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 March 31, 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 May 5, 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
March 31, 2000 (Unaudited) and December 31, 1999
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 9,051,562 $ 8,032,257
Restricted cash 222,000 222,000
Restricted cash for settlement 1,568,877 1,614,156
Loans receivable 1,351,038 1,370,471
Accounts receivable 390,645 567,112
Accrued interest receivable 493,032 2,694,289
Due from related party 615,848 762,102
Prepaid expenses and other 761,043 723,397
Deposits to purchase land 87,500 700,000
---------------- --------------
Total current assets 14,541,545 16,685,784
Property, improvements and equipment, net 24,702,555 24,884,220
Wraparound notes, net 11,874,957 18,641,853
Deferred income tax asset, net 1,344,072 2,293,167
Management contract rights, net 114,030 117,875
Debt financing costs and other, net 638,290 655,393
--------------- --- ----------
Total assets $ 53,215,449 $ 63,278,292
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 972,305 $ 2,547,866
Accrued settlement payable 1,568,877 1,614,156
Accrued interest payable 141,888 148,173
Master Lease payable 547,595 3,916,308
Current portion of mortgages and notes payable 1,092,285 4,203,029
Income taxes payable 18,405 20,000
----------- ----------------
Total current liabilities 4,341,355 12,449,532
Mortgages and notes payable 30,477,244 33,996,162
----------- ------------
Total liabilities 34,818,599 46,445,694
----------- ------------
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 March 31, 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 March 31, 2000
and December 31, 1999) 164 164
Additional paid in surplus 45,340,638 45,340,638
Accumulated deficit ( 23,739,345) (25,303,597)
Shares held in treasury - at cost (3,254,043) (3,254,043)
---- ------------ ---------------
Total stockholders' equity 18,396,850 16,832,598
--------------- --------------
Total liabilities and stockholders' equity $ 53,215,449 $ 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 March 31, 2000 and 1999
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
-------------- --------------
REVENUES
<S> <C> <C>
Rent $ 1,329,277 $ 2,042,097
Interest income 672,346 1,507,034
Revenue from management company operations 120,244 189,122
Tenant reimbursements 297,541 277,554
Percentage rent 35,792 55,197
Gain on sale of real estate and real estate related assets 3,557,670 0
------------- ---------------------
Total revenues 6,012,870 4,071,004
------------- ---------------
EXPENSES
Master Lease expense 547,588 1,955,054
Interest expense 675,867 1,069,973
Depreciation and amortization 173,457 191,795
Salaries, general and administrative 620,725 552,636
Property expenses 394,266 449,770
Expired extensions to land purchase contracts 748,799 0
Expenses for management company operations 230,198 176,930
Professional fees 125,319 194,019
------------- --------------
Total expenses 3,516,219 4,590,177
------------ ------------
Income (loss) before income taxes and minority interest 2,496,651 (519,173)
Provision (benefit) for income taxes 949,095 (286,116)
------------ ---------
Net income (loss) before minority interest 1,547,556 (233,057)
Minority interest in net loss of consolidated subsidiaries 16,696 0
------------- -----------------
Net income (loss) attributable to common stockholders $ 1,564,252 $ ( 233,057)
============ ==============
Income (loss) per common share, basic $ .37 $ (0.05)
================= ================
Weighted average common shares outstanding, basic 4,269,792 4,244,664
============ ===========
Income (loss) per common share, diluted $ .36 $ (0.05)
================= ================
Weighted average common shares outstanding, diluted 4,360,589
============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Three Months Ended March 31, 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 three months ended
March 31, 2000
----------- ------------ -------------- ----------- ---------- --------------
Balance, March 31, 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 three months ended
March 31, 2000 1,564,252 1,564,252
--------------- --------------- ---------------
Balance, March 31, 2000 $ 45,340,638 $ (23,739,345) $ 18,396,850
=============== =============== ===============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
-------------- --------------
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income ( loss) $ 1,564,252 $ (233,057)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 173,457 191,795
Deferred taxes 949,095 (299,106)
Gain on sale of real estate related assets (3,557,670) 0
Changes in operating assets and liabilities
Decrease in accounts receivable 176,467 204,167
Decrease (increase) in due from related party 146,254 (40,720)
Decrease in accrued interest receivable 2,201,257 4,042,361
(Increase) decrease in prepaid expenses and other (37,646) 366,935
Decrease in deposits to purchase land 612,500 0
Decrease in accounts payable and accrued expenses (1,575,561) (1,233,489)
(Decrease) increase in accrued interest payable (6,285) 102,814
Decrease in Master Lease payable (3,368,713) (7,072,016)
Decrease in accrued settlement payable (45,279) 0
Decrease in income taxes payable (1,595) 0
------------------ -----------------
Net cash used in operating activities (2,769,467) (3,970,316)
--------------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Principal repayments on loans receivable 19,433 17,943
Principal repayments on wraparound notes 2,056,721 3,782,763
Purchase of leasehold improvements (89,296) (178,250)
Proceeds from realization of real estate related assets 5,503,279 0
Proceeds from redemption of investments in preferred stock 0 445,500
-------------------- ------------
Net cash provided by investing activities 7,490,137 4,067,956
------------ -----------
CASH FLOW FROM FINANCING ACTIVITIES
Principal payments on mortgages and notes payable (3,746,644) (496,079)
Decrease (increase) in restricted cash 45,279 (8,949,036)
--------------- -----------
Net cash used in financing activities (3,701,365) (9,445,115)
------------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,019,305 (9,347,475)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,032,257 11,826,301
------------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,051,562 $ 2,478,826
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 682,152 $ 967,159
============= ==============
Cash paid during the period for income taxes $ 1,595 $ 12,990
============== ===============
</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
4
<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 March 31,
2000 and 1999 are unaudited. The consolidated financial statements for the
period ended March 31, 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 March 31, 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 March 31, 1999, the Company possessed interests
in 35 commercial real properties consisting of (i) 10 properties owned in fee
and (ii) the ownership of wraparound notes and wraparound mortgages secured by
25 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,
5
<PAGE>
canceled the subject Master 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) 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
6
<PAGE>
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.
During the first quarter of year 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 March 31, 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 March 31, 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.
7
<PAGE>
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 Acquisition and Disposition of Real Estate Related Assets.
Results of Operations
Three Months Ended March 31, 2000 compared to Three Months Ended March 31, 1999
For the three months ended March 31, 2000, the Company recognized net income of
$1,564,252, or $0.37 per share of common stock, basic computation. For the three
months ended March 31, 1999, the Company recognized a net loss of $233,057, or
$0.05 per share of common stock, basic computation.
Total revenues for the three months ended March 31, 2000 were $6,012,870, as
compared to $4,071,004 for the three months ended March 31, 1999, an increase of
$1,941,866, or 48%, due primarily to the following:
Rent decreased $712,820, or 35%, to $1,329,277 for the three months ended March
31, 2000 as compared to $2,042,097 for the three months ended March 31, 1999.
This decrease is primarily due to property sales of 15 of the Underlying
Properties by their owners, i.e., the partnership that owned the property,
subsequent to the first quarter of 1999 through the first quarter of 2000.
Interest income decreased $834,688, or 55%, to $672,346 for the three months
ended March 31, 2000 compared to $1,507,034 the three months ended March 31,
1999. This decrease is primarily due to a decrease in interest income of
approximately $825,000 as a result of the Company receiving 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 during 1999 and 2000.
Gain on sale of real estate and real estate related assets increased $3,557,670
for the three months ended March 31, 2000 as compared to no gain or loss on sale
of real estate and real estate related assets for the same period in 1999. This
increase is due to the property sales of six properties previously described in
Note 1 to the consolidated financial statements.
Total expenses for the three months ended March 31, 2000 were $3,516,219, as
compared to $4,590,177 for the three months ended March 31, 1999, a decrease of
$1,073,958, or 23% due primarily to the following:
Master Lease expense decreased $1,407,466, or 72%, to $547,588 for the three
months ended March 31, 2000 as compared to $1,955,054 for the three months ended
March 31, 1999. The decrease is due to a decrease in the number of properties
leased by the Company as a result of the sale of 15 of the Underlying Properties
by their owners.
Interest expense for the three months ended March 31, 2000 was $675,867, a
decrease of $394,106, or 37%, from $1,069,973 for the three months ended March
31, 1999. Such decrease is due to a reduction in the Underlying Debt of the
Company resulting from property sales in both 1999 and 2000.
Expired extensions to land purchase contracts for the three months ended March
31, 2000 were $748,799 as compared to $0 for the three months ended March 31,
1999, because the recent investments in Land Ventures first occurred in periods
after March 31, 1999.
8
<PAGE>
Cash Flows
For the three months ended March 31, 2000, the Company had an increase in cash
and cash equivalents of $1,019,305, as compared to a decrease in cash and cash
equivalents of $9,347,475 for the three months ended March 31, 1999. For the
three months ended March 31, 2000, cash used in operating activities was
$2,769,467, cash provided by investing activities was $7,490,137 and cash used
in financing activities was $3,701,365. The significant decrease in cash and
cash equivalents for the three months ended March 31, 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
three months ended March 31, 2000 as compared to no property sales during the
three months ended March 31, 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 the first quarter of 2000 and may continue
throughout the year. See Part I Acquisition and Disposition of Real Estate
Related Assets.
The Company has made investments in Land Ventures ("Ventures"), and the Ventures
previously assumed contracts to purchase certain land parcels in the South
Florida area. At March 31, 2000, the Ventures included $87,500 of deposits to
purchase land which were refunded to the Ventures prior to the date of this
filing. 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 quarter ended March 31, 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 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.
9
<PAGE>
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 June 30, 1999 (and the cross-reference therein).
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 three months ended March 31, 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 period ended March
31, 2000, and is qualified in its entirety by
reference to such financial statements.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K
during the first quarter of 2000.
10
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Milestone Properties, Inc.
We have reviewed the accompanying consolidated balance sheet of Milestone
Properties, Inc. and its subsidiaries (the "Company") as of March 31, 2000, and
the related consolidated statements of revenues and expenses, stockholders'
equity, and cash flows for the three month period 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 March 31, 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
May 5, 2000
11
<PAGE>
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: May 10, 2000 By /s/ Robert A. Mandor
--------------------------------------
Robert A. Mandor
President and Chief Financial Officer
Date: May 10, 2000 By /s/ Patrick S. Kirse
--------------------------------------
Patrick S. Kirse
Vice President of Accounting
(Principal Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,051,562
<SECURITIES> 0
<RECEIVABLES> 2,850,563
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,541,545
<PP&E> 27,753,524
<DEPRECIATION> 3,050,969
<TOTAL-ASSETS> 53,215,449
<CURRENT-LIABILITIES> 4,341,355
<BONDS> 0
0
164
<COMMON> 49,436
<OTHER-SE> 18,347,250
<TOTAL-LIABILITY-AND-EQUITY> 53,215,449
<SALES> 0
<TOTAL-REVENUES> 6,012,870
<CGS> 0
<TOTAL-COSTS> 3,516,219
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 675,867
<INCOME-PRETAX> 2,513,347
<INCOME-TAX> 949,095
<INCOME-CONTINUING> 1,564,252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,564,252
<EPS-BASIC> 0.37
<EPS-DILUTED> 0.36
</TABLE>
