-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FvBmfEhNXHLFSpbRcjc38IiPY0oa+VN9cir1/GJ8Qc+igsTqCUKtrUqm5A+kM6kI zhNViki90UJFaXI9mlHtzQ== 0000950137-01-503098.txt : 20010816 0000950137-01-503098.hdr.sgml : 20010816 ACCESSION NUMBER: 0000950137-01-503098 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GETTY REALTY CORP /MD/ CENTRAL INDEX KEY: 0001052752 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 113412575 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13777 FILM NUMBER: 1713995 BUSINESS ADDRESS: STREET 1: 125 JERICHO TURNPIKE CITY: JERICHO STATE: NY ZIP: 11753 BUSINESS PHONE: 5163382600 MAIL ADDRESS: STREET 1: 125 JERICHO TURNPIKE CITY: JERICHO STATE: NY ZIP: 11753 10-Q 1 c64495e10-q.txt QUARTERLY REPORT 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark one) [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For quarter ended June 30,2001 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to -------------- --------------- Commission file number 001-13777 GETTY REALTY CORP. ------------------ (Exact name of registrant as specified in its charter) Maryland 11-2412575 - ------------------------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 125 Jericho Turnpike, Suite 103, Jericho, New York 11753 - -------------------------------------------------- ----- (Address of principal executive offices) (Zip code) (516) 478-5400 -------------- (Registrant's telephone number, including area code) 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 --- --- Registrant had outstanding 21,415,533 shares of Common Stock, par value $.01 per share, and 2,865,768 shares of Series A Participating Convertible Redeemable Preferred Stock, par value $.01 per share, as of August 6, 2001. ================================================================================ 2 GETTY REALTY CORP. INDEX Part I. FINANCIAL INFORMATION Page Number Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000 1 Consolidated Statements of Operations for the three and six months ended June 30, 2001 and 2000 2 Consolidated Statements of Cash Flows for the six months ended June 30, 2001 and 2000 3 Notes to Consolidated Financial Statements 4-6 Item 2. Management's Discussion and Analysis of Financial 7-10 Condition and Results of Operations Part II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 3 GETTY REALTY CORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
- -------------------------------------------------------------------------------------------------------- June 30, 2001 December 31, Assets: Historical Pro Forma 2000 - -------------------------------------------------------------------------------------------------------- (unaudited) Real Estate: Land $ 135,015 $ 135,015 $ 135,349 Buildings and improvements 177,680 177,680 177,688 --------- --------- --------- 312,695 312,695 313,037 Less - accumulated depreciation and amortization 85,462 85,462 80,971 --------- --------- --------- Real estate, net 227,233 227,233 232,066 Cash and equivalents 2,105 2,105 723 Mortgages and accounts receivable, net 4,906 4,906 5,472 Deferred rent receivable 4,194 4,194 -- Recoveries from state underground storage tank funds 10,755 10,755 11,957 Prepaid expenses and other assets 1,210 1,210 5,507 --------- --------- --------- Total assets $ 250,403 $ 250,403 $ 255,725 ========= ========= ========= - ------------------------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity: - ------------------------------------------------------------------------------------------------------ Borrowing under credit lines $ 19,400 $ 19,400 $ 27,000 Mortgages payable 21,856 21,856 22,969 Accounts payable and accrued expenses 13,152 77,252 14,109 Environmental remediation costs 22,165 22,165 23,371 Deferred income taxes 42,229 42,229 40,177 --------- --------- --------- Total liabilities 118,802 182,902 127,626 --------- --------- --------- Stockholders' equity: Referred stock, par value $.01 per shares; authorized 20,000,000 shares for issuance in series of which 3,000,000 shares are classified as Series A Participating Convertible Redeemable Preferred; issued 2,888,798 at June 30, 2001 and December 31, 2000 72,220 72,220 72,220 Common stock, par value $.01 per share; authorized 50,000,000 shares; issued 13,572,186 at June 30, 2001 and 13,567,335 at December 31, 2000 136 136 136 Paid-in capital 67,053 7,857 67,036 Retained earnings 4,904 - 1,419 Preferred stock held in treasury, at cost (23,030 shares at June 30, 2001 and December 31, 2000) (430) (430) (430) Common stock held in treasury, at cost (1,019,048 shares at June 30, 2001 and December 31, 2000) (12,282) (12,282) (12,282) --------- --------- --------- Total stockholders' equity 131,601 67,501 128,099 --------- --------- --------- Total liabilities and stockholders' equity $ 250,403 $ 250,403 $ 255,725 ========= ========= =========
See accompanying notes. -1- 4 GETTY REALTY CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)
- --------------------------------------------------------------------------------------------------------------- Three months ended June 30, Six months ended June 30, - --------------------------------------------------------------------------------------------------------------- 2001 2000 2001 2000 - --------------------------------------------------------------------------------------------------------------- Revenues: Revenues from rental properties $17,092 $14,706 $34,238 $29,430 Other income 675 588 907 741 ------------------------- ------------------------ 17,767 15,294 35,145 30,171 ------------------------- ------------------------ Rental property expense 2,901 3,086 5,697 6,138 Environmental expenses 1,254 1,760 4,013 4,793 General and administrative expenses 1,219 1,075 2,236 1,678 Depreciation and amortization 2,364 2,483 4,733 4,994 Interest expense 744 920 1,642 1,690 ------------------------- ------------------------ 8,482 9,324 18,321 19,293 ------------------------- ------------------------ Earnings before provision for income taxes 9,285 5,970 16,824 10,878 Provision for income taxes 3,824 2,375 7,031 4,571 ------------------------- ------------------------ Net earnings 5,461 3,595 9,793 6,307 Preferred stock dividends 1,272 1,277 2,544 2,557 ------------------------- ------------------------ Net earnings applicable to common stockholders $ 4,189 $ 2,318 $ 7,249 $ 3,750 ========================= ======================== Net earnings per common share: Basic $.33 $.18 $.58 $.29 Diluted $.33 $.18 $.58 $.29 Weighted average common shares outstanding: Basic 12,550 12,844 12,549 13,132 Diluted 12,561 12,845 12,557 13,133 Pro forma net earnings per common share: Basic $.45 Diluted $.45 Pro forma weighted average common shares outstanding: Basic 16,102 Diluted 16,110
See accompanying notes. -2- 5 GETTY REALTY CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
- -------------------------------------------------------------------------------------- Six months ended June 30, - -------------------------------------------------------------------------------------- 2001 2000 - -------------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings $ 9,793 $ 6,307 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 4,733 4,994 Deferred income taxes 2,052 3,641 Gain on dispositions of real estate (628) (495) Deferred rent receivable (4,194) -- Changes in assets and liabilities: Mortgages and accounts receivable 566 47 Recoveries from state underground storage tank funds 1,202 (2,579) Prepaid expenses and other assets 4,297 227 Accounts payable and accrued expenses (957) (1,073) Environmental remediation costs (1,206) 193 Income taxes payable -- (1,374) ------------------------ Net cash provided by operating activities 15,658 9,888 ------------------------ Cash flows from investing activities: Capital expenditures (373) (555) Property acquisitions -- (155) Proceeds from dispositions of real estate 1,101 1,181 ------------------------ Net cash provided by investing activities 728 471 ------------------------ Cash flows from financing activities: Borrowing (repayments) under credit lines, net (7,600) 12,400 Repayment of mortgages payable (1,113) (2,754) Cash dividends (6,308) (6,462) Stock options, common and treasury stock, net 17 (9,902) ------------------------ Net cash used in financing activities (15,004) (6,718) ------------------------ Net increase in cash and equivalents 1,382 3,641 Cash and equivalents at beginning of period 723 (4,162) ------------------------ Cash and equivalents at end of period $ 2,105 $ (521) ======================== Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 1,685 $ 1,841 Income taxes, net 333 2,304
See accompanying notes. -3- 6 GETTY REALTY CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. General: The accompanying consolidated financial statements include the accounts of Getty Realty Corp. and its wholly-owned subsidiaries (the "Company"). The consolidated financial statements have been prepared, in conformity with generally accepted accounting principles and include amounts that are based on management's best estimates and judgments. While all available information has been considered, actual amounts could differ from those estimates. The consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation. These statements should be read in conjunction with the consolidated financial statements and related notes which appear in the Company's Transition Report on Form 1O-K for the transition period February 1, 2000 to December 31, 2000. The Consolidated Statements of Operations and Cash Flows for 2000 have been recast to include the three and six months ended June 30, 2000 as a result of the change in the Company's year-end to December 31 from January 31. 2. Revenue recognition: Rental revenue under the Amended and Restated Master Lease ("Master Lease") with Getty Petroleum Marketing Inc. ("Marketing"), which became effective December 9, 2000, is recognized on a straight-line basis over the initial fifteen-year lease term. The cumulative difference between lease revenue recognized under this method and contractual lease payment terms is recorded as deferred rent receivable. 3. Earnings per common share: Basic earnings per common share is computed by dividing net earnings less preferred dividends by the weighted average number of common shares outstanding during the period. Diluted earnings per common share also gives effect to the potential dilution from the exercise of stock options in the amount of 11,000 shares and 1,000 shares for the quarters ended June 30, 2001 and 2000, respectively, and 8,000 shares and 1,000 shares for the six months ended June 30, 2001 and 2000, respectively. For the quarter and six months ended June 30, 2001 and 2000, conversion of Series A Participating Convertible Redeemable Preferred stock into common stock utilizing the if-converted method would have been antidilutive and therefore conversion was not assumed for the purposes of computing diluted earnings per common share. 4. Contingency: On November 2, 2000, the Company entered into the Master Lease, which became effective upon the acquisition of a controlling interest in Marketing by a subsidiary of OAO Lukoil. The amendment of the Master Lease and a related amendment of a lease between two of the Company's subsidiaries was alleged by Fleet National Bank ("Fleet" or the "Lenders") to have caused a non-monetary default under a loan agreement between one of those subsidiaries, Power Test Realty Company Limited Partnership, and Fleet (the "Loan Agreement"). On July 20, 2001, The Chase Manhattan Bank purchased the Lenders' interests under the loan agreement. The Company and Chase restated the then outstanding loan of approximately $20.0 million to bear interest at the lower of the prime rate or 2.5% over 30-day LIBOR and to mature on August 31, 2002. As a result of such restatement, the non-monetary default alleged by Fleet was cured. On August 1, 2001, the Company retired the entire outstanding loan with a portion of the net proceeds of its 8.9 million share common stock offering (see Note 6). -4- 7 5. Stockholders' equity: A summary of the changes in stockholders' equity for the six months ended June 30, 2001 is as follows (in thousands, except per share amounts):
Preferred Common Stock Held Stock Held Preferred Common Paid-in Retained in Treasury, in Treasury, Stock Stock Capital Earnings at Cost at Cost Total - ------------------------------------------------------------------------------------------------------------------- Balance, December 31, 2000 $72,220 $136 $67,036 $1,419 ($430) ($12,282) $128,099 Net earnings 9,793 9,793 Stock options exercised 17 17 Cash dividends: Preferred -- $.8875 per share (2,544) (2,544) Common -- $.30 per share (3,764) (3,764) - ------------------------------------------------------------------------------------------------------------------- Balance, June 30, 2001 $72,220 136 $67,053 $4,904 ($430) ($12,282) $131,601 ===================================================================================================================
6. Subsequent events: On August 1, 2001, the Company closed a public offering of 8,855,000 shares of its common stock (including exercise of the underwriters' over-allotment option) at a price of $16 per share, and at a special meeting of stockholders held on August 1, 2001, the Company's stockholders approved a charter amendment containing ownership limitations typical for real estate investment trusts (REITs). A portion of the $133.5 million net proceeds of the offering was used to pay a $64.1 million special one-time "earnings and profits" cash distribution to stockholders. The special distribution was paid on August 2, 2001 to holders of record of Getty common stock and Series A Preferred stock as of the close of business on July 25, 2001. Common stockholders received $4.15 per share and Series A Preferred stockholders received $4.20 per share. Purchasers of Getty common stock in the public offering did not receive any portion of the special distribution on any of the shares of common stock they purchased. The Company used $17.5 million of net proceeds from the offering to repay all amounts then outstanding under the lines of credit and $19.9 million to retire the loan with Chase Manhattan Bank (which had been previously purchased from Fleet National Bank). The remaining $32.0 million of net proceeds will be used for general corporate purposes. The Company will elect to be taxed as a REIT under the federal income tax laws beginning with the year ending December 31, 2001. As a REIT, the Company will be required to distribute at least 90% of its taxable income to stockholders each year. The Company intends to pay common stock dividends of $0.4125 per quarter ($1.65 per share on an annual basis), commencing with the quarterly dividend to be declared in September 2001. Payment of future dividends is subject to market conditions, the Company's financial condition, the distribution preferences of the Company's preferred stock and other factors, and therefore cannot be assured. While the REIT election is effective for tax purposes as of the beginning of the year, the ability to make such election was contingent upon the completion of the offering to finance the required distribution of "earnings and profits". Accordingly, the effects of the change in tax status from a C-corp to a REIT will be reflected in the third quarter at which time, the Company will record a nonrecurring tax benefit in the third quarter results to reverse the provision for income taxes recorded for the six months ended June 30, 2001 and other accrued tax liabilities that it would no longer be required to pay as a REIT. -5- 8 7. Pro forma presentation The Pro Forma Consolidated Balance Sheet as of June 30, 2001 gives effect to the accrual for the "earnings and profits" distribution of $64.1 million to the common and Series A Preferred stockholders (See Note 6). In connection with the common stock offering, the Company will elect to be taxed as a real estate investment trust and will be required to make the aforementioned distribution. Pro Forma Net Earnings per Common Share for the six months ended June 30, 2001 is presented to give effect to the dilution in net earnings per common share caused by the issuance of common stock to fund the "earnings and profits" distribution to pre-offering stockholders (See Note 6). Pro forma net earnings per common share assumes the issuance of approximately 3,553,000 shares of common stock at an offering price of $16.00 per share, which would be utilized to fund the "earnings and profits" distribution of $64,100,000 after deducting the historical net earnings of $7,249,000 applicable to common stockholders. -6- 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General We are a real estate company specializing in the ownership and leasing of service stations, convenience stores and petroleum marketing terminals. We lease most of our properties on a long-term net basis to Getty Petroleum Marketing Inc. ("Marketing"), which was spun-off to our stockholders on March 21, 1997. On December 12, 2000, our Board of Directors approved a change in our fiscal year end to December 31 from January 31. We will elect to be taxed as a REIT under the federal income tax laws beginning with the year ending December 31, 2001. As a REIT, we will be required to distribute at least 90% of our taxable income to stockholders each year. Our financial results largely depend on rental income from Marketing and other tenants and are materially dependent upon the ability of Marketing to meet its obligations under the master lease entered into on February 1, 1997 and amended and restated effective December 9, 2000 (the "Master Lease"). Based on the information currently available to us, we do not anticipate that Marketing will have difficulty in making required rental payments under the Master Lease in the foreseeable future. On December 8, 2000, a subsidiary of OAO Lukoil, Russia's largest vertically integrated oil company, acquired approximately 72% of the outstanding common stock of Marketing in a tender offer and acquired the remaining equity of Marketing through a merger on January 25, 2001. The financial results for 2000 have been recast to include the three and six months ended June 30, 2000 as a result of the change in our year-end to December 31 from January 31. Results of Operations - Quarter ended June 30, 2001 compared with quarter ended June 30, 2000 Revenues from rental properties for the quarter ended June 30, 2001 were $17.1 million, compared to $14.7 million for the quarter ended June 30, 2000. Approximately $16.5 million and $14.0 million of these rentals for the quarters ended June 30, 2001 and 2000, respectively, were from properties leased to Marketing under the Master Lease. The increase in rental income is primarily due to $2.1 million of deferred rent receivable recognized in the current period, as required by generally accepted accounting principles, related to the 2% future annual rent increases due from Marketing under the terms of the Master Lease. These fixed rent increases are recognized on a straight-line basis over the initial 15-year term of the Master Lease rather than when received. Previously, rent increases were based on the Consumer Price Index and would have been recognized when such increases were due. Rental income from Marketing also increased during the current quarter by $0.3 million due to a 4% rent increase effective December 9, 2000, net of a rent reduction due to a decrease in the number of properties leased compared to the prior period. Other income was $0.7 million for the quarter ended June 30, 2001 as compared with $0.6 million for the quarter ended June 30, 2000. The quarter ended June 30, 2000 included $0.2 million of higher gains on real estate dispositions. Rental property expenses, which are principally comprised of rent expense and real estate taxes, were $2.9 million for the quarter ended June 30, 2001 compared to $3.1 million for the quarter ended June 30, 2000. The decrease was due to a reduction in rent paid for leased properties due to termination of leases with third party landlords. Environmental expenses for the quarter ended June 30, 2001 were $1.3 million as compared with $1.8 million for the quarter ended June 30, 2000. The current quarter included a change in estimated remediation costs of $0.9 million as compared to $1.5 million during the prior year quarter. These charges are the result of changes in estimated remediation costs associated with contamination discovered at sites where we retain responsibility for environmental remediation and revisions to estimates at other sites where remediation is ongoing. As of June 30, 2001, we had accrued $22.2 million as management's best estimate for probable and reasonably estimable environmental remediation costs and had recorded $10.8 million as management's best estimate for recoveries from state underground storage tank remediation funds related to environmental obligations -7- 10 and liabilities. Such accruals are reviewed on a regular basis and any changes will be reflected in our financial statements as they become known. General and administrative expenses for the quarter ended June 30, 2001 were $1.2 million, which is comparable to the $1.1 million for the quarter ended June 30, 2000. Included in general and administrative expenses for the quarters ended June 30, 2001 and 2000 are $74,000 and $159,000, respectively, of net fees paid to Marketing for certain administrative services and technical services performed under a services agreement. Substantially all of these services were discontinued as of April 1, 2001. Depreciation and amortization was $2.4 million and $2.5 million, respectively, for the quarters ended June 30, 2001 and 2000. The decrease was primarily the result of assets becoming fully depreciated and real estate dispositions. Interest expense for the three months ended June 30, 2001 was $0.7 million as compared with $0.9 million for the quarter ended June 30, 2000. The decrease was principally due to lower average borrowings and lower interest rates. Results of Operations - Six months ended June 30, 2001 compared with six months ended June 30, 2000 Revenues from rental properties for the six months ended June 30, 2001 were $34.2 million as compared with $29.4 million for the comparable prior year period. Rentals from properties leased to Marketing under the Master Lease for the six months ended June 30, 2001 were $33.0 million as compared with $28.1 million for the prior year period. The increase in rental income is primarily due to $4.2 million of deferred rent receivable accrued in the current year. Rental income from Marketing also increased during the current period by $0.7 million due to a 4% rent increase effective December 9, 2000, net of a rent reduction due to a decrease in the number of properties leased compared to the prior period. Other income was $0.9 million for the six months ended June 30, 2001 as compared with $0.7 million for the six months ended June 30, 2000. The six month period ended June 30, 2001 included $0.1 million of higher gains on real estate dispositions. Rental property expenses were $5.7 million for the six months ended June 30, 2001, compared to $6.1 million for the comparative prior year period. The decrease was due to a reduction in rent paid for leased properties due to termination of leases with third party landlords and real estate tax refunds received in the six months ended June 30, 2001. Environmental expenses for the six months ended June 30, 2001 were $4.0 million which decreased by $0.8 million from the prior year period. The decrease was due to reduced changes in estimated remediation costs associated with contamination discovered at sites where we retain responsibility for environmental remediation and revisions to estimates at other sites where remediation is ongoing of $0.4 million for the six month period. The prior six month period also included $0.7 million of charges related to environmental litigation. General and administrative expenses were $2.2 million for the six months ended June 30, 2001 as compared with $1.7 million for the six months ended June 30, 2000. The increase of $0.5 million was primarily due to employee-related expenses and legal fees. Included in general and administrative expenses for the six months ended June 30, 2001 and 2000 are $233,000 and $318,000, respectively, of net fees paid to Marketing for certain administrative and technical services performed under a services agreement. Substantially all of these services were discontinued as of April 1, 2001. Depreciation and amortization was $4.7 million for the six months ended June 30, 2001, a decrease of $0.3 million as compared with the six months ended June 30, 2000 due to assets becoming fully depreciated and real estate dispositions. Interest expense for the six months ended June 30, 2001 was $1.6 million as compared with $1.7 million for the six months ended June 30, 2000. The decrease in interest expense was principally due to lower average borrowings. -8- 11 Liquidity and Capital Resources Our principal sources of liquidity are available cash and equivalents, the cash flows from our business and a short-term uncommitted line of credit with a bank. Management believes that cash requirements for our business, including capital expenditures and debt service, can be met by cash flows from operations, available cash and equivalents and the credit line. As of June 30, 2001, we had lines of credit amounting to $35.0 million, of which $19.4 million was utilized for short-term borrowing and $3.3 million in connection with outstanding letters of credit. We repaid all amounts outstanding under the credit lines with a portion of the net proceeds of a common stock offering on August 1, 2001, as discussed below. As of August 8, 2001, a line of credit with one of the banks was terminated and the remaining line was increased to $25.0 million. Borrowings under the line of credit are unsecured and bear interest at the prime rate or, at our option, LIBOR plus 1.25%. The line of credit is subject to renewal at the discretion of the bank. During the six months ended June 30, 2001 and 2000, the Company declared quarterly preferred stock dividends of $.44375 per share and quarterly cash common stock dividends of $.15 per share. These dividends aggregated $6.3 million and $6.5 million for the six months ended June 30, 2001 and 2000, respectively. Capital expenditures for the six months ended June 30, 2001 were $0.4 million. On August 1, 2000, we closed a public offering of 8,855,000 shares of our common stock (including exercise of the underwriters over-allotment option) at a price of $16 per share. At a special meeting of stockholders held on August 1, 2001, our stockholders approved a charter amendment containing ownership limitations typical for real estate investment trusts (REITs). We used a portion of the $133.5 million net proceeds of the offering to pay a $64.1 million special one-time cash distribution to stockholders. The special distribution was paid on August 2, 2001 to holders of record of Getty common stock and Series A Preferred stock as of the close of business on July 25, 2001. Common stockholders received $4.15 per share and Series A Preferred stockholders received $4.20 per share. Purchasers of Getty common stock in the public offering did not receive any portion of the special distribution on any of the shares of common stock they purchased. We used $17.5 million of net proceeds from the offering to repay all amounts then outstanding under the lines of credit and $19.9 million to retire the loan with Chase Manhattan Bank (which had been previously purchased from Fleet National Bank). The remaining $32.0 million of net proceeds will be used for general corporate purposes. We will elect to be taxed as a REIT under the federal income tax laws beginning with the year ending December 31, 2001. As a REIT, we will be required to distribute at least 90% of our taxable income to stockholders each year. We intend to pay common stock dividends of $0.4125 per quarter ($1.65 per share on an annual basis), commencing with the quarterly dividend to be declared in September 2001. Payment of dividends is subject to market conditions, our financial condition, the distribution preferences of our preferred stock and other factors, and therefore cannot be assured. As a result of a change in tax status from a C-corp. to a REIT, we will record a nonrecurring tax benefit in the third quarter results to reverse the provision for income taxes recorded for the six months ended June 30, 2001 and other accrued tax liabilities that we would no longer be required to pay as a REIT. Although we expect that the existing sources of liquidity will be sufficient to meet our expected business and debt service requirements, we may be required to obtain additional sources of capital in the future, which we believe are available. Special Factors Regarding Forward-Looking Statements Certain statements in this Quarterly Report on Form 1O-Q may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When we use the words "believes", "expects", "plans", "estimates" and similar expressions, we intend to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance and achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to: risks associated with owning and leasing real estate generally; dependence on -9- 12 Marketing as a tenant and on rentals from companies engaged in the petroleum marketing and convenience store businesses; competition for locations and tenants; the effects of regulation; our expectations as to the cost of completing environmental remediation; and the impact of our electing to be taxed as a REIT, including subsequent failure to qualify as a REIT and future dependence on external sources of capital. As a result of these and other factors, we may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect our business, financial condition, operating results, ability to pay dividends at expected levels, and stock prices. An investment in our stock involves various risks, including those mentioned above and elsewhere in this report and those that are detailed from time to time in filings with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements, which reflect our view only as of the date hereof. We undertake no obligation to publicly release revisions to these forward-looking statements that reflect future events or circumstances or reflect the occurrence of unanticipated events. -10- 13 Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. At our Annual Meeting of Stockholders on June 21, 2001, our stockholders re-elected Messrs. Milton Cooper, Philip E. Coviello, Leo Liebowitz, Howard Safenowitz and Warren Wintrub as directors and ratified the appointment of PricewaterhouseCoopers LLP as our auditors for the year ending December 31, 2001. At a Special Meeting of Stockholders on August 1, 2001, our stockholders approved a charter amendment containing ownership limitations typical for REITs. The amendment was approved by a vote of 12,288,071 common shares (including the Series A Preferred shares voting on an as-converted basis) in favor, 6,988 shares against and 3,411 abstentions or withheld votes, as well as by a separate class vote of the Series A Preferred stockholders, with 2,228,238 in favor, 530 against and 484 abstentions or withheld votes. The charter amendment was filed with the State Department of Assessments and Taxation of Maryland and became effective shortly after the meeting. Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. (a) The following exhibits are filed with this report: 3. Articles of Amendment dated August 1, 2001 to Charter of Getty Realty Corp. (incorporated herein by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K dated August 1, 200l). 10. Seconded Amended and Restated Loan Agreement, dated as of July 20, 2001, between Power Test Realty Company Limited Partnership and The Chase Manhattan Bank (incorporated herein by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K dated July 20, 2001). (b) The following Current Reports on Form 8-K have been filed by the Company since March 31, 2001: July 16, 2001 -- announcing mailing of proxy materials for Special Stockholders Meeting; July 17, 2001 -- announcing declaration of special distribution; July 20, 2001 -- announcing refinancing of loan agreement and preliminary results for quarter ended June 30, 2001; July 26, 2001 -- announcing pricing of common stock public offering and further preliminary results for quarter ended June 30, 200l; and August 1, 2001 -- announcing closing of common stock public offering, approval of charter amendment, payment of special distribution and intention to elect to be taxed as a REIT under federal income tax laws beginning with year ending December 31, 2001. -11- 14 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. GETTY REALTY CORP. ------------------ (Registrant) Dated: August 14, 2001 BY: /s/ Thomas J. Stirnweis ---------------------------------- (Signature) THOMAS J. STIRNWEIS Corporate Controller and Treasurer (Principal Financial and Accounting Officer) Dated: August 14, 2001 BY: /s/ Leo Liebowitz ---------------------------------- (Signature) LEO LIEBOWITZ President and Chief Executive Officer -12- -----END PRIVACY-ENHANCED MESSAGE-----