<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, 1999
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________to_______________
Commission file number 1-9349
------
SIZELER PROPERTY INVESTORS, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 72-1082589
- ------------------------------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2542 WILLIAMS BOULEVARD, KENNER, LOUISIANA 70062
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (504) 471-6200
--------------
_____________________________________________________________________________
Former name, former address and former fiscal year,if changed since last
report.
Indicate by Check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No_____
---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date. 7,838,983 shares of Common Stock ($.01 Par Value) were
outstanding as of August 6, 1999.
Page 1 of 13 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 - 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
Part II: Other Information
-----------------
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Sizeler Property Investors, Inc. and Subsidiaries
Consolidated Balance Sheets
---------------------------
(unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Real estate investments:
Land $ 50,288,000 $ 49,814,000
Buildings and improvements, net of accumulated depreciation
of $60,995,000 in 1999 and $55,964,000 in 1998 221,386,000 222,699,000
Investment in real estate partnership 914,000 913,000
------------ ------------
272,588,000 273,426,000
Cash and cash equivalents 1,262,000 1,150,000
Accounts receivable and accrued revenue, net of allowance for
doubtful accounts of $436,000 in 1999 and $423,000 in 1998 2,015,000 2,829,000
Prepaid expenses and other assets 9,424,000 8,481,000
------------ ------------
Total Assets $285,289,000 $285,886,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $ 89,009,000 $ 89,869,000
Notes payable 52,589,000 49,178,000
Accounts payable and accrued expenses 6,989,000 6,657,000
Tenant deposits and advance rents 864,000 878,000
Minority interest in real estate partnerships 215,000 209,000
------------ ------------
149,666,000 146,791,000
Convertible subordinated debentures 62,878,000 62,878,000
------------ ------------
Total Liabilities 212,544,000 209,669,000
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, 6,000,000 shares authorized, none issued --- ---
Common stock, par value $.01 per share, 30,000,000 shares
authorized, shares issued and outstanding - 8,994,000 in 1999
and 8,980,000 in 1998 90,000 90,000
Additional paid-in capital 127,873,000 127,750,000
Accumulated distributions in excess of net earnings (44,951,000) (42,688,000)
------------ ------------
83,012,000 85,152,000
Treasury shares, at cost, 1,152,000 shares in 1999 and
990,000 shares in 1998 (10,255,000) (8,926,000)
Accumulated other comprehensive income (12,000) (9,000)
------------ ------------
Total Shareholders' Equity 72,745,000 76,217,000
------------ ------------
Total Liabilities and Shareholders' Equity $285,289,000 $285,886,000
============ ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
Sizeler Property Investors, Inc. and Subsidiaries
Consolidated Statements of Income
---------------------------------
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended June 30 Six Months Ended June 30
-------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUE
Rents and other income $12,179,000 $11,806,000 $24,563,000 $23,556,000
Equity in income of partnership 29,000 28,000 60,000 55,000
----------- ----------- ----------- -----------
12,208,000 11,834,000 24,623,000 23,611,000
----------- ----------- ----------- -----------
OPERATING EXPENSES
Management and leasing fees 662,000 635,000 1,333,000 1,252,000
Utilities 500,000 461,000 974,000 943,000
Real estate taxes 974,000 887,000 1,949,000 1,763,000
Operations and maintenance 1,691,000 1,825,000 3,582,000 3,531,000
Administrative expenses 679,000 586,000 1,364,000 1,254,000
Other operating expenses 635,000 603,000 1,293,000 1,231,000
Depreciation and amortization 2,712,000 2,507,000 5,350,000 5,011,000
----------- ----------- ----------- -----------
7,853,000 7,504,000 15,845,000 14,985,000
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 4,355,000 4,330,000 8,778,000 8,626,000
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Interest, dividends, and other income 6,000 4,000 18,000 17,000
Interest expense (3,762,000) (3,622,000) (7,584,000) (7,269,000)
----------- ----------- ----------- -----------
(3,756,000) (3,618,000) (7,566,000) (7,252,000)
----------- ----------- ----------- -----------
NET INCOME $ 599,000 $ 712,000 $ 1,212,000 $ 1,374,000
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS
PER SHARE DATA
Net income $0.08 $0.08 $0.15 $0.16
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
Sizeler Property Investors, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,212,000 $ 1,374,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,350,000 5,011,000
Decrease in accounts receivable and accrued revenue 814,000 193,000
Increase in prepaid expenses and other assets (373,000) (175,000)
Increase in accounts payable and accrued expenses 332,000 1,805,000
------------ ------------
Net Cash Provided by Operating Activities 7,335,000 8,208,000
------------ ------------
INVESTING ACTIVITIES:
Acquisitions of land (474,000) ---
Improvements to real estate investments (3,718,000) (5,962,000)
------------ ------------
Net Cash Used in Investing Activities (4,192,000) (5,962,000)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable and notes
payable to banks 18,171,000 63,576,000
Principal payments on mortgage notes payable and
notes payable to banks (15,620,000) (61,428,000)
Mortgage escrow deposits and debt issuance costs (826,000) (1,075,000)
Cash dividends paid (3,475,000) (3,713,000)
Issuance of shares of common stock pursuant to
stock option plans 48,000 50,000
Purchases of treasury shares (1,329,000) ---
------------ ------------
Net Cash Used in Financing Activities (3,031,000) (2,590,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents 112,000 (344,000)
Cash and cash equivalents at beginning of year 1,150,000 1,128,000
------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,262,000 $ 784,000
============ ============
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
Sizeler Property Investors, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1999
NOTE A -- BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with Generally Accepted Accounting Principles (GAAP) for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by 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,
1999, are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. The consolidated balance sheet at December 31,
1998, 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, 1998.
NOTE B -- RECLASSIFICATIONS
Certain reclassifications have been made in the 1998 Consolidated Financial
Statements to conform with the 1999 financial statement presentation.
NOTE C -- 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 participate in the earnings of the Company. Weighted average
shares totalled 7,852,000 and 8,439,000 for the three-month periods ended June
30, 1999 and 1998, respectively, and totalled 7,905,000 and 8,438,000 for the
six-month periods ended June 30, 1999 and 1998, respectively. There was no
effect on net income per share in the calculation of diluted EPS.
NOTE D -- MORTGAGE NOTES PAYABLE
The Company's mortgage notes payable are secured by certain land, buildings, and
improvements. At June 30, 1999, mortgage notes payable totalled approximately
$89.0 million. Individual notes ranged from $3.0 million to $21.7 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 approximately $130.1
million at June 30, 1999, with individual property net book values ranging from
$3.7 million to $32.2 million.
NOTE E - SEGMENT DISCLOSURE
The Company is engaged in two operating segments, the ownership and rental of
retail shopping center properties and apartment properties. These reportable
segments offer different products or services and are managed separately as each
requires different operating strategies and management expertise. There are no
intersegment sales or transfers.
6
<PAGE>
The Company assesses and measures segment operating results based on a
performance measure referred to as Income from Rental Operations, and is based
on the revenues and expenses associated with the operations of the real estate
properties. Income from Rental Operations is not a measure of operating results
or cash flows from operating activities as measured by generally accepted
accounting principles, and is not necessarily indicative of cash available to
fund cash needs and should not be considered an alternative to cash flows as a
measure of liquidity.
The operating revenues, operating expenses, income from rental operations, and
real estate investments for each of the reportable segments are summarized below
for the periods ended June 30, 1999, and 1998.
<TABLE>
<CAPTION>
Quarter Ended June 30 Six Months Ended June 30
---------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Operating revenues:
Retail $ 6,761,000 $ 6,837,000 $13,808,000 $13,626,000
Apartments 5,447,000 4,997,000 10,815,000 9,985,000
------------ ------------ ----------- -----------
$ 12,208,000 $ 11,834,000 $24,623,000 $23,611,000
============ ============ =========== ===========
Operating expenses:
Retail $ 2,696,000 $ 2,709,000 $ 5,487,000 $ 5,436,000
Apartments 2,445,000 2,288,000 5,008,000 4,538,000
------------ ------------ ----------- -----------
5,141,000 4,997,000 10,495,000 9,974,000
Depreciation 2,712,000 2,507,000 5,350,000 5,011,000
------------ ------------ ----------- -----------
$ 7,853,000 $ 7,504,000 $15,845,000 $14,985,000
============ ============ =========== ===========
Income from rental
operations:
Retail $ 4,065,000 $ 4,128,000 $ 8,321,000 $ 8,190,000
Apartments 3,002,000 2,709,000 5,807,000 5,447,000
------------ ------------ ----------- -----------
7,067,000 6,837,000 14,128,000 13,637,000
Depreciation (2,712,000) (2,507,000) (5,350,000) (5,011,000)
------------ ------------ ----------- -----------
Income from operations 4,355,000 4,330,000 8,778,000 8,626,000
Other income/(expenses) (1) (3,756,000) (3,618,000) (7,566,000) (7,252,000)
------------ ------------ ----------- -----------
Net income $ 599,000 $ 712,000 $ 1,212,000 $ 1,374,000
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
June 30
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Real estate investments: (2)
Retail $201,670,000 $198,763,000
Apartments 131,913,000 119,751,000
------------ ------------
$333,583,000 $318,514,000
============ ============
</TABLE>
(1) Includes interest expense, net of interest and dividend income.
(2) Includes investments in land, which the Company can use for future
development, and an investment in a real estate partnership, which is
accounted for by the equity method.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Comparison of the Three Months Ended June 30, 1999 and 1998
Operating revenue totalled $12.2 million, compared to $11.8 million
reported for the same period a year ago. Operating revenue for retail centers
and apartments were $6.8 million and $5.4 million, respectively. The increase in
operating revenue is due primarily to increases in rental rates and sustained
occupancy levels at the properties, and also to net operating revenue derived
from the development of Governors Gate apartments completed during the first
quarter of 1999. Income from operations before depreciation totalled $7.1
million in 1999, compared to $6.8 million in 1998, and depreciation expense
totalled $2.7 million and $2.5 million, respectively, for the same periods.
Operating expenses, net of depreciation, totalled $5.1 million in 1999, compared
to $5.0 million in 1998. The increase in operating expenses is primarily
attributable to an increase in non-controllable expenses, such as management and
leasing fees, real estate taxes, and utilities. Controllable expenses, which
include operating and maintenance costs and administrative expenses, remained
relatively consistent between periods.
Interest expense reflects a net increase of $140,000 resulting from the
following activity. In December 1997, mortgage financing was completed on one
of the Company's enclosed regional malls, and in the second quarter of 1998, the
Company refinanced mortgage debt on ten of its apartment properties, resulting
in a net decrease in mortgage interest expense of $108,000. These mortgage
notes payable are long-term, fixed-rate, non-recourse instruments. The mortgage
proceeds derived from the financing and refinancings were used to pay down bank
debt resulting in lower bank line balances. Subsequently, the Company drew on
its bank lines to fund the following transactions: (i) repaid a mortgage note
payable on one of its retail centers; (ii) made contract payments on the
Governors Gate apartment property development; (iii) made contract payments on
the development of a free-standing Walgreens store (of which related interest
has been capitalized); and (iv) funded treasury share repurchases. As a result
of the above activity, bank line interest expense increased $248,000, and
mortgage interest expense decreased $108,000, resulting in a net increase of
$140,000. The average bank borrowings were approximately $51.7 million and
$32.9 million for the second quarter of 1999 and 1998, respectively, with an
average rate of 6.3% and 7.2%, respectively.
Net income totalled $599,000, or $0.08 per share in the second quarter of
1999, compared to $712,000, or $0.08 per share, for the same period in 1998.
The decrease in net income is primarily attributable to an increase in non-cash
depreciation charges, and a net increase in interest expense.
Comparison of the Six Months Ended June 30, 1999 and 1998
Operating revenue totalled $24.6 million, compared to $23.6 million
reported for the same period a year ago. Operating revenue for retail centers
and apartments were $13.8 million and $10.8 million, respectively. The increase
in operating revenue is due primarily to increases in rental rates and sustained
occupancy levels at the properties, and net operating revenue derived from the
development of Governors Gate apartments completed during the first quarter of
1999. Income from operations before depreciation totalled $14.1 million in 1999,
compared to $13.6 million in 1998, and depreciation expense totalled $5.4
million and $5.0 million, respectively, for the same periods. Operating
expenses, net of depreciation, totalled $10.5 million in 1999, compared to $10.0
million in 1998. The increase in operating expenses is due to an increase in
non-controllable expenses such as management and leasing fees, real estate
taxes, utilities, and other operating expenses, combined with an increase in
controllable expenses such as operations and maintenance costs relating to
increased development activities and administrative expenses.
Interest expense reflects a net increase of $315,000 resulting from the
following activity. In December 1997, mortgage financing was completed on one
of the Company's enclosed regional malls, and in the second quarter of 1998, the
Company refinanced mortgage debt on ten of its apartment properties, resulting
in a net decrease in mortgage interest expense of $282,000. These mortgage
notes payable are long-term, fixed-rate, non-recourse instruments. The mortgage
proceeds derived from the financing and refinancings were used to pay down bank
debt resulting in lower bank line balances. Subsequently, the Company drew on
its bank lines to fund the following transactions: (i) repaid a mortgage note
payable on one of its retail centers; (ii) made contract payments on the
8
<PAGE>
Governors Gate apartment property development; (iii) made contract payments on
the development of a free-standing Walgreens store (of which related interest
has been capitalized); and (iv) funded treasury share repurchases. As a result
of the above activity, bank line interest expense increased $597,000, and
mortgage interest expense decreased $282,000, resulting in a net increase of
$315,000. The average bank borrowings were approximately $51.4 million and $33.5
million for the first six months of 1999 and 1998, respectively, with an average
rate of 6.5% and 7.1%, respectively.
Net income totalled $1.2 million for the six-month period ended June 30,
1999, compared to $1.4 million for the same period in 1998. The decrease in net
income is primarily attributable to an increase in non-cash depreciation
charges, and a net increase in interest expense.
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 property development and redevelopment
activities, portfolio acquisitions, and other expenditures. At June 30, 1999,
the Company had $1.3 million in cash and cash equivalents and bank commitments
totalling $105 million of lines of credit, of which approximately $52.4 million
was available. Utilization of the bank lines is subject to certain restrictive
covenants that impose maximum borrowing levels by the Company through the
maintenance of certain prescribed financial ratios.
Net cash flows provided by operating activities decreased $873,000 in the
first six months of 1999 compared to the same period in 1998. The decrease is
principally attributable to a net decrease in operating assets and liabilities
relating to development activity, partially offset by an increase in income from
operations before depreciation, as described in the previous section.
Net cash flows used in investing activities decreased approximately $1.8
million in 1999 from 1998, primarily attributable to the decreased level of
improvements to real estate investments resulting from the completion of the
development of Governors Gate apartment property located in Florida.
Construction of this new luxury apartment community was completed at the end of
the first quarter in 1999. This community has 240 garden-style units, with a
mix of one, two, and three bedroom units. Although in its initial lease-up
period, this property generated positive cash flow from operations. Also during
the first quarter of 1999, the Company acquired two parcels of land, one in
Florida and the other in Texas, which can be used for future development, and
began development of a free-standing Walgreens store at one of its retail
centers.
Net cash flows used in financing activities increased $441,000, primarily
attributable to funding treasury share repurchases, partially offset by a
reduction in net proceeds received and debt issuance costs incurred in
connection with mortgage debt refinancing during 1998 involving ten of the
Company's apartment properties. Pursuant to the Company's stock repurchase
program initiated in 1995, the Company repurchased 162,000 treasury shares at a
total cost of approximately $1.3 million during the first six months of 1999.
There were no treasury shares repurchased during the first six months of 1998.
Although the dividends paid per share remained consistent, as a result of fewer
common shares outstanding, total cash dividends paid decreased approximately
$238,000 during the first six months of 1999 as compared to the same period a
year ago. During the second quarter in 1998, mortgage debt totalling $59.1
million was refinanced resulting in new long-term, fixed-rate, non-recourse
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
achieved 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%.
As of June 30, 1999, thirteen of the Company's properties, comprising
approximately 47% of its gross investment in real estate, were subject to a
total of $89.0 million in mortgage obligations, all of which are non-recourse
and bear fixed rates of interest for fixed terms. The remaining seventeen
properties and vacant parcels of land in the portfolio are currently
unencumbered by debt. The Company anticipates that its current cash balance,
operating cash flows, and borrowings (including borrowings under its lines of
credit) will be adequate
9
<PAGE>
to fund the Company's future (i) operating and administrative expenses, (ii)
debt service obligations, (iii) distributions to shareholders, (iv) development
activities, (v) capital improvements on existing properties, and (vi) typical
repair and maintenance expenses at its properties.
The Company's current dividend policy is to pay quarterly dividends to
shareholders, based upon, among other factors, funds from operations, as opposed
to net income. As funds from operations excludes the deduction of certain 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 12, 1999,
the Company's Board of Directors declared a cash dividend with respect to the
quarter ending June 30, 1999, of $0.22 per share, payable on September 2, 1999,
to shareholders of record as of August 27, 1999.
Funds From Operations
Real estate industry analysts utilize the concept of funds from operations
as an important analytical measure of a Real Estate Investment Trust's financial
performance. The Company considers funds from operations in evaluating its
operating results, and its dividend policy 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, 1999, funds from operations
totalled $3.2 million, compared to $3.1 million earned for the same period in
1998. For the six-month periods ended June 30, 1999 and 1998, funds from
operations totalled $6.3 million and $6.1 million, respectively. The increase in
funds from operations is primarily attributable to the Company's portfolio of
both retail and apartment properties experiencing internal growth resulting from
increased rental rates and market sustained occupancy levels, coupled with
revenue generated from increased development activities.
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 and maintenance 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; (i) year 2000 issues, and (j) a general economic
downturn resulting in downward pressure on occupancies and rents at retail and
apartment 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 (collectively "independent third
parties"). The Company has identified required modifications to its internal
corporate computer operating systems and certain software modifications at its
apartment properties. The
10
<PAGE>
Company has completed these identified modifications and continues to test and
monitor its systems. The Company has been working with external consultants to
evaluate its computer systems and to determine their Y2K compliance. At June 30,
1999, this external evaluation has shown that the Company's computer systems
have been either fixed to become compliant, or replaced with new systems which
are Y2K compliant. The Company will continue assessing its own and its
independent third parties' exposure to the Y2K problem, and developing
contingency plans to deal with identified exposures. Based on the results of
these assessments, the Company will formulate appropriate contingency back-up
plans to take necessary and feasible precautions against problems not within its
control. The Company is also continuing the process of reviewing, testing, and
monitoring 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 throughout 1999 due to the
dependence upon the timeliness of activities of the Company's third parties,
whom it does not control.
Pursuant to the disclosure requirements of the Securities and Exchange
Commission, the Company is attempting to identify possible worst case scenarios
concerning Y2K issues and the related risks to the Company should one or more of
these scenarios occur. It should be noted, however, that the Company cannot
predict the probability of these scenarios actually materializing. The risks
which could have a material effect on the Company's business, results of
operations, or financial information and statements would likely be due to the
Company's dependence on the services of independent third parties over which the
Company has no control. Such potentially material risks would include, but are
not limited to, the following: (i) failure of tenants to make rental payments
because either their internal systems or their banking institutions will be
unable to process such payments; (ii) the Company will be unable to pay vendors
and/or creditors due to the failure of tenants to pay rents and/or the Company's
banking institutions' failure to process such payments; and (iii) the complete
failure or extended interruption of utility services to the Company's
properties, which are served by various utilities, due to the utilities'
inability to provide such services. If such a worse case scenario occurs, it
will likely be of catastrophic proportions impacting multiple companies and
industries of all kinds. Accordingly, the Company's ability to mitigate its
exposures to such risks will be limited to what it can control, and corrective
measures will be subject to the Company's resources as well as the efforts which
industry and government make to alleviate the problems.
Currently, the Company is continuing its Y2K compliance review process and
to evaluate contingency plans for the above-described scenarios. However, the
Company's plans will depend upon the assessments and contingency plans of the
independent third parties. The Company has requested such information from
numerous independent third parties, and it is evaluating their responses.
Responses received to date indicate that independent third parties are working
on their own assessments at this time. The Company will continue to assess this
matter so as to develop appropriate plans to reasonably mitigate such risks, if
and when identified.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We incorporate by reference the disclosure contained in Item 7a,
Quantitative and Qualitative Disclosures About Market Risk, of the Company's
Form 10-K, for the year ended December 31, 1998. There have been no material
changes during the first six months of 1999.
11
<PAGE>
PART II
Other Information
-----------------
Item 1. Legal Proceedings.
There are no pending legal proceedings to which the Company is a party
or to which any of its properties is subject, which in the opinion of
management and its litigation counsel has resulted or will result in
any material adverse effect on the financial position of the Company.
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 7, 1999,
the following matters were submitted for voting by the shareholders:
(1) Election of Directors - The shareholders re-elected Francis L.
Fraenkel and Sidney W. Lassen to serve until the Annual Meeting
of Shareholders in 2002 or until their successors are duly
elected and qualified (the terms of office of Thomas A. Masilla,
Jr., James W. McFarland, Theodore H. Strauss, J. Terrell Brown,
Harold B. Judell and Richard L. Pearlstone continued after the
meeting).
Votes Votes
Directors For Withheld
------------------- --------- --------
Francis L. Fraenkel 6,995,502 91,316
Sidney W. Lassen 7,003,702 83,116
(2) Proposal to amend the Sizeler Property Investors, Inc. 1996 Stock
Option Plan, as Amended -
Votes Votes Votes
For Against Abstaining
--------- ------- ----------
6,533,533 489,136 64,149
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.
12
<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/ Robert A. Whelan
-----------------------------
Robert A. Whelan
Chief Financial Officer
By: /s/ David A. O'Flynn, Jr.
-----------------------------
David A. O'Flynn, Jr.
Controller and Secretary
(Principal Accounting Officer)
Date: August 12, 1999
13
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,262,000
<SECURITIES> 0
<RECEIVABLES> 2,451,000
<ALLOWANCES> 436,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 333,583,000
<DEPRECIATION> 60,995,000
<TOTAL-ASSETS> 285,289,000
<CURRENT-LIABILITIES> 59,578,000
<BONDS> 151,887,000
0
0
<COMMON> 90,000
<OTHER-SE> 72,655,000
<TOTAL-LIABILITY-AND-EQUITY> 285,289,000
<SALES> 0
<TOTAL-REVENUES> 24,623,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,845,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,584,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,212,000
<EPS-BASIC> 0.15
<EPS-DILUTED> 0.15
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