United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended June 30, 1997
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 0-23616
PRIME RETAIL, INC.
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(Exact name of registrant as specified in its charter)
Maryland 52-1836258
- ------------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 East Pratt Street
Nineteenth Floor
Baltimore, Maryland 21202
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(Address of principal executive offices) (Zip Code)
(410) 234-0782
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address, or former fiscal year, if changed since last
report)
Indicate by check mark 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 periods 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
As of July 25, 1997, the issuer had outstanding 15,794,951 shares of Common
Stock, $.01 par value per share.
<PAGE>
PRIME RETAIL, INC.
FORM 10-Q
INDEX
PAGE
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996. 1
Consolidated Statements of Operations for the three and
six months ended June 30, 1997 and 1996. 2
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996. 3
Notes to the Consolidated Financial Statements 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 6
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 2. CHANGES IN SECURITIES 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS OR REPORTS ON FORM 8-K 18
SIGNATURES 19
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
PRIME RETAIL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
<TABLE>
<CAPTION>
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JUNE 30, 1997 December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in rental property:
Land $ 51,291 $ 44,731
Buildings and improvements 608,264 570,761
Property under development 39,220 20,900
Furniture and equipment 4,844 4,367
----------- ----------
703,619 640,759
Accumulated depreciation (69,001) (57,674)
----------- ----------
634,618 583,085
Cash and cash equivalents 985 3,924
Restricted cash 47,346 45,127
Accounts receivable, net 7,424 6,096
Deferred charges, net 18,906 20,841
Due from affiliates, net 1,313 1,549
Investment in partnerships 5,729 5,625
Other assets 1,231 556
----------- -----------
Total assets $717,552 $666,803
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bonds payable $ 32,900 $ 32,900
Notes payable 501,539 466,623
Accrued interest 3,584 3,640
Real estate taxes payable 4,944 2,138
Construction costs payable 1,402 3,047
Accounts payable and other liabilities 15,114 19,246
----------- ----------
Total liabilities 559,483 527,594
Shareholders' equity:
Shares of preferred stock, 24,315,000 shares authorized:
10.5% Series A Senior Cumulative Preferred Stock, $0.01
par value (liquidation preference of $57,500), 2,300,000
shares issued and outstanding 23 23
8.5% Series B Cumulative Participating Convertible Preferred Stock, $0.01
par value (liquidation preference of $74,545 and $70,150, respectively),
2,981,800 and 2,806,000 shares
issued and outstanding, respectively 30 28
Shares of common stock, 75,000,000 shares authorized:
Common stock, $0.01 par value, 15,794,951 and 13,404,651
shares issued and outstanding, respectively 158 134
Additional paid-in capital 197,074 165,346
Distributions in excess of net income (39,216) (26,322)
----------- -----------
Total shareholders' equity 158,069 139,209
----------- -----------
Total liabilities and shareholders' equity $717,552 $666,803
=========== ===========
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Prime Retail, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
<TABLE>
<CAPTION>
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THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
-------------------------- ---------------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
REVENUES
Base rents $19,006 $12,786 $37,072 $25,530
Percentage rents 721 368 1,390 811
Tenant reimbursements 8,969 5,895 17,918 12,034
Income (loss) from investment partnerships (98) 168 (60) 609
Interest and other 2,615 933 5,055 2,297
------- ------- ------- -------
Total revenues 31,213 20,150 61,375 41,281
EXPENSES
Property operating 7,022 4,796 13,655 9,415
Real estate taxes 2,399 1,012 4,789 2,485
Depreciation and amortization 6,543 4,612 12,871 8,999
Corporate general and administrative 1,269 966 2,619 1,859
Interest 9,703 6,148 18,872 12,204
Other charges 694 6,566 1,493 7,212
------- ------- ------- -------
Total expenses 27,630 24,100 54,299 42,174
------- ------- ------- -------
INCOME (LOSS) BEFORE MINORITY INTERESTS AND
EXTRAORDINARY ITEM 3,583 (3,950) 7,076 (893)
(Income) loss allocated to minority interests (2,672) 4,993 (5,263) 6,470
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY ITEM 911 1,043 1,813 5,577
Extraordinary item - loss on early extinguishment of
debt, net of minority interests of $3,263 - (1,017) - (1,017)
------- ------- ------- -------
NET INCOME 911 26 1,813 4,560
Income allocated to preferred shareholders 3,093 3,000 6,186 8,236
------- ------- ------- -------
NET LOSS APPLICABLE TO COMMON SHARES $ (2,182) $ (2,974) $ (4,373) $ (3,676)
======= ======= ======= =======
PER COMMON SHARE:
Loss before extraordinary item $ (0.14) $ (0.62) $ (0.29) $ (0.88)
Extraordinary item - (0.32) - (0.34)
------- ------- ------- -------
Net loss $ (0.14) $ (0.94) $ (0.29) $ (1.22)
======= ======= ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 15,795 3,171 15,073 3,023
======= ======= ======= ======
DISTRIBUTIONS DECLARED PER COMMON SHARE $ 0.295 $ 0.295 $ 0.590 $ 0.735
======= ======= ======= ========
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PRIME RETAIL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
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SIX MONTHS ENDED JUNE 30
----------------------------------
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,813 $ 4,560
Adjustments to reconcile net income to
net cash provided by operating activities:
Income (loss) allocated to minority interests 5,263 (6,470)
Extraordinary loss for early retirement of debt - 1,017
Write-off of financing costs - 6,131
Gains on sale of outlots (598) -
Depreciation and amortization 12,871 8,999
Amortization of deferred financing costs and
interest rate protection contracts 1,925 2,250
Cash distributions in excess of equity earnings
from joint ventures 480 79
Provision for uncollectible accounts receivable 475 281
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,803) 1,882
(Increase) decrease in due from affiliates, net 236 (104)
Increase in other assets (2,939) (863)
Increase (decrease) in accrued interest (56) 122
Increase (decrease) in accounts payable and other liabilities (1,410) 1,701
-------- -------
Net cash provided by operating activities 16,257 19,585
INVESTING ACTIVITIES
Proceeds from sale of outlots 900 -
Purchase of buildings and improvements (9,124) (3,704)
Increase in property under development (19,157) (20,235)
Deferred leasing commissions - (21)
Acquisition of outlet centers (37,658) -
-------- -------
Net cash used in investing activities (65,039) (23,960)
FINANCING ACTIVITIES
Net proceeds from issuance of common and preferred stock 31,754 -
Proceeds from notes payable 66,633 14,700
Principal repayments on notes payable (31,717) (1,877)
Deferred financing costs (857) (2,873)
Distributions and dividends paid (14,707) (12,170)
Distributions to minority interests (5,263) (4,292)
-------- -------
Net cash provided by (used in) financing activities 45,843 (6,512)
-------- -------
Decrease in cash and cash equivalents (2,939) (10,887)
Cash and cash equivalents at beginning of period 3,924 14,927
-------- -------
Cash and cash equivalents at end of period $ 985 $ 4,040
======== =======
=================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PRIME RETAIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and unit information)
NOTE 1 -- INTERIM FINANCIAL PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") for interim
financial information and the 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 GAAP for complete financial statements. In the opinion of
management, all adjustments consisting only of recurring accruals considered
necessary for a fair presentation have been included. Operating results for such
interim periods are not necessarily indicative of the results which may be
expected for a full fiscal year. For further information, refer to the
consolidated financial statements and footnotes included in Prime Retail's (the
"Company") annual report on Form 10-K for the year ended December 31, 1996.
Unless the context requires otherwise, all references to the Company herein mean
Prime Retail, Inc. and those entities owned or controlled by Prime Retail, Inc.,
including Prime Retail, L.P. (the "Operating Partnership"). The consolidated
financial statements include the accounts of the Company, the Operating
Partnership and the partnerships in which the Company has operational control.
Profits and losses are allocated in accordance with the terms of the agreement
of limited partnership of the Operating Partnership. Investments in partnerships
in which the Company does not have operational control are accounted for under
the equity method of accounting. Income (loss) applicable to minority interests
and common shares as presented in the consolidated statements of operations is
allocated based on income (loss) before minority interests after income
allocated to preferred shareholders.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Significant intercompany accounts and transactions have been
eliminated in consolidation. Certain prior year financial statement amounts and
related footnote information have been reclassified to conform with the current
year presentation.
NOTE 2 -- RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which is
required to be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of stock options will be excluded. The
adoption of SFAS No. 128 is expected to have no impact on the Company's primary
and fully diluted earnings per share for the three and six months ended June 30,
1997 and 1996.
<PAGE>
NOTE 3 -- MINORITY INTERESTS
Cash distributions and losses allocated to minority interests have reduced the
minority interests balance to zero. After reducing the minority interests
balance to zero, additional distributions and losses of $4,674 incurred during
the six months ended June 30, 1997 that were allocable to minority interests
were allocated to common shareholders. The cumulative amount of distributions
and losses that were allocable to minority interests that were allocated to
common shareholders at June 30, 1997 was $8,131. There were no distributions and
losses allocable to minority interests which were allocated to common
shareholders during the six months ended June 30, 1996.
NOTE 4 -- ACQUISITIONS
On February 7, 1997, the Company purchased an additional 20.0% partnership
interest in Oxnard Factory Outlet from an unrelated third party for $334. As a
result of this purchase, the Company owns a 50.0% equity interest in Oxnard
Factory Outlet. The remaining 50.0% equity interest is owned by an affiliate of
Fru-Con Projects, Inc.
On February 13, 1997, the Company acquired Oak Creek Factory Stores, Bend
Factory Outlets and Factory Outlets at Post Falls from an unrelated third party
for an aggregate purchase price of $37,250. The Company financed the purchase
with loan proceeds from a financial institution and a $4,000 promissory note
issued to the seller. The operating results of the Company for 1997 include the
results of these acquisitions effective with the closing on February 13, 1997.
NOTE 5 -- PUBLIC STOCK OFFERINGS
In February and March 1997, the Company completed a public offering of 2,390,300
shares of its Common Stock at $12.50 per share and 175,800 shares of its Series
B Cumulative Participating Convertible Preferred Stock at $22.75 per share (the
"1997 Stock Offering"). As a result of the 1997 Stock Offering, the Company
received net proceeds of $31,930 that were used (i) to repay certain outstanding
indebtedness aggregating $26,500, (ii) to fund development and construction
activities, and (iii) for general corporate purposes.
NOTE 6 -- DISTRIBUTIONS
On June 26, 1996, the Company's Board of Directors approved a special cash
distribution on its Common Stock of $0.145 per common share, payable to holders
of record on June 27, 1996. Such distribution is included in the distributions
disclosed in the Consolidated Statement of Operations.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in thousands, except share, unit and square foot information)
INTRODUCTION
The following discussion and analysis of the consolidated financial condition
and results of operations of Prime Retail, Inc. (the "Company") should be read
in conjunction with the Consolidated Financial Statements and Notes thereto.
Historical results and percentage relationships set forth herein are not
necessarily indicative of future operations.
CAUTIONARY STATEMENTS
The following discussion in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 which
reflect management's current views with respect to future events and financial
performance. Such forward-looking statements are subject to certain risks and
uncertainties; including, but not limited to, the effects of future events on
the Company's financial performance; the risk that the Company may be unable to
finance its planned development activities; risks related to the retail industry
in which the Company's factory outlet centers compete, including the potential
adverse impact of external factors, such as inflation, consumer confidence,
unemployment rates and consumer tastes and preferences; risks associated with
the Company's property development activities, such as the potential for cost
overruns, delays and the lack of predictability with respect to the financial
returns associated with these development activities; the risk of potential
increase in market interest rates from current levels; risks associated with the
Company's property acquisition activities, such as the uncertainty as to whether
these transactions may be completed and the lack of predictability with respect
to the financial returns; and risks associated with real estate ownership, such
as the potential adverse impact of changes in local economic climate on the
revenues and the value of the Company's properties.
RESULTS OF OPERATIONS
GENERAL
The Company has grown by developing and acquiring factory outlet centers and
expanding certain of its existing factory outlet centers. As summarized in TABLE
1, the Company's factory outlet portfolio consisted of twenty-four operating
factory outlet centers totaling 6,138,000 square feet of gross leasable area
("GLA") at June 30, 1997, compared to seventeen factory outlet centers totaling
4,331,000 square feet of GLA at June 30, 1996.
The Company purchased three factory outlet centers during the first quarter of
1997, adding 358,000 square feet of GLA in the aggregate. During 1996, the
Company opened two new factory outlet centers and nine expansions, and acquired
two factory outlet centers, adding 1,449,000 square feet of GLA in the
aggregate. Additionally, the Company purchased its joint venture partner's first
mortgage and 50% partnership interest in Grove City Factory Shops Partnership on
November 1, 1996 and now owns 100% of this factory outlet center with 533,000
square feet of GLA. The significant increase in the number of operating
properties and total GLA at June 30, 1997 compared to the portfolio of
properties at June 30, 1996, is collectively referred to as the "Portfolio
Expansion".
<PAGE>
TABLE 1 -- PORTFOLIO OF PROPERTIES AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
GRAND GLA PERCENTAGE
FACTORY OUTLET CENTER PHASE OPENING DATE (SQ. FT.) LEASED(12)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Warehouse Row Factory Shops(1)(2)--Chattanooga, Tennessee I November 1989 95,000 92%
II August 1993 26,000 94
------- -----
121,000 92
Oak Creek Factory Outlets(3)--Sedona, Arizona I August 1990 82,000 99
San Marcos Factory Shops--San Marcos, Texas I August 1990 177,000 100
II August 1991 67,000 100
III August 1993 117,000 100
IIIB November 1994 20,000 91
IIIC November 1995 35,000 100
------- -----
416,000 100
The Factory Outlets at Post Falls(3)--Post Falls, Idaho I July 1991 111,000 88
II July 1992 68,000 89
------- -----
179,000 88
Gulf Coast Factory Shops--Ellenton, Florida I October 1991 187,000 99
II August 1993 123,000 99
III October 1996 30,000 100
------- -----
340,000 99
Triangle Factory Shops--Raleigh-Durham, North Carolina I October 1991 181,000 99
II July 1996 6,000 100
------- -----
187,000 99
Coral Isle Factory Shops--Naples/Marco Island, Florida I December 1991 94,000 98
II December 1992 32,000 100
------- -----
126,000 99
Castle Rock Factory Shops--Castle Rock, Colorado I November 1992 181,000 100
II August 1993 94,000 99
III November 1993 95,000 100
------- -----
370,000 100
Bend Factory Outlets(3)--Bend Oregon I December 1992 97,000 100
Ohio Factory Shops--Jeffersonville, Ohio I July 1993 186,000 99
II November 1993 100,000 100
IIB November 1994 13,000 100
IIIA August 1996 35,000 100
------- -----
334,000 99
Gainesville Factory Shops--Gainesville, Texas I August 1993 210,000 92
II November 1994 106,000 89
------- -----
316,000 91
Nebraska Crossing Factory Shops--Gretna, Nebraska I October 1993 192,000 92
Rocky Mountain Factory Stores(4)--Loveland, Colorado I May 1994 139,000 100
II November 1994 50,000 100
III May 1995 114,000 100
IV May 1996 25,000 100
------- -----
328,000 100
Oxnard Factory Outlet(5)--Oxnard, California I June 1994 148,000 90
Grove City Factory Shops(6)--Grove City, Pennsylvania I August 1994 235,000 100
II November 1994 95,000 100
III November 1995 85,000 99
IV November 1996 118,000 97
------- -----
533,000 99
</TABLE>
<PAGE>
TABLE 1 -- PORTFOLIO OF PROPERTIES AS OF JUNE 30, 1997 (CONTINUED)
<TABLE>
<CAPTION>
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GRAND GLA PERCENTAGE
FACTORY OUTLET CENTER PHASE OPENING DATE (SQ. FT.) LEASED(12)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Huntley Factory Shops--Huntley, Illinois I August 1994 192,000 90%
II November 1995 90,000 71
------- -----
282,000 84
Florida Keys Factory Shops--Florida City, Florida I September 1994 208,000 98
Indiana Factory Shops--Daleville, Indiana I November 1994 208,000 97
IIA November 1996 26,000 35
------- -----
234,000 90
Kansas City Factory Outlets(4)--Odessa, Missouri I July 1995 191,000 98
II November 1996 105,000 67
------- -----
296,000 87
Magnolia Bluff Factory Shops(7)--Darien, Georgia I July 1995 238,000 86
IIA November 1995 56,000 69
IIB July 1996 21,000 66
------- -----
315,000 82
Arizona Factory Shops(8)--Phoenix, Arizona I September 1995 217,000 96
II September 1996 109,000 82
------- -----
326,000 91
Gulfport Factory Shops(9)--Gulfport, Mississippi I November 1995 228,000 99
IIA November 1996 40,000 85
------- -----
268,000 97
Buckeye Factory Shops(10)--Burbank, Ohio I November 1996 205,000 94
Carolina Factory Shops--Gaffney, South Carolina I November 1996 235,000 91
------- -----
TOTAL FACTORY OUTLET CENTER PORTFOLIO(11) 6,138,000 94%
========= ======
=========================================================================================================================
<FN>
Notes:
(1) The Company owns a 2% partnership interest as the sole general partner in
Phase I of this property but is entitled to 99% of the property's operating
cash flow and net proceeds from a sale or refinancing. An unrelated third
party holds a 35% limited partnership interest and the Company holds a 65%
general partnership interest in the partnership that owns Phase II of this
property.
(2) Phase I of this mixed-use development includes 154,000 square feet of
office space and Phase II includes 5,000 square feet of office space. The
total office space of 159,000 square feet of GLA is not included in this
table and such space was 100% leased as of June 30, 1997.
(3) The Company acquired this factory outlet center on February 13, 1997 from
an unrelated third party.
(4) The Company acquired this factory outlet center on November 1, 1996 from an
unrelated third party.
(5) On February 7, 1997, the Company purchased an additional 20% partnership
interest from a joint venture partner which increased the Company's
ownership interest to 50%.
(6) On November 1, 1996, the Company purchased its joint venture partner's 50%
partnership interest in Grove City Factory Shops Partnership and now owns
100% of this factory outlet center.
(7) The Company operates this property pursuant to a long-term lease under
which it receives the economic benefit of a 100% ownership interest.
(8) The Company owns 50% of this factory outlet center in a joint venture
partnership with an unrelated third party.
(9) The real property on which this outlet center is located is subject to a
long-term ground lease. The Company receives the economic benefit of a 100%
ownership interest.
(10) The Company owns 75% of this factory outlet center in a joint venture
partnership with an unrelated third party.
(11) The Company also owns three community centers containing 424,000 square
feet of GLA in the aggregate that were 96% leased as of June 30, 1997.
(12) Fully executed leases as of June 30, 1997 as a percent of square feet of
GLA.
</FN>
</TABLE>
<PAGE>
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1997 TO THE THREE MONTHS ENDED
JUNE 30, 1996
Summary
For the three months ended June 30, 1997, the Company reported net income of
$911 on total revenues of $31,213. For the three months ended June 30, 1997, the
net loss applicable to common shareholders was $2,182 or $0.14 per common share.
For the three months ended June 30, 1996, the Company reported net income of $26
on total revenues of $20,150. These results include a nonrecurring charge (the
"Nonrecurring Charge") and extraordinary loss of $6,131 and $1,017 (net of
minority interests in the amount of $3,263), respectively, related to a binding
loan commitment that the Company obtained on June 5, 1996. For the three months
ended June 30, 1996, the net loss applicable to common shareholders was $2,974
or $0.94 per common share.
Revenues
Total revenues were $31,213 for the three months ended June 30, 1997 compared to
$20,150 for the three months ended June 30, 1996, an increase of $11,063, or
54.9%. Base rents increased $6,220, or 48.6%, in the second quarter of 1997
compared to the second quarter of 1996. These increases are primarily due to the
Portfolio Expansion. Straight-line rents (included in base rents) were $127 and
$99 for the three months ended June 30, 1997 and 1996, respectively. Tenant
reimbursements, which represent the contractual recovery from tenants of certain
operating expenses, increased by $3,074, or 52.1 %, during the three months
ended June 30, 1997 over the same period in 1996. These increases were primarily
due to the Portfolio Expansion.
Income (loss) from investment partnerships decreased by $266, or 158.3%, for the
three months ended June 30, 1997 to $(98) from $168 for the same period in 1996.
This decrease reflects the Company's purchase of its joint venture partner's
first mortgage and 50% partnership interest in Grove City Factory Shops
Partnership on November 1, 1996. As a result of this acquisition, the Company
owns 100.0% of this factory outlet center and, therefore, commencing November 1,
1996, its operations are included in the consolidated results of the Company.
Prior to November 1, 1996, the Company accounted for its interest in Grove City
Factory Shops under the equity method of accounting. The decrease also reflects
the Company's share of a loss incurred by Buckeye Factory Shops of $152 for the
three months ended June 30, 1997. The decrease in income (loss) from investment
partnerships during the second quarter of 1997 compared to the second quarter of
1996 was offset, in part, by the opening of Arizona Factory Shops (Phase
II--September 1996).
Interest and other income increased by $1,682, or 180.3%, to $2,615 during the
three months ended June 30, 1997 as compared to $933 for the three months ended
June 30, 1996. The increase reflects increases in interest income of $752, gains
on outlot sales of $598, temporary tenant income of $172, lease buy-out and late
fee income of $168, municipal assistance income of $140, and ancillary income of
$24, partially offset by reduced property development and construction
management fees of $172. The increase in interest income was primarily due to
interest earnings on the Company's $40,000 expansion loan escrow account
included in restricted cash.
Expenses
Property operating expenses increased by $2,226, or 46.4%, to $7,022 for the
three months ended June 30, 1997 compared to $4,796 for the same period in 1996.
Real estate taxes increased by $1,387, or 137.1%, to $2,399 for the three months
ended June 30, 1997, from $1,012 in the same period for 1996. The increases in
property operating expenses and real estate taxes are primarily due to the
Portfolio Expansion. As shown in TABLE 2, depreciation and amortization expense
increased
<PAGE>
by $1,931, or 41.9%, to $6,543 for the three months ended June 30, 1997,
compared to $4,612 for 1996. This increase results from the depreciation and
amortization of assets associated with the Portfolio Expansion.
TABLE 2 -- COMPONENTS OF DEPRECIATION AND AMORTIZATION EXPENSE
The components of depreciation and amortization expense are summarized as
follows:
- -------------------------------------------------------------------------------
THREE MONTHS ENDED
JUNE 30
---------------------------
1997 1996
- -------------------------------------------------------------------------------
Building and improvements $3,450 $2,226
Land improvements 727 474
Tenant improvements 1,649 1,248
Furniture and fixtures 200 160
Leasing commissions(1) 517 504
------- -------
Total $6,543 $4,612
======= =======
===============================================================================
Note:
(1) In accordance with generally accepted accounting principles ("GAAP"),
leasing commissions are classified as intangible assets. Therefore, the
amortization of leasing commissions is reported as a component of
depreciation and amortization expense.
TABLE 3 -- COMPONENTS OF INTEREST EXPENSE
The components of interest expense are summarized as follows:
- -------------------------------------------------------------------------------
THREE MONTHS ENDED
JUNE 30
--------------------------
1997 1996
- -------------------------------------------------------------------------------
Interest incurred $9,721 $5,753
Interest capitalized (975) (705)
Interest earned on interest rate protection contracts (24) (38)
Amortization of deferred financing costs 622 819
Amortization of interest rate protection contracts 359 319
------- -------
Total $9,703 $6,148
======= =======
================================================================================
As shown in TABLE 3, interest expense for the three months ended June 30, 1997
increased by $3,555, or 57.8%, to $9,703 compared to $6,148 for the same period
in 1996. This increase reflects higher interest incurred of $3,968, a decrease
in amortization of deferred financing costs of $197, an increase in the amount
of interest capitalized in connection with development projects of $270, an
increase in the amortization of interest rate protection contracts of $40, and a
reduction in interest earned on interest rate protection contracts of $14.
The increase in interest incurred is primarily attributable to an increase of
approximately $222,050 in the Company's average debt outstanding during the
three months ended June 30, 1997 compared to the same period in 1996. The
weighted average interest rates were 7.32% and 7.45% for the 1997 and 1996
periods, respectively.
Other charges decreased by $5,872, or 89.4%, to $694. The decrease is primarily
attributable to the Nonrecurring Charge of $6,131 incurred during the 1996
period, partially offset by a higher provision for uncollectable accounts
receivable of $164 and other miscellaneous charges of $95.
<PAGE>
In connection with re-leasing space to new merchants, the Company incurred $89
and $121 in capital expenditures during the three months ended June 30, 1997 and
1996, respectively.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 TO THE SIX MONTHS ENDED JUNE
30, 1996
Summary
For the six months ended June 30, 1997, the Company reported net income of
$1,813 on total revenues of $61,375. For the six months ended June 30, 1997, the
net loss applicable to common shareholders was $4,373, or $0.29 per common
share.
For the six months ended June 30, 1996, the Company reported net income of
$4,560 on total revenues of $41,281. These results include the Nonrecurring
Charge and an extraordinary loss of $6,131 and $1,017 (net of minority interests
in the amount of $3,263), respectively, related to a binding loan commitment
that the Company obtained on June 5, 1996. For the six months ended June 30,
1996, the net loss applicable to common shareholders was $3,676 or $1.22 per
common share.
Revenues
Total revenues were $61,375 for the six months ended June 30, 1997, as compared
to $41,281 for the six months ended June 30, 1996, an increase of $20,094, or
48.7%. Base rents increased $11,542, or 45.2%, during the six months ended June
30, 1997 compared to the same period in 1996. These increases are primarily due
to the Portfolio Expansion. Straight-line rents (included in base rents) were
$252 and $237 for the six months ended June 30, 1997 and 1996, respectively.
Tenant reimbursements, which represent the contractual recovery from tenants of
certain operating expenses, increased by $5,884, or 48.9%, during the six months
ended June 30, 1997 over the same period in 1996. These increases are primarily
due to the Portfolio Expansion.
Income (loss) from investment partnerships decreased by $669, or 109.9%, for the
six months ended June 30, 1997 to $(60) from $609 for the same period in 1996.
This decrease reflects the Company's purchase of its joint venture partner's
first mortgage and 50% partnership interest in Grove City Factory Shops
Partnership on November 1, 1996. As a result of its acquisition, the Company
owns 100.0% of this factory outlet center and, therefore, commencing November 1,
1996, its operations are included in the consolidated results of the Company.
Prior to November 1, 1996, the Company accounted for its interest in Grove City
Factory Shops under the equity method of accounting. The decrease in income
(loss) from investment partnerships was also due to a decrease of $185 in the
Company's share of earnings in its joint ventures.
Interest and other income increased by $2,758, or 120.1%, to $5,055 during the
six months ended June 30, 1997 as compared to $2,297 for the six months ended
June 30, 1996. The increase reflects higher interest income of $1,580, gain on
outlot sales of $598, temporary tenant income of $364, municipal assistance
income of $241, customer service income of $70, and ancillary income of $51.
These increases were offset by reduced property development and construction
management fees and property management fees of $77 and $69, respectively. The
increase in interest income was primarily due to interest earnings on the
Company's $40,000 expansion loan escrow included in restricted cash.
For the six months ended June 30, 1997, same-space sales in centers owned by the
Company increased 2.2% compared to the same period in 1996. Excluding 1996 sales
reported by a tenant that departed Triangle Factory Shops in July 1996,
same-space sales increased 6.3% for the six months ended June 30, 1997 compared
to the same period in 1996. "Same-space sales" is defined as the weighted
average sales per square foot reported by merchants for space open since January
1, 1996.
<PAGE>
The Company's same-space sales for the year ended December 31, 1996 were $232.45
per square foot. For the six months ended June 30, 1997, same-store sales
increased by 4.4% compared to the same period in 1996. "Same-store sales" is
defined as the weighted average sales per square foot reported by merchants for
stores opened since January 1, 1996.
Expenses
Property operating expenses increased by $4,240, or 45.0%, to $13,655 for the
six months ended June 30, 1997 compared to $9,415 for the same period in 1996.
Real estate taxes increased by $2,304, or 92.7%, to $4,789 for the six months
ended June 30, 1997 from $2,485 in the same period for 1996. The increases in
property operating expenses and real estate taxes are primarily due to the
Portfolio Expansion. As shown in TABLE 4, depreciation and amortization expense
increased by $3,872, or 43.0%, to $12,871 for the six months ended June 30, 1997
compared to $8,999 for 1996. This increase results from the depreciation and
amortization of assets associated with the Portfolio Expansion.
TABLE 4 -- COMPONENTS OF DEPRECIATION AND AMORTIZATION EXPENSE
The components of depreciation and amortization expense are summarized as
follows:
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30
--------------------------
1997 1996
- -------------------------------------------------------------------------------
Building and improvements $6,708 $4,455
Land improvements 1,354 953
Tenant improvements 3,476 2,354
Furniture and fixtures 402 315
Leasing commissions(1) 931 922
-------- -------
Total $12,871 $8,999
======== =======
===============================================================================
Note:
(1) In accordance with generally accepted accounting principles ("GAAP"),
leasing commissions are classified as intangible assets. Therefore, the
amortization of leasing commissions is reported as a component of
depreciation and amortization expense.
TABLE 5 -- COMPONENTS OF INTEREST EXPENSE
The components of interest expense are summarized as follows:
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30
--------------------------
1997 1996
- -------------------------------------------------------------------------------
Interest incurred $18,830 $11,394
Interest capitalized (1,820) (1,318)
Interest earned on interest rate protection contracts (63) (122)
Amortization of deferred financing costs 1,230 1,612
Amortization of interest rate protection contracts 695 638
-------- --------
Total $18,872 $12,204
======== ========
===============================================================================
As shown in TABLE 5, interest expense for the six months ended June 30, 1997
increased by $6,668, or 54.6%, to $18,872 compared to $12,204 for the same
period in 1996. This increase reflects higher interest incurred of $7,436, an
increase in amortization of interest rate protection contracts of $57 and a
reduction in interest earned on interest rate protection contracts of $59,
partially offset by a
<PAGE>
decrease in amortization of deferred financing costs of $382 and an increase in
the amount of interest capitalized in connection with development projects of
$502.
The increase in interest incurred is primarily attributable to an increase of
approximately $217,752 in the Company's average debt outstanding during the six
months ended June 30, 1997 compared to the same period in 1996. The weighted
average interest rates were 7.18% and 7.44% for the 1997 and 1996 periods,
respectively.
Other charges decreased by $5,719, or 79.3%, to $1,493. This decrease is
primarily attributable to the Nonrecurring Charge of $6,131 during the 1996
period partially offset by a higher provision for uncollectable accounts
receivable of $194, higher marketing costs of $211, and other miscellaneous
charges of $7.
In connection with re-leasing space to new merchants, the Company incurred $140
and $121 in capital expenditures during the six months ended June 30, 1997 and
1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH -- GENERAL
For the six months ended June 30, 1997, net cash provided by operating
activities was $15,837. Net cash used in investing activities was $64,619 for
the six months ended June 30, 1997. The primary use of these funds was for costs
associated with the completion of factory outlet centers and expansions opened
during 1996, costs associated with the acquisition of three factory outlet
centers, costs related to the purchase of an additional 20% equity interest in a
factory outlet center, and costs for pre-development activities associated with
future development. Net cash provided by financing activities was $45,843 for
the six months ended June 30, 1997. The principal sources of these funds were
the proceeds from new borrowings and the Company's public offering of certain
equity securities. Such proceeds were offset by principal repayments on notes
payable of $31,717, distributions to minority interests (including distributions
to the limited partner unit holders) of $5,263, and preferred and common stock
distributions of $14,707.
SOURCES AND USES OF CASH -- 1997 PUBLIC OFFERING OF COMMON
STOCK AND CONVERTIBLE PREFERRED STOCK
On January 10, 1997, the Company filed a Form S-3 Registration Statement (the
"January 1997 Shelf Registration") with the Securities and Exchange Commission
(the "SEC") to register $100,000 of the Company's equity securities. On February
20, 1997, the Company completed a public offering (the "1997 Stock Offering") by
issuing 2,080,000 shares of its Common Stock at $12.50 per share and 175,800
shares of its Convertible Preferred Stock at $22.75 per share. In addition, on
March 10, 1997, the underwriter of the 1997 Stock Offering exercised its
overallotment option to purchase 310,300 shares of the Company's Common Stock at
$12.50 per share. As a result of the 1997 Stock Offering, the Company received
net proceeds of $31,930 that were used to (i) repay certain outstanding
indebtedness aggregating $26,500, (ii) to fund development and construction
activities, and (iii) for general corporate purposes.
On June 17, 1997, the Company filed a Form S-3 Registration Statement (the
"Shelf Registration") with the SEC to register $300,000 of the Company's equity
securities. From time to time, the Company will consider issuing additional
equity securities under the Shelf Registration for the development or
acquisition of additional properties, the expansion and improvement of existing
properties, repayment of indebtedness, and for general corporate purposes.
<PAGE>
SOURCES AND USES OF CASH -- PROPERTY ACQUISITIONS
On February 7, 1997, the Company purchased an additional 20.0% partnership
interest in Oxnard Factory Outlet from an unrelated third party for $334. As a
result of this purchase, the Company owns a 50.0% equity interest in Oxnard
Factory Outlet. The remaining 50.0% equity interest is owned by an unrelated
third party.
On February 13, 1997, the Company acquired Oak Creek Factory Stores, Bend
Factory Outlets and Factory Outlets at Post Falls from an unrelated third party
for an aggregate purchase price of $37,250. The Company financed the purchase
with loan proceeds from a financial institution and a $4,000 promissory note
issued to the seller. The operating results of the Company for 1997 include the
results of these acquisitions effective with the closing on February 13, 1997.
Oak Creek Factory Outlets is located in Sedona, Arizona, which is north of
Phoenix and south of the Grand Canyon. Oak Creek Factory Outlets contains
approximately 82,000 square feet of GLA and was 99% occupied at June 30, 1997.
Bend Factory Outlets is located in Bend, Oregon, which is east of Eugene, Oregon
and southeast of Portland. Bend Factory Outlets contains approximately 97,000
square feet of GLA and was 100% occupied at June 30, 1997. Factory Outlets at
Post Falls is located in Post Falls, Idaho, which is 30 miles east of Spokane,
Washington. Factory Outlets at Post Falls contains approximately 179,000 square
feet of GLA and was 86% occupied at June 30, 1997.
During 1997 and 1998, the Company will continue to explore acquisitions of
factory outlet centers in the United States. The Company cannot predict if any
transaction will be consummated, nor the terms or form of consideration
required.
PLANNED DEVELOPMENT
Management believes that there is sufficient demand for continued development of
new factory outlet centers and the expansion of certain existing factory outlet
centers. The Company expects to open approximately 250,000 square feet of GLA
during 1997 in connection with planned expansions of existing factory outlet
centers. At June 30, 1997, the remaining budgeted capital expenditures for these
expansions aggregated approximately $19,617, while anticipated capital
expenditures related to the completion of new factory outlet centers and
expansions opened during the year ended December 31, 1996 (aggregating 930,000
square feet of GLA) approximated $6,700.
Management believes that the Company has sufficient capital and capital
commitments to fund the remaining capital expenditures associated with its 1996
and 1997 development activities. These funding requirements are expected to be
met, in large part, with borrowings under various loan facilities including cash
escrow accounts established for future developments, the sale of equity
securities in the public or private capital markets, and funds provided by joint
venture partners.
The Company plans to open new factory outlet centers and expansions in 1998 that
are expected to contain between approximately 700,000 and 900,000 square feet of
GLA, in the aggregate, and have a total expected development cost ranging
between approximately $91,400 and $118,800, respectively. The Company expects to
fund the development cost of its new factory outlet centers and expansions from
(i) certain line of credit facilities, (ii) retained cash flow from operations,
(iii) construction loans, and (iv) the sale of equity securities in the public
or private capital markets. There can be no assurance that the Company will be
successful in obtaining the required amount of equity capital or debt financing
for the 1998 planned openings or that the terms of such capital raising
activities will be as favorable as the Company has experienced in prior periods.
If adequate financing for such development and expansion is not available, the
Company may not be able to develop new centers or expand existing centers at
currently planned levels.
<PAGE>
DEBT REPAYMENTS AND PREFERRED STOCK DISTRIBUTIONS AND DIVIDENDS
The Company's aggregate indebtedness was $534,439 and $499,523 at June 30, 1997
and December 31, 1996, respectively. At June 30, 1997, such indebtedness had a
weighted average maturity of 6.3 years and bore interest at a weighted average
interest rate of 7.3% per annum. At June 30, 1997, $58,184, or 10.9%, of such
indebtedness bore interest at fixed rates and $476,255, or 89.1%, of such
indebtedness, including $28,250 of tax-exempt bonds, bore interest at
variable-rates. Of the variable-rate indebtedness, approximately $357,362 is
scheduled to convert to a fixed rate of 7.782% in November 1998 for the
remaining five years of the note.
At June 30, 1997, the Company held interest rate protection contracts on $28,250
of floating rate tax-exempt indebtedness and $357,362 of other floating rate
indebtedness (or approximately 81.0% of its total floating rate indebtedness).
These contracts expire in 1999 and 1998, respectively. In addition, the Company
held additional interest rate protection contracts on $43,900 of the $357,362
floating rate indebtedness to further reduce the Company's exposure to increases
in interest rates.
The Company's ratio of debt to total market capitalization at June 30, 1997
(defined as total debt divided by the sum of: (i) the aggregate market value of
the outstanding shares of Common Stock, assuming the full exchange of Common
Units into Common Stock; (ii) the aggregate market value of the outstanding
shares of Convertible Preferred Stock; (iii) the aggregate liquidation
preference of the Series A Senior Cumulative Preferred Stock ("Senior Preferred
Stock") at $25.00 per share; and (iv) the total debt of the Company) was 54.0%.
The Company is obligated to repay $18,675 of mortgage indebtedness during the
remainder of 1997 and $45,442 in 1998. Annualized cumulative dividends on the
Company's Senior Preferred Stock and Convertible Preferred Stock outstanding as
of June 30, 1997 are $6,037 and $6,336, respectively. These dividends are
payable quarterly, in arrears.
The Company anticipates that cash flow from operations, together with cash
available from borrowings and other sources, including the potential sale of
equity securities in the public or private capital markets, will be sufficient
to satisfy its debt service obligations, expected distribution and dividend
requirements and operating cash needs for the next year.
ECONOMIC CONDITIONS
Substantially all of the merchants' leases contain provisions that somewhat
mitigate the impact of inflation. Such provisions include clauses providing for
increases in base rent and clauses enabling the Company to receive percentage
rentals based on merchants' gross sales. Substantially all leases require
merchants to pay their proportionate share of all operating expenses, including
common area maintenance, real estate taxes and insurance, thereby reducing the
Company's exposure to increased costs and operating expenses resulting from
inflation. At June 30, 1997, the Company maintained interest rate protection
contracts to protect against significant increases in interest rates on certain
floating rate indebtedness (see "Debt Repayments and Preferred Stock
Distributions and Dividends").
The Company intends to reduce operating and leasing risks by managing its
existing portfolio of properties with the goal of improving its tenant mix,
rental rates and lease terms and attracting upscale fashion and national
brand-name manufacturers and retailers as merchants.
FUNDS FROM OPERATIONS
Management believes that to facilitate a clear understanding of the Company's
operating results, funds from operations ("FFO") should be considered in
conjunction with net income (loss) presented in accordance with GAAP. FFO is
defined as net income (loss) (determined in accordance with GAAP) excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization after adjustments for unconsolidated partnerships
and joint ventures.
<PAGE>
In March 1995, the National Association of Real Estate Investment Trusts
established guidelines clarifying the definition of FFO (as modified, the "New
Definition"). The Company reports FFO under both the Old Definition and the New
Definition. For the Company, the primary impact of adopting the New Definition
was a reduction in FFO since the amortization of capitalized debt costs and
depreciation of non-real estate assets are not added back to income before
allocations to minority interests and preferred shareholders.
The Company generally considers FFO an appropriate measure of liquidity of an
equity REIT because industry analysts have accepted it as a performance measure
of equity REITs. The Company's FFO is not comparable to FFO reported by other
REITs that do not define the term using the current NAREIT definition or that
interpret the current NAREIT definition differently than does the Company.
Therefore, the Company cautions that the calculation of FFO may vary from entity
to entity and as such the presentation of FFO by the Company may not be
comparable to other similarly titled measures of other reporting companies. The
Company believes that in order to facilitate a clear understanding of its
operating results, FFO should be examined in conjunction with net income
determined in accordance with GAAP. FFO does not represent cash generated from
operating activities in accordance with GAAP and should not be considered as an
alternative to net income as an indication of the Company's performance or to
cash flows as a measure of liquidity or ability to make distributions.
TABLE 7 provides a reconciliation of income before allocations to minority
interests and preferred shareholders to FFO under the New Definition and Old
Definition for the three and six months ended June 30, 1997 and 1996.
New Definition FFO before allocations to preferred shareholders and minority
interests was $10,586 for the three months ended June 30, 1997 compared to $951
for the three months ended June 30, 1996. New Definition FFO before allocations
to preferred shareholders and minority interests was $20,838 for the six months
ended June 30, 1997 compared to $8,566 for the six months ended June 30, 1996.
The increases in the 1997 periods when compared to the 1996 periods are
primarily due to the Nonrecurring Charge of $6,131 incurred during the 1996
periods and the Portfolio Expansion. Excluding the effect of the Nonrecurring
Charge, New Definition FFO before allocations to preferred shareholders and
minority interests increased $3,504, or 49.5%, and $6,141, or 41.8%, for the
three and six months ended June 30, 1997, respectively, compared to the same
periods in 1996. These increases are primarily attributable to the Portfolio
Expansion.
Upon payment of the scheduled distributions with respect to the common units
held by Prime Retail, Inc. and the limited partners on August 15, 1997, the
preferential distribution with respect to the common units held by the Company
will terminate since the Company will have paid equal distributions of $0.295 to
both the common shareholders and the limited partner unit holders for four
successive quarters. For purposes of determining the amount of distributions to
the limited partners and whether the Company's FFO was sufficient to terminate
the preferential distribution, FFO was calculated under the Old Definition. As a
result of the termination of the preferential distribution, commencing in the
third quarter of 1997, the Company will no longer report FFO under the Old
Definition and the New Definition. Rather, the Company will report its results
only under the New Definition.
<PAGE>
TABLE 7 -- FUNDS FROM OPERATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
1997 1996 1997 1996 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
(New Definition) (Old Definition) (New Definition) (Old Definition)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before minority interests
and extraordinary item $ 3,583 $(3,950) $ 3,583 $(3,950) $ 7,076 $ (893) $ 7,076 $ (893)
FFO adjustments:
Depreciation and amortization 6,473 4,420 6,543 4,612 12,747 8,619 12,871 8,999
Amortization of deferred financing costs
and interest rate protection contracts - - 981 1,138 - - 1,925 2,249
Unconsolidated joint venture adjustments
530 481 535 482 1,015 840 1,025 842
------- ------- ------- ------- ------- ------ ------- -------
FFO before allocations to minority
interests and preferred shareholders $10,586 $ 951 $11,642 $ 2,282 $20,838 $8,566 $22,897 $11,197
======= ======= ======= ======= ======= ====== ======= =======
==============================================================================================================================
</TABLE>
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
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 Shareholders Meeting held on May 29,
1997 (the "Annual Meeting"), the nominees for director
proposed by the Company were elected. The votes cast for these
nominees were as set forth below:
For Withheld
-------------- ---------------
Michael W. Reschke 14,264,828 31,329
Terence C. Golden 14,265,078 31,129
In addition, at the Annual Meeting, the proposal to ratify the
selection of the firm of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1997 was
approved. The votes cast with respect to that proposal were as
set forth below:
For Against Abstain
------------- -------------- ------------
14,238,329 14,473 43,355
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS OR REPORTS ON FORM 8-K
(a) The following exhibits are included in this Form 10-Q:
Exhibit 12 Ratio of Earnings to Fixed Charges and Preferred
Stock Dividends and Distributions
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
None
<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.
PRIME RETAIL, INC.
Registrant
Date: July 29, 1997 /s/ Abraham Rosenthal
------------------------------------- ----------------------
Abraham Rosenthal
Chief Executive Officer
Date: July 29, 1997 /s/ Robert P. Mulreaney
-------------------------------------- ------------------------
Robert P. Mulreaney
Executive Vice President,
Chief Financial Officer
and Treasurer
PRIME RETAIL, INC.
EXHIBIT 12: COMPUTATION OF RATIO OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DISTRIBUTIONS AND DIVIDENDS
(Amounts in thousands, except for ratio information)
Six Months Ended
June 30
-----------------------------------
1997 1996
-------------- --------------
Income (loss) before minority $ 7,076 $ (893)
Interest incurred 20,215 12,738
Amortization of capitalized interest 157 142
Amortization of debt issuance costs 1,230 1,612
Amortization of interest rate protection
contracts 695 638
Less interest earned on interest rate
protection contracts (63) (122)
Less capitalized interest (2,003) (1,318)
-------------- --------------
Earnings 27,307 12,797
-------------- --------------
Interest incurred 20,215 12,738
Amortization of debt issuance costs 1,230 1,612
Amortization of interest rate protection
contracts 695 638
Preferred stock distributions and dividends 6,186 8,236
-------------- --------------
Combined Fixed Charges and
Preferred Stock Distributions
and Dividends 28,326 23,224
-------------- --------------
Excess of Combined Fixed Charges
and Preferred Stock Distributions
and Dividends over Earnings $ (1,019) $ (10,427)
============== =============
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 985
<SECURITIES> 0
<RECEIVABLES> 7,424
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 82,934
<PP&E> 703,619
<DEPRECIATION> 69,001
<TOTAL-ASSETS> 717,552
<CURRENT-LIABILITIES> 25,044
<BONDS> 534,439
0
53
<COMMON> 158
<OTHER-SE> 157,858
<TOTAL-LIABILITY-AND-EQUITY> 717,552
<SALES> 0
<TOTAL-REVENUES> 61,375
<CGS> 0
<TOTAL-COSTS> 54,299
<OTHER-EXPENSES> 1,493
<LOSS-PROVISION> 475
<INTEREST-EXPENSE> 18,872
<INCOME-PRETAX> 1,813
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,813
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,813
<EPS-PRIMARY> (.029)
<EPS-DILUTED> 0
</TABLE>
