_______________________
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q/A
AMENDMENT TO FORM 10-Q
Filed Pursuant to
THE SECURITIES EXCHANGE ACT OF 1934
SIZELER PROPERTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items,
financial statements, exhibits, or other portions of its Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995, as set forth in the pages
attached hereto:
Part I.
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Part II.
Item 6. Exhibits and Reports on Form 8-K.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIZELER PROPERTY INVESTORS, INC.
Dated: August 17, 1995 By:
-------------------------------------
John J. Gilluly, Jr.
Vice President/Secretary/Treasurer
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q/A
PAGE
------
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 8-10
Part II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
2
PART I
FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
---------- -------------
1995 1994
---------- -------------
ASSETS
Real estate investments:
Land $ 47,634,000 $ 46,918,000
Buildings and improvements, net of
accumulated depreciation of $23,119,000
in 1995 and $21,309,000 in 1994. 216,078,000 210,498,000
Investment in real estate partnership 970,000 973,000
------------ ------------
264,682,000 258,389,000
Cash and cash equivalents 2,137,000 1,423,000
Accounts receivable and accrued revenue,
net of allowance for doubtful accounts
of $352,000 in 1995 and $321,000 in 1994 2,987,000 2,931,000
Prepaid expenses and other assets 7,802,000 7,180,000
------------ ------------
Total Assets $277,608,000 $269,923,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $ 61,881,000 $ 42,139,000
Notes payable 44,038,000 52,987,000
Accounts payable and accrued expenses 2,905,000 4,119,000
Tenant deposits and advance rents 860,000 845,000
Commitments and contingencies --- ---
Minority interest in real estate
partnerships 249,000 245,000
------------ ------------
109,933,000 100,335,000
Convertible subordinated debentures 62,878,000 62,878,000
------------ ------------
Total Liabilities 172,811,000 163,213,000
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, 3,000,000 shares
authorized, none issued --- ---
Common stock, par value $.01 per share,
15,000,000 shares authorized, shares
issued and outstanding--8,927,319
in 1995 and 8,922,819 in 1994 89,000 89,000
Additional paid-in capital 127,248,000 127,199,000
Accumulated distributions in excess of
net earnings (22,356,000) (20,551,000)
------------ ------------
104,981,000 106,737,000
Treasury shares, at cost, 15,000 shares
in 1995 (157,000) ---
Unrealized loss on securities (27,000) (27,000)
------------ ------------
Total Shareholders' Equity 104,797,000 106,710,000
------------ ------------
Total Liabilities and
Shareholders' Equity $277,608,000 $269,923,000
============ ============
See notes to consolidated financial statements.
3
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
QUARTER ENDED
MARCH 31,
1995 1994
----------- -----------
OPERATING REVENUE
Rents and other income $10,498,000 $ 7,732,000
Equity in income of
partnership 22,000 9,000
----------- -----------
10,520,000 7,741,000
----------- -----------
OPERATING EXPENSES
Management and leasing 522,000 360,000
Utilities 440,000 350,000
Real estate taxes 788,000 499,000
Operations and maintenance 1,512,000 1,039,000
Depreciation 1,945,000 1,314,000
Other operating expenses 563,000 385,000
----------- -----------
5,770,000 3,947,000
----------- -----------
INCOME FROM RENTAL
OPERATIONS 4,750,000 3,794,000
----------- -----------
OTHER INCOME (EXPENSES)
Interest and other income 8,000 44,000
Interest expense (3,551,000) (1,809,000)
Administrative expenses (512,000) (424,000)
----------- -----------
(4,055,000) (2,189,000)
----------- -----------
INCOME BEFORE GAIN ON
SALE OF INVESTMENT
SECURITIES 2,640,000 2,919,000
---------- -----------
Gain on sale of investment
securities -- 8,000
---------- -----------
NET INCOME $ 695,000 $ 1,613,000
=========== ===========
NET INCOME PER SHARE $ .08 $ 0.18
=========== ===========
See notes to consolidated financial statements.
4
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,
1995 1994
------------ ------------
OPERATING ACTIVITIES:
Net income $ 695,000 $ 1,613,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 1,945,000 1,314,000
Gain on sale of real estate companies
and other securities --- (8,000)
Equity in depreciation of real estate
partnership, net of minority interest
depreciation 2,000 16,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
and accrued revenue (56,000) 53,000
Decrease in prepaid expenses and other
assets 125,000 16,000
Increase in accounts payable and accrued
expenses (942,000) (1,043,000)
Increase (decrease) in tenant deposits
and advance rents 15,000 (51,000)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,784,000 1,910,000
----------- -----------
INVESTING ACTIVITIES:
Acquisitions of real estate investments (4,747,000) (2,033,000)
Improvements to real estate investments (3,628,000) (1,316,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (8,375,000) (3,349,000)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable and notes
payable to banks 19,825,000 1,000,000
Principal payments on mortgage notes payable
and notes payable to banks (9,032,000) (2,076,000)
Debt issuance costs and mortgage escrow payments (884,000) (79,000)
Cash dividends paid (2,500,000) (2,403,000)
Issuance of shares pursuant to Ownership
and option Plans 49,000 --
Purchases of treasury shares (157,000) --
Minority interest in real estate
partnerships 4,000 10,000
----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 7,305,000 (3,548,000)
----------- -----------
Net increase (decrease) in cash and cash
equivalents 714,000 (4,987,000)
Cash and cash equivalents at
beginning of year 1,423,000 6,299,000
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 2,137,000 $ 1,312,000
=========== ===========
See notes to consolidated financial statements.
5
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 1995, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1995. The consolidated balance sheet at December 31, 1994,
has been derived from the audited consolidated financial statements at that
date, but does not include all of the information and footnotes required by
generally accepted accounting principles 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, 1994.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Sizeler Property Investors, Inc., and its majority-owned
subsidiaries and partnerships (the "Company"). All significant intercompany
transactions and accounts have been eliminated in consolidation.
REAL ESTATE INVESTMENTS: Real estate investments are carried at cost.
Depreciation of buildings and improvements is provided by the straight-line
method over the estimated useful lives of the assets, ranging from ten to forty
years. Maintenance and repairs are expensed in the period incurred.
INVESTMENT IN REAL ESTATE PARTNERSHIP: An investment in a partnership for which
the Company owns a 50% interest is accounted for by use of the equity method.
RENTAL INCOME: Rental income includes rents from shopping center and apartment
properties. Minimum rents from shopping center leases are accounted for ratably
over the term of the lease. Percentage rents are recognized based upon tenant
sales that exceed specified levels. Tenant reimbursements are recognized as the
applicable services are rendered or related expenses incurred.
INCOME TAXES: The Company has elected to be taxed as a real estate investment
trust (REIT) under the Internal Revenue Code and intends to maintain its
qualification as a REIT in the future. Accordingly, no provision for federal or
state income taxes was made.
A real estate investment trust is required to distribute to shareholders at
least 95% of its ordinary taxable income. Taxable income differs from net
income for financial reporting purposes principally because of differences in
the method and timing of depreciation of the properties.
EARNINGS PER SHARE: Primary earnings per share is based upon the weighted
average number of shares outstanding. The weighted average number of shares
outstanding
6
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
were 8,924,000 and 8,902,000 for the three months ended March 31, 1995 and 1994,
respectively.
Fully-diluted per share amounts are similarly computed, but include the effect,
when dilutive, of the Company's common stock equivalents. The Company's
outstanding debentures and options are excluded in these calculations for 1995
and 1994, due to their antidilutive effect.
NOTE B -- MORTGAGE NOTES PAYABLE
The Company's mortgage notes payable are secured by certain land, buildings, and
improvements. The respective book values of the mortgaged properties and
related mortgage balances at March 31, 1995, are as follows:
Interest Maturity Book Mortgage
Rate Date Value Balance
---------- ------------- ------------ -----------
9.75% Sept. 1, 1996 $ 4,633,000 $ 3,503,000
8.35% Nov. 1, 1996 35,523,000 22,750,000
9.00% Mar. 1, 1997 3,151,000 2,255,000
10.88% Dec. 1, 1999 4,607,000 3,583,000
9.00% Dec. 27, 1999 3,937,000 2,215,000
9.47% Feb. 1, 2000 17,934,000 12,025,000
9.47% Feb. 1, 2000 11,818,000 7,800,000
8.25% July 1, 2000 10,522,000 6,899,000
9.00% Nov. 10, 2000 3,896,000 271,000
8.50% July 15, 2003 4,326,000 580,000
------------ -----------
$100,818,000 $61,881,000
============ ===========
NOTE C -- ISSUANCE OF COMMON STOCK AND CONVERTIBLE SUBORDINATED DEBENTURES
On March 7, 1994, the Company filed a shelf Registration Statement (Form S-3)
with the Securities and Exchange Commission, pursuant to which it proposes to
offer for sale, from time to time, convertible subordinated debentures,
preferred stock, or common stock, with a cumulative public offering price of up
to $150 million. To date, no securities have been issued pursuant to this
Registration.
7
Financial Information (continued)
RESULTS OF OPERATIONS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
COMPARISON OF THE QUARTERS ENDED MARCH 31, 1995, AND MARCH 31, 1994.
Operating revenue from all properties in the portfolio for the quarter ended
March 31, 1995, compared to 1994, increased $2.8 million (36%), due principally
to newly-acquired properties and, to a lesser extent, higher rental rates on
properties which were a part of the Company's portfolio during both comparative
periods. Revenue from shopping centers and apartments increased $1.6 million and
$1.2 million, respectively. Rental operating expenses of all properties
increased $1.8 million (46); rental operating expenses of shopping centers and
apartments increased $1.0 million and $816,000, respectively. Income from
rental operations of all properties increased $1.0 million (25%); income from
rental operations of shopping centers and apartments increased $570,000 and
$388,000, respectively. The reported increases in operating revenue, operating
expenses, and income from rental operations were due principally to newly-
acquired properties.
Operating revenue from properties owned during both comparable periods
increased $331,000 (4%) in 1995, attributable to higher rental rates and higher
average occupancies at certain of the Company's properties. Income from rental
operations of these properties decreased $33,000 (1%) for the quarter ended
March 31, 1995, compared to 1994, primarily attributable to an increase in
depreciation expense resulting from capital improvements completed at several of
the Company's properties during 1994 and 1995. At March 31, 1995, the Company's
shopping center and apartment properties were 95% and 97% leased,
respectively.
Interest expense increased $1.7 million for the quarter ended March 31, 1995,
compared to that of 1994, attributable to the following: (1) an increase of
$880,000 in mortgage interest expense resulting from mortgage debt assumed in
the third quarter of 1994 for the term financing of the North Shore Square
Shopping Mall ($22.8 million principal amount at 8.35%); mortgage financing
completed in the first quarter of 1995 on the Lafayette Square, Hampton Park,
and Pine Bend Apartments ($19.8 million principal amount at 9.47%); and (2) $863
of interest expense on bank debt (average bank borrowings were approximately
$48.5 million and $4.5 million, with an average rate of interest of 8.7% and
6.0% for the first quarter of 1995 and 1994, respectively.
Administrative expenses increased $88,000 (21%) for the quarter ended March
31, 1995, compared to 1994, principally attributable to increased costs incurred
in connection with the evaluation of potential acquisitions, higher payroll
costs, professional fees, and other administrative costs associated with the
Company's increased portfolio size and capital structure.
Net income decreased between the quarters ended March 31, 1995 and 1994 in the
aggregate and on a per-share basis. The decrease was attributable to an
increase in income from rental operations, principally offset by increased
depreciation expense relative to the Company's additional investment in real
estate properties and higher interest expense resulting from increased
borrowings and higher interest rates.
8
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
and distributions to shareholders. In addition, the Company maintains unsecured
credit lines with commercial banks, which it utilizes to temporarily finance the
cost of portfolio growth, property improvements, and other expenditures. At the
beginning of 1995, the Company had $1.4 million of cash and cash equivalents and
$78 million of bank lines of credit, of which $25 million was available.
Net cash flows from operating activities decreased by $126,000 in the first
three months of 1995, compared to 1994. This decrease was principally
attributable to the decrease in net income, as discussed above, offset by
increased depreciation expense. Cash flows from changes in operating assets and
liabilities included payment of six months' accrued interest on the Company's
convertible subordinated debentures in both January 1995 and 1994. Other
changes in operating assets and liabilities in 1995 from 1994 were primarily
attributable to the growth of the Company's portfolio following the first
quarter of 1994.
Net cash flows used in investing activities increased $5.0 million in 1995
from 1994. This increase resulted primarily from the acquisition of an
apartment property in January 1995, at a cost of approximately $4.75 million.
Also during the first three months in 1995, approximately $3.6 million was
expended in improvements to existing properties. During the first quarter of
1994, the Company acquired additional land adjoining one of its shopping
centers, at a cost of $1.8 million, and expended $1.3 million for improvements
to existing properties.
Net cash flows from financing activities increased $10.9 million in 1995 from
1994. During the first quarter of 1995, the Company mortgaged three of its
apartment properties for $19.8 million of term debt at a fixed rate of interest
of 9.47%. Proceeds from this financing were used to pay down outstanding
borrowings from the Company's bank lines of credit and to fund investing
activities and other cash requirements. In connection with these mortgage
financings, and a financing assumed subsequent to the second quarter of 1994,
the Company paid $884,000 in debt issuance costs and mortgage escrow deposits
during 1995. In February 1995, the Company announced that its Board of
Directors authorized a program, pursuant to which it may repurchase up to an
aggregate of $10 million of its common stock and convertible subordinated
debentures. Pursuant to this program, the Company acquired 15,000 shares of its
common stock at a cost of $157,000 during the first three months of 1995.
As of March 31, 1995, eleven of the Company's properties, comprising
approximately 36% of its gross investment in real estate, were subject to a
total of $61.9 million in mortgage debt, all of which bears a fixed rate of
interest for a fixed term. The remainder of the portfolio would be available
for additional debt financing, if determined appropriate. The Company
anticipates that its current cash balance, operating cash flows and borrowings
(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) capital improvements, and
(v) normal repair and maintenance expenses at its properties.
The Company's current dividend policy is to pay quarterly dividends to
shareholders, based upon, among other factors, funds from operations. Because
funds from operations excludes the deduction of non-cash charges, principally
depreciation and non-operating items, quarterly dividends will typically be
greater than net income and may include a tax-deferred return of capital
component. On May 5, 1995, the Company's Board of Directors declared a cash
dividend with respect to the period January 1, 1995 through March 31, 1995, of
$.28 per share, payable on June 6, 1995, to shareholders of record as of May 24,
1995.
9
FUNDS FROM OPERATIONS
Funds from operations is defined by the Company as net income, excluding gains
(or losses) from sales of property and other non-operating extraordinary
items, plus depreciation, and after adjustments for unconsolidated partnerships
to reflect funds from operations on the same basis. Funds from operations does
not represent cash flows from operations as defined by generally accepted
accounting principles, nor is it indicative that cash flows are adequate to fund
all cash needs. Funds from operations is not to be considered as an alternative
to net income as defined by generally accepted accounting principles nor to cash
flows as a measure of liquidity. Real estate industry analysts utilize the
concept of funds from operations as an important measure of a REIT's financial
performance. The Company considers funds from operations in evaluating its
operating results, and its dividend policy is also based, in part, on the
concept of funds from operations.
For the quarter ended March 31, 1995, funds from operations totalled $2.64
million, a decrease of $293,000 (10%) over the same period in 1994. During the
first quarter of 1995, funds from operations was affected by several factors, as
described above. The operating performance of the Company's real estate
properties reflected overall growth in income from rental operations, in line
with the Company's expectations. However, rising interest rates, combined with
a higher level of borrowings, resulted in increased interest expense, and a
negative impact on 1995 funds from operations.
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. Also, 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 contribute towards property
operating expenses, thereby reducing the Company's exposure to higher costs
caused by inflation. Apartment leases are written for short terms, generally
six to twelve months.
10
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
11