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, 2004
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 |
92081 | |
| (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 ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨.
As of July 27, 2004, the number of shares of the registrant’s common stock outstanding was 40,454,067.
PAN PACIFIC RETAIL PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| June 30, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | ||||||||
| ASSETS: |
||||||||
| Properties, at cost: |
||||||||
| Land |
$ | 510,420 | $ | 509,887 | ||||
| Buildings and improvements |
1,379,680 | 1,374,663 | ||||||
| Tenant improvements |
54,198 | 49,793 | ||||||
| 1,944,298 | 1,934,343 | |||||||
| Less accumulated depreciation and amortization |
(179,519 | ) | (160,449 | ) | ||||
| 1,764,779 | 1,773,894 | |||||||
| Investments in unconsolidated entities |
1,399 | 3,223 | ||||||
| Cash and cash equivalents |
4,760 | 6,453 | ||||||
| Accounts receivable (net of allowance for doubtful accounts of $3,546 and $4,444, respectively) |
7,854 | 13,478 | ||||||
| Accrued rent receivable (net of allowance for doubtful accounts of $3,018 and $2,735, respectively) |
24,191 | 22,552 | ||||||
| Notes receivable |
7,414 | 7,844 | ||||||
| Deferred lease commissions (including unamortized related party amounts of $8,849 and $7,386, respectively, and net of accumulated amortization of $6,487 and $5,512, respectively) |
12,880 | 11,029 | ||||||
| Prepaid expenses |
18,141 | 19,072 | ||||||
| Other assets |
60,021 | 5,803 | ||||||
| $ | 1,901,439 | $ | 1,863,348 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY: |
||||||||
| Notes payable |
$ | 329,335 | $ | 345,077 | ||||
| Line of credit payable |
104,500 | 48,250 | ||||||
| Senior notes |
503,409 | 503,708 | ||||||
| Accounts payable, accrued expenses and other liabilities |
37,653 | 41,703 | ||||||
| 974,897 | 938,738 | |||||||
| Minority interests |
30,012 | 32,325 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock par value $.01 per share, 30,000,000 authorized shares, no shares issued and outstanding at June 30, 2004 and December 31, 2003, Respectively |
— | — | ||||||
| Common stock par value $.01 per share, 100,000,000 authorized shares, 40,449,599 and 40,293,382 shares issued and outstanding, net of 1,190,999 treasury shares, at June 30, 2004 and December 31, 2003, respectively |
404 | 403 | ||||||
| Paid in capital in excess of par value |
954,338 | 952,973 | ||||||
| Deferred compensation |
(8,904 | ) | (8,781 | ) | ||||
| Accumulated deficit |
(49,308 | ) | (52,310 | ) | ||||
| 896,530 | 892,285 | |||||||
| $ | 1,901,439 | $ | 1,863,348 | |||||
See accompanying notes to consolidated financial statements.
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, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| REVENUE: |
||||||||||||||||
| Base rent |
$ | 54,582 | $ | 51,340 | $ | 108,046 | $ | 99,453 | ||||||||
| Percentage rent |
747 | 427 | 1,551 | 958 | ||||||||||||
| Recoveries from tenants |
14,145 | 12,940 | 27,862 | 25,446 | ||||||||||||
| Income from unconsolidated entities |
103 | 60 | 272 | 118 | ||||||||||||
| Other |
1,455 | 1,386 | 2,828 | 2,216 | ||||||||||||
| 71,032 | 66,153 | 140,559 | 128,191 | |||||||||||||
| EXPENSES: |
||||||||||||||||
| Property operating |
9,491 | 8,935 | 19,178 | 18,741 | ||||||||||||
| Property taxes |
5,936 | 5,490 | 11,639 | 10,883 | ||||||||||||
| Depreciation and amortization |
10,928 | 10,154 | 21,888 | 19,258 | ||||||||||||
| Interest |
15,139 | 14,695 | 30,389 | 28,521 | ||||||||||||
| General and administrative |
3,453 | 4,015 | 6,759 | 8,195 | ||||||||||||
| Other |
2,332 | 81 | 2,791 | 413 | ||||||||||||
| 47,279 | 43,370 | 92,644 | 86,011 | |||||||||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND DISCONTINUED OPERATIONS |
23,753 | 22,783 | 47,915 | 42,180 | ||||||||||||
| Minority interests |
(651 | ) | (260 | ) | (1,282 | ) | (1,120 | ) | ||||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE DISCONTINUED OPERATIONS |
23,102 | 22,523 | 46,633 | 41,060 | ||||||||||||
| Discontinued operations |
— | 5,659 | 206 | 12,737 | ||||||||||||
| NET INCOME |
$ | 23,102 | $ | 28,182 | $ | 46,839 | $ | 53,797 | ||||||||
| Basic earnings per share: |
||||||||||||||||
| Income from continuing operations |
$ | 0.58 | $ | 0.57 | $ | 1.17 | $ | 1.05 | ||||||||
| Discontinued operations |
$ | — | $ | 0.14 | $ | — | $ | 0.33 | ||||||||
| Net income |
$ | 0.58 | $ | 0.71 | $ | 1.17 | $ | 1.38 | ||||||||
| Diluted earnings per share: |
||||||||||||||||
| Income from continuing operations |
$ | 0.57 | $ | 0.55 | $ | 1.16 | $ | 1.04 | ||||||||
| Discontinued operations |
$ | — | $ | 0.14 | $ | — | $ | 0.31 | ||||||||
| Net income |
$ | 0.57 | $ | 0.69 | $ | 1.16 | $ | 1.35 | ||||||||
See accompanying notes to consolidated financial statements.
PAN PACIFIC RETAIL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| For the Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| (unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 46,839 | $ | 53,797 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Bad debt expense |
1,043 | 1,949 | ||||||
| Depreciation and amortization |
21,888 | 19,258 | ||||||
| Amortization of prepaid financing costs |
689 | 630 | ||||||
| Income from unconsolidated entities |
(273 | ) | (118 | ) | ||||
| Discontinued operations |
(206 | ) | (12,737 | ) | ||||
| Minority interests |
1,282 | 1,120 | ||||||
| Vesting of restricted stock |
2,221 | 731 | ||||||
| Changes in assets and liabilities, net of the effects of the acquisition of Center Trust in 2003: |
||||||||
| Decrease (increase) in accounts receivable |
4,870 | (1,360 | ) | |||||
| Increase in accrued rent receivable |
(1,928 | ) | (1,824 | ) | ||||
| Increase in accrued interest on notes receivable |
(299 | ) | (555 | ) | ||||
| Increase in deferred lease commissions |
(3,196 | ) | (2,110 | ) | ||||
| Decrease in prepaid expenses |
239 | 4,752 | ||||||
| Increase in other assets |
(2,163 | ) | (1,442 | ) | ||||
| (Decrease) increase in accounts payable, accrued expenses and other liabilities |
(4,050 | ) | 5,282 | |||||
| Net cash provided by operating activities |
66,956 | 67,373 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Acquisitions of and additions to properties |
(9,024 | ) | (69,308 | ) | ||||
| Funds held in escrow pending property acquisition |
(55,600 | ) | — | |||||
| Proceeds from sale of real estate |
1,300 | 182,321 | ||||||
| Distributions and equity repayments from unconsolidated entities |
2,097 | 4,917 | ||||||
| Acquisition of Center Trust |
— | (12,786 | ) | |||||
| Acquisition of minority interest |
— | (526 | ) | |||||
| Redemption of operating subsidiary units |
(5,971 | ) | (1,093 | ) | ||||
| Collections of notes receivable |
729 | 2,580 | ||||||
| Net cash (used in) provided by investing activities |
(66,469 | ) | 106,105 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Notes payable proceeds |
— | 4,488 | ||||||
| Notes payable payments |
(15,627 | ) | (207,199 | ) | ||||
| Line of credit proceeds |
277,000 | 261,950 | ||||||
| Line of credit payments |
(220,750 | ) | (281,450 | ) | ||||
| Repayment of senior notes |
(50,000 | ) | — | |||||
| Issuance of senior notes |
49,591 | 74,816 | ||||||
| Repurchase of common shares |
— | (112 | ) | |||||
| Issuance of common shares |
2,585 | 7,419 | ||||||
| Distributions paid |
(45,002 | ) | (38,286 | ) | ||||
| Net cash used in financing activities |
(2,203 | ) | (178,374 | ) | ||||
| DECREASE IN CASH AND CASH EQUIVALENTS |
(1,716 | ) | (4,896 | ) | ||||
| Cash from discontinued operations |
23 | 4,752 | ||||||
| NET DECREASE IN | ||||||||