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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2002
 
Commission File Number:  001-13243
 
 
PAN PACIFIC RETAIL PROPERTIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Maryland
  
33-0752457
(State of Incorporation)
  
(I.R.S. Employer Identification No.)
 
1631-B South Melrose Drive,
Vista, California
  
92083
(Address of Principal Executive Offices)
  
(zip code)
 
Registrant’s telephone number, including area code:  (760) 727-1002
 
 
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 July 31, 2002, the number of shares of the registrant’s common stock outstanding was 33,544,237.
 

PART I—FINANCIAL INFORMATION
 
ITEM 1—FINANCIAL STATEMENTS
 
PAN PACIFIC RETAIL PROPERTIES, INC.
 
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 
    
June 30,
2002
     
December 31,
2001
  
    
(unaudited)
         
ASSETS:
                  
Properties, at cost:
                  
Land
   
$
368,085
 
   
$
349,694
 
Buildings and improvements
   
 
1,001,619
 
   
 
946,188
 
Tenant improvements
   
 
38,887
 
   
 
36,069
 
    
  
    
 
1,408,591
 
   
 
1,331,951
 
Less accumulated depreciation and amortization
   
 
(112,257
)
   
 
(98,762
)
    
  
    
 
1,296,334
 
   
 
1,233,189
 
Investments in unconsolidated partnerships
   
 
1,519
 
   
 
1,600
 
Cash and cash equivalents
   
 
320
 
   
 
3,429
 
Accounts receivable (net of allowance for doubtful accounts of $1,702 and $1,680, respectively)
   
 
6,101
 
   
 
7,994
 
Accrued rent receivable (net of allowance for doubtful accounts of $2,091 and $1,928, respectively)
   
 
18,816
 
   
 
17,351
 
Notes receivable
   
 
48,417
 
   
 
47,892
 
Deferred lease commissions (including unamortized related party amounts of $4,808 and $4,279, respectively, and net of accumulated amortization of $3,672 and $3,368, respectively)
   
 
7,114
 
   
 
6,352
 
Prepaid expenses
   
 
9,388
 
   
 
10,305
 
Other assets
   
 
2,838
 
   
 
11,178
 
    
  
    
$
1,390,847
 
   
$
1,339,290
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY:
                  
Notes payable
   
$
234,613
 
   
$
229,135
 
Line of credit payable
   
 
154,500
 
   
 
165,300
 
Senior notes
   
 
328,575
 
   
 
273,800
 
Accounts payable, accrued expenses and other liabilities
   
 
21,748
 
   
 
27,849
 
    
  
    
 
739,436
 
   
 
696,084
 
Minority interests
   
 
15,868
 
   
 
20,748
 
    
  
Stockholders’ equity:
                  
Common stock par value $.01 per share, 100,000,000 authorized shares, 33,538,271 and 32,789,913 shares issued and outstanding, net of 1,126,666 and 1,000,000 treasury shares, at June 30, 2002 and December 31, 2001, respectively
   
 
335
 
   
 
328
 
Paid in capital in excess of par value
   
 
730,951
 
   
 
718,525
 
Deferred compensation
   
 
(4,946
)
   
 
(3,910
)
Accumulated deficit
   
 
(90,797
)
   
 
(92,485
)
    
  
    
 
635,543
 
   
 
622,458
 
    
  
    
$
1,390,847
 
   
$
1,339,290
 
    
  
 
See accompanying notes to consolidated financial statements.

1

PAN PACIFIC RETAIL PROPERTIES, INC.
 
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
 
    
For the Three Months Ended June 30,
     
For the Six Months Ended June 30,
  
    
2002
     
2001
     
2002
     
2001
  
    
(unaudited)
     
(unaudited)
  
REVENUE:
                                    
Base rent
   
$
37,973
 
   
$
34,992
 
   
$
74,653
 
   
$
69,516
 
Percentage rent
   
 
404
 
   
 
761
 
   
 
844
 
   
 
1,569
 
Recoveries from tenants
   
 
8,918
 
   
 
7,911
 
   
 
17,799
 
   
 
15,783
 
Income from unconsolidated partnerships
   
 
18
 
   
 
193
 
   
 
89
 
   
 
410
 
Other
   
 
1,787
 
   
 
2,148
 
   
 
3,285
 
   
 
4,023
 
    
  
  
  
    
 
49,100
 
   
 
46,005
 
   
 
96,670
 
   
 
91,301
 
    
  
  
  
EXPENSES:
                                    
Property operating
   
 
6,009
 
   
 
5,288
 
   
 
11,592
 
   
 
10,674
 
Property taxes
   
 
3,822
 
   
 
3,467
 
   
 
7,651
 
   
 
6,910
 
Depreciation and amortization
   
 
7,744
 
   
 
7,897
 
   
 
15,361
 
   
 
14,765
 
Interest
   
 
11,317
 
   
 
12,079
 
   
 
22,282
 
   
 
23,775
 
General and administrative
   
 
2,594
 
   
 
2,294
 
   
 
5,248
 
   
 
4,683
 
Other
   
 
268
 
   
 
330
 
   
 
435
 
   
 
637
 
    
  
  
  
    
 
31,754
 
   
 
31,355
 
   
 
62,569
 
   
 
61,444
 
    
  
  
  
INCOME BEFORE MINORITY INTERESTS AND GAIN ON SALE OF REAL ESTATE:
   
 
17,346
 
   
 
14,650
 
   
 
34,101
 
   
 
29,857
 
Minority interests
   
 
(368
)
   
 
(880
)
   
 
(726
)
   
 
(1,380
)
Gain on sale of real estate
   
 
—  
 
   
 
2,591
 
   
 
—  
 
   
 
2,418
 
    
  
  
  
NET INCOME
   
$
16,978
 
   
$
16,361
 
   
$
33,375
 
   
$
30,895
 
    
  
  
  
Basic earnings per share
   
$
0.51
 
   
$
0.52
 
   
$
1.00
 
   
$
0.98
 
Diluted earnings per share
   
$
0.50
 
   
$
0.51
 
   
$
0.99
 
   
$
0.96
 
 
See accompanying notes to consolidated financial statements.

2

PAN PACIFIC RETAIL PROPERTIES, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
    
For the Six Months Ended June 30,
  
    
2002
     
2001
  
    
(unaudited)
  
CASH FLOWS FROM OPERATING ACTIVITIES:
                  
Net income
   
$
33,375
 
   
$
30,895
 
Adjustments to reconcile net income to net cash provided by operating activities:
                  
Depreciation and amortization
   
 
15,361
 
   
 
14,765
 
Restricted stock amortization
   
 
580
 
   
 
408
 
Amortization of prepaid financing costs
   
 
513
 
   
 
476
 
Net gain on sale of real estate
   
 
—  
 
   
 
(2,418
)
Income from unconsolidated partnerships
   
 
(89
)
   
 
(410
)
Minority interests
   
 
726
 
   
 
1,380
 
Changes in assets and liabilities:
                  
Decrease in restricted cash
   
 
—  
 
   
 
331
 
Decrease in accounts receivable
   
 
1,893
 
   
 
1,030
 
Increase in accrued rent receivable
   
 
(1,465
)
   
 
(1,427
)
Increase in accrued interest to notes receivable
   
 
(1,538
)
   
 
—  
 
Increase in deferred lease commissions
   
 
(2,048
)
   
 
(1,296
)
Decrease (increase) in prepaid expenses
   
 
372
 
   
 
(169
)
Increase in other assets
   
 
(527
)
   
 
(570
)
Decrease in accounts payable, accrued expenses and other liabilities
   
 
(5,911
)
   
 
(1,103
)
    
  
Net cash provided by operating activities
   
 
41,242
 
   
 
41,892
 
    
  
CASH FLOWS FROM INVESTING ACTIVITIES:
                  
Acquisitions of and additions to operating properties
   
 
(68,082
)
   
 
(8,558
)
Proceeds from sale of real estate
   
 
—  
 
   
 
22,725
 
(Decrease) increase in construction accounts payable and accrued expenses
   
 
(190
)
   
 
74
 
Distributions from unconsolidated partnerships
   
 
170
 
   
 
135
 
Redemption of operating partnership units
   
 
(6,721
)
   
 
(2,203
)
Acquisition of Western
   
 
—  
 
   
 
(1,846
)
Increase in other assets
   
 
—  
 
   
 
(9,062
)
Collections of notes receivable
   
 
1,671
 
   
 
2,771
 
Increase in notes receivable
   
 
(946
)
   
 
(13,983
)
    
  
Net cash used in investing activities
   
 
(74,098
)
   
 
(9,947
)
    
  
CASH FLOWS FROM FINANCING ACTIVITIES:
                  
Line of credit proceeds
   
 
83,450
 
   
 
55,450
 
Line of credit payments
   
 
(94,250