UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 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 1-7859
IRT PROPERTY COMPANY
--------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1366611
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
(770) 955-4406
----------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
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(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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 12, 2002
------------------------------ ------------------------------------
Common Stock, $1 Par Value 34,193,635 Shares
1
SPECIAL CAUTIONARY NOTICE REGARDING
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for IRT Property Company (the
"Company"), including, but not limited to, the section herein entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," may contain various "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended, that are based on the Company's
beliefs and assumptions, as well as information currently available to the
Company. Readers can identify these forward-looking statements through the
Company's use of words such as "may," "will," "intend," "project," "would,"
"could," "should," "expect," "anticipate," "assume," "believe," "estimate,"
"continue" or other similar words. Forward-looking statements involve known and
unknown risks, uncertainties and other factors, which may be beyond the
Company's control. The Company's actual results may differ significantly from
those expressed or implied in such forward-looking statements. Factors that
might cause these differences include, but are not limited to:
- changes in tax laws or regulations, especially those relating to real
estate investment trusts and real estate in general;
- the number, frequency and duration of vacancies that the Company
experiences;
- the Company's ability to solicit new tenants and to obtain lease renewals
from existing tenants on terms that are favorable to the Company;
- tenant bankruptcies and closings;
- the general financial condition of, or possible mergers or acquisitions
involving, the Company's tenants and competitors;
- competition;
- changes in interest rates and national and local economic conditions;
- possible environmental liabilities;
- the availability, cost and terms of financing;
- the Company's ability to identify, acquire, construct or develop
additional properties that result in the returns anticipated or sought;
and
- the Company's ability to effectively integrate properties or portfolio
acquisitions or other mergers or acquisitions.
Readers should not rely on the information contained in any forward-looking
statements and should not expect the Company to update or revise any
forward-looking statements. With respect to such forward-looking statements,
the Company claims protection under the Private Securities Litigation Reform Act
of 1995. The information in this Report, including the information contained in
forward-looking statements, is also qualified by the special cautionary notice
regarding forward-looking statements and the information in the section entitled
"Risk Factors" contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 2001 and other filings that the Company makes with the
Securities and Exchange Commission, which are incorporated herein by reference.
The documents that the Company files with the Securities and Exchange Commission
are available from the Company, and also may be examined at public reference
facilities maintained by the Securities and Exchange Commission or, to the
extent filed via EDGAR, accessed through the Internet website of the Securities
and Exchange Commission (http://www.sec.gov).
2
ITEM 1. FINANCIAL STATEMENTS
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
June 30, December 31,
2002 2001
---------- ----------
ASSETS
Real estate investments:
Rental properties . . . . . . . . . . . . . . . . . . . . . . $ 673,779 $ 659,820
Properties under development. . . . . . . . . . . . . . . . . 22,651 22,599
---------- ----------
696,430 682,419
Accumulated depreciation. . . . . . . . . . . . . . . . . . . (117,186) (109,344)
---------- ----------
Net rental properties. . . . . . . . . . . . . . . . . . 579,244 573,075
Net investment in direct financing leases . . . . . . . . . . 2,118 2,174
Mortgage loans, net . . . . . . . . . . . . . . . . . . . . . 311 1,160
---------- ----------
Net real estate investments. . . . . . . . . . . . . . . 581,673 576,409
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . 3,900 2,457
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . 13,126 11,634
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . $ 598,699 $ 590,500
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable, net . . . . . . . . . . . . . . . . . $ 132,890 $ 134,672
7.3% convertible subordinated debentures, net . . . . . . . . - 23,275
Senior notes, net . . . . . . . . . . . . . . . . . . . . . . 149,782 124,760
Indebtedness to banks . . . . . . . . . . . . . . . . . . . . 24,000 51,654
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . 4,752 4,598
Accrued expenses and other liabilities. . . . . . . . . . . . 10,045 10,652
---------- ----------
Total liabilities. . . . . . . . . . . . . . . . . . . . 321,469 349,611
Commitments and contingencies (Note 8)
Minority interest payable. . . . . . . . . . . . . . . . . . . . . 7,655 7,755
Shareholders' equity:
Preferred stock, $1 par value, authorized 10,000,000 shares;
none issued. . . . . . . . . . . . . . . . . . . . . . . - -
Common stock, $1 par value, 150,000,000 shares authorized;
34,187,635 and 33,234,206 shares issued in
2002 and 2001, respectively. . . . . . . . . . . . . . . 34,187 33,234
Additional paid-in capital. . . . . . . . . . . . . . . . . . 289,614 272,172
Deferred compensation/stock loans . . . . . . . . . . . . . . (3,573) (1,732)
Treasury stock, at cost, 0 and 2,738,204 shares
in 2002 and 2001, respectively . . . . . . . . . . . . . - (22,783)
Cumulative distributions in excess of net earnings. . . . . . (50,653) (47,757)
---------- ----------
Total shareholders' equity . . . . . . . . . . . . . . . 269,575 233,134
---------- ----------
Total liabilities and shareholders' equity . . . . . . . $ 598,699 $ 590,500
========== ==========
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2002 2001 2002 2001
-------- -------- -------- --------
REVENUES:
Income from rental properties. . . . . . . . . . . . . . $22,508 $21,266 $44,842 $42,520
Interest income. . . . . . . . . . . . . . . . . . . . . 15 148 34 280
Interest on direct financing leases. . . . . . . . . . . 49 94 171 284
Gain on sale of outparcels . . . . . . . . . . . . . . . 505 452 505 745
-------- -------- -------- --------
Total revenues. . . . . . . . . . . . . . . . . . . 23,077 21,960 45,552 43,829
-------- -------- -------- --------
EXPENSES:
Operating expenses of rental properties. . . . . . . . . 5,837 5,362 11,321 10,688
Interest expense . . . . . . . . . . . . . . . . . . . . 5,462 5,830 11,116 11,479
Depreciation . . . . . . . . . . . . . . . . . . . . . . 3,935 3,799 7,842 7,522
Amortization of debt costs . . . . . . . . . . . . . . . 156 164 304 312
General and administrative . . . . . . . . . . . . . . . 1,224 1,113 2,252 2,083
-------- -------- -------- --------
Total expenses. . . . . . . . . . . . . . . . . . . 16,614 16,268 32,835 32,084
Equity in loss of unconsolidated affiliates . . . . . . . . . - - - (4)
-------- -------- -------- --------
Earnings before income taxes, minority interest,
gain on sales of properties and extraordinary item. 6,463 5,692 12,717 11,741
Income tax provision. . . . . . . . . . . . . . . . . . . . . - (53) (9) (53)
Minority interest of unitholders in operating partnership . . (142) (244) (284) (305)
Gain on sales of properties . . . . . . . . . . . . . . . . . - 2,498 - 2,498
-------- -------- -------- --------
Earnings before extraordinary item. . . . . . . . . 6,321 7,893 12,424 13,881
EXTRAORDINARY ITEM:
Loss on extinguishment of debt . . . . . . . . . . . . . - - (156) -
-------- -------- -------- --------
Net earnings. . . . . . . . . . . . . . . . . . . . $ 6,321 $ 7,893 $12,268 $13,881
======== ======== ======== ========
PER SHARE: (Note 8)
Earnings before extraordinary item - basic . . . . . . . $ 0.19 $ 0.26 $ 0.39 $ 0.46
Extraordinary item - basic . . . . . . . . . . . . . . . - - - -
-------- -------- -------- --------
Net earnings - basic . . . . . . . . . . . . . . . . . . $ 0.19 $ 0.26 $ 0.39 $ 0.46
======== ======== ======== ========
Earnings before extraordinary item - diluted . . . . . . $ 0.19 $ 0.26 $ 0.39 $ 0.45
Extraordinary item - diluted . . . . . . . . . . . . . . - - - -
-------- -------- -------- --------
Net earnings - diluted . . . . . . . . . . . . . . . . . $ 0.19 $ 0.26 $ 0.39 $ 0.45
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . 32,673 30,281 31,564 30,247
======== ======== ======== ========
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . 33,701 32,462 32,564 33,200
======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated
statements.
4
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30,
--------------------
2002 2001
--------- ---------
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,268 $ 13,881
Adjustments to reconcile earnings to net cash from operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,842 7,522
Gain on sale of operating properties. . . . . . . . . . . . . . . . . - (2,498)
Gain on sale of outparcels. . . . . . . . . . . . . . . . . . . . . . (505) (745)
Extraordinary loss on extinguishment of debt. . . . . . . . . . . . . 156 -
Minority interest of unitholders in partnership . . . . . . . . . . . (100) (79)
Straight line rent adjustment . . . . . . . . . . . . . . . . . . . . (324) (271)
Amortization of deferred compensation . . . . . . . . . . . . . . . . 75 59
Amortization of debt costs and discounts. . . . . . . . . . . . . . . 304 330
Amortization of capitalized leasing income. . . . . . . . . . . . . . 57 88
Changes in assets and liabilities:
Increase in accrued interest on debentures and senior notes . . . . 232 40
Increase in interest receivable, prepaid expenses
and other assets . . . . . . . . . . . . . . . . . . . . . . . . . (936) (48)
(Decrease) increase in accrued expenses and other liabilities . . . (680) 1,177
--------- ---------
Net cash flows from operating activities . . . . . . . . . . . . . . . . . 18,389 19,456
--------- ---------
Cash flows used in investing activities:
Additions to operating properties, net . . . . . . . . . . . . . . . . . (3,277) (11,329)
Additions to development properties, net . . . . . . . . . . . . . . . . (5,672) (1,989)
Proceeds from sale of operating properties, net. . . . . . . . . . . . . - 11,260
Proceeds from sale of outparcels, net. . . . . . . . . . . . . . . . . . 1,091 931
Purchase of unconsolidated affiliate, net of assets acquired . . . . . . - 177
Distribution from dissolution of unconsolidated affiliate. . . . . . . . - 21
Funding of mortgage loans. . . . . . . . . . . . . . . . . . . . . . . . - (414)
Collections of mortgage loans, net . . . . . . . . . . . . . . . . . . . 2 21
--------- ---------
Net cash flows used in investing activities. . . . . . . . . . . . . . . . (7,856) (1,322)
--------- ---------
Cash flows (used in) provided by financing activities:
Cash dividends, net. . . . . . . . . . . . . . . . . . . . . . . . . . . (15,165) (14,261)
Issuance of common stock, net. . . . . . . . . . . . . . . . . . . . . . 38,508 -
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . - (405)
Exercise of stock options. . . . . . . . . . . . . . . . . . . . . . . . 574 1,266
Issuance of shares under stock purchase plan . . . . . . . . . . . . . . 21 -
Proceeds from mortgage notes payable . . . . . . . . . . . . . . . . . . - 20,740
Principal amortization of mortgage notes payable . . . . . . . . . . . . (1,385) (1,225)
Repayment of mortgage notes payable. . . . . . . . . . . . . . . . . . . (5,198) -
Proceeds from 7.84% senior notes issuance. . . . . . . . . . . . . . . . 25,000 -
Proceeds from 7.77% senior notes issuance. . . . . . . . . . . . . . . . - 50,000
Repayment of 7.3% convertible subordinated debentures. . . . . . . . . . (23,110) -
Repayment of 7.45% senior notes. . . . . . . . . . . . . . . . . . . . . - (50,000)
Increase in bank indebtedness. . . . . . . . . . . . . . . . . . . . . . (27,654) (19,000)
Payment of deferred financing costs. . . . . . . . . . . . . . . . . . . (681) (1,078)
--------- ---------
Net cash flows (used in) provided by financing activities. . . . . . . . . (9,090) (13,963)
--------- ---------
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . 1,443 4,171
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . 2,457 831
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . $ 3,900 $ 5,002
========= =========
Supplemental disclosures of cash flow information:
Total cash paid during period for interest . . . . . . . . . . . . . . . $ 11,356 $ 11,711
========= =========
The accompanying notes are an integral part of these condensed consolidated
statements.
5
IRT PROPERTY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. UNAUDITED FINANCIAL STATEMENTS
These condensed consolidated financial statements for interim periods are
unaudited and should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended December 31, 2001. The accompanying condensed
consolidated financial statements include the accounts of IRT Property Company
and its wholly-owned subsidiaries, IRT Management Company ("IRTMC"), VW Mall,
Inc., IRT Alabama, Inc. ("IRTAL") and IRT Capital Corporation II ("IRTCCII"),
and its majority-owned subsidiary, IRT Partners L.P. ("LP") (collectively, the
"Company"). Intercompany transactions and balances have been eliminated in the
consolidation. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to a fair presentation of the
financial statements as of June 30, 2002 and 2001 have been recorded. The
results of operations for the interim periods presented are not necessarily
indicative of the results that may be expected for future interim periods or for
the full year.
2. RENTAL PROPERTIES
The rental property acquired in 2002 is summarized below.
SHOPPING CENTER ACQUISITIONS
Date Square Year Built/ % Leased Total Initial
Acquired Property Name City, State Footage Renovated at Acquisition Cost Cash Paid
-------- ----------------- ----------- -------- ---------- --------------- ---------- ----------
2/19/02 Parkwest Crossing Durham, NC 85,602 1991 100% $6,620 $1,946
In connection with the acquisition of Parkwest Crossing, the Company assumed a
$4,800, 8.1% mortgage. See Note 5.
3. DEVELOPMENT AGREEMENTS
The Company enters into agreements to develop shopping centers with local
developers. The agreements generally consist of the Company committing to loan a
fixed amount, at a specified interest rate, for the development of the shopping
center with the possibility of the Company then purchasing the center upon the
developer meeting certain budgetary and leasing requirements. The loan is
secured by the development property and due upon completion. The developer is
responsible for all construction matters as well as initial leasing efforts.
Additionally, the Company could enter into a separate agreement to purchase
the completed shopping center. Generally, the purchase price to the Company is
based on the shopping center's net operating income and an implied rate of
return at the time when the developer meets the specified requirements. As of
June 30, 2002, the Company has no such purchase commitments.
The Company is involved in one development agreement, Freehome Village, a
89,270 square foot shopping center. As of June 30, 2002, the Company has loaned
$925 for development and the shopping center should be completed in 2003.
6
The development agreement is classified as a property under development in
the accompanying Condensed Consolidated Balance Sheet as of June 30, 2002.
Previously, this development agreement had been considered as a mortgage loan.
4. INVESTMENT IN AND ADVANCES TO AFFILIATES
As of June 30, 2002, LP, IRTCCII, IRTAL and IRTMC guaranteed the Company's
indebtedness under the Company's existing unsecured revolving term loan and its
other senior debt. The guarantees are joint and several and full and
unconditional. The following tables show IRTCCII, IRTAL and IRTMC as
"Consolidated Subsidiaries."
GUARANTORS
--------------------------- CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
------------- ------------- ------------- ------------- -------------
AS OF JUNE 30, 2002
ASSETS
Net rental properties . . . . . . . . . . . . $ 398,023 $ 29,814 $ 151,407 $ - $ 579,244
Investment in affiliates. . . . . . . . . . . 124,098 - - (124,098) -
Other assets. . . . . . . . . . . . . . . . . 38,829 40,113 21,112 (80,599) 19,455
------------- ------------- ------------- ------------- -------------
Total assets . . . . . . . . . . . . . . . 560,950 69,927 172,519 (204,697) 598,699
============= ============= ============= ============= =============
LIABILITIES
Mortgage notes payable. . . . . . . . . . . . 86,960 4,051 41,879 - 132,890
Senior Notes, net . . . . . . . . . . . . . . 149,782 - - - 149,782
Indebtedness to banks . . . . . . . . . . . . 24,000 - - - 24,000
Other liabilities . . . . . . . . . . . . . . 67,412 24,939 3,046 (72,945) 22,452
------------- ------------- ------------- ------------- -------------
Total liabilities. . . . . . . . . . . . . 328,154 28,990 44,925 (72,945) 329,124
------------- ------------- ------------- ------------- -------------
SHAREHOLDERS' EQUITY
Total shareholders' equity . . . . . . . . 232,796 40,937 127,594 (131,752) 269,575
------------- ------------- ------------- ------------- -------------
Total liabilities and shareholders' equity $ 560,950 $ 69,927 $ 172,519 $ (204,697) $ 598,699
============= ============= ============= ============= =============
GUARANTORS
---------------------------- CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
------------- ------------- ------------- ------------- -------------
AS OF DECEMBER 31, 2001
ASSETS
Net rental properties . . . . . . . . . . . . $ 399,312 $ 28,138 $ 145,625 $ - $ 573,075
Investment in affiliates. . . . . . . . . . . 122,168 - - (122,168) -
Other assets. . . . . . . . . . . . . . . . . 35,677 33,488 21,248 (72,988) 17,425
------------- ------------- ------------- ------------- -------------
Total assets . . . . . . . . . . . . . . . 557,157 61,626 166,873 (195,156) 590,500
============= ============= ============= ============= =============
LIABILITIES
Mortgage notes payable. . . . . . . . . . . . 93,115 4,093 37,464 - 134,672
Senior Notes, net . . . . . . . . . . . . . . 124,760 - - - 124,760
Indebtedness to banks . . . . . . . . . . . . 51,654 - - - 51,654
Other liabilities . . . . . . . . . . . . . . 84,928 24,431 2,154 (65,233) 46,280
------------- ------------- ------------- ------------- -------------
Total liabilities. . . . . . . . . . . . . 354,457 28,524 39,618 (65,233) 357,366
------------- ------------- ------------- ------------- -------------
SHAREHOLDERS' EQUITY
Total shareholders' equity . . . . . . . . 202,700 33,102 127,255 (129,923) 233,134
------------- ------------- ------------- ------------- -------------
Total liabilities and shareholders' equity $ 557,157 $ 61,626 $ 166,873 $ (195,156) $ 590,500
============= ============= ============= ============= =============
7
GUARANTORS
--------------------------- CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
------------- ------------- ------------- ------------- --------------
FOR THE THREE MONTHS ENDED JUNE 30, 2002
REVENUES
Income from rental properties. . . . . . . . $ 15,532 $ 501 $ 6,475 $ - $ 22,508
Interest Income. . . . . . . . . . . . . . . 147 - 79 (211) 15
Interest on direct financing leases. . . . . 49 - - - 49
Other income . . . . . . . . . . . . . . . . 315 2,582 - (2,392) 505
------------- ------------- ------------- ------------- --------------
Total revenues. . . . . . . . . . . . . . 16,043 3,083 6,554 (2,603) 23,077
------------- ------------- ------------- ------------- --------------
EXPENSES
Operating expenses of rental properties. . . 3,874 128 1,835 - 5,837
Interest expense . . . . . . . . . . . . . . 4,689 164 818 (209) 5,462
Depreciation . . . . . . . . . . . . . . . . 2,827 66 1,042 - 3,935
Amortization of debt costs . . . . . . . . . 150 1 5 - 156
General and administrative . . . . . . . . . 791 113 320 - 1,224
------------- ------------- ------------- ------------- --------------
Total expenses. . . . . . . . . . . . . . 12,331 472 4,020 (209) 16,614
------------- ------------- ------------- ------------- --------------
Equity in earnings (losses) of affiliates . . . 2,611 - - (2,611) -
------------- ------------- ------------- ------------- --------------
Earnings before income taxes, minority
interest, gain on sales of properties and
extraordinary item. . . . . . . . . . . . 6,323 2,611 2,534 (5,005) 6,463
Income tax provision. . . . . . . . . . . . . . - - - - -
Minority interest in operating partnership . . - - - (142) (142)
Gain on sales of properties . . . . . . . . . . - - - - -
------------- ------------- ------------- ------------- --------------
Earnings before extraordinary item. . . . 6,323 2,611 2,534 (5,147) 6,321
Extraordinary item - loss on extinguishment
of debt . . . . . . . . . . . . . . . . . . . - - - - -
------------- ------------- ------------- ------------- --------------
Net Earnings. . . . . . . . . . . . . . . . . . $ 6,323 $ 2,611 $ 2,534 $ (5,147) $ 6,321
============= ============= ============= ============= ==============
GUARANTORS
----------------------------- CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
------------- -------------- ------------- ------------- --------------
FOR THE THREE MONTHS ENDED JUNE 30, 2001
REVENUES
Income from rental properties . . . . . . . $ 15,063 $ 344 $ 5,859 $ - $ 21,266
Interest Income . . . . . . . . . . . . . . 241 - 189 (282) 148
Interest on direct financing leases . . . . 94 - - - 94
Other income. . . . . . . . . . . . . . . . 37 3,846 - (3,431) 452
------------- -------------- ------------- ------------- --------------
Total revenues . . . . . . . . . . . . . 15,435 4,190 6,048 (3,713) 21,960
------------- -------------- ------------- ------------- --------------
EXPENSES
Operating expenses of rental properties . . 3,743 71 1,548 - 5,362
Interest expense. . . . . . . . . . . . . . 5,186 218 709 (283) 5,830
Depreciation. . . . . . . . . . . . . . . . 2,767 63 969 - 3,799
Amortization of debt costs. . . . . . . . . 160 1 3 - 164
General and administrative. . . . . . . . . 792 68 253 - 1,113
------------- -------------- ------------- ------------- --------------
Total expenses . . . . . . . . . . . . . 12,648 421 3,482 (283) 16,268
------------- -------------- ------------- ------------- --------------
Equity in earnings (losses) of affiliates. . . 3,716 - - (3,716) -
------------- -------------- ------------- ------------- --------------
Earnings before income taxes, minority
interest and gain on sales of properties 6,503 3,769 2,566 (7,146) 5,692
Income tax provision . . . . . . . . . . . . . - (53) - - (53)
Minority interest in operating partnership. . - - - (244) (244)
Gain on sales of properties. . . . . . . . . . 1,388 - 1,108 2 2,498
------------- -------------- ------------- ------------- --------------
Net Earnings . . . . . . . . . . . . . . . . . $ 7,891 $ 3,716 $ 3,674 $ (7,388) $ 7,893
============= ============== ============= ============= ==============
8
GUARANTORS
------------------------------ CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
-------------- -------------- -------------- ------------- --------------
FOR THE SIX MONTHS ENDED JUNE 30, 2002
REVENUES
Income from rental properties . . . . . . . . $ 31,048 $ 928 $ 12,866 $ - $ 44,842
Interest Income . . . . . . . . . . . . . . . 280 - 158 (404) 34
Interest on direct financing leases . . . . . 171 - - - 171
Other income. . . . . . . . . . . . . . . . . 341 5,094 - (4,930) 505
-------------- -------------- -------------- ------------- --------------
Total revenues . . . . . . . . . . . . . . 31,840 6,022 13,024 (5,334) 45,552
-------------- -------------- -------------- ------------- --------------
EXPENSES
Operating expenses of rental properties . . . 7,536 238 3,547 - 11,321
Interest expense. . . . . . . . . . . . . . . 9,625 310 1,584 (403) 11,116
Depreciation. . . . . . . . . . . . . . . . . 5,633 131 2,078 - 7,842
Amortization of debt costs. . . . . . . . . . 294 1 9 - 304
General and administrative. . . . . . . . . . 1,487 173 592 - 2,252
-------------- -------------- -------------- ------------- --------------
Total expenses . . . . . . . . . . . . . . 24,575 853 7,810 (403) 32,835
-------------- -------------- -------------- ------------- --------------
Equity in earnings (losses) of affiliates. . . . 5,160 - - (5,160) -
-------------- -------------- -------------- ------------- --------------
Earnings before income taxes, minority
interest, gain on sales of properties and
extraordinary item . . . . . . . . . . . . 12,425 5,169 5,214 (10,091) 12,717
Income tax provision . . . . . . . . . . . . . . - (9) - - (9)
Minority interest in operating partnership. . . - - - (284) (284)
Gain on sales of properties. . . . . . . . . . . - - - - -
-------------- -------------- -------------- ------------- --------------
Earnings before extraordinary item . . . . 12,425 5,160 5,214 (10,375) 12,424
Extraordinary item - loss on extinguishment
of debt. . . . . . . . . . . . . . . . . . . . (156) - - - (156)
-------------- -------------- -------------- ------------- --------------
Net Earnings . . . . . . . . . . . . . . . . . . $ 12,269 $ 5,160 $ 5,214 $ (10,375) $ 12,268
============== ============== ============== ============= ==============
Net cash flows provided by (used in)
operating activities . . . . . . . . . . . . . . $ 11,657 $ 4,373 $ 7,272 $ (4,913) $ 18,389
============== ============== ============== ============= ==============
Net cash flows used in
investing activities . . . . . . . . . . . . . . $ (3,206) $ (1,592) $ (3,058) $ - $ (7,856)
============== ============== ============== ============= ==============
Net cash flows (used in) provided by
financing activities . . . . . . . . . . . . . . $ (7,331) $ (2,596) $ (4,076) $ 4,913 $ (9,090)
============== ============== ============== ============= ==============
9
GUARANTORS
------------------------------ CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES PARTNERS, LP ENTRIES COMPANY
------------- -------------- -------------- ------------- --------------
FOR THE SIX MONTHS ENDED JUNE 30, 2001
REVENUES
Income from rental properties. . . . . . . . $ 30,300 $ 622 $ 11,598 $ - $ 42,520
Interest Income. . . . . . . . . . . . . . . 709 - 170 (599) 280
Interest on direct financing leases. . . . . 284 - - - 284
Other income . . . . . . . . . . . . . . . . 43 6,412 293 (6,003) 745
------------- -------------- -------------- ------------- --------------
Total revenues. . . . . . . . . . . . . . 31,336 7,034 12,061 (6,602) 43,829
------------- -------------- -------------- ------------- --------------
EXPENSES
Operating expenses of rental properties. . . 7,452 136 3,100 - 10,688
Interest expense . . . . . . . . . . . . . . 10,483 286 1,312 (602) 11,479
Depreciation . . . . . . . . . . . . . . . . 5,502 91 1,929 - 7,522
Amortization of debt costs . . . . . . . . . 308 1 3 - 312
General and administrative . . . . . . . . . 1,478 107 494 4 2,083
------------- -------------- -------------- ------------- --------------
Total expenses. . . . . . . . . . . . . . 25,223 621 6,838 (598) 32,084
------------- -------------- -------------- ------------- --------------
Equity in earnings (losses) of affiliates . . . 6,360 - - (6,364) (4)
------------- -------------- -------------- ------------- --------------
Earnings before income taxes, minority
interest and gain on sales of properties. 12,473 6,413 5,223 (12,368) 11,741
Income tax provision. . . . . . . . . . . . . . - (53) - - (53)
Minority interest in operating partnership . . - - - (305) (305)
Gain on sales of properties . . . . . . . . . . 1,388 - 1,108 2 2,498
------------- -------------- -------------- ------------- --------------
Net Earnings. . . . . . . . . . . . . . . . . . $ 13,861 $ 6,360 $ 6,331 $ (12,671) $ 13,881
============= ============== ============== ============= ==============
Net cash flows provided by (used in)
operating activities. . . . . . . . . . . . . . $ 13,382 $ 5,717 $ 7,147 $ (6,790) $ 19,456
============= ============== ============== ============= ==============
Net cash flows provided by (used in)
investing activities. . . . . . . . . . . . . . $ 18,156 $ (597) $ (1,724) $ (17,157) $ (1,322)
============= ============== ============== ============= ==============
Net cash flows provided by (used in)
financing activities. . . . . . . . . . . . . . $ 10,518 $ (5,155) $ (11,736) $ (7,590) $ (13,963)
============= ============== ============== ============= ==============
5. MORTGAGE NOTES PAYABLE
On February 19, 2002, the Company assumed a non-recourse, secured loan
totaling $4,800, in connection with the acquisition of Parkwest Crossing. The
secured loan has a fixed interest rate of 8.1%. The loan is due and payable
September 1, 2010 and the principal amortization is based on a thirty year
amortization schedule. Costs associated with assuming the secured loan totaled
$56 and is being amortized over the term of the loan.
On March 1, 2002, the Company prepaid a 9.63% secured loan of approximately
$5,198. The loan was due on June 1, 2002.
6. 7.3% CONVERTIBLE SUBORDINATED DEBENTURES
On January 24, 2002, the Company redeemed all of the outstanding 7.3%
convertible subordinated debentures due August 15, 2003 at par plus accrued
interest. Prior to redemption, 165 bonds were converted into 14,659 shares of
common stock. The Company paid $23,110 to redeem the remaining bonds outstanding
and recognized a $156 extraordinary loss on the extinguishment of unamortized
debt costs.
7. SENIOR NOTES
On January 23, 2002, pursuant to the Medium Term Note Program (the "MTN
Program") established in 2001, the Company issued $25,000 of 7.84% senior
unsecured notes due January 23, 2012. Interest on these senior notes is payable
semi-annually on January 23 and July 23. Costs associated with the issuance of
these senior notes totaled approximately $306 and are being amortized over the
life of the notes.
10
8. COMMITMENTS AND CONTINGENCIES
Certain of the Company's properties have environmental concerns that have
been or are being addressed. The Company maintains limited insurance coverage
for this type of environmental risk. Although no assurance can be given that
Company properties will not be affected adversely in the future by environmental
problems, the Company presently believes that there are no environmental matters
that are reasonably likely to have a material adverse effect on the Company's
financial position.
9. COMMON STOCK
In May 2002, the Company completed an offering of 3,450,000 shares of
common stock at $11.79 per share. Net proceeds to the Company were approximately
$38,508.
10. DEFERRED COMPENSATION
On May 30, 2002, 160,000 restricted shares of common stock were granted to
certain Company officers as incentives for future services. The restricted
shares vest proportionately over 4 years from the date of grant. The restricted
shares were valued at the closing price of the Company's common stock on May 30,
2002 of $11.97. As of June 30, 2002, the Company had recognized approximately
$16 within the Condensed Consolidated Income Statements.
11
11. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding during the period. The effects of
the conversion of the operating partnership units held by the minority interest
are dilutive for the three and six months ended June 30, 2002 and for the six
months ended June 30, 2001 and have been included in the calculation of diluted
earnings per share for those periods. For the three months ended June 30, 2001,
the effect of the operating partnership units have been excluded from the
calculation as they are anti-dilutive for the period. For the three and six
months ended June 30, 2001 the effects of the conversion of the 7.3% debentures
have been included as they are dilutive for such periods. For the three and six
months ended June 30, 2002, due to the redemption of such convertible bonds in
January 2002, the effects of the conversion have been excluded from the
calculation of diluted earnings per share as they are anti-dilutive for those
periods. The effects of certain stock options and non-vested restricted stock,
using the treasury stock method, have been included in the calculation of
diluted earnings per share, as they are dilutive for all periods presented.
Per Share
Income Shares Amount
------- ------ -------
(In thousands except per share amounts)
For the three months ended June 30, 2002
----------------------------------------------------------
Basic net earnings available to shareholders . . . . . . . $ 6,314 32,673 $ 0.19
=======
Options outstanding. . . . . . . . . . . . . . . . . . . . - 192
Restricted stock . . . . . . . . . . . . . . . . . . . . . - 20
Minority interest of unitholders in operating partnership. 142 816
Diluted net earnings available to shareholders . . . . . . $ 6,456 33,701 $ 0.19
======= ====== =======
For the three months ended June 30, 2001
----------------------------------------------------------
Basic net earnings available to shareholders . . . . . . . $ 7,893 30,281 $ 0.26
=======
Options outstanding. . . . . . . . . . . . . . . . . . . . - 92
Restricted stock . . . . . . . . . . . . . . . . . . . . . - 20
Conversion of 7.3% debentures. . . . . . . . . . . . . . . 450 2,069
Diluted net earnings available to shareholders . . . . . . $ 8,343 32,462 $ 0.26
======= ====== =======
For the six months ended June 30, 2002
----------------------------------------------------------
Basic net earnings available to shareholders . . . . . . . $12,261 31,564 $ 0.39
=======
Options outstanding. . . . . . . . . . . . . . . . . . . . - 168
Restricted Stock . . . . . . . . . . . . . . . . . . . . . - 16
Minority interest of unitholders in operating partnership. 284 816
Diluted net earnings available to shareholders . . . . . . $12,545 32,564 $ 0.39
======= ====== =======
For the six months ended June 30, 2001
----------------------------------------------------------
Basic net earnings available to shareholders . . . . . . . $13,881 30,247 $ 0.46
=======
Options outstanding. . . . . . . . . . . . . . . . . . . . - 65
Restricted stock . . . . . . . . . . . . . . . . . . . . . - 3
Minority interest of unitholders in operating partnership. 305 816
Conversion of 7.3% debentures. . . . . . . . . . . . . . . 900 2,069
Diluted net earnings available to shareholders . . . . . . $15,086 33,200 $ 0.45
======= ====== =======
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto included elsewhere in
this report.
OVERVIEW
IRT Property Company ("IRT" or the "Company") was founded in 1969 and
became a public company in May 1971 (NYSE: IRT). The Company is an owner,
operator, redeveloper and developer of high quality, well located neighborhood
and community shopping centers throughout the southeastern United States. The
Company's portfolio consists of 89 shopping centers, three shopping center
investments, four development properties, one industrial property and three
mortgage loans. The 89 shopping centers and the three shopping center
investments total approximately 9.8 million square feet of retail space and are
located in eleven southeastern states. IRT shopping centers are anchored by
necessity-oriented retailers such as supermarkets, drug stores, national value
retailers and department stores.
GEOGRAPHIC MARKETS
The Company owns and operates 89 shopping centers in ten states primarily
located in Florida (26), Georgia (20), Louisiana (14) and North Carolina (14).
The following table summarizes the Company's shopping centers by state for total
gross leasable area ("GLA") and rental income for the six months ended June 30,
2002 and for the year ended December 31, 2001:
% OF GLA % OF RENTAL INCOME
------------------------ ------------------------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2002 2001 2002 2001
--------- ------------- --------- -------------
Florida. . . . 32.5% 32.3% 39.0% 38.4%
Georgia. . . . 24.6% 25.1% 24.4% 25.6%
Louisiana. . . 17.5% 17.8% 14.0% 14.4%
North Carolina 13.2% 12.5% 11.8% 11.2%
Tennessee. . . 3.7% 3.7% 3.4% 3.2%
Virginia . . . 2.8% 2.8% 2.4% 2.3%
South Carolina 2.5% 2.6% 2.0% 2.0%
Alabama. . . . 2.1% 2.1% 2.1% 2.2%
Mississippi. . 0.7% 0.7% 0.5% 0.3%
Kentucky . . . 0.4% 0.4% 0.4% 0.4%
--------- ------------- --------- -------------
100.0% 100.0% 100.0% 100.0%
========= ============= ========= =============
13
TENANTS AND LEASING
The Company's 89 shopping centers are anchored by necessity-oriented
retailers such as supermarkets, drug stores, national value retailers and
department stores. The Company's five largest tenants, as a percentage of
revenues, are Publix (9.1%), Kroger (7.1%), Wal-Mart (4.6%), Kmart (4.0%) and
Winn Dixie (2.6%). As of June 30, 2002, of the Company's 9.8 million square feet
of retail space, approximately 2.8 million, or 28.6%, was leased to grocery
stores. Including anchor tenants, the Company has over 1,000 different tenants.
The following table represents the percent leased and the average base rent per
square foot leased by state as of June 30, 2002 and December 31, 2001:
AVERAGE BASE RENT
% LEASED PER SQUARE FOOT LEASED
------------------------ ------------------------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2002 2001 2002 2001
--------- ------------- --------- -------------
Florida . . . . . . . . . 94% 92% $ 9.19 $ 9.10
Georgia . . . . . . . . . 94% 95% 8.19 8.19
Louisiana . . . . . . . . 82% 87% 7.44 7.22
North Carolina. . . . . . 94% 94% 6.92 6.64
Tennessee . . . . . . . . 96% 97% 6.49 6.60
Virginia. . . . . . . . . 93% 92% 7.01 6.93
South Carolina. . . . . . 94% 95% 6.07 6.06
Alabama . . . . . . . . . 99% 98% 7.95 7.90
Mississippi . . . . . . . 100% 100% 5.63 5.62
Kentucky. . . . . . . . . 51% 94% 7.89 7.81
--------- ------------- --------- -------------
Total of all properties 92% 93% $ 8.03 $ 7.94
========= ============= ========= =============
The overall percent leased slightly decreased from 93% at December 31, 2001 to
92% at June 30, 2002. The decrease was due to one of the Company's major
tenants, Kmart, rejecting one lease in Louisiana of 72,897 square feet at the
end of June.
Base rent per square foot leased increased from $7.94 per square foot as of
December 31, 2001 to $8.03 per square foot as of June 30, 2002 due to increased
renewal rental rates and higher rates on the new properties. The Company renewed
leases during 2002 at an average increase of 5.2% in rental revenues. The
Company also completed two developments and purchased three properties during
2001 and 2002, which have higher base rents per square foot.
The necessity-oriented retailers, such as those occupying the Company's
properties, typically perform well in an economic recession; however, adverse
changes in general or local economic conditions could result in the inability of
some existing tenants to meet their lease obligations and could adversely affect
the Company's ability to attract or retain tenants.
In October 1999, a grocery anchor, Jitney Jungle, filed for reorganization
under Chapter 11 of the United States Bankruptcy Code. At the time of filing,
the Company had leases with Jitney Jungle at 10 store locations. Jitney Jungle
disavowed two of these leases at the time of the bankruptcy filing. During 2000,
Jitney Jungle rejected three additional leases, and in January 2001 the
remaining five leases were rejected by the bankruptcy court. As of June 30,
2002, of the 10 original Jitney Jungle locations, three are fully leased to
grocery operators, three are fully leased to other national tenants and one is
partially leased to a national tenant. The Company is negotiating with retailers
for two of the remaining three locations.
14
On January 22, 2002, one of the Company's anchor tenants, Kmart Corporation,
filed for bankruptcy protection. The Company has eight stores leased to Kmart,
which accounted for 4.0% of the Company's total revenues for the six months
ended June 30, 2002. On March 8, 2002, Kmart Corporation announced nationwide
store closings that included two stores in IRT's portfolio. Rental income from
these two stores in 2001 was approximately $730, including base rents and all
related charges of property taxes and common area maintenance. Subsequently in
June 2002, the two stores, located at Siegen Village and Pinhook Plaza in
Louisiana, closed when store-closing inventory sales were completed. The Siegen
Village lease was purchased by a third party, which continues to pay rent for
this space. The lease at Pinhook Plaza was rejected by Kmart and the Company
obtained possession of this space. The Company is aggressively marketing this
location to prospective tenants and presently believes revenue lost will not
have a material adverse affect on the Company.
Other tenants have also filed for protection under bankruptcy laws,
however; the Company presently believes the potential financial losses likely
will not be significant with regard to the Company's overall portfolio of
tenants.
As of June 30, 2002, our leases with anchor tenants had a weighted average
life of 7.25 years. Anchor tenants are defined as supermarkets, drug stores,
national value retailers, department stores and other tenants leasing in excess
of 10,000 square feet which, in management's opinion, have the
traffic-generating qualities necessary to be considered an anchor. Our leases
with shop tenants, which include all other tenants except anchors, had a
weighted average life of 2.65 years as of June 30, 2002. The following table
represents anchor and shop tenant lease expirations as of June 30, 2002:
APPROXIMATE ANNUALIZED
NUMBER OF LEASED BASE RENT AVERAGE
LEASE YEAR LEASES AREA IN UNDER EXPIRING BASE RENT
EXPIRATION EXPIRING SQUARE FEET LEASES PER SQUARE FOOT
---------- --------- ----------- --------------- ----------------
2002 . . . 153 349,676 $ 3,883,139 $ 11.10
2003 . . . 320 871,238 8,857,400 10.17
2004 . . . 286 798,576 8,359,530 10.47
2005 . . . 268 914,807 8,620,194 9.42
2006 . . . 188 898,944 8,294,053 9.23
2007 . . . 125 833,102 6,548,317 7.86
2008 . . . 22 403,373 2,422,503 6.01
2009 . . . 25 784,006 4,188,812 5.34
2010 . . . 20 313,860 2,083,252 6.64
2011 . . . 17 496,761 3,209,201 6.46
2012 . . . 15 436,195 3,029,319 6.94
Thereafter 55 1,771,516 12,566,249 7.09
--------- ----------- --------------- ----------------
Total. . 1,494 8,872,054 $ 72,061,969 $ 8.12
========= =========== =============== ================
15
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2002 TO THE THREE MONTHS ENDED
JUNE 30, 2001
Revenues
Total revenues increased $1,117, or 5.1%, to $23,077 in 2002 primarily due
to an increase in income from rental properties of $1,242 and gains on sales of
outparcels of $53, which was partially offset by decreases in interest income of
$133 and interest on direct financing leases of $45.
Income from rental properties increased $1,242, or 5.8%, to $22,508 in
2002. Included in income from rental properties is minimum rent, percentage rent
and other rental income. Minimum rents increased $919, or 5.3%, primarily due to
an increase in rental rates per square foot from $7.94 in 2001 to $8.03 in 2002
and the core portfolio of properties contributing $719, or an increase of 3.4%,
over 2001. The core portfolio is defined as properties held in the same
corresponding period from the current and prior year, excluding those properties
sold or acquired during the same corresponding period. Income from rental
properties increased $510 due to one property acquired in 2002 and one property
acquired in 2001 which was partially offset by a $13 decrease in income
attributable to the sale of four properties in 2001. Percentage rent, based on
tenant's gross sales exceeding specified amounts, increased $127, or 56.7%, to
$351 for 2002 due to timing of receipt of payments differing from 2001. Other
rental income such as tenant reimbursements for common area maintenance ("CAM"),
property taxes and insurance, tenant allowances (bad debt reserves) and lease
cancellation fees, increased $196, or 5.1%, to $4,042. This increase was
partially due to an increase in tenant reimbursements for CAM of $292, or 7.8%.
The reimbursements received as a percentage of expenses were 73.6% in 2002 and
74.2% in 2001. The decrease in the reimbursement percentage is due to the
significant increase in insurance costs, not all of which can be reimbursed by
the tenants. Tenant allowances decreased $4, or 3.4%, from 2001 and represented
only 0.5% of rental income in 2002. Lease cancellation fees decreased $71, or
63.8%, due to the one-time lease termination fee of an anchor in 2001.
Interest income decreased $133, or 89.9%, to $15 in 2002 from $148 in 2001.
The decrease was due to interest charged on a development loan that was repaid
in 2001.
Interest on direct financing leases decreased $45, or 47.9%, due to the
sale of one direct financing lease investment in May 2001.
Gain on sale of outparcels increased $53, or 11.7% to $505 in 2002. In 2002
the Company sold two outparcels compared to one outparcel in 2001.
Expenses
Total expenses increased $346, or 2.1%, to $16,614 in 2002 due to increases
in operating expenses of rental properties of $475, depreciation of $136,
administrative expenses of $111, partially offset by a decrease in interest
expense of $368 and amortization costs of $8.
Operating expenses of rental properties increased $475, or 8.9%, to $5,837
in 2002. This increase was partially due to an increase of real estate taxes of
$154, or 8.0%, over 2001 as a result of increased property values. Insurance
costs increased by $290, or 97.5%, over 2001 due to a significant increase in
premiums as a result of the insurance market environment. The Company amortizes
lease fees that are capitalized and the amortization expense increased $24, or
7.8%, in 2002 due to increased leasing activity in 2001 in connection with the
releasing of the former Jitney Jungle stores. During 2002, the Company executed
over 209,000 square feet of new or renewed leases. Tenant reimbursable operating
expenses decreased $11, or 0.6%, primarily due to lower operating and
maintenance costs. Overall, the operating expenses of properties increased due
to core portfolio operating expenses increasing $339, or 6.4%, over
16
2001 and the one property acquired in 2002 with the one property acquired during
2001 increasing expenses $128. These increases were partially offset by a
decrease in expenses of $9 from the sales of four properties during 2001.
Interest expense decreased $368, or 6.3%, in 2002 primarily due to a
decrease of $427 on bank interest as a result of a lower effective interest rate
of 3.89% in 2002 as compared to 6.88% in 2001 and a lower average borrowing
during 2002 of $38,396 compared to $42,705 during 2001. This decrease was
partially offset by the higher interest rate on the new senior unsecured notes
issued in January 2002 of 7.84% or $65.
The net increase of $136, or 3.6%, in depreciation expense in 2002 was due
to the acquisition of a shopping center in the first quarter of 2002 and two
shopping centers during 2001, net of the effect of the disposition of three
properties in 2001.
Amortization of debt costs decreased $8, or 4.9%, due to the $25,000 of
7.84% senior notes issued in January 2002, partially offset by the write-off of
costs relating to the redemption of the 7.3% convertible bonds in January 2002.
General and administrative expenses increased $111, or 10%, to $1,224 in
2002 primarily due to a $82 decrease in capitalized development costs as
compared to 2001 since one development was completed in 2002. Total general and
administrative expenses as a percentage of total revenues were 5.3% and 5.1% for
2002 and 2001, respectively.
Other
Income taxes were $53 in 2001 compared to no income tax expense in 2002 due
to a subsidiary having taxable income in the second quarter of 2001 and no
additional tax liability for 2002 due to prior year credits for taxable income.
Minority interest expense decreased $102, or 41.8%, to $142 in 2002.
Minority interest represents the interest of an unaffiliated limited partner in
the earnings of a partnership with the Company. The partnership sold two
properties in 2001 thus increasing the net income of the partnership in 2001. No
such sales occurred in 2002. This decrease in partnership net income from 2001
is partially offset due to the Company acquiring one property in 2002 and two
properties in 2001 for inclusion in the partnership, which increased the
Company's percentage ownership of the partnership from 93.0% in 2001 to 94.4% in
2002.
The Company sold four properties in 2001 compared to none in 2002, leading
to a decrease in gain on sales of properties of $2,498 from 2001.
Net Earnings
Net earnings decreased $1,572, or 19.9%, to $6,321 in 2002 from $7,893 in
2001. The decrease was attributable to no gains on sales of properties in 2002
and higher operating expenses of the properties along with higher general and
administrative expenses. These increases in expenses were partially offset by an
increase in revenues primarily from the increase in base rents per square foot
and rental revenues.
17
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2002 TO THE SIX MONTHS ENDED JUNE
30, 2001
Revenues
Total revenues increased $1,723, or 3.9%, to $45,552 in 2002 primarily due
to an increase in income from rental properties of $2,322, which was partially
offset by decreases in interest income of $246, interest on direct financing
leases of $113 and gains on sale of outparcels of $240.
Income from rental properties increased $2,322, or 5.5%, to $44,842 in
2002. Included in income from rental properties is minimum rent, percentage rent
and other rental income. Minimum rents increased $1,800, or 5.3%, primarily due
to an increase in rental rates per square foot from $7.94 in 2001 to $8.03 in
2002 and the core portfolio of properties contributing $980, or an increase of
2.3%, over 2001. The core portfolio is defined as properties held in the same
corresponding period from the current and prior year, excluding those properties
sold or acquired during the same corresponding period. Income from rental
properties increased $1,449 due to one property acquired in 2002 and two
properties acquired in 2001 which was partially offset by a $106 decrease in
income attributable to the sale of four properties in 2001. Percentage rent,
based on tenant's gross sales exceeding specified amounts, decreased $32, or
3.9%, to $785 for 2002 due to several anchor tenants closing in 2001. Other
rental income such as tenant reimbursements, tenant allowances (bad debt
reserves) and lease cancellation fees, increased $554, or 7.4%, to $8,087. This
increase was partially due to an increase in tenant reimbursements for common
area maintenance ("CAM") of $568, or 7.7%. The reimbursements received as a
percentage of expenses were 75.5% in 2002 and 73.9% in 2001. This increase is
due to the new properties acquired in 2002 and 2001. Tenant allowances decreased
$63, or 22.1%, from 2001 and represented only 0.5% of rental income in 2002.
Lease cancellation fees decreased $156, or 77.5%, due to the one-time lease
termination fee of an anchor in 2001.
Interest income decreased $246, or 87.9%, to $34 in 2002 from $280 in 2001.
The decrease was due to interest charged on a development loan that was repaid
in 2001.
Interest on direct financing leases decreased $113, or 39.8%, due to the
sale of one direct financing lease investment in May 2001.
Gain on sale of outparcels decreased $240, or 32.2% to $505 in 2002. In
2002 and 2001 the Company sold two outparcels.
Expenses
Total expenses increased $751, or 2.3%, to $32,835 in 2002 due to increases
in operating expenses of rental properties of $633, depreciation of $320 and
administrative expenses of $169, partially offset by a decrease in interest
expense of $363 and amortization of debt costs of $8.
Operating expenses of rental properties increased $633, or 5.9%, to $11,321
in 2002. This increase was partially due to an increase of real estate taxes of
$314, or 8.2%, over 2001 as a result of increased property values. Insurance
costs increased by $578, or 97.1%, over 2001 due to a significant increase in
premiums as a result of the insurance market environment. The Company amortizes
lease fees that are capitalized and the amortization expense increased $58, or
9.8%, in 2002 due to increased leasing activity in 2001 in connection with the
releasing of the former Jitney Jungle stores. During 2002, the Company executed
over 460,000 square feet of new or renewed leases. Tenant reimbursable operating
expenses decreased $236, or 6.6%, primarily due to lower operating and
maintenance costs. Overall, the operating expenses of properties increased due
to core portfolio operating expenses increasing $259, or 2.4%, over 2001 and the
one property acquired in 2002 with the two properties acquired during 2001
increasing expenses $392. These increases were partially offset by a decrease in
expenses of $16 from the sales of four properties during 2001.
18
Interest expense decreased $363, or 3.2%, in 2002 primarily due to a
decrease of $831 on bank interest as a result of a lower effective interest rate
of 3.89% in 2002 as compared to 7.3% in 2001 and a lower average borrowing
during 2002 of $22,510 compared to $24,251 during 2001. This decrease was
partially offset by the higher interest rate on the new senior unsecured notes
issued in January 2002 of 7.84% or $114 and the higher interest rate on the
three mortgage notes obtained in the second quarter of 2001 of 7.17% or $317.
The net increase of $320, or 4.3%, in depreciation expense in 2002 was due
to the acquisition of a shopping center in the first quarter of 2002 and two
shopping centers during 2001, net of the effect of the disposition of three
properties in 2001.
Amortization of debt costs decreased $8, or 2.6%, due to the $25,000 of
7.84% senior notes issued in January 2002, partially offset by the write-off of
costs relating to the redemption of the 7.3% convertible bonds in January 2002.
General and administrative expenses increased $169, or 8.1%, to $2,252 in
2002 primarily due to a $165 decrease in capitalized lease fees. Capitalized
lease fees decreased from 2001 due to several anchor tenant locations being
released in 2001 as a result of the Jitney Jungle bankruptcy. Total general and
administrative expenses as a percentage of total revenues were 4.9% and 4.8% for
2002 and 2001, respectively.
Other
Income taxes decreased $44, or 83.0%, in 2002 due to a subsidiary not
having as much taxable income in 2002 as 2001.
Minority interest expense decreased $21, or 6.9%, to $284 in 2002. Minority
interest represents the interest of an unaffiliated limited partner in the
earnings of a partnership with the Company. The partnership sold two properties
in 2001 thus increasing the net income of the partnership in 2001. No such sales
occurred in 2002. This decrease in partnership net income from 2001 is partially
offset due to the Company acquiring one property in 2002 and two properties in
2001 for inclusion in the partnership, which increased the Company's percentage
ownership of the partnership from 93.0% in 2001 to 94.4% in 2002.
The Company sold four properties in 2001 compared to none in 2002, leading
to a decrease in gain on sales of properties of $2,498 from 2001.
Due to the early extinguishment of the 7.3% convertible debentures in
January 2002, the Company recognized an extraordinary loss of $156 on the
unamortized debt issue costs. No such transaction occurred in 2001.
Net Earnings
Net earnings decreased $1,613, or 11.6%, to $12,268 in 2002 from $13,881 in
2001. The decrease was attributable to a one time extraordinary loss on the
extinguishment of debt, no gains on sales of properties and higher operating
expenses of the properties along with higher general and administrative
expenses. These increases in expenses were partially offset by an increase in
revenues primarily from the increase in base rents per square foot and rental
revenues.
19
LIQUIDITY AND CAPITAL RESOURCES
The Company presently expects cash from operating activities to be its
primary source of funds to pay dividends, mortgage note payments and certain
capital improvements on properties. Net cash from operating activities was
$18,389 in 2002 as compared to $19,456 in 2001, a decrease of 5.5%. The decrease
in cash flow is due to a decrease in accrued expenses during 2002, and an
increase in prepaid expenses during 2002. Dividends paid during 2002 and 2001
were $15,165 and $14,261, respectively. Mortgage principal payments for 2002 and
2001 were $1,385 and $1,225, respectively. Total capital expenditures on
operating properties for 2002 and 2001 were $1,064 and $3,426, respectively.
Other planned activities, including property acquisitions, new
developments, certain capital improvement programs and debt repayments, are
expected to be funded to the extent necessary by bank borrowings, mortgage
financing, periodic sales or exchanges of existing properties, the issuance of
OP Units and public or private offerings of stock or debt. Net cash used in
investing activities was $7,856 in 2002, as compared to $1,322 in 2001, an
increase of $6,534. This increase in cash used in investing activities was due
to an acquisition in 2002 and an increase in capital expenditures relating to
the development program of $1,989 in 2001 to $5,672 in 2002 as the Company
completed one development and was concluding another development.
Net cash used in financing activities decreased to $9,090 in 2002 from
$13,963 in 2001, a decrease of $4,873. This decrease was due to the Company
issuing $38,508 of common stock and $25,000 of senior notes in 2002 compared to
the Company issuing $50,000 of senior notes in 2001 offset by the redemption of
the convertible debentures in 2002 of $23,110 and a repayment of a mortgage in
2002 of $5,198.
In May 1998, the Company filed a shelf registration statement covering up to
$300,000 of common stock, preferred stock, depositary shares, debt securities
and warrants. In January 2001, the Company filed a new shelf registration
statement to replace and update the 1998 shelf registration statement. The
Company presently intends to use the net proceeds of any offerings under such
shelf registration for general corporate purposes, which may include, without
limitation, repayment of maturing obligations, redemption of outstanding
indebtedness or other securities, financing future acquisitions and for working
capital.
On March 23, 2001, the Company established a Medium Term Note Program (the
"MTN Program"), pursuant to the Company's shelf registration statement filed in
January 2001. The MTN Program allows the Company, from time to time, to issue
and sell up to $100,000 of medium term notes. Medium term notes have a maturity
of nine months or more from the date of issuance. On March 29, 2001, pursuant to
the MTN Program, the Company issued $50,000 of 7.77% medium term notes due April
1, 2006. Net proceeds from the issuance totaled $49,328 and were used to
substantially repay the $50,000 of 7.45% senior notes that were due on April 1,
2001. On January 23, 2002, an additional $25,000 of 7.84% medium term notes were
issued to redeem the 7.3% convertible subordinated debentures. These new notes
are due on January 23, 2012. As a result, the Company has $25,000 of medium term
notes available for issuance under its MTN Program. As of March 31, 2002, the
Company had issued $75,000 in debt securities from the shelf registration.
The Company also issued 3,450,000 shares at an offering price of $11.79 per
share for total proceeds, before expenses, of $40,676 under the shelf
registration statement in May 2002. As a result of the MTN Program and common
stock sales, $184,324 of securities remain available for issuance under the
shelf registration statement.
20
On January 24, 2002, the Company redeemed all of the outstanding 7.3%
convertible subordinated debentures at par for $23,220. Prior to redemption, 165
bonds were converted into 14,659 shares of common stock.
The Company uses secured borrowings to meet capital requirements. As of
June 30, 2002 the Company had $132,890 in mortgage notes payable at a weighted
average interest rate of 7.60%, which are due in monthly installments with
maturity dates ranging from 2002 to 2024.
In February 2002, the Company assumed a non-recourse, mortgage loan
totaling $4,800, in connection with the acquisition of Parkwest Crossing. The
secured loan has a fixed interest rate of 8.1%. The loan is due and payable in
eight years and the principal amortization is based on a thirty year
amortization schedule.
On March 1, 2002, the Company prepaid a 9.63% mortgage loan of
approximately $5,198. The loan was due on June 1, 2002.
In February 2001, the Company entered into three mortgage loans totaling
$20,740, secured by first mortgages on three properties. These notes are due and
payable in ten years and the principal amortization is based on a thirty year
amortization schedule. The notes bear interest at a weighted average interest
rate of 7.17% and range from 7.02% to 7.25%.
Future principal amortization and balloon payments applicable to mortgage
notes payable at June 30, 2002 are as follows:
Scheduled Balloon
Amortization Payments Total
------------- --------- --------
2002 . . . . $ 1,424 $ 1,978 $ 3,402
2003 . . . . 2,965 - 2,965
2004 . . . . 3,192 - 3,192
2005 . . . . 3,448 31,500 34,948
2006 . . . . 3,586 54,797 58,383
Thereafter 53,991 150,009 204,000
------------- --------- --------
$ 68,606 $ 238,284 $306,890
============= ========= ========
21
On November 1, 1999, the Company obtained a $100,000 unsecured revolving
loan facility (the "Revolving Loan"), with an original maturity of November 1,
2002. This Revolving Loan replaced the Company's previous credit facility and is
led by a different financial institution and further backed by a syndicate of
four other financial institutions. Not later than November 1 of each year
commencing in 2000, the Company may request to extend the maturity date for an
additional 12-month period beyond the existing maturity date. The interest rate
is, at the option of the Company, either prime, fluctuating daily, or LIBOR plus
the "Applicable Margin" (currently 105 basis points), which is subject to
adjustment based upon the rating of the senior unsecured long-term debt
obligations of the Company. The Company may borrow, repay and/or reborrow under
this loan at any time. In addition, the Company secured a $5,000 unsecured swing
line, bearing interest at LIBOR plus the Applicable Margin, scheduled to mature
on October 31, 2000. In October 2000, the maturity date of the Revolving Loan
and the swing line was extended to November 1, 2003. The Company also secured an
option to increase the Revolving Loan at its discretion by $50,000. On May 29,
2002, the Company amended and renewed the existing $100 million unsecured line
of credit, as well as extending the Company's option to expand the line by $50
million, until May 29, 2005. The Revolving Loan was also amended to decrease the
Applicable Margin to 105 basis points from 115 basis points. The terms of the
Company's credit facilities and other instruments and agreements relating to our
indebtedness include certain customary operational and financial covenants,
which the Company was in compliance with as of June 30, 2002.
As of June 30, 2002 and December 31, 2001, the borrowings under the
Company's credit facilities totaled $24,000 and $51,654, respectively. The
average interest rates for 2002 and 2001 were 3.89% and 6.48%, respectively. At
June 30, 2002, the weighted average interest rate was 3.06% on outstanding
borrowings under the Revolving Loan.
LP, IRTCCII, IRTAL and IRTMC guarantee the Company's indebtedness under the
Company's existing unsecured revolving term loan and its other senior debt.
The Company presently believes that based on currently proposed plans and
assumptions relating to its operations, the Company's existing financial
arrangements, together with cash flows from operations, will be sufficient to
satisfy its foreseeable cash requirements for the next year. At June 30, 2002
the Company's market capitalization was approximately $742,227, of which 41%, or
$306,672, was from financing sources. It is the Company's present intention to
have access to the capital resources necessary to expand and develop its
business while maintaining its investment grade ratings with Moody's Investor
Services and Standard and Poors'. Accordingly, the Company may, from time to
time, seek to obtain funds through additional security offerings or debt
financings in a manner consistent with its current debt capitalization policy.
INFLATION AND ECONOMIC FACTORS
The effects of inflation upon the Company's results of operations and
investment portfolio are varied. From the standpoint of revenues, inflation has
the dual effect of both increasing the tenant revenues upon which percentage
rentals are based and allowing increased fixed rentals as rental rates rise
generally to reflect higher construction costs on new properties. This positive
effect is partially offset by increasing operating and interest expenses, but
usually not to the extent of the increases in revenues.
The Federal Reserve regulates the supply of money through various means,
including open market dealings in United States government securities, the
discount rate at which banks may borrow from the Federal Reserve, and the
reserve requirements on deposits. Such activities affect the availability and
cost of credit, generally, and the Company's costs under its bank credit
facilities, in particular.
22
ENVIRONMENTAL FACTORS
Certain of the Company's properties have environmental concerns that have
been or are being addressed. The North Carolina Department of Environment,
Health and Natural Resources ("DEHNR") informed the Company, by letter dated
November 30, 2000, that the Company's Industrial property in Charlotte, North
Carolina ("Industrial Property"), continues to be included on the North Carolina
Inactive Hazardous Waste Sites Priority List ("Priority List"). According to
DEHNR, the Priority List is a list of sites in North Carolina where uncontrolled
disposal, spills, or releases of hazardous substances have been identified. The
Company also has been informed by a third-party consultant that hazardous
substances may be present in groundwater under the Industrial Property in excess
of regulatory limits. DEHNR indicated in its November 30 letter that it was
notifying the Company of the inclusion of the Industrial Property on the
Priority List, and that the letter was not an order to conduct any work, but
that the Company was invited to consider a voluntary cleanup.
The Company has begun investigating this matter, including the basis for
inclusion of the Industrial Property on the Priority List and the scope and
source of any such hazardous substances in groundwater (which may be a result
of, among other things, prior ownership and usage of the Industrial Property or
contaminants from other nearby properties), and whether its insurance will cover
these costs in whole or in part. Depending on the results of this investigation,
notification of DEHNR may be required and certain corrective actions performed.
Based on information presently available, the Company presently believes that
the costs of any such corrective action is not expected to have a material
adverse effect on the Company.
Various of our properties include facilities leased to dry cleaners. At
some of the properties, dry cleaning solvents have been discovered in soil
and/or groundwater, and in several cases, preliminary investigations indicate
the amounts exceed applicable groundwater and/or soil protection standards and
may require further investigation or remediation. The costs associated with such
investigation or corrective actions are uncertain.
Since January 1, 2000, the Company has maintained environmental and
pollution legal liability insurance coverage to attempt to mitigate the
associated risks. Although no assurance can be given that Company properties
will not be affected adversely in the future by environmental problems, the
Company presently believes that there are no environmental matters that are
reasonably likely to have a material adverse effect on the Company's financial
position.
23
FUNDS FROM OPERATIONS
The Company defines funds from operations, consistent with the National
Association of Real Estate Investment Trusts ("NAREIT") definition, as net
earnings on real estate investments less gains (losses) on sale of properties
and extraordinary items plus depreciation and amortization of capitalized
leasing costs. Interest and amortization of issuance costs related to
convertible subordinated debentures and minority interest expenses are added
back to funds from operations when assumed conversion of the debentures and OP
Units is dilutive. The conversion of the debentures, that were redeemed on
January 24, 2002, and the OP Units are dilutive and therefore assumed for the
three and six months ended June 30, 2002 and 2001. Management believes funds
from operations should be considered along with, but not as an alternative to,
net earnings as defined by generally accepted accounting principles as a measure
of the Company's operating performance. Funds from operations does not represent
cash generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs.
The following data is presented with respect to the calculation of funds
from operations under the NAREIT definition for the three and six months ended
June 30, 2002 and 2001 (in thousands except per share amounts):
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2002 2001 2002 2001
------- -------- ------- --------
NET EARNINGS. . . . . . . . . . . . . . . . . . . $ 6,321 $ 7,893 $12,268 $13,881
Extraordinary loss on extinguishment of debt - - 156 -
Gain on sales of properties. . . . . . . . . - (2,498) - (2,498)
Depreciation *. . . . . . . . . . . . . . . 3,876 3,735 7,728 7,390
Amortization of capitalized leasing fees *. 332 308 650 595
------- -------- ------- --------
FUNDS FROM OPERATIONS . . . . . . . . . . . . . . 10,529 9,438 20,802 19,368
Interest on convertible debentures . . . . . - 425 109 850
Amortization of convertible debenture costs. - 25 7 50
Amounts attributable to minority interests . 204 313 406 446
------- -------- ------- --------
FULLY DILUTED FUNDS FROM OPERATIONS . . . . . . . $10,733 $10,201 $21,324 $20,714
======= ======== ======= ========
FULLY DILUTED FUNDS FROM OPERATIONS PER SHARE . . $ 0.32 $ 0.31 $ 0.65 $ 0.63
======= ======== ======= ========
APPLICABLE WEIGHTED AVERAGE SHARES. . . . . . . . 33,701 33,278 32,838 33,199
======= ======== ======= ========
* Net of amounts attributable to minority interests
24
Additional Information: The following data is presented with respect to amounts
incurred for improvements to the Company's real estate investments, for the
straight line rent adjustment, for leasing fees paid and for principal
amortization of mortgage notes payable during the three and six months ended
June 30, 2002 and 2001 (in thousands).
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2002 2001 2002 2001
----- ------ ------ ------
Straight line rent adjustment . . . . . . . . . $ 149 $ 160 $ 324 $ 271
===== ====== ====== ======
Revenue-generating capital expenditures
Tenant Improvements - Anchors. . . . . . . $ - $1,500 $ - $1,641
Tenant Improvements - Non anchors. . . . . 285 159 490 554
----- ------ ------ ------
Total revenue-generating capital expenditures** $ 285 $1,659 $ 490 $2,195
===== ====== ====== ======
Non revenue-generating capital expenditures . . $ 279 $1,126 $ 398 $1,514
===== ====== ====== ======
Lease fee payments. . . . . . . . . . . . . . . $ 305 $ 468 $ 631 $ 944
===== ====== ====== ======
Scheduled principal amortization. . . . . . . . $ 692 $ 624 $1,385 $1,225
===== ====== ====== ======
** Includes tenant improvements and capital expenditures to prepare spaces for
leasing.
Excludes expansions.
25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities and Use of Proceeds.
Not applicable.
Item 3. Default Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
IRT Property Company held its Annual Meeting of Shareholders on
Thursday, May 30, 2002. A total of 26,739,428 shares were represented
in person or by proxy, or approximately 88% of the total shares
outstanding.
Shareholders elected the six Director nominees named in the Proxy
Statement.
NAME FOR WITHHELD
------------------- ---------- -----------
Thomas P. D'Arcy. . 26,456,319 283,109
Patrick L. Flinn. . 26,482,473 256,955
Homer B. Gibbs, Jr. 26,474,817 264,611
Samuel W. Kendrick. 26,486,632 252,796
Thomas H. McAuley . 24,746,104 1,993,324
Bruce A. Morrice. . 26,479,370 260,058
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3(a) to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997).
3.2 Articles of Amendment to the Amended and Restated Articles of
Incorporation (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K filed on June 9, 1999)
3.3 By-Laws, as amended (incorporated by reference to Exhibit 3 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995)
26
3.4 Amendments to By-laws (incorporated by reference to Exhibit 3.1
to the Company's Current Report on Form 8-K filed on August 21,
1998).
3.5 Amendment to the By-laws (incorporated by reference to Exhibit
4.5 to the Company's Registration Statement on Form S-3
(333-53638) dated January 12, 2001).
4.1 Indentures, dated as of November 9, 1995, by and between the
Company and SunTrust Bank, Atlanta, Georgia, as Trustee, relating
to the Company's Senior Debt Securities and Subordinated Debt
Securities (incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
4.2 First Supplemental Indenture, dated as of March 26, 1996, by and
between IRT Property Company and SunTrust Bank, Atlanta, Georgia,
as Trustee (incorporated by reference to the Company's Current
Report on Form 8-K dated March 26, 1996).
4.3 Supplemental Indenture No. 2, dated August 15, 1997, by and
between IRT Property Company and SunTrust Bank, Atlanta, Georgia,
as Trustee (incorporated by reference to the Company's Current
Report on Form 8-K dated August 15, 1997).
4.4 Supplemental Indenture No. 3, dated September 9, 1998, by and
between IRT Property Company and SunTrust Bank, Atlanta, Georgia,
as Trustee (incorporated by reference to the Company's Current
Report on Form 8-K dated September 15, 1998).
4.5 Indenture, dated as of September 9, 1998, by and between the
Company and SunTrust Bank, Atlanta, Georgia, as Trustee, relating
to Senior Debt Securities (incorporated by reference to the
Company's Current Report on Form 8-K dated September 15, 1998).
4.6 Indenture, dated as of September 9, 1998, by and between the
Company and SunTrust Bank, Atlanta, Georgia, as Trustee, relating
to Subordinated Debt Securities (incorporated by reference to the
Company's Form 8-K dated September 15, 1998).
4.7 Supplemental Indenture No. 1, dated September 9, 1998, by and
between the Company, IRT Partners, L.P. and SunTrust Bank,
Atlanta, Georgia, as Trustee, to the Indenture dated September 9,
1998, relating to Senior Debt Securities (incorporated by
reference to the Company's Form 8-K dated September 15, 1998).
4.8 IRT Property Company Stock Certificate Legend Regarding the
Shareholder Rights Agreement (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999).
4.9 Supplemental Indenture No. 2, dated as of November 1, 1999, by
and among IRT Property Company, as issuer, IRT Capital
Corporation II, IRT Management Company, IRT Alabama, Inc., and
IRT Partners L.P., as guarantors, and SunTrust Bank, Atlanta,
Georgia, as trustee (Registration Statement No. 333-48571)
(incorporated by reference to Exhibit 4.5 to the Company's
Current Report on Form 8-K dated November 12, 1999).
27
4.10 Supplemental Indenture No. 4, dated as of November 1, 1999, by
and among IRT Property Company, an issuer, IRT Capital
Corporation II, IRT Management Company, IRT Alabama, Inc., and
IRT Partners L.P., as guarantors, and SunTrust Bank, Atlanta,
Georgia, as trustee (Registration Statement No. 333-48571)
(incorporated by reference to Exhibit 4.7 to the Company's
Current Report on Form 8-K dated November 12, 1999).
10.1 Second Amended and Restated Credit Agreement as of May 29, 2002.
10.2 Restricted Stock Award Agreement between Thomas H. McAuley and
IRT Property Company dated May 30, 2002.
10.3 Restricted Stock Award Agreement between James G. Levy and IRT
Property Company dated May 30, 2002.
10.4 Restricted Stock Award Agreement between E. Thornton Anderson and
IRT Property Company dated May 30, 2002.
10.5 Restricted Stock Award Agreement between Daniel F. Lovett and IRT
Property Company dated May 30, 2002.
10.6 Employment Agreement between Thomas H.
McAuley and IRT Property Company dated May 30, 2002.
10.7 Employment Agreement between James G. Levy
and IRT Property Company dated May 30, 2002.
99.1 Certification of Chief Executive Officer.
99.2 Certification of Chief Financial Officer.
(b) Reports on Form 8-K.
During the three month period ended June 30, 2002, the Company
filed the following Current Reports on Form 8-K:
- Current Report on Form 8-K filed on April 30, 2002;
- Current Report on Form 8-K filed on May 3, 2002;
- Current Report on Form 8-K filed on May 15, 2002; and
- Current Report on Form 8-K filed on May 23, 2002.
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
IRT PROPERTY COMPANY
Date: August 14, 2002 /s/ Thomas H. McAuley
----- ---------------- ----------------------
Thomas H. McAuley
President & Chief Executive Officer
Date: August 14, 2002 /s/ James G. Levy
----- ---------------- ----------------------
James G. Levy
Executive Vice President &
Chief Financial Officer
29