-----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, HAciHstE/SWDCkR6qe4jNSk4KO16ilBNxT78zsDDMdqNflhM2nNQ/Z1s3SNVKQyk GxTcKstzFV3gVmR1gUMNCQ== 0000948524-99-000072.txt : 19990816 0000948524-99-000072.hdr.sgml : 19990816 ACCESSION NUMBER: 0000948524-99-000072 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METRIC INCOME TRUST SERIES INC CENTRAL INDEX KEY: 0000846722 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 943087630 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18294 FILM NUMBER: 99688267 BUSINESS ADDRESS: STREET 1: ONE CALIFORNIA ST STREET 2: STE 1400 CITY: SAN FRANCISCO STATE: CA ZIP: 94111-5415 BUSINESS PHONE: 4156782000 MAIL ADDRESS: STREET 1: ONE CALIFORNIA ST STREET 2: SUITE 1400 CITY: SAN FRANCISCO STATE: CA ZIP: 94111-5415 FORMER COMPANY: FORMER CONFORMED NAME: METRIC PARTNERS HIGH INCOME FUND SERIES I INC DATE OF NAME CHANGE: 19890629 10-Q 1 JUNE 30, 1999 10-Q - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 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 0-18294 METRIC INCOME TRUST SERIES, INC., a California corporation (Exact name of Registrant as specified in its charter) CALIFORNIA 94-3087630 - --------------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One California Street San Francisco, California 94111 - --------------------------------------- ------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 678-2000 (800) 347-6707 in all states Indicate by check mark whether the registrant (1) has filed all the 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 common stock outstanding as of June 30, 1999: 6,321,641. - -------------------------------------------------------------------------------- Page 1 PART 1 FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited). METRIC INCOME TRUST SERIES, INC., a California corporation CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, 1999 1998 ---- ---- ASSETS Cash $ 290,000 $ 1,291,000 Accounts and Interest Receivable 9,000 14,000 Investment in Mortgage-Backed Securities 1,653,000 2,550,000 Prepaid and Other Assets -- 22,000 ------------ ------------ Total Assets $ 1,952,000 $ 3,877,000 ============ ============ LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities Dividends Payable $ -- $ 868,000 Payable to Advisor and Affiliates 5,000 4,000 Other Accounts Payable and Accrued Liabilities 8,000 36,000 ------------ ------------ Total Liabilities 13,000 908,000 ------------ ------------ Commitments and Contingencies Shareholders' Equity: Common Stock - no par value, stated at $0.001, 12,250,000 Shares authorized and 6,321,641 Shares issued and outstanding 6,000 6,000 Additional Paid-in Capital 55,200,000 55,200,000 Accumulated Dividends in Excess of Net Income (53,224,000) (52,278,000) Unrealized Holding Gain (Loss) on Investment in Mortgage-Backed Securities (43,000) 41,000 ------------ ------------ Total Shareholders' Equity 1,939,000 2,969,000 ------------ ------------ Total Liabilities and Shareholders' Equity $ 1,952,000 $ 3,877,000 ============ ============ See notes to consolidated financial statements (unaudited). Page 2 METRIC INCOME TRUST SERIES, INC., a California corporation CONSOLIDATED STATEMENTS OF INCOME OR LOSS (UNAUDITED) For the Six Months Ended June 30, ------------------------ 1999 1998 ---- ---- Revenues: Lease income $ -- $ 71,000 Interest on mortgage-backed securities 59,000 35,000 Other interest income 21,000 73,000 Gain on sale of mortgage-backed securities 8,000 -- --------- --------- Total Revenues 88,000 179,000 --------- --------- Expenses: General and administrative 140,000 191,000 --------- --------- Total Expenses 140,000 191,000 --------- --------- Loss Before Loss on Sale of Properties (52,000) (12,000) Loss on Sale of Properties - Net -- (25,000) --------- --------- Net Loss $ (52,000) $ (37,000) ========= ========= Net Income (Loss) per Share: Income (Loss) before loss on sale of properties $ (0.01) $ -- Loss on sale of properties -- -- --------- --------- Net Loss per Share $ (0.01) $ -- ========= ========= Dividends per Share $ 0.14 $ -- ========= ========= CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS (UNAUDITED) For the Six Months Ended June 30, ------------------------ 1999 1998 ---- ---- Net loss $ (52,000) $ (37,000) Unrealized holding gain (loss) on investment in mortgage-backed securities (76,000) 20,000 Realization of unrealized holding gain on investment in mortgage-backed securities (8,000) -- --------- --------- Comprehensive loss $(136,000) $ (17,000) ========= ========= See notes to consolidated financial statements (unaudited). Page 3 METRIC INCOME TRUST SERIES, INC., a California corporation CONSOLIDATED STATEMENTS OF INCOME OR LOSS (UNAUDITED) For the Three Months Ended June 30, -------------------------- 1999 1998 ---- ---- Revenues: Lease income $ -- $ 26,000 Interest on mortgage-backed securities 28,000 35,000 Other interest income 4,000 12,000 Gain on sale of mortgage-backed securities -- -- --------- --------- Total Revenues 32,000 73,000 --------- --------- Expenses: General and administrative 65,000 105,000 --------- --------- Total Expenses 65,000 105,000 --------- --------- Loss Before Loss on Sale of Properties (33,000) (32,000) Loss on Sale of Properties - Net -- (1,000) --------- --------- Net Loss $ (33,000) $ (33,000) ========= ========= Net Income (Loss) per Share: Income (Loss) before loss on sale of properties $ (0.01) $ -- Loss on sale of properties -- -- --------- --------- Net Loss per Share $ (0.01) $ -- ========= ========= Dividends per Share $ -- $ -- ========= ========= CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS (UNAUDITED) For the Three Months Ended June 30, -------------------------- 1999 1998 ---- ---- Net loss $ (33,000) $ (33,000) Unrealized holding gain (loss) on investment in mortgage-backed securities (53,000) 20,000 Realization of unrealized holding gain on investment in mortgage-backed securities -- -- --------- --------- Comprehensive loss $ (86,000) $ (13,000) ========= ========= Page 4 METRIC INCOME TRUST SERIES, INC., A California corporation CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) For the Six Months Ended June 30, 1999 and 1998
Unrealized Holding Accumulated Gain/(Loss)on Common Stock Additional Dividends in Investment in ------------ Paid-in Excess of Mortgage-Backed Shares Amount Capital Net Income Securities - Net Total ------ ------ ------- ---------- ---------------- ----- Balance, January 1, 1999 6,321,641 $ 6,000 $ 55,200,000 $(52,278,000) $ 41,000 $ 2,969,000 Unrealized Holding Loss on Investment in Mortgage- Backed Securities (76,000) (76,000) Realization of Unrealized Holding Gain on Investment in Mortgage-Backed Securities (8,000) (8,000) Net Loss (52,000) (52,000) Dividends Declared (894,000) (894,000) ------------ ------------ ------------ ------------ ------------ ------------ Balance, June 30, 1999 6,321,641 $ 6,000 $ 55,200,000 $(53,224,000) $ (43,000) $ 1,939,000 ============ ============ ============ ============ ============ ============ Balance, January 1, 1998 6,321,641 $ 6,000 $ 55,200,000 $(51,342,000) $ -- $ 3,864,000 Unrealized Holding Gain on Investment in Mortgage- Backed Securities 20,000 20,000 Income Before Loss on Sale of Properties (12,000) (12,000) Loss on Sale of Properties (25,000) (25,000) ------------ ------------ ------------ ------------ ------------ ------------ Balance, June 30, 1998 6,321,641 $ 6,000 $ 55,200,000 $(51,379,000) $ 20,000 $ 3,847,000 ============ ============ ============ ============ ============ ============
See notes to consolidated financial statements (unaudited). Page 5 METRIC INCOME TRUST SERIES, INC., a California corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months Ended June 30, ------------------------ 1999 1998 ---- ---- Operating Activities Net Loss $ (52,000) $ (37,000) Adjustments to reconcile net loss to net cash used by operating activities: Amortization (1,000) -- Gain on sale of mortgage-backed securities (8,000) -- Loss on sale of properties -- 25,000 Changes in operating assets and liabilities: (Increase) Decrease in accounts and interest receivable 5,000 (9,000) Decrease in prepaid and other assets 22,000 3,000 Increase (Decrease) in payable to sponsor and affiliates 1,000 (47,000) Decrease in other accounts payable and accrued liabilities (28,000) (288,000) ------------ ------------ Net cash used by operating activities (61,000) (353,000) ------------ ------------ Investing Activities Purchase of mortgage-backed securities -- (2,702,000) Proceeds from sale of mortgage-backed securities 669,000 -- Principal payments received on mortgage-backed securities 153,000 31,000 Proceeds from sale of properties -- 1,005,000 Cash used for selling costs of properties -- (126,000) ------------ ------------ Net cash provided (used) by investing activities 822,000 (1,792,000) ------------ ------------ Financing Activities Dividends paid to Shareholders (1,762,000) (17,385,000) ------------ ------------ Cash used by financing activities (1,762,000) (17,385,000) ------------ ------------ Decrease in Cash (1,001,000) (19,530,000) Cash at beginning of period 1,291,000 19,762,000 ------------ ------------ Cash at End of Period $ 290,000 $ 232,000 ============ ============ SUPPLEMETAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES Sale of rental properties - see Note 4 Unrealized holding gain on investment in mortgage-backed securities - see Note 5 See notes to consolidated financial statements (unaudited). Page 6 METRIC INCOME TRUST SERIES, INC., a California corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Reference to 1998 Audited Consolidated Financial Statements These unaudited consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the 1998 audited consolidated financial statements. The financial information contained herein reflects all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation. 2. Transactions with Advisor and Affiliates In accordance with the Advisory Agreement, the Fund pays the Advisor and its affiliates compensation for services provided to the Fund. Amounts earned by the Advisor and its affiliates for the six months ended June 30, 1999 and 1998 were as follows: 1999 1998 ---- ---- Reimbursement of administrative expenses $40,000 $59,000 Securities management fee 5,000 3,000 Advisory fee 50,000 25,000 ------- ------- Total $95,000 $87,000 ======= ======= The securities management fee was earned by State Street Research & Management Company, an affiliate of the Advisor. The quarterly advisory fees payable to the Advisor under the Advisory Agreement commencing April 1, 1994 were calculated at a rate of 0.75 percent per annum of the appraised value of the properties. Such fees were payable in full only if the Fund made annualized dividend payments equaling at least 8.5 percent of the Shareholders' adjusted capital contribution. To the extent that the dividend paid for a calendar quarter was less than 8.5 percent on an annualized basis, the advisory fee payable to the Advisor was proportionately reduced. No dividends were paid for the first quarter of 1998; therefore no advisory fee was earned. In February 1998, the Independent Directors approved the renewal of the term of the Advisory Agreement to December 31, 1998 with flat fees of $25,000 per quarter to be paid to the Advisor with the quarter commencing April 1, 1998. In the first quarter of 1999, the Independent Directors approved the extension of the Advisory Agreement and the payment of flat fees of $25,000 per quarter to December 31, 1999. 3. Net Loss per Share Net loss per Share is based upon 6,321,641 Shares outstanding. 4. Sale of Rental Properties In the first half of 1998, additional expenses of sale were paid and a loss on sale totaling $11,000 was recognized for the following properties which were sold in December of 1997: the National Convenience Stores located in Placentia, California, Marietta, Georgia, and Fort Worth and San Antonio, Texas, and the Wickes Furniture Store located in Torrance, California. In March 1998, the Fund sold the Pearle Express Store located in Morrow, Georgia for $1,005,000. After payment of expenses of sale of $103,000 (including real estate commissions of $80,000 paid to outside brokers), the proceeds received by the Fund were $902,000. The carrying value at the time of sale was $916,000 (net of the $42,000 provision for impairment of value recognized in 1997), resulting in a net loss on sale of $14,000. Page 7 5. Mortgage-Backed Securities In the first half of 1999, the Fund sold a pool of mortgage-backed securities. Net proceeds from the sale were $669,000 resulting in a realized gain of $8,000. In accordance with FAS 115 and Management's intentions, the Fund's investment in mortgage-backed securities is classified as "available-for-sale securities" and is reported at fair value with unrealized gains and losses reported as a net amount in a separate component of Shareholders' Equity. Fair values of mortgage-backed securities at June 30, 1999 and December 31, 1998 were as follows: Gross Unrealized Gross Unrealized Estimated Fair Amortized Cost Holding Gains Holding Losses Market Value -------------- ---------------- ---------------- -------------- 1999: GNMA $1,696,000 $ 0 $ 43,000 $1,653,000 1998: GNMA $2,509,000 $ 41,000 $ 0 $2,550,000 The coupon rate of the securities is 6.5% per annum and the repayment period terminates in 2024. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This item should be read in conjunction with Consolidated Financial Statements and other Items contained elsewhere in this Report. Pursuant to the Plan of Liquidation and Dissolution approved by Shareholders in June 1998, the Registrant is in the process of winding down its operations and has sold all of its real property assets as of December 31, 1998. Accordingly, historical financial information will not be representative of future results. Future results of operations will be limited to the orderly liquidation of the Registrant's assets and liabilities. Properties A description of the properties in which the Fund or its subsidiary held an ownership interest as of June 30, 1999 and June 30, 1998 follows: METRIC INCOME TRUST SERIES, INC., a California corporation PROPERTY AND OCCUPANCY SUMMARY Occupancy at June 30, Date of -------------- Size Purchase 1999 1998 ---- -------- ---- ---- National Convenience Stores (1) ..... 3,100 sq. ft. 11/89 -- 100% _____________ (1) The Fund has sold its entire original portfolio of nineteen convenience stores, the last of which was sold in December 1998. For details of individual properties, see Part I, Item 2 of the Form 10-K Report filed for 1998. Results of Operations Loss before loss on sale of properties decreased $40,000 and $1,000 respectively for the first half and second quarter of 1999 compared to the same periods in 1998 primarily due to the sale of the Fund's remaining properties in 1998 offset by a decrease in expenses in 1999. There was no lease income in 1999 compared to $71,000 in the first half of 1998. Interest on mortgage-backed securities increased $24,000 and decreased $7,000, respectively, in the first half and second quarter of 1999 compared to the same periods in 1998. The increase for the first half of 1999 was due to the fact that the Fund held no mortgage-backed securities until the second quarter of 1998. The decrease for the second quarter of 1999 was due to the sale of a portion of the mortgage-backed securities Page 8 portfolio in the first quarter of 1999. Other interest income decreased $52,000 and $8,000 for the first half and second quarter of 1999, respectively, due primarily to the interest earned in the first half of 1998 on the proceeds from the sales which took place in the last quarter of 1997 and first quarter of 1998. As a result of the sale of a portion of its mortgage-backed securities portfolio, the Fund had an $8,000 gain on sale of mortgage-backed securities in the first half of 1999. General and Administrative expenses decreased $51,000 and $40,000 in the first half and second quarter of 1999, respectively, compared with the same periods in 1998. This was due mainly to higher asset management costs and higher accruals for audit and tax preparation fees in the first half of 1998. The first half of 1999 included an adjustment to the audit expense accrued in 1998, as the actual cost was lower than accrued. The reduction in expenses in the first half of 1999 was offset by the payment of a $25,000 asset management fee in the first quarter of 1999 while no asset management fee was paid in the first quarter of 1998 (See Note 2 to the Consolidated Financial Statements). As discussed in Note 4 to the Consolidated Financial Statements, the Fund sold the Pearle Express Store in Morrow, Georgia in March 1998, resulting in a loss on sale of $14,000, and paid additional expenses of sale for properties sold in December 1997, resulting in a loss on sale of $11,000 recognized in the first half of 1998. In August 1996 the Board of Directors approved a sales strategy for the Fund's remaining convenience stores and by year end 1998, all had been sold. In the second quarter of 1997 the Board of Directors approved a sales strategy for the Fund's Haverty's Furniture Store in Plano, Texas and the remaining Pearle Express Store in Morrow, Georgia, and in the third quarter approved remarketing the Wickes Furniture Store in Torrance, California. Haverty's was sold in October 1997 and Wickes was sold in December 1997. The Pearle Express- Morrow, Georgia location was sold in March 1998. As previously reported, in September 1997, the Advisor was instructed by the Board of Directors to liquidate the Fund's holdings in mortgage-backed securities. These securities were sold in the third quarter of 1997. During the first half of 1998, the Fund invested cash reserved from sales in the fourth quarter of 1997 and the bulk of the proceeds from the sale of the Pearle Express- Morrow, Georgia location in mortgage-backed securities. In January 1999 a pool of mortgage-backed securities was sold. Fund Liquidity and Capital Resources The Fund intends to meet its cash needs from cash flow generated by securities that it holds. In order to continue to qualify as a REIT for income tax purposes, the Fund is required, among other things, to distribute 95 percent of its REIT taxable income to its Shareholders annually. The level of cash distributions to Shareholders through 1999 will be sustained by cash provided from net operating activities, from the principal repayments on the mortgage-backed securities, and from capital gains from the sale of securities. First Half of 1999 The Fund, after taking into account interest on mortgage-backed securities, other interest income, gain on sale of mortgage-backed securities, and general and administrative expenses, experienced negative results from operations for the period. As presented in the Consolidated Statement of Cash Flows, cash was provided by investing activities, from proceeds from sale of mortgage-backed securities, and from principal payments received on mortgage-backed securities. Cash was used in financing activities for dividends paid to Shareholders. As approved by the Board of Directors in the third quarter of 1995, the Fund marketed for sale the Pearle Express location in Morrow, Georgia through the second quarter of 1996; however, due to the short term of the existing lease, no viable offers were received and the property was removed from the market. Subsequently, the Advisor successfully negotiated an extension to the lease, and in March 1997, Pearle, Inc. signed an amendment providing for an extension of eight years in exchange for a blending of the remaining lease obligations with current market rates. Pursuant to a decision by the Board of Directors, the Advisor again marketed the property for sale in the third quarter of 1997. On March 3, 1998, the property was sold for $1,005,000. After the payment of the expenses of sale of $103,000 (including real estate commissions of $80,000 paid to outside brokers), the proceeds to the Fund were $902,000. The carrying value at the time of sale was $916,000 (net of the $42,000 provision for impairment of value recognized in 1997), resulting in a net loss on sale of $14,000. Page 9 The Advisor anticipates that the Fund will have sufficient resources to meet its capital and operating requirements through its dissolution. PART II OTHER INFORMATION Item 1. Legal Proceedings. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Fund (or any of its subsidiaries) is a party or of which any of their property is the subject. Item 6. Exhibits and Reports on Form 8-K. a) No reports on Form 8-K were required to be filed during the last quarter of the period covered by this Report. Page 10 SIGNATURE 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. METRIC INCOME TRUST SERIES, INC., a California corporation By: /s/ William A. Finelli ---------------------- William A. Finelli Director, Vice President, Chief Financial Officer, and Treasurer Date: August 12, 1999 --------------- Page 11 EX-27 2 FDS
5 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 290,000 1,653,000 9,000 0 0 0 0 0 1,952,000 0 0 0 0 6,000 1,933,000 1,952,000 0 88,000 0 0 140,000 0 0 (52,000) 0 (52,000) 0 0 0 (52,000) (.01) 0
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