U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission File Number 0-3960
CAPITAL PROPERTIES, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Rhode Island 05-0386287
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Hospital Trust Plaza, Suite 920, Providence, RI 02903
(Address of principal executive offices)
Issuer's telephone number 40l-33l-0100
(Former name, former address and former fiscal year, if changed
since last report.)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the issuer was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the lastest practicable date:
As of November 6, 1995, the registrant had 1,000,000
shares of common stock outstanding.
Transitional small business disclosure format (check one).
YES NO X .
<PAGE>
PART I
Item 1. Financial Statements
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(Unaudited)
ASSETS
<TABLE>
<S> <C>
Properties and equipment (net of accumulated
depreciation)(Note 3).......................... $ 9,467,000
Cash and cash equivalents........................ 878,000
Note receivable, Providence and Worcester
Railroad Company (Note 4)...................... 4,662,000
Other receivables (Note 5)....................... 168,000
Accrued rental income of $8,592,000 less
amount for which realization is not
assured of $8,345,000 (Note 6)................. 247,000
Prepaid and other................................ 214,000
$15,636,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable............................... 38,000
Accrued expenses:
Property taxes................................ 515,000
Other......................................... 134,000
Deferred income taxes (Note 7)................. 1,445,000
2,132,000
Commitment (Note 8)
Shareholders' equity:
Common stock, $1 par; authorized, issued
and outstanding 1,000,000 shares.............. 1,000,000
Capital in excess of par....................... 10,828,000
Retained earnings.............................. 1,676,000
13,504,000
$15,636,000
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Income:
Rentals (Note 5)............................ $ 439,000 $375,000 $1,320,000 $1,135,000
Garage and surface parking revenues......... 112,000 97,000 363,000 319,000
Interest:
Providence and Worcester Railroad Company.. 157,000 209,000 552,000 634,000
Other...................................... 10,000 3,000 26,000 11,000
Gain on sale of properties and equipment.... 75,000
718,000 684,000 2,336,000 2,099,000
Expenses:
Expenses applicable to:
Rental income.............................. 269,000 167,000 625,000 456,000
Garage and surface parking................. 282,000 157,000 595,000 474,000
General and administrative.................. 208,000 269,000 931,000 814,000
Interest.................................... 28,000 51,000 124,000 148,000
787,000 644,000 2,275,000 1,892,000
Income (loss) before income taxes............. (69,000) 40,000 61,000 207,000
Income tax expense (benefit) ................. (41,000) (5,000) 24,000 83,000
Net income (loss)............................. $ (28,000) $ 45,000 $ 37,000 $ 124,000
Earnings (loss) per common share.............. $(.03) $.05 $.04 $.12
Dividends per common share.................... $ -0- $-0- $.10 $.10
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
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Cash flows from operating activities:
Net income........................... $ 37,000 $ 124,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation ...................... 274,000 286,000
Gain on sale of properties and
equipment......................... (75,000)
Deferred income taxes ............. (90,000) (93,000)
Other, principally net changes in
other receivables, accounts
payable and accrued expenses...... (20,000) (65,000)
Net cash provided by
operating activities................ 126,000 252,000
Cash flows from investing activities:
Purchase of properties and
equipment........................... (10,000) (22,000)
Proceeds from:
Collection of note receivable....... 2,020,000 383,000
Sale of properties and equipment.... 138,000
Net cash provided by investing
activities.......................... 2,148,000 361,000
Cash flows from financing activities,
payment of:
Note payable, bank.................. (2,053,000) (543,000)
Dividends........................... (100,000) (100,000)
Net cash used in financing
activities.......................... (2,153,000) (643,000)
Increase (decrease) in cash and
cash equivalents..................... 121,000 (30,000)
Cash and cash equivalents, beginning... 757,000 813,000
Cash and cash equivalents, ending...... $ 878,000 $ 783,000
Supplemental disclosure, cash paid for:
Interest............................. $ 119,000 $ 144,000
Income taxes......................... $ 280,000 $ 234,000
</TALE>
See notes to consolidated financial statements.
<PAGE>
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying interim consoli-
dated financial statements contain all adjustments necessary to
present fairly the financial position as of September 30, 1995 and
the results of operations for the three and nine months ended
September 30, 1995 and 1994, and cash flows for the nine months
ended September 30, 1995 and 1994.
2. Results for interim periods may not be necessarily indicative of
the results to be expected for the year.
3. Properties and equipment:
</TABLE>
<TABLE>
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Properties and equipment on
lease or held for lease:
Land and land improvements.......... $ 6,140,000
Buildings and structures............ 325,000
Equipment, petroleum storage
tanks.............................. 4,163,000
10,628,000
Other:
Land and land improvements.......... 192,000
Buildings, principally parking
garage............................. 2,536,000
Equipment........................... 83,000
2,811,000
13,439,000
Less accumulated depreciation:
Properties and equipment on
lease or held for lease............ 3,410,000
Other............................... 562,000
3,972,000
$ 9,467,000
</TABLE>
4. Note receivable, Providence and Worcester Railroad Company:
During the second quarter of 1995, Providence and Worcester
Railroad Company (Railroad) informed the Company that it had
secured a commitment from a bank which would enable it to borrow
funds in an amount sufficient to prepay the entire balance of
Railroad's note to the Company at an interest rate significantly
below the 12% rate of the note. The Company and Railroad
negotiated a reduction of the interest rate to 10% upon the
Railroad's prepaying $l,800,000 on its note, which prepayment was
made in August 1995. The Company used the proceeds to prepay in
full its note payable to a bank in the amount of $l,755,000.
<PAGE>
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
4. Note receivable, Providence and Worcester Railroad Company
(continued):
The prepayment by Railroad and the interest rate adjustment
results in a current monthly payment over the remaining term of
twelve years by Railroad of principal and interest of $55,000.
5. Other receivables:
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Rentals, principally tenant
property tax reimbursement......... $ 129,000
Interest, Providence and
Worcester Railroad Company......... 39,000
$ 168,000
</TABLE>
6. Description of leasing arrangements:
At September 30, 1995, the Company has entered into land leases
for three separate land parcels with remaining terms of up to 98
years. The Company also leases petroleum storage facilities and
various parcels of land for surface parking.
Prior to March 1995, the Company leased various parcels of land
for outdoor advertising to two tenants. During March 1995, one
tenant acquired the other tenant, and the Company extended the
term of its current lease with the remaining tenant to 2023.
For those leases with scheduled rent increases, the cumulative
excess of straight-line over contractual rentals (considering
scheduled rent increases over the initial 32 to 102 year terms of
the leases) amounted to $8,592,000 at September 30, 1995.
Commencing in 1992, management has been able to conclude that a
portion of the excess of straight-line over contractual rentals
($247,000 through September 30, 1995) is realizable when payable
over the terms of the leases.
7. Income taxes:
Deferred taxes are recorded based upon differences between the
financial statement and tax basis of assets and liabilities and
available tax credit carryforwards. The tax effect of temporary
differences and carryforwards which give rise to deferred tax
assets and liabilities at September 30, 1995 were as follows:
<PAGE>
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
7. Income taxes (continued):
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Gross deferred tax liabilities:
Property having a financial
statement basis in excess of
its tax basis................... $1,509,000
Excess of straight line over
contractual rental income....... 99,000
1,608,000
Gross deferred tax assets,
principally professional fees..... (163,000)
$1,445,000
</TABLE>
8. Commitment:
Under an agreement with the State of Rhode Island entered into in
1990, the Company will owe the State $158,000 sixty days after the
completion by the State of a construction contract for certain
public improvements affecting one of the Company's parcels. The
Company anticipates that such payment will be reimbursable by the
developer of such parcel. Accordingly, the Company has not
provided for such obligation on the accompanying consolidated
financial statements. The agreement is secured by a mortgage on
one of the Company's parcels. The agreement further provides
that, should the amount not be paid when it is due, interest will
accrue from the due date at the rate of prime plus 1%.
<PAGE>
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis or Plan of Operation
Financial condition:
A significant portion of the Company's land consists of
approximately 20.5 acres, including 1.9 acres of air rights, in
downtown Providence, Rhode Island, held for development. The
Company is negotiating a lease on one of its parcels and is
engaged in discussions concerning the possible development of
other parcels but is unable to predict when leases on additional
parcels will commence; however, the Company will continue to use
the available parcels for public surface parking.
Effective October 1, 1991, the Company's petroleum terminal
storage facilities were leased under a five-year lease under
which the tenant has the right to extend the lease term for an
additional five years. At any time during the first five years
of the lease, the tenant can exercise an option to purchase the
petroleum terminal storage facilities. The purchase price
during the first year of the lease was $4,500,000 and is
increased by an inflation factor in each of the remaining four
years ($4,961,000 at September 30, 1995). The Company has
received from the tenant notification of the tenant's
termination of the lease at September 30, 1996. However, the
tenant has continued discussions with the Company to extend the
lease for a two-year period with no increase in the annual
rental. The notice of termination of the lease does not affect
the tenant's right to purchase the petroleum terminal storage
facilities, which right expires September 30, 1996. In the
event the tenant and the Company do not extend the lease, the
Company believes it will have sufficient time to locate a
successor tenant.
In August 1994, a leak was discovered in a 25,000 barrel storage
tank at the petroleum terminal storage facilities which allowed
the escape of a small amount of fuel oil. The tank was emptied,
and all required notices were made to the appropriate
environmental agency. The soil contamination was contained
underneath the tank, and monitoring wells have to date shown no
degradation of the area's groundwaters. The Company is
presently in discussions with the applicable governmental agency
to determine what additional remediation, if any, is necessary
at this time. However, the Company does not anticipate that any
additional costs for remediation, if any, will be significant.
The costs associated with this leak to date total $82,000, which
costs were shared equally between the tenant and the Company.
During the second quarter of 1995, Providence and Worcester
Railroad Company (Railroad) informed the Company that it had
secured a commitment from a bank which would enable it to borrow
funds in an amount sufficient to prepay the entire balance of
<PAGE>
Railroad's note to the Company at an interest rate significantly
below the 12% rate of the note. The Company and Railroad
negotiated a reduction of the interest rate to 10% upon the
Railroad's prepaying $l,800,000 on its note, which prepayment
was made in August 1995. The Company used the proceeds to
prepay in full its note payable to a bank in the amount of
$l,755,000. The prepayment by Railroad and the interest rate
adjustment resulted in a current monthly payment over the
remaining term of twelve years by Railroad of principal and
interest of $55,000. The concurrent prepayments resulted in no
significant change to the Company's net cash flow on a monthly
basis.
Results of operations:
For the three and nine months ended Septemter 30, 1995, total
income increased approximately 5% and 11%, respectively, over
the 1994 level. The increase in rental income resulted
principally from scheduled rental increases in long-term land
leases and the recognition of the excess of straight-line over
contractual rents associated with said leases. Also included in
total income for the nine months ended September 30, 1995, is
$75,000 resulting from the sale of properties and equipment,
principally the Company's only billboard which was sold to its
tenant. Such increases were offset in part by a decrease in
interest income on the note receivable from Railroad resulting
from voluntary prepayments.
For the three and nine months ended September 30, 1995, expenses
applicable to rental income increased approximately 37% and 61%,
respectively, over the 1994 level due principally to (1)
previously deferred engineering costs incurred in connection
with the proposed paving of one of the Company's parcels, which
project was abandoned when it was determined that the cost of
regulatory environmental requirements would not make the project
viable and (2) an unanticipated increase in property taxes
(approximately $126,000 on an annual basis).
For the three and nine months ended September 30, 1995, expenses
applicable to garage and surface parking increased approximately
80% and 26%, respectively, over the 1994 level due to an
unanticipated increase in taxes (approximately $139,000).
The Company has filed an appeal of the increase in property
taxes and is unable to determine if the appeal will result in
the lowering of the taxes.
For the three months ended September 30, 1995, general and
administrative expenses decreased approximately 23% due
principally to a decrease in payroll and related costs resulting
from a reduced number of employees offset in part by an increase
in professional fees incurred in connection with the
condemnation case which is currently being retried. For the
nine months ended September 30, 1995, general and administrative
expenses increased approximately 14% over the 1994 level
resulting from the increase in professional fees as described
above.
The Company had two notes payable outstanding with a bank, one
of which was fully prepaid in September 1994 and the other of
which was fully prepaid in August 1995.
Future cash outlays for income taxes will be a more significant
portion of total tax expense and presently exceed tax expense
for financial reporting purposes. This results principally from
the recognition of rental income on a contractual basis for tax
reporting purposes and to additional depreciation claimed for
financial reporting purposes.
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3) (a) Articles of incorporation (incor-
porated by reference to Exhibit 3 to the
Issuer's annual report on Form 10-K for
the year ended December 31, 1988).
(b) By-laws, as amended (incorporated by
reference to Exhibit 3(b) to the Issuer's
quarterly report on Form 10-QSB for the
quarter ended June 30, 1995).
(10) (a) Note from Providence and Worcester
Railroad Company to Issuer dated January
1, 1988 (incorporated by reference to
Exhibit 10(a) to the Issuer's annual
report on Form 10-KSB for the year ended
December 31, 1992).
(b) Lease between Whiteco Metrocom, Inc.
and Issuer dated June 25, 1985 (incor-
porated by reference to Exhibit 10(b) to
the Issuer's annual report on Form 10-KSB
for the year ended December 31, 1992) as
amended by agreement dated March 13, 1995
(incorporated by reference to Exhibit
10(c) to the Issuer's quarterly report on
Form 10-QSB for the quarter ended June 30,
1995).
(c) Leases between Metropark, Ltd. and
Issuer:
(1) Dated November 10, 1994 (incor-
porated by reference to Exhibit 10(c)(i)
to the Issuer's annual report on Form 10-
KSB for the year ended December 31, 1994).
(2) Dated November 10, 1994 (incor-
porated by reference to Exhibit 10(c)(ii)
to the Issuer's annual report on Form 10-
KSB for the year ended December 31, 1994).
(3) Dated November 10, 1994 (incor-
porated by reference to Exhibit 10(c)(iii)
to the Issuer's annual report on Form 10-
KSB for the year ended December 31, 1994).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended September 30, 1995.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange
Act, the issuer caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CAPITAL PROPERTIES, INC.
By /s/ Barbara J. Dreyer
Barbara J. Dreyer
President, Treasurer and
Principal Financial Officer
DATED: November 6, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<CASH> 0 878
<SECURITIES> 0 0
<RECEIVABLES> 0 4830
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 13439
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<TOTAL-ASSETS> 0 15636
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
<COMMON> 0 1000
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 15636
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<TOTAL-REVENUES> 718 2336
<CGS> 0 0
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