PART I — FINANCIAL INFORMATION Item 1. Financial Statements Q1 2019 net income improved to $28.0 million due to reduced impairment charges, despite lower revenues from property sales, with ASC 842 adoption impacting the balance sheet Balance Sheet Summary (in thousands) | Financial Metric | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | $2,970,190 | $2,953,840 | | Total Liabilities | $1,624,856 | $1,607,162 | | Total Equity | $1,345,334 | $1,346,678 | Income Statement Summary (in thousands) | Income Statement (in thousands) | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Total Gross Revenues | $81,248 | $102,821 | | Impairment Charges | ($588) | ($53,049) | | Net Income (Loss) Attributable to Shareholders | $28,027 | ($14,315) | | Net Income (Loss) per Common Share (Diluted) | $0.11 | ($0.07) | Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $47,621 | $56,221 | | Net Cash Provided by Investing Activities | $19,810 | $51,237 | | Net Cash Used in Financing Activities | ($65,102) | ($121,921) | - The company adopted the new lease accounting standard, ASC Topic 842, on January 1, 2019 This resulted in the initial recognition of operating lease right-of-use assets of $41.8 million and operating lease liabilities of $43.0 million36101 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management highlights the strategic shift to industrial assets (72.2% of portfolio), explaining Q1 2019 revenue decline from dispositions, net income increase from reduced impairment, and a 2.2% same-store NOI decrease - The company's current business strategy focuses on growing its portfolio with leased industrial investments and selling non-core assets like office and retail properties As of March 31, 2019, industrial assets increased to 72.2% of the portfolio's gross book value110 - During Q1 2019, the company entered into new leases and extensions for approximately 1.5 million square feet The average fixed rent on extended leases increased from $12.16 to $12.95 per square foot112 - The $42.4 million increase in net income attributable to common shareholders compared to Q1 2018 was primarily due to a $52.5 million decrease in impairment charges This was partially offset by a $21.6 million decrease in gross revenues from property sales127128130 - Same-store Net Operating Income (NOI) decreased by 2.2% in Q1 2019 compared to Q1 2018, primarily due to a decrease in occupancy from 97.2% to 94.8%133 FFO Metric (per share) | FFO Metric (per share) | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | FFO - Diluted | $0.20 | $0.25 | | Adjusted Company FFO - Diluted | $0.20 | $0.25 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is related to interest rate fluctuations on its variable-rate debt, which was $429.1 million or 28.7% of total debt, with a 100 basis point increase impacting interest expense by $1.0 million - As of March 31, 2019, the company had $429.1 million in consolidated aggregate principal variable-rate indebtedness, which is 28.7% of its total consolidated debt144 - A 100 basis point increase in the weighted-average interest rate would have increased interest expense by $1.0 million for the three months ended March 31, 2019144 - The company had no interest rate swap agreements as of March 31, 2019, as the previous swaps on its term loans expired in January 201964146 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2019148 - No changes were identified in the internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls149 PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in a legal dispute with Cummins Inc. regarding a purchase option for a Columbus, Indiana office building, which the company intends to vigorously defend - A significant legal proceeding involves tenant Cummins Inc., who is seeking a court declaration to purchase a building in Columbus, Indiana, despite failing to timely exercise a purchase option by the July 15, 2018 deadline99151 - The company filed a motion to dismiss the complaint on January 8, 2019, and intends to vigorously defend its right to retain ownership of the building99151 Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - The company reported no material changes in its risk factors from those disclosed in its most recent Annual Report153 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2019, the company repurchased 441,581 common shares at an average price of $8.13 per share under its ongoing repurchase program Share Repurchase Activity | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January 1 - 31, 2019 | 441,581 | $8.13 | | February 1 - 28, 2019 | — | — | | March 1 - 31, 2019 | — | — | | First quarter 2019 | 441,581 | $8.13 | - As of March 31, 2019, the company had authorization to repurchase a maximum of 10,306,255 additional shares under its program, which has no expiration date89154 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, debt agreements, officer certifications, and XBRL data files
LXP(LXP) - 2019 Q1 - Quarterly Report