-----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, K3RQhpwuc8A5DODALofdOu/38gWd3rAMpDtzw1qxv9k7n03pqRGFrkpK9BO6D+KQ 5aGKtnoRjHHz/xFC+qoP4g== 0000828916-02-000051.txt : 20021114 0000828916-02-000051.hdr.sgml : 20021114 20021114153720 ACCESSION NUMBER: 0000828916-02-000051 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 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: 02824974 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: PO 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 September 30, 2002 ------------------ 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 November 8, 2002, there were 52,035,100 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 Nine Months Ended September 30, September 30, -------------------- ---------------------- 2002 2001 2002 2001 --------- --------- ---------- ---------- Revenues: Rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 91,347 $ 80,262 $ 264,770 $ 221,479 Interest income . . . . . . . . . . . . . . . . . . . . . . . . 270 261 701 910 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,202 732 4,217 3,072 --------- --------- ---------- ---------- Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 93,819 81,255 269,688 225,461 --------- --------- ---------- ---------- Expenses: Depreciation and amortization . . . . . . . . . . . . . . . . . 19,390 16,812 56,380 48,732 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,062 14,677 48,590 40,072 Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,879 12,616 40,767 33,046 Ad valorem taxes. . . . . . . . . . . . . . . . . . . . . . . . 11,914 9,755 32,910 27,638 General and administrative. . . . . . . . . . . . . . . . . . . 2,576 2,385 8,650 7,489 --------- --------- ---------- ---------- Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 65,821 56,245 187,297 156,977 --------- --------- ---------- ---------- Income Before Equity in Earnings of Joint Ventures, Minority Interest in Income of Partnerships, Gain (Loss) on Sale of Properties and Discontinued Operations . . . . . 27,998 25,010 82,391 68,484 Equity in Earnings of Joint Ventures. . . . . . . . . . . . . . . 989 2,512 3,028 4,559 Minority Interest in Income of Partnerships . . . . . . . . . . . (578) (141) (1,637) (323) Gain (Loss) on Sale of Properties . . . . . . . . . . . . . . . . (517) 4,467 --------- --------- ---------- ---------- Income Before Discontinued Operations . . . . . . . . . . . . . . 28,409 26,864 83,782 77,187 --------- --------- ---------- ---------- Operating Income from Discontinued Operations . . . . . . . . . . 198 525 1,236 1,585 Gain on Sale of Properties. . . . . . . . . . . . . . . . . . . . 10,818 15,158 --------- --------- ---------- ---------- Income From Discontinued Operations. . . . . . . . . . . . 11,016 525 16,394 1,585 --------- --------- ---------- ---------- Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,425 27,389 100,176 78,772 Dividends on Preferred Shares . . . . . . . . . . . . . . . . . . 4,939 5,010 14,817 15,030 --------- --------- ---------- ---------- Net Income Available to Common Shareholders . . . . . . . . . . . $ 34,486 $ 22,379 $ 85,359 $ 63,742 ========= ========= ========== ========== Net Income Per Common Share - Basic: Income Before Discontinued Operations . . . . . . . . . . . . . $ .45 $ .45 $ 1.33 $ 1.32 Income From Discontinued Operations . . . . . . . . . . . . . . .21 .01 .32 .03 --------- --------- ---------- ---------- Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ .66 $ .46 $ 1.65 $ 1.35 ========= ========= ========== ========== Net Income Per Common Share - Diluted: Income Before Discontinued Operations . . . . . . . . . . . . . $ .45 $ .45 $ 1.33 $ 1.31 Income From Discontinued Operations . . . . . . . . . . . . . . .20 .01 .31 .03 --------- --------- ---------- ---------- Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ .65 $ .46 $ 1.64 $ 1.34 ========= ========= ========== ========== Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,425 $ 27,389 $ 100,176 $ 78,772 --------- --------- ---------- ---------- Other Comprehensive Income (Loss): Cumulative effect of change in accounting principle (SFAS 133) on other comprehensive loss. . . . . . . . . . . . (1,877) Unrealized derivative gain (loss) on interest rate swaps. . . . 905 (1,669) (2,830) (2,656) Unrealized derivative gain (loss) on forward-starting interest rate swaps . . . . . . . . . . . . . . . . . . . . . (40) (2,210) 1,401 1,561 --------- --------- ---------- ---------- Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . 865 (3,879) (1,429) (2,972) --------- --------- ---------- ---------- Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . $ 40,290 $ 23,510 $ 98,747 $ 75,800 ========= ========= ========== ==========
See Notes to Consolidated Financial Statements. PAGE 2
WEINGARTEN REALTY INVESTORS CONSOLIDATED BALANCE SHEETS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) September 30, December 31, 2002 2001 ------------- ------------- ASSETS Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,623,683 $ 2,352,393 Accumulated Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (447,862) (402,958) ------------- ------------- Property - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,175,821 1,949,435 Investment in Real Estate Joint Ventures. . . . . . . . . . . . . . . . . . . . . 29,761 25,742 ------------- ------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,205,582 1,975,177 Notes Receivable from Real Estate Joint Ventures and Partnerships . . . . . . . . 9,961 6,068 Unamortized Debt and Lease Costs. . . . . . . . . . . . . . . . . . . . . . . . . 48,722 42,755 Accrued Rent and Accounts Receivable (net of allowance for doubtful accounts of $4,146 in 2002 and $2,926 in 2001). . . . . . . . . . . . . . . . . 31,122 32,382 Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,850 12,434 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,703 26,931 ------------- ------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,362,940 $ 2,095,747 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,283,700 $ 1,070,835 Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . 68,563 80,412 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,278 19,542 ------------- ------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,372,541 1,170,789 ------------- ------------- Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,192 3,886 ------------- ------------- 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 3,519 and 3,526 shares outstanding in 2002 and 2001; liquidation preference $25 per share. . . 106 106 7.0% Series C cumulative redeemable preferred shares of beneficial interest; 2,300 shares issued and 2,254 and 2,256 shares outstanding in 2002 and 2001; liquidation preference $50 per share. . . 67 67 Common Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 150,000; shares issued and outstanding: 52,021 in 2002 and 51,521 in 2001 . . . . . . . . . . . . . . . . . . . . . 1,558 1,548 Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,081,541 1,066,757 Accumulated Dividends in Excess of Net Income . . . . . . . . . . . . . . . . . (145,726) (144,560) Accumulated Other Comprehensive Loss. . . . . . . . . . . . . . . . . . . . . . (1,429) (2,936) ------------- ------------- Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 936,207 921,072 ------------- ------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,362,940 $ 2,095,747 ============= =============
See Notes to Consolidated Financial Statements. PAGE 3
WEINGARTEN REALTY INVESTORS STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) (AMOUNTS IN THOUSANDS) Nine Months Ended September 30, ---------------------- 2002 2001 ---------- ---------- Cash Flows from Operating Activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100,176 $ 78,772 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization. . . . . . . . . . . . . . . 57,060 49,551 Equity in earnings of joint ventures . . . . . . . . . . . (3,028) (4,559) Minority interest in income of partnerships. . . . . . . . 1,637 323 Gain on sale of properties . . . . . . . . . . . . . . . . (15,158) (4,467) Changes in accrued rent and accounts receivable. . . . . . 198 (6,153) Changes in other assets. . . . . . . . . . . . . . . . . . (11,271) (22,837) Changes in accounts payable and accrued expenses . . . . . (10,978) (4,296) Other, net . . . . . . . . . . . . . . . . . . . . . . . . 384 953 ---------- ---------- Net cash provided by operating activities. . . . . . . . 119,020 87,287 ---------- ---------- Cash Flows from Investing Activities: Investment in properties . . . . . . . . . . . . . . . . . . . . (162,661) (353,073) Notes Receivable: Advances . . . . . . . . . . . . . . . . . . . . . . . . . (4,747) (3,616) Collections. . . . . . . . . . . . . . . . . . . . . . . . 2,166 7,672 Proceeds from sales and disposition of property. . . . . . . . . 37,525 8,321 Real estate joint ventures and partnerships: Investments. . . . . . . . . . . . . . . . . . . . . . . . (5,355) (1,011) Distributions. . . . . . . . . . . . . . . . . . . . . . . 3,217 3,279 ---------- ---------- Net cash used in investing activities. . . . . . . . . . (129,855) (338,428) ---------- ---------- Cash Flows from Financing Activities: Proceeds from issuance of: Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,997 431,150 Common shares of beneficial interest . . . . . . . . . . . 13,454 221,401 Principal payments of debt . . . . . . . . . . . . . . . . . . . (77,735) (297,261) Common and preferred dividends paid. . . . . . . . . . . . . . . (101,342) (91,224) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (123) 52 ---------- ---------- Net cash provided by financing activities. . . . . . . . 36,251 264,118 ---------- ---------- Net increase in cash and cash equivalents. . . . . . . . . . . . . . 25,416 12,977 Cash and cash equivalents at January 1 . . . . . . . . . . . . . . . 12,434 7,321 ---------- ---------- Cash and cash equivalents at September 30. . . . . . . . . . . . . . $ 37,850 $ 20,298 ========== ==========
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, however, amounts presented in the balance sheet as of December 31, 2001 are derived from the audited financial statements of the Company at that date. 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 to the current year presentation. 2. NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS On January 1, 2002, WRI adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses accounting and reporting for the impairment or disposal of a segment of a business. More specifically, this Statement broadens the presentation of discontinued operations to include a component of an entity whose operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. In 2002, we sold four retail projects located in Houston (2), Grand Prairie and San Antonio, Texas; one industrial building located in Houston, Texas and the River Pointe Apartments located in Conroe, Texas. Accordingly, the operating results of the disposed properties have been reclassified and reported as discontinued operations in the Statements of Consolidated Income and Comprehensive Income. Included in the December 31, 2001 Consolidated Balance Sheet was $28.8 million of Property and $6.1 million of Accumulated Depreciation associated with the four shopping centers, the industrial building and the multi-family residential project that were sold. In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The adoption of SFAS No. 143 will not have a material impact on our financial position, results of operations, or cash flows. In April 2002, FASB issued SFAS No. 145, "Rescission of SFAS Statements No. 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections." The purpose of this statement is to update, clarify and simplify existing accounting standards. We adopted this statement effective April 30, 2002 and determined that the adoption of this statement did not have a material impact on our financial position, results of operations, or cash flows. PAGE 5 3. DERIVATIVES AND HEDGING 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 instrument 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 three interest rate swap contracts with an aggregate notional amount of $45 million, which are designated as cash flow hedges, and eleven interest rate swap contracts with an aggregate notional amount of $107.5 million, which are designated as fair value hedges. In July 2002, one interest rate swap with a notional amount of $25 million matured. On September 30, 2002, the derivative instruments designated as cash flow hedges were reported at their fair values as Other Liabilities, net of accrued interest, of $2.9 million. The derivative instruments designated as fair value hedges on September 30, 2002 were reported at their fair values as Other Assets and Fixed-Rate Debt, net of accrued interest, of $7.7 million. Within the next twelve months, the Company expects to reclassify to earnings as interest expense approximately $1.9 million of the current balance held in accumulated other comprehensive loss. As of September 30, 2002, the balance in accumulated other comprehensive loss relating to the derivatives was $1.4 million. With respect to fair value hedges, both changes in fair market value of the derivative hedging instrument and changes in the fair value of the hedged item will be recorded in earnings each reporting period. These amounts should completely offset with no impact to earnings, except for the portion of the hedge that proves to be ineffective, if any. 4. PER SHARE DATA Net income per common share - basic is computed using net income available to common shareholders and the weighted average shares outstanding that have been adjusted for the three-for-two share split described in Note 9. Net income per common share - diluted includes the effect of potentially dilutive securities for the periods indicated, as follows (in thousands):
Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 2002 2001 2002 2001 --------- --------- --------- --------- Numerator: Net income available to common shareholders - basic . . . . $ 34,486 $ 22,379 $ 85,359 $ 63,742 Income attributable to operating partnership units. . . . . 764 10 1,640 75 --------- --------- --------- --------- Net income available to common shareholders - diluted . . . $ 35,250 $ 22,389 $ 86,999 $ 63,817 ========= ========= ========= ========= Denominator: Weighted average shares outstanding - basic . . . . . . . . 51,993 48,665 51,869 47,334 Effect of dilutive securities: Share options and awards. . . . . . . . . . . . . . . 369 237 326 163 Operating partnership units . . . . . . . . . . . . . 1,479 77 1,001 77 --------- --------- --------- --------- Weighted average shares outstanding - diluted . . . . . . . 53,841 48,979 53,196 47,574 ========= ========= ========= =========
PAGE 6 Options to purchase 800 and 150 common shares for the third quarter ended September 30, 2002 and 2001, respectively, and 1,050 and 1,800 common shares for the nine months ended September 30, 2002 and 2001, respectively, were not included in the calculation of net income per common share - diluted as the exercise prices were greater than the average market price. 5. DEBT WRI's debt consists of the following (in thousands):
September 30, December 31, 2002 2001 ------------ ------------ Fixed-rate debt payable to 2030 at 5.14% to 8.75%. . . . . . . . $ 1,001,585 $ 796,900 Variable-rate unsecured notes payable. . . . . . . . . . . . . . 75,000 100,000 Unsecured notes payable under revolving credit agreements. . . . 167,880 134,500 Obligations under capital leases . . . . . . . . . . . . . . . . 33,462 33,554 Industrial revenue bonds payable to 2015 at 1.8% to 3.6% . . . . 5,760 5,868 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 13 ------------ ------------ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,283,700 $ 1,070,835 ============ ============
At September 30, 2002, the variable interest rate for notes payable under the $50 million term loan agreement was 2.33%, and the $350 million revolving credit agreement was 2.38%. At September 30, 2002, $14.9 million was outstanding under the $20 million revolving credit agreement at 2.28%. In January 2002, WRI issued $35 million of twelve-year 6.7% fixed-rate, unsecured medium term notes. An additional $30 million of twelve-year 6.525% fixed-rate, unsecured medium term notes were issued in February 2002. In the third quarter of 2002, the Company issued a total of $82 million of unsecured fixed-rate medium term notes at a weighted average fixed rate of 5.7% and weighted average term of 8.8 years. On July 1, 2002, WRI issued $10 million of five-year 5.29% fixed-rate medium term notes. An additional $42 million was issued on July 15, 2002 consisting of $15 million five-year and $27 million eleven-year fixed-rate medium term notes at 5.14% and 6.11%, respectively. On July 18, 2002, WRI issued an additional $10 million of ten-year 5.99% fixed-rate medium term notes. On August 20, 2002, WRI issued at a discount $10 million of ten-year 3% fixed-rate medium term notes with an effective rate of 5.66%. On September 18 and 24, 2002, WRI issued two additional ten-year fixed-rate medium term notes of $5 million each at 5.5% and 5.4%, respectively. Proceeds received were used to pay down amounts outstanding under our $350 million revolving credit facility. In March 2001, we filed a $500 million shelf registration statement, of which $316.9 million is currently available. Also, we have a $400 million shelf registration statement, of which $18 million is currently available. PAGE 7 WRI's debt can be summarized as follows (in thousands):
September 30, December 31, 2002 2001 ------------- ------------- As to interest rate (including the effects of interest rate swaps): Fixed-rate debt . . . . . . . . . . . . . . $ 960,100 $ 780,500 Variable-rate debt. . . . . . . . . . . . . 323,600 290,335 ------------- ------------- Total . . . . . . . . . . . . . . . . . . . $ 1,283,700 $ 1,070,835 ============= ============= As to collateralization: Unsecured debt. . . . . . . . . . . . . . . $ 933,589 $ 798,524 Secured debt. . . . . . . . . . . . . . . . 350,111 272,311 ------------- ------------- Total . . . . . . . . . . . . . . . . . . . $ 1,283,700 $ 1,070,835 ============= =============
In July 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 million 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 that was recorded in the caption Accumulated Other Comprehensive Loss. This gain is being amortized to earnings over the life of the 7% notes. Also, in July 2001, we entered into eleven interest rate swaps with an aggregate notional amount of $107.5 million that convert fixed interest payments to variable interest payments. 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. WRI has two interest rate swap contracts with an aggregate notional amount of $20 million that serve as a hedge against changes in interest rates on a like amount of our $350 million variable-rate revolving credit facility. Such contracts, which expire in 2004, have been outstanding since their purchase in 1992 and fix the interest rate at 7.7%. We also have an additional interest rate swap for a notional amount of $25 million which serves as a hedge against changes in interest rates on a $25 million variable-rate medium term note. This swap fixes the interest rate on the medium term note at 6.8% and matures in July 2003. In July 2002, an interest rate swap with a notional amount of $25 million matured. PAGE 8 6. PROPERTY WRI's property consists of the following (in thousands):
September 30, December 31, 2002 2001 ------------- ------------- Land . . . . . . . . . . . . . . $ 483,368 $ 439,332 Land held for development. . . . 23,491 24,131 Land under development . . . . . 48,824 56,414 Buildings and improvements . . . 1,952,604 1,750,059 Construction in-progress . . . . 115,396 82,457 ------------- ------------- Total. . . . . . . . . . . . . . $ 2,623,683 $ 2,352,393 ============= =============
Interest and ad valorem taxes capitalized to land under development or buildings under construction was $2.2 million and $2.9 million for the quarters ended September 30, 2002 and 2001, respectively, and $7.3 million and $7.4 million for the nine months ended September 30, 2002 and 2001, respectively. 7. INVESTMENTS IN REAL ESTATE JOINT VENTURES WRI owns interests in 16 joint ventures or limited partnerships where we do not exercise financial and operating control. These partnerships are accounted for under the equity method since WRI exercises significant influence. Our interests in these joint ventures and limited partnerships range from 20% to 75% and, with the exception of one partnership, which owns seven industrial properties, each venture owns a single real estate asset. Combined condensed financial information of these ventures (at 100%) is summarized as follows (in thousands):
September 30, December 31, 2002 2001 ------------- ------------- Combined Balance Sheets Property. . . . . . . . . . . . $ 176,059 $ 171,344 Accumulated Depreciation. . . . (22,895) (24,941) ------------- ------------- Property - net . . . . . . 153,164 146,403 Other Assets. . . . . . . . . . 10,935 11,373 ------------- ------------- Total. . . . . . . . . $ 164,099 $ 157,776 ============= ============= Debt. . . . . . . . . . . . . . $ 72,137 $ 76,635 Amounts Payable to WRI. . . . . 13,978 9,270 Other Liabilities . . . . . . . 3,725 4,705 Accumulated Equity. . . . . . . 74,259 67,166 ------------- ------------- Total. . . . . . . . . $ 164,099 $ 157,776 ============= =============
PAGE 9
Combined Statements of Income Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 2002 2001 2002 2001 --------- --------- --------- --------- Revenues. . . . . . . . . . . . . . . $ 6,129 $ 6,435 $ 18,831 $ 19,198 --------- --------- --------- --------- Expenses: Depreciation and amortization . . . 1,175 1,061 3,658 3,307 Operating . . . . . . . . . . . . . 846 870 2,554 2,663 Interest. . . . . . . . . . . . . . 1,550 1,758 4,813 5,437 Ad valorem taxes. . . . . . . . . . 798 845 2,391 2,437 General and administrative. . . . . 9 37 44 --------- --------- --------- --------- Total. . . . . . . . . . . . . 4,378 4,534 13,453 13,888 --------- --------- --------- --------- Gain on Sale of Properties. . . . . . 2,855 2,855 --------- --------- --------- --------- Net Income. . . . . . . . . . . . . . $ 1,751 $ 4,756 $ 5,378 $ 8,165 ========= ========= ========= =========
Our investment in real estate joint ventures, as reported on the balance sheets, differs from our proportionate share of the joint ventures' underlying net assets due to basis differentials, which arose upon the transfer of assets from WRI to the joint ventures. This basis differential, which totaled $4.8 million and $5.0 million at September 30, 2002 and December 31, 2001, respectively, is depreciated over the useful lives of the related assets. Fees earned by WRI for the management of these joint ventures totaled: $.1 million for the quarters ended September 30, 2002 and 2001, respectively, and $.4 million for the nine months ended September 30, 2002 and 2001, respectively. In August of 2001, WRI sold its interest in two joint ventures which owned mini-storage warehouses resulting in a gain of $2.9 million. In May of 2002, a 50%-owned joint venture commenced construction on Tropicana Beltway Center, a 660,000 square foot center in Las Vegas, Nevada, which will include a corporate-owned WalMart of 224,000 square feet and a corporate-owned Lowe's of 170,000 square feet. In August of 2002, a 33%-owned limited partnership commenced construction on Alpine Valley Center, a 240,000 square foot center in American Fork, Utah, which will include a corporate-owned Target of 147,000 square feet. Also, in August of 2002, WRI acquired a joint venture partner's 50% interest in a shopping center in Lewiston, Maine. PAGE 10 8. 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, discount retailers, 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, Georgia, Florida 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. Information concerning WRI's reportable segments is as follows (in thousands):
SHOPPING CENTER INDUSTRIAL OTHER TOTAL ------------ ---------- ----------- ------------- Three Months Ended September 30, 2002: Revenues . . . . . . . . . . . . . . . . . . $ 84,094 $ 9,175 $ 550 $ 93,819 Net operating income . . . . . . . . . . . . 60,131 6,303 592 67,026 Equity in earnings of joint ventures . . . . 913 84 (8) 989 Investment in real estate joint ventures . . 29,083 678 29,761 Total assets . . . . . . . . . . . . . . . . 2,008,031 212,215 142,694 2,362,940 Three Months Ended September 30, 2001: Revenues . . . . . . . . . . . . . . . . . . $ 73,300 $ 7,710 $ 245 $ 81,255 Net operating income . . . . . . . . . . . . 53,172 5,285 427 58,884 Equity in earnings of joint ventures . . . . 971 1,562 (21) 2,512 Investment in real estate joint ventures . . 25,391 1,220 26,611 Total assets . . . . . . . . . . . . . . . . 1,695,904 184,634 108,712 1,989,250 Nine Months Ended September 30, 2002: Revenues . . . . . . . . . . . . . . . . . . $ 241,006 $ 27,199 $ 1,483 $ 269,688 Net operating income . . . . . . . . . . . . 175,567 18,726 1,718 196,011 Equity in earnings of joint ventures . . . . 2,821 239 (32) 3,028 Nine Months Ended September 30, 2001: Revenues . . . . . . . . . . . . . . . . . . $ 200,652 $ 23,066 $ 1,743 $ 225,461 Net operating income . . . . . . . . . . . . 146,463 16,136 2,178 164,777 Equity in earnings of joint ventures . . . . 2,818 1,822 (81) 4,559
PAGE 11 Net operating income reconciles to income before discontinued operations as shown on the Statements of Consolidated Income and Comprehensive Income as follows (in thousands):
Three Months Ended Nine Months Ended September 30, September 30, -------------------- ---------------------- 2002 2001 2002 2001 --------- --------- ---------- ---------- Total segment net operating income . . . . . . . . . . $ 67,026 $ 58,884 $ 196,011 $ 164,777 Less: Depreciation and amortization . . . . . . . . . . 19,390 16,812 56,380 48,732 Interest. . . . . . . . . . . . . . . . . . . . . 17,062 14,677 48,590 40,072 General and administrative. . . . . . . . . . . . 2,576 2,385 8,650 7,489 Minority interest in income of partnerships . . . 578 141 1,637 323 Equity in earnings of joint ventures. . . . . . . (989) (2,512) (3,028) (4,559) Gain (loss) on sale of properties . . . . . . . . 517 (4,467) --------- --------- ---------- ---------- Income Before Discontinued Operations. . . . . . . . . $ 28,409 $ 26,864 $ 83,782 $ 77,187 ========= ========= ========== ==========
9. COMMON SHARES OF BENEFICIAL INTEREST In February 2002, a three-for-two share split, affected in the form of a 50% share dividend, was declared for shareholders of record on April 1, 2002, payable April 15, 2002. We issued 17.3 million common shares of beneficial interest as a result of the share split. All references to the number of shares and per share amounts have been restated to reflect the share split, and an amount equal to the par value of the number of common shares issued have been reclassified to common stock from retained earnings. In February 2002, we completed the sale of .3 million common shares of beneficial interest. Net proceeds to WRI totaled $9.5 million based on a price of $33.65 per share and were used to pay down amounts outstanding under our $350 million revolving credit facility. On January 29, 2001, we issued 6.8 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 300,000 shares. Net proceeds to WRI totaled $188.1 million based on a price of $28.13 per share. In May 2001, we issued 1.0 million common shares of beneficial interest in a secondary public offering. Net proceeds of $27.9 million were based on a price of $28.57 per share. In November 2001, we issued 2.7 million common shares of beneficial interest in a secondary public offering. Net proceeds of $86.0 million were based on a price of $33.47 per share. Proceeds from these offerings were used to pay down amounts outstanding under our $350 million revolving credit facility. 10. BANKRUPTCY REMOTE PROPERTIES On April 2, 2001, we purchased 19 supermarket-anchored shopping centers, aggregating 2.5 million square feet, in California. The purchase price for the properties was $277.5 million, including the assumption of approximately $132 million in debt secured by all 19 properties. PAGE 12 These 19 properties, having a net book value of approximately $271.6 million at September 30, 2002 (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 13 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 242 anchored shopping centers, 56 industrial properties and one office building at September 30, 2002. Of WRI's 299 developed properties, 176 are located in Texas (including 91 in Houston and Harris County). Our remaining properties are located in California (20), Louisiana (17), Arizona (14), Florida (11), Nevada (10), Tennessee (8), Colorado (8), North Carolina (8), Arkansas (6), New Mexico (6), Kansas (5), Oklahoma (4), Missouri (2), Illinois (1), Mississippi (1), Georgia (1) and Maine (1). WRI has 5,800 leases and 4,500 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 $119.0 million for the first nine months of 2002 as compared to $87.3 million for the same period of 2001. 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 of $.555 per common share for the third quarter of 2002. Our dividend payout ratio on common equity for the third quarter of 2002 and 2001, respectively, was 67% based on funds from operations for the applicable period. WRI invested $39.1 million for the acquisition of one shopping center and our joint venture partner's 50% interest in a shopping center in Lewiston, Maine during the third quarter. In August 2002, the Company acquired Chino Hills Shopping Center, a 320,000 square foot supermarket-anchored center located in Chino Hills, California (Los Angeles metropolitan area). This property is anchored by Von's (Safeway), Rite-Aid and Kmart, and is 94% occupied. In August 2002, a 33%-owned limited partnership commenced construction on Alpine Valley Center, a 240,000 square foot center in American Fork, Utah, which will include a corporate-owned Target of 147,000 square feet. This limited partnership will be accounted for using the equity method of accounting, as WRI has the ability to exercise significant influence, but does not have financial or operating control. PAGE 14 With respect to new development, we had 18 projects at various stages of construction. These projects, upon completion, will represent an investment of approximately $244 million and will add 1.8 million square feet to the portfolio. We expect to invest approximately $68.4 million in these properties during 2002. These projects will continue to come on-line during the remainder of 2002 throughout 2003. In January 2002, WRI issued $35 million of twelve-year 6.7% fixed-rate, unsecured medium term notes. An additional $30 million of twelve-year 6.525% fixed-rate, unsecured medium term notes were issued in February 2002. In the third quarter 2002, the Company issued a total of $82 million of unsecured fixed-rate medium term notes at a weighted average fixed rate of 5.7% and weighted average term of 8.8 years. On July 1, 2002, WRI issued $10 million of five-year 5.29% fixed-rate medium term notes. An additional $42 million was issued on July 15, 2002 consisting of $15 million five-year and $27 million eleven-year fixed-rate medium term notes at 5.14% and 6.11%, respectively. On July 18, 2002, WRI issued an additional $10 million of ten-year 5.99% fixed-rate medium term notes. On August 20, 2002, WRI issued at a discount $10 million of ten-year 3% fixed-rate medium term notes with an effective rate of 5.66%. On September 18 and 24, 2002, WRI issued two additional ten-year fixed-rate medium term notes of $5 million each at 5.5% and 5.4%, respectively. Proceeds received were used to pay down amounts outstanding under our $350 million revolving credit facility. Total debt outstanding increased $212.9 million to $1.3 billion at September 30, 2002. This increase was primarily due to the funding of the Company's acquisitions and ongoing development and redevelopment efforts. Included in total debt outstanding of $1.3 billion at September 30, 2002 is variable-rate debt of $323.6 million, after recognizing the net effect of $152.5 million of interest rate swaps. In March 2001, we filed a $500 million shelf registration statement, of which $316.9 million is currently available. Also, we have a $400 million shelf registration statement, of which $18 million is currently available. In February 2002, a three-for-two share split, affected in the form of a 50% share dividend, was declared for shareholders of record on April 1, 2002, payable April 15, 2002. We issued 17.3 million common shares of beneficial interest as a result of the share split. In February 2002, we completed the sale of .3 million common shares of beneficial interest. Net proceeds to WRI totaled $9.5 million based on a price of $33.65 per share and were used to pay down amounts outstanding under our $350 million revolving credit facility. 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 Weingarten, believe FFO is an appropriate alternative measurement of performance relative to other REITs. FFO provides investors with additional information to better understand 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. PAGE 15 Funds from operations - diluted for the three and nine months ended September 30, 2002 and 2001 is calculated as follows:
Three Months Ended Nine Months Ended September 30, September 30, -------------------- ---------------------- 2002 2001 2002 2001 --------- --------- ---------- ---------- Net income available to common shareholders . . . . . . . . $ 34,486 $ 22,379 $ 85,359 $ 63,742 Depreciation and amortization . . . . . . . . . . . . . . . 18,691 16,451 54,921 47,897 Depreciation and amortization of unconsolidated joint ventures. . . . . . . . . . . . . . . . . . . . . . 476 435 1,494 1,376 (Gain) loss on sale of properties . . . . . . . . . . . . . (10,818) 517 (15,158) (4,467) Gain on sale of properties of unconsolidated joint ventures. . . . . . . . . . . . . . . . . . . . . . (1,427) (1,427) --------- --------- ---------- ---------- Funds from operations . . . . . . . . . . . . 42,835 38,355 126,616 107,121 Funds from operations attributable to operating partnership units . . . . . . . . . . . . . . . . . . . . 1,089 35 2,288 147 --------- --------- ---------- ---------- Funds from operations assuming conversion of OP units. . . . . . . . . . . $ 43,924 $ 38,390 $ 128,904 $ 107,268 ========= ========= ========== ========== Weighted average shares outstanding - basic . . . . . . . . 51,993 48,665 51,869 47,334 Effect of dilutive securities: Share options and awards. . . . . . . . . . . . . . . 369 237 326 163 Operating partnership units . . . . . . . . . . . . . 1,479 77 1,001 77 --------- --------- ---------- ---------- Weighted average shares outstanding - diluted . . . . . . . 53,841 48,979 53,196 47,574 ========= ========= ========== ==========
RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 Net income available to common shareholders increased to $34.5 million, or $.65 per diluted share, from $22.4 million, or $.46 per diluted share for the third quarter of 2002 as compared with the same quarter of 2001. The increase in net income available to common shareholders is due primarily from growth in the portfolio from acquisitions and new development, and the $10.8 million gain from the sale of certain non-core assets, whereas the third quarter of 2001 only contains $.9 million of such gains (including a $1.4 million gain from our unconsolidated joint ventures). Rental revenues were $91.3 million in 2002, as compared to $80.3 million in 2001, representing an increase of approximately $11.1 million or 13.8%. Property acquisitions and new development contributed $11.8 million to this increase, with an offsetting decrease of $.7 million attributable to our existing properties. This decrease in rental revenues at our existing properties is due primarily to the sale of non-core assets in 2001. Occupancy of the total portfolio was 91.4% at September 30, 2002 as compared to 92.4% last year. The occupancy of the retail portfolio was down slightly at 92.3% as compared to 92.4% at September 30, 2001, while the occupancy of the industrial portfolio decreased to 88.0% from 92.4% in the prior year. The decrease in the industrial portfolio is due to vacancies in the Memphis properties, totaling 307,000 square feet. During the first nine months of 2002, WRI completed 933 renewals or new leases comprising 3.8 million square feet at an average rental rate increase of 8.3%. Net of the amortized portion of capital costs for tenant improvements, the increase averaged 6.2%. Other income increased by $1.5 million to $2.2 million in the third quarter of 2002 from $.7 million for the same quarter of 2001. This increase is due primarily to an increase in lease cancellation income from various tenants. PAGE 16 Gross interest costs, before capitalization of interest, increased by $1.9 million from $17.4 million in the third quarter of 2001 to $19.3 million for the third quarter of 2002. The increase is due primarily to an increase in the average debt outstanding between periods of $1.0 billion in 2001 to $1.2 billion in 2002. The average interest rate decreased from 6.98% in 2001 to 6.2% in 2002. The amount of interest capitalized during the period was $2.2 million and $2.7 million in 2002 and 2001, respectively. General and administrative expenses increased by $.2 million to $2.6 million in the third quarter of 2002 from $2.4 million for the same quarter of 2001. The increase is due primarily to an increase in staffing necessitated by the growth in the portfolio from acquisitions and new development. 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 NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 Net income available to common shareholders increased to $85.4 million, or $1.64 per diluted share, from $63.7 million, or $1.34 per diluted share for the nine months of 2002 as compared with the same period of 2001. The increase in net income available to common shareholders is due primarily from growth in the portfolio from acquisitions and new development, and the $15.2 million gain from the sale of certain non-core assets, whereas the nine months of 2001 only contains $5.9 million of such gains (including $1.4 million gain from our unconsolidated joint ventures). Rental revenues were $264.8 million in 2002, as compared to $221.5 million in 2001, representing an increase of approximately $43.3 million or 19.5%. Property acquisitions and new development contributed $42.5 million to the increase with the remaining increase of $.8 million attributable to our existing properties. Gross interest costs, before capitalization of interest, increased by $8.4 million from $47.1 million for the nine months of 2001 to $55.5 million for the nine months of 2002. The increase is due primarily to an increase in the average debt outstanding between periods of $891.9 million in 2001 to $1.2 billion in 2002. The average interest rate decreased from 7.0% in 2001 to 6.3% in 2002. The amount of interest capitalized during the period was $6.9 million and $7.0 million in 2002 and 2001, respectively. General and administrative expenses increased by $1.2 million to $8.7 million for the nine months of 2002 from $7.5 million for the same period of 2001. The increase is due primarily to an increase in staffing necessitated by the growth in the portfolio from acquisitions and new development. 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, 2002, WRI adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses accounting and reporting for the impairment or disposal of a segment of a business. More specifically, this Statement broadens the presentation of discontinued operations to include a component of an entity whose operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. PAGE 17 In 2002, we sold four retail projects located in Houston (2), Grand Prairie and San Antonio, Texas; one industrial building located in Houston Texas and the River Pointe Apartments located in Conroe, Texas. Accordingly, the operating results of the disposed properties have been reclassified and reported as discontinued operations in the Statements of Consolidated Income and Comprehensive Income. Included in the December 31, 2001 Consolidated Balance Sheet was $28.8 million of Property and $6.1 million of Accumulated Depreciation associated with the four shopping centers, the industrial building and the multi-family residential project that were sold. In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The adoption of SFAS No. 143 will not have a material impact on our financial position, results of operations, or cash flows. In April 2002, FASB issued SFAS No. 145, "Rescission of SFAS Statements No. 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections." The purpose of this statement is to update, clarify and simplify existing accounting standards. We adopted this statement effective April 30, 2002 and determined that the adoption of this statement did not have a material impact on our financial position, results of operations, or cash flows. ITEM 3. 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 September 30, 2002, WRI had fixed-rate debt of $960.1 million and variable-rate debt of $323.6 million, after adjusting for the net effect of $152.5 million of interest rate swaps. ITEM 4. CONTROLS AND PROCEDURES The principal executive officer and principal financial officer have evaluated the disclosure controls and procedures as of a date within 90 days before the filing date of this quarterly report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that the disclosure controls and procedures effectively ensure that information required to be disclosed in the Company's filings and submissions with the Securities and Exchange Commission under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. In addition, the Company has reviewed its internal controls and there have been no significant changes in its internal controls or in other factors that could significantly affect those controls subsequent to the date of its last evaluation. PAGE 18 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. (99.1) Certification certificate for Chief Executive Officer. (99.2) Certification certificate for Chief Financial Officer. (b) Reports on Form 8-K A Form 8-K, dated July 29, 2002, was filed in response to Item 5., Other Events and Item 7., Financial Statements, Pro Forma Financial Information and Exhibits. PAGE 19 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: November 14, 2002 ------------------- PAGE 20 CERTIFICATION I, Andrew M. Alexander, Chief Executive Officer of Weingarten Realty Investors certify that: 1. I have reviewed this quarterly report on Form 10-Q of Weingarten Realty Investors; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. BY: /s/ Andrew M. Alexander ----------------------------------- Andrew M. Alexander President/Chief Executive Officer November 14, 2002 PAGE 21 CERTIFICATION I, Stephen C. Richter, Sr. Vice President/Chief Financial Officer of Weingarten Realty Investors certify that: 1. I have reviewed this quarterly report on Form 10-Q of Weingarten Realty Investors; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. BY: /s/ Stephen C. Richter ------------------------------------------ Stephen C. Richter Sr. Vice President/Chief Financial Officer November 14, 2002 PAGE 22 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 Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- Net income available to common shareholders . . . . . . . . $ 34,486 $ 22,379 $ 85,359 $ 63,742 Add: Portion of rents representative of the interest factor. . . 234 248 695 719 Interest on indebtedness. . . . . . . . . . . . . . . . . . 17,062 14,677 48,590 40,072 Preferred dividends . . . . . . . . . . . . . . . . . . . . 4,939 5,010 14,817 15,030 Amortization of debt cost . . . . . . . . . . . . . . . . . 323 367 971 929 ---------- ---------- ---------- ---------- Net income as adjusted. . . . . . . . . . . . . . . . . $ 57,044 $ 42,681 $ 150,432 $ 120,492 ========== ========== ========== ========== Fixed charges: Interest on indebtedness. . . . . . . . . . . . . . . . . . $ 17,062 $ 14,677 $ 48,590 $ 40,072 Capitalized interest. . . . . . . . . . . . . . . . . . . . 2,215 2,680 6,946 7,016 Preferred dividends . . . . . . . . . . . . . . . . . . . . 4,939 5,010 14,817 15,030 Amortization of debt cost . . . . . . . . . . . . . . . . . 323 367 971 929 Portion of rents representative of the interest factor. . . 234 248 695 719 ---------- ---------- ---------- ---------- Fixed charges . . . . . . . . . . . . . . . . . . . . . $ 24,773 $ 22,982 $ 72,019 $ 63,766 ========== ========== ========== ========== RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS . . . . . . . . . . . . . . 2.30 1.86 2.09 1.89 ========== ========== ========== ========== Net income available to common shareholders . . . . . . . . $ 34,486 $ 22,379 $ 85,359 $ 63,742 Depreciation and amortization . . . . . . . . . . . . . . . 19,167 16,886 56,415 49,273 Gain on sale of properties. . . . . . . . . . . . . . . . . (10,818) (910) (15,158) (5,894) ---------- ---------- ---------- ---------- Funds from operations . . . . . . . . . . . . . . . . . 42,835 38,355 126,616 107,121 Add: Portion of rents representative of the interest factor. . . 234 248 695 719 Preferred dividends . . . . . . . . . . . . . . . . . . . . 4,939 5,010 14,817 15,030 Interest on indebtedness. . . . . . . . . . . . . . . . . . 17,062 14,677 48,590 40,072 Amortization of debt cost . . . . . . . . . . . . . . . . . 323 367 971 929 ---------- ---------- ---------- ---------- Funds from operations as adjusted . . . . . . . . . . . $ 65,393 $ 58,657 $ 191,689 $ 163,871 ========== ========== ========== ========== RATIO OF FUNDS FROM OPERATIONS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS . . . . . . . . . . . 2.64 2.55 2.66 2.57 ========== ========== ========== ==========
EX-99.1 4 doc3.txt EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Weingarten Realty Investors (the "Company") on Form 10-Q for the period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Andrew M. Alexander, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. BY: /s/ Andrew M. Alexander ----------------------------------- Andrew M. Alexander President/Chief Executive Officer November 14, 2002 EX-99.2 5 doc4.txt EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Weingarten Realty Investors (the "Company") on Form 10-Q for the period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stephen C. Richter, Sr. Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. BY: /s/ Stephen C. Richter ------------------------------------------ Stephen C. Richter Sr. Vice President/Chief Financial Officer November 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----