SAUL CENTERS INC - 10-Q Quarterly Report

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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 EXCHANGE ACT OF 1934

FOR QUARTER ENDED June 30, 2004

COMMISSION FILE NUMBER 1-12254

SAUL CENTERS, INC.

(Exact name of registrant as specified in its charter)

Maryland

52-1833074

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

7501 Wisconsin Avenue, Bethesda, Maryland 20814

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code (301) 986-6200

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 requirement 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 Act). YES x No ¨

Number of shares of common stock, par value $0.01 per share outstanding as of August 6, 2004: 16,267,000

SAUL CENTERS, INC.

Table of Contents


			Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	(a)	Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003	4

	(b)	Consolidated Statements of Operations for the three and six months ended June 30, 2004 and 2003	5

	(c)	Consolidated Statements of Stockholders’ Equity as of June 30, 2004 and December 31, 2003.	6

	(d)	Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003.	7

	(e)	Notes to Consolidated Financial Statements	8

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

	(a)	Critical Accounting Policies	24

	(b)	Results of Operations
		Three months ended June 30, 2004 compared to three months ended June 30, 2003.	27

		Six months ended June 30, 2004 compared to six months ended June 30, 2003.	29

	(c)	Liquidity and Capital Resources	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40

Item 4.	Controls and Procedures		41

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		41
Item 2.	Changes in Securities		41
Item 3.	Defaults Upon Senior Securities		41
Item 4.	Submission of Matters to a Vote of Security Holders		42
Item 5.	Other Information		42
Item 6.	Exhibits and Reports on Form 8-K		42

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Basis of Presentation

In the opinion of management, the accompanying consolidated financial statements reflect all adjustments necessary for the fair presentation of the financial position and results of operations of Saul Centers, Inc. All such adjustments are of a normal recurring nature. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements of Saul Centers, Inc. for the year ended December 31, 2003, which are included in its Annual Report on Form 10-K. The results of operations for interim periods are not necessarily indicative of results to be expected for the year.

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Saul Centers, Inc.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Dollars in thousands)	June 30 2004			December 31, 2003
Assets
Real estate investments
Land	$	109,153		$	82,256
Buildings and equipment		500,086			436,487
Construction in progress		41,938			33,372

		651,177			552,115
Accumulated depreciation		(172,851	)		(164,823	)

		478,326			387,292
Cash and cash equivalents		10,066			45,244
Accounts receivable and accrued income, net		15,558			14,642
Leasing costs, net		18,887			15,344
Prepaid expenses		2,170			3,633
Deferred debt costs, net		4,509			4,224
Other assets		5,266			1,237

Total assets	$	534,782		$	471,616

Liabilities
Mortgage notes payable	$	389,544		$	357,248
Revolving credit facility		22,000			—
Dividends and distributions payable		10,322			9,454
Accounts payable, accrued expenses and other liabilities		12,482			7,793
Deferred income		4,220			4,478

Total liabilities		438,568			378,973

Stockholders’ equity
Series A Cumulative Redeemable Preferred stock, par value $0.01 per share, 1,000,000 shares authorized and 40,000 shares issued and outstanding		100,000			100,000
Common stock, $0.01 par value, 30,000,000 shares authorized, 16,143,785 and 15,861,234 shares issued and outstanding, respectively		161			159
Additional paid-in capital		98,980			91,469
Accumulated deficit		(102,927	)		(98,985	)

Total stockholders’ equity		96,214			92,643

Total liabilities and stockholders’ equity	$	534,782		$	471,616

The accompanying notes are an integral part of these statements

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Saul Centers, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(Dollars in thousands, except per share amounts)	2004			2003			2004			2003
Revenue
Base rent	$	22,751		$	18,931		$	44,027		$	37,982
Expense recoveries		4,018			3,365			7,912			7,170
Percentage rent		260			215			704			664
Other		859			715			1,586			1,280

Total revenue		27,888			23,226			54,229			47,096

Operating expenses
Property operating expenses		2,870			2,579			5,762			5,608
Provision for credit losses		99			56			168			92
Real estate taxes		2,488			2,130			4,879			4,261
Interest expense		6,407			6,466			12,456			12,960
Amortization of deferred debt expense		227			199			444			397
Depreciation and amortization		5,347			4,285			9,985			8,327
General and administrative		2,121			1,495			3,877			2,896

Total operating expenses		19,559			17,210			37,571			34,541

Net Operating income before minority interests		8,329			6,016			16,658			12,555

Minority interests
Minority share of income		(1,545	)		(1,503	)		(3,102	)		(3,151	)
Distributions in excess of earnings		(498	)		(517	)		(965	)		(889	)

Total minority interests		(2,043	)		(2,020	)		(4,067	)		(4,040	)

Net income		6,286			3,996			12,591			8,515

Preferred dividends		(2,000	)		—			(4,000	)		—

Net income available to common shareholders		4,286			3,996			8,591			8,515

Per share (basic and dilutive)
Net income	$	0.27		$	0.26		$	0.54		$	0.55

Distributions declared per common share outstanding	$	0.39		$	0.39		$	0.78		$	0.78

The accompanying notes are an intregal part of these statements

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Saul Centers, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


(Dollars in thousands, except per share amounts)	Preferred Stock		Common Stock		Additional Paid-in Capital		Accumulated Deficit			Total
Stockholders’ equity:
Balance, December 31, 2003	$	100,000	$	159	$	91,469	$	(98,985	)	$	92,643

Issuance of 128,235 shares of common stock:		—		1		3,391		—			3,392
123,689 shares due to dividend reinvestment plan
4,546 shares due to directors deferred stock plan		—		—		126		—			126
Net income		—		—		—		6,305			6,305
Distributions payable preferred stock ($50.00 per share)		—		—		—		(2,000	)		(2,000	)
Distributions payable common stock ($.39 per share)		—		—		—		(6,236	)		(6,236	)

Balance, March 31, 2004		100,000		160		94,986		(100,916	)		94,230

Issuance of 155,721 shares of common stock:
140,253 shares due to dividend reinvestment plan				1		3,479					3,480
15,468 shares due to employee stock options and directors deferred stock plan						515					515
Net income								6,286			6,286
Distributions payable preferred stock ($50.00 per share)