Power REIT — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Unaudited consolidated financial statements; comparisons are with Q1 2018 unless otherwise noted.
Business context
Power REIT owns and manages U.S. transportation- and energy-infrastructure real estate. At quarter-end, its portfolio included approximately 112 miles of railroad infrastructure and related real estate leased to a railway company, and approximately 601 acres leased to solar projects with aggregate generating capacity of about 108 MW. The company said it was actively pursuing acquisitions in renewable energy and other qualifying infrastructure sectors.
Financial performance and position
| Metric | Q1 2019 / March 31, 2019 | Comparable period / December 31, 2018 |
|---|---|---|
| Total revenue | $494,593 | $492,603 in Q1 2018 |
| Net income | $197,245 | $214,647 in Q1 2018 |
| Net income attributable to common shares | $127,187; $0.07 per share | $144,589; $0.08 per share in Q1 2018 |
| Core FFO, a non-GAAP measure | $256,723; $0.14 per share | $257,537; $0.14 per share in Q1 2018 |
| Net cash provided by operating activities | $321,837 | $552,643 in Q1 2018 |
| Cash and cash equivalents | $2,009,129 | $1,771,011 at December 31, 2018 |
| Total assets | $22,233,407 | $21,895,136 at December 31, 2018 |
| Total liabilities | $9,851,361 | $9,704,231 at December 31, 2018 |
| Long-term debt, including current portion | $9,549,968 | $9,557,332 at December 31, 2018 |
Revenue increased approximately 0.4%, while net income declined about 8.1% and net income attributable to common shares fell about 12.0%. Management attributed the year-over-year difference principally to a roughly $23,000 increase in general and administrative expense, partly offset by a roughly $3,700 decrease in interest expense. G&A was $115,775 versus $92,789. Operating cash flow declined about 42%; cash increased by $238,118 during the quarter. The filing does not provide a specific operating-margin measure.
Debt includes bonds carrying a fixed 4.34% rate and maturing in 2034, a term loan at 5.0%, and municipal debt at 5.0%. Preferred stock carried at $3,492,149 comprises 144,636 outstanding Series A shares with a 7.75% cumulative dividend. The company paid approximately $70,000 in preferred dividends during the quarter.
Liquidity, outlook, and other matters
Management said working-capital and longer-term funding needs are met through operating cash flow, equity issuance, and borrowings, typically secured by acquired assets. No quantitative earnings or acquisition guidance was provided. Management cautioned that interim results are not necessarily indicative of full-year results and that forward-looking statements are subject to risks and uncertainties.
The company adopted ASC 842 lease accounting on January 1, 2019, using the modified retrospective approach; it reported no cumulative retained-earnings adjustment. Stock-based compensation expense was approximately $64,000, up from $47,000, and unrecognized share-based compensation was approximately $273,000 at quarter-end. On April 23, 2019, the company declared a preferred dividend of $0.484375 per share, payable June 15, 2019.
Risk factors are incorporated by reference from the company’s March 25, 2019 Form 10-K. The filing refers to litigation involving P&WV and NSC; no legal fees were paid to the company’s related-party law firm during the quarter. Management assessed disclosure controls as effective at March 31, 2019 and reported no material changes in internal control over financial reporting.
Important facts for investors to verify
- Review the 10-K risk factors and updates on the P&WV/NSC litigation and its potential financial or operating consequences.
- Assess the sustainability of operating cash flow, particularly the year-over-year decline and the working-capital movements reflected in the cash flow statement.
- Verify debt terms, scheduled principal obligations, collateral and refinancing exposure; compare reported debt with cash and future funding needs.
- Evaluate acquisition plans, tenant and project concentration, and the operating status of the railroad and solar leases; the filing gives no specific growth targets.
- Consider the fixed preferred dividend obligation and the distinction between GAAP earnings attributable to common shares and management’s non-GAAP Core FFO.