<PAGE>
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 JUNE 30, 1996
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES
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 (I.R.S. Employer Identification No.)
of incorporation or organization)
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.
8,422,669 shares of Common Stock ($.01 Par Value) were outstanding as
of August 6, 1996.
Page 1 of 12 Pages
<PAGE>
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
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 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote
of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
2
<PAGE>
PART I
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
June 30, December 31,
-------- ------------
1996 1995
---- ----
<S> <C> <C>
ASSETS
Real estate investments:
Land $ 48,440,000 $ 48,402,000
Buildings and improvements, net of
accumulated depreciation of $33,201,000
in 1996 and $29,041,000 in 1995 218,052,000 218,478,000
Investment in real estate partnership 954,000 963,000
------------ ------------
267,446,000 267,843,000
Cash and cash equivalents 600,000 1,274,000
Accounts receivable and accrued revenue,
net of allowance for doubtful accounts
of $204,000 in 1996 and $166,000 in 1995 2,543,000 3,088,000
Prepaid expenses and other assets, net 9,175,000 9,652,000
------------ ------------
Total Assets $279,764,000 $281,857,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $ 68,408,000 $ 68,317,000
Notes payable 50,900,000 51,419,000
Accounts payable and accrued expenses 4,541,000 2,762,000
Tenant deposits and advance rents 851,000 896,000
Commitments and contingencies --- ---
Minority interest in real estate
partnerships 262,000 262,000
------------ ------------
124,962,000 123,656,000
Convertible subordinated debentures 62,878,000 62,878,000
------------ ------------
Total Liabilities 187,840,000 186,534,000
------------ ------------
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--8,946,369
in 1996 and 8,930,069 in 1995 90,000 89,000
Additional paid-in capital 127,420,000 127,273,000
Accumulated distributions in excess of
net earnings (30,613,000) (27,580,000)
------------ ------------
96,897,000 99,782,000
Treasury shares, at cost, 523,700 shares
in 1996 and 460,900 in 1995 (4,969,000) (4,454,000)
Unrealized loss on securities (4,000) (5,000)
------------ ------------
Total Shareholders' Equity 91,924,000 95,323,000
------------ ------------
Total Liabilities and
Shareholders' Equity $279,764,000 $281,857,000
============ ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUE $10,889,000 $10,580,000 $21,714,000 $21,078,000
Rents and other income 25,000 31,000 50,000 53,000
----------- ----------- ----------- -----------
Equity in income of partnership 10,914,000 10,611,000 21,764,000 21,131,000
----------- ----------- ----------- -----------
OPERATING EXPENSES
Management & leasing 537,000 441,000 1,071,000 963,000
Utilities 497,000 457,000 945,000 896,000
Real estate taxes 789,000 790,000 1,582,000 1,578,000
Operations & maintenance 1,584,000 1,567,000 3,088,000 3,084,000
Administrative expenses 516,000 527,000 1,040,000 1,039,000
Other operating expenses 596,000 596,000 1,208,000 1,155,000
Depreciation & amortization 2,260,000 2,101,000 4,478,000 4,046,000
----------- ----------- ----------- -----------
6,779,000 6,479,000 13,412,000 12,761,000
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 4,135,000 4,132,000 8,352,000 8,370,000
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Interest, dividends, and other income 13,000 16,000 59,000 24,000
Interest expense (3,602,000) (3,527,000) (7,274,000) (7,078,000)
----------- ----------- ----------- -----------
(3,589,000) (3,511,000) (7,215,000) (7,054,000)
----------- ----------- ----------- -----------
INCOME BEFORE
EXTRAORDINARY ITEM 546,000 621,000 1,137,000 1,316,000
----------- ----------- ----------- -----------
Extraordinary item--early
extinguishment of debt --- --- (449,000) ---
----------- ----------- ----------- -----------
NET INCOME $ 546,000 $ 621,000 $ 688,000 $ 1,316,000
=========== =========== =========== ===========
PER SHARE DATA:
Income before extraordinary item $ 0.06 $ 0.07 $ 0.13 $ 0.15
=========== =========== =========== ===========
Extraordinary item --- --- (0.05) ---
=========== =========== =========== ===========
Net income $ 0.06 $ 0.07 $ 0.08 $ 0.15
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 688,000 $ 1,316,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 4,478,000 4,046,000
Extraordinary item--early extinguishment
of debt 449,000 ---
(Increase) decrease in accounts receivable
and accrued revenue 545,000 (32,000)
(Increase) decrease in prepaid expenses and
other assets 428,000 (120,000)
Decrease in accounts payable and accrued
expenses 1,779,000 826,000
Other, net (4,000) 165,000
----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,363,000 6,201,000
----------- ------------
INVESTING ACTIVITIES:
Acquisitions of real estate investments, net
of debt assumed --- (4,747,000)
Improvements to real estate investments (3,763,000) (6,867,000)
----------- ------------
NET CASH USED IN INVESTING ACTIVITIES (3,763,000) (11,614,000)
----------- ------------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable and notes
payable to banks 175,000 35,825,000
Principal payments on mortgage notes payable
and notes payable to banks (603,000) (21,620,000)
Debt issuance costs and mortgage escrow deposits (701,000) (2,214,000)
Cash dividends paid (3,719,000) (4,969,000)
Issuance of shares pursuant to stock option
plans 90,000 16,000
Purchases of treasury shares (516,000) (1,955,000)
Minority interest in real estate
partnerships --- 10,000
----------- ------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (5,274,000) 5,093,000
----------- ------------
Net decrease in cash and cash equivalents (674,000) (320,000)
Cash and cash equivalents at
beginning of year 1,274,000 1,423,000
----------- ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 600,000 $ 1,103,000
=========== ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE A -- 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 and six-month periods ended June 30, 1996, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. The consolidated balance sheet at December 31, 1995, 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, 1995.
NOTE B -- EXTRAORDINARY ITEM
Unamortized financing costs in connection with the early extinguishment of two
mortgage notes payable, totalling approximately $20 million, are reflected in
the Consolidated Statements of Income as an extraordinary item.
NOTE C -- EARNINGS PER SHARE
Primary earnings per share is based upon the weighted average number of shares
outstanding. The weighted average number of shares outstanding were 8,423,000
and 8,791,000 for the three months ended June 30, 1996 and 1995, respectively
and 8,443,000 and 8,857,000 for the six months ended June 30, 1996 and 1995,
respectively.
NOTE D -- MORTGAGE NOTES PAYABLE
The Company's mortgage notes payable are secured by certain land, buildings, and
improvements. At June 30, 1996, mortgage notes payable totalled $68.4 million.
Individual notes ranged from $2.2 million to $16.0 million, with fixed rates of
interest ranging from 7.44% to 10.88%, and maturity dates ranging from September
1, 1996, to November 1, 2000. Book values of properties securing these
mortgage notes payable totalled $104.2 million at June 30, 1996, with individual
property book values ranging from $3.3 million to $27.5 million.
6
<PAGE>
Financial Information (continued)
RESULTS OF OPERATIONS
- ---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Income from operations totalled $4.14 million for the three-month period
ended June 30, 1996, compared to $4.13 million for the same period in 1995.
Operating revenue from shopping centers and apartments increased $55,000 and
$254,000, respectively; the combined total increase was $309,000 (3%),
attributable primarily to higher rental rates coupled with higher occupancy. The
shopping centers and apartments were 92% and 98% leased at June 30, 1996,
respectively. Operating expenses before depreciation increased $459,000 (5%),
and income from operations before depreciation increased $162,000 (3%).
Depreciation increased $159,000 (8%) primarily due to capital improvements made
to the Company's real estate properties during 1995 and 1996.
Interest expense increased $75,000 for the quarter ended June 30, 1996, compared
to that of 1995, attributable to the following: (1) an increase of $290,000 of
interest expense on bank debt (average bank borrowings were approximately $51.9
million and $37.3 million, with an average interest rate of 7.0% and 8.2% for
the second quarter of 1996 and 1995, respectively), offset by; (2) a net
decrease of $215,000 in mortgage interest expense due to: (i) repayment of
approximately $25.0 million of mortgage debt after the second quarter of 1995,
(ii) mortgage debt financings totalling approximately $16.4 million completed
after the second quarter of 1995, and (iii) refinancing existing mortgage debt
of approximately $20.0 million in the first quarter of 1996, whereby there was a
reduction in the interest rate of approximately 200 basis points.
Net income for the three months ended June 30, 1996, compared to that of the
same period in 1995, decreased in the aggregate and on a per-share basis,
principally due to increased depreciation expense as explained above,
and increased interest expense resulting from a higher level of
borrowings.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Income from operations totalled $8.35 million for the six-month period ended
June 30, 1996, compared to $8.37 million for the same period in 1995. Operating
revenue from shopping centers and apartments increased $122,000 and $514,000,
respectively; the combined total increase was $636,000 (3%), attributable
primarily to higher rental rates coupled with higher occupancy, and to a lesser
extent, the acquisition of an apartment property in mid-January of 1995.
Operating expenses before depreciation increased $219,000 (3%), and income from
operations before depreciation increased $414,000 (3%). Depreciation increased
$432,000 (11%) due to capital improvements made to the Company's real estate
properties during 1995 and 1996.
Interest expense increased $196,000 for the six months ended June 30, 1996,
compared to that of 1995, attributable to the following: (1) an increase of
$330,000 in interest expense on bank debt (average bank borrowings were
approximately $51.2 million and $41.6 million, with an average interest rate
of 7.2% and 8.3% for the six month period in 1996 and 1995, respectively),
offset by; (2) a net decrease of $134,000 in mortgage interest expense for the
same reasons as stated above in the discussion of the three month comparison.
7
<PAGE>
In January of 1996, the Company completed the refinancing of two mortgages,
totalling approximately $20 million, whereby the Company realized a reduction in
the interest rate on those borrowings of approximately 200 basis points. Net
income for the six months ended June 30, 1996, compared to that of the same
period in 1995, decreased in the aggregate and on a per-share basis, due
principally to an extraordinary charge of $449,000, resulting from the expensing
of deferred financing costs associated with the refinancing of the $20 million
in mortgage debt, combined with the increase in depreciation expense and
interest expense previously explained.
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
June 30, 1996, the Company had $600,000 of cash and cash equivalents and bank
commitments totalling $95 million in lines of credit, of which approximately $44
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 prescribed debt-to-equity or other financial ratios.
Net cash flows provided by operating activities increased $2.16 million in the
first six months of 1996 compared to the same period in 1995, attributable to an
increase in income from operations before depreciation, the recognition of an
extraordinary item associated with the early extinguishment of mortgage debt,
and a net decrease in operating assets offset by a net increase in operating
liabilities.
Net cash flows used in investing activities decreased $7.85 million in 1996
from 1995, attributable to a decrease in the acquisition of and capital
improvements made to real estate properties. The decrease in improvements to
properties was the result of the completion in 1995 of renovation programs at
two of the Company's shopping centers. The Company had no material commitments
for capital improvements at June 30, 1996.
Net cash flows provided by financing activities decreased $10.37 million in the
first six months of 1996 from that of 1995, primarily due to mortgage debt
financings completed in the first six months of 1995, and a decrease in treasury
shares purchased in the first six months of 1996 compared to 1995. In the first
six months of 1995, the Company completed mortgage debt financing totalling
$35.8 million, which the Company utilized to reduce variable-rate bank debt, and
to fund investment activity. The principal purpose of the mortgage debt
financing was to limit exposure to rising interest rates by replacing a
substantial amount of the Company's variable-rate, short-term bank debt with
fixed-rate, long-term debt. Bank debt was subsequently increased due to the
financing of capital improvements to real estate properties.
As of June 30, 1996, thirteen of the Company's properties, comprising
approximately 38% of its gross investment in real estate, were subject to a
total of $68.4 million in mortgage debt, all of which bears a fixed rate of
interest for a fixed term. The remainder of the portfolio may be available for
additional debt financing, if determined appropriate. 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 in accordance with Internal
Revenue Code requirements for a Real Estate Investment Trust ("REIT"), (iv)
capital improvements, and (v) normal repair and maintenance expenses at its
properties.
8
<PAGE>
The Company's current dividend policy is to pay quarterly dividends to
shareholders, based upon, among other factors, funds from operations, as opposed
to net income. Because funds from operations excludes the deduction of most
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. On August 1, 1996, the Company's Board of
Directors declared a cash dividend with respect to the period April 1, 1996,
through June 30, 1996, of $.22 per share, payable on September 4, 1996, to
shareholders of record as of August 20, 1996.
FUNDS FROM OPERATIONS
On January 1, 1996, the Company adopted a new definition of funds from
operations, in keeping with industry guidelines as established by the National
Association of Real Estate Investment Trusts (NAREIT). Real estate industry
analysts utilize the concept of funds from operations as an important analytical
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.
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 on real estate assets, 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 necessarily indicative
that cash flows are adequate to fund all cash needs. Funds from operations is
not to be considered an alternative to net income, as defined by generally
accepted accounting principles, or to cash flows as a measure of liquidity.
For the quarter ended June 30, 1996, funds from operations totalled $2.65
million, compared to $2.57 million for the same period in 1995, an increase of
3.0%. For the six months ended June 30, 1996, funds from operations increased
approximately $200,000 (4.1%), from $5.09 million in 1995 to $5.30 million in
1996. The increase in funds from operations is attributable to the operating
performance of the Company's real estate properties which experienced overall
income growth, primarily from higher rental rates coupled with higher occupancy
and, to a lesser extent, the acquisition of an apartment property in mid-January
1995; offset by a slight increase in interest expense due to a higher level of
average borrowings.
9
<PAGE>
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.
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 has resulted or will result in any material
adverse effect on the financial position of the Company.
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.
10
<PAGE>
SIGNATURES
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/ Thomas A. Masilla, Jr.
-----------------------------
Thomas A. Masilla, Jr.
Vice Chairman and President
(Principal Operating and
Financial Officer)
Date: August 13, 1996
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 600,000
<SECURITIES> 0
<RECEIVABLES> 2,747,000
<ALLOWANCES> (204,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 300,647
<DEPRECIATION> (33,201,000)
<TOTAL-ASSETS> 279,764,000
<CURRENT-LIABILITIES> 4,541,000
<BONDS> 182,186,000
0
0
<COMMON> 90,000
<OTHER-SE> 91,834,000
<TOTAL-LIABILITY-AND-EQUITY> 279,764,000
<SALES> 0
<TOTAL-REVENUES> 21,764,000
<CGS> 0
<TOTAL-COSTS> 13,412,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,274,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,137,000
<DISCONTINUED> 0
<EXTRAORDINARY> (449,000)
<CHANGES> 0
<NET-INCOME> 688,000
<EPS-PRIMARY> .13
<EPS-DILUTED> 0.00
</TABLE>
