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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 AND EXCHANGE ACT OF 1934
For quarter ended October 31, 1997 Commission file number 1-8059
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GETTY REALTY CORP.
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(Exact name of registrant as specified in its charter)
DELAWARE 11-2232705
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 Jericho Turnpike, Jericho, New York 11753
- - --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(516) 338 - 2600
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(Registrant's telephone number, including area code)
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
--- ---
Registrant has 13,395,357 shares of Common Stock, par value $.10 per share,
outstanding as of October 31, 1997.
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<PAGE>
GETTY REALTY CORP.
INDEX
Part I. FINANCIAL INFORMATION Page Number
- - ------------------------------ -----------
Item 1. Financial Statements
Consolidated Balance Sheets as of October 31, 1997 and
January 31, 1997 1
Consolidated Statements of Operations for the three and
nine months ended October 31, 1997 and 1996 2
Consolidated Statements of Cash Flows for the
nine months ended October 31, 1997 and 1996 3
Notes to Consolidated Financial Statements 4 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 12
Part II. OTHER INFORMATION
- - ---------------------------
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
<PAGE>
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
- - --------------------------------------------------------------------------------
October 31, January 31,
- - --------------------------------------------------------------------------------
Assets: 1997 1997
- - --------------------------------------------------------------------------------
(unaudited)
Real Estate:
Land $41,219 $40,647
Buildings 59,582 59,229
Equipment 22,195 16,180
Leasehold improvements 31,387 31,703
Assets recorded under
capital leases 51,084 51,233
-------- --------
205,467 198,992
Less, accumulated depreciation
and amortization 107,140 101,058
-------- --------
Real estate, net 98,327 97,934
Cash and equivalents 9,945 11,385
Accounts receivable, net 1,762 2,731
Mortgages receivable 6,355 6,602
Recoveries from state
underground storage tank funds 14,559 16,217
Deferred income taxes 19,109 18,485
Prepaid expenses and other assets 6,251 4,010
Assets of Getty Petroleum
Marketing Inc. - 135,500
-------- --------
Total assets $156,308 $292,864
======== ========
- - --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
- - --------------------------------------------------------------------------------
Mortgages payable $15,296 $18,882
Obligations under capital leases 18,093 22,710
Accounts payable and accrued expenses 21,427 22,281
Environmental remediation costs 38,678 46,134
Income taxes payable - 1,426
Liabilities of Getty Petroleum Marketing Inc. - 80,959
Stockholders' equity:
Preferred stock, par value $1.00 per share;
authorized 10,000,000 shares for issuance in
series (none of which is issued) - -
Common stock, par value $.10 per share; authorized
30,000,000 shares; issued 14,278,673 at
October 31, 1997 and 13,582,394 at January 31, 1997 1,428 1,358
Paid-in capital 75,518 120,293
Accumulated deficit (212) (7,215)
Treasury stock, at cost (883,316 shares at
October 31, 1997 and 885,893 shares at
January 31, 1997) (13,920) (13,964)
-------- --------
Total stockholders' equity 62,814 100,472
-------- --------
Total liabilities and stockholders' equity $156,308 $292,864
======== ========
See accompanying notes.
-1-
<PAGE>
<TABLE>
<CAPTION>
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
- - -----------------------------------------------------------------------------------------------------------------------------
Three months ended October 31, Nine months ended October 31,
- - -----------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Revenues from rental property $14,862 $8,998 $44,740 $26,775
Net sales of petroleum products 5,441 214,755 19,085 638,554
Other income 629 911 2,522 3,495
------- ------- ------- -------
20,932 224,664 66,347 668,824
Equity in earnings of Getty Petroleum Marketing Inc. - - 2,931 -
------- ------- ------- -------
20,932 224,664 69,278 668,824
------- ------- ------- -------
Cost of sales of petroleum products
(excluding depreciation and amortization) 5,185 201,889 17,603 585,496
Rental property expenses 3,404 5,502 10,286 16,171
Environmental and maintenance expenses 920 1,169 4,491 11,841
Selling, general and administrative expenses 2,471 5,948 9,701 19,089
Depreciation and amortization 2,466 5,867 7,272 17,279
Interest expense 1,209 1,651 3,898 5,264
Change of control charge - - 2,166 -
Litigation charge (credit) - (1,783) - 5,802
------- ------- ------- -------
15,655 220,243 55,417 660,942
------- ------- ------- -------
Earnings before provision for
income taxes 5,277 4,421 13,861 7,882
Provision for income taxes 2,256 1,868 5,683 3,325
------- ------- ------- -------
Net earnings $3,021 $2,553 $8,178 $4,557
======= ======= ======= =======
Net earnings per share $0.23 $0.20 $0.63 $0.36
======= ======= ======= =======
Weighted average shares outstanding 13,315 12,675 13,069 12,673
======= ======= ======= =======
See accompanying notes.
</TABLE>
-2-
<PAGE>
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine months ended
October 31,
- - --------------------------------------------------------------------------------
1997 1996
- - --------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $8,178 $4,557
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 7,272 17,279
Deferred income taxes (624) 2,251
Stock option charge 4,635 -
Change of control charge 2,166 -
Gain on dispositions of real estate (731) (1,559)
Equity in net earnings of Getty Petroleum Marketing Inc. (1,731) -
Changes in assets and liabilities:
Accounts receivable 969 (541)
Mortgages receivable 247 -
Recoveries from state underground storage tank funds 1,658 -
Prepaid expenses and other assets (2,292) (3,523)
Accounts payable and accrued expenses (3,156) 15,525
Environmental remediation costs (7,456) -
Income taxes payable (1,426) (175)
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Net cash provided by operating activities 7,709 33,814
------- -------
Cash flows from investing activities:
Capital expenditures (6,139) (17,405)
Property acquisitions (2,106) (839)
Proceeds from dispositions of real estate 1,362 2,321
------- -------
Net cash used in investing activities (6,883) (15,923)
------- -------
Cash flows from financing activities:
Mortgage borrowings 306 -
Repayment of mortgages payable (3,892) (3,722)
Payments under capital lease obligations (4,617) (3,951)
Cash dividends (1,175) (1,140)
Stock options and treasury stock, net 7,112 204
------- -------
Net cash used in financing activities (2,266) (8,609)
------- -------
Net increase (decrease) in cash and equivalents (1,440) 9,282
Cash and equivalents at beginning of period 11,385 19,808
------- -------
Cash and equivalents at end of period $9,945 $29,090
======= =======
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $3,888 $5,269
Income taxes, net 3,398 4,623
See accompanying notes.
-3-
<PAGE>
GETTY REALTY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General:
The accompanying consolidated financial statements include the accounts
of Getty Realty Corp., known prior to March 31, 1997 as Getty Petroleum Corp.,
and its wholly-owned subsidiaries (the "Company") (See Note 2). The
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and include amounts that are based on
management's best estimates and judgments. While all available information
has been considered, actual amounts could differ from those estimates. The
consolidated financial statements are unaudited but, in the opinion of
management, reflect all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation. These statements should be read in
conjunction with the consolidated financial statements and related notes which
appear in the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1997.
Certain reclassifications have been made in the financial statements as
of January 31, 1997 and for the periods ended October 31, 1996, to conform to
the October 31, 1997 presentation.
2. Spin-off:
On March 21, 1997, the Company effected the spin-off of Getty Petroleum
Marketing Inc. ("Marketing") to its stockholders. Stockholders of record of
the Company on March 21, 1997 received a tax-free dividend of one share of
Marketing common stock for each share of common stock of the Company.
Prior to the spin-off, the Company transferred to Marketing the assets
and liabilities of the petroleum marketing business and the New York Mid-
Hudson Valley home heating oil business previously conducted by a subsidiary
of the Company. The Company has retained its fee and leased properties,
including service stations and supply terminals, substantially all of which
are leased or subleased to Marketing on a long-term net basis. The Company
also has retained the Pennsylvania and Maryland home heating oil business.
The consolidated statement of operations of the Company for the nine
months ended October 31, 1997 include the financial results of the Marketing
business under the caption "Equity in earnings of Getty Petroleum Marketing
Inc." for the period from February 1, 1997 to March 21, 1997, amounting to
pre-tax income of $2.9 million ($1.7 million after-tax). The financial
results of the Marketing business for the quarter and nine months ended
October 31, 1996 are included in the consolidated financial results of the
Company for the respective periods and amounted to a pre-tax loss of $5.8
million and $3.6 million, respectively ($3.4 million and $2.1 million after-
tax, respectively).
-4-
<PAGE>
The financial results of the real estate and retained heating oil
businesses for the quarters and nine months ended October 31, 1997 and 1996
are set forth below. The following financial information does not include the
financial results of Marketing and is presented for informational purposes
only and is not necessarily indicative of the financial results that would
have occurred had the real estate and heating oil businesses been operated as
separate, stand-alone entities during certain of such periods, nor are they
necessarily indicative of future results.
<TABLE>
<CAPTION
Quarter ended October 31, 1997 Quarter ended October 31, 1996
------------------------------ ------------------------------
Real Heating Real Heating
Estate Oil Total Estate Oil Total
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from rental property $14,835 $27 $14,862 $14,768 $41 $14,809
Net sales of petroleum products - 5,441 5,441 - 6,082 6,082
Other income 616 13 629 841 24 865
------- ------ ------ ------ ------ -------
15,451 5,481 20,932 15,609 6,147 21,756
------- ------ ------ ------ ------ -------
Cost of sales of petroleum
products (excluding depreciation
and amortization) - 5,185 5,185 - 5,836 5,836
Rental property expenses 3,398 6 3,404 3,343 6 3,349
Environmental and maintenance
expenses (credit) 920 - 920 (714) - (714)
Selling, general and
administrative expenses 2,019 452 2,471 398 440 838
Depreciation and amortization 2,328 138 2,466 2,275 135 2,410
Interest expense 1,209 - 1,209 1,558 - 1,558
Litigation credit - - - (1,783) - (1,783)
------- ------ ------ ------ ------ -------
9,874 5,781 15,655 5,077 6,417 11,494
------- ------ ------ ------ ------ -------
Earnings (loss) before provision
(credit) for income taxes 5,577 (300) 5,277 10,532 (270) 10,262
Provision (credit) for income taxes 2,378 (122) 2,256 4,444 (114) 4,330
------- ------ ------ ------ ------ -------
Net earnings (loss) $3,199 ($178) $3,021 $6,088 ($156) $ 5,932
======= ====== ====== ======= ====== =======
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Nine months ended October 31, 1997 Nine months ended October 31, 1996
--------------------------------- ----------------------------------
Real Heating Real Heating
Estate Oil Total Estate Oil Total
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from rental property $44,659 $81 $44,740 $43,847 $156 $44,003
Net sales of petroleum products - 19,085 19,085 - 21,386 21,386
Other income 2,514 8 2,522 3,281 61 3,342
------- ------ ------ ------ ------ -------
47,173 19,174 66,347 47,128 21,603 68,731
------- ------ ------ ------ ------ -------
Cost of sales of petroleum
products (excluding depreciation
and amortization) - 17,603 17,603 - 19,943 19,943
Rental property expenses 10,271 15 10,286 9,739 22 9,761
Environmental and maintenance
expenses 4,491 - 4,491 6,006 - 6,006
Selling, general and
administrative expenses 8,282 1,419 9,701 2,285 1,401 3,686
Depreciation and amortization 6,876 396 7,272 6,740 380 7,120
Interest expense 3,898 - 3,898 4,912 - 4,912
Change of control charge 2,166 - 2,166 - - -
Litigation charge - - - 5,802 - 5,802
------- ------ ------ ------ ------ -------
35,984 19,433 55,417 35,484 21,746 57,230
------- ------ ------ ------ ------ -------
Earnings (loss) before provision
(credit) for income taxes 11,189 (259) 10,930 11,644 (143) 11,501
Provision (credit) for
income taxes 4,589 (106) 4,483 4,912 (60) 4,852
------- ------ ------ ------ ------ -------
Net earnings (loss) $6,600 ($153) $6,447 $6,732 ($83) $6,649
======= ====== ====== ======= ====== =======
</TABLE>
3. Earnings per share:
Earnings per share is computed by dividing net earnings by the weighted
average number of shares of common stock outstanding during the period.
Common stock equivalents are not included in earnings per share computations
since their effect is immaterial.
-6-
<PAGE>
4. Stockholders' equity:
A summary of the changes in stockholders' equity for the nine months
ended October 31, 1997 is as follows (in thousands):
Treasury
Common Paid-in Accumulated Stock
Stock Capital Deficit at cost Total
- - --------------------------------------------------------------------------------
Balance,
January 31, 1997 $1,358 $120,293 ($7,215) ($13,964) $100,472
Distribution to
Marketing (56,272) (56,272)
Net earnings 8,178 8,178
Cash dividends (1,175) (1,175)
Purchase of
treasury stock (7) (7)
Issuance of
treasury stock (1) 51 50
Stock options 70 11,498 11,568
------ -------- ------ -------- --------
Balance,
October 31, 1997 $1,428 $ 75,518 ($212) ($13,920) $ 62,814
====== ======== ====== ======== ========
5. Legal proceeding:
In May 1996, a federal judge in the U.S. District Court for the Eastern
District of New York entered a judgment in the amount of $8.4 million, plus
interest, in favor of Morrison-Knudsen Company, Inc. against the Company's
former construction company subsidiary, Slattery Associates, Inc., which was
sold in 1989.
The case arose out of a joint venture between Slattery Associates and
Morrison-Knudsen which was established to reconstruct a portion of an
expressway in Philadelphia in 1986. The judgment represents Slattery's share
of joint venture construction costs which the Court held Slattery owed.
Slattery had contended that Morrison-Knudsen had mismanaged the project and
had failed to disclose material facts. Slattery also had contended that
certain costs were improperly charged to the joint venture.
During the quarter ended October 31, 1996, the Company reversed into
income $1.8 million of a previously established reserve as a result of the
settlement of this litigation resulting in a charge of $5.8 million related to
this matter for the nine months ended October 31, 1996.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
- - -------
The accompanying consolidated financial statements include the accounts
of Getty Realty Corp., known prior to March 31, 1997 as Getty Petroleum Corp.,
and its wholly-owned subsidiaries (the "Company").
Spin-off
- - --------
On March 21, 1997, the Company effected the spin-off of its petroleum
marketing business to its stockholders. The Company retained its real estate
business and leases most of its properties on a long-term net basis to the
distributed company, which is named Getty Petroleum Marketing Inc.
("Marketing"). The Company also retained the Pennsylvania and Maryland home
heating oil business. Stockholders of record of the Company on March 21, 1997
received a tax-free dividend of one share of Marketing common stock for each
share of common stock of the Company.
The consolidated statement of operations of the Company for the nine
months ended October 31, 1997 include the financial results of the Marketing
business under the caption "Equity in earnings of Getty Petroleum Marketing
Inc." for the period from February 1, 1997 to March 21, 1997, amounting to
pre-tax income of $2.9 million ($1.7 million after-tax). The financial
results of the Marketing business for the quarter and nine months ended
October 31, 1996 are included in the consolidated financial results of the
Company for the respective periods and amounted to a pre-tax loss of $5.8
million and $3.6 million, respectively ($3.4 million and $2.1 million after-
tax, respectively). For additional information regarding the spin-off, see
Note 2 to the consolidated financial statements.
Results of Operations - Quarter ended October 31, 1997 compared
with quarter ended October 31, 1996
- - -----------------------------------
Revenues from rental property for the quarter ended October 31, 1997
principally represent rental income from Marketing ($14.2 million) with the
remainder from other lessees and sublessees. Revenues from rental property
for the quarter ended October 31, 1996 principally represented rental income
from Marketing's dealers prior to the spin-off.
Net sales for the third fiscal quarter ended October 31, 1997 were $5.4
million, all of which were attributable to the Company's retained heating oil
business (most of which revenues occur in the first and fourth fiscal
quarters), as compared with $214.8 million during the same quarter last year,
which were attributable to both the heating oil business and the Marketing
business. After excluding $208.7 million of net sales of the Marketing
business for the quarter ended October 31, 1996, the prior year's quarterly
net sales for the retained heating oil business amounted to $6.1 million. The
decrease in net sales of $.7 million was principally due to lower sales prices
in comparison to the quarter ended October 31, 1996. Gross profit for the
retained heating oil business was $.3 and $.2 million for quarters ended
October 31, 1997 and 1996, respectively.
-8-
<PAGE>
Other income was $.6 million for the three months ended October 31, 1997
as compared with $.9 million for the quarter ended October 31, 1996. The
decrease in other income of $.2 million, after excluding $.1 million of other
income of Marketing for the quarter ended October 31, 1996, was principally
due to $.2 million of lower gains on asset sales and $.2 million of lower
investment income, offset by $.3 million of expenses incurred in the quarter
ended October 31, 1996 related to the spin-off.
Rental property expenses, which are comprised of rent expense and real
estate taxes, were $3.4 million for the quarter ended October 31, 1997 as
compared with $5.5 million for the quarter ended October 31, 1996. After
excluding $2.2 million of real estate taxes payable by Marketing during the
quarter ended October 31, 1996, rental property expenses increased $.1 million
over the prior year's comparable quarter.
Environmental and maintenance expenses for the quarter ended October 31,
1997 were $.9 million as compared with $1.2 million for the quarter ended
October 31, 1996. After excluding $1.9 million of Marketing expenses for the
quarter ended October 31, 1996 (principally maintenance), the increase in
environmental and maintenance expense during the current quarterly period
amounted to $1.6 million. The current period charge is principally due to a
revision to the Company's estimate of future remediation costs. The prior
period credit of $.7 million (after excluding Marketing expenses) was due to
greater than anticipated recoveries from state underground storage tank funds
during the prior year quarter. As of October 31, 1997, the Company had an
accrual of $38.7 million representing management's best estimate for future
environmental remediation costs and had recorded $14.6 million as management's
best estimate for recoveries from state underground storage tank remediation
funds. Such accruals are reviewed on a regular basis and any revisions
thereto will be reflected in the Company's financial statements as they become
known.
Selling, general and administrative expenses for the quarter ended
October 31, 1997 amounted to $2.5 million as compared with $5.9 million for
the quarter ended October 31, 1996. After excluding $5.1 million of selling,
general and administrative expenses of Marketing for the quarter ended October
31, 1996, selling, general and administrative expenses increased by $1.6
million primarily due to $.9 million of expense relating to stock options
resulting from appreciation of the Company's stock price.
Depreciation and amortization was $2.5 million for the quarter ended
October 31, 1997 as compared with $5.9 million for the quarter ended October
31, 1996. After excluding $3.5 million of depreciation and amortization of
Marketing for the quarter ended October 31, 1996, depreciation and
amortization increased by $.1 million over the prior quarterly period as a
result of capital expenditures and property acquisitions.
Interest expense for the three months ended October 31, 1997 amounted to
$1.2 million as compared with $1.7 million for the quarter ended October 31,
1996. After excluding $.1 million of interest expense of Marketing for the
quarter ended October 31, 1996, the decrease in interest expense of $.4
million was principally due to reduced capitalized lease obligations and debt
outstanding during the quarter ended October 31, 1997.
-9-
During the quarter ended October 31, 1996, the Company reversed into
income $1.8 million of a previously established litigation reserve as a result
of the settlement of a judgment against a former construction company
subsidiary, which the Company sold in 1989.
Results of Operations - Nine months ended October 31, 1997 compared
with nine months ended October 31, 1996
- - ---------------------------------------
Revenues from rental property for the nine months ended October 31, 1997
principally represent rental income from Marketing ($42.8 million) with the
remainder from other lessees and sublessees. Revenues from rental property
for the nine months ended October 31, 1996 principally represented rental
income from Marketing's dealers prior to the spin-off.
Net sales for the nine months ended October 31, 1997 were $19.1 million,
all of which were attributable to the Company's retained heating oil business,
as compared with $638.6 million during the same period last year, which were
attributable to both the heating oil business and the Marketing business.
After excluding $617.2 million of net sales of the Marketing business for the
nine months ended October 31, 1996, the prior year's net sales for the
retained heating oil business amounted to $21.4 million. The decrease in net
sales of $2.3 million during the nine months ended October 31, 1997 was due to
a decrease in gallonage sold and lower sales prices in comparison to the nine
months ended October 31, 1996. Gross profit for the retained heating oil
business was $1.5 million and $1.4 million for the nine month periods ended
October 31, 1997 and 1996, respectively. Higher margins were partially offset
by lower gallonage sales during the current period.
Other income was $2.5 million for the nine months ended October 31, 1997
as compared with $3.5 million for the nine months ended October 31, 1996.
After excluding $.2 million of other income of Marketing for the nine months
ended October 31, 1996, other income amounted to $3.3 million. The decrease
in other income of $.8 million was principally due to $.7 million of lower
gains on asset sales and $.6 million of lower investment income, offset by $.6
million of expenses incurred in the nine months ended October 31, 1996 related
to the spin-off.
Rental property expenses, which are comprised of rent expense and real
estate taxes, were $10.3 million for the nine months ended October 31, 1997 as
compared with $16.2 million for the nine months ended October 31, 1996. After
excluding $6.4 million of real estate taxes payable by Marketing during the
nine months ended October 31, 1996, rental property expenses increased $.5
million over the prior year's comparable period.
Environmental and maintenance expenses for the nine months ended October
31, 1997 were $4.5 million as compared with $11.8 million for the nine months
ended October 31, 1996. After excluding $5.8 million of Marketing expenses for
the nine months ended October 31, 1996 (principally maintenance), the decrease
in environmental and maintenance expense during the current nine month period
amounted to $1.5 million. The current nine month period charge is principally
due to a revision to the Company's estimate of future remediation costs.
-10-
<PAGE>
Selling, general and administrative expenses for the nine months ended
October 31, 1997 amounted to $9.7 million as compared with $19.1 million for
the nine months ended October 31, 1996. After excluding $15.4 million of
selling, general and administrative expenses of Marketing for the nine months
ended October 31, 1996, selling, general and administrative expenses increased
by $6.0 million primarily due to $4.6 million of expense relating to stock
options resulting from appreciation of the Company's stock price.
Depreciation and amortization was $7.3 million for the nine months ended
October 31, 1997 as compared with $17.3 million for the nine months ended
October 31, 1996. After excluding $10.2 million of depreciation and
amortization of Marketing for the nine months ended October 31, 1996,
depreciation and amortization increased by $.2 million over the prior period
as a result of capital expenditures and property acquisitions.
Interest expense for the nine months ended October 31, 1997 amounted to
$3.9 million as compared with $5.3 million for the nine months ended October
31, 1996. After excluding $.4 million of interest expense of Marketing for
the nine months ended October 31, 1996, the decrease in interest expense of
$1.0 million was principally due to reduced capitalized lease obligations and
debt outstanding during the nine months ended October 31, 1997.
The change of control charge for the nine months ended October 31, 1997
of $2.2 million related to certain "change of control" agreements in
connection with the spin-off.
The litigation charge of $5.8 million during the nine months ended
October 31, 1996 related to a judgment against a former construction company
subsidiary which the Company sold in 1989.
Liquidity and Capital Resources
- - -------------------------------
The Company's principal sources of liquidity are cash flows from
operations and its short-term uncommitted lines of credit with two banks.
Management believes that cash requirements for operations, capital
expenditures and debt service can be met by cash flows from operations,
available cash and equivalents and its credit lines. As of October 31, 1997,
such lines of credit amounted to $25 million, of which $7.6 million were
utilized in connection with outstanding letters of credit. Borrowings under
such lines of credit are unsecured and bear interest at the prime rate or, at
the Company's option, a rate tied to the bank's cost of funds or LIBOR plus
1.0% or 1.1% Although it is expected that the existing sources of liquidity
will be sufficient to meet its expected operating and debt service
requirements, the Company may be required to obtain additional sources of
capital in the future to fund certain of its capital expenditures and property
acquisitions, which capital sources it believes are available.
During the nine months ended October 31, 1997 and 1996, respectively, the
Company paid quarterly cash dividends in the amount of $.03 per share for each
of the three quarters.
-11-
<PAGE>
The Company's capital expenditures for the nine months ended October 31,
1997 amounted to $8.2 million, which included $5.5 million for the replacement
of underground storage tanks at gasoline stations and $2.1 million for
property acquisitions. Capital expenditures with respect to tank replacements
required to meet the December 22, 1998 federal environmental standards and
certain environmental liabilities and obligations continue to be the
responsibility of the Company after the spin-off. As of October 31, 1997, the
Company estimates that in connection therewith, it will expend approximately
$15.9 million in capital expenditures and $24.1 million, net of estimated
recoveries, for environmental liabilities and obligations.
-12-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The U. S. Environmental Protection Agency has issued a Notice of
Violation to a Company subsidiary for selling gasoline to two Maryland
locations, which gasoline exceeded the permissible level of Reid Vapor
Pressure under Clean Air Act Regulations. The EPA has proposed a penalty of
$136,500, the amount of which the Company is contesting.
During the quarter ended October 31, 1997, the Company and its
subsidiaries settled several claims arising out of the Keystone Superfund
litigation (U.S. District Court, Middle District of Pennsylvania) for the
aggregate amount of approximately $30,000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Designation of Exhibit
in this Quarterly Report
on Form 10-Q Description of Exhibit
------------ ------------------------
27 Financial Data Schedule
Reports on Form 8-K:
None
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.
GETTY REALTY CORP.
--------------------
(Registrant)
Dated: December 11, 1997 BY: /s/ John J. Fitteron
-------------------------------
(Signature)
JOHN J. FITTERON
Senior Vice President, Treasurer
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Dated: December 11, 1997 BY: /s/ Leo Liebowitz
-------------------------------
(Signature)
LEO LIEBOWITZ
President (Chief Executive
Officer)
-13-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF GETTY REALTY CORP. AND SUBSIDIARIES AS OF
OCTOBER 31, 1997 AND FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 9,945
<SECURITIES> 0
<RECEIVABLES> 1,999
<ALLOWANCES> 237
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 205,467
<DEPRECIATION> 107,140
<TOTAL-ASSETS> 156,308
<CURRENT-LIABILITIES> 0
<BONDS> 33,389
<COMMON> 1,428
0
0
<OTHER-SE> 61,386
<TOTAL-LIABILITY-AND-EQUITY> 156,308
<SALES> 19,085
<TOTAL-REVENUES> 66,347
<CGS> 17,603
<TOTAL-COSTS> 39,652
<OTHER-EXPENSES> 2,166
<LOSS-PROVISION> 48
<INTEREST-EXPENSE> 3,898
<INCOME-PRETAX> 13,861
<INCOME-TAX> 5,683
<INCOME-CONTINUING> 8,178
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,178
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
