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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 March 31, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
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Commission File Number 1-7859
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IRT PROPERTY COMPANY
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(Exact name of registrant as specified in its charter)
Georgia 58-1366611
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
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(Address of principal executive offices) (Zip Code)
(770) 955-4406
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(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 May 14, 2001
--------------------------- ---------------------------
Common Stock, $1 Par Value 30,329,570 Shares
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CERTAIN INFORMATION CONTAINED IN THIS REPORT CONTAINS FORWARD-LOOKING
STATEMENTS, WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. READERS OF THIS
REPORT SHOULD BE AWARE THAT THERE ARE VARIOUS FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS MADE HEREIN.
THIS INFORMATION IS FURTHER QUALIFIED BY THE SPECIAL CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS AND THE INFORMATION IN THE SECTION ENTITLED "RISK
FACTORS" CONTAINED IN THE IRT PROPERTY COMPANY ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 2000, WHICH ARE INCORPORATED HEREIN BY REFERENCE.
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Item 1. Financial Statements
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
March 31, December 31,
2001 2000
----------- ------------
(Unaudited)
ASSETS
Real estate investments:
Rental properties $ 633,221 $ 632,337
Properties under development 20,318 679
--------- ---------
653,539 633,016
Accumulated depreciation (99,946) (96,183)
--------- ---------
Net rental properties 553,593 536,833
Equity investment in and advances to unconsolidated affiliates -- 17,342
Net investment in direct financing leases 4,195 4,245
Mortgage loans, net 4,425 4,313
--------- ---------
Net real estate investments 562,213 562,733
Cash and cash equivalents 50,488 831
Prepaid expenses and other assets 11,237 10,996
--------- ---------
Total assets $ 623,938 $ 574,560
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable, net $ 115,908 $ 116,509
7.3% convertible subordinated debentures, net 23,275 23,275
Senior notes, net 174,728 124,714
Indebtedness to banks 57,000 55,000
Accrued interest 2,759 3,612
Accrued expenses and other liabilities 8,703 8,316
--------- ---------
Total liabilities 382,373 331,426
Commitments and contingencies (Note 8)
Minority interest payable 7,837 7,981
Shareholders' equity:
Common stock, $1 par value, 150,000,000 shares authorized;
33,234,206 shares issued in 2001 and 2000, respectively 33,234 33,234
Preferred stock, $1 par value, authorized 10,000,000 shares;
none issued -- --
Additional paid-in capital 272,055 272,040
Deferred compensation/stock loans (1,820) (1,850)
Treasury stock, at cost, 2,927,636 and 2,889,276 shares
in 2001 and 2000, respectively (24,221) (23,883)
Cumulative distributions in excess of net earnings (45,520) (44,388)
--------- ---------
Total shareholders' equity 233,728 235,153
--------- ---------
Total liabilities and shareholders' equity $ 623,938 $ 574,560
========= =========
The accompanying notes are an integral part of these
consolidated balance sheets.
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IRT PROPERTY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the Three Months Ended March 31, 2001 and 2000
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
----------------------------
2001 2000
--------- ---------
REVENUES:
Income from rental properties $ 21,254 $ 21,064
Interest income 132 216
Interest on direct financing leases 190 188
Gain on sale of outparcel 293 --
--------- ---------
Total revenues 21,869 21,468
--------- ---------
EXPENSES:
Operating expenses of rental properties 5,326 4,824
Interest expense 5,649 5,401
Depreciation 3,723 3,572
Amortization of debt costs 148 132
General and administrative 970 779
--------- ---------
Total expenses 15,816 14,708
Equity in loss of unconsolidated affiliates (4) (11)
--------- ---------
Earnings before minority interest
and gain on sales of properties 6,049 6,749
Minority interest of unitholders in operating partnership (61) (159)
Gain on sales of properties -- 2,738
--------- ---------
NET EARNINGS $ 5,988 $ 9,328
========= =========
PER SHARE:
Net earnings -- basic $ 0.20 $ 0.29
========= =========
Net earnings -- diluted $ 0.19 $ 0.28
========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 30,213 32,298
========= =========
Diluted 31,064 35,188
========= =========
The accompanying notes are an integral part of these
consolidated statements.
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IRT PROPERTY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2001 and 2000
(Unaudited)
(In thousands)
Three Months Ended
March 31,
----------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net earnings $ 5,988 $ 9,328
Adjustments to reconcile earnings to net cash from operating activities:
Depreciation 3,723 3,572
Gain on sale of operating properties -- (2,738)
Gain on sale of outparcel (293) --
Minority interest of unitholders in partnership (131) (34)
Straight line rent adjustment (111) (11)
Amortization of deferred compensation 30 31
Amortization of debt costs and discounts 159 147
Amortization of capitalized leasing income 51 41
Changes in assets and liabilities:
Decrease in accrued interest on debentures
and senior notes (853) (853)
Increase in interest receivable, prepaid expenses
and other assets 829 1,078
Decrease in accrued expenses and other liabilities (680) (524)
--------- ---------
Net cash flows from operating activities 8,712 10,037
--------- ---------
Cash flows (used in) from investing activities:
Proceeds from sales of operating properties, net -- 11,660
Proceeds from sale of outparcel, net 348 --
Investment in unconsolidated affiliates -- (660)
Purchase of unconsolidated affiliate, net of assets acquired 177 --
Distribution from dissolution of unconsolidated affiliate 21 --
Additions to operating properties, net (925) (1,267)
Additions to development properties, net (1,610) --
Funding of mortgage loans (114) (1,888)
Collections of mortgage loans, net 2 2
--------- ---------
Net cash flows (used in) from investing activities (2,101) 7,847
--------- ---------
Cash flows from (used in) financing activities:
Cash dividends, net (7,120) (7,627)
Purchase of treasury stock (405) (5,800)
Exercise of stock options 69 --
Principal amortization of mortgage notes payable (601) (513)
Repayment of mortgage notes payable -- (3,520)
Payment of deferred financing costs (897) (2)
Proceeds from mortgage notes payable -- --
Proceeds from note issuance 50,000 --
Increase (decrease) in bank indebtedness 2,000 (400)
--------- ---------
Net cash flows from (used in) financing activities 43,046 (17,862)
Net increase in cash and cash equivalents 49,657 22
Cash and cash equivalents at beginning of period 831 514
--------- ---------
Cash and cash equivalents at end of period $ 50,488 $ 536
========= =========
Supplemental disclosures of cash flow information:
Total cash paid during period for interest $ 6,627 $ 6,294
========= =========
The accompanying notes are an integral part of these
consolidated statements.
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IRT PROPERTY COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001 and 2000
(Dollars in thousands, except per share amounts)
1. Unaudited Financial Statements
These consolidated financial statements for interim periods are
unaudited and should be read in conjunction with the Company's Report on Form
10-K for the year ended December 31, 2000. The accompanying 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 March 31, 2001 and 2000 have been recorded. The results of
operations for the interim period are not necessarily indicative of the results
that may be expected for future interim periods or for the full year.
As of December 31, 2000, the Company's investment in IRT Capital
Corporation ("IRTCC") and IRTCCII was accounted for under the equity method of
accounting. In January 2001, IRTCC was dissolved and the Company's investment in
IRTCC was eliminated. In March 2001, the Company purchased the remaining voting
and non-voting common stock of IRTCCII, making IRTCCII a wholly-owned
subsidiary. See Note 6.
2. Investment in and Advances to Unconsolidated Affiliates
As of March 31, 2001, 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.
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Guarantors
------------------------------ Consolidated
IRT Property Combined IRT Eliminating IRT Property
Company Subsidiaries(1) Partners, LP Entries Company
------------ --------------- ------------ ----------- -------------
AS OF MARCH 31, 2001
ASSETS
Net rental properties $ 392,716 $ 24,669 $ 136,208 $ -- $ 553,593
Investment in affiliates 129,787 -- -- (129,787) --
Other assets 79,589 24,666 9,709 (43,619) 70,345
--------- --------- --------- --------- ---------
Total assets 602,092 49,335 145,917 (173,406) 623,938
========= ========= ========= ========= =========
LIABILITIES
Mortgage notes payable 81,314 4,153 30,441 -- 115,908
Senior Notes, net 174,728 -- -- -- 174,728
Indebtedness to banks 57,000 -- -- -- 57,000
Other liabilities 55,322 21,008 9,530 (43,286) 42,574
--------- --------- --------- --------- ---------
Total liabilities 368,364 25,161 39,971 (43,286) 390,210
--------- --------- --------- --------- ---------
SHAREHOLDERS' EQUITY
Total shareholders' equity 233,728 24,174 105,946 (130,120) 233,728
--------- --------- --------- --------- ---------
Total liabilities and shareholders' equity $ 602,092 $ 49,335 $ 145,917 $(173,406) $ 623,938
========= ========= ========= ========= =========
FOR THE THREE MONTHS ENDED MARCH 31, 2001
REVENUES
Income from rental properties $ 15,236 $ 278 $ 5,740 $ -- $ 21,254
Interest Income 132 -- -- -- 132
Interest on direct financing leases 190 -- -- -- 190
Other income 29 2,569 293 (2,598) 293
--------- --------- --------- --------- ---------
Total revenues 15,586 2,847 6,033 (2,597) 21,869
--------- --------- --------- --------- ---------
EXPENSES
Operating expenses of rental properties 3,709 66 1,551 -- 5,326
Interest expense 4,959 68 622 -- 5,649
Depreciation 2,735 28 960 -- 3,723
Amortization of debt costs 147 1 -- -- 148
General and administrative 690 39 241 -- 970
--------- --------- --------- --------- ---------
Total expenses 12,240 202 3,374 -- 15,816
--------- --------- --------- --------- ---------
Equity in earnings (losses) of affiliates 2,641 (3) -- (2,642) (4)
--------- --------- --------- --------- ---------
Earnings before minority interest, and gain on
sales of properties 5,988 2,642 2,659 (5,240) 6,049
Minority interest in operating partnership -- -- -- (61) (61)
Gain on sales of properties -- -- -- -- --
--------- --------- --------- --------- ---------
Net Earnings $ 5,988 $ 2,642 $ 2,659 $ (5,301) $ 5,988
========= ========= ========= ========= =========
Net cash flows provided by (used in) operating
activities $ 5,872 $ 1,975 $ 3,653 $ (2,788) $ 8,712
========= ========= ========= ========= =========
Net cash flows provided by (used in) investing
activities $ 7,159 $ (954) $ (7,394) $ (912) $ (2,101)
========= ========= ========= ========= =========
Net cash flows provided by (used in) financing
activities $ 43,194 $ (972) $ (2,896) $ 3,720 $ 43,046
========= ========= ========= ========= =========
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Guarantors
------------------------------------- Consolidated
IRT Combined IRT IRT Capital IRT Capital IRT
Property Subsidiaries Partners, Corporation Corporation Eliminating Property
Company (1) LP II I Entries Company
-------- ------------ --------- ----------- ----------- ----------- ------------
AS OF DECEMBER 31, 2000
ASSETS
Net rental properties $394,144 $ 5,575 $137,114 $17,989 $ -- $ (17,989) $536,833
Investment in affiliates 127,364 -- -- -- -- (110,022) 17,342
Other assets 29,444 21,720 8,700 397 31 (39,907) 20,385
-------- ------- -------- ------- ------- --------- --------
Total assets 550,952 27,295 145,814 18,386 31 (167,918) 574,560
======== ======= ======== ======= ======= ========= ========
LIABILITIES
Mortgage notes payable 81,741 4,173 30,595 -- -- -- 116,509
Senior Notes, net 124,714 -- -- -- -- -- 124,714
Indebtedness to banks 55,000 -- -- -- -- -- 55,000
Other liabilities 54,344 1,319 8,320 18,396 2 (39,197) 43,184
-------- ------- -------- ------- ------- --------- --------
Total liabilities 315,799 5,492 38,915 18,396 2 (39,197) 339,407
-------- ------- -------- ------- ------- --------- --------
SHAREHOLDERS' EQUITY
Total shareholders' equity 235,153 21,803 106,899 (10) 29 (128,721) 235,153
-------- ------- -------- ------- ------- --------- --------
Total liabilities and
shareholders' equity $550,952 $27,295 $145,814 $18,386 $ 31 $(167,918) $574,560
======== ======= ======== ======= ======= ========= ========
FOR THE THREE MONTHS ENDED
MARCH 31, 2000
REVENUES
Income from rental properties $ 15,808 $ 171 $ 5,085 $ 36 $ -- $ (36) $ 21,064
Interest Income 91 -- 125 -- -- -- 216
Interest on direct financing leases 188 -- -- -- -- -- 188
Other income 21 2,046 -- -- -- (2,067) --
-------- ------- -------- ------- ------- --------- --------
Total revenues 16,109 2,217 5,210 36 -- (2,104) 21,468
-------- ------- -------- ------- ------- --------- --------
EXPENSES
Operating expenses of rental
properties 3,484 34 1,306 30 -- (30) 4,824
Interest expense 4,717 69 615 -- -- -- 5,401
Depreciation 2,680 19 873 7 -- (7) 3,572
Amortization of debt costs 132 -- -- -- -- -- 132
General and administrative 588 2 189 6 3 (9) 779
-------- ------- -------- ------- ------- --------- --------
Total expenses 11,601 124 2,983 43 3 (46) 14,708
-------- ------- -------- ------- ------- --------- --------
Equity in earnings (losses)
of affiliates 2,083 -- -- -- -- (2,094) (11)
-------- ------- -------- ------- ------- --------- --------
Earnings before minority
interest and gain on sales
of properties 6,590 2,093 2,227 (7) (3) (4,151) 6,749
Minority interest in
operating partnership -- -- -- -- -- (159) (159)
Gain on sales of properties 2,738 -- -- -- -- -- 2,738
-------- ------- -------- ------- ------- --------- --------
Net Earnings $ 9,328 $ 2,093 $ 2,227 $ (7) $ (3) $ (4,310) $ 9,328
======== ======= ======== ======= ======= ========= ========
Net cash flows provided by
(used in) operating activities $ 6,809 $ 1,818 $ 3,092 $ (104) $ (2) $ (1,576) $ 10,037
======== ======= ======== ======= ======= ========= ========
Net cash flows provided by
(used in) investing activities $ 10,432 $ -- $ (938) $ (577) $ -- $ (1,070) $ 7,847
======== ======= ======== ======= ======= ========= ========
Net cash flows provided by
(used in) financing activities $(17,205) $(1,818) $ (2,167) $ 671 $ -- $ 2,657 $(17,862)
======== ======= ======== ======= ======= ========= ========
NOTES:
(1) For the quarter ended March 31, 2001, includes IRTMC, IRTAL, and
IRTCCII. For the year ended December 31, 2000 and the quarter ended
March 31, 2000, includes IRTMC and IRTAL.
3. Earnings Per Share
Basic earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding during the period consistent with
the guidelines of Statement of Financial Accounting Standards No. 128, "Earnings
Per Share." The effects of the conversion of the operating partnership units
held by the minority interest are dilutive and have been included in the
calculation of dilutive earnings per share for all periods presented. The
effects of the conversion of the 7.3% debentures have been excluded from the
calculation of dilutive earnings per share for the three months ended March 31,
2001 as they
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were anti-dilutive for that period. For the three months ended March 31, 2000,
the effects of the conversion of such debentures have been included in the
calculation of dilutive earnings per share as they are dilutive. The effects of
certain stock options and non-vested restricted stock, using the treasury stock
method, have been included in the calculation of dilutive earnings per share, as
they are dilutive.
Per Share
Income Shares Amount
------- ------- ---------
(In thousands except per share data)
For the three months ended March 31, 2001
Basic net earnings available to shareholders $ 5,988 30,213 $ 0.20
=======
Options outstanding -- 28
Restricted stock -- 7
Minority interest of unitholders in operating partnership 61 816
------- -------
Diluted net earnings available to shareholders $ 6,049 31,064 $ 0.19
======= ======= =======
For the three months ended March 31, 2000
Basic net earnings available to shareholders $ 9,328 32,298 $ 0.29
=======
Options outstanding -- 5
Minority interest of unitholders in operating partnership 159 816
Conversion of the 7.3% debentures 450 2,069
------- -------
Diluted net earnings available to shareholders $ 9,937 35,188 $ 0.28
======= ======= =======
4. 7.3% Convertible Subordinated Debentures
Based upon the $11.25 conversion price, 2,068,889 authorized but
unissued common shares have been reserved for possible issuance if the remaining
$23,275 of debentures outstanding on March 31, 2001 are converted.
5. Senior Notes
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, pursuant to which the Company may from time to time issue
and sell up to $100,000 of medium term notes (the "Medium Term Notes"). The
Medium Term Notes must have a maturity of nine months or more from the date of
issuance and be unconditionally guaranteed as to the payment of principal,
premium, if any, and interest, if any, by each of LP, IRTMC, IRTAL and IRTCCII.
On March 29, 2001, pursuant to the MTN Program, the Company issued
$50,000 of 7.77% senior notes due April 1, 2006. Interest on these senior notes
is payable semi-annually on April 1 and October 1. Costs associated with the
issuance of these senior notes totaled approximately $480 and are being
amortized over the life of the notes. Proceeds of these notes were used to repay
the $50,000 of 7.45% senior notes due April 1, 2001. See Note 9.
6. Investment in Joint Venture
IRTCII, a taxable subsidiary, was formed under the laws of Georgia in
1999. IRTCCII has the ability to develop properties, buy and sell properties,
provide equity to developers and perform third party management, leasing and
brokerage. As of December 31, 2000, the Company accounted for IRTCCII under the
equity method of accounting, as the Company held 96% of the non-voting common
stock and
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1% of the voting common stock. The remaining voting common stock was held by an
officer and a director of the Company. In March 2001 the Company purchased the
remaining non-voting and voting common stock from such officer and director for
approximately $2, which was the initial investment amount of such officer and
director. As a result, as of March 31, 2001, IRTCCII is a wholly-owned taxable
subsidiary of the Company.
7. Treasury Stock
On January 16, 2001, the Company completed the $25,000 stock repurchase
program authorized by the Board of Directors in November 1999. The Company
repurchased a total of 3,028,276 shares at an average price of $8.26 per share.
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 reasonable likely to have a material adverse
effect on the Company's financial position.
9. Subsequent Events
On April 2, 2001, the Company repaid the $50,000 of 7.45% senior notes
from the issuance proceeds of the 7.77% senior notes.
On April 17, 2001, the Company acquired Unigold Shopping Center, a
102,985 square foot center in Orlando, Florida for $8,000.
On April 18, 2001, the Company sold Eden Centre, a 56,355 square foot
shopping center, located in Eden, North Carolina for approximately $3,829 in
cash, and recognized a gain on the sale of approximately $748.
On April 19, 2001, the Company obtained non-recourse, secured loans
totaling $20,700, on three shopping centers at a weighted average fixed interest
rate of 7.17%. The loans have a ten year term and a thirty year amortization.
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Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(Dollars in thousands)
Material Changes in Financial Condition.
During the three months ended March 31, 2001, the Company:
- obtained cash proceeds of $50,000 from the issuance of the
7.77% senior unsecured notes,
- obtained cash proceeds of approximately $348 upon the sale of
an outparcel and recognized a gain of approximately $293 for
financial reporting purposes, and
- obtained cash, net of assets acquired, of $177 in the purchase
of IRTCCII stock.
During the three months ended March 31, 2001, the Company utilized
funds of:
- approximately $7,120 to pay dividends to the holders of the
Company's common stock,
- approximately $405 to repurchase outstanding shares of the
Company's common stock,
- approximately $1,610 for development of land and properties,
- approximately $925 for capital expenditures relating to
operating properties, and
- approximately $897 for deferred financing costs in connection
with the issuance of the 7.77% Senior Notes and the $20,700
secured loans.
During the three months ended March 31, 2000 the Company:
- obtained cash proceeds of approximately $11,660 upon the sales
of two properties and recognized a gain of approximately
$2,738 for financial reporting purposes.
During the three months ended March 31, 2000, the Company utilized
funds of:
- approximately $7,627 to pay dividends to the holders of the
Company's common stock,
- approximately $5,800 to repurchase outstanding shares of the
Company's common stock,
- approximately $3,520 to repay a 7.75% mortgage at its
scheduled maturity,
- approximately $1,888 to fund a loan for a co-development
project,
- approximately $1,267 for capital expenditures and tenant
improvements, and
- approximately $660 for advances to IRTCCII for further
development of land and properties acquired in 1999.
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Material Changes in Results of Operations.
During the three months ended March 31, 2001, rental income from the
Company's portfolio of shopping center investments:
- decreased approximately $27 for the core portfolio,
- increased approximately $457 due to the acquisition of a
shopping center in 2000, and
- decreased approximately $240 due to sales of two investments
in 2000.
During the three months ended March 31, 2000, rental income from the
Company's portfolio of shopping center investments:
- increased approximately $376 for the core portfolio,
- increased approximately $468 due to the acquisition of two
shopping centers in 1999, and
- decreased approximately $592 due to sales of two investments
in 2000 and four in 1999.
Percentage rentals received from shopping center investments, excluding
percentage rentals received from the two Wal-Mart investments classified as
direct financing leases, totaled approximately $593 and $608 during the three
months ended March 31, 2001 and 2000, respectively. Percentage rental income is
recorded upon collection based on the tenants' lease year end.
Interest income during the three months ended March 31, 2001 decreased
approximately $84 due primarily to the interest charged to previously
unconsolidated affiliates offset by interest accrued on development loans.
During the three months ended March 31, 2001, operating expenses
related to the Company's portfolio of real estate investments:
- increased approximately $425 for the core portfolio,
- increased approximately $158 due to the acquisition of a
shopping center in 2000, and
- decreased approximately $81 due to the sales of two properties
in 2000.
During the three months ended March 31, 2000, operating expenses
related to the Company's portfolio of real estate investments:
- increased approximately $303 for the core portfolio,
- increased approximately $125 due to the acquisition of two
shopping centers in 1999, and
- decreased approximately $131 due to the sales of two
properties in 2000 and four in 1999.
During the three months ended March 31, 2001, interest expense on
mortgages decreased approximately $67 primarily due to scheduled amortization.
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Interest expense on bank indebtedness increased approximately $315 for
the three months ended March 31, 2001. The Company had average borrowings of
approximately $54,253 and $19,569 at effective interest rates of 7.65% and 7.3%,
under its bank credit facility during the three months ended March 31, 2001 and
2000, respectively. The Company incurred commitment fees of approximately $50
and $51 in 2001 and 2000, respectively, which are included in this interest
expense.
The net increase of $151 in depreciation expense in 2001 was due to the
acquisition of a real estate investment in the fourth quarter of 2000, net of
the effect of the disposition of two properties in the first quarter of 2000.
The net increase in general and administrative expense of approximately
$191 for the three months ended March 31, 2001 was primarily due to an increase
in non-capitalizable development activities.
Funds from Operations. The Company defines funds from operations,
consistent with the National Association of Real Estate Investment Trusts
("NAREIT") definition of such term, as net earnings on real estate less gains
(losses) on sales 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 ("OP Units") are added back to funds from operations when assumed
conversion of the debentures and OP Units is dilutive. Conversion of the
debentures and OP Units is dilutive and therefore assumed for the three months
ended March 31, 2001 and 2000. Management believes funds from operations should
be considered along with, but not as an alternative to, net income 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.
Three Months Ended
March 31,
----------------------------
2001 2000
--------- ---------
NET EARNINGS $ 5,988 $ 9,328
Gain on sales of properties -- (2,738)
Depreciation * 3,655 3,517
Amortization of capitalized leasing fees * 287 173
Amortization of capitalized leasing income 51 41
--------- ---------
FUNDS FROM OPERATIONS 9,981 10,321
Interest on convertible debentures 425 425
Amortization of convertible debenture costs 25 25
Amounts attributable to minority interests 133 224
--------- ---------
FULLY DILUTED FUNDS FROM OPERATIONS $ 10,564 $ 10,995
========= =========
FULLY DILUTED FUNDS FROM OPERATIONS PER SHARE $ 0.32 $ 0.31
========= =========
APPLICABLE WEIGHTED AVERAGE SHARES 33,133 35,188
========= =========
* Net of amounts attributable to minority interests
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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 months ended March 31,
2001 and 2000 (in thousands):
Three Months Ended
March 31,
----------------------------
2001 2000
--------- ---------
Straight line rent adjustment $ 111 $ 11
========= =========
Revenue-generating capital expenditures
Tenant Improvements -- Anchors $ 141 $ 795
Tenant Improvements -- Non anchors 395 274
--------- ---------
Total revenue-generating capital expenditures ** $ 536 $ 1,069
========= =========
Non revenue-generating capital expenditures $ 388 $ 198
========= =========
Lease fee payments $ 476 $ 390
========= =========
Scheduled principal amortization $ 601 $ 513
========= =========
** Includes tenant improvements and capital expenditures to prepare spaces for
leasing. Excludes expansions.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
The Company filed a Report on Form 8-K dated March 23, 2001
relating to the establishment of the Medium Term Note Program (the "MTN
Program"), the execution of guarantees by IRT Alabama, Inc., IRT
Management Company, IRT Partners L.P. and IRT Capital Corporation II
for the Company's MTN Program, and the Agency Agreement with its Agents
in connection with the MTN Program. No other reports on Form 8-K were
filed by the Company during the quarter ended March 31, 2001.
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: May 14, 2001 /s/ Thomas H. McAuley
----------------------- ---------------------------
Thomas H. McAuley
President & Chief Executive Officer
Date: May 14, 2001 /s/ James G. Levy
----------------------- ---------------------------
James G. Levy
Executive Vice President &
Chief Financial Officer
15