-----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, OoXCA9FQvP4vLM+mQySnABQJeFJI0xahKi88E4nwY8T2mmW+euogksJfL8TXcqgN aRVUIPP0gDWrF3uLtqlKZg== 0000950152-98-000911.txt : 19980212 0000950152-98-000911.hdr.sgml : 19980212 ACCESSION NUMBER: 0000950152-98-000911 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980211 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEVETRUST REALTY INVESTORS CENTRAL INDEX KEY: 0000020975 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 341085584 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05641 FILM NUMBER: 98530505 BUSINESS ADDRESS: STREET 1: 2001 CROCKER RD STE 400 CITY: WESTLAKE STATE: OH ZIP: 44145 BUSINESS PHONE: 2168990909 MAIL ADDRESS: STREET 1: 2001 CROCKER ROAD STREET 2: STE 400 CITY: WESTLAKE STATE: OH ZIP: 44145 10-Q 1 CLEVETRUST REALTY INVESTORS/QUARTERLY REPORT/10-Q 1 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 December 31, 1997 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 0-5641 CLEVETRUST REALTY INVESTORS (Exact name of registrant as specified in its charter) Massachusetts 34-1085584 (State or other jurisdiction of incorporation (I. R. S. Employer or organization) Identification No.) 2001 Crocker Road, Suite 400 Westlake, Ohio 44145 (Address of Principal Executive Offices) (Zip Code) (440) 899-0909 (Registrant's telephone number, including area code) Not Applicable 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 ________ Shares of Beneficial Interest Outstanding at February 6, 1998: 5,136,616 2 CLEVETRUST REALTY INVESTORS INDEX
Page Number PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Statement of Financial Condition -- December 31,1997 and September 30, 1997 3 Statement of Operations -- Three Months ended December 31, 1997 and 1996 4 Statement of Cash Flows -- Three Months ended December 31, 1997 and 1996 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities 10 Item 3. Defaults upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10
- 2 - 3 CLEVETRUST REALTY INVESTORS STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 SEPTEMBER 30, 1997 ------------------------- --------------------------- (in thousands) ASSETS - -------------------------------------------------------- Invested assets - NOTE B: Properties held for sale 9,590 12,918 Less: Valuation reserve 77 260 ------------------------- --------------------------- 9,513 12,658 Cash and cash equivalents 5,022 4,612 Other assets 208 368 ------------------------- --------------------------- TOTAL ASSETS $14,743 $17,638 ========================= =========================== LIABILITIES - -------------------------------------------------------- Mortgage notes payable $ 5,514 $ 5,561 Accrued federal and state income taxes - NOTE A 109 2,085 Accrued distributions payable - NOTE D 3,596 0 Accrued expenses and other liabilities - NOTE C 1,910 3,184 ------------------------- --------------------------- TOTAL LIABILITIES 11,129 10,830 SHAREHOLDERS' EQUITY - -------------------------------------------------------- Shares of Beneficial Interest, par value $1 per Share: Authorized - - Unlimited Issued and outstanding shares - 5,136,616 5,137 5,137 Additional paid-in capital 5,816 9,412 Accumulated deficit (7,339) (7,741) ------------------------- --------------------------- SHAREHOLDERS' EQUITY 3,614 6,808 ------------------------- --------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,743 $17,638 ========================= ===========================
See notes to financial statements. -3- 4 CLEVETRUST REALTY INVESTORS STATEMENTS OF OPERATIONS The following statements of operations of CleveTrust Realty Investors for the three-month periods ended December 31, 1997 and 1996, respectively, are unaudited, but in the opinion of management include all adjustments necessary to present fairly the results of operations. All such adjustments were of a normal, recurring nature. The results of operations for the three-month period ended December 31, 1997 are not necessarily indicative of the results of operations for succeeding periods.
Three Months Ended ----------------------------- 12/31/97 12/31/96 ------------ ------------ (in thousands, except per share data) INCOME - -------------------------------------------------- Real estate operations: Rental Income $ 669 $ 2,492 Less: Real estate operating expenses 244 1,106 ------- ------- Income from real estate operations 425 1,386 Interest income 53 20 Other 30 2 ------- ------- 508 1,408 EXPENSES - -------------------------------------------------- Interest: Mortgage notes payable 115 184 Bank notes payable 0 168 ------- ------- 115 352 General and administrative 210 536 Provision for valuation reserve - NOTE B (54) 0 ------- ------- 271 888 ------- ------- Income before gains on sales of real estate and income taxes 237 520 Gains on sales of real estate - NOTE B 373 576 Federal and state income taxes - NOTE A (208) 0 ------- ------- NET INCOME $ 402 $ 1,096 ======= ======= Per Share of Beneficial Interest - NOTE E: Income before gains on sales of real estate and income taxes 0.05 0.10 Gains on sales of real estate 0.07 0.11 Federal and state income taxes (0.04) 0.00 ------- ------- NET INCOME PER SHARE $ 0.08 $ 0.21 ======= ======= Weighted Average Number of Shares of Beneficial Interest Outstanding 5,137 5,143 ======= =======
See notes to financial statements. -4- 5 CLEVETRUST REALTY INVESTORS STATEMENTS OF CASH FLOWS
Three Months Ended ---------------------- 12/31/97 12/31/96 -------- -------- (in thousands) CASH FLOW FROM OPERATING ACTIVITIES: Net income $ 402 $ 1,096 Non-cash revenues and expenses included in income: Provision for (reverse) valuation reserve (54) 0 Decrease in other assets 160 2,030 Decrease in accrued interest on notes payable 0 (8) Decrease in accrued federal and state income taxes (1,976) 0 (Decrease) increase in accrued expenses and other liabilities (1,274) 298 Reconciliation to net cash flow from operating activities: Gains on sales of real estate (373) (576) -------------------- Cash Flow (Used In) From Operating Activities (3,115) 2,840 CASH FLOW FROM INVESTING ACTIVITIES: Equity investments: Improvements to existing properties 0 (373) Proceeds from properties sold 3,572 2,351 Real estate mortgage loan repayments 0 37 ------- ------- Cash Flow From Investing Activities 3,572 2,015 CASH FLOW FROM FINANCING ACTIVITIES: Mortgage notes payable: Principal borrowings 0 0 Principal amortization payments (47) (53) Principal repayments 0 (1,208) Bank notes payable: Repayments 0 (3,800) Shares repurchased and subsequently retired 0 (202) ------- ------- Cash Flow (Used In) Financing Activities (47) (5,263) ------- ------- Increase (decrease) in cash and short-term investments 410 (408) Balance at beginning of year 4,612 1,490 ------- ------- Balance at end of period $ 5,022 $ 1,082 ======= =======
See notes to financial statements. -5- 6 CLEVETRUST REALTY INVESTORS NOTES TO FINANCIAL STATEMENTS December 31, 1997 NOTE A - INCOME TAXES For the three month period ended December 31, 1997 the Trust recorded Federal income taxes of $207,000 ($14,000 of current taxes and $193,000 deferred) and State income taxes of $1,000. For the fiscal year ending September 30, 1998 the Trust could incur additional income taxes should the Trust be successful in completing the sale of the properties currently being held for sale. The Trust had no income tax expense for the three month period ended December 31, 1996. For the fiscal year ended September 30, 1997 the Trust recorded Federal income taxes of $2,400,000 ($2,531,000 of current taxes, net of a deferred tax asset of $131,000) and State income taxes of $314,00. During the three months ended December 31, 1997 the Trust made a Federal income tax payment of $2,131,000 for taxes due for the tax year ended September 30, 1997. The 1997 Federal tax return has not yet been filed. The Trust had a net deferred tax liability of approximately $62,000 at December 31, 1997. The Trust had a net deferred tax asset position at September 30, 1997 of approximately $131,000. NOTE B - INVESTED ASSETS On December 8, 1997 the Trust completed a $3,150,000 sale of the Petroleum Club Building located in Tulsa, Oklahoma. This sale resulted in a gain of approximately $373,000. Additionally, on December 15, 1997 the Trust completed a $643,000 sale of a vacant restaurant located in Davenport, Iowa. This sale resulted in a loss of approximately $129,000 which had previously been provided for in the Valuation Reserve. The Valuation Reserve on this property was $183,000, after applying the loss of $129,000, the balance of $54,000 was reversed. NOTE C - ACCRUED EXPENSES AND OTHER LIABILITIES At September 30, 1997 the Trust had accrued $1,160,000 of severance payments due the officers and employees of the Trust in connection with the Plan for the Orderly Liquidation of the Trust (the "Plan"). These payments were to be made at the termination of the individuals' employment upon receipt by the Trust of a release of all claims against the Trust. On October 24, 1997 the Trustees prepaid the severance payments after obtaining the required releases. By prepaying the severance, the payments will be shown as an expense on the Trust's 1997 tax return thus reducing the 1997 federal income tax obligations. NOTE D - DISTRIBUTIONS On December 19, 1997 the Trustees declared a liquidating distribution of $.70 per share, payable on January 19, 1998 to shareholders of record as of January 12, 1998. With the payment of this distribution, the combined per share amount of liquidation distributions paid to shareholders will total $6.40 since the effective date of the Plan, April 29, 1997. - 6 - 7 CLEVETRUST REALTY INVESTORS NOTES TO FINANCIAL STATEMENTS - (Continued) NOTE E - NET INCOME PER SHARE Net income per Share of Beneficial Interest has been computed using the weighted average number of Shares of Beneficial Interest outstanding each period. NOTE F - SUBSEQUENT EVENTS On January 30, 1998 the Trust completed a $7,400,000 sale of the Cannon West Shopping Center located in Austin, Texas. This sale resulted in a gain of approximately $743,000 which will be reported in the second quarter ended March 31, 1998. - 7 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. FINANCIAL CONDITION At December 31, 1997 the Trust's invested assets consisted of properties held for sale, net of a $77,000 valuation reserve, of $9,513,000. This compared with properties held for sale, net of a $260,000 valuation reserve, of $12,658,000 at September 30, 1997. The change since year end was due to the December 8, 1997 sale of the Petroleum Club Building, located in Tulsa, Oklahoma and the December 15, 1997 sale of a vacant restaurant, located in Davenport, Iowa. On December 19, 1997 the Trustees declared a liquidating distribution of $.70 per share, payable on January 19, 1998 to shareholders of record as of January 12, 1998. The $3,596,000 distribution was accrued at December 31, 1997. Also, at September 30, 1997 the Trust accrued $1,160,000 of severance payments due the officers and employees of the Trust in connection with the Plan. These payments were to be made at the termination of the individuals' employment upon receipt by the Trust of a release of all claims against the Trust. On October 24, 1997 the Trustees prepaid the severance payments after obtaining the required releases. By prepaying the severance, the payments will be shown as an expense on the Trust's 1997 tax return thus reducing the 1997 federal income tax obligation. These payments were the primary reason for the decrease in accrued expenses and other liabilities at December 31, 1997 from September 30, 1997. The $3,194,000 decrease in shareholders' equity at December 31, 1997 from September 30, 1997 was the net effect of the Trust recording net income of $402,000 and the reduction for the recording of the distribution declared of $3,596,000 referenced previously. RESULTS OF OPERATIONS Income from real estate operations during the quarter ended December 31, 1997 decreased $961,000 (69%) when compared to the quarter ended December 31, 1996. Rental income for the quarter ended December 31, 1997 decreased $1,823,000 (73%) compared to the quarter ended December 31, 1996. Real estate operating expenses decreased $862,000 (78%) in the three months ended December 31, 1997 versus 1996. The decline is primarily the result of the Trust selling eleven properties during the year ended September 30, 1997. The $237,000 (67%) decrease in interest expense for the three month period ended December 31, 1997 when compared to the same period one year ago was primarily due to the Trust's repayment of a $1,209,000 first mortgage loan on a property sold in fiscal 1997 and the repayment of a $9,800,000 loan with the Trust's Bank in fiscal 1997. The $326,000 decrease in general and administrative expenses when comparing the three months ended December 31, 1997 to December 31, 1996, was primarily due to the Trust recording $74,000 of expenses relating to the Plan and recording $266,000 of severance payable to officers and employees, which was discussed previously, during the three months ended December 31, 1996, with no like expenses being recorded during the current three-month period. Also, the Trust reversed $54,000 of valuation reserve which related to the vacant restaurant, as the loss on the sale was less than anticipated at the time the reserve was established. -8- 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS - (Continued) As previously mentioned, the Trust completed the $3,150,000 sale of the Petroleum Club Building, located in Tulsa, Oklahoma of December 8, 1997. This sale resulted in a gain of $373,000. For the quarter ended December 31, 1996 the Trust recorded a gain of $563,000 on the sale of the Littleton Bank Building and $13,000 on the sale of a .23 acre parcel of land located in Dubuque, Iowa. During the quarter ended December 31, 1997 the Trust recorded federal income tax expense of $207,000 ($14,000 of current taxes and $193,000 deferred) and $1,000 of state income taxes. There was no income tax expense for the quarter ended December 31, 1996. OUTLOOK On January 30, 1998 the Trust completed a $7,400,000 sale of the Cannon West Shopping Center located in Austin, Texas. This sale resulted in a gain of approximately $743,000 which will be reported in the second quarter ended March 31, 1998. Effective January 28, 1998 the Trust executed a contract of sale for Tiffany Plaza, Ardmore, Oklahoma for a sales price of $3,400,000. The contract provides for a due diligence period, during which time the buyer could cancel the contract at its option. Upon completion of the due diligence period the buyer would either place a non-refundable deposit with the Trust or cancel the contract. Thereafter, should the buyer fail to complete the sale, the deposit would be forfeited and retained by the Trust. Therefore, there is no guarantee that Tiffany Plaza would actually be sold for the price stated. Tiffany Plaza and a 20 acre vacant land parcel are the only remaining properties of the Trust. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. -9- 10 P A R T I I Item 1. Legal Proceedings There are no items or events requiring reporting with respect to this item. Item 2. Changes in Securities There are no items or events requiring reporting with respect to this item. Item 3. Defaults upon Senior Securities There are no items or events requiring reporting with respect to this item. Item 4. Submission of Matters to a Vote of Security Holders There are no items or events requiring reporting with respect to this item. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27: Financial Data Schedule (b) There were no Reports on Form 8-K filed during the quarter for which this report is filed. - 10 - 11 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. CLEVETRUST REALTY INVESTORS (Registrant) Date: February 10, 1998 By: /s/ John C Kikol ------------------------------- John C. Kikol, Chairman and President Date: February 10, 1998 By: /s/ Michael R Thoms ------------------------------- Michael R. Thoms, Vice President and Treasurer - 11 - 12 CLEVETRUST REALTY INVESTORS QUARTERLY REPORT ON FORM 10-Q FOR QUARTER ENDED DECEMBER 31, 1997 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- (27) Financial Data Schedule - 12 - EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 5,022 0 110 77 0 98 9,590 0 14,743 5,615 5,514 0 0 5,137 (1,523) 14,743 0 752 0 244 210 (54) 115 237 208 29 0 373 0 402 .08 .08
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