SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 31, 2000 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 1-7172 BRT REALTY TRUST ---------------- (Exact name of registrant as specified in its charter) Massachusetts 13-2755856 -------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 60 Cutter Mill Road, Great Neck, NY 11021 ------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (516) 466-3100 Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date. 7,180,263 Shares of Beneficial Interest, $3 par value, outstanding on February 10, 2000 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 ---
<TABLE> <CAPTION> Part 1 - FINANCIAL INFORMATION Item 1. Financial Statements BRT REALTY TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts In Thousands) December 31, September 30, 2000 2000 ---- ---- (Unaudited) (Audited) ASSETS <S> <C> <C> Real estate loans - Note 3: Earning interest, including $750 and $850 from related parties $ 51,383 $ 40,413 Not earning interest 415 3,250 --------- --------- 51,798 43,663 Less allowance for possible losses 1,381 1,381 --------- ---------- 50,417 42,282 --------- --------- Real estate assets: Real estate properties net, including $2,903 and $2,944 held for sale 6,863 6,944 Investment in unconsolidated real estate ventures at equity 5,496 5,381 --------- ---------- 12,359 12,325 Less valuation allowance 349 349 --------- ----------- 12,010 11,976 --------- --------- Cash and cash equivalents - Note 4 14,833 16,221 Securities available-for-sale at market 16,290 16,310 Other assets 1,986 1,667 ---------- ---------- Total Assets $ 95,536 $ 88,456 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Note payable - Credit facility - Note 5 $ 105 $ 88 Mortgage payable 2,846 - Accounts payable and accrued liabilities, including deposits of $1,913 and $1,550 3,816 3,221 --------- --------- Total Liabilities 6,767 3,309 --------- --------- Shareholders' Equity - Note 2: Preferred shares, $1 par value: Authorized 10,000 shares, none issued - - Shares of beneficial interest, $3 par value: Authorized number of shares - unlimited, issued - 8,888 shares at each date 26,665 26,665 Additional paid-in capital 81,473 81,499 Accumulated other comprehensive loss - net unrealized loss on available-for-sale securities (2,672) (3,133) Accumulated deficit (1,946) (5,047) ---------- ---------- 103,520 99,984 Cost of 1,708 and 1,718 treasury shares of beneficial interest at each date (14,751) (14,837) --------- --------- Total Shareholders' Equity 88,769 85,147 --------- --------- Total Liabilities and Shareholders' Equity $ 95,536 $ 88,456 ========= ========= See Accompanying Notes to Consolidated Financial Statements. </TABLE>
<TABLE> <CAPTION> BRT REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In Thousands except for Per Share Data) Three Months Ended December 31, 2000 1999 ---- ---- <S> <C> <C> Revenues: Interest and fees on real estate loans including $24 and $-0- from related parties $ 2,732 $ 1,521 Operating income from real estate properties 307 188 Equity in earnings of unconsolidated ventures 162 114 Other, primarily investment income 1,267 502 ---------- --------- Total Revenues 4,468 2,325 ---------- --------- Expenses: Interest-notes payable and loans payable 17 22 Advisor's fee 168 132 General and administrative 790 780 Other taxes 60 35 Operating expenses relating to real estate properties including interest on mortgages of $59 and $15 208 164 Amortization and depreciation 139 97 ---------- ---------- Total Expenses 1,382 1,230 ---------- ---------- Income before gain on sale of real estate loans and real estate properties and available-for-sale securities 3,086 1,095 Net gain on sale of real estate loans and real estate properties held for sale - 732 Net realized gain on available-for-sale securities 15 - ---------- ---------- Net Income $ 3,101 $ 1,827 ========== ========== Income per share of Beneficial Interest: Basic earnings per share $ .43 $ .25 ========== ========== Diluted earnings per share $ .43 $ .25 ========== ========== See Accompanying Notes to Consolidated Financial Statements. </TABLE>
<TABLE> <CAPTION> BRT REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Amounts In Thousands) Accumulated Shares of Additional Other Accum- Beneficial Paid-In Comprehensive ulated Treasury Interest Capital Income Deficit Shares Total --------- -------- ------ ------- ------ ----- <S> <C> <C> <C> <C> <C> <C> Balances, September 30, 2000 $26,665 $81,499 $(3,133) $(5,047) $(14,837) $85,147 Exercise of stock options - (26) - - 86 60 Net income - - - 3,101 - 3,101 Other comprehensive loss - net unrealized gain on available-for-sale securities (net of reclassification adjust- ment for gains included in net income of $15) - - 461 - - 461 --------- Comprehensive income - - - - - 3,562 --------------------------------------------------------------------------------- Balances, December 31, 2000 $26,665 $81,473 $ (2,672) $(1,946) $(14,751) $88,769 ================================================================================= See Accompanying Notes to Consolidated Financial Statements. </TABLE>
<TABLE> <CAPTION> BRT REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) Three Months Ended December 31, 2000 1999 ---- ---- <S> <C> <C> Cash flow from operating activities: Net income $ 3,101 $ 1,827 Adjustments to reconcile net income to net cash provided by operating activities: Amortization and depreciation 139 97 Net gain on sale of real estate loans and properties - (732) Gain on sale of available-for-sale securities (15) - Equity in earnings of unconsolidated ventures (162) (114) Increase in interest and dividends receivable (172) (10) Increase in prepaid expenses (93) (3) Increase (Decrease) in accounts payable and accrued liabilities 143 (465) Increase in deferred revenues 189 46 Increase (Decrease) in escrow deposits 135 (272) Increase in deferred costs (59) (14) Decrease in receivable from venture partner - 4,620 Other (45) 215 -------- -------- Net cash provided by operating activities 3,161 5,195 -------- -------- Cash flows from investing activities: Collections from real estate loans 10,335 5,926 Additions to real estate loans (18,470) (7,818) Net costs capitalized to real estate assets (1) (104) Proceeds from sale of real estate assets - 814 Increase (Decrease) in deposits payable 129 (52) Purchase of marketable securities - (4,618) Sales of marketable securities 495 - Capital contributions to unconsolidated entities - (250) Partnership distributions 40 - -------- -------- Net cash used in investing activities (7,472) (6,102) -------- -------- Cash flow from financing activities: Increase in mortgage payable 2,850 - Payoff/paydown of loan and mortgages payable (4) (841) Proceeds from note payable - credit facility 17 - Repayment of note payable - credit facility - (121) Exercise of stock options 60 - -------- -------- Net cash used in financing activities 2,923 (962) -------- -------- Net decrease in cash and cash equivalents (1,388) (1,869) Cash and cash equivalents at beginning of period 16,221 28,757 -------- -------- Cash and cash equivalents at end of period $ 14,833 $ 26,888 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for interest expense $ 31 $ 29 ======== ======== See Accompanying Notes to Consolidated Financial Statements. </TABLE>
BRT REALTY TRUST AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 1 - Basis of Preparation The accompanying interim unaudited consolidated financial statements as of December 31, 2000 and for the three months ended December 31, 2000 and 1999 reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for such interim periods. The results of operations for the three months ended December 31, 2000 are not necessarily indicative of the results for the full year. Certain items on the consolidated financial statements for the preceding periods have been reclassified to conform with the current consolidated financial statements. The consolidated financial statements include the accounts of BRT Realty Trust, its wholly owned subsidiaries, and its majority-owned or controlled real estate entities. Investments in less than majority-owned entities have been accounted for using the equity method. Material intercompany items and transactions have been eliminated. BRT Realty Trust and its subsidiaries are hereinafter referred to as "BRT" or the "Trust". These statements should be read in conjunction with the consolidated financial statements and related notes which are included in BRT's Annual Report on Form 10-K for the year ended September 30, 2000. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Note 2 - Shareholders' Equity Per Share Data Basic earnings per share were determined by dividing net income for the period by the weighted average number of shares of common stock outstanding during each period which was 7,170,698 and 7,165,263 for the three month periods ended December 31, 2000 and 1999, respectively. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of BRT. For the three months ended December 31, 2000 and 1999 diluted earnings per share was determined by dividing net income for the period by the total of the weighted average number of shares of common stock outstanding plus the dilutive effect of the BRT's outstanding options using the treasury stock method which aggregated 7,255,542 and 7,249,712 respectively.
Note 3 - Real Estate Loans If all loans classified as non-earning were earning interest at their contractual rates for the three months ended December 31, 2000 and 1999, interest income would have increased by approximately $11,000 and $39,000, respectively. During the quarter ended December 31, 2000, a non interest earning loan with a carrying value of $2,835,000 was returned to earning interest. Pursuant to a workout/refinancing agreement with the Borrower, interest income of $170,000 representing a portion of the interest due was recorded in the quarter ended December 31, 2000. The remaining interest is to be paid in monthly installments until all past interest is paid. Note 4 - Available-For-Sale Securities Included in available-for-sale securities are 1,355,600 shares of Entertainment Properties Trust (NYSE:EPR), which have a cost basis of $17,806,000 and a fair value at December 31, 2000 of $14,912,000. The shares held by the Trust represent approximately 9.24% of the outstanding shares of Entertainment Properties Trust. Note 5 -Note Payable - Credit Facility On January 11, 2001 BRT terminated its revolving credit facility with TransAmerica Business Credit Corporation ("TransAmerica"). BRT has applied for a $15,000,000 credit facility from a different lender. Deferred fees in the amount of $274,000 associated with the terminated credit facility will be written off in the next quarter. Note 6 - Comprehensive Income Statement No. 130 establishes standards for reporting comprehensive income and its components in a full set of general-purpose financial statements and requires that all components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. During the three months ended December 31, 2000 accumulated other comprehensive income (loss), which is solely comprised of the net unrealized loss on available-for-sale securities, decreased to $2,672,000 from $3,133,000. For the three month period ended December 31, 1999 accumulated other comprehensive income, which is comprised solely of unrealized gain on available-for-sale securities was $96,000. Note 7 - Segment Reporting Effective October 1, 1998, the Trust adopted the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 131, Disclosure About Segments of an Enterprise and Related Information. Statement 131 superseded FASB Statement No. 14 Financial Reporting for Segments of a Business Enterprise. Statement No. 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. Statement No. 131 also establishes standards for related disclosures about products and services, geographical areas, and major customers. The adoption of Statement No. 131 did not affect results of operations or financial position. As the Trust operates predominantly in one industry segment, it has determined that it has one reportable segment and operates primarily in one geographic location. Management believes it is in compliance with the standards established by Statement No. 131. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources - ------------------------------- BRT's primary business activity is originating and holding for investment senior real estate mortgages, secured by income producing property. To a lesser extent BRT originates and holds for investment junior real estate mortgage loans secured by income producing property and senior mortgage loans secured by unimproved real property. Its investment policy emphasizes short-term mortgage loans. Repayments of real estate loans in the amount of $30,311,000 are due during the twelve months ending December 31, 2001, including $1,710,000 due on demand. The availability of mortgage financing secured by real property and the market for selling real estate is cyclical. Accordingly, BRT cannot project the portion of loans maturing during the next twelve months which will be paid or the portion of loans which will be extended for a fixed term or on a month to month basis. In May, 1999 BRT entered into a $45,000,000 revolving credit facility with TransAmerica Business Credit Corporation ("TransAmerica"). Borrowings under the facility are secured by specific receivables of BRT and its subsidiary, BRT Funding and the agreement provides that the amount borrowed will not exceed 80% of the value of the collateral. As of December 31, 2000 BRT had acceptable collateral which would permit BRT to borrow up to approximately $4,100,000 under the facility. The facility matures on May 17, 2002. On January 11, 2001 BRT terminated its revolving credit line with TransAmerica. The outstanding balance and all accrued interest was paid at termination. BRT has applied for a new $15,000,000 credit facility from a different lender. As of February 10, 2001, a new credit facility was not in place. In the next fiscal quarter BRT will recognize as an extraordinary item the write off of $274,000 of deferred fees associated with the TransAmerica credit line. During the three months ended December 31, 2000, the Trust generated cash of $3,161,000 from operations, $10,335,000 from collections from real estate loans, $2,850,000 from the placement of a first mortgage on a leasehold position in commercial real property and $495,000 from the sale of securities. These funds, in addition to cash on hand, were used primarily to fund real estate loan originations of $18,470,000. BRT's cash and cash equivalents were $14,833,000 at December 31, 2000. The Trust will satisfy its liquidity needs from cash and liquid investments on hand, interest received on outstanding real estate loans and net cash flow generated from the operation and sale of real estate assets.
Results of Operations Interest and fees on loans increased by $1,211,000 to $2,732,000 for the three months ended December 31, 2000 as compared to $1,521,000 for the three months ended December 31, 2000. During the current quarter a participating loan was paid off resulting in "additional interest" and fees of $844,000. Also a loan that was previously non performing was returned to performing status and $170,000 of delinquent interest was recorded. In addition to these one time items, the average balance of loans increased by approximately $5,100,000 accounting for an increase in interest income of $207,000. These increases were slightly offset by a 10 basis point decline in the interest rate earned on the portfolio from 12.65% to 12.55%, resulting in a decline in interest income of $12,000. Operating income on real estate properties increased to $307,000 in the three months ended December 31, 2000 from $188,000 in the quarter ended December 31, 1999, an increase of $119,000. This increase, primarily rental income, is attributable to BRT's purchase of a leasehold interest in commercial real property in the last quarter of the prior fiscal year. Equity in earnings of unconsolidated ventures increased $48,000 in the quarter ended December 31, 2000 to $162,000 from $114,000 in the quarter ended December 31, 1999. This increase of $48,000 is the result of increased income from existing ventures and income earned on new ventures entered into since the quarter ended December 31, 1999. Other revenues, primarily investment income increased to $1,267,000 in the quarter ended December 31, 2000, from $502,000 in the same quarter in 1999, an increase of $765,000. During the quarter BRT received $438,000 from a residual interest it holds in a venture. This residual interest resulted from the sale of a partnership interest in a prior year. The remaining increase of $327,000 is the result of increased invested balances and increased rates earned on those balances. The average balance of invested assets increased $3,300,000 causing interest to increase $72,000. Over the last several quarters the Trust has invested a portion of its available cash in higher yielding REIT securities rather than treasury securities and other money market products, causing the average rate earned to increase from 6.97% in the prior year's first quarter to 10.29% in the current quarter, accounting for the remaining $255,000 increase. The Advisor's fee, which is calculated based on invested assets, increased $36,000 in the quarter ended December 31, 2000 to $168,000 from $132,000 in the quarter ended December 31, 1999. In the current quarter the Trust experienced a higher outstanding balance of invested assets thereby causing an increase in the fee. Operating expenses relating to real estate increased $44,000 in the quarter ended December 31, 2000 to $208,000 from $164,000 in the quarter ended December 31, 1999. This increase represents mortgage interest expense on a leasehold that the Trust purchased at the end of the prior fiscal year. Amortization and depreciation increased from $97,000 in the quarter ended December 31, 1999 to $139,000 in the quarter ended December 31, 2000. This increase of $42,000 is primarily leasehold amortization on a property that was purchased during the last quarter of the prior fiscal year. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K On January 18, 2001 BRT filed an 8-K reporting that on January 11, 2001 BRT terminated its $45,000,000 revolving credit facility with Transamerica Business Credit Corporation.
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. BRT REALTY TRUST Registrant February 12, 2001 /s/ Jeffrey Gould - ------------------ ----------------- Date Jeffrey Gould, President February 12, 2001 /s/ George Zweier - ----------------- ------------------ Date George Zweier, Vice President and Chief Financial Officer