000 | ||||||||
Supplemental disclosure, cash paid for income taxes | $ | 507,000 | $ | 518,000 | $ | 431,000 | $ | 56,000 | ||||||||
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1. | Description of business: | ||
Capital Properties, Inc. and its wholly-owned subsidiaries, Tri-State Displays, Inc., Capital Terminal Company and Dunellen, LLC (collectively referred to as “the Company”), operate in two segments: (1) Leasing and (2) Petroleum Storage. | |||
The leasing segment consists of the long-term leasing of certain of its real estate interests in downtown Providence, Rhode Island (upon the commencement of which the tenants are required to construct buildings thereon, with the exception of a parking garage), the leasing of a portion of | |||
The petroleum storage segment consists of operating the petroleum storage terminal (the “Terminal”) and the Wilkesbarre Pier (the “Pier”), collectively referred to as the “Facility,” located in East Providence, Rhode Island, for Global Companies, LLC (“Global”) which stores and distributes petroleum products. | |||
The principal difference between the two segments relates to the nature of the operations. The tenants | |||
2. | Principles of consolidation and basis of presentation: | ||
The accompanying condensed consolidated financial statements include the accounts and transactions of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. | |||
The accompanying condensed consolidated balance sheet as of December 31, | |||
The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. | |||
Recent pronouncements: | |||
In April 2009, the Financial Accounting Standards Board (“FASB”) released Staff Position (“FSP”) 107-1 and APB 28-1 (Interim Disclosures About Fair Value of Financial Instruments). The FSP requires disclosure about fair value of financial instruments in interim financial statements as well as in annual financial statements. The Company elected to adopt the FSP prior to its effective date. |
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As of January 1, 2008, the Company adopted Statement of Financial Accounting Standards (“FAS”) No. 157 (Fair Value Measurements) for items that are recognized or disclosed at fair value in the financial statements on a recurring basis and is utilizing Level 1 inputs to measure their fair market value. FASB issued FSP 157-2, which permitted a delay in the effective date of FAS No. 157 to fiscal years beginning after November 15, 2008, for nonfinancial assets and liabilities measured or disclosed on a non-recurring basis. The effect of the adoption of this Statement is not material. | |||
The Company believes that the fair value of financial instruments, including cash and accounts payable and accrued expenses, approximate their respective book values at March 31, 2009. | |||
New accounting standards: | |||
The Company reviews new accounting standards as issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any standards that it believes merit further discussion. The Company expects that none of the new standards would have a significant impact on its consolidated financial statements. | |||
3. | Use of estimates: | ||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. | |||
4. | Properties and equipment: | ||
Properties and equipment consists of the following: |
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2008 | 2007 | 2009 | 2008 | |||||||||||||
Properties on lease or held for lease: | ||||||||||||||||
Land and land improvements | $ | 4,621,000 | $ | 4,621,000 | $ | 4,621,000 | $ | 4,621,000 | ||||||||
Building | 1,732,000 | 1,699,000 | 1,864,000 | 1,772,000 | ||||||||||||
6,353,000 | 6,320,000 | 6,485,000 | 6,393,000 | |||||||||||||
Petroleum storage facility, on lease: | ||||||||||||||||
Land and land improvements | 5,584,000 | 5,561,000 | 5,591,000 | 5,591,000 | ||||||||||||
Buildings and structures | 1,504,000 | 1,406,000 | 1,739,000 | 1,684,000 | ||||||||||||
Tanks and equipment | 14,578,000 | 14,569,000 | 14,593,000 | 14,593,000 | ||||||||||||
21,666,000 | 21,536,000 | 21,923,000 | 21,868,000 | |||||||||||||
Office equipment | 131,000 | 126,000 | 131,000 | 131,000 | ||||||||||||
28,150,000 | 27,982,000 | 28,539,000 | 28,392,000 | |||||||||||||
Less accumulated depreciation: | ||||||||||||||||
Properties on lease or held for lease | 49,000 | 16,000 | 71,000 | 60,000 | ||||||||||||
Petroleum storage facility, on lease | 7,640,000 | 7,160,000 | 7,950,000 | 7,789,000 | ||||||||||||
Office equipment | 93,000 | 89,000 | 97,000 | 96,000 | ||||||||||||
7,782,000 | 7,265,000 | 8,118,000 | 7,945,000 | |||||||||||||
$ | 20,368,000 | $ | 20,717,000 | $ | 20,421,000 | $ | 20,447,000 | |||||||||
In February 2009, the Company entered into a contract at a cost of $2,100,000 for the historic restoration and utility infrastructure of the Steeple Street building purchased in November 2007. Construction will commence in the spring of 2009 and should be completed within twelve months. |
7
5. | Description of leasing arrangements: | ||
As of | |||
Under the seven land leases, | |||
Under one of the leases which commenced in 2005, the tenant is entitled to a credit for future rents equal to a portion of the real property taxes paid by the tenant through April 2007, which credit now totals $520,000, the maximum | |||
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6. | Petroleum storage facility: | ||
Environmental remediation: | |||
In 1994, a leak was discovered in a 25,000 barrel storage tank at the Terminal which allowed the escape of a small amount of fuel oil. All required notices were made to the State of Rhode Island Department of Environmental Management (“RIDEM”). In 2000, the tank was demolished and testing of the groundwater indicated that there was no large pooling of contaminants. In 2001, RIDEM approved a plan pursuant to which the Company installed a passive system consisting of three wells and commenced monitoring the wells. | |||
In 2003, RIDEM decided that the passive monitoring system previously approved was not sufficient and required the Company to design an active remediation system for the removal of product from the contaminated site. The Company and its consulting engineers began the pre-design testing of the site in the fourth quarter of 2004. The consulting engineers estimated a total cost of $200,000 to design, install and operate the system, which amount was accrued in 2004. Through | |||
Environmental incident: | |||
In 2002, during testing of monitoring wells at the Terminal, the Company’s consulting engineer discovered free floating phase product in a groundwater monitoring well located on that portion of the Terminal purchased in 2000. |
8
Since January 2003, the Company has not incurred significant costs in connection with this matter and is unable to determine the costs it might incur to remedy the situation as well as any costs to investigate, defend, and seek reimbursement from the responsible party with respect to this contamination. | |||
7. | Income taxes: | ||
Deferred income taxes are recorded based upon differences between financial statement and tax basis amounts of assets and liabilities. The tax effects of temporary differences which give rise to deferred tax assets and liabilities were as follows: |
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2008 | 2007 | 2009 | 2008 | |||||||||||||
Gross deferred tax liabilities: | ||||||||||||||||
Property having a financial statement basis in excess of tax basis | $ | 5,480,000 | $ | 5,391,000 | $ | 5,516,000 | $ | 5,513,000 | ||||||||
Insurance premiums | 80,000 | 80,000 | ||||||||||||||
Insurance premiums and accrued leasing revenue | 67,000 | 92,000 | ||||||||||||||
5,560,000 | 5,471,000 | 5,583,000 | 5,605,000 | |||||||||||||
Gross deferred tax assets | (316,000 | ) | (320,000 | ) | (324,000 | ) | (336,000 | ) | ||||||||
$ | 5,244,000 | $ | 5,151,000 | $ | 5,259,000 | $ | 5,269,000 | |||||||||
8. | Shareholders’ equity: | ||
In November 2008, the Company restated its Articles of Incorporation: |
• | To create a new class of common stock of the Company to be designated Class B Common Stock consisting of 3,500,000 shares, $.01 par value per share; | ||
• | To increase the number of authorized shares of Class A Common Stock from 6,000,000 to 10,000,000 shares; and | ||
• | To provide for certain transfer and ownership restrictions as set forth therein. |
In December 2008, the Company issued (in the form of a stock dividend) 3,299,956 shares of Class B Common Stock on a one-for-one basis for each share of Class A Common Stock held. The Company accounted for the stock split effective in the form of a dividend by transferring $33,000 from capital in excess of par to Class B Common Stock on December 11, 2008. | |||
The holders of Class A and the Class B Common Stock vote together as a single class on all matters submitted to the shareholders of the Company except for the election of the Board of Directors and except in connection with certain major corporate actions, including a sale of the Company. The holders of Class A Common Stock, voting as a separate class, elect one-third of the Board of Directors. The holders of Class B Common Stock, voting as a separate class, will elect the remainder of the Board of Directors. | |||
Class B Common Stock is convertible by the record owner thereof into the same number of shares of Class A Common Stock at anytime. For the three months ended March 31, 2009, 19,078 shares were converted. | |||
The Class A Common Stock is listed on the Premier QX Tier of the OTCQX (Pink Sheets). The Class B Common Stock is not listed on any national or regional stock exchange, or on the National Association of Securities Dealers Automated Quotation National Market System or on the OTCQX (Pink Sheets). | |||
The holders of Class A and Class B Common Stock share equally in the earnings of the Company. | |||
The holders of Class A and Class B Common Stock share equally in dividends declared by the Company. For the three months ended March 31, 2008, dividends on common stock and basic income per share on the accompanying consolidated statement of income and retained earnings have been restated to give effect to the additional shares outstanding. | |||
The Company’s Restated Articles of Incorporation prohibits any shareholder from acquiring more than a 5% interest in the Company’s classes of common stock and prohibits any shareholder or any beneficial owner who, at the time of the filing of the Restated Articles of Incorporation owned 5% or more of the Company’s classes of common stock from increasing their percentage ownership of either class of common stock. Should a shareholder acquire a number of shares that results in the limitation being exceeded, shares in excess of the limitation would be automatically converted into an equal number of shares of Excess Stock, which class was authorized pursuant to the 2001 Amendment to the Company’s Articles of Incorporation. Excess Stock is non-voting and is not entitled to |
9
dividends. However, the shareholder may designate a qualifying transferee for shares of Excess Stock, at which time such shares would be converted and reissued as Class A or Class B Common shares as the case may be. |
The purpose for creating the Class B Common Stock was to put the Company in the position to qualify to be taxed as a real estate investment trust (“REIT”). One of the qualifications to be taxed as a REIT is that no more than 50% of the shares of a company can be held by five or fewer individuals during the last half of each taxable year. Currently, the majority shareholder controls 52.3% of the Company’s outstanding common stock and three other shareholders each own more than 5% of the Company’s outstanding common stock. In order for the Company to qualify to be taxed as a REIT, the major shareholders’ ownership of the Company’s issued and outstanding common stock would need to be reduced below the 50% level. | |||
9. | Operating segment disclosures: | ||
The Company operates in two segments: (1) Leasing and (2) Petroleum Storage. | |||
The Company makes decisions relative to the allocation of resources and evaluates performance based on each segment’s respective income before income taxes, excluding interest income, and certain corporate expenses. |
8
Inter-segment revenues are immaterial in amount. The Company did not incur interest expense during the | |||
The following financial information is used for making operating decisions and assessing performance of each of the Company’s segments for the |
2008 | 2007 | 2009 | 2008 | |||||||||||||
Leasing: | ||||||||||||||||
Revenues: | ||||||||||||||||
Long-term leases: | ||||||||||||||||
Contractual | $ | 1,586,000 | $ | 1,532,000 | $ | 527,000 | $ | 521,000 | ||||||||
Contingent | 130,000 | 116,000 | 12,000 | 14,000 | ||||||||||||
Option | — | 100,000 | ||||||||||||||
Short-term leases | 538,000 | 419,000 | 175,000 | 180,000 | ||||||||||||
Total revenues | $ | 2,254,000 | $ | 2,167,000 | $ | 714,000 | $ | 715,000 | ||||||||
Property tax expense | $ | 358,000 | $ | 350,000 | $ | 123,000 | $ | 134,000 | ||||||||
Depreciation | $ | 33,000 | $ | — | $ | 11,000 | $ | 18,000 | ||||||||
Income before income taxes | $ | 1,744,000 | $ | 1,737,000 | $ | 511,000 | $ | 525,000 | ||||||||
Assets | $ | 6,474,000 | $ | 4,114,000 | $ | 6,614,000 | $ | 6,446,000 | ||||||||
Additions to properties and equipment | $ | 33,000 | $ | — | ||||||||||||
Properties and equipment, additions | $ | 92,000 | $ | — | ||||||||||||
Petroleum storage: | ||||||||||||||||
Revenues: | ||||||||||||||||
Contractual | $ | 2,764,000 | $ | 2,574,000 | $ | 936,000 | $ | 901,000 | ||||||||
Contingent | 86,000 | 171,000 | — | 50,000 | ||||||||||||
Total revenues | $ | 2,850,000 | $ | 2,745,000 | $ | 936,000 | $ | 951,000 | ||||||||
Property tax expense | $ | 157,000 | $ | 80,000 | $ | 53,000 | $ | 52,000 | ||||||||
Depreciation | $ | 480,000 | $ | 514,000 | $ | 161,000 | $ | 160,000 | ||||||||
Income before income taxes | $ | 1,224,000 | $ | 1,126,000 | $ | 359,000 | $ | 436,000 | ||||||||
Assets | $ | 14,394,000 | $ | 14,627,000 | $ | 14,298,000 | $ | 14,559,000 | ||||||||
Properties and equipment: | ||||||||||||||||
Additions | $ | 130,000 | $ | 428,000 | ||||||||||||
Deletions | — | (73,000 | ) | |||||||||||||
Properties and equipment, additions | $ | 55,000 | $ | 9,000 | ||||||||||||
$ | 130,000 | $ | 355,000 | |||||||||||||
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The following is a reconciliation of the segment information to the amounts reported in the accompanying consolidated financial statements for the |
2008 | 2007 | 2009 | 2008 | |||||||||||||
Revenues and other income: | ||||||||||||||||
Revenues for operating segments: | ||||||||||||||||
Leasing | $ | 2,254,000 | $ | 2,167,000 | $ | 714,000 | $ | 715,000 | ||||||||
Petroleum storage | 2,850,000 | 2,745,000 | 936,000 | 951,000 | ||||||||||||
5,104,000 | 4,912,000 | 1,650,000 | 1,666,000 | |||||||||||||
Interest income | 18,000 | 94,000 | — | 7,000 | ||||||||||||
Total consolidated revenues and other income | $ | 5,122,000 | $ | 5,006,000 | $ | 1,650,000 | $ | 1,673,000 | ||||||||
Property tax expense: | ||||||||||||||||
Property tax expense for operating segments: | ||||||||||||||||
Leasing | $ | 358,000 | $ | 350,000 | $ | 123,000 | $ | 134,000 | ||||||||
Petroleum storage | 157,000 | 80,000 | 53,000 | 52,000 | ||||||||||||
515,000 | 430,000 | 176,000 | 186,000 | |||||||||||||
Unallocated corporate property tax expense | 1,000 | 1,000 | 1,000 | 1,000 | ||||||||||||
Total consolidated property tax expense | $ | 516,000 | $ | 431,000 | $ | 177,000 | $ | 187,000 | ||||||||
Depreciation: | ||||||||||||||||
Depreciation for operating segments: | ||||||||||||||||
Leasing | $ | 11,000 | $ | 18,000 | ||||||||||||
Petroleum storage segment: | 161,000 | 160,000 | ||||||||||||||
172,000 | 178,000 | |||||||||||||||
Unallocated corporate depreciation | 1,000 | 1,000 | ||||||||||||||
Total consolidated depreciation | $ | 173,000 | $ | 179,000 | ||||||||||||
Income before income taxes: | ||||||||||||||||
Income before income taxes for operating segments: | ||||||||||||||||
Leasing | $ | 511,000 | $ | 525,000 | ||||||||||||
Petroleum storage | 359,000 | 436,000 | ||||||||||||||
870,000 | 961,000 | |||||||||||||||
Interest income | — | 7,000 | ||||||||||||||
Unallocated corporate expenses | (259,000 | ) | (291,000 | ) | ||||||||||||
Total consolidated income before income taxes | $ | 611,000 | $ | 677,000 | ||||||||||||
Assets: | ||||||||||||||||
Assets for operating segments: | ||||||||||||||||
Leasing | $ | 6,614,000 | $ | 6,446,000 | ||||||||||||
Petroleum storage | 14,298,000 | 14,559,000 | ||||||||||||||
20,912,000 | 21,005,000 | |||||||||||||||
Corporate cash and cash equivalents | 3,193,000 | 2,172,000 | ||||||||||||||
Other unallocated amounts | 34,000 | 40,000 | ||||||||||||||
Total consolidated assets | $ | 24,139,000 | $ | 23,217,000 | ||||||||||||
Additions to properties and equipment: | ||||||||||||||||
Assets for operating segments: | ||||||||||||||||
Leasing | $ | 92,000 | $ | — | ||||||||||||
Petroleum storage | 55,000 | 9,000 | ||||||||||||||
147,000 | 9,000 | |||||||||||||||
Unallocated corporate additions to properties and equipment | — | 5,000 | ||||||||||||||
Total consolidated additions | $ | 147,000 | $ | 14,000 | ||||||||||||
911
2008 | 2007 | |||||||
Depreciation: | ||||||||
Depreciation for operating segments: | ||||||||
Leasing | $ | 33,000 | $ | — | ||||
Petroleum storage | 480,000 | 514,000 | ||||||
513,000 | 514,000 | |||||||
Unallocated corporate depreciation | 4,000 | 1,000 | ||||||
Total consolidated depreciation | $ | 517,000 | $ | 515,000 | ||||
Income before income taxes: | ||||||||
Income before income taxes for operating segments: | ||||||||
Leasing | $ | 1,744,000 | $ | 1,737,000 | ||||
Petroleum storage | 1,224,000 | 1,126,000 | ||||||
2,968,000 | 2,863,000 | |||||||
Interest income | 18,000 | 94,000 | ||||||
Unallocated corporate expenses | (738,000 | ) | (931,000 | ) | ||||
Total consolidated income before income taxes | $ | 2,248,000 | $ | 2,026,000 | ||||
Assets: | ||||||||
Assets for operating segments: | ||||||||
Leasing | $ | 6,474,000 | $ | 4,114,000 | ||||
Petroleum storage | 14,394,000 | 14,627,000 | ||||||
20,868,000 | 18,741,000 | |||||||
Corporate cash and cash equivalents | 2,987,000 | 4,113,000 | ||||||
Other unallocated amounts | 198,000 | 23,000 | ||||||
Total consolidated assets | $ | 24,053,000 | $ | 22,877,000 | ||||
Additions to properties and equipment: | ||||||||
Additions and deletions to operating segments, net: | ||||||||
Leasing | $ | 33,000 | $ | — | ||||
Petroleum storage | 130,000 | 355,000 | ||||||
163,000 | 355,000 | |||||||
Unallocated corporate additions to properties and equipment | 5,000 | 15,000 | ||||||
Total consolidated additions | $ | 168,000 | $ | 370,000 | ||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Certain portions of this report, and particularly the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Notes to Consolidated Financial Statements, contain forward-looking statements which represent the Company’s expectations or beliefs concerning future events. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the following: the ability of the Company to generate adequate amounts of cash; the collectibility of the accrued leasing revenues when due over the terms of the long-term land leases; the commencement of additional long-term land leases; changes in economic conditions that may affect either the current or future development on the Company’s parcels; and exposure to contamination, remediation or similar costs associated with the operation of the petroleum storage |
1. | Overview: |
Critical accounting policies: | ||
The Company believes that its revenue recognition policy for long-term leases with scheduled rent increases (leasing segment) meets the definition of a critical accounting policy which is discussed in the Company’s Form 10-K for the year ended December 31, | ||
Segments: | ||
The Company operates in two segments, leasing and petroleum storage. | ||
The leasing segment consists of the long-term leasing of certain of its real estate interests in downtown Providence, Rhode Island (upon the commencement of which the tenants are required to construct buildings thereon, with the exception of a parking garage), the leasing of a portion of the Steeple Street Building | ||
The petroleum storage segment consists of operating | ||
The principal difference between the two segments relates to the nature of the operations. The tenants |
2. | Results of operations: |
Three months ended | ||
Leasing segment: |
2008 | 2007 | Difference | 2009 | 2008 | Difference | |||||||||||||||||||
Leasing revenues | $ | 726,000 | $ | 676,000 | $ | 50,000 | $ | 714,000 | $ | 715,000 | $ | (1,000 | ) | |||||||||||
Leasing expense | 141,000 | 169,000 | $ | (28,000 | ) | 203,000 | 190,000 | $ | 13,000 | |||||||||||||||
$ | 585,000 | $ | 507,000 | $ | 511,000 | $ | 525,000 | |||||||||||||||||
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Leasing | ||
Petroleum storage segment: |
2008 | 2007 | Difference | 2009 | 2008 | Difference | |||||||||||||||||||
Petroleum storage facility revenues | $ | 948,000 | $ | 860,000 | $ | 88,000 | $ | 936,000 | $ | 951,000 | $ | (15,000 | ) | |||||||||||
Petroleum storage facility expense | 566,000 | 516,000 | $ | 50,000 | 577,000 | 515,000 | $ | 62,000 | ||||||||||||||||
$ | 382,000 | $ | 344,000 | $ | 359,000 | $ | 436,000 | |||||||||||||||||
Due to a decrease in the cost-of-living, there is no rent adjustment under the lease for the petroleum storage facility for the contract year commencing May 1, 2009. | ||
General: | ||
For the three months ended | ||
Other income, interest: | ||
Interest income decreased | ||
2008 | 2007 | Difference | ||||||||||
Leasing revenues | $ | 2,254,000 | $ | 2,167,000 | $ | 87,000 | ||||||
Leasing expense | 510,000 | 430,000 | $ | 80,000 | ||||||||
$ | 1,744,000 | $ | 1,737,000 | |||||||||
2008 | 2007 | Difference | ||||||||||
Petroleum storage facility revenues | $ | 2,850,000 | $ | 2,745,000 | $ | 105,000 | ||||||
Petroleum storage facility expense | 1,626,000 | 1,619,000 | $ | 7,000 | ||||||||
$ | 1,224,000 | $ | 1,126,000 | |||||||||
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3. | Liquidity and capital resources: | |
Historically, the Company has had adequate liquidity to fund its operations. | ||
Cash | ||
At | ||
Under the terms of the Company’s long-term land leases, appraisals of the premises are periodically required at various stated intervals to provide the basis for recalculating the annual rent. However, if as a result of such appraisal the annual rent is calculated to be less than the then current rent, the annual rent will remain at the current level. |
• | The first of such scheduled appraisals will commence in the second quarter of 2009 for Parcel 3S to determine what amount, if any, the annual rent will be increased October 1, 2009. The current annual rent is $468,000. | ||
• | A second appraisal commences later this year for Parcel 8 to determine what amount, if any, the annual rent will be increased February 1, 2010. The current annual rent is $223,000. |
In | ||
The Company expects that cash generated from current operations will continue to be sufficient to meet operating expenses, ordinary capital expenditures and the current level of dividends. |
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In April 2009, the Company declared a quarterly dividend of $198,000 ($ | ||
The current world-wide financial crisis has had | ||
Under the Company’s lease with Global, in previous years, the Company has earned contingent revenue based upon petroleum throughput in excess of 4,000,000 barrels in any contract year. In 2008, the contingent revenue earned was $88,000. For the contract year ending April 30, 2009, the Company does not anticipate reaching 4,000,000 barrels of throughput and therefore will not earn any contingent revenue for the current contract year. | ||
In management’s opinion, the Company should be able to generate adequate amounts of cash to meet all of its anticipated obligations. In the event temporary additional liquidity is required, the Company believes that a line of credit or other arrangements could be obtained by pledging some or all of its unencumbered assets as collateral. |
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Item |
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and the Company’s principal financial officer. Based upon that evaluation, the principal executive officer and the principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. | ||
There was no significant change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to affect, the Company’s internal control over financial reporting. The Company continues to enhance its internal controls over financial reporting, primarily by evaluating and enhancing process and control documentation. Management discusses with and discloses these matters to the Audit Committee of the Board of Directors and the Company’s auditors. |
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(b) | Exhibits: |
3.1 | |||
3.2 | By-laws, as amended (incorporated by reference to Exhibit 3.2 to the registrant’s annual report on Form 10-K for the year ended December 31, 2007). | ||
10 | Material contracts: |
(a) | Lease between Metropark, Ltd. and Company: | ||
(i) | Dated January 1, 2005 (incorporated by reference to Exhibit 10(a) to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2004), as amended. | ||
(b) | Miscellaneous contract: | ||
(i) | Option Agreement to Purchase Real Property and Related Assets, dated June 9, 2003, by and between Dunellen, LLC and Global Companies, LLC (incorporated by reference to Exhibit 10(b)(i) to the registrant’s Report on Form 10-QSB/A for the quarterly period ended June 30, 2003), as amended. |
31.1 | Rule 13a-14(a) Certification of President and Principal Executive Officer | ||
31.2 | Rule 13a-14(a) Certification of Treasurer and Principal Financial Officer | ||
32.1 | Certification of President and Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
32.2 | Certification of Treasurer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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CAPITAL PROPERTIES, INC. | ||||||
By | /s/ Robert H. Eder | |||||
President and Principal Executive Officer | ||||||
By | /s/ Barbara J. Dreyer | |||||
Barbara J. Dreyer | ||||||
Treasurer and Principal Financial Officer |
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