SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 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 1-9349 SIZELER PROPERTY INVESTORS, INC. (Exact name of registrant as specified in its charter) DELAWARE 72-1082589 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2542 WILLIAMS BOULEVARD, KENNER, LOUISIANA 70062 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (504) 471-6200 Former name, former address and former fiscal year, if changed since last report. Indicate by Check X whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 8,200,000 shares of Common Stock ($.01 Par Value) were outstanding as of May 4, 2001. Page 1 of 1 SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES INDEX PAGE ----- Part I: FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 - 9 Item 3. Quantitative and Qualitative Disclosures about Market Risk 9 Part II: OTHER INFORMATION Item 1. Legal Proceedings 9 Item 2. Changes in Securities 10 Item 3. Defaults upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURE 10 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31 December 31 2001 2000 ASSETS (Unaudited) (Audited) ------------ ------------ Real estate investments (Note A): Land $ 53,003,000 $ 52,461,000 Buildings and improvements, net of accumulated depreciation of $79,395,000 in 2001 and $76,727,000 in 2000 217,840,000 219,571,000 Investment in real estate partnership 918,000 916,000 ------------ ------------ 271,761,000 272,948,000 Cash and cash equivalents 776,000 1,896,000 Accounts receivable and accrued revenue, net of allowance for doubtful accounts of $304,000 in 2001 and $331,000 in 2000 2,338,000 2,035,000 Prepaid expenses and other assets 9,174,000 8,538,000 ------------ ------------ Total Assets $284,049,000 $285,417,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Mortgage notes payable (Note C) $112,629,000 $113,163,000 Notes payable 36,913,000 35,716,000 Accounts payable and accrued expenses 4,976,000 6,701,000 Tenant deposits and advance rents 862,000 840,000 ------------ ------------ 155,380,000 156,420,000 Convertible subordinated debentures 61,878,000 61,878,000 ------------ ------------ Total Liabilities 217,258,000 218,298,000 SHAREHOLDERS' EQUITY Preferred stock, 6,000,000 shares authorized, none issued --- --- Common stock, par value $.01 per share, 30,000,000 shares authorized, shares issued and outstanding - 9,439,000 in 2001 and 9,329,000 in 2000 94,000 93,000 Additional paid-in capital 131,272,000 130,397,000 Cumulative net income 40,380,000 39,713,000 Cumulative distributions paid (93,778,000) (91,907,000) ------------ ------------ 77,968,000 78,296,000 Treasury shares, at cost, 1,266,000 shares in 2001 and in 2000 (11,177,000) (11,177,000) ------------ ------------ Total Shareholders' Equity 66,791,000 67,119,000 ------------ ------------ Total Liabilities and Shareholders' Equity $284,049,000 $285,417,000 ============ ============ See notes to consolidated financial statements. 3 SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) Quarter Ended March 31 ------------------------- 2001 2000 ----------- ----------- OPERATING REVENUE Rental and other income $13,125,000 $12,634,000 Equity in income of partnership 31,000 31,000 ----------- ----------- 13,156,000 12,665,000 ----------- ----------- OPERATING EXPENSES Management and leasing fees 658,000 706,000 Utilities 564,000 448,000 Real estate taxes 988,000 947,000 Administrative expenses 645,000 753,000 Operations and maintenance 1,933,000 1,864,000 Other operating expenses 890,000 621,000 Depreciation and amortization 2,833,000 2,769,000 ----------- ----------- 8,511,000 8,108,000 ----------- ----------- INCOME FROM OPERATIONS 4,645,000 4,557,000 Interest expense 3,982,000 3,931,000 ----------- ----------- NET INCOME $ 663,000 $ 626,000 =========== =========== BASIC AND DILUTED EARNINGS PER SHARE $ 0.08 $ 0.08 =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,107,000 7,901,000 =========== =========== See notes to consolidated financial statements. 4 SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Quarter Ended March 31 -------------------------- 2001 2000 ----------- ---------- OPERATING ACTIVITIES: Net income $ 663,000 $ 626,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,833,000 2,769,000 (Increase) decrease in accounts receivable and accrued revenue (298,000) 292,000 Increase in prepaid expenses and other assets (112,000) (6,000) Decrease in accounts payable and accrued expenses (1,721,000) (3,168,000) ----------- ----------- Net Cash Provided by Operating Activities 1,365,000 513,000 ----------- ----------- INVESTING ACTIVITIES: Acquisitions of and improvements to real estate investments (1,484,000) (2,572,000) ----------- ----------- Net Cash Used in Investing Activities (1,484,000) (2,572,000) ----------- ----------- FINANCING ACTIVITIES: Principal payments on mortgage notes payable (534,000) (448,000) Net proceeds on notes payable to banks 1,197,000 4,256,000 Increase in mortgage escrow deposits and debt issuance costs (669,000) (462,000) Cash dividends to shareholders (1,871,000) (1,738,000) Proceeds from issuance of shares of common stock pursuant to direct stock purchase, stock option, and stock award plans 876,000 565,000 Purchases of Company's common stock - (713,000) ----------- ----------- Net cash (used in) provided by financing activities (1,001,000) 1,460,000 ----------- ----------- Net decrease in cash and cash equivalents (1,120,000) (599,000) Cash and cash equivalents at beginning of period 1,896,000 1,337,000 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 776,000 $ 738,000 =========== =========== Cash interest payments, net of capitalized interest $ 5,526,000 $ 5,087,000 =========== =========== See notes to consolidated financial statements 5 SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2001 NOTE A -- BASIS OF PRESENTATION As of March 31, 2001, the Company's real estate portfolio included interest in sixteen shopping centers and fourteen apartment communities. The Company holds, directly or indirectly through both wholly-owned subsidiaries and majority-owned entities, a fee interest in twenty-eight of its properties, and long-term ground leases on the remaining two properties - Southwood Shopping Center in Gretna, Louisiana and Westland Shopping Center in Kenner, Louisiana. Sixteen properties are held through partnerships and limited partnerships whereby the majority owner is a wholly-owned subsidiary of Sizeler Property Investors, Inc. The minority interests in these entities are held by third party corporations who have contributed capital for their respective interests. The other fourteen properties in the portfolio are held through wholly-owned subsidiary corporations and limited liability companies. The Company, the wholly-owned subsidiaries and majority-owned partnerships and limited partnerships, are referred to collectively as the "Company". The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Furthermore, the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. Operating results for the three-month period ended March 31, 2001, are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. The consolidated balance sheet at December 31, 2000, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Sizeler Property Investors, Inc. Annual Report on Form 10-K for the year ended December 31, 2000. NOTE B -- RECLASSIFICATIONS Certain reclassifications have been made in the 2000 Consolidated Financial Statements to conform with the 2001 financial statement presentation. NOTE C -- MORTGAGE NOTES PAYABLE The Company's mortgage notes payable are secured by certain land, buildings and improvements. At March 31, 2001, mortgage notes payable totalled approximately $112.6 million. Individual notes ranged from $937,000 to $20.1 million, with fixed rates of interest ranging from 6.85% to 8.63% and maturity dates ranging from September 30, 2001, to January 1, 2013. Net book values of properties securing these mortgage notes payable totalled approximately $136.1 million at March 31, 2001, with individual property net book values ranging from $2.3 million to $30.4 million. NOTE D - SEGMENT DISCLOSURE The Company is engaged in two operating segments, the ownership and rental of retail shopping center properties and apartment properties. These reportable segments offer different products or services and are managed separately as each requires different operating strategies and management expertise. There are no intersegment sales or transfers. 6 The Company assesses and measures segment operating results based on a performance measure referred to as Net Operating Income and is based on the operating revenues and operating expenses directly associated with the operations of the real estate properties (excluding depreciation). Net Operating Income is not a measure of operating results or cash flows from operating activities as measured by GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. The operating revenues, operating expenses, net operating income and real estate investments for each of the reportable segments are summarized below for the three-month periods ended March 31, 2001 and 2000. Quarter Ended March 31 ---------------------------- Retail: 2001 2000 ------------ ------------ Operating Revenue $ 7,277,000 $ 7,029,000 Operating Expenses (3,013,000) (2,683,000) ------------ ------------ Net Operating Income - Retail $ 4,264,000 $ 4,346,000 Apartments: Operating Revenue $ 5,879,000 $ 5,635,000 Operating Expenses (2,665,000) (2,655,000) ------------ ------------ Net Operating Income - Apartments 3,214,000 2,980,000 Net Operating Income - Total $ 7,478,000 $ 7,326,000 Depreciation (2,833,000) (2,769,000) ------------ ------------ Income From Operations 4,645,000 4,557,000 Interest Expense (3,982,000) (3,931,000) ------------ ------------ Net Income $ 663,000 $ 626,000 ============ ============ Gross Real Estate Investments: Retail $213,821,000 $207,182,000 Apartments 137,335,000 134,600,000 ------------ ------------ $351,156,000 $341,782,000 ============ ============ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 For the three months ended March 31, 2001 net operating income totalled $7.5 million, compared to $7.3 million earned for the same period in 2000. Total operating revenues increased approximately 4% to $13.2 million, compared to $12.7 earned for the same period a year ago. Operating revenue for retail centers and apartments was $7.3 million and $5.9 million, respectively. The increase in operating revenue was due primarily to higher apartment occupancies, market sustained rents and new retail leases, in particular the leasing of a 44,300 s.f. Publix Supermarket at the Town and Country Power Shopping Center in Palatka, Florida, which opened for business in August, 2000. Increased first quarter revenues were partially offset by increased operating costs, in particular utilities, real estate taxes and property insurance costs. Operating expenses, net of depreciation, totalled $5.7 million in 2001, compared to $5.3 million in 2000. 7 LIQUIDITY AND CAPITAL RESOURCES The primary source of working capital for the Company is net cash provided by operating activities, from which the Company funds normal operating requirements, debt service obligations, and distributions to shareholders. In addition, the Company maintains unsecured credit lines with commercial banks, which it utilizes to supplement cash provided by operating activities and to initially finance the cost of property development and redevelopment activities, portfolio acquisitions and other expenditures. At March 31, 2001, the Company had $776,000 in cash and cash equivalents and $55 million in committed bank lines of credit facilities, of which approximately $18 million was available. Utilization of the bank lines is subject to certain restrictive covenants that impose maximum borrowing levels by the Company through the maintenance of certain prescribed financial ratios. Net cash flows provided by operating activities increased $852,000 in the first quarter of 2001 compared to the same period in 2000. The increase was principally attributable to a reduction in contractor retainages paid in 2001 relating to development activities. Net cash flows used in investing activities decreased approximately $1.1 million in 2001 from 2000, primarily attributable to decreased development activities. Net cash flows provided by financing activities decreased $2.5 million in 2001 from 2000 due primarily to lower usage of bank lines, as a result of decreased development activities. As of March 31, 2001, fourteen of the Company's properties, comprising approximately 49% of its gross investment in real estate, were subject to a total of $112.6 million in mortgage obligations, all of which are long-term, non-recourse and bear fixed rates of interest for fixed terms. The remaining sixteen properties and vacant parcels of land in the portfolio are currently unencumbered by debt. The Company anticipates that its current cash balance, operating cash flows, and borrowing capacity (including borrowings under its lines of credit) will be adequate to fund the Company's future (i) operating and administrative expenses, (ii) debt service obligations, (iii) distributions to shareholders, (iv) development activities, (v) capital improvements on existing properties, and (vi) typical repair and maintenance expenses at its properties. The Company's current dividend policy is to pay quarterly dividends to shareholders, based upon funds from operations, as well as other factors. As funds from operations excludes the deduction of certain non-cash charges, principally depreciation on real estate assets, quarterly dividends will typically be greater than net income and may include a tax-deferred return of capital component. The Board of Directors, on May 11, 2001, declared a cash dividend of $0.23 per share for the period January 1, 2001 through March 31, 2001, payable on June 1, 2001 to shareholders of record as of May 25, 2001. FUNDS FROM OPERATIONS Real estate industry analysts and the Company utilize the concept of funds from operations as an important analytical measure of a Real Estate Investment Trust's financial performance. The Company considers funds from operations in evaluating its operating results and its dividend policy, as previously mentioned, is also based, in part, on the concept of funds from operations. Funds from operations (FFO) is defined by the Company and the National Association of Real Estate Investment Trusts (NAREIT) as net income, excluding gains or losses from sales of property and those items defined as extraordinary under accounting principles generally accepted in the United States of America, plus depreciation on real estate assets and after adjustments for unconsolidated partnerships to reflect funds from operations on the same basis. Funds from operations do not represent cash flows from operations as defined by GAAP, nor is it indicative that cash flows are adequate to fund all cash needs, including distributions to shareholders. Funds from operations should not be considered as an alternative to net income as defined by GAAP or to cash flows as a measure of liquidity. A reconciliation of net income to basic funds from operations is presented below (in thousands): 8 Quarter Ended March 31 ------------------------------------ 2001 2000 ----------------- ----------------- ($000) Shares ($000) Shares -------- ------ -------- ------ NET INCOME $ 663 8,107 $ 626 7,901 Additions: Depreciation 2,833 2,769 Partnership depreciation 9 9 Deductions: Minority depreciation 12 12 Amortization costs 157 143 ------ ----- ------ ----- FUNDS FROM OPERATIONS - BASIC $3,336 8,107 $3,249 7,901 ====== ===== ====== ===== EFFECTS OF INFLATION Substantially all of the Company's retail leases contain provisions designed to provide the Company with a hedge against inflation. Most of the Company's retail leases contain provisions which enable the Company to receive percentage rentals based on tenant sales in excess of a stated breakpoint and/or provide for periodic increases in minimum rent during the lease term. The majority of the Company's retail leases are for terms of less than ten years, which allows the Company to adjust rentals to changing market conditions. In addition, most retail leases require tenants to pay a contribution towards property operating expenses, thereby reducing the Company's exposure to higher costs caused by inflation. The Company's apartment leases are written for short terms, generally six to twelve months, and are adjusted according to changing market conditions. FUTURE RESULTS This Form 10-Q and other documents prepared and statements made by the Company, may contain certain forward-looking statements that are subject to risk and uncertainty. Investors and potential investors in the Company's securities are cautioned that a number of factors could adversely affect the Company and cause actual results to differ materially from those in the forward-looking statements, including, but not limited to (a) the inability to lease current or future vacant space in the Company's properties; (b) decisions by tenants and anchor tenants who own their space to close stores at the Company's properties; (c) the inability of tenants to pay rent and other expenses; (d) tenant financial difficulties; (e) decreases in rental rates available from tenants; (f) increases in operating costs at the Company's properties; (g) lack of availability of financing for acquisition, development and rehabilitation of properties by the Company; (h) possible dispositions of mature properties since the Company is continuously engaged in the examination of its various lines of business; (i) increases in interest rates; (j) a general economic downturn resulting in lower retail sales and causing downward pressure on occupancies and rents at retail properties; as well as (k) the adverse tax consequences if the Company were to fail to qualify as a REIT in any taxable year. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We incorporate by reference the disclosure contained in Item 7a, Quantitative and Qualitative Disclosures About Market Risk, of the Company's Form 10-K, for the year ended December 31, 2000. There have been no material changes during the first three months of 2001. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. There are no pending legal proceedings to which the Company is a party or to which any of its properties is subject, which in the opinion of management and its litigation counsel has resulted or will result in any material adverse effect on the financial position of the Company. 9 ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 27. Financial Data Schedule. (b) Reports on Form 8-K None. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SIZELER PROPERTY INVESTORS, INC. ------------------------------- (Registrant) By: /S/ ROBERT A. WHELAN ----------------------------- Robert A. Whelan Chief Financial Officer Date: May 11, 2001 10