Jannock Properties Limited (TSX VENTURE:JPL.UN) today reported net earnings of
$817,000 ($0.02 per share) for the Second Quarter of 2007 compared with a loss
of $12,000 ($0.00 per share) for the same period in 2006.
Real Estate
In the Second Quarter of 2007, Jannock Properties received payments totaling
$1,590,000 against its mortgages receivable. Of this amount, $1,190,000 was a
full discharge of one of the two mortgages receivable that were outstanding at
the beginning of the period. The balance was an interim payment of $400,000 that
was received against a mortgage receivable of $2,480,000 under an agreement to
extend its term from April 2007 to October 2007.
Also in the Second Quarter the Corporation received $178,000 as a recovery of
levy credits relating to a property that had previously been sold.
The only real estate asset the Corporation is currently holding is a mortgage
receivable of $2,080,000 which is due in October 2007.
Jancor Companies, Inc.
Operating results in the second quarter showed a small improvement over the same
period in 2006 but were not sufficient to make up the shortfall experienced in
the First Quarter. The outlook for the rest of the year is for an improvement
over the small loss that occurred in the second half of 2006. Senior debt levels
at Jancor increased by US$2 million during the Second Quarter and are consistent
with the normal seasonal build-up in working capital.
Under the terms of the sale of the Jancor equity interest in 2001, Jannock
Properties participates in payments of principal and interest by Jancor on its
subordinated debt after these payments reached a threshold level in September
2006. In April 2007, Jannock Properties received US$1,003,000 (Cdn$1,162,000)
relating to a payment which Jancor made on its subordinated debt at the end of
March.
Jancor management has advised Jannock Properties that, as a result of weak
earnings, it has negotiated an extension to the repayment of principal on its
subordinated debt until it is able to meet certain covenants on its senior debt
that would apply in the event of repayment of the subordinated debt. This means
that Jannock Properties now estimates it will receive US$1,003,000 in early
October rather than the US$5,679,000 that had previously been expected when
Jancor was scheduled to repay 50% of the outstanding principal on its
subordinated debt. Proceeds in 2008 are now estimated to be US$2,006,000 versus
the US$2,340,000 previously projected.
Cash Flows from Operations
Cash provided by operating activities in the Second Quarter of this year
amounted to $2,789,000 compared to $56,000 for the same period last year. The
major differences are due to:
- Cash receipts for the Second Quarter this year were $3,067,000 and 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. This compares with $148,000 of interest receipts for the
Second Quarter of last year.
- Cash payments for the Second Quarter this year were $278,000 and consisted of
$160,000 for income tax payments on 2007 earnings and $118,000 for
administrative expenses, which included a foreign exchange loss of $56,000. In
the same period last year cash payments were $92,000 and were primarily
administrative expenses.
Corporate Items
In the Second Quarter of this year administrative and other expenses were
$151,000, compared with $110,000 for the Second Quarter of last year. Included
in these costs in 2007 is an amount of $56,000 for foreign exchange losses
resulting from a delay in converting the Jancor proceeds to Canadian funds.
Excluding the foreign exchange losses, the year-to-date administrative costs are
12% less than for the same period in 2006.
A cash distribution equivalent to $0.05 per Unit was paid on June 15, 2007
through the redemption of 5 of the Class A Special shares that were included in
each unit. Following this redemption, each Unit consists of one Class B common
share and 65 Class A special shares.
The Corporation's Annual and Special Meeting was held in Toronto on May 9, 2007.
At this meeting shareholders approved the re-election of J. Lorne Braithwaite,
Ian C.B. Currie, Robert W. Korthals and David P. Smith as directors of the
Corporation, the re-appointment of PricewaterhouseCoopers LLP as auditors of the
Corporation and confirmed an amendment to the corporation's general by-law
regarding indemnities to directors and officers.
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).
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)
JUNE DECEMBER 31
2007 2006
---- ----
(unaudited)
ASSETS
Mortgages receivable (note 2) 2,080 3,670
Other assets 68 62
Cash and cash equivalents 3,864 3,010
---------- -----------
$ 6,012 $ 6,742
---------- -----------
LIABILITIES
Accounts payable and accrued liabilities $ 37 $ 47
Income taxes payable 375 91
Future income taxes 212 257
---------- -----------
$ 624 $ 395
---------- -----------
SHAREHOLDERS' EQUITY
Capital stock (note 4) $ 23,114 $ 24,896
Contributed surplus 6,868 6,868
Deficit (24,594) (25,417)
---------- -----------
$ 5,388 $ 6,347
---------- -----------
---------- -----------
$ 6,012 $ 6,742
---------- -----------
INTERIM STATEMENT OF OPERATIONS AND DEFICIT
(in thousands of Canadian dollars, except per share amount)
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
2007 2006 2007 2006
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Land sales $ - $ - $ - $ -
Cost of sales
(recovery of prior
years amounts) (178) - (178) -
------------ ------------ ------------ ------------
Gross profit 178 - 178 -
Interest income 89 92 174 189
Recovery on Jancor
(note 8) 1,162 1,162
------------ ------------ ------------ ------------
1,429 92 1,514 189
General and
administrative expenses (151) (110) (226) (195)
------------ ------------ ------------ ------------
Income before income
taxes 1,278 (18) 1,288 (6)
Income taxes
provided/(recovered)
(note 3)
- current 508 (7) 510 (5)
- future (47) 1 (45) 3
------------ ------------ ------------ ------------
Net income for the
period $ 817 $ (12) $ 823 $ (4)
------------ ------------ ------------ ------------
Deficit - beginning of
period $ (25,411) $ (26,211) $ (25,417) $ (26,219)
Deficit - end of period $ (24,594) $ (26,223) $ (24,594) $ (26,223)
Net earnings per share $ 0.02 $ 0.00 $ 0.02 $ 0.00
INTERIM STATEMENT OF CASH FLOWS
(in thousands of Canadian dollars)
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
2007 2006 2007 2006
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Cash receipts
Recovery of prior years'
cost of sales amounts $ 178 $ - $ 178 $ -
Collection of mortgages
receivable 1,590 - 1,590 513
Interest received 137 148 185 191
Recovery on Jancor 1,162 1,162
---------- -------- ---------- ---------
3,067 148 3,115 704
---------- -------- ---------- ---------
Cash payments
Expenditures on land
development - (1) (3) (5)
Income taxes paid (160) - (226) (918)
Other payments (118) (91) (251) (221)
---------- -------- ---------- ---------
(278) (92) (480) (1,144)
---------- -------- ---------- ---------
---------- -------- ---------- ---------
Total operating
activities 2,789 56 2,635 (440)
---------- -------- ---------- ---------
FINANCING ACTIVITIES
Redemption of capital
stock (1,781) (1,781) (1,781) (1,781)
---------- -------- ---------- ---------
(1,781) (1,781) (1,781) (1,781)
---------- -------- ---------- ---------
---------- -------- ---------- ---------
INCREASE/(DECREASE) IN
CASH AND CASH
EQUIVALENTS 1,008 (1,725) 854 (2,221)
---------- -------- ---------- ---------
CASH AND CASH EQUIVALENTS
- BEGINNING OF PERIOD $ 2,856 $ 4,066 $ 3,010 $ 4,562
CASH AND CASH EQUIVALENTS
- END OF PERIOD $ 3,864 $ 2,341 $ 3,864 $ 2,341
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,
2006 (except as set out in Note 9) and should be read in conjunction with those
financial statements.
2. Mortgages receivable
At June 30, 2007, one mortgage receivable was outstanding for $2,080 (December
31, 2006 - $3,670 for two mortgages receivable) and is due in October 2007.
3. Income taxes
The following table reconciles income taxes calculated at the current combined
Canadian federal and provincial income tax rates of 36.1% with the Company's
income tax expense.
Six months ended
----------------
June 30, 2007 June 30, 2006
------------- --------------
Earnings/(loss) before income taxes $ 1,288 $ (6)
------------- --------------
------------- --------------
Expected income taxes/(recovery) $ 465 $ (2)
------------- --------------
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. The following
summarizes the changes in capital stock during the six months to June 30, 2007;
Number of shares
----------------
Class B Common Class A special Amount
-------------- ---------------- --------
Issued and outstanding
December 31, 2006 35,631,932 2,494,235,240 24,896
Redemption of Class A special
shares (178,159,660) (1,781)
-------------- ---------------- --------
Issued and outstanding
June 30, 2007 35,631,932 2,316,075,580 23,114
5. Commitments
Security for $1,200 and $300 respectively, is to be provided to Jannock Limited
(now Vicwest Corporation) to cover any potential environmental liabilities that
may arise for three years after the sale of the Britannia site (sold September
2004) and the Milton quarry (sold March 2005). These security amounts expire in
September 2007 and March 2008 respectively. The Corporation is not aware of any
liabilities for environmental issues at these sites.
6. Related Party Transactions
For the first six months of 2007, a former President of the Corporation was paid
$1 for consulting services provided to the Corporation ($6 in 2006).
The Corporation pays a share of rent and expenses to the former President as a
sub-tenant in office space that it shares with him and a third party.
In March 2006, the former President repaid a mortgage receivable of $513
relating to a property which had been previously sold by the Corporation to an
unrelated party and which was subsequently acquired by the former President.
7. 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.
8. 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. As a result of prior
year writedowns the carrying value of the investment in Jancor at the time of
this transaction was $nil and consequently no gain or loss was recognized on
this sale. The fair value of the proceeds received at the time was estimated to
be $nil.
Under the terms of the sale of the Jancor equity interest, Jannock Properties
has the right to receive:
- A participation in payments by Jancor on its subordinated debt after these
payments reach a threshold level equal to the principal amount of US$16,717.
Jannock Properties is to receive 100% of all payments between US$16,717 and
US$22,289 and 25% of amounts over US$22,289.
- 25% of any net proceeds, after repayment of senior debt, if and when the
equity holders decide to sell their interest in Jancor.
Payments by Jancor on its subordinated debt reached the threshold level in
September 2006 and in October 2006 Jannock Properties received US$118 (Cdn$132)
as its share of the payment made in September 2006. In April 2007, Jannock
Properties received US$1,003 (Cdn$1,162) as its share of a payment which Jancor
made on its subordinated debt at the end of March. Jannock Properties has not
been able to determine how much of these payments, if any, would be taxable and
has consequently made full tax provisions against the amounts received to date.
Jancor management has advised Jannock Properties that, as a result of weak
earnings, it has negotiated an extension to the repayment of principal on its
subordinated debt until it is able to meet certain covenants on its senior debt
that would apply in the event of repayment of the subordinated debt. This means
that Jannock Properties now projects it will receive US$1,003 in early October
rather than the US$5,679 that had previously been expected when Jancor was
scheduled to repay 50% of the outstanding principal on its subordinated debt.
9. Accounting policy changes
On January 1, 2007, the Corporation adopted the Canadian Institute of Chartered
Accountants handbook standards contained in Section 3855 entitled "Financial
Instruments - Recognition and Measurement". There were no changes required to
the opening balances due to the adoption of these new accounting
recommendations.
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