<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, 1998
--------------
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
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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 (x) 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.
8,439,006 shares of Common Stock ($.01 Par Value) were outstanding as of
August 10, 1998.
Page 1 of 12 Pages
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SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
INDEX
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 7-10
Part II: OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 11-12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
2
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PART I
FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 1998 1997
------------ -------------
(unaudited)
Real estate investments:
Land $ 49,203,000 $ 49,203,000
Buildings and improvements, net of
accumulated depreciation
of $51,128,000 in 1998 and $46,454,000
in 1997 217,267,000 214,655,000
Investment in real estate partnership 916,000 904,000
------------ ------------
267,386,000 264,762,000
Cash and cash equivalents 784,000 1,128,000
Accounts receivable and accrued revenue,
net of allowance for
doubtful accounts of $377,000 in 1998
and $281,000 in 1997 2,503,000 2,696,000
Prepaid expenses and other assets 8,730,000 7,759,000
------------ ------------
Total Assets $279,403,000 $276,345,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $ 90,696,000 $ 90,615,000
Notes payable 34,409,000 32,342,000
Accounts payable and accrued expenses 8,032,000 4,903,000
Tenant deposits and advance rents 850,000 871,000
Minority interest in real estate
partnerships 209,000 209,000
------------ ------------
134,196,000 128,940,000
Convertible subordinated debentures 62,878,000 62,878,000
------------ ------------
Total Liabilities 197,074,000 191,818,000
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, 6,000,000 shares
authorized in 1998, and
3,000,000 shares authorized in 1997,
none issued --- ---
Common stock, par value $.01 per share,
30,000,000 shares
authorized in 1998, 15,000,000 shares
authorized in 1997,
shares issued -- 8,979,806 in 1998 and
8,966,119 in 1997 90,000 90,000
Additional paid-in capital 127,750,000 127,602,000
Accumulated distributions in excess of
net earnings (40,369,000) (38,028,000)
------------ ------------
87,471,000 89,664,000
Treasury shares, at cost, 540,800 shares
in 1998 and 1997 (5,146,000) (5,146,000)
Accumulated other comprehensive income 4,000 9,000
------------ ------------
Total Shareholders' Equity 82,329,000 84,527,000
------------ ------------
Commitments and contingencies --- ---
------------ ------------
Total Liabilities and Shareholders'
Equity $279,403,000 $276,345,000
============ ============
See notes to consolidated financial statements.
3
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SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
--------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
OPERATING REVENUE
Rents and other income $11,806,000 $11,462,000 $23,556,000 $22,770,000
Equity in income of partnership 28,000 24,000 55,000 48,000
----------- ----------- ----------- -----------
11,834,000 11,486,000 23,611,000 22,818,000
----------- ----------- ----------- -----------
OPERATING EXPENSES
Management & leasing fees 635,000 575,000 1,252,000 1,190,000
Utilities 461,000 488,000 943,000 970,000
Real estate taxes 887,000 857,000 1,763,000 1,707,000
Operations & maintenance 1,825,000 1,701,000 3,531,000 3,303,000
Administrative expenses 586,000 609,000 1,254,000 1,226,000
Other operating expenses 603,000 615,000 1,231,000 1,197,000
Depreciation & amortization 2,507,000 2,390,000 5,011,000 4,754,000
----------- ----------- ----------- -----------
7,504,000 7,235,000 14,985,000 14,347,000
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 4,330,000 4,251,000 8,626,000 8,471,000
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Interest, dividends, & other income 4,000 12,000 17,000 51,000
Interest expense (3,622,000) (3,633,000) (7,269,000) (7,287,000)
----------- ----------- ----------- -----------
(3,618,000) (3,621,000) (7,252,000) (7,236,000)
----------- ----------- ----------- -----------
NET INCOME $ 712,000 $ 630,000 $ 1,374,000 $ 1,235,000
=========== =========== =========== ===========
BASIC AND DILUTED
EARNINGS PER SHARE DATA:
Net income $ 0.08 $ 0.07 $ 0.16 $ 0.15
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
4
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SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,374,000 $1,235,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,011,000 4,754,000
Decrease in accounts receivable and accrued revenue 193,000 943,000
Increase in prepaid expenses and other assets (235,000) (185,000)
Increase in accounts payable and accrued expenses 1,805,000 1,982,000
Other, net 60,000 93,000
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,208,000 8,822,000
---------- ----------
INVESTING ACTIVITIES:
Improvements to real estate investments (5,962,000) (2,788,000)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (5,962,000) (2,788,000)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable and notes
payable to banks 63,576,000 ---
Principal payments on mortgage notes payable and
notes payable to banks (61,428,000) (1,147,000)
Debt issuance costs and mortgage escrow deposits (1,075,000) (796,000)
Cash dividends paid (3,713,000) (3,706,000)
Issuance of shares pursuant to stock option plans 50,000 17,000
Minority interest in real estate partnerships --- (3,000)
Purchases of treasury shares --- (177,000)
------------ ----------
NET CASH USED IN FINANCING ACTIVITIES (2,590,000) (5,812,000)
------------ ----------
Net increase (decrease) in cash and cash equivalents (344,000) 222,000
Cash and cash equivalents at beginning of year 1,128,000 468,000
------------ ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 784,000 $ 690,000
============ ==========
</TABLE>
See notes to consolidated financial statements.
5
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SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
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- and six-month periods ended June 30, 1998, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. The consolidated balance sheet at December 31, 1997, 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, 1997.
NOTE B -- EARNINGS PER SHARE (EPS)
Basic EPS is computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock
that would then share in the earnings of the Company. Below is a
reconciliation, for each reporting period, of the basic EPS computation to the
diluted EPS computation considering the effect of dilution on shares of common
stock.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
-------------------- --------------------- --------------------- --------------------
Shares Per Share Shares Per Share Shares Per Share Shares Per Share
--------- --------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share 8,439,000 $ 0.08 8,418,000 $ 0.07 8,438,000 $ 0.16 8,422,000 $ 0.15
Basic EPS
Effect of dilutive securities:
Stock options 30,000 21,000 30,000 21,000
--------- ------- --------- ------- --------- ------- --------- -------
Diluted EPS 8,469,000 $ 0.08 8,439,000 $ 0.07 8,468,000 $ 0.16 8,443,000 $ 0.15
========= ======= ========= ======= ========= ======= ========= =======
</TABLE>
There was no effect on net income per share in the calculation of diluted EPS.
NOTE C -- MORTGAGE NOTES PAYABLE
The Company's mortgage notes payable are secured by certain land, buildings, and
improvements. At June 30, 1998, mortgage notes payable totalled $90.7 million.
Individual notes ranged from $3.0 million to $22.6 million, with fixed rates of
interest ranging from 6.85% to 10.88%, and maturity dates ranging from
December 1, 1999, to January 1, 2013. Net book values of properties securing
these mortgage notes payable totalled $132.1 million at June 30, 1998, with
individual property net book values ranging from $3.8 million to $33.3 million.
During the second quarter of 1998, the Company completed mortgage refinancing on
ten of its apartment properties totalling approximately $59.1 million. The
refinanced loans are First Lien Fixed Rate FNMA DUS loans, with an average
interest rate of approximately 6.8% and a maturity of ten years. The previous
mortgage loans had an average interest rate of approximately 7.8% maturing in
the years 2000 and 2001. Also, during the second quarter of 1998, the Company
repaid mortgage debt on one of its retail centers, totalling $1.7 million, with
an interest rate of 9.0%.
6
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NOTE D -- NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income. This Statement requires the
reporting of comprehensive income and its components, the purpose of which is to
report a measure of all changes in equity of an enterprise that result from
recognized transactions and other economic events of the period other than
transactions with owners in their capacity as owners. The term comprehensive
income is used to describe the total of all components of comprehensive income,
including net income. Other comprehensive income refers to revenues, expenses,
gains, and losses that under generally accepted accounting principles (GAAP) are
included in comprehensive income, but excluded from net income. Comprehensive
income for the three months ended June 30, 1998 and 1997, was $707,000 and
$631,000, respectively, and for the six months ended June 30, 1998 and 1997, was
$1,369,000 and $1,236,000, respectively. Other comprehensive income was composed
of unrealized holding gains on marketable securities.
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 131, Disclosure About Segments of an Enterprise
and Related Information. This Statement establishes standards for the way that
public business enterprises report information about operating segments in
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The FASB
also issued SFAS No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits. This Statement revises disclosures about pension and
other postretirement benefit plans. It does not change the measurement or
recognition of those plans. The Company has reviewed these Statements and does
not believe the pronouncements will have a material impact on its fiscal 1998
consolidated financial statements.
On May 21, 1998, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus decision on Issue No. 98-9,
Accounting for Contingent Rent in Interim Financial Periods, which provides that
recognition of contingent (percentage) rental income in interim periods must be
deferred until the specified target (breakpoint) that triggers the percentage
rental income is achieved. The Company has historically recognized percentage
rental income based on a percentage of tenants sales ratably over the course of
the year. This consensus of EITF is effective May 21, 1998, and will require the
Company to defer recognition of this income until the date that the tenants'
sales exceed the breakpoint set forth in the lease agreements. The Company is
evaluating the effect of EITF Issue No. 98-9 on its financial statements for
the year ended December 31, 1998. Additionally, the amount of percentage rental
income recognized in each quarter of subsequent fiscal years will differ from
historical experience, with a concentration of percentage rental income in the
fourth quarter.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Operating revenue totalled $11.8 million, representing a 3% increase over the
same period a year ago, which totalled $11.5 million. Operating revenue for
retail centers and apartments were $6.8 million and $5.0 million, respectively.
The increase in operating revenue is due primarily to increases in rental rates
and sustained high occupancy levels at the properties. Income from operations
totalled $6.8 million in 1998, compared to $6.6 million in 1997, and
depreciation expense totalled $2.5 million and $2.4 million, respectively, for
the same periods. Operating expenses, net of depreciation totalled $5.0 million
in 1998, compared to $4.8 million in 1997, due primarily to higher maintenance
expenses.
Interest expense decreased $10,000 attributable to the following: (1) a net
increase of $376,000 in mortgage interest expense resulting primarily from the
following transactions: (i) an increase of $457,000 from mortgage financing
completed at one of the Company's enclosed regional malls in December 1997, and
(ii) a decrease of $78,000 resulting from mortgage refinancing on ten of the
Company's apartment properties and repaying a mortgage note payable on one of
the Company's retail centers, all of which were completed during the second
quarter of 1998; offset by (2) a decrease of $386,000 in interest expense on
bank debt due to using the mortgage proceeds from above to pay down bank debt
(average bank borrowings were approximately $33.4 million and $53.1 million for
the second quarter of 1998 and 1997, respectively, with an average rate of 7.2%
in each period.)
Net income totalled $712,000, or $0.08 per share, compared to $630,000, or
$0.07 per share, for the same period in 1997.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Operating revenue totalled $23.6 million, representing a 4% increase over the
same period a year ago, which totalled $22.8 million. Operating revenue for
retail centers and apartments were $13.6 million and $10.0 million,
respectively. The increase in operating revenue is due primarily to increases
in rental rates and sustained high occupancy levels at the properties. The
Company's retail and apartment properties were 95% and 97% leased,
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respectively, at June 30, 1998. Income from operations, before depreciation,
totalled $13.6 million in 1998, compared to $13.2 million in 1997, and
depreciation expense totalled $5.0 million and $4.8 million, respectively, for
the same periods. Operating expenses, net of depreciation totalled $10.0 million
in 1998, compared to $9.6 million in 1997, due primarily to increased fees
resulting from improved operating performance at the Company's properties,
higher real estate taxes, higher maintenance expenses, and an increase in
franchise taxes.
Interest expense decreased $18,000 attributable to the following: (1) a net
increase of $827,000 in mortgage interest expense resulting primarily from the
following transactions: (i) an increase of $919,000 from mortgage financing
completed at one of the Company's enclosed regional malls in December 1997, and
(ii) a decrease of $84,000 resulting from mortgage refinancing on ten of the
Company's apartment properties and repaying a mortgage note payable on one of
the Company's retail centers, all of which were completed during the second
quarter of 1998; offset by (2) a decrease of $845,000 in interest expense on
bank debt due to using the mortgage proceeds from above to pay down bank debt
(average bank borrowings were approximately $33.4 million and $53.3 million for
the second quarter of 1998 and 1997, respectively, with an average rate of 7.2%
in each period.
Net income totalled $1.4 million, or $0.16 per share, compared to $1.2
million, or $0.15 per share, for the same period in 1997.
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, 1998, the Company had $784,000 of cash and cash equivalents and bank
commitments for $80 million of lines of credit, of which approximately $46
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 decreased $614,000 in the
first six months of 1998 compared to the same period in 1997, attributable
to changes in operating assets and liabilities, offset by an increase in income
from operations before depreciation, as described in the previous section.
Net cash flows used in investing activities increased $3.2 million in 1998
from 1997, primarily attributable to the development of a new luxury apartment
community in Florida. During the third quarter of 1997, the Company entered
into a construction contract with a non-affiliated company to build the
apartment community. This community will have approximately 240 garden-style
units, with a mix of one, two, and three bedroom units. The total development
cost is expected to be approximately $14.0 million and the development is
expected to be completed by the end of 1998 or the beginning of 1999.
Net cash flows used in financing activities decreased $3.2 million, primarily
attributable to mortgage debt refinancing completed during the second quarter of
1998 involving ten of the Company's apartment properties. Mortgage debt
totalling $59.1 million was refinanced resulting in mortgage debt totalling
$61.5 million, of which the net proceeds totalling $2.4 million were used to
pay down short-term variable-rate bank debt. The Company was able to achieve
a reduction in the average interest rate on the mortgages refinanced by
approximately 100 basis points, from an average rate of approximately 7.8% down
to an average rate of approximately 6.8%. Combined with additional debt
amortization resulting from mortgage debt financing completed in December 1997,
the Company also repaid mortgage debt totalling $1.7 million on one of its
retail centers during the second quarter of 1998. Additionally, the Company did
not acquire any treasury shares during the first six months of 1998 as it did in
the same period in 1997.
As of June 30, 1998, thirteen of the Company's properties, comprising
approximately 48% of its gross investment in real estate, were subject to a
total of $90.7 million in mortgage obligations, all of which bear fixed rates of
interest for fixed terms. The remaining sixteen properties in the portfolio are
currently unencumbered by debt. The Company anticipates that its current cash
balance, operating cash flows, and borrowings (including
8
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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, as opposed
to net income. Because funds from operations excludes the deduction of non-cash
charges, principally depreciation on real estate assets and certain non-
operating items, quarterly dividends will typically be greater than net income
and may include a tax-deferred return of capital component. On August 6, 1998,
the Company's Board of Directors declared a cash dividend with respect to the
quarter ending June 30, 1998, of $0.22 per share, and also adopted a replacement
shareholder rights plan for the original shareholder rights plan in effect since
May 19, 1989. The Board also declared a distribution of $0.01 for each right
being redeemed under the original shareholder rights plan. The combined cash
distribution of $0.23 per share for the dividend and rights redemption is
payable on September 3, 1998, to shareholders of record as of August 27, 1998.
FUNDS FROM OPERATIONS
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 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.
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.
For the three-month period ended June 30, 1998, funds from operations
increased $220,000, 7.7%, totalling $3.07 million in 1998, compared to $2.85
million for the same period in 1997. For the six-month period ended June 30,
1998, funds from operations increased $400,000, 7.1%, totalling $6.06 million in
1998, compared to $5.66 million for the same period in 1997. The increase in
funds from operations results from internal growth and improved operating
performance attributable to the Company's portfolio of both retail and apartment
properties.
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 (a) the inability to lease currently 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 bankruptcies; (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) increases in interest
rates; and (i) a general economic downturn resulting in lower retail sales and
causing downward pressure on occupancies and rents at retail properties.
YEAR 2000 ISSUE
The Company has been addressing the potential computer program problems
resulting from the arrival of Year 2000 (Y2K). The Company has established a
Y2K compliance review process to assess the impact on the Company's internal
financial information systems and property mechanical operations systems, as
well as the potential impact from Y2K problems of significant tenants, vendors
and suppliers of financial and other services
9
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(collectively "independent third parties"). The Company has identified required
modifications to its internal corporate computer operating system and certain
software modifications at its apartment properties. The Company plans to
complete these identified modifications in 1998 and at an immaterial cost. The
Company's compliance plan is to continue the process of conducting inquiries of
its independent third parties in order to determine if these third parties have
Y2K problems and what contingency plans they have developed to deal with
identified exposures. Based on the results of these inquiries, the Company will
formulate appropriate contingency plans to take necessary and feasible
precautions against problems not within its control. The Company is also
continuing the process of reviewing its own internal systems to ensure that they
are Y2K compliant and to make necessary and timely corrections of identified Y2K
problems under its direct control. This overall process will be on-going for the
remainder of 1998 and will likely extend into 1999 depending upon the timeliness
of activities of the Company's third parties, whom it does not control.
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.
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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.
At the Company's Annual Meeting of Shareholders, held on May 8, 1998,
the following matters were submitted for voting by the shareholders:
(1) Election of Three Directors - The shareholders re-elected J. Terrell
Brown, Harold B. Judell, and Richard L. Pearlstone to serve until
the Annual Meeting of Shareholders in 2001 or until their successors
are duly elected and qualified (the terms of office of Francis L.
Fraenkel, Sidney W. Lassen, Thomas A. Masilla, Jr., James W.
McFarland and Theodore H. Strauss continued after the meeting).
Votes Votes
Directors For Withheld
-------------------- --------- --------
J. Terrell Brown 7,750,632 126,388
Harold B. Judell 7,738,061 138,939
Richard L. Pearlstone 7,752,432 124,588
(2) Proposal to increase the number of authorized shares of Common Stock
to 35,000,000 -
Votes Votes Votes
For Against Abstaining
--------- --------- ----------
7,417,083 401,496 58,441
(3) Proposal to increase the number of authorized shares of Common Stock
to 40,000,000 -
Votes Votes Votes
For Against Abstaining
--------- --------- ----------
7,308,897 489,477 78,648
(4) Proposal to increase the number of authorized shares of Common Stock
to 45,000,000 -
Votes Votes Votes
For Against Abstaining
--------- --------- ----------
7,358,306 450,064 68,651
11
<PAGE>
(5) Proposal to increase the number of authorized shares of Preferred
Stock to 7,000,000 -
Votes Votes Votes
For Against Abstaining
--------- --------- ----------
4,581,200 1,082,217 80,192
(6) Proposal to increase the number of authorized shares of Preferred
Stock to 8,000,000 -
Votes Votes Votes
For Against Abstaining
--------- --------- ----------
4,506,590 1,142,298 94,721
(7) Proposal to increase the number of authorized shares of Preferred
Stock to 9,000,000 -
Votes Votes Votes
For Against Abstaining
--------- --------- ----------
4,503,855 1,143,291 96,463
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.
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)
By: /s/ David A. O'Flynn, Jr.
----------------------------------
David A. O'Flynn, Jr.
Controller
(Accounting Officer)
Date: August 13, 1998
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 784,000
<SECURITIES> 0
<RECEIVABLES> 2,880,000
<ALLOWANCES> 377,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 318,514,000
<DEPRECIATION> 51,128,000
<TOTAL-ASSETS> 279,403,000
<CURRENT-LIABILITIES> 42,441,000
<BONDS> 153,574,000
0
0
<COMMON> 90,000
<OTHER-SE> 82,239,000
<TOTAL-LIABILITY-AND-EQUITY> 279,403,000
<SALES> 0
<TOTAL-REVENUES> 23,611,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,985,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,269,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,374,000
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
