UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
| [x] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended September 30, 2002 | ||
| OR |
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| [ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to
Commission file number 1-11690
DEVELOPERS DIVERSIFIED REALTY CORPORATION
(Exact name of registrant as specified in its charter)
| Ohio | 34-1723097 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
3300 Enterprise Parkway, Beachwood, Ohio 44122
(216) 755-5500
by check ü 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 ü No
As of November 8, 2002, the registrant had 64,944,263 outstanding common shares, without par value.
-1-
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001.
Condensed Consolidated Statements of Operations for the Three Month Periods ended September 30, 2002 and 2001.
Condensed Consolidated Statements of Operations for the Nine Month Periods ended September 30, 2002 and 2001.
Condensed Consolidated Statements of Cash Flows for the Nine Month Periods ending September 30, 2002 and 2001.
Notes to Condensed Consolidated Financial Statements.
-2-
DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
| September 30, 2002 | December 31, 2001 | |||||||||||
Assets |
||||||||||||
Real estate rental property: |
||||||||||||
Land |
$ | 487,127 | $ | 419,261 | ||||||||
Buildings |
2,093,952 | 1,869,753 | ||||||||||
Fixtures and tenant improvements |
73,094 | 60,115 | ||||||||||
Land under development |
21,354 | 25,539 | ||||||||||
Construction in progress |
122,325 | 118,997 | ||||||||||
| 2,797,852 | 2,493,665 | |||||||||||
Less accumulated depreciation |
(392,898 | ) | (351,709 | ) | ||||||||
Real estate, net |
2,404,954 | 2,141,956 | ||||||||||
Cash and cash equivalents |
9,227 | 19,069 | ||||||||||
Investments in and advances to joint ventures |
253,366 | 255,565 | ||||||||||
Notes receivable |
11,933 | 5,221 | ||||||||||
Real estate property held for sale |
7,095 | — | ||||||||||
Other assets |
88,546 | 75,396 | ||||||||||
| $ | 2,775,121 | $ | 2,497,207 | |||||||||
Liabilities and Shareholders’ Equity |
||||||||||||
Unsecured indebtedness: |
||||||||||||
Fixed rate senior notes |
$ | 307,400 | $ | 405,827 | ||||||||
Variable rate senior notes |
100,000 | — | ||||||||||
Variable rate term debt |
22,120 | 22,120 | ||||||||||
Revolving credit facility |
515,000 | 376,000 | ||||||||||
| 944,520 | 803,947 | |||||||||||
Secured indebtedness: |
||||||||||||
Revolving credit facility |
9,000 | 25,750 | ||||||||||
Mortgage and other secured indebtedness |
546,866 | 478,604 | ||||||||||
| 555,866 | 504,354 | |||||||||||
Total indebtedness |
1,500,386 | 1,308,301 | ||||||||||
Accounts payable and accrued expenses |
71,949 | 55,560 | ||||||||||
Dividends payable |
24,736 | 22,072 | ||||||||||
Other liabilities |
17,024 | 26,859 | ||||||||||
| 1,614,095 | 1,412,792 | |||||||||||
Minority equity interest |
22,758 | 23,034 | ||||||||||
Preferred operating partnership interests |
207,111 | 207,111 | ||||||||||
Operating partnership minority interests |
18,668 | 20,256 | ||||||||||
| 1,862,632 | 1,663,193 | |||||||||||
Commitments and contingencies
Shareholders’ equity: |
||||||||||||
Class A – 9.5% cumulative redeemable preferred
shares, without par value, $250 liquidation
value; 750,000 shares authorized; 421,500 shares
issued and outstanding at December 31, 2001 |
— | 105,375 | ||||||||||
Class B – 9.44% cumulative redeemable preferred
shares, without par value, $250 liquidation
value; 750,000 shares authorized; 177,500 shares
issued and outstanding at December 31, 2001 |
— | 44,375 | ||||||||||
Class C – 8.375% cumulative redeemable preferred
shares, without par value, $250 liquidation
value; 750,000 shares authorized; 400,000 shares
issued and outstanding at September 30, 2002 and
December 31, 2001 |
100,000 | 100,000 | ||||||||||
Class D – 8.68% cumulative redeemable preferred
shares, without par value, $250 liquidation
value; 750,000 shares authorized; 216,000 shares
issued and outstanding at September 30, 2002 and
December 31, 2001 |
54,000 | 54,000 | ||||||||||
Class F – 8.60% cumulative redeemable preferred
shares, without par value, $250 liquidation
value; 750,000 shares authorized; 600,000 shares
issued and outstanding at September 30, 2002 |
150,000 | — | ||||||||||
Common shares, without par value, $.10 stated
value; 100,000,000 shares authorized; 71,559,773
and 66,093,105 shares issued at September 30,
2002 and December 2001, respectively |
7,156 | 6,609 | ||||||||||
Paid-in-capital |
849,053 | 753,228 | ||||||||||
Accumulated distributions in excess of net income |
(152,437 | ) | (130,436 | ) | ||||||||
Accumulated other comprehensive loss |
(2,821 | ) | (8,174 | ) | ||||||||
Less: Unearned compensation – restricted stock |
(3,241 | ) | (1,753 | ) | ||||||||
Common stock in treasury at cost: |
||||||||||||
6,639,004 and 6,638,457 shares at
September 30, 2002 and
December 31, 2001, respectively |
(89,221 | ) | (89,210 | ) | ||||||||
| 912,489 | 834,014 | |||||||||||
| $ | 2,775,121 | $ | 2,497,207 | |||||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-3-
DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDING SEPTEMBER 30,
(Dollars in thousands, except per share amounts)
(Unaudited)
| 2002 | 2001 | ||||||||||
Revenues from operations: |
|||||||||||
Minimum rents |
$ | 66,674 | $ | 58,901 | |||||||
Percentage and overage rents |
812 | 528 | |||||||||
Recoveries from tenants |
18,580 | 14,899 | |||||||||
Ancillary income |
510 | 373 | |||||||||
Other property related income |
615 | 393 | |||||||||
Management fee income |
2,427 | 2,798 | |||||||||
Development fee income |
1,236 | 698 | |||||||||
Interest income |
1,496 | 1,226 | |||||||||
Other |
159 | 2,451 | |||||||||
| 92,509 | 82,267 | ||||||||||
Rental operation expenses: |
|||||||||||
Operating and maintenance |
10,867 | 8,095 | |||||||||
Real estate taxes |
11,373 | 9,332 | |||||||||
General and administrative |
6,632 | 5,907 | |||||||||
Interest |
19,824 | 20,730 | |||||||||
Impairment charge |
— | 2,895 | |||||||||
Depreciation and amortization |
18,617 | 16,662 | |||||||||
| 67,313 | 63,621 | ||||||||||
Income before equity in net income of joint ventures,
gain on disposition of real estate and real estate investments,
minority interests and discontinued operations |
25,196 | 18,646 | |||||||||
Equity in net income of joint ventures |
4,781 | 4,076 | |||||||||
Gain on disposition of real estate and real estate investments |
159 | 3,015 | |||||||||
Income before minority interests and discontinued
operations |
30,136 | 25,737 | |||||||||
Minority interests: |
|||||||||||
Minority equity interests |
(458 | ) | (404 | ) | |||||||
Preferred operating partnership minority interests |
(4,770 | ) | (4,770 | ) | |||||||
Operating partnership minority interests |
(342 | ) | (372 | ) | |||||||
| (5,570 | ) | (5,546 | ) | ||||||||
Income from continuing operations |
24,566 | 20,191 | |||||||||
Discontinued operations: |
|||||||||||
Income from operations |
143 | 161 | |||||||||
Gain on sales of real estate |
468 | — | |||||||||
| 611 | 161 | ||||||||||
Net income |
$ | 25,177 | $ | 20,352 | |||||||
Net income applicable to common shareholders |
$ | 18,687 | $ | 13,537 | |||||||
Per share data: |
|||||||||||
Basic earnings per share data: |
|||||||||||
Income from continuing operations |
$ | 0.28 | $ | 0.25 | |||||||
Income from discontinued operations |
0.01 | — | |||||||||
Net income applicable to common shareholders |
$ | 0.29 | $ | 0.25 | |||||||
Diluted earnings per share data: |
|||||||||||
Income from continuing operations |
$ | 0.27 | $ | 0.24 | |||||||
Income from discontinued operations |
0.01 | — | |||||||||
Net income applicable to common shareholders |
$ | 0.28 | $ | 0.24 | |||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-4-
DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIODS ENDING SEPTEMBER 30,
(Dollars in thousands, except per share amounts)
(Unaudited)
| 2002 | 2001 | |||||||||
Revenues from operations: |
||||||||||
Minimum rents |
$ | 189,428 | $ | 165,191 | ||||||
Percentage and overage rents |
2,285 | 2,208 | ||||||||
Recoveries from tenants |
51,152 | 43,739 | ||||||||
Ancillary income |
1,196 | 1,038 | ||||||||
Other property related income |
1,189 | 765 | ||||||||
Management fee income |
7,789 | 8,816 | ||||||||
Development fee income |
2,042 | 1,724 | ||||||||
Interest income |
4,056 | 4,724 | ||||||||
Other |
4,900 | 4,898 | ||||||||
| 264,037 | 233,103 | |||||||||
Rental operation expenses: |
||||||||||
Operating and maintenance |
30,135 | 24,800 | ||||||||
Real estate taxes |
32,279 | 25,995 | ||||||||
General and administrative |
20,012 | 17,838 | ||||||||
Interest |
57,984 | 61,473 | ||||||||
Impairment charge |
— | 2,895 | ||||||||
Depreciation and amortization |
57,215 | 44,647 | ||||||||
| 197,625 | 177,648 | |||||||||
Income before equity in net income of joint ventures and
minority equity investment, gain on disposition of real
estate and real estate investments, minority interests
and discontinued operations |
66,412 | 55,455 | ||||||||
Equity in net income of joint ventures |
22,398 | 13,431 | ||||||||
Equity in net income from minority equity investment |
— | 1,550 | ||||||||
Gain on disposition of real estate and real estate investments |
2,988 | 15,761 | ||||||||
Income before minority interests and discontinued
operations |
91,798 | 86,197 | ||||||||
Minority interests: |
||||||||||
Minority equity interests |
(1,355 | ) | (530 | ) | ||||||
Preferred operating partnership minority interests |
(14,311 | ) | (14,311 | ) | ||||||
Operating partnership minority interests |
(1,104 | ) | (1,147 | ) | ||||||
| (16,770 | ) | (15,988 | ) | |||||||
Income from continuing operations |
75,028 | 70,209 | ||||||||
Discontinued operations: |
||||||||||
Income from operations |
382 | 1,967 | ||||||||
Loss on sales of real estate, net |
(3,058 | ) | — | |||||||
| (2,676 | ) | 1,967 | ||||||||
Net income |
$ | 72,352 | $ | 72,176 | ||||||
Net income applicable to common shareholders |
$ | 51,785 | $ | 51,729 | ||||||
Per share data: |
||||||||||
Basic earnings per share data: |
||||||||||
Income from continuing operations |
$ | 0.86 | $ | 0.90 | ||||||
(Loss) income from discontinued operations |
(0.04 | ) | 0.04 | |||||||
Net income applicable to common shareholders |
$ | 0.82 | $ | 0.94 | ||||||
Diluted earnings per share data: |
||||||||||
Income from continuing operations |
$ | 0.84 | $ | 0.89 | ||||||
(Loss) income from discontinued operations |
(0.04 | ) | 0.04 | |||||||
Net income applicable to common shareholders |
$ | 0.80 | $ | 0.93 | ||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-5-
DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDING SEPTEMBER 30,
(Dollars in thousands)
(Unaudited)
| &nb |