<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996
/ / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
-------------- ----------------
Commission file number 1-9524
BURNHAM PACIFIC PROPERTIES, INC.
----------------------------------
(Exact name of Registrant as specified in its Charter)
CALIFORNIA 33-0204162
- ------------------------------------------- -------------------------------
(State of other jurisdiction of incorporation) (IRS Employer Identification No.)
610 WEST ASH STREET, SAN DIEGO, CALIFORNIA 92101
- ------------------------------------------ --------------------
(Address of principal executive offices) (Zip Code)
(619) 652-4700
-----------------------
Registrant's telephone number, including area code
NA
---------------------------------------
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 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 _____
Number of shares of the Registrant's common stock outstanding at August 13,
1996: 17,084,452
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
ASSETS JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
Real Estate $365,985 $367,088
Less Accumulated Depreciation (53,694) (54,388)
-------- --------
Real Estate-Net 312,291 312,700
Cash and Cash Equivalents 644 1,543
Receivables-Net 5,923 5,647
Other Assets 7,542 7,880
-------- --------
Total $326,400 $327,770
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable and Other Liabilities 1,760 3,458
Accrued Interest on Convertible Debentures 943 943
Tenant Security Deposits 1,017 969
Notes Payable 91,230 92,173
Convertible Debentures 25,700 25,700
Line of Credit Advances 28,682 24,933
-------- --------
Total Liabilities 149,332 148,176
-------- --------
Minority Interest 434 434
-------- --------
Stockholders' Equity:
Preferred Stock, 5,000,000 Shares
Authorized; No Shares Issued or Outstanding
Common Stock, No Par Value,
40,000,000 Shares Authorized;
17,084,452 and 17,081,670 Shares
Outstanding at June 30, 1996, and
December 31, 1995, Respectively 262,151 262,130
Notes Receivable-Stock Purchase Plan (197)
Dividends Paid in Excess of Net Income (85,517) (82,773)
-------- --------
Total Stockholders' Equity 176,634 179,160
-------- --------
Total $326,400 $327,770
-------- --------
-------- --------
See the Accompanying Notes
2
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
REVENUES THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Rents $12,058 $12,298 $24,192 $24,750
Interest 109 141 220 241
---------- ---------- ---------- ----------
Total Revenues 12,167 12,439 24,412 24,991
---------- ---------- ---------- ----------
COSTS AND EXPENSES
Interest 2,821 2,997 5,689 5,935
Rental Operating 3,202 2,744 6,326 5,672
Provision for Bad Debt 108 123 210 140
General and Administrative 600 536 1,087 1,033
Depreciation and Amortization 2,650 3,236 5,270 6,247
---------- ---------- ---------- ----------
Total Costs and Expenses 9,381 9,636 18,582 19,027
---------- ---------- ---------- ----------
Income From Operations Before
Gain on Sales of Real Estate and
Distribution to Minority Interest
Holders 2,786 2,803 5,830 5,964
Gain on Sales of Real Estate 9 1,428 9 1,428
Distribution to Minority Interest
Holders (10) (10)
---------- ---------- ---------- ----------
Net Income $ 2,785 $ 4,231 $ 5,829 $7,392
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Income Per Share $ 0.16 $ 0.25 $ 0.34 $ 0.44
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Dividends Paid Per Share $ 0.25 $ 0.36 $ 0.50 $ 0.72
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted Average Number of Shares 17,081,518 16,996,271 17,081,512 16,951,533
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See the Accompanying Notes
3
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
June 30, June 30,
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $5,829 $7,392
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Depreciation and Amortization 5,270 6,247
Provision for Bad Debt 210 140
Gain on Sales of Real Estate (9) (1428)
Changes in Other Assets and Liabilities:
Receivables and Other Assets (746) (1,401)
Accounts Payable and Other (1,698) (831)
Tenant Security Deposits 48 (19)
------- -------
Net Cash Provided By Operating Activities 8,904 10,100
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for Acquisitions of Property and
Capital Improvements (13,064) (3,807)
Proceeds from Sale of Property 8,801 2,619
Principal Payments on Notes Receivable 226
------- -------
Net Cash Used For Investing Activities (4,263) (962)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings Under Line of Credit Agreements 16,150 15,525
Repayments Under Line of Credit Agreements (12,401) (12,682)
Principal Payments of Notes Payable (943) (858)
Repurchase of Common Stock (1,255)
Payment of Notes Receivable-Stock Purchase Plan 197 64
Dividends Paid (8,543) (12,271)
Dividend Reinvestment 1,376
------- -------
Net Cash Used for Financing Activities (5,540) (10,101)
------- -------
Net Decrease in Cash and Cash Equivalents (899) (963)
Cash and Cash Equivalents at Beginning Of Period 1,543 1,664
------- -------
Cash and Cash Equivalents at End Of Period $ 644 $ 701
------- -------
------- -------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash Paid During Six Months For Interest $ 6,121 $ 5,985
------- -------
------- -------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Notes Receivable-Stock Purchase Plan $ -0- $ 2,524
------- -------
------- -------
See the Accompanying Notes
4
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, DECEMBER 31, 1995, AND JUNE 30, 1995
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are unaudited but, in the opinion
of management, reflect all normal recurring adjustments necessary for a
fair presentation of operating results. These financial statements
should be read in conjunction with the audited financial statements of
Burnham Pacific Properties, Inc. for the year ended December 31, 1995.
Certain of the 1995 amounts have been reclassified to conform to 1996
presentation.
Dividends Per Share - Dividends of 25 cents per share were paid on June
28, 1996 to shareholders of record on June 21, 1996.
2. NET INCOME PER SHARE
Net income per share is computed by dividing net income for the
respective periods by the weighted average number of shares outstanding
during the applicable period.
3. REGISTRATION STATEMENT
During September 1993, the Company filed with the Securities and
Exchange Commission a $200 million shelf registration statement on Form
S-3. As of June 30, 1996, no such issuances have occurred.
4. REAL ESTATE
Real Estate is summarized as follows (in thousands):
June 30, 1996 December 31, 1995
------------- -----------------
Retail Centers $261,635 $261,045
Office/Industrial Buildings 88,160 102,149
Retail Centers Under Development 14,214 2,691
Other 1,976 1,203
-------- --------
Total Real Estate 365,985 367,088
Accumulated Depreciation (53,694) (54,388)
-------- --------
Real Estate-Net $312,291 $312,700
-------- --------
-------- --------
On June 27, 1996, the Company sold the McDonnell Douglas Building.
Proceeds from the disposition totaled approximately $9,300,000,
resulting in a gain of approximately $9,000. Such proceeds were used to
reduce borrowings under the Company's credit facilities.
5
<PAGE>
5. SUBSEQUENT EVENTS
On July 11, 1996, the Company sold Highlands Plaza and the Fireman's
Fund Building. Net proceeds from the dispositions total approximately
$22,700,000, resulting in a gain of approximately $300,000. Such
proceeds were used to reduce borrowings under the Company's credit
facilities. The Fireman's Fund Building served as a portion of the
collateral for the Company's secured credit facility. With the sale of
the Fireman's Fund Building the borrowing capacity under the Company's
credit facilities was reduced from $50,000,000 to approximately
$42,700,000.
On July 26, 1996, the Company made an initial contribution of
approximately $20,125,000 into a newly formed limited liability company
("LLC"). Funds were provided by borrowings under the Company's credit
facilities. The LLC's purpose is to acquire, own, operate, renovate,
lease, develop, finance and invest in the Ladera Shopping Center in Los
Angeles, California (the "Center"). With the Company's initial
contribution proceeds, the LLC purchased the Center. The Center is a
184,684 square foot, market-dominant community shopping center on 15
acres of land and on the acquisition date was 93% occupied.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
MATERIAL CHANGES IN FINANCIAL CONDITION
June 30, 1996 compared to December 31, 1995:
The Corporation experienced no material changes in financial condition during
the six months ended June 30, 1996.
On January 31, 1996, the Company exercised its option to purchase the land for
the development of its Richmond Hilltop project for approximately $8,600,000.
On June 27, 1996, the Company sold the McDonnell Douglas Building, which had a
net book value at the time of sale of $9,289,000.
As of June 30, 1996, and December 31, 1995 approximately $3,217,000 and
$3,387,000, respectively, of straight-lined rent is included in other assets.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 and 1995:
During the six months ended June 30, 1996, net income decreased $1,563,000 or
21%, to $5,829,000 ($0.34 per share) compared to $7,392,000 ($0.44 per share)
for the same period in 1995. Included in 1995 net income was a $1,428,000 gain
on the sale of A-Storage Place. If the gain was excluded, net income in 1996
would have decreased $135,000 or 2% as compared to the same period in 1995. The
principal reasons for this decrease are discussed in the following paragraphs.
6
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Revenues decreased $579,000 to $24,412,000 in 1996 from $24,991,000 in 1995.
This decrease is primarily due to the sales of A-Storage Place and Beverly
Garland's Holiday Inn Hotel during 1995, and from lower rents received on the
Anacomp Building following the renegotiation of the Anacomp lease during the
first quarter of 1996. These decreases were partially offset by the fourth
quarter 1995 acquisition of the Richmond Shopping Center.
Interest expense decreased $246,000 from $5,935,000 in 1995 to $5,689,000 in
1996. The decrease is primarily attributable to a lower short-term interest
rate environment in 1996 and slightly lower average outstandings under the
Company's line of credit.
Rental operating expenses increased by $654,000 to $6,326,000 in 1996 from
$5,672,000 in 1995, reflecting generally higher property level costs, the
acquisition of the Richmond Shopping Center, the internalization of property
management, and the renegotiation of the Anacomp lease.
The provision for bad debt increased $70,000 to $210,000 in 1996 from $140,000
in 1995. This increase is the result of credit problems in 1996 with two
tenants.
General and administrative expenses increased $54,000 to $1,087,000 in 1996
compared to $1,033,000 in 1995, reflecting the opening of offices in Los Angeles
and San Francisco.
Depreciation and amortization expense decreased $977,000 from $6,247,000 in 1995
to $5,270,000 in 1996. The decrease reflects discontinued depreciation on the
real estate held for disposition and the sales of A-Storage Place and the
Beverly Garland's Holiday Inn during 1995.
The Company considers Funds From Operations (FFO) to be a relevant supplemental
measure of the performance of an equity REIT since such measure does not
recognize depreciation and certain amortization expenses as operating expenses.
Management believes that reductions for these charges are not meaningful in
evaluating income-producing real estate, which historically has not depreciated.
FFO does not represent cash generated from operating activities in accordance
with generally accepted accounting principles and is not necessarily indicative
of cash available to fund cash needs and should not be considered as an
alternative to net income as an indicator of the Company's operating performance
or as an alternative to cash flow as a measure of liquidity.
For the first six months FFO decreased $1,039,000 from $11,824,000 to
$10,784,000. The principal reasons for this decrease include the sales of A-
Storage Place and Beverly Garland's Holiday Inn, the renegotiation of the
Anacomp lease, and the increases in rental operating expenses, the provision for
bad debt and general and administrative expenses. These decreases were
partially offset by the decrease in interest expense and the purchase of the
Richmond Shopping Center.
7
<PAGE>
The calculation of FFO for the six month periods ended June 30, 1996 and 1995 is
as follows (in thousands):
1996 1995
-------- --------
Net Income $ 5,829 $ 7,392
Adjustments:
Gain on Sales of Real Estate (9) (1,428)
Depreciation of Real Estate
and Tenant Improvements 4,607 5,626
Amortization of Leasing Costs 357 234
------- -------
Funds from Operations $10,784 $11,824
------- -------
------- -------
Three Months Ended June 30, 1996 and 1995:
During the three months ended June 30, 1996, net income decreased $1,446,000 or
34%, to $2,785,000 ($0.16 per share) compared to $4,231,000 ($0.25 per share)
for the same period in 1995. Included in 1995 net income was a $1,428,000 gain
on the sale of A-Storage Place. If the gain was excluded, net income in 1996
would have decreased $18,000 or less than 1% as compared to the same period in
1995. The principal reasons for this decrease are discussed in the following
paragraphs.
Revenues decreased $272,000 to $12,167,000 in 1996 from $12,439,000 in 1995.
This decrease is primarily due to the sales of A-Storage Place and Beverly
Garland's Holiday Inn Hotel during 1995, and from lower rents received on the
Anacomp Building following the renegotiation of the Anacomp lease during the
first quarter of 1996. These decreases were partially offset by the fourth
quarter 1995 acquisition of the Richmond Shopping Center.
Interest expense decreased $176,000 from $2,997,000 in 1995 to $2,821,000 in
1996. The decrease is primarily attributable to a lower short-term interest
rate environment in 1996 and slightly lower average outstandings under the
Company's line of credit.
Rental operating expenses increased by $458,000 to $3,202,000 in 1996 from
$2,744,000 in 1995, reflecting generally higher property level costs, the
acquisition of the Richmond Shopping Center, the internalization of property
management and the renegotiation of the Anacomp lease.
The provision for bad debt decreased $15,000 from $123,000 in 1995 to $108,000
in 1996. This decrease is the result of credit problems in 1995 with one
tenant.
General and administrative expenses increased $64,000 to $600,000 in 1996
compared to $536,000 in 1995, reflecting the opening of offices in Los Angeles
and San Francisco.
8
<PAGE>
Depreciation and amortization expense decreased $586,000 from $3,236,000 in 1995
to $2,650,000 in 1996. The decrease reflects discontinued depreciation on the
real estate held for disposition, and the sales of A-Storage Place and the
Beverly Garland Holiday Inn during 1995.
FFO decreased $527,000 from $5,818,000 in 1995 to $5,291,000 in 1996. The
principal reasons for this decrease include the sales of A-Storage Place and
Beverly Garland's Holiday Inn, the renegotiation of the Anacomp lease, and the
increases in rental operating expenses, the provision for bad debt, and general
and administrative expenses. These decreases were partially offset by the
decrease in interest expense and the purchase of Richmond Shopping Center.
The calculation of FFO for the three month periods ended June 30, 1996 and 1995
is as follows (in thousands):
1996 1995
-------- --------
Net Income $2,785 $4,231
Adjustments:
Gain on Sales of Real Estate (9) (1,428)
Depreciation of Real Estate
and Tenant Improvements 2,336 2,870
Amortization of Leasing Costs 179 145
------ ------
Funds from Operations $5,291 $5,818
------ ------
------ ------
LIQUIDITY
The Company anticipates that cash flow from operating activities will continue
to provide adequate capital for all principal payments on notes payable,
recurring tenant improvements, and dividend payments in accordance with REIT
requirements and that cash on hand, available borrowings under credit
facilities, proceeds from sales of non-strategic assets, and the use of project
financing, as well as other debt and equity alternatives, will be adequate to
provide the necessary capital to achieve growth.
CAPITAL RESOURCES
The Company has secured and unsecured credit facilities to provide additional
capacity. Borrowings under the facilities bear interest at rates of IBOR (the
bank's international reference rate) plus 1.75% or prime per annum and IBOR plus
2.00% or prime per annum, respectively. As of June 30, 1996, approximately
$21,318,000 was available to be drawn under these facilities. On July 11, 1996,
the Company sold Highlands Plaza and the Fireman's Fund Building. The total
capacity of the Company's facilities was reduced from $50,000,000 to
approximately $42,700,000 with the sale of the Fireman's Fund Building which
served as a portion of the collateral for the secured credit facility. Proceeds
from the sale of the Fireman's Fund Building and Highlands Plaza (approximately
$22,700,000), were used to reduce borrowings under the Company's credit
facilities. These facilities in their present form, are scheduled to mature on
June 1, 1997. On July 26, 1996, the Company made an initial contribution of
approximately $20,125,000 into a newly formed limited liability
9
<PAGE>
company ("LLC"). Funds were provided by borrowings under the Company's credit
facilities. The LLC's purpose is to acquire, own, operate, renovate, lease,
develop, finance and invest in the Ladera Shopping Center in Los Angeles,
California (the "Center"). With the Company's initial contribution proceeds,
the LLC purchased the Center. The Center is a 184,684 square foot,
market-dominant community shopping center on 15 acres of land and on the
acquisition date was 93% occupied.
At June 30, 1996, the Company's capitalization consisted of $145,612,000 of
debt and $198,607,000 of market equity (market equity is defined as shares
outstanding multiplied by the closing price of the common shares on the New York
Stock Exchange at June 30, 1996 of $11.63) resulting in a debt to total market
capitalization rate of .42 to 1. At June 30, 1996, the Company's total debt
consisted of $82,861,000 of fixed rate debt, including $25,700,000 of
convertible debentures and $62,751,000 of variable rate debt. The average rate
of interest on the fixed and variable rate debt was 8.8% and 7.66%,
respectively, at June 30, 1996.
It is management's intention that the Company have access to the capital
resources necessary to expand and develop its business. Accordingly, the
Company may seek to obtain funds through additional equity offerings or debt
financing in a manner consistent with its intention to operate with an
acceptable debt capitalization policy. The Company has on file with the
Securities and Exchange Commission a $200 million shelf registration statement
on Form S-3. This registration statement was filed for the purpose of issuing
either common stock or debentures for the purpose of repaying outstanding debt,
potential future acquisitions of commercial properties and for general corporate
purposes. As of June 30, 1996, no such issuance has occurred.
FORWARD LOOKING STATEMENTS
The preceding comments in this Form 10-Q contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference include those discussed in
the section entitled "Future Effect of Certain Events" in Item 7 of the
Company's Form 10-K for the year ended December 31, 1995.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
The Corporation was not a party to any material legal proceedings during the
period covered by this report or subsequently.
ITEM 2. CHANGES IN SECURITIES:
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
Not Applicable.
10
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
On May 17, 1996, the Company held its regular Annual Meeting of Shareholders.
Proxies for such meeting were solicited pursuant to Regulation 14 under the Act.
At such meeting, two matters were presented for vote. The matters were the
election of nine directors and the approval of amendments to the Company's stock
option plan. There was no solicitation in opposition to the nominated Directors
and all such directors were elected for a one-year term. Of 14,279,799 shares
voting, 13,930,804 voted in favor of the election of the directors and 348,995
voted against. Of 14,279,799 shares voting, 13,128,036 voted in favor of the
amendment to the Company's stock option plan, 863,494 voted against and 288,269
abstained.
ITEM 5. OTHER INFORMATION:
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
Not Applicable
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.
BURNHAM PACIFIC PROPERTIES, INC.
Date: //8/14/96// By://J. David Martin//
--------------------------- ----------------------------------
J. David Martin, Chief Executive
Officer
Date: //8/14/96// By://Daniel B. Platt//
--------------------------- ----------------------------------
Daniel B. Platt, Chief Financial
Officer
11
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
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<PERIOD-END> JUN-30-1996
<CASH> 644
<SECURITIES> 0
<RECEIVABLES> 7,550
<ALLOWANCES> 1,627
<INVENTORY> 0
<CURRENT-ASSETS> 20,032
<PP&E> 365,985
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<BONDS> 145,612
262,151
0
<COMMON> 434
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<SALES> 24,192
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