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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 APRIL 30, 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 12,778,215 shares of Common Stock, par value $.01 per
share, and 2,878,068 shares of Series A Participating Convertible Redeemable
Preferred Stock, par value $.01 per share, as of May 31, 2000.
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GETTY REALTY CORP.
INDEX
Part I. FINANCIAL INFORMATION Page Number
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Item 1. Financial Statements
Consolidated Balance Sheets as of April 30, 2000 and
January 31, 2000 1
Consolidated Statements of Operations for the three months ended
April 30, 2000 and 1999 2
Consolidated Statements of Cash Flows for the three months ended
April 30, 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 - 8
Part II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
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GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
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April 30, January 31,
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Assets: 2000 2000
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(unaudited)
<S> <C> <C>
Real Estate:
Land $ 136,089 $ 136,039
Buildings and improvements 180,005 179,963
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316,094 316,002
Less - accumulated depreciation and amortization 76,724 74,502
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Real estate, net 239,370 241,500
Cash and equivalents 531 651
Mortgages and accounts receivable, net 5,748 6,024
Recoveries from state underground storage tank funds 11,753 9,883
Prepaid expenses and other assets 2,119 2,694
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Total assets $ 259,521 $ 260,752
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Liabilities and Stockholders' Equity:
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Borrowings under credit lines $ 23,200 $ 14,800
Mortgages payable 27,650 29,193
Accounts payable and accrued expenses 9,887 12,440
Environmental remediation costs 27,715 26,424
Deferred income taxes 36,141 36,084
Income taxes payable 1,631 -
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Total liabilities 126,224 118,941
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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
April 30, 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 April 30, 2000
and January 31, 2000 136 136
Paid-in capital 67,036 67,036
Retained earnings 3,299 3,114
Preferred stock held in treasury, at cost (4,730 shares
at April 30, 2000 and 700 shares at January 31, 2000) (91) (14)
Common stock held in treasury, at cost (755,306 shares
at April 30, 2000 and 59,916 shares at January 31, 2000) (9,303) (681)
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Total stockholders' equity 133,297 141,811
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Total liabilities and stockholders' equity $ 259,521 $ 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>
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Three months ended April 30,
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2000 1999
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<S> <C> <C>
Revenues:
Revenues from rental properties $14,725 $14,760
Other income 668 660
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15,393 15,420
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Rental property expenses 3,063 3,068
Environmental expenses 2,475 2,209
General and administrative expenses 549 1,255
Depreciation and amortization 2,503 2,505
Interest expense 800 624
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9,390 9,661
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Earnings before provision for income taxes 6,003 5,759
Provision for income taxes 2,548 2,416
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Net earnings 3,455 3,343
Preferred stock dividends 1,280 1,282
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Net earnings applicable to common stockholders $ 2,175 $ 2,061
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Net earnings per common share:
Basic $ .16 $ .15
Diluted $ .16 $ .15
Weighted average common shares outstanding:
Basic 13,231 13,566
Diluted 13,231 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>
Three months ended
April 30,
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<S> <C> <C>
2000 1999
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Cash flows from operating activities:
Net earnings $3,455 $3,343
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 2,503 2,505
Deferred income taxes 57 1,372
Gain on dispositions of real estate (518) (480)
Changes in assets and liabilities, net of effect of
acquisitions and dispositions:
Mortgages and accounts receivable 276 (57)
Recoveries from state underground storage tank funds (1,870) 221
Prepaid expenses and other assets 545 909
Accounts payable and accrued expenses (2,553) (1,876)
Environmental remediation costs 1,291 (2,748)
Income taxes payable 1,631 439
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Net cash provided by operating activities 4,817 3,628
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Cash flows from investing activities:
Capital expenditures (267) (2,853)
Property acquisitions (155) (3,894)
Proceeds from dispositions of real estate 597 1,263
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Net cash provided by (used in) investing activities 175 (5,484)
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Cash flows from financing activities:
Borrowings under credit lines 8,400 5,300
Repayment of mortgages payable (1,543) (1,108)
Cash dividends (3,270) (2,639)
Purchase of common and preferred stock for treasury (8,699) -
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Net cash provided by (used in) financing activities (5,112) 1,553
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Net decrease in cash and equivalents (120) (303)
Cash and equivalents at beginning of period 651 657
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Cash and equivalents at end of period $ 531 $ 354
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Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $1,116 $ 621
Income taxes, net 257 605
</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 April 30, 1999.
For the quarters ended April 30, 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 three months ended
April 30, 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
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<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 3,455 3,455
Cash dividends:
Common -- $.15 per share (1,990) (1,990)
Preferred -- $.44375 per share (1,280) (1,280)
Purchase of preferred stock
for treasury (77) (77)
Purchase of common stock
for treasury, net (8,622) (8,622)
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Balance, April 30, 2000 $72,220 $136 $67,036 $3,299 ($91) ($9,303) $133,297
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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 its
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
making rental payments in the foreseeable future.
Results of Operations
Revenues from rental properties for the quarter ended April 30, 2000 was
$14.7 million, which was comparable to the quarter ended April 30, 1999.
Approximately $14.1 million of these rentals for each of the quarters were from
properties leased to Marketing under master lease agreements.
Other income was $.7 million for the quarter ended April 30, 2000, which
was comparable to the quarter ended April 30, 1999.
Rental property expenses, which are principally comprised of rent expense
and real estate taxes, were $3.1 million for each of the quarters ended April
30, 2000 and 1999.
Environmental expenses for the quarter ended April 30, 2000 were $2.5
million as compared with $2.2 million for the quarter ended April 30, 1999. The
current quarter included a change in estimated remediation costs of $2.3 million
as compared to $2.0 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. As of April 30, 2000, we had accrued $27.7 million
as management's best estimate for future environmental remediation costs and had
recorded $11.8 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.
General and administrative expenses for the quarter ended April 30, 2000
were $.5 million, a decrease of $.7 million as compared with the quarter ended
April 30, 1999. The decrease was primarily due to a reduction in employee
related expenses, lower retrospective insurance charges relating to the spun-off
petroleum marketing business and lower legal fees. Included in general and
administrative expenses for the quarters ended April 30, 2000 and 1999 are
$159,000 and $227,000 respectively, of net fees paid to Marketing for certain
administrative and technical services performed under a services agreement.
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Depreciation and amortization was $2.5 million for each of the quarters
ended April 30, 2000 and 1999.
Interest expense for the three months ended April 30, 2000 was $.8 million
as compared with $.6 million for the quarter ended April 30, 1999. The increase
was principally due to higher average borrowings under credit lines 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 April 30, 2000, we had lines of credit amounting to $30
million, of which $23.2 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% or 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 quarters ended April 30, 2000 and 1999, the Board of Directors
declared quarterly preferred stock dividends of $.44375 per share and quarterly
cash common stock dividends of $.15 and $.10 per share, respectively. These
dividends aggregated $3.3 million and $2.6 million for the quarters ended April
30, 2000 and 1999, respectively.
In March 2000, the Board of Directors approved the purchase of up to an
aggregate of 500,000 shares of the Company's common and preferred stock. As of
April 30, 2000, we purchased 459,856 shares of common stock and 330 shares of
preferred stock at an aggregate cost of $5.8 million. In May 2000, we completed
this stock buyback program which resulted in the purchase of an additional
33,814 shares of common stock and 6,000 shares of preferred stock at an
additional cost of $.5 million.
Capital expenditures for the quarter ended April 30, 2000 were $.3 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.
During the quarter ended April 30, 2000, the Company acquired one property
located in New York.
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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 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Designation of Exhibit
in this Quarterly Report
on Form 10-Q Description of Exhibit
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27 Financial Data Schedule
(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: June 12, 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: June 12, 2000 BY: /s/ Leo Liebowitz
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(Signature)
LEO LIEBOWITZ
President and Chief Executive
Officer
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