UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 2011
Commission File Number: 1-5447
PITTSBURGH & WEST VIRGINIA RAILROAD
Pennsylvania 25-6002536
(State of Organization) (I.R.S. Employer Identification No.)
55 Edison Avenue, West Babylon, NY 11704
(Address of principal executive offices) (Zip Code)
Telephone (212) 750-0373
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X__ No _____
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large accelerated filer _____ Accelerated filer _____ Non-accelerated
filer ____ Smaller reporting company __X____
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes _____ No __X__
PITTSBURGH & WEST VIRGINIA RAILROAD
FORM 10-Q
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
1,623,250 shares of beneficial interest, without par value.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENT OF INCOME
(Dollars in Thousands except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
2011 2010
INCOME AVAILABLE FOR
DISTRIBUTION:
Interest income from
capital lease $ 229 $ 229
Less general and
administrative expense 60 71
NET INCOME $ 169 $ 158
Weighted Average Shares
During Period 1,528,875 1,510,000
Per Share:
Net Income $ .11 $ .10
Cash Dividends $ .10 $ .12
The accompanying notes are an integral part of these financial statements.
BALANCE SHEET
(Dollars in Thousands)
(Unaudited) (Audited)
March 31, December 31
2011 2010
ASSETS
Cash $ 1,000 $ 49
Prepaid Expense 34 -
Net investment in capital lease 9,150 9,150
TOTAL ASSETS $10,184 $ 9,199
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable $ 12 -
Shareholders' equity:
Shares of beneficial interest, at no par
Value (1,623,250 and 1,510,000 shares
issued and outstanding as of
3/31/2011 and 12/31/2010,respectively) 10,101 9,145
Retained earnings 71 54
Total shareholders' equity 10,172 9,199
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $10,184 $ 9,199
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Three Months Ended
March 31,
2011 2010
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 169 $ 158
Adjustment to reconcile net income to net
cash provided by operating activities:
Prepaid Expenses (34) -
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 135 $ 158
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (151) (181)
Net Proceeds from Financing 968 -
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES $ 817 $(181)
Net increase (decrease) in Cash 952 (23)
Cash, beginning of period 49 40
Cash, end of period $1,000 $ 17
The accompanying notes are an integral part of these financial statements.
Notes to financial statements:
(1) The foregoing interim financial statements are unaudited but, in the
opinion of management, reflect all adjustments necessary for a fair
presentation of the results of operations for the interim periods presented.
All adjustments are of a normal recurring nature.
(2) Pittsburgh & West Virginia Railroad ("Registrant" or "Trust") has elected
to be treated for tax purposes as a real estate investment trust (REIT). It is
the Trust's policy to distribute at least 90% of its ordinary taxable income to
its shareholders to maintain its REIT corporate status. Furthermore, in
accordance with the terms of the lease, Norfolk Southern Corporation will
reimburse the lessor, in the form of additional rent, for all taxes and
governmental charges imposed upon the leased assets of the lessor except for
taxes relating to cash rent payments made by the lessee. Due to the treatment
of the lease as a direct financing lease for GAAP purposes, the tax basis of
the leased property is higher than the GAAP basis in the leased property.
(3) Under the terms of the lease, Norfolk Southern Corporation has
leased all of Pittsburgh & West Virginia Railroad's real properties, including
its railroad lines, for a term of 99 years, renewable by the lessee upon the
same terms for additional 99-year terms in perpetuity. The lease provides for
a cash rental of $915,000 per year for the current lease period and all renewal
periods. The net investment in capital lease, recognizing renewal options in
perpetuity, was estimated to have a current value of $9,150,000 assuming an
implicit interest rate of 10%.
(4) Under the provisions of the lease, the Trust may not issue, without
the prior written consent of Norfolk Southern, any shares or options to
purchase shares or declare any dividends on its shares of beneficial interest
in an amount exceeding the value of the assets not covered by the lease plus
the annual cash rent of $915,000 to be received under the lease, less any
expenses incurred for the benefit of shareholders. At March 31, 2011,
all net assets, other than $1,000,000 of cash, are covered by the lease. The
Trust may not borrow any money or assume any guarantees except with the prior
written consent of Norfolk Southern.
(5) With the approval of Norfolk Southern Corporation, on March 16, 2011, the
Trust completed a rights offering, pursuant to which the Trust issued 113,250
common shares of beneficial interest, no par value, raising gross proceeds of
$1,019,000.
(6) For interim financial reporting purposes, the accounting policy has changed
to record a prepaid expense for certain annual expenses and to allocate these
expenses to interim periods based on the benefit received in each interim
period. Previously, these amounts were expensed in the interim period in whch
they were paid. The effect of this change is to reduce expenses by $21,000 in
the quarter ended March 31, 2011.
Item 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are those that predict or describe future events
or trends and that do not relate solely to historical matters. You can
generally identify forward-looking statements as statements containing the
words "believe," "expect," "will," "anticipate," "intend," "estimate,"
"project," "plan," "assume" or other similar expressions, or negatives of
those expressions, although not all forward-looking statements contain these
identifying words. All statements contained in this report regarding our
future strategy, future operations, projected financial position, estimated
future revenues, projected costs, future prospects, the future of our
industries and results that might be obtained by pursuing management's
current or future plans and objectives are forward-looking statements.
You should not place undue reliance on any forward-looking statements because
the matters they describe are subject to known and unknown risks,
uncertainties and other unpredictable factors, many of which are beyond our
control. Our forward-looking statements are based on the information
currently available to us and speak only as of the date of the filing of this
report. New risks and uncertainties arise from time to time, and it is
impossible for us to predict these matters or how they may affect us. Over
time, our actual results, performance or achievements will likely differ from
the anticipated results, performance or achievements that are expressed or
implied by our forward-looking statements, and such difference might be
significant and materially adverse to our security holders.
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
All of the Registrant's railroad properties are leased to Norfolk and
Western Railway Company, now known as Norfolk Southern Corporation (NSC), for
99 years, with unlimited renewals on the same terms. Cash rental is a fixed
amount of $915,000 per year, with no provision for change during the term of
the lease and any renewal periods. This cash rental is the only current
source of funds. Although the lease provides for additional rentals to be
recorded, these amounts do not increase cash flow or net income as they are
charged to NSC's settlement account with no requirement for payment, except
at termination or non renewal of the lease. Due to the indeterminate
settlement date, these additional rental amounts are not recorded for
financial reporting purposes.
In comparing the first quarter of 2011 with the preceding fourth quarter of
2010 and the first quarter of 2010, revenues totaled $229,000, $229,000, and
$229,000, respectively. Net income and income available for distribution was
$169,000, $214,000 and $158,000 respectively.
Registrant's cash outlays, other than dividend payments, are for general and
administrative (G&A) expenses, which include professional fees, consultants,
office rental and director's fees. The existing leased properties are
maintained entirely at NSC's expense.
Currently, substantially all of Registrant's income consists of fixed-rate
rental payments that it receives pursuant to the lease of its only
substantial asset. There are no rent escalations provided for in the lease.
The lease has a 99-year term and can be renewed by the lessee for an
unlimited number of additional 99-year periods. For all these reasons,
Registrant faces substantial constraints on its income. Nevertheless,
Registrant's expenses continue to rise, including in particular its costs of
complying with the laws, regulations and rules that apply as a result of
Registrant's public company status. As a result of the foregoing, the amount
of free cash flow available to Registrant's shareholders is expected to
decline over time.
Accordingly, in order to justify continuing as a public company and address the
projected decline in net income and free cash flow available to shareholders,
Registrant is broadening its business to include new investments in
transportation and energy infrastructure assets, consistent with its status as
an infrastructure-focused real-estate investment trust. The Trust raised
approximately $1,019,000 of gross proceeds in connection with a rights offering
that closed on March 16, 2011 and plans to use the proceeds to provide working
capital for its business expansion. The Trust expects that G&A expenses will
increase in 2011 as it commences activities to further its business expansion.
There can be no assurance that the Registrant will be successful in broadening
its business. See Note Regarding Forward-Looking Statements and additional risk
factors that are more fully disclosed in Registrant's Form S-3/A filed with the
SEC on February 25, 2011.
Item 4. CONTROLS AND PROCEDURES
Management is responsible for establishing and maintaining effective
disclosure controls and procedures. As of the end of the period covered
by this report, the Registrant carried out an evaluation under the
supervision and with the participation of the Registrant's management,
including the Chief Executive Officer and Secretary-Treasurer, of the
effectiveness of the design and operation of the disclosure controls and
procedures pursuant to Rule 13a-15 under the Securities and Exchange Act of
1934, as amended. Based on that evaluation, the Chief Executive Officer and
Secretary-Treasurer have concluded that the Registrant's disclosure controls
and procedures are adequate and effective to ensure that information required
to be disclosed in the Registrant's required SEC filings is recorded,
processed, summarized and reported within the time periods specified in
the Commission's rules and forms.
There have been no significant changes in the Registrant's internal controls
or in other factors that that could significantly affect internal controls
subsequent to the date the Registrant carried out its evaluation.
We maintain a system of internal control over financial reporting that
is designed to provide reasonable assurance that our books and records
accurately reflect the transactions of the Registrant and that our
policies and procedures are followed. There have been no changes in
our internal control over financial reporting during the first quarter
that have materially affected, or are reasonable likely to materially
affect such controls.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
None
Item 6. Exhibits
Exhibit 1.1 - The Registrant's Current Reports on Form 8-K filed on July 13,
2010, August 11, 2010, October 5, 2010, December 7, 2010, February 4, 2011,
February 15, 2011, March 11, 2011 and March 17, 2011 and April 29, 2011 are
incorporated by reference.
Exhibit 1.2 - The Registrant's Current Annual Report on Form 10-K filed on
March 28, 2011 is incorporated by reference.
Exhibit 1.3 - The Registrant's Form S-3/A filed with the SEC on February
25, 2011 is incorporated by reference.
Exhibit 31.1 Section 302 Certification for David H. Lesser
Exhibit 31.2 Section 302 Certification for Arun Mittal
Exhibit 99 Section 906 Certification for David H. Lesser and Arun Mittal.
SIGNATURES
Pursuant to the requirements 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.
PITTSBURGH & WEST VIRGINIA RAILROAD
/s/David H. Lesser
David H. Lesser
CEO & Chairman of the Board
Date: May 12, 2011
/s/Arun Mittal
Arun Mittal
Secretary-Treasurer
Date: May 12, 2011