Jannock Properties Limited (TSX VENTURE: JPL.UN) today reported net
earnings for the Third Quarter of 2008 of $436,000 ($0.01 per
share) compared with a net loss of $13,000 ($0.00 per share) for
the Third Quarter of 2007. The earnings in the Third Quarter were
mainly due to income tax recoveries of $432,000 that were received
during the period.
Operating activities for the three months ended September 30,
2008 generated cash of $433,000 compared with cash used of $105,000
for the same period in 2007.
Revenue
Income in the three months to September 30, 2008 consisted of
interest earned on short term investments of surplus cash of
$39,000 plus interest on income tax refunds of $11,000. This
compares with interest earnings of $78,000 in the same period last
year which included interest earned on cash surpluses of $41,000
plus interest earned on mortgages receivable of $37,000.
General and Administrative Expenses
In the Third Quarter of this year, general and administrative
expenses were $45,000. In the same period last year administrative
and other expenses were $83,000 which included an amount of $27,000
relating to the successful appeal of the income tax treatment of
the Jancor proceeds that were received in prior years.
For the year-to-date, administrative expenses reflect the
Corporation's efforts to reduce all areas of costs and are 31% less
than for the same period in 2007.
Income taxes
In the Third Quarter of this year, the Corporation received
refunds of $432,000 from Federal and Ontario tax authorities
relating to income tax payments that had previously been made on
the recoveries from Jancor in 2006 and 2007. An additional $11,000
of interest that accompanied the refunds has been included in
revenue.
Cash Flows from Operations
Cash generated from operating activities in the Third Quarter of
this year amounted to $433,000 compared with cash used by operating
activities of $105,000 for the same period last year. The major
differences are due to:
- Cash receipts for the Third Quarter this year were $482,000
and consisted of income tax refunds of $432,000 plus interest
receipts of $50,000 which consisted of $39,000 interest on cash
surpluses and $11,000 interest on the income tax recoveries. This
compares with $41,000 of cash receipts in the Third Quarter of last
year which were all from interest income on cash surpluses.
- Cash payments for the Third Quarter this year were $49,000 and
were primarily related to general and administrative expenses. In
the same period last year, cash payments were $146,000 and included
$75,000 for income tax payments, $58,000 for administrative and
other expenses and $10,000 for interest costs.
Jancor Companies, Inc. (Jancor)
Jannock Properties sold all of its equity interest in Jancor in
2001 in return for debt participation rights relating to payments
received by Jancor's subordinated lender and to equity
participation rights to proceeds received by Jancor's shareholders
from a sale of Jancor.
In April 2007 the Corporation received proceeds of US$1,003,000
(Cdn$1,162,000) under the terms of the agreement on its debt
participation rights. No further proceeds have been received since
that time under either the debt participation rights or the equity
participation rights. Jannock Properties had previously disclosed
that it was unlikely that it would receive any recoveries from
these participation rights in the foreseeable future.
On October 30, 2008 Jancor made a voluntary Chapter 11 filing
after it had ceased operations at its manufacturing plants a few
days earlier.
Jannock Properties believes that the current economic downturn
and the closure of the Jancor operations means that it is highly
unlikely that proceeds from the Jancor assets will exceed Jancor's
senior debt. Consequently the Corporation believes that there will
not be any value in either the debt participation rights or the
equity participation rights.
Corporate Items
Following the sale of its real estate properties, the
Corporation's remaining assets are its cash balances and the
potential recovery of levy credits on a previously sold property.
The cash balances at September 30, 2008 are equivalent to
approximately $0.16 per unit.
The Corporation is now investigating methods for maximizing
shareholder values including the orderly liquidation of the
Corporation in a timely manner.
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.
Interim Balance Sheet
(in thousands of Canadian dollars)
September 30 December 31
2008 2007
---- ----
(unaudited)
-----------
-----------
Assets
Cash and cash equivalents $ 5,790 $ 5,825
Other assets 10 21
Future income taxes 31 34
------------ ------------
------------ ------------
$ 5,831 $ 5,880
------------ ------------
Liabilities
Accounts payable and accrued liabilities $ 20 $ 27
Income taxes payable 15 470
------------ ------------
------------ ------------
$ 35 $ 497
------------ ------------
Shareholders' Equity
Capital stock (note 4) $ 23,115 $ 23,115
Contributed surplus 6,868 6,868
Deficit (24,187) (24,600)
------------ ------------
$ 5,796 $ 5,383
------------ ------------
------------ ------------
------------ ------------
$ 5,831 $ 5,880
------------ ------------
Interim Statement of Income, Comprehensive Income and deficit
(in thousands of Canadian dollars, except per share amount)
Three Months Nine Months
Ended September 30 Ended September 30
---------------------- ------------------------
2008 2007 2008 2007
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue
Interest Income $ 50 $ 78 $ 145 $ 252
Recovery of prior years
cost of sales - - - 178
Recovery on Jancor
(note 9) - - - 1,162
---------- ---------- ---------- ----------
Total 50 78 145 1,592
---------- ---------- ---------- ----------
Expenses
General and
administrative costs (45) (83) (175) (255)
Interest (10) (10)
Foreign exchange loss (54)
---------- ---------- ---------- ----------
Total (45) (93) (175) (319)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income/(loss) before
income taxes 5 (15) (30) 1,273
Income tax provision
(recovery) (note 3)
- current (432) (3) (445) 507
- future 1 1 2 (44)
---------- ---------- ---------- ----------
Net income (loss) and
comprehensive income
(loss) for the period $ 436 $ (13) $ 413 $ 810
---------- ---------- ---------- ----------
Deficit - beginning of
period $ (24,623) $ (24,594) $ (24,600) $ (25,417)
Deficit - end of period $ (24,187) $ (24,607) $ (24,187) $ (24,607)
Basic and diluted
earnings (loss) per
share $ 0.01 $ 0.00 $ 0.01 $ 0.02
Interim Statement of Cash Flows
(in thousands of Canadian dollars)
Three Months Nine Months
Ended September 30 Ended September 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
Collection of mortgages
receivable - - - 1,590
Income tax recoveries 432 432
Interest received 50 41 154 226
Recovery on Jancor
(note 9) - - - 1,162
Cash payments
Income taxes - (75) (443) (301)
Interest payments (10) (10)
Expenditures on land
development - (3) - (6)
Other payments (49) (58) (178) (309)
---------- ---------- ---------- ----------
Total operating
activities 433 (105) (35) 2,530
---------- ---------- ---------- ----------
Financing activities
Redemption of capital
stock - - - (1,781)
---------- ---------- ---------- ----------
Increase (decrease) in
cash equivalents 433 (105) (35) 749
---------- ---------- ---------- ----------
Cash and cash equivalents
- beginning of period $ 5,357 $ 3,864 $ 5,825 $ 3,010
Cash and cash equivalents
- end of period $ 5,790 $ 3,759 $ 5,790 $ 3,759
Cash and cash equivalents
are comprised of:
Cash 40 99
Short term investments
(note 2) 5,750 3,660
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.
Nine Months ended
-----------------
September 30, 2008 September 30, 2007
------------------- -------------------
Income (loss) before income taxes $ (30) $ 1,273
------------ ------------
Expected income taxes (recovery) $ (11) $ 460
Permanent differences (432) 3
------------ ------------
Income tax provision (recovery) $ (443) $ 463
------------ ------------
The permanent differences relate to the refunds of prior years
taxes resulting from the successful appeal of the treatment of the
proceeds received from the Jancor participation rights.
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 Nine months to September 30,
2008.
Number of shares
----------------
Class B
Common Class A special Amount
------- --------------- ------
Issued and outstanding at
September 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
and the potential recovery of levy credits.
The Corporation is now investigating methods for maximizing
shareholder value including orderly liquidation of the Corporation
in a timely manner.
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 Nine 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 has not had any influence over
the business since that time. 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.
In April 2007 the Corporation received proceeds of US$1,003,000
(Cdn$1,162,000) under the terms of the agreement on its debt
participation rights. No further proceeds have been received since
that time under either the debt participation rights or the equity
participation rights.
On October 30, 2008 Jancor made a voluntary Chapter 11 filing
after it had ceased operations at its manufacturing plants a few
days earlier. Jannock Properties had previously disclosed that it
was unlikely that it would receive any recoveries from its Jancor
participation rights in the foreseeable future.
Jannock Properties believes that the current economic downturn
and the closure of the Jancor operations means that it is highly
unlikely that proceeds from the Jancor assets will exceed Jancor's
senior debt. Consequently the Corporation believes that there will
not be any value in either the debt participation rights or the
equity participation rights.
10. 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.
Contacts: Jannock Properties Limited Brian Jamieson (905)
821-4464 Email: bjamie@jannockproperties.com
Jannock Pptys Ltd (TSXV:JPL.UN)
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Jannock Pptys Ltd (TSXV:JPL.UN)
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