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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2011
 OR
 o
    
    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.
  MARYLAND
    
    11-3412575(State or other jurisdiction of incorporation or 
organization)
    
    (I.R.S. Employer
Identification No.)
 125 Jericho Turnpike, Suite 103  Jericho, New York 11753
 (516) 478  5400   (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large
Accelerated Filer o
    

Accelerated Filer þ
    

Non-Accelerated
Filer o
    

Smaller
Reporting Company o(Do not check if a smaller reporting company)
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Page NumberPart I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)
    
    
    1Consolidated Balance Sheets as of June 30, 2011 and
December 31, 2010
    
    
    1Consolidated Statements of Operations for the
Three and Six Months ended June 30, 2011 and 2010
    
    
    2Consolidated Statements of Comprehensive Income for the
Three and Six Months ended June 30, 2011 and 2010
    
    
    3Consolidated Statements of Cash Flows for the
Six Months ended June 30, 2011 and 2010
    
    
    4Notes to Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    30Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    
    54Item 4. Controls and Procedures
    
    
    55Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    56Item 1a. Risk Factors
    
    
    56Item 4. Other Information
    
    
    61Item 5. Exhibits
    
    
    62Signatures
    
    
    63EX-31.I.1EX-31.I.2EX-32.1EX-32.2




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GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
 June 30,
    
    
    December 31,2011
    
    
    2010Assets:Real Estate:Land
    
    $
    353,422
    
    
    $
    253,413Buildings and improvements
    
    
    247,777
    
    
    
    251,174601,199
    
    
    
    504,587Less  accumulated depreciation and amortization
    
    
    (147,075
    )
    
    
    (144,217
    )Real estate, net
    
    
    454,124
    
    
    
    360,370Net investment in direct financing leases
    
    
    90,231
    
    
    
    20,540Deferred rent receivable (net of allowance of $7,212 as of June 30, 2011 and
$8,170 as of December 31, 2010)
    
    
    27,569
    
    
    
    27,385Cash and cash equivalents
    
    
    14,941
    
    
    
    6,122Other receivables, net
    
    
    4,210
    
    
    
    4,533Notes, mortgages and accounts receivable, net
    
    
    31,996
    
    
    
    1,525Prepaid expenses and other assets
    
    
    13,771
    
    
    
    6,669Total assets
    
    $
    636,842
    
    
    $
    427,144Liabilities and Shareholders Equity:Borrowings under credit line
    
    $
    150,000
    
    
    $
    41,300Term loan
    
    
    23,200
    
    
    
    23,590Environmental remediation costs
    
    
    15,000
    
    
    
    14,874Dividends payable
    
    
    16,111
    
    
    
    14,432Accounts payable and accrued liabilities
    
    
    29,780
    
    
    
    18,013Total liabilities
    
    
    234,091
    
    
    
    112,209Commitments and contingencies (notes 2, 3, 5, and 6)
    
    
    
    
    
    
    Shareholders equity:Common stock, par value $.01 per share; authorized
50,000,000 shares; issued 33,394,175 at June 30, 2011
and 29,944,155 at December 31, 2010
    
    
    334
    
    
    
    299Paid-in capital
    
    
    460,355
    
    
    
    368,093Dividends paid in excess of earnings
    
    
    (57,938
    )
    
    
    (52,304
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    (1,153
    )Total shareholders equity
    
    
    402,751
    
    
    
    314,935Total liabilities and shareholders equity
    
    $
    636,842
    
    
    $
    427,144
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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 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Revenues:Revenues from rental properties
    
    $
    27,126
    
    
    $
    21,734
    
    
    $
    52,151
    
    
    $
    44,173Interest on notes and mortgages receivable
    
    
    741
    
    
    
    35
    
    
    
    1,146
    
    
    
    67Total revenues
    
    
    27,867
    
    
    
    21,769
    
    
    
    53,297
    
    
    
    44,240Operating expenses:Rental property expenses
    
    
    3,709
    
    
    
    2,314
    
    
    
    7,192
    
    
    
    5,527Impairment charges
    
    
    1,513
    
    
    
    
    
    
    
    2,507
    
    
    
    Environmental expenses, net
    
    
    1,326
    
    
    
    1,332
    
    
    
    2,453
    
    
    
    2,884General and administrative expenses
    
    
    2,736
    
    
    
    1,820
    
    
    
    7,621
    
    
    
    4,158Depreciation and amortization expense
    
    
    2,204
    
    
    
    2,405
    
    
    
    4,528
    
    
    
    4,794Total operating expenses
    
    
    11,488
    
    
    
    7,871
    
    
    
    24,301
    
    
    
    17,363Operating income
    
    
    16,379
    
    
    
    13,898
    
    
    
    28,996
    
    
    
    26,877Other income (expense), net
    
    
    (49
    )
    
    
    18
    
    
    
    (43
    )
    
    
    107Interest expense
    
    
    (1,346
    )
    
    
    (1,322
    )
    
    
    (2,665
    )
    
    
    (2,816
    )Earnings from continuing operations
    
    
    14,984
    
    
    
    12,594
    
    
    
    26,288
    
    
    
    24,168Discontinued operations:Earnings (loss) from operating activities
    
    
    (13
    )
    
    
    37
    
    
    
    1
    
    
    
    58Gains from dispositions of real estate
    
    
    231
    
    
    
    1,328
    
    
    
    299
    
    
    
    1,638Earnings from discontinued operations
    
    
    218
    
    
    
    1,365
    
    
    
    300
    
    
    
    1,696Net earnings
    
    $
    15,202
    
    
    $
    13,959
    
    
    $
    26,588
    
    
    $
    25,864Basic and diluted earnings per common share:Earnings from continuing operations
    
    $
    0.45
    
    
    $
    0.46
    
    
    $
    0.79
    
    
    $
    0.93Earnings from discontinued operations
    
    $
    0.01
    
    
    $
    0.05
    
    
    $
    0.01
    
    
    $
    0.07Net earnings
    
    $
    0.45
    
    
    $
    0.51
    
    
    $
    0.80
    
    
    $
    0.99Weighted-average shares outstanding:Basic
    
    
    33,394
    
    
    
    27,150
    
    
    
    32,948
    
    
    
    25,958Stock options and restricted stock units
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    2Diluted
    
    
    33,395
    
    
    
    27,152
    
    
    
    32,950
    
    
    
    25,960
 The accompanying notes are an integral part of these consolidated financial statements.
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GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
 (unaudited)
 Three months ended June 30,
    
    
    Six months ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Net earnings
    
    $
    15,202
    
    
    $
    13,959
    
    
    $
    26,588
    
    
    $
    25,864Other comprehensive income:Unrealized gain on interest rate swap
    
    
    584
    
    
    
    545
    
    
    
    1,153
    
    
    
    848Comprehensive income
    
    $
    15,786
    
    
    $
    14,504
    
    
    $
    27,741
    
    
    $
    26,712
 The accompanying notes are an integral part of these consolidated financial statements.
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GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Six months ended June 30,2011
    
    
    2010Cash flows from operating activities:Net earnings
    
    $
    26,588
    
    
    $
    25,864Adjustments to reconcile net earnings to net cash flow provided by operating activities:Depreciation and amortization expense
    
    
    4,530
    
    
    
    4,804Impairment charges
    
    
    2,507
    
    
    
    Gains from dispositions of real estate
    
    
    (319
    )
    
    
    (1,638
    )Deferred rental revenue, net of allowance
    
    
    (184
    )
    
    
    (159
    )Amortization of above-market and below-market leases
    
    
    (262
    )
    
    
    (343
    )Accretion expense
    
    
    296
    
    
    
    345Stock-based employee compensation expense
    
    
    311
    
    
    
    231Changes in assets and liabilities:Other receivables, net
    
    
    220
    
    
    
    (329
    )Net investment in direct financing leases
    
    
    211
    
    
    
    (157
    )Accounts receivable
    
    
    65
    
    
    
    156Prepaid expenses and other assets
    
    
    75
    
    
    
    (323
    )Environmental remediation costs
    
    
    (330
    )
    
    
    266Accounts payable and accrued liabilities
    
    
    (397
    )
    
    
    (136
    )Net cash flow provided by operating activities
    
    
    33,311
    
    
    
    28,581Cash flows from investing activities:Property acquisitions and capital expenditures
    
    
    (166,594
    )
    
    
    (4,662
    )Proceeds from dispositions of real estate
    
    
    784
    
    
    
    2,739Decrease in cash held for property acquisitions
    
    
    60
    
    
    
    2,243Issuance of notes and mortgages receivable
    
    
    (30,640
    )
    
    
    Collection of notes and mortgages receivable
    
    
    307
    
    
    
    72Net cash flow provided by (used in) investing activities
    
    
    (196,083
    )
    
    
    392Cash flows from financing activities:Borrowings under credit agreement
    
    
    231,253
    
    
    
    29,000Repayments under credit agreement
    
    
    (122,553
    )
    
    
    (135,200
    )Repayments under term loan agreement
    
    
    (390
    )
    
    
    (390
    )Payments of cash dividends
    
    
    (30,543
    )
    
    
    (23,625
    )Payments of loan origination costs
    
    
    (175
    )
    
    
    Security deposits received
    
    
    2,013
    
    
    
    78Net proceeds from issuance of common stock
    
    
    91,986
    
    
    
    108,205Net cash flow provided by (used in) financing activities
    
    
    171,591
    
    
    
    (21,932
    )Net increase in cash and cash equivalents
    
    
    8,819
    
    
    
    7,041Cash and cash equivalents at beginning of period
    
    
    6,122
    
    
    
    3,050Cash and cash equivalents at end of period
    
    $
    14,941
    
    
    $
    10,091Supplemental disclosures of cash flow informationInterest paid
    
    $
    2,466
    
    
    $
    2,763Income taxes paid, net
    
    
    146
    
    
    
    252
 The accompanying notes are an integral part of these consolidated financial statements.
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GETTY REALTY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. GENERAL
 Basis of Presentation:
 Use of Estimates, Judgments and Assumptions:
 Discontinued Operations:
 Unaudited, Interim Financial Statements: .
 Earnings per Common Share:
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Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,(in thousands)
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Earnings from continuing operations
    
    $
    14,984
    
    
    $
    12,594
    
    
    $
    26,288
    
    
    $
    24,168Less dividend equivalents attributable to restricted
stock units outstanding
    
    
    (82
    )
    
    
    (56
    )
    
    
    (164
    )
    
    
    (112
    )Earnings from continuing operations attributable to common
shareholders used for basic earnings per share calculation
    
    
    14,902
    
    
    
    12,538
    
    
    
    26,124
    
    
    
    24,056Discontinued operations
    
    
    218
    
    
    
    1,365
    
    
    
    300
    
    
    
    1,696Net earnings attributable to common shareholders used for
basic earnings per share calculation
    
    $
    15,120
    
    
    $
    13,903
    
    
    $
    26,424
    
    
    $
    25,752Weighted-average number of common shares outstanding:Basic
    
    
    33,394
    
    
    
    27,150
    
    
    
    32,948
    
    
    
    25,958Stock options
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    2Diluted
    
    
    33,395
    
    
    
    27,152
    
    
    
    32,950
    
    
    
    25,960Restricted stock units outstanding at the end of the period
    
    
    171
    
    
    
    118
    
    
    
    171
    
    
    
    118
 2. LEASES
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3. COMMITMENTS AND CONTINGENCIES
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4. CREDIT AGREEMENT AND TERM LOAN AGREEMENT
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5. INTEREST RATE SWAP AGREEMENT
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6. ENVIRONMENTAL EXPENSES
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7. SHAREHOLDERS EQUITY
  DIVIDENDS
    
    
    ACCUMULATEDPAID
    
    
    OTHERCOMMON STOCK
    
    
    PAID-IN
    
    
    IN EXCESS
    
    
    COMPREHENSIVESHARES
    
    
    AMOUNT
    
    
    CAPITAL
    
    
    OF EARNINGS
    
    
    LOSS
    
    
    TOTALBalance, December 31, 2010
    
    
    29,944,155
    
    
    $
    299
    
    
    $
    368,093
    
    
    $
    (52,304
    )
    
    $
    (1,153
    )
    
    $
    314,935Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,588
    
    
    
    
    
    
    
    26,588Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,222
    )
    
    
    
    
    
    
    (32,222
    )Stock-based
employee compensation expense
    
    
    20
    
    
    
    
    
    
    
    311
    
    
    
    
    
    
    
    
    
    
    
    311Issuance of common stock
    
    
    3,450,000
    
    
    
    35
    
    
    
    91,951
    
    
    
    
    
    
    
    
    
    
    
    91,986Net
unrealized gain on interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,153
    
    
    
    1,153Balance, June 30, 2011
    
    
    33,394,175
    
    
    $
    334
    
    
    $
    460,355
    
    
    $
    (57,938
    )
    
    $
    
    
    
    $
    402,751
   8. PROPERTY ACQUISITIONS
 CPD NY SALE/LEASEBACK
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NOURIA SALE/LEASEBACK
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Six months ended June 30,2011
    
    
    2010Revenues
    
    $
    55,084
    
    
    $
    55,877Net earnings
    
    $
    31,134
    
    
    $
    35,012Basic and diluted net earnings
per common share
    
    $
    0.94
    
    
    $
    1.35
 9. SUPPLEMENTAL CONDENSED COMBINING FINANCIAL INFORMATION
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GettyPetroleum
    
    
    OtherMarketing
    
    
    Tenants
    
    
    Corporate
    
    
    ConsolidatedASSETS:Real Estate:Land
    
    $
    136,203
    
    
    $
    217,219
    
    
    $
    
    
    
    $
    353,422Buildings and improvements
    
    
    150,899
    
    
    
    96,507
    
    
    
    371
    
    
    
    247,777287,102
    
    
    
    313,726
    
    
    
    371
    
    
    
    601,199Less  accumulated depreciation and
amortization
    
    
    (119,586
    )
    
    
    (27,276
    )
    
    
    (213
    )
    
    
    (147,075
    )Real estate, net
    
    
    167,516
    
    
    
    286,450
    
    
    
    158
    
    
    
    454,124Net investment in direct financing leases
    
    
    
    
    
    
    90,231
    
    
    
    
    
    
    
    90,231Deferred rent receivable, net
    
    
    20,409
    
    
    
    7,160
    
    
    
    
    
    
    
    27,569Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    14,941
    
    
    
    14,941Other receivables, net
    
    
    3,821
    
    
    
    153
    
    
    
    236
    
    
    
    4,210Notes, mortgages and accounts receivable, net
    
    
    34
    
    
    
    30,568
    
    
    
    1,394
    
    
    
    31,996Prepaid expenses and other assets
    
    
    
    
    
    
    10,547
    
    
    
    3,224
    
    
    
    13,771Total assets
    
    
    191,780
    
    
    
    425,109
    
    
    
    19,953
    
    
    
    636,842LIABILITIES:Borrowings under credit line
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    150,000Term loan
    
    
    
    
    
    
    
    
    
    
    23,200
    
    
    
    23,200Environmental remediation costs
    
    
    13,970
    
    
    
    1,030
    
    
    
    
    
    
    
    15,000Dividends payable
    
    
    
    
    
    
    
    
    
    
    16,111
    
    
    
    16,111Accounts payable and accrued liabilities
    
    
    1,054
    
    
    
    20,424
    
    
    
    8,302
    
    
    
    29,780Total liabilities
    
    
    15,024
    
    
    
    21,454
    
    
    
    197,613
    
    
    
    234,091Net assets (liabilities)
    
    $
    176,756
    
    
    $
    403,655
    
    
    $
    (177,660
    )
    
    $
    402,751
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GettyPetroleum
    
    
    OtherMarketing
    
    
    Tenants
    
    
    Corporate
    
    
    ConsolidatedASSETS:Real Estate:Land
    
    $
    137,151
    
    
    $
    116,262
    
    
    $
    
    
    
    $
    253,413Buildings and improvements
    
    
    152,570
    
    
    
    98,233
    
    
    
    371
    
    
    
    251,174289,721
    
    
    
    214,495
    
    
    
    371
    
    
    
    504,587Less  accumulated depreciation and amortization
    
    
    (118,784
    )
    
    
    (25,241
    )
    
    
    (192
    )
    
    
    (144,217
    )Real estate, net
    
    
    170,937
    
    
    
    189,254
    
    
    
    179
    
    
    
    360,370Net investment in direct financing lease
    
    
    
    
    
    
    20,540
    
    
    
    
    
    
    
    20,540Deferred rent receivable, net
    
    
    21,221
    
    
    
    6,164
    
    
    
    
    
    
    
    27,385Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    6,122
    
    
    
    6,122Other receivables, net
    
    
    3,874
    
    
    
    363
    
    
    
    296
    
    
    
    4,533Mortgages and accounts receivable, net
    
    
    13
    
    
    
    238
    
    
    
    1,274
    
    
    
    1,525Prepaid expenses and other assets
    
    
    
    
    
    
    3,444
    
    
    
    3,225
    
    
    
    6,669Total assets
    
    
    196,045
    
    
    
    220,003
    
    
    
    11,096
    
    
    
    427,144LIABILITIES:Borrowings under credit line
    
    
    
    
    
    
    
    
    
    
    41,300
    
    
    
    41,300Term loan
    
    
    
    
    
    
    
    
    
    
    23,590
    
    
    
    23,590Environmental remediation costs
    
    
    13,841
    
    
    
    1,033
    
    
    
    
    
    
    
    14,874Dividends payable
    
    
    
    
    
    
    
    
    
    
    14,432
    
    
    
    14,432Accounts payable and accrued liabilities
    
    
    962
    
    
    
    6,953
    
    
    
    10,098
    
    
    
    18,013Total liabilities
    
    
    14,803
    
    
    
    7,986
    
    
    
    89,420
    
    
    
    112,209Net assets (liabilities)
    
    $
    181,242
    
    
    $
    212,017
    
    
    $
    (78,324
    )
    
    $
    314,935
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GettyPetroleum
    
    
    OtherMarketing
    
    
    Tenants
    
    
    Corporate
    
    
    ConsolidatedRevenues:Revenues from rental properties
    
    $
    14,172
    
    
    $
    12,954
    
    
    $
    
    
    
    $
    27,126Interest on notes and mortgages receivable
    
    
    
    
    
    
    710
    
    
    
    31
    
    
    
    741Total revenues
    
    
    14,172
    
    
    
    13,664
    
    
    
    31
    
    
    
    27,867Operating expenses:Rental property expenses
    
    
    1,275
    
    
    
    2,282
    
    
    
    152
    
    
    
    3,709Impairment charges
    
    
    
    
    
    
    1,513
    
    
    
    
    
    
    
    1,513Environmental expenses, net
    
    
    1,295
    
    
    
    31
    
    
    
    
    
    
    
    1,326General and administrative expenses
    
    
    31
    
    
    
    1,679
    
    
    
    1,026
    
    
    
    2,736Depreciation and amortization expense
    
    
    921
    
    
    
    1,272
    
    
    
    11
    
    
    
    2,204Total operating expenses
    
    
    3,522
    
    
    
    6,777
    
    
    
    1,189
    
    
    
    11,488Operating income (loss)
    
    
    10,650
    
    
    
    6,887
    
    
    
    (1,158
    )
    
    
    16,379Other income (expense), net
    
    
    20
    
    
    
    
    
    
    
    (69
    )
    
    
    (49
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (1,346
    )
    
    
    (1,346
    )Earnings (loss) from continuing operations
    
    
    10,670
    
    
    
    6,887
    
    
    
    (2,573
    )
    
    
    14,984Discontinued operations:Earnings (loss) from operating activities
    
    
    (1
    )
    
    
    (12
    )
    
    
    
    
    
    
    (13
    )Gains on dispositions of real estate
    
    
    231
    
    
    
    
    
    
    
    
    
    
    
    231Earnings (loss) from discontinued operations
    
    
    230
    
    
    
    (12
    )
    
    
    
    
    
    
    218Net earnings (loss)
    
    $
    10,900
    
    
    $
    6,875
    
    
    $
    (2,573
    )
    
    $
    15,202
  GettyPetroleum
    
    
    OtherMarketing
    
    
    Tenants
    
    
    Corporate
    
    
    ConsolidatedRevenues:Revenues from rental properties
    
    $
    14,817
    
    
    $
    6,917
    
    
    $
    
    
    
    $
    21,734Interest on notes and mortgages receivable
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    35Total revenues
    
    
    14,817
    
    
    
    6,917
    
    
    
    35
    
    
    
    21,769Operating expenses:Rental property expenses
    
    
    1,560
    
    
    
    579
    
    
    
    175
    
    
    
    2,314Environmental expenses, net
    
    
    1,301
    
    
    
    31
    
    
    
    
    
    
    
    1,332General and administrative expenses
    
    
    60
    
    
    
    25
    
    
    
    1,735
    
    
    
    1,820Depreciation and amortization expense
    
    
    1,054
    
    
    
    1,342
    
    
    
    9
    
    
    
    2,405Total operating expenses
    
    
    3,975
    
    
    
    1,977
    
    
    
    1,919
    
    
    
    7,871Operating income (loss)
    
    
    10,842
    
    
    
    4,940
    
    
    
    (1,884
    )
    
    
    13,898Other income, net
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18Interest expense
    
    
    
    
    
    
    
    
    
    
    (1,322
    )
    
    
    (1,322
    )Earnings (loss) from continuing operations
    
    
    10,842
    
    
    
    4,940
    
    
    
    (3,188
    )
    
    
    12,594Discontinued operations:Earnings from operating activities
    
    
    4
    
    
    
    33
    
    
    
    
    
    
    
    37Gains on dispositions of real estate
    
    
    1,328
    
    
    
    
    
    
    
    
    
    
    
    1,328Earnings from discontinued operations
    
    
    1,332
    
    
    
    33
    
    
    
    
    
    
    
    1,365Net earnings (loss)
    
    $
    12,174
    
    
    $
    4,973
    
    
    $
    (3,188
    )
    
    $
    13,959
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##### Table of Contents



GettyPetroleum
    
    
    OtherMarketing
    
    
    Tenants
    
    
    Corporate
    
    
    ConsolidatedRevenues:Revenues from rental properties
    
    $
    28,982
    
    
    $
    23,169
    
    
    $
    
    
    
    $
    52,151Interest on notes and mortgages receivable
    
    
    
    
    
    
    1,083
    
    
    
    63
    
    
    
    1,146Total revenues
    
    
    28,982
    
    
    
    24,252
    
    
    
    63
    
    
    
    53,297Operating expenses:Rental property expenses
    
    
    2,697
    
    
    
    4,204
    
    
    
    291
    
    
    
    7,192Impairment charges
    
    
    994
    
    
    
    1,513
    
    
    
    
    
    
    
    2,507Environmental expenses, net
    
    
    2,397
    
    
    
    56
    
    
    
    
    
    
    
    2,453General and administrative expenses
    
    
    75
    
    
    
    1,764
    
    
    
    5,782
    
    
    
    7,621Depreciation and amortization expense
    
    
    1,961
    
    
    
    2,546
    
    
    
    21
    
    
    
    4,528Total operating expenses
    
    
    8,124
    
    
    
    10,083
    
    
    
    6,094
    
    
    
    24,301Operating income (loss)
    
    
    20,858
    
    
    
    14,169
    
    
    
    (6,031
    )
    
    
    28,996Other income (expense), net
    
    
    20
    
    
    
    
    
    
    
    (63
    )
    
    
    (43
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (2,665
    )
    
    
    (2,665
    )Earnings (loss) from continuing operations
    
    
    20,878
    
    
    
    14,169
    
    
    
    (8,759
    )
    
    
    26,288Discontinued operations:Earnings (loss) from operating activities
    
    
    24
    
    
    
    (23
    )
    
    
    
    
    
    
    1Gains on dispositions of real estate
    
    
    299
    
    
    
    
    
    
    
    
    
    
    
    299Earnings (loss) from discontinued operations
    
    
    323
    
    
    
    (23
    )
    
    
    
    
    
    
    300Net earnings (loss)
    
    $
    21,201
    
    
    $
    14,146
    
    
    $
    (8,759
    )
    
    $
    26,588
  GettyPetroleum
    
    
    OtherMarketing
    
    
    Tenants
    
    
    Corporate
    
    
    ConsolidatedRevenues:Revenues from rental properties
    
    $
    29,631
    
    
    $
    14,542
    
    
    $
    
    
    
    $
    44,173Interest on notes and mortgages receivable
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    67Total revenues
    
    
    29,631
    
    
    
    14,542
    
    
    
    67
    
    
    
    44,240Operating expenses:Rental property expenses
    
    
    3,460
    
    
    
    1,659
    
    
    
    408
    
    
    
    5,527Environmental expenses, net
    
    
    2,818
    
    
    
    66
    
    
    
    
    
    
    
    2,884General and administrative expenses
    
    
    92
    
    
    
    58
    
    
    
    4,008
    
    
    
    4,158Depreciation and amortization expense
    
    
    2,108
    
    
    
    2,669
    
    
    
    17
    
    
    
    4,794Total operating expenses
    
    
    8,478
    
    
    
    4,452
    
    
    
    4,433
    
    
    
    17,363Operating income (loss)
    
    
    21,153
    
    
    
    10,090
    
    
    
    (4,366
    )
    
    
    26,877Other income, net
    
    
    
    
    
    
    
    
    
    
    107
    
    
    
    107Interest expense
    
    
    
    
    
    
    
    
    
    
    (2,816
    )
    
    
    (2,816
    )Earnings (loss) from continuing operations
    
    
    21,153
    
    
    
    10,090
    
    
    
    (7,075
    )
    
    
    24,168Discontinued operations:Earnings from operating activities
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    58Gains on dispositions of real estate
    
    
    1,612
    
    
    
    26
    
    
    
    
    
    
    
    1,638Earnings from discontinued operations
    
    
    1,670
    
    
    
    26
    
    
    
    
    
    
    
    1,696Net earnings (loss)
    
    $
    22,823
    
    
    $
    10,116
    
    
    $
    (7,075
    )
    
    $
    25,864
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##### Table of Contents



GettyPetroleum
    
    
    OtherMarketing
    
    
    Tenants
    
    
    Corporate
    
    
    ConsolidatedCASH FLOWS FROM OPERATING ACTIVITIES:Net earnings (loss)
    
    $
    21,201
    
    
    $
    14,146
    
    
    $
    (8,759
    )
    
    $
    26,588Adjustments to reconcile net earnings (loss) to net cash flow
provided by (used in) operating activities:Depreciation and amortization expense
    
    
    1,963
    
    
    
    2,546
    
    
    
    21
    
    
    
    4,530Impairment charges
    
    
    994
    
    
    
    1,513
    
    
    
    
    
    
    
    2,507Gain from dispositions of real estate
    
    
    (319
    )
    
    
    
    
    
    
    
    
    
    
    (319
    )Deferred rental revenue
    
    
    812
    
    
    
    (996
    )
    
    
    
    
    
    
    (184
    )Amortization of above-market and below-market leases
    
    
    
    
    
    
    (262
    )
    
    
    
    
    
    
    (262
    )Accretion expense
    
    
    290
    
    
    
    6
    
    
    
    
    
    
    
    296Stock-based employee compensation expense
    
    
    
    
    
    
    
    
    
    
    311
    
    
    
    311Changes in assets and liabilities:Recoveries from state underground storage tank funds, net
    
    
    209
    
    
    
    11
    
    
    
    
    
    
    
    220Net investment in direct financing leases
    
    
    
    
    
    
    211
    
    
    
    
    
    
    
    211Notes, mortgages and accounts receivable, net
    
    
    (21
    )
    
    
    86
    
    
    
    
    
    
    
    65Prepaid expenses and other assets
    
    
    
    
    
    
    (101
    )
    
    
    176
    
    
    
    75Environmental remediation costs
    
    
    (317
    )
    
    
    (13
    )
    
    
    
    
    
    
    (330
    )Accounts payable and accrued liabilities
    
    
    92
    
    
    
    155
    
    
    
    (644
    )
    
    
    (397
    )Net cash flow provided by (used in) operating activities
    
    
    24,904
    
    
    
    17,302
    
    
    
    (8,895
    )
    
    
    33,311CASH FLOWS FROM INVESTING ACTIVITIES:Property acquisitions and capital expenditures
    
    
    
    
    
    
    (166,594
    )
    
    
    
    
    
    
    (166,594
    )Proceeds from dispositions of real estate
    
    
    784
    
    
    
    
    
    
    
    
    
    
    
    784Decrease in cash held for property acquisitions
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    60Issuance of notes and mortgages receivable
    
    
    
    
    
    
    (30,400
    )
    
    
    (240
    )
    
    
    (30,640
    )Collection of notes and mortgages receivable
    
    
    
    
    
    
    187
    
    
    
    120
    
    
    
    307Net cash flow provided by (used in) investing activities
    
    
    784
    
    
    
    (196,807
    )
    
    
    (60
    )
    
    
    (196,083
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings under credit agreement
    
    
    
    
    
    
    
    
    
    
    231,253
    
    
    
    231,253Repayments under credit agreement
    
    
    
    
    
    
    
    
    
    
    (122,553
    )
    
    
    (122,553
    )Repayments under term loan agreement
    
    
    
    
    
    
    
    
    
    
    (390
    )
    
    
    (390
    )Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    (30,543
    )
    
    
    (30,543
    )Credit agreement origination costs
    
    
    
    
    
    
    
    
    
    
    (175
    )
    
    
    (175
    )Net proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    91,986
    
    
    
    91,986Security deposits received
    
    
    
    
    
    
    2,013
    
    
    
    
    
    
    
    2,013Cash consolidation  Corporate
    
    
    (25,688
    )
    
    
    177,492
    
    
    
    (151,804
    )
    
    
    Net cash flow (used in) provided by financing activities
    
    
    (25,688
    )
    
    
    179,505
    
    
    
    17,774
    
    
    
    171,591Net increase in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    8,819
    
    
    
    8,819Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    
    
    
    
    6,122
    
    
    
    6,122Cash and cash equivalents at end of year
    
    $
    
    
    
    $
    
    
    
    $
    14,941
    
    
    $
    14,941
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##### Table of Contents



GettyPetroleum
    
    
    OtherMarketing
    
    
    Tenants
    
    
    Corporate
    
    
    ConsolidatedCASH FLOWS FROM OPERATING ACTIVITIES:Net earnings (loss)
    
    $
    22,823
    
    
    $
    10,116
    
    
    $
    (7,075
    )
    
    $
    25,864Adjustments to reconcile net earnings (loss) to net cash flow
provided by (used in) operating activities:Depreciation and amortization expense
    
    
    2,117
    
    
    
    2,670
    
    
    
    17
    
    
    
    4,804Gain from dispositions of real estate
    
    
    (1,612
    )
    
    
    (26
    )
    
    
    
    
    
    
    (1,638
    )Deferred rental revenue
    
    
    620
    
    
    
    (779
    )
    
    
    
    
    
    
    (159
    )Amortization of above-market and below-market leases
    
    
    
    
    
    
    (343
    )
    
    
    
    
    
    
    (343
    )Accretion expense
    
    
    337
    
    
    
    8
    
    
    
    
    
    
    
    345Stock-based employee compensation expense
    
    
    
    
    
    
    
    
    
    
    231
    
    
    
    231Changes in assets and liabilities:Recoveries from state underground storage tank funds, net
    
    
    (311
    )
    
    
    (18
    )
    
    
    
    
    
    
    (329
    )Net investment in direct financing leases
    
    
    
    
    
    
    (157
    )
    
    
    
    
    
    
    (157
    )Mortgages and accounts receivable, net
    
    
    (5
    )
    
    
    161
    
    
    
    
    
    
    
    156Prepaid expenses and other assets
    
    
    
    
    
    
    (57
    )
    
    
    (266
    )
    
    
    (323
    )Environmental remediation costs
    
    
    (640
    )
    
    
    906
    
    
    
    
    
    
    
    266Accounts payable and accrued liabilities
    
    
    191
    
    
    
    (432
    )
    
    
    105
    
    
    
    (136
    )Net cash flow provided by (used in) operating activities
    
    
    23,520
    
    
    
    12,049
    
    
    
    (6,988
    )
    
    
    28,581CASH FLOWS FROM INVESTING ACTIVITIES:Property acquisitions and capital expenditures
    
    
    
    
    
    
    (4,626
    )
    
    
    (36
    )
    
    
    (4,662
    )Proceeds from dispositions of real estate
    
    
    2,515
    
    
    
    224
    
    
    
    
    
    
    
    2,739Increase in cash held for property acquisitions
    
    
    
    
    
    
    
    
    
    
    2,243
    
    
    
    2,243Collection of mortgages receivable, net
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    72Net cash flow provided by (used in) investing activities
    
    
    2,515
    
    
    
    (4,402
    )
    
    
    2,279
    
    
    
    392CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings under credit agreement
    
    
    
    
    
    
    
    
    
    
    29,000
    
    
    
    29,000Repayments under credit agreement
    
    
    
    
    
    
    
    
    
    
    (135,200
    )
    
    
    (135,200
    )Repayments under term loan agreement
    
    
    
    
    
    
    
    
    
    
    (390
    )
    
    
    (390
    )Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    (23,625
    )
    
    
    (23,625
    )Net proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    108,205
    
    
    
    108,205Security deposits received
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    78Cash consolidation  Corporate
    
    
    (26,035
    )
    
    
    (7,725
    )
    
    
    33,760
    
    
    
    Net cash flow (used in) provided by financing activities
    
    
    (26,035
    )
    
    
    (7,647
    )
    
    
    11,750
    
    
    
    (21,932
    )Net increase in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    7,041
    
    
    
    7,041Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    
    
    
    
    3,050
    
    
    
    3,050Cash and cash equivalents at end of year
    
    $
    
    
    
    $
    
    
    
    $
    10,091
    
    
    $
    10,091
 - 29 -




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10. SUBSEQUENT EVENT
  
   - 30 -




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GENERAL
 Recent Development
  Real Estate Investment Trust
  Retail Petroleum Marketing Business
  - 31 -




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Marketing and the Marketing Leases
     - 32 -




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.
   - 33 -




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®
   - 35 -




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Supplemental Non-GAAP Measures
   - 38 -




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Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Net earnings
    
    $
    15,202
    
    
    $
    13,959
    
    
    $
    26,588
    
    
    $
    25,864Depreciation and amortization of real estate assets
    
    
    2,205
    
    
    
    2,409
    
    
    
    4,530
    
    
    
    4,804Gains from dispositions of real estate
    
    
    (251
    )
    
    
    (1,328
    )
    
    
    (319
    )
    
    
    (1,638
    )Funds from operations
    
    
    17,156
    
    
    
    15,040
    
    
    
    30,799
    
    
    
    29,030Revenue recognition adjustments
    
    
    (774
    )
    
    
    (275
    )
    
    
    (1,004
    )
    
    
    (659
    )Impairment charges
    
    
    1,513
    
    
    
    
    
    
    
    2,507
    
    
    
    Property
acquisition costs
    
    
    48
    
    
    
    
    
    
    
    2,034
    
    
    
    Adjusted funds from operations
    
    $
    17,943
    
    
    $
    14,765
    
    
    $
    34,336
    
    
    $
    28,371Diluted per share amounts:Earnings per share
    
    $
    0.46
    
    
    $
    0.51
    
    
    $
    0.80
    
    
    $
    1.00Funds from operations per share
    
    $
    0.51
    
    
    $
    0.55
    
    
    $
    0.93
    
    
    $
    1.12Adjusted funds from operations per share
    
    $
    0.54
    
    
    $
    0.54
    
    
    $
    1.04
    
    
    $
    1.09Diluted weighted-average shares outstanding
    
    
    33,395
    
    
    
    27,152
    
    
    
    32,950
    
    
    
    25,960
 RESULTS OF OPERATIONS
 Three months ended June 30, 2011 compared to the three months ended June 30, 2010
  - 39 -




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Six months ended June 30, 2011 compared to the six months ended June 30, 2010
     - 42 -




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- 43 -




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LIQUIDITY AND CAPITAL RESOURCES
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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ENVIRONMENTAL MATTERS
 General
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Environmental litigation
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Forward-Looking Statements
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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Item 4. Controls and Procedures
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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Our financial results are materially dependent on the performance of Marketing. In the event
that Marketing does not perform its rental, environmental or other obligations under the Marketing
Leases, our business, financial condition, revenues, operating expenses, results of operations,
liquidity, ability to pay dividends or stock price could be materially adversely affected. The
financial performance of Marketing has deteriorated in recent years.
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In July 2011 a $230 million award was issued against Marketing . We cannot predict what impact
such award will have on Marketings ability or willingness to perform its rental, environmental and
other obligations under the Master Lease and on Marketings business.
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Lukoil transferred its ownership interest in Marketing. We cannot predict what impact such
transfer will have on Marketings ability or willingness to perform its rental, environmental and
other obligations under the Master Lease and on Marketings business.
   If the Marketing Leases are modified significantly or terminated, our business, financial
condition, revenues, operating expenses, results of operations, liquidity, ability to pay dividends
or stock price could be materially adversely affected.
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Although we periodically receive and review the unaudited financial statements and other
financial information from Marketing, this information is not publicly available to investors. You
will not have access to financial information about Marketing provided to us by Marketing to allow
you to independently assess Marketings financial condition or its ability to satisfy its rental,
environmental and other obligations under the Marketing Leases.
  
 We are dependent on external sources of capital which may not be available on favorable terms, or
at all
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Item 4. Other Information




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Item 5. Exhibits
 Exhibit No.
    
    Description of Exhibit31(i).1
    
    Rule 13a-14(a) Certification of Chief Financial Officer31(i).2
    
    Rule 13a-14(a) Certification of Chief Executive Officer32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350 (a)32.2
    
    Certifications of Chief Financial Officer pursuant to 18 U.S.C. § 1350 (a)
 
 (a)
    
    These certifications are being furnished solely to accompany the Report pursuant
to 18 U.S.C. § 1350, and are not being filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, and are not to be incorporated by
reference into any filing of the Company, whether made before or after the date
hereof, regardless of any general incorporation language in such filing. - 62 -




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SIGNATURES
  Getty Realty Corp.
(Registrant) BY:
    /s/ Thomas J. Stirnweis(Signature)THOMAS J. STIRNWEIS
Vice President, Treasurer and
Chief Financial OfficerAugust 9, 2011BY:
    /s/ David Driscoll(Signature)DAVID DRISCOLL
President and Chief
Executive OfficerAugust 9, 2011 - 63 -