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 September 30, 1997 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 0-11083 ONE LIBERTY PROPERTIES, INC. (Exact name of registrant as specified in its charter) MARYLAND 13-3147497 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 60 Cutter Mill Road, Great Neck, New York 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. As of November 1, 1997, the Registrant had 1,557,950 shares of Common Stock and 808,776 shares of Redeemable Convertible Preferred Stock outstanding. 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
Part I - FINANCIAL INFORMATION Item 1. Financial Statements <TABLE> <CAPTION> ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, December 31, 1997 1996 ----------- ----------- (Unaudited) <S> <C> <C> Assets Real estate investments, at cost Land $10,598,515 $11,040,590 Buildings 33,029,157 33,695,317 ---------- ---------- 43,627,672 44,735,907 Less accumulated depreciation 2,301,689 1,846,694 --------- --------- 41,325,983 42,889,213 Mortgages receivable-less unamortized discount-(substantially all from related parties) 5,942,138 6,049,033 Cash and cash equivalents 1,843,879 2,478,580 Unbilled rent receivable 563,403 304,828 Rent, interest, deposits and other receivables 318,283 66,908 Investment in BRT Realty Trust- (related party) 274,188 199,068 Deferred financing costs 431,697 480,640 Other 62,866 54,718 ------ ------ Total assets $50,762,437 $52,522,988 =========== =========== Liabilities and Stockholders' Equity Liabilities: Mortgages payable $ 16,283,523 $16,846,921 Note payable-bank 2,000,000 3,900,000 Accrued expenses and other liabilities 469,353 475,109 Dividends payable 786,805 765,603 ------- ------- Total liabilities 19,539,681 21,987,633 ---------- ---------- Commitments and contingencies - - Minority interest in subsidiary - 141,722 ---------- ------- Redeemable convertible preferred stock, $1 par value; $1.60 cumulative annual dividend; 2,300,000 shares authorized; 808,776 shares issued; liquidation and redemption values of $16.50 13,067,750 12,950,792 ---------- ---------- Stockholders' equity: Common stock, $1 par value; 25,000,000 shares authorized; 1,544,314 and 1,473,642 shares issued and outstanding 1,544,314 1,473,642 Paid-in capital 14,268,741 13,650,737 Net unrealized gain on available-for-sale securities 172,793 97,673 Accumulated undistributed net income 2,169,158 2,220,789 --------- --------- Total stockholders' equity 18,155,006 17,442,841 ---------- ---------- Total liabilities and stockholders'equity $50,762,437 $52,522,988 =========== =========== See accompanying notes to consolidated financial statements. </TABLE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 --------- --------- --------- --------- <S> <C> <C> <C> <C> Revenues: Rental income $1,267,217 $1,247,777 $3,949,729 $2,841,346 Interest from related parties 207,596 301,591 625,996 921,462 Interest and other income 17,703 44,522 50,150 214,023 ------ ------ ------ ------- 1,492,516 1,593,890 4,625,875 3,976,831 --------- --------- --------- --------- Expenses: Depreciation and amortization 252,476 187,699 754,580 483,575 Interest - mortgages payable 368,788 216,331 1,157,027 557,880 Interest - bank 25,635 15,418 96,771 15,418 Leasehold rent 72,208 72,208 216,625 216,625 General and administrative 150,119 161,010 484,019 503,387 Provision for valuation adjustment of real estate - 145,000 - 459,000 ------- ------- -------- ------- 869,226 797,666 2,709,022 2,235,885 ------- ------- --------- --------- Income before gain on sale of real estate and minority interest 623,290 796,224 1,916,853 1,740,946 Gain on sale of real estate 599,251 - 599,251 - ------- ------- ------- ------- Income before minority interest 1,222,541 796,224 2,516,104 1,740,946 Minority interest (217,532) (5,249) (230,839) (5,249) -------- ------ -------- ------ Net income $1,005,009 $ 790,975 $2,285,265 $1,735,697 ========== =========== ========== ========== Calculation of net income applicable to common stockholders: Net income $1,005,009 $ 790,975 $2,285,265 $1,735,697 Less: dividends and accretion on preferred stock 362,613 362,147 1,087,488 1,086,094 ------- ------- --------- --------- Net income applicable to common stockholders $ 642,396 $ 428,828 $1,197,777 $ 649,603 =========== ============ ========== ========== Weighted average number of common shares outstanding 1,535,982 1,457,273 1,511,042 1,439,051 ========= ========= ========= ========= Net income per common share (Note 2) $ .42 $ .29 $ .79 $ .45 ========== ============= =========== =========== Cash distributions per share: Common Stock $ .30 $ .30 $ .90 $ .90 =========== ============= =========== =========== Preferred Stock $ .40 $ .40 $ 1.20 $ 1.20 =========== ============= =========== =========== See accompanying notes to consolidated financial statements. </TABLE>
<TABLE> ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY <CAPTION> For the nine month period ended September 30, 1997 and the year ended December 31, 1996 (Unaudited) Net Unrealized Gain (loss) on Accumulated Common Paid-in Available-for- Undistributed Stock Capital Sale Securities Net Income Total --------- -------- --------------- ------------ ------- <S> <C> <C> <C> <C> Balances, January 1, 1996 $1,416,119 $13,218,757 $ ( 6,758) $3,083,386 $17,711,504 Net income - - - 2,173,952 2,173,952 Distributions - common stock - - - (1,742,507) (1,742,507) Distributions - preferred stock - - - (1,294,042) (1,294,042) Accretion on preferred stock - (154,317) - - (154,317) Exercise of options 23,500 190,937 - - 214,437 Shares issued through dividend reinvestment plan 34,023 395,360 - - 429,383 Net unrealized gain on available-for-sale securities - - 104,431 - 104,431 --------- --------- -------- ---------- --------- Balances, December 31, 1996 1,473,642 13,650,737 97,673 2,220,789 17,442,841 Net income - - - 2,285,265 2,285,265 Distributions - common stock - - - (1,366,365) (1,366,365) Distributions - preferred stock - - - (970,531) (970,531) Accretion on preferred stock - (116,958) - - (116,958) Exercise of options 25,500 207,188 - - 232,688 Shares issued through dividend reinvestment plan 45,172 527,774 - - 572,946 Net unrealized gain on available-for-sale securities - - 75,120 - 75,120 ---------- ---------- ---------- --------- ---------- Balances, September 30, 1997 $1,544,314 $14,268,741 $ 172,793 $ 2,169,158 $18,155,006 ========== =========== =========== =========== =========== </TABLE> See accompanying notes to consolidated financial statements.
<TABLE> <CAPTION> ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 1997 1996 <S> <C> <C> Cash flows from operating activities: Net income $ 2,285,265 $ 1,735,697 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of real estate (599,251) - (Increase) in rental income from straight-lining of rent (258,575) - Provision for valuation adjustment of real estate - 459,000 Depreciation and amortization 754,580 483,575 Minority interest 230,839 5,249 Changes in assets and liabilities: (Increase) in rent, interest, deposits and other receivables (259,523) (109,182) Increase (decrease) in accrued expenses and other liabilities (5,756) 176,441 ------ ------- Net cash provided by operating activities 2,147,579 2,750,780 --------- --------- Cash flows from investing activities: Additions to real estate (2,832,231) (11,442,313) Net proceeds from sale of real estate 4,347,603 - Collection of mortgages receivable - (including $86,466 and $934,984 from related parties) 106,895 954,066 Collection of senior secured note receivable - BRT Realty Trust - related party - 528,575 Sale of U.S. Government obligations and securities, net - 569,598 Investment by minority interest in subsidiary - 167,980 Payments to minority interest by subsidiary (396,333) (30,757) Other 54,332 (2,248) Net cash provided by (used in) investing activities 1,280,266 (9,255,099) --------- ---------- Cash flows from financing activities: Proceeds from mortgages payable 1,600,000 7,125,000 Repayment of mortgages payable (2,163,398) (76,955) Repayments on note payable-bank (1,900,000) - Payment of financing costs (89,088) (204,269) Exercise of stock options 232,688 205,312 Cash distributions - common stock (1,345,163) (1,288,008) Cash distributions - preferred stock (970,531) (970,531) Issuance of shares through dividend reinvestment plan 572,946 238,511 ------- ------- Net cash provided by (used in) financing activities (4,062,546) 5,029,060 ---------- --------- Net (decrease) increase in cash and cash equivalents (634,701) (1,475,259) Cash and cash equivalents at beginning of period 2,478,580 3,844,409 --------- --------- Cash and cash equivalents at end of period $1,843,879 $2,369,150 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for interest expense $ 1,272,646 $ 549,524 Cash paid during the period for income taxes 17,035 59,444 Supplemental schedule of noncash investing and financing activities: Accretion on preferred stock 116,958 115,563 See accompanying notes to consolidated financial statements. </TABLE>
One Liberty Properties, Inc. and Subsidiaries Notes to Consolidated Financial Statements Note 1 - Basis of Preparation The accompanying interim unaudited consolidated financial statements as of September 30, 1997 and for the nine and three months ended September 30, 1997 and 1996 reflect all normal, recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for such interim periods. The results of operations for the nine and three months ended September 30, 1997 are not necessarily indicative of the results for the full year. The consolidated financial statements include the accounts of One Liberty Properties, Inc., its wholly-owned subsidiaries and a majority-owned limited liability company (see Note 5). Material intercompany items and transactions have been eliminated. One Liberty Properties, Inc., its subsidiaries and the limited liability company are hereinafter referred to as the "Company" Certain amounts reported in previous consolidated financial statements have been reclassified in the accompanying consolidated financial statements to conform to the current year's presentation. These statements should be read in conjunction with the consolidated financial statements and related notes which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Note 2 - Per Share Data Primary earnings per common share data is based upon the weighted average number of common shares and assumed equivalent shares outstanding during the period, after giving effect to dividends and accretion relating to the Company's preferred stock. The preferred stock is not considered a common stock equivalent for the purposes of computing earnings per share because their assumed conversion is anti-dilutive. The assumed exercise of outstanding stock options, using the treasury stock method, is not materially dilutive for the primary earnings per common share computation for the nine and three month periods ended September 30, 1997 and 1996. Fully diluted earnings per common share are based on an increase in the number of common shares that would be outstanding assuming the exercise of common share options. Since fully diluted earnings per share amounts are not materially dilutive, such amounts are not presented.
One Liberty Properties, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) Note 2 - Per Share Data (Continued) In February, 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of Statement 128 on the calculation of primary and fully diluted earnings per share is not expected to be material. Note 3 - Preferred and Common Stock Dividend Distributions On August 25, 1997 the Board of Directors declared quarterly cash distributions of $.30 and $.40 per share on the Company's common and preferred stock, respectively, payable on October 1, 1997 to stockholders of record on September 17, 1997. Note 4 - Stock Options Options to purchase a total of 25,500 shares of the Company's common stock at $9.125 per share were exercised in September and June 1997. The options had been granted under the 1989 Stock Option Plan. Note 5 - Sale of Real Estate On August 5, 1997, the property owned by a limited liability company in which the Company is a significant member was sold and the limited liability company was liquidated. A gain of approximately $599,000 was realized on the sale. The Company's share of the gain is approximately $384,000. Note 6 - Financial Accounting Standards Board Statement No. 131 In June, 1997 the Financial Accounting Standards Board issued Statement No. 131,"Disclosure about segments of an enterprise and Related Information" which is effective for financial statements issued for periods beginning after December 15, 1997. Statement No. 131 requires disclosures about segments of an enterprise and related information regarding the different types of business activities in which an enterprise engages and the different economic environments in which it operates. The Company does not believe that the implementation of Statement No. 131 will have a material impact on its financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Company's primary sources of liquidity are cash generated from operating activities, cash and cash equivalents, funds available under a revolving credit facility (of which $7,000,000 was available at September 30, 1997) and funds obtainable from mortgages to be secured by real estate investments. On August 5, 1997, the property owned by a limited liability company in which the Company is a significant member was sold and the limited liability company was liquidated. A gain of approximately $599,000 was realized on the sale. The Company's share of the gain was approximately $384,000. A portion of the net cash proceeds distributed to the Company by the limited liability company was used to pay off $1,050,626 under the Credit Agreement, (defined below), the outstanding balance at that time. In September 1997, the Company purchased an additional property for a consideration of approximately $2,830,000. The Company borrowed $2,700,000 under the Credit Agreement ($700,000 has since been repaid with cash provided by operations) to consumate the purchase. In March, 1996 the Company entered into a $5 million revolving credit agreement ("Credit Agreement") with Bank Leumi Trust Company of New York ("Bank Leumi"). Under the terms of the Credit Agreement the Company can add additional lenders to provide a maximum total facility of $15,000,000. In June 1997, the Company closed on a $4,000,000 participation interest with Commercial Bank of New York (formerly First Bank of the Americas), increasing the total facility to $9,000,000. Borrowings under the Credit Agreement will provide the Company with funds, when needed, to acquire additional properties. The Credit Agreement matures February 28, 1999 with a right for the Company to extend the Credit Agreement until February 29, 2000. The Company is currently in discussions concerning the acquisition of additional net leased properties. In management's judgement, cash provided from operations and the Company's cash position will provide adequate funds for cash distributions to shareholders and operating expenses. These sources of funds, as well as funds available under the Credit Agreement, will provide funds for future property acquisitions. It will continue to be the Company's policy to make sufficient cash distributions to shareholders in order for the Company to maintain its real estate investment trust status under the Internal Revenue Code. In connection with the lease agreements with Total Petroleum, Inc. ("Total Petroleum") consummated in 1991, the Company agreed to expend certain funds to remediate environmental problems at certain locations net leased to Total Petroleum. It was agreed that the net cost to the Company would not exceed $350,000 per location, with any excess being the responsibility of Total Petroleum. At that time the Company deposited $2,000,000 with an independent escrow agent to insure compliance by the Company with its obligations with respect to the environmental clean up. The escrow agent held approximately $881,000 as of September 30, 1997, which the Company deems adequate to cover any additional environmental costs.
Results of Operations Nine and three months ended September 30, 1997 and 1996 As a result of the acquisition of five properties in 1996 and one property in 1997 rental income increased by $1,108,383 to $3,949,729 for the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996. The properties acquired in 1996 were acquired at various times between April and November 1996; accordingly, two of such properties (purchased in the last quarter of 1996), and the property acquired in 1997, did not contribute to rental income in the 1996 nine month period, and three of such properties contributed to rental income for only a portion of the 1996 nine month period. Rental income for the 1997 nine month period was negatively affected by the sale of three properties, one in January 1997, one in May 1997 and the third, and most material, in August 1997. The property acquisitions and dispositions referred to above, also affected rental income for the quarter ended September 30, 1997 as compared to the quarter ended September 30, 1996. Rental income for the 1997 quarter was $19,440 greater than the 1996 quarter. The primary reasons for rental income in the third quarter of 1997 not reflecting a greater increase as compared to the third quarter of 1996 are the property sale in early August 1997, the disposition of two other properties in January 1997 and May 1997 and the greater impact of straight-lining of rents during the September 30, 1996 quarter. The decrease in interest income from related parties of $295,466 from $921,462 in the nine months ended September 30, 1996 to $625,996 in the 1997 nine month period and the decrease of $93,995 from $301,591 in the three months ended September 30, 1996 to $207,596 in the current three month period is substantially due to the payoff in full of a senior note receivable during August 1996. Interest and other income decreased to $50,150 in the current nine month period from $214,023 in the prior nine month period and to $17,703 in the current three month period from $44,522 in the prior three month period due to a combination of factors including a decrease in interest earned on U.S. Government securities resulting from the sale of such securities, the proceeds of which were used to purchase properties. Increases in depreciation and amortization expense of $271,005 and $64,777 for the nine and three months ended September 30, 1997 to $754,580 and $252,476 results primarily from depreciation on properties acquired during 1996. Also contributing to the increase was the amortization of capitalized costs incurred in connection with the Company's credit facility and placing mortgages on its properties. The increase in interest-mortgages payable to $1,157,027 and $368,788 in the current nine and three month periods from $557,880 and $216,331 in the prior nine and three month periods is due to interest paid on mortgages placed on properties acquired during 1996. Interest - bank note payable amounted to $96,771 and $25,635 during the nine and three months ended September 30, 1997 resulting from borrowings under the Credit Agreement. Such interest amounted to $15,418 during both of the 1996 comparable periods. Borrowings under the Credit Agreement were made to facilitate property acquisitions. During the nine and three months ended September 30, 1996 the Company determined that the estimated fair value of certain of its properties were lower than the carrying amount and thus recorded a provision for valuation adjustment for the difference. The valuation adjustment was $459,000 for the nine months ended September 30, 1996, covering three properties and $145,000 for the three months ended September 30, 1996 covering one property. Two of these properties were sold during the nine months ended September 30, 1997 and one property is vacant. There were no comparable provisions taken in 1997. On August 5, 1997, the property owned by a limited liability company in which the Company is a significant member was sold and a gain of $599,251 was realized on the sale. The Company's share of the gain is $383,915 (after the minority interest share of the gain of $215,336).
Part II - Other Information Item 6. - Exhibits and Reports on Form 8-K No Form 8-Ks were filed during the quarter ended September 30, 1997.
ONE LIBERTY PROPERTIES, INC. 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. One Liberty Properties, Inc. (Registrant) November 13, 1997 /s/ Matthew Gould Date Matthew Gould President November 13, 1997 /s/ David W. Kalish Date David W. Kalish Vice President and Chief Financial Officer