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 December 31, 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
December 31, 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
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 January 15, 1999 was
6,300,150.
Page 1
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MONMOUTH REAL ESTATE INVESTMENT CORPORATION
FOR THE QUARTER ENDED DECEMBER 31, 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 6-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
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 10
Signatures 11
Page 2
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MONMOUTH REAL ESTATE INVESTMENT CORPORATION
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
12/31/98 9/30/98
<S> <C> <C>
Real Estate Investments:
Land $ 8,835,724 $ 7,665,724
Buildings, Improvements and Equipment,
Net of Accumulated Depreciation of
$7,045,088 and $6,659,642,
respectively 46,999,897 42,952,713
Mortgage Loans Receivable 141,619 153,663
__________ __________
Total Real Estate Investments 55,977,240 50,772,100
Cash and Cash Equivalents 112,051 147,976
Securities Available for Sale at Fair
Value 3,071,265 2,050,500
Interest and Other Receivables 683,058 597,723
Prepaid Expenses 67,646 130,911
Lease Costs, Net of Accumulated
Amortization 188,875 196,320
Investment in Hollister '97, L.L.C. 1,010,000 1,010,000
Other Assets 721,425 677,315
__________ __________
TOTAL ASSETS $61,831,560 $55,582,845
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage Notes Payable $29,682,622 $25,949,782
Loans Payable 1,405,503 1,335,382
Deferred Gain-Installment Sale 102,839 108,840
Other Liabilities 1,009,548 784,019
__________ __________
Total Liabilities 32,200,512 28,178,023
__________ __________
Shareholders' Equity:
Common Stock-Class A-$.01 Par Value, 8,000,000
Shares Authorized, 6,164,580 and 5,703,544
Shares Issued and Outstanding, respectively 61,646 57,035
Common Stock-Class B-$.01 Par Value,
100,000 Shares Authorized, No Shares
Issued or Outstanding -0- -0-
Additional Paid-In Capital 29,841,339 27,375,711
Accumulated Other Comprehensive Loss ( 11,423) ( 27,924)
Undistributed Income ( 260,514) -0-
__________ __________
Total Shareholders' Equity 29,631,048 27,404,822
__________ __________
TOTAL LIAIBILITES AND SHAREHOLDERS' EQUITY $61,831,560 $55,582,845
========== ==========
</TABLE>
Unaudited
See Accompanying Notes to Financial Statements
Page 3
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF INCOME
FOR THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
INCOME:
Rental and Occupancy Charges $ 1,837,898 $ 1,628,011
Interest and Other Income 80,960 271,558
_________ _________
Total Income 1,918,858 1,899,569
_________ _________
EXPENSES:
Interest Expense 541,339 464,466
Real Estate Taxes 139,043 158,988
Operating Expenses 132,589 163,356
Office and General Expenses 163,680 144,216
Depreciation 385,446 272,987
_________ _________
Total Expenses
1,362,097 1,204,013
_________ _________
INCOME BEFORE GAINS 556,761 695,556
Gain on Sale of Assets -
Investment Property 6,000 6,000
_________ _________
NET INCOME $ 562,761 $ 701,556
========= =========
NET INCOME PER SHARE
Basic and Diluted $ 0.10 $ 0.15
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 5,917,362 4,532,751
========= =========
Diluted 5,917,362 4,537,163
========= =========
</TABLE>
Unaudited
See Accompanying Notes to Financial Statements
Page 4
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 562,761 $ 701,556
Noncash Items Included in Net Income:
Depreciation 385,446 272,987
Amortization 23,523 60,001
Gain on Sales of Assets-Investment Property ( 6,000) ( 6,000)
Gain on Sales of Securities Available For Sale -0- ( 190,233)
Changes In:
Interest and Other Receivables ( 85,335) ( 79,642)
Prepaid Expenses 63,265 93,308
Other Assets and Lease Costs ( 15,088) 191,519
Other Liabilities 225,528 33,202
_________ _________
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,154,100 1,076,698
_________ _________
CASH FLOWS FROM INVESTING ACTIVITIES
Collections on Installment Sales 12,044 11,093
Additions to Land, Buildings,
Improvements and Equipment (5,602,630) (1,543,723)
Purchase of Securities Available for Sale (1,004,264) -0-
Proceeds from Sale of Securities
Available for Sale -0- 1,536,510
_________ _________
NET CASH (USED) PROVIDED BY INVESTING
ACTIVITIES (6,594,850) 3,880
_________ _________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Loans 2,005,503 278,437
Principal Payments on Loans (1,935,382) (3,039,999)
Proceeds from Mortgages 4,100,000 1,100,000
Principal Payments on Mortgages ( 367,160) ( 314,895)
Financing Costs on Debt ( 45,100) ( 15,000)
Proceeds from Issuance of Class A
Common Stock 2,161,350 1,194,121
Dividends Paid ( 514,386) ( 318,588)
_________ _________
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 5,404,825 1,115,924
_________ _________
NET DECREASE IN CASH AND CASH EQUIVALENTS ( 35,925) ( 35,346)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 147,976 269,291
_________ _________
END OF PERIOD $ 112,051 $ 233,945
========= =========
</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 December 31, 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, 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 -
0- and 4,412 for the three months ended December 31, 1998 and
1997, respectively, are included in the diluted weighted average
shares outstanding. Options for 320,000 shares were excluded at
December 31, 1998 since they were anti-dilutive.
NOTE 3 - COMPREHENSIVE INCOME
Total comprehensive income for the three months ended
December 31, 1998 and 1997 is $579,262 and $448,104,
respectively.
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>
NOTE 5 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
On December 15, 1998, the Company paid $823,275 as a
dividend of $.1375 per share to shareholders of record November
16, 1998
For the quarter ended December 31, 1998, the Company
received $2,470,239 from the Dividend Reinvestment and Stock
Purchase Plan (DRIP). There were 461,036 shares issued,
resulting in 6,164,580 shares outstanding.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the three months ended December 31,
1998 and 1997 for interest are $541,339 and $464,466,
respectively.
During the three months ended December 31, 1998 and 1997,
the Company had dividend reinvestments of $308,889 and $272,994,
respectively, which required no cash transfers.
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 $1,154,100 for the current three months as
compared to $1,076,698 for the prior period. The Company
raised $2,470,239 from the issuance of shares of common stock
through its Dividend Reinvestment and Stock Purchase Plan
(DRIP). Dividends paid for the three months ended December 31,
1998 amounted to $823,275.
Total real estate investments increased by $5,205,140,
primarily due to the purchase of a warehouse facility in Omaha,
Nebraska.
Mortgage notes payable increased by $3,732,840 during
the three months ended December 31, 1998. 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 $367,160.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Rental and occupancy charges increased for the quarter
ended December 31, 1998 to $1,837,898 as compared to $1,628,011
for the quarter ended December 31, 1997. This increase was due
primarily to acquisitions made during fiscal 1998 and 1999.
Interest and other income decreased by $190,598 for the
quarter ended December 31, 1998 as compared to the quarter ended
December 31, 1997. This was due primarily to a gain on sale of
Securities Available for Sale of $190,233 for the quarter ended
December 31, 1997.
Interest expense increased by $76,873 for the quarter ended
December 31, 1998 as compared to the quarter ended December 31,
1997. This was the result of additional borrowings for the new
acquisitions made during fiscal 1998 and 1999.
Depreciation expense increased by $112,459 for the quarter
ended December 31, 1998 as compared to the quarter ended December
31, 1997, due to the real estate acquisitions in fiscal 1998
and 1999.
Funds from operations (FFO), defined as net income,
excluding gains (or losses) from sales of depreciable assets,
plus depreciation decreased from $968,543 for the quarter ended
December 31, 1997 to $942,207 for the quarter ended December
31, 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.
Page 8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities increased
during the quarter ended December 31, 1998 to $1,154,100 as
compared to $1,076,698 generated during the quarter ended
December 30, 1997.
The Company owns twenty properties of which fourteen
carried mortgage loans totaling $29,682,622 at December 31,
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.
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.
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 9
<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 -
Form 8-K dated December 11, 1998 was filed to report the
acquisition of a warehouse facility in Omaha, Nebraska.
Page 10
<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: February 11, 1999 By: /s/Eugene W. Landy
Eugene W. Landy
President
Date: February 11, 1999 By: /s/Anna T. Chew
Anna T. Chew
Controller
Page 11
<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 DECEMBER 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 112,051
<SECURITIES> 3,071,265
<RECEIVABLES> 683,058
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,934,020
<PP&E> 62,880,709
<DEPRECIATION> 7,045,088
<TOTAL-ASSETS> 61,831,560
<CURRENT-LIABILITIES> 1,009,548
<BONDS> 29,682,622
0
0
<COMMON> 61,646
<OTHER-SE> 29,569,402
<TOTAL-LIABILITY-AND-EQUITY> 61,831,560
<SALES> 0
<TOTAL-REVENUES> 1,924,858
<CGS> 0
<TOTAL-COSTS> 271,632
<OTHER-EXPENSES> 549,126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 541,339
<INCOME-PRETAX> 562,761
<INCOME-TAX> 0
<INCOME-CONTINUING> 562,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 562,761
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
