-----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, BkN+LwCAn9TiS8H5ibxqT916HU435bEEQda7FWFuSLbTwm7LluvqDaRjpiTUAAba nBd2NhMh5psBBEgDO+dLlw== 0000828916-01-500044.txt : 20010815 0000828916-01-500044.hdr.sgml : 20010815 ACCESSION NUMBER: 0000828916-01-500044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEINGARTEN REALTY INVESTORS /TX/ CENTRAL INDEX KEY: 0000828916 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 741464203 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09876 FILM NUMBER: 1713171 BUSINESS ADDRESS: STREET 1: 2600 CITADEL PLAZA DR STREET 2: SUITE 300 CITY: HOUSTON STATE: TX ZIP: 77292 BUSINESS PHONE: 7138666000 MAIL ADDRESS: STREET 1: P O BOX 924133 STREET 2: P O BOX 924133 CITY: HOUSTON STATE: TX ZIP: 77292-4133 10-Q 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________________ to ____________________ Commission file number 1-9876 ------ WEINGARTEN REALTY INVESTORS --------------------------- (Exact name of registrant as specified in its charter) Texas 74-1464203 - ---------------------------------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2600 Citadel Plaza Drive, P.O. Box 924133, Houston, Texas 77292-4133 - ---------------------------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 866-6000 -------------- ____________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X. No. ---- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes. No. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of July 31, 2001, there were 32,405,500 common shares of beneficial interest of Weingarten Realty Investors, $.03 par value, outstanding.
PART 1 FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS WEINGARTEN REALTY INVESTORS STATEMENTS OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Three Months Ended Six Months Ended June 30, June 30, -------------------- ---------------------- 2001 2000 2001 2000 --------- --------- ---------- ---------- Revenues: Rentals . . . . . . . . . . . . . . . . . . . . . . . . $ 83,392 $ 64,218 $ 156,088 $ 126,372 Interest income . . . . . . . . . . . . . . . . . . . . 945 1,556 1,868 2,959 Other . . . . . . . . . . . . . . . . . . . . . . . . . 1,659 708 2,539 1,123 --------- --------- ---------- ---------- Total. . . . . . . . . . . . . . . . . . . . . . . 85,996 66,482 160,495 130,454 --------- --------- ---------- ---------- Expenses: Depreciation and amortization . . . . . . . . . . . . . 17,858 13,720 34,713 27,375 Interest. . . . . . . . . . . . . . . . . . . . . . . . 16,072 10,601 28,493 20,744 Operating . . . . . . . . . . . . . . . . . . . . . . . 11,676 10,093 22,339 19,100 Ad valorem taxes. . . . . . . . . . . . . . . . . . . . 10,464 8,054 19,783 15,980 General and administrative. . . . . . . . . . . . . . . 2,740 2,053 5,117 3,927 --------- --------- ---------- ---------- Total. . . . . . . . . . . . . . . . . . . . . . . 58,810 44,521 110,445 87,126 --------- --------- ---------- ---------- Income Before Minority Interest in Income of Partnerships and Gain on Sales of Property. . . . . . . 27,186 21,961 50,050 43,328 Minority Interest in Income of Partnerships . . . . . . . (1,879) (1,983) (3,651) (3,899) Gain on Sales of Property . . . . . . . . . . . . . . . . 674 4,984 --------- --------- ---------- ---------- Net Income. . . . . . . . . . . . . . . . . . . . . . . . 25,981 19,978 51,383 39,429 Dividends on Preferred Shares . . . . . . . . . . . . . . 5,010 5,010 10,020 10,020 --------- --------- ---------- ---------- Net Income Available to Common Shareholders . . . . . . . $ 20,971 $ 14,968 $ 41,363 $ 29,409 ========= ========= ========== ========== Net Income Per Common Share - Basic . . . . . . . . . . . $ .65 $ .56 $ 1.33 $ 1.10 ========= ========= ========== ========== Net Income Per Common Share - Diluted . . . . . . . . . . $ .65 $ .56 $ 1.33 $ 1.10 ========= ========= ========== ========== Net Income. . . . . . . . . . . . . . . . . . . . . . . . $ 25,981 $ 19,978 $ 51,383 $ 39,429 --------- --------- ---------- ---------- Other Comprehensive Income: Cumulative effect of change in accounting principle (SFAS 133) on other comprehensive loss. . . . . . . . (1,877) Unrealized derivative gain(loss) on interest rate swaps 282 (987) Unrealized derivative gain on forward-starting interest rate swaps . . . . . . . . . . . . . . . . . 3,771 3,771 --------- --------- ---------- ---------- Other Comprehensive Income. . . . . . . . . . . . . . . . 4,053 907 --------- --------- ---------- ---------- Comprehensive Income. . . . . . . . . . . . . . . . . . . $ 30,034 $ 19,978 $ 52,290 $ 39,429 ========= ========= ========== ==========
See Notes to Consolidated Financial Statements. Page 2
WEINGARTEN REALTY INVESTORS CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) June 30, December 31, 2001 2000 ------------ ------------ (unaudited) ASSETS Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,343,989 $ 1,906,431 Accumulated Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . (411,955) (387,118) ------------ ------------ Property - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,932,034 1,519,313 Notes Receivable from Real Estate Joint Ventures and Partnerships . . . . . . . 35,092 31,002 Unamortized Debt and Lease Costs. . . . . . . . . . . . . . . . . . . . . . . . 39,327 38,453 Accrued Rent and Accounts Receivable (net of allowance for doubtful accounts of $2,106 in 2001 and $1,898 in 2000). . . . . . . . . . . . . . . . 19,433 22,273 Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,107 14,825 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,997 20,145 ------------ ------------ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,065,990 $ 1,646,011 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,080,328 $ 869,627 Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . . . . . . 63,508 69,561 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,808 4,263 ------------ ------------ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,150,644 943,451 ------------ ------------ Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,430 72,693 ------------ ------------ Commitments and Contingencies Shareholders' Equity: Preferred Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 10,000 7.44% Series A cumulative redeemable preferred shares of beneficial interest; 3,000 shares issued and outstanding; liquidation preference $25 per share. . . . . . . . . . . . . . . . . 90 90 7.125% Series B cumulative redeemable preferred shares of beneficial interest; 3,600 shares issued and 3,536 and 3,552 shares outstanding in 2001 and 2000; liquidation preference $25 per share. . 106 107 7.0% Series C cumulative redeemable preferred shares of beneficial interest; 2,300 shares issued and 2,258 and 2,266 shares outstanding in 2001 and 2000; liquidation preference $50 per share. . 68 68 Common Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 150,000; shares issued and outstanding: 32,405 in 2001 and 26,921 in 2000 . . . . . . . . . . . . . . . . . . . . 971 807 Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 976,534 758,363 Accumulated Dividends in Excess of Net Income . . . . . . . . . . . . . . . . (138,760) (129,568) Accumulated Other Comprehensive Income. . . . . . . . . . . . . . . . . . . . 907 ------------ ------------ Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 839,916 629,867 ------------ ------------ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,065,990 $ 1,646,011 ============ ============
See Notes to Consolidated Financial Statements. Page 3
WEINGARTEN REALTY INVESTORS STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) (AMOUNTS IN THOUSANDS) Six Months Ended June 30, ------------------------ 2001 2000 ----------- ----------- Cash Flows from Operating Activities: Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,383 $ 39,429 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . 34,713 27,375 Minority interest in income of partnerships . . . . . . . 3,651 3,899 Gain on sales of property . . . . . . . . . . . . . . . . (4,984) Changes in accrued rent and accounts receivable . . . . . 1,547 6,772 Changes in other assets . . . . . . . . . . . . . . . . . (16,101) (9,327) Changes in accounts payable and accrued expenses. . . . . (8,154) (13,158) Other, net. . . . . . . . . . . . . . . . . . . . . . . . (4) 119 ----------- ----------- Net cash provided by operating activities . . . . . . . 62,051 55,109 ----------- ----------- Cash Flows from Investing Activities: Investment in properties. . . . . . . . . . . . . . . . . . . . (290,127) (70,050) Notes Receivable: Advances. . . . . . . . . . . . . . . . . . . . . . . . . (5,082) (18,908) Collections . . . . . . . . . . . . . . . . . . . . . . . 336 288 Proceeds from sales and disposition of property . . . . . . . . 6,811 Investment in real estate joint ventures and partnerships . . . (811) (1,049) ----------- ----------- Net cash used in investing activities . . . . . . . . . (288,873) (89,719) ----------- ----------- Cash Flows from Financing Activities: Proceeds from issuance of: Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . 166,590 108,115 Common shares of beneficial interest. . . . . . . . . . . 218,089 14 Principal payments of debt. . . . . . . . . . . . . . . . . . . (102,465) (25,891) Common and preferred dividends paid . . . . . . . . . . . . . . (60,574) (50,097) Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . 464 (453) ----------- ----------- Net cash provided by financing activities . . . . . . . 222,104 31,688 ----------- ----------- Net decrease in cash and cash equivalents . . . . . . . . . . . . . (4,718) (2,922) Cash and cash equivalents at January 1. . . . . . . . . . . . . . . 14,825 8,467 ----------- ----------- Cash and cash equivalents at June 30. . . . . . . . . . . . . . . . $ 10,107 $ 5,545 =========== ===========
See Notes to Consolidated Financial Statements. Page 4 WEINGARTEN REALTY INVESTORS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (AMOUNTS IN THOUSANDS) 1. INTERIM FINANCIAL STATEMENTS The consolidated financial statements included in this report are unaudited, except for the balance sheet as of December 31, 2000. In the opinion of WRI, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted of normal recurring items. Interim results are not necessarily indicative of results for a full year. The consolidated financial statements and notes are presented as permitted by Form 10-Q, and do not contain certain information included in WRI's annual financial statements and notes. Certain reclassifications of prior year's amounts have been made to conform with the current year presentation. 2. NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS On January 1, 2001, WRI adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. SFAS No. 133 establishes accounting and reporting standards for derivative instruments. Specifically SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either shareholders' equity or net income depending on whether the derivative instruments qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. WRI hedges the future cash flows of debt transactions principally through interest rate swaps with major financial institutions. WRI has four interest rate swap contracts with an aggregate notional amount of $70 million that convert variable interest payments to fixed interest payments at rates from 6.80% to 7.87%. These swaps have been designated and qualify as cash flow hedges. We have determined these swap agreements are highly effective in offsetting future variable interest cash flows of the related debt instruments. As of January 1, 2001, the adoption of the new standard resulted in a cumulative transition adjustment of $1.9 million to accumulated other comprehensive income, a component of shareholders' equity, and a corresponding liability of the same amount. For the six months ended June 30, 2001, the change in fair market value of our interest rate swaps was $1.0 million and was recorded in accumulated other comprehensive income. On June 25, 2001, WRI entered into two forward-starting interest rate swap contracts with a notional amount of $188.7 million. These contracts have been designated and qualify as cash flow hedges of forecasted interest payments. We have determined these contracts are highly effective in offsetting future variable interest cash flows of fixed-rate debt instruments to be issued in future periods. For the six months ended June 30, 2001, the change in fair market value of our forward-starting interest rate swap contracts was $3.8 million and was recorded in accumulated other comprehensive income and other assets. We do not anticipate any material reclassifications to earnings from accumulated other comprehensive income over the next 12 months. Page 5 In July 2000, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on EITF Issue No. 00-1,"Investor Balance Sheet and Income Statement Display under the Equity Method for Investments in Certain Partnerships and Other Ventures." This consensus requires that the proportionate share method of presenting balance sheet and income statement information for partnerships and other ventures in which entities have joint interest and control be discontinued, except in limited circumstances. WRI was required to conform with the guidance provided in this Issue effective December 31, 2000. Accordingly, the consolidated financial statements for all periods of the prior year presented in this Form 10-Q have been restated to conform with the revised presentation. 3. PER SHARE DATA Net income per common share - basic is computed using net income available to common shareholders and the weighted average shares outstanding. Net income per common share - diluted includes the effect of potentially dilutive securities for the periods indicated, as follows (in thousands):
Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2001 2000 2001 2000 --------- --------- --------- --------- Numerator: Net income available to common shareholders - basic . . . $ 20,971 $ 14,968 $ 41,363 $ 29,409 Income attributable to operating partnership units. . . . 29 42 64 81 --------- --------- --------- --------- Net income available to common shareholders - diluted . . $ 21,000 $ 15,010 $ 41,427 $ 29,490 ========= ========= ========= ========= Denominator: Weighted average shares outstanding - basic . . . . . . . 32,090 26,754 31,105 26,730 Effect of dilutive securities: Share options and awards. . . . . . . . . . . . . . 113 54 95 37 Operating partnership units . . . . . . . . . . . . 51 103 51 117 --------- --------- --------- --------- Weighted average shares outstanding - diluted . . . . . . 32,254 26,911 31,251 26,884 ========= ========= ========= =========
4. DEBT WRI's debt consists of the following (in thousands):
June 30, December 31, 2001 2000 ------------ ------------ Fixed-rate debt payable to 2015 at 6.0% to 10.0%. . . . $ 688,944 $ 545,391 Variable-rate unsecured notes payable to 2003 . . . . . 50,000 50,000 Notes payable under revolving credit agreements . . . . 297,780 230,100 Obligations under capital leases. . . . . . . . . . . . 33,569 33,467 Industrial revenue bonds to 2015 at 2.8% to 5.25% . . . 5,939 6,010 Other . . . . . . . . . . . . . . . . . . . . . . . . . 4,096 4,659 ------------ ------------ Total. . . . . . . . . . . . . . . . . . . . . . . $ 1,080,328 $ 869,627 ============ ============
Page 6 At June 30, 2001, the variable interest rate for notes payable under the $20 and $350 million revolving credit agreements was 4.4% and 4.5%, respectively. In January 2000, WRI issued $10.5 million of ten-year 8.25% fixed-rate, unsecured medium term notes. In connection with this debt issuance, we entered into a ten-year interest rate swap agreement with a notional amount of $10.5 million to swap 8.25% fixed-rate interest for floating-rate interest. On January 4, 2001, we terminated this interest rate swap with the counter-party, resulting in the receipt of $.9 million. As the swap was accounted for as a hedge of the medium term note, the gain will be amortized over the remaining life of the note, which lowers the effective interest rate on the note to 7.4% In March 2001, we filed a $500 million shelf registration statement which can be utilized for the issuance of either debt or equity securities. This registration statement is not yet effective. WRI's debt can be summarized as follows (in thousands):
June 30, December 31, 2001 2000 ------------ ------------ As to interest rate (including the effects of interest rate swaps): Fixed-rate debt . . . . . . . . . . . $ 780,031 $ 645,903 Variable-rate debt. . . . . . . . . . 300,297 223,724 ------------ ------------ Total . . . . . . . . . . . . . . . . $ 1,080,328 $ 869,627 ============ ============ As to collateralization: Unsecured debt. . . . . . . . . . . . $ 736,265 $ 669,106 Secured debt. . . . . . . . . . . . . 344,063 200,521 ------------ ------------ Total . . . . . . . . . . . . . . . . $ 1,080,328 $ 869,627 ============ ============
Subsequent to June 30, 2001, the Company completed two additional financing transactions. On July 5, 2001, we entered into a $50 million unsecured term loan with two banks that also participate in our $350 million revolving credit facility. The terms of the $50 million loan are substantially identical to those of our $350 million revolving credit facility, and it also matures on the same date. On July 12, 2001, we sold $200 million of unsecured notes with a coupon of 7%. Net proceeds from the offering totaled $198.3 million and were used to pay down amounts outstanding under our $350 revolving credit facility. Concurrent with the sale of the 7% notes, we settled our $188.7 million forward-starting interest rate swap contracts, resulting in a gain of $1.6 million. These swap contracts had been designated as a cash flow hedge of forecasted interest payments for fixed-rate notes to be issued in future periods, and accordingly, the gain will be amortized over the life of the 7% notes. On July 26, 2001, the Company entered into eleven interest rate swaps with an aggregate notional amount of $107.5 million that convert fixed interest payments to variable interest payments at rates from 6.35% to 7.35%. These interest rate swaps have been designated as fair value hedges. We have determined that these contracts will be highly effective in limiting our risk of changes in the fair value of the fixed-rate notes attributable to changes in variable interest rates. Page 7 5. PROPERTY WRI's property consists of the following (in thousands):
June 30, December 31, 2001 2000 ------------ ------------ Land . . . . . . . . . . . . . $ 443,317 $ 362,987 Land held for development. . . 25,379 24,013 Land under development . . . . 47,883 43,240 Buildings and improvements . . 1,771,229 1,442,536 Construction in-progress . . . 56,181 33,655 ------------ ------------ Total. . . . . . . . . . . . . $ 2,343,989 $ 1,906,431 ============ ============
Interest and ad valorem taxes capitalized to land under development or buildings under construction was $2.5 million and $1.1 million, respectively, for the quarters ended June 30, 2001 and 2000 and $4.5 million and $1.8 million, respectively, for the six months ended June 30, 2001 and 2000. 6. SEGMENT INFORMATION The operating segments presented are the segments of WRI for which separate financial information is available and operating performance is evaluated regularly by senior management in deciding how to allocate resources and in assessing performance. WRI evaluates the performance of its operating segments based on net operating income that is defined as total revenues less operating expenses and ad valorem taxes. The shopping center segment is engaged in the acquisition, development and management of real estate, primarily anchored neighborhood and community shopping centers located in Texas, California, Louisiana, Arizona, Nevada, Arkansas, New Mexico, Oklahoma, Tennessee, Kansas, Colorado, Missouri, Illinois, Florida, Mississippi, North Carolina and Maine. The customer base includes supermarkets, drugstores and other retailers who generally sell basic necessity-type commodities. The industrial segment is engaged in the acquisition, development and management of bulk warehouses and office/service centers. Its properties are located in Texas, Nevada and Tennessee, and the customer base is diverse. Included in "Other" are corporate-related items, insignificant operations and costs that are not allocated to the reportable segments. Page 8 Information concerning WRI's reportable segments is as follows (in thousands):
SHOPPING CENTER INDUSTRIAL OTHER TOTAL ------------- ---------- --------- ------------ Three Months Ended June 30, 2001: Revenues . . . . . . . . . $ 73,926 $ 10,180 $ 1,890 $ 85,996 Net operating income . . . 54,543 7,233 2,080 63,856 Total assets . . . . . . . 1,735,574 244,901 85,515 2,065,990 Three Months Ended June 30, 2000: Revenues . . . . . . . . . $ 55,493 $ 8,664 $ 2,325 $ 66,482 Net operating income . . . 39,764 6,160 2,411 48,335 Total assets . . . . . . . 1,156,674 223,041 101,680 1,481,395 Six Months Ended June 30, 2001: Revenues . . . . . . . . . $ 136,790 $ 19,960 $ 3,745 $ 160,495 Net operating income . . . 100,344 14,190 3,839 118,373 Six Months Ended June 30, 2000: Revenues . . . . . . . . . $ 108,953 $ 17,044 $ 4,457 $ 130,454 Net operating income . . . 78,437 12,161 4,776 95,374
Net operating income reconciles to net income as shown on the Statements of Consolidated Income as follows (in thousands):
Three Months Ended Six Months Ended June 30, June 30, -------------------- ---------------------- 2001 2000 2001 2000 --------- --------- ---------- ---------- Total segment net operating income. . . . . . . . . . . $ 63,856 $ 48,335 $ 118,373 $ 95,374 Less: Depreciation and amortization . . . . . . . . . . 17,858 13,720 34,713 27,375 Interest. . . . . . . . . . . . . . . . . . . . . 16,072 10,601 28,493 20,744 General and administrative. . . . . . . . . . . . 2,740 2,053 5,117 3,927 Minority interest in income of partnerships . . . 1,879 1,983 3,651 3,899 Gain on sales of property . . . . . . . . . . . . (674) (4,984) --------- --------- ---------- ---------- Net Income. . . . . . . . . . . . . . . . . . . . . . . $ 25,981 $ 19,978 $ 51,383 $ 39,429 ========= ========= ========== ==========
7. COMMON SHARES OF BENEFICIAL INTEREST On January 29, 2001, we issued 4.5 million common shares of beneficial interest in a secondary public offering. In February 2001, the underwriters exercised their over-allotment option and purchased an additional 200,000 shares. Net proceeds of 188.1 million based on a price of $42.19 per share were used to pay down the amounts outstanding under our $350 million revolving line of credit. Page 9 On May 7, 2001, we issued an additional 690,000 common shares of beneficial interest in a secondary public offering. Net proceeds of $27.9 million based on a price of $42.85 per share were used to pay down amounts outstanding under our $350 million revolving line of credit. Had this transaction occurred on January 1, 2001, earnings per common share - basic and earnings per common share - diluted would have both decreased by $.02 per share. 8. BANKRUPTCY REMOTE PROPERTIES On April 2, 2001, we purchased 19 supermarket-anchored shopping centers, aggregating 2.5 million square feet, in California from Burnham Pacific Properties, Inc. The purchase price for the properties was $277.5 million, including the assumption of approximately $132 million in debt secured by all 19 properties. These properties are located in the Sacramento/San Francisco Bay area (13 properties) and in the Los Angeles area (six properties). These 19 properties having a net book value of approximately $276.8 million at June 30, 2001 (collectively the "Bankruptcy Remote Properties", and each a "Bankruptcy Remote Property"), are wholly-owned by various "Bankruptcy Remote Entities". Each Bankruptcy Remote Entity is an indirect subsidiary of the Company. The assets of each Bankruptcy Remote Entity, including the respective Bankruptcy Remote Property or Properties owned by each, are owned by that Bankruptcy Remote Entity alone and are not available to satisfy claims that any creditor may have against the Company, its affiliates, or any other person or entity. No Bankruptcy Remote Entity has agreed to pay or make its assets available to pay creditors of the Company, any of its affiliates, or any other person or entity. Neither the Company nor any of its affiliates has agreed to pay or make its assets available to pay creditors of any Bankruptcy Remote Entity (other than any agreement by a Bankruptcy Remote Entity to pay its own creditors). No affiliate of any Bankruptcy Remote Entity has agreed to pay or make its assets available to pay creditors of any Bankruptcy Remote Entity. The accounts of the Bankruptcy Remote Entities are included in WRI's consolidated financial statements as WRI owns, indirectly, 100% of each of the entities. Additionally, WRI, through its wholly-owned subsidiaries, makes all day to day operating and financial decisions with respect to these properties, subject to approval by the loan servicing agent for the certain significant transactions. WRI has the right to prepay the loan at any time, which would eliminate all encumbrances and restrictions. Page 10 PART I FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and notes thereto and the comparative summary of selected financial data appearing elsewhere in this report. Historical results and trends which might appear should not be taken as indicative of future operations. Weingarten Realty Investors owned and operated 224 anchored shopping centers, 55 industrial properties, one multi-family residential property and one office building at June 30, 2001. Of WRI's 281 developed properties, 185 are located in Texas (including 98 in Houston and Harris County). Our remaining properties are located in California (19), Louisiana (13), Arizona (12), Nevada (9), Tennessee (7), Arkansas (6), New Mexico (6), Kansas (5), Colorado (5), Oklahoma (4), Florida (4), Missouri (2), Illinois (1), North Carolina (1), Mississippi (1) and Maine (1). WRI has 5,200 leases and 4,000 different tenants. Leases for our properties range from less than a year for smaller spaces to over 25 years for larger tenants; leases generally include minimum lease payments and contingent rentals for payment of taxes, insurance and maintenance and for an amount based on a percentage of the tenants' sales. The majority of our anchor tenants are supermarkets, value-oriented apparel and discount stores and other retailers, which generally sell basic necessity-type items. CAPITAL RESOURCES AND LIQUIDITY WRI anticipates that cash flows from operating activities will continue to provide adequate capital for all dividend payments in accordance with REIT requirements. Cash on hand, borrowings under our existing credit facilities, issuance of unsecured debt and the use of project financing, as well as other debt and equity alternatives, will provide the necessary capital to achieve growth. Cash flow from operating activities as reported in the Statements of Consolidated Cash Flows was $62.1 million for the first six months of 2001 as compared to $55.1 million for the same period of 2000. The increase was due primarily to WRI's acquisition and new development programs and improvements in the performance of its existing portfolio of properties. Our Board of Trust Managers approved a quarterly dividend per common share of $.79 for the second quarter of 2001. Our dividend payout ratio on common equity for the second quarter of 2001 and 2000 was 69% and 71%, respectively, based on funds from operations for the applicable period. WRI invested $343.8 million for the acquisition of 25 shopping centers during the second quarter. On April 2, 2001, we completed the acquisition of 19 supermarket-anchored shopping centers in California. These properties are located in the Sacramento/San Francisco Bay area (13 properties) and in the Los Angeles area (six properties). Anchor merchants include the market's major supermarket companies such as Ralph's (Kroger), Albertson's, Safeway, Raley's and Food 4 Less (Fleming Company). Additionally, the properties include other well-known anchor retailers including Target, K-Mart, Home Depot and Walgreens. These properties added nearly 2.5 million square feet to the portfolio. On May 15, 2001, we acquired four supermarket-anchored shopping centers in the Memphis, Tennessee market area. Three of the centers are anchored by Kroger and the fourth is anchored by Seessel's (owned by Albertson's). Other anchor retailers include Walgreen Drugs and Stein Mart. These properties total nearly 617,000 square feet and were over 92% leased in the aggregate. With this acquisition, WRI now owns eight properties totaling over 1.3 million square feet in the Memphis area. On June 6, 2001, we purchased the Venice Pines Shopping Center in Venice, Florida, our fourth property in the state of Florida. This 97,000 square foot center is anchored by Kash N Karry Supermarket and is 91% leased. Page 11 On June 29, 2001, we purchased Parkway Pointe Shopping Center in Cary, North Carolina, a suburb of Raleigh. Anchored by Food Lion, Eckerd Drugs and Ace Hardware, the center was 95% leased upon acquisition. With respect to new development, we have 15 retail developments underway including three joint ventures with our development partner in Denver. These projects, upon completion, will represent an investment of approximately $160 million and will add 1.3 million square feet to the portfolio. We expect to invest approximately $84.0 million in these properties during 2001. These projects with continue to come on-line during the second half of this year and through mid 2002. Additionally, we commenced an $11 million redevelopment of a shopping center in Las Vegas which will include a new 220,000 square foot Super Wal-Mart. In January, we issued 4.5 million common shares of beneficial interest in a secondary public offering and an additional 200,000 shares in February, as the underwriters exercised their over-allotment option. Net proceeds of $188.1 million, based on a price of $42.19 per share, were used to pay down amounts outstanding under our $350 million revolving line of credit. On May 7, 2001, we issued an additional 690,000 common shares of beneficial interest in a secondary public offering. Net proceeds of $27.9 million based on a price of $42.85 per share were used to pay down amounts outstanding under our $350 million revolving line of credit. Total debt outstanding increased to $1.1 billion at quarter-end from $869.6 million at December 31, 2000. This increase was primarily due to the funding of the Company's acquisitions and ongoing development and redevelopment efforts, offset by the use of proceeds from the common equity offerings. Included in total debt outstanding of $1.1 billion at June 30, 2001 is variable-rate debt of $272.3 million, after recognizing the effect of $70.0 million of interest rate swaps and $28.0 million of variable-rate notes receivables. In March 2001, we filed a $500 million shelf registration statement that can be utilized for the issuance of either debt or equity securities. This registration statement is not yet effective. Subsequent to June 30, 2001, the Company completed two additional financing transactions. On July 5, 2001, we entered into a $50 million unsecured term loan with two banks that also participate in our $350 million revolving credit facility. The terms of the $50 million loan are substantially identical to those of our $350 million revolving credit facility, and it also matures on the same date. On July 12, 2001, we sold $200 million of unsecured notes with a coupon of 7%. Net proceeds from the offering totaled $198.3 million and were used to pay down amounts outstanding under our $350 revolving credit facility. Concurrent with the sale of the 7% notes, we settled our $188.7 million forward-starting interest rate swap contracts, resulting in a gain of $1.6 million. These swap contracts had been designated as a cash flow hedge of forecasted interest payments for fixed-rate notes to be issued in future periods, and accordingly, the gain will be amortized over the life of the 7% notes. On July 26, 2001, the Company entered into eleven interest rate swaps with an aggregate notional amount of $107.5 million that convert fixed interest payments to variable interest payments at rates from 6.35% to 7.35%. These interest rate swaps have been designated as fair value hedges. We have determined that these contracts will be highly effective in limiting our risk of changes in the fair value of the fixed-rate notes attributable to changes in variable interest rates. FUNDS FROM OPERATIONS The Board of Governors of the National Association of Real Estate Investment Trusts defines funds from operations (FFO) as net income (loss) computed in accordance with generally accepted accounting principles, excluding gains or losses from sales of property, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In addition, NAREIT recommends that extraordinary items not be considered in arriving at FFO. We calculate FFO in a manner consistent with the NAREIT definition. Most industry analysts and equity REITS, including Page 12 Weingarten, believe FFO is an appropriate measure of performance relative to other REITs. FFO provides investors with an understanding of our ability to incur and service debt, make capital expenditures and pay common share dividends. There can be no assurance that FFO presented by Weingarten is comparable to similarly titled measures of other REITs. FFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing, or financing activities as a measure of liquidity. FFO does not reflect working capital changes, cash expenditures for capital improvements, or principal payments on indebtedness. Funds from operations - diluted for the three and six months ended June 30, 2001 and 2000 is calculated as follows:
Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2001 2000 2001 2000 --------- --------- --------- --------- Net income available to common shareholders . . . . . . . . . $ 20,971 $ 14,968 $ 41,363 $ 29,409 Depreciation and amortization . . . . . . . . . . . . . . . . 16,714 13,122 32,387 26,226 Gain on sales of property . . . . . . . . . . . . . . . . . . (674) (4,984) --------- --------- --------- --------- Funds from operations . . . . . . . . . . . . . 37,011 28,090 68,766 55,635 Funds from operations attributable to operating partnership units . . . . . . . . . . . . . . . . . . . . . 53 87 113 170 --------- --------- --------- --------- Funds from operations assuming conversion of OP units . . . . . . . . . . . . . . . . . $ 37,064 $ 28,177 $ 68,879 $ 55,805 ========= ========= ========= ========= Weighted average shares outstanding - basic . . . . . . . . . 32,090 26,754 31,105 26,730 Effect of dilutive securities: Share options and awards. . . . . . . . . . . . . . . . 113 54 95 37 Operating partnership units . . . . . . . . . . . . . . 51 103 51 117 --------- --------- --------- --------- Weighted average shares outstanding - diluted . . . . . . . . 32,254 26,911 31,251 26,884 ========= ========= ========= =========
RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2001 Net income available to common shareholders increased to $21.0 million, or $.65 per diluted share, from $15.0 million, or $.56 per diluted share for the second quarter of 2001 as compared with the same quarter of 2000. The increase in net income available to common shareholders is due primarily from the growth in the portfolio from acquisitions and new development. Also, the increase is attributable to a large lease cancellation, offset by a one-time adjustment to administrative expenses in 2001 that is not present in 2000. Rental revenues were $83.4 million in 2001, as compared to $64.2 million in 2000, representing an increase of approximately $19.2 million or 29.9%. Of these increases, property acquisitions and new development contributed $18.1 million in 2001, as compared to $6.0 million for the same period of 2000. The remaining portion of these increases is due to activity at our existing properties. Occupancy of the total portfolio was unchanged from the prior year at 92.7%. The occupancy of the retail portfolio stood at 92.8% as compared to 92.7% at June 30, 2000, while the occupancy of the industrial portfolio decreased to 92.1% from 92.7% in the prior year. During the first six months of 2001, WRI completed 422 renewals or new leases comprising 1.7 million square feet at an average rental rate increase of 10.2%. Net of the amortized portion of capital costs for tenant improvements, the increased averaged 6.9%. Page 13 Gross interest costs, before capitalization of interest, increased by $6.8 million from $11.6 million in the second quarter of 2000 to $18.4 million in the second quarter of 2001. The increase is due primarily to an increase in the average debt outstanding between periods of $641.0 in 2000 to $1.0 billion in 2001. The average interest rate decreased from 7.2% in 2000 to 7.1% in 2001. The amount of interest capitalized during the period was $2.4 million and $1.0 million in 2001 and 2000, respectively. General and administrative expenses increased by $.7 million to $2.7 million in the second quarter of 2001 from $2.1 million in the same quarter of 2000. The increase is due primarily to an increase in staffing necessitated by the growth in the portfolio from acquisitions and new development, as well as an increase in professional fees from a non-recurring adjustment of $.2 million in June 2001. The increases in depreciation and amortization, operating expenses and ad valorem taxes were primarily the result of WRI's acquisitions and new development programs. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2001 Net income available to common shareholders increased to $41.4 million, or $1.33 per diluted share, from $29.4 million, or $1.10 per diluted share for the six months of 2001 as compared with the same period of 2000. The increase in net income available to common shareholders is due primarily from the growth in the portfolio from acquisitions and new development, as well as a gain on the sales of property of $5.0 million in 2001 that is absent from 2000. Rental revenues were $156.1 million in 2001, as compared to $126.4 million in 2000, representing an increase of approximately $29.7 million or 23.5%. Of these increases, property acquisitions and new development contributed $26.3 million in 2001, as compared to $11.9 million for the same period of 2000. The remaining portion of these increases is due to activity at our existing properties. Gross interest costs, before capitalization of interest, increased by $10.5 million from $22.4 million for the six months of 2000 to $32.8 million for the six months of 2001. The increase is due primarily to an increase in the average debt outstanding between periods of $616.2 million in 2000 to $905.6 million in 2001. The average interest rate remained unchanged at 7.2% in 2001 and 2000. The amount of interest capitalized during the period was $4.3 million and $1.6 million in 2001 and 2000, respectively. General and administrative expenses increased by $1.2 million to $5.1 million for the six months of 2001 from $3.9 million for the same period of 2000. The increase is due primarily to an increase in staffing necessitated by the growth in the portfolio from acquisitions and new development, as well as an increase in professional fees from a non-recurring adjustment of $.2 million in June 2001. The increases in depreciation and amortization, operating expenses and ad valorem taxes were primarily the result of WRI's acquisitions and new development programs. NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS On January 1, 2001, WRI adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. SFAS No. 133 establishes accounting and reporting standards for derivative instruments. Specifically SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either shareholders' equity or net income depending on whether the derivative instruments qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. WRI hedges the future cash flows of debt transactions principally through interest rate swaps with major financial institutions. WRI has four interest rate swap contracts with an aggregate notional amount of $70 million that convert variable interest payments to fixed interest payments at rates from Page 14 6.80% to 7.87%. These swaps have been designated and qualify as cash flow hedges. We have determined these swap agreements are highly effective in offsetting future variable interest cash flows of the related debt instruments. As of January 1, 2001, the adoption of the new standard resulted in a cumulative transition adjustment of $1.9 million to accumulated other comprehensive income, a component of shareholders' equity, and a corresponding liability of the same amount. For the six months ended June 30, 2001, the change in fair market value of our interest rate swaps was $1.0 million and was recorded in accumulated other comprehensive income. On June 25, 2001, WRI entered into two forward-starting interest rate swap contracts with a notional amount of $188.7 million. These contracts have been designated and qualify as cash flow hedges of forecasted interest payments. We have determined these contracts are highly effective in offsetting future variable interest cash flows of fixed-rate debt instruments to be issued in future periods. For the six months ended June 30, 2001, the change in fair market value of our forward-starting interest rate swap contracts was $3.8 million and was recorded in accumulated other comprehensive income and other assets. We do not anticipate any material reclassifications to earnings from accumulated other comprehensive income over the next 12 months. In July 2000, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on EITF Issue No. 00-1,"Investor Balance Sheet and Income Statement Display under the Equity Method for Investments in Certain Partnerships and Other Ventures." This consensus requires that the proportionate share method of presenting balance sheet and income statement information for partnerships and other ventures in which entities have joint interest and control be discontinued, except in limited circumstances. WRI was required to conform with the guidance provided in this Issue effective December 31, 2000. Accordingly, the consolidated financial statements for all periods of the prior year presented in this Form 10-Q have been restated to conform with the revised presentation. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK WRI uses fixed and floating-rate debt to finance its capital requirements. These transactions expose WRI to market risk related to changes in interest rates. Derivative financial instruments are used to manage a portion of this risk, primarily interest rate swap agreements with major financial institutions. These swap agreements expose WRI to credit risk in the event of non-performance by the counter-parties to the swaps. We do not engage in the trading of derivative financial instruments in the normal course of business. At June 30, 2001, WRI had fixed-rate debt of $780.0 million and variable-rate debt of $272.3 million, after adjusting for the effect of $70 million of interest rate swaps and $28.0 million of variable-rate notes receivables. Page 15 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) (12) A statement of computation of ratios of earnings and funds from operations to combined fixed charges and preferred dividends. (b) Reports on Form 8-K A Form 8-K, dated April 16, 2001, was filed to report a significant acquisition in response to Item 2., Acquisition or Disposition of Assets. A Form 8-K, dated April 26, 2001, was filed to report significant acquisitions in response to Item 5., Other Events and Item 7., Financial Statements, Pro Forma Financial Information and Exhibits. A Form 8-K/A, dated April 30, 2001, was filed to supplement information previously filed on April 26, 2001 in response to Item 5., Other Events. A Form 8-K, dated May 4, 2001, was filed to report an event in response to Item 5., Other Events and Item 7., Financial Statements, Pro Forma Financial Information and Exhibits. A Form 8-K/A, dated June 18, 2001, was filed to supplement information previously filed on April 26, 2001 in response to Item 2., Acquisition or Disposition of Assets and Item 7., Financial Statements, Pro Forma Financial Information and Exhibits. A Form 8-K/A, dated June 21, 2001, was filed to supplement information previously filed on April 30, 2001 in response to Item 5., Other Events. Page 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WEINGARTEN REALTY INVESTORS ----------------------------- (Registrant) BY: /s/ Andrew M. Alexander --------------------------------- Andrew M. Alexander President/Chief Executive Officer (Principal Executive Officer) BY: /s/ Joe D. Shafer --------------------------------- Joe D. Shafer Vice President/Controller (Principal Accounting Officer) DATE: August 14, 2001 ----------------- Page 17 EX-12 3 doc2.txt EXHIBIT 12
WEINGARTEN REALTY INVESTORS COMPUTATION OF RATIOS OF EARNINGS AND FUNDS FROM OPERATIONS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS (AMOUNTS IN THOUSANDS) Three Months Ended Six Months Ended June 30, June 30, -------------------- ---------------------- 2001 2000 2001 2000 --------- --------- ---------- ---------- Net income available to common shareholders. . . . . . . . . . $ 20,971 $ 14,968 $ 41,363 $ 29,409 Add: Portion of rents representative of the interest factor . . . . 228 235 487 464 Interest on indebtedness . . . . . . . . . . . . . . . . . . . 16,072 10,601 28,493 20,744 Preferred dividends. . . . . . . . . . . . . . . . . . . . . . 5,010 5,010 10,020 10,020 Amortization of debt cost. . . . . . . . . . . . . . . . . . . 262 103 587 209 --------- --------- ---------- ---------- Net income as adjusted . . . . . . . . . . . . . . . . . . $ 42,543 $ 30,917 $ 80,950 $ 60,846 ========= ========= ========== ========== Fixed charges: Interest on indebtedness . . . . . . . . . . . . . . . . . . . $ 16,072 $ 10,601 $ 28,493 $ 20,744 Capitalized interest . . . . . . . . . . . . . . . . . . . . . 2,355 1,015 4,336 1,625 Preferred dividends. . . . . . . . . . . . . . . . . . . . . . 5,010 5,010 10,020 10,020 Amortization of debt cost. . . . . . . . . . . . . . . . . . . 262 103 587 209 Portion of rents representative of the interest factor . . . . 228 235 487 464 --------- --------- ---------- ---------- Fixed charges. . . . . . . . . . . . . . . . . . . . . . . $ 23,927 $ 16,964 $ 43,923 $ 33,062 ========= ========= ========== ========== RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS. . . . . . . . . . . . . . . . 1.78 1.82 1.84 1.84 ========= ========= ========== ========== Net income available to common shareholders. . . . . . . . . . $ 20,971 $ 14,968 $ 41,363 $ 29,409 Depreciation and amortization. . . . . . . . . . . . . . . . . 16,714 13,122 32,387 26,226 Gain on sales of property. . . . . . . . . . . . . . . . . . . (674) (4,984) --------- --------- ---------- ---------- Funds from operations. . . . . . . . . . . . . . . . . . . 37,011 28,090 68,766 55,635 Add: Portion of rents representative of the interest factor . . . . 228 235 487 464 Preferred dividends. . . . . . . . . . . . . . . . . . . . . . 5,010 5,010 10,020 10,020 Interest on indebtedness . . . . . . . . . . . . . . . . . . . 16,072 10,601 28,493 20,744 Amortization of debt cost. . . . . . . . . . . . . . . . . . . 262 103 587 209 --------- --------- ---------- ---------- Funds from operations as adjusted. . . . . . . . . . . . . $ 58,583 $ 44,039 $ 108,353 $ 87,072 ========= ========= ========== ========== RATIO OF FUNDS FROM OPERATIONS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS. . . . . . . . . . . . . 2.45 2.60 2.47 2.63 ========= ========= ========== ==========
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