Jannock Properties Limited (TSX VENTURE:JPL.UN) today reported a net loss for
the Second Quarter of 2008 of $17,000 ($0.00 per share) compared with net income
of $817,000 ($0.02 per share) for the Second Quarter of 2007.
Operating activities for the three months ended June 30, 2008 used cash of
$6,000 compared with cash generation of $2,789,000 for the same period in 2007.
Revenue
Income in the three months to June 30, 2008 consisted of interest earned on
short term investments of surplus cash of $42,000. This compares with interest
earnings of $89,000 in the same period last year which included interest earned
on cash surpluses of $34,000 plus interest earned on mortgages receivable of
$55,000. Also in the Second Quarter of 2007 the Corporation received $178,000
from a recovery of levy credits on a property that had previously been sold and
$1,162,000 as its share of an interest payment that was received by the
subordinated lender to Jancor Companies, Inc.
General and Administrative Expenses
In the Second Quarter of this year, general and administrative expenses were
$68,000. In the same period last year administrative and other expenses were
$151,000 which included an amount of $56,000 for a foreign exchange loss
resulting from a delay in converting the Jancor recovery to Canadian funds.
Excluding the foreign exchange loss in 2007, the year-to-date administrative
costs are 24% less than for the same period in 2007.
Cash Flows from Operations
Cash used for operating activities in the Second Quarter of this year amounted
to $6,000 compared with cash generation of $2,789,000 for the same period last
year. The major differences are due to:
- Cash receipts for the Second Quarter this year were $42,000 and were all from
interest received from the investment of cash surpluses. This compares with
$3,067,000 of cash receipts in the Second Quarter of last year which included
$1,590,000 from payments against mortgages receivable, $1,162,000 (US$1,003,000)
as a recovery from Jancor, $178,000 as a recovery of levy credits and $137,000
of interest income.
- Cash payments for the Second Quarter this year were $48,000. In the same
period last year cash payments were $278,000 and included income tax
installments of $160,000.
Jancor Companies, Inc. (Jancor)
The downturn in the US housing markets combined with higher raw material prices
and the effect of increased energy prices on transportation costs have hurt
revenues and margins for suppliers of building products. Given these industry
conditions and the highly leveraged capitalization of Jancor, it seems unlikely
that Jannock Properties will make any recoveries from its participation rights
in Jancor in the foreseeable future.
Currently, Jannock Properties has the right to participate in subordinated debt
payments received by Jancor's subordinated lender and to receive 25% of any net
proceeds, after repayment of senior debt, if and when the equity holders decide
to sell their interest in Jancor.
Corporate Items
Following the sale of its real estate properties, the Corporation's remaining
assets are its cash balances, the potential recovery of levy credits and any
possible recoveries from its Jancor rights. However with the diminished
likelihood of any recoveries from Jancor, the Corporation is now investigating
methods for maximizing shareholder values including the possible sale or
liquidation of the Corporation.
The interest earned on cash balances currently offsets a large portion of the
ongoing administrative costs.
The mandate for the Company is to dispose of its assets in a manner that
maximizes value and distributes the net proceeds realized from those assets to
shareholders in a timely fashion.
The Company's common shares are listed on the Canadian Venture Exchange (trading
symbol: JPL.UN). Currently each Unit consists of one Class B common share and 65
Class A special shares.
Forward-looking statements contained in this news release involve risks and
uncertainties that could cause actual results to differ materially from those
contemplated by such statements. Factors that could cause such differences
include local real estate markets, zoning applications, changes in interest
rates and general economic conditions. In addition, there are risk factors
described from time to time in the reports and disclosure documents filed by
Jannock Properties Limited with Canadian and U.S. securities regulatory agencies
and commissions.
NOTICE
The accompanying interim unaudited financial statements have not been reviewed
by the Company's auditors.
JANNOCK PROPERTIES LIMITED
Interim Balance Sheet
(in thousands of Canadian dollars)
June 30 December 31
2008 2007
---- ----
(unaudited)
-----------
Assets
Cash and cash equivalents $ 5,357 $ 5,825
Other assets 12 21
Future income taxes 32 34
---------- ---------
$ 5,401 $ 5,880
---------- ---------
---------- ---------
Liabilities
Accounts payable and accrued liabilities $ 26 $ 27
Income taxes payable 15 470
---------- ---------
$ 41 $ 497
---------- ---------
---------- ---------
Shareholders' Equity
Capital stock (note 4) $ 23,115 $ 23,115
Contributed surplus 6,868 6,868
Deficit (24,623) (24,600)
---------- ---------
$ 5,360 $ 5,383
---------- ---------
---------- ---------
---------- ---------
$ 5,401 $ 5,880
---------- ---------
---------- ---------
Interim Statement of Income, Comprehensive Income and deficit
(in thousands of Canadian dollars, except per share amount)
Three Months Six Months
Ended June 30 Ended June 30
----------------------- -----------------------
2008 2007 2008 2007
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue
Interest Income $ 42 $ 89 $ 95 $ 174
Recovery of prior
years cost of sales - 178 - 178
Recovery on Jancor
(note 9 ) - 1,162 - 1,162
---------- ----------- ---------- -----------
Total 42 1,429 95 1,514
---------- ----------- ---------- -----------
Expenses
General and
administrative costs (68) (151) (130) (226)
---------- ----------- ---------- -----------
Income/(loss) before
income taxes (26) 1,278 (35) 1,288
Income tax provision
(recovery) (note 3)
- current (9) 508 (13) 510
- future - (47) 1 (45)
Net income (loss) and
comprehensive income ---------- ----------- ---------- -----------
(loss) for the period $ (17) $ 817 $ (23) $ 823
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
Deficit - beginning of
period $ (24,606) $ (25,411) $ (24,600) $ (25,417)
Deficit - end of period $ (24,623) $ (24,594) $ (24,623) $ (24,594)
Basic and diluted
earnings (loss)
per share $ (0.00) $ 0.02 $ 0.02 $ 0.02
Interim Statement of Cash Flows
(in thousands of Canadian dollars)
Three Months Six Months
Ended June 30 Ended June 30
----------------------- -----------------------
2008 2007 2008 2007
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Cash provided by (used in)
Operating activities
Cash receipts
Recovery of prior years
cost of sales $ - $ 178 $ - $ 178
Collection of mortgages
receivable - 1,590 - 1,590
Interest received 42 137 104 185
Recovery on Jancor
(note 9) - 1,162 - 1,162
Cash payments
Income taxes paid - (160) (443) (226)
Expenditures on land
development - - - (3)
Other payments (48) (118) (129) (251)
---------- ----------- ---------- -----------
Total operating
activities (6) 2,789 (468) 2,635
---------- ----------- ---------- -----------
Financing activities
Redemption of capital stock - (1,781) - (1,781)
---------- ----------- ---------- -----------
Increase (decrease) in cash
equivalents (6) 1,008 (468) 854
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
Cash and cash equivalents -
beginning of period $ 5,363 $ 2,856 $ 5,825 $ 3,010
Cash and cash equivalents -
end of period $ 5,357 $ 3,864 $ 5,357 $ 3,864
Cash and cash equivalents
are comprised of:
Cash 55 414
Short term investments
(note 2) 5,302 3,450
NOTES TO INTERIM FINANCIAL STATEMENTS
(unaudited - in thousands of dollars)
1. Summary of significant accounting policies
These interim unaudited financial statements have been prepared in accordance
with Canadian generally accepted accounting principles for interim financial
statements in Canada. The disclosures contained in these unaudited interim
financial statements do not include all disclosures required for annual
financial statements. They have been prepared using the same accounting
policies as set out in Note 2 to the financial statements for the year ended
December 31, 2007 and should be read in conjunction with those financial
statements.
2. Cash and cash equivalents
Investments are held in either banker's acceptances or term deposits with major
Canadian banks in order to minimize any credit risk.
3. Income taxes
The following table reconciles income taxes calculated at the current Canadian
federal and provincial tax rates with the Company's income tax expense.
Six months ended
------------------
June 30, 2008 June 30, 2007
------------- --------------
Income (loss) before income taxes $ (35) $ 1,288
--------- ----------
--------- ----------
Expected income taxes (recovery) $ (12) $ 465
--------- ----------
4. Capital Stock
The Company's capital stock consists of Class A special shares and Class B
common shares. The Class A special shares are transferable with and only with
the associated Class B common shares and trade as one unit (JPL.UN).
Accordingly, the Company's earnings per share have been calculated using the
number of Class B common shares outstanding of 35,631,932. There have been no
changes to the shares outstanding during the six months to March 31, 2008
Number of shares
----------------
Class B Class A Amount
Common special ------
------- -------
Issued and outstanding at June 30, 2008 35,631,932 2,316,075,580 $23,115
5. Capital Management
The mandate for the Corporation is to dispose of its assets in a manner that
maximizes value and distributes the net proceeds realized from those assets to
shareholders in a timely fashion.
The Corporation's remaining assets relate to its cash balances, the potential
recovery of levy credits and any possible recoveries from its Jancor rights.
However with the diminished likelihood of any recovery from Jancor, the
Corporation is now investigating methods for maximizing shareholder value
including the possible sale or liquidation of the Corporation.
The interest earned on cash balances currently offsets a large portion of the
ongoing administrative costs.
6. Commitments
Security in the amount of $300 which was required for any potential
environmental liabilities that may have arisen for three years after the sale of
the Milton quarry in March 2005 expired in March 2008. Security in the amount of
$1,200 which was required for the sale of the Britannia site in September 2004
expired in September 2007. The Corporation is not aware of any liabilities for
environmental issues at these sites.
7. Related Party Transactions
The Corporation pays a nominal amount as its share of rent and expenses to a
former president of the Corporation as a sub-tenant in office space that it
shares with him and a third party.
In the first six months of 2007, the former President was paid $1 for consulting
services provided to the Corporation ($nil in 2008).
8. Potential Recoveries
The Corporation has identified approximately $281 of potential recoveries of
development charges that are contingent upon actions of other developers. Any
amounts received will be treated as a recovery of development costs charged to
cost of sales in prior years.
The ultimate amounts realized and the timing of recovery are uncertain and could
differ from current estimates.
9. Jancor Companies, Inc (Jancor)
In 2001, Jannock Properties sold all of its equity interest in Jancor, a US
manufacturer of residential vinyl siding, windows and outdoor fence and deck
products and no longer has any influence over the business. Jannock Properties
does not have any carrying value on its balance sheet as it made a provision in
2000 to fully write down its investment to reflect plant closures and a decline
in value that was other than temporary.
Under the terms of the sale of the Jancor equity interest, Jannock Properties
has the right to receive:
- debt participation right -a participation in any receipts of principal and
interest by Jancor's subordinated lender (an affiliate of Jancor's majority
owner) after they reach a threshold level equal to the principal amount of the
subordinated debt of US$16,717,000. Jannock Properties is to receive 100% of all
receipts between US$16,717,000 and US$22,289,000 and 25% of amounts over
US$22,289,000. This arrangement is to restore Jannock Properties to a 25%
participation in any such receipts; and
- equity participation right - 25% of any net proceeds to the owners, after
repayment of senior debt, if and when the equity holders sell their interest in
Jancor.
Jannock Properties did not receive any proceeds from either its debt
participation right or its equity participation right in the Second Quarter of
2008. In the Second Quarter of 2007 the Corporation received proceeds of
US$1,003,000 (Cdn$1,162,000) under the terms of the agreement on its debt
participation right. No further proceeds have been received since that time as
Jancor has deferred all payments of principal and interest that were to be made
on its subordinated debt.
The downturn in the US housing markets combined with higher raw material prices
and the effect of increased energy prices on transportation costs have hurt
revenues and margins for suppliers of building products. Given these industry
conditions and the highly leveraged capitalization of Jancor, it seems unlikely
that Jannock Properties will make any recoveries from its participation rights
in Jancor in the foreseeable future.
10. Subsequent events
In the Third Quarter, the Corporation has received refunds of $430,000 from
Federal and Ontario tax authorities on income taxes that were paid on the
recoveries from Jancor in 2006 and 2007. A further $30,000 is expected to be
received from these tax authorities. These income tax refunds will be recorded
in the period received.
11. Accounting policy changes
Effective January 1, 2008 the Corporation adopted CICA Handbook Section 1535,
Capital Disclosures. Also, in fiscal 2008, the Company has adopted Section 3862,
"Financial Instruments - Disclosures", and Section 3863, Financial Instruments -
Presentation". These sections replace Section 3861, "Financial Instruments -
Disclosure and Presentation", revising and enhancing disclosure requirements,
and carrying forward unchanged presentation requirements. These new Sections
place increased emphasis on disclosures about the nature and extent of risks
arising from financial instruments and how the entity manages those risks.
These standards impact the Company's disclosures provided but do not affect the
Company's results or financial position.
Jannock Pptys Ltd (TSXV:JPL.UN)
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