EX-99.4 9 exh99_4.txt Exhibit 99.4 ITEM 1. FINANCIAL STATEMENTS IRT PROPERTY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
September 30, December 31, 2002 2001 ---------- ---------- ASSETS Real estate investments: Rental properties $ 679,383 $ 659,820 Properties under development 15,901 22,599 ---------- ---------- 695,284 682,419 Accumulated depreciation (119,673) (109,344) ---------- ---------- Net rental properties 575,611 573,075 Net investment in direct financing leases 2,070 2,174 Mortgage loans, net 60 1,160 ---------- ---------- Net real estate investments 577,741 576,409 Cash and cash equivalents - 2,457 Prepaid expenses and other assets 14,695 11,634 ---------- ---------- Total assets $ 592,436 $ 590,500 ========== ========== LIABILITIES & SHAREHOLDERS' EQUITY Liabilities: Mortgage notes payable, net $ 130,196 $ 134,672 7.3% convertible subordinated debentures, net - 23,275 Senior notes, net 149,792 124,760 Indebtedness to banks 17,000 51,654 Accrued interest 3,798 4,598 Accrued expenses and other liabilities 13,990 10,652 ---------- ---------- Total liabilities 314,776 349,611 Commitments and contingencies (Note 8) Minority interest payable 7,719 7,755 Shareholders' equity: Preferred stock, $1 par value, authorized 10,000,000 shares; none issued - - Common stock, $1 par value, 150,000,000 shares authorized; 34,197,736 and 33,234,206 shares issued in 2002 and 2001, respectively 34,198 33,234 Additional paid-in capital 289,695 272,172 Deferred compensation/stock loans (3,495) (1,732) Treasury stock, at cost, 0 and 2,738,204 shares in 2002 and 2001, respectively - (22,783) Cumulative distributions in excess of net earnings (50,457) (47,757) ---------- ---------- Total shareholders' equity 269,941 233,134 ---------- ---------- Total liabilities and shareholders' equity $ 592,436 $ 590,500 ========== ==========
The accompanying notes are an integral part of these consolidated balance sheets. 1 IRT PROPERTY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2002 2001 2002 2001 -------- -------- -------- -------- REVENUES: Income from rental properties $22,542 $21,255 $66,989 $63,405 Interest income 13 92 47 372 Interest on direct financing leases 47 51 218 335 Gain on sale of outparcels (7) 258 498 1,003 -------- -------- -------- -------- Total revenues 22,595 21,656 67,752 65,115 -------- -------- -------- -------- EXPENSES: Operating expenses of rental properties 5,969 5,203 17,204 15,809 Interest expense 5,369 5,719 16,472 17,185 Depreciation 3,889 3,790 11,656 11,239 Amortization of debt costs 186 165 490 477 General and administrative 974 1,076 3,226 3,159 -------- -------- -------- -------- Total expenses 16,387 15,953 49,048 47,869 EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES - - - (4) -------- -------- -------- -------- Income from continuing operations before income taxes, minority interest, gain on sale of property and discontinued operations 6,208 5,703 18,704 17,242 INCOME TAX PROVISION - - (9) (53) MINORITY INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP (126) (109) (396) (405) GAIN ON SALES OF PROPERTIES - - - 2,498 -------- -------- -------- -------- Income from continuing operations 6,082 5,594 18,299 19,282 -------- -------- -------- -------- DISCONTINUED OPERATIONS Income from discontinued operations, net of minority interest 88 122 295 315 Gain on sales of properties, net of minority interest 2,062 - 2,062 - -------- -------- -------- -------- Income from discontinued operations 2,150 122 2,357 315 -------- -------- -------- -------- Income before extraordinary item 8,232 5,716 20,656 19,597 EXTRAORDINARY ITEM Loss on extinguishment of debt - - (156) - -------- -------- -------- -------- NET INCOME $ 8,232 $ 5,716 $20,500 $19,597 ======== ======== ======== ======== PER SHARE: (Note 11) Income from continuing operations - basic $ 0.18 $ 0.19 $ 0.57 $ 0.64 Income from discontinued operations - basic 0.06 - 0.07 0.01 -------- -------- -------- -------- Income before extraordinary item 0.24 0.19 0.64 0.65 Extraordinary item - basic - - (0.01) - -------- -------- -------- -------- Net earnings - basic $ 0.24 $ 0.19 $ 0.63 $ 0.65 ======== ======== ======== ======== Income from continuing operations - diluted $ 0.18 $ 0.19 $ 0.57 $ 0.63 Income from discontinued operations - diluted 0.06 - 0.07 0.01 -------- -------- -------- -------- Income before extraordinary item 0.24 0.19 0.64 0.64 Extraordinary item - diluted - - (0.01) - -------- -------- -------- -------- Net earnings - diluted $ 0.24 $ 0.19 $ 0.63 $ 0.64 ======== ======== ======== ======== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 33,973 30,388 32,360 30,294 ======== ======== ======== ======== Diluted 34,176 31,339 32,551 31,191 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. 2 IRT PROPERTY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) (IN THOUSANDS)
Nine Months Ended September 30, -------------------- 2002 2001 --------- --------- Cash flows from operating activities: Net earnings $ 20,500 $ 19,597 Adjustments to reconcile earnings to net cash from operating activities: Depreciation 11,768 11,348 Gain on sale of operating properties (2,185) (2,498) Gain on sale of outparcels (498) (1,003) Extraordinary loss on extinguishment of debt 156 - Minority interest of unitholders in partnership (37) (153) Straight line rent adjustment (496) (370) Amortization of deferred compensation 152 88 Amortization of debt costs and discounts 510 501 Amortization of capitalized leasing income 104 119 Changes in assets and liabilities: Decrease in accrued interest on debentures and senior notes (660) (762) Increase in interest receivable, prepaid expenses and other assets (2,431) (882) Increase in accrued expenses and other liabilities 3,205 2,472 --------- --------- Net cash flows from operating activities 30,088 28,457 --------- --------- Cash flows used in investing activities: Additions to operating properties, net (5,720) (12,143) Additions to development properties, net (7,851) (6,451) Proceeds from sale of operating properties, net 6,513 11,260 Proceeds from sale of outparcels, net 1,084 1,330 Purchase of unconsolidated affiliate, net of assets acquired - 177 Distribution from dissolution of unconsolidated affiliate - 21 Funding of mortgage loans - (445) Collections of mortgage loans, net 253 23 --------- --------- Net cash flows used in investing activities (5,721) (6,228) --------- --------- Cash flows used in financing activities: Cash dividends, net (23,200) (21,422) Issuance of common stock, net 38,508 - Purchase of treasury stock - (405) Exercise of stock options 657 1,561 Issuance of shares under stock purchase plan 30 - Proceeds from mortgage notes payable - 20,740 Principal amortization of mortgage notes payable (2,091) (1,890) Repayment of mortgage notes payable (7,186) - Proceeds from 7.84% senior notes issuance 25,000 - Proceeds from 7.77% senior notes issuance - 50,000 Repayment of 7.3% convertible subordinated debentures (23,110) - Repayment of 7.45% senior notes - (50,000) Decrease in bank indebtedness (34,654) (19,000) Payment of deferred financing costs (778) (1,082) --------- --------- Net cash flows used in financing activities (26,824) (21,498) --------- --------- Net (decrease) increase in cash and cash equivalents (2,457) 731 Cash and cash equivalents at beginning of period 2,457 831 --------- --------- Cash and cash equivalents at end of period $ - $ 1,562 ========= ========= Supplemental disclosures of cash flow information: Total cash paid during period for interest $ 17,816 $ 18,887 ========= =========
The accompanying notes are an integral part of these consolidated statements. 3 IRT PROPERTY COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 AND 2001 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. UNAUDITED FINANCIAL STATEMENTS These condensed consolidated financial statements for interim periods are unaudited and should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2001. The accompanying condensed consolidated financial statements include the accounts of IRT Property Company and its wholly-owned subsidiaries, IRT Management Company ("IRTMC"), VW Mall, Inc., IRT Alabama, Inc. ("IRTAL") and IRT Capital Corporation II ("IRTCCII"), and its majority-owned subsidiary, IRT Partners L.P. ("LP") (collectively, the "Company"). Intercompany transactions and balances have been eliminated in the consolidation. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to a fair presentation of the financial statements as of September 30, 2002 and 2001 have been recorded. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for future interim periods or for the full year. 2. RENTAL PROPERTIES The rental properties acquired and disposed in 2002 are summarized below.
SHOPPING CENTER ACQUISITIONS Date Square Year Built/ % Leased Total Initial Acquired Property Name City, State Footage Renovated at Acquisition Cost Cash Paid -------- ----------------- ----------- ------- --------- --------------- --------- ---------- 2/19/02 Parkwest Crossing Durham, NC 85,602 1991 100% $ 6,620 $ 1,946
SHOPPING CENTER DISPOSITIONS Date Square Sales Net Gain Sold Property Name City, State Footage Price Proceeds (Loss) ------- ------------------- ----------- ------- ------ --------- ------- 9/25/02 Forest Hills Centre Wilson, NC 74,180 $ 6,850 $ 6,513 $ 2,062 (1)
(1) Net of $123 of minority interest In connection with the acquisition of Parkwest Crossing, the Company assumed a $4,800, 8.1% mortgage. See Note 5. On September 26, 2002, the Company entered into a sale agreement for Lawrence Commons in Lawrenceburg, TN, to close in the fourth quarter of 2002. This property is not classified as held for sale within the Condensed Consolidated Balance Sheets due to the buyer's unconditional right to terminate the agreement for sixty days after the date of the agreement. 4 3. DEVELOPMENT AGREEMENTS The Company enters into agreements to develop shopping centers with local developers. The agreements generally consist of the Company committing to loan a fixed amount, at a specified interest rate, for the development of the shopping center with the possibility of the Company then purchasing the center upon the developer meeting certain budgetary and leasing requirements. The loan is secured by the development property and due upon completion. The developer is responsible for all construction matters as well as initial leasing efforts. Additionally, the Company could enter into a separate agreement to purchase the completed shopping center. Generally, the purchase price to the Company is based on the shopping center's net operating income and an implied rate of return at the time when the developer meets the specified requirements. As of September 30, 2002, the Company has no such purchase commitments. The Company is involved in one development loan, Freehome Village, a 89,270 square foot shopping center. As of September 30, 2002, the Company has loaned $925 for development and the shopping center should be completed in 2003. Beginning in the second quarter, the Company changed its treatment to account for the development loan as a property under development in the accompanying Condensed Consolidated Balance Sheet as of September 30, 2002. As of December 31, 2001, this development loan had been considered as a mortgage loan. Management believes the effect on prior periods is not significant. 5 4. INVESTMENT IN AND ADVANCES TO AFFILIATES As of September 30, 2002, LP, IRTCCII, IRTAL and IRTMC guaranteed the Company's indebtedness under the Company's existing unsecured revolving term loan and its other senior debt. The guarantees are joint and several and full and unconditional. The following tables show IRTCCII, IRTAL and IRTMC as "Combined Subsidiaries."
GUARANTORS ---------------------------- CONSOLIDATED IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY ------------- ------------- ------------- ------------- ------------- AS OF SEPTEMBER 30, 2002 ASSETS Net rental properties $ 398,705 $ 29,172 $ 147,734 $ - $ 575,611 Investment in affiliates 124,109 - - (124,109) - Other assets 35,951 43,137 26,339 (88,602) 16,825 ------------- ------------- ------------- ------------- ------------- Total assets 558,765 72,309 174,073 (212,711) 592,436 ============= ============= ============= ============= ============= LIABILITIES Mortgage notes payable 84,485 4,030 41,681 - 130,196 Senior Notes, net 149,792 - - - 149,792 Indebtedness to banks 17,000 - - - 17,000 Other liabilities 78,711 24,017 3,668 (80,889) 25,507 ------------- ------------- ------------- ------------- ------------- Total liabilities 329,988 28,047 45,349 (80,889) 322,495 ------------- ------------- ------------- ------------- ------------- SHAREHOLDERS' EQUITY Total shareholders' equity 228,777 44,262 128,724 (131,822) 269,941 ------------- ------------- ------------- ------------- ------------- Total liabilities and shareholders' equity $ 558,765 $ 72,309 $ 174,073 $ (212,711) $ 592,436 ============= ============= ============= ============= =============
GUARANTORS ---------------------------- CONSOLIDATED IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY ------------- ------------- ------------- ------------- ------------- AS OF DECEMBER 31, 2001 ASSETS Net rental properties $ 399,312 $ 28,138 $ 145,625 $ - $ 573,075 Investment in affiliates 122,168 - - (122,168) - Other assets 35,677 33,488 21,248 (72,988) 17,425 ------------- ------------- ------------- ------------- ------------- Total assets 557,157 61,626 166,873 (195,156) 590,500 ============= ============= ============= ============= ============= LIABILITIES Mortgage notes payable 93,115 4,093 37,464 - 134,672 Senior Notes, net 124,760 - - - 124,760 Indebtedness to banks 51,654 - - - 51,654 Other liabilities 84,928 24,431 2,154 (65,233) 46,280 ------------- ------------- ------------- ------------- ------------- Total liabilities 354,457 28,524 39,618 (65,233) 357,366 ------------- ------------- ------------- ------------- ------------- SHAREHOLDERS' EQUITY Total shareholders' equity 202,700 33,102 127,255 (129,923) 233,134 ------------- ------------- ------------- ------------- ------------- Total liabilities and shareholders' equity $ 557,157 $ 61,626 $ 166,873 $ (195,156) $ 590,500 ============= ============= ============= ============= =============
6
GUARANTORS ---------------------------- CONSOLIDATED IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY -------------- ------------- ------------- ------------- -------------- FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002 REVENUES Income from rental properties $ 15,922 $ 639 $ 5,981 $ - $ 22,542 Interest Income 121 - 76 (184) 13 Interest on direct financing leases 47 - - - 47 Other income 41 4,265 - (4,313) (7) -------------- ------------- ------------- ------------- -------------- Total revenues 16,131 4,904 6,057 (4,497) 22,595 -------------- ------------- ------------- ------------- -------------- EXPENSES Operating expenses of rental properties 4,113 166 1,690 - 5,969 Interest expense 4,556 186 816 (189) 5,369 Depreciation 2,829 55 1,005 - 3,889 Amortization of debt costs 180 1 5 - 186 General and administrative 603 110 261 - 974 -------------- ------------- ------------- ------------- -------------- Total expenses 12,281 518 3,777 (189) 16,387 -------------- ------------- ------------- ------------- -------------- Equity in earnings (losses) of affiliates - - - - - -------------- ------------- ------------- ------------- -------------- Earnings from continuing operations before income taxes, minority interest, gain on sales of properties and discontinued operations 3,850 4,386 2,280 (4,308) 6,208 Income tax provision - - - - - Minority interest in operating partnership 126 - - (252) (126) Gain on sales of properties - - - - - -------------- ------------- ------------- ------------- -------------- Income from continuing operations before discontinued operations and extraordinary item 3,976 4,386 2,280 (4,560) 6,082 Income from discontinued operations (131) - 2,281 - 2,150 Extraordinary item - loss on extinguishment of debt - - - - - -------------- ------------- ------------- ------------- -------------- Net income $ 3,845 $ 4,386 $ 4,561 $ (4,560) $ 8,232 ============== ============= ============= ============= ==============
GUARANTORS ---------------------------- CONSOLIDATED IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY -------------- ------------- ------------- ------------- -------------- FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 REVENUES Income from rental properties $ 15,199 $ 322 $ 5,734 $ - $ 21,255 Interest Income 190 - 158 (256) 92 Interest on direct financing leases 51 - - - 51 Other income 284 2,477 - (2,503) 258 -------------- ------------- ------------- ------------- -------------- Total revenues 15,724 2,799 5,892 (2,759) 21,656 -------------- ------------- ------------- ------------- -------------- EXPENSES Operating expenses of rental properties 3,636 82 1,485 - 5,203 Interest expense 5,058 193 732 (264) 5,719 Depreciation 2,810 63 917 - 3,790 Amortization of debt costs 161 1 3 - 165 General and administrative 746 62 268 - 1,076 -------------- ------------- ------------- ------------- -------------- Total expenses 12,411 401 3,405 (264) 15,953 -------------- ------------- ------------- ------------- -------------- Equity in earnings (losses) of affiliates 2,398 - - (2,398) - -------------- ------------- ------------- ------------- -------------- Earnings from continuing operations before income taxes, minority interest, gain on sales of properties and discontinued operations 5,711 2,398 2,487 (4,893) 5,703 Income tax provision - - - - - Minority interest in operating partnership 8 - - (117) (109) Gain on sales of properties 1,390 - - (1,390) - -------------- ------------- ------------- ------------- -------------- Income from continuing operations before discontinued operations 7,109 2,398 2,487 (6,400) 5,594 Income from discontinued operations (11) - 133 - 122 -------------- ------------- ------------- ------------- -------------- Net Income $ 7,098 $ 2,398 $ 2,620 $ (6,400) $ 5,716 ============== ============= ============= ============= ==============
7
GUARANTORS ------------------------------ CONSOLIDATED IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY -------------- -------------- -------------- ------------- -------------- FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 REVENUES Income from rental properties $ 46,969 $ 1,568 $ 18,452 $ - $ 66,989 Interest Income 401 - 234 (588) 47 Interest on direct financing leases 218 - - - 218 Other income 383 9,359 - (9,244) 498 -------------- -------------- -------------- ------------- -------------- Total revenues 47,971 10,927 18,686 (9,832) 67,752 -------------- -------------- -------------- ------------- -------------- EXPENSES Operating expenses of rental properties 11,649 404 5,151 - 17,204 Interest expense 14,164 496 2,400 (588) 16,472 Depreciation 8,462 186 3,008 - 11,656 Amortization of debt costs 474 2 14 - 490 General and administrative 2,090 283 853 - 3,226 -------------- -------------- -------------- ------------- -------------- Total expenses 36,839 1,371 11,426 (588) 49,048 -------------- -------------- -------------- ------------- -------------- Equity in earnings (losses) of affiliates 9,547 - - (9,547) - -------------- -------------- -------------- ------------- -------------- Earnings from continuing operations before income taxes, minority interest, gain on sales of properties and discontinued operations 20,679 9,556 7,260 (18,791) 18,704 Income tax provision - (9) - - (9) Minority interest in operating partnership 142 - - (538) (396) Gain on sales of properties - - - - - -------------- -------------- -------------- ------------- -------------- Income from continuing operations before discontinued operations and extraordinary item 20,821 9,547 7,260 (19,329) 18,299 Income from discontinued operations (158) - 2,515 - 2,357 Extraordinary item - loss on extinguishment of debt (156) - - - (156) -------------- -------------- -------------- ------------- -------------- Net income $ 20,507 $ 9,547 $ 9,775 $ (19,329) $ 20,500 ============== ============== ============== ============= ============== Net cash flows provided by (used in) operating activities $ 19,932 $ 8,616 $ 10,795 $ (9,255) $ 30,088 ============== ============== ============== ============= ============== . Net cash flows (used in) provided by investing activities $ (6,474) $ (1,004) $ 1,757 $ - $ (5,721) ============== ============== ============== ============= ============== Net cash flows (used in) provided by financing activities $ (16,610) $ (7,686) $ (12,347) $ 9,819 $ (26,824) ============== ============== ============== ============= ==============
GUARANTORS ------------------------------ CONSOLIDATED IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY -------------- -------------- -------------- ------------- -------------- FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 REVENUES Income from rental properties $ 45,498 $ 945 $ 16,962 $ - $ 63,405 Interest Income 899 - 328 (855) 372 Interest on direct financing leases 335 - - - 335 Other income 327 8,888 293 (8,505) 1,003 -------------- -------------- -------------- ------------- -------------- Total revenues 47,059 9,833 17,583 (9,360) 65,115 -------------- -------------- -------------- ------------- -------------- EXPENSES Operating expenses of rental properties 11,088 218 4,503 - 15,809 Interest expense 15,517 479 2,044 (855) 17,185 Depreciation 8,312 153 2,774 - 11,239 Amortization of debt costs 469 2 6 - 477 General and administrative 2,223 170 762 4 3,159 -------------- -------------- -------------- ------------- -------------- Total expenses 37,609 1,022 10,089 (851) 47,869 -------------- -------------- -------------- ------------- -------------- Equity in earnings (losses) of affiliates 8,758 - - (8,762) (4) -------------- -------------- -------------- ------------- -------------- Earnings from continuing operations before income taxes, minority interest, gain on sales of properties and discontinued operations 18,208 8,811 7,494 (17,271) 17,242 Income tax provision - (53) - - (53) Minority interest in operating partnership 17 - - (422) (405) Gain on sales of properties 1,390 - 1,108 - 2,498 -------------- -------------- -------------- ------------- -------------- Income from continuing operations before discontinued operations 19,615 8,758 8,602 (17,693) 19,282 Income from discontinued operations (34) - 349 - 315 -------------- -------------- -------------- ------------- -------------- Net Income $ 19,581 $ 8,758 $ 8,951 $ (17,693) $ 19,597 ============== ============== ============== ============= ============== Net cash flows provided by (used in) operating activities $ 19,796 $ 7,738 $ 10,666 $ (9,743) $ 28,457 ============== ============== ============== ============= ============== Net cash flows (used in) provided by investing activities $ (2,481) $ (2,589) $ (1,843) $ 685 $ (6,228) ============== ============== ============== ============= ============== Net cash flows (used in) provided by financing activities $ (11,172) $ (4,918) $ (14,466) $ 9,058 $ (21,498) ============== ============== ============== ============= ==============
8 5. MORTGAGE NOTES PAYABLE On February 19, 2002, the Company assumed a non-recourse, secured loan totaling $4,800, in connection with the acquisition of Parkwest Crossing. The secured loan has a fixed interest rate of 8.1%. The loan is due and payable September 1, 2010 and the principal amortization is based on a thirty year amortization schedule. Costs associated with assuming the secured loan totaled $56 and is being amortized over the term of the loan. On March 1, 2002, the Company prepaid a 9.63% secured loan of approximately $5,198. The loan was due on June 1, 2002. On September 30, 2002, the Company prepaid a 7.65% secured loan of approximately $1,989. The loan was due on December 1, 2002. 6. 7.3% CONVERTIBLE SUBORDINATED DEBENTURES On January 24, 2002, the Company redeemed all of the outstanding 7.3% convertible subordinated debentures due August 15, 2003 at par plus accrued interest. Prior to redemption, 165 bonds were converted into 14,659 shares of common stock. The Company paid $23,110 to redeem the remaining bonds outstanding and recognized a $156 extraordinary loss on the extinguishment of unamortized debt costs. 7. SENIOR NOTES On January 23, 2002, pursuant to the Medium Term Note Program (the "MTN Program") established in 2001, the Company issued $25,000 of 7.84% senior unsecured notes due January 23, 2012. Interest on these senior notes is payable semi-annually on January 23 and July 23. Costs associated with the issuance of these senior notes totaled approximately $306 and are being amortized over the life of the notes. 8. COMMITMENTS AND CONTINGENCIES Certain of the Company's properties have environmental concerns that have been or are being addressed. The Company maintains limited insurance coverage for this type of environmental risk. Although no assurance can be given that Company properties will not be affected adversely in the future by environmental problems, the Company presently believes that there are no environmental matters that are reasonably likely to have a material adverse effect on the Company's financial position. 9. COMMON STOCK In May 2002, the Company completed an offering of 3,450,000 shares of common stock at $11.79 per share. Net proceeds to the Company were approximately $38,508. 10. DEFERRED COMPENSATION On May 30, 2002, 160,000 restricted shares of common stock were granted to certain Company officers as incentives for future services. The restricted shares vest proportionately over 4 years from the date of grant. The restricted shares were valued at the closing price of the Company's common stock on May 30, 2002 of $11.97. As of September 30, 2002, the Company had recognized compensation expense of approximately $64 related to this grant within the Condensed Consolidated Income Statements. 9 11. EARNINGS PER SHARE Basic earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period. The effects of the conversion of the operating partnership units held by the minority interest are dilutive for the three and nine months ended September 30, 2001 and have been included in the calculation of diluted earnings per share for those periods. For the three and nine months ended September 30, 2002, the effect of the operating partnership units have been excluded from the calculation as they are anti-dilutive for the period. For the three and nine months ended September 30, 2002 and 2001 the effects of the conversion of the 7.3% debentures have been excluded from the calculation of diluted earnings per share as they are anti-dilutive for those periods. The effects of certain stock options and non-vested restricted stock, using the treasury stock method, have been included in the calculation of diluted earnings per share, as they are dilutive for all periods presented.
Per Share Income Shares Amount ------- ------ ------- (In thousands except per share amounts) For the three months ended September 30, 2002 ---------------------------------------------------------- Basic net earnings available to shareholders $ 8,232 33,973 $ 0.24 ======= Options outstanding - 184 Restricted stock - 19 Diluted net earnings available to shareholders $ 8,232 34,176 $ 0.24 ======= ====== ======= For the three months ended September 30, 2001 ---------------------------------------------------------- Basic net earnings available to shareholders $ 5,716 30,388 $ 0.19 ======= Options outstanding - 106 Restricted stock - 29 Minority interest of unitholders in operating partnership 117 816 Diluted net earnings available to shareholders $ 5,833 31,339 $ 0.19 ======= ====== ======= For the nine months ended September 30, 2002 ---------------------------------------------------------- Basic net earnings available to shareholders $20,500 32,360 $ 0.63 ======= Options outstanding - 174 Restricted Stock - 17 Diluted net earnings available to shareholders $20,500 32,551 $ 0.63 ======= ====== ======= For the nine months ended September 30, 2001 ---------------------------------------------------------- Basic net earnings available to shareholders $19,597 30,294 $ 0.65 ======= Options outstanding - 78 Restricted stock - 3 Minority interest of unitholders in operating partnership 422 816 Diluted net earnings available to shareholders $20,019 31,191 $ 0.64 ======= ====== =======
12. SUBSEQUENT EVENTS On October 7, 2002, an agreement was signed for the sale of the Lexington Shopping Center in Lexington, VA to close on November 29, 2002. This unsolicited offer was from the single tenant occupying the center. The Company expects to recognize a gain on the sale of approximately $1,400. On October 28, 2002, Equity One, Inc. (NYSE: EQY) and the Company executed a merger agreement pursuant to which Equity One will acquire the Company. In connection with the merger, each of the Company's shareholders may elect to receive for each share of the Company's common stock either $12.15 in cash or 0.9 shares of Equity One common stock, or a combination thereof. The terms of the merger agreement further provide that the holders of no more than 50% of the Company's outstanding common stock may elect to receive cash. 10 Completion of the transaction, which is expected to take place in the first quarter of 2003, is subject to the approval of Equity One's and the Company's shareholders and other customary conditions. The boards of each of the Company and Equity One have unanimously approved the transaction. Additionally, holders of approximately 75% of Equity One's common stock and approximately 8% of the Company's common stock have agreed to vote their shares in favor of the transactions contemplated by the merger. On the 4th business day prior to the shareholder meetings, the Equity One holders may withdraw their voting support, and the Company's board may withdraw its merger recommendation, if Equity One's weighted average stock price for the 30 preceding trading days is less than $12.06 or less than $11.00 for the three preceding trading days. In addition, on the 4th business day prior to the shareholder meetings the Equity One holders may withdraw their voting support if the Company's weighted average stock price for the 30 preceding trading days is less than $10.935 or less than $9.935 for the three preceding trading days. The Company cannot make any assurances that the merger with Equity One will be consummated according to the terms set forth in the merger agreement, if at all. Either the Company or Equity One may terminate the merger agreement if the merger is not consummated by March 31, 2003. The Company will be required to pay a $15 million break-up fee to Equity One in the event that the Company enters into an agreement for a superior transaction or if, under certain circumstances, the Company's board withdraws its recommendation for the transaction. On October 31, 2002, Janet Herszenhorn, an individual stockholder of IRT, purporting to represent a class of holders of IRT common stock, filed a putative class action lawsuit in the Superior Court of Cobb County, Georgia, against IRT, Equity One and each of the directors of IRT. The complaint alleges, among other things, that IRT and its individual directors breached their fiduciary duties by agreeing to the merger between Equity One and IRT and that Equity One aided and abetted such breach. The complaint seeks injunctive relief, an order enjoining consummation of the merger and unspecified damages. On October 31, 2002, John Greaves, an individual stockholder of IRT, purporting to represent a class of holders of IRT common stock, also filed a putative class action lawsuit in the Superior Court of Cobb County, Georgia, against IRT, Equity One and each of the directors of IRT. The complaint alleges, among other things, that IRT and its individual directors breached their fiduciary duties by agreeing to the merger between Equity One and IRT and that Equity One aided and abetted such breach. The complaint seeks injunctive relief, an order enjoining consummation of the merger and unspecified damages. Although the defendants believe that these suits are without merit and intend to defend themselves vigorously, there can be no assurance that the pending litigation will not interfere with the consummation of the merger. IRT and Equity One do not expect that these suits will interfere with the scheduling of their respective shareholder meetings or the consummation of the merger, if approved. 11