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• | Trading securities – the Company’s publicly traded equity securities are classified as trading securities and are reported at fair value because the Company intends to sell these securities in order to acquire real asset investments. |
• | Other equity securities – the Company’s other equity securities represent interests in private companies for which the Company has elected to report these at fair value under the fair value option. |
• | Realized and unrealized gains and losses on trading securities and other equity securities – Changes in the fair values of the Company’s securities during the period reported and the gains or losses realized upon sale of securities during the period are reflected as other income or expense within the accompanying Consolidated Statements of Income. |
Major Components of Net Realized and Unrealized Gain (Loss) on Trading Securities | ||||||||||||
For the Three Months Ended | For the One-Month Transition Period Ended | |||||||||||
March 31, 2013 | February 29, 2012 | December 31, 2012 | ||||||||||
Net unrealized gain on trading securities | $ | 751,004 | $ | — | $ | 4,663,211 | ||||||
Net realized gain (loss) on trading securities | (434,941 | ) | 2,862,272 | (6,432,269 | ) | |||||||
Total net realized and unrealized gain (loss) on trading securities | $ | 316,063 | $ | 2,862,272 | $ | (1,769,058 | ) |
• | The independent valuation firm prepares the valuations and the supporting analysis. |
• | The Investment Committee of the Adviser reviews the valuations and supporting analysis, prior to approving the valuations. |
• | Level 1 – quoted prices in active markets for identical investments |
• | Level 2 – other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.) |
• | Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments) |
• | Cash and Cash Equivalents — The carrying value of cash, amounts due from banks, federal funds sold and securities purchased under resale agreements approximates fair value. |
• | Escrow Receivable — The escrow receivable due the Company, which relates to the sale of International Resource Partners, LP, is anticipated to be released upon satisfaction of certain post-closing obligations and/or the expiration of certain time periods (the shortest of which was to be 14 months from the April 2011 closing date of the sale). The fair value of the escrow receivable reflects a discount for the potential that the full amount due to the Company will not be realized. No clear agreement has been reached as to the remaining escrow balance and Management anticipates that it may take more than a year to satisfy other post-closing obligations, prior to receiving the approximately $699 thousand escrow balance remaining. |
• | Long-term Debt — The fair value of the Company’s long-term debt is calculated, for disclosure purposes, by discounting future debt service requirements by a rate equal to the Company’s current expected rate for an equivalent transaction. |
• | Line of Credit — The carrying value of the line of credit approximates the fair value due to its short term nature. |
• | Sales Revenue – Revenues related to natural gas distribution and performance of management services are recognized in accordance with GAAP upon delivery of natural gas and upon the substantial performance of management and supervision services related to the expansion of the natural gas distribution system. Omega, acting as a principal, provides for transportation services and natural gas supply for its customers on a firm basis. In addition, Omega is paid fees for the operation and maintenance of its natural gas distribution system, including any necessary expansion of the distribution system. Omega is responsible for the coordination, supervision and quality of the expansions while actual construction is generally performed by third party contractors. Revenues from expansion efforts are recognized in accordance with GAAP using either a completed contract or percentage of completion method based on the level and volume of estimates utilized, as well as the certainty or uncertainty of our ability to collect those revenues. |
• | Lease Revenue – Income related to the Company’s leased property is recognized on a straight-line basis over the term of the lease when collectibility is reasonably assured. Rental payments on the Pinedale LGS leased property are typically received on a monthly basis. Prior to November 1, 2012 rental payments on the EIP leased property were typically received on a semi-annual basis and were included as lease revenue within the accompanying Consolidated Statements of Income. Upon the November 1, 2012 execution of the Purchase Agreement related to the EIP leased property (the "Purchase Agreement"), rental payments on the leased property are to be received in advance and are classified as unearned income and included in liabilities within the Consolidated Balance Sheets. Unearned income is amortized ratably over the lease period as revenue recognition criteria are met. |
• | Securities Transactions and Investment Income Recognition – Securities transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Distributions received from our equity investments generally are comprised of ordinary income, capital gains and distributions received from investment securities from the portfolio company. The Company records investment income and return of capital based on estimates made at the time such distributions are received. Such estimates are based on information available from each portfolio company and/or other industry sources. These estimates may subsequently be revised based on information received from the portfolio companies after their tax reporting periods are concluded, as the actual character of these distributions are not known until after our fiscal year end. |
• | Dividends and distributions from investments – Dividends and distributions from investments are recorded on their ex-dates and are reflected as other income within the accompanying Consolidated Statements of Income. Distributions received from the Company’s investments generally are characterized as ordinary income, capital gains and distributions received from investment securities. The portion characterized as return of capital is paid by our investees from their cash flow from operations. The Company records investment income, capital gains and/or distributions received from investment securities based on estimates made at the time such distributions are received. Such estimates are based on information available from each company and/or other industry sources. These estimates may subsequently be revised based on information received from the entities after their tax reporting periods are concluded, as the actual character of these distributions is not known until after the fiscal year end of the Company. |
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As a Percentage of | ||||||||
Leased Properties | Lease Revenues | |||||||
As of March 31, 2013 | As of December 31, 2012 | For the Three Months Ended March 31, 2013 | For the One-Month Transition Period Ended December 31, 2012 | |||||
Pinedale LGS | 94.2% | 94.2% | 88.7% | 75.2% | ||||
Public Service of New Mexico | 5.8% | 5.8% | 11.3% | 24.8% |
Ultra Petroleum Summary Consolidated Balance Sheets (Unaudited) (in thousands) | ||||||||
March 31, 2013 | December 31, 2012 | |||||||
Current assets | $ | 129,063 | $ | 125,848 | ||||
Non-current assets | 1,906,320 | 1,881,497 | ||||||
Total Assets | $ | 2,035,383 | $ | 2,007,345 | ||||
Current liabilities | 422,094 | 514,092 | ||||||
Non-current liabilities | 2,175,481 | 2,071,120 | ||||||
Total Liabilities | $ | 2,597,575 | $ | 2,585,212 | ||||
Shareholder's equity (deficit) | (562,192 | ) | (577,867 | ) | ||||
Total Liabilities and Shareholder's Equity | $ | 2,035,383 | $ | 2,007,345 | ||||
Ultra Petroleum Summary Consolidated Statements of Income (Unaudited) (in thousands) | ||||||||
For the Three Months Ended | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Revenues | $ | 225,626 | $ | 226,143 | ||||
Expenses | 139,994 | 193,539 | ||||||
Operating Income | 85,632 | 32,604 | ||||||
Other Income (Expense), net | (67,831 | ) | 97,147 | |||||
Income before income tax provision | 17,801 | 129,751 | ||||||
Income tax provision | 1,368 | 45,489 | ||||||
Net Income | $ | 16,433 | $ | 84,262 |
Future Minimum Lease Rentals | ||||
Years Ending December 31, | Amount | |||
2013 | $ | 15,000,000 | ||
2014 | 24,267,371 | |||
2015 | 20,000,000 | |||
2016 | 20,000,000 | |||
2017 | 20,000,000 | |||
Thereafter | 199,354,839 | |||
Total | $ | 298,622,210 |
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Deferred Tax Assets and Liabilities | ||||||||||||
March 31, 2013 | November 30, 2012 | December 31, 2012 | ||||||||||
Deferred Tax Assets: | ||||||||||||
Organization costs | $ | — | $ | (17,668 | ) | $ | (27,188 | ) | ||||
Net operating loss carryforwards | — | (6,411,230 | ) | — | ||||||||
Net unrealized loss on investment securities | — | — | (143,822 | ) | ||||||||
Cost recovery of leased assets | — | (36,443 | ) | — | ||||||||
Asset acquisition costs | — | (134,415 | ) | (158,535 | ) | |||||||
AMT and State of Kansas credit | — | (196,197 | ) | — | ||||||||
Sub-total | $ | — | $ | (6,795,953 | ) | $ | (329,545 | ) | ||||
Deferred Tax Liabilities: | ||||||||||||
Basis reduction of investment in partnerships | $ | 2,090,696 | $ | 11,655,817 | $ | 2,675,142 | ||||||
Net unrealized gain on investment securities | 1,040,400 | 2,312,269 | — | |||||||||
Cost recovery of leased assets | — | — | 50,446 | |||||||||
Sub-total | 3,131,096 | 13,968,086 | 2,725,588 | |||||||||
Total net deferred tax liability | $ | 3,131,096 | $ | 7,172,133 | $ | 2,396,043 |
Income Tax Expense (Benefit) | ||||||||||||
For the Three-Month Periods Ended | For the One-Month Transition Period Ended December 31, 2012 | |||||||||||
March 31, 2013 | February 29, 2012 | |||||||||||
Application of statutory income tax rate | $ | 1,201,795 | $ | 3,224,535 | $ | (848,239 | ) | |||||
State income taxes, net of federal tax benefit | 62,270 | 241,379 | (64,771 | ) | ||||||||
Dividends received deduction | — | — | (7,133 | ) | ||||||||
Income of Real Estate Investment Trust | (243,121 | ) | — | — | ||||||||
Total income tax expense (benefit) | $ | 1,020,944 | $ | 3,465,914 | $ | (920,143 | ) |
Components of Income Tax Expense (Benefit) | ||||||||||||
For the Three-Month Periods Ended | For the One-Month Transition Period Ended December 31, 2012 | |||||||||||
March 31, 2013 | February 29, 2012 | |||||||||||
Current tax expense | ||||||||||||
Federal | $ | 268,205 | $ | — | $ | 3,610,165 | ||||||
State (net of federal tax benefit) | 17,686 | — | 245,782 | |||||||||
AMT expense | — | 10,000 | — | |||||||||
Total current tax expense | 285,891 | 10,000 | 3,855,947 | |||||||||
Deferred tax expense (benefit) | ||||||||||||
Federal | 690,468 | 3,215,230 | (4,465,104 | ) | ||||||||
State (net of federal tax benefit) | 44,585 | 240,684 | (310,986 | ) | ||||||||
Total deferred tax expense (benefit) | 735,053 | 3,455,914 | (4,776,090 | ) | ||||||||
Total income tax expense (benefit) | $ | 1,020,944 | $ | 3,465,914 | $ | (920,143 | ) |
Aggregate Cost of Securities for Income Tax Purposes | ||||||||||||
March 31, 2013 | November 30, 2012 | December 31, 2012 | ||||||||||
Aggregate cost for federal income tax purposes | $ | 19,734,837 | $ | 41,995,195 | $ | 22,007,069 | ||||||
Gross unrealized appreciation | 2,161,017 | 33,892,176 | 2,018,455 | |||||||||
Gross unrealized depreciation | — | (801,340 | ) | — | ||||||||
Net unrealized appreciation | $ | 2,161,017 | $ | 33,090,836 | $ | 2,018,455 |
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Property and Equipment | ||||||||||||
March 31, 2013 | November 30, 2012 | December 31, 2012 | ||||||||||
Natural gas pipeline | $ | 5,215,424 | $ | 5,215,424 | $ | 5,215,424 | ||||||
Vehicles and trailers | 125,117 | 110,782 | 110,783 | |||||||||
Computers | 14,548 | 14,018 | 14,439 | |||||||||
Gross property and equipment | 5,355,089 | 5,340,224 | 5,340,646 | |||||||||
Less: accumulated depreciation | (1,825,253 | ) | (1,751,202 | ) | (1,774,616 | ) | ||||||
Net property and equipment | $ | 3,529,836 | $ | 3,589,022 | $ | 3,566,030 |
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March 31, 2013 | ||||||||||||||||
Fair Value | ||||||||||||||||
March 31, 2013 | Level 1 | Level 2 | Level 3 | |||||||||||||
Investments: | ||||||||||||||||
Trading securities | $ | — | $ | — | $ | — | $ | — | ||||||||
Other equity securities | 21,895,854 | — | — | 21,895,854 | ||||||||||||
Total Assets | $ | 21,895,854 | $ | — | $ | — | $ | 21,895,854 |
November 30, 2012 | ||||||||||||||||
November 30, 2012 | Fair Value | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | ||||||||||||||||
Trading securities | $ | 55,219,411 | $ | 27,480,191 | $ | 27,739,220 | $ | — | ||||||||
Other equity securities | 19,866,621 | — | — | 19,866,621 | ||||||||||||
Total Assets | $ | 75,086,032 | $ | 27,480,191 | $ | 27,739,220 | $ | 19,866,621 |
December 31, 2012 | ||||||||||||||||
December 31, 2012 | Fair Value | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | ||||||||||||||||
Trading securities | $ | 4,318,398 | $ | 4,318,398 | $ | — | $ | — | ||||||||
Other equity securities | 19,707,126 | — | — | 19,707,126 | ||||||||||||
Total Assets | $ | 24,025,524 | $ | 4,318,398 | $ | — | $ | 19,707,126 |
For the Three-Month Periods Ended | For the One-Month Transition Period Ended December 31, 2012 | ||||||||||
March 31, 2013 | February 29, 2012 | ||||||||||
Fair value beginning balance | $ | 19,707,126 | $ | 41,856,730 | $ | 19,866,621 | |||||
Total realized and unrealized gains (losses) included in net income | 2,425,986 | 6,069,194 | (159,495 | ) | |||||||
Return of capital adjustments impacting cost basis of securities | (237,258 | ) | (656,195 | ) | — | ||||||
Fair value ending balance | $ | 21,895,854 | $ | 47,269,729 | $ | 19,707,126 | |||||
Changes in unrealized gains (losses), included in net income, relating to securities still held (1) | $ | 2,425,986 | $ | 6,069,194 | $ | (159,495 | ) | ||||
(1) Located in Net realized and unrealized gain (loss) on other equity securities in the Statements of Income |
Significant Unobservable Inputs Used To Value Portfolio Investments | ||||||||||||||
Unobservable Inputs | Range | Weighted Average | ||||||||||||
Assets at Fair Value | Fair Value | Valuation Technique | Low | High | ||||||||||
Other equity securities, at fair value | $ | 21,895,854 | Public company historical EBITDA analysis | Historical EBITDA Valuation Multiples | 9.0x | 12.3x | 10.7x | |||||||
Public company projected EBITDA analysis | Projected EBITDA Valuation Multiples | 8.8x | 11.4x | 10.1x | ||||||||||
M&A company analysis | EV/LTM 2012 EBITDA | 9.0x | 10.3x | 9.7x | ||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 9.5% | 14.0% | 11.8% |
Carrying and Fair Value Amounts | ||||||||||||||||||||||||||
Level within fair value hierarchy | March 31, 2013 | November 30, 2012 | December 31, 2012 | |||||||||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||
Financial Assets: | ||||||||||||||||||||||||||
Cash and cash equivalents | Level 1 | $ | 18,196,151 | $ | 18,196,151 | $ | 14,333,456 | $ | 14,333,456 | $ | 17,680,783 | $ | 17,680,783 | |||||||||||||
Escrow receivable | Level 2 | $ | 698,729 | $ | 698,729 | $ | 698,729 | $ | 698,729 | $ | 698,729 | $ | 698,729 | |||||||||||||
Financial Liabilities: | ||||||||||||||||||||||||||
Long-term debt | Level 2 | $ | 70,000,000 | $ | 70,000,000 | $ | — | $ | — | $ | 70,000,000 | $ | 70,000,000 | |||||||||||||
Line of credit | Level 1 | $ | 139,397 | $ | 139,397 | $ | 120,000 | $ | 120,000 | $ | — | $ | — |
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Intangible Lease Asset | ||||||||||||
March 31, 2013 | November 30, 2012 | December 31, 2012 | ||||||||||
Intangible lease asset | $ | 1,094,771 | $ | 1,094,771 | $ | 1,094,771 | ||||||
Accumulated amortization | (510,893 | ) | (413,580 | ) | (437,908 | ) | ||||||
Net intangible lease asset | $ | 583,878 | $ | 681,191 | $ | 656,863 |
Remaining Estimated Amortization On Intangibles | ||||
Year ending December 31, | Amount | |||
2013 | $ | 218,954 | ||
2014 | 291,939 | |||
2015 | 72,985 | |||
Total | $ | 583,878 |
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Derivative Financial Instruments Measured At Fair Value on a Recurring Basis | |||||||||||||||
Balance Sheet Classification | Fair Value Hierarchy | ||||||||||||||
Balance Sheet Line Item | Level 1 | Level 2 | Level 3 | ||||||||||||
March 31, 2013 | |||||||||||||||
Prepaid expenses and other assets | Assets | $ | — | $ | — | $ | — | ||||||||
Accounts payable and other accrued liabilities | Liabilities | $ | — | $ | 266,880 | $ | — | ||||||||
December 31, 2012 | |||||||||||||||
Prepaid expenses and other assets | Assets | $ | — | $ | — | $ | — | ||||||||
Accounts payable and other accrued liabilities | Liabilities | $ | — | $ | 316,756 | $ | — | ||||||||
Level 1 – quoted prices in active markets for identical investments | |||||||||||||||
Level 2 – other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.) | |||||||||||||||
Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments) |
Outstanding Derivatives Not Designated as Hedges in a Qualifying Hedging Relationship | ||||||||||||
Interest Rate Derivative | Number of Instruments | Notional Amount Outstanding | Floating Rate Received | Fixed Rate Paid | ||||||||
Effective Date | Termination Date | |||||||||||
Interest Rate Swap | 2 | $52,500,000 | February 5, 2013 | December 5, 2017 | 1-month US Dollar LIBOR | 0.865% |
Effect of Derivative Financial Instruments on Income Statement | ||||||||||||||
Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivative * | ||||||||||||
For the Three Months Ended | For the One-Month Transition Period Ended December 31, 2012 | |||||||||||||
March 31, 2013 | February 29, 2012 | |||||||||||||
Interest rate contracts | Interest Expense | $ | (3,350 | ) | $ | — | $ | (316,756 | ) | |||||
* The gain or (loss) recognized in income on derivatives includes changes in fair value of the derivatives as well as the periodic cash settlements and interest accruals for derivatives not designated as hedging instruments |
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CorEnergy Historical Summary Consolidated Balance Sheets | |||||||
December 31, 2012 (Unaudited) | December 31, 2011 (Unaudited) | ||||||
Current assets | $ | 19,202,432 | $ | 5,307,970 | |||
Non-current assets | 274,459,553 | 90,623,108 | |||||
Total Assets | $ | 293,661,985 | $ | 95,931,078 | |||
Current liabilities | $ | 8,290,065 | $ | 1,552,281 | |||
Non-current liabilities | 74,529,728 | 2,894,200 | |||||
Total Liabilities | 82,819,793 | 4,446,481 | |||||
Shareholder's equity | 210,842,192 | 91,484,597 | |||||
Total Liabilities and Shareholder's Equity | $ | 293,661,985 | $ | 95,931,078 | |||
CorEnergy Historical Summary Consolidated Statements of Income | |||||||
For the One- Month Transition Period Ended December 31, 2012 (Unaudited) | For the One- Month Transition Period Ended December 31, 2011 (Unaudited) | ||||||
Revenues | $ | 1,726,901 | $ | 1,079,612 | |||
Expenses | 1,826,422 | 993,919 | |||||
Operating Income (Loss) | (99,521 | ) | 85,693 | ||||
Other Income (Expense), net | (2,342,365 | ) | 1,601,084 | ||||
Income (Loss) before income tax benefit (provision) | (2,441,886 | ) | 1,686,777 | ||||
Income tax benefit (provision) | 920,143 | (628,493 | ) | ||||
Net Income (Loss) | (1,521,743 | ) | 1,058,284 | ||||
Less: Net Income (Loss) attributable to non-controlling interest | (18,347 | ) | — | ||||
Net Income (Loss) attributable to CORR Stockholders | $ | (1,503,396 | ) | $ | 1,058,284 |
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• | Trading securities – the Company’s publicly traded equity securities are classified as trading securities and are reported at fair value because the Company intends to sell these securities in order to acquire real asset investments. |
• | Other equity securities – the Company’s other equity securities represent interests in private companies for which the Company has elected to report these at fair value under the fair value option. |
• | Realized and unrealized gains and losses on trading securities and other equity securities – Changes in the fair values of the Company’s securities during the period reported and the gains or losses realized upon sale of securities during the period are reflected as other income or expense within the accompanying Consolidated Statements of Income. |
Major Components of Net Realized and Unrealized Gain (Loss) on Trading Securities | ||||||||||||
For the Three Months Ended | For the One-Month Transition Period Ended | |||||||||||
March 31, 2013 | February 29, 2012 | December 31, 2012 | ||||||||||
Net unrealized gain on trading securities | $ | 751,004 | $ | — | $ | 4,663,211 | ||||||
Net realized gain (loss) on trading securities | (434,941 | ) | 2,862,272 | (6,432,269 | ) | |||||||
Total net realized and unrealized gain (loss) on trading securities | $ | 316,063 | $ | 2,862,272 | $ | (1,769,058 | ) |
• | The independent valuation firm prepares the valuations and the supporting analysis. |
• | The Investment Committee of the Adviser reviews the valuations and supporting analysis, prior to approving the valuations. |
• | Level 1 – quoted prices in active markets for identical investments |
• | Level 2 – other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.) |
• | Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments) |
• | Cash and Cash Equivalents — The carrying value of cash, amounts due from banks, federal funds sold and securities purchased under resale agreements approximates fair value. |
• | Escrow Receivable — The escrow receivable due the Company, which relates to the sale of International Resource Partners, LP, is anticipated to be released upon satisfaction of certain post-closing obligations and/or the expiration of certain time periods (the shortest of which was to be 14 months from the April 2011 closing date of the sale). The fair value of the escrow receivable reflects a discount for the potential that the full amount due to the Company will not be realized. No clear agreement has been reached as to the remaining escrow balance and Management anticipates that it may take more than a year to satisfy other post-closing obligations, prior to receiving the approximately $699 thousand escrow balance remaining. |
• | Long-term Debt — The fair value of the Company’s long-term debt is calculated, for disclosure purposes, by discounting future debt service requirements by a rate equal to the Company’s current expected rate for an equivalent transaction. |
• | Line of Credit — The carrying value of the line of credit approximates the fair value due to its short term nature. |
• | Sales Revenue – Revenues related to natural gas distribution and performance of management services are recognized in accordance with GAAP upon delivery of natural gas and upon the substantial performance of management and supervision services related to the expansion of the natural gas distribution system. Omega, acting as a principal, provides for transportation services and natural gas supply for its customers on a firm basis. In addition, Omega is paid fees for the operation and maintenance of its natural gas distribution system, including any necessary expansion of the distribution system. Omega is responsible for the coordination, supervision and quality of the expansions while actual construction is generally performed by third party contractors. Revenues from expansion efforts are recognized in accordance with GAAP using either a completed contract or percentage of completion method based on the level and volume of estimates utilized, as well as the certainty or uncertainty of our ability to collect those revenues. |
• | Lease Revenue – Income related to the Company’s leased property is recognized on a straight-line basis over the term of the lease when collectibility is reasonably assured. Rental payments on the Pinedale LGS leased property are typically received on a monthly basis. Prior to November 1, 2012 rental payments on the EIP leased property were typically received on a semi-annual basis and were included as lease revenue within the accompanying Consolidated Statements of Income. Upon the November 1, 2012 execution of the Purchase Agreement related to the EIP leased property (the "Purchase Agreement"), rental payments on the leased property are to be received in advance and are classified as unearned income and included in liabilities within the Consolidated Balance Sheets. Unearned income is amortized ratably over the lease period as revenue recognition criteria are met. |
• | Securities Transactions and Investment Income Recognition – Securities transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Distributions received from our equity investments generally are comprised of ordinary income, capital gains and distributions received from investment securities from the portfolio company. The Company records investment income and return of capital based on estimates made at the time such distributions are received. Such estimates are based on information available from each portfolio company and/or other industry sources. These estimates may subsequently be revised based on information received from the portfolio companies after their tax reporting periods are concluded, as the actual character of these distributions are not known until after our fiscal year end. |
• | Dividends and distributions from investments – Dividends and distributions from investments are recorded on their ex-dates and are reflected as other income within the accompanying Consolidated Statements of Income. Distributions received from the Company’s investments generally are characterized as ordinary income, capital gains and distributions received from investment securities. The portion characterized as return of capital is paid by our investees from their cash flow from operations. The Company records investment income, capital gains and/or distributions received from investment securities based on estimates made at the time such distributions are received. Such estimates are based on information available from each company and/or other industry sources. These estimates may subsequently be revised based on information received from the entities after their tax reporting periods are concluded, as the actual character of these distributions is not known until after the fiscal year end of the Company. |
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Major Components of Net Realized and Unrealized Gain (Loss) on Trading Securities | ||||||||||||
For the Three Months Ended | For the One-Month Transition Period Ended | |||||||||||
March 31, 2013 | February 29, 2012 | December 31, 2012 | ||||||||||
Net unrealized gain on trading securities | $ | 751,004 | $ | — | $ | 4,663,211 | ||||||
Net realized gain (loss) on trading securities | (434,941 | ) | 2,862,272 | (6,432,269 | ) | |||||||
Total net realized and unrealized gain (loss) on trading securities | $ | 316,063 | $ | 2,862,272 | $ | (1,769,058 | ) |
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As a Percentage of | ||||||||
Leased Properties | Lease Revenues | |||||||
As of March 31, 2013 | As of December 31, 2012 | For the Three Months Ended March 31, 2013 | For the One-Month Transition Period Ended December 31, 2012 | |||||
Pinedale LGS | 94.2% | 94.2% | 88.7% | 75.2% | ||||
Public Service of New Mexico | 5.8% | 5.8% | 11.3% | 24.8% |
Ultra Petroleum Summary Consolidated Balance Sheets (Unaudited) (in thousands) | ||||||||
March 31, 2013 | December 31, 2012 | |||||||
Current assets | $ | 129,063 | $ | 125,848 | ||||
Non-current assets | 1,906,320 | 1,881,497 | ||||||
Total Assets | $ | 2,035,383 | $ | 2,007,345 | ||||
Current liabilities | 422,094 | 514,092 | ||||||
Non-current liabilities | 2,175,481 | 2,071,120 | ||||||
Total Liabilities | $ | 2,597,575 | $ | 2,585,212 | ||||
Shareholder's equity (deficit) | (562,192 | ) | (577,867 | ) | ||||
Total Liabilities and Shareholder's Equity | $ | 2,035,383 | $ | 2,007,345 | ||||
Ultra Petroleum Summary Consolidated Statements of Income (Unaudited) (in thousands) | ||||||||
For the Three Months Ended | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Revenues | $ | 225,626 | $ | 226,143 | ||||
Expenses | 139,994 | 193,539 | ||||||
Operating Income | 85,632 | 32,604 | ||||||
Other Income (Expense), net | (67,831 | ) | 97,147 | |||||
Income before income tax provision | 17,801 | 129,751 | ||||||
Income tax provision | 1,368 | 45,489 | ||||||
Net Income | $ | 16,433 | $ | 84,262 |
Future Minimum Lease Rentals | ||||
Years Ending December 31, | Amount | |||
2013 | $ | 15,000,000 | ||
2014 | 24,267,371 | |||
2015 | 20,000,000 | |||
2016 | 20,000,000 | |||
2017 | 20,000,000 | |||
Thereafter | 199,354,839 | |||
Total | $ | 298,622,210 |
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Deferred Tax Assets and Liabilities | ||||||||||||
March 31, 2013 | November 30, 2012 | December 31, 2012 | ||||||||||
Deferred Tax Assets: | ||||||||||||
Organization costs | $ | — | $ | (17,668 | ) | $ | (27,188 | ) | ||||
Net operating loss carryforwards | — | (6,411,230 | ) | — | ||||||||
Net unrealized loss on investment securities | — | — | (143,822 | ) | ||||||||
Cost recovery of leased assets | — | (36,443 | ) | — | ||||||||
Asset acquisition costs | — | (134,415 | ) | (158,535 | ) | |||||||
AMT and State of Kansas credit | — | (196,197 | ) | — | ||||||||
Sub-total | $ | — | $ | (6,795,953 | ) | $ | (329,545 | ) | ||||
Deferred Tax Liabilities: | ||||||||||||
Basis reduction of investment in partnerships | $ | 2,090,696 | $ | 11,655,817 | $ | 2,675,142 | ||||||
Net unrealized gain on investment securities | 1,040,400 | 2,312,269 | — | |||||||||
Cost recovery of leased assets | — | — | 50,446 | |||||||||
Sub-total | 3,131,096 | 13,968,086 | 2,725,588 | |||||||||
Total net deferred tax liability | $ | 3,131,096 | $ | 7,172,133 | $ | 2,396,043 |
Income Tax Expense (Benefit) | ||||||||||||
For the Three-Month Periods Ended | For the One-Month Transition Period Ended December 31, 2012 | |||||||||||
March 31, 2013 | February 29, 2012 | |||||||||||
Application of statutory income tax rate | $ | 1,201,795 | $ | 3,224,535 | $ | (848,239 | ) | |||||
State income taxes, net of federal tax benefit | 62,270 | 241,379 | (64,771 | ) | ||||||||
Dividends received deduction | — | — | (7,133 | ) | ||||||||
Income of Real Estate Investment Trust | (243,121 | ) | — | — | ||||||||
Total income tax expense (benefit) | $ | 1,020,944 | $ | 3,465,914 | $ | (920,143 | ) |
Components of Income Tax Expense (Benefit) | ||||||||||||
For the Three-Month Periods Ended | For the One-Month Transition Period Ended December 31, 2012 | |||||||||||
March 31, 2013 | February 29, 2012 | |||||||||||
Current tax expense | ||||||||||||
Federal | $ | 268,205 | $ | — | $ | 3,610,165 | ||||||
State (net of federal tax benefit) | 17,686 | — | 245,782 | |||||||||
AMT expense | — | 10,000 | — | |||||||||
Total current tax expense | 285,891 | 10,000 | 3,855,947 | |||||||||
Deferred tax expense (benefit) | ||||||||||||
Federal | 690,468 | 3,215,230 | (4,465,104 | ) | ||||||||
State (net of federal tax benefit) | 44,585 | 240,684 | (310,986 | ) | ||||||||
Total deferred tax expense (benefit) | 735,053 | 3,455,914 | (4,776,090 | ) | ||||||||
Total income tax expense (benefit) | $ | 1,020,944 | $ | 3,465,914 | $ | (920,143 | ) |
Aggregate Cost of Securities for Income Tax Purposes | ||||||||||||
March 31, 2013 | November 30, 2012 | December 31, 2012 | ||||||||||
Aggregate cost for federal income tax purposes | $ | 19,734,837 | $ | 41,995,195 | $ | 22,007,069 | ||||||
Gross unrealized appreciation | 2,161,017 | 33,892,176 | 2,018,455 | |||||||||
Gross unrealized depreciation | — | (801,340 | ) | — | ||||||||
Net unrealized appreciation | $ | 2,161,017 | $ | 33,090,836 | $ | 2,018,455 |
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Property and Equipment | ||||||||||||
March 31, 2013 | November 30, 2012 | December 31, 2012 | ||||||||||
Natural gas pipeline | $ | 5,215,424 | $ | 5,215,424 | $ | 5,215,424 | ||||||
Vehicles and trailers | 125,117 | 110,782 | 110,783 | |||||||||
Computers | 14,548 | 14,018 | 14,439 | |||||||||
Gross property and equipment | 5,355,089 | 5,340,224 | 5,340,646 | |||||||||
Less: accumulated depreciation | (1,825,253 | ) | (1,751,202 | ) | (1,774,616 | ) | ||||||
Net property and equipment | $ | 3,529,836 | $ | 3,589,022 | $ | 3,566,030 |
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March 31, 2013 | ||||||||||||||||
Fair Value | ||||||||||||||||
March 31, 2013 | Level 1 | Level 2 | Level 3 | |||||||||||||
Investments: | ||||||||||||||||
Trading securities | $ | — | $ | — | $ | — | $ | — | ||||||||
Other equity securities | 21,895,854 | — | — | 21,895,854 | ||||||||||||
Total Assets | $ | 21,895,854 | $ | — | $ | — | $ | 21,895,854 |
November 30, 2012 | ||||||||||||||||
November 30, 2012 | Fair Value | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | ||||||||||||||||
Trading securities | $ | 55,219,411 | $ | 27,480,191 | $ | 27,739,220 | $ | — | ||||||||
Other equity securities | 19,866,621 | — | — | 19,866,621 | ||||||||||||
Total Assets | $ | 75,086,032 | $ | 27,480,191 | $ | 27,739,220 | $ | 19,866,621 |
December 31, 2012 | ||||||||||||||||
December 31, 2012 | Fair Value | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | ||||||||||||||||
Trading securities | $ | 4,318,398 | $ | 4,318,398 | $ | — | $ | — | ||||||||
Other equity securities | 19,707,126 | — | — | 19,707,126 | ||||||||||||
Total Assets | $ | 24,025,524 | $ | 4,318,398 | $ | — | $ | 19,707,126 |
For the Three-Month Periods Ended | For the One-Month Transition Period Ended December 31, 2012 | ||||||||||
March 31, 2013 | February 29, 2012 | ||||||||||
Fair value beginning balance | $ | 19,707,126 | $ | 41,856,730 | $ | 19,866,621 | |||||
Total realized and unrealized gains (losses) included in net income | 2,425,986 | 6,069,194 | (159,495 | ) | |||||||
Return of capital adjustments impacting cost basis of securities | (237,258 | ) | (656,195 | ) | — | ||||||
Fair value ending balance | $ | 21,895,854 | $ | 47,269,729 | $ | 19,707,126 | |||||
Changes in unrealized gains (losses), included in net income, relating to securities still held (1) | $ | 2,425,986 | $ | 6,069,194 | $ | (159,495 | ) | ||||
(1) Located in Net realized and unrealized gain (loss) on other equity securities in the Statements of Income |
Significant Unobservable Inputs Used To Value Portfolio Investments | ||||||||||||||
Unobservable Inputs | Range | Weighted Average | ||||||||||||
Assets at Fair Value | Fair Value | Valuation Technique | Low | High | ||||||||||
Other equity securities, at fair value | $ | 21,895,854 | Public company historical EBITDA analysis | Historical EBITDA Valuation Multiples | 9.0x | 12.3x | 10.7x | |||||||
Public company projected EBITDA analysis | Projected EBITDA Valuation Multiples | 8.8x | 11.4x | 10.1x | ||||||||||
M&A company analysis | EV/LTM 2012 EBITDA | 9.0x | 10.3x | 9.7x | ||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 9.5% | 14.0% | 11.8% |
Carrying and Fair Value Amounts | ||||||||||||||||||||||||||
Level within fair value hierarchy | March 31, 2013 | November 30, 2012 | December 31, 2012 | |||||||||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||
Financial Assets: | ||||||||||||||||||||||||||
Cash and cash equivalents | Level 1 | $ | 18,196,151 | $ | 18,196,151 | $ | 14,333,456 | $ | 14,333,456 | $ | 17,680,783 | $ | 17,680,783 | |||||||||||||
Escrow receivable | Level 2 | $ | 698,729 | $ | 698,729 | $ | 698,729 | $ | 698,729 | $ | 698,729 | $ | 698,729 | |||||||||||||
Financial Liabilities: | ||||||||||||||||||||||||||
Long-term debt | Level 2 | $ | 70,000,000 | $ | 70,000,000 | $ | — | $ | — | $ | 70,000,000 | $ | 70,000,000 | |||||||||||||
Line of credit | Level 1 | $ | 139,397 | $ | 139,397 | $ | 120,000 | $ | 120,000 | $ | — | $ | — |
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Intangible Lease Asset | ||||||||||||
March 31, 2013 | November 30, 2012 | December 31, 2012 | ||||||||||
Intangible lease asset | $ | 1,094,771 | $ | 1,094,771 | $ | 1,094,771 | ||||||
Accumulated amortization | (510,893 | ) | (413,580 | ) | (437,908 | ) | ||||||
Net intangible lease asset | $ | 583,878 | $ | 681,191 | $ | 656,863 |
Remaining Estimated Amortization On Intangibles | ||||
Year ending December 31, | Amount | |||
2013 | $ | 218,954 | ||
2014 | 291,939 | |||
2015 | 72,985 | |||
Total | $ | 583,878 |
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Derivative Financial Instruments Measured At Fair Value on a Recurring Basis | |||||||||||||||
Balance Sheet Classification | Fair Value Hierarchy | ||||||||||||||
Balance Sheet Line Item | Level 1 | Level 2 | Level 3 | ||||||||||||
March 31, 2013 | |||||||||||||||
Prepaid expenses and other assets | Assets | $ | — | $ | — | $ | — | ||||||||
Accounts payable and other accrued liabilities | Liabilities | $ | — | $ | 266,880 | $ | — | ||||||||
December 31, 2012 | |||||||||||||||
Prepaid expenses and other assets | Assets | $ | — | $ | — | $ | — | ||||||||
Accounts payable and other accrued liabilities | Liabilities | $ | — | $ | 316,756 | $ | — | ||||||||
Level 1 – quoted prices in active markets for identical investments | |||||||||||||||
Level 2 – other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.) | |||||||||||||||
Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments) |
Effect of Derivative Financial Instruments on Income Statement | ||||||||||||||
Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivative * | ||||||||||||
For the Three Months Ended | For the One-Month Transition Period Ended December 31, 2012 | |||||||||||||
March 31, 2013 | February 29, 2012 | |||||||||||||
Interest rate contracts | Interest Expense | $ | (3,350 | ) | $ | — | $ | (316,756 | ) | |||||
* The gain or (loss) recognized in income on derivatives includes changes in fair value of the derivatives as well as the periodic cash settlements and interest accruals for derivatives not designated as hedging instruments |
Outstanding Derivatives Not Designated as Hedges in a Qualifying Hedging Relationship | ||||||||||||
Interest Rate Derivative | Number of Instruments | Notional Amount Outstanding | Floating Rate Received | Fixed Rate Paid | ||||||||
Effective Date | Termination Date | |||||||||||
Interest Rate Swap | 2 | $52,500,000 | February 5, 2013 | December 5, 2017 | 1-month US Dollar LIBOR | 0.865% |
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CorEnergy Historical Summary Consolidated Balance Sheets | |||||||
December 31, 2012 (Unaudited) | December 31, 2011 (Unaudited) | ||||||
Current assets | $ | 19,202,432 | $ | 5,307,970 | |||
Non-current assets | 274,459,553 | 90,623,108 | |||||
Total Assets | $ | 293,661,985 | $ | 95,931,078 | |||
Current liabilities | $ | 8,290,065 | $ | 1,552,281 | |||
Non-current liabilities | 74,529,728 | 2,894,200 | |||||
Total Liabilities | 82,819,793 | 4,446,481 | |||||
Shareholder's equity | 210,842,192 | 91,484,597 | |||||
Total Liabilities and Shareholder's Equity | $ | 293,661,985 | $ | 95,931,078 | |||
CorEnergy Historical Summary Consolidated Statements of Income | |||||||
For the One- Month Transition Period Ended December 31, 2012 (Unaudited) | For the One- Month Transition Period Ended December 31, 2011 (Unaudited) | ||||||
Revenues | $ | 1,726,901 | $ | 1,079,612 | |||
Expenses | 1,826,422 | 993,919 | |||||
Operating Income (Loss) | (99,521 | ) | 85,693 | ||||
Other Income (Expense), net | (2,342,365 | ) | 1,601,084 | ||||
Income (Loss) before income tax benefit (provision) | (2,441,886 | ) | 1,686,777 | ||||
Income tax benefit (provision) | 920,143 | (628,493 | ) | ||||
Net Income (Loss) | (1,521,743 | ) | 1,058,284 | ||||
Less: Net Income (Loss) attributable to non-controlling interest | (18,347 | ) | — | ||||
Net Income (Loss) attributable to CORR Stockholders | $ | (1,503,396 | ) | $ | 1,058,284 |
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