<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION WASHINGTON, D.C. 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 March 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
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Commission File Number 1-7859
IRT PROPERTY COMPANY
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(Exact name of registrant as specified in its charter)
Georgia 58-1366611
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
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(Address of principal (Zip Code)
executive offices)
(404) 955-4406
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal
year, if changed since last report)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at May 10, 1994
- - --------------------------- ---------------------------
<S> <C>
Common Stock, $1 Par Value 25,321,889 Shares
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
IRT PROPERTY COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
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(Unaudited)
<S> <C> <C>
ASSETS
Real estate investments:
Rental properties, at cost $331,350,472 $331,012,764
Accumulated depreciation (35,439,213) (33,463,530)
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295,911,259 297,549,234
Net investment in direct financing
leases 9,418,797 9,461,899
Mortgage loans, net of interest discounts of
$312,698 in 1994 and $313,253 in 1993 8,359,160 8,392,959
----------- -----------
Net real estate investments 313,689,216 315,404,092
Cash and cash equivalents 77,811,475 78,629,700
Accrued interest receivable 732,349 895,556
Prepaid expenses and other assets 6,958,928 7,389,777
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$399,191,968 $402,319,125
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LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable plus net interest premium of
$146,271 in 1994 and $163,244 in 1993 $ 98,415,940 $ 98,878,505
7.3% convertible subordinated
debentures due August 15, 2003 86,250,000 86,250,000
Accrued interest on debentures 804,521 2,116,240
Accrued expenses and other
liabilities 4,103,747 3,617,213
Deferred income taxes 1,122,000 1,122,000
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Total liabilities 190,696,208 191,983,958
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Shareholders' Equity:
Common stock, $1 par value, authorized 75,000,000
shares; 25,321,489 shares issued and outstanding in
1994 and 25,288,624 shares in 1993 25,321,489 25,288,624
Additional paid-in capital 197,099,558 196,793,150
Cumulative distributions in excess of net earnings (13,925,287) (11,746,607)
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Total shareholders' equity 208,495,760 210,335,167
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$399,191,968 $402,319,125
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</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
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<PAGE> 3
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
For the Three Months Ended March 31, 1994 and 1993
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
Revenues:
Income from rental properties $10,646,645 $10,123,959
Interest 857,844 355,164
Interest on direct financing leases 534,310 465,231
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12,038,799 10,944,354
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Expenses:
Operating expenses of real estate investments 2,407,360 2,485,012
Interest on mortgages 2,182,824 2,752,088
Interest on debentures 1,571,413 151,632
Interest on indebtedness to bank 23,991 54,777
Depreciation 1,975,683 1,855,171
Amortization of debt costs 111,096 24,033
General & administrative 634,501 538,918
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8,906,868 7,861,631
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Net earnings $ 3,131,931 $ 3,082,723
=========== ===========
Per Share:
Net earnings $ 0.12 $ 0.15
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Weighted average number of shares outstanding 25,297,019 21,030,136
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 4
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Distributions Total
Common Paid-In in Excess of Shareholders'
Stock Capital Net Earnings Equity
------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $21,016,570 $155,618,551 $ (8,061,119) $168,574,002
Net earnings for period - - 3,082,723 3,082,723
Cash dividends paid -
$.21 per share - - (4,415,658) (4,415,658)
Issuance of shares under
Dividend Reinvestment
Plan, net 25,047 290,716 - 315,763
Exercise of Incentive Stock
Options, net 1,939 5,454 - 7,393
Issuance of shares for the
acquisition of properties 9,182 105,409 - 114,591
----------- ------------ ------------ ------------
Balance at March 31, 1993 $21,052,738 $156,020,130 $ (9,394,054) $167,678,814
=========== ============ ============ ============
Balance at December 31, 1993 $25,288,624 $196,793,150 $(11,746,607) $210,335,167
Net earnings for period - - 3,131,931 3,131,931
Cash dividends paid -
$.21 per share - - (5,310,611) (5,310,611)
Issuance of shares under
Dividend Reinvestment
Plan, net 21,093 196,981 - 218,074
Exercise of Incentive Stock
Options, net 610 (519) - 91
Issuance of shares for the
acquisition of properties 11,162 109,946 - 121,108
----------- ------------ ------------ ------------
Balance at March 31, 1994 $25,321,489 $197,099,558 $(13,925,287) $208,495,760
=========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 5
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,131,931 $ 3,082,723
Adjustments to reconcile earnings to net cash from operating
activities:
Depreciation 1,975,683 1,855,171
Amortization of debt costs 111,096 24,033
Recovery of investment in direct
financing leases 43,102 38,483
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5,261,812 5,000,410
Changes in accrued assets and liabilities:
Increase (decrease) in accrued interest on
debentures -
7.3% interest payable (1,311,719) -
2.0% interest payable - 28,650
Accrued premium on 2.0% debentures - 122,982
Decrease (increase) in interest receivable,
prepaid expenses and other assets 482,960 (122,579)
Increase in accrued expenses and other
liabilities 604,361 868,956
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Net cash flows from operating activities 5,037,414 5,898,419
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Cash flows from (used in) investing activities:
Additions to real estate investments, net -
Acquisitions, expansions and renovations (144,397) (1,619,957)
Improvements (190,030) (310,633)
Collections of mortgage loans, net 33,799 1,077
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Net cash flows used in investing activities (300,628) (1,929,513)
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Cash flows from (used in) financing activities:
Cash dividends paid, net (5,092,537) (4,099,895)
Exercise of Incentive Stock Options, net 91 7,393
Amortization of mortgage notes payable, net (332,565) (395,764)
Repayment of mortgage notes payable, net (130,000) (920,213)
Increase in bank indebtedness, net - 3,799,900
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Net cash flows used in financing activities (5,555,011) (1,608,579)
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Net increase (decrease) in cash and cash equivalents (818,225) 2,360,327
Cash and cash equivalents at beginning of period 78,629,700 133,549
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Cash and cash equivalents at end of period $77,811,475 $ 2,493,876
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 6
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
Supplemental disclosures of cash flow
information:
-------------------------------------
Cash paid during the period for interest
related to:
Mortgage notes payable $ 2,234,936 $ 2,767,760
Convertible subordinated debentures -
7.3% interest 2,885,782 -
2% interest - -
Premiums - -
Indebtedness to bank 24,524 71,491
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Total cash paid during the period
for interest $ 5,145,242 $ 2,839,251
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Supplemental schedule of noncash investing
and financing activities:
------------------------------------------
Acquisitions:
Cost of acquisitions, expansions and
renovations $ 265,505 $ 5,734,548
Additions to mortgage notes payable -
Assumed - (4,000,000)
Issuance of common stock (121,108) (114,591)
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Cash paid for acquisitions, expansions
and renovations of real estate
investments $ 144,397 $ 1,619,957
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 7
IRT PROPERTY COMPANY
Notes to Consolidated Financial Statements
March 31, 1994 and 1993
1. Unaudited Financial Statements and Reclassification
These consolidated financial statements for interim periods are
unaudited and should be read in connection with the Company's Annual Report to
Shareholders for the year ended December 31, 1993. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to a fair presentation of the financial statements as of March 31,
1994 and 1993 have been recorded. Certain items on the consolidated statements
of earnings and cash flows have been reclassified to conform with the 1994
presentation.
2. Earnings Per Share
Earnings per share have been computed based on the weighted average
number of shares of common stock outstanding. The effect on earnings per share
assuming conversion of the 7.3% convertible subordinated debentures would be
anti-dilutive. Exercise of the outstanding stock options would not have a
material dilutive effect on earnings per share.
3. Interest on Short-Term Investments
Interest income includes income on certificates of deposit of $634,534
for the three months ended March 31, 1994.
4. Mortgage Loan Investment
On April 14, 1994, the borrower under the Spanish Quarter Apartments
wrap-around mortgage loan filed Chapter 11 bankruptcy. The principal balance
of the loan at March 31, 1994 was $5,234,897. This wrap-around mortgage is
subject to two first mortgages having an aggregate balance of $1,285,267 as of
March 31, 1994. In accordance with the Company's accounting policy on income
recognition, the Company ceased accruing interest income on the wrap-around
mortgage loan effective April 1, 1994. The outcome of the bankruptcy
proceedings cannot be determined at this time.
5. Commitments and Contingencies
The Company has executed contracts to purchase two shopping centers in
Florida. The total purchase price is estimated to be $12,700,000, consisting
of approximately $5,300,000 of first mortgage financing and $7,400,000 of cash.
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<PAGE> 8
During 1992, the Company purchased from the Sofran Group and the IBM
Retirement Plan Trust Fund (advised by Dreyfus Realty Advisors) 17 shopping
centers which have certain rental guaranties from the sellers. At the time of
the purchases, 290,762 shares of the Company's common stock (representing
approximately $3,003,000 of the purchase price) were retained as "holdback
shares." The Company may be required to issue all or a portion of the holdback
shares at various dates over the holdback periods if certain occupancy levels
on a portfolio basis or on agreed-upon spaces are achieved by the end of the
respective periods.
The Sofran holdback, which expires January 1995, contained a total of
169,290 shares. For the period August 1, 1992 through December 31, 1993, the
number of shares available to the sellers was reduced by 110,540 shares and the
Company issued 9,182 shares to the sellers, leaving a balance of 49,568
holdback shares.
The Dreyfus holdback, which expires December 1995, contained a total
of 121,472 shares. For the period December 23, 1992 through December 31, 1993,
the number of shares available to the sellers was reduced by 25,387 shares and
the Company issued 31,731 shares to the sellers, leaving a balance of 64,354
holdback shares.
The shares issued represented additional cost of acquisition for
financial reporting purposes. In addition, during the holdback periods, the
sellers are entitled to amounts equivalent to dividends on the holdback shares
until such time as their right to receive such holdback shares may be
extinguished at the close of the periods. The Company paid dividend
equivalents of $10,409 and $25,110 during the first three months of 1994 and
1993, respectively, to the sellers of the Sofran centers. Also, the Company
paid dividend equivalents of $15,858 and $25,509 during the first quarter of
1994 and 1993, respectively, to the sellers of the Dreyfus centers. These
payments are considered part of the cost of acquisition on the respective
payment dates.
Additionally, the seller of one of the IBM/Dreyfus centers pledged
115,343 of its IRT Property Company shares to the Company as collateral for a
guarantee of rents payable by one of the anchor tenants which had filed
bankruptcy. For the period December 23, 1992 through December 31, 1993, 15,943
shares held as collateral were released to the seller and 773 shares were
retired.
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<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Material Changes in Financial Condition. There were no material
changes in the Company's financial condition during the first quarter of 1994.
During the first quarter of 1994, the Company had an average of
approximately $79,000,000 of the proceeds of the August 1993 equity and debt
offerings invested in short-term money market investments earning an average
interest rate of approximately 3.2%. This resulted in temporary dilution in
funds from operations. This temporary dilution will cease as this cash is
invested in higher-yielding real estate investments which the Company is
actively pursuing.
Material Changes in Results of Operations. Funds from operations is
defined as net cash flows from operating activities before changes in accrued
assets and liabilities. Funds from operations totaled $5,261,812 and
$5,000,410 for the three-month periods ended March 31, 1994 and 1993,
respectively.
The Company's 1993 property acquisitions, expansions and sales
resulted in net increases in income from rental properties and depreciation and
a net decrease in operating expenses of real estate investments during the
first quarter of 1994.
The increase in interest income during the quarter ended March 31,
1994 was primarily due to approximately $635,000 of interest earned on
short-term investments. No cash was available for short-term investing in the
first quarter of 1993. The 1994 increase was partially offset by a decrease in
interest income of approximately $107,000 due to the repayment of two of the
Company's mortgage loan investments in December 1993.
During the first quarter of 1994, the Company received percentage
rental totaling $292,000 from its four Wal-Mart investments accounted for as
direct financing leases, an increase of approximately $73,000 over that
received in 1993.
The decrease in interest on mortgages was primarily due to the
repayment of eleven mortgage notes payable during 1993 and the refinancing of a
12.625% mortgage at 8.125% in March 1994, partially offset by additional
interest from 1993 acquisitions.
The increase in interest on debentures during the three-month period
ended March 31, 1994 resulted from the issuance of $86,250,000 of 7.3%
convertible subordinated debentures in
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<PAGE> 10
August 1993, partially offset by the Company's redemption of the remaining 2%
convertible subordinated debentures on August 1, 1993.
The Company had no borrowings under its bank credit facility during
the three months ended March 31, 1994, but had average borrowings of
approximately $2.5 million during the comparable period in 1993. This resulted
in decreased interest expense on bank debt for the first quarter of 1994.
The increase in general and administrative expenses in 1994 was
primarily due to the costs of increased administrative and property management
personnel.
On April 14, 1994, the borrower under the wrap-around mortgage loan
secured by Spanish Quarter Apartments filed Chapter 11 bankruptcy. In
accordance with the Company's accounting policy on income recognition, the
Company ceased accruing interest income on this loan effective April 1, 1994.
The outcome of the bankruptcy proceedings cannot be determined at this time.
(See Note 4.)
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<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the first quarter of 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
IRT PROPERTY COMPANY
Date: May 10, 1994 /s/ Donald W. Macleod
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Donald W. MacLeod
Chairman & President
Date: May 10, 1994 /s/ Mary M. Thomas
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Mary M. Thomas
Executive Vice President &
Treasurer
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