Exhibit 99.4
ITEM 1. FINANCIAL STATEMENTS
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
September 30, December 31,
2002 2001
---------- ----------
ASSETS
Real estate investments:
Rental properties $ 679,383 $ 659,820
Properties under development 15,901 22,599
---------- ----------
695,284 682,419
Accumulated depreciation (119,673) (109,344)
---------- ----------
Net rental properties 575,611 573,075
Net investment in direct financing leases 2,070 2,174
Mortgage loans, net 60 1,160
---------- ----------
Net real estate investments 577,741 576,409
Cash and cash equivalents - 2,457
Prepaid expenses and other assets 14,695 11,634
---------- ----------
Total assets $ 592,436 $ 590,500
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable, net $ 130,196 $ 134,672
7.3% convertible subordinated debentures, net - 23,275
Senior notes, net 149,792 124,760
Indebtedness to banks 17,000 51,654
Accrued interest 3,798 4,598
Accrued expenses and other liabilities 13,990 10,652
---------- ----------
Total liabilities 314,776 349,611
Commitments and contingencies (Note 8)
Minority interest payable 7,719 7,755
Shareholders' equity:
Preferred stock, $1 par value, authorized 10,000,000 shares;
none issued - -
Common stock, $1 par value, 150,000,000 shares authorized;
34,197,736 and 33,234,206 shares issued in
2002 and 2001, respectively 34,198 33,234
Additional paid-in capital 289,695 272,172
Deferred compensation/stock loans (3,495) (1,732)
Treasury stock, at cost, 0 and 2,738,204 shares
in 2002 and 2001, respectively - (22,783)
Cumulative distributions in excess of net earnings (50,457) (47,757)
---------- ----------
Total shareholders' equity 269,941 233,134
---------- ----------
Total liabilities and shareholders' equity $ 592,436 $ 590,500
========== ==========
The accompanying notes are an integral part of these
consolidated balance sheets.
1
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2002 2001 2002 2001
-------- -------- -------- --------
REVENUES:
Income from rental properties $22,542 $21,255 $66,989 $63,405
Interest income 13 92 47 372
Interest on direct financing leases 47 51 218 335
Gain on sale of outparcels (7) 258 498 1,003
-------- -------- -------- --------
Total revenues 22,595 21,656 67,752 65,115
-------- -------- -------- --------
EXPENSES:
Operating expenses of rental properties 5,969 5,203 17,204 15,809
Interest expense 5,369 5,719 16,472 17,185
Depreciation 3,889 3,790 11,656 11,239
Amortization of debt costs 186 165 490 477
General and administrative 974 1,076 3,226 3,159
-------- -------- -------- --------
Total expenses 16,387 15,953 49,048 47,869
EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES - - - (4)
-------- -------- -------- --------
Income from continuing operations before income taxes,
minority interest, gain on sale of property
and discontinued operations 6,208 5,703 18,704 17,242
INCOME TAX PROVISION - - (9) (53)
MINORITY INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP (126) (109) (396) (405)
GAIN ON SALES OF PROPERTIES - - - 2,498
-------- -------- -------- --------
Income from continuing operations 6,082 5,594 18,299 19,282
-------- -------- -------- --------
DISCONTINUED OPERATIONS
Income from discontinued operations, net of minority interest 88 122 295 315
Gain on sales of properties, net of minority interest 2,062 - 2,062 -
-------- -------- -------- --------
Income from discontinued operations 2,150 122 2,357 315
-------- -------- -------- --------
Income before extraordinary item 8,232 5,716 20,656 19,597
EXTRAORDINARY ITEM
Loss on extinguishment of debt - - (156) -
-------- -------- -------- --------
NET INCOME $ 8,232 $ 5,716 $20,500 $19,597
======== ======== ======== ========
PER SHARE: (Note 11)
Income from continuing operations - basic $ 0.18 $ 0.19 $ 0.57 $ 0.64
Income from discontinued operations - basic 0.06 - 0.07 0.01
-------- -------- -------- --------
Income before extraordinary item 0.24 0.19 0.64 0.65
Extraordinary item - basic - - (0.01) -
-------- -------- -------- --------
Net earnings - basic $ 0.24 $ 0.19 $ 0.63 $ 0.65
======== ======== ======== ========
Income from continuing operations - diluted $ 0.18 $ 0.19 $ 0.57 $ 0.63
Income from discontinued operations - diluted 0.06 - 0.07 0.01
-------- -------- -------- --------
Income before extraordinary item 0.24 0.19 0.64 0.64
Extraordinary item - diluted - - (0.01) -
-------- -------- -------- --------
Net earnings - diluted $ 0.24 $ 0.19 $ 0.63 $ 0.64
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 33,973 30,388 32,360 30,294
======== ======== ======== ========
Diluted 34,176 31,339 32,551 31,191
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
2
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
September 30,
--------------------
2002 2001
--------- ---------
Cash flows from operating activities:
Net earnings $ 20,500 $ 19,597
Adjustments to reconcile earnings to net cash from operating activities:
Depreciation 11,768 11,348
Gain on sale of operating properties (2,185) (2,498)
Gain on sale of outparcels (498) (1,003)
Extraordinary loss on extinguishment of debt 156 -
Minority interest of unitholders in partnership (37) (153)
Straight line rent adjustment (496) (370)
Amortization of deferred compensation 152 88
Amortization of debt costs and discounts 510 501
Amortization of capitalized leasing income 104 119
Changes in assets and liabilities:
Decrease in accrued interest on debentures and senior notes (660) (762)
Increase in interest receivable, prepaid expenses
and other assets (2,431) (882)
Increase in accrued expenses and other liabilities 3,205 2,472
--------- ---------
Net cash flows from operating activities 30,088 28,457
--------- ---------
Cash flows used in investing activities:
Additions to operating properties, net (5,720) (12,143)
Additions to development properties, net (7,851) (6,451)
Proceeds from sale of operating properties, net 6,513 11,260
Proceeds from sale of outparcels, net 1,084 1,330
Purchase of unconsolidated affiliate, net of assets acquired - 177
Distribution from dissolution of unconsolidated affiliate - 21
Funding of mortgage loans - (445)
Collections of mortgage loans, net 253 23
--------- ---------
Net cash flows used in investing activities (5,721) (6,228)
--------- ---------
Cash flows used in financing activities:
Cash dividends, net (23,200) (21,422)
Issuance of common stock, net 38,508 -
Purchase of treasury stock - (405)
Exercise of stock options 657 1,561
Issuance of shares under stock purchase plan 30 -
Proceeds from mortgage notes payable - 20,740
Principal amortization of mortgage notes payable (2,091) (1,890)
Repayment of mortgage notes payable (7,186) -
Proceeds from 7.84% senior notes issuance 25,000 -
Proceeds from 7.77% senior notes issuance - 50,000
Repayment of 7.3% convertible subordinated debentures (23,110) -
Repayment of 7.45% senior notes - (50,000)
Decrease in bank indebtedness (34,654) (19,000)
Payment of deferred financing costs (778) (1,082)
--------- ---------
Net cash flows used in financing activities (26,824) (21,498)
--------- ---------
Net (decrease) increase in cash and cash equivalents (2,457) 731
Cash and cash equivalents at beginning of period 2,457 831
--------- ---------
Cash and cash equivalents at end of period $ - $ 1,562
========= =========
Supplemental disclosures of cash flow information:
Total cash paid during period for interest $ 17,816 $ 18,887
========= =========
The accompanying notes are an integral part of these consolidated statements.
3
IRT PROPERTY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. UNAUDITED FINANCIAL STATEMENTS
These condensed consolidated financial statements for interim periods are
unaudited and should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended December 31, 2001. The accompanying condensed
consolidated financial statements include the accounts of IRT Property Company
and its wholly-owned subsidiaries, IRT Management Company ("IRTMC"), VW Mall,
Inc., IRT Alabama, Inc. ("IRTAL") and IRT Capital Corporation II ("IRTCCII"),
and its majority-owned subsidiary, IRT Partners L.P. ("LP") (collectively, the
"Company"). Intercompany transactions and balances have been eliminated in the
consolidation. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to a fair presentation of the
financial statements as of September 30, 2002 and 2001 have been recorded. The
results of operations for the interim periods presented are not necessarily
indicative of the results that may be expected for future interim periods or for
the full year.
2. RENTAL PROPERTIES
The rental properties acquired and disposed in 2002 are summarized below.
SHOPPING CENTER ACQUISITIONS
Date Square Year Built/ % Leased Total Initial
Acquired Property Name City, State Footage Renovated at Acquisition Cost Cash Paid
- -------- ----------------- ----------- ------- --------- --------------- --------- ----------
2/19/02 Parkwest Crossing Durham, NC 85,602 1991 100% $ 6,620 $ 1,946
SHOPPING CENTER DISPOSITIONS
Date Square Sales Net Gain
Sold Property Name City, State Footage Price Proceeds (Loss)
- ------- ------------------- ----------- ------- ------ --------- -------
9/25/02 Forest Hills Centre Wilson, NC 74,180 $ 6,850 $ 6,513 $ 2,062 (1)
(1) Net of $123 of minority interest
In connection with the acquisition of Parkwest Crossing, the Company
assumed a $4,800, 8.1% mortgage. See Note 5.
On September 26, 2002, the Company entered into a sale agreement for
Lawrence Commons in Lawrenceburg, TN, to close in the fourth quarter of 2002.
This property is not classified as held for sale within the Condensed
Consolidated Balance Sheets due to the buyer's unconditional right to terminate
the agreement for sixty days after the date of the agreement.
4
3. DEVELOPMENT AGREEMENTS
The Company enters into agreements to develop shopping centers with local
developers. The agreements generally consist of the Company committing to loan a
fixed amount, at a specified interest rate, for the development of the shopping
center with the possibility of the Company then purchasing the center upon the
developer meeting certain budgetary and leasing requirements. The loan is
secured by the development property and due upon completion. The developer is
responsible for all construction matters as well as initial leasing efforts.
Additionally, the Company could enter into a separate agreement to purchase
the completed shopping center. Generally, the purchase price to the Company is
based on the shopping center's net operating income and an implied rate of
return at the time when the developer meets the specified requirements. As of
September 30, 2002, the Company has no such purchase commitments.
The Company is involved in one development loan, Freehome Village, a 89,270
square foot shopping center. As of September 30, 2002, the Company has loaned
$925 for development and the shopping center should be completed in 2003.
Beginning in the second quarter, the Company changed its treatment to account
for the development loan as a property under development in the accompanying
Condensed Consolidated Balance Sheet as of September 30, 2002. As of December
31, 2001, this development loan had been considered as a mortgage loan.
Management believes the effect on prior periods is not significant.
5
4. INVESTMENT IN AND ADVANCES TO AFFILIATES
As of September 30, 2002, LP, IRTCCII, IRTAL and IRTMC guaranteed the
Company's indebtedness under the Company's existing unsecured revolving term
loan and its other senior debt. The guarantees are joint and several and full
and unconditional. The following tables show IRTCCII, IRTAL and IRTMC as
"Combined Subsidiaries."
GUARANTORS
---------------------------- CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
------------- ------------- ------------- ------------- -------------
AS OF SEPTEMBER 30, 2002
ASSETS
Net rental properties $ 398,705 $ 29,172 $ 147,734 $ - $ 575,611
Investment in affiliates 124,109 - - (124,109) -
Other assets 35,951 43,137 26,339 (88,602) 16,825
------------- ------------- ------------- ------------- -------------
Total assets 558,765 72,309 174,073 (212,711) 592,436
============= ============= ============= ============= =============
LIABILITIES
Mortgage notes payable 84,485 4,030 41,681 - 130,196
Senior Notes, net 149,792 - - - 149,792
Indebtedness to banks 17,000 - - - 17,000
Other liabilities 78,711 24,017 3,668 (80,889) 25,507
------------- ------------- ------------- ------------- -------------
Total liabilities 329,988 28,047 45,349 (80,889) 322,495
------------- ------------- ------------- ------------- -------------
SHAREHOLDERS' EQUITY
Total shareholders' equity 228,777 44,262 128,724 (131,822) 269,941
------------- ------------- ------------- ------------- -------------
Total liabilities and shareholders' equity $ 558,765 $ 72,309 $ 174,073 $ (212,711) $ 592,436
============= ============= ============= ============= =============
GUARANTORS
---------------------------- CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
------------- ------------- ------------- ------------- -------------
AS OF DECEMBER 31, 2001
ASSETS
Net rental properties $ 399,312 $ 28,138 $ 145,625 $ - $ 573,075
Investment in affiliates 122,168 - - (122,168) -
Other assets 35,677 33,488 21,248 (72,988) 17,425
------------- ------------- ------------- ------------- -------------
Total assets 557,157 61,626 166,873 (195,156) 590,500
============= ============= ============= ============= =============
LIABILITIES
Mortgage notes payable 93,115 4,093 37,464 - 134,672
Senior Notes, net 124,760 - - - 124,760
Indebtedness to banks 51,654 - - - 51,654
Other liabilities 84,928 24,431 2,154 (65,233) 46,280
------------- ------------- ------------- ------------- -------------
Total liabilities 354,457 28,524 39,618 (65,233) 357,366
------------- ------------- ------------- ------------- -------------
SHAREHOLDERS' EQUITY
Total shareholders' equity 202,700 33,102 127,255 (129,923) 233,134
------------- ------------- ------------- ------------- -------------
Total liabilities and shareholders' equity $ 557,157 $ 61,626 $ 166,873 $ (195,156) $ 590,500
============= ============= ============= ============= =============
6
GUARANTORS
---------------------------- CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
-------------- ------------- ------------- ------------- --------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
REVENUES
Income from rental properties $ 15,922 $ 639 $ 5,981 $ - $ 22,542
Interest Income 121 - 76 (184) 13
Interest on direct financing leases 47 - - - 47
Other income 41 4,265 - (4,313) (7)
-------------- ------------- ------------- ------------- --------------
Total revenues 16,131 4,904 6,057 (4,497) 22,595
-------------- ------------- ------------- ------------- --------------
EXPENSES
Operating expenses of rental properties 4,113 166 1,690 - 5,969
Interest expense 4,556 186 816 (189) 5,369
Depreciation 2,829 55 1,005 - 3,889
Amortization of debt costs 180 1 5 - 186
General and administrative 603 110 261 - 974
-------------- ------------- ------------- ------------- --------------
Total expenses 12,281 518 3,777 (189) 16,387
-------------- ------------- ------------- ------------- --------------
Equity in earnings (losses) of affiliates - - - - -
-------------- ------------- ------------- ------------- --------------
Earnings from continuing operations before
income taxes, minority interest, gain on
sales of properties and discontinued operations 3,850 4,386 2,280 (4,308) 6,208
Income tax provision - - - - -
Minority interest in operating partnership 126 - - (252) (126)
Gain on sales of properties - - - - -
-------------- ------------- ------------- ------------- --------------
Income from continuing operations before
discontinued operations and extraordinary item 3,976 4,386 2,280 (4,560) 6,082
Income from discontinued operations (131) - 2,281 - 2,150
Extraordinary item - loss on extinguishment
of debt - - - - -
-------------- ------------- ------------- ------------- --------------
Net income $ 3,845 $ 4,386 $ 4,561 $ (4,560) $ 8,232
============== ============= ============= ============= ==============
GUARANTORS
---------------------------- CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
-------------- ------------- ------------- ------------- --------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
REVENUES
Income from rental properties $ 15,199 $ 322 $ 5,734 $ - $ 21,255
Interest Income 190 - 158 (256) 92
Interest on direct financing leases 51 - - - 51
Other income 284 2,477 - (2,503) 258
-------------- ------------- ------------- ------------- --------------
Total revenues 15,724 2,799 5,892 (2,759) 21,656
-------------- ------------- ------------- ------------- --------------
EXPENSES
Operating expenses of rental properties 3,636 82 1,485 - 5,203
Interest expense 5,058 193 732 (264) 5,719
Depreciation 2,810 63 917 - 3,790
Amortization of debt costs 161 1 3 - 165
General and administrative 746 62 268 - 1,076
-------------- ------------- ------------- ------------- --------------
Total expenses 12,411 401 3,405 (264) 15,953
-------------- ------------- ------------- ------------- --------------
Equity in earnings (losses) of affiliates 2,398 - - (2,398) -
-------------- ------------- ------------- ------------- --------------
Earnings from continuing operations before
income taxes, minority interest, gain on
sales of properties and discontinued operations 5,711 2,398 2,487 (4,893) 5,703
Income tax provision - - - - -
Minority interest in operating partnership 8 - - (117) (109)
Gain on sales of properties 1,390 - - (1,390) -
-------------- ------------- ------------- ------------- --------------
Income from continuing operations before
discontinued operations 7,109 2,398 2,487 (6,400) 5,594
Income from discontinued operations (11) - 133 - 122
-------------- ------------- ------------- ------------- --------------
Net Income $ 7,098 $ 2,398 $ 2,620 $ (6,400) $ 5,716
============== ============= ============= ============= ==============
7
GUARANTORS
------------------------------ CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
-------------- -------------- -------------- ------------- --------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
REVENUES
Income from rental properties $ 46,969 $ 1,568 $ 18,452 $ - $ 66,989
Interest Income 401 - 234 (588) 47
Interest on direct financing leases 218 - - - 218
Other income 383 9,359 - (9,244) 498
-------------- -------------- -------------- ------------- --------------
Total revenues 47,971 10,927 18,686 (9,832) 67,752
-------------- -------------- -------------- ------------- --------------
EXPENSES
Operating expenses of rental properties 11,649 404 5,151 - 17,204
Interest expense 14,164 496 2,400 (588) 16,472
Depreciation 8,462 186 3,008 - 11,656
Amortization of debt costs 474 2 14 - 490
General and administrative 2,090 283 853 - 3,226
-------------- -------------- -------------- ------------- --------------
Total expenses 36,839 1,371 11,426 (588) 49,048
-------------- -------------- -------------- ------------- --------------
Equity in earnings (losses) of affiliates 9,547 - - (9,547) -
-------------- -------------- -------------- ------------- --------------
Earnings from continuing operations before
income taxes, minority interest, gain on
sales of properties and discontinued operations 20,679 9,556 7,260 (18,791) 18,704
Income tax provision - (9) - - (9)
Minority interest in operating partnership 142 - - (538) (396)
Gain on sales of properties - - - - -
-------------- -------------- -------------- ------------- --------------
Income from continuing operations before
discontinued operations and extraordinary item 20,821 9,547 7,260 (19,329) 18,299
Income from discontinued operations (158) - 2,515 - 2,357
Extraordinary item - loss on extinguishment
of debt (156) - - - (156)
-------------- -------------- -------------- ------------- --------------
Net income $ 20,507 $ 9,547 $ 9,775 $ (19,329) $ 20,500
============== ============== ============== ============= ==============
Net cash flows provided by (used in)
operating activities $ 19,932 $ 8,616 $ 10,795 $ (9,255) $ 30,088
============== ============== ============== ============= ==============
.
Net cash flows (used in) provided by
investing activities $ (6,474) $ (1,004) $ 1,757 $ - $ (5,721)
============== ============== ============== ============= ==============
Net cash flows (used in) provided by
financing activities $ (16,610) $ (7,686) $ (12,347) $ 9,819 $ (26,824)
============== ============== ============== ============= ==============
GUARANTORS
------------------------------ CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
-------------- -------------- -------------- ------------- --------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
REVENUES
Income from rental properties $ 45,498 $ 945 $ 16,962 $ - $ 63,405
Interest Income 899 - 328 (855) 372
Interest on direct financing leases 335 - - - 335
Other income 327 8,888 293 (8,505) 1,003
-------------- -------------- -------------- ------------- --------------
Total revenues 47,059 9,833 17,583 (9,360) 65,115
-------------- -------------- -------------- ------------- --------------
EXPENSES
Operating expenses of rental properties 11,088 218 4,503 - 15,809
Interest expense 15,517 479 2,044 (855) 17,185
Depreciation 8,312 153 2,774 - 11,239
Amortization of debt costs 469 2 6 - 477
General and administrative 2,223 170 762 4 3,159
-------------- -------------- -------------- ------------- --------------
Total expenses 37,609 1,022 10,089 (851) 47,869
-------------- -------------- -------------- ------------- --------------
Equity in earnings (losses) of affiliates 8,758 - - (8,762) (4)
-------------- -------------- -------------- ------------- --------------
Earnings from continuing operations before
income taxes, minority interest, gain on
sales of properties and discontinued operations 18,208 8,811 7,494 (17,271) 17,242
Income tax provision - (53) - - (53)
Minority interest in operating partnership 17 - - (422) (405)
Gain on sales of properties 1,390 - 1,108 - 2,498
-------------- -------------- -------------- ------------- --------------
Income from continuing operations before
discontinued operations 19,615 8,758 8,602 (17,693) 19,282
Income from discontinued operations (34) - 349 - 315
-------------- -------------- -------------- ------------- --------------
Net Income $ 19,581 $ 8,758 $ 8,951 $ (17,693) $ 19,597
============== ============== ============== ============= ==============
Net cash flows provided by (used in)
operating activities $ 19,796 $ 7,738 $ 10,666 $ (9,743) $ 28,457
============== ============== ============== ============= ==============
Net cash flows (used in) provided by
investing activities $ (2,481) $ (2,589) $ (1,843) $ 685 $ (6,228)
============== ============== ============== ============= ==============
Net cash flows (used in) provided by
financing activities $ (11,172) $ (4,918) $ (14,466) $ 9,058 $ (21,498)
============== ============== ============== ============= ==============
8
5. MORTGAGE NOTES PAYABLE
On February 19, 2002, the Company assumed a non-recourse, secured loan
totaling $4,800, in connection with the acquisition of Parkwest Crossing. The
secured loan has a fixed interest rate of 8.1%. The loan is due and payable
September 1, 2010 and the principal amortization is based on a thirty year
amortization schedule. Costs associated with assuming the secured loan totaled
$56 and is being amortized over the term of the loan.
On March 1, 2002, the Company prepaid a 9.63% secured loan of approximately
$5,198. The loan was due on June 1, 2002.
On September 30, 2002, the Company prepaid a 7.65% secured loan of
approximately $1,989. The loan was due on December 1, 2002.
6. 7.3% CONVERTIBLE SUBORDINATED DEBENTURES
On January 24, 2002, the Company redeemed all of the outstanding 7.3%
convertible subordinated debentures due August 15, 2003 at par plus accrued
interest. Prior to redemption, 165 bonds were converted into 14,659 shares of
common stock. The Company paid $23,110 to redeem the remaining bonds outstanding
and recognized a $156 extraordinary loss on the extinguishment of unamortized
debt costs.
7. SENIOR NOTES
On January 23, 2002, pursuant to the Medium Term Note Program (the "MTN
Program") established in 2001, the Company issued $25,000 of 7.84% senior
unsecured notes due January 23, 2012. Interest on these senior notes is payable
semi-annually on January 23 and July 23. Costs associated with the issuance of
these senior notes totaled approximately $306 and are being amortized over the
life of the notes.
8. COMMITMENTS AND CONTINGENCIES
Certain of the Company's properties have environmental concerns that have
been or are being addressed. The Company maintains limited insurance coverage
for this type of environmental risk. Although no assurance can be given that
Company properties will not be affected adversely in the future by environmental
problems, the Company presently believes that there are no environmental matters
that are reasonably likely to have a material adverse effect on the Company's
financial position.
9. COMMON STOCK
In May 2002, the Company completed an offering of 3,450,000 shares of
common stock at $11.79 per share. Net proceeds to the Company were approximately
$38,508.
10. DEFERRED COMPENSATION
On May 30, 2002, 160,000 restricted shares of common stock were granted to
certain Company officers as incentives for future services. The restricted
shares vest proportionately over 4 years from the date of grant. The restricted
shares were valued at the closing price of the Company's common stock on May 30,
2002 of $11.97. As of September 30, 2002, the Company had recognized
compensation expense of approximately $64 related to this grant within the
Condensed Consolidated Income Statements.
9
11. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding during the period. The effects of
the conversion of the operating partnership units held by the minority interest
are dilutive for the three and nine months ended September 30, 2001 and have
been included in the calculation of diluted earnings per share for those
periods. For the three and nine months ended September 30, 2002, the effect of
the operating partnership units have been excluded from the calculation as they
are anti-dilutive for the period. For the three and nine months ended September
30, 2002 and 2001 the effects of the conversion of the 7.3% debentures have been
excluded from the calculation of diluted earnings per share as they are
anti-dilutive for those periods. The effects of certain stock options and
non-vested restricted stock, using the treasury stock method, have been included
in the calculation of diluted earnings per share, as they are dilutive for all
periods presented.
Per Share
Income Shares Amount
------- ------ -------
(In thousands except per share amounts)
For the three months ended September 30, 2002
- ----------------------------------------------------------
Basic net earnings available to shareholders $ 8,232 33,973 $ 0.24
=======
Options outstanding - 184
Restricted stock - 19
Diluted net earnings available to shareholders $ 8,232 34,176 $ 0.24
======= ====== =======
For the three months ended September 30, 2001
- ----------------------------------------------------------
Basic net earnings available to shareholders $ 5,716 30,388 $ 0.19
=======
Options outstanding - 106
Restricted stock - 29
Minority interest of unitholders in operating partnership 117 816
Diluted net earnings available to shareholders $ 5,833 31,339 $ 0.19
======= ====== =======
For the nine months ended September 30, 2002
- ----------------------------------------------------------
Basic net earnings available to shareholders $20,500 32,360 $ 0.63
=======
Options outstanding - 174
Restricted Stock - 17
Diluted net earnings available to shareholders $20,500 32,551 $ 0.63
======= ====== =======
For the nine months ended September 30, 2001
- ----------------------------------------------------------
Basic net earnings available to shareholders $19,597 30,294 $ 0.65
=======
Options outstanding - 78
Restricted stock - 3
Minority interest of unitholders in operating partnership 422 816
Diluted net earnings available to shareholders $20,019 31,191 $ 0.64
======= ====== =======
12. SUBSEQUENT EVENTS
On October 7, 2002, an agreement was signed for the sale of the Lexington
Shopping Center in Lexington, VA to close on November 29, 2002. This unsolicited
offer was from the single tenant occupying the center. The Company expects to
recognize a gain on the sale of approximately $1,400.
On October 28, 2002, Equity One, Inc. (NYSE: EQY) and the Company executed
a merger agreement pursuant to which Equity One will acquire the Company. In
connection with the merger, each of the Company's shareholders may elect to
receive for each share of the Company's common stock either $12.15 in cash or
0.9 shares of Equity One common stock, or a combination thereof. The terms of
the merger agreement further provide that the holders of no more than 50% of the
Company's outstanding common stock may elect to receive cash.
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Completion of the transaction, which is expected to take place in the first
quarter of 2003, is subject to the approval of Equity One's and the Company's
shareholders and other customary conditions. The boards of each of the Company
and Equity One have unanimously approved the transaction. Additionally, holders
of approximately 75% of Equity One's common stock and approximately 8% of the
Company's common stock have agreed to vote their shares in favor of the
transactions contemplated by the merger. On the 4th business day prior to the
shareholder meetings, the Equity One holders may withdraw their voting support,
and the Company's board may withdraw its merger recommendation, if Equity One's
weighted average stock price for the 30 preceding trading days is less than
$12.06 or less than $11.00 for the three preceding trading days. In addition, on
the 4th business day prior to the shareholder meetings the Equity One holders
may withdraw their voting support if the Company's weighted average stock price
for the 30 preceding trading days is less than $10.935 or less than $9.935 for
the three preceding trading days.
The Company cannot make any assurances that the merger with Equity One will
be consummated according to the terms set forth in the merger agreement, if at
all. Either the Company or Equity One may terminate the merger agreement if the
merger is not consummated by March 31, 2003. The Company will be required to
pay a $15 million break-up fee to Equity One in the event that the Company
enters into an agreement for a superior transaction or if, under certain
circumstances, the Company's board withdraws its recommendation for the
transaction.
On October 31, 2002, Janet Herszenhorn, an individual stockholder of IRT,
purporting to represent a class of holders of IRT common stock, filed a putative
class action lawsuit in the Superior Court of Cobb County, Georgia, against IRT,
Equity One and each of the directors of IRT. The complaint alleges, among other
things, that IRT and its individual directors breached their fiduciary duties by
agreeing to the merger between Equity One and IRT and that Equity One aided and
abetted such breach. The complaint seeks injunctive relief, an order enjoining
consummation of the merger and unspecified damages.
On October 31, 2002, John Greaves, an individual stockholder of IRT,
purporting to represent a class of holders of IRT common stock, also filed a
putative class action lawsuit in the Superior Court of Cobb County, Georgia,
against IRT, Equity One and each of the directors of IRT. The complaint alleges,
among other things, that IRT and its individual directors breached their
fiduciary duties by agreeing to the merger between Equity One and IRT and that
Equity One aided and abetted such breach. The complaint seeks injunctive relief,
an order enjoining consummation of the merger and unspecified damages.
Although the defendants believe that these suits are without merit and
intend to defend themselves vigorously, there can be no assurance that the
pending litigation will not interfere with the consummation of the merger. IRT
and Equity One do not expect that these suits will interfere with the scheduling
of their respective shareholder meetings or the consummation of the merger, if
approved.
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