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 March 31, 1999
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
March 31, 1999 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
required 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 April 15, 1999 was 6,788,900.
Page 1
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
FOR THE QUARTER ENDED MARCH 31, 1999
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 6-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk
There have been no material changes to information required
regarding quantitative and qualitative disclosures about market
risk from the end of the preceding year to the date of this
Form 10-Q.
Part II - Other Information 11
Signatures 12
Page 2
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
BALANCE SHEETS
AS OF MARCH 31, 1999 AND SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
3/31/99 9/30/98
<S> <C> <C>
Real Estate Investments:
Land $ 8,715,814 $ 7,665,724
Buildings, Improvements and Equipment,
Net of Accumulated Depreciation of
$6,597,263 and $6,659,642, respectively 45,704,879 42,952,713
Mortgage Loans Receivable 133,438 153,663
__________ __________
Total Real Estate Investments 54,554,131 50,772,100
Cash and Cash Equivalents 459,482 147,976
Securities Available for Sale at Fair Value 6,587,411 2,050,500
Interest and Other Receivables 533,856 597,723
Prepaid Expenses 158,843 130,911
Lease Costs, Net of Accumulated Amortization 148,501 196,320
Investment in Hollister '97, L.L.C. 1,010,000 1,010,000
Other Assets 3,266,527 677,315
___________ __________
TOTAL ASSETS $66,718,751 $55,582,845
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage Notes Payable $29,269,500 $25,949,782
Loans Payable 4,039,104 1,335,382
Deferred Gain-Installment Sale 96,840 108,840
Other Liabilities 802,832 784,019
__________ __________
Total Liabilities 34,208,276 28,178,023
__________ __________
Shareholders' Equity:
Common Stock-Class A-$.01 Par Value,800,000
Shares Authorized, 6,633,115 and 5,703,544
Shares Issued and Outstanding,respectively 66,331 57,035
Common Stock-Class B-$.01 Par Value, 100,000 Shares
Authorized, No Shares Issued or Outstanding -0- -0-
Additional Paid-In Capital 32,254,837 27,375,711
Accumulated Other Comprehensive Loss (443,025) (27,924)
Undistributed Income 632,332 -0-
__________ __________
Total Shareholders' Equity 32,510,475 27,404,822
__________ __________
TOTAL LIAIBILITES AND SHAREHOLDERS' EQUITY $66,718,751 $55,582,845
========== ==========
</TABLE>
Unaudited
See Accompanying Notes to Financial Statements
Page 3
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF INCOME
FOR THREE AND SIX MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
3 Months 6 Months 3 Months 6 Months
Ended Ended Ended Ended
3/31/99 3/31/99 3/31/98 3/31/98
<S> <C> <C> <C> <C>
INCOME:
Rental and Occupancy Charges $2,099,402 $3,937,300 $1,567,033 $3,195,044
Interest and Other Income 157,081 238,041 104,117 375,675
_________ _________ _________ _________
Total Income 2,256,483 4,175,341 1,671,150 3,570,719
_________ _________ _________ _________
EXPENSES:
Interest Expense 627,728 1,169,067 452,371 916,837
Real Estate Taxes 288,231 427,274 30,277 189,265
Operating Expenses 208,510 341,099 154,235 317,591
Office and General 176,669 340,349 194,711 338,927
Depreciation 404,370 789,816 278,271 551,258
_________ _________ _________ _________
Total Expenses 1,705,508 3,067,605 1,109,865 2,313,878
--------- --------- --------- ---------
INCOME BEFORE GAINS 550,975 1,107,736 561,285 1,256,841
Gain on Sale of Assets -
Investment Property 1,246,325 1,252,325 6,000 12,000
_________ _________ _________ _________
NET INCOME $1,797,300 $2,360,061 $ 567,285 $1,268,841
========== ========== ========== ==========
NET INCOME PER SHARE
Basic and Diluted $ .28 $ .38 $ .12 $ .27
========== ========= ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic 6,389,558 6,151,882 4,778,005 4,655,064
========== ========== ========== =========
Diluted 6,389,558 6,151,882 4,803,914 4,680,973
========== ========== ========== =========
</TABLE>
Unaudited
See Accompanying Notes to Financial Statements
Page 4
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $2,360,061 $1,268,841
Noncash Items Included in Net Income:
Depreciation 789,816 551,258
Amortization 54,863 35,990
Gain on Sales of Assets-Investment
Property (1,252,325) (12,000)
Gain on Sales of Securities Available
for Sale -0- (190,233)
Changes In:
Interest and Other Receivables 63,867 (27,786)
Prepaid Expenses (27,932) (5,337)
Other Assets and Lease Costs (295,383) 27,279
Other Liabilities 18,813 68,751
_________ _________
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,711,780 1,716,763
_________ _________
CASH FLOWS FROM INVESTING ACTIVITIES
Collections on Installment Sales 20,225 18,628
Additions to Land, Buildings,
Improvements and Equipment (5,598,000) (1,555,870)
Purchase of Securities Available for
Sale (4,952,012) (218,568)
Proceeds from Sale of Securities
Available for Sale -0- 1,536,510
___________ _________
NET CASH USED BY INVESTING ACTIVITIES (10,529,787) (219,300)
___________ _________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Loans 4,739,104 428,437
Principal Payments on Loans (2,035,382) (3,467,999)
Proceeds from Mortgages 4,100,000 1,100,000
Principal Payments on Mortgages (780,282) (1,848,534)
Financing Costs on Debt (54,620) -0-
Proceeds from Issuance of Class A Common
Stock 4,241,616 2,856,378
Dividends Paid (1,080,923) (670,227)
_________ _________
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 9,129,513 (1,601,945)
_________ _________
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 311,506 (104,482)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 147,976 269,291
_________ _________
END OF PERIOD $ 459,482 $ 164,809
========= =========
</TABLE>
Unaudited
See Accompanying Notes to Financial Statements
Page 5
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICY
The interim financial statements furnished herein reflect
all adjustments which were, in the opinion of management,
necessary to present fairly the financial position, results of
operations and cash flows at March 31, 1999 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, 1998 have been
omitted.
NOTE 2 - NET INCOME PER SHARE
Basic net income per share is calculated by dividing net
income by the weighted-average number of common shares
outstanding during the period. 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. Options in the amount of
25,909 for the three and six months ended March 31, 1998 are
included in the diluted weighted average shares outstanding.
Options for 320,000 shares were excluded for the three and six
months ended March 31, 1999 since they were anti-dilutive.
NOTE 3 - COMPREHENSIVE INCOME
Total comprehensive income for the three and six months
ended March 31, 1999 and 1998 is as follows:
March 31, 1999 March 31, 1998
Three Months $1,365,698 $ 558,678
Six Months 1,944,960 1,006,782
NOTE 4 - REAL ESTATE INVESTMENTS
On December 11, 1998, the Company purchased an 88,140
square foot warehouse facility in Omaha, Nebraska from Jones
Development Company, LLC, an unrelated entity. This warehouse
facility is 100% net leased to Federal Express Corporation.
The purchase price, including closing costs, was approximately
$5,598,000. The Company paid approximately $600,000 in cash,
used approximately $900,000 of its revolving line of credit
with Summit Bank and obtained a mortgage of $4,100,000. This
mortgage payable is at an interest rate of 7.15% and is due
January 1, 2014.
Page 6
<PAGE>
On March 16, 1999, the Company sold the warehouse facility
located at 40 Robert Pitt Drive, Monsey, New York. The net
proceeds from this sale amounted to $2,246,253 and resulted in a
gain of $1,234,325. These funds were placed into an escrow
account and are included in other assets. This sale was part of
a tax free exchange (See Note 7).
NOTE 5 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
On March 15, 1999, the Company paid $904,454 as a dividend
of $.14 per share to shareholders of record February 16, 1999.
For the six months ended March 31, 1999, the Company
received $4,888,422 from the Dividend Reinvestment and Stock
Purchase Plan (DRIP). There were 929,571 shares issued,
resulting in 6,633,115 shares outstanding.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the six months ended March 31, 1999 and
1998 for interest are $1,169,067 and $916,837, respectively.
During the six months ended March 31, 1999 and 1998, the
Company had dividend reinvestments of $646,806 and $542,540,
respectively, which required no cash transfers.
During the six months ended March 31, 1999, proceeds from
the sale of investment property totaling $2,246,253 were directly
paid into an escrow account and required no cash transfers by the
Company
NOTE 7 - SUBSEQUENT EVENTS
On April 6, 1999, MREIC purchased a 49,900 square foot
warehouse facility in Albemarle County, Virginia for
approximately $3,900,000. This warehouse is 100% net-leased to
Federal Express Corporation. MREIC used $1,360,000 of its credit
line with Summit Bank. This line is at an interest rate of
prime.
Page 7
<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 $1,711,780 for the current six months as compared
to $1,716,763 for the prior period. The Company raised
$4,888,422 from the issuance of shares of common stock through
its Dividend Reinvestment and Stock Purchase Plan (DRIP).
Dividends paid for the six months ended March 31, 1999 amounted
to $1,727,729.
Total real estate investments increased by $3,788,031,
primarily due to the purchase of a warehouse facility in Omaha,
Nebraska for approximately $5,598,000, offset by the sale of the
warehouse in Monsey, New York.
Securities available for sale increased by $4,536,911
primarily as a result of additional purchases.
Mortgage notes payable increased by $3,319,718 during
the six months ended March 31, 1999. This increase was the
result of new mortgages of $4,100,000 relating to the purchase of
a warehouse facility in Omaha, Nebraska offset by principal
repayments of $780,282.
Loans payable increased by $2,703,722 during the six month
ended March 31, 1999. This increase was primarily the result of
additional take-downs of the Company's revolving credit line
offset by repayments.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Rental and occupancy charges increased for the three
months ended March 31, 1999 to $2,099,402 as compared to
$1,567,033 for the three months ended March 31, 1998. Rental
and occupancy charges increased for the six months ended March
31, 1999 to $3,937,300 as compared to $3,195,044 for the six
months ended March 31, 1998. These increases were due primarily
to acquisitions made during fiscal 1998 and 1999.
Interest and other income increased by $52,964 for the
three months ended March 31, 1999 as compared to the three months
ended March 31, 1998. Interest and other income decreased for
the six months ended March 31, 1999 by $137,634 as compared to
the six months ended March 31, 1998. This was due primarily to a
gain on sale of Securities Available for Sale of $190,233 for the
prior period.
Interest expense increased by $175,357 for the three months
ended March 31, 1999 as compared to the three months ended March
31, 1998. Interest expense increased by $252,230 for the six
months ended March 31, 1999 as compared to the six months ended
March 31, 1998. This was the result of additional borrowings for
the new acquisitions made during fiscal 1998 and 1999.
Page 8
<PAGE>
Real estate taxes increased by $257,954 for the three months
ended March 31, 1999 as compared to the three months ended March
31, 1998. Real estate taxes increased by $238,009 for the six
months ended March 31, 1999 as compared to the six months ended
March 31, 1998. This was due to the reassessment of a warehouse
facility in Illinois. Since the tenant's lease provides for the
payment of real estate taxes by the tenant, there was a
corresponding increase in occupancy charges.
Depreciation expense increased by $126,099 for the three
months ended March 31, 1999 as compared to the three months
ended March 31, 1998. Depreciation expense increased by
$238,558 for the six months ended March 31, 1999 as compared to
the six months ended March 31, 1998. This was due to the real
estate acquisitions in fiscal 1998 and 1999.
Gain On Sales Of Assets - Investment Property increased by
$1,240,325 for the three and six months ended March 31, 1999 as
compared to the three and six months ended March 31, 1998. This
was primarily due to the gain on sale of the warehouse facility
in Monsey, New York.
Funds from operations (FFO), defined as net income,
excluding gains (or losses) from sales of depreciable assets,
plus depreciation increased from $1,808,099 for the six months
ended March 31, 1998 to $1,897,552 for the six months ended
March 31, 1999. 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 remained
relatively stable during the six months ended March 31, 1999
as compared to the six months ended March 31, 1998.
The Company owns nineteen properties of which fourteen
carried mortgage loans totaling $29,269,500 at March 31, 1999.
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.
YEAR 2000
The Company is currently in the process of implementing its
Year 2000 compliance plan. The Company has assessed all hardware
and software for Year 2000 readiness. The Company has developed
and is currently implementing renovation plans, including
hardware replacement and software upgrades, to ensure all
hardware and software is Year 2000 compliant. The Company has no
significant suppliers or vendors. The Company is in the process
of assessing the Year 2000 readiness of its major tenants.
Renovation and testing are scheduled to be completed during the
first half of 1999.
Page 9
<PAGE>
The Company has developed contingency plans for each of its
critical systems which includes moving many of the Company's
operations to a manual system. There can be no assurances given
that the Year 2000 compliance plan will be completed successfully
by the Year 2000, in which event the Company can incur additional
costs to implement its contingency plans. Management does not
anticipate that such costs would be significant to the Company.
The total costs associated with the Company's Year 2000 plan are
anticipated to be less than $20,000.
Successful and timely completion of the Year 2000 plan is
based on management's best estimates derived from various
assumptions of future events, which are inherently uncertain,
including the effectiveness of remediation and validation plans,
and all vendors and suppliers readiness.
Page 10
<PAGE>
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 - None
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
<PAGE>
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: May 7, 1999 By:/s/ Eugene W. Landy
Eugene W. Landy
President
Date: May 7, 1999 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 MARCH 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 459,482
<SECURITIES> 6,587,411
<RECEIVABLES> 533,856
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,739,592
<PP&E> 61,017,956
<DEPRECIATION> 6,597,263
<TOTAL-ASSETS> 66,718,751
<CURRENT-LIABILITIES> 4,841,936
<BONDS> 29,269,500
0
0
<COMMON> 66,331
<OTHER-SE> 32,444,144
<TOTAL-LIABILITY-AND-EQUITY> 66,718,751
<SALES> 0
<TOTAL-REVENUES> 5,427,666
<CGS> 0
<TOTAL-COSTS> 768,373
<OTHER-EXPENSES> 1,130,165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,169,067
<INCOME-PRETAX> 2,360,061
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,360,061
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,360,061
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
