UNITED STATES
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 March 31, 2003
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 1-9349
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SIZELER PROPERTY INVESTORS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 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 ___
---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). 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.
13,089,000 shares of Common Stock ($.0001 Par Value) were outstanding as of May
2, 2003.
1
Sizeler Property Investors, Inc. and Subsidiaries
INDEX
Page
----
Part I: Financial Information
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 8
Independent Accountants' Review Report 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
Item 4. Controls and Procedures 12
Part II: Other Information
-----------------
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature 13
Certifications 14 - 15
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Sizeler Property Investors, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31 December 31
2003 2002
ASSETS (Unaudited) (Audited)
------------------------ ---------------------
Real estate investments (Notes A and C):
Land $ 53,844,000 $ 53,751,000
Buildings and improvements, net of accumulated depreciation
of $100,034,000 in 2003 and $97,322,000 in 2002 219,469,000 214,039,000
Investment in real estate partnership 819,000 835,000
------------------------ ---------------------
274,132,000 268,625,000
Cash and cash equivalents 3,365,000 3,648,000
Accounts receivable and accrued revenue, net of allowance for
doubtful accounts of $118,000 in 2003 and $116,000 in 2002 2,279,000 2,787,000
Prepaid expenses and other assets 12,697,000 12,686,000
------------------------ ---------------------
Total Assets $ 292,473,000 $ 287,746,000
======================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable (Note D) $ 108,262,000 $ 108,883,000
Notes payable 18,649,000 9,250,000
Accounts payable and accrued expenses 8,621,000 9,575,000
Tenant deposits and advance rents 864,000 883,000
------------------------ ---------------------
136,396,000 128,591,000
Convertible subordinated debentures 56,599,000 56,599,000
------------------------ ---------------------
Total Liabilities 192,995,000 185,190,000
SHAREHOLDERS' EQUITY
Series A preferred stock, 40,000 shares authorized, none issued --- ---
Series B preferred stock, par value $0.0001 per share, liquidation
preference $25 per share, 2,476,000 shares authorized,
336,000 issued and outstanding in 2003 and 2002 1,000 1,000
Common stock, par value $0.0001 per share, 51,484,000 shares authorized,
shares issued and outstanding -- 13,082,000 in 2003 and 13,079,000 in 2002 1,000 1,000
Excess stock, par value $0.0001 per share, 16,000,000 authorized, none issued --- ---
Additional paid-in capital 169,422,000 169,520,000
Accumulated other comprehensive (loss) gain (44,000) 20,000
Cumulative net income 45,070,000 44,774,000
Cumulative distributions paid (114,972,000) (111,760,000)
------------------------ ---------------------
Total Shareholders' Equity 99,478,000 102,556,000
------------------------ ---------------------
Total Liabilities and Shareholders' Equity $ 292,473,000 $ 287,746,000
======================== =====================
See notes to consolidated financial statements.
3
Sizeler Property Investors, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
Quarter Ended March 31
-----------------------------------
2003 2002
----------------- ----------------
OPERATING REVENUE
Rents and other income $ 13,158,000 $ 13,101,000
Equity in income of partnership 14,000 34,000
----------------- ----------------
13,172,000 13,135,000
----------------- ----------------
OPERATING EXPENSES
Utilities 543,000 487,000
Real estate taxes 1,045,000 999,000
Administrative expenses 1,800,000 1,365,000
Operations and maintenance 2,046,000 1,957,000
Other operating expenses 1,425,000 1,007,000
Depreciation and amortization 2,885,000 2,823,000
----------------- ----------------
9,744,000 8,638,000
----------------- ----------------
INCOME FROM OPERATIONS 3,428,000 4,497,000
Interest expense 3,131,000 3,306,000
----------------- ----------------
NET INCOME $ 297,000 $ 1,191,000
================= ================
NET INCOME ALLOCATION:
Allocable to preferred shareholders 205,000 ---
Allocable to common shareholders 92,000 1,191,000
----------------- ----------------
NET INCOME $ 297,000 $ 1,191,000
================= ================
Net income per common share - basic and diluted $ 0.01 $ 0.10
================= ================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDNG 13,084,000 12,236,000
================= ================
See notes to consolidated financial statements.
5
Sizeler Property Investors, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended March 31
---------------------------
2003 2002
----------- ------------
OPERATING ACTIVITIES:
Net income $ 297,000 $ 1,191,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,885,000 2,823,000
Decrease in accounts receivable and accrued revenue 508,000 694,000
Increase in prepaid expenses and other assets (50,000) (686,000)
Decrease in accounts payable and accrued expenses (2,969,000) (3,755,000)
----------- -----------
Net Cash Provided by Operating Activities 671,000 267,000
----------- -----------
INVESTING ACTIVITIES:
Acquisitions of and improvements to real estate investments (8,235,000) (1,266,000)
----------- -----------
Net Cash Used in Investing Activities (8,235,000) (1,266,000)
----------- -----------
FINANCING ACTIVITIES:
Principal payments on mortgage notes payable (621,000) (577,000)
Net proceeds from (payments on) notes payable to banks 11,413,000 (38,000)
(Increase) decrease in mortgage escrow deposits (201,000) 329,000
Cash dividends to shareholders (3,212,000) (2,802,000)
Purchase of company stock (309,000) ---
Proceeds from issuance of shares of common stock pursuant to direct
stock purchase, stock option, and stock award plans 211,000 4,123,000
----------- -----------
Net Cash Provided by Financing Activities 7,281,000 1,035,000
----------- -----------
Net (decrease) increase in cash and cash equivalents (283,000) 36,000
Cash and cash equivalents at beginning of year 3,648,000 1,228,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,365,000 $ 1,264,000
=========== ===========
Cash interest payments, net of capitalized interest $ 4,356,000 $ 4,550,000
=========== ===========
See notes to consolidated financial statements.
5
Sizeler Property Investors, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2003
NOTE A -- BASIS OF PRESENTATION
As of March 31, 2003, the Company's real estate portfolio included interests in
fifteen shopping centers and sixteen apartment communities. Two of the apartment
communities are currently under construction. The Company holds, directly or
indirectly through both wholly-owned subsidiaries and majority-owned entities, a
fee interest in twenty-nine of its properties, and long-term ground leases on
the remaining two properties - Southwood Shopping Center in Gretna, Louisiana
and Westland Shopping Center in Kenner, Louisiana. Sixteen properties are held
through partnerships and limited partnerships whereby the majority owner is a
wholly-owned subsidiary of Sizeler Property Investors, Inc. The minority
interests in these entities are held by third party corporations who have
contributed capital for their respective interests. The other fifteen properties
in the portfolio are held through wholly-owned subsidiary corporations and
limited liability companies. The Company, the wholly-owned subsidiaries and
majority-owned partnerships and limited partnerships, are referred to
collectively as the "Company", and are properly reflected on the Company's
consolidated balance sheet. Minority interests in majority-owned partnerships
are not material.
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America (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 GAAP for complete financial
statements. Furthermore, the preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. Actual results could materially differ from those estimates.
Operating results for the three-month period ended March 31, 2003, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003. The consolidated balance sheet at December 31, 2002, has been
derived from the audited consolidated financial statements at that date, but
does not include all of the information and footnotes required by GAAP 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, 2002.
NOTE B -- RECLASSIFICATIONS
Certain reclassifications have been made in the 2002 consolidated financial
statements to conform with the 2003 consolidated financial statement
presentation.
NOTE C -- REAL ESTATE INVESTMENTS
In April 2002, the Company executed a construction contract for approximately
$12.0 million for the construction of the second phase of its Governors Gate
apartment community located in Pensacola, Florida. In August 2002, the Company
executed a construction contract for approximately $10.9 million for the
construction of Greenbrier Estates, a new apartment community in proximity to
the Company's North Shore Square Mall located in Slidell, Louisiana.
Construction is currently underway on both apartment communities which will add
approximately 350 new units to the existing portfolio. During the quarter ended
March 31, 2003, the Company capitalized $302,000 in interest costs related to
these and other developments.
6
NOTE D -- MORTGAGE NOTES PAYABLE
The Company's mortgage notes payable are secured by certain land, buildings and
improvements. At March 31, 2003, mortgage notes payable totalled approximately
$108.3 million. Individual notes ranged from $791,000 to $17.8 million, with
fixed rates of interest ranging from 6.85% to 8.25% and maturity dates ranging
from May 1, 2008 to January 1, 2013. Net book values of properties securing
these mortgage notes payable totalled approximately $131.2 million at March 31,
2003, with individual property net book values ranging from $2.3 million to
$29.7 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.
The Company assesses and measures segment operating results based on a
performance measure referred to as Net Operating Income and is based on the
operating revenues and operating expenses directly associated with the
operations of the real estate properties (excluding depreciation and
amortization, administrative and interest expense). Net Operating Income is not
a measure of operating results or cash flows from operating activities as
measured by GAAP, 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 revenue, operating expenses, net operating income and real estate
investments for each of the reportable segments are summarized below for the
three-month periods ended March 31, 2003 and 2002.
Quarter Ended March 31
-----------------------------
Retail: 2003 2002
------------- -------------
Operating revenue $ 7,417,000 $ 7,136,000
Operating expenses (2,276,000) (2,207,000)
------------- ------------
Net operating income - retail 5,141,000 4,929,000
Apartments:
Operating revenue 5,755,000 5,999,000
Operating expenses (2,783,000) (2,243,000)
------------- -------------
Net operating income - apartments 2,972,000 3,756,000
Net operating income - total 8,113,000 8,685,000
Administrative expenses (1,800,000) (1,365,000)
Depreciation and amortization (2,885,000) (2,823,000)
------------- -----------
Income from operations 3,428,000 4,497,000
Interest expense (3,131,000) (3,306,000)
------------- ------------
Net income $ 297,000 $ 1,191,000
============= =============
March 31
-----------------------------
2003 2002
-----------------------------
Gross real estate investments:
Retail $ 217,538,000 $ 211,749,000
Apartments 156,628,000 139,799,000
------------- -------------
$ 374,166,000 $ 351,548,000
============= =============
NOTE F - ACCOUNTING PRONOUNCEMENTS
During the second quarter of 2002, the FASB issued Statement 145, Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and
Technical Corrections ("Statement 145"). This statement rescinds SFAS No. 4,
Reporting Gains and Losses from Extinguishments of Debt, and requires that all
gains and losses from extinguishments of debt should be classified as
extraordinary items only if they meet the criteria in APB No. 30. Applying APB
No. 30
7
will distinguish transactions that are part of an entity's recurring operations
from those that are unusual or infrequent or that meet the criteria for
classification as to an extraordinary item. Any gain or loss on extinguishment
of debt that was classified as an extraordinary item in prior periods presented
that does not meet the criteria in APB No. 30 for classification as an
extraordinary item must be reclassified. The Company adopted the provisions
related to the rescission of SFAS No. 4 as of January 1, 2003, and will
reclassify its 2002 early extinguishment of debt in the second quarter.
In June 2002, the Financial Accounting Standards Board issued Statement 146,
Accounting for Costs Associated with Exit or Disposal Activities. Statement 146
addresses financial accounting and reporting for costs associated with exit or
disposal activities and requires that the liabilities associated with these
costs be recorded at their fair value in the period in which the liability is
incurred. Statement 146 was effective for us for disposal activities initiated
after December 31, 2002, and had no effect on our consolidated financial
position, results of operations or cash flows for the period ended March 31,
2003.
As required by Statement of Financial Accounting Standards No. 148 (FAS No.
148), Accounting for Stock Based Compensation- Transition and Disclosure, which
amends FAS No. 123, the following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value recognition
provisions of FAS No. 123 to a stock based employee compensation. The pro forma
data presented below is not representative of the effects on reported amounts
for future years.
Three months ended March 31,
----------------------------
2003 2002
------------ -----------
Net income, available to common shareholders $ 92,000 $ 1,191,000
Stock-based employee compensation expense (50,000) (40,000)
------------ -----------
Pro forma net income $ 42,000 $ 1,151,000
============ ===========
Basic and diluted earnings per share:
Earnings, available to common shareholders $ 0.01 $ 0.10
============ ===========
Pro forma earnings $ 0.00 $ 0.09
============ ===========
Black-Scholes option pricing model assumptions:
Risk free interest rate 5.3% 5.4%
Expected life (years) 10 years 10 years
Volatility 21.9% 18.0%
Dividend yield 9.6% 10.9%
8
Independent Accountants' Review Report
Shareholders and Board of Directors
Sizeler Property Investors, Inc.:
We have reviewed the accompanying consolidated balance sheet of Sizeler Property
Investors, Inc. and subsidiaries (the Company) as of March 31, 2003, and the
related consolidated statements of income and cash flows for the three-month
periods ended March 31, 2003 and 2002. These consolidated financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Sizeler Property Investors, Inc. and subsidiaries as of December 31, 2002, and
the related consolidated statements of income, shareholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
February 5, 2003, except for Note I as to which the date is March 6, 2003, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 2002, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG LLP
New Orleans, Louisiana
April 25, 2003
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Comparison of the Three Months Ended March 31, 2003 and 2002
Total operating revenues were $13.2 million for the three-month period ended
March 31, 2003, compared to $13.1 million earned a year ago. Operating revenues
for the first quarter of 2003 were positively affected by increased rental
rates, and higher occupancy in the retail portfolio, but negatively impacted by
lower occupancy levels in the apartment portfolio. Management has formulated and
is implementing steps to increase the occupancy rates at its apartment
communities. First quarter operating costs were $5.1 million in 2003, compared
to $4.4 million in 2002. The increase in costs was primarily due to increased
insurance costs, real estate taxes and various other operating costs. Net
operating income totaled $8.1 million for the three months ended March 31, 2003,
compared to $8.7 million, earned in 2002.
General and administrative costs increased approximately $435,000 in the first
quarter of 2003 due primarily to increased payroll costs and legal fees.
Interest expense for the three months ended March 31, 2003 decreased $175,000
compared to the same period last year. During the quarter, the Company
capitalized $302,000 in interest costs in 2003, as compared to $55,000 in the
prior year's period. The average credit line interest rate was 3.22% for the
three months ended March 31, 2003, compared to 3.95% in the prior year's period.
The reduction in bank debt interest was partially offset by increased interest
expense related to the Company's 9.0% convertible subordinated debentures due in
2009.
For the three months ended March 31, 2003, net income was $297,000, compared to
$1.2 million in the prior year. Net income available to common shareholders was
$92,000 in current year's quarter, compared to $1.2 million for the same period
last year.
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, debt service obligations, and distributions to shareholders. In
addition, the Company maintains unsecured credit lines with commercial banks,
which it utilizes to supplement cash provided by operating activities and to
initially finance the cost of property development and redevelopment activities,
portfolio acquisitions and other expenditures. At March 31, 2003, the Company
had $3.4 million in cash and cash equivalents and $75 million in committed bank
lines of credit facilities, of which approximately $56.4 million was available.
These lines of credit are renewable on an annual basis and utilization 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 increased approximately $400,000
in 2003 compared to the same period in 2002. The increase was principally
attributable to the timing in payment of certain expenses, partially offset by
lower net income as compared to the prior year's period.
Net cash flows used in investing activities increased approximately $7.0 million
in 2003 from 2002, primarily attributable to increased development activities.
The Company is currently constructing a second phase of its Governors Gate
apartment complex in Pensacola, Florida and a new apartment community in
Slidell, Louisiana. The Company currently plans to fund the remaining
construction costs through operating cash flows and usage of its bank lines of
credit. During the quarter, the Company capitalized $302,000 in interest costs
related to these and other developments.
Net cash flows provided by financing activities increased approximately $6.2
million in 2003 from 2002 due to (i) an increase of $11.5 million in borrowing
proceeds from notes payable to banks in 2003, offset by (ii) a decrease of $3.9
million in proceeds from the issuance of shares of common stock pursuant to the
direct stock purchase and dividend reinvestment plan, stock option redemptions
and stock award plans, (iii) increased cash dividends to shareholders of
$411,000 and (iv) increased cash usage of $309,000 to purchase shares of Company
stock.
As of March 31, 2003, the Company had mortgage debt of $108.3 million. All of
these mortgages are non-recourse and bear fixed rates of interest for a fixed
term. The Company has a 50% interest in a partnership which owns the Southwood
Shopping Center located in Gretna, Louisiana. This property is subject to a
mortgage for which the other 50% owner is liable. Fourteen of the Company's
existing operating properties are currently unencumbered by mortgage debt. The
Company anticipates that its current cash balance, operating cash flows, and
borrowing capacity (including borrowings
10
under its lines of credit) will be adequate to fund the Company's future (i)
operating and administrative expenses, (ii) debt service obligations, (iii)
distributions to shareholders, (iv) development activities, (v) capital
improvements on existing properties, and (vi) typical repair and maintenance
expenses at its properties.
Holders of the Company's Series B cumulative redeemable preferred stock are
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available for the payment of dividends, preferential cumulative
cash dividends at the rate of 9.75% per annum of the liquidation preference per
share (equivalent to a fixed annual amount of $2.4375 per share). Dividends on
the Series B preferred stock will be payable quarterly in arrears on the
fifteenth day of February, May, August and November of each year, or, if not a
business day, the next succeeding business day.
The Company's current common stock dividend policy is to pay quarterly dividends
to shareholders, based upon, among other things, funds from operations, as
opposed to net income. Because funds from operations excludes the deduction of
non-cash charges, principally depreciation on real estate assets, quarterly
dividends will typically be greater than net income and may include a
tax-deferred return of capital component. The Board of Directors, on May 9,
2003, declared a cash dividend on common stock of $0.23 per share for the period
January 1, 2003 through March 31, 2003, payable on June 5, 2003 to shareholders
of record as of May 30, 2003.
Funds From Operations
Real estate industry analysts and the Company 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 (FFO) is defined by the Company as net income, excluding
gains or losses from sales of property and those items defined as extraordinary
under accounting principles generally accepted in the United States of America
(GAAP), certain non-recurring charges, plus depreciation on real estate assets
and after adjustments for unconsolidated partnerships to reflect FFO on the same
basis. FFO does not represent cash flows from operations as defined by GAAP, nor
is it indicative that cash flows are adequate to fund all cash needs, including
distributions to shareholders. FFO should not be considered as an alternative to
net income as defined by GAAP or to cash flows as a measure of liquidity. A
reconciliation of net income to basic and diluted FFO is presented below (in
thousands):
Quarter Ended March 31
----------------------
2003 2002
---- ----
Dollars Shares Dollars Shares
---------- ---------- ---------- ----------
Net income $ 297 13,084,000 $ 1,191 12,236,000
Additions:
Depreciation 2,885 2,823
Partnership depreciation 8 9
Deductions:
Minority depreciation 14 14
Preferred dividends 205 ---
Amortization costs 156 149
---------- ---------- ---------- ----------
Funds from operations - available to common shareholders $ 2,815 13,084,000 $ 3,860 12,236,000
Interest on convertible debentures 1,274 1,238
Amortization of debenture issuance costs 64 61
---------- ---------- ---------- ----------
Funds from operations - available to common shareholders
- diluted $ 4,153 18,230,000 $ 5,159 17,073,000
========== ========== ========== ==========
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
11
rentals based on tenant sales in excess of a stated breakpoint and/or provide
for periodic increases in minimum rent during the lease term. 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 pay a contribution towards property operating
expenses, thereby reducing the Company's exposure to higher operating costs
caused by inflation. The Company's apartment leases are written for short terms,
generally six to twelve months, and are adjusted according to changing market
conditions.
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, but not limited to (a) the inability to lease current or
future 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
financial difficulties; (e) general economic and world conditions, including
threats to the United States homeland from unfriendly factions; (f) decreases in
rental rates available from tenants; (g) increases in operating costs at the
Company's properties; (h) increases in corporate operating costs associated with
new regulatory requirements; (i) lack of availability of financing for
acquisition, development and rehabilitation of properties by the Company; (j)
possible dispositions of mature properties since the Company is continuously
engaged in the examination of its various lines of business; (k) increases in
interest rates; (l) a general economic downturn resulting in lower retail sales
and causing downward pressure on occupancies and rents at retail properties; as
well as (m) the adverse tax consequences if the Company were to fail to qualify
as a REIT in any taxable year. Except as required under federal securities laws
and the rules and regulations of the SEC, we do not have any intention or
obligation to update or revise any forward-looking statements in this Form 10-Q,
whether as a result of new information, future events, changes in assumptions or
otherwise.
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, 2002. There have been no material changes during the
first three months of 2003.
Item 4. Controls and Procedures.
Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's periodic
SEC filings.
In addition, the Company reviewed its internal controls, and there have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect those controls subsequent to the date of their last
evaluation.
PART II
Other Information
Item 1. Legal Proceedings.
The Company operates in various states in the Gulf South and has
subsidiaries and other affiliates domiciled in those states owning
titles to the properties in their respective states. There are no
pending legal proceedings to which the Company or any subsidiary or
affiliate 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 to the financial position of
the Company as a whole.
12
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 15. Letter regarding Unaudited Interim Financial
Information (filed herewith). Exhibit 99.1. Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002- Sidney W.
Lassen. Exhibit 99.2. Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002- Charles E. Miller, Jr.
(b) Reports on Form 8-K None.
SIGNATURE
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/ CHARLES E. MILLER, JR.
----------------------------------------
Charles E. Miller, Jr.
Chief Financial Officer
Date: May 13, 2003
13
CERTIFICATIONS
I, Sidney W. Lassen, certify that:
1. I have reviewed the quarterly report on Form 10-Q of Sizeler Property
Investors, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluations as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003
/S/ SIDNEY W. LASSEN
--------------------
Sidney W. Lassen
Chief Executive Officer
14
CERTIFICATIONS
I, Charles E. Miller, Jr., certify that:
1. I have reviewed the quarterly report on Form 10-Q of Sizeler Property
Investors, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluations as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003
/S/ CHARLES E. MILLER, JR
-------------------------
Charles E. Miller, Jr.
Chief Financial Officer
15