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 AND
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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 1-9349
SIZELER PROPERTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 72-1082589
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2542 WILLIAMS BOULEVARD, KENNER, LOUISIANA 70062
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (504) 471-6200
Former name, former address and former fiscal year, if changed since last
report.
Indicate by Check X 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date.
8,200,000 shares of Common Stock ($.01 Par Value) were outstanding as of
May 4, 2001.
Page 1 of 1
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
INDEX
PAGE
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Part I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 9
Part II: OTHER INFORMATION
Item 1. Legal Proceedings 9
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
SIGNATURE 10
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31 December 31
2001 2000
ASSETS (Unaudited) (Audited)
------------ ------------
Real estate investments (Note A):
Land $ 53,003,000 $ 52,461,000
Buildings and improvements, net of accumulated depreciation
of $79,395,000 in 2001 and $76,727,000 in 2000 217,840,000 219,571,000
Investment in real estate partnership 918,000 916,000
------------ ------------
271,761,000 272,948,000
Cash and cash equivalents 776,000 1,896,000
Accounts receivable and accrued revenue, net of allowance for
doubtful accounts of $304,000 in 2001 and $331,000 in 2000 2,338,000 2,035,000
Prepaid expenses and other assets 9,174,000 8,538,000
------------ ------------
Total Assets $284,049,000 $285,417,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable (Note C) $112,629,000 $113,163,000
Notes payable 36,913,000 35,716,000
Accounts payable and accrued expenses 4,976,000 6,701,000
Tenant deposits and advance rents 862,000 840,000
------------ ------------
155,380,000 156,420,000
Convertible subordinated debentures 61,878,000 61,878,000
------------ ------------
Total Liabilities 217,258,000 218,298,000
SHAREHOLDERS' EQUITY
Preferred stock, 6,000,000 shares authorized, none issued --- ---
Common stock, par value $.01 per share, 30,000,000 shares
authorized, shares issued and outstanding - 9,439,000 in 2001
and 9,329,000 in 2000 94,000 93,000
Additional paid-in capital 131,272,000 130,397,000
Cumulative net income 40,380,000 39,713,000
Cumulative distributions paid (93,778,000) (91,907,000)
------------ ------------
77,968,000 78,296,000
Treasury shares, at cost, 1,266,000 shares
in 2001 and in 2000 (11,177,000) (11,177,000)
------------ ------------
Total Shareholders' Equity 66,791,000 67,119,000
------------ ------------
Total Liabilities and Shareholders' Equity $284,049,000 $285,417,000
============ ============
See notes to consolidated financial statements.
3
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended March 31
-------------------------
2001 2000
----------- -----------
OPERATING REVENUE
Rental and other income $13,125,000 $12,634,000
Equity in income of partnership 31,000 31,000
----------- -----------
13,156,000 12,665,000
----------- -----------
OPERATING EXPENSES
Management and leasing fees 658,000 706,000
Utilities 564,000 448,000
Real estate taxes 988,000 947,000
Administrative expenses 645,000 753,000
Operations and maintenance 1,933,000 1,864,000
Other operating expenses 890,000 621,000
Depreciation and amortization 2,833,000 2,769,000
----------- -----------
8,511,000 8,108,000
----------- -----------
INCOME FROM OPERATIONS 4,645,000 4,557,000
Interest expense 3,982,000 3,931,000
----------- -----------
NET INCOME $ 663,000 $ 626,000
=========== ===========
BASIC AND DILUTED EARNINGS
PER SHARE $ 0.08 $ 0.08
=========== ===========
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 8,107,000 7,901,000
=========== ===========
See notes to consolidated financial statements.
4
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Quarter Ended March 31
--------------------------
2001 2000
----------- ----------
OPERATING ACTIVITIES:
Net income $ 663,000 $ 626,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,833,000 2,769,000
(Increase) decrease in accounts receivable
and accrued revenue (298,000) 292,000
Increase in prepaid expenses and other assets (112,000) (6,000)
Decrease in accounts payable and accrued expenses (1,721,000) (3,168,000)
----------- -----------
Net Cash Provided by Operating Activities 1,365,000 513,000
----------- -----------
INVESTING ACTIVITIES:
Acquisitions of and improvements to real estate investments (1,484,000) (2,572,000)
----------- -----------
Net Cash Used in Investing Activities (1,484,000) (2,572,000)
----------- -----------
FINANCING ACTIVITIES:
Principal payments on mortgage notes payable (534,000) (448,000)
Net proceeds on notes payable to banks 1,197,000 4,256,000
Increase in mortgage escrow deposits and debt issuance costs (669,000) (462,000)
Cash dividends to shareholders (1,871,000) (1,738,000)
Proceeds from issuance of shares of common stock pursuant to
direct stock purchase, stock option, and stock award plans 876,000 565,000
Purchases of Company's common stock - (713,000)
----------- -----------
Net cash (used in) provided by financing activities (1,001,000) 1,460,000
----------- -----------
Net decrease in cash and cash equivalents (1,120,000) (599,000)
Cash and cash equivalents at beginning of period 1,896,000 1,337,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 776,000 $ 738,000
=========== ===========
Cash interest payments, net of capitalized interest $ 5,526,000 $ 5,087,000
=========== ===========
See notes to consolidated financial statements
5
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2001
NOTE A -- BASIS OF PRESENTATION
As of March 31, 2001, the Company's real estate portfolio included interest in
sixteen shopping centers and fourteen apartment communities. The Company holds,
directly or indirectly through both wholly-owned subsidiaries and majority-owned
entities, a fee interest in twenty-eight of its properties, and long-term ground
leases on the remaining two properties - Southwood Shopping Center in Gretna,
Louisiana and Westland Shopping Center in Kenner, Louisiana. Sixteen properties
are held through partnerships and limited partnerships whereby the majority
owner is a wholly-owned subsidiary of Sizeler Property Investors, Inc. The
minority interests in these entities are held by third party corporations who
have contributed capital for their respective interests. The other fourteen
properties in the portfolio are held through wholly-owned subsidiary
corporations and limited liability companies. The Company, the wholly-owned
subsidiaries and majority-owned partnerships and limited partnerships, are
referred to collectively as the "Company".
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America (GAAP) for interim financial information and with instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by GAAP for complete financial
statements. Furthermore, the preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. Actual results could materially differ from those estimates.
Operating results for the three-month period ended March 31, 2001, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. The consolidated balance sheet at December 31, 2000, has
been derived from the audited consolidated financial statements at that date,
but does not include all of the information and footnotes required by GAAP for
complete financial statements. For further information, refer to the
consolidated financial statements and footnotes thereto included in the Sizeler
Property Investors, Inc. Annual Report on Form 10-K for the year ended December
31, 2000.
NOTE B -- RECLASSIFICATIONS
Certain reclassifications have been made in the 2000 Consolidated Financial
Statements to conform with the 2001 financial statement presentation.
NOTE C -- MORTGAGE NOTES PAYABLE
The Company's mortgage notes payable are secured by certain land, buildings and
improvements. At March 31, 2001, mortgage notes payable totalled approximately
$112.6 million. Individual notes ranged from $937,000 to $20.1 million, with
fixed rates of interest ranging from 6.85% to 8.63% and maturity dates ranging
from September 30, 2001, to January 1, 2013. Net book values of properties
securing these mortgage notes payable totalled approximately $136.1 million at
March 31, 2001, with individual property net book values ranging from $2.3
million to $30.4 million.
NOTE D - SEGMENT DISCLOSURE
The Company is engaged in two operating segments, the ownership and rental of
retail shopping center properties and apartment properties. These reportable
segments offer different products or services and are managed separately as each
requires different operating strategies and management expertise. There are no
intersegment sales or transfers.
6
The Company assesses and measures segment operating results based on a
performance measure referred to as Net Operating Income and is based on the
operating revenues and operating expenses directly associated with the
operations of the real estate properties (excluding depreciation). Net
Operating Income is not a measure of operating results or cash flows from
operating activities as measured by GAAP, and is not necessarily indicative of
cash available to fund cash needs and should not be considered an alternative to
cash flows as a measure of liquidity.
The operating revenues, operating expenses, net operating income and real estate
investments for each of the reportable segments are summarized below for the
three-month periods ended March 31, 2001 and 2000.
Quarter Ended March 31
----------------------------
Retail: 2001 2000
------------ ------------
Operating Revenue $ 7,277,000 $ 7,029,000
Operating Expenses (3,013,000) (2,683,000)
------------ ------------
Net Operating Income - Retail $ 4,264,000 $ 4,346,000
Apartments:
Operating Revenue $ 5,879,000 $ 5,635,000
Operating Expenses (2,665,000) (2,655,000)
------------ ------------
Net Operating Income - Apartments 3,214,000 2,980,000
Net Operating Income - Total $ 7,478,000 $ 7,326,000
Depreciation (2,833,000) (2,769,000)
------------ ------------
Income From Operations 4,645,000 4,557,000
Interest Expense (3,982,000) (3,931,000)
------------ ------------
Net Income $ 663,000 $ 626,000
============ ============
Gross Real Estate Investments:
Retail $213,821,000 $207,182,000
Apartments 137,335,000 134,600,000
------------ ------------
$351,156,000 $341,782,000
============ ============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
For the three months ended March 31, 2001 net operating income totalled $7.5
million, compared to $7.3 million earned for the same period in 2000. Total
operating revenues increased approximately 4% to $13.2 million, compared to
$12.7 earned for the same period a year ago. Operating revenue for retail
centers and apartments was $7.3 million and $5.9 million, respectively. The
increase in operating revenue was due primarily to higher apartment occupancies,
market sustained rents and new retail leases, in particular the leasing of a
44,300 s.f. Publix Supermarket at the Town and Country Power Shopping Center in
Palatka, Florida, which opened for business in August, 2000. Increased first
quarter revenues were partially offset by increased operating costs, in
particular utilities, real estate taxes and property insurance costs. Operating
expenses, net of depreciation, totalled $5.7 million in 2001, compared to $5.3
million in 2000.
7
LIQUIDITY AND CAPITAL RESOURCES
The primary source of working capital for the Company is net cash provided by
operating activities, from which the Company funds normal operating
requirements, debt service obligations, and distributions to shareholders. In
addition, the Company maintains unsecured credit lines with commercial banks,
which it utilizes to supplement cash provided by operating activities and to
initially finance the cost of property development and redevelopment activities,
portfolio acquisitions and other expenditures. At March 31, 2001, the Company
had $776,000 in cash and cash equivalents and $55 million in committed bank
lines of credit facilities, of which approximately $18 million was available.
Utilization of the bank lines is subject to certain restrictive covenants that
impose maximum borrowing levels by the Company through the maintenance of
certain prescribed financial ratios.
Net cash flows provided by operating activities increased $852,000 in the first
quarter of 2001 compared to the same period in 2000. The increase was
principally attributable to a reduction in contractor retainages paid in 2001
relating to development activities.
Net cash flows used in investing activities decreased approximately $1.1 million
in 2001 from 2000, primarily attributable to decreased development activities.
Net cash flows provided by financing activities decreased $2.5 million in 2001
from 2000 due primarily to lower usage of bank lines, as a result of decreased
development activities.
As of March 31, 2001, fourteen of the Company's properties, comprising
approximately 49% of its gross investment in real estate, were subject to a
total of $112.6 million in mortgage obligations, all of which are long-term,
non-recourse and bear fixed rates of interest for fixed terms. The remaining
sixteen properties and vacant parcels of land in the portfolio are currently
unencumbered by debt. The Company anticipates that its current cash balance,
operating cash flows, and borrowing capacity (including borrowings under its
lines of credit) will be adequate to fund the Company's future (i) operating and
administrative expenses, (ii) debt service obligations, (iii) distributions to
shareholders, (iv) development activities, (v) capital improvements on existing
properties, and (vi) typical repair and maintenance expenses at its properties.
The Company's current dividend policy is to pay quarterly dividends to
shareholders, based upon funds from operations, as well as other factors. As
funds from operations excludes the deduction of certain non-cash charges,
principally depreciation on real estate assets, quarterly dividends will
typically be greater than net income and may include a tax-deferred return of
capital component. The Board of Directors, on May 11, 2001, declared a cash
dividend of $0.23 per share for the period January 1, 2001 through March 31,
2001, payable on June 1, 2001 to shareholders of record as of May 25, 2001.
FUNDS FROM OPERATIONS
Real estate industry analysts and the Company utilize the concept of funds from
operations as an important analytical measure of a Real Estate Investment
Trust's financial performance. The Company considers funds from operations in
evaluating its operating results and its dividend policy, as previously
mentioned, is also based, in part, on the concept of funds from operations.
Funds from operations (FFO) is defined by the Company and the National
Association of Real Estate Investment Trusts (NAREIT) as net income, excluding
gains or losses from sales of property and those items defined as extraordinary
under accounting principles generally accepted in the United States of America,
plus depreciation on real estate assets and after adjustments for unconsolidated
partnerships to reflect funds from operations on the same basis. Funds from
operations do not represent cash flows from operations as defined by GAAP, nor
is it indicative that cash flows are adequate to fund all cash needs, including
distributions to shareholders. Funds from operations should not be considered
as an alternative to net income as defined by GAAP or to cash flows as a measure
of liquidity. A reconciliation of net income to basic funds from operations is
presented below (in thousands):
8
Quarter Ended March 31
------------------------------------
2001 2000
----------------- -----------------
($000) Shares ($000) Shares
-------- ------ -------- ------
NET INCOME $ 663 8,107 $ 626 7,901
Additions:
Depreciation 2,833 2,769
Partnership depreciation 9 9
Deductions:
Minority depreciation 12 12
Amortization costs 157 143
------ ----- ------ -----
FUNDS FROM OPERATIONS - BASIC $3,336 8,107 $3,249 7,901
====== ===== ====== =====
EFFECTS OF INFLATION
Substantially all of the Company's retail leases contain provisions designed to
provide the Company with a hedge against inflation. Most of the Company's
retail leases contain provisions which enable the Company to receive percentage
rentals based on tenant sales in excess of a stated breakpoint and/or provide
for periodic increases in minimum rent during the lease term. The majority of
the Company's retail leases are for terms of less than ten years, which allows
the Company to adjust rentals to changing market conditions. In addition, most
retail leases require tenants to pay a contribution towards property operating
expenses, thereby reducing the Company's exposure to higher costs caused by
inflation. The Company's apartment leases are written for short terms,
generally six to twelve months, and are adjusted according to changing market
conditions.
FUTURE RESULTS
This Form 10-Q and other documents prepared and statements made by the Company,
may contain certain forward-looking statements that are subject to risk and
uncertainty. Investors and potential investors in the Company's securities are
cautioned that a number of factors could adversely affect the Company and cause
actual results to differ materially from those in the forward-looking
statements, including, but not limited to (a) the inability to lease current or
future vacant space in the Company's properties; (b) decisions by tenants and
anchor tenants who own their space to close stores at the Company's properties;
(c) the inability of tenants to pay rent and other expenses; (d) tenant
financial difficulties; (e) decreases in rental rates available from tenants;
(f) increases in operating costs at the Company's properties; (g) lack of
availability of financing for acquisition, development and rehabilitation of
properties by the Company; (h) possible dispositions of mature properties since
the Company is continuously engaged in the examination of its various lines of
business; (i) increases in interest rates; (j) a general economic downturn
resulting in lower retail sales and causing downward pressure on occupancies and
rents at retail properties; as well as (k) the adverse tax consequences if the
Company were to fail to qualify as a REIT in any taxable year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We incorporate by reference the disclosure contained in Item 7a, Quantitative
and Qualitative Disclosures About Market Risk, of the Company's Form 10-K, for
the year ended December 31, 2000. There have been no material changes during
the first three months of 2001.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no pending legal proceedings to which the Company is a party or
to which any of its properties is subject, which in the opinion of
management and its litigation counsel has resulted or will result in any
material adverse effect on the financial position of the Company.
9
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27. Financial Data Schedule.
(b) Reports on Form 8-K
None.
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.
SIZELER PROPERTY INVESTORS, INC.
-------------------------------
(Registrant)
By: /S/ ROBERT A. WHELAN
-----------------------------
Robert A. Whelan
Chief Financial Officer
Date: May 11, 2001
10