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 September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 1-10641
MILESTONE PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0158204
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
150 E. Palmetto Park Rd. 4th Floor, Boca Raton, FL 33432
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 394 - 9533
--------------------------
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
As of November 9, 2000, 4,943,633 shares of the Registrant's Common
Stock, par value $.01 per share, were outstanding and 16,423 shares of the
Registrant's $.78 Convertible Series A Preferred Stock were outstanding.
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2000 (Unaudited) and December 31, 1999
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 8,384,435 $ 8,032,257
Restricted cash 222,000 222,000
Restricted cash for settlement 1,521,111 1,614,156
Loans receivable 1,311,036 1,370,471
Accounts receivable 530,862 567,112
Accrued interest receivable 1,521,329 2,694,289
Due from related party 803,004 762,102
Prepaid expenses and other 809,818 723,397
Deposits to purchase land 0 700,000
----------- --------------
Total current assets 15,103,595 16,685,784
Property, improvements and equipment, net 24,455,508 24,884,220
Wraparound notes, net 11,911,263 18,641,853
Deferred income tax asset, net 1,344,072 2,293,167
Management contract rights, net 113,884 117,875
Debt financing costs, net 579,600 655,393
------------ ---------------
Total assets $ 53,507,922 $ 63,278,292
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Accounts payable and accrued expenses $ 1,137,705 $ 2,547,866
Accrued settlement payable 1,521,111 1,614,156
Accrued interest payable 139,183 148,173
Master Lease payable 1,642,772 3,916,308
Current portion of mortgages and notes payable 1,159,744 4,203,029
Income taxes payable 3,405 20,000
-------------- ----------------
Total current liabilities 5,603,920 12,449,532
Mortgages and notes payable 29,948,496 33,996,162
------------ ------------
Total liabilities 35,552,416 46,445,694
----------- ------------
COMMITMENTS AND CONTINGENCIES
Stockholders' equity:
Common stock ($.01 par value, 10,000,000 shares
authorized, 4,943,633 shares issued and outstanding,
655,091 shares in treasury, at September 30, 2000 and
December 31, 1999) 49,436 49,436
Preferred stock (Series A $.01 par value, $10 liquidation
preference, 1,000,000 shares authorized,
16,423 shares issued and outstanding at
September 30, 2000 and December 31, 1999) 164 164
Additional paid in surplus 45,340,638 45,340,638
Accumulated deficit (24,180,689) (25,303,597)
Shares held in treasury - at cost (3,254,043) (3,254,043)
---------------- ---------------
Total stockholders' equity 17,955,506 16,832,598
----------- --------------
Total liabilities and stockholders' equity $ 53,507,922 $ 63,278,292
============== ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
1
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
(Unaudited)
For the Three Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
REVENUES
<S> <C> <C>
Rent $ 1,261,814 $ 1,815,324
Interest income 748,537 1,172,416
Revenue from management company operations 189,487 168,465
Tenant reimbursements 276,925 214,761
Percentage rent 15,059 84,041
Gain on sale of real estate and real estate related assets 0 1,488,523
---------------- ---------------
Total revenues 2,491,822 4,943,530
---------- ---------------
EXPENSES
Master Lease expense 547,588 1,549,217
Interest expense 637,827 914,896
Depreciation and amortization 199,795 193,793
Salaries, general and administrative 622,413 1,219,811
Property expenses 475,895 474,799
Expenses for management company operations 225,947 171,242
Professional fees 52,058 127,127
----------- --------------
Total expenses 2,761,523 4,650,885
---------- ------------
(Loss) income before income taxes and minority interest (269,701) 292,645
Provision for income taxes 49,202 964,986
------------ --------------
Net loss before minority interest (318,903) (672,341)
Minority interest in net loss of consolidated subsidiaries 1,969 0
-------------- -----------------
Net loss attributable to common stockholders $ (316,934) $ ( 672,341)
============ ==============
Loss per common share, basic and diluted $ (0.07) $ (0.16)
=============== ================
Weighted average common shares outstanding, basic and diluted 4,288,542 4,250,992
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
(Unaudited)
For the Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
REVENUES
<S> <C> <C>
Rent $ 3,827,615 $ 5,804,790
Interest income 2,263,853 3,913,787
Revenue from management company operations 521,735 538,186
Tenant reimbursements 834,205 750,211
Percentage rent 142,782 262,487
Gain on sale of real estate and real estate related assets 3,557,670 2,762,316
-------------- ---------------
Total revenues 11,147,860 14,031,777
------------- --------------
EXPENSES
Master Lease expense 1,642,764 5,172,613
Interest expense 1,972,460 2,904,141
Depreciation and amortization 578,007 576,714
Salaries, general and administrative 1,788,398 2,654,853
Property expenses 1,368,808 1,417,163
Expired extensions to land purchase contracts 748,799 0
Expenses for management company operations 658,517 615,641
Professional fees 271,525 469,299
-------------- --------------
Total expenses 9,029,278 13,810,424
------------- -----------
Income before income taxes and minority interest 2,118,582 221,353
Provision for income taxes 1,015,703 1,165,236
-------------- -------------
Net income (loss) before minority interest 1,102,879 (943,883)
Minority interest in net loss of consolidated subsidiaries 20,029 0
--------------- ------------------
Net income (loss) attributable to common stockholders $ 1,122,908 $ ( 943,883)
============ =============
Income (loss) per common share, basic $ 0.26 $ (0.22)
================ ================
Weighted average common shares outstanding, basic 4,288,542 4,250,992
============ ===========
Income (loss) per common share, diluted $ .26 $ (0.22)
================= ================
Weighted average common shares outstanding, diluted 4,360,589
============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Nine Months Ended September 30, 2000
<TABLE>
<CAPTION>
Common Stock Preferred Stock Treasury Stock
Shares Cost Shares Cost Shares Cost
=================================================== =========== =========== =============== =========== =========== ==============
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 4,943,633 $ 49,436 16,423 $ 164 (655,091) $ (3,254,043)
Net income for the nine months ended
September 30, 2000
---------- ----------- --------------- ----------- ----------- --------------
Balance, September 30, 2000 4,943,633 $ 49,436 16,423 $ 164 (655,091) $ (3,254,043)
=========== =========== =============== =========== =========== ==============
Additional
paid in Accumulated Stockholders'
surplus deficit equity
=================================================== ============== ================== =================
<S> <C> <C> <C>
Balance, January 1, 2000 $ 45,340,638 $ (25,303,597) $ 16,832,598
Net income for the nine months ended
September 30, 2000 1,122,908 1,122,908
-------------- ------------------ -----------------
Balance, September 30, 2000 $ 45,340,638 $ (24,180,689) $ 17,955,506
============== ================== =================
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
4
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income ( loss) $ 1,122,908 $ (943,883)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 578,007 576,714
Deferred income tax 949,095 1,150,525
Gain on sale of real estate related assets (3,557,670) (2,721,750)
Changes in operating assets and liabilities
Decrease in accounts receivable 36,250 137,579
Increase in due from related party (40,902) (135,360)
Decrease in accrued interest receivable 1,172,960 2,225,488
Increase in prepaid expenses and other (86,421) (57,886)
Decrease in deposits to purchase land 700,000 0
Decrease in accounts payable and accrued expenses (1,410,161) (1,118,979)
(Decrease) increase in accrued interest payable (8,990) 85,911
Decrease in Master Lease payable (2,273,536) (4,296,107)
Decrease in accrued settlement payable (93,045) (7,298,643)
Decrease in income taxes payable (16,595) (59,069)
-------------- ---------------
Net cash used in operating activities (2,928,100) (12,455,460)
------------- ------------
CASH FLOW FROM INVESTING ACTIVITIES
Principal repayments on loans receivable 59,435 54,921
Principal repayments on wraparound notes 2,056,721 3,782,763
Investment in affiliate 0 (708,093)
Purchase of leasehold improvements (187,966) (342,532)
Proceeds from realization of real estate related assets, net 5,466,975 8,742,017
Proceeds from redemption of investments in preferred stock 0 445,500
------------------ --------------
Net cash provided by investing activities 7,395,165 11,974,576
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from mortgages and notes payable 0 1,750,000
Principal payments on mortgages and notes payable (4,207,932) (5,275,386)
Decrease (increase) in restricted cash for settlement 93,045 (1,650,393)
--------------- ---------------
Net cash used in financing activities (4,114,887) (5,175,779)
-------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 352,178 (5,656,663)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,032,257 11,826,301
--------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,384,435 $ 6,169,638
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 1,981,449 $ 4,314,309
=============== ================
Cash paid during the period for income taxes $ 42,477 $ 59,069
================= ==================
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
AND INVESTING ACTIVITIES
On February 25, 2000, the Company's interest in a Wraparound Note and Wraparound
Mortgage encumbering a shopping center in Quincy, Illinois was terminated. The
transaction resulted in the termination of a Wraparound Note of $1,156,057, the
underlying mortgage and note payable of $2,883,019 and resulted in a gain for
the Company of $1,726,962.
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of
Milestone Properties, Inc.
We have reviewed the accompanying consolidated balance sheet of Milestone
Properties, Inc. and its subsidiaries (the "Company") as of September 30, 2000,
and the related consolidated statements of revenues and expenses, stockholders'
equity, and cash flows for the three month and nine month periods then ended.
These financial statements are the responsibility of the management of the
Company.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying September 30, 2000 consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
/s/ Ahearn, Jasco + Company, P.A.
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
November 9, 2000
6
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying consolidated financial statements of Milestone Properties, Inc.
("Milestone") and its wholly owned subsidiaries (together, Milestone with its
subsidiaries is hereinafter referred to as the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The financial statements as of and for the periods ended September 30,
2000 and 1999 are unaudited. The consolidated financial statements for the
periods ended September 30, 2000 have been reviewed by an independent public
accountant pursuant to Rule 10-01 (d) of Regulation S-X and following applicable
standards for conducting such reviews, and the report of the accountant is
included as part of this filing. The results of operations for the interim
periods are not necessarily indicative of the results of operations for the
fiscal year. Certain information for 1999 has been reclassified to conform to
the 2000 presentation. These consolidated financial statements should be read in
conjunction with the financial statements and footnotes included thereto in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
The Company is primarily engaged in the ownership, operation and management of
interests in commercial real estate properties, which as of September 30, 2000
and as of the date of this filing consists of (i) 10 properties owned in fee
(the "Fee Properties"), (ii) the ownership of wraparound notes (the "Wraparound
Notes") and wraparound mortgages (the "Wraparound Mortgages" and, together with
the Wraparound Notes, the "Wrap Debt") which are secured by 10 commercial real
properties (the "Underlying Properties" and, together with the Fee Properties,
the "Properties"), (iii) one parcel of land and (iv) the operation and
management of the Properties. At September 30, 1999, the Company possessed
interests in 32 commercial real properties consisting of (i) 10 properties owned
in fee and (ii) the ownership of wraparound notes and wraparound mortgages
secured by 22 commercial real properties.
1. Acquisition and Disposition of Real Estate Related Assets
On January 7, 2000, a Wraparound Note held by the Company on a 32,400 square
foot single tenant commercial building located in Walpole, New Hampshire (the
"Walpole Property"), was paid as a result of the sale of the Walpole Property by
its owner, an affiliate of the Company (the partnership that owned the Walpole
Property), to an unrelated third party. In connection with the sale of the
Walpole Property, the Company, as the master lessee on a Master Lease on the
Walpole Property, canceled the subject Master Lease. Of the gross proceeds,
$736,000 was used to satisfy the underlying mortgage debt on the Walpole
Property. As a result of the payment of the Wraparound Note, the Company
realized net cash proceeds of approximately $510,000 and recorded a book gain of
approximately $381,000 in the first quarter of 2000.
On January 13, 2000, a Wraparound Note held by the Company on a 46,400
single-tenant commercial building located in Savannah, Tennessee (the "Savannah
Property"), was paid as a result of the sale of the Savannah Property by its
owner, an affiliate of the Company (the partnership that owned the Savannah
Property) to an unrelated third party. In conjunction with the sale of the
Savannah Property, the Company, as the master lessee on a Master Lease on the
Savannah Property, canceled the subject Master
7
<PAGE>
Lease. As a result of the payment of the Wraparound Note, the Company realized
net cash proceeds of approximately $173,000 and recorded a book gain of
approximately $129,000 in the first quarter of 2000.
On January 13, 2000, a Wraparound Note held by the Company on a 43,200 square
foot single tenant commercial building located in Hamilton, New York (the
"Hamilton Property"), was paid as a result of the sale of the Hamilton Property
by its owner, an affiliate of the Company (the partnership that owned the
Hamilton Property), to an unrelated third party. In connection with the sale of
the Hamilton Property, the Company, as the master lessee on a Master Lease on
the Hamilton Property, canceled the subject Master Lease. Of the gross proceeds,
$774,000 was used to satisfy the underlying mortgage debt on the Hamilton
Property. As a result of the payment of the Wraparound Note and the satisfaction
of the underlying mortgage debt, the Company realized net cash proceeds of
approximately $521,000 and recorded a book gain of approximately $375,000 in the
first quarter of 2000.
On February 3, 2000, a Wraparound Note held by the Company on a 43,200 square
foot single tenant commercial building located in Warsaw, Virginia (the "Warsaw
Property"), was paid as a result of the sale of the Warsaw Property by its
owner, an affiliate of the Company (the partnership that owned the Warsaw
Property), to an unrelated third party. In connection with the sale of the
Warsaw Property, the Company, as the master lessee on a Master Lease on the
Warsaw Property, canceled the subject Master Lease. Of the gross proceeds,
$768,000 was used to satisfy the underlying mortgage debt on the Warsaw
Property. As a result of the payment of the Wraparound Note and the satisfaction
of the underlying mortgage debt, the Company realized net cash proceeds of
approximately $519,000 and recorded a book gain of approximately $315,000 in the
first quarter of 2000.
On February 15, 2000, a Wraparound Note held by the Company on a 91,800 square
foot single tenant commercial building located in Palatka, Florida (the "Palatka
Property"), was paid as a result of the sale of the Palatka Property by its
owner, an affiliate of the Company (the partnership that owned the Palatka
Property), to an unrelated third party. In connection with the sale of the
Palatka Property, the Company, as the master lessee on a Master Lease on the
Palatka Property, canceled the subject Master Lease. Of the gross proceeds,
$1,067,000 was used to satisfy the underlying mortgage debt on the Palatka
Property. As a result of the payment of the Wraparound Note and the satisfaction
of the underlying mortgage debt, the Company realized net cash proceeds of
approximately $911,000 and recorded a book gain of approximately $631,000 in the
first quarter of 2000.
On February 25, 2000, a Wraparound Note held by the Company on a 138,954 square
foot shopping center located in Quincy, Illinois (the "Quincy Property"), was
terminated as a result of a foreclosure sale by the bank (the holder of the
underlying debt, relating to the underling property) of the Quincy Property
executed on its owner, an affiliate of the Company (the partnership that owned
the Quincy Property). The Company had previously terminated, by written notice,
the Master Lease associated with the Quincy Property as of December 31, 1998. As
a result of the foreclosure sale by the bank of the Quincy Property and the
termination of the Wraparound Note and the Underlying Debt, the Company recorded
a book gain of approximately $1,727,000 in the first quarter of 2000, but
received no cash proceeds.
2. Income Taxes
The Company is required by Statement of Financial Accounting Standards (SFAS)
No. 109 to record a deferred tax asset or liability for the basis of an asset or
liability that is temporarily different for financial reporting purposes and tax
reporting purposes. Income taxes for interim periods are generally computed
using the effective tax rate estimated to be applicable for the full fiscal
year. The interim tax provision is adjusted for specific significant
transactions which affect deferred tax assets or liabilities as recorded under
SFAS 109.
8
<PAGE>
During 2000, the Wraparound Notes held by the Company on the six properties
previously described above were satisfied. Relating to such Wraparound Notes,
the Company had previously recorded deferred tax assets which were realized
through the provision for income taxes. As a consequence of realizing the
deferred tax assets specifically recorded for these Wraparound Notes, which is a
non-cash tax adjustment, the Company's effective tax rate for the period ended
September 30, 2000 is different from the expected federal tax rate of 35%, and
the expected rate for the entire year 2000 may also be different.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
This Quarterly Report on Form 10-Q for the period ended September 30, 2000 filed
by Milestone contains or incorporates by reference certain 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 and Milestone intends that
such forward-looking statements be subject to the safe harbors created thereby.
Such forward-looking statements involve risks and uncertainties and include, but
are not limited to, statements regarding future events and its plans, goals and
objectives. Such statements are generally accompanied by words such as "intend,"
"anticipate," "believe," "estimate," "expect" or similar terms. Milestone's
actual results may differ materially from such statements. Factors that could
cause or contribute to such differences include, without limitation, the
following: (i) its plans, strategies, objectives, expectations and intentions
are subject to change at any time at its discretion; (ii) general economic and
business conditions, which may, among other things, affect the demand for retail
space or retails goods, the availability and creditworthiness of prospective
tenants, rental terms and the terms and availability of financing, are subject
to change at any time; (iii) adverse changes in real estate markets including,
among other things, competition with other companies; (iv) adverse changes in
the properties Milestone owns which could require the expenditure of funds to
fix or maintain such properties; (v) the general risks of real estate
development and acquisitions, such as changes in demographics, construction
delays, cost overruns, work stoppages and slowdowns, the cost and availability
of skilled labor and weather conditions; (vi) governmental actions and
initiatives, such as seizures of property, condemnation and construction of
alternative roadways; (vii) environmental and safety conditions and hazards; and
(viii) other risks and uncertainties indicated from time to time in Milestone's
filings with the Securities and Exchange Commission and in the documents
incorporated herein by reference. Although Milestone believes that the
assumptions underlying its forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, Milestone cannot make any
assurances that the results contemplated in such forward-looking statements will
be realized. The inclusion of such forward- looking information should not be
regarded as a representation by Milestone or any other person that the future
events, plans or expectations contemplated by Milestone will be achieved.
Furthermore, past performance is not necessarily an indicator of future
performance.
The Company is engaged in the business of owning, acquiring, managing,
developing and investing in commercial real estate and real estate related
assets. See Part I - Financial Information, Item 1. Financial Statements, Notes
to Consolidated Financial Statements, Note 1. Acquisition and Disposition of
Real Estate Related Assets.
9
<PAGE>
Results of Operations
Three Months Ended September 30, 2000 compared to Three Months Ended September
30, 1999
For the three months ended September 30, 2000, the Company recognized net loss
of ($316,934), or $0.07 per share of common stock, basic and diluted
computation. For the three months ended September 30, 1999, the Company
recognized a net loss of $672,341, or $0.16 per share of common stock, basic and
diluted computation.
Total revenues for the three months ended September 30, 2000 were $2,491,822, as
compared to $4,943,530 for the three months ended September 30, 1999, a decrease
of $2,451,708, or 50%, due primarily to the following:
Rent decreased $553,510, or 31%, to $1,261,814 for the three months ended
September 30, 2000 as compared to $1,815,324 for the three months ended
September 30, 1999. This decrease is primarily due to property sales of the
Underlying Properties subsequent to the third quarter of 1999.
Interest income decreased $423,879, or 36%, to $748,537 for the three months
ended September 30, 2000 compared to $1,172,416 the three months ended September
30, 1999. This decrease is primarily due to the Company receiving final payment
during 1999 and 2000 on Wraparound Notes held by the Company as a result of the
sale of some of the Underlying Properties by their owners.
Gain on sale of real estate and real estate related assets decreased $1,488,523
to none for the three months ended September 30, 2000 as compared to $1,488,523
for the three months ended September 30, 1999. This decrease is due to no
property sales during the third quarter of 2000 as compared to one property sale
during the quarter ended September 30, 1999.
Total expenses for the three months ended September 30, 2000 were $2,761,523, as
compared to $4,650,885 for the three months ended September 30, 1999, a decrease
of $1,889,362, or 41% due primarily to the following:
Master Lease expense decreased $1,001,629, or 65%, to $547,588 for the three
months ended September 30, 2000 as compared to $1,549,217 for the three months
ended September 30, 1999. The decrease is due to a decrease in the number of
properties leased by the Company as a result of the sale of several of the
Underlying Properties by their owners.
Interest expense for the three months ended September 30, 2000 was $637,827, a
decrease of $277,069, or 30%, from $914,896 for the three months ended September
30, 1999. Such decrease is due to a reduction in the Underlying Debt (related to
Underlying Properties) of the Company resulting from property sales in both 1999
and 2000.
Salaries, general and administrative expense for the three months ended
September 30, 2000 was $622,413, a decrease of $597,398 or 49%, from $1,219,811
for the three months ended September 30, 1999. The decrease is due to
non-recurring costs, some of which are associated with the sale of several of
the Underlying Properties by their owners.
10
<PAGE>
Nine Months Ended September 30, 2000 compared to Nine Months Ended September 30,
1999
-------------------------------------------------------------------------------
For the nine months ended September 30, 2000, the Company recognized net income
of $1,122,908, or $.26 per share of common stock, basic computation. For the
nine months ended September 30, 1999, the Company recognized a net loss of
$943,883, or $0.22 per share of common stock, basic computation.
Total revenues for the nine months ended September 30, 2000 were $11,147,860, as
compared to $14,031,777 for the nine months ended September 30, 1999, a decrease
of $2,883,917, or 21%, due primarily to the following:
Rent decreased $1,977,175, or 34%, to $3,827,615 for the nine months ended
September 30, 2000 as compared to $5,804,790 for the nine months ended September
30, 1999. This decrease is primarily due to property sales of the Underlying
Properties subsequent to the second quarter of 1999.
Interest income decreased $1,649,934, or 42%, to $2,263,853 for the nine months
ended September 30, 2000 compared to $3,913,787 the nine months ended September
30, 1999. This decrease is primarily due to the Company receiving final payment
during 1999 and 2000 on Wraparound Notes held by the Company as a result of the
sale of some of the Underlying Properties by their owners.
Gain on sale of real estate and real estate related assets increased $795,354 to
$ 3,557,670 for the nine months ended September 30, 2000 as compared to
$2,762,316 for the nine months ended September 30, 1999. The increase is due to
six property sales for the nine months ended September 30,2000 compared to three
property sales for the same period in 1999.
Total expenses for the nine months ended September 30, 2000 were $9,029,278, as
compared to $13,810,424 for the nine months ended September 30, 1999, a decrease
of $4,781,146, or 35% due primarily to the following:
Master Lease expense decreased $3,529,849, or 68 %, to $1,642,764 for the nine
months ended September 30, 2000 as compared to $5,172,613 for the nine months
ended September 30, 1999. The decrease is due to a decrease in the number of
properties leased by the Company as a result of the sale of several of the
Underlying Properties by their owners.
Interest expense for the nine months ended September 30, 2000 was $1,972,460, a
decrease of $931,681, or 32%, from $2,904,141 for the nine months ended
September 30, 1999. Such decrease is due to a reduction in the Underlying Debt
of the Company resulting from property sales in both 1999 and 2000.
Amounts paid for extensions in connection with land purchase contracts, which
expired during the nine months ended September 30, 2000 were $748,799; there
were no comparable expenditures for the nine months ended September 30, 1999,
because the recent investments in certain land ventures (described below) had
not expired until periods after September 30, 1999.
Salaries, general and administrative expense for the nine months ended September
30, 2000 was $1,788,398, a decrease of $866,455 or 33%, from $2,654,853 for the
nine months ended September 30, 1999. The decrease is due to non-recurring
costs, some of which are associated with the sale of several of the Underlying
Properties by their owners.
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Cash Flows
For the nine months ended September 30, 2000, the Company had an increase in
cash and cash equivalents of $352,178, as compared to a decrease in cash and
cash equivalents of $5,656,663 for the nine months ended September 30, 1999. For
the nine months ended September 30, 2000, cash used in operating activities was
$2,928,100, cash provided by investing activities was $7,395,165 and cash used
in financing activities was $4,114,887. The significant decrease in cash and
cash equivalents for the nine months ended September 30, 1999 is primarily due
to the March 1999 payment of approximately $8,949,000 of cash to the exchange
agent in connection with the cancellation of Series A Preferred Stock in
accordance with the settlement of the Winston Actions (the "Winston Settlement
Agreement"). Also, the Company generated cash proceeds through five property
sales during the nine months ended September 30, 2000 as compared to three
property sales during the nine months ended September 30, 1999.
Liquidity and Capital Resources
During the fiscal year ended December 31, 1999, the Company generated cash as a
result of payments received by the Company on its Wraparound Notes, as described
above. This trend continued during 2000. See Part I - Financial Information,
Item 1. Financial Statements, Notes to Consolidated Financial Statements, Note
1. Acquisition and Disposition of Real Estate Related Assets.
The Company had made investments in land ventures ("Ventures"), and the Ventures
previously assumed contracts to purchase certain land parcels in the South
Florida area. At September 30, 2000, no deposits to purchase land were
outstanding. No additional capital contributions will be required by the Company
to service the costs associated with extending the expiration dates of land
parcel contracts. The consolidated financial statements of the Company include
the operating results for the Ventures for the periods ended September 30, 2000.
The Company's existing borrowings and the encumbrances on the properties
securing those borrowings may inhibit, or result in increased costs to the
Company in connection with its ability to incur future indebtedness and/or raise
substantial equity capital in the marketplace.
The Company has invested available funds in secure, short-term, interest bearing
investments. The Company believes that its levels of working capital, liquidity
and funds from operations are sufficient to support present foreseeable
operations.
Other than described herein, management is not aware of any other trends,
events, commitments or uncertainties that will, or are likely to, materially
impact the Company's liquidity.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
The Company, in its normal course of business, is theoretically exposed to
interest rate changes as they relate to real estate mortgages and the effect of
such mortgage rate changes on the value of real estate. However, for the
Company, most of its mortgage debt is at fixed rates, is for extended terms, is
not assumable and would be unaffected by any sudden change in interest rates.
The Company's possible risk is from increases in long-term real estate mortgage
rates that may occur over a decade or more, as this may decrease the overall
value of real estate. Since the Company intends to hold its existing mortgages
to maturity (or until the sale of a Property), there is believed to be no
interest rate market risk to the Company.
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The Company's cash equivalents and short-term investments, if any, generally
bear variable interest rates. Changes in the market rates of interest available
will affect from time-to-time the interest earned by the Company. Since the
Company does not rely on its interest earnings to fund working capital needs,
changes in these interest rates will not have an impact on the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For a detailed description of certain litigation known as the Winston Actions,
the settlement thereof, and the commencement of a state court action in Florida
against certain insurance companies for their refusal to contribute to the
aforementioned settlement, please see the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999 (and the cross-reference therein).
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders in Miami, Florida on Friday,
May 26, 2000. At the Annual Meeting, two Class I Directors were elected for
three-year terms, each expiring in 2003. The Class I Directors elected were
Joseph P. Otto and Geoffrey S. Aaronson, both with 3,837,491 votes "for"; 12,562
votes "against"; and 70 "abstain". Robert A. Mandor, Leonard S. Mandor, Harvey
Shore, Harvey Jacobson and Gregory McMahon are Directors of the Company whose
term of office as a Director continued after the meeting. In addition to the
election of Class I Directors, the shareholders approved the proposal that the
firm of Ahearn, Jasco + Company, P.A., be appointed as the Company's independent
certified accountants for the year ending December 31, 2000, with 3,838,677
votes "for"; 6,187 votes "against"; and 5,259 "abstain". No other matters were
brought before or voted on by the Company's shareholders at the Annual Meeting.
Item 5. Other Information
Milestone's Board of Directors determined not to declare any dividends on the
Series A Preferred Stock during each of the years ended December 31, 1997, 1998
and 1999 and during the nine months ended September 30, 2000. The last dividend
declared by Milestone was for the quarter ended December 31, 1995 and was paid
on February 15, 1996 at $0.195 per share of Series A Preferred Stock. Any
decision as to the future payment of dividends on the Series A Preferred Stock
will depend on the results of operations and the financial condition of the
Company and such other factors as Milestone's Board of Directors, in its
discretion, deems relevant. See Part I-Financial Information, Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operation, Liquidity and Capital Resources.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
27 Financial Data Schedule Article 5 included for
Electronic Data Gathering, Analysis and Retrieval
(EDGAR) purposes only. This Schedule contains
summary financial information extracted from the
consolidated balance sheets and consolidated
statements of revenues and expenses of the Company
as of and for the three month and nine month
periods ended September 30, 2000, and is qualified
in its entirety by reference to such financial
statements.
(b) Reports on Form 8-K: None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MILESTONE PROPERTIES, INC.
(Registrant)
Date: November 10, 2000 By /s/ Robert A. Mandor
------------------------------------------
Robert A. Mandor
President and Chief Financial Officer
Date: November 10, 2000 By /s/ Patrick S. Kirse
------------------------------------------
Patrick S. Kirse
Vice President of Accounting
(Principal Accounting Officer)
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