<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) February 23, 1996, March 11,
1996 and March 28, 1996
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
---------------------------------------------
(Exact name of Registrant as specified in charter)
MARYLAND 33-99994 13-3726306
-------------- ---------------------- ------------------
(State of (Commission File No.) (IRS Employer
organization) Identification No.)
50 Rockefeller Plaza, 2nd Floor
New York, New York 10020
----------------------------------------
(Address of principal executive offices)
(212) 492-1100
---------------------------------
(Registrant's telephone number)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION
Pro Forma Annualized Statement of Taxable Operations and Cash Generated
(Unaudited).
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
The folowing unaudited pro forma financial statements for the Company
have been prepared based upon certain pro forma adjustments to the historical
financial statements of the Company (see note 1 to Pro Forma Financial
Statements).
The statment covers only the properties or interests in entities
owning properties which have been acquired by the Company and its wholly-owned
subsidiaries which are net leased to Applied BioScience Inc., Rheometric
Scientific , Inc., The Upper Deck Company, Telos Corporation and Lanxide
Corporation and does not cover any properties which the Company may acquire in
the future or any future financings of these properties.
1
<PAGE>
<TABLE>
<CAPTION>
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1995
(Unaudited)
Assets: Historical Pro Forma Adjustments
RSI APBI Upper Deck
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Land $ 5,295,898
Building 30,153,241
Accumulated depreciation (390,307)
========================================================================
Real estate accounted for under
the operating method 35,058,832
Net investment in direct financing
leases 13,545,609 $ 6,300,000
Equity investments 10,382,492 5,327,225
Cash and cash equivalents 20,239,764 (2,874,000) 7,500,000 (5,070,725)
Deferred offering costs 1,066,262
Accrued rents and interest receivable 141,716
Other assets 738,102
------------------------------------------------------------------------
Total assets: $ 81,172,777 $ 3,426,000 $ 7,500,000 $ 256,500
========================================================================
Liability and Shareholders' Equity:
Liabilities
Mortgage notes payable $ 18,127,538 $ 3,300,000 7,500,000
Accounts payable to affiliates 2,499,284
Accounts Payable and accrued
expenses 104,141
Deferred acquisition fees 1,577,639 126,000 $ 256,500
Prepaid rental income and
security deposits 884,581
Dividends payable 1,189,830
Accrued interest payable 136,086
------------------------------------------------------------------------
Total liabilities: 24,519,09 3,426,000 7,500,000 256,500
========================================================================
Common stock subject to
redemption 5,269,210
-----------------------------------------------------------------------
Shareholders' equity
Common stock 6,028
Additional paid-in capital 52,488,567
Distributions in excess of
accumulated earnings (1,110,127)
------------------------------------------------------------------------
Total shareholders' equity 51,384,468
Total Liabilities and
shareholders' equity $ 81,172,777 $ 3,426,000 $ 7,500,000 256,500
========================================================================
</TABLE>
<TABLE>
<CAPTION>
Telos Lanxide Del Monte (J) Pro Forma
Land $ (304,073) $ 4,991,825
Building (1,366,725) 28,786,516
Accumulated depreciation (390,307)
========================================================================================================================
<S> <C> <C> <C> <C>
Real estate accounted for under
the operating method (1,670,798) 33,388,034
Net investment in direct financing
leases $12,147,000 $8,664,250 10,995,000 51,651,859
Equity investments 15,709,717
Cash and cash equivalents (5,654,060) (3,820,000) (3,074,202) 7,246,777
Deferred offering costs 1,066,262
Accrued rents and interest receivable 141,716
Other assets 131,750 869,852
------------------------------------------------------------------------
Total assets: $ 6,492,940 $4,976,000 $6,250,000 $110,074,217
========================================================================
Liability and Shareholders' Equity:
Liabilities
Mortgage notes payable $ 6,250,000 $4,400,000 $6,250,000 $45,827,538
Accounts payable to affiliates 2,499,284
Accounts Payable and accrued
expenses 104,141
Deferred acquisition fees 242940 176,000 2,379,079
Prepaid rental income and
security deposits 400,000 1,284,581
Dividends payable 1,189,830
Accrued interest payable 136,086
------------------------------------------------------------------------
Total liabilities: 6,492,940 4,976,000 6,250,000 53,420,539
------------------------------------------------------------------------
Common stock subject to
redemption 5,269,210
------------------------------------------------------------------------
Shareholders' equity -
Common stock 6,028
Additional paid-in capital 52,488,567
Distributions in excess of
accumulated earnings (1,110,127)
------------------------------------------------------------------------
Total shareholders' equity 51,384,468
Total Liabilities and
shareholders' equity $6,492,940 $4,976,000 $6,250,000 $110,074,217
========================================================================
</TABLE>
2
<PAGE>
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
------------ ----------------------------------------------------------------------------
Walmart ETEC SFC NK Lawn APBI Del Monte
--------- --------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Interest income from direct
financing leases $1,221,026 $383,596 $1,286,250
Rental income from operating
leases 2,111,998 $ 43,743 $159,673 $293,737 $1,128,400
Other interest income 660,623
---------- --------- -------- -------- -------- ---------- ----------
3,993,647 43,743 159,673 293,737 383,596 1,128,400 1,286,250
---------- --------- -------- -------- -------- ---------- ----------
Expenses:
Interest expense 1,260,189 148,636 40,289 105,503 159,353 613,019 619,285
Depreciation 390,307 10,429 33,089 43,366 240,743
General and administrative 942,074
Property expense 596,227
Amortization 12,797
---------- --------- -------- -------- -------- ---------- ----------
3,201,594 159,065 73,378 148,869 159,353 853,762 619,285
---------- --------- -------- -------- -------- ---------- ----------
Income before income from equity
investments 792,053 (115,322) 86,295 144,868 224,243 274,638 666,965
Equity income 1,322,990
---------- --------- -------- -------- -------- ---------- ----------
Net income $2,115,043 $(115,322) $ 86,295 $144,868 $224,243 $ 274,638 $ 666,965
========== ========= ======== ======== ======== ========== ==========
<CAPTION>
Pro Forma Adjustments Pro Forma
----------------------------------------------------------------- ------------
Upper Deck RSI Telos Lanxide Other
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Interest income from direct
financing leases $1,030,000 $ 6,547.872
Rental income from operating
leases $1,180,000 $1,447,000 3,737,551
Other interest income $ (660,623) --
--------- --------- ---------- ---------- ----------- ----------
1,180,000 1,447,000 1,030,000 (660,623) 10,285,423
--------- --------- ---------- ---------- ----------- ----------
Expenses:
Interest expense 295,391 561,660 444,982 71,582 4,319,889
Depreciation 717,934
General and administrative 942,074
Property expense 662,619 1,258,846
Amortization 12,797
--------- --------- ---------- ---------- ----------- ----------
295,391 561,660 444,982 734,201 7,251,540
--------- --------- ---------- ---------- ----------- ----------
Income before income from equity
investments 884,609 885,340 585,018 (1,394,824) 3,033,883
Equity income $ 690,714 2,013,704
--------- --------- ---------- ---------- ----------- ----------
Net income $ 690,714 $ 884,609 $ 885,340 $ 585,018 $(1,394,824) $ 5,047,587
========= ========= ========== ========== =========== ==========
</TABLE>
<PAGE>
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF TAXABLE INCOME
AND AFTER TAX CASH FLOW (UNAUDITED)
Net income per consolidated pro forma
income for
December 31, 1995 $ 5,047,587
Depreciation on direct financing leases (1,095,527)
for tax purposes (Note L)
Difference between interest accrued on
direct financing leases and rental
revenue recognized for tax (94,659)
purposes (Note M)
Adjustment to equity income from GAAP (501,560)
to tax basis (Note N) -----------
Pro forma taxable income 3,355,841
Add: Depreciation from direct 1,813,461
financing and operating leases (Note O)
Distributions from
equity investments in
excess of share of
tax earnings (Note 338,435
P)
Less: Principal paid (Note Q) (1,481,908)
-----------
Pro forma after tax cash flow $ 4,025,829
-----------
1. BASIS OF PRESENTATION
The pro forma consolidated financial statement of Corporate Property
Associates 12 Incorporated and subsidiaries (the "Company"), which are
unaudited, have been prepared based on the historical financial statements of
the Company. The pro forma consolidated balance sheet of the Company at
December 31, 1995 has been prepared as if the mortgage loan collateralized by
properties leased to Applied BioScience Inc. ("APBI") and the purchase of
properties leased to Rheometric Scientific, Inc. ("Rheometric"), The Upper Deck
Company ("Upper Deck"), Telos Corporation ("Telos") and Lanxide Corporation
("Lanxide") had been completed on December 31, 1995. The pro forma statements
of operations for the year ended December 31, 1995 has been prepared as if the
acquisition of the Properties and the related mortgage financing occurred on
January 1, 1995. To the extent that certain properties had been acquired prior
to January 1, 1995, lease revenues and interest expense are based on an
historical basis.
During 1994, the Company purchased general partnership interests in two
general partnerships which lease properties to Gensia, Inc. ("Gensia") and Best
Buy Co., Inc. ("Best Buy"), respectively, and an interest as a tenant-in-common
in two properties leased to Big V. In 1995, the Company purchased properties
leased to Wal-Mart Stores, Inc. ("Wal-Mart"), ETEC Systems, Inc. ("ETEC"),
Sports & Fitness Clubs of America, Inc. ("Sports & Fitness"), NK Lawn and Garden
& Co. ("NK Lawn and Garden") APBI and Del Monte Corporation ("Del Monte"). To
the extent that any purchase of property was completed subsequent to December
31, 1994, the pro forma adjustment presented is intended to reflect an
adjustment for the difference between what has been recorded in the historical
consolidated statement of operations relating to that property and what the
effect would have been if the Company held its ownership interest as of January
1, 1995. In addition, adjustments have been presented to reflect the Company's
asset management fee expense and interest accrued on subordinated acquisition
fee payable. In management's opinion, all adjustments necessary to reflect the
effects of the aforementioned acquisitions have been made. The pro forma
financial information should be read in conjunction with the historical
consolidated financial statements of the Company.
4
<PAGE>
The pro forma financial results are not necessarily indicative of the
financial condition or the results of operations had the acquisitions occurred
on January 1, 1995 or prior, nor are they necessarily indicative of the
financial position or results of operations for future periods.
2. PRO FORMA ADJUSTMENTS
A. The Rheometric lease provides for annual rent of $1,180,000.
Interest expense is based on an interest rate of 9.625% per annum and monthly
principal payments of $42,000. As the Rheometric lease is classified as a
direct financing lease, no depreciation expense has been presented. The purchase
price for the Rheometric property was $6,300,000 with $3,300,000 of the purchase
price was obtained through limited recourse mortgage financing of $3,300,000. A
portion of the purchase price in the amount of $126,000 has been retained by the
Company as a deferred acquisition fee and is payable, subject to certain
limitations, to an affiliate over a period of no less than eight years.
B. The APBI lease provides for annual rent of $1,302,000. Included in
the historical results of operations for the year ended December 31, 1995 is
$173,600 of rental income. Annual depreciation expense on the APBI property of
$275,174 per year is computed on a straight-line basis over 40 years and is
based on buildings and improvements with a depreciable basis of $11,006,940.
Included in the historical results of operations for the year ended December 31,
1995 is $34,431 of depreciation expense. In January 1996, the Company obtained
$7,500,000 of limited recourse financing collateralized by the APBI properties.
The loan will bear interest at the rate of 8.25% with monthly debt service of
$63,905.
C. The Company has a 50% interest in a limited liability company (the
"Upper Deck LLC") which leases land and buildings to The Upper Deck Company.
The Company is accounting for this investment under the equity method. The
Company's pro forma equity income in the Upper Deck LLC is based on its share of
earnings resulting from annual rental income of $2,639,750, monthly payments of
$120,077 on a $15,000,000 debt which bears interest at a rate of 8.43% and a 25-
year principal amortization schedule and a depreciation expense of $558,773
computed on a 40-year straight-line basis on buildings and certain state
franchise taxes incurred. The lease has been classified as a direct financing
lease for financial reporting purposes. Accordingly, the effect of depreciation
is not reflected in earnings. The total purchase price of the properties owned
by Upper Deck LLC was $25,654,450. The Company's 50% share of the pro forma
share of earnings from the Upper Deck LLC is $690,714 for the year ended
December 31, 1995. None of these earnings are reflected in the historical
results.
D. The Telos lease provides for annual rent of $1,447,000 in monthly
installments in advance. The Company has a commitment for limited recourse
mortgage financing of $6,250,000. The effect of the mortgage financing has been
reflected for pro forma purposes even though such financing has not yet been
acquired by the Company. The loan provides for monthly payments of principal and
interest at a floating rate at the London Inter-Bank Offered Rate plus 3.5% per
annum and a twenty year amortization schedule. For pro forma purposes, an annual
interest rate of 9.0625% has been utilized. As the Telos lease is classified as
a direct financing lease, no depreciation expense has has been presented. The
purchase price of the Telos property was $ 12,147,000 with $242,940 retained by
the Company as a deferred acquisition fee and is payable, subject to certain
limitations, to an affiliate over a period of no less than eight years.
E. The Lanxide lease provides for annual rent which at the inception of
the lease is $1,030,000 paid in quarterly installments in advance. As a portion
of the rent varies based on changes in debt service on the limited recourse
loans on the property, actual rent may vary during the terrn of the lease. A
first priority mortgage loan on the property of $4,000,000 provides for monthly
payments of prinicpal and interest with
-5-
<PAGE>
interest based on the lender's prime rate plus 2% and a 15-year amortization
schedule. At the inception of the lease, the annual interest rate on the loan
was 10.25%. A purchase money mortgage mortgage loan of $400,000 provides for
monthly payments of principal and interest at 10.25% per annum and is based on a
l5-year amortization schedule. For pro forma purposes, interest expense and
principal amortization have been presented as though a $4,400,000 loan with a
fixed rate of 10.25% and a l5-year amortization schedule and monthly payments of
$47,957.84 were in effect. Lanxide was required to provide a $400,000 security
deposit at the inception of the lease. The purchase price for the Lanxide
transaction was $8,796,000. In connection with the purchase, Lanxide granted the
Company warrants to purchase up to 15,500 common shares of Lanxide. The exercise
price of the warrants was $8.50 less than the market value of the stock on the
date of purchase, $ 124,000 of the purchase price has been allocated to the
warrants and are included in the pro forrna balance sheet in other assets. The
remaining purchase price of $8,672,000 been allocated to the property. A
deferred acquisition fee of $ 176,000 has been retained by the Company and is
payable, subject to certain limitations to an affiliate over a period of no less
than 8 years. As the Lanxide lease is a direct financing lease, no depreciation
expense has been presented.
F. The Wal-Mart lease provides for annual rent of $397,226. Included
in the historical results of operations for the year ended December 31, 1995 is
$353,483 of rental income. Annual depreciation expense on the Wal-Mart property
of $83,432 is computed on a straight-line basis over 40 years and is based on
buildings and improvements with a depreciable basis of $3,337,283. Included in
the historical results of operations for the year ended December 31, 1995 is
$73,003 of depreciation expense. Interest expense on the limited recourse loan
on the Wal-Mart property is based on a mortgage loan which had an initial
balance of $2,500,000 and provides for monthly payments ($22,223) based on an
18-year amortization schedule and an annual interest rate of 8.23%. Based on
the pro forma amortization schedule which assumes the mortgage was obtained on
January 1, 1995, pro forma interest is calculated to be $203,398, of which
$4,762 is included in the historical results of operations.
G. The ETEC lease provides for annual rent of $1,370,325. Included in
the historical results of operations for the year ended December 31, 1995 is
$1,210,652 of rental income. Annual depreciation expense on the ETEC property
of $264,711 is computed on a straight-line basis over 40 years and is based on
buildings and improvements with a depreciable basis of $10,588,436. Included in
the historical results of operations for the year ended December 31, 1995 is
$231,622 of depreciation expense. Interest expense on the limited recourse loan
on the ETEC property is based on a mortgage loan which had an initial balance of
$6,250,000 and requires the payment of interest at a variable rate and requires
monthly payments of principal based on a schedule provided by the lender in the
mortgage note. For pro forma purposes, the interest rate used is 8.75% per
annum. Amortization of principal is based on a loan of $6,250,000 at 8.75% on a
15 year amortization schedule. Based on the pro forma amortization schedule,
pro forma interest is calculated to be $538,545 of which $498,256 is included in
the historical results of operations for the year ended December 31, 1995.
H. The Sports & Fitness lease provides for annual rent of $668,000.
Included in the historical results of operations for the year ended December 31,
1995 is $374,263 of rental income. Interest expense on the Sports & Fitness
property is based on a mortgage loan which had an initial balance of $2,750,000
and provides for monthly payments ($28,385) based on a 15-year amortization
schedule and an annual interest rate of 9.3%. Based on the pro forma
amortization schedule which assumes the mortgage was obtained on January 1,
1994, pro forma interest is calculated to be $252,037, of which $146,534 is
included in the historical results of operations. Annual depreciation expense
on the Sports & Fitness property of $94,617 is computed on a straight-line basis
over 40 years and is based on buildings and improvements with a depreciable
basis of $3,784,684. Included in the historical results of operations is
$51,251 of depreciation expense.
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<PAGE>
I. The NK Lawn & Garden lease provides for annual rent of $816,400.
Included in the historical results of operations for the year ended December 31,
1995 is $432,804 of interest income from direct financing leases. Interest
expense on the limited recourse loan on the NK Lawn & Garden property is based
on a mortgage loan which had an initial balance of $3,500,000 and provides for
monthly payments ($29,778) based on a 20-year amortization schedule and an
annual interest rate of 8.23%. Based on the pro forma amortization schedule
which assumes the mortgage was obtained on January 1, 1994, pro forma interest
is calculated to be $285,376 for the period of which $126,023 is included in the
historical results of operations. As the NK Lawn & Garden lease has been
classified as a direct financial lease for financial reporting purposes, no
depreciation expense has been presented.
J. The Company is committed to finance the construction of properties
for Del Monte. These pro forma financial statements assume that the Company has
advanced its full commitment ($10,995,000) as of the beginning of the year. The
Del Monte lease provides for annual rent based on the total costs of
construction, which rent, for purposes of the pro forma statements, is assumed
to be $1,286,250. Total debt is based on the commitment of $6,250,000 of debt
financing to the Company upon completion of construction of the Del Monte
facilities. Interest expense on a $5,500,000 portion of the debt is based on an
annual interest rate of 10%, a 20-year amortization and quarterly payments of
principal and interest of $159,643. Interest expense on the remaining $750,000
portion of the debt is calculated on the basis of an annual interest rate of
9.75% (LIBOR plus 400 basis points), a 20 year amortization and quarterly
payments of $21,398. The Del Monte lease has been accounted for as a direct
financing lease. As the Del Monte lease is classified as a direct financing
lease, no depreciation expense has been presented. For historical reporting
purposes, the Del Monte land and costs attributed to building have not been
classified as direct financing lease assets. Upon completion of construction,
the Company will perform an evaluation of the Del Monte lease in accordance with
Statement of Financial Accounting Standards No. 13 and classify the lease based
on facts and circumstances which may vary from a classification which would have
occurred if the properties had been purchased and construction completed on
January 1, 1995. Accordingly, the ultimate classification of the Del Monte
lease cannot be determined at this time.
K. The Company accrues interest on the deferred acquisition fee payable
to an affiliate of $2,120,439 at the rate of 7% per annum. The pro forma
interest expense of $177,757 is one year's interest on the deferred fee (7% of
$2,539,379) of which $106,175 is included in the historical results of
operations. The asset management and performance fee payable to the Advisor is
based on 1% of the Average Invested Assets of $124,657,824. Average Invested
Assets have been determined by (1) the total basis for directly owned properties
in which the Company has a 100% ownership interest and deducting the noncash
component representing deferred acquisition fees payable to an affiliate and (2)
the pro rata basis of all properties which are jointly owned directly or,
indirectly with affiliates, with deduction from such bases for fees paid by the
joint owner and with an increase for fees paid directly by the Company if such
fees were not paid by both parties at the time of purchase of the property. Pro
forma asset management and performance fee is $1,246,578, of which $583,959 is
included in the historical operating results.
<TABLE>
<CAPTION>
Average
Invested
Gross Cost Deferred Fee Assets
----------- ------------ ---------
<S> <C> <C> <C>
$ 3,791,703 $ (75,174) $ 3,716,529
Wal-Mart...................... 11,860,880 (237,173) 11,623,707
ETEC.......................... 5,497,000 (109,575) 5,387,425
Sports & Fitness.............. 6,950,000 (132,250) 6,817,750
NK Lawn & Garden.............. 17,292,366 (345,847) 16,946,519
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Best Buy (1).................. 11,719,531 (237,510) 11,482,021
Gensia (2).................... 6,455,498 (129,110) 6,326,388
Del Monte..................... 10,995,000 (220,000) 10,775,000
APBI.......................... 12,565,000 (251,300) 12,313,700
Upper Deck.................... 12,827,225 (256,500) 12,570,725
Rheometric Scientific Inc..... 6,300,000 (126,000) 6,174,000
Telos Corporation............. 12,147,000 (242,940) 11,904,060
Lanxide Corporation........... 8,796,000 (176,000) 8,620,000
------------
$124,657,824
============
</TABLE>
- - -----------------------------------
(1) Determination of Best Buy Pro Rata Basis
<TABLE>
<CAPTION>
<S> <C>
Gross Cost.......................... $46,233,000
Initial fee paid by affiliate....... (1,600,000)
-----------
$44,633,000
===========
CPA:12 share of basis in property... $16,514,210
Total fee payable by CPA:12......... 778,156
-----------
17,292,366
Deferred fee to be paid by CPA:12... (345,847)
</TABLE>
(2) Determination of Gensia Pro Rata Basis
<TABLE>
<CAPTION>
<S>...................................... <C>
Gross cost............................... $23,570,266
Initial fee paid by an affiliate......... (1,200,000)
$22,370,266
===========
CPA:12 share of basis in property........ $11,719,531
Total fee payable by CPA:12.............. 534,398
-----------
11,719,531
Deferred fee to be paid by CPA:12........ (237,510)
-----------
$11,482,021
===========
</TABLE>
(3) Determination of Big V Pro Rata Basis
<TABLE>
<CAPTION>
<S> <C>
Gross Cost............................... $23,570,266
Initial fee paid by an affiliate......... (1,200,000)
-----------
$22,370,266
===========
CPA:12 share of basis in property........ $11,185,133
Total fee payable by CPA:12.............. 534,398
-----------
11,719,531
Deferred fee to be paid by CPA:12........ (237,510)
-----------
$11,482,021
===========
</TABLE>
L. For financial reporting purposes, no depreciation is taken on
leases classified as direct financing leases; however, as such leases are
classified as operating leases for tax reporting purposes, depreciation is
computed for such properties for the purpose of determining REIT taxable income.
-8-
<PAGE>
Depreciation is computed on a straight-line basis over 40 years and is based on
buildings and improvements for the six direct financing leases with a combined
depreciable basis of $43,821,097.
M. The Company's reported interest income on its direct financing
lease with Big V which is $94,609 greater than the applicable rental income
reported for tax purposes.
N. The Company's share of taxable income and GAAP income for the
Gensia and Best Buy Partnerships is based on the actual amounts reported in
Federal income tax returns and audited financial statements.
The Company's share of taxable income from the Upper Deck LLC differs
from its share of GAAP income due to its classification as a direct financing
lease. While depreciation is taken for tax purposes, no depreciation is taken
for financial reporting purposes. Depreciation expense which is computed on a
straight-line basis over 40 years is based on buildings and improvements with a
depreciable basis of $22,350,938. Rental income for tax purposes does not vary
from recognition of rental income for financial reporting purposes. The net
effect of the depreciation adjustment is $558,773 of which the Company's 50%
share is $279,386.
O. This adjustment consists of depreciation from operating leases as
reflected on the pro forma consolidated statement of operations of $717,934 and
the tax adjustment for depreciation on direct financing leases of $655,185.
P. The difference between tax basis income from equity investments in
general partnerships and the cash available for distribution for the Gensia and
Best Buy partnerships' equity investments is based on the difference between
amounts reported for Federal income tax purposes and actual cash distributions
received by the Company. The pro forma adjustment for Upper Deck is as follows:
<TABLE>
<CAPTION>
<S> <C>
GAAP income on a pro forma basis........ $1,381,429
Add: Depreciation
Less: Principal amortization........... (183,407)
----------
Cash available for distribution......... $1,198,022
==========
Company's share of cash available....... $ 599,011
Company's share of taxable income....... 411,328
----------
Cash available in excess of taxable..... $ 187,683
income................................. ==========
Q. Principal is deemed to
have been paid as follows:
NK Lawn & Garden........................ $ 71,965
Sports & Fitness........................ 88,586
Etec.................................... 211,042
Big V................................... 37,652
Del Monte............................... 104,879
Wal-Mart................................ 63,280
APBI.................................... 153,840
Rheometric.............................. 504,000
Telos................................... 116,152
Rheometric.............................. 130,512
----------
Total................................... $1,481,098
==========
</TABLE>
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<PAGE>
3. INVESTMENT IN PROPERTIES LEASED TO THE UPPER DECK COMPANY
On January 4, 1996, the Company acquired a 50% interest in a newly formed
limited liability company, which purchased land and buildings and net leased
them to Upper Deck as explained in Note 2C. Neither the Company nor its equity
investee has made an equity investment in Upper Deck. Upper Deck is the leading
manufacturer and marketer of sports trading cards in the United States with
about 25% of the sports trading card market in 1994. Management believes that
the audited financial statements of Upper Deck are not material to a prospective
investor in making an investment decision. Pursuant to Management's current
assessment of the impact of future investments in properties on the Company's
prospective financial position and results of operations, the property net
leased to Upper Deck will not be material. The following is a summary of
selected financial information for Upper Deck. The Statement of Operations and
Balance Sheet data for the three years ended December 31, 1992, 1993 and 1994
have been derived from audited financial statements provided by Upper Deck.
Data provided for the nine month periods ending September 30, 1994 and 1995 have
been derived from unaudited financial statements provided by Upper Deck.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA: NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
---------------------------------
SEPTEMBER 30,
-------------
1995 1994 1994 1993 1992
------------- ------------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
(Unaudited)
- - -------------------------------
Gross sales $159,761,713 $195,282,797 $252,051,949 $262,175,660 $290,931,706
Gross profit 57,154,923 63,013,326 73,284,473 95,145,462 115,364,889
------------ ------------
Income(loss) from operations 25,610,688 23,467,482 22,207,932 38,102,013 47,317,479
- - -------------------------------
Net income 20,191,387 20,525,661 $ 18,201,901 $ 31,169,862 $ 43,127,832
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
------------------ ------------------
BALANCE SHEET DATA:
1995 1994 1993 1992
------------ ------------ ------------ ------------
(Unaudited)
Cash and cash equivalents $ 103,205 $ 6,431,822 $ 304,945 $ 2,143,447
Net accounts receivable 23,595,176 18,079,567 15,430,674 16,086,368
Total assets 114,976,866 105,237,037 85,960,553 70,952,438
Total indebtedness 21,554,546 75,765,676 63,661,027 61,922,563
Common stock 3,500 3,500 3,500 3,500
Treasury stock (6,301,066) (6,301,066) - -
Stockholders' equity 41,862,747 29,471,361 22,299,526 9,029,875
</TABLE>
-10-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES
12 INCORPORATED
By: /s/ Michael D. Roberts
---------------------------
Michael D. Roberts
First Vice President and
Controller
Dated: May 9, 1996
