EX-99 3 tfocform8k0604ex.txt EXHIBIT 99.2 EARNINGS RLS NEWS RELEASE FOR RELEASE: IMMEDIATE RELEASE CONTACT: Frank C. Marchisello, Jr. (336) 834-6834 TANGER REPORTS SECOND QUARTER 2004 RESULTS 42.0% Increase in Total FFO, 14.6% Increase in FFO per Share Greensboro, NC, July 27, 2004, Tanger Factory Outlet Centers, Inc. (NYSE:SKT) today reported net income available to common shareholders for the second quarter of 2004 was $3.7 million, or $0.28 per share, as compared to net income available to common shareholders of $1.9 million, or $0.20 per share for the second quarter of 2003. For the six months ended June 30, 2004, net income was $4.8 million, or $0.35 per share, compared to $3.7 million, or $0.38 per share for the first six months of 2003. 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, $1.2 million in land parcel gains during the second quarter of 2004 and a $2.2 million increase in discontinued operations associated with the sale of properties during the second quarters of 2004 and 2003. For the three months ended June 30, 2004, funds from operations ("FFO"), a widely accepted measure of REIT performance, was $15.6 million, or $0.94 per share, as compared to FFO of $11.0 million, or $0.82 per share, for the three months ended June 30, 2003, representing a 42.0% increase in total FFO and a 14.6% increase in FFO per share. For the six months ended June 30, 2004, FFO was $29.5 million, or $1.78 per share, as compared to FFO of $21.3 million, or $1.60 per share, for the six months ended June 30, 2003, representing a 38.7% increase in total FFO and an 11.3% increase in FFO per share. Tanger's FFO for the three months and six months ended June 30, 2004 included $1.2 million in gains on the sale of land parcels, which are included in other income. These land parcel gains represent $0.06 per share for the three months and six months ended June 30, 2004, compared to no land parcel gains in the prior year periods. Excluding these gains, which are a component of our strategic plan, but unpredictable in their occurrence, FFO for the second quarter and six months ended June 30, 2004 would have been $0.88 and $1.72 per share respectively, resulting in a 7.3% increase in FFO per share for the second quarter and a 7.5% increase in FFO per share for the six months. 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. Second Quarter Highlights o Comparative sales increased 5.0% to $309 per square foot in reported same-space tenant sales for the rolling twelve months ended June 30, 2004 compared to $294 per square foot for the twelve months ended June 30, 2003 o 95% period-end portfolio occupancy rate o 43.5% debt-to-total market capitalization ratio, 3.46 times interest coverage ratio compared to 2.54 times last year 1 o General and administrative expenses as a percentage of total revenues decreased from 8.5% to 6.6% o 79,000 square feet of expansion space completed in Myrtle Beach, South Carolina o Year to date 1,040,785 square feet, or 58.1% of the square feet scheduled to expire during 2004 has been renewed with the existing tenants at an average increase in base rental rates of 7.5% o Generated $6.5 million in net proceeds in conjunction with the sale of two non-core properties o Generated $2.5 million in net proceeds in conjunction with the sale of three land parcels Stanley K. Tanger, Chairman of the Board and Chief Executive Officer, commented, "Our second quarter results exceeded plan, as comparative tenant sales were impressive across our entire portfolio. Our leasing activity continues to be very encouraging as many of our tenants are increasing their presence in Tanger centers by opening additional new stores. This should give us the opportunity to increase occupancies across our portfolio during the second half of the year. In addition, tenant renewals continued to be very strong during the second quarter and we plan to complete the vast majority of the remaining renewals by the end of the year." Portfolio Operating Results During the second quarter of 2004, Tanger executed 110 leases, totaling 436,107 square feet. Lease renewals for the second quarter of 2004 accounted for 284,953 square feet and generated a 6.5% increase in average base rental rates on a cash basis. For the first six months of 2004, 1,040,785 square feet of renewals generated a 7.5% increase in average base rental rates, and represented 58.1% of the 1,790,000 square feet originally scheduled to expire during 2004. The average initial base rent for new stores opened during the first six months of 2004 was $17.81, which was 11.0% above the average base rent for stores that closed during the same period. Reported same-space sales per square foot for the rolling twelve months ended June 30, 2004 was $309 per square foot. This represents a 5.0% increase compared to the rolling twelve months ended June 30, 2003. For the second quarter of 2004, same-space sales increased by 3.0%, 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 and Other Activities Tanger has completed the construction of 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 company held a grand opening celebration for the expansion during the weekend of July 4, 2004. Stores included in the third and final phase include Banana Republic, GAP, Calvin Klein, Ann Taylor, Puma, Guess and Jones, NY and others. The Company's two Myrtle Beach centers combined now 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 approximately 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 early 2006 and the Deer Park site to be 790,000 square feet at total 2 build out with the initial phase scheduled for delivery in late 2006 or early 2007. Tanger has also recently announced a new site in Charleston, South Carolina located at the southwest quadrant of Interstate 26 and Interstate 526 and a site in Wisconsin Dells, Wisconsin located at Exit 92 on Interstate 94 and Route 12. The Company currently expects the Charleston site to be 370,000 square feet and the Wisconsin site to be 300,000 square feet. Tanger currently expects both of these projects to be delivered in 2006. Financing Activities and Balance Sheet Summary As of June 30, 2004, Tanger had a total market capitalization of approximately $1.2 billion, with $503.0 million of debt outstanding (excluding a debt premium of $10.6 million), equating to a 43.5% debt-to-total market capitalization ratio. This represents a 49.6% increase in total market capitalization since June 30, 2003. As of June 30, 2004, $449.5 million, or 89.4% of Tanger's total debt, was at fixed interest rates and the Company did not have any amounts borrowed on its unsecured lines of credit. During the second quarter Tanger reduced its total debt outstanding by $6.8 million and continued to improve its interest coverage ratio, which was 3.46 times for the second quarter of 2004, as compared to 2.54 times interest coverage in the same period last year. Subsequent to the end of the second quarter of 2004, Tanger was successful in obtaining a commitment for an additional $25 million unsecured line of credit from Citicorp North America, Inc., a subsidiary of Citigroup; bringing the total committed unsecured lines of credit to $125 million. In addition, the Company has obtained commitments to extend the maturity dates on all of its lines of credit until June of 2007. 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 $0.70 and $0.74 per share and its FFO for 2004 will be between $3.76 and $3.80 per share, representing an increase in FFO over the prior year of approximately 9% to 10%. 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 $ 3.76 $ 3.80 Minority interest, depreciation and amortization uniquely significant to real estate including minority interest share, gain or loss on sale of real estate assets, and our share of joint ventures (3.06) (3.06) Estimated diluted net income available to common shareholders per share $ 0.70 $ 0.74 Tanger currently believes it will earn 30% of its net income and 25% of its FFO in the third quarter and 44% of its net income and 28% of its FFO in the fourth quarter. Second Quarter Conference Call Tanger will host a conference call to discuss its second quarter results for analysts, investors and other interested parties on Wednesday, July 28, 2004, 3 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 Second 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. A telephone replay of the call will be available from July 28, 2004 starting at 12:00 P.M. Eastern Time through 11:59 P.M., July 30, 2004, by dialing 1-800-642-1687 (conference ID # 8771519). Additionally, an online archive of the broadcast will also be available through July 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 38 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 June 30, 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 Six Months Ended June 30, June 30, 2004 2003 2004 2003 ----------------------------------------------------------------------------------------------------------------------------------- (unaudited) (unaudited) REVENUES Base rentals (a) $ 32,440 $ 19,306 $ 64,277 $ 38,361 Percentage rentals 957 549 1,670 944 Expense reimbursements 13,173 8,226 25,189 16,435 Other income (b) 2,395 791 3,253 1,450 ----------------------------------------------------------------------------------------------------------------------------------- Total revenues 48,965 28,872 94,389 57,190 ----------------------------------------------------------------------------------------------------------------------------------- EXPENSES Property operating 14,926 9,749 28,514 19,314 General and administrative 3,254 2,451 6,413 4,881 Depreciation and amortization 13,117 6,880 25,429 13,936 ----------------------------------------------------------------------------------------------------------------------------------- Total expenses 31,297 19,080 60,356 38,131 ----------------------------------------------------------------------------------------------------------------------------------- Operating income 17,668 9,792 34,033 19,059 Interest expense 8,900 6,556 17,764 13,279 ----------------------------------------------------------------------------------------------------------------------------------- Income before equity in earnings of unconsolidated joint ventures, minority interest and discontinued operations 8,768 3,236 16,269 5,780 Equity in earnings of unconsolidated joint ventures (c) 275 279 440 372 Minority interest Consolidated joint venture (6,619) - (13,212) - Operating partnership (445) (757) (644) (1,306) ----------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations 1,979 2,758 2,853 4,846 Discontinued operations, net of minority interest (d) 1,766 (451) 1,904 (348) ----------------------------------------------------------------------------------------------------------------------------------- Net income 3,745 2,307 4,757 4,498 Less applicable preferred share dividends - (363) - (806) ----------------------------------------------------------------------------------------------------------------------------------- Net income available to common shareholders $ 3,745 $ 1,944 $ 4,757 $ 3,692 ----------------------------------------------------------------------------------------------------------------------------------- Basic earnings per common share: Income from continuing operations $ 0.15 $ 0.25 $ 0.21 $ 0.43 Net income $ 0.28 $ 0.20 $ 0.35 $ 0.39 ----------------------------------------------------------------------------------------------------------------------------------- Diluted earnings per common share: Income from continuing operations $ 0.15 $ 0.24 $ 0.21 $ 0.42 Net income $ 0.28 $ 0.20 $ 0.35 $ 0.38 ----------------------------------------------------------------------------------------------------------------------------------- Funds from operations (FFO) $ 15,606 $ 10,989 $ 29,499 $ 21,267 FFO per common share - diluted $ 0.94 $ 0.82 $ 1.78 $ 1.60 ----------------------------------------------------------------------------------------------------------------------------------- Summary of discontinued operations (d) Operating income (loss) from discontinued operations $ 79 $ 142 $ 248 $ 274 Gain (loss) on sale of real estate 2,084 (735) 2,084 (735) ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) from discontinued operations 2,163 (593) 2,332 (461) Minority interest in discontinued operations 397 (142) 428 (113) ----------------------------------------------------------------------------------------------------------------------------------- Discontinued operations, net of minority interest $ 1,766 $ (451) $ 1,904 $ (348) -----------------------------------------------------------------------------------------------------------------------------------
(a) Includes straight-line rent and market rent adjustments of $447 and $(57) for the three months ended and $593 and $(117) for the six months ended June 30, 2004 and 2003, respectively. (b) Includes gains on sales of three outparcels of land of $1,219 for the three and six months ended June 30, 2004. (c) Includes Myrtle Beach, South Carolina Hwy 17 property which is operated by us through a 50% ownership joint venture. (d) In accordance with SFAS No. 144 "Accounting for the Impairment or Disposal of Long Lived Assets," the results of operations for properties disposed of during the year have been reported above as discontinued operations for both the current and prior periods presented. 5
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30, December 31, 2004 2003 --------------------------------------------------------------------------------------------------------------------------- (unaudited) ASSETS Rental property Land $ 115,541 $ 119,833 Buildings, improvements and fixtures 965,394 958,720 --------------------------------------------------------------------------------------------------------------------------- 1,080,935 1,078,553 Accumulated depreciation (209,359) (192,698) --------------------------------------------------------------------------------------------------------------------------- Rental property, net 871,576 885,855 Cash and cash equivalents 8,694 9,836 Deferred charges, net 64,747 68,568 Other assets 26,963 23,178 --------------------------------------------------------------------------------------------------------------------------- Total assets $ 971,980 $ 987,437 --------------------------------------------------------------------------------------------------------------------------- LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY Liabilities Long-term debt Senior, unsecured notes $ 147,509 $ 147,509 Mortgages payable (including a premium of $10,608 and $11,852 respectively) 366,065 370,160 Lines of credit - 22,650 --------------------------------------------------------------------------------------------------------------------------- 513,574 540,319 Construction trade payables 6,300 4,345 Accounts payable and accrued expenses 18,579 18,025 --------------------------------------------------------------------------------------------------------------------------- Total liabilities 538,453 562,689 --------------------------------------------------------------------------------------------------------------------------- Commitments Minority interest Consolidated joint venture 220,225 218,148 Operating partnership 38,731 39,182 --------------------------------------------------------------------------------------------------------------------------- Total minority interests 258,956 257,330 --------------------------------------------------------------------------------------------------------------------------- Shareholders' equity Common shares, $.01 par value, 50,000,000 shares authorized, 13,671,770 and 12,960,643 shares issued and outstanding at June 30, 2004 and December 31, 2003 137 130 Paid in capital 272,459 250,070 Distributions in excess of net income (94,603) (82,737) Deferred compensation (3,406) - Accumulated other comprehensive loss (16) (45) --------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 174,571 167,418 --------------------------------------------------------------------------------------------------------------------------- Total liabilities, minority interest and shareholders' equity $ 971,980 $ 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 Six Months Ended June 30, June 30, 2004 2003 2004 2003 ----------------------------------------------------------------------------------------------------------------------- Funds From Operations: Net income $ 3,745 $ 2,307 $ 4,757 $ 4,498 Adjusted for: Minority interest in operating partnership 445 757 644 1,306 Minority interest adjustment - consolidated joint venture (329) - (296) - Minority interest, depreciation and amortization attributable to discontinued operations 463 118 558 418 Depreciation and amortization uniquely significant to real estate - consolidated 13,062 6,806 25,316 13,790 Depreciation and amortization uniquely significant to real estate - unconsolidated joint venture 304 266 604 520 (Gain)/loss on sale of real estate (2,084) 735 (2,084) 735 ----------------------------------------------------------------------------------------------------------------------- Funds from operations $ 15,606 $ 10,989 $ 29,499 $ 21,267 ----------------------------------------------------------------------------------------------------------------------- Funds from operations per share - diluted $ 0.94 $ 0.82 $ 1.78 $ 1.60 ----------------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE SHARES Basic weighted average common shares 13,504 9,590 13,420 9,387 Effect of outstanding share and unit options 84 219 116 228 Effect of unvested restricted share awards 6 - 5 - ----------------------------------------------------------------------------------------------------------------------- Diluted weighted average common shares (for earnings per share computations) 13,594 9,809 13,541 9,615 Convertible preferred shares (a) - 590 - 656 Convertible operating partnership units (a) 3,033 3,033 3,033 3,033 ----------------------------------------------------------------------------------------------------------------------- Diluted weighted average common shares (for funds from operations per share computations) 16,627 13,432 16,574 13,304 ----------------------------------------------------------------------------------------------------------------------- OTHER INFORMATION Gross leasable area open at end of period - Wholly owned 5,240 5,449 5,240 5,449 Partially owned - consolidated (b) 3,273 - 3,273 - Partially owned - unconsolidated (c) 374 309 374 309 Managed 434 457 434 457 ----------------------------------------------------------------------------------------------------------------------- Total gross leasable area open at end of period 9,321 6,215 9,321 6,215 Outlet centers in operation - Wholly owned 24 27 24 27 Partially owned - consolidated (b) 9 - 9 - Partially owned - unconsolidated (c) 1 1 1 1 Managed 4 5 4 5 ----------------------------------------------------------------------------------------------------------------------- Total outlet centers in operation 38 33 38 33 States operated in at end of period (b) (c) 23 20 23 20 Occupancy percentage at end of period (b) (c) 95% 96% 95% 96% -----------------------------------------------------------------------------------------------------------------------
(a) The convertible preferred shares and operating partnership units (minority interest) 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 33% 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. 7