SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 June 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 0-11083
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ONE LIBERTY PROPERTIES, INC.
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(Exact name of registrant as specified in its charter)
MARYLAND 13-3147497
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
60 Cutter Mill Road, Great Neck, New York 11021
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 466-3100
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Indicate the number of shares outstanding of each of the
issuer's classes of stock, as of the latest practicable date.
As of August 1, 1998, the Registrant had 2,933,544 shares of
Common Stock and 808,776 shares of Redeemable Convertible
Preferred Stock outstanding.
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
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1998 1997
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(Unaudited)
Assets
Real estate investments, at cost
Land $14,662,589 $12,210,147
Buildings 48,451,187 38,641,419
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63,113,776 50,851,566
Less accumulated depreciation 3,086,532 2,534,582
----------- -----------
60,027,244 48,316,984
Mortgages receivable-less unamortized
discount-(substantially all from
related parties) 5,825,723 5,943,450
Cash and cash equivalents 5,246,977 1,606,364
Unbilled rent receivable 907,755 665,052
Rent, interest, deposits and
other receivables 393,595 300,584
Investment in U.S. Government obligations 4,048,855 -
Investment in BRT Realty Trust-
(related party) 208,458 240,384
Deferred financing costs 703,963 510,123
Other 135,959 64,614
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Total assets $77,498,529 $57,647,555
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Mortgages payable $27,358,262 $20,545,247
Note payable-bank - 4,605,029
Accrued expenses and other liabilities 408,878 394,459
Dividends payable 799,706 791,945
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Total liabilities 28,566,846 26,336,680
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Commitments and contingencies - -
Minority interest in subsidiary 2,294 -
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Redeemable convertible preferred
stock, $1 par value; $1.60
cumulative annual dividend;
2,300,000 shares authorized;
808,776 shares issued; liquidation
and redemption values of $16.50 13,185,764 13,106,970
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Stockholders' equity:
Common stock, $1 par value;
25,000,000 shares authorized;
2,919,050 and 1,561,450
shares issued and outstanding 2,919,050 1,561,450
Paid-in capital 30,807,327 14,419,609
Accumulated other comprehensive income-net
unrealized gain on available-for-sale securities 123,470 146,706
Accumulated undistributed net income 1,893,778 2,076,140
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Total stockholders' equity 35,743,625 18,203,905
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Total liabilities and stockholders' equity $77,498,529 $57,647,555
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See accompanying notes to consolidated financial statements.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
Rental income $ 1,744,317 $ 1,343,554 $ 3,267,855 $ 2,682,512
Interest from related parties 204,235 208,701 409,855 418,400
Interest and other income 33,043 14,913 48,841 32,447
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1,981,595 1,567,168 3,726,551 3,133,359
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Expenses:
Depreciation and amortization 339,921 251,754 638,122 502,104
Interest - mortgages payable 513,641 395,459 938,417 788,239
Interest - bank 147,302 29,152 257,913 71,136
Leasehold rent 72,209 72,209 144,417 144,417
General and administrative 177,641 170,841 330,315 333,900
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1,250,714 919,415 2,309,184 1,839,796
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Income before minority interest 730,881 647,753 1,417,367 1,293,563
Minority interest (4,044) (6,703) (4,044) (13,307)
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Net income $ 726,837 $ 641,050 $1,413,323 $ 1,280,256
============= ============ ========== ===========
Calculation of net income applicable to
common stockholders:
Net income $ 726,837 $ 641,050 $ 1,413,323 $ 1,280,256
Less: dividends and accretion on preferred stock 362,966 362,496 725,814 724,875
-------------- ------------- ------------- ------------
Net income applicable to
common stockholders $ 363,871 $ 278,554 $ 687,509 $ 555,381
============= ============ ============ ============
Weighted average number of common
shares outstanding:
Basic 1,719,027 1,507,542 1,647,061 1,498,484
============= ============ ============ ============
Diluted 1,719,763 1,516,354 1,648,482 1,507,466
============= ============ ============ ============
Net income per common share (Note 2)
Basic $ .21 $ .18 $ .42 $ 37
============= ============ ============= ===========
Diluted $ .21 $ .18 $ .42 $ .37
============= ============ ============= ===========
Cash distributions per share:
Common Stock $ .30 $ .30 $ .60 $ .60
============= ============ ============= ===========
Preferred Stock $ .40 $ .40 $ .80 $ .80
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See accompanying notes to consolidated financial statements.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the six month period ended June 30, 1998
and the year ended December 31, 1997
(Unaudited)
Accumulated
Other Accumulated
Common Paid-in Comprehensive Undistributed
Stock Capital Income Net Income Total
----- ------- --------------- ---------- -----
Balances,
January 1, 1997 $1,473,642 $13,650,737 $ 97,673 $2,220,789 $17,442,841
Net income - - - 2,984,192 2,984,192
Distributions -
common stock - - - (1,834,799) (1,834,799)
Distributions -
preferred stock - - - (1,294,042) (1,294,042)
Accretion on
preferred stock - (156,178) - - (156,178)
Exercise of options 29,000 235,625 - - 264,625
Shares issued through
dividend reinvestment
plan 58,808 689,425 - - 748,233
Net unrealized gain
on available-for-sale
securities - - 49,033 - 49,033
--------------- ---------------- ---------- --------------- -----------
Balances,
December 31, 1997 1,561,450 14,419,609 146,706 2,076,140 18,203,905
Net income - - - 1,413,323 1,413,323
Distributions -
common stock - - - (948,665) (948,665)
Distributions -
preferred stock - - - (647,020) (647,020)
Accretion on
preferred stock - (78,794) - - (78,794)
Shares issued through
rights offering 1,331,733 16,139,254 - - 17,470,987
Shares issued through
dividend reinvestment
plan 25,867 327,258 - - 353,125
Net unrealized loss
on available-for-sale
securities - - (23,236) - (23,236)
--------------- ---------------- -------------- --------------- ---------------
Balances,
June 30, 1998 $2,919,050 $30,807,327 $ 123,470 $ 1,893,778 $35,743,625
========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1998 1997
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Cash flows from operating activities:
Net income $ 1,413,323 $ 1,280,256
Adjustments to reconcile net income
to net cash provided by operating activities:
(Increase) in rental income from straight-lining of rent (242,703) (175,673)
Depreciation and amortization 638,122 502,104
Minority interest 4,044 13,307
Changes in assets and liabilities:
(Increase) in rent, interest,
deposits and other receivables (150,380) (75,568)
Increase in accrued expenses and other liabilities 14,419 33,404
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Net cash provided by operating activities 1,676,825 1,577,830
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Cash flows from investing activities:
Additions to real estate (12,262,210) -
Net proceeds from sale of real estate - 384,598
Collection of mortgages receivable -
(including $103,436 and $56,577
from related parties) 117,727 68,060
Investment in U.S. Government obligations (4,048,855) -
Payments to minority interest by subsidiary (1,750) (13,200)
Other (5,286) 54,334
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Net cash (used in) provided by investing activities (16,200,374) 493,792
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Cash flows from financing activities:
Proceeds from mortgages payable 6,975,000 1,600,000
Repayment of mortgages payable (161,985) (129,233)
Repayment of bank borrowings, net of proceeds (4,605,029) (2,849,374)
Payment of financing costs (280,012) (89,088)
Cash distributions - common stock (940,904) (888,944)
Cash distributions - preferred stock (647,020) (647,020)
Proceeds from issuance of shares through rights offering 17,470,987 -
Issuance of shares through
dividend reinvestment plan 353,125 402,057
Exercise of stock options - 136,875
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Net cash provided by (used in) financing activities 18,164,162 (2,464,727)
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Net increase (decrease) in cash
and cash equivalents 3,640,613 (393,105)
Cash and cash equivalents at beginning of period 1,606,364 2,478,580
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Cash and cash equivalents at end of period $ 5,246,977 $ 2,085,475
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Supplemental disclosures of cash flow information:
Cash paid during the period for interest expense $ 1,284,278 $ 858,777
Cash paid during the period for income taxes 11,907 16,011
See accompanying notes to consolidated financial statements.
One Liberty Properties, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Basis of Preparation
The accompanying interim unaudited consolidated financial statements as of June
30, 1998 and for the six and three months ended June 30, 1998 and 1997 reflect
all normal, recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the results for such interim periods. The
results of operations for the six and three months ended June 30, 1998 are not
necessarily indicative of the results for the full year.
The consolidated financial statements include the accounts of One Liberty
Properties, Inc., its wholly-owned subsidiaries and a majority-owned limited
liability company. Material intercompany items and transactions have been
eliminated. One Liberty Properties, Inc., its subsidiaries and the limited
liability company are hereinafter referred to as the "Company".
Certain amounts reported in previous consolidated financial statements have been
reclassified in the accompanying consolidated financial statements to conform to
the current year's presentation.
These statements should be read in conjunction with the consolidated financial
statements and related notes which are included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997.
Note 2 - Earnings Per Common Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share. Statement No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement No. 128
requirements.
For the six and three month periods ended June 30, 1998 and 1997 basic earnings
per share was determined by dividing net income applicable to common
stockholders for the period by the weighted average number of shares of Common
Stock outstanding during each period.
One Liberty Properties, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Note 2 - Earnings Per Common Share (Continued)
Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue Common Stock were exercised or converted
into Common Stock or resulted in the issuance of Common Stock that then shared
in the earnings of the Company. For the six and three month periods ended June
30, 1998 and 1997 diluted earnings per share was determined by dividing net
income applicable to common stockholders for the period by the total of the
weighted average number of shares of Common Stock outstanding plus the dilutive
effect of the Company's outstanding options (1,421 and 736 for the six and three
months ended June 1998 and 8,982 and 8,812 for the six and three months ended
June 1997, respectively) using the treasury stock method. The Preferred Stock
was not considered for the purpose of computing diluted earnings per share
because their assumed conversion is antidilutive. In addition, options to
purchase 40,000 shares of Common Stock at $14.50 per share (which were granted
during March 1998) were not included in the computation of diluted earnings per
share because the exercise price of these options is greater than the average
market price of the common shares and, therefore, the effect would be
antidilutive.
Note 3 - Preferred and Common Stock Dividend Distributions
On June 12, 1998 the Board of Directors declared quarterly cash distributions of
$.30 and $.40 per share on the Company's common and preferred stock,
respectively, payable on July 2, 1998 to stockholders of record on June 23,
1998.
Note 4 - Rights Offering
On June 22, 1998, the Company sold 1,331,733 shares of Common Stock at $13.25
per share in a rights offering to its shareholders. Pursuant to a Registration
Statement filed with the Securities and Exchange Commission on February 10, 1998
and declared effective on March 31, 1998 the Company issued to each common and
preferred stockholder of record as of March 24, 1998, one nontransferable right
for each common and/or preferred share owned of record entitling the holder to
purchase one share of Common Stock for a price of $13.25 per share. In addition,
each common and preferred stockholder was afforded the opportunity to
over-subscribe to the extent of two additional shares, but, in order for the
over-subscription privilege to come into effect a stockholder must have fully
exercised the basic subscription privilege. The offer expired on June 15, 1998.
One Liberty Properties, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Note 5 - Financial Accounting Standards Board Statement No. 130
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income, which is effective for fiscal years
beginning after December 15, 1997. Statement No. 130 establishes standards for
reporting comprehensive income and its components in a full set of
general-purpose financial statements and requires that all components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company adopted Statement
No. 130 as of January 1, 1998. During the six months ended June 30, 1998,
accumulated other comprehensive income, which is solely composed of the net
unrealized gain on available-for-sale securities, decreased $23,236 from
$146,706 to $123,470.
Note 6 - Financial Accounting Standards Board Statement No. 131
In June, 1997 the Financial Accounting Standards Board issued Statement No. 131,
Disclosures About Segments of an Enterprise and Related Information, which is
effective for financial statements issued for years beginning after December 15,
1997. Statement No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. Statement No. 131 is effective for financial statements for fiscal
years beginning after December 15, 1997, and therefore the Company will adopt
the new requirements retroactively in 1998. Management has not completed its
review of Statement No. 131, but does not anticipate that the adoption of this
statement will have a significant effect on the Company's reported segments.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At June 30, 1998, the Company's primary sources of liquidity are approximately
$5,247,000 in cash and cash equivalents, $4,049,000 in investments in U.S.
Government obligations and funds available under a revolving credit facility (of
which the entire $9,000,000 facility was available at June 30, 1998). Other
sources of liquidity are cash generated from operating activities and funds
obtainable from mortgages to be secured by real estate investments.
On June 22, 1998, the Company sold 1,331,733 shares of Common Stock at $13.25
per share in a rights offering to its shareholders. The net proceeds of
approximately $17,470,000 (after expenses) was used to repay the $6,985,000
outstanding under the revolving credit facility and the balance will be used for
the acquisition of additional properties. The Company purchased two additional
properties during the last week of June 1998. The purchase price of one property
was $1,970,000, which was paid in cash (financing is anticipated in the near
future). The purchase price of the other property was $3,525,000, which was paid
in part by a $2,450,000 first mortgage loan secured by the property and the
balance was paid in cash.
In March, 1996 the Company entered into a $5 million revolving credit agreement
("Credit Agreement") with Bank Leumi Trust Company of New York ("Bank Leumi").
Under the terms of the Credit Agreement the Company could add additional lenders
to provide a maximum total facility of $15,000,000. In June 1997, the Company
closed on a $4,000,000 participation interest with Commercial Bank of New York
(formerly First Bank of the Americas), increasing the total facility to
$9,000,000. Borrowings under the Credit Agreement provides the Company with
funds, when needed, to acquire additional properties. The Credit Agreement
matures February 28, 1999 with a right for the Company to extend the Credit
Agreement until February 29, 2000.
The Company is currently in various stages of negotiation for the acquisition of
additional net leased properties. Cash provided from operations and the
Company's cash position will provide funds for cash distributions to
stockholders and operating expenses. These sources of funds, funds available
under the Credit Agreement, and funds derived from mortgage financings will
provide funds for additional property acquisitions. It will continue to be the
Company's policy to make sufficient cash distributions to stockholders in order
for the Company to maintain its real estate investment trust status under the
Internal Revenue Code.
In connection with the lease agreements with Total Petroleum, Inc. ("Total
Petroleum") consummated in 1991, the Company agreed to expend certain funds to
remediate environmental problems at certain locations net leased to Total
Petroleum. It was agreed that the net cost to the Company would not exceed
$350,000 per location, with any excess being the responsibility of Total
Petroleum. At that time the Company deposited $2,000,000 with an independent
escrow agent to insure compliance by the Company with its obligations with
respect to the environmental clean up. At June 30, 1998, there are two locations
which require additional remediation efforts. The Company believes the $800,000
held by the escrow agent will be adequate to cover any additional environmental
costs at the Total Petroleum locations.
There will be no effect on the Company's liquidity relating to the year
2000 issue because during 1997 the Company acquired computer hardware and
software to handle the Company's accounting and real estate management. The
computer software is capable of handling all issues relating to the year 2000.
Non-compliance with the year 2000 issue by third parties with whom the Company
has a relation will not have a material effect on the Company's business,
financial condition or results of operations.
Results of Operations
Six and three months ended June 30, 1998 and 1997
Rental income increased by $585,343 and $400,763 to $3,267,855 and $1,744,317
for the six and three months ended June 30, 1998 from $2,682,512 and $1,343,554
for the six and three months ended June 30, 1997 resulting primarily from the
acquisition of one property in March 1998 and two properties in 1997, offset in
part by the sale of a property during 1997. Although the Company purchased a
total of three properties during the six months ended June 30, 1998, two such
properties were acquired during the last week of the quarter ended June 30, 1998
and thus had little impact on the Company's results of operations.
Interest and other income increased by $16,394 and $18,130 to $48,841 and
$33,043, due to an increase in cash and cash equivalents and U.S. Government
obligations available for investment. Such investments were made primarily from
the proceeds realized by the Company from the sale of common shares through the
rights offering.
Increases in depreciation and amortization expense of $136,018 and $88,167 for
the six and three months ended June 30, 1998 to $638,122 and $339,921 results
primarily from depreciation on three properties acquired during 1998 and 1997,
offset in part by the sale of one property during 1997.
The increases in interest-mortgages payable to $938,417 and $513,641 for the six
and three months ended June 30, 1998 from $788,239 and $395,459 in the prior six
and three month periods is due to mortgages placed on two of the properties
acquired during 1998 and 1997, offset in part by the sale of one property during
1997.
Interest-bank note payable amounted to $257,913 and $147,302 for the six and
three months ended June 30, 1998, respectively, resulting from borrowings under
the Credit Agreement. Borrowings were made to facilitate the purchase of one
property in 1998 and two properties in 1997. The $6,985,000 outstanding note
balance was repaid June 22, 1998 with a portion of the proceeds realized by the
Company from the sale of Common Stock through the rights offering.
Part II - Other Information
Item 6. - Exhibits and Reports on Form 8-K
On June 24, 1998, the Company filed a current report on Form 8-K with the
Securities and Exchange Commission to report the completion of the Company's
rights offering, pursuant to which the Company sold 1,331,733 common shares. The
Company's Registration Statement on Form S-11 was declared effective by the
Securities and Exchange Commission on March 31, 1998.
The proceeds of the offering totaled approximately $17,645,000, with net
proceeds of approximately $17,470,000, of which $6,985,000 was used to pay bank
debt with the balance available for property acquisitions.
ONE LIBERTY PROPERTIES, INC.
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.
One Liberty Properties, Inc.
(Registrant)
August 13, 1998 /s/ Matthew Gould
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Date Matthew Gould
President
August 13, 1998 /s/ David W. Kalish
- --------------- -------------------
Date David W. Kalish
Vice President and
Chief Financial Officer