<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-12482
GLIMCHER REALTY TRUST
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 31-1390518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 SOUTH THIRD STREET 43215
COLUMBUS, OHIO (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (614) 621-9000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
COMMON SHARES OF BENEFICIAL INTEREST, PAR VALUE $0.01 PER SHARE NEW YORK STOCK EXCHANGE
9 1/4% SERIES B CUMULATIVE REDEEMABLE PREFERRED SHARES OF NEW YORK STOCK EXCHANGE
BENEFICIAL INTEREST, PAR VALUE $0.01 PER SHARE
</TABLE>
-------------------------------------
Securities registered pursuant to Section 12(g) of the Act: NONE
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 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___
As of August 4, 2000, there were 23,804,111 Common Shares of Beneficial Interest
outstanding, par value $0.01 per share.
1 of 11 pages
<PAGE> 2
RIDER 1
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A to the Quarterly Report on Form
10-Q for the quarter ended June 30, 2000 of the Registrant amends and restates
in its entirety Item 2 of Part 1.
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following should be read in conjunction with the unaudited
consolidated financial statements of Glimcher Realty Trust (the "Company" or
"GRT") including the respective notes thereto, all of which are included in this
Form 10-Q.
This Form 10-Q, together with other statements and information publicly
disseminated by GRT, contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are
based on assumptions and expectations which may not be realized and are
inherently subject to risks and uncertainties, many of which cannot be predicted
with accuracy and some of which might not even be anticipated. Future events and
actual results, financial and otherwise, may differ from the results discussed
in the forward-looking statements. Risks and other factors that might cause
differences, some of which could be material, include, but are not limited to:
the effect of economic and market conditions; failure to consummate financing
and joint venture arrangements; development risks, including lack of
satisfactory financing, construction and lease-up delays and cost overruns; the
level and volatility of interest rates; the financial stability of tenants
within the retail industry, the rate of revenue increases versus expense
increases, as well as other risks listed from time to time in this Form 10-Q and
in GRT's other reports filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
REVENUES
Total revenues increased 9.9%, or $5.3 million, for the three months
ended June 30, 2000. Of the $5.3 million increase, $5.2 million was the result
of increased revenues at the malls, $50,000 was the result of increased revenues
at the community centers offset with a decrease of $350,000 from dispositions
and $410,000 was related to other revenue increases. Mall acquisitions for the
three month period ended June 30, 2000, reflects the inclusion of The Great Mall
of the Great Plains in the consolidated financial statements effective October
1, 1999, as a result of an increase in the Company's ownership to 55.0% at that
date.
Minimum rents
Minimum rents increased 8.5%, or $3.2 million, for the three months
ended June 30, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
---------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.8 $ 0.0 $0.8 2.1%
Acquisitions/Developments.... 2.7 0.0 2.7 7.2
Dispositions................. 0.0 (0.3) (0.3) (0.8)%
---- ----- ---- ----
$3.5 $(0.3) $3.2 8.5%
==== ===== ==== ====
</TABLE>
2
<PAGE> 3
Percentage rents
Percentage rents decreased $230,000 for the three months ended June 30,
2000. This decrease was primarily attributable to the prior year reflecting a
catch-up adjustment upon final sales reporting at one of the malls.
Tenant recoveries
Tenant recoveries reflect a net increase of 14.1%, or $1.7 million, for the six
months ended June 30, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-----------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.6 $0.1 $0.7 5.8%
Acquisitions/Developments.... 1.0 0.0 1.0 8.3
---- ---- ---- ----
$1.6 $0.1 $1.7 14.1%
==== ==== ==== ====
</TABLE>
Other revenues
The $610,000 increase in other revenues is primarily the result of a
net increase of $410,000 in management fee revenues from the joint ventures as a
result of the opening of Jersey Gardens in October 1999 and an increase of
$190,000 in compactor pad rentals at the malls.
OPERATING EXPENSES
Total operating expenses increased 16.7%, or $2.3 million, for the
three months ended June 30, 2000. Recoverable operating expenses increased $2.2
million and the provision for credit losses increased $50,000.
Recoverable expenses
Recoverable expenses increased 16.9%, or $2.2 million for the three
months ended June 30, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-----------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.7 $0.1 $0.8 6.1%
Acquisitions/Developments.... 1.4 0.0 1.4 10.8
---- ---- ---- ----
$2.1 $0.1 $2.2 16.9%
==== ==== ==== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $650,000 and
represented 1.1% of tenant revenues for both the three months ended June 30,
2000 and the three months ended June 30, 1999.
DEPRECIATION AND AMORTIZATION
The $2.0 million increase in depreciation and amortization consists
primarily of an increase of $1.6 million from mall acquisitions and an increase
of $400,000 in the core portfolio properties.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $2.4 and represented 4.1% of
total revenues for the three months ended June 30, 2000, compared to $2.4
million and 4.6% of total revenues for the corresponding period in 1999.
3
<PAGE> 4
GAIN ON SALES
During the second quarter of 2000, the Company completed $3.5 million
in asset sales and recognized net gains of $730,000.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased 34.3%, or $5.2 million for the three months
ended June 30, 2000. The summary below identifies the increase by its various
components (dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
------------------------------------------------------
2000 1999 INC. (DEC.)
---- ---- -----------
<S> <C> <C> <C>
Average loan balance..................... $ 1,067,675 $ 1,021,501 $ 46,174
Average rate............................. 7.80% 7.11% 0.69%
Total interest........................... $ 20,820 $ 18,157 $2,663
Less: Capitalized interest.............. (259) (1,667) 1,408
Other (1)................................ (233) (1,350) 1,117
------------- ------------ ---------
Interest expense......................... $ 20,328 $ 15,140 $ 5,188
============ ============ =========
</TABLE>
(1) Other consists primarily of interest costs billed to joint venture entities.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
REVENUES
Total revenues increased 9.9%, or $10.6 million, for the six months
ended June 30, 2000. Of the $10.6 million increase, $10.0 million was the result
of increased revenues at the malls, $360,000 was the result of increased
revenues at the community centers offset with a decrease of $710,000 from
dispositions and $950,000 was related to other revenue increases. Mall
acquisitions for the six month period ended June 30, 2000, reflects the
inclusion of The Great Mall of the Great Plains in the consolidated financial
statements effective October 1, 1999, as a result of an increase in the
Company's ownership to 55.0% at that date.
Minimum rents
Minimum rents increased 8.4%, or $6.3 million, for the six months ended
June 30, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
----------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $1.5 $0.4 $1.9 2.5%
Acquisitions/Developments.... 5.1 0.0 5.1 6.8
Dispositions................. 0.0 (0.7) (0.7) (0.9)
---- ----- ---- ----
$6.6 $(0.3) $6.3 8.4%
==== ===== ==== ====
</TABLE>
Percentage rents
Percentage rents decreased $170,000 for the six months ended June 30,
2000. This decrease was primarily attributable to the prior year reflecting a
catch-up adjustment upon final sales reporting at one of the malls.
4
<PAGE> 5
Other revenues
The 1.4 million increase in other revenues is primarily the result of
increases in temporary tenant income at the malls of $280,000, a net increase of
$730,000 in management fee revenues from the joint ventures as a result of the
opening of Jersey Gardens in October 1999 and an increase of $320,000 in
compactor pad rentals at the malls.
OPERATING EXPENSES
Total operating expenses increased 15.1%, or $4.3 million, for the six
months ended June 30, 2000. Recoverable operating expenses increased $3.6
million, the provision for credit losses increased $170,000 and other operating
expenses increased $480,000.
Recoverable expenses
Recoverable operating expenses increased 13.9%, or $3.6 million, for
the six months ended June 30, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
----------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.6 $0.2 $0.8 3.1%
Acquisitions/Developments.... 2.8 0.0 2.8 10.8
---- ---- ---- ----
$3.4 $0.2 $3.6 13.9%
==== ==== ==== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $1.4 million and
represented 1.2% of tenant revenues for the six months ended June 30, 2000,
compared to 1.1% of tenant revenues for the six months ended June 30, 1999.
DEPRECIATION AND AMORTIZATION
The $4.1 million increase in depreciation and amortization consists
primarily of an increase of $3.2 million from mall acquisitions and an increase
of $900,00 in the core portfolio properties.
GAIN ON SALES
During the first half of 2000, the Company completed $5.0 million in
asset sales and recognized net gains of $2.0 million.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased 33.9%, or $10.2 million for the six months
ended June 30, 2000. The summary below identifies the increase by its various
components (dollars in thousands).
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------
2000 1999 INC. (DEC.)
---- ---- -----------
<S> <C> <C> <C>
Average loan balance..................... $ 1,067,280 $ 1,016,716 $ 50,564
Average rate............................. 7.71% 7.14% 0.57%
Total interest........................... $ 41,144 $ 36,297 $ 4,847
Less: Capitalized interest.............. (490) (3,374) 2,884
Other (1)................................ (453) (2,900) 2,447
------------ ------------ ----------
Interest expense......................... $ 40,201 $ 30,023 $ 10,178
============ ============ ==========
</TABLE>
(1) Other consists primarily of interest costs billed to joint venture entities.
5
<PAGE> 6
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's short term (less than one year) liquidity requirements
include recurring operating costs, capital expenditures, debt service
requirements and preferred and common dividend requirements. The Company
anticipates that these needs will be met with cash flows provided by operations,
the refinancing of maturing debt and proceeds from the sale of assets.
The Company has a $170.0 million revolving line of credit with a group
of banks that matures January 31, 2001. The Company has initiated discussions
with the lead banks and anticipates that a new agreement, on comparable terms,
will be executed prior to December 31, 2000.
In February 2000, the Company refinanced a $16.2 million construction
loan payable with a new $16.2 million mortgage note payable on Georgesville
Square, which matures in March 2010 and bears interest at 8.52% per annum. The
Company repaid $58.2 million in mortgage notes during the first half of the year
and executed new short-term notes payable of $58.5 million. The Company also
made payments on other mortgages and notes payable of $14.2 million; net
additional borrowings on the Company's Credit Facility were $31.0 million.
The Company refinanced certain maturing debt in the first six months of
2000 with short term floating rate debt. The Company expects to refinance an
additional $101.0 million of debt maturing in August and October of 2000 with
additional floating rate debt under the same terms in order to facilitate the
sale of certain single tenant and non-strategic community center assets. The
Company believes that these short term borrowings provide maximum flexibility in
structuring such sales.
The Company's long term (greater than one year) liquidity requirements
include scheduled debt maturities, capital expenditures to maintain, renovate
and expand existing assets, property acquisitions and development projects.
Management anticipates that net cash provided by operating activities, the funds
available under its Credit Facility, its construction financing, long-term
mortgage debt, venture structure for acquisitions and developments, issuance of
preferred and common shares of beneficial interest and proceeds from the sale of
assets will provide sufficient capital resources to carry out the Company's
business strategy relative to the renovations, expansions and developments
discussed herein. Based upon its current debt-to-market capitalization, the
Company does not expect to pursue significant additional acquisitions until such
time as the Company has reduced the amount of outstanding borrowings or has
access to additional equity capital.
At June 30, 2000, the Company's debt-to-total-market capitalization was
63.5%, compared to 64.7% at December 31, 1999. The Company's intent is to
maintain this ratio between approximately 40.0% and 60.0% and the Company is
working toward reducing this ratio below 60.0% in 2000. The Company is pursuing
the sale of certain assets as a means of reducing its leverage.
Net cash provided by operating activities for the six months ended
June 30, 2000, was $32.6 versus $46.3 million for the corresponding period of
1999. Net income adjusted for non-cash items accounted for a $2.6 million
decrease, while changes in operating assets and liabilities accounted for a
$11.1 million decrease.
Net cash used in investing activities for the six months ended June 30,
2000, was $13.6 million. It primarily reflects additional direct investments in
real estate assets of $10.6 million, a decrease in indirect investments in real
estate through investments in unconsolidated entities of $3.3 million, an
increase in deferred expenses, prepaid and other assets of $11.0 million and
proceeds from sale of assets of $4.7 million.
Net cash used in financing activities for the six months ended June 30,
2000, was $20.1 million. Cash was used to fund distributions of $41.3 million
and make principal payments on mortgage and notes payable of $88.9 million. Cash
was provided by additional borrowings on the Credit Facility of $31.0 million
and issuance of new mortgage and notes payable of $78.8 million.
6
<PAGE> 7
EXPANSION, RENOVATION AND DEVELOPMENT ACTIVITY
The Company continues to be active in its expansion, renovation and
development activities. Its business strategy is to grow the Company's assets
and cash flow available, to among other things, provide for dividend
requirements.
EXPANSIONS AND RENOVATIONS
The Company maintains a strategy of selective expansions and
renovations in order to improve the operating performance and the competitive
position of its existing portfolio. The Company also engages in an active
redevelopment program with the objective of attracting innovative retailers
which management believes will enhance the operating performance of the
properties.
Malls
At The Great Mall of the Great Plains, in Olathe, Kansas, Saks Fifth
Avenue's value brand, Off 5th opened as an anchor in 25,000 square feet of gross
leasable area. Additionally, at Jersey Gardens, in Elizabeth, New Jersey, Old
Navy opened during in the second quarter 2000 in a 45,000 square foot store.
Community Centers
The Company currently has community center anchor expansion and
redevelopment projects in process at Cross-Creek Plaza in Beaufort, South
Carolina, Stewart Plaza in Mansfield, Ohio and Loyal Plaza in Loyalsock,
Pennsylvania. The total financial commitment in connection with these projects
is approximately $5.0 million.
DEVELOPMENTS
Polaris Towne Center
In March 1998, the Company, in a joint venture in which it has a 50.0%
ownership interest, commenced construction of an approximately 700,000
square-foot power Community Center, Polaris Towne Center in northern Columbus,
Ohio. At June 30, 2000, approximately 682,000 square feet of retail space was
open. Upon completion, Polaris Towne Center will feature grocery and discount
store anchors, restaurants, big box retailers and several specialty shops. The
initial anchor, a 64,000 square-foot Kroger, opened in the fourth quarter of
1998. During 1999 and the first six months of 2000, seven additional anchor
tenants, 16 small shop tenants and seven outparcel tenants opened for business.
Included in the total square footage are Target and Lowes which purchased land
and constructed their own stores. Target opened a 136,000 square-foot store in
the fourth quarter of 1999 and Lowes opened in a 135,000 square foot-store in
the second quarter of 2000.
The space for which construction has been completed was 100.0% occupied
at June 30, 2000. The required equity for Polaris Towne Center was contributed
to the joint venture during 1998. During the second quarter of 2000, the joint
venture refinanced the construction loan with a permanent 10-year mortgage note
payable at an interest rate of 8.20% per annum.
Jersey Gardens
The Company, in a joint venture in which the Company has a 30.0%
ownership interest, developed a 1.3 million square-foot value-oriented fashion
and entertainment megamall, ("Jersey Gardens"), located in Elizabeth, New
Jersey. Construction of the mall and related infrastructure has been completed
and the grand opening of Jersey Gardens was October 21, 1999. At the opening
date leases had been executed for approximately 92.8% of the GLA. Occupancy of
Jersey Gardens was 89.5% at June 30, 2000. The required equity for Jersey
Gardens and off-site improvements had previously been funded. The Company has
also arranged a construction loan facility for the project which matures in
2002.
7
<PAGE> 8
Polaris Fashion Place
In March 1998, the Company announced plans for the development of a new
super-regional mall of approximately 1.4 million square feet in northern
Columbus, Ohio. Polaris Fashion Place is expected to be a bi-level mall
featuring six anchor tenants, approximately 150 mall stores and four
restaurants, and will be located across the street from Polaris Towne Center.
Construction is expected to commence in 2000 with a projected opening date in
the fourth quarter of 2001.
Carson
In April 1999, the Company terminated its contingent contract to
acquire the land for a value-oriented super-regional mall located in Carson,
California. The Company is currently exploring alternatives with respect to
continued participation in the development of this site.
PORTFOLIO DATA
Tenants reporting sales data in the table below for the twelve month
periods ended June 30, 2000, and 1999, represent 19.1 million square feet of
GLA, or 73.8% of the "same store" population.
<TABLE>
<CAPTION>
MALLS COMMUNITY CENTERS
-------------------------- ---------------------------------
PROPERTY TYPE SALES PSF % INCREASE SALES PSF % INCREASE
------------- --------- ---------- ------------------ ----------
<S> <C> <C> <C> <C>
Anchors............................ $159.88 1.5% $248.37 0.5%
Stores............................. $293.46 2.5% $200.97 5.3%
Total.............................. $223.90 2.1% $243.73 0.9%
</TABLE>
Portfolio occupancy statistics by property type are summarized below:
<TABLE>
<CAPTION>
OCCUPANCY (1) (2)
---------------------------------------------------------------
6/30/00 3/31/00 12/31/99 9/30/99 6/30/99
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Mall Anchors........................ 99.0% 99.0% 98.8% 97.3% 97.5%
Mall Stores......................... 82.7% 83.5% 84.8% 82.9% 81.9%
Mall Stores Comparable 12 Months.... 82.5% 83.4% 85.0% 82.9% 81.9%
Total Mall Portfolio................ 92.8% 93.0% 93.4% 91.9% 91.8%
Community Center Anchors............ 96.9% 97.2% 98.3% 97.5% 97.5%
Community Center Stores............. 89.6% 90.6% 90.8% 89.1% 89.1%
Total Community Centers............. 95.2% 95.7% 96.5% 95.5% 95.6%
Single Tenant Retail Properties..... 100.0% 92.2% 92.2% 92.2% 92.2%
Total Community Center Portfolio.... 95.6% 95.3% 96.1% 95.2% 95.2%
</TABLE>
(1) Occupancy statistics included in the above table are based on the total
Company portfolio which includes properties owned by the Company and
properties held in joint ventures.
(2) Occupied space is defined as any space where a tenant is occupying the
space or paying rent at the date indicated, excluding all tenants with
leases having an initial term of less than one year.
8
<PAGE> 9
FUNDS FROM OPERATIONS
Management considers funds from operations ("FFO") to be a supplemental
measure of the Company's operating performance. FFO does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs. FFO should not be considered as an alternative to net income,
as the primary indicator of the Company's operating performance, or as an
alternative to cash flow as a measure of liquidity.
The following table illustrates the calculation of FFO for the three and six
months ended June 30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income available to common shareholders................ $ 3,747 $ 4,315 $ 8,043 $ 9,406
Add back (less):
Real estate depreciation and amortization............. 11,050 9,591 22,052 18,904
GRT share of joint venture depreciation
and amortization................................... 4,036 2,414 7,963 4,743
(Gain) loss on sales of depreciated property.......... (113) (574)
(Gain) loss on sales of undepreciated property........ (618) (1,426)
Extraordinary item.................................... 70 295 70 295
Minority interest in operating partnership............ 466 451 992 1,078
--------- --------- -------- --------
Funds from operations...................................... $ 18,638 $ 17,066 $ 37,120 $ 34,426
======== ========= ======== ========
Funds from operations...................................... $ 18,638 $ 17,066 $ 37,120 $ 34,426
Add back (less):
Capital expenditures.................................. (5,260) (1,589) (7,278) (2,738)
Straight-line of minimum rents........................ (339) (571) (759) (1,101)
Straight-line of ground lease expense................. 1 11 7 27
GRT share of joint venture capital expenditures and
straight-line of minimum rents...................... (483) (744) (866) (1,057)
--------- --------- -------- --------
Adjusted funds from operations............................. $ 12,557 $ 14,173 $ 28,224 $ 29,557
========= ========= ======== ========
</TABLE>
FFO increased 9.2%, or $1.6 million for the three months ended June 30,
2000. The increase was the result of the Company's continuous focus on its core
portfolio. Property net operating income increased $2.9 million and FFO from
unconsolidated entities increased $4.6 million. These increases were partially
offset by an increase in net interest expense of $4.8 million, an increase in
non-real estate depreciation and amortization of $500,000 and an increase in
preferred stock dividends of $600,000.
FFO increased 7.8%, or $2.7 million for the six months ended June 30,
2000. The increase was the result of the Company's continuous focus on its core
portfolio. Property net operating income increased $6.3 million, FFO from
unconsolidated entities increased $7.1 million and general and administrative
expense decreased $300,000. These increases were partially offset by an increase
in net interest expense of $9.4 million, an increase in non-real estate
depreciation and amortization of $900,000 and an increase in preferred stock
dividends of $700,000.
ACCOUNTING PRONOUNCEMENTS
In July 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for financial
statements for fiscal quarters of fiscal years beginning after June 15, 2000.
The Company will be required to adopt SFAS No. 133 effective January 1, 2001.
SFAS No. 133 standardizes the accounting for derivative instruments by requiring
that all entities recognize them as assets and liabilities in the balance sheet
and subsequently measure them at fair market value. It also prescribes specific
accounting principles to be applied to hedging activities and hedging
transactions, which are significantly different from prior accounting
principles. The Company has began the process for adopting SFAS No. 133 but has
not yet determined its impact.
9
<PAGE> 10
YEAR 2000 ISSUES
Year 2000 issues had a minimal impact on the business, operations and
financial condition of the Company. All known issues have been remedied, and we
continue to exercise caution as we approach certain milestone dates.
With respect to its Year 2000 readiness on its information technology
("IT") there were no hardware related issues. All file servers, workstations and
routers continue to function normally. We experienced two minor software related
issues. These issues have been fixed and tested across all related databases.
With respect to its Year 2000 reliability and condition of its non-IT
systems, there were a total of three non-IT related issues that involved display
issues which have been fixed.
The costs incurred by the Company have been less then $100,000 and the
Company has not experienced any material adverse effect due to failure of any of
its or its partner's systems. Our tenants did not report any failures.
Even though the Company has successfully completed the year-end
financial reporting with minimal impact, and first six months with no impact, we
continue to exercise caution as we approach other critical dates.
OTHER
The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season when tenant occupancy and retail sales
are typically at their highest levels. In addition, malls achieve most of their
temporary tenant rents and percentage rents during the holiday season. As a
result of the above, earnings are generally highest in the fourth quarter of
each year.
The retail industry has experienced some difficulty, which is reflected
in sales trends and in the bankruptcies and continued restructuring of several
prominent retail organizations. Continuation of these trends could impact future
earnings performance.
INFLATION
Inflation has remained relatively low during the past three years and
has had a minimal impact on the Company's properties. Many tenants' leases
contain provisions designed to lessen the impact of inflation. Such provisions
include clauses enabling the Company to receive percentage rentals based on
tenants' gross sales, which generally increase as prices rise, and/or escalation
clauses, which generally increase rental rates during the terms of the leases.
In addition, many of the leases are for terms of less than 10 years, which may
enable the Company to replace existing leases with new leases at higher base
and/or percentage rentals if rents in the existing leases are below the
then-existing market rate. Substantially all of the leases, other than those for
anchors, require the tenants to pay a proportionate share of common area
maintenance, real estate taxes and insurance, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
Inflation may, however, have a negative impact on some of the Company's
other operating items. Interest expense and general and administrative expenses
may be adversely affected by inflation as these specified costs could increase
at a rate higher than rents. Also, for tenant leases with stated rent increases,
inflation may have a negative effect as the stated rent increases in these
leases could be lower than the increase in inflation at any given time.
10
<PAGE> 11
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.
GLIMCHER REALTY TRUST
September 26, 2000 /s/ Herbert Glimcher
--------------------- ------------------------------------------------------
(Date) Herbert Glimcher, Chairman of the Board and
Chief Executive Officer (Principle Executive Officer)
September 26, 2000 /s/ William G. Cornely
--------------------- ------------------------------------------------------
(Date) William G. Cornely, Executive Vice President
Chief Operating Officer & Chief Financial Officer
11
