INLAND REAL ESTATE CORP - 10-Q Quarterly Report

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, 2003

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 #0-28382

Inland Real Estate Corporation

(Exact name of registrant as specified in its charter)

Maryland	#36-3953261
(State or other jurisdiction	(I.R.S. Employer Identification Number)
of incorporation or organization)

2901 Butterfield Road, Oak Brook, Illinois	60523
(Address of principal executive office)	(Zip code)

Registrant's telephone number, including area code: 630-218-8000

N/A

(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

As of August 5, 2003, there were 65,139,387 Shares of Common Stock outstanding.

INLAND REAL ESTATE CORPORATION

(a Maryland corporation)

TABLE OF CONTENTS

	Part I - Financial Information

		Page
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	5
	Consolidated Statement of Stockholders' Equity	7
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38

Item 4.	Controls and Procedures	38


	Part II - Other Information

Item 6.	Exhibits and Reports on Form 8-K
	(a) Exhibits	39
	(b) Reports on Form 8-K	40

SIGNATURES		41

Part I - Financial Information

Item 1. Consolidated Financial Statements

INLAND REAL ESTATE CORPORATION

(a Maryland corporation)

Consolidated Balance Sheets

June 30, 2003 and December 31, 2002

Assets

		June 30, 2003 (unaudited)	December 31, 2002
Investment properties:
Land	$	337,392,198	335,485,705
Building and improvements		894,820,794	875,898,829

		1,232,212,992	1,211,384,534
Less accumulated depreciation		131,331,387	117,939,233

Net investment properties		1,100,881,605	1,093,445,301

Cash and cash equivalents		20,963,397	21,433,995
Investment in securities (net of an unrealized gain of $1,543,952 and $1,151,182 at June 30, 2003 and December 31, 2002, respectively		12,935,894	12,578,575
Investment in marketable securities		63,991	63,073
Investment property held for sale (net of accumulated depreciation of $3,265,146)		16,388,048	-
Restricted cash		7,684,723	10,398,430
Accounts and rents receivable (net of provision for doubtful accounts of $3,349,196 and $2,678,945 at June 30, 2003 and December 31, 2002, respectively)		33,905,872	30,795,862
Mortgage receivable (net of investment in LLC of ($338,371) and $74,723 at June 30, 2003 and December 31, 2002, respectively)		7,540,795	6,716,013
Deposits and other assets		1,379,368	656,756
Acquired above market lease intangibles (net of accumulated amortization of $540,999 and $181,744 at June 30, 2003 and December 31, 2002, respectively)		5,688,443	5,726,993
Acquired in place lease intangibles (net of accumulated amortization of $247,253 and $79,294 at June 30, 2003 and December 31, 2002, respectively)		5,493,775	1,958,320
Leasing fees (net of accumulated amortization of $1,067,887 and $839,177 at June 30, 2003 and December 31, 2002, respectively)		1,779,422	1,519,353
Loan fees (net of accumulated amortization of $4,112,389 and $3,360,671 at June 30, 2003 and December 31, 2002, respectively)		5,101,679	4,738,340

Total assets	$	1,219,807,012	1,190,031,011
		===========	==========

See accompanying notes to consolidated financial statements.

INLAND REAL ESTATE CORPORATION

(a Maryland corporation)

Consolidated Balance Sheets

(continued)

June 30, 2003 and December 31, 2002

Liabilities and Stockholders' Equity

		June 30, 2003 (unaudited)	December 31, 2002
Liabilities:
Accounts payable and accrued expenses	$	2,496,950	1,801,279
Acquired below market lease intangibles (net of accumulated amortization of $810,306 and $247,611 at June 30, 2003 and December 31, 2002, respectively)		6,583,580	6,771,727
Accrued interest		1,812,574	1,856,638
Accrued real estate taxes		25,831,200	24,405,734
Distributions payable		5,173,235	5,310,303
Security and other deposits		2,939,972	2,991,480
Mortgages payable		585,236,617	582,282,367
Line of credit		100,000,000	80,000,000
Prepaid rents and unearned income		3,143,629	2,356,484
Liabilities associated with assets held for sale		9,647,151	-
Other liabilities		2,179,588	3,048,898

Total liabilities		745,044,496	710,824,910

Minority interest		21,862,007	22,456,919

Stockholders' Equity:
Preferred stock, $.01 par value, 6,000,000 Shares authorized; none issued and outstanding at June 30, 2003 and December 31, 2002		-	-
Common stock, $.01 par value, 100,000,000 Shares authorized; 64,971,786 and 64,460,139 Shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively		649,718	644,601
Additional paid-in capital (net of offering costs of $58,816,092)		620,314,833	614,459,497
Deferred stock compensation		(48,000)	(60,000)
Accumulated distributions in excess of net income		(169,559,994)	(159,446,098)
Accumulated other comprehensive income		1,543,952	1,151,182

Total stockholders' equity		452,900,509	456,749,182

Commitments and contingencies

Total liabilities and stockholders' equity	$	1,219,807,012	1,190,031,011
		==========	=========

See accompanying notes to consolidated financial statements.

INLAND REAL ESTATE CORPORATION

(a Maryland corporation)

Consolidated Statements of Operations

For the three and six months ended June 30, 2003 and 2002

(unaudited)

		Three months ended June 30, 2003	Three months ended June 30, 2002	Six months ended June 30, 2003	Six months ended June 30, 2002
Income:
Rental income	$	31,637,731	25,732,771	62,580,365	51,101,462
Additional rental income		11,850,811	10,262,992	24,429,187	20,376,535
Lease termination income		-	-	369,819	618,981
Interest income		130,674	411,678	257,572	1,027,796
Dividend income		277,139	326,070	550,687	588,315
Other income		117,749	117,818	233,707	191,821

		44,014,104	36,851,329	88,421,337	73,904,910
Expenses:
Professional services		173,089	91,185	254,531	232,906
General and administrative expenses		1,441,402	1,205,538	2,533,258	2,155,412
Bad debt expense		624,932	630,832	1,351,105	696,087
Property operating expenses		13,066,935	11,116,062	27,468,059	22,878,290
Interest expense		9,869,162	7,849,433	19,657,962	15,549,829
Depreciation		8,356,313	6,781,854	16,560,622	13,434,902
Amortization		264,923	125,010	496,733	238,686
Acquisition cost expenses		6,849	-	23,232	20

		33,803,605	27,799,914	68,345,502	55,186,132

Income from operations		10,210,499	9,051,415	20,075,835	18,718,778
Minority interest		(177,539)	(222,441)	(357,843)	(445,940)
Loss from operations of unconsolidated ventures		(187,821)	(2,816)	(160,833)	(16,738)

Income before discontinued operations		9,845,139	8,826,158	19,557,159	18,256,100

Discontinued operations
Income from discontinued operations (including gain on sale of investment properties of $2,529 and $814,070 for the three months ended June 30, 2003 and 2002, respectively, and $2,529 and $1,362,086 for the six months ended June 30, 2003 and 2002, respectively)		239,055	919,827	528,863	1,700,585

Net income		10,084,194	9,745,985	20,086,022	19,956,685

Other comprehensive income:
Unrealized gain on investment securities		837,219	344,546	392,770	734,085

Comprehensive income	$	10,921,413	10,090,531	20,478,792	20,690,770
		========	========	========	========

See accompanying notes to consolidated financial statements.

INLAND REAL ESTATE CORPORATION

(a Maryland corporation)

Consolidated Statements of Operations

(continued)

For the three and six months ended June 30, 2003 and 2002

(unaudited)

		Three months ended June 30, 2003	Three months ended June 30, 2002	Six months ended June 30, 2003	Six months ended June 30, 2002

Income before discontinued operations per common share, basic and diluted	$	.15	.14	.30	.29
		==========	==========	==========	==========
Income from discontinued operations per common share, basic and diluted	$	-	.01	.01	.02
		==========	==========	==========	==========
Net income per common share, basic and diluted	$	.15	.15	.31	.31
		==========	==========	==========	==========
Weighted average common shares outstanding, basic		64,904,385	63,868,407	64,781,518	63,737,766
		==========	==========	==========	==========
Weighted average common shares outstanding, diluted		64,909,839	63,873,861	64,786,972	63,743,220
		==========	==========	==========	==========

See accompanying notes to consolidated financial statements.

INLAND REAL ESTATE CORPORATION

(a Maryland corporation)

Consolidated Statement of Stockholders' Equity

For the six months ended June 30, 2003

(unaudited)

	Number of Shares		Common Stock	Additional Paid-in Capital	Deferred Stock Compensation	Accumulated Distributions in Excess of Net Income	Accumulated Other Comprehensive Income	Total

Balance January 1, 2003	64,460,139	$	644,601	614,459,497	(60,000)	(159,446,098)	1,151,182	456,749,182

Net income	-