<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
For the Quarter ended Commission File
June 30, 1997 No. 2-29442
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 22-1897375
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 Wyckoff Road, Eatontown, New Jersey 07724
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code:(732)542-4927
----------------------------------------------------------------
(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 and Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was re-
quired to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the financial statements required
by instruction H have been reviewed by an independent public ac-
countant. Yes No X
The number of shares or other units outstanding of each of the
issuer's classes of securities as of August 1, 1997 was
4,218,115.
Page 1
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MONMOUTH REAL ESTATE INVESTMENT CORPORATION
FOR THE QUARTER ENDED JUNE 30, 1997
C O N T E N T S
Page No.
Part I - Financial Information
Item 1 - Financial Statements (Unaudited):
Balance Sheets 3
Statements of Income 4
Statements of Cash Flows 5
Notes to Financial Statements 6-9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-11
Part II- Other Information 12
Signatures 13
Page 2
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<TABLE>
<CAPTION>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
BALANCE SHEETS
AS OF JUNE 30, 1997 AND SEPTEMBER 30, 1996
ASSETS
6/30/97 9/30/96
<S> <C> <C>
Real Estate Investments:
Land $ 6,141,724 $ 4,929,924
Buildings, Improvements and
Equipment, Net of Accumulated
Depreciation of $5,170,046
and $4,494,322, respectively 32,858,555 25,294,699
Mortgage Loans Receivable 234,663 262,585
___________ ___________
Total Real Estate Investments 39,234,942 30,487,208
Cash and Cash Equivalents 184,217 244,394
Securities Available for Sale at
Fair Value 3,156,241 607,975
Interest and Other Receivables 523,202 552,091
Prepaid Expenses 70,170 123,669
Lease Costs - Net of Accumulated
Amortization 108,948 55,347
Investment in Hollister '97, LLC 1,000,000 -0-
Other Assets 569,224 467,392
___________ ___________
TOTAL ASSETS $44,846,944 $32,538,076
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage Notes Payable $21,389,014 $15,216,610
Loans Payable 4,390,510 500,000
Deferred Gain - Installment Sale 167,989 185,989
Other Liabilities 598,888 526,095
___________ ___________
Total Liabilities 26,546,401 16,428,694
___________ ___________
Shareholders' Equity:
Common Stock-Class A-$.01 Par Value,
8,000,000 Shares Authorized,
4,218,115 and 3,800,924 Shares
Issued and Outstanding, respectively 42,181 38,009
Common Stock-Class B-$.01 Par Value,
100,000 Shares Authorized, No shares
Issued or Outstanding -0- -0-
Additional Paid-in Capital 18,433,373 16,044,359
Unrealized Holding Gain on
Securities Available for Sale 237,612 27,014
Undistributed Income (412,623) -0-
___________ ___________
Total Shareholders' Equity 18,300,543 16,109,382
___________ ___________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $44,846,944 $32,538,076
=========== ===========
Unaudited
See Accompanying Notes to Financial Statements
Page 3
</TABLE>
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<TABLE>
<CAPTION>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1997 AND 1996
3 Months 9 Months 3 Months 9 Months
Ended Ended Ended Ended
6/30/97 6/30/97 6/30/96 6/30/96
<S> <C> <C> <C> <C>
INCOME:
Rental and Occupancy
Charges $1,238,973 $3,622,752 $1,119,184 $3,298,288
Interest and Other
Income 91,113 304,612 28,998 110,917
__________ __________ __________ __________
TOTAL INCOME 1,330,086 3,927,364 1,148,182 3,409,205
__________ __________ __________ __________
EXPENSES:
Interest Expense 389,472 1,157,677 315,299 931,259
Real Estate Taxes 62,876 273,076 51,360 210,057
Operating Expenses 92,767 283,189 89,114 287,982
Office and General
Expenses 193,576 474,377 164,305 442,829
Depreciation 234,983 675,724 196,147 588,806
__________ __________ __________ __________
TOTAL EXPENSES 973,674 2,864,043 816,225 2,460,933
__________ __________ __________ __________
INCOME BEFORE GAINS 356,412 1,063,321 331,957 948,272
Gain on Sale of
Assets-Investment
Property 6,000 18,000 6,000 18,000
__________ __________ __________ __________
NET INCOME $ 362,412 1,081,321 $ 337,957 $ 966,272
========== ========== ========== ==========
PER SHARE INFORMATION
Weighted Average
Shares Outstanding 4,121,707 3,984,388 3,635,491 3,535,794
========== ========== ========== ==========
Net Income Per Share $ 0.09 $ 0.27 $ 0.09 $ 0.27
========== ========== ========== ==========
Unaudited
See Notes to Financial Statements
Page 4
</TABLE>
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<TABLE>
<CAPTION>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,081,321 $ 966,272
Noncash Items Included in Net Income:
Depreciation 675,724 588,806
Amortization 28,515 83,799
Gain on Sales of Assets &
Investment Property (18,000) (18,000)
Gain on Sales of Securities
Available for Sale (75,323) (66,933)
Changes In:
Interest and Other Receivables 28,889 30,051
Prepaid Expenses 53,499 841
Other Assets and Lease Costs (183,948) (18,386)
Other Liabilities 72,793 152,098
__________ ___________
NET CASH PROVIDED FROM OPERATING
ACTIVITIES 1,663,470 1,718,548
__________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES
Collections on Installment Sales 27,922 25,486
Additions to Land, Buildings,
Improvements and Equipment (9,451,380) (2,565,057)
Purchase of Securities
Available for Sale (2,728,215) (292,225)
Proceeds from Sale of
Securities Available for Sale 465,870 214,650
Investment in Hollister '97, LLC (1,000,000) -0-
__________ ___________
NET CASH USED IN INVESTING
ACTIVITIES (12,685,803) (2,617,146)
__________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Loans 9,390,510 -0-
Principal Payments on Loans (5,500,000) -0-
Proceeds from Mortgages 6,930,776 2,500,000
Principal Payments of Mortgages (758,372) (2,000,414)
Proceeds from Issuance of Class A
Common Stock 1,744,620 1,158,866
Dividends Paid (845,378) (751,758)
___________ ___________
NET CASH PROVIDED FROM FINANCING
ACTIVITIES 10,962,156 906,694
___________ ___________
Net Increase (Decrease) in Cash
and Cash Equivalents (60,177) 8,096
Cash and Cash Equivalents at Beginning
of Period 244,394 144,019
___________ ___________
Cash and Cash Equivalents at End
of Period $ 184,217 $ 152,115
=========== ===========
Unaudited
See Accompanying Notes to Financial Statements
Page 5
</TABLE>
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MONMOUTH REAL ESTATE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICY
The interim financial statements furnished herein reflect all adjust-
ments which were, in the opinion of management, necessary to present
fairly the financial position, results of operations and cash flows at
June 30, 1997 and for all periods presented. All adjustments made in
the interim period were of a normal recurring nature. Certain footnote
disclosures which would substantially duplicate the disclosures
contained in the audited financial statements and notes thereto
included in the Annual Report of Monmouth Real Estate Investment
Corporation (the Company) for the year ended September 30, 1996 have
been omitted.
NOTE 2 - SECURITIES AVAILABLE FOR SALE
During the nine months ended June 30, 1997, the Company purchased
securities available for sale in the amount of $2,728,215. The Company
also sold $390,547 of securities available for sale for a gain of
$75,323 which is included in interest and other income. Total
securities available at fair value at June 30, 1997 amounted to
$3,156,241 which includes gross unrealized holding gains of $237,612.
NOTE 3 - REAL ESTATE INVESTMENTS
On October 1, 1996, the Company adopted 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
did not have a material impact on the financial position or results of
operations of the Company. If there is an event or change in
circumstances that indicates that the basis of an investment property
may not be recoverable, management assesses the possible impairment of
value through evaluation of the estimated future cash flows of the
property, on an undiscounted basis, as compared to the property's
current carrying value. A property's carrying value would be adjusted
to fair value, if necessary, to reflect an impairment in the value of
the property.
NOTE 4 - ACQUISITIONS
On May 27, 1997, the Company purchased a 148,000 square foot warehouse
facility in Fayetteville, North Carolina from CK Fayetteville #1, LLC,
an unrelated entity. This warehouse facility is 100% net leased to
Belk Enterprises, Inc. The purchase price was approximately
$4,600,000. The Company paid approximately $100,000 in cash, used
approximately $1,100,000 of its revolving line of credit with Summit
Bank and assumed an existing mortgage of approximately $3,400,000.
This mortgage payable is at an interest rate of 7.8% and is due August
1, 2006. The property acquired is commercial rental property and will
continue to be used as such.
Page 6
<PAGE>
On June 11, 1997, the Company purchased a 73,500 square foot warehouse
facility in Schaumburg, Illinois from SK Properties I, LLC, an
unrelated entity. The warehouse facility is 100% net leased to Federal
Express Corporation. The purchase price was approximately $4,700,000.
The Company paid approximately $100,000 in cash, used approximately
$1,100,000 of its revolving line of credit with Summit Bank and
obtained a mortgage of approximately $3,500,000. This mortgage payable
is at an interest rate of 8.48% and is due July 1, 2012. The property
acquired is commercial rental property and will continue to be used as
such.
On June 4, 1997, the Company invested $1,000,000 in a limited liability
company, Hollister '97, LLC, whose sole business is the ownership and
operation of the Hollister Corporate Park in Teterboro, New Jersey.
Under the agreement, the Company is to receive an 11% return, paid
quarterly, and a preferred 25% interest in the corporation. The
Company will account for this investment under the equity method.
NOTE 5 - LOANS PAYABLE
On October 4, 1996, the Company entered into a $5,000,000 term loan
with Summit Bank which may be used for acquisitions or working capital
purposes. The loan bears interest at prime plus 1/2%. Principal
payments of $250,000 plus interest are due quarterly. This loan
matures on October 4, 2001. This loan was completely repaid by June
30, 1997.
On April 29, 1997, the Company entered into a $5,000,000 line of
credit with Summit Bank which may be used for acquisitions or working
capital purposes. The line bears interest paid monthly at prime plus
1/2%. This line was used to pay off the $5,000,000 term loan to Summit
Bank. As of June 30, 1997, the outstanding balance on this line was
$4,390,510.
NOTE 6 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
On June 16, 1997, the Company paid $516,485 as a dividend of $.125 per
share to shareholders of record May 15, 1997. For the nine months
ended June 30, 1997, the Company paid $1,493,944 in dividends.
For the quarter ended June 30, 1997, the Company received $946,717 from
the Dividend Reinvestment and Stock Purchase Plan (DRIP). The total
received from the DRIP for the nine months ended June 30, 1997 amounted
to $2,393,186. For the nine months ended June 30, 1997, there were
417,191 shares issued, resulting in 4,218,115 shares outstanding.
Page 7
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NOTE 7- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128, "Earnings
Per Share"(Statement 128). Statement 128 supersedes APB Opinion No.
15, "Earnings Per Share", and specifies the computation, presentation,
and disclosure requirements for earning per share (EPS) for entities
with publicly held common stock or potential common stock. Statement
128 replaces Primary EPS and Fully Diluted EPS with Basic EPS and
Diluted EPS, respectively. Statement 128 also requires dual
presentation of Basic and Diluted EPS on the face of the income
statement for entities with complex capital structures and a
reconciliation of the information utilized to calculate Basic EPS to
that used to calculate Diluted EPS. Statement 128 is effective for
financial statement periods ending after December 15, 1997. Earlier
application is not permitted. After adoption, all prior period EPS is
required to be restated to conform with Statement 128. The Company
expects that the adoption of Statement 128 will result in Basic EPS
being higher than Primary EPS and Diluted EPS will be approximately the
same as Fully Diluted EPS.
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" (Statement 129) was issued in
February 1997. Statement 129 is effective for periods ending after
December 15, 1997. Statement 129 lists required disclosures about
capital structure that had been included in a number of separate
statements and opinions of authoritative accounting literature. As
such, the adoption of Statement 129 is not expected to have a
significant impact on the disclosures in financial statements of the
Company.
In June, 1997, FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (Statement 130). Statement
130 established standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial
statements. Under Statement 130, comprehensive income is divided into
net income and other comprehensive income. Other comprehensive income
includes items previously recorded directly in equity, such as
unrealized gains or losses on securities available for sale. Statement
130 is effective for interim and annual periods beginning after
December 15, 1997. Comparative financial statements provided for
earlier periods are required to be reclassified to reflect application
of the provisions of the Statement.
In June, 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (Statement 131). Statement 131 established
standards for the way public business enterprises are to report
information about operating segments in annual financial statements and
requires those enterprises to report selected financial information
about operating segments in interim financial reports to shareholders.
Statement 131 is effective for financial statements for periods
beginning after December 15, 1997
Page 8
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NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the nine months ended June 30, 1997 and 1996 for
interest was $1,157,677 and $1,043,311, respectively.
During the nine months ended June 30, 1997 and 1996, the Company had
dividend reinvestments of $648,566 and $577,028, respectively, which
required no cash transfers.
Page 9
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company generated net cash provided from operating activities of
$1,663,470 for the current nine months as compared to $1,718,548 for
the prior period. The Company raised $2,393,186 from the issuance of
shares of common stock through a Dividend Reinvestment and Stock Pur-
chase Plan (DRIP). Dividends paid for the nine months ended June 30,
1997 amounted to $1,493,944.
Securities Available for Sale increased by $2,548,266 due to purchases
of $2,728,215 and an increase in unrealized holding gain of $210,598
offset by sales of $390,547.
Mortgage notes payable increased by $6,172,404 during the nine months
ended June 30, 1997 due to new mortgages of $6,930,776 offset by
principal repayments of $758,372.
Loans payable increased by $3,890,510 as a result of new loans used for
acquisitions. The Company borrowed $9,390,510 from Summit Bank. Total
repayments to Summit Bank amounted to $5,500,000.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Rental and occupancy charges increased for the quarter ended June 30,
1997 to $1,238,973 as compared to $1,119,184 for the quarter ended June
30, 1996. Rental and occupancy charges increased for the nine months
ended June 30, 1997 to $3,622,752 as compared to $3,298,288 for the
nine months ended June 30, 1996. This increase was due primarily to
acquisitions made during fiscal 1996 and 1997 as well as an increase in
occupancy charges. There was a corresponding increase in real estate
taxes.
Interest and other income increased by $62,115 and $193,695 for the
three and nine month periods ended June 30, 1997, respectively, as
compared to the three and nine months ended June 30, 1996. This was
due primarily to the purchase of Securities Available for Sale.
Interest expense increased by $74,173 for the three months ended June
30, 1997 as compared to the three months ended June 30, 1996. Interest
expense increased by $226,418 from $931,259 for the nine months ended
June 30, 1996 to $1,157,677 for the nine months ended June 30, 1997.
This was the result of the additional borrowings for the new
acquisitions.
Real estate taxes increased by $11,516 and $63,019 for the three and
nine months ended June 30, 1997, respectively, as compared to the three
and nine months ended June 30, 1996. This was a result of new
acquisitions.
Operating expenses remained relatively stable for the three and nine
months ended June 30, 1997 as compared to the three and nine months
ended June 30, 1996.
Page 10
<PAGE>
Office and general expenses increased by $29,271 and $31,548 for the
three and nine months ended June 30, 1997, respectively, as compared to
the three and nine months ended June 30, 1996. This was due primarily
to an increase in professional fees.
Depreciation expense increased by $38,836 and $86,918 for the three and
nine month periods ended June 30, 1997 and 1996, respectively, as
compared to the three and nine month periods ended June 30, 1996, due
to the real estate acquisitions in fiscal 1996 and 1997
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities decreased during the nine
months ended June 30, 1997 to $1,663,470 as compared to $1,718,548
generated during the nine months ended June 30, 1996. Other Assets at
June 30, 1997 included approximately $130,000 of loan costs relating to
the new line of credit and to new loans for acquisitions. The Company
has been raising capital through the DRIP and investing in net leased
industrial properties.
The Company owns sixteen properties of which twelve carried mortgage
loans totaling $21,389,014 at June 30, 1997. The Company believes that
funds generated from operations, the Dividend Reinvestment and Stock
Purchase Plan, together with the ability to finance and refinance its
properties will provide sufficient funds to adequately meet its
obligations over the next several years.
Page 11
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PART II: OTHER INFORMATION
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
ITEM 1: LEGAL PROCEEDINGS - None
ITEM 2 CHANGES IN SECURITIES - None
ITEM 3: DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held on April 24,
1997 to elect a Board of Directors for the ensuing year,
to approve the selection of independent auditors and to
approve the Company's Stock Option Plan. Proxies for the
meeting were solicited pursuant to Regulation 14 under
the Securities and Exchange Act of 1934.
ITEM 5: OTHER INFORMATION - None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS - None
(b) REPORTS ON FORM 8-K
(1) Form 8-K dated May 28, 1997 was filed to report
the acquisition of a warehouse facility in
Fayetteville, North Carolina.
(2) Form 8-K dated June 11, 1997 was filed to report
the acquisition of a warehouse facility in
Schaumburg, Illinois.
Page 12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
Date: August 8, 1997 By: /s/Eugene W. Landy
EUGENE W. LANDY,
President
Date: August 8, 1997 By: /s/Anna T. Chew
ANNA T. CHEW
Controller
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MONMOUTH REAL ESTATE INVESTMENT CORPORATION AS OF
AND FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 184,217
<SECURITIES> 3,156,241
<RECEIVABLES> 523,202
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,933,830
<PP&E> 44,170,325
<DEPRECIATION> 5,170,046
<TOTAL-ASSETS> 44,846,944
<CURRENT-LIABILITIES> 4,989,398
<BONDS> 21,389,014
0
0
<COMMON> 42,181
<OTHER-SE> 18,258,362
<TOTAL-LIABILITY-AND-EQUITY> 44,846,944
<SALES> 0
<TOTAL-REVENUES> 3,945,364
<CGS> 0
<TOTAL-COSTS> 556,265
<OTHER-EXPENSES> 1,150,101
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,157,677
<INCOME-PRETAX> 1,081,321
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,081,321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,081,321
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
