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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For quarter ended JULY 31, 2000 Commission file number 001-13777
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GETTY REALTY CORP.
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(Exact name of registrant as specified in its charter)
MARYLAND 11-3412575
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 JERICHO TURNPIKE, JERICHO, NEW YORK 11753
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(Address of principal executive offices) (Zip Code)
(516) 338 - 2600
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(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
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Registrant had outstanding 12,679,987 shares of Common Stock, par value $.01 per
share, and 2,865,768 shares of Series A Participating Convertible Redeemable
Preferred Stock, par value $.01 per share, as of September 5, 2000.
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GETTY REALTY CORP.
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page Number
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<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of July 31, 2000 and
January 31, 2000 1
Consolidated Statements of Operations for the three and six
months ended July 31, 2000 and 1999 2
Consolidated Statements of Cash Flows for the six months ended
July 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4 - 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6 - 9
Part II. OTHER INFORMATION
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Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
</TABLE>
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GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
July 31, January 31,
Assets: 2000 2000
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(unaudited)
<S> <C> <C>
Real Estate:
Land $135,463 $136,039
Buildings and improvements 178,824 179,963
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314,287 316,002
Less - accumulated depreciation and amortization 77,952 74,502
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Real estate, net 236,335 241,500
Cash and equivalents 521 651
Mortgages and accounts receivable, net 5,872 6,024
Recoveries from state underground storage tank funds 10,846 9,883
Prepaid expenses and other assets 2,762 2,694
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Total assets $256,336 $260,752
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Liabilities and Stockholders' Equity:
Borrowings under credit lines $25,800 $14,800
Mortgages payable 26,439 29,193
Accounts payable and accrued expenses 10,056 12,440
Environmental remediation costs 25,242 26,424
Deferred income taxes 36,877 36,084
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Total liabilities 124,414 118,941
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Stockholders' equity:
Preferred stock, par value $.01 per share; authorized
20,000,000 shares for issuance in series of which
3,000,000 shares are classified as Series A Participating
Convertible Redeemable Preferred; issued 2,888,798 at
July 31, 2000 and January 31, 2000 72,220 72,220
Common stock, par value $.01 per share; authorized
50,000,000 shares; issued 13,567,335 at July 31, 2000
and January 31, 2000 136 136
Paid-in capital 67,036 67,036
Retained earnings 3,366 3,114
Preferred stock held in treasury, at cost (17,730 shares
at July 31, 2000 and 700 shares at January 31, 2000) (329) (14)
Common stock held in treasury, at cost (862,648 shares
at July 31, 2000 and 59,916 shares at January 31, 2000) (10,507) (681)
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Total stockholders' equity 131,922 141,811
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Total liabilities and stockholders' equity $256,336 $260,752
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</TABLE>
See accompanying notes.
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GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended July 31, Six months ended July 31,
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Revenues:
Revenues from rental properties $14,700 $14,666 $29,425 $29,426
Other income 185 1,731 853 2,391
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14,885 16,397 30,278 31,817
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Rental property expenses 3,064 3,031 6,127 6,099
Environmental expenses 1,688 1,970 4,163 4,179
General and administrative expenses 1,076 1,640 1,625 2,895
Depreciation and amortization 2,503 2,737 5,006 5,242
Interest expense 980 669 1,780 1,293
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9,311 10,047 18,701 19,708
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Earnings before provision for income taxes 5,574 6,350 11,577 12,109
Provision for income taxes 2,317 2,664 4,865 5,080
------- ------- ------- -------
Net earnings 3,257 3,686 6,712 7,029
Preferred stock dividends 1,275 1,282 2,555 2,564
------- ------- ------- -------
Net earnings applicable to common stockholders $1,982 $2,404 $4,157 $4,465
======= ======= ======= =======
Net earnings per common share:
Basic $.16 $.18 $.32 $.33
Diluted $.16 $.18 $.32 $.33
Weighted average common shares outstanding:
Basic 12,767 13,567 12,996 13,567
Diluted 12,767 13,570 12,997 13,569
</TABLE>
See accompanying notes.
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GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended
July 31,
---------------------------
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $6,712 $7,029
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 5,006 5,242
Deferred income taxes 793 3,557
Gain on dispositions of real estate (525) (884)
Changes in assets and liabilities, net of effect of
acquisitions and dispositions:
Mortgages and accounts receivable 152 1,156
Recoveries from state underground storage tank funds (963) 448
Prepaid expenses and other assets (122) 820
Accounts payable and accrued expenses (2,384) (4,409)
Environmental remediation costs (1,182) (5,049)
Income taxes payable - (786)
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Net cash provided by operating activities 7,487 7,124
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Cash flows from investing activities:
Capital expenditures (506) (3,557)
Property acquisitions (155) (6,873)
Proceeds from dispositions of real estate 1,399 2,928
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Net cash provided by (used in) investing activities 738 (7,502)
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Cash flows from financing activities:
Borrowings under credit lines 11,000 9,000
Repayment of mortgages payable (2,754) (3,462)
Cash dividends (6,460) (5,278)
Purchase of common and preferred stock for treasury (10,141) -
Stock options - 15
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Net cash provided by (used in) financing activities (8,355) 275
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Net decrease in cash and equivalents (130) (103)
Cash and equivalents at beginning of period 651 657
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Cash and equivalents at end of period $521 $554
======= ======
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $2,086 $1,291
Income taxes, net 4,193 2,309
</TABLE>
See accompanying notes.
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GETTY REALTY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General:
The accompanying consolidated financial statements include the accounts of
Getty Realty Corp. and its wholly-owned subsidiaries (the "Company"). The
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and include amounts that are based on
management's best estimates and judgments. While all available information has
been considered, actual amounts could differ from those estimates. The
consolidated financial statements are unaudited but, in the opinion of
management, reflect all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation. These statements should be read in
conjunction with the consolidated financial statements and related notes which
appear in the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 2000.
2. Earnings per common share:
Basic earnings per common share is computed by dividing net earnings less
preferred dividends by the weighted average number of common shares outstanding
during the period. Diluted earnings per common share also gives effect to the
potential dilution from the exercise of stock options in the amount of 3,000
shares for the quarter ended July 31, 1999 and 1,000 shares and 2,000 shares for
the six months ended July 31, 2000 and 1999, respectively.
For the quarters and six months ended July 31, 2000 and 1999, conversion of
the Series A Participating Convertible Redeemable Preferred stock into common
stock utilizing the if-converted method would have been antidilutive and
therefore conversion was not assumed for purposes of computing diluted earnings
per common share.
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3. Stockholders' equity:
A summary of the changes in stockholders' equity for the six months ended
July 31, 2000 is as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Preferred Common
Stock Held Stock Held
Preferred Common Paid-in Retained in Treasury, in Treasury,
Stock Stock Capital Earnings at Cost at Cost Total
----------- -------- -------- -------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 31, 2000 $72,220 $136 $67,036 $3,114 ($14) ($681) $141,811
Net earnings 6,712 6,712
Cash dividends:
Common -- $.30 per share (3,905) (3,905)
Preferred -- $.8875 per share (2,555) (2,555)
Purchase of preferred stock
for treasury (315) (315)
Purchase of common stock
for treasury, net (9,826) (9,826)
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Balance, July 31, 2000 $72,220 $136 $67,036 $3,366 ($329) ($10,507) $131,922
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</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company is a real estate company specializing in the ownership and
leasing of service stations, convenience stores and petroleum marketing
terminals. The Company leases most of its properties on a long-term net basis to
Getty Petroleum Marketing Inc. ("Marketing"), which was spun-off to the
Company's stockholders on March 21, 1997. Our financial results largely depend
on rental income from Marketing and other lessees and sublessees. Therefore, our
financial results are materially dependent upon the ability of Marketing to meet
its lease obligations; however, we do not anticipate that Marketing will have
difficulty in making rental payments in the foreseeable future.
Results of Operations - Quarter ended July 31, 2000 compared with quarter ended
July 31, 1999
Revenues from rental properties for the quarter ended July 31, 2000 was
$14.7 million, which was comparable to the quarter ended July 31, 1999.
Approximately $14.0 million and $14.1 million of these rentals for the quarters
ended July 31, 2000 and 1999, respectively, were from properties leased to
Marketing under master lease agreements.
Other income was $.2 million for the quarter ended July 31, 2000 as
compared with $1.7 million for the quarter ended July 31, 1999. The quarter
ended July 31, 1999 included the settlement of a lawsuit resulting in the
elimination of a $1.2 million reserve and $.4 million of higher gains on real
estate dispositions.
Rental property expenses, which are principally comprised of rent
expense and real estate taxes, were $3.1 million for the quarter ended July 31,
2000 which was comparable to the $3.0 million for the quarter ended July 31,
1999.
Environmental expenses for the quarter ended July 31, 2000 were $1.7
million as compared with $2.0 million for the quarter ended July 31, 1999. The
current quarter included a change in estimated remediation costs of $1.5 million
as compared to $1.0 million during the prior year quarter. These charges are the
result of contamination discovered during work performed to meet certain federal
underground storage tank standards and revisions to estimates at other sites
where remediation is ongoing. The prior year quarter also included $.8 million
of higher legal charges related to environmental matters. As of July 31, 2000,
we had accrued $25.2 million as management's best estimate for future
environmental remediation costs and had recorded $10.8 million as management's
best estimate for recoveries from state underground storage tank remediation
funds. Such accruals are reviewed on a regular basis and any revisions thereto
are reflected in our financial statements as they become known.
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General and administrative expenses for the quarter ended July 31, 2000
were $1.1 million, a decrease of $.6 million as compared with the quarter ended
July 31, 1999. The decrease was primarily due to lower legal fees, lower
retrospective insurance charges relating to the spun-off petroleum marketing
business and lower employee related expenses. Included in general and
administrative expenses for the quarters ended July 31, 2000 and 1999 are
$159,000 and $205,000, respectively, of net fees paid to Marketing for certain
administrative and technical services performed under a services agreement.
Depreciation and amortization was $2.5 million and $2.7 million,
respectively, for the quarters ended July 31, 2000 and 1999. The decrease was
primarily the result of assets becoming fully depreciated and real estate
dispositions.
Interest expense for the three months ended July 31, 2000 was $1.0
million as compared with $.7 million for the quarter ended July 31, 1999. The
increase was principally due to higher average borrowings and higher interest
rates.
Results of Operations - Six months ended July 31, 2000 compared with six months
ended July 31, 1999
Revenues from rental properties for each of the six months ended
July 31, 2000 and 1999 were $29.4 million. Approximately $28.1 million and
$28.2 million of these rentals for the six months ended July 31, 2000 and
1999, respectively, were from properties leased to Marketing under master
lease agreements.
Other income was $.9 million for the six months ended July 31, 2000 as
compared with $2.4 million for the six months ended July 31, 1999. The six month
period ended July 31, 1999 included the settlement of a lawsuit resulting in the
elimination of a $1.2 million reserve, and $.4 million of higher gains on real
estate dispositions.
Rental property expenses, which are principally comprised of rent
expense and real estate taxes, were $6.1 million for each of the six months
ended July 31, 2000 and 1999.
Environmental expenses for the six months ended July 31, 2000 were $4.2
million which was comparable to the six months ended July 31, 1999. The current
six month period included a change in estimated remediation costs of $3.8
million as compared to $3.0 million during the prior year six month period. The
higher change in estimate was offset by $.7 million of lower legal charges
related to environmental matters during the current six month period.
General and administrative expenses were $1.6 million for the six
months ended July 31, 2000 as compared with $2.9 million for the six months
ended July 31, 1999. The decrease of $1.3 million was primarily due to lower
legal fees, lower retrospective insurance charges
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relating to the spun-off petroleum marketing business, and lower employee
related expenses. Included in general and administrative expenses for the six
months ended July 31, 2000 and 1999 are $318,000 and $432,000, respectively, of
net fees paid to Marketing for certain administrative and technical services
performed under a services agreement.
Depreciation and amortization was $5.0 million for the six months ended
July 31, 2000, a decrease of $.2 million as compared with the six months ended
July 31, 1999 due to assets becoming fully depreciated and real estate
dispositions.
Interest expense for the six months ended July 31, 2000 was $1.8
million as compared with $1.3 million for the six months ended July 31, 1999.
The increase in interest expense was principally due to higher average
borrowings and higher interest rates.
Liquidity and Capital Resources
Our principal sources of liquidity are cash flows from our business and
short-term uncommitted lines of credit with two banks. Management believes that
cash requirements for our business, including capital expenditures and debt
service can be met by cash flows from operations, available cash and equivalents
and credit lines. As of July 31, 2000, we had lines of credit amounting to $30
million, of which $25.8 million was utilized for short-term borrowings and $2.4
million in connection with outstanding letters of credit. Borrowings under the
lines of credit are unsecured and bear interest at the prime rate or, at our
option, LIBOR plus 1.0% to 1.1%. The lines of credit are subject to renewal at
the discretion of the banks. Although we expect that the existing sources of
liquidity will be sufficient to meet our expected business and debt service
requirements, we may be required to obtain additional sources of capital in the
future, which we believe are available.
During the six months ended July 31, 2000 and 1999, the Company
declared quarterly preferred stock dividends of $.44375 per share and quarterly
cash common stock dividends of $.15 per share in the year 2000 and $.10 per
share in 1999. These dividends aggregated $6.5 million and $5.3 million for the
six months ended July 31, 2000 and 1999, respectively.
Capital expenditures for the six months ended July 31, 2000 were $.5
million, primarily related to the replacement of underground storage tanks and
vapor recovery facilities at gasoline stations. These expenditures and certain
environmental liabilities and obligations continue to be our responsibility
after the spin-off of Marketing in 1997.
In June 2000, the Board of Directors approved the purchase of up to an
aggregate of 300,000 shares of the Company's common and preferred stock. As of
July 31, 2000, we purchased 73,528 shares of common stock and 7,000 shares of
preferred stock at an aggregate cost of $.9 million. Since the end of the second
quarter, we acquired an additional 30,000 common and preferred shares for $.4
million.
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Special Factors Regarding Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. When we use the words "believes", "expects",
"plans", "estimates" and similar expressions, we intend to identify
forward-looking statements. These forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance and achievements to be materially different from any future
results, performance or achievements expressed or implied by these
forward-looking statements. These factors include, but are not limited to: risks
associated with owning and leasing real estate generally; dependence on
Marketing as a lessee and on rentals from companies engaged in the petroleum
marketing and convenience store businesses; competition for locations and
tenants; risk of tenant non-renewal; the effects of regulation; and our
expectations as to the cost of completing environmental remediation.
As a result of these and other factors, we may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect our business, financial condition,
operating results and stock prices. An investment in our stock involves various
risks, including those mentioned above and elsewhere in this report and those
which are detailed from time to time in filings with the Securities and Exchange
Commission.
You should not place undue reliance on forward-looking statements,
which reflect our view only as of the date hereof. We undertake no obligation to
publicly release revisions to these forward-looking statements that reflect
future events or circumstances or reflect the occurrence of unanticipated
events.
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PART II. OTHER INFORMATION
Item 5. Other Information
The date by which proposals of security holders intended to be
presented at the next annual meeting, currently scheduled for June 21,
2001, must be received by the Company for inclusion in the proxy
statement for such meeting is December 31, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Designation of Exhibit
in this Quarterly Report
on Form 10-Q Description of Exhibit
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<S> <C>
27 Financial Data Schedule
</TABLE>
(b) Reports filed on Form 8-K:
None.
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.
GETTY REALTY CORP.
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(Registrant)
Dated: September 13, 2000 BY: /s/ John J. Fitteron
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(Signature)
JOHN J. FITTERON
Senior Vice President, Treasurer
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Dated: September 13, 2000 BY: /s/ Leo Liebowitz
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(Signature)
LEO LIEBOWITZ
President and Chief Executive
Officer
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