-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JpfYXU3HkY0ZA1qojnxnOxZT35oU1wpBsGcM9Ygm7NKjU76PXtU8c7t2Y4kHKiSs zTDdncz/c6JpWryBb/t4pg== 0001042810-03-000137.txt : 20030919 0001042810-03-000137.hdr.sgml : 20030919 20030919154700 ACCESSION NUMBER: 0001042810-03-000137 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030918 ITEM INFORMATION: Other events FILED AS OF DATE: 20030919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITY ONE INC CENTRAL INDEX KEY: 0001042810 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 650563410 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13499 FILM NUMBER: 03902715 BUSINESS ADDRESS: STREET 1: 1696 N E MIAMI GARDENS DR SUITE 200 CITY: NORTH MIAMI BEACH STATE: FL ZIP: 33179 MAIL ADDRESS: STREET 1: 1696 N E MIAMI GARDENS DR SUITE 200 CITY: NORTH MIAMI BEACH STATE: FL ZIP: 33179 8-K 1 eqy8k_discops.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) March 5, 2003 EQUITY ONE, INC. ----------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Maryland ----------------------------------------------------------------------- (State or other jurisdiction of Incorporation) 001-13499 52-1794271 ------------------------- --------------------------------- (Commission File Number) (IRS Employer Identification No.) 1696 N.E. Miami Gardens Drive, North Miami Beach, FL 33179 ----------------------------------------------------------------------- (Address of principal executive office) (305) 947-1664 ----------------------------------------------------------------------- (Registrants Telephone Number, Including Area Code) N/A ----------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) EQUITY ONE, INC. FORM 8-K Index Page ------ Item 5. Other Events................................................... 1 Selected Consolidated Financial Data.................................... 1 Management Discussion and Analysis of Financial Condition and Results of Operations........................................ 4 Liquidity and Capital Resources.................................... 9 Mortgage Indebtedness.............................................. 12 Inflation and Recession Consideration.............................. 17 Quantitative and Qualitative Disclosures About Market Risk......... 17 Index To Financial Statements Independent Auditors' Report....................................... F-1 Consolidated Balance Sheets........................................ F-2 Consolidated Statements of Operations ............................. F-4 Consolidated Statements of Comprehensive Income ................... F-6 Consolidated Statements of Stockholders' Equity ................... F-7 Consolidated Statements of Cash Flows ............................. F-8 Notes to Consolidated Financial Statements......................... F-10 Signature Item 7. Exhibit 23.1 Consent of Independent Accountants ITEM 5. OTHER EVENTS Equity One, Inc. is filing this Form 8-K, which includes the consolidated financial statements of Equity One, Inc. and subsidiaries (the "Company") as of December 31, 2002 and 2001 and for each of the three years in the period ended December 31, 2002, and reflects the impact of the reclassification of discontinued operations of depreciable rental property disposed of during the six-months ended June 30, 2003 or designated as held for sale as of June 30, 2003, in accordance with the requirements of Statements of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long Lived Assets. This Form 8-K also includes a revised Management's Discussion and Analysis of Financial Condition and Results of Operations and revised Selected Financial Data. We adopted the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, effective January 1, 2002. This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. It also retains the basic provision for presenting discontinued operations in the statement of operations but broadened the scope to include a component of an entity rather than a segment of a business. Pursuant to the definition of a component of an entity in the pronouncement, the sale of depreciable rental property is now considered a discontinued operation. In a period in which a component of an entity either has been disposed of or is classified as held for sale, the income statements for current and prior periods shall report the results of operations of the component, including any gain or loss recognized, as discontinued operations. The results of operations of the following depreciable rental properties disposed of through June 30, 2003 or classified as held for sale as of June 30, 2003, for which the Company has no significant continuing involvement, are reflected as discontinued operations in the accompanying consolidated financial statements.
Square Gross Sales Property Location Date Sold Feet/Acres (ac) Price ------------------------- ---------------- ----------- ---------------- -------------- Eckerd Leesburg Leesburg, FL March 2003 12,739 $4,050 Eckerd Melbourne Melbourne, FL March 2003 10,908 2,715 Pompano (Lowe's) Pompano, FL April 2003 80,697 3,400 Oak Square Joint Venture Gainesville, FL June 2003 - 2,230 -------------- $12,395 ==============
SELECTED FINANCIAL DATA The selected consolidated operating data and balance sheet data set forth below have been derived from our consolidated financial statements, including the consolidated financial statements for the years ended December 31, 2002, 2001 and 2000 contained elsewhere herein. The consolidated financial statements as of and for the years ended December 31, 2002, 2001 and 2000 have been audited by Deloitte & Touche LLP, independent auditors. The data set forth below should be read in conjunction with the consolidated financial statements and related notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this annual report. 1
Year Ended December 31, ---------------------------------------------------------------------- 2002 2001 2000 1999 1998 ---------- ---------- ---------- ---------- ---------- (in thousands other than per share, percentage and ratio data) Statement of Operations Data:(1)(2) Total revenues................. $ 101,978 $ 79,360 $ 47,850 $ 26,035 $ 21,936 ---------- ---------- ---------- ---------- ---------- Property operating expenses...................... 30,023 23,171 12,645 6,702 5,611 Rental property depreciation and amortization.............. 13,533 11,440 6,517 3,396 2,798 Interest expense............... 22,368 20,770 12,348 4,851 4,667 Amortization of deferred financing fees................ 884 1,128 258 105 191 Litigation settlement.......... 2,067 - - - - General and administrative expenses....... 6,649 3,553 2,559 1,622 1,381 ---------- ---------- ---------- ---------- ---------- Total costs and expenses....... 75,524 60,062 34,327 16,676 14,648 ---------- ---------- ---------- ---------- ---------- Other income (expense)......... 1,968 (2,441) (1,755) 3,718 1,320 ---------- ---------- ---------- ---------- ---------- Income from continuing $28,422 $ 16,857 $11,768 $ 13,077 $ 8,600 operations.................... ========== ========== ========== ========== ========== Net income $39,934 $ 18,721 $12,555 $ 13,589 $ 9,065 ========== ========== =========== ========== ========== Basic earnings per share: Income from continuing operations.................... $ 0.87 $ 0.75 $ 0.82 $ 1.21 $ 0.96 ========== ========== ========== ========== ========== Net income.................... $ 1.22 $ 0.83 $ 0.88 $ 1.26 $ 1.01 ========== ========== ========== ========== ========== Diluted earnings per share: Income from continuing operations.................... $ 0.86 $ 0.75 $ 0.82 $ 1.21 $ 0.95 ========== ========== ========== ========== ========== Net income.................... $ 1.20 $ 0.83 $ 0.87 $ 1.26 $ 1.00 ========== ========== ========== ========== ========== (continued)
2
Year Ended December 31, ---------------------------------------------------------------------- 2002 2001 2000 1999 1998 ---------- ---------- ---------- ---------- ---------- (in thousands other than per share, percentage and ratio data) Balance Sheet Data: (2) Total rental properties, afteraccumulated depreciation................. $ 678,431 $ 627,687 $ 483,699 $204,919 $ 138,623 Total assets................... 730,069 668,536 542,817 212,497 152,955 Mortgage notes payable........... 332,143 345,047 280,396 97,752 67,145 Total liabilities................ 375,969 386,400 317,392 120,079 71,737 Minority interest in equity of consolidated subsidiary....... 3,869 3,869 3,875 989 - Minority interest in CEFUS....... - - 33,887 - - Shareholders' equity............. 350,231 278,267 187,663 90,440 81,218 Other Data:(2) Funds from operations(3)....... $ 45,487 $ 29,848 $ 19,266 $ 13,354 $ 10,598 Cash flows from: Operating activities......... 45,613 28,214 20,293 20,169 3,697 Investing activities......... (57,536) (42,435) (11,679) (62,239) (23,824) Financing activities......... 13,961 12,780 (6,694) 40,903 19,123 GLA (square feet) at end of period....................... 8,530 8,637 3,169 2,836 2,078 Occupancy at end of period..... 89% 86% 95% 95% 95% Dividends per share............ $ 1.08 $ 1.06 $ 1.10 $ 1.02 $ 1.00 (continued)
____________ (1) Restated to reflect the reporting of discontinued operations. (2) Prior year data has been reclassified to conform to the current periods' presentation. (3) We consider Funds From Operations ("FFO") as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), to be a widely used and appropriate supplemental measure of performance for equity REITs that provides a relevant basis for comparison among REITs. FFO, as defined by NAREIT, means net income determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"), excluding gains (losses) from sales of rental property, adjustments for extraordinary items and cumulative effects of accounting changes, plus real estate related depreciation and amortization, minority interest and after adjustments for unconsolidated partnerships and joint ventures. We present FFO to assist investors in analyzing our performance. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO (i) does not represent cash flows from operations as defined by GAAP, (ii) is not indicative of cash available to fund all cash flow needs and liquidity, including our ability to make distributions and (iii) should not be considered as an alternative to net income (determined in accordance with GAAP) for purposes of evaluating our operating performance. 3
Year Ended December 31, ----------------------------------------------------------------------- 2002 2001 2000 1999 1998 --------- --------- --------- --------- --------- (in thousands) Net Income........................... $ 39,934 $ 18,721 $12,555 $13,589 $9,065 Rental property depreciation and amortization...................... 13,810 11,665 6,534 3,483 2,845 Depreciation attributable to joint ventures.......................... 647 238 33 - - Deferred income tax (benefit) expenses - (374) 1,071 - - Put option expense................... - - - - 1,320 Minority interest in consolidated subsidiary........................ 101 99 - 96 - Interest on convertible partnership units............................. 259 259 20 - - (Gain) loss on sale of real estate... (9,264) 609 63 (3,814) (2,632) Minority interest in CEFUS share of FFO adjustments................ - (1,369) (1,010) - - ----------- ------------ ------------ ----------- ----------- FFO $ 45,487 $ 29,848 $19,266 $13,354 $10,598 =========== ============ ============ =========== ===========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The following should be read in conjunction with our consolidated financial statements, including the notes thereto, which are included elsewhere in this annual report. We operate as a real estate investment trust, or REIT, that principally acquires, renovates, develops and manages community and neighborhood shopping centers located predominately in high growth markets in the southern United States. Our shopping centers are primarily anchored by supermarkets or other necessity-oriented retailers such as drug stores or discount retail stores. As of December 31, 2002, our portfolio consisted of 88 properties, comprising 55 supermarket-anchored shopping centers, nine drug store-anchored shopping centers, 19 other retail-anchored shopping centers, one self-storage facility and four retail developments, as well as non-controlling interests in four unconsolidated joint ventures that own and operate commercial properties. Before giving effect to the IRT merger, as of December 31, 2002, our existing properties were located primarily in metropolitan areas of Florida and Texas, contained an aggregate of 8.5 million square feet of gross leasable area, and were 88.9% occupied based on gross leasable area; compared to 8.6 million square feet of gross leaseable area, and 86.2% occupied as of December 31, 2001. In September 2001, we acquired Centrefund Realty (U.S.) Corporation, or CEFUS, and United Investors Realty Trust, or UIRT. As a result of these acquisitions, we acquired 50 shopping centers and other retail properties which contained an aggregate of approximately 5.2 million square feet of gross leasable area. The acquisition of CEFUS has been accounted for on a push-down basis and partially in a manner similar to a pooling of interests. See the discussion of this policy in the section below entitled "Significant Accounting Policies and Estimates." The acquisition of UIRT was accounted for using the purchase method of accounting and the results of UIRT are included in our consolidated financial statements from the date we acquired it. During 2002, we sold an office building, an apartment complex, one 6.8-acre parcel of undeveloped land and six shopping centers that no longer meet our investment criteria. We also acquired six shopping centers, two free-standing drugstores and three parcels of undeveloped land totaling approximately 27.4 acres. 4 On February 12, 2003, we completed our acquisition of IRT Property Company, or IRT, by statutory merger. As a result of the merger, we acquired 92 properties encompassing approximately 10 million square feet of gross leaseable area and including 66 supermarket anchored shopping centers, two drug store anchored shopping center, 21 other retail-anchored shopping centers an industrial property and two development projects. In connection with the merger, we paid aggregate cash consideration of approximately $181 million, issued approximately 17.5 million shares of our common stock valued at approximately $232 million and assumed approximately $337 million of mortgages, unsecured indebtedness and other liabilities, including $150 million of IRT's senior unsecured indebtedness. The merger is being accounted for as a purchase as such term is used under accounting principles generally accepted in the United States of America. Accordingly, IRT's consolidated results of operations will be included in our consolidated results of operations from the closing of the merger and our consolidated financial statements for 2002 fiscal year and earlier periods reported upon in this annual report do not reflect the effects of the merger. As a result of our recently completed merger with IRT Property Company, our property portfolio, as of March 20, 2003, consists of 179 properties, comprising 122 supermarket-anchored shopping centers, nine drug store-anchored shopping centers, 41 other retail-anchored shopping centers, one self-storage facility, one industrial and five retail developments, as well as non-controlling interests in four unconsolidated joint ventures that own and operate commercial properties. These properties are located in 12 states in the southern United States and contain an aggregate of 18.5 million square feet of gross leasable area, or GLA. We intend to continue to expand our business by acquiring and developing additional neighborhood and community shopping centers in the near future primarily through a combination of individual property acquisitions, development of new properties, property portfolio purchases and acquisitions of other REITs and real estate companies. Critical Accounting Policies and Estimates Management's Discussion and Analysis of Financial Condition and Results of Operations provides additional information related to our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates and if necessary, adjusts its estimates and judgments, including those related to real estate and development assets, revenue recognition in conjunction with providing development, leasing and management services and equity in earnings of unconsolidated joint ventures. Management believes that the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of our consolidated financial statements. Real Estate Development Assets. We capitalize acquisition and construction costs, property taxes, interest and other miscellaneous costs that are directly identifiable with a project, from pre-acquisition until the time that construction is complete and the development is ready for its intended use, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 67 and SFAS No. 34. We allocate the capitalized project costs to the various components of the project based on the components' relative fair value. Our cost allocation method requires the use of management estimates regarding the fair market value of each project component. Management bases its estimates on current market appraisals, comparable sales, existing sale and purchase contracts, historical experience, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the fair market value of real estate assets. Actual results may differ from these estimates and anticipated returns on a project, as well as the gain or loss on disposition of the individual project components, could vary significantly from estimated amounts. Management reviews long-lived assets used in operations for impairment when there is an event or change in circumstances that indicates that the carrying amount of the asset may not be recoverable and the future undiscounted cash flows expected to be generated by the asset are less than its carrying amount. If such asset is considered to be impaired, we record impairment losses and reduce the carrying amount of the impaired asset to an amount that reflects the fair value of the asset at the time impairment is evident. Our impairment review process 5 relies on management's judgment regarding the indicators of impairment, the remaining life of the asset used to generate the asset's undiscounted cash flows, and the fair value of the asset at a particular point in time. Management uses historical experience, current market appraisals and various other assumptions to form the basis for making judgments about the impairment of real estate assets. Under different assumptions or conditions, the asset impairment analysis may yield a different outcome, which would alter the ultimate return on our assets, as well as the gain or loss on the eventual disposition of the asset. Revenue Recognition. We, as lessor, retain substantially all the risks and benefits of property ownership and account for our leases as operating leases. Revenue from percentage rent is recognized when tenants' reported sales have reached certain levels specified in the respective leases. Recoveries from tenants for real estate taxes and other operating expenses are recognized as revenue in the period when the applicable costs are incurred. Investments in Unconsolidated Joint Ventures. We do not consider ourselves to be in control of joint ventures when major business decisions require the approval of at least one other managing equity owner. Accordingly, we account for our joint ventures in which we do not retain unilateral control under the equity method. We calculate the equity in income or loss earned from our unconsolidated joint ventures based on each equity owners' economic ownership, which is estimated based on anticipated stabilized cash flows as they would be allocated to each equity owner based on how cash flow is distributed. Generally, under the terms of the respective joint venture agreements, net ordinary cash flow is distributed to each equity owner in accordance with such owner's equity ownership percentages. Accounting for Stock Options. We apply the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in measuring stock-based compensation, including options. Accordingly, no compensation expense has been recognized for options granted under our compensation plan as no grants were made at less than market value. In accordance with SFAS No. 123, Accounting for Stock-Based Compensation, compensation expense would be recognized based upon the fair value of the award at the grant date. Discontinued Operations We adopted the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, effective January 1, 2002. This standard addresses financial accounting and reporting for the impairment or disposal on long-lived assets. It also retained the basic provision for presenting discontinued operations in the income statement but broadened the scope to include a component of an entity rather than a segment of a business. Pursuant to the definition of a component of an entity in the pronouncement, the sale of depreciable rental property is now considered a discontinued operation. Accordingly, the results of operations of depreciable rental properties disposed of or classified as held for sale subsequent to January 1, 2003, for which we have no significant continuing involvement, are reflected as discontinued operations. The operations of the following addtional properties (disposed of during the six months ended June 30, 2003), have been reflected as discontinued operations in the consolidated financial statements for each of the three years in the period ended December 31, 2002, included herein:
Square Feet/ Gross Sales Property Location Date Sold Acres Price Gain on Sale - -------------------------- ----------------- ------------ ------------ ------------ ------------- 2003 Dispositions - -------------------------- Eckerd.................... Leesburg, FL March 12,739 $ 4,050 $ 326 Eckerd.................... Melbourne, FL March 10,908 2,715 177 ------------ ------------- First quarter .............................................................. 6,765 503 ------------ ------------- Pompano................... Pompano Beach, FL April 80,697 3,400 470 Oak Square Joint Venture.. Gainesville, FL June - 2,230 901 ------------ ------------- Second quarter .............................................................. 5,630 1,371 ------------ ------------- Total .................................................................. $ 12,395 $ 1,874 ============ =============
6 Results of Operations We derive substantially all of our revenues from rents received from tenants under existing leases on each of our properties. These revenues include fixed rents, recoveries of expenses that we have incurred and which we pass through to the individual tenants and percentage rents that are based on specified percentages of tenants' revenues, in each case as provided in the particular leases. Our primary cash expenses consist of our property operating expenses, which include real estate taxes, repairs and maintenance, payroll, insurance, utilities and other expenses, general and administrative expenses, which include payroll, office expenses, professional fees and other administrative expenses, and interest expense, primarily on mortgage indebtedness. In addition, we incur substantial non-cash charges for depreciation and amortization on our properties. We also capitalize certain expenses, such as taxes and interest, incurred in respect of property under development or redevelopment until the property is ready for its intended use. Year Ended December 31, 2002 Compared To Year Ended December 31, 2001 Total revenues increased by $22.6 million, or 28.5%, to $102.0 million for the year ended December 31, 2002 from $79.4 million in 2001. This increase was primarily due to the increase in revenue of $16.2 million relating to the properties acquired in the UIRT transaction in September 2001, an increase of $4.2 million as a result of the 2002 acquisitions of six shopping centers and two drugstores, and an increase in same property revenues of $1.2 million, or 3.5%, to $36.3 million for the year ended December 31, 2002 from $34.6 million for the year ended December 31, 2001 primarily as a result of higher rental rates and occupancy. Revenues also increased for termination fees of $1.2 million and an increase in other income of $762,000. These increases were partially offset by a decrease in third party management and leasing fees of $649,000 and a decrease in investment income of $298,000. Property operating expenses increased by $6.8 million, or 29.6%, to $30.0 million for the year ended December 31, 2002 from $23.2 million for 2001. This increase was primarily due to an increase in property operating expenses of $3.1 million relating to properties acquired in the UIRT transaction. Operating expenses also increased by $1.3 million as a result of the property acquisitions mentioned above, an increase in same property operating expenses of $801,000, or 8.3%, to $10.4 million for the year ended December 31, 2002 from $9.6 million for the year ended December 31, 2001 as a result of higher operating costs. Included in property operating expenses, property management expenses increased by $1.6 million for the year ended December 31, 2002 compared to the year ended December 31, 2001 as a result of managing a larger portfolio of properties, of which $833,000 was due to an increase in salaries and benefits. Interest expense increased by $1.6 million, or 7.7%, to $22.4 million for the year ended December 31, 2002 from $20.8 million for 2001. Amortization of deferred financing fees decreased by $244,000, or 21.6% to $884,000 for the year ended December 31, 2002 from $1.1 million for 2001. The net increase in interest expense was primarily due to an increase in interest expense of $3.5 million relating to the assumption of mortgage loans in the acquisition of UIRT. In addition, interest increased $1.2 million from the closing of four new loans and increased $503,000 from higher average balances on the revolving credit facilities. These increases were partially offset by the repayment of nine loans which reduced interest by $1.9 million, an increase in capitalized interest of $273,000 related to increased development activity, lower interest rates on the variable rate mortgages which reduced interest incurred by $1.4 million and reduced interest on all other loans of $30,000. Rental property depreciation and amortization increased by $2.1 million, or 18.3%, to $13.5 million for the year ended December 31, 2002 from $11.4 million for 2001. This increase was primarily due to an increase in depreciation and amortization of $1.4 million relating to the acquisition of UIRT and a $700,000 increase related to property acquisitions and capital improvements. General and administrative expenses increased by $3.1 million, or 87.1%, to $6.6 million for the year ended December 31, 2002 from $3.5 million for 2001. The primary reason for the increase in general and administrative expenses relates to our growth, as reflected by an increase in compensation and employee related expenses of $1.8 million, an increase in professional fees of $332,000, the write-off of previously capitalized pre-acquisition due diligence costs for projects that did not materialize totaling $695,000, an increase in public relations costs of $223,000 and an increase in all other expenses of $46,000. 7 During 2001, we recorded the following related to the acquisition of CEFUS: minority interest of $1.6 million, a loss on sale of real estate of $609,000 and a current and deferred income tax benefit of $967,000 which we no longer record because CEFUS operated as a C corporation rather than as a REIT. In addition, we prepaid a mortgage and incurred a loss on early debt extinguishment of $1.5 million. During 2002, we settled an outstanding mortgage note payable at less than fair value and recognized a gain on early debt extinguishment of $1.5 million. In addition, we settled a lawsuit which was related to one of the properties acquired from UIRT for $2.1 million, including legal fees. All other income/loss items primarily relate to earnings from joint ventures. Operating income from properties sold is reflected as discontinued operations for the years ended December 31, 2002 and 2001. The income was $2.2 million for 2002 and $1.9 million for 2001. The sale of these properties produced a gain of $9.3 million. As a result of the foregoing, net income increased by $21.2 million, or 113.3%, to $39.9 million for the year ended December 31, 2002 compared to $18.7 million for 2001. Year Ended December 31, 2001 Compared To Year Ended December 31, 2000 Total revenues increased by $31.5 million, or 65.9%, to $79.4 million for the year ended December 31, 2001 from $47.9 million in 2000. This increase was primarily due to an increase in revenues of $21.5 million resulting from the consolidation of the results of CEFUS for all of 2001 compared to the period from August 18, 2000 to December 31, 2000 for the prior year and an additional $6.0 million of revenues from the acquisition of UIRT in September 2001. In addition, revenues increased by $2.5 million for the year ended December 31, 2001 compared to 2000 as a result of our acquisition of two shopping centers and the completion of development projects in 2001 and the latter part of 2000. Same property revenues increased by $700,000, or 2.2%, to $33.5 million for the year ended December 31, 2001 from $32.1 million for the year ended December 31, 2000 as a result of higher rental rates and the completion of additions to some of our properties. Finally, investment revenue increased by $347,000 and management fees, consisting primarily of real estate services provided to third parties, increased by $567,000 for the year ended December 31, 2001 compared to the year ended December 31, 2000, partially offset by reduction of termination fees of $142,000. Property operating expenses increased by $10.6 million, or 83.2%, to $23.2 million for the year ended December 31, 2001 from $12.6 million for the year ended December 31, 2000. The increase in property operating expenses was primarily the result of $6.5 million of increased operating expenses from the consolidation of CEFUS for all of 2001 compared to the shorter period in 2000 and $1.8 million of operating expenses for UIRT from its acquisition date. In addition, operating expenses increased by $401,000 for the year ended December 31, 2001 compared to the year ended December 31, 2000 as a result of our acquisition of two shopping centers and the completion of development projects in 2001 and the latter part of 2000. Same property operating expenses increased by $300,000, or 3.6%, to $8.7 million for the year ended December 31, 2001 from $8.4 million for the year ended December 31, 2000 as a result of higher operating costs and the completion of additions to some of our properties. Finally, property management expenses increased by $1.6 million for the year ended December 31, 2001 compared to the year ended December 31, 2000 as a result of managing a substantially larger portfolio of properties, of which $1.1 million was due to an increase in employee salaries and benefits. Interest expense increased by $8.5 million, or 68.2%, to $20.8 million for the year ended December 31, 2001 from $12.3 million for the year ended December 31, 2000. Amortization of deferred financing fees increased by $870,000, or 337.2%, to $1.1 million for the year ended December 31, 2001 from $258,000 in 2001. The net increase in interest expense was primarily due to an increase in interest expense of $6.2 million on indebtedness assumed in connection with the acquisition of CEFUS and $1.2 million of interest expense on indebtedness assumed in connection with the acquisition of UIRT. In addition, interest expense increased for the year ended December 31, 2001 as compared to the year ended December 31, 2000 as a result of increased mortgage interest of $1.3 million from the assumption of two loans, the closing of two new loans and an increase of $218,000 in interest on convertible partnership units and decreased capitalized interest expense of $79,000. These increased interest expenses were partially offset by reductions of $644,000 due to decreased borrowing under our revolving credit facility with City National Bank of Florida. Rental property depreciation and amortization expense increased by $4.9 million, or 75.5%, to $11.4 million for the year ended December 31, 2001, from $6.5 million for the year ended December 31, 2000. The 8 increase resulted primarily from depreciation and amortization expenses attributable to CEFUS and UIRT in the amounts of $3.4 million and $781,000, respectively, and $683,000 attributable to our acquisition of new properties and completion of new development. General and administrative expenses increased by $994,000, or 38.8%, to $3.6 million for the year ended December 31, 2001 from $2.6 million for the year ended December 31, 2000. The increase was primarily the product of our growth. Included in these expenses, compensation expenses increased by $245,000, directors' fees increased by $136,000, professional fees increased by $134,000, general and administrative costs increased by $76,000, and all other costs increased $403,000. Minority interest in CEFUS increased by $1.0 million to $1.6 million for the year ended December 31, 2001 from $603,000 for the year ended December 31, 2000. This increase was a result of the consolidation of CEFUS for the period from January 1 to September 19, 2001, subject to a minority interest as described above, compared to the shorter period in 2000. In addition, we recorded loss on extinguishment of debt of $1.5 million for the year ended December 31, 2001 as a result of the payment of a prepayment penalty in connection with the prepayment of a loan secured by one of our properties. The increase in equity in income of unconsolidated subsidiaries of $489,000 for the year ended December 31, 2001 relates primarily to our interest in the four joint ventures acquired in the CEFUS acquisition and is attributable to the inclusion of CEFUS's results for the full year in 2001, as well as commencement of operations at those properties upon completion of development. Operating income from properties sold is reflected as discontinued operations for the years ended December 31, 2001 and 2000. The income was $1.9 million for 2001 and $787,000 in 2000. As a result of the foregoing, net income increased by $6.2 million, or 49.1%, to $18.7 million for the year ended December 31, 2001 compared to $12.5 million for the year ended December 31, 2000. Liquidity and Capital Resources We anticipate that cash generated from operating activities will provide the necessary funds on a short-term basis for our operating expenses, interest expense, scheduled payments on outstanding indebtedness, recurring capital expenditures necessary to properly maintain the shopping centers and distributions to stockholders. During 2002, we generated cash from operations of $45.6 million, reflecting our net income of $39.9 million plus an add back for non-cash deductions to income, the most significant of which were depreciation and amortization of $14.9 million, partially offset by gain on debt extinguishment of $1.5 million and a gain on the disposal of real estate of $9.3 million. In addition, operating cash benefited from, among other items, a $4.1 million increase in accounts payable and accrued expenses and $943,000 of other liabilities, partially offset by an increase in accounts and other receivables and other assets of $3.4 million. We used $57.5 million of cash in investing activities, reflecting $85.5 million used for acquisitions of properties, payment of leasing costs of $1.7 million and escrowed funds on the sale of properties to utilize tax deferred exchanges for $4.2 million. These uses were partially offset by proceeds from the disposal of properties of $27.2 million, receipt of $871,000 in distributions received from joint ventures, proceeds from repayments of notes receivable of $5.1 million and $762,000 of proceeds from the sale of securities available for sale. We generated $14.0 million in cash from financing activities reflecting $66.5 million in net proceeds from issuance of common stock. This was partially offset by $11.2 million in repayments in excess of mortgage note borrowings, $4.4 million in net repayments on revolving credit facilities, $1.1 million in payments of financing fees and $35.8 million in cash dividends to shareholders. During 2002, we incurred cash payments for interest, net of capitalized interest, of $22.8 million. Capitalized interest, which includes interest for development properties and additions and renovations to rental properties, totaled $2.4 million. We expect to meet long-term liquidity requirements for maturing debt, non-recurring capital expenditures and acquisition, renovation and development of shopping centers from excess cash generated from operating 9 activities, working capital reserves, additional borrowings under our existing credit facilities, long-term secured and unsecured indebtedness and through the issuance of additional equity or debt securities in the private or public markets. Our total mortgage notes payable at December 31, 2002 and 2001 consisted of the following:
(in thousands) Mortgage Notes Payable 2002 2001 --------------------------------------------------------- -------------- -------------- Fixed rate mortgage loans................................. $ 307,508 $ 296,887 Variable rate mortgage loans.............................. 24,635 48,160 -------------- -------------- Total mortgage notes payable........................ $ 332,143 $ 345,047 ============== ==============
Each of these loans is secured by a mortgage on one or more of our properties. As of December 31, 2002, the percentage of the total real estate cost of our properties that was encumbered by debt was 49.4%. For a more complete description of our mortgage indebtedness, see "Mortgage Indebtedness" below. The merger with IRT has increased our outstanding indebtedness, as of December 31, 2002, as follows: o Mortgage notes payable of approximately $136 million, bearing interest at an effective rate of 7.53% o Senior unsecured debt of $150 million, bearing interest at rates ranging from 7.25% to 7.84% o Revolving credit facility of $15 million, bearing interest at LIBOR plus 1.05% Certain of the mortgages on the merged company properties involving an aggregate principal amount of approximately $171 million contain prohibitions on transfers of ownership which may have been violated by our previous issuances of common stock or in connection with past acquisitions and may be violated by transactions involving our capital stock in the future. If a violation were established, it could serve as a basis for a lender to accelerate amounts due under the affected mortgage. We are in the process of obtaining the necessary consents from the lenders. Based on discussions with various lenders to date, current credit market conditions and other factors, we believe that such consents will be obtained or that the mortgages will not be accelerated. Accordingly, we believe that the ultimate outcome of this matter will not have a material adverse impact on our results of operations, financial condition or cash flows. On February 7, 2003 we entered into a $340 million unsecured revolving credit facility with a group of banks for which Wells Fargo Bank, National Association is the sole lead arranger and administrative agent. This facility bears interest at our option at (i) LIBOR plus 0.65% to 1.35%, depending on the credit ratings of our senior unsecured long term indebtedness or (ii) at the greater of (x) Wells Fargo's prime rate and (y) the Federal Funds Rate plus 0.5%. The facility also includes a competitive bid option which allows us to conduct auctions among the participating banks for borrowings in an amount not to exceed $150 million, a $25 million swing line facility for short term borrowings and a $20 million letter of credit commitment. The facility expires February 12, 2006 with a one year extension option. In addition, the facility contains customary covenants, including financial covenants regarding debt levels, total liabilities, interest coverage, EBITDA levels, unencumbered properties, permitted investments and others. The facility also prohibits stockholder distributions in excess of 95% of funds from operations calculated at the end of each fiscal quarter for the four fiscal quarters then ending. Notwithstanding this limitation, we can make stockholder distributions to avoid income taxes on asset sales. If a default under the facility exists, our ability to pay dividends would be limited to the amount necessary to maintain our status as a REIT unless the default is a payment default or bankruptcy event in which case we would be prohibited from paying any dividends. The facility is guaranteed by several of our wholly-owned subsidiaries. On February 12, 2003, the date of the IRT merger, we borrowed $175.0 million to fund $94.9 million for the cash portion of the IRT merger with the remaining funds prepaying a variable rate mortgage facility, both the Bank Leumi and our prior secured Wells Fargo revolving credit facilities, various other mortgage loans and transaction costs related to the IRT merger. 10 As a result of our merger with IRT, we assumed IRT's obligations relating to $150 million principal amount of Senior Notes, bearing interest at fixed annual interest rates ranging from 7.25% to 7.84% and maturing between 2006 and 2012. One of the notes interest rate is dependent on our senior unsecured debt rating. These notes have also been guaranteed by several of our wholly-owned subsidiaries. We have debt and other liabilities outstanding after the merger with IRT in the aggregate amount of approximately $890 million. As of December 31, 2002, we had a $10.4 million credit agreement secured by four properties with City National Bank of Florida. In February 2003, this credit agreement was restructured to a $5 million unsecured credit agreement in connection with the execution of the new Wells Fargo facility. As of December 31, 2002, we had $30.0 million revolving line of credit with Bank Leumi Le-Israel B.M. In February 2003, this credit facility was retired with execution of the new Wells Fargo facility. As of December 31, 2002, we had a variable-rate revolving credit facility with Wells Fargo under which we could borrow up to $41.3 million against a borrowing base of six properties pledged to secure the facility. In February 2003, this credit facility was retired with the execution of the new Wells Fargo facility. As of December 31, 2002, we had accounts payable and accrued expenses outstanding of approximately $15 million relating to increased operating costs, real estate taxes and construction payables. Our debt level could subject us to various risks, including the risk that our cash flow will be insufficient to meet required payments of principal and interest, and the risk that the resulting reduced financial flexibility could inhibit our ability to develop or improve our rental properties, withstand downturns in our rental income or take advantage of business opportunities. In addition, because we currently anticipate that only a small portion of the principal of our indebtedness will be repaid prior to maturity, it is expected that it will be necessary to refinance the majority of our debt. Accordingly, there is a risk that such indebtedness will not be able to be refinanced or that the terms of any refinancing will not be as favorable as the terms of our current indebtedness. We have entered into a ground lease with a drug store and expect to commence development in early 2003 of a 25,000 square foot drug-store anchored shopping center on a parcel of land we already own at the northeast corner of S.W. 147th Avenue and Coral Way in Miami-Dade County, Florida at a total cost of $2.0 million. Development of phase three of the Shops at Skylake, totaling approximately 120,000 square feet is anticipated to be completed in late 2003 at an estimated cost of approximately $6.2 million. Development of 20,000 square feet of retail space on our four acre site at Port St. Lucie, Florida, adjacent to our Cashmere Corners retail Center, at a cost of $1.8 million is expected to be completed in late 2003. In addition, as of December 31, 2002, in order to complete the construction of other in progress development projects, we have committed to fund construction costs of $11.5 million. These obligations, comprise principally of construction contracts and are generally due as the work is performed. We expect to fund the costs of the development projects from cash flow from operations, borrowings under our various revolving credit facilities and other sources of cash. We believe, based on currently proposed plans and assumptions relating to our operations, that our existing financial arrangements, together with cash flows from operations, will be sufficient to satisfy our cash requirements for a period of at least twelve months. In the event that our plans change, our assumptions change or prove to be inaccurate or cash flows from operations or amounts available under existing financing arrangements prove to be insufficient to fund our expansion and development efforts or to the extent we discover suitable acquisition targets the purchase price of which exceed our existing liquidity, we would be required to seek additional sources of financing. There can be no assurance that any additional financing will be available on acceptable terms, or at all and any equity financing could be dilutive to existing shareholders. If adequate funds are not available, our business operations could be materially adversely affected. We believe that we qualify and intend to qualify as a REIT under the Internal Revenue Code. As a REIT, we are allowed to reduce taxable income by all or a portion of our distributions to stockholders. As distributions have exceeded taxable income, no provision for federal income taxes has been made. While we intend to continue to pay dividends to our stockholders, we also will reserve such amounts of cash flow, as we consider necessary for the proper maintenance and improvement of our real estate, while still maintaining our qualification as a REIT. 11 Mortgage Indebtedness The following table sets forth certain information regarding Equity One's mortgage indebtedness related to our properties as of December 31, 2002:
Balance at Balance December 31, Interest Due at 2002 Rate(1) Maturity Date Maturity ------------ ---------- ----------------- ------------ (in thousands) Fixed Rate Mortgage Debt Lantana $ 3,816 6.950% March 2005 $ 3,498 Benchmark 3,393 9.250% July 2005 3,170 Sterling Plaza 4,083 8.750% September 2005 3,794 Townsend Square 4,922 8.500% October 2005 4,703 Green Oaks 3,100 8.375% November 2005 2,861 Melbourne Plaza 1,792 8.375% November 2005 1,654 Oak Hill(*) 2,016 7.625% January 2006 1,713 Walden Woods 2,492 7.875% August 2006 2,071 Big Curve 5,552 9.190% October 2006 5,059 Highland Square 4,135 8.870% December 2006 3,743 Park Northern 2,377 8.370% December 2006 1,963 University Mall 12,680 8.440% December 2006 11,922 Rosemeade 3,244 8.295% December 2007 2,864 Colony Plaza 3,053 7.540% January 2008 2,834 Parkwood(2) 6,277 7.280% January 2008 5,805 Richwood(2) 3,234 7.280% January 2008 2,990 Commonwealth 2,864 7.000% February 2008 2,204 Mariners Crossing 3,425 7.080% March 2008 3,154 Pine Island/Ridge Plaza 25,274 6.910% July 2008 23,104 Forestwood 7,425 5.070% January 2009 6,406 Shoppes of Northport 4,201 6.650% February 2009 3,526 Prosperity Centre 6,730 7.875% March 2009 4,137 Shoppes of Ibis 6,031 6.730% September 2009 4,680 Park Promenade 6,360 8.100% February 2010 5,833 Skipper Palms 3,585 8.625% March 2010 3,318 Jonathan's Landing 2,932 8.050% May 2010 2,639 Bluff's Square 10,162 8.740% June 2010 9,401 Kirkman Shoppes 9,596 8.740% June 2010 8,878 Ross Plaza 6,693 8.740% June 2010 6,192 Boynton Plaza 7,561 8.030% July 2010 6,902 Pointe Royale 4,763 7.950% July 2010 2,502 Plymouth Park East 1(3) 154 8.250% August 2010 113 Plymouth Park East 2(3) 463 8.250% August 2010 340 Plymouth Park North(3) 8,260 8.250% August 2010 6,076 Plymouth Park South(3) 617 8.250% August 2010 454 Plymouth Park Story North(3) 380 8.250% August 2010 279 Plymouth Park West 2,468 8.250% August 2010 1,816 Shops at Skylake 14,964 7.650% August 2010 11,644 Minyard's 2,546 8.320% November 2010 2,175 Forest Village 4,533 7.270% April 2011 4,039 Boca Village 8,382 7.200% May 2011 7,466 Sawgrass Promenade 8,382 7.200% May 2011 7,466 Plaza del Rey(*) 2,202 8.125% September 2011 - Lake Mary 24,763 7.250% November 2011 21,973 Lake St. Charles 3,911 7.130% November 2011 3,461
12
Marco Island 8,875 6.700% January 2012 7,150 Cashmere 5,343 5.880% November 2012 4,084 Eastwood 6,366 5.880% November 2012 4,866 Meadows 6,690 5,870% November 2012 5,113 Summerlin Square 4,156 6.750% February 2014 - Bird Ludlum 10,857 7.680% February 2015 - West Lake(*) 4,979 7.875% June 2016 130 Atlantic Village(*) 4,449 6.850% November 2018 - ----------- ---------- --------------------- Total Fixed Rate Mortgage Debt (53 loans) 307,508 7.52% 6.37 years ========== ===================== (wtd-avg. rate) (wtd-avg. maturity) Variable Rate Mortgage Debt Comerica/4 properties(4)(*) 24,635 LIBOR+150 February 2004 $ 24,635 ----------- Total Mortgage Notes Payable 332,143 ----------- Variable Rate Revolving Credit Facilities City National Bank(5) - LIBOR+225 May 2003 - Bank Leumi(6)(*) - LIBOR+125 March 2003 - Wells Fargo(7)(*) 23,000 LIBOR+125 February 2005 $ 23,000 ----------- Total Variable Rate Revolving Credit Facilities 23,000 ----------- Total Debt $ 355,143 ===========
_______________ (1) The rate in effect on December 31, 2002. (2) The mortgage balances for Parkwood and Richwood represent the future minimum lease payments (net of imputed interest) attributable to lease payments on these two properties, both of which are owned pursuant to capital lease obligations. (3) All of the Plymouth loans are with Sun Life of Canada. In the case of Plymouth Park North and East, the collateral has been split into two parts; hence the two individual loans. (4) This Comerica facility is secured by Grogans Mill ($7,995), Steeplechase ($6,305), Mission Bend ($6,370) and Beechcrest ($3,965). The floating interest rate is LIBOR plus 150 basis points. (*) (5) This facility was authorized to $10,403 as of December 31, 2002, and was secured by Mandarin Mini-Storage, Skylake Phase III land, Beauclerc Village and East Bay Plaza. We have two, 364-day extension options for an extended maturity of May, 2005. This facility was restructured to a $5 million unsecured credit facility upon the execution of the $340 million credit facility with Wells Fargo. (6) The Bank Leumi facility is secured by negative pledges on Ryanwood, Pompano, Southwest Walgreens, Bandera, Market at First Colony and Mason Park. (*) (7) This facility is secured by Blanco Village, Oakbrook, Mandarin Landing, Hedwig, Bissonet and Spring Shadows. The rate on the facility is LIBOR plus a range of 115 to 150 depending on overall leverage. As of December 31, 2002, the rate was LIBOR+125.(*) (*) These loans were repaid with proceeds from the equity private placement and new credit facility with Wells Fargo. 13 Our mortgage and outstanding revolving credit facilities indebtedness outstanding at December 31, 2002 will require approximate balloon and scheduled principal payments as follows:
Schedule Year Due Amortization Balloon Payments Total --------------- ----------------- -------------------- --------------- 2003 $ 6,288 $ - $ 6,288 2004 6,762 24,635 31,397 2005 7,040 42,680 49,720 2006 6,978 26,470 33,448 2007 6,855 2,864 9,719 2008 6,592 40,104 46,696 2009 5,977 18,749 24,726 2010 5,011 68,564 73,575 2011 3,716 44,410 48,126 2012 2,790 21,212 24,002 Thereafter 7,316 130 7,446 ----------------- -------------------- ---------------- Total $65,325 $289,818 $ 355,143 ================= ==================== ================
The following table sets forth certain information regarding indebtedness related to our joint venture properties as of December 31, 2002:
Joint Venture Debt Balance at Balance Due December 31, 2002 Interest Rate Maturity Date at Maturity -------------------- ------------- ------------- ----------- Joint Venture Debt Park Place* $15,000 LIBOR+1.40% April 2005 $15,000 City Centre 12,983 8.54% April 2010 11,989 Oaks Square 16,642 7.63% December 2010 15,011 ________________________ * Guaranteed by Equity One.
The following table sets forth certain information regarding IRT's mortgage indebtedness related to the properties of IRT as of December 31, 2002:
Balance at Interest December 31, Description Rate Maturity Date 2002 - ----------------------------------- ----------- ------------------- ---------------- Fixed Rate Debt (in thousands) Mortgage notes payable: June, 2005 Elmwood Oaks 8.8% May, 2011 $ 7,500 Shoppes at Lago Mar 7.50% April, 2006 5,293 North Village Center 8.13% March, 2009 1,677 Tamarac Town Square 9.19% October, 2009 6,284 Spalding Village 8.19% September, 2010 10,820 Parkwest Crossing 8.10% September, 2010 4,769 Charlotte Square 9.19% February, 2011 3,673 Pine Ridge Square 7.02% May, 2011 7,431 Heritage Walk 7.25% May, 2011 7,101
14
MacLand Pointe 7.25% May, 2011 5,918 Riverside Square 9.19% March, 2012 7,789 Lutz Lake 6.28% December, 2012 7,500 Village of Northshore 9.00% July, 2013 4,411 Treasure Coast 8.00% April, 2015 5,055 Shoppes of Silverlakes 7.75% July, 2015 2,924 Grassland Crossing 7.87% December, 2016 6,130 Mableton Crossing 6.85% August, 2018 4,245 Douglas Commons 6.50% February, 2024 5,220 Paulding Commons 6.50% February, 2024 6,805 Wesley Chapel Crossing 6.50% February, 2024 3,496 Fairview Oaks 6.50% February, 2024 4,940 Madison Centre 6.50% February, 2024 4,008 Chastain Square 6.50% February, 2024 4,008 Daniel Village 6.50% February, 2024 4,381 Siegen Village 6.50% February, 2024 4,428 Interest Premium - - 1,182 --------------- Mortgage notes payable 7.53% (2) 136,988 Other Fixed Rate Debt: 7.84% Senior unsecured notes 7.84% January, 2012 25,000 7.77% Senior unsecured notes 7.77% April, 2006 50,000 7.25% Senior unsecured notes 7.25% August, 2007 75,000 --------------- Total Fixed Rate Debt 7.49% 286,988 Variable Rate Debt Revolving Credit Facility (LIBOR + 1.05%) 2.71% (2) May, 2005 15,000 --------------- Total debt 7.26% (2) $301,988 ===============
(1) Although the Company owns a 49.5% interest in North Village Center, 100% of the mortgage is recorded for financial reporting purposes. (2) Average rates on outstanding loans as of December 31, 2002 where indicated. IRT's mortgage and outstanding revolving credit facilities indebtedness outstanding at December 31, 2002 will require approximate balloon and scheduled principal payments as follows:
Scheduled Balloon Year Due: Amortization Payments Total ------------------------- ----------------- ---------------- ---------------- 2003 $2,965 - $ 2,965 2004 3,192 - 3,192 2005 3,448 $22,500 25,948 2006 3,586 54,797 58,383 2007 3,773 75,000 78,773 Thereafter 50,715 82,012 132,727 ----------------- ---------------- ---------------- $67,679 $234,309 $301,988 ================= ================ ================
We may not have sufficient funds on hand to repay these balloon amounts at maturity. Therefore, we expect to refinance this indebtedness either through additional mortgage financing secured by individual properties or groups of properties, by unsecured private or public debt offerings or by additional equity offerings. Our results of operations could be affected if the cost of new debt is greater or lesser than existing debt. If new debt is not available, our business would be adversely affected. 15 New Accounting Standards In June 2001, the Financial Accounting Standards Board ("FASB") approved the issuance of SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. These standards established accounting and reporting for business combinations. SFAS No. 141 requires all business combinations entered into subsequent to June 30, 2001 to be accounted for using the purchase method of accounting. SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for impairment at least annually. The Company adopted SFAS No. 142 on January 1, 2002 and no longer amortizes goodwill. The Company has performed an impairment test of the goodwill and other intangible assets as of January 1, 2002 and November 30, 2002 and has determined that the assets are not impaired. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes, but does not replace, SFAS No. 121, Accounting for the Impairment of Long-Lived Assets to be Disposed Of, as well as other earlier related pronouncements, either in whole or in part. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years, although earlier application is encouraged. The Company adopted SFAS No. 144 effective January 1, 2002 and has reflected the operations of property held for sale and disposed of properties as discontinued operations, along with any gain on dispositions. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections which rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. It also rescinds FASB Statement No. 44, Accounting for Intangible Assets or Motor Carriers, and amends FASB Statement No. 13, Accounting for Leases. Finally SFAS No. 145 amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions related to the rescission of FASB Statement No. 4 and its amendment Statement No. 64 are effective for fiscal years beginning after May 15, 2002. The Company adopted SFAS No. 145 as of July 2002, and no longer reflects gains (losses) from extinguishment of debt as extra ordinary income. In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This Statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management's commitment to an exit plan, which is generally before an actual liability has been incurred. Adoption of this Statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. In November 2002, FASB issued FASB Interpretation No. 45 ("FIN 45"), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Other's (an interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34). FIN 45 clarifies the requirements of FASB Statement No. 5, Accounting for Contingencies. It requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee regardless of whether or not the guarantor receives separate identifiable consideration (i.e., a premium). We have adopted the new disclosure requirements, which are effective beginning with 2002 calendar year-end financials. FIN 45's provisions for initial recognition and measurement are effective on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 is not expected to have a material impact on our financial statements. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure. This Statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirement of SFAS No. 123, Accounting for Stock-Based Compensation, to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation, description of the transition method utilized and the effect of the method used on reported results. SFAS No. 148 is effective for financial statements issued for fiscal years ending after December 15, 2002 and, as it relates to Opinion No. 28, Interim Financial Reporting, the interim periods beginning after December 15, 2002, although earlier application is encouraged. The Company applies the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in measuring stock-based 16 compensation. The Company has adopted the disclosure requirements of SFAS No. 148 in its financial statements for 2002. In January 2003, FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"), an interpretation of ABR 51. FIN 46 provides guidance on identifying entities for which control is achieved through means other than through voting rights, variable interest entities ("VIE"), and how to determine when and which business enterprises should consolidate the VIE. In addition, FIN 46 requires both the primary beneficiary and all other enterprises with a significant variable interest in a VIE to make additional disclosures. The transitional disclosure requirements will take effect almost immediately and are required for all financial statements initially issued after January 31, 2003. The consolidated provisions of FIN 46 are effective immediately for variable interests in VIEs created after January 31, 2003. For variable interests in VIEs created before February 1, 2003, the provisions of FIN 46 are effective for the first interim period beginning after June 15, 2003. The adoption of FIN 46 is not expected to have a material impact on our financial statements. Environmental Matters We are subject to numerous environmental laws and regulations. The operation of dry cleaning facilities at our shopping centers is the principal environmental concern. We believe that the tenants who operate these facilities do so in accordance with current laws and regulations and we have established procedures to monitor their operations. Additionally, we use all legal means to cause tenants to remove dry cleaning plants from our shopping centers. Where available, we have applied and been accepted into state sponsored environmental programs. We have also placed environmental insurance on specific properties with known contamination in order to mitigate our environmental risk. We believe that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity or operations. Inflation and Recession Considerations Most of our leases contain provisions designed to partially mitigate the adverse impact of inflation. Most of our leases require the tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation. A small portion of our leases also include clauses enabling us to receive percentage rents based on a tenant's gross sales above predetermined levels, which sales generally increase as prices rise, or escalation clauses which are typically related to increases in the Consumer Price Index or similar inflation indices. Our financial results are affected by general economic conditions in the markets in which our properties are located. An economic recession, or other adverse changes in general or local economic conditions, could result in the inability of some of our existing tenants to meet their lease obligations and could otherwise adversely affect our ability to attract or retain tenants. Supermarkets, drugstores and other anchor tenants that offer day-to-day necessities rather than luxury items anchor our existing properties. These types of tenants, in our experience, generally maintain more consistent sales performance during periods of adverse economic conditions. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The primary market risk to which we have exposure is interest rate risk. Changes in interest rates can affect our net income and cash flows. As changes in market conditions occur, interest rates can either increase or decrease, and interest expense from the variable component of our debt balances will move in the same direction. With respect to our investment portfolio, changes in interest rates generally do not affect our interest income as our investments are predominantly in equity securities. In addition, most of our mortgage notes payable currently have fixed interest rates and therefore changes in interest rates generally do not have a material effect on our operations. In addition, each of our revolving credit facilities have a variable-rate component and we may enter into additional variable-rate facilities in the future. Therefore, increases in interest rates could in the future have a materially adverse impact on our results of operations and cash flows. Moreover, increases in long-term real estate mortgage rates that may occur over a decade or more may decrease the overall value of real estate. We estimate the fair value of our long term, fixed rate mortgage loans generally using discounted cash flow analysis based on current borrowing rates for similar types of debt. At December 31, 2002, the fair value of the fixed rate mortgage notes payable was estimated to be approximately $348.5 million compared to a carrying value amount of approximately $307.5 million. 17 If the weighted average interest rate on our fixed rate debt at December 31, 2002 were 100 basis points higher or lower, the fair market value would be approximately $293.2 million and approximately $323.4 million, respectively. If the weighted average interest rate on our variable rate debt at December 31, 2002 were 100 basis points higher or lower, annual interest expense would be increased or decreased by approximately $476,000. Our objective in managing our exposure to interest rate changes is to limit the impact of interest rate changes on earnings and cash flows. We may use a variety of financial instruments to reduce our interest rate risk, including interest rate swap agreements whereby we exchange our variable interest costs on a defined amount of principal for another party's obligation to pay fixed interest on the same amount of principal, or interest rate caps, which will set a ceiling on the maximum variable interest rate we will incur on the amount of debt subject to the cap and for the time period specified in the interest rate cap. As of December 31, 2002, we have no market risk sensitive instruments. Off Balance Sheet Commitments We have off balance sheet joint ventures and other unconsolidated arrangements with varying structures. As of December 31, 2002, the Company's off balance sheet commitments were as follows: We have has aggregate revolving credit facilities available of $81.7 million of which $23.0 million was outstanding as of December 31, 2002. Letters of credit totaling $1.1 million have been provided as security for certain performance criteria. The Company's unconsolidated joint ventures have aggregate outstanding indebtedness of approximately $45 million, of which the Company has guaranteed a $15 million loan for one of the unconsolidated joint ventures. The Company's investment in these joint ventures is $7.4 million. The Company has committed to fund the construction costs of $11.5 million in order to complete our started development projects. These obligations comprise principally of construction contracts, are generally due as the work is performed and are expected to be financed by the available credit facilities. For more information regarding our off balance sheet joint ventures and other unconsolidated arrangements please refer to Note 4 of our Consolidated Financial Statements contained in this annual report and incorporated herein by reference. 18 EQUITY ONE, INC. AND SUBSIDIARIES TABLE OF CONTENTS Page ------------ Independent Auditors' Report F-1 Consolidated Balance Sheets F-2 - F-3 Consolidated Statements of Operations F-4 - F-5 Consolidated Statements of Comprehensive Income F-6 Consolidated Statements of Stockholders' Equity F-7 Consolidated Statements of Cash Flows F-8 - F-9 Notes to the Consolidated Financial Statements F-10 - F-29 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Equity One, Inc.: We have audited the accompanying consolidated balance sheets of Equity One, Inc. and subsidiaries (the "Company") as of December 31, 2002 and 2001, and the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2002 and 2001 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Certified Public Accounts Miami, Florida February 17, 2003, except for Note 14, as to which the date is September 12, 2003. F-1 EQUITY ONE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2002 AND 2001 (In thousands, except per share amounts)
2002 2001 --------- --------- ASSETS RENTAL PROPERTY: Land, buildings, and equipment ............................................. $ 664,157 $ 605,820 Building improvements ...................................................... 18,784 17,513 Land held for development .................................................. 16,434 23,420 Construction in progress ..................................................... 19,489 5,416 --------- --------- 718,864 652,169 Less: accumulated depreciation ............................................. (40,433) (28,031) Property held for sale ..................................................... - 3,549 --------- --------- Rental property, net .................................................... 678,431 627,687 CASH AND CASH EQUIVALENTS ..................................................... 2,944 906 CASH HELD IN ESCROW ........................................................... 5,933 1,715 SECURITIES AVAILABLE FOR SALE ................................................. 921 1,681 ACCOUNTS AND OTHER RECEIVABLES (net of allowances for doubtful accounts of $619 and $759 for 2002 and 2001, respectively) ................. 7,053 5,262 NOTES RECEIVABLE .............................................................. 8,428 9,697 INVESTMENTS IN JOINT VENTURES ................................................. 7,420 7,742 DEPOSITS ...................................................................... 6,806 6,219 DEFERRED EXPENSES (net of accumulated amortization of $2,994 and $1,924 for 2002 and 2001, respectively) .................................... 5,263 3,883 GOODWILL ...................................................................... 2,276 1,281 OTHER ASSETS .................................................................. 4,594 2,463 --------- --------- TOTAL ......................................................................... $730,069 $668,536 ========= ========= (continued)
F-2 EQUITY ONE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2002 AND 2001 (In thousands, except per share amounts)
2002 2001 --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: NOTES PAYABLE Mortgage notes payable...................................................... $ 332,143 $ 345,047 Revolving credit facilities................................................. 23,000 27,409 --------- --------- Total notes payable...................................................... 355,143 372,456 OTHER LIABILITIES Accounts payable and accrued expenses....................................... 14,760 8,987 Tenant security deposits.................................................... 4,342 4,090 Other liabilities........................................................... 1,724 867 --------- --------- Total liabilities........................................................ 375,969 386,400 --------- --------- MINORITY INTEREST IN EQUITY OF CONSOLIDATED SUBSIDIARY......................... 3,869 3,869 --------- --------- COMMITMENTS AND CONTINGENT LIABILITIES STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value - 10,000 shares authorized but unissued - - Common stock, $0.01 par value - 100,000 shares authorized, 34,540 and 28,781 shares issued and outstanding for 2002 and 2001, respectively..... 345 288 Additional paid-in capital.................................................. 355,450 283,619 Retained earnings........................................................... 5,969 1,808 Accumulated other comprehensive loss........................................ (46) (34) Unamortized restricted stock compensation................................... (4,375) (1,836) Notes receivable from issuance of common stock.............................. (7,112) (5,578) --------- --------- Total stockholders' equity............................................... 350,231 278,267 --------- --------- TOTAL.......................................................................... $ 730,069 $ 668,536 ========= ========= See accompanying notes to the consolidated financial statements. (Concluded)
F-3 EQUITY ONE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (In thousands, except per share amounts)
2002 2001 2000 ------------ ------------ ------------ RENTAL INCOME: Minimum rental................................................. $ 72,536 $ 57,076 $ 34,572 Expense recoveries............................................. 22,983 17,400 9,392 Termination fees................................................ 2,235 1,015 1,157 Percentage rent payments........................................ 1,507 967 746 ------------ ------------ ------------ Total rental income.......................................... 99,261 76,458 45,867 MANAGEMENT FEES..................................................... 278 927 360 INVESTMENT INCOME.................................................. 1,632 1,930 1,583 OTHER INCOME...................................................... 807 45 40 ------------ ------------ ------------ Total revenues................................................ 101,978 79,360 47,850 ------------ ------------ ------------ COSTS AND EXPENSES: Property operating expenses..................................... 30,023 23,171 12,645 Interest expense................................................ 22,368 20,770 12,348 Amortization of deferred financing fees......................... 884 1,128 258 Rental property depreciation and amortization.................... 13,533 11,440 6,517 Litigation settlement........................................... 2,067 - - General and administrative expenses............................. 6,649 3,553 2,559 ------------ ------------ ------------ Total costs and expenses..................................... 75,524 60,062 34,327 ------------ ------------ ------------ INCOME BEFORE GAIN/(LOSS) ON EXTINGUISHMENT OF DEBT, LOSS ON SALE OF REAL ESTATE, EQUITY IN INCOME OF JOINT VENTURES, MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARY, INCOME TAXES, MINORITY INTEREST IN CEFUS AND DISCONTINUED OPERATIONS......................................... 26,454 19,298 13,523 GAIN/(LOSS) ON EXTINGUISHMENT OF DEBT.............................. 1,520 (1,546) - LOSS ON SALE OF REAL ESTATE........................................ - (609) (63) EQUITY IN INCOME OF JOINT VENTURES................................. 549 473 5 MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARY........... (101) (99) - ------------ ------------ ------------ INCOME BEFORE INCOME TAXES, MINORITY INTEREST IN CEFUS AND DISCONTINUED OPERATIONS.......................................... 28,422 17,517 13,465 ------------ ------------ ------------ INCOME TAX BENEFIT/(EXPENSE)....................................... Current.......................................................... - 593 (23) Deferred......................................................... - 374 (1,071) ------------ ------------ ------------ Total income tax benefit/(expense)............................ - 967 (1,094) ------------ ------------ ------------ INCOME BEFORE MINORITY INTEREST IN CEFUS AND DISCONTINUED OPERATIONS 28,422 18,484 12,371 MINORITY INTEREST IN CEFUS.......................................... - (1,627) (603) ------------ ------------ ------------ INCOME FROM CONTINUING OPERATIONS.................................. 28,422 16,857 11,768 ------------ ------------ ------------ DISCONTINUED OPERATIONS Income from rental properties sold or held for sale............. 2,248 1,864 787 Gain on disposal of real estate................................. 9,264 - - ------------ ------------ ------------ Total income from discontinued operations..................... 11,512 1,864 787 ------------ ------------ ------------ NET INCOME......................................................... $ 39,934 $ 18,721 $ 12,555 ============ ============ ============ (continued)
F-4 EQUITY ONE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (In thousands, except per share amounts)
2002 2001 2000 ------------ ------------ ------------ EARNINGS PER SHARE: BASIC EARNINGS PER SHARE Income from continuing operations................................ $ 0.87 $ 0.75 $ 0.82 Income from discontinued operations.............................. 0.35 0.08 0.06 ------------ ------------ ------------ Total basic earnings per share................................. $ 1.22 $ 0.83 $ 0.88 ============ ============ ============ NUMBER OF SHARES USED IN COMPUTING BASIC EARNINGS PER SHARE......................................... 32,662 22,414 14,285 ============ ============ ============ DILUTED EARNINGS PER SHARE Income from continuing operations................................ $ 0.86 $ 0.75 $ 0.82 Income from discontinued operations.............................. 0.34 0.08 0.05 ------------ ------------ ------------ Total diluted earnings per share............................... $ 1.20 $ 0.83 $ 0.87 ============ ============ ============ NUMBER OF SHARES USED IN COMPUTING DILUTED EARNINGS PER SHARE....................................... 33,443 23,037 14,504 ============ ============ ============ (Concluded)
See accompanying notes to the consolidated financial statements. F-5 EQUITY ONE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (In thousands, except per share amounts)
2002 2001 2000 ----------- ------------ ------------ NET INCOME............................................................ $ 39,934 $ 18,721 $ 12,555 ----------- ------------ ------------ OTHER COMPREHENSIVE (LOSS) INCOME: Net unrealized holding (loss) gain on securities available for sale (12) 310 208 Reclassified adjustment for gains included in net income........... - (33) - ----------- ------------ ------------ TOTAL............................................................... (12) 277 208 ----------- ------------ ------------ COMPREHENSIVE INCOME.................................................. $ 39,922 $ 18,998 $ 12,763 =========== ============ ============
See accompanying notes to the consolidated financial statements. F-6 EQUITY ONE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (In thousands, except per share amounts)
Accumu- lated Unamor- Notes Equity Other tized Receivable Addit- Related to Compre- Restricted from the Total ional Step hensive Stock Issuance of Stock- Common Paid-In Acquisi- Retained (Loss)/ Compen- Common holders' Stock Capital tion Earnings Income sation Stock Equity ------- --------- ---------- ---------- ---------- ---------- ----------- ---------- BALANCE, JANUARY 1, 2000....... $ 113 $ 89,990 $ - $ 2,390 $ (519) $ - $ (545) $ 91,429 Issuance of common stock 15 15,530 - - - (809) - 14,736 Equity related to step acquisition......... - - 82,123 - - - 82,123 Stock issuance cost.. - (152) - - - - - (152) Net income........... - - - 12,555 - - - 12,555 Dividends paid...... - - - (13,236) - - - (13,236) Net unrealized holding gain on securities available for sale - - - - 208 - - 208 ------- --------- ---------- --------- ---------- ---------- ----------- --------- BALANCE, DECEMBER 31, 2000 128 105,368 82,123 1,709 (311) (809) (545) 187,663 Issuance of common stock: CEFUS transaction... 105 120,540 (82,123) - - - - 38,522 UIRT transaction.... 29 31,450 - - - - - 31,479 Alony Hetz.......... 20 21,187 - - - - - 21,207 Other issuances..... 6 6,550 - - - (1,027) (5,033) 496 Stock issuance cost... - (1,476) - - - - - (1,476) Net income............ - - - 18,721 - - - 18,721 Dividends paid........ - - - (18,622) - - - (18,622) Net unrealized holding gain on securities available for sale.. - - - - 277 - - 277 ------- --------- ---------- --------- ---------- ---------- ----------- --------- BALANCE, DECEMBER 31, 2001 288 283,619 - 1,808 (34) (1,836) (5,578) 278,267 Issuance of common stock 57 73,359 - - - (2,539) (1,534) 69,343 Stock issuance cost.. - (1,528) - - - - - (1,528) Net income........... - - - 39,934 - - - 39,934 Dividends paid....... - - - (35,773) - - - (35,773) Net unrealized holding loss on securities available for sale . - - - - (12) - - (12) -------- --------- ---------- --------- ---------- ---------- ----------- --------- BALANCE, DECEMBER 31, 2002.... $ 345 $ 355,450 $ - $ 5,969 $ (46) $ (4,375) $ (7,112) $ 350,231 ======== ========= ========== ========= ========== ========== =========== =========
See accompanying notes to the consolidated financial statements. F-7 EQUITY ONE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (In thousands, except per share amounts)
2002 2001 2000 --------- ---------- ---------- OPERATING ACTIVITIES: Net income............................................................ $ 39,934 $ 18,721 $ 12,555 Adjustments to reconcile net income to net cash provided by operating activities:.............................................. Rental property depreciation and amortization.................... 13,533 11,440 6,517 Amortization of deferred financing fees.......................... 884 1,128 258 Depreciation and amortization included in discontinued operations 497 358 146 Provision for losses on accounts receivable...................... 524 322 261 (Gain) loss on disposal of real estate........................... (9,264) 609 63 Gain on securities available for sale............................ (14) - - (Gain) loss on debt extinguishment............................... (1,520) 1,546 - Equity in income of joint ventures............................... (549) (473) (5) Minority interest in earnings of consolidated subsidiary......... 101 99 - Minority interest in CEFUS....................................... - 1,627 603 Deferred income tax (benefit) expense............................ - (374) 1,071 Changes in assets and liabilities: Accounts and other receivables.................................. (2,618) 1,757 1,455 Deposits........................................................ (487) (2,975) (115) Other assets.................................................... (730) 1,907 943 Accounts payable and accrued expenses........................... 4,127 (7,389) (4,061) Tenants' security deposits...................................... 252 206 202 Other liabilities............................................... 943 (295) 400 --------- ---------- ---------- Net cash provided by operating activities............................. 45,613 28,214 20,293 --------- ---------- ---------- INVESTING ACTIVITIES: Additions to and purchase of rental property....................... (85,554) (37,409) (11,944) Proceeds from disposal of rental property.......................... 27,195 22,276 - Proceeds from sales of joint venture interest...................... - 6,630 - Increase in deferred leasing expenses.............................. (1,660) (378) (514) Increase in cash held in escrow.................................... (4,218) (402) - Distributions received from joint ventures......................... 871 287 2,057 Proceeds from repayments of notes receivable....................... 5,068 2,643 - Sale of securities available for sale.............................. 762 - 23 Cash used in the purchase of UIRT.................................. - (36,294) - Cash acquired in acquisitions...................................... - - 1,995 Due to (from) affiliates........................................... - 212 (3,296) --------- ---------- ---------- Net cash used in investing activities........................... (57,536) (42,435) (11,679) --------- ---------- ---------- FINANCING ACTIVITIES: Repayments of mortgage notes payable............................... (43,156) (66,210) (13,229) Borrowings under mortgage notes payable............................ 31,947 64,884 26,366 Decrease (increase) in restricted cash............................. - 4,273 (4,273) Net (repayments) borrowings under revolving credit facilities...... (4,409) 9,210 (15,232) Increase in deferred financing expenses............................ (1,058) (540) (190) Advances to affiliates............................................. - - (1,490) Proceeds from stock subscription and issuance of common stock...... 67,982 21,366 14,736 Stock issuance costs............................................... (1,471) (1,476) (152) Cash dividends paid to stockholders................................ (35,773) (18,622) (13,236) Distributions to minority interest................................. (101) (105) 6 ---------- ---------- ---------- Net cash provided by (used in) financing activities................... 13,961 12,780 (6,694) ---------- ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,038 (1,441) 1,920 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 906 2,347 427 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,944 $ 906 $ 2,347 ========== ========== ========== (Continued)
F-8 EQUITY ONE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (In thousands, except per share amounts)
2002 2001 2000 ---------- ----------- ----------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest, net of amount capitalized................. $ 22,772 $ 20,457 $ 12,216 ========== =========== =========== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Unrealized (loss) gain on securities available for sale.............. $ (12) $ 277 $ 208 ========== =========== =========== Issuance of restricted stock......................................... $ 3,900 $ 1,525 $ 1,208 ========== =========== =========== Common stock issued for notes receivable............................. $ 1,534 $ 5,033 ========== =========== Note receivable from sale of land.................................... $ 3,900 ========== Sale of joint venture interest in settlement of notes receivable..... $ 1,438 =========== Issuance of CEFUS common stock in settlement of 5 affiliated debt................................................... $ 3,345 =========== Purchase of minority interest in CEFUS............................... $ 40,893 =========== The Company acquired all the outstanding capital stock of UIRT for $67,773, including transaction costs: Fair value of assets acquired................................... $147,640 Liabilities assumed............................................. (79,867) Common stock issued............................................. (31,479) ----------- Cash paid for acquisition, including transaction costs.......... $ 36,294 =========== The Company acquired 68.07% of the outstanding capital stock of CEFUS: Fair value of assets acquired................................... $ 315,195 Liabilities assumed............................................. (198,480) Minority interest............................................... (34,592) ----------- Equity related to step acquisition.............................. $ 82,123 =========== Acquisition of rental property....................................... $ 7,250 Change in minority interest.......................................... (2,880) ----------- Assumption of mortgage note payable.................................. $ 4,370 =========== See accompanying notes to the consolidated financial statements. (Concluded)
F-9 EQUITY ONE, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000 (In thousands, except per share amounts) - ---------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Equity One, Inc. operates as a self-managed real estate investment trust ("REIT") that principally acquires, renovates, develops and manages community and neighborhood shopping centers located predominately in high growth markets in the southern United States. These shopping centers are primarily anchored by supermarkets or other necessity-oriented retailers such as drugstores or discount retail stores. The consolidated financial statements include the accounts of Equity One, Inc. and its wholly-owned subsidiaries and those partnerships where the Company has financial and operating control. Equity One, Inc. and subsidiaries are hereinafter referred to as "the consolidated companies" or "the Company." The Company has a 50% investment in three joint ventures and a 50.1% interest in one joint venture for which it does not have financial or operating control and accordingly uses the equity method of accounting for these joint ventures. All significant intercompany transactions and balances have been eliminated in consolidation. As of December 31, 2002, the Company owned a total of 88 properties, encompassing 55 supermarket-anchored shopping centers, nine drug store-anchored shopping centers, 19 other retail-anchored shopping centers, one self-storage facility and four retail developments, as well as non-controlling interests in four joint ventures which own and operate commercial real estate properties. On September 20, 2001, the Company completed the acquisition of Centrefund Realty (U.S.) Corporation ("CEFUS") from First Capital Realty Inc. ("FCR"), formerly known as Centrefund Realty Corporation, for approximately $281,000 (including assumed debt). As provided for in the stock exchange agreement, the Company issued 10,500 shares of its common stock to subsidiaries of FCR and assumed approximately $149,021 of CEFUS's outstanding debt. The acquisition of CEFUS was partially accounted for on a "push-down" basis and partially in a manner similar to a pooling of interests, due to the acquisition by Gazit Globe (1982) Ltd., the Company's majority shareholder, of a 68.07% controlling interest in Centrefund Realty Corporation on August 18, 2000. To reflect the events of August 18, 2000, the Company recorded equity related to step acquisition in the consolidated financial statements equivalent to 68.07% of the value of the consideration paid to subsidiaries of FCR (the "Equity Related to Step Acquisition"). In addition, the Company recorded a minority interest equivalent to 31.93% of the value of the net assets acquired on August 18, 2000 (the "31.93% Minority Interest"), which was eliminated on September 20, 2001 when the acquisition of CEFUS was completed. The results for the year ended December 31, 2000 were restated to incorporate the results of CEFUS for the period from August 18, 2000 to December 31, 2000. The results for the year ended December 31, 2001 were adjusted to incorporate the results of CEFUS for the period January 1, 2001 to September 19, 2001. The restatement consolidates the operations of the Company and CEFUS between August 18, 2000 and September 19, 2001, subject to a 31.93% minority interest in F-10 CEFUS (the "CEFUS Accounting Treatment"). During the period from August 18, 2000 to September 19, 2001, CEFUS operated under the control of FCR as a subchapter C-corporation under the Internal Revenue Code (the "Code") and recorded current and deferred income taxes in connection with its operations. Effective September 20, 2001, the Company no longer recorded any provision for income taxes consistent with the acquisition of 100% of CEFUS, and the Company's intent to operate CEFUS as a qualified REIT subsidiary. In addition, with the September 20, 2001 acquisition of 100% of CEFUS, the Company has eliminated the Equity Related to Step Acquisition, the 31.93% Minority Interest and the deferred income tax assets, and has recorded in their place the issuance of 10,500 shares of the Company's common stock. On September 21, 2001, the Company completed the acquisition of United Investors Realty Trust ("UIRT"), a Texas-based REIT, for $147,640 (including assumed debt). As a result of the transaction with UIRT, the Company issued 2,896 shares of its common stock, paid $36,294 in cash consideration to former UIRT shareholders including transaction costs and assumed approximately $79,867 of UIRT's outstanding debt. The acquisition of UIRT was accounted for using the purchase method and the results of UIRT are included in the Company's consolidated financial statements from the date of its acquisition. Rental Property Income producing property is stated at cost and includes all costs related to acquisition, development and construction, including tenant improvements, interest incurred during development, costs of predevelopment and certain direct and indirect costs of development. Costs incurred during the predevelopment stage are capitalized once management has identified a site, determined that the project is feasible and it is probable that the Company is able to proceed with the project. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations and improvements, which improve or extend the useful life of assets, are capitalized. Income producing properties are individually evaluated for impairment when various conditions exist that may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis) from a property are less than its historical net cost basis. Upon determination that a permanent impairment has occurred, the Company records an impairment charge equal to the excess of historical cost basis over fair value. In addition, the Company writes off costs related to predevelopment projects when it determines that it will no longer pursue the project. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, as follows: Buildings 30-40 years Building improvements 5-20 years Tenant improvements Over the term of the related lease Equipment 5-7 years Land Held for Development Land held for development is stated at cost. Interest, real estate taxes and other costs directly related to the properties and projects under development are capitalized until the property is ready for its intended use. Similar costs related to properties not under development are expensed as incurred. F-11 Long-Lived Assets Long-lived assets, such as property, land held for development, certain identifiable intangibles, and goodwill related to those assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that it is probable that the sum of expected undiscounted cash flows of the related operations are less than historical net cost basis. These factors, along with plans with respect to the operations, are considered in assessing the recoverability of long-lived assets. If the Company determines that the carrying amount is impaired, the long-lived assets are written down to their fair value with a corresponding charge to earnings. During the periods presented, no such impairment was incurred. Cash and Cash Equivalents The Company considers highly liquid investments with an initial maturity of three months or less to be cash equivalents. Cash Held in Escrow Escrowed cash consists of cash being held in anticipation of the execution of tax-free exchanges under Section 1031 of the Internal Revenue Code. Investment Securities As of December 31, 2002 and 2001, all of the securities are classified as securities available for sale and are carried at fair value. Unrealized gains and losses are reported as a separate component of stockholders' equity in accumulated other comprehensive income or loss until realized. Deposits Deposits are composed of funds held by various institutions for future payments of property taxes, insurance and improvements, utility and other service deposits. Deferred Expenses Deferred expenses consist of loan origination fees, other fees directly related to rental property financing with third parties and leasing costs. The loan costs are amortized over the term of the loan, which approximates the effective interest method. The leasing costs are being amortized using the straight-line method over the term of the leases. Goodwill Goodwill has been recorded to reflect the excess of cost over the fair value of net assets acquired in various acquisitions. The Company adopted Statement of Financial Accounting Standard ("SFAS") No. 142 on January 1, 2002 and no longer amortizes goodwill. The Company will perform annual impairment tests and has performed impairment tests of the goodwill and other intangible assets as of January 1, 2002 and November 30, 2002 and determined that the assets are not impaired. For the years ended December 31, 2001 and 2000, goodwill amortization was $69 and $50, respectively. Minority Interest On January 1, 1999, Equity One (Walden Woods) Inc., a wholly-owned subsidiary, entered into a limited partnership as a general partner. An income producing shopping center ("Walden Woods Village") was contributed by its owners (the "Minority Partners"), and the Company contributed 93,656 shares of common stock (the "Walden Woods Shares") to the limited partnership at an agreed-upon price of $10.30 per share. Based on this per share price and the net value of property contributed by the Minority Partners, each of the partners received 93,656 limited partnership units. F-12 The Company has entered into a Redemption Agreement with the Minority Partners whereby the Minority Partners can request that the Company purchase either their limited partnership units or any shares of common stock which they received in exchange for their partnership units at a price of $10.30 per unit or per share no earlier than two years nor later than fifteen years after the exchange date of January 1, 1999. As a result of the Redemption Agreement, the Company has consolidated the accounts of the partnership with the Company's financial data. In addition, under the terms of the limited partnership agreement, the Minority Partners do not have an interest in the Walden Woods Shares except to the extent of dividends. Accordingly, a preference in earnings has been allocated to the Minority Partners to the extent of the dividends declared. The Walden Woods Shares are not considered outstanding in the consolidated financial statements, and are excluded from the share count in the calculation of primary earnings per share. On December 5, 2000, Equity One (North Port), Inc., a wholly-owned subsidiary, entered into a limited partnership (the "Shoppes of North Port, Ltd.") as a general partner. An income producing shopping center ("Shoppes of North Port") was contributed by its owners (the "North Port Minority Partners") and the Company contributed an income producing property to a limited liability company wholly owned by the Shoppes of North Port, Ltd. Both the North Port Minority Partners and the general partner were issued partnership operating units ("OPU") based on the net value of the properties contributed. The North Port Minority Partners received 261,850 OPU which can be redeemed for the Company's common stock on a one-for-one basis or cash at an agreed upon price of $11.00 per share no earlier than December 10, 2001, nor later than three and one half years thereafter. As a result of the Redemption Agreement, the Company has consolidated the accounts of the partnership with the Company's financial data. The North Port Minority Partners are to receive a preferred quarterly distribution equal to a 9.0% annual return on their initial capital contribution. This amount is reflected as interest expense in the consolidated financial statements. Rental Income Rental income comprises minimum rents, expense reimbursements and percentage rent payments. Rental income is recognized as earned. Expense reimbursements are recognized in the period that the applicable costs are incurred. The Company accounts for these leases as operating leases as the Company has retained substantially all risks and benefits of property ownership. Percentage rent is recognized when the tenant's reported sales have reached certain levels specified in the respective lease. Management Fees Management fees consist of fees earned in connection with certain third-party leasing activities and other third-party management activities. Management fees are recognized when earned. Income Taxes The Company elected to be taxed as a real estate investment trust (REIT) under the Code, commencing with its taxable year ended December 31, 1995. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its REIT taxable income to its stockholders. It is management's current intention to adhere to these requirements and maintain the Company's REIT status. As a REIT, the Company generally will not be subject to corporate level federal income tax on taxable income it distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject F-13 to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. During the period from August 18, 2000 to September 19, 2001, CEFUS, a wholly owned subsidiary of FCR, was taxed as a Corporation and accordingly recorded current and deferred income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. These taxes are reflected in the accompanying consolidated financial statements as current and deferred components of the income tax benefit/expense. In addition, certain corporate tax attributes will carry over to the Company as a result of this transaction (for example, net operating losses, alternative minimum tax credit carry- forwards, etc.). Net operating losses available to the Company are estimated to be approximately $11,973, but their utilization is limited subject to the provisions of the Code Sections 381 and 382. As a result of the acquisition of CEFUS, Code Section 1374 imposes a tax on the net built-in gain of C corporation (i.e. CEFUS) assets that become assets of a REIT (i.e. the Company) in a carryover-basis transaction. The estimated net built-in gain at the date of acquisition is approximately $29,974. In lieu of the tax imposed on the transferor C corporation (i.e. CEFUS), the Company can elect to be subject to a Ten-Year Rule, which defers and eliminates recognition of the built-in gain tax liability if the assets subject to the tax are not disposed of within ten years from the date of the acquisition. In addition to the Ten-Year Rule, the Company has the ability to utilize like-kind exchanges, carry-over C corporation tax attributes, and other tax planning strategies to mitigate the potential recognition of built-in gain tax. Segment Information The Company operates in one reportable segment as an owner and operator of commercial rental properties. As of December 31, 2002, rental operations are provided to tenants through the Company's properties located primarily in Florida and Texas. Each of these properties provides management with monthly financial statements. All of the properties have been aggregated into one reporting segment due to their similar tenant and operating characteristics. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. New Accounting Pronouncements In June 2001, Financial Accounting Standards Board ("FASB") approved the issuance of SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. These standards established accounting and reporting for business combinations. SFAS No. 141 requires all business combinations entered into subsequent to June 30, 2001 to be accounted for using the purchase method of accounting. SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for impairment at least annually. The Company adopted SFAS No. 142 on January 1, 2002 and no longer amortizes goodwill. The Company has performed an impairment test of the goodwill and other intangible assets as of January 1, 2002 and November 30, 2002 and has determined that the assets are not impaired. For the years ended December 31, 2001 and 2000, goodwill amortization was $69 and $50, respectively. F-14 In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes, but does not replace, SFAS No. 121, Accounting for the Impairment of Long-Lived Assets to be Disposed Of, as well as other earlier related pronouncements, either in whole or in part. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years, although earlier application is encouraged. The Company adopted SFAS No. 144 effective January 1, 2002 and has reflected the operations of property held for sale and disposed of properties as discontinued operations, along with any gain on dispositions. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections which rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. It also rescinds FASB Statement No. 44, Accounting for Intangible Assets or Motor Carriers, and amends FASB Statement No. 13, Accounting for Leases. Finally SFAS No. 145 amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions related to the rescission of FASB Statement No. 4 and its amendment Statement No. 64 are effective for fiscal years beginning after May 15, 2002. The Company adopted SFAS No. 145 as of July 2002, and no longer reflects gains (losses) from extinguishment of debt as extra ordinary income. In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This Statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management's commitment to an exit plan, which is generally before an actual liability has been incurred. Adoption of this Statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The adoption of this statement is not expected to have a material impact on the Company's financial statements. In November 2002, FASB issued FASB Interpretation No. 45 ("FIN 45"), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantee's of Indebtedness of Other's (an interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34). FIN 45 clarifies the requirements of FASB Statement No. 5, Accounting for Contingencies. It requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee regardless of whether or not the guarantor receives separate identifiable consideration (i.e., a premium). We have adopted the new disclosure requirements, which are effective beginning with 2002 calendar year-end financials. FIN 45's provisions for initial recognition and measurement are effective on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 is not expected to have a material impact on the Company's financial statements. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure. This Statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirement of SFAS No. 123, Accounting for Stock-Based Compensation, to require prominent disclosure in both annual and interim financial statements about the effect of the method used on reported results. SFAS No. 148 is effective for financial statements issued for fiscal years ending after December 15, 2002 and, as it relates to Opinion No. 28, Interim Financial Reporting, the interim periods beginning after December 15, 2002, although earlier application is encouraged. The Company applies the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related F-15 interpretations in measuring stock-based compensation. The Company has adopted the disclosure requirements of SFAS No. 148 in its financial statements for 2002. In January 2003, FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"), an interpretation of ABR 51. FIN 46 provides guidance on identifying entities for which control is achieved through means other than through voting rights, variable interest entities ("VIE"), and how to determine when and which business enterprises should consolidate the VIE. In addition, FIN 46 requires both the primary beneficiary and all other enterprises with a significant variable interest in a VIE to make additional disclosures. The transitional disclosure requirements will take effect almost immediately and are required for all financial statements initially issued after January 31, 2003. The consolidated provisions of FIN 46 are effective immediately for variable interests in VIEs created after January 31, 2003. For variable interests in VIEs created before February 1, 2003, the provisions of FIN 46 are effective for the first interim period beginning after June 15, 2003. The adoption of FIN 46 is not expected to have a material impact on the Company's financial statements. Fair Value of Financial Instruments The estimated fair values of financial instruments have been determined by the Company using available market information and appropriate valuation methods. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methods may have a material effect on the estimated fair value amounts. The Company has used the following market assumptions and/or estimation methods: Cash and Cash Equivalents and Accounts and Other Receivables - The carrying amounts reported in the balance sheets for these financial instruments approximate fair value because of their short maturities. Securities Available for Sale - Fair values are based on quoted market prices, dealer quotes, and independent pricing services. Notes Receivable - The fair value is estimated by using the current interest rates at which similar loans would be made. The carrying amounts reported in the balance sheets approximate fair value. Mortgage Loans Payable - The estimated fair value at December 31, 2002 and 2001 was $373,166 and $325,489, respectively, calculated based on the net present value of payments over the term of the loans using estimated market rates for similar mortgage loans. Revolving Credit Facilities - The fair value is estimated by using the current rates at which similar loans would be made. The carrying amounts reported in the balance sheets approximate fair value. Reclassifications Certain prior year amounts have been reclassified to conform with the 2002 financial presentation. F-16 2. ACCOUNTS AND OTHER RECEIVABLES
Composition in the consolidated balance sheets: December 31, ----------------------- 2002 2001 --------- --------- Tenants................................................................. $ 6,568 $ 5,211 Other................................................................... 1,104 810 Allowance for doubtful accounts......................................... (619) (759) --------- -------- Total accounts and other receivables.................................... $ 7,053 $ 5,262 ========= ========
3. NOTES RECEIVABLE
Composition in the consolidated balance sheets: December 31, ----------------------- 2002 2001 --------- --------- Mortgage notes receivable, bearing interest at 8% to 9% per annum, due from July 2003 to March 2006......................................... $ 5,406 $ 6,471 Loan receivable from a partner in a joint venture to fund development activities, bearing interest at the Company's cost of funds up to 10% per annum, due upon refinancing or sale of the property.......... 2,601 2,940 Other................................................................... 421 286 --------- -------- Total notes receivable.................................................. $ 8,428 $ 9,697 ========= ========
4. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES A summary of the Company's investments in and advances to joint ventures at December 31, 2002 and 2001 is as follows (all investments in unconsolidated entities are accounted for under the equity method):
December 31 December 31, Entity Location Ownership 2002 2001 - ----------------------- --------------------- -------------- ------------- --------------- PG Partners Palm Beach Gardens, FL 50.0% $ 2,823 $ 2,937 Parcel F, LLC Palm Beach Gardens, FL 50.0% 228 228 Oak Square JV Gainesville, FL 50.0% 1,243 1,452 CDG (Park Place) LLC Plano, TX 50.1% 3,126 3,125 ------------- --------------- Investments in and advances to joint ventures $7,420 $7,742 ============= ===============
A summary of unaudited financial information for all four joint ventures being reported on the equity method of accounting is as follows:
As of As of December 31, 2002 December 31, 2001 -------------------- ------------------- Assets: Rental properties, net.................... $ 47,309 $ 47,771 Cash and cash equivalents................. 690 368 Other assets.............................. 1,170 888 -------------------- ------------------- Total assets.............................. $ 49,169 $ 49,027 ==================== =================== Liabilities and Ventures' Equity: Mortgage notes............................ $ 44,625 $ 43,816 Other liabilities......................... 651 1,018 Ventures' equity.......................... 3,893 4,193 -------------------- ------------------- Total .................................... $ 49,169 $ 49,027 ==================== ===================
The Company's investments in joint ventures, as reported on its consolidated balance sheets, differ from its proportionate share of the joint ventures' underlying net assets due to basis differentials. F-17 This basis differential of approximately $5,000 as of December 31, 2002 and 2001 is being depreciated over the useful lives of the related assets. As of December 31, 2002, the Company has guaranteed a mortgage note payable of $15,000 for one of its joint ventures.
Year Ended December 31, 2002 ------------------------------------------------- Condensed Statements of Operations 2002 2001 2000 -------------- -------------- ------------- Revenues: Rental revenues................................ $ 7,176 $ 6,376 $ 943 Other revenues................................. 12 125 18 -------------- -------------- ------------- Total revenues............................... 7,188 6,501 961 -------------- -------------- ------------- Expenses: Operating expenses............................. 1,742 1,399 241 Interest expense............................... 2,932 3,285 567 Depreciation................................... 1,291 579 100 Other expense.................................. 125 250 43 -------------- -------------- ------------- Total expense................................ 6,090 5,513 951 -------------- -------------- ------------- Net income..................................... $ 1,098 $ 988 $ 10 ============== ============== ============= The Company's equity in income of joint ventures reported in: Continuing operations...................... $ 549 $ 473 $ 5 ============== ============== ============= Discontinued operations.................... $ - $ 21 $ - ============== ============== =============
Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company. 5. NOTES PAYABLE
Composition in the consolidated balance sheets: December 31, ----------------- --- ---------------- 2002 2001 ----------------- ---------------- Fixed rate mortgage loans Various mortgage notes payable secured by rental properties, bearing interest at 5.07% to 9.25% per annum, maturing from February 2005 through November 2018.............................. $ 307,508 $296,887 Variable rate mortgage loans Mortgage note payable secured by rental properties, bearing interest of LIBOR plus 1.50% (the interest rate at December 31, 2002 was 3.32%), maturing February 2004.......................... 24,635 48,160 ----------------- ---------------- Total mortgage notes payable........................................ 332,143 345,047 ----------------- ---------------- Revolving credit facilities Line of credit of $10,403, with a bank, bearing interest at LIBOR plus 2.25% maturing May 2003. The credit agreement is secured by various rental properties........................................ - 1,409 Line of credit of $30,000 with a bank, bearing interest at LIBOR plus 1.25%, maturing March 2003. The credit agreement is secured by various rental properties............................. - 26,000 Line of credit of $41,300 with a bank, bearing interest at LIBOR plus 1.25%, maturing February 2005. The credit agreement is secured by various rental properties............................. 23,000 - ----------------- ---------------- Total revolving credit facilities................................... 23,000 27,409 ----------------- ---------------- Total notes payable................................................. $ 355,143 $ 372,456 ================= ================
F-18 Principal maturities (including scheduled amortization payments) of the notes payable as of December 31, 2002 are as follows: Year ending December 31, Amount ------------------------- ---------------- 2003..................... $ 6,288 2004..................... 31,397 2005..................... 49,720 2006..................... 33,448 2007..................... 9,719 Thereafter............... 224,571 ---------------- Total.................... $ 355,143 ================ Certain of the mortgages on the Company's properties involving an aggregate principal amount of approximately $50,000 contain prohibitions on transfers of ownership which may have been violated by the Company's previous issuances of common stock or in connection with past acquisitions and may be violated by transactions involving the Company's capital stock in the future. If a violation were established, it could serve as a basis for a lender to accelerate amounts due under the affected mortgage. The Company is in the process of obtaining the necessary consents from the lenders. Based on discussions with various lenders to date, current credit market conditions and other factors, the Company believes that such consents will be obtained or that the mortgages would not be accelerated. Accordingly, the Company believes that the ultimate outcome of this matter will not have a material impact on the Company's results of operations, financial condition or cash flows. The Company intends to monitor and manage interest rate costs on its variable rate debt. The Company may, from time to time, enter into interest rate hedge agreements to manage interest costs and risk associated with changing interest rates. There were no rate hedge agreements outstanding as of December 31, 2002 and 2001. Interest costs incurred were $25,955, $24,345 and $14,988 in the years ended December 31, 2002, 2001 and 2000, respectively, of which $2,375, $2,102 and $2,181 were capitalized in the years ended December 31, 2002, 2001 and 2000, respectively. 6. DEBT EXTINGUISHMENT The Company settled an outstanding mortgage note payable at less than face value during 2002 and recognized a gain of $1,520 on an early extinguishment of debt. During 2001, the Company prepaid a mortgage and incurred a loss of $1,546 on an early extinguishment of debt. The Company has adopted SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections, and no longer reflects gains and losses on extinguishment of debt as extraordinary income. 7. DISPOSITIONS The Company has adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, effective January 1, 2002, and has included the operations of properties sold and held for sale, as well as the gain on sale of sold properties identified for sale on or after January 1, 2002, as discontinued operations for all periods presented. The Company expects to reclassify historical operating results whenever necessary in order to comply with the requirements of SFAS No. 144. F-19 The following table reflects properties being reported in discontinued operations for the years ended December 31, 2002, 2001 and 2000:
Square Feet/ Gross Sales Property Location Date Sold Acres (ac) Price ------------------------------ ---------------------- --------------- ----------------- ------------ Equity One Office Miami Beach, FL February 28,780 $ 6,050 Olive land Miami, FL February 6.79ac 1,900 Benbrook Fort Worth, TX February 247,422 2,590 Montclair apartments Miami Beach, FL June 9,375 2,450 Shoppess of Westburry Miami, FL July 33,706 5,220 Forest Edge Orlando, FL July 68,631 3,475 Northwest Crossing Dallas, TX September 33,366 2,350 McMinn Plaza Athens, TN November 107,200 6,200 Woodforest Houston, TX December 12,741 1,850 ---------- $32,085 ==========
During January 2003, Lowe's home improvement centers indicated its binding intent to exercise its option to purchase its ground lease in April 2003 at the Pompano Beach, Florida location. This property has a gross leaseable area of 81,000 square feet and a net book value of $2,903. As of December 31, 2001, a retail property and an office building were classified as property held for sale and were subsequently sold in 2002. These properties have an aggregate gross leasable area of 276 square feet and an aggregate net book value of $3,549. 8. ACQUISITIONS The following table reflects properties acquired since January 1, 2002:
SquareFeet/ Property Location Date Purchased Acres (ac) Purchase Price ------------------------ ---------------------- --------------- ----------------- ---------------- Eckerd Melbourne, FL February 10,908 $ 2,479 Eckerd Leesburg, FL February 12,739 3,677 Coral Way S.E. Miami, FL February 8.9ac 2,000 Olive land Miami, FL February 6.79ac 1,000 Homestead retail land Homestead, FL May 12.1ac 1,800 Blanco Village San Antonio, TX May 108,325 18,800 Meadows Miami, FL May 75,524 8,925 Salerno Village Stuart, FL May 58,804 2,600 Eastwood Orlando, FL June 69,037 8,630 Shoppes of Ibis West Palm Beach, FL July 79,420 9,250 Forestwood Houston, TX December 88,760 10,355 ------------------ $ 69,516 ==================
F-20 9. Stockholders' Equity and earnings per share The following table reflects the change in number of shares of common stock outstanding for the year ended December 31, 2002:
Common Options Stock Exercised Total ------------ ------------ ------------ Board of Directors/Corporate Secretary......... 13* 5 18 Officers....................................... 253* 161 414 Employees...................................... 7* 8 15 Security offerings............................. 4,138 - 4,138 Dividend Reinvestment and Stock Purchase Plan.. 1,174 - 1,174 ------------ ------------ ------------ Total................................... 5,585 174 5,759 ============ ============ ============ * Reflects shares of "restricted stock" which are subject to forfeiture and vest over a period of two to five years.
On March 27, 2002, the Company completed a public offering of 3,450 shares of our common stock at a per share price of $13.25. On January 18, 2002, the Company sold 688 unregistered shares of our common stock to a limited number of accredited investors. In connection with this private placement, the Company sold an aggregate of 344 shares of common stock at a price of $12.80 per share to unaffiliated investors and 344 shares of our common stock at a price of $13.05 per share to investors that are affiliates, resulting in aggregate net proceeds of approximately $8,900. The following table reports dividends paid for the twelve months ended December 31, 2002 and 2001:
2002 2001 -------------------------------------------------- --------------------------------------------------- Date Per Share Amount Date Per Share Amount -------------------- -------------- ---------- -------------------- -------------- ---------- March 28............. $ 0.27 $ 8,015 March 30........... $ 0.26 $ 3,342 June 28.............. $ 0.27 9,124 June 29............ $ 0.26 3,359 September 30......... $ 0.27 9,298 September 28....... $ 0.27 4,151 December 31.......... $ 0.27 9,336 December 31........ $ 0.27 7,770 ------------ ----------- Total $ 35,773 Total $ 18,622 ============ ===========
F-21 The following is a reconciliation of the amounts of net income and shares of common stock used in calculating basic and diluted per-share income ("EPS") for the years ended December 31, 2002, 2001 and 2000:
For the Year Ended December 31, 2002 --------------------------------------------------- Income Shares Per Share (Numerator) (Denominator) Amount ------------ ------------- ------------- Net Income $ 39,934 ============ Basic EPS Income attributable to common stockholders..... $ 39,934 32,662 $ 1.22 ------------ ------------ ============= Effect of Dilutive Securities Walden Woods Village, Ltd...................... 101 94 Unvested restricted stock...................... - 298 Converted partnership units.................... 259 262 Stock options.................................. - 127 ------------ ------------ 360 781 ------------ ------------ Diluted EPS Income attributable to common stockholders assuming conversions........................ $ 40,294 33,443 $ 1.20 ============ ============ =============
For the Year Ended December 31, 2001 --------------------------------------------------- Income Shares Per Share (Numerator) (Denominator) Amount ------------ ------------- ------------- Net Income $ 18,721 ============ Basic EPS Income attributable to common stockholders..... $ 18,721 22,414 $ 0.83 ------------ ------------ ============= Effect of Dilutive Securities Walden Woods Village, Ltd...................... 99 94 Unvested restricted stock...................... - 192 Converted partnership units.................... 259 262 Stock options.................................. - 75 ------------ ------------ 358 623 ------------ ------------ Diluted EPS Income attributable to common stockholders assuming conversions.............................. $ 19,079 23,037 $ 0.83 ============ ============ =============
Options to purchase 30 shares of common stock at $12.38 per share were outstanding at December 31, 2001 but were not included in the computation of diluted EPS because the option price was greater than the average market price of common shares. F-22
For the Year Ended December 31, 2000 --------------------------------------------------- Income Shares Per Share (Numerator) (Denominator) Amount ------------ ------------- ------------- Net Income $ 12,555 ============ Basic EPS Income attributable to common stockholders..... $ 12,555 14,285 $ 0.88 ------------ ------------ ============= Effect of Dilutive Securities Walden Woods Village, Ltd...................... - 94 Unvested restricted stock...................... - 122 Converted partnership units.................... 20 3 ------------ ------------ 20 219 ------------ ------------ Diluted EPS Income attributable to common stockholders assuming conversions............................. $ 12,575 14,504 $ 0.87 ============ ============ =============
Options to purchase 953 shares of common stock from $9.90 to $12.38 per share were outstanding at December 31, 2000 but were not included in the computation of diluted EPS because the option prices were greater than the average market price of common shares. For the years ended December 31, 2001 and 2000, basic and diluted earnings per share have been adjusted so that the weighted average number of shares used in those calculations include the effect of the assumed issuance on August 18, 2000 of 68.07% of the 10,500 shares which were issued in connection with the CEFUS acquisition on September 20, 2001. This adjustment is in accordance with the CEFUS Accounting Treatment described in Note 1. 10. BENEFIT PLANS Stock-Based Compensation On October 23, 1996, the Company adopted the Equity One, Inc. 1995 Stock Option Plan (the "Plan"), which was amended December 10, 1998. The purpose of the Plan is to further the growth of the Company by offering incentives to directors, officers and other key employees of the Company, and to increase the interest of these employees in the Company through additional ownership of its common stock. The effective date of the Plan was January 1, 1996. The maximum number of shares of common stock as to which options may be granted under this Plan is 1,000 shares, which is reduced each year by the required or discretionary grant of options. The term of each option is determined by the Compensation Committee of the Company (the "Committee"), but in no event can longer than ten years from the date of the grant. The vesting of the options is determined by the Committee, in its sole and absolute discretion, at the date of grant of the option. On June 23, 2000, the Company, with shareholder approval, adopted the Equity One 2000 Executive Incentive Compensation Plan (the "2000 Plan"). The terms of the 2000 Plan provide for grants of stock options, stock appreciation rights ("SARs"), restricted stock, deferred stock, other stock-related awards and performance or annual incentive awards that may be settled in cash, stock or other property. The persons eligible to receive an award under the 2000 Plan are the officers, directors, employees and independent contractors of the Company and its subsidiaries. During the term of the 2000 Plan, as amended by the shareholders on May 24, 2002, the total number of shares of Common Stock that may be issuable under the 2000 Plan is 2,500 shares, plus (i) the number of shares with respect to which options previously granted under the 1995 Stock F-23 Option Plan terminate without being exercised, and (ii) the number of shares that are surrendered in payment of the exercise price for any awards or any tax withholding requirements. The Company applies the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in measuring stock-based compensation, including options. Accordingly, no compensation expense has been recognized for options granted under either of the Plans as no grants were made at less than market value. Had compensation expense been determined based upon the fair value at the grant date for awards under the Plan consistent with SFAS No. 123, Accounting for Stock-Based Compensation, the Company's net income and earnings per share on a pro forma basis would have been:
Year Ended December 31, -------------------------------------------------- 2002 2001 2000 --------------- -------------- ------------- Net income As reported........ $39,934 $18,721 $12,555 Pro forma.......... 39,191 18,483 11,820 Basic earnings per share As reported........ $1.22 $0.83 $0.88 Pro forma.......... 1.20 0.82 0.83 Diluted earnings per As reported........ $1.20 $0.83 $0.87 share Pro forma.......... 1.18 0.82 0.82
The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions for the years ended December 31, 2002, 2001 and 2000:
2002 2001 2000 ------------------- ----------------- ------------------ Dividend Yield.................. 7.9% 7.5% 10.6% Risk-free interest rate......... 4.3% 4.3% - 5.1% 5.3% - 6.0% Expected option life (years).... 10 7 7 Expected volatility............. 24% 25% 17%
In accordance with SFAS No. 123, the following is a summary of the Company's stock option activity for the years ended December 31, 2002, 2001 and 2000:
2002 2001 2000 -------------------------- ------------------------- -------------------------- Weighted Weighted Weighted Average Average Average Stock Exercise Stock Exercise Stock Exercise Options Price Options Price Options Price ----------- ----------- --------- ----------- ----------- ----------- Outstanding at the 625 $ 10.12 953 $ 10.08 737 $ 10.45 beginning of year Granted............. 509 13.25 175 10.00 332 9.95 Forfeited........... - - - - (116) 12.05 Exercised........... (174) 10.15 (503) 10.00 - - ----------- ----------- --------- ----------- ----------- ----------- Outstanding at the end of year....... 960 $ 11.78 625 $ 10.12 953 $ 10.08 =========== =========== ========= =========== =========== =========== Exercisable, end of year....... 541 $ 11.78 325 $ 10.23 716 $ 10.08 =========== =========== ========= =========== =========== =========== Weighted average fair value of options granted during the year... $ 1.69 $ 2.39 $ 0.92 =========== ========== ===========
F-24 The following table summarizes information about outstanding stock options as of December 31, 2002:
Options Outstanding Options Exercisable ---------------------------------------------------------------------- ------------------- Weighted Average Remaining Number Contractual Life Number Exercise Price Outstanding (in years) Exercisable ---------------------------- ------------- ----------------- -------------- $ 9.90 88 6.7 44 $10.00 298 6.7 167 $10.44 50 6.7 37 $12.38 15 4.0 15 $13.25 506 9.6 278 $13.44 3 9.6 - ------------- -------------- 960 541 ============= ==============
Restricted Stock Grants The Company grants restricted stock to its officers, directors, and other employees. Vesting periods for the restricted stock are determined by the Company's Compensation Committee. As of December 31, 2002, the Company had 330 shares of non-vested restricted stock grants outstanding. The vesting of the 330 shares is as follows: Year Ending December 31, Number of Shares --------------------------- ------------------- 2003.................... 135 2004.................... 75 2005.................... 43 2006.................... 39 2007.................... 38 ------------------- Total 330 =================== 401(k) Plan The Company has a 401(k) defined contribution plan (the "401(k) Plan") covering substantially all of the officers and employees of the Company which permits participants to defer up to a maximum of 15% of their compensation. The Company matches 50% of the employees' contribution up to a maximum of 3% of an employees' annual compensation. Employees' contributions vest immediately and the Company's matching contributions vest pro rata over three years. The Company's contributions to the 401(k) Plan for the year ended December 31, 2002, 2001 and 2000 (inception) were $67, $49 and $10, respectively. The 401(k) Plan invests the Company's matching contributions by purchasing publicly traded shares of the Company's common stock. F-25 11. FUTURE MINIMUM RENTAL INCOME, COMMITMENTS AND CONTINGENT LIABILITIES Future minimum rental income under noncancelable operating leases approximates the following as of December 31, 2002: Year Ending December 31, Number of Shares ------------------------ ------------------- 2003................... $74,315 2004................... 64,942 2005................... 53,621 2006................... 43,740 2007................... 35,047 Thereafter............. 171,310 ------------------- Total.................. $ 442,975 =================== As of December 31, 2002 and 2001, the Company has pledged letters of credit for $1,128 and $2,000, respectively, as additional security for financing. The Company has guaranteed a mortgage note payable for one of its joint ventures of approximately $15,000. The Company is subject to litigation in the normal course of business, none of which as of December 31, 2002 in the opinion of management will have a material adverse effect on the financial condition, results of operations, or cash flows of the Company. 12. RELATED PARTY TRANSACTIONS As of December 31, 2002 and 2001, the Company had outstanding loans to various executives in connection with their exercises of options to purchase shares of the Company's common stock. The notes bear interest at rates ranging from 5% to 6.35%. Interest is payable quarterly and the entire principal is due between 2006 and 2009. Investment income earned on the loans was $337 and $97 for the years ended December 31, 2002 and 2001, respectively. On January 18, 2002, the Company sold 688 unregistered shares of common stock to a limited number of accredited investors. In connection with this private placement, the Company sold an aggregate of 344 shares of common stock at a price of $12.80 per share to unaffiliated investors and 344 shares of common stock at a price of $13.05 per share to investors that are affiliates, resulting in aggregate net proceeds of approximately $8,900. 13. SUBSEQUENT EVENTS On February 12, 2003, the Company completed a statutory merger with IRT Property Company ("IRT"). In connection with the merger, the Company acquired 92 properties that comprise an aggregate of approximately 10,000 square feet of gross leasable area. The aggregate purchase price for the acquisition was approximately $762,000 (including transaction costs and assumed debt), consisting of approximately $181,200 in cash, issuance of approximately 17,500 shares of the Company's common stock valued at approximately $231,700 and assumption of approximately $337,300 of outstanding debt and other liabilities. F-26 The cash portion of the purchase price was partially financed by proceeds of $93,200 from a private placement offering of 6,911 shares of the Company's common stock at a price of $13.50 per share. The balance of the cash consideration was funded from a new revolving credit facility. On February 7, 2003, the Company entered into a $340,000 unsecured revolving credit facility. The facility has an initial term of three years with a one-year extension option, and bears interest of LIBOR plus 0.65% to 1.35%, depending on the credit ratings of the Company's senior unsecured long-term indebtedness. The Company used available funds under this credit facility to pay part of the cash consideration to be paid to the IRT shareholders, to pay transaction expenses and to repay certain outstanding indebtedness. After the merger, the Company's combined portfolio of neighborhood shopping centers anchored by national and regional supermarket chains and other necessity-oriented retailers such as drug stores or discount stores are located in twelve states in the southern United States. After giving effect to the merger, as of December 31, 2002, the Company's portfolio would have comprised 180 properties totaling approximately 18,400 square feet, and include 121 supermarket-anchored shopping centers, eleven drugstore-anchored shopping centers, 40 other retail-anchored shopping centers, one self storage facility, one industrial and six retail developments, as well as non-controlling interests in four unconsolidated joint ventures. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed from IRT. The Company is in the process of valuing certain assets and liabilities; thus, the allocation of the purchase price is subject to refinement. As of December 31, 2002 ------------------ Rental property.................................... $ 713,871 Cash and cash equivalents.......................... 11,394 Accounts receivable................................ 4,703 Deposits........................................... 1,009 Other assets....................................... 107 Costs over fair value of net assets acquired....... 31,412 ------------------ Total assets acquired...................... 762,496 ------------------ Notes payable...................................... 314,091 Other liabilities.................................. 23,241 ------------------ Total liabilities assumed.................. 337,332 ------------------ Net assets acquired........................ $ 425,164 ================== F-27 Following the execution of the merger agreement with IRT in October 2002, three IRT shareholders filed three separate purported class action and derivative suits in the Superior Court of Cobb County, State of Georgia, against IRT, IRT's board of directors and the Company alleging claims of breach of fiduciary duty by the defendant directors, unjust enrichment and irreparable harm. The complaints sought declaratory relief, an order enjoining consummation of the merger, and unspecified damages. Although the Georgia court did not grant the plaintiffs the equitable relief requested and permitted the completion of the merger, two of these lawsuits, Greaves v. IRT Property Company, et. al. and Phillips v. IRT Property Company, et. al., are still pending and second amended complaints have been filed in each case and the other was voluntarily dismissed. Although management believes that these suits are without merit and intends to continue to defend them vigorously, there can be no assurance that the pending litigation will be resolved in the Company's favor. 14. SUBSEQUENT DISPOSITIONS During the six months ended June 30, 2003, the Company sold the following properties:
Square Feet/Acres Gross Sales Property Location Date Sold (ac) Price - -------------------------- -------------------- --------------- ------------- ------------ Eckerd Leesburg Leesburg, FL March 2003 12,739 $ 4,050 Eckerd Melbourne Melbourne, FL March 2003 10,908 2,715 Pompano (Lowe's) Pompano, FL April 2003 80,697 3,400 Oak Square Joint Venture Gainesville, FL June 2003 - 2,230 - -------------------------- -------------------- --------------- ------------- ------------ $ 12,395 ============
Since the Company's financial statements for the year ended December 31, 2002 included in its Annual Report on Form 10-K will be incorporated by reference in a registration statement on Form S-3 subsequently filed with the SEC, the SEC requires the financial statements to be restated to reflect discontinued operations treatment for the properties sold during the six months ended June 30, 2003. The net income for these properties has been reclassified to discontinued operations for the years ended December 31, 2002, 2001 and 2000 to conform with the presentation in the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2003. F-28 15. QUARTERLY FINANCIAL DATA (unaudited)
First Second Third Fourth Quarter(1) Quarter(1) Quarter(1) Quarter(1) Total(2) ---------- ---------- ---------- ---------- -------- 2002: Total revenues........................... $ 24,991 $ 23,947 $ 25,574 $ 27,466 $101,978 Income from continuing operations...... 6,919 6,151 9,432 5,920 28,422 Net income............................. $ 13,267 $ 8,438 $ 10,926 $ 7,303 $ 39,934 Basic per share data Income from continuing operations...... $ 0.24 $ 0.18 $ 0.28 $ 0.17 $ 0.87 Net Income............................. $ 0.45 $ 0.25 $ 0.32 $ 0.21 $ 1.22 Diluted per share data Income from continuing operations...... $ 0.23 $ 0.18 $ 0.27 0.17 $ 0.86 Net income............................. $ 0.44 $ 0.25 $ 0.32 $ 0.21 $ 1.20 2001: Total revenues........................... $ 18,542 $ 17,956 $ 19,278 $ 23,584 $ 79,360 Income from continuing operations...... 3,570 3,324 5,431 4,532 16,857 Net income............................. $ 4,024 $ 3,775 $ 5,826 $ 5,096 $ 18,721 Basic per share data Income from continuing operations...... $ 0.18 $ 0.17 $ 0.25 $ 0.16 $ 0.75 Net income............................. $ 0.20 $ 0.19 $ 0.27 $ 0.18 $ 0.83 Diluted per share data Income from continuing operations...... $ 0.18 $ 0.16 $ 0.25 $ 0.16 $ 0.75 Net income............................. $ 0.20 $ 0.19 $ 0.27 $ 0.17 $ 0.83
_____________________ (1) Restated to reflect the reporting of discontinued operations. (2) The sum of quarterly earnings per share amounts may differ from annual earnings per share. * * * * * F-29 ITEM 7. EXHIBITS 23.1 Independent Auditors' Consent SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: September 19, 2003 EQUITY ONE, INC. / s / HOWARD M. SIPZNER -------------------------------------------- Howard M. Sipzner Chief Financial Officer (Principal Accounting and Financial Officer) INDEX TO EXHIBITS EXHIBIT DESCRIPTION 23.1 Independent Auditors' Consent EX-23 3 exh23-1.txt EXHIBIT 23.1 Exhibit 23.1 ------------ INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 333-81216, 333-98775 and 333-106909 of Equity One, Inc. on Forms S-3 and Registration Statement No. 333-99577 and 333-103368 of Equity One, Inc. on Form S-8, as amended, of our report dated February 17, 2003 (except for Note 14, as to which the date is September 12, 2003) appearing in this Current Report on Form 8-K dated September 19, 2003 of Equity One, Inc. We also consent to the reference to us under the heading "Selected Financial Data" in such Form 8-K. Deloitte & Touche LLP Miami, Florida September 19, 2003 -----END PRIVACY-ENHANCED MESSAGE-----