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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 EXCHANGE ACT OF 1934
________________
For Quarter Ended March 31, 1994 Commission File Number 1-6249
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First Union Real Estate Equity and Mortgage Investments
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(Exact name of registrant as specified in its charter)
Ohio 34-6513657
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 1900, 55 Public Square
Cleveland, Ohio 44113-1937
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 781-4030
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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 registrant's classes
of common stock, as of the latest practicable date.
18,108,725 Shares of Beneficial Interest outstanding as of March 31, 1994
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________________________________________________________________________________
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Total number of pages contained in this report: 8
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements.
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The combined financial statements included herein have been prepared by the
registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the registrant believes that
the disclosures contained herein are adequate to make the information presented
not misleading. It is suggested that these combined financial statements be
read in conjunction with the combined financial statements and the notes
thereto included in the registrant's latest annual report on Form 10-K.
The unaudited "Combined Balance Sheets" as of March 31, 1994 and December 31,
1993, and "Selected Financial Data, Combined Statements of Income and Combined
Statements of Changes in Cash" for the periods ended March 31, 1994 and 1993,
of the registrant, and "Notes to Combined Financial Statements," presented in
the registrant's First Quarter Report, March 31, 1994, are incorporated herein
by reference. These financial statements reflect, in the opinion of the
registrant, all adjustments (consisting of normal recurring accruals)
necessary to present fairly the combined financial position and results of
operations for the respective periods in conformity with generally accepted
accounting principles consistently applied.
Item 2. Management's Discussion and Analysis of Financial Condition and
- - ------- ---------------------------------------------------------------
Results of Operations.
----------------------
Income from operations was $1.6 million, for the three months
ended March 31, 1994 and $2.9 million for the three months ended March 31,
1993.
Income from property operations, which is rents less operating
expenses and real estate taxes, declined by $238,000 when comparing the first
quarter of 1994 to the same period of 1993. This decrease was primarily
attributed to increased maintenance expenses, weather related expenses from
extreme winter conditions in 1994 and to the one time recognition, in 1993, of
a real estate tax refund from an office building in Pittsburgh, PA.
Short term investment interest increased when comparing the first
quarter of 1994 to the same period of 1993 because of investments in short term
securities averaging $35 million during the first quarter of 1994. During the
first quarter of 1993, an average of approximately $3 million was invested in
short term securities. Short term investments increased in 1994 due to First
Union borrowing, then subsequently investing in short term securities,
approximately $38 million under one of its lines of credit on December 31, 1993.
This line of credit converted to a five year term loan based on the $60 million
balance outstanding as of December 31, 1993.
Mortgage interest expense increased when comparing the first
quarter of 1994 to the same period of 1993. The increase was caused by the $35
million mortgage loan obtained in September 1993. The mortgage is secured by a
shopping mall in St. Cloud, MN.
Senior notes interest expense increased when comparing the three
months ended March 31, 1994 and March 31, 1993. The increase was due to the
issuance of $100 million of senior notes at a coupon rate of 8.875% on October
1, 1993. The proceeds were used primarily to repay $45 million of 8.375%
senior notes and $37.6 million of 10.25% convertible debentures on November 1,
1993.
General and administrative expenses increased during the first
quarter of 1994 as compared to the first quarter of 1993 primarily because of
the expensing of previously deferred costs related to possible acquisitions and
increased professional fees resulting from the registrant's management and
portfolio reorganization efforts.
Net income was $1.6 million for the first quarter of 1994 and $4.4
million for the first quarter of 1993. Included in net income was a capital
gain of $1.5 million in the first quarter of 1993 from a prior year installment
sale. The final portion of this gain was recognized during 1993.
2
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Except as noted above, there has been no material change in the
registrant's financial condition from December 31, 1993.
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings.
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None.
Item 2. Changes in Securities.
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None.
Item 3. Defaults Upon Senior Securities.
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None.
Item 4. Submission of Matters to a Vote of Security Holders.
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The following matters were considered at the Annual Meeting of
Shareholders held on April 12, 1994:
<TABLE>
1. Election of Trustees
--------------------
<CAPTION>
Name Total Votes For Against Abstentions
---- ----------- --- ------- -----------
<S> <C> <C> <C> <C>
Kenneth K. Chalmers 14,590,364 14,068,499 --- 521,865
William E. Conway 14,590,364 14,071,606 --- 518,759
Russell R. Gifford 14,590,364 14,044,923 --- 545,441
</TABLE>
3
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<TABLE>
Continuing Term Trustees
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<CAPTION>
Name Expiration of Term
---- ------------------
<S> <C>
Stephen R. Hardis 1995
E. Bradley Jones 1995
James C. Mastandrea 1995
Otes Bennett, Jr. 1996
Allen H. Ford 1996
Daniel G. DeVos 1996
</TABLE>
<TABLE>
2. 1994 Long Term Incentive Performance Plan
-----------------------------------------
<CAPTION>
Total Votes For Against Abstentions
----------- --- ------- -----------
<S> <C> <C> <C>
10,824,116 7,514,600 2,883,032 426,484
</TABLE>
Item 5. Other Information.
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None.
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits:
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Exhibit (11) - Statements Re: Computation of Per Share Earnings.
Exhibit (20) - First Quarter Report, March 31, 1994.
(b) Reports on Form 8-K:
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None.
4
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SIGNATURES
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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.
First Union Real Estate Equity and
Mortgage Investments
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(Registrant)
Date: May 13, 1994 By: /s/ Gregory D. Bruhn
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Gregory D. Bruhn, Executive
Vice President and Chief
Financial Officer
Date: May 13, 1994 By: /s/ John J. Dee
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John J. Dee, Senior Vice
President-Controller
(Principal Accounting
Officer)
5
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Index to Exhibits
-----------------
Page
Number
------
Exhibit (11) - Statements Re: Computation of Per Share
Earnings ........................................ 7
Exhibit (20) - First Quarter Report, March 31, 1994 ........... 8
6
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<TABLE>
Exhibit 11
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FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS AND
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FIRST UNION MANAGEMENT, INC.
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STATEMENTS RE: COMPUTATION OF PER SHARE EARNINGS
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
Three Months Ended
March 31,
------------------------------
1994 1993
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<S> <C> <C>
Shares Outstanding:
For computation of primary net income
per share -
Weighted average 18,109 18,090
======== =======
For computation of fully diluted net
income per share -
Weighted average, without regard to exer-
cise of shares under share option plans 18,109 18,086
Weighted average of outstanding shares
issued under share option plans --- 4
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Adjusted shares outstanding 18,109 18,090
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Net Income $ 1,612 $ 4,357
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Per Share - Primary and fully diluted:
Income from operations $ .09 $ .16
Capital gains .08
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Net income $ .09 $ .24
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</TABLE>
7
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Exhibit 20
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First Quarter Report, March 31, 1994
8
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<TABLE>
SELECTED FINANCIAL DATA
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<CAPTION>
THREE MONTHS
Unaudited (In thousands, except per share data) ENDED MARCH 31,
-------------------------
1994 1993
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<S> <C> <C>
OPERATING RESULTS
Revenues $ 18,917 $ 18,216
Income from operations 1,612 2,847
Net income 1,612 4,357
Funds from operations (1) 4,453 5,555
Dividends declared 1,811 3,257
PER SHARE
Income from operations $ .09 $ .16
Net income .09 .24
Funds from operations .25 .31
Dividends declared .10 .18
<FN>
(1) The amount of funds from operations is calculated as income from
operations plus noncash charges for depreciation and
amortization.
</TABLE>
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<TABLE>
COMBINED BALANCE SHEETS
-----------------------
<CAPTION>
MARCH 31, DECEMBER 31,
Unaudited (In thousands, except shares) 1994 1993
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<S> <C> <C>
ASSETS
INVESTMENTS IN REAL ESTATE
Land $ 40,346 $ 40,284
Buildings and improvements 370,057 368,776
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410,403 409,060
Less--Accumulated depreciation (104,533) (101,824)
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Total investments in real estate 305,870 307,236
MORTGAGE LOANS RECEIVABLE 35,596 35,550
OTHER ASSETS
Cash and cash equivalents 37,801 38,523
Accounts receivable 4,883 4,621
Deferred charges, net 2,416 2,506
Unamortized debt issue costs 5,091 5,185
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$ 391,657 $ 393,621
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LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage loans $ 89,220 $ 92,355
Senior notes 105,000 105,000
Bank loans 60,000 60,000
Accounts payable and accrued liabilities 15,720 14,356
Deferred obligations 10,424 10,394
Deferred capital gains and other
deferred income 7,749 7,750
Shareholders' equity, including shares of
beneficial interest, $1 par, unlimited
authorization, outstanding 1994--18,108,725;
1993--18,108,725 103,544 103,766
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$ 391,657 $ 393,621
=========== ===========
</TABLE>
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<TABLE>
COMBINED STATEMENTS OF INCOME
-----------------------------
<CAPTION>
THREE MONTHS
Unaudited (In thousands, except per share data) ENDED MARCH 31,
------------------------
1994 1993
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<S> <C> <C>
REVENUES
Rents $ 17,651 $ 17,122
Interest--Mortgage loans 975 1,070
--Short term investments 291 24
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18,917 18,216
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EXPENSES
Property operating 6,591 6,055
Real estate taxes 2,021 1,790
Depreciation and amortization 2,841 2,708
Interest--Mortgage loans 1,788 1,376
--Senior notes 2,327 1,050
--Convertible debentures 965
--Bank loans and other 1,010 1,037
General and administrative 727 388
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17,305 15,369
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INCOME FROM OPERATIONS 1,612 2,847
CAPITAL GAINS 1,510
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NET INCOME $ 1,612 $ 4,357
========= =========
PER SHARE
Income from operations $ .09 $ .16
Capital gains .08
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Net income $ .09 $ .24
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Dividends declared $ .10 $ .18
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ADJUSTED SHARES OF BENEFICIAL INTEREST 18,109 18,090
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<FN>
NOTES TO COMBINED FINANCIAL STATEMENTS
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1. Income per share of beneficial interest has been computed based
on weighted average shares and share equivalents outstanding for
the applicable periods. The shares issuable upon conversion of
the convertible subordinated debentures have not been included in
the per share computation because they were not dilutive.
2. Capital gains recognized in 1993 were from an installment sale
which occurred in 1983.
</TABLE>
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<TABLE>
COMBINED STATEMENTS OF CHANGES IN CASH
--------------------------------------
<CAPTION>
THREE MONTHS
Unaudited (In thousands) ENDED MARCH 31,
------------------------
1994 1993
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<S> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATIONS:
Net income $ 1,612 $ 4,357
Adjustments to reconcile net income to net
cash provided by operations --
Depreciation and amortization 2,841 2,708
Capital gains (1,510)
Decrease (Increase) in deferred charges, net 51 (348)
Increase in deferred interest on
mortgage investments, net (81) (95)
Increase in deferred obligations 30 26
Recognition of deferred income, net (1) (52)
Net changes in other assets and liabilities 2,551 1,546
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Net cash provided by operations 7,003 6,632
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CASH PROVIDED BY (USED FOR) INVESTING:
Principal received from mortgage investments 35 2,142
Investments in properties (1,343) (1,795)
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Net cash provided by (used for) investing (1,308) 347
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CASH PROVIDED BY (USED FOR) FINANCING:
Increase in short term loans 2,000
Repayment of mortgage loans - Normal payments (910) (872)
- Balloon payments (2,225)
Dividends paid (3,260) (3,255)
Other (22) 62
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Net cash used for financing (6,417) (2,065)
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(Decrease) Increase in cash and cash equivalents (722) 4,914
Cash and cash equivalents at beginning of period 38,523 992
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Cash and cash equivalents at end of period $ 37,801 $ 5,906
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</TABLE>
