Getty Realty (GTY) - 2022 Q3 - Quarterly Report

PART I Item 1. Financial Statements (Unaudited) Getty Realty Corp.'s unaudited financial statements show $1.49 billion in total assets, $62.73 million in nine-month net earnings driven by an environmental credit, and shifts in cash flow Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity | Balance Sheet Highlights (in millions) | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1,489.27 | $1,466.95 | | Real estate, net | $1,295.32 | $1,271.08 | | Cash and cash equivalents | $11.45 | $24.74 | | Total Liabilities | $737.34 | $721.84 | | Senior unsecured notes, net | $623.44 | $523.85 | | Environmental remediation obligations | $29.22 | $47.60 | | Total Stockholders' Equity | $751.93 | $745.11 | Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net earnings over specified periods | Income Statement Highlights (in millions) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $41.97 | $40.10 | $122.47 | $116.05 | | Total operating expenses | $22.14 | $22.13 | $47.40 | $62.74 | | Operating income | $20.18 | $20.04 | $82.71 | $62.87 | | Net earnings | $13.30 | $14.01 | $62.73 | $44.83 | | Diluted EPS | $0.27 | $0.30 | $1.31 | $0.98 | - A significant factor in the year-over-year change for the nine-month period was the environmental expense, which was a credit of ($15.4 million) in 2022 compared to an expense of $1.3 million in 2021[11] Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities | Cash Flow Highlights (in millions) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash flow provided by operating activities | $67.87 | $58.69 | | Net cash flow used in investing activities | ($60.92) | ($119.66) | | Net cash flow provided by (used in) financing activities | ($20.30) | $12.97 | | Change in cash, cash equivalents and restricted cash | ($13.34) | ($48.01) | Notes to Consolidated Financial Statements This section provides additional details and explanations for the figures presented in the financial statements - The company is a net lease REIT specializing in convenience, automotive, and other single-tenant retail real estate, with a portfolio of 1,021 properties in 38 states and Washington, D.C. as of September 30, 2022[16][17] - As of September 30, 2022, the company's three largest tenants by revenue were subsidiaries of Global Partners LP (16%), ARKO Corp. (14%), and United Oil (11%)[60] - The company is involved in significant environmental litigation, including matters related to the Lower Passaic River and MTBE contamination in Pennsylvania and Maryland, which could have a material adverse effect[64][65][71][73] Debt Summary | Debt Summary (in millions) | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Unsecured Revolving Credit Facility | $0 | $60.00 | | Senior Unsecured Notes | $625.00 | $525.00 | | Total debt | $625.00 | $585.00 | - A significant reduction in environmental liabilities occurred during the nine months ended September 30, 2022, due to the expiration of "Lookback Periods" for many properties, allowing the removal of $17.1 million of previously accrued unknown reserve liabilities, resulting in a net credit of $16.6 million to environmental expense[103] Environmental Remediation Obligations | Environmental Remediation Obligations (in millions) | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Known reserve liabilities | $10.54 | $11.38 | | Unknown reserve liabilities | $18.68 | $36.22 | | Total Accrued Obligations | $29.22 | $47.60 | - During the nine months ended September 30, 2022, the company acquired 16 properties for $63.3 million, a decrease from the 77 properties acquired for $126.6 million in the same period of 2021[130][133] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting revenue growth, a $16.6 million environmental expense credit, and liquidity maintained through operations, credit facility, and an ATM equity program Results of Operations This section analyzes the company's financial results, focusing on revenue and expense trends - For the three months ended September 30, 2022, revenues from rental properties increased by $1.8 million year-over-year, primarily due to revenue from newly acquired properties and contractual rent increases[171] - For the nine months ended September 30, 2022, environmental expenses were a credit of $15.4 million, compared to an expense of $1.3 million in the prior-year period, principally due to the removal of $17.1 million in unknown reserve liabilities after certain contractual "Lookback Periods" expired[185] - Interest expense increased to $20.4 million for the nine months ended September 30, 2022, from $18.5 million in the prior year, due to higher average borrowings outstanding[189] Supplemental Non-GAAP Measures This section provides reconciliations of net earnings to non-GAAP financial measures such as FFO and AFFO Reconciliation to FFO and AFFO | Reconciliation to FFO and AFFO (in millions) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net earnings | $13.30 | $14.01 | $62.73 | $44.83 | | Funds from operations (FFO) | $23.72 | $22.03 | $86.83 | $63.99 | | Adjusted funds from operations (AFFO) | $25.79 | $24.18 | $76.03 | $69.71 | - AFFO for the nine months ended September 30, 2022, increased to $76.0 million from $69.7 million in the prior year period[168] Liquidity and Capital Resources This section discusses the company's ability to generate and manage cash to meet its financial obligations and investment needs - Principal sources of liquidity are cash flows from operations, a $300 million Revolving Credit Facility, and an ATM equity program with up to $250 million in capacity[191][215] - Net cash used in investing activities decreased to $60.9 million for the first nine months of 2022 from $119.7 million in 2021, primarily due to a $63.0 million decrease in property acquisitions[194] - During the first nine months of 2022, the company entered into forward sale agreements under its ATM program to sell 714,136 shares at an average price of $30.22 per share, with no shares settled during the period[217] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its $300 million variable-rate Revolving Credit Facility, though no borrowings were outstanding as of September 30, 2022 - The primary market risk is interest rate risk from the $300 million Second Restated Credit Agreement, which has a variable interest rate tied to LIBOR or a base rate[251] - As of September 30, 2022, there were no borrowings outstanding at variable interest rates, minimizing current exposure[251] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the third quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[255] - There were no changes in internal control over financial reporting during the third quarter of 2022 that materially affected, or are reasonably likely to materially affect, internal controls[256] PART II—OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 4 for details on material pending legal proceedings, confirming no new material developments since the 2021 Annual Report on Form 10-K - For information regarding material pending legal proceedings, the report refers to Note 4 in Part I, Item 1 of this Form 10-Q[259] Item 1A. Risk Factors The company states that there have been no material changes to the risk factors that were previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[260] Item 5. Other Information There is no information reported under this item for the period - None[261] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data files - The report lists certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1, 32.2) and various XBRL data files as exhibits filed with the report[262]