<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 June 30, 1996
-------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
---------------- ---------------------
Commission File Number 1-7859
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IRT PROPERTY COMPANY
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1366611
------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
- -------------------------------- ----------------------------
(Address of principal (Zip Code)
executive offices)
(770) 955-4406
- ----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- ----------------------------------------------------------------------------
(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.
Class Outstanding at August 6, 1996
- -------------------------- -----------------------------
Common Stock, $1 Par Value 25,756,692 Shares
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
IRT PROPERTY COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate investments: $444,571,463 $452,508,601
Rental properties, at cost (51,762,754) (51,600,890)
Accumulated depreciation ------------ ------------
392,808,709 400,907,711
Net investment in direct financing leases 8,990,447 9,097,717
Mortgage loans, net of interest discounts of $244,919
in 1996 and $266,957 in 1995 12,246,568 8,499,210
------------ ------------
Net real estate investments 414,045,724 418,504,638
Cash and cash equivalents 6,540,795 16,400
Accrued interest receivable 573,362 544,073
Prepaid expenses and other assets 8,207,412 8,332,907
------------ ------------
$429,367,293 $427,398,018
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable plus net interest premium of
$47,755 in 1996 and $78,657 in 1995 $ 88,435,599 $ 99,188,181
7.3% convertible subordinated debentures due
August 15, 2003 84,905,000 84,905,000
7.45% senior notes due April 1, 2001, net of interest
discount of $79,230 49,920,770 -
Indebtedness to banks - 36,000,000
Accrued interest on debentures 2,341,488 2,341,488
Accrued interest on senior notes 993,334 -
Accrued expenses and other liabilities 5,982,655 5,265,202
Deferred income taxes 1,068,000 1,068,000
------------ ------------
Total liabilities 233,646,846 228,767,871
------------ ------------
Commitments and Contingencies (Note 8)
Shareholders' Equity:
Common stock, $1 par value, authorized 75,000,000
shares; 25,756,692 shares issued and outstanding in
1996 and 25,689,002 shares in 1995 25,756,692 25,689,002
Additional paid-in capital 200,842,341 200,318,168
Cumulative distributions in excess of net earnings (30,878,586) (27,377,023)
------------ ------------
Total shareholders' equity 195,720,447 198,630,147
------------ ------------
$429,367,293 $427,398,018
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
2
<PAGE> 3
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
For the Three- and Six-Month Periods Ended
June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
1996 1995 1996 1995
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Income from rental properties $14,389,235 $14,377,976 $28,751,489 $28,850,967
Interest 410,610 223,645 636,270 446,365
Interest on direct financing leases 230,411 235,944 506,050 820,540
----------- ----------- ----------- -----------
15,030,256 14,837,565 29,893,809 30,117,872
----------- ----------- ----------- -----------
Expenses:
Operating expenses of real estate
investments 2,936,523 3,107,654 5,785,294 6,223,655
Interest on mortgages 1,924,665 2,333,032 4,021,854 4,715,066
Interest on debentures 1,549,515 1,549,515 3,099,030 3,111,032
Interest on senior notes 927,007 - 989,190 -
Interest on indebtedness to banks 62,051 534,704 714,526 1,060,172
Depreciation 2,532,253 2,580,316 5,187,898 5,167,157
Amortization of debt costs 155,334 110,310 284,738 221,261
General & administrative 955,350 731,173 1,921,195 1,532,447
----------- ----------- ----------- -----------
11,042,698 10,946,704 22,003,725 22,030,790
----------- ----------- ----------- -----------
Earnings before gain (loss) on real
estate investments 3,987,558 3,890,861 7,890,084 8,087,082
Gain (loss) on real estate investments:
Gain (loss) on sales of properties (12,874) (58,084) 194,622 (74,757)
----------- ----------- ----------- -----------
Earnings before extraordinary item 3,974,684 3,832,777 8,084,706 8,012,325
Extraordinary item -
(Loss) on extinguishment of debt (16,500) - (16,500) -
----------- ----------- ----------- -----------
Net earnings $ 3,958,184 $ 3,832,777 $ 8,068,206 $ 8,012,325
=========== =========== =========== ===========
Per Share:
Earnings before extraordinary item $ 0.15 $ 0.15 $ 0.31 $ 0.31
Extraordinary item - - - -
=========== ----------- ----------- -----------
Net earnings $ 0.15 $ 0.15 $ 0.31 $ 0.31
=========== =========== =========== ===========
Weighted average number of shares
outstanding 25,737,741 25,590,389 25,720,717 25,533,116
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 4
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(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, 1994 $25,420,747 $197,937,465 $(20,319,748) $203,038,464
Net earnings for period - - 8,012,325 8,012,325
Cash dividends paid -
$.435 per share - - (11,105,218) (11,105,218)
Issuance of shares under
Dividend Reinvestment
Plan, net 59,812 494,812 - 554,624
Conversion of debentures,
net 119,554 1,175,718 - 1,295,272
Issuance of shares for the
acquisition of properties 11,520 100,904 - 112,424
----------- ------------ ------------ ------------
Balance at June 30, 1995 $25,611,633 $199,708,899 $(23,412,641) $201,907,891
=========== ============ ============ ============
Balance at December 31, 1995 $25,689,002 $200,318,168 $(27,377,023) $198,630,147
Net earnings for period - - 8,068,206 8,068,206
Cash dividends paid -
$.45 per share - - (11,569,769) (11,569,769)
Issuance of shares under
Dividend Reinvestment
Plan, net 62,051 481,557 - 543,608
Exercise of Incentive Stock
Options, net 2,300 15,238 - 17,538
Issuance of shares for the
acquisition of properties 3,339 27,378 - 30,717
----------- ------------ ------------ ------------
Balance at June 30, 1996 $25,756,692 $200,842,341 $(30,878,586) $195,720,447
=========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,068,206 $ 8,012,325
Adjustments to reconcile earnings to net cash from
operating activities:
Depreciation 5,187,898 5,167,157
Loss (gain) on sales of properties (194,622) 74,757
Extraordinary (loss) 16,500 -
Amortization of debt costs and discount 289,008 221,261
Amortization of capitalized leasing income 107,270 113,028
----------- -----------
13,474,260 13,588,528
Changes in accrued assets and liabilities:
Increase (decrease) in accrued interest on
debentures - (37,092)
Increase in accrued interest on senior notes 993,334 -
Decrease in interest receivable, prepaid
expenses and other assets 333,643 396,429
Increase in accrued expenses and other
liabilities 717,453 2,417,894
----------- -----------
Net cash flows from operating activities 15,518,690 16,365,759
----------- -----------
Cash flows from (used in) investing activities:
Proceeds from sales of properties, net 1,589,442 811,217
Additions to real estate investments, net -
Acquisitions, expansions and renovations (787,480) (6,625,621)
Improvements (1,465,519) (373,657)
Collections of mortgage loans, net 52,642 21,236
Additions to mortgage loans - (143,067)
----------- -----------
Net cash flows used in investing activities (610,915) (6,309,892)
----------- -----------
Cash flows from (used in) financing activities:
Cash dividends paid, net (11,026,161) (10,550,594)
Exercise of Incentive Stock Options, net 17,538 -
Issuance of 7.45% senior notes, net 49,394,325 -
Amortization of mortgage notes payable, net (653,831) (810,717)
Repayment of mortgage notes payable, net (10,098,751) (3,250,000)
Increase (decrease) in bank indebtedness, net (36,000,000) 7,000,000
Cash in lieu of fractional shares on conversion of
debentures - (15)
Extraordinary item -
(Loss) on extinguishment of debt (16,500) -
----------- -----------
Net cash flows used in financing activities (8,383,380) (7,611,326)
----------- -----------
Net increase in cash and cash equivalents 6,524,395 2,444,541
Cash and cash equivalents at beginning of period 16,400 1,841,388
----------- -----------
Cash and cash equivalents at end of period $ 6,540,795 $ 4,285,929
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest related to:
Mortgage notes payable $ 4,080,549 $4,757,981
Convertible subordinated debentures 3,099,032 3,148,124
Senior notes, including $8,414 capitalized in 1996 83,500 -
Indebtedness to banks, including $2,853
capitalized in 1996 and $73,122 in 1995 836,593 701,575
----------- ----------
Total cash paid during the period
for interest $ 8,099,674 $8,607,680
=========== ==========
Supplemental schedule of noncash investing and
financing activities:
Sales of Properties:
Gross proceeds from sales of properties $ 5,389,442 $ 811,217
Additions to mortgage loans (3,800,000) -
----------- ----------
Cash proceeds from sales of properties, net $ 1,589,442 $ 811,217
=========== ==========
Acquisitions, Expansions and Renovations:
Cost of acquisitions, expansions and renovations $ 818,197 $9,202,390
Additions to mortgage notes payable -
Assumed, including interest premium at date of
acquisition of $80,890 - (2,464,345)
Issuance of common stock (30,717) (112,424)
----------- ----------
Cash paid for acquisitions, expansions and
renovations of real estate investments $ 787,480 $6,625,621
=========== ==========
Conversion of debentures:
Debentures converted $ - $ 1,345,000
Associated unamortized debenture costs - (49,713)
Equity issued on conversion - (1,295,272)
----------- ----------
Cash paid in lieu of fractional shares $ - $ 15
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 7
IRT PROPERTY COMPANY
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
1. Unaudited Financial Statements
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, 1995. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to a fair presentation of the financial statements as of June 30, 1996
and 1995 have been recorded.
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. Adoption of Financial Accounting Standards
During the first quarter of 1996, the Company adopted the Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." This standard
had no effect on the Company's financial statements.
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"). Effective in January 1996, the Company adopted the
disclosure option of SFAS No. 123, "Accounting for Stock-based Compensation."
SFAS No. 123 requires that companies which do not choose to account for
stock-based compensation as prescribed by the statement shall disclose the pro
forma effects on earnings and earnings per share as if SFAS No. 123 had been
adopted. Additionally, certain other disclosures are
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required with respect to stock compensation and the assumptions used to
determine the pro forma effects of SFAS No. 123. The required disclosures will
be made on an annual basis in the Form 10-K.
4. IRT Capital Corporation
On May 23, 1996, IRT Capital Corporation, a taxable subsidiary of the
Company, was formed under the laws of Georgia. This taxable subsidiary will
have the ability to develop properties, buy and sell properties, provide equity
to developers who are merchant builders and perform third-party management,
leasing and brokerage. The Company holds 100% of the non-voting and 1% of the
voting common stock of IRT Capital Corporation. The remaining voting common
stock is held by two principal executive officers of the Company. The
ownership of the common stock of IRT Capital Corporation entitles the Company
to substantially all (99%) of the economic benefits from the results of
operations of this subsidiary. IRT Capital Corporation is included in the
Company's Consolidated Financial Statements, but is taxed as a regular
corporation.
5. Issuance of 7.45% Senior Notes
On March 26, 1996, the Company issued $50,000,000 of 7.45% senior notes
due April 1, 2001. The senior notes were issued at a discount of $83,500 which
will be amortized over the life of the notes for financial reporting purposes.
Net proceeds from the issuance totaled approximately $49,394,000.
Interest on the senior notes is payable semi-annually on April 1 and
October 1. Costs associated with the issuance of the senior notes totaled
approximately $522,000 and are being amortized over the life of the notes.
6. Purchase of Rental Properties
On January 6, 1995, the Company acquired two shopping centers in Slidell
and Galliano, Louisiana. The cost to the Company aggregated $6,901,000,
consisting of the initial purchase price of $6,658,000, $162,000 of acquisition
costs and an $80,890 premium recorded on the valuation of the mortgage debt
assumed. This
8
<PAGE> 9
acquisition was funded by the assumption of the $2,383,000 existing mortgage
debt and cash of $4,437,000. These two centers were part of a package of 13
centers, 11 of which were acquired on December 21, 1994.
7. Sales of Properties
On March 31, 1996, the Company sold Valley West Mall in Glendale, Arizona
for a total sales price of $5,450,000. The Company received net cash proceeds
from this sale of approximately $1,589,000 and took back a purchase money
mortgage of $3,800,000. The purchase money mortgage, which matures April 1,
2001, bears interest at an annual rate of 9.00% and is payable in monthly
installments of $30,576 with a balloon payment at maturity. The Company
recognized a gain on this sale of approximately $195,000 for financial
reporting purposes.
In February 1995, the Company sold a parcel of land totaling 1.03 acres at
its Siegen Village Shopping Center in Baton Rouge, Louisiana for a total sales
price of $325,000 and recognized a loss of approximately $16,700 for financial
reporting purposes. In April 1995, the Company sold Union Plaza and Winnsboro
Plaza shopping centers for aggregate sales prices of $545,000 and recognized
net losses totaling $59,900 for financial reporting purposes. Additionally,
the Company recognized a gain of $1,800 on a condemnation of a small parcel of
land.
8. Commitments and Contingencies
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 was 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 were achieved by the end of the
respective periods.
The Sofran holdback, which expired in January 1995, contained a total of
169,290 shares. Over the term of this holdback, 9,182 shares were earned by
and issued to the sellers and the remaining 160,108 shares were forfeited.
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<PAGE> 10
The Dreyfus holdback, which expired in December 1995, contained a total of
121,472 shares. Over the term of this holdback, 86,781 shares were earned by
and issued to the sellers and the remaining 34,691 shares were forfeited.
The shares issued represented additional cost of acquisition for financial
reporting purposes. In addition, during the holdback periods, the sellers were
entitled to amounts equivalent to dividends on the holdback shares until such
time as their right to receive such holdback shares was extinguished at the
close of the periods. The Company paid no dividend equivalents during the
first six months of 1996 and $8,387 during the first six months of 1995 to the
sellers of the Dreyfus centers. These payments were 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 June 30, 1996, 53,887 shares held as
collateral were released to the seller and 12,140 shares were retired, leaving
a balance of 49,316 shares.
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<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Material Changes in Financial Condition. During the six months ended June
30, 1996, the Company received cash proceeds of approximately $49,394,000 from
the issuance of $50,000,000 of senior notes due April 2001 and net cash
proceeds of approximately $1,589,000 on the sale of Valley West Mall. It
utilized funds of a) $36,000,000 to repay the outstanding balance of its
unsecured revolving term loan, b) $6,263,000 to repay a 9.78% mortgage at
maturity, c) $1,052,000 to repay a 13.875% mortgage (discounted to 9.5% for
financial reporting purposes) at maturity, d) $2,727,000 to prepay a 9.375%
mortgage, e) $57,000 to prepay an 8.5% mortgage and f) $777,000 to fund
expansion or redevelopment costs of four existing investments.
During the first six months of 1995, the Company borrowed $7,000,000 under
its revolving term loan and received cash proceeds of approximately $811,000 on
sales of a parcel of land and two shopping centers. It utilized funds of a)
$6,820,000 for the acquisition of two shopping center investments, consisting
of cash of approximately $4,437,000 and mortgage debt of approximately
$2,383,000 secured by one of the centers and b) $2,181,000 to fund expansion or
redevelopment costs of five existing investments. Additionally, in March 1995
$1,345,000 of the Company's 7.3% convertible subordinated debentures were
converted into 119,554 shares of common stock at $11.25 per share.
Material Changes in Results of Operations. During the quarter ended June
30, 1996, rental income from the Company's core portfolio of shopping center
investments increased approximately $425,000. This increase includes
approximately $109,000 of additional income earned from two property expansions
completed during 1995 and is net of approximately $67,000 less income earned
due to two tenant bankruptcies during 1995. The increase in the Company's core
portfolio income was offset by approximately $5,000 less income earned on three
investments sold during 1995 and approximately $409,000 less income earned due
to the sale of the Company's Valley West Mall investment. The Valley West Mall
investment was sold on March 31, 1996 for a gain of approximately $195,000 for
financial reporting purposes.
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<PAGE> 12
During the first six months of 1996, rental income from the Company's core
portfolio of shopping center investments increased approximately $762,000.
This increase includes approximately $215,000 of additional income earned from
two property expansions completed during 1995 and is net of approximately
$137,000 less income earned during the first six months of 1996 due to two
tenant bankruptcies during 1995. The increase in the Company's core portfolio
income was offset by approximately $62,000 less income earned on three
investments sold during 1995 and approximately $799,000 less income earned due
to the sale of Valley West Mall in March 1996. The decrease in income for
Valley West Mall included approximately $137,000 of property tax reimbursements
due to the tenants as a result of a reduction in property taxes for 1994 and
1995 awarded by the State of Arizona in 1996.
During the first quarter of 1996, the Company received percentage rentals
totaling $43,789 from one of its four Wal-Mart investments accounted for as
direct financing leases. This represented a decrease of approximately $304,000
over that received during the first quarter of 1995, as Wal-Mart has ceased
operations in three of the four Wal-Mart investments, from which the Company
received approximately $305,000 of percentage rentals during the first quarter
of 1995. Wal-Mart remains liable under the leases which expire in January 2011
and continues to pay base rentals, but no further percentage rentals are
anticipated to be earned from these three facilities.
Operating expenses related to the Company's core portfolio of real estate
investments increased approximately $185,000 and $338,000 for the quarter and
six months ended June 30, 1996, respectively. These increases were offset by
approximately $5,000 and $16,000 less expenses incurred for the quarter and six
months ended June 30,1996, respectively, on three investments sold during 1995.
In addition, approximately $352,000 and $761,000 less expenses were incurred
for the quarter and six months ended June 30, 1996, respectively, due to the
sale of Valley West Mall in March 1996. The decrease for Valley West Mall
included a property tax refund for 1994 and 1995 of approximately $325,000
awarded by the State of Arizona during the first quarter of 1996.
Interest expense on mortgages decreased approximately $408,000 and
$693,000 for the quarter and six months ended June 30, 1996, respectively, due
to various mortgages repaid or refinanced during 1995 and the first six months
of 1996. During the six months of 1996, the Company (a) repaid at maturity a
$6,263,000 mortgage bearing
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interest at 9.78%, (b) repaid at maturity a $1,052,000 mortgage bearing
interest at 13.875% (discounted to 9.5% for financial reporting purposes), (c)
prepaid a $2,727,000 mortgage bearing interest at 9.375%, resulting in a
$16,500 loss on extinguishment of debt and (d) prepaid a $57,000 mortgage
bearing interest at 8.50%. During 1995, the Company (a) repaid at maturity two
variable rate mortgages totaling $3,524,000, (b) repaid at maturity an $860,000
mortgage bearing interest at 13.875% (discounted to 9.5% for financial
reporting purposes), (c) refinanced a $9,000,000 mortgage, reducing the face of
the mortgage to $7,500,000 and the interest rate from 9.75% to 8.375% and (d)
refinanced a $12,330,000 mortgage, reducing the face of the mortgage to
$11,377,000 and the interest rate from 9.375% to 8.194%. In addition, a 9.5%
fully amortizing mortgage note payable was extinguished at maturity in August
1995.
Interest expense on bank indebtedness decreased approximately $473,000 and
$346,000 for the quarter and six months ended June 30, 1996, respectively. The
Company had no amounts outstanding under its bank credit facility during the
quarter ended June 30, 1996 and had average borrowings of $24,611,000 at an
effective interest rate of 8.54% during the quarter ended June 30, 1995. The
Company had average borrowings of approximately $15,063,000 and $24,683,000 at
effective interest rates of 8.05% and 8.47%, respectively, under its bank
credit facility during the six months ended June 30, 1996 and 1995,
respectively. In addition, the Company incurred commitment fees of
approximately $62,000 and $3,000 for the quarters ended June 30, 1996 and 1995,
respectively, and approximately $101,000 and $9,000 for the six months ended
June 30, 1996 and 1995, respectively, based on the aggregate unused portion of
the commitment. The Company's revolving term loan commitment increased to
$100,000,000 from $50,000,000 in December 1995.
The increases in general and administrative expenses in 1996 were
primarily due to the appointment of a new President and Chief Operating Officer
in October 1995, as well as the costs of increased administrative and property
management personnel and increased state franchise taxes.
Funds from Operations. Effective January 1, 1996, the Company adopted
the NAREIT definition of funds from operations. NAREIT defines funds from
operations as net income before gains (losses) on real estate investments and
extraordinary items plus depreciation and amortization of capitalized leasing
costs. Amortization of convertible debenture costs is added to funds from
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<PAGE> 14
operations when assumed conversion of the debentures is dilutive. Conversion
of the debentures is dilutive and therefore assumed for the quarter and
six months ended June 30, 1996 and 1995. Management believes funds from
operations should be considered along with, but not as an alternative to, net
income as defined by generally accepted accounting principles as a measure of
the Company's operating performance. Funds from operations does not represent
cash generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs.
The following data is presented with respect to the calculation of funds
from operations under the NAREIT definition for the quarters and six months
ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
1996 1995 1996 1995
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net Earnings $ 3,958,184 $ 3,832,777 $ 8,068,206 $ 8,012,325
Loss (gain)on real estate
investments 12,874 58,084 (194,622) 74,757
Loss on extinguishment
of debt 16,500 - 16,500 -
Depreciation 2,532,253 2,580,316 5,187,898 5,167,157
Amortization of
capitalized leasing fees 55,145 46,955 108,355 92,323
Amortization of
capitalized leasing income 54,348 51,628 107,270 113,028
----------- ----------- ----------- -----------
Funds from operations 6,629,304 6,569,760 13,293,607 13,459,590
Interest on convertible
debentures 1,549,515 1,549,515 3,099,030 3,111,032
Amortization of
convertible debenture costs 91,440 91,440 182,880 183,511
----------- ----------- ----------- -----------
Fully diluted funds from
operations $ 8,270,259 $ 8,210,715 $16,575,517 $16,754,133
=========== =========== =========== ===========
Fully diluted weighted
average shares 33,284,852 33,137,501 33,267,829 33,119,569
=========== =========== =========== ===========
</TABLE>
14
<PAGE> 15
Additional Information. The following data is presented with respect to
amounts incurred for improvements to the Company's real estate investments and
for leasing fees during the quarters and six-month periods ended June 30, 1996
and 1995:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
1996 1995 1996 1995
-------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Tenant Improvements:
Shopping Centers $181,225 $144,182 $ 375,492 $274,239
Industrial 170,739 - 348,399 -
-------- -------- ---------- --------
Total Tenant
Improvements 351,964 144,182 723,891 274,239
-------- -------- ---------- --------
Capital Expenditures:
Shopping Centers 409,946 90,346 497,276 100,670
Apartment 33,109 9,491 86,360 17,691
Industrial 157,690 (29,497) 157,992 (18,943)
-------- -------- ---------- --------
Total Capital
Expenditures 600,745 70,340 741,628 99,418
-------- -------- ---------- --------
Total Improvements $952,709 $214,522 $1,465,519 $373,657
======== ======== ========== ========
Leasing Fees $ 41,535 $142,120 $ 143,739 $192,474
======== ======== ========== ========
</TABLE>
Tenant improvements reflected above do not include leasing fees. Leasing
fees are recorded as deferred assets and expensed on the straight line basis
over the lives of the respective leases in operating expenses of real estate
investments.
15
<PAGE> 16
PART II. OTHER INFORMATION
Item 4. Results of Votes of Security Holders.
The Annual Meeting of Shareholders of the Company was held May 13, 1996
with 21,601,629 shares represented by proxy, or approximately 84% of the shares
outstanding as of the March 25, 1996 record date. The only matter voted upon
by shareholders of the Company was the election of eight directors to hold
office until their successors are elected and qualified. All eight directors
were elected with at least 97.94% of the shares represented at the meeting
voted in favor of all the nominees as directors. The following table lists the
votes cast for and against each director:
<TABLE>
<S> <C> <C>
DIRECTOR FOR AGAINST
------------------- ---------- -------
Donald W. MacLeod 21,157,220 444,409
Thomas H. McAuley 21,169,867 431,762
Mary M. Thomas 21,168,856 432,773
Homer B. Gibbs, Jr. 21,398,986 202,643
Samuel W. Kendrick 21,391,570 210,059
Bruce A. Morrice 21,400,086 201,543
James H. Nobil 21,390,774 210,855
Louis P. Wolfort 21,376,318 225,311
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(27) Financial Data Schedule (for S.E.C. use only).
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company
during the quarter ended June 30, 1996.
16
<PAGE> 17
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: August 6, 1996 /s/ Donald W. MacLeod
-------------- ---------------------
Donald W. MacLeod
Chairman and Chief
Executive Officer
Date: August 6, 1996 /s/ Thomas H. McAuley
-------------- ---------------------
Thomas H. McAuley
President & Chief Operating
Officer
Date: August 6, 1996 /s/ Mary M. Thomas
-------------- ------------------
Mary M. Thomas
Executive Vice President &
Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF IRT PROPERTY COMPANY AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,541
<SECURITIES> 0
<RECEIVABLES> 573
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,322
<PP&E> 453,562
<DEPRECIATION> (51,763)
<TOTAL-ASSETS> 429,367
<CURRENT-LIABILITIES> 9,317
<BONDS> 223,261
0
0
<COMMON> 25,757
<OTHER-SE> 169,964
<TOTAL-LIABILITY-AND-EQUITY> 429,367
<SALES> 0
<TOTAL-REVENUES> 29,894
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,706
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,109
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,890
<DISCONTINUED> 0
<EXTRAORDINARY> (17)
<CHANGES> 0
<NET-INCOME> 8,068
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0
</TABLE>
