EX-99 3 tfocform8k0304ex.txt EXHIBIT 99.2 EARNINGS RLS NEWS RELEASE FOR RELEASE: IMMEDIATE RELEASE CONTACT: Frank C. Marchisello, Jr. (336) 834-6834 TANGER REPORTS FIRST QUARTER 2004 RESULTS 35.2% Increase in Total FFO, 7.7% Increase in FFO Per Share Greensboro, NC, April 27, 2004, Tanger Factory Outlet Centers, Inc. (NYSE:SKT) today reported net income available to common shareholders for the first quarter of 2004 was $1.0 million, or $0.08 per share, as compared to net income available to common shareholders of $1.7 million, or $0.19 per share for the first quarter of 2003. As expected, comparative net income amounts were impacted by the allocation of income to Tanger's consolidated joint venture partner in 2004 as required under the Company's current accounting policies. For the three months ended March 31, 2004, funds from operations ("FFO"), a widely accepted measure of REIT performance, was $13.9 million, or $0.84 per share, as compared to FFO of $10.3 million, or $0.78 per share, for the three months ended March 31, 2003, representing a 35.2% increase in total FFO and a 7.7% per share increase. Net income and FFO per share amounts above are on a diluted basis. A reconciliation of net income to FFO is presented on the supplemental information page of this press release. First Quarter Highlights o Generated $13.2 million in net proceeds in conjunction with the exercise of the underwriters' over-allotment option relating to the December 2003 common share offering o 200 leases signed, totaling 886,640 square feet with respect to re-tenanting and renewal activity, including 42.2% of the square footage scheduled to expire during 2004 o $306 per square foot in reported same-space tenant sales for the rolling twelve months ended March 31, 2004 o 79,000 square feet of expansion space underway and scheduled to open in third quarter of 2004 o 94% period-end portfolio occupancy rate o 40.5% debt-to-total market capitalization ratio, 3.26 times interest coverage ratio o Increased the common share dividend from $0.615 to $0.625 per share, $2.50 per share annualized, representing 11th consecutive year of increased dividends o General and administrative expenses as a percentage of total revenues decreased from 8.5% to 6.9% 1 Stanley K. Tanger, Chairman of the Board and Chief Executive Officer, commented, "Our first quarter results were encouraging. Percentage rentals and specialty leasing income exceeded our first quarter forecast. Same space tenants' sales were up significantly over last year. Our leasing spreads during the quarter continued to grow for both new leases and renewals. The integration of the Charter Oak portfolio into our systems is virtually complete. This should be a busy and productive year for our company." Portfolio Operating Results During the first quarter of 2004, Tanger executed 200 leases, totaling 886,640 square feet. Lease renewals during the first quarter accounted for 755,832 square feet, generated a 7.9% increase in average base rental rates on a cash basis and represented 42.2% of the 1,790,000 square feet originally scheduled to expire during 2004. Base rental increases on re-tenanted space during the first quarter averaged 8.3% on a cash basis and accounted for the remaining 130,808 square feet. Additionally, the average initial base rent on a cash basis for new stores opened during the first quarter of 2004 was $17.26, representing an increase of $.83 or 5.1% above the average base rent for stores closed during the first quarter of 2004. Reported same-space sales per square foot for the rolling twelve months ended March 31, 2004 were $306 per square foot. This represents a 4.2% increase compared to $294 per square foot for the rolling twelve months ended March 31, 2003. For the first quarter of 2004, same-space sales increased by 6.1%, as compared to the same period in 2003. Same-space sales is defined as the weighted average sales per square foot reported in space open for the full duration of the comparative periods. Investment Activities Tanger is currently underway with constructing a 79,000 square foot third phase at its center located on Highway 17 North in Myrtle Beach, SC. This center, which was developed and is managed and leased by the Company, is owned through a joint venture of which the Company owns a 50% interest. The estimated cost of the expansion is $9.7 million, and the company currently expects to complete the expansion with stores commencing operations during the summer of 2004. The capital investment by Tanger for the third phase is approximately $1.7 million with an expected return on our investment in excess of 20%. Leases have been executed with Banana Republic, GAP, Calvin Klein, Ann Taylor, Puma, Guess and Jones, NY. Upon completion of the expansion, the Company's two Myrtle Beach centers will total approximately 830,000 square feet. Tanger has also started the early development and leasing of a site located at Exit 41 on Interstate 79 south of Pittsburgh, Pennsylvania and a site located in Deer Park, New York on Commack Road about 5 miles south of Exit 52 on the Long Island Expressway. The Company currently expects the Pittsburgh site to be 420,000 square feet at total build out with the initial phase scheduled for delivery in late 2005 or early 2006 and the Deer Park site to be 790,000 square feet at total build out with the initial phase scheduled for delivery in late 2006 or early 2007. Financing Activities and Balance Sheet Summary In December 2003, Tanger raised approximately $88.0 million in net equity proceeds through the sale of 2.3 million newly issued common shares. The Company utilized the proceeds, together with other available funds, to fund its portion of the equity required to acquire the Charter Oak Portfolio of nine outlet centers. On January 6, 2004, an additional 345,000 shares were issued in conjunction with the exercise of the underwriters' over-allotment option, 2 resulting in approximately $13.2 million in additional net proceeds which were used to pay down amounts outstanding on Tanger's floating rate unsecured lines of credit. As of March 31, 2004, Tanger had a total market capitalization of approximately $1.3 billion, with $509.2 million of debt outstanding (excluding a debt premium of $11.2 million), equating to a 40.5% debt-to-total market capitalization ratio. This represents a 68.8% increase in total market capitalization since March 31, 2003. As of March 31, 2004, $450.9 million, or 88.5% of Tanger's total debt, was at fixed interest rates and the Company had $4.8 million outstanding with $95.2 million available on its lines of credit. During the first quarter Tanger reduced its total debt outstanding by $19.9 million and continued to improve its interest coverage ratio, which was 3.26 times for the first quarter of 2004, as compared to 2.46 times interest coverage in the same period last year. On April 8, 2004, Moody's Investors Service affirmed Tanger's Ba1 senior unsecured debt rating, and concurrently changed the Company's rating outlook to positive, from stable. According to Moody's, this rating outlook change reflects "Tanger's ability to increase the size and market leadership of its outlet center portfolio, and reduce single-asset concentration, while demonstrating consistent improvement in its coverage ratios and applying prudent balance sheet management." 2004 FFO Per Share Guidance Based on current market conditions, the strength and stability of its core portfolio and the Company's development, acquisition and disposition strategy, Tanger currently believes its net income available to common shareholders for 2004 will be between $0.62 and $0.70 per share and its FFO for 2004 will be between $3.68 and $3.76 per share, representing an increase in FFO over the prior year of approximately 7% to 9%. The following table provides the reconciliation of estimated diluted FFO per share to estimated diluted net income available to common shareholders per share: For the twelve months ended December 31, 2004 Low Range High Range Estimated diluted FFO per share $ 3.68 $ 3.76 Minority interest, depreciation and amortization uniquely significant to real estate including minority interest share and our share of joint ventures (3.06) (3.06) Estimated diluted net income available to common shareholders per share $ 0.62 $ 0.70 Tanger currently believes it will earn 14% of its annual 2004 net income and 23% of its FFO per share in the second quarter, 30% of its net income and 26% of its FFO in the third quarter and 44% of its net income and 28% of its FFO in the fourth quarter. First Quarter Conference Call Tanger will host a conference call to discuss its first quarter results for analysts, investors and other interested parties on Wednesday, April 28, 2004, at 10:00 A.M. eastern time. To access the conference call, listeners should dial 1-877-277-5113 and request to be connected to the Tanger Factory Outlet Centers First Quarter Financial Results call. Alternatively, the call will be web cast by CCBN and can be accessed at the "Tanger News" section of Tanger Factory Outlet Centers, Inc.'s web site at www.tangeroutlet.com. 3 A telephone replay of the call will be available from April 28, 2004 starting at 12:00 P.M Eastern Time through April 30, 2004, by dialing 1-800-642-1687 (conference ID # 6362865). Additionally, an online archive of the broadcast will also be available through April 30, 2004. About Tanger Factory Outlet Centers Tanger Factory Outlet Centers, Inc. (NYSE: SKT), a fully integrated, self-administered and self-managed publicly traded REIT, presently has ownership interests in or management responsibilities for 40 centers in 23 states coast to coast, totaling approximately 9.3 million square feet of gross leasable area. Tanger is filing a Form 8-K with the Securities and Exchange Commission that includes a supplemental information package for the quarter ended March 31, 2004. For more information on Tanger Outlet Centers, visit our web site at www.tangeroutlet.com. Estimates of future net income per share and FFO per share are by definition, and certain other matters discussed in this press release regarding our re-merchandising strategy, the renewal and re-tenanting of space, tenant sales and sales trends, interest rates, fund from operations, the development of new centers, the opening of ongoing expansions, coverage of the current dividend and the impact of sales of land parcels may be, forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those projected due to various factors including, but not limited to, the risks associated with general economic and local real estate conditions, the availability and cost of capital, our ability to lease our properties, our inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, and competition. For a more detailed discussion of the factors that affect our operating results, interested parties should review the Tanger Factory Outlet Centers, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2003. 4
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended March 31, 2004 2003 -------------------------------------------------------------------------------------------------------- (unaudited) REVENUES Base rentals (a) $32,060 $19,285 Percentage rentals 713 395 Expense reimbursements 12,147 8,313 Other income 859 662 -------------------------------------------------------------------------------------------------------- Total revenues 45,779 28,655 -------------------------------------------------------------------------------------------------------- EXPENSES Property operating 13,710 9,702 General and administrative 3,159 2,428 Depreciation and amortization 12,376 7,128 -------------------------------------------------------------------------------------------------------- Total expenses 29,245 19,258 -------------------------------------------------------------------------------------------------------- Operating income 16,534 9,397 Interest expense 8,864 6,724 -------------------------------------------------------------------------------------------------------- Income before equity in earnings of unconsolidated joint ventures, minority interest and discontinued operations 7,670 2,673 Equity in earnings of unconsolidated joint ventures (b) 165 92 Minority interest Consolidated joint venture (6,593) --- Operating partnership (230) (579) -------------------------------------------------------------------------------------------------------- Income from continuing operations 1,012 2,186 Discontinued operations (c) --- 5 -------------------------------------------------------------------------------------------------------- Net income 1,012 2,191 Less applicable preferred share dividends --- (443) -------------------------------------------------------------------------------------------------------- Net income available to common shareholders $1,012 $1,748 -------------------------------------------------------------------------------------------------------- Basic earnings per common share (c) Income from continuing operations $.08 $.19 Net income $.08 $.19 -------------------------------------------------------------------------------------------------------- Diluted earnings per common share (c) Income from continuing operations $.08 $.19 Net income $.08 $.19 -------------------------------------------------------------------------------------------------------- Funds from operations (FFO) $13,893 $10,278 FFO per common share - diluted (c) $.84 $.78 -------------------------------------------------------------------------------------------------------- (a) Includes straight-line rent adjustment and market rent adjustments of $144 and ($57) for the three months ended March 31, 2004 and 2003, respectively. (b) Includes Myrtle Beach, South Carolina Hwy 17 property which is operated by us through a 50% ownership joint venture. (c) In accordance with SFAS No. 144 "Accounting for the Impairment or Disposal of Long Lived Assets", the results of operations for property disposed of during 2003 have been reported above as Discontinued Operations for the 2003 period presented.
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TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) March 31, December 31, 2004 2003 --------------------------------------------------------------------------------------------------------------------------- (unaudited) ASSETS Rental Property Land $118,933 $119,833 Buildings, improvements and fixtures 965,948 958,720 --------------------------------------------------------------------------------------------------------------------------- 1,084,881 1,078,553 Accumulated depreciation (202,454) (192,698) --------------------------------------------------------------------------------------------------------------------------- Rental property, net 882,427 885,855 Cash and cash equivalents 10,781 9,836 Deferred charges, net 67,114 68,568 Other assets 19,565 23,178 --------------------------------------------------------------------------------------------------------------------------- Total assets $979,887 $987,437 --------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Long-term debt Senior, unsecured notes $147,509 $147,509 Mortgages payable 368,087 370,160 Lines of credit 4,825 22,650 --------------------------------------------------------------------------------------------------------------------------- 520,421 540,319 Construction trade payables 5,816 4,345 Accounts payable and accrued expenses 18,507 18,025 --------------------------------------------------------------------------------------------------------------------------- Total liabilities 544,744 562,689 --------------------------------------------------------------------------------------------------------------------------- Commitments and contingencies Minority interest Consolidated joint venture 220,337 218,148 Operating partnership 39,524 39,182 --------------------------------------------------------------------------------------------------------------------------- Total minority interests 259,861 257,330 --------------------------------------------------------------------------------------------------------------------------- Shareholders' equity Common shares, $.01 par value, 50,000,000 shares authorized, 13,452,203 and 12,960,643 shares issued and outstanding at March 31, 2004 and December 31, 2003 135 130 Paid in capital 265,087 250,070 Distributions in excess of net income (89,916) (82,737) Accumulated other comprehensive loss (24) (45) --------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 175,282 167,418 --------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $979,887 $987,437 ---------------------------------------------------------------------------------------------------------------------------
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TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (In thousands, except per share, state and center information) Three Months Ended March 31, 2004 2003 -------------------------------------------------------------------------------------------------- Funds from Operations: Net income $1,012 $2,191 Adjusted for: Minority interest in operating partnership 230 579 Minority interest adjustment - consolidated joint venture 33 --- Minority interest, depreciation and amortization attributable to discontinued operations --- 200 Depreciation and amortization uniquely significant to real estate - consolidated 12,318 7,054 Depreciation and amortization uniquely significant to real estate - unconsolidated joint ventures 300 254 -------------------------------------------------------------------------------------------------- Funds from operations $13,893 $10,278 -------------------------------------------------------------------------------------------------- Funds from operations per share - diluted $.84 $.78 -------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE SHARES Basic weighted average common shares 13,337 9,181 Effect of outstanding share and unit options 151 227 -------------------------------------------------------------------------------------------------- Diluted weighted average common shares (for earnings per share computations) 13,488 9,408 Convertible preferred shares (a) --- 723 Convertible operating partnership units (a) 3,033 3,033 -------------------------------------------------------------------------------------------------- Diluted weighted average common shares (for funds from operations per share computations) 16,521 13,164 -------------------------------------------------------------------------------------------------- OTHER INFORMATION Gross leasable area open at end of period - Wholly owned 5,302 5,497 Partially-owned consolidated 3,273 --- Partially-owned unconolidated 324 260 Managed 434 457 -------------------------------------------------------------------------------------------------- Total gross leasable area open at end of period 9,333 6,214 Outlet centers in operation - Wholly owned 26 28 Partially owned - consolidated (b) 9 --- Partially owned - unconsolidated (c) 1 1 Managed 4 5 -------------------------------------------------------------------------------------------------- Total outlet centers in operation 40 34 States operated in at end of period (b) (c) 23 21 Occupancy percentage at end of period (b) (c) 94% 95% -------------------------------------------------------------------------------------------------- (a) The convertible preferred shares and operating partnership units (minority interest in operating partnership) are not dilutive on earnings per share computed in accordance with generally accepted accounting principles. (b) Includes the Charter Oak portfolio which is operated by us through a one-third ownership joint venture. However, these properties are consolidated for financial reporting under FIN 46. (c) Includes Myrtle Beach, South Carolina Hwy 17 property which is operated by us through a 50% ownership joint venture.
We believe that for a clear understanding of our operating results, FFO should be considered along with net income as presented elsewhere in this report. FFO is presented because it is a widely accepted financial indicator used by certain investors and analysts to analyze and compare one equity REIT with another on the basis of operating performance. FFO is generally defined as net income (loss), computed in accordance with generally accepted accounting principles, before extraordinary items and gains (losses) on sale or disposal of depreciable operating properties, plus depreciation and amortization uniquely significant to real estate and after adjustments for unconsolidated partnerships and joint ventures. We caution that the calculation of FFO may vary from entity to entity and as such the presentation of FFO by us may not be comparable to other similarly titled measures of other reporting companies. FFO does not represent net income or cash flow from operations as defined by accounting principles generally accepted in the United States of America and should not be considered an alternative to net income as an indication of operating performance or to cash flows from operations as a measure of liquidity. FFO is not necessarily indicative of cash flows available to fund dividends to shareholders and other cash needs. 7