Item 1.
Business
Company Overview
The Registrant, Canal Capital Corporation ("Canal" or the "Company"), incorporated in the state of Delaware in 1964, commenced business operations through a predecessor in 1936.
Canal is engaged in two distinct businesses -- real estate and stockyard operations.
Real Estate Operations - Canal's real estate properties are located in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri, Omaha, Nebraska and Sioux Falls, South Dakota. The properties consist, for the most part, of an Exchange Building (commercial office space), land and structures leased to third parties (rail car repair shops, lumber yards and various other commercial and retail businesses) as well as vacant land available for development or resale. Its principal real estate operating revenues are derived from lease income from land and structures leased to various commercial and retail enterprises, rental income from its Exchange Building, and proceeds from the sale of real estate properties. In addition to selling what was excess stockyard property, the company entertains any offers to purchase, develop and restructure the real estate properties currently under operating leases, stockyard operating properties and properties held for development or resale in order to support cash flow and to enhance the value of the existing properties and surrounding real estate. See "Real Estate Operations".
Stockyard Operations - Canal currently operates one central public stockyard located in St. Joseph, Missouri. Canal closed the stockyard it operated in Sioux Falls, South Dakota in December 2009(collectively the “Stockyards”). Public stockyards act much like a securities exchange, providing markets for all categories of livestock and fulfilling the economic functions of assembly, grading, and price discovery. The Company’s principal stockyard revenues are derived from a per head charge (“yardage charge”) imposed on all livestock consigned for sale at the stockyards and the sale of feed and bedding. See “Stockyard Operations”.
Real Estate Operations
General - Canal is involved in the management, development or sale of its real estate properties located in five Midwest states. Real estate operations, resulted in operating income of $1.0 million, while contributing $1.9 million to Canal's revenues for fiscal 2009. During fiscal 2009, Canal sold approximately 28 acres of land located in Saint Joseph, Missouri and Sioux City, Iowa for $1.5 million generating operating income of $0.8 million.
As of October 31, 2009, there are approximately 37 acres of undeveloped land owned by Canal located in two Midwest states (see ITEM 2) . Canal is continuing the program, which it started several years ago, to develop or sell this property. Additionally, Canal will continue to entertain any offers to purchase, develop and restructure the real estate properties currently under operating leases, stockyard operating properties and properties held for development or resale in order to support cash flow and to enhance the value of the existing properties and surrounding real estate in fiscal 2010.
Risk - Real estate activities in general may involve various degrees of risk, such as competition for tenants, general market conditions and interest rates. Furthermore, there can be no assurance that Canal will be successful in the development, lease or sale of its real estate properties.
Competition - Canal competes in the area of real estate development with other regional developers, some of which are substantially larger and have significantly greater financial resources than Canal. To a certain extent, Canal's real estate revenues are dependent on the ability of the stockyard operations and the various meat packers located adjacent to Canal’s properties to successfully compete in their respective businesses.
Stockyard Operations
General - Canal currently operates one central public stockyard located in St. Joseph, Missouri. Canal closed the stockyard it operated in Sioux Falls, South Dakota in December 2009(collectively the “Stockyards”).
Sioux Falls Stockyard Closure - In December 2009, after extensive efforts to reorganize and return this stockyard to profitability, Canal ceased all stockyard operations at its Sioux Falls, South Dakota location. Canal now leases a portion of this property (approximately 10 acres), on a month to month basis, to a group that formerly operated at the stockyards as independent commission firms. This group will only handle hogs and sheep on the leased property. Canal has listed the entire property (approximately 30 acres) for sale with a local real estate agency. The sale of this property will be a priority in fiscal 2010. Canal will entertain all reasonable offers. The net value of this property was transferred to property held for development or resale as of October 31, 2009.
Public stockyards act much like a securities exchange, providing markets for all categories of livestock and fulfilling the economic functions of assembly, grading, and price discovery. The livestock handled by the Company’s stockyard include cattle, hogs, and sheep. Cattle and hogs may come through the stockyard facilities at two different stages, either as feeder livestock or slaughter livestock. The Company’s stockyard provides all services and facilities required to operate an independent market for the sale of livestock, including veterinary facilities, auction arenas, auctioneers, weigh masters and scales, feed and bedding, and security personnel. In addition, the stockyard provides other services including pure bred and other specialty sales for producer organizations. The Company promotes its stockyard business through public relations efforts, advertising, and personal solicitation of producers.
Actual marketing transactions at a stockyard are managed for livestock producers by market agencies and independent commission sales people to which the livestock are consigned for sale. These market agencies (some of which are owned and operated by the Company) and independent sales people receive commissions from the seller upon settlement of a transaction and the stockyard receives a yardage fee on all livestock using the facility which is paid within twenty-four hours of the sale. Yardage fees vary depending upon the type of animal, the extent of services provided by the stockyard, and local competition. Yardage revenues are not directly dependent upon market prices, but rather are a function of the volume of livestock handled. In general, stockyard livestock volume is dependent upon conditions affecting livestock production and upon the market agencies and independent commission sales people which operate at the stockyard. Stockyard operations are seasonal, with greater volume generally experienced during the first and fourth quarters of each fiscal year, during which periods livestock is generally brought to market.
Virtually all of the volume at Canal’s Sioux Falls stockyard in fiscal 2009 was handled through market agencies and independent commission sales people, while the St. Joseph stockyards has solicitation operations of its own which account for approximately 50% of its livestock volume annually.
Canal intends to continue its soliciting efforts at its St. Joseph stockyards in fiscal 2010. Further, Canal tries to balance its dependence on market agencies and independent commission sales people in various ways, including: developing solicitation operations of its own; direct public relations; advertising and personal solicitation of producers on behalf of the stockyards; providing additional services at the stockyard to attract sellers and buyers; and providing incentives to market agencies and independent commission sales people for increased business.
Stockyard operations resulted in operating income of approximately $0.7 million while contributing approximately $2.6 million to Canal’s revenues for fiscal 2009. The Saint Joseph stockyard generated operating income of $167,000 while the Sioux Falls stockyard generated an operating loss of $96,000 in fiscal 2009. The sharp decrease in operating results experienced in fiscal 2008 is due primarily to the general weakness of the national economy coupled with a decrease in production by the smaller livestock producers who are the primary users of the Company’s stockyards and the loss of two independent commission firms at the Sioux Falls, South Dakota stockyards at the beginning of fiscal 2007.
Risk - Stockyard activities face a variety of risks and uncertainties related to the safeguarding of the national food supply which are beyond our control. Public confidence in the government’s efforts to safeguard the food supply is essential for the success of our stockyard operations. An outbreak of a disease such as bovine spongiform encephalopathy (BSE) better known as Mad Cow Disease could have a devastating impact on stockyard operations. For the company’s part we strictly follow all USDA regulations to ensure to the extent we can the safety of the food supply. Furthermore, stockyard activities in general may involve various degrees of risk, such as competition from other regional stockyards and sale barns, general market conditions and to a lesser extent interest rates.
Competition - Canal competes in the area of public stockyards with other regional public stockyards and sale barns, some of which are substantially larger and have greater financial resources than Canal. To a certain extent, Canal’s stockyard revenues are dependent on the ability of the market agencies and independent commission sales people at each of Canal’s stockyard locations to compete within the region.
Art Inventory Held for Sale
Canal established its art operations in the late 1980's by acquiring for resale a significant inventory of antiquities primarily from the ancient Mediterranean cultures.
Canal is in the process of selling, in an orderly manner, its remaining art inventory consisting of antiquities only as of October 31, 2009. This will be accomplished primarily through consignment arrangements with various independent art dealers and through sale at public art auctions. In the case of consignment sales through independent art dealers, Canal consigns its pieces at specific prices. In the case of public art auctions, the Company primarily consigns its art pieces to the two largest auction houses for their spring and fall art auctions and Canal sets a minimum acceptable price on the pieces consigned.
In fiscal 2009, Canal did not have any art sales. Canal’s remaining art inventory consists of seven pieces of antiquity art at both October 31, 2009 and 2008.
Risk & Competition - Selling art in general involves various degrees of risk. Canal’s success in selling its art inventory is dependent at least in part, on general economic conditions, including supply, demand, international monetary conditions and inflation. Canal competes in the sale of its art inventory with investment groups and other dealers, most of whom are substantially larger and have greater financial resources and staff than Canal.
Employees - At October 31, 2009, Canal had approximately 30 employees.
Executive Officers - At October 31, 2009 Canal’s Executive Officers were:
Risk Factors - In addition to other information in this Annual Report on Form 10-K, the following risk factors should be carefully considered when evaluating our Company and our business. Investing in our common stock involves a high degree of risk, and you should be able to bear the complete loss of your investment. The risk and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risk and uncertainties actually occur, our future operating results and financial condition could be harmed and the market price of our common stock could decline.
Risk Related to Our Business - The Company’s risk and uncertainties related to our financial condition and our business include a variety of factors that are beyond our control. Such factors include, without limitation: overall economic conditions; public confidence in the government’s ability to safeguard the food supply from infectious diseases; competition for tenants in the agribusiness; the ability of the Company’s tenants to compete in their respective businesses; the effect of fluctuations in supply, demand, international monetary conditions and inflation on the Company’s art inventories; securities risks associated with collections of antiquities and art; and the effect of fluctuations in interest rates and inflation on the Company’s indebtedness.
ITEM 2.
ITEM 2.
Properties
Canal's real estate properties located in five Midwest states are primarily associated with its current and former stockyards operations. Each property consists, for the most part, of land and structures leased to third parties (meat packing facilities, rail car repair shops, lumber yards and various other commercial and retail businesses) an Exchange Building (commercial office space), as well as vacant land available for development or resale. In addition to selling what was excess stockyard property, the company entertains any offers to purchase, develop and restructure real estate lots surrounding its existing operating lease properties, stockyard operating properties and properties held for development or resale in order to enhance the value of the existing properties and surrounding real estate. As landlord, Canal's management responsibilities include leasing, billing, repairs and maintenance and overseeing the day to day operations of its properties. Canal's properties at October 31, 2009 include:
New York Headquarters - Canal’s New York operations consist of approximately 200 square feet of office space located in Port Jefferson Station, New York.
The following schedule shows the average occupancy rate and average rental rate of Canal's Exchange Building located in Sioux Falls, South Dakota:
NOTES
(1) Canal operates one central public stockyard. a
(2) For information with respect to mortgages and pledges see Note 4.
(3) For information related to property held for development see Note 2(D).
(4) Per square foot.
ITEM 3.
ITEM 3.
Legal Proceedings
Canal and its subsidiaries are from time to time involved in litigation incidental to their normal business activities, none of which, in the opinion of management, will have a material adverse effect on the consolidated financial condition and operations of the Company.
Canal was not a party to any ongoing litigation at October 31, 2009. The following situation did arise in fiscal 2005.
Environmental Protection Agency - Special Notice Letter for Remedial Investigation, Portland, Oregon Property
In 1989, the Company sold its 48 acre Portland, Oregon stockyard to Oregon Waste Systems, Inc. On September 29, 2003, the United States Environmental Agency (EPA) placed a 4.2 acre portion of that property on the National Priorities List pursuant to the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), commonly known as the Superfund Act. In a letter from the EPA dated June 27, 2005 the Company, along with approximately 13 other parties, including the current owner and operator of the site, was notified that it might be liable to perform or pay for the remediation of environmental contamination found on and around the site. Since the receipt of the letter, the Company has been in periodic communications with the other parties who received a similar letter with respect to what action, collectively or individually, should be taken in response to the EPA assertion of liability. The Company believes that the remediation of contamination of the site is properly the responsibility of other parties that have occupied and used it for waste recycling purposes since 1961, although under CERCLA the EPA is able to assert joint and several liability against all parties who ever owned or operated the site or generated or transported wastes to it. This investigation is in its preliminary stages and the Company intends to vigorously defend any liability for remediation. At October 31, 2009, the liability for remediation, if any, is not estimatable and therefore no accrual has been recorded in the financial statements.
ITEM 4.
ITEM 4.
Submission of Matters to a Vote of Security Holders
No matters were submitted to our stockholders during the fourth quarter of the fiscal year ended October 31, 2009.
PART II
ITEM 5.
ITEM 5.
Market for the Registrant's Common Stock and Related Stockholder Matters
Market Information
Canal's stock is traded over-the-counter through the "pink sheets". The high and low price ranges of Canal's common stock for the eight quarters ended October 31, 2009 as reported on the "pink sheets" were:
Dividend Policy and Holders
There were no cash dividends paid during fiscal 2009 or 2008. Canal is subject to restrictions on the payment of cash dividends under certain debt agreements. As of January 15, 2010, Canal had approximately 1,500 holders of record of its common stock, par value $.01 per share.
ITEM 6.
ITEM 6. Selected Financial Data (continued..)
NOTES:
(1)
The revenue increase was due primarily to a $0.3 million increase in sales of real estate offset to a certain extent by a $0.2 million decrease in revenues from stockyard operations.
(2)
The revenue increase was due primarily to a $1.1 million increase in sales of real estate offset to a certain extent by a $0.3 million decrease in revenues from stockyard operations.
(3)
The revenue decrease was due primarily to a $0.5 million decrease in sales of real estate coupled with a $0.2 million decrease in revenues from stockyard operations.
(4)
The revenue decrease was due primarily to a $2.2 million decrease in sales of real estate offset to a certain extent by the $0.2 million increase in revenues from stockyard operations.
(5)
The revenue increase was due primarily to a $2.5 million increase in sales of real estate offset by a decrease in exchange building rent.
(6)
For discussion of material uncertainties and commitments, see Notes 9 and 17 to the Consolidated Financial Statement.
ITEM 7.
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the more detailed business information and consolidated financial statements and related notes that appear elsewhere in this report and in the documents that we incorporate by reference into this report. This report may contain certain “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. This information involves risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in “Risk factors”.
You should also be aware that due to financial constraints Canal’s fiscal 2009 Financial Statements have been presented without audit.
Company Overview
The Registrant, Canal Capital Corporation ("Canal" or the "Company"), incorporated in the state of Delaware in 1964, commenced business operations through a predecessor in 1936.
Canal is engaged in two distinct businesses -- real estate and stockyard operations.
Real Estate Operations - Canal's real estate properties are located in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri, Omaha, Nebraska and Sioux Falls, South Dakota. The properties consist, for the most part, of an Exchange Building (commercial office space), land and structures leased to third parties (meat packing facilities, rail car repair shops, lumber yards and various other commercial and retail businesses) as well as vacant land available for development or resale. Its principal real estate operating revenues are derived from lease income from land and structures leased to various commercial and retail enterprises, rental income from its Exchange Buildings, and proceeds from the sale of real estate properties. In addition to selling what was excess stockyard property, the company entertains any offers to purchase, develop and restructure real estate lots surrounding its existing operating lease properties, stockyard operating properties and properties held for development or resale in order to enhance the value of the existing properties and surrounding real estate. See "Real Estate Operations".
Stockyard Operations - Canal currently operates one central public stockyard located in St. Joseph, Missouri. Canal closed the stockyard it operated in Sioux Falls, South Dakota in December 2009(collectively the “Stockyards”). Public stockyards act much like a securities exchange, providing markets for all categories of livestock and fulfilling the economic functions of assembly, grading, and price discovery. The Company’s principal stockyard revenues are derived from a per head charge (“yardage charge”) imposed on all livestock consigned for sale at the stockyards and the sale of feed and bedding. See “Stockyard Operations”.
Real Estate Operations
General - Canal is involved in the management, development or sale of its real estate properties located in five Midwest states. Real estate operations, resulted in operating income of $1.0 million, while contributing $1.9 million to Canal's revenues for fiscal 2009. During fiscal 2009, Canal sold approximately 28 acres of land located in Saint Joseph, Missouri and Sioux City, Iowa for $1.5 million generating operating income of $0.8 million.
As of October 31, 2009, there are approximately 37 acres of undeveloped land owned by Canal located in two Midwest states (see ITEM 2) . Canal is continuing the program, which it started several years ago, to develop or sell this property. Additionally, Canal will continue to entertain any offers to purchase, develop and restructure the real estate properties currently under operating leases, stockyard operating properties and properties held for development or resale in order to support cash flow and to enhance the value of the existing properties and surrounding real estate in fiscal 2010.
Risk - Real estate activities in general may involve various degrees of risk, such as competition for tenants, general market conditions and interest rates. Furthermore, there can be no assurance that Canal will be successful in the development, lease or sale of its real estate properties.
Competition - Canal competes in the area of real estate development with other regional developers, some of which are substantially larger and have significantly greater financial resources than Canal. To a certain extent, Canal's real estate revenues are dependent on the ability of the stockyard operations and the various meat packers located adjacent to Canal’s properties to successfully compete in their respective businesses.
Stockyard Operations
General - Canal currently operates one central public stockyard located in St. Joseph, Missouri. Canal closed the stockyard it operated in Sioux Falls, South Dakota in December 2009(collectively the “Stockyards”).
Sioux Falls Stockyard Closure - In December 2009, after extensive efforts to reorganize and return this stockyard to profitability, Canal ceased all stockyard operations at its Sioux Falls, South Dakota location. Canal now leases a portion of this property (approximately 10 acres), on a month to month basis, to a group that formerly operated at the stockyards as independent commission firms. This group will only handle hogs and sheep on the leased property. Canal has listed the entire property (approximately 30 acres) for sale with a local real estate agency. The sale of this property will be a priority in fiscal 2010. Canal will entertain all reasonable offers. The net value of this property was transferred to property held for development or resale as of October 31, 2009.
Public stockyards act much like a securities exchange, providing markets for all categories of livestock and fulfilling the economic functions of assembly, grading, and price discovery. The livestock handled by the Company’s stockyards include cattle, hogs, and sheep. Cattle and hogs may come through the stockyard facilities at two different stages, either as feeder livestock or slaughter livestock. The Company’s stockyards provide all services and facilities required to operate an independent market for the sale of livestock, including veterinary facilities, auction arenas, auctioneers, weigh masters and scales, feed and bedding, and security personnel. In addition, the stockyards provide other services including pure bred and other specialty sales for producer organizations. The Company promotes its stockyard business through public relations efforts, advertising, and personal solicitation of producers.
Actual marketing transactions at a stockyard are managed for livestock producers by market agencies and independent commission sales people to which the livestock are consigned for sale. These market agencies (some of which are owned and operated by the Company) and independent sales people receive commissions from the seller upon settlement of a transaction and the stockyard receives a yardage fee on all livestock using the facility which is paid within twenty-four hours of the sale. Yardage fees vary depending upon the type of animal, the extent of services provided by the stockyard, and local competition. Yardage revenues are not directly dependent upon market prices, but rather are a function of the volume of livestock handled. In general, stockyard livestock volume is dependent upon conditions affecting livestock production and upon the market agencies and independent commission sales people which operate at the stockyards. Stockyard operations are seasonal, with greater volume generally experienced during the first and fourth quarters of each fiscal year, during which periods livestock is generally brought to market.
Virtually all of the volume at Canal’s Sioux Falls stockyards was handled through market agencies and independent commission sales people, while the St. Joseph stockyards has solicitation operations of its own which account for approximately 50% of its livestock volume annually.
Canal intends to continue its soliciting efforts at its St. Joseph stockyards in fiscal 2010. Further, Canal tries to balance its dependence on market agencies and independent commission sales people in various ways, including: developing solicitation operations of its own; direct public relations; advertising and personal solicitation of producers on behalf of the stockyards; providing additional services at the stockyards to attract sellers and buyers; and providing incentives to market agencies and independent commission sales people for increased business.
Stockyard operations resulted in operating income of approximately $0.7 million while contributing approximately $2.6 million to Canal’s revenues for fiscal 2009. The Saint Joseph stockyard generated operating income of $167,000 while the Sioux Falls stockyard generated an operating loss of $96,000 in fiscal 2009. The sharp decrease in operating results experienced in fiscal 2008 is due primarily to the general weakness of the national economy coupled with a decrease in production by the smaller livestock producers who are the primary users of the Company’s stockyards and the loss of two independent commission firms at the Sioux Falls, South Dakota stockyards at the beginning of fiscal 2007.
Risk - Stockyard activities face a variety of risks and uncertainties related to the safeguarding of the national food supply which are beyond our control. Public confidence in the government’s efforts to safeguard the food supply is essential for the success of our stockyard operations. An outbreak of a disease such as bovine spongiform encephalopathy (BSE) better known as Mad Cow Disease could have a devastating impact on stockyard operations. For the company’s part we strictly follow all USDA regulations to ensure to the extent we can the safety of the food supply. Furthermore, stockyard activities in general may involve various degrees of risk, such as competition from other regional stockyards and sale barns, general market conditions and to a lesser extent interest rates.
Competition - Canal competes in the area of public stockyards with other regional public stockyards and sale barns, some of which are substantially larger and have greater financial resources than Canal. To a certain extent, Canal’s stockyard revenues are dependent on the ability of the market agencies and independent commission sales people at each of Canal’s stockyard locations to compete within the region.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. We continually evaluate our estimates, including those related to revenue recognition, bad debts, income taxes, fixed assets, restructuring, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Management believes the following critical accounting policies impact our most difficult, subjective and complex judgments used in the preparation of our consolidated financial statements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a further discussion of these and other accounting policies, please see Note 2 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report.
Revenue Recognition -- Lease and rental revenues are recognized ratably over the period covered. All real estate leases are accounted for as operating leases. Revenues from real estate sales are recognized generally when title to the property passes. Revenues from stockyard operations which consist primarily of yardage fees (a standard per head charge for each animal sold through the stockyards) and sale of feed and bedding are recognized at the time the service is rendered or the feed and bedding are delivered.
Art Inventory Held for Sale -- Inventory of art consisting of antiquities only as of October 31, 2009 is valued at the lower of cost, including direct acquisition and restoration expenses, or net realizable value on a specific identification basis. The nature of art makes it difficult to determine a replacement value. The most compelling evidence of a value in most cases is an independent appraisal. For fiscal 2009 the net realizable value of Canals remaining art inventory has been estimated by management based in part on the Company’s history of art sales in previous years and in part on the results of the independent appraisals done in previous years. However, because of the nature of art inventory, such determination is very subjective and, therefore, the estimated values could differ significantly from the amount ultimately realized.
Properties and Related Depreciation -- Properties are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of the properties. Such lives are estimated from 35 to 40 years for buildings and from 5 to 20 years for improvements and equipment.
Property held for Development or Resale -- Property held for development or resale consist of approximately 37 acres located in the Midwest of undeveloped land not currently utilized for corporate purposes nor included in any of the present operating leases. The Company constantly evaluates proposals received for the purchase, leasing or development of this asset. The land is valued at cost which does not exceed the net realizable value.
Long-Lived Assets -- The Company reviews the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the assets to the estimated future cash flows expected to result from the use of the asset. The measurement of the loss, if any, will be calculated as the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Results of Operations
The following tables set forth certain items in our statement of operations for the periods indicated:
While the Company is currently operating as a going concern, certain significant factors raise substantial doubt about the Company's ability to continue as a going concern. The Company has suffered recurring losses from operations and is obligated to continue making substantial annual contributions to its defined benefit pension plan. The financial statements do not include any adjustments that might result from the resolution of these uncertainties (See Note 1). Additionally, the accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Canal recognized net income of $0.1 million for 2009 as compared to the 2008 net loss of $0.1 million and the 2007 net loss of $0.9 million. After recognition of preferred stock dividend payments (accrued or paid in additional shares of preferred stock for each of fiscal 2009, 2008 and 2007 of $73,000 in 2009, $85,000 in 2008 and $105,000 in 2007, the results attributable to common stockholders were a net loss of $0.1 million in 2009, a net loss of $0.1 million in 2008 and a net loss of $1.1 million in 2007. Canal’s 2009 net loss of $0.1 million is due primarily to a $0.3 million increase in operating income from stockyard operations combined with a $0.1 million decrease in general and administrative expenses, which were offset by a $0.3 million decrease in operating income generated by sales of real estate. Canal’s 2008 net loss of $0.1 million was due primarily to the $0.3 million decrease in income from stockyard operations.
Canal's revenues from continuing operations consist of revenues from its real estate and stockyard operations. Revenues in 2008 increased by $0.8 million to $4.4 million as compared with 2007 revenues which had decreased by $0.8 million to $3.6 million as compared with 2006 revenues of $4.4 million. The fiscal 2009 increase in revenues is due primarily to the $0.3 million increase in sales of real estate offset to a certain extent by the $0.2 million decrease in revenues from stockyard operations. The fiscal 2008 increase in revenues is due primarily to the $1.1 million increase in sales of real estate offset to a certain extent by the $0.3 million decrease in revenues from stockyard operations.
Contractual Obligations
The following table summarizes the Company’s commitments as of October 31, 2009 to make future payments under its debt agreements and other contractual obligations (in 000's):
(a)
See Note 21 and Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(b)
The mortgage notes are due May 15, 2012 and are held entirely by the Company’s Chief Executive Officer and members of his family. These notes carry interest at 10% per annum and are collateralized by substantially all of Canal’s property, the stock of certain subsidiaries and its art inventories.
COMPARISON OF FISCAL YEARS ENDED OCTOBER 31, 2009 AND 2008
Real Estate Revenues
Real estate revenues for 2009 of $1.9 million accounted for 42.8% of the 2009 total revenues as compared to revenues of $1.7 million or 37.8% for 2008. Real estate revenues are comprised of sale of real estate (79.2% and 70.8%), rentals and other lease income from the rental of vacant land and certain structures (19.4% and 27.2%) and rental income from commercial office space in its Exchange Buildings (1.4% and 2.0%) for 2009 and 2008, respectively. The percentage variations in the year to year comparisons are due primarily to the $0.3 million increase in real estate sales for fiscal 2009.
Real Estate Expenses
Real estate expenses for 2009 of $0.9 million increased by $0.6 million (163.8%) from $0.3 million in 2008. Real estate expenses are comprised of cost of real estate sold (76.2% and 50.8%), labor, operating and maintenance (5.5% and 22.6%), depreciation and amortization (2.2% and 6.4%), taxes other than income taxes (2.4% and 7.5%), and general and administrative expenses (4.0% and 12.7%) for 2009 and 2008, respectively. The 2009 increase in the cost of real estate sold of $0.6 million is due to the increase in real estate sales discussed above. The percentage variations in the year to year comparisons of the other real estate operating expenses is also due to the sharp increase in cost of real estate sold in fiscal 2009.
Stockyard Revenues
Stockyard revenues for 2009 of $2.6 million accounted for 57.2% of the 2009 total revenues as compared to revenues of $2.8 million or 62.2% for 2008. Stockyard revenues are comprised of yard handling and auction (87.0% and 87.8%), feed and bedding income (7.0% and 6.8%), rental and other income (6.0% and 5.4%) for 2009 and 2008, respectively. The 2009 decrease in stockyard revenues as a percent of total revenues is due to the $0.3 million increase in sales of real estate this year. There were no other significant percentage variations in the year to year comparisons.
Stockyard Expenses
Stockyard expenses for 2009 of $2.5 million decreased by $0.5 million (14.8%) from $3.0 million in 2008. Stockyard expenses are comprised of labor and related costs (45.4% and 47.3%), operating and maintenance (27.8% and 28.6%), feed and bedding expense (5.2% and 5.9%), depreciation and amortization (0.8% and 0.7%), taxes other than income taxes (6.5% and 5.7%)
and general and administrative expenses (14.3% and 12.0%) for 2009 and 2008, respectively. The 2009 decrease is due primarily to certain operating efficiencies coupled with somewhat milder weather conditions experienced throughout the mid-west this past winter . There were no significant percentage variations in the year to year comparisons.
General and Administrative
General and administrative expenses for 2009 of $1.0 million decreased by $0.1 million (10.7%) from $1.1 million in 2008. The major components of general and administrative expenses are officers salaries (48.4% and 46.1%),pension expense (13.1% and 10.3%), insurance expense (8.3% and 11.3%), office salaries (9.6% and 9.7%), travel expense (3.6% and 4.3%), rent expense (2.1% and 2.1%) and legal fees (5.4% and 5.0%) for 2009 and 2008, respectively. There were no significant percentage variations in the year to year comparisons.
Interest Expense
Interest expense for 2009 of $132,000 decreased by $45,000 (25.2%) from $177,000 in 2008. The 2009 decrease is due primarily to the $270,000 decrease in long-term debt outstanding during fiscal 2009. Interest rates on Canal's variable rate mortgage notes averaged 10.00% in 2009 and 2008. At October 31, 2009 the outstanding balance of these notes was $992,000.
Interest and Other Income
Interest and other income of $32,000 for 2009 decreased $23,000 (41.8%) from $55,000 in fiscal 2008. Interest and other income is primarily comprised of dividend and interest income.
Income from Art Sales
In fiscal 2009, Canal recognized a loss from art operations of $5,000 which was unchanged from fiscal 2008. Art revenues are comprised of the proceeds from the sale of art. There were no art sales in fiscal 2009 or fiscal 2008. Art expenses are comprised of the cost of inventory sold and selling, general and administrative expenses. In both fiscal 2009 and fiscal 2008 Canal incurred selling, general and administrative expenses of $5,000. It is the Company’s policy to use the adjusted carrying value for sales, thereby reducing the valuation reserve proportionately as the inventory is sold.
Other Expense
There was no transaction of this nature in either fiscal 2009 or 2008.
COMPARISON OF FISCAL YEARS ENDED OCTOBER 31, 2008 AND 2007
Real Estate Revenues
Real estate revenues for 2008 of $1.7 million accounted for 37.8% of the 2008 total revenues as compared to revenues of $0.6 million or 16.5% for 2007. Real estate revenues are comprised of sale of real estate (70.8% and 12.5%), rentals and other lease income from the rental of vacant land and certain structures (27.2% and 82.3%) and rental income from commercial office space in its Exchange Buildings (2.0% and 5.2%) for 2008 and 2007, respectively. The 2008 increase in the cost of real estate sold is due to the increase in real estate sales discussed above. The percentage variations in the year to year comparisons of the other real estate operating expenses is also due to the sharp increase in cost of real estate sold in fiscal 2008.
Real Estate Expenses
Real estate expenses for 2008 of $0.3 million increased by $0.1 million (46.3%) from $0.2 million in 2007. Real estate expenses are comprised of cost of real estate sold (50.8% and 23.8%), labor, operating and maintenance (22.6% and 33.2%), depreciation and amortization (6.4% and 9.3%), taxes other than income taxes (7.5% and 11.1%),loss on abandonment (0.0% and 4.7%), and general and administrative expenses (12.7% and 17.9%) for 2008 and 2007, respectively. The 2008 increase in the cost of real estate sold is due to the increase in real estate sales discussed above. The percentage variations in the year to year comparisons of the other real estate operating expenses is also due to the sharp increase in cost of real estate sold in fiscal 2008.
Stockyard Revenues
Stockyard revenues for 2008 of $2.8 million accounted for 62.2% of the 2008 total revenues as compared to revenues of $3.0 million or 83.5% for 2007. Stockyard revenues are comprised of yard handling and auction (87.8% and 88.5%), feed and bedding income (6.8% and 6.0%), rental and other income (5.4% and 5.5%) for 2008 and 2007, respectively. The 2008 decrease in stockyard revenues as a percent of total revenues is due to the $1.1 million increase in sales of real estate this year. There were no significant percentage variations in the year to year comparisons.
Stockyard Expenses
Stockyard expenses for 2008 of $3.0 million increased by $0.1 million (1.2%) from $2.9 million in 2007. Stockyard expenses are comprised of labor and related costs (47.3% and 48.3%), operating and maintenance (28.6% and 27.3%), feed and bedding expense (5.9% and 5.5%), depreciation and amortization (0.7% and 0.7%), taxes other than income taxes (5.7% and 6.0%) and general and administrative expenses (12.0% and 12.2%) for 2008 and 2007, respectively. The 2008 increase is due primarily to the severe weather conditions experienced throughout the mid-west this past winter . There were no significant percentage variations in the year to year comparisons.
General and Administrative
General and administrative expenses for 2008 of $1.1 million decreased by $0.1 million (3.9%) from $1.1 million in 2007. The major components of general and administrative expenses are officers salaries (46.1% and 42.9%),pension expense (10.3% and 24.0%), insurance expense (11.3% and 5.8%), office salaries (9.7% and 8.4%), travel expense (4.3% and 3.6%), rent expense (2.1% and 1.7%) and legal fees (5.0% and 4.7%) for 2008 and 2007, respectively. The percentage variations in the year to year comparisons are due primarily to the significant decrease in pension expense for fiscal 2008.
Interest Expense
Interest expense for 2008 of $0.2 million decreased by $0.1 million (34.3%) from $0.3 million in 2007. The 2008 decrease is due primarily to the $1.4 million decrease in long-term debt outstanding during fiscal 2008. Interest rates on Canal's variable rate mortgage notes averaged 10.00% in 2008 and 2007. At October 31, 2008 the outstanding balance of these notes was $1,262,000.
Interest and Other Income
Interest and other income of $55,000 for 2008 decreased $71,000 (56.3%) from $126,000 in fiscal 2007. Interest and other income is primarily comprised of dividend and interest income. The 2008 decrease is due primarily to the collection of the mortgage note receivable associated with the 2004 sale of the St. Paul, Minnesota Exchange Building.
Income from Art Sales
In fiscal 2008, Canal recognized a loss from art operations of $5,000 as compared to income of $17,000 for fiscal 2007. Art revenues are comprised of the proceeds from the sale of art. There were no art sales in fiscal 2008, as compared to fiscal 2007 when Canal sold its remaining 13 pieces of contemporary art, twelve of which were to a related party (See note 24) generating gross proceeds of $159,000. Art expenses are comprised of the cost of inventory sold and selling, general and administrative expenses. In fiscal 2008, Canal incurred selling, general and administrative expenses of $5,000 as compared to fiscal 2007 cost of inventory sold of $144,000 (net of a valuation allowance of $406,000) and selling, general and administrative expenses of $19,000. Additionally, in fiscal 2007, Canal recognized a $89,122 valuation allowance against its remaining art inventory to reflect management’s estimate of the inventories net realizable value. It is the Company’s policy to use the adjusted carrying value for sales, thereby reducing the valuation reserve proportionately as the inventory is sold.
Other Expense
Other expense of $86,000 for 2007 was primarily related to the loss incurred by the Company on the sale of its joint venture investment. There was no transaction of this nature in fiscal 2008.
Related Party Transactions
Interest Expense Related Party - At October 31, 2009, all of Canal’s Long-Term Debt is held by the company’s Chief Executive Officer and members of his family. These notes pay interest at a rate of 10% per annum and come due May 15, 2012. Canal has incurred interest expense on these notes of $132,000, $177,000 and $269,000 for the years ended October 31, 2009, 2008 and 2007, respectively. At various times during fiscal 2009 certain holders of these notes agreed to defer interest payments. This deferred interest liability accrued additional interest at a rate of 10% per annum, while outstanding and was repaid as funds became available in fiscal 2009. As of October 31, 2009, the balance due under these notes was $992,000 all of which is classified as long-term debt related party.
In September, 2007 Canal sold its remaining 12 pieces of contemporary art to a group which included the Company’s Chairman. The 12 pieces were sold for $100,000 which was approximately $20,000 less than its carrying value. The sale was reviewed by the independent members of management with the Chairman abstaining as he was part of the purchasing group. In considering the adequacy of the offer, independent management had to give significant weight to the length of time (18 years) these pieces had been held for resale. In addition the independent management considered the softness of the current art market; general economic conditions; Canal’s cash flow needs and financial condition; and the future costs to Canal in continuing to maintain this inventory. After giving due consideration to all of these factors, independent management determined that it was in Canal’s best interest to sell its remaining contemporary art inventory at the price offered. The loss of approximately $20,000 has been shown as a distribution in stockholders’ equity for the year ended October 31, 2007. There were no transactions of this nature in fiscal 2008 or 2009.
Contractual Obligations
The following table summarizes the Company’s commitments as of October 31, 2009 to make future payments under its debt agreements and other contractual obligations (in 000's):
(a)
See Note 21 and Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(b)
The mortgage notes are due May 15, 2012 and are held entirely by the Company’s Chief Executive Officer and members of his family. These notes carry interest at 10% per annum and are collateralized by substantially all of Canal’s property, the stock of certain subsidiaries and its art inventories.
Liquidity and Capital Resources
While the Company is currently operating as a going concern, certain significant factors raise substantial doubt about the Company's ability to continue as a going concern. The Company has suffered recurring losses from operations and is obligated to continue making substantial annual contributions to its defined benefit pension plan. The financial statements do not include any adjustments that might result from the resolution of these uncertainties (See Note 1). Additionally, the accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company’s variable rate mortgage notes (originally issued in 1998 and amended several times since then) are due May 15, 2012 and are held entirely by the Company’s Chief Executive Officer and members of his family. These notes carry interest at the rate of ten percent per annum. These notes, among other things, prohibit Canal from becoming an investment company as defined by the Investment Company Act of 1940; restricts Canal’s ability to pay cash dividends or repurchase stock and require principal prepayments to be made only out of the proceeds from the sale of certain assets. As of October 31, 2009, the balance due under these notes was $992,000, all of which is classified as long-term debt-related party.
Cash and cash equivalents of $155,000 at October 31, 2009 increased $134,000 from $21,000 at October 31, 2008. Net cash used by operations in fiscal 2009 was $0.8 million. Substantially all of the 2009 net proceeds from the sale of real estate of $1.5 million was used in operations, to reduce long-term debt and to meet the company’s long-term pension liability.
At October 31, 2009 the Company’s current liabilities exceeded current assets by approximately $0.1 million which represented a decrease of $0.3 million over October 31, 2008 when current liabilities exceeded current assets by approximately $0.4 million.
As discussed above, Canal’s cash flow position has been under significant strain for the past several years. Canal continues to closely monitor and reduce where possible its operating expenses and plans to continue its program to develop or sell the property it holds for development
or resale as well as to reduce the level of its art inventories to enhance current cash flows. Management believes that its income from operations combined with its cost cutting program and planned reduction of its antiquities art inventory will enable it to finance its current business activities. There can, however, be no assurance that Canal will be able to effectuate its planned antiquities art inventory reductions or that its income from operations combined with its cost cutting program in itself will be sufficient to fund operating cash requirements.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain quarterly financial data for the eight quarters ended October 31, 2009. This quarterly information is unaudited, has been prepared on the same basis as the annual financial statements, and, in our opinion, reflects all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the information for periods presented.
ITEM 7A.
ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risk.
The Securities and Exchange Commission’s rule related to market risk disclosure requires that we describe and quantify our potential losses from market risk sensitive instruments attributable to reasonably possible market changes. Market risk sensitive instruments include all financial or commodity instruments and other financial instruments (such as investments and debt) that are sensitive to future changes in interest rates, currency exchange rates, commodity prices or other market factors. We are not exposed to market risks from changes in foreign currency exchange rates or commodity prices. We do not hold derivative financial instruments nor do we hold securities for trading or speculative purposes. Under our current policies, we do not use interest rate derivative instruments to manage our exposure to interest rate changes.
At October 31, 2009, the following long-term debt-related party financial instruments are sensitive to changes in interest rates by expected maturity dates:
(A)
Long-term debt related party (See Note 5): it is not practicable to estimate the fair value of the related party debt (See Note 18).
ITEM 8.
ITEM 8.
Financial Statements and Supplemental Data
The financial statements filed as part of this Annual Report are identified in the Index to Consolidated Financial Statements on page hereto and are set forth on pages through included in Item 15(A) of the report.
ITEM 9.
ITEM 9.
Changes and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Due to financial constraints Canal’s fiscal 2009 Financial Statements have been presented without audit.
ITEM 9A(T).
ITEM 9A(T).
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15 (e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Annual Report. Based on such evaluation, such officers have concluded that, as of such date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to Canal Capital Corporation (and its consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.
(b) Management’s Report on Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). In evaluating the Company’s internal control over financial reporting, management has adopted the framework of Internal Control-Integrated Framework issued by the Committee of Sponsoring organizations of the Treadway Commission (the “COSO Framework”). Under the supervision and with the participation of our management including the Chief Executive Officer and Chief Financial Officer of the Company, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting as of the end of the period covered by this report. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principals. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principals, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. However, because of inherent limitations internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Based on management’s evaluation under the COSO Framework, it has concluded that the Company’s internal control over financial reporting, was, as of the end of the period covered by this report, effective.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. The Company’s internal control over financial reporting was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only for this report.
(C) Changes in Internal Control over Financial Reporting. There were no significant changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B.
Other Information
None.
PART III
ITEM 10.
ITEM 10.
Directors and Executive Officers of the Registrant
The company’s Board of Directors is comprised of two non-independent directors, the Chairman, Asher B. Edelman and the President, Michael E. Schultz. Due to the limited number of directors, the creation of numerous independent committees is not feasible. During fiscal 2009, the Board of Directors held three meetings.
In addition to Messrs. Edelman and Schultz, there is one additional executive officer, Reginald Schauder, Vice President and Chief Financial Officer. Due to, among other things, the financial condition of the company and the limited number of executive officers, the company has not adopted a code of ethics that applies to the Company’s principle executive officer, principle financial and accounting officer, or persons performing similar functions. The Company has not adopted such a code of ethics because all of management’s efforts have been directed to maintaining the business of the Company. At a later time, a code of ethics may be adopted by the Board of Directors.
The following information with respect to the principal occupation or employment of each director and executive officer and the name and principal business of the Company or other organization in which such occupation or employment is carried on, and in regard to other affiliations and business experience during the past five years, has been furnished to the Company by the respective directors.
Asher B. Edelman, age 70, has been Chairman of the Board since September 1991 and prior thereto Vice Chairman of the Board and Chairman of the Executive Committee since February, 1985. Mr. Edelman was a Director, Vice-Chairman of the Board, and Chairman of the Executive Committee of The CattleSale Company formerly known as Dynacore Holdings Corporation, ("CattleSale") from March 1985 to December 2003.
Michael E. Schultz, age 73, has been President and Chief Executive Officer since September 1991 and a Director since 1985; and had been a partner in the law firm of Ehrenkranz, Ehrenkranz & Schultz until December 31, 1994.
Reginald Schauder, age 60, has been Vice President, Chief Financial Officer and Treasurer since January 1989 and assumed responsibility as Secretary of the Company in September 1995.
There are no family relationships between any of the aforementioned executive officers of the Registrant and such executive officers were elected to serve for a term of one year or until the election and qualification of their respective successors.
ITEM 11.
ITEM 11.
Executive Compensation
The following table summarizes the compensation of the Company's Chief Executive Officer and the other two executive officers of the Company whose salary for fiscal 2009 exceeded $100,000.
SUMMARY COMPENSATION TABLE - Annual Compensation
In order to improve the Company’s cash flow, Messrs. Edelman and Schultz each agreed to defer receipt for $55,000 of their annual salaries effective June 1, 2001. Additionally, effective November 1, 2006 Mr. Schauder agreed to defer receipt for $12,000 of his annual salary. These amounts are accrued by the Company with payments made from time to time as cash becomes available to the Company. At October 31, 2009, the total liability under these agreements was $0. Additionally, Mr. Schultz has deferred interest and other reimbursable expenses during the year. All of the outstanding liability under these agreements were repaid as funds become available in fiscal 2009.
Retirement Plans - The Canal Capital Corporation Retirement Plan (the "Retirement Plan") provides benefits to eligible employees of the Company and its subsidiaries and affiliates. Directors who are not employees are not eligible to participate in the Retirement Plan. The Retirement Plan is administered by the Company. All Company contributions under the Retirement Plan were deposited with an insurance company and invested in a group annuity contract through May 30, 1985. Thereafter, all Company contributions have been held in trust under a Trust Agreement between the Company and the Executive Committee of the Board of Directors, as trustee. Contributions to the Retirement Plan are determined on an actuarial basis, without individual allocation.
In October 1991, each of three executive officers of the Company voluntarily withdrew from participation in the Retirement Plan. As a result of prior service, Messrs. Edelman and Schauder have deferred annual accumulated benefits of approximately $1,900 and $600, respectively, as of October 31, 2009. Mr. Schultz has no benefit under the Retirement Plan. For further information on the Retirement Plan (see Note 21).
COMPENSATION OF DIRECTORS
Fees and Expenses; Other Benefits
Directors who are not officers of the Company (if any) do not receive cash compensation for service as Directors. Directors are reimbursed for expenses incurred in attending Board and Committee meetings, including those for travel, food and lodging. There have been no expense reimbursements made in the past three years.
Stock Options for Directors
The Company maintains an option plan for the benefit of directors of the Company -- the 1985 Directors' Stock Option Plan (the "1985 Plan"), which was approved by the stockholders of the Company on March 12, 1986. Pursuant to the 1985 Plan, a maximum of 264,000 shares of common stock, $0.01 par value per share, of the Company have been reserved for issuance to directors and members of the Executive Committee of the Company and its subsidiaries.
Options granted under the 1985 Plan are non-qualified stock options and have an exercise price equal to 100% of fair market value of the shares on the date of grant. The options may be exercised no earlier than one year from the date of grant and no later than ten years after the date of grant. Under the 1985 Plan, options covering 22,000 shares are automatically granted to each new director upon the effective date of his election to office and options covering 5,500 shares are automatically granted to each new member of the Executive Committee upon the effective date of his appointment to office.
During the 2009 fiscal year, no options under the 1985 plan were granted and no options previously granted were exercised. At October 31, 2009, there were no options outstanding under the 1985 Plan.
Compensation Committee - Interlocks and Insider Participation
The Board of Directors (comprised of Asher B. Edelman, Chairman of the Board and Chairman of the Executive Committee, Michael E. Schultz, President and Chief Executive Officer) determines the compensation of the Chief Executive Officer and the Company's other executive officers and administers the Company's 1984 Employees Stock Option Plan and 1985 Directors Stock Option Plan.
In connection with the Company's investment activities, if any, the Executive Committee of the Board of Directors, through Mr. Edelman, has the authority to invest funds of the Company in securities of other companies. At October 31, 2009, the Company had no such investments.
ITEM 12.
ITEM 12.
Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
To the knowledge of the Company, the only beneficial owners of 5% or more of the voting stock of the Company (other than those listed below under "Securities Owned by Management") as of January 15, 2010 were:
SECURITIES BENEFICIALLY OWNED
(a) Under applicable regulations of the Securities and Exchange Commission (the "SEC"), a person who has or shares the power to direct the voting or disposition of stock is considered a "beneficial owner". Each individual referred to in the above table has the sole power to direct the voting and disposition of the shares shown.
(b) The number reported herein for Mr. Walters includes 117,220 shares owned by Mr. Walters, 117,220 shares owned by Whale Securities Co., L.P., of which Mr. Walters is Chief Executive Officer. Mr. Walters has sole power to vote and dispose of the shares described herein.
(c) For additional information about beneficial ownership see "Securities Owned by Management" below.
SECURITIES OWNED BY MANAGEMENT
The following table sets forth certain information as of January 15, 2010, with respect to the beneficial ownership of the Company's Common Stock with respect to all persons who are directors, each of the executives named in the Executive Compensation Table and by all directors and officers as of the most practical date. Unless otherwise indicated, the percentage of stock owned constitutes less than one percent of the outstanding Common Stock and the beneficial ownership for each person consists of sole voting and sole investment power.
(a) Under applicable regulations of the Securities and Exchange Commission (the "SEC"), a person who has or shares the power to direct the voting or disposition of stock is considered a "beneficial owner". Each director and officer referred to in the above table has the sole power to direct the voting and disposition of the shares shown, except as otherwise set forth in footnote (e)below.
(b) The number reported herein for Mr. Edelman includes 31,300 shares held in Mr. Edelman's retirement plan, 1,017,220 shares owned by A.B. Edelman Limited Partnership ("Edelman Limited Partnership"), of which Mr. Edelman is the sole general partner, 590,186 shares of common stock owned by the Edelman Family Partnership, L.P. (“Edelman Family Partnership”), of which Mr. Edelman is the general partner, 43,830 shares of common stock owned by Edelman Value Partners, L.P. (“Value Partners”), of which Mr. Edelman is the sole stockholder of the general partner, 26,620 shares of common stock held by Canal Capital Corporation Retirement Plan (“Canal Retirement Plan”), of which Mr. Edelman serves as a trustee, 8,400 shares owned by Aile Blanche, Inc., of which Mr. Edelman is the sole stockholder and 3,399 shares owned by Felicitas Partners, L.P. ("Felicitas"), the general partner of which is Citas Partners ("Citas") of which Mr. Edelman is the controlling general partner. Edelman Limited Partnership has the sole power to vote and dispose of the shares owned by it, which power is exercisable by Mr. Edelman as the sole general partner of Edelman Limited Partnership. Edelman Family Partnership has the sole power to vote and dispose of the shares owned by it, which power is exercisable by Mr. Edelman as the general partner. Value Partners has shared power to vote and dispose of the shares owned by it. The power to dispose of such shares is exercisable by A. B. Edelman Management Company, Inc., a corporation controlled by Mr. Edelman as the sole stockholder. Canal Retirement Plan has the sole power to vote and dispose of the shares owned by it, which power is exercisable by Mr. Edelman as trustee. Aile Blanche, Inc. has the sole power to vote and dispose of the shares owned by it, which power is exercisable by Mr. Edelman as President. Felicitas has the sole power to vote and dispose of the shares owned by it, which power is exercisable by Mr. Edelman as the controlling general partner of Citas. Additionally, the number reported herein for Mr. Edelman includes 188,650 shares of common stock held in three Uniform Gifts to Minors Act accounts for the benefit of Mr. Edelman's children of which Mr. Edelman is the custodian.
(c) Represents 100 shares owned directly.
(d) Represents 58,835 shares owned directly.
(e) The number reported herein for Mr. Schultz excludes 26,620 shares of common stock held by the Canal Capital Corporation Retirement Plan of which Mr. Schultz serves as a trustee, as to which Mr. Schultz expressly disclaims beneficial ownership.
ITEM 13.
ITEM 13.
Certain Relationships and Related Transactions
See:
Item 11 "Compensation Committee Interlocks and Insider Participation"
ITEM 14.
ITEM 14.
Principal Accounting Fees and Services
Due to financial constraints Canal’s fiscal 2009 Financial Statements have been presented by management without audit.
The following fees were billed to us by Todman & Co., CPAs, PC during fiscal 2009 and 2008:
Audit-related fees include statutory audits and Sarbanes-Oxley related consultation. Other fees primarily consist of routine advisory services.
The Board of Directors of Canal has determined that Todman & Co., CPAs, PC provision of non-audit services is compatible with maintaining the independence of Todman & Co., CPAs PC.
PART IV
ITEM 15.
ITEM 15.
Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1.
Financial Statements and Notes
See accompanying index to consolidated financial statements.
2.
Schedules and Supplementary Note
None
3.
Exhibits
See accompanying index to exhibits.
(b) 1.
Reports on Form 8-K
None
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
Item 15(a)(3).
Exhibits -
The following exhibits required by Item 601 of Regulations S-K are filed as part of this report. For convenience of reference, the exhibits are listed according to the numbers appearing in Table I to Item 601 of Regulation S-K. Each exhibit which is incorporated by reference and the document in which such exhibit was originally filed are indicated in parentheses immediately following the description of such exhibit.
Exhibit No.
3(a)
Restated Certificate of Incorporation (filed as Exhibit 3(a) to the Registrant's Registration Statement on Form 10 filed with the Securities and Exchange Commission on May 3, 1984 (the "Form 10") and incorporated herein by reference).
3(b)
Bylaws (filed as Exhibit 3(b) to the Registrant's Registration Statement on Form 10 and incorporated herein by reference).
3(c)
Certificate of Amendment of the Restated Certificate of Incorporation dated September 22, 1988 (filed as Exhibit 3(c) to the Registrant's Form 10-K filed January 29, 1989 and incorporated herein by reference).
10(a)
Stock Option Plan (1) (see Exhibit A included in the Registrant's Proxy Statement dated January 31, 1985, relating to the annual meeting of stockholders held March 18, 1985, which exhibit is incorporated herein by reference).
10(b)
Form of Incentive Stock Option Agreement (filed as Exhibit 10(b) to the Registrant's Form 10-K filed January 31, 1986 and incorporated herein by reference).
10(c)
Directors' Stock Option Plan (1) (See Exhibit A included in the Registrant's Proxy Statement dated January 31, 1986, relating to the annual meeting of stockholders held March 12, 1986, which exhibit is incorporated herein by reference).
10(d)
Form of Directors' Stock Option Agreement (filed as Exhibit 10(ab) to the Registrant's Form 10-K filed January 29, 1986 and incorporated herein by reference).
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS, CONTINUED
Exhibit No.
10(e)
Stock Pledge and Security Agreement dated January 8, 1998 by and between Canal Capital Corporation, SY Trading Corporation and CCC Lending Corporation (filed as Exhibit 10 (ai) to the Registrant’s Form 10-K filed January 30, 1998 and incorporated herein by reference).
10(f)
Security Agreement dated January 8, 1998 by and between Canal Capital Corporation, Canal Galleries Corporation, Canal Arts Corporation and CCC Lending Corporation (filed as Exhibit 10 (an) to the Registrant’s Form 10-K filed January 30, 1998 and incorporated herein by reference).
10(g)
$1,000,000 Promissory Note dated January 8, 1998 by and between Michael E. Schultz and Canal Capital Corporation (filed as Exhibit 10 (ao) to the Registrant’s Form 10-K filed January 30, 1998 and incorporated herein by reference).
10(h)
$242,000 Promissory Note dated January 8, 1998 by and between Michael E. Schultz Defined Benefit Trust and Canal Capital Corporation (filed as Exhibit 10 (ap) to the Registrant’s Form 10-K filed January 30, 1998 and incorporated herein by reference).
10(i)
$229,000 Promissory Note dated January 8, 1998 by and between Lora K. Schultz and Canal Capital Corporation (filed as Exhibit 10 (aq) to the Registrant’s Form 10-K filed January 30, 1998 and incorporated herein by reference).
Subsidiaries of the registrant.
Certification Pursuant to Rule 13a-14(a)/15d-14(A).
Certification Pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbane-Oxley Act of 2002.
INVESTOR INFORMATION
Annual Meeting
Corporate Headquarters
The Annual Meeting of Shareholders of Canal Capital Corporation will be held in our offices at 4 Morris Street, Port Jefferson Station NY, 11776 on a date to be announced.
Morris Street, Port Jefferson
Station, NY 11776
Stock Certificates
The Board of Directors of Canal Capital Corporation urges all shareholders to vote their shares in person or by proxy and thus participate in the decisions that will be made at the annual meeting.
Inquiries regarding change of name or address, or to replace lost certificates should be made directly to American Stock Transfer and Trust Co., 59 Maiden Lane, New York, NY 10007 or telephone (718) 921-8200
Stock Listing
Canal Capital Corporation common stock is traded on the over-the-counter market through the "pink sheets".
Auditors
None
Investment Analyst Inquiries
General Counsel
Analyst inquiries are welcome.
Proskauer Rose LLP
Broadway
Phone or write: Michael E. Schultz,
New York, NY 10036
President at (631) 234-0140
(212) 969-3000
FORM 10-K -- ITEM 15(a)(1) and (2)
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The following documents are filed as part of this report:
MANAGEMENTS REPORT
To the Stockholders of Canal Capital Corporation:
As a Stockholder of Canal Capital Corporation you should be aware that due to financial constraints Canal’s fiscal 2009 Financial Statements have been presented in this Form 10k without benefit of independent audit.
Management has prepared the accompanying consolidated balance sheets of CANAL Capital Corporation (a Delaware corporation) and Subsidiaries (the “Company”) as of October 31, 2009 and 2008, and the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended October 31, 2009.
Canals’ fiscal 2009 consolidated financial statements have been prepared, by management, in accordance with accounting principles generally accepted in the United States. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. Management continually evaluates our estimates, including those related to revenue recognition, bad debts, income taxes, fixed assets, restructuring, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Dated: January 27, 2010
Dated: January 27, 2010
/S/ Michael E. Schultz
/S/ Reginald Schauder
Chief Executive Officer
Chief Financial officer
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME
Continued
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 2009(UNAUDITED), 2008(AUDITED), AND 2007(AUDITED)
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENT
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Continued
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Canal Capital Corporation ("Canal"), incorporated in the state of Delaware in 1964, commenced business operations through a predecessor in 1936.
General - While the Company is currently operating as a going concern, certain significant factors raise substantial doubt about the Company's ability to continue as a going concern. The Company has suffered recurring losses from operations and is obligated to continue making substantial annual contributions to its defined benefit pension plan. The financial statements do not include any adjustments that might result from the resolution of these uncertainties. Additionally, the accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Canal continues to closely monitor and reduce where possible its operating expenses and plans to continue its program to develop or sell the property it holds for development or resale as well as to reduce the level of its antiquities art inventories to enhance current cash flows. Management believes that its income from operations combined with its cost cutting program and planned reduction of its antiquities art inventory will enable it to finance its current business activities. There can, however, be no assurance that Canal will be able to effectuate its planned art inventory reductions or that its income from operations combined with its cost cutting program in itself will be sufficient to fund operating cash requirements.
Canal is engaged in two distinct businesses - real estate and stockyard operations.
Real Estate Operations - Canal's real estate properties are located in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri, Omaha, Nebraska and Sioux Falls, South Dakota. The properties consist, for the most part, of an Exchange Building (commercial office space), land and structures leased to third parties (rail car repair shops, lumber yards and various other commercial and retail businesses) as well as vacant land available for development or resale. Its principal real estate operating revenues are derived from lease income from land and structures leased to various commercial and retail enterprises, rental income from its Exchange Building, and proceeds from the sale of real estate properties. In addition to selling what was excess stockyard property, the company entertains any offers to purchase, develop and restructure the real estate properties currently under operating leases, stockyard operating properties and properties held for development or resale in order to support cash flow and to enhance the value of the existing properties and surrounding real estate.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stockyard Operations - Canal currently operates one central public stockyard located in St. Joseph, Missouri. Canal closed the stockyard it operated in Sioux Falls, South Dakota in December 2009(collectively the “Stockyards”).
Sioux Falls Stockyard Closure - In December 2009, after extensive efforts to reorganize and return this stockyard to profitability, Canal ceased all stockyard operations at its Sioux Falls, South Dakota location. Canal now leases a portion of this property (approximately 10 acres), on a month to month basis, to a group that formerly operated at the stockyards as independent commission firms. This group will only handle hogs and sheep on the leased property. Canal has listed the entire property (approximately 30 acres) for sale with a local real estate agency. The sale of this property will be a priority in fiscal 2010. Canal will entertain all reasonable offers. The net value of this property was transferred to property held for development or resale as of October 31,2009.
Public stockyards act much like a securities exchange, providing markets for all categories of livestock and fulfilling the economic functions of assembly, grading, and price discovery. The livestock handled by the Company’s stockyards include cattle, hogs, and sheep. Cattle and hogs may come through the stockyard facilities at two different stages, either as feeder livestock or slaughter livestock. The Company’s stockyards provide all services and facilities required to operate an independent market for the sale of livestock, including veterinary facilities, auction arenas, auctioneers, weigh masters and scales, feed and bedding, and security
personnel. In addition, the stockyards provide other services including pure bred and other specialty sales for producer organizations. The Company promotes its stockyard business through public relations efforts, advertising, and personal solicitation of producers.
Actual marketing transactions at a stockyard are managed for livestock producers by market agencies and independent commission sales people to which the livestock are consigned for sale. These market agencies (some of which are owned and operated by the Company) and independent sales people receive commissions from the seller upon settlement of a transaction and the stockyard receives a yardage fee on all livestock using the facility which is paid within twenty-four hours of the sale. Yardage fees vary depending upon the type of animal, the extent of services provided by the stockyard, and local competition. Yardage revenues are not directly dependent upon market prices, but rather are a function of the volume of livestock handled. In general, stockyard livestock volume is dependent upon conditions affecting livestock production and upon the market agencies and independent commission sales people which operate at the stockyards. Stockyard operations are seasonal, with greater volume generally experienced during the first and fourth quarters of each fiscal year, during which periods livestock is
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Virtually all of the volume at Canal’s Sioux Falls stockyards was handled through market agencies and independent commission sales people, while the St. Joseph stockyards has solicitation operations of its own which account for approximately 50% of its livestock volume annually.
Canal intends to continue its soliciting efforts at its St. Joseph stockyards in fiscal 2010. Further, Canal tries to balance its dependence on market agencies and independent commission sales people in various ways, including: developing solicitation operations of its own; direct public relations; advertising and personal solicitation of producers on behalf of the stockyards; providing additional services at the stockyards to attract sellers and buyers; and providing incentives to market agencies and independent commission sales people for increased business.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
A) Principles of Consolidation -- The consolidated financial statements include the accounts of Canal Capital Corporation ("Canal") and its wholly-owned subsidiaries (“the Company”). All material intercompany balances and transactions have been eliminated in consolidation.
B) Investments in Joint Venture -- Canal’s Investment in joint venture in which ownership interest was approximately 50% was accounted for under the equity method. During the 2007 fiscal year the Company sold its only joint venture investment back to its Joint Venture partners at the Company’s original purchase price of $25,000 and recorded a loss of approximately $86,000 on the sale.
C) Properties and Related Depreciation -- Properties are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of the properties. Such lives are estimated from 35 to 40 years for buildings and from 5 to 20 years for improvements and equipment.
Property held for Development or Resale -- Property held for development or resale consist of approximately 37 acres located in the midwest of undeveloped land not currently utilized for corporate purposes nor included in any of the present operating leases. The Company constantly evaluates proposals received for the purchase, leasing or development of this asset. The land is valued at cost which does not exceed the net realizable value.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long-Lived Assets - The Company reviews the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the assets to the estimated future cash flows expected to result from the use of the asset. The measurement of the loss, if any, will be calculated as the amount by which the carrying amount of the asset exceeds the fair value of the asset.
D) Expenditures for maintenance and repairs are charged to operations as incurred. Significant renewals and betterments are capitalized. When properties are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in current income.
E) Art Inventory Held for Sale - Inventory of art consisting of antiquities only as of October 31, 2009 is valued at the lower of cost, including direct acquisition and restoration expenses, or net realizable value on a specific identification basis. The nature of art makes it difficult to determine a replacement value. The most compelling evidence of a value in most cases is an independent appraisal. For fiscal 2009 the net realizable value of Canals remaining art inventory has been estimated by management based in part on the Company’s history of art sales in previous years and in part on the results of the independent appraisals done in previous years. However, because of the nature of art inventory, such determination is very subjective and, therefore, the estimated values could differ significantly from the amount ultimately realized.
F) Income Taxes -- Canal and its subsidiaries file a consolidated Federal income tax return. The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities.
G) Accounting Estimates -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
H) Stockyard Inventory - Inventory is stated at the lower of cost or market. Cost is determined using the first-in, first-out method.
I) Revenue Recognition -- Lease and rental revenues are recognized ratably over the period covered. All real estate leases are accounted for as operating leases. Revenues from real estate sales are recognized generally when title to the property passes. Revenues from stockyard operations which consist primarily of yardage fees (a standard per head charge for each animal sold through the stockyards) and sale of feed and bedding are recognized at the time the service is rendered or the feed and bedding are delivered.
Other Income (Expense) Items -- Art sales are recognized using the specific identification method, when the piece is shipped to the purchaser. Art owned by Canal which is on consignment, joint venture, or being examined in contemplation of sale is not removed from inventory and not recorded as a sale until notice of sale or acceptance has been received. The sale of investments available for sale, if any, are recognized, on a specific identification method, on a trade date basis.
J) Statements of Cash Flows -- The company considers all short-term investments with a maturity of three months or less to be cash equivalents. Cash equivalents primarily include bank, broker and time deposits with an original maturity of less than three months. These investments are carried at cost, which approximates market value. Canal made state income tax payments of $3,000, $4,000 and $5,000 and interest payments of $132,000, $177,000 and $269,000 in 2009, 2008 and 2007, respectively.
K) Comprehensive Income (Loss) -- The Company’s only adjustments for each classification of the comprehensive income was for minimum pension liability.
L) Earnings (Loss) Per Share -- Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common shares by the weighted average of common shares outstanding during the period. Diluted earnings (loss) per share adjusts basic earnings (loss) per share for the effects of convertible securities, stock options and other potentially dilutive financial instruments, only in the period in which such effect is dilutive. There were no dilutive securities in any of the periods presented herein. The shares issuable upon the exercise of stock options are excluded from the calculation of net income (loss) per share as their effect would be antidilutive.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
M) Reclassification -- Certain prior year amounts have been reclassified to conform to the current year presentation.
N) Recently Issued Accounting Pronouncements -- In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a frame work for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements. SFAS No. 157 becomes effective for fiscal years beginning after November 15, 2007, which is the Company’s 2009 fiscal year beginning on November 1, 2008. In February 2008, the FASB issued FASB staff position No. 157-2, effective date of FASB statement No. 157 (FSP 157-2), which delayed the effective date of SFAS 157 for certain non-financial assets and non-financial liabilities to fiscal years beginning after November 15, 2008. The Company continues to evaluation the impact of SFAS No. 157 and FSP 157-2 on its consolidated financial statements, but at this time does not expect the potential impact of adopting this standard to have a material effect on the Company’s financial position, results of operations or cash flows.
In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162" (“SFAS 168"). Under SFAS 168, the FASB Accounting Standards Codification (Codification) will become the sole source of authoritative U.S. GAAP to be applied by non-governmental entities. SFAS 168 is effective for the financial statements issued for interim and annual periods ending after September 15, 2009. The adoption will have no material impact on the Company’s consolidated financial statements but will require that interim and annual filings include references to the Codification.
3.
IMPAIRMENT LOSS ON LONG-LIVED ASSETS
The Company reviews the values of its long-lived assets annually. There was no impairment in the value of Canal’s long-lived assets to be recorded as of October 31, 2009, 2008 and 2007.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4.
BORROWINGS
The Company’s variable rate mortgage notes (originally issued in 1998) are due May 15, 2012 and are held entirely by the Company’s Chief Executive Officer and members of his family. These notes carry interest at the rate of ten percent per annum. These notes, among other things, prohibit Canal from becoming an investment company as defined by the Investment Company Act of 1940; require Canal to maintain minimum net worth; restrict Canal’s ability to pay cash dividends or repurchase stock and require principal prepayments to be made only out of the proceeds from the sale of certain assets. As of October 31, 2009, the balance due under these notes was $992,000, all of which is classified as long-term debt-related party. Canal has incurred interest expense on these notes of $132,000, $177,000 and $269,000 for the years ended October 31, 2009, 2008 and 2007, respectively.
At October 31, 2009, substantially all of Canal's real properties, the stock of certain subsidiaries and its art inventories are pledged as collateral for the following obligations:
The following table summarizes the Company’s commitments as of October 31, 2009 to make future payments under its debt agreements and other contractual obligations (in 000's):
(a)
See Note 22 and Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(b)
The mortgage notes are due May 15, 2012 and are held entirely by the Company’s Chief Executive Officer and members of his family. These notes carry interest at 10% per annum and are collateralized by substantially all of Canal’s property, the stock of certain subsidiaries and its art inventories.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5.
INCOME TAXES
Significant components of the Company’s deferred asset/(liability) as of October 31, 2009, 2008 and 2007 include differences in depreciation methods, inventory valuation allowance and net operating loss carryforward ($ 000's Omitted):
Actual income tax (benefit) expense differs from the “expected” tax expense computed by applying the U.S. federal corporate tax rate of 35% to income(loss) before income taxes as follows (& 000's Omitted):
At October 31, 2009, the Company has net operating loss carryforwards of approximately $10,200,000 that expire through 2029. For financial statement purposes, a valuation allowance has been provided to offset the net deferred tax assets due to the cumulative net operating losses incurred during recent years. Such allowance increased (decreased) by approximately $(200,000), $80,000 and $(550,000) during the years ended October 31, 2009, 2008 and 2007, respectively. The valuation allowance will be reduced when and if, in the opinion of management, significant positive evidence exists which indicates that it is more likely than not that the Company will be able to realize its deferred tax assets.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6.
LEASE COMMITMENTS
In July 2009 Canal terminated its lease on approximately 1,000 square feet of office space in Hauppauge, New York at a monthly rental of approximately $1,900. Canal relocated its New York operations to approximately 200 square feet of rent free office space located in Port Jefferson Station, New York. There are no lease commitments extending past five years. Net rent expense under this operating lease was $20,000, $23,000 and $19,000 for the years ended October 31, 2009, 2008 and 2007.
7.
STOCK OPTION PLAN
Under Canal's 1984 Employee and 1985 Directors Stock Option Plans, $550,000 and 264,000 shares, respectively, of Canal's common stock have been reserved for option grants. The purchase price of shares subject to each option granted, under the Employee and Directors Plans, will not be less than 85% and 100%, respectively, of their fair market value at the date of grant. Options granted under both plans are exercisable for 10 years from the date of grant, but no option will be exercisable earlier than one year from the date of grant. Under the Employee Plan, stock appreciation rights may be granted in connection with stock options, either at the time of grant of the options or at any time thereafter. No stock appreciation rights have been granted under this plan. There were no exercisable options outstanding under either of these plans at October 31, 2009, 2008 or 2007.
8.
PENSION VALUATION RESERVE
In September 2006, the FASB issued, SFAS 158, Employers’ Accounting for Defined Benefit Pension and Other Retirement Plans, an amendment of SFAS No. 87, 88, and 132(R) to improve financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. This statement also improves financial reporting by requiring an employer to measure funded status of a plan as of the date of its year end statement of financial position.
The Pension Valuation Reserve represents the excess of additional minimum pension liability required under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 87 amended by SFAS 158 over the unrecognized prior service costs of former stockyard employees. Such excess arose due to the decline in the market value of pension assets available for pension benefits of former employees, which benefits were frozen at the time the stockyard operations were sold in 1989. The additional minimum pension liability will be expensed as actuarial computations of annual pension cost recognize the deficiency that exists.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9.
ART INVENTORY HELD FOR SALE
Canal is in the process of selling, in an orderly manner, its remaining antiquities art inventory. This will be accomplished primarily through consignment arrangements with various independent art dealers and through sale at public art auctions. The Company's ability to dispose of its art inventory is dependent primarily on general economic conditions and the competitiveness of the art market itself. Accordingly, there can be no assurance that Canal will be successful in selling its art inventory.
There were no art sales in fiscal 2009. Canal's art operations have generated a loss of $5,000, a loss of $5,000 and income of $17,000 on revenues of approximately $0, $0 and $59,000 for the years ended October 31, 2009, 2008 and 2007, respectively. In fiscal 2007, Canal sold its remaining 13 pieces of contemporary art, 12 of which were sold to a related party, (see note 23). Additionally, in fiscal 2007, Canal recognized a $89,122 valuation allowance against its remaining art inventory to reflect management’s estimate of the inventories net realizable value of $100,000 at both October 31, 2009 and 2008.
Antiquities art represented 100% of total art inventory at both October 31, 2009 and 2008, respectively.
The Company classified its art inventory for the two years ended October 31, 2009 and 2008 as follows ($ 000's Omitted):
The Company’s valuation allowance for the three years ended October 31, 2009, 2008 and 2007 is as follows:
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The amount recorded as the current portion of art inventory represents management's estimate of the inventory expected to be sold during the next twelve months. The Company recorded a valuation allowance against the current portion of its inventory to reduce it to its estimated net realizable value based on the history of losses sustained on inventory items sold in the current and previous years. In fiscal 2007, Canal recognized a $89,122 valuation allowance against its remaining art inventory to reflect management’s estimate of the inventories net realizable value at October 31, 2007. Additionally, in fiscal 2007 Canal applied against sales $405,600 of the valuation allowance against its art inventory, thereby, decreasing the total valuation allowance to $396,522 as of October 31, 2007 as compared to $713,000 at October 31, 2006.
10.
401(k) Plan
The Company has a defined contribution 401(k) plan covering substantially all of its full time stockyard employees. The plan provides for employee contributions and 401(k) matching contributions of up to 2 ½% of the employee’s annual salary by the Company. The Company made 401(k) matching contributions of approximately $16,000 and $18,000 for each of fiscal 2009 and 2008, respectively.
11.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments (all of which are held for non-trading purposes) for which it is practicable to estimate that value.
a)
Cash and cash equivalents: The carrying amount approximates fair market value because of the short maturities of such instruments.
b)
Long-Term Debt Related Party (see Note 5): It is not practicable to estimate the fair value of the related party debt.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12.
EARNINGS (LOSS) PER COMMON SHARE AND DIVIDENDS PAID
During each of the fiscal years ended October 31, 2009, 2008 and 2007, the Company had no options outstanding. There were no dividends declared on common stock during the years ended October 31, 2009, 2008 and 2007. Dividends accrued or declared on preferred stock during the years ended October 31, 2009, 2008 and 2007 were approximately $73,000, $85,000 and $105,000.
Basic earnings (loss) per share are computed by dividing earnings (loss) available to common stockholders by the weighted average number of common share outstanding during the period. Diluted earnings (loss) per share reflect per share amounts that would have resulted if dilutive potential common stock had been reported in the financial statements.
Basic and diluted earnings (losses) available to common stockholders at October 31, 2009(Unaudited), 2008(Audited) and 2007(Audited) were:
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13.
FINANCIAL INFORMATION FOR BUSINESS SEGMENTS
Canal is engaged in two distinct businesses - the management and further development of its agribusiness related real estate operations and stockyard operations.
The following summary presents segment information relating to these lines of business except for the respective revenues, operating income and the reconciliation of operating income with pre-tax income which information is presented on Canal's income statement.
Income from real estate operations includes gains on sales of real estate of $0.8 million, $1.0 million and $0.1 million in 2009, 2008 and 2007, respectively.
14.
Minimum Future Rentals on Operating Leases
Minimum future rentals consist primarily of rental income from leased land and structures, Exchange Building rents (commercial office space) and other rental activities, all of which are accounted for as operating leases. The estimated minimum future rentals on operating leases are $325,000, $350,000, $375,000, $400,000 and $425,000 for fiscal years 2010, 2011, 2012, 2013 and 2014, respectively.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
15.
LITIGATION
Canal and its subsidiaries are from time to time involved in litigation incidental to their normal business activities, none of which, in the opinion of management, will have a material adverse effect on the consolidated financial condition and operations of the Company. Canal was not a party to any ongoing litigation at October 31, 2009. The following situation did arise in fiscal 2005:
Environmental Protection Agency - Special Notice Letter for Investigation, Portland, Oregon Property
In 1989, the Company sold its 48 acre Portland, Oregon stockyard to Oregon Waste Systems, Inc. On September 29, 2003, the United States Environmental Agency (EPA) placed a 4.2 acre portion of that property on the National Priorities List pursuant to the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), commonly known as the Superfund Act. In a letter from the EPA dated June 27, 2005 the Company, along with approximately 13 other parties, including the current owner and operator of the site, was notified that it might be liable to perform or pay for the remediation of environmental contamination found on and around the site. Since the receipt of the letter, the Company has been in periodic communications with the other parties who received a similar letter with respect to what action, collectively or individually, should be taken in response to the EPA assertion of liability. The Company believes that the remediation of contamination of the site is properly the responsibility of other parties that have occupied and used it for waste recycling purposes since 1961, although under CERCLA the EPA is able to assert joint and several liability against all parties who ever owned or operated the site or generated or transported wastes to it. This investigation is in its preliminary stages and the Company intends to vigorously defend any liability for remediation. At October 31, 2009, the liability for remediation, if any, is not estimatable and therefore no accrual has been recorded in the financial statements.
16.
Restricted Cash
Transit Insurance - Transit insurance covers livestock for the period that they are physically at the stockyards and under the care of stockyard personnel. This self insurance program is funded by a per head charge on all livestock received at the stockyard. The October 31, 2009 balance in restricted cash- transit insurance of approximately $31,000 represents the excess of per head fees charged over actual payments made for livestock that was injured or died while at the stockyards.
Letter of Credit - This is a $130,000 deposit with Chase Bank to secure a Letter of Credit issued by the bank for bonds issued in relation to the St. Joseph Stockyards clearing operation. This deposit is maintained in an interest bearing account.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
17. Property on Operating Leases
Property on operating leases consist of approximately 16 acres of land located in Omaha, Nebraska; S. St. Paul, Minnesota; Sioux City, Iowa as well as furniture and equipment used in the Hauppauge, New York office. Land and structures leased to third parties include vacant land, exchange buildings (commercial office space), meat packing facilities, railcar repair shops, lumber yards and various other commercial and retail businesses.
A schedule of the Company’s property on operating leases at October 31, 2009 is as follows (000's omitted):
A schedule of the Company’s reconciliation of property on operating leases carried for the three years ended October 31, 2009, 2008 and 2007 is as follows (000's omitted):
(1)
Substantially all of Canal’s real property is pledged as collateral for its debt obligations (see Note 4).
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
18.
Property used in Stockyard Operations
Property used in stockyard operations consist of approximately 30 acres of land located in St. Joseph, Missouri and Sioux Falls, South Dakota. The Company’s stockyards provide all services and facilities required to operate an independent market for the sale of livestock. Stockyard facilities include exchange buildings (commercial office space), auction arenas, scale houses, veterinary facilities, barns, livestock pens and loading docks.
A schedule of the Company’s property used in stockyard operations at October 31, 2009 is as follows (000's omitted):
A schedule of the Company’s reconciliation of property used in stockyard operations carried for the three years ended October 31, 2009, 2008 and 2007 is as follows (000's omitted):
(1)
Substantially all of Canal’s real property is pledged as collateral for its debt obligations (see Note 4).
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
19.
Property Held for Development or Resale
Property held for development or resale consist of approximately 37 acres of land located in the midwest. This is undeveloped land not currently utilized for corporate purposes and not included in any of the present operating leases. The Company constantly evaluates proposals received for the purchase, leasing or development of this asset. The land is valued at cost which does not exceed the net realizable value.
A schedule of the Company’s property held for development or resale at October 31, 2009 is as follows (000's omitted):
A schedule of the Company’s reconciliation of property held for development or resale carried for the three years ended October 31, 2009, 2008 and 2007 is as follows (000's omitted):
(1)
Substantially all of Canal’s real property is pledged as collateral for its debt obligations (see Note 4).
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
20.
PREFERRED STOCK ISSUANCE
On October 15, 1986 Canal exchanged 986,865 shares of its $1.30 Exchangeable Preferred Stock ("the Preferred Stock") for a like amount of its outstanding common stock. Since the exchange, the Company has issued an additional 9,108,015 shares in the form of stock dividends and in October 2003 the Company, repurchased for retirement, 992,225 shares (from an affiliate) at $0.10 per share resulting in a total outstanding at October 31, 2009 of 9,102,655. All of the Preferred Stock has a par value of $0.01 per share and a liquidation preference of $10 per share. The Preferred Stock is subject to optional redemption, in exchange for Canal's 13% Subordinated Notes, by Canal, in whole or in part at any time on or after September 30, 1988 at the redemption price of $10 per share. Dividends on the Preferred Stock accrue at an annual rate of $1.30 per share and are cumulative. Dividends are payable quarterly in cash or in Preferred Stock at Canal's option. To date, dividends paid in additional stock have resulted in the issuance of 9,108,015 shares which were recorded at their fair value at the time of issuance.
Canal is restricted from paying cash dividends by certain of its debt agreements (See Note 5). The last cash dividend paid on Canal's preferred stock was in September 1989. The last dividend payment (which was paid in additional stock) was for the quarter ended June 30, 2006. The dividend payable from July 1, 2006 through October 31, 2009 has been accrued but not paid. Additionally, the dividends payable through December 31, 2009 have been accrued but not paid. This results in the Company being in arrears on its quarterly dividends for ten full quarters.
Whenever quarterly dividends payable on the Preferred Stock are in arrears in the aggregate amount at least equal to six full quarterly dividends (which need not be consecutive), the number of directors constituting the Board of Directors of Canal shall be increased by two and the holders of the Preferred Stock shall have, in addition to the rights set forth above, the special right, voting separately as a single class, to elect two directors of Canal to fill such newly created directorships at the next succeeding annual meeting of shareholders (and at each succeeding annual meeting of shareholders thereafter until such cumulative dividends have been paid in full). The date of the next annual stockholder’s meeting has not yet been determined.
VOTING RIGHTS - The holders of the Preferred Stock shall not have any voting rights except that the following actions must be approved by holders of 66 2/3% of the shares of Preferred Stock, voting as a class: (I) any amendment to the Certificate of Incorporation of Canal which would materially alter the relative rights and preferences of the Preferred Stock so as to adversely affect the holders thereof; and (ii) issuance of securities of any class of Canal's capital stock ranking prior (as to dividends or upon liquidation, dissolution or winding up) to the Preferred Stock. The holders of the Preferred Stock shall be entitled to specific enforcement of the foregoing covenants and to injunctive relief against any violation thereof.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
21.
PENSION PLANS
Canal has a defined benefit pension plan covering substantially all of its salaried employees (the "Plan"). The benefits are based on years of service and the employee's compensation earned each year. The Company's funding policy is to contribute the amount that can be deducted for federal
income tax purposes. Accordingly, the Company has made contributions of approximately $49,000 for fiscal 2009, $50,000 for fiscal 2008 and $91,000 for fiscal 2007. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. Assets of the plan were invested in U.S. Government securities, common stocks and antiquities. The Company uses an October 31 measurement date for its pension plan.
The following tables in accordance with FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension Plans sets forth the benefit obligations, fair value of plan assets, funded status, and amounts recognized in the Company's consolidated balance sheets at October 31, 2009 and 2008.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The expected long-term rate of return for the plan’s total assets is based on the expected return of each of the above categories, weighted based on the median of the target allocation for each class. Equity securities are expected to return 10% to 11% over the long-term, while cash and fixed income is expected to return between 4% to 6%. Based on historical experience, the company expects that the plan’s asset managers will provide a modest (0.5% to 1.0% per annum) premium to their respective market benchmark indices.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Plan Assets
The company’s pension plan weighted-average asset allocations at October 31, 2009 and 2008, by asset category are as follows:
* Includes Canal Capital Corporation common stock in the amounts of approximately $1,000 (0.0%) at both October 31, 2009 and 2008, respectively.
The policy as established by the pension plan trustees, is to provide for growth of capital with a moderate level of volatility by investing assets per the established target allocations. The assets will be reallocated from time to time to meet the target allocations. The investment policy will be reviewed on a regular basis, to determine if the established policies should be changed.
Cash Flows
Contributions
The company expects to contribute approximately $58,000 to its pension plan in fiscal 2010.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the fiscal years ending:
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
22.
QUARTERLY FINANCIAL DATA
The following table sets forth certain quarterly financial data for the eight quarters ended October 31, 2009. This quarterly information is unaudited, has been prepared on the same basis as the annual financial statements, and, in our opinion, reflects all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the information for periods presented.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
23.
RELATED PARTY TRANSACTIONS
At October 31, 2009, all of Canal’s Long-Term Debt is held by the company’s Chief Executive Officer and members of his family. These notes pay interest at a rate of 10% per annum and come due May 15, 2012. Canal has incurred interest expense on these notes of $132,000, $177,000 and $269,000 for the years ended October 31, 2009, 2008 and 2007, respectively. At various times during fiscal 2009 certain holders of these notes agreed to defer interest payments. This deferred interest liability accrued additional interest at a rate of 10% per annum, while outstanding and was repaid as funds became available in fiscal 2009. As of October 31, 2009, the balance due under these notes was $992,000 all of which is classified as long-term debt related party.
In September, 2007 Canal sold its remaining 12 pieces of contemporary art to a group which included the Company’s Chairman. The 12 pieces were sold for $100,000 (of which $95,000 was used to repay deferred executive salaries payable) which was approximately $20,000 less than its carrying value. The sale was reviewed by the independent members of management with the Chairman abstaining as he was part of the purchasing group. In considering the adequacy of the offer, independent management, had to give significant weight to the length of time (18 years) these pieces had been held for resale. In addition the independent management considered the nature of the current art market; general economic conditions; Canal’s cash flow needs and financial condition; and the future costs to Canal in continuing to maintain this inventory. After giving due consideration to all of these factors, independent management, determined that it was in Canal’s best interest to sell its remaining contemporary art inventory at the price offered. The loss of approximately $20,000 has been shown as a distribution in stockholders’ equity for the year ended October 31, 2007. There were no transactions of this nature in fiscal 2008 or 2009.
24.
SUBSEQUENT EVENTS
Sioux Falls Stockyard Closure - In December 2009, after extensive efforts to reorganize and return this stockyard to profitability, Canal ceased all stockyard operations at its Sioux Falls, South Dakota location. Canal now leases a portion of this property (approximately 10 acres), on a month to month basis, to a group that formerly operated at the stockyards as independent commission firms. This group will only handle hogs and sheep on the leased property. Canal has listed the entire property (approximately 30 acres) for sale with a local real estate agency. The sale of this property will be a priority in fiscal 2010. Canal will entertain all reasonable offers. The net value of this property was transferred to property held for development or resale as of October 31,2009.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 26th day of January, 2010.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
President and Chief
/S/ Michael E. Schultz
Executive Officer and Director
Michael E. Schultz
(Principal Executive Officer)
January 26, 2010
Vice President-Finance
Secretary and Treasurer
/S/ Reginald Schauder
(Principal Financial and
Reginald Schauder
Accounting Officer)
January 26, 2010
/S/ Asher B. Edelman
Chairman of the Board
Asher B. Edelman
and Director
January 26, 2010