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 September 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 0-11083
ONE LIBERTY PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 13-3147497
----------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
60 Cutter Mill Road, Great Neck, New York 11021
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 466-3100
Indicate the number of shares outstanding of each of the
issuer's classes of stock, as of the latest practicable date.
As of November 1, 1998, the Registrant had 2,940,201 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
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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1998 1997
---- ----
(Unaudited)
Assets
Real estate investments, at cost
Land $14,602,205 $12,210,147
Buildings 48,359,301 38,641,419
---------- ----------
62,961,506 50,851,566
Less accumulated depreciation (3,401,903) (2,534,582)
---------- -----------
59,559,603 48,316,984
Mortgages receivable-less unamortized
discount-(substantially all from
related party in 1997) 268,332 5,943,450
Cash and cash equivalents 18,989,773 1,606,364
Unbilled rent receivable 1,034,633 665,052
Rent, interest, deposits and
other receivables 751,330 300,584
Investment in BRT Realty Trust-
(related party) 176,532 240,384
Deferred financing costs 730,060 510,123
Other 480,643 64,614
------- -------
Total assets $81,990,906 $57,647,555
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Mortgages payable $29,527,096 $20,545,247
Note payable-bank - 4,605,029
Accrued expenses and other liabilities 419,312 394,459
Dividends payable 1,203,573 791,945
----------- -----------
Total liabilities 31,149,981 26,336,680
---------- ----------
Commitments and contingencies - -
Minority interest in subsidiary 2,676 -
----------- ------------
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 13,225,338 13,106,970
---------- ----------
Stockholders' equity:
Common stock, $1 par value;
25,000,000 shares authorized;
2,933,544 and 1,561,450
shares issued and outstanding 2,933,544 1,561,450
Paid-in capital 30,934,838 14,419,609
Accumulated other comprehensive
income-net unrealized gain on
available-for-sale securities 107,740 146,706
Accumulated undistributed net income 3,636,789 2,076,140
---------- ----------
Total stockholders' equity 37,612,911 18,203,905
---------- ----------
Total liabilities and stockholders' equity $81,990,906 $57,647,555
=========== ===========
See accompanying notes to consolidated financial statements.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Rental income $ 1,897,958 $ 1,267,217 $ 5,165,813 $ 3,949,729
Interest from related party (Note 5) 2,250,459 207,596 2,660,314 625,996
Interest and other income 129,069 17,703 177,910 50,150
------------- ------------- ------------ --------------
4,277,486 1,492,516 8,004,037 4,625,875
------------ ----------- ----------- ------------
Expenses:
Depreciation and amortization 368,827 252,476 1,006,949 754,580
Interest - mortgages payable 560,703 368,788 1,499,120 1,157,027
Interest - bank - 25,635 257,913 96,771
Leasehold rent 72,208 72,208 216,625 216,625
General and administrative 168,300 150,119 498,615 484,019
Provision for valuation
adjustment of real estate 156,832 - 156,832 -
------------- ----------- ---------- ------------
1,326,870 869,226 3,636,054 2,709,022
------------ ----------- ----------- ----------
Income before gain on sale of
real estate and minority interest 2,950,616 623,290 4,367,983 1,916,853
Gain on sale of real estate including
minority interest share of $215,336 - 599,251 - 599,251
------------- ----------- ------------ -----------
Income before minority interest 2,950,616 1,222,541 4,367,983 2,516,104
Minority interest (4,032) (217,532) (8,076) (230,839)
------------- ----------- ------------ -----------
Net income $ 2,946,584 $ 1,005,009 $ 4,359,907 $ 2,285,265
============ =========== =========== ===========
Calculation of net income applicable to common stockholders:
Net income $ 2,946,584 $ 1,005,009 $ 4,359,907 $ 2,285,265
Less: dividends and accretion
on preferred stock 363,085 362,613 1,088,899 1,087,488
------------ ------------- ------------ ------------
Net income applicable to
common stockholders $ 2,583,499 $ 642,396 $ 3,271,008 $ 1,197,777
============ ============= ============ ===========
Weighted average number of common shares outstanding (Note 2):
Basic 2,933,544 1,535,982 2,080,601 1,511,042
============ ============ ============ ===========
Diluted 3,600,784 1,540,139 2,081,548 1,518,416
============ ============ ============ ===========
Net income per common share (Note 2):
Basic $ .88 $ .42 $ 1.57 $ .79
============ ============= ============ ===========
Diluted $ .82 $ .42 $ 1.57 $ .79
============ ============= ============ ===========
Cash distributions per share:
Common Stock $ .30 $ .30 $ .90 $ .90
============ ============= ============ ===========
Preferred Stock $ .40 $ .40 $ 1.20 $ 1.20
============ ============= ============ ===========
See accompanying notes to consolidated financial statements.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the nine month period ended September 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 - - - 4,359,907 4,359,907
Distributions -
common stock - - - (1,828,727) (1,828,727)
Distributions -
preferred stock - - - (970,531) (970,531)
Accretion on
preferred stock - (118,368) - - (118,368)
Shares issued through
rights offering 1,331,733 16,139,254 - - 17,470,987
Shares issued through
dividend reinvestment
plan 40,361 494,343 - - 534,704
Net unrealized loss
on available-for-sale
securities - - (38,966) - (38,966)
----------- ---------- ----------- ----------- ----------
Balances,
September 30, 1998 $2,933,544 $30,934,838 $ 107,740 $ 3,636,789 $37,612,911
========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
Cash flows from operating activities:
Net income $ 4,359,907 $ 2,285,265
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on sale of real estate - (599,251)
(Increase) in rental income from straight-lining of rent (369,581) (258,575)
Provision for valuation adjustment 156,832 -
Depreciation and amortization 1,006,949 754,580
Minority interest in earnings of subsidiary 8,076 230,839
Changes in assets and liabilities:
(Increase) in rent, interest,
deposits and other receivables (495,286) (259,523)
Increase (decrease) in accrued expenses and other liabilities 24,853 (5,756)
------------- ---------------
Net cash provided by operating activities 4,691,750 2,147,579
------------ ------------
Cash flows from investing activities:
Additions to real estate (12,266,772) (2,832,231)
Net proceeds from sale of real estate - 4,347,603
Collection of mortgages receivable -
(including $5,653,413 and $86,466
from related party) 5,675,118 106,895
Purchase of marketable securities (346,603) -
Payments to minority interest by subsidiary (5,400) (396,333)
Other - 54,332
------------- -----------
Net cash (used in) provided by investing activities (6,943,657) 1,280,266
------------- ------------
Cash flows from financing activities:
Proceeds from mortgages payable 9,236,178 1,600,000
Repayment of mortgages payable (254,329) (2,163,398)
Repayment of bank borrowings, net of proceeds (4,605,029) (1,900,000)
Payment of financing costs (359,565) (89,088)
Cash distributions - common stock (1,417,099) (1,345,163)
Cash distributions - preferred stock (970,531) (970,531)
Proceeds from issuance of shares through rights offering 17,470,987 -
Issuance of shares through dividend reinvestment plan 534,704 572,946
Exercise of stock options - 232,688
----------- -------------
Net cash provided by (used in) financing activities 19,635,316 (4,062,546)
----------- -------------
Net increase (decrease) in cash
and cash equivalents 17,383,409 (634,701)
Cash and cash equivalents at beginning of period 1,606,364 2,478,580
------------ ------------
Cash and cash equivalents at end of period $18,989,773 $ 1,843,879
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest expense $ 1,855,971 $ 1,272,646
Cash paid during the period for income taxes 20,429 17,035
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
September 30, 1998 and for the nine and three months ended September 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 nine and three months ended September
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 nine and three month periods ended September 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 nine month periods ended September 30,
1998 and 1997 and the three month period ended September 30, 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 (947 for the nine months ended September 1998 and 7,374 and
4,157 for the nine and three months ended September 1997, respectively) using
the treasury stock method. The Preferred Stock was not considered for the
purpose of computing diluted earnings per share during these periods because
their assumed conversion is antidilutive. However, for the three months ended
September 30, 1998, the assumed conversion of the Preferred Stock is dilutive.
Thus, for the three months ended September 30, 1998, diluted earnings per share
was determined by dividing net income for the period by the total of the
weighted average number of Common Stock outstanding plus the dilutive effect of
the Company's Preferred Stock using the if-converted method.
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 August 28, 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 October 1, 1998 to stockholders of record on September
15, 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 - Interest from Related Party
On September 16, 1998, the Company received a payoff in full of a mortgage
receivable encumbering a property owned by a related party. The principal amount
paid off and received by the Company was $7,582,000. The mortgage receivable was
acquired during fiscal 1993 at a discount of $3,738,400 which was being
amortized over the life of the mortgage. The Company realized interest income on
this transaction in the amount of $2,080,918, which represents the unamortized
balance of the discount. Such amount is included in interest from related party
in the accompanying consolidated financial statements.
Note 6 - 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. At September 30, 1998, accumulated other comprehensive income, which is
solely comprised of the net unrealized gain on available-for-sale securities was
$107,740.
Note 7 - 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.
Note 8 - Subsequent Event
On October 30, 1998, the Company sold a property located in the State of
Washington for a sales price of $1,500,000 and will recognize a gain of
approximately $1,200,000 during the December 1998 quarter. In addition, a second
mortgage receivable the Company held on the property was paid off as part of the
sale. At September 30, 1998, the outstanding balance of this mortgage receivable
was $36,600.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At September 30, 1998, the Company's primary sources of liquidity are
approximately $18,990,000 in cash and cash equivalents, and funds available
under a revolving credit facility (of which the entire $9,000,000 facility was
available at September 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 is to be used
for the acquisition of additional properties. The Company purchased two
properties during the last week of June 1998. The purchase price of one property
was $1,970,000, which was paid in cash at the closing. A $1,285,000 first
mortgage loan secured by the property was obtained in September 1998. 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 in cash.
On October 2, 1998, the Company purchased an additional property for a purchase
price of $900,000 which was paid in cash. On October 30, 1998, the Company sold
a property located in the State of Washington for a sales price of $1,500,000
and will recognize a gain of approximately $1,200,000 during the December 1998
quarter.
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 September 30, 1998, there are two
locations which require additional remediation efforts. The Company believes the
$791,000 held by the escrow agent will be adequate to cover the Company's
responsibility to pay for the environmental costs at these two 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 or tenants 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
Nine and three months ended September 30, 1998 and 1997
Rental income increased by $1,216,084 and $630,741 to $5,165,813 and $1,897,958
for the nine and three months ended September 30, 1998 from $3,949,729 and
$1,267,217 for the nine and three months ended September 30, 1997 resulting
primarily from the acquisition of three properties in 1998 and two properties in
1997, offset in part by the sale of a property during 1997.
On September 16, 1998, the Company received a payoff in full of a mortgage
receivable, which had previously been acquired at a discount. Included in
interest from related party for the 1998 periods is $2,080,918, which represents
the unamortized balance of the discount.
Interest and other income increased by $127,760 and $111,366 to $177,910 and
$129,069, due to an increase in cash and cash equivalents 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 $252,369 and $116,351 for
the nine and three months ended September 30, 1998 to $1,006,949 and $368,827
results primarily from depreciation on five properties acquired during 1998 and
1997, offset in part by the sale of one property during 1997.
The increases in interest-mortgages payable to $1,499,120 and $560,703 for the
nine and three months ended September 30, 1998 from $1,157,027 and $368,788 in
the prior nine and three month periods is due to mortgages placed on four 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 for the nine months ended
September 30, 1998, 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 shares through the rights offering.
General and administrative expenses increased by $14,596 and $18,181 to $498,615
and $168,300 for the nine and three months ended September 30, 1998,
respectively. These increases were due to a combination of factors including an
increase in personnel costs as the Company's level of activities increased.
At September 30, 1998 the Company owns three properties which had been leased to
a retail chain of stores. Since the expiration of the initial term of these
leases on December 31, 1996, two of these stores have been re-leased and one
remains vacant. The Company has determined that the estimated fair value of
these properties are lower than their carrying amounts and thus, the Company has
taken a provision for the differences. The total provision taken on these three
properties amounts to $156,832. There was no comparable provision in the nine
months ended September 30, 1997.
On August 5, 1997, the property owned by a limited liability company in which
the Company was a majority member was sold and a gain of $599,251 was realized
on the sale. The Company's share of the gain is $383,915 (after deducting the
minority interest share of the gain of $215,336). There was no comparable gain
in the nine months ended September 30, 1998.
Part II - Other Information
Item 6. - Exhibits and Reports on Form 8-K
On September 24, 1998, the Company filed a current report on Form 8-K with the
Securities and Exchange Commission to report the amendment of certain provisions
of the Company's By-Laws.
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)
November 13, 1998 /s/ Matthew Gould
Date Matthew Gould
President
November 13, 1998 /s/ David W. Kalish
Date David W. Kalish
Vice President and
Chief Financial Officer