FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
( 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, 1998
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, 1998 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
The number of shares or other units outstanding of each of the
issuer's classes of securities as of August 3, 1998 was
5,467,387.
Page 1
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MONMOUTH REAL ESTATE INVESTMENT CORPORATION
FOR THE QUARTER ENDED JUNE 30, 1998
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 6-8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-10
Part II- Other Information 11
Signatures 12
Page 2
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<TABLE>
<CAPTION>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
BALANCE SHEETS
AS OF JUNE 30, 1998 AND SEPTEMBER 30, 1997
<S> <C> <C>
6/30/98 9/30/97
ASSETS
Real Estate Investments:
Land $ 6,942,724 $ 6,141,724
Buildings, Improvements and
Equipment, Net of Accumulated
Depreciation of $6,312,053
and $5,482,525, respectively 36,726,080 32,606,220
Mortgage Loans Receivable 165,439 195,583
___________ ___________
Total Real Estate Investments 43,834,243 38,943,527
Cash and Cash Equivalents 210,814 269,291
Securities Available for Sale at
Fair Value 2,065,050 3,250,147
Interest and Other Receivables 572,927 542,177
Prepaid Expenses 58,304 125,498
Lease Costs - Net of Accumulated
Amortization 204,553 100,602
Investment in Hollister'97 LLC 1,010,000 1,010,000
Other Assets 820,396 701,481
___________ ___________
TOTAL ASSETS $48,776,287 $44,942,723
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage Notes Payable $21,477,984 $21,079,238
Loans Payable 358,065 3,190,510
Deferred Gain - Installment Sale 120,532 138,532
Other Liabilities 1,067,683 645,155
___________ ___________
Total Liabilities 23,024,264 25,053,435
___________ ___________
Shareholders' Equity:
Common Stock-Class A-$.01 Par Value,
8,000,000 Shares Authorized,
5,381,867 and 4,421,847 Shares
Issued and Outstanding, respectively 53,819 44,218
Common Stock-Class B-$.01 Par Value,
100,000 Shares Authorized, No shares
Issued or Outstanding -0- -0-
Additional Paid-in Capital 25,660,388 19,450,137
Accumulated Other Comprehensive
Income 79,081 394,933
Undistributed Income (41,265) -0-
___________ ___________
Total Shareholders' Equity 25,752,023 19,889,288
___________ ___________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $48,776,287 $44,942,723
=========== ===========
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, 1998 AND 1997
3 Months 9 Months 3 Months 9 Months
Ended Ended Ended Ended
6/30/98 6/30/98 6/30/97 6/30/97
<S> <C> <C> <C> <C>
INCOME:
Rental and Occupancy
Charges $1,528,137 $4,723,181 $1,238,973 $3,622,752
Interest and Other
Income 72,717 448,392 91,113 304,612
__________ __________ __________ __________
TOTAL INCOME 1,600,854 5,171,573 1,330,086 3,927,364
__________ __________ __________ __________
EXPENSES:
Interest Expense 407,053 1,323,890 389,472 1,157,677
Real Estate Taxes 67,407 256,672 62,876 273,076
Operating Expenses 71,496 389,087 92,767 283,189
Office and General
Expenses 177,211 516,138 193,576 474,377
Depreciation 278,271 829,529 234,983 675,724
__________ __________ __________ __________
TOTAL EXPENSES 1,001,438 3,315,316 973,674 2,864,043
__________ __________ __________ __________
INCOME BEFORE GAINS 599,416 1,856,257 356,412 1,063,321
Gains on Sale of
Assets-Investment
Property 6,000 18,000 6,000 18,000
__________ __________ __________ __________
NET INCOME $ 605,416 1,874,257 $ 362,412 $1,081,321
========== ========== ========== ==========
PER SHARE INFORMATION
Weighted Average
Shares Outstanding
Basic 5,146,878 4,821,577 4,121,707 3,984,388
========== ========== ========== ==========
Diluted 5,182,053 4,846,395 4,121,707 3,984,388
========== ========= ========== ==========
Net Income Per Share
Basic and Diluted $ 0.12 $ .39 $ 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, 1998 AND 1997
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,874,257 $ 1,081,321
Noncash Items Included in Net Income:
Depreciation 829,529 675,724
Amortization 59,287 28,515
Gain on Sales of Assets -
Investment Property (18,000) (18,000)
Gain on Sales of Securities
Available for Sale (212,636) (75,323)
Changes In:
Interest and Other Receivables (30,750) 28,889
Prepaid Expenses 67,194 53,499
Other Assets and Lease Costs (282,153) (183,948)
Other Liabilities 422,528 72,793
__________ __________
NET CASH PROVIDED FROM OPERATING
ACTIVITIES 2,709,256 1.663.470
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Collections on Installment Sales 30,144 27,922
Additions to Land, Buildings,
Improvements and Equipment (5,750,389) (9,451,380)
Purchase of Securities
Available for Sale (465,766) (2,728,215)
Proceeds from Sale of
Securities Available for Sale 1,547,647 465,870
Investment in Hollister '97 LLC -0- (1,000,000)
____________ ____________
NET CASH USED IN
INVESTING ACTIVITIES (4,638,364) (12,685,803)
____________ ____________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Loans 3,021,501 9,390,510
Principal Payments on Loans (5,853,946) (5,500,000)
Proceeds from Mortgages 3,900,000 6,930,776
Principal Payments of Mortgages (3,501,254) (758,372)
Proceeds from Issuance of Class A
Common Stock 5,395,069 1,744,620
Dividends Paid (1,090,739) (845,378)
____________ ___________
NET CASH PROVIDED FROM
FINANCING ACTIVITIES 1,870,631 10,962,156
____________ ___________
Net Decrease in Cash
and Cash Equivalents (58,477) (60,177)
Cash and Cash Equivalents at Beginning
of Period 269,291 244,394
____________ ___________
Cash and Cash Equivalents at End
of Period $ 210,814 $ 184,217
=========== ===========
Unaudited
See Accompanying Notes to Financial Statements
</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, 1998 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, 1997 have
been omitted.
Effective January 1, 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130). SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in a
full set of general purpose financial statements. Under SFAS 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. Comparative financial statements provided for
earlier periods are required to be reclassified to reflect application
of the provisions of SFAS 130.
SFAS 130 requires total comprehensive income and its components to be
displayed on the face of a financial statement for annual financial
statements. For interim financial statements, SFAS 130 requires only
total comprehensive income to be reported and allows such disclosure to
be presented in the notes to the interim financial statements.
Total comprehensive income for the three and nine month periods ended
June 30, 1998 and 1997 is as follows:
June 30, 1998 June 30, 1997
Three Months $ 551,623 $ 431,331
Nine Months 1,558,405 1,291,919
NOTE 2 - SECURITIES AVAILABLE FOR SALE
During the nine months ended June 30, 1998, the Company sold $1,335,011
of securities available for sale for a gain of $212,636 which is
included in interest and other income. Total securities available for
sale at June 30, 1998 amounted to $2,065,050 which includes gross
unrealized holding gains of $79,081.
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NOTE 3 - REAL ESTATE INVESTMENTS
On December 18, 1997, the Company purchased a 12,477 square foot
warehouse facility in Burr-Ridge, Illinois from SK Properties II, LLC,
an unrelated entity. This warehouse facility is 100% net leased to
Sherwin-Williams Company. The purchase price, including closing costs,
was approximately $1,500,000. The Company paid approximately $120,000
in cash, used approximately $280,000 of its revolving line of credit
with Summit Bank and obtained a mortgage of $1,100,000. This mortgage
payable is at an interest rate of 8% and is due January 1, 2014.
On June 22, 1998, the Company purchased a 72,000 square foot warehouse
facility in Romulus, Michigan from SK Properties I, L.L.C., an
unrelated entity. This warehouse facility is 100% net leased to
Federal Express Corporation. The purchase price, including closing
costs was approximately $4,150,000. The Company utilized $1,200,000 of
its revolving credit line with Summit Bank and obtained a mortgage of
$2,800,000. This mortgage is at an interest rate of 7.56% and is due
June 22, 2013.
NOTE 4 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
On June 15, 1998, the Company paid $702,755 as a dividend of $.135 per
share to shareholders of record May 15, 1998. For the nine months
ended June 30, 1998, the Company paid $1,915,522.
For the quarter ended June 30, 1998, the Company received $2,820,934
from the Dividend Reinvestment and Stock Purchase Plan (DRIP). The
total received from the DRIP for the nine months ended June 30, 1998
amounted to $6,219,852. For the nine months ended June 30, 1998, there
were 960,020 shares issued, resulting in 5,381,867 shares outstanding.
NOTE 5 - EMPLOYEE STOCK OPTIONS
During the nine months ended June 30, 1998, the following stock options
were granted:
Date of Number of Number of Option Expiration
Grant Employees Shares Price Date
4/8/98 2 20,000 $ 7.25 4/8/2003
As of June 30, 1998, there were options outstanding to purchase 320,000
shares and 430,000 shares available for grant under the Company's Stock
Option Plan.
NOTE 6 - NET INCOME PER SHARE
Effective December 31, 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share." Diluted net income per share is calculated by dividing net
income by the weighted-average number of common shares outstanding plus
the weighted-average number of net shares that would be issued upon
exercise of stock options pursuant to the treasury stock method.
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Options in the amount of 35,175 and 24,818 for the three and nine
months ended June 30, 1998, respectively, are included in the diluted
weighted average shares outstanding. There were no options outstanding
for the corresponding 1997 periods.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the nine months ended June 30, 1998 and 1997 for
interest are $1,323,890 and $1,157,677, respectively.
During the nine months ended June 30, 1998 and 1997, the Company had
dividend reinvestments of $824,783 and $648,566, respectively, which
required no cash transfers.
Page 8
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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
$2,709,256 for the current nine months as compared to $1,663,470 for
the prior period. The Company raised $6,219,852 from the issuance of
shares of common stock through its Dividend Reinvestment and Stock Pur-
chase Plan (DRIP). Dividends paid for the nine months ended June 30,
1998 amounted to $1,915,522.
Securities Available for Sale decreased by $1,185,097 due primarily to
sales of $1,335,011.
Mortgage notes payable increased by $398,746 during the nine months
ended June 30, 1998. This increase was the result of new mortgages of
$3,900,000 relating to the purchase of the Burr-Ridge, Illinois and
Romulus, Michigan warehouse facilities offset by principal repayments
of $3,501,254.
Loans payable decreased by $2,832,445 as a result of payments of
$5,853,946 offset by new borrowings of $3,021,501.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Rental and occupancy charges increased for the quarter ended June 30,
1998 to $1,528,137 as compared to $1,238,973 for the quarter ended June
30, 1997. Rental and occupancy charges increased for the nine months
ended June 30, 1998 to $4,723,181 as compared to $3,622,752 for the
nine months ended June 30, 1997. This increase was due primarily to
acquisitions made during fiscal 1997 and 1998 as well as a lease
extension from July 1, 1997 to December 31, 1997 on the South
Brunswick, NJ property at a monthly rental of $162,585. The previous
monthly rental was $54,195.
Interest and other income decreased by $18,396 for the three months
ended June 30, 1998 as compared to the three months ended June 30, 1997
due to a decrease in dividend income. Primarily during the first
quarter of 1998, $1,335,011 of securities were sold. Interest and
other income increased by $143,780 for the nine months ended June 30,
1998 as compared to the nine months ended June 30, 1997. This was due
primarily to the $212,636 gain on sale of Securities Available for
Sale.
Interest expense increased by $17,581 for the three months ended June
30, 1998 as compared to the three months ended June 30, 1997. Interest
expense increased by $166,213 from $1,157,677 for the nine months ended
June 30, 1997 to $1,323,890 for the nine months ended June 30, 1998.
This was the result of additional borrowings for the new acquisitions
made during fiscal 1997 and 1998.
Real estate taxes remained relatively stable for the three and nine
months ended June 30, 1998 as compared to the three and nine months
ended June 30, 1997.
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Operating expenses decreased by $21,271 for the three months ended
June 30, 1998, as compared to the three months ended June 30, 1997.
Operating expenses increased by $105,898 for the nine months ended June
30, 1998 as compared to the nine months ended June 30, 1997. This was
primarily due to an increase in repairs and maintenance and personnel
costs at the Monaca, PA and Monsey, NY properties during the first and
second quarters of fiscal 1998.
Office and general expenses remained relatively stable for the three
months ended June 30, 1998, as compared to the three months ended June
30, 1997. Office and general expenses increased for the nine months
ended June 30, 1998 as compared to June 30, 1997. This was due to an
increase in professional fees.
Depreciation expense increased by $43,288 and $153,805 for the three
and nine month periods ended June 30, 1998, respectively, as compared
to the three and nine month periods ended June 30, 1997, due to the
real estate acquisitions in fiscal 1997 and 1998.
Funds from operations (FFO), defined as net income, excluding gains (or
losses) from sales of depreciable assets, plus depreciation increased
from $591,395 for the quarter ended June 30, 1997 to $877,687 for the
quarter ended June 30, 1998 and from $1,739,045 for the nine months
ended June 30, 1997 to $2,685,786 for the nine months ended June 30,
1998. FFO does not replace net income (determined in accordance with
generally accepted accounting principles) as a measure of performance
or net cash flows as a measure of liquidity. FFO should be considered
as a supplemental measure of operating performance used by real estate
investment trusts.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities increased during the nine
months ended June 30, 1998 to $2,709,256 as compared to $1,663,470
generated during the nine months ended June 30, 1997. This was
primarily due to the increase in net income.
The Company owns eighteen properties of which twelve carried mortgage
loans totaling $21,477,984 at June 30, 1998. The Company has been
raising capital through its DRIP and investing in net leased industrial
properties. The Company believes that funds generated from operations,
the DRIP, together with the ability to finance and refinance its
properties will provide sufficient funds to adequately meet its
obligations over the next several years.
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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 23, 1998
to elect a Board of Directors for the ensuing year and to
approve the selection of independent auditors. 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 - None
Page 11
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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 10, 1998 By:/s/Eugene W. Landy
Eugene W. Landy
President
Date: August 10, 1998 By:/s/Anna T. Chew
Anna T. Chew
Controller
Page 12
<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, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 210,814
<SECURITIES> 2,065,050
<RECEIVABLES> 572,927
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,907,095
<PP&E> 49,980,857
<DEPRECIATION> 6,312,053
<TOTAL-ASSETS> 48,776,287
<CURRENT-LIABILITIES> 1,425,748
<BONDS> 21,477,984
0
0
<COMMON> 53,819
<OTHER-SE> 25,698,204
<TOTAL-LIABILITY-AND-EQUITY> 48,776,287
<SALES> 0
<TOTAL-REVENUES> 5,189,573
<CGS> 0
<TOTAL-COSTS> 645,759
<OTHER-EXPENSES> 1,345,667
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,323,890
<INCOME-PRETAX> 1,874,257
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,874,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,874,257
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
