<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 September 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
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Commission File Number 1-7859
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IRT PROPERTY COMPANY
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(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
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(Address of principal (Zip Code)
executive offices)
(770) 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.
Class Outstanding at November 8, 1996
- -------------------------- -------------------------------
Common Stock, $1 Par Value 25,783,911 Shares
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
IRT PROPERTY COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate investments:
Rental properties, at cost $450,782,278 $452,508,601
Accumulated depreciation (54,303,085) (51,600,890)
------------ ------------
396,479,193 400,907,711
Net investment in direct financing leases 8,934,633 9,097,717
Mortgage loans, net of interest discounts of $233,900
in 1996 and $266,957 in 1995 12,219,270 8,499,210
------------ ------------
Net real estate investments 417,633,096 418,504,638
Cash and cash equivalents 3,068,332 16,400
Accrued interest receivable 570,309 544,073
Prepaid expenses and other assets 9,180,134 8,332,907
------------ ------------
$430,451,871 $427,398,018
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable plus net interest premium of
$41,419 in 1996 and $78,657 in 1995 $ 88,146,299 $ 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 $75,060 49,924,940 -
Indebtedness to banks 1,100,000 36,000,000
Accrued interest on debentures 791,972 2,341,488
Accrued interest on senior notes 1,914,236 -
Accrued expenses and other liabilities 8,339,614 5,265,202
Deferred income taxes 1,068,000 1,068,000
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Total liabilities 236,190,061 228,767,871
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Commitments and Contingencies (Note 10)
Shareholders' Equity:
Common stock, $1 par value, authorized 75,000,000
shares; 25,783,911 shares issued and outstanding in
1996 and 25,689,002 shares in 1995 25,783,911 25,689,002
Additional paid-in capital 201,056,571 200,318,168
Cumulative distributions in excess of net earnings (32,578,672) (27,377,023)
------------ ------------
Total shareholders' equity 194,261,810 198,630,147
------------ ------------
$430,451,871 $427,398,018
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
2
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IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
For the Three- and Nine-Month Periods Ended
September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Income from rental properties $14,522,236 $14,525,464 $43,273,725 $43,376,431
Interest 394,924 226,751 1,031,194 673,116
Interest on direct financing leases 228,932 234,616 734,982 1,055,156
----------- ----------- ----------- -----------
15,146,092 14,986,831 45,039,901 45,104,703
----------- ----------- ----------- -----------
Expenses:
Operating expenses of real estate
investments 2,982,625 3,171,109 8,767,919 9,394,764
Interest on mortgages 1,897,645 2,267,545 5,919,499 6,982,611
Interest on debentures 1,549,519 1,549,515 4,648,549 4,660,547
Interest on senior notes 904,261 - 1,893,451 -
Interest on indebtedness to banks 69,690 543,653 784,216 1,603,825
Depreciation 2,540,331 2,551,815 7,728,229 7,718,972
Amortization of debt costs 155,334 111,794 440,072 333,055
General & administrative 951,517 880,960 2,872,712 2,413,407
----------- ----------- ----------- -----------
11,050,922 11,076,391 33,054,647 33,107,181
----------- ----------- ----------- -----------
Earnings before gain (loss) on
real estate investments 4,095,170 3,910,440 11,985,254 11,997,522
Gain (loss) on real estate
investments:
Gain (loss) on sales of properties - - 194,622 (74,757)
----------- ----------- ----------- -----------
Earnings before extraordinary item 4,095,170 3,910,440 12,179,876 11,922,765
Extraordinary item -
Loss on extinguishment of debt - - (16,500) -
----------- ----------- ----------- -----------
Net earnings $ 4,095,170 $ 3,910,440 $12,163,376 $11,922,765
=========== =========== =========== ===========
Per Share:
Earnings before extraordinary item $ 0.16 $ 0.15 $ 0.47 $ 0.47
Extraordinary item - - - -
----------- ----------- ----------- -----------
Net earnings $ 0.16 $ 0.15 $ 0.47 $ 0.47
=========== =========== =========== ===========
Weighted average number of shares outstanding 25,765,568 25,626,357 25,735,777 25,564,538
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
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IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 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 - - 11,922,765 11,922,765
Cash dividends paid -
$.66 per share - - (16,870,352) (16,870,352)
Issuance of shares under
Dividend Reinvestment
Plan, net 89,306 732,720 - 822,026
Conversion of debentures, net 119,554 1,175,718 - 1,295,272
Exercise of Incentive Stock
Options, net 7,000 46,375 - 53,375
Issuance of shares for the
acquisition of properties 15,674 137,305 - 152,979
----------- ------------ ------------ ------------
Balance at September 30, 1995 $25,652,281 $200,029,583 $(25,267,335) $200,414,529
=========== ============ ============ ============
Balance at December 31, 1995 $25,689,002 $200,318,168 $(27,377,023) $198,630,147
Net earnings for period - - 12,163,376 12,163,376
Cash dividends paid -
$.675 per share - - (17,365,025) (17,365,025)
Issuance of shares under
Dividend Reinvestment
Plan, net 89,270 695,787 - 785,057
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 September 30, 1996 $25,783,911 $201,056,571 $(32,578,672) $194,261,810
=========== ============ ============ ============
</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 Nine Months Ended September 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 12,163,376 $ 11,922,765
Adjustments to reconcile earnings to net cash from
operating activities:
Depreciation 7,728,229 7,718,972
Loss (gain) on real estate investments (194,622) 74,757
Extraordinary loss 16,500 -
Amortization of debt costs and discount 448,512 333,055
Amortization of capitalized leasing income 163,084 161,166
------------ ------------
20,325,079 20,210,715
Changes in accrued assets and liabilities:
Decrease in accrued interest on debentures (1,549,516) (1,586,610)
Increase in accrued interest on senior notes 1,914,236 -
Decrease in interest receivable, prepaid
expenses and other assets (791,360) (989,818)
Increase in accrued expenses and other
liabilities 3,074,412 3,499,625
------------ ------------
Net cash flows from operating activities 22,972,851 21,133,912
------------ ------------
Cash flows from (used in) investing activities:
Proceeds from sales of properties, net 1,589,442 820,377
Additions to real estate investments, net -
Acquisitions, expansions and renovations (6,379,903) (7,032,328)
Improvements (2,083,911) (672,464)
Collections of mortgage loans, net 79,940 34,116
Additions to mortgage loans - (260,000)
------------ ------------
Net cash flows used in investing activities (6,794,432) (7,110,299)
------------ ------------
Cash flows from (used in) financing activities:
Cash dividends paid, net (16,579,968) (16,048,326)
Exercise of Incentive Stock Options, net 17,538 53,375
Issuance of 7.45% senior notes, net 49,394,325 -
Amortization of mortgage notes payable, net (943,131) (1,206,308)
Repayment of mortgage notes payable, net (10,098,751) (4,202,566)
Increase (decrease) in bank indebtedness, net (34,900,000) 10,000,000
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 (13,126,487) (11,403,840)
------------ ------------
Net increase in cash and cash equivalents 3,051,932 2,619,773
Cash and cash equivalents at beginning of period 16,400 1,841,388
------------ ------------
Cash and cash equivalents at end of period $ 3,068,332 $ 4,461,161
============ ============
</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 NINE MONTHS ENDED SEPTEMBER 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 $ 6,005,088 $ 7,021,470
Convertible subordinated debentures 6,198,065 6,247,157
Senior notes, including $29,225 capitalized in 1996 83,500 -
Indebtedness to banks, including $2,853
capitalized in 1996 and $93,063 in 1995 961,276 1,507,657
----------- -----------
Total cash paid during the period
for interest $13,247,929 $14,776,284
=========== ===========
Supplemental schedule of noncash investing and
financing activities:
Sales of Properties:
Gross proceeds from sales of properties $5,389,442 $ 820,377
Additions to mortgage loans (3,800,000) -
----------- -----------
Cash proceeds from sales of properties, net $ 1,589,442 $ 820,377
=========== ===========
Acquisitions, Expansions and Renovations:
Cost of acquisitions, expansions and renovations $ 6,410,620 $ 9,649,652
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) (152,979)
----------- -----------
Cash paid for acquisitions, expansions and
renovations of real estate investments $ 6,379,903 $ 7,032,328
=========== ===========
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
September 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 September
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 required with respect to
stock compensation and the assumptions
7
<PAGE> 8
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. Indebtedness to Banks
In accordance with the terms of the $100,000,000 unsecured revolving
term loan agreement dated December 15, 1995, during the quarter ended September
30, 1996, the Company extended the maturity date for an additional twelve-month
period to January 4, 2000.
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<PAGE> 9
7. Interest on Short-Term Investments
Interest income includes income on short-term money-market investments
of approximately $86,000 and $186,000 for the three- and nine-month periods
ended September 30, 1996.
8. Purchase of Rental Properties
On August 30, 1996, the Company acquired Salisbury Marketplace in
Salisbury, North Carolina for $4,611,000 cash, consisting of the initial
purchase price of $4,600,000 and $11,000 of acquisition costs.
On June 26, 1996, the Company purchased 1.97 acres of land adjacent to
its Lawrence Commons Shopping Center investment in Lawrenceburg, Tennessee for
approximately $100,000 cash. The parcel of land was purchased to allow an
expansion of the anchor tenant space by approximately 20,000 sq. ft. The
Company has committed to reimburse the anchor tenant for the cost of the
expansion, not to exceed $2,100,000, provided the expansion is completed prior
to October 1, 1997. The anchor tenant's rent increased by 11% of the land cost
from the date of purchase and will increase by 10.33% of the expansion cost
upon funding.
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 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.
9. 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% and is payable in monthly
installments of $30,576 with a balloon payment at maturity. The
9
<PAGE> 10
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.
10. 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 had 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.
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 nine months of 1996 and $10,869 during the first nine 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.
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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 September 30, 1996,
58,066 shares held as collateral were released to the seller and 12,140 shares
were retired, leaving a balance of 45,137 shares.
See Note 8 for a description of the Company's commitment to fund the
expansion of the anchor tenant's space at Lawrence Commons Shopping Center.
11
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Material Changes in Financial Condition. During the nine months ended
September 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) $4,611,000 for the acquisition of a shopping center
investment, b) $1,769,000 to fund expansion or redevelopment costs of four
existing investments, c) $34,900,000 to repay the outstanding balance of its
unsecured revolving term loan, d) $6,263,000 to repay a 9.78% mortgage at
maturity, e) $1,052,000 to repay a 13.875% mortgage (discounted to 9.5% for
financial reporting purposes) at maturity, f) $2,727,000 to prepay a 9.375%
mortgage, and g) $57,000 to prepay an 8.5% mortgage.
During the first nine months of 1995, the Company borrowed $10,000,000
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 the assumption of mortgage
debt of approximately $2,383,000 secured by one of the centers, b) $2,585,000
to fund expansion or redevelopment costs of five existing investments, c)
$4,203,000 to repay one variable rate mortgage at maturity and to pay down two
mortgages upon refinancing, and d) $260,000 to fund capital improvements under
its mortgage loan investment secured by Spanish Quarter Apartments.
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
September 30, 1996, rental income from the Company's core portfolio of shopping
center investments increased approximately $341,000. This increase includes
approximately $32,000 of additional income earned from two property expansions
completed during 1995 and is net of approximately $66,000 less income earned
due to two tenant bankruptcies during 1995. The increase in the Company's core
portfolio income was offset by approximately $401,000 less income earned due to
the sale of the Company's Valley West Mall investment which was sold on March
31, 1996 and was supplemented by approximately $57,000 of income earned from
the shopping center investment acquired August 30, 1996.
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<PAGE> 13
During the first nine months of 1996, rental income from the Company's
core portfolio of shopping center investments increased approximately
$1,103,000. This increase includes approximately $246,000 of additional income
earned from two property expansions completed during 1995 and is net of
approximately $203,000 less income earned during the first nine 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 $1,200,000 less income
earned due to the sale of Valley West Mall in March 1996 and was supplemented
by approximately $57,000 of income earned from the shopping center investment
acquired August 30, 1996. The decrease in income for Valley West Mall included
approximately $127,000 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 $147,000 and $485,000 for the
quarter and nine months ended September 30, 1996, respectively. These
increases were offset by approximately $2,000 and $18,000 less expenses
incurred for the quarter and nine months ended September 30, 1996,
respectively, on three investments sold during 1995. In addition, approximately
$341,000 and $1,102,000 less expenses were incurred for the quarter and nine
months ended September 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. Additionally, approximately $8,000
of operating expenses were incurred by the shopping center investment acquired
August 30, 1996.
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<PAGE> 14
Interest expense on mortgages decreased approximately $370,000 and
$1,063,000 for the quarter and nine months ended September 30, 1996,
respectively, due to various mortgages repaid or refinanced during 1995 and the
first nine months of 1996. During the first nine months of 1996, the Company
(a) repaid at maturity a $6,263,000 mortgage bearing 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 $474,000
and $820,000 for the quarter and nine months ended September 30, 1996,
respectively. The Company had average borrowings of approximately $335,000 and
$28,262,000 at effective rates of 8.25% and 7.49%, respectively, under its bank
credit facility during the quarters ended September 30, 1996 and 1995,
respectively. The Company had average borrowings of approximately $11,232,000
and $27,351,000 at effective interest rates of 7.25% and 7.68%, respectively,
under its bank credit facility during the nine months ended September 30, 1996
and 1995, respectively. In addition, the Company incurred commitment fees of
approximately $63,000 and $3,000 for the quarters ended September 30, 1996 and
1995, respectively, and approximately $164,000 and $12,000 for the nine months
ended September 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.
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<PAGE> 15
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
operations when assumed conversion of the debentures is dilutive. Conversion
of the debentures is dilutive and therefore assumed for the quarters and
nine-month periods ended September 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
nine-month periods ended September 30, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings $ 4,095,170 $ 3,910,440 $12,163,376 $11,922,765
Loss (gain) on real estate
investments - - (194,622) 74,757
Loss on extinguishment
of debt - - 16,500 -
Depreciation 2,540,331 2,551,815 7,728,229 7,718,972
Amortization of
capitalized leasing fees 59,975 54,010 168,330 146,166
Amortization of
capitalized leasing income 55,814 48,138 163,084 161,166
----------- ----------- ----------- -----------
Funds from operations 6,751,290 6,564,403 20,044,897 20,023,826
Interest on convertible
debentures 1,549,519 1,549,515 4,648,549 4,660,547
Amortization of
convertible debenture costs 91,440 91,440 274,320 274,951
----------- ----------- ----------- -----------
Fully diluted funds from
operations $ 8,392,249 $ 8,205,358 $24,967,766 $24,959,324
=========== =========== =========== ===========
Fully diluted weighted
average shares 33,312,679 33,173,469 33,282,888 33,137,733
=========== =========== =========== ===========
</TABLE>
15
<PAGE> 16
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 nine-month periods ended September
30, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Tenant Improvements:
Shopping Centers $156,134 $182,437 $ 531,626 $456,676
Industrial 1,060 - 349,459 -
-------- -------- ---------- --------
Total Tenant Improvements 157,194 182,437 881,085 456,676
-------- -------- ---------- --------
Capital Expenditures:
Shopping Centers 303,162 101,694 800,438 202,364
Apartment 157,956 20,325 244,316 38,016
Industrial 80 (5,649) 158,072 (24,592)
-------- -------- ---------- --------
Total Capital Expenditures 461,198 116,370 1,202,826 215,788
-------- -------- ---------- --------
Total Improvements $618,392 $298,807 $2,083,911 $672,464
======== ======== ========== ========
Leasing Fees $ 69,726 $ 48,481 $ 213,465 $240,955
======== ======== ========== ========
</TABLE>
16
<PAGE> 17
PART II. OTHER INFORMATION
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 September 30, 1996.
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: November 8, 1996 /s/ Donald W. MacLeod
----------------------------------------
Donald W. MacLeod
Chairman and Chief Executive Officer
Date: November 8, 1996 /s/ Thomas H. McAuley
----------------------------------------
Thomas H. McAuley
President & Chief Operating Officer
Date: November 8, 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 NINE MONTHS
ENDED SEPTEMBER 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,068
<SECURITIES> 0
<RECEIVABLES> 570
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,819
<PP&E> 405,414
<DEPRECIATION> 54,303
<TOTAL-ASSETS> 430,452
<CURRENT-LIABILITIES> 11,046
<BONDS> 224,076
0
0
<COMMON> 25,784
<OTHER-SE> 168,478
<TOTAL-LIABILITY-AND-EQUITY> 430,452
<SALES> 0
<TOTAL-REVENUES> 45,040
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,369
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,686
<INCOME-PRETAX> 11,985
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,985
<DISCONTINUED> 0
<EXTRAORDINARY> (17)
<CHANGES> 0
<NET-INCOME> 12,163
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0
</TABLE>
