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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
------------------
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 number 1-9876
------
WEINGARTEN REALTY INVESTORS
---------------------------
(Exact name of registrant as specified in its charter)
Texas 74-1464203
- ---------------------------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2600 Citadel Plaza Drive, P.O. Box 924133, Houston, Texas 77292-4133
- ----------------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 866-6000
--------------
____________________________________________
(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 .
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes . No .
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of November 8, 2002, there
were 52,035,100 common shares of beneficial interest of Weingarten Realty
Investors, $.03 par value, outstanding.
PART 1
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
WEINGARTEN REALTY INVESTORS
STATEMENTS OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
2002 2001 2002 2001
--------- --------- ---------- ----------
Revenues:
Rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 91,347 $ 80,262 $ 264,770 $ 221,479
Interest income . . . . . . . . . . . . . . . . . . . . . . . . 270 261 701 910
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,202 732 4,217 3,072
--------- --------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 93,819 81,255 269,688 225,461
--------- --------- ---------- ----------
Expenses:
Depreciation and amortization . . . . . . . . . . . . . . . . . 19,390 16,812 56,380 48,732
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,062 14,677 48,590 40,072
Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,879 12,616 40,767 33,046
Ad valorem taxes. . . . . . . . . . . . . . . . . . . . . . . . 11,914 9,755 32,910 27,638
General and administrative. . . . . . . . . . . . . . . . . . . 2,576 2,385 8,650 7,489
--------- --------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 65,821 56,245 187,297 156,977
--------- --------- ---------- ----------
Income Before Equity in Earnings of Joint Ventures,
Minority Interest in Income of Partnerships, Gain (Loss)
on Sale of Properties and Discontinued Operations . . . . . 27,998 25,010 82,391 68,484
Equity in Earnings of Joint Ventures. . . . . . . . . . . . . . . 989 2,512 3,028 4,559
Minority Interest in Income of Partnerships . . . . . . . . . . . (578) (141) (1,637) (323)
Gain (Loss) on Sale of Properties . . . . . . . . . . . . . . . . (517) 4,467
--------- --------- ---------- ----------
Income Before Discontinued Operations . . . . . . . . . . . . . . 28,409 26,864 83,782 77,187
--------- --------- ---------- ----------
Operating Income from Discontinued Operations . . . . . . . . . . 198 525 1,236 1,585
Gain on Sale of Properties. . . . . . . . . . . . . . . . . . . . 10,818 15,158
--------- --------- ---------- ----------
Income From Discontinued Operations. . . . . . . . . . . . 11,016 525 16,394 1,585
--------- --------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,425 27,389 100,176 78,772
Dividends on Preferred Shares . . . . . . . . . . . . . . . . . . 4,939 5,010 14,817 15,030
--------- --------- ---------- ----------
Net Income Available to Common Shareholders . . . . . . . . . . . $ 34,486 $ 22,379 $ 85,359 $ 63,742
========= ========= ========== ==========
Net Income Per Common Share - Basic:
Income Before Discontinued Operations . . . . . . . . . . . . . $ .45 $ .45 $ 1.33 $ 1.32
Income From Discontinued Operations . . . . . . . . . . . . . . .21 .01 .32 .03
--------- --------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ .66 $ .46 $ 1.65 $ 1.35
========= ========= ========== ==========
Net Income Per Common Share - Diluted:
Income Before Discontinued Operations . . . . . . . . . . . . . $ .45 $ .45 $ 1.33 $ 1.31
Income From Discontinued Operations . . . . . . . . . . . . . . .20 .01 .31 .03
--------- --------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ .65 $ .46 $ 1.64 $ 1.34
========= ========= ========== ==========
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,425 $ 27,389 $ 100,176 $ 78,772
--------- --------- ---------- ----------
Other Comprehensive Income (Loss):
Cumulative effect of change in accounting principle
(SFAS 133) on other comprehensive loss. . . . . . . . . . . . (1,877)
Unrealized derivative gain (loss) on interest rate swaps. . . . 905 (1,669) (2,830) (2,656)
Unrealized derivative gain (loss) on forward-starting
interest rate swaps . . . . . . . . . . . . . . . . . . . . . (40) (2,210) 1,401 1,561
--------- --------- ---------- ----------
Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . 865 (3,879) (1,429) (2,972)
--------- --------- ---------- ----------
Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . $ 40,290 $ 23,510 $ 98,747 $ 75,800
========= ========= ========== ==========
See Notes to Consolidated Financial Statements.
PAGE 2
WEINGARTEN REALTY INVESTORS
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
September 30, December 31,
2002 2001
------------- -------------
ASSETS
Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,623,683 $ 2,352,393
Accumulated Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (447,862) (402,958)
------------- -------------
Property - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,175,821 1,949,435
Investment in Real Estate Joint Ventures. . . . . . . . . . . . . . . . . . . . . 29,761 25,742
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,205,582 1,975,177
Notes Receivable from Real Estate Joint Ventures and Partnerships . . . . . . . . 9,961 6,068
Unamortized Debt and Lease Costs. . . . . . . . . . . . . . . . . . . . . . . . . 48,722 42,755
Accrued Rent and Accounts Receivable (net of allowance for doubtful
accounts of $4,146 in 2002 and $2,926 in 2001). . . . . . . . . . . . . . . . . 31,122 32,382
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,850 12,434
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,703 26,931
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,362,940 $ 2,095,747
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,283,700 $ 1,070,835
Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . 68,563 80,412
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,278 19,542
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,372,541 1,170,789
------------- -------------
Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,192 3,886
------------- -------------
Commitments and Contingencies
Shareholders' Equity:
Preferred Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 10,000
7.44% Series A cumulative redeemable preferred shares of
beneficial interest; 3,000 shares issued and outstanding;
liquidation preference $25 per share. . . . . . . . . . . . . . . . . . 90 90
7.125% Series B cumulative redeemable preferred shares of
beneficial interest; 3,600 shares issued and 3,519 and 3,526 shares
outstanding in 2002 and 2001; liquidation preference $25 per share. . . 106 106
7.0% Series C cumulative redeemable preferred shares of
beneficial interest; 2,300 shares issued and 2,254 and 2,256 shares
outstanding in 2002 and 2001; liquidation preference $50 per share. . . 67 67
Common Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 150,000; shares issued and outstanding:
52,021 in 2002 and 51,521 in 2001 . . . . . . . . . . . . . . . . . . . . . 1,558 1,548
Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,081,541 1,066,757
Accumulated Dividends in Excess of Net Income . . . . . . . . . . . . . . . . . (145,726) (144,560)
Accumulated Other Comprehensive Loss. . . . . . . . . . . . . . . . . . . . . . (1,429) (2,936)
------------- -------------
Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 936,207 921,072
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,362,940 $ 2,095,747
============= =============
See Notes to Consolidated Financial Statements.
PAGE 3
WEINGARTEN REALTY INVESTORS
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
Nine Months Ended
September 30,
----------------------
2002 2001
---------- ----------
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100,176 $ 78,772
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . 57,060 49,551
Equity in earnings of joint ventures . . . . . . . . . . . (3,028) (4,559)
Minority interest in income of partnerships. . . . . . . . 1,637 323
Gain on sale of properties . . . . . . . . . . . . . . . . (15,158) (4,467)
Changes in accrued rent and accounts receivable. . . . . . 198 (6,153)
Changes in other assets. . . . . . . . . . . . . . . . . . (11,271) (22,837)
Changes in accounts payable and accrued expenses . . . . . (10,978) (4,296)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . 384 953
---------- ----------
Net cash provided by operating activities. . . . . . . . 119,020 87,287
---------- ----------
Cash Flows from Investing Activities:
Investment in properties . . . . . . . . . . . . . . . . . . . . (162,661) (353,073)
Notes Receivable:
Advances . . . . . . . . . . . . . . . . . . . . . . . . . (4,747) (3,616)
Collections. . . . . . . . . . . . . . . . . . . . . . . . 2,166 7,672
Proceeds from sales and disposition of property. . . . . . . . . 37,525 8,321
Real estate joint ventures and partnerships:
Investments. . . . . . . . . . . . . . . . . . . . . . . . (5,355) (1,011)
Distributions. . . . . . . . . . . . . . . . . . . . . . . 3,217 3,279
---------- ----------
Net cash used in investing activities. . . . . . . . . . (129,855) (338,428)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from issuance of:
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,997 431,150
Common shares of beneficial interest . . . . . . . . . . . 13,454 221,401
Principal payments of debt . . . . . . . . . . . . . . . . . . . (77,735) (297,261)
Common and preferred dividends paid. . . . . . . . . . . . . . . (101,342) (91,224)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (123) 52
---------- ----------
Net cash provided by financing activities. . . . . . . . 36,251 264,118
---------- ----------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . 25,416 12,977
Cash and cash equivalents at January 1 . . . . . . . . . . . . . . . 12,434 7,321
---------- ----------
Cash and cash equivalents at September 30. . . . . . . . . . . . . . $ 37,850 $ 20,298
========== ==========
See Notes to Consolidated Financial Statements.
PAGE 4
WEINGARTEN REALTY INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
1. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements included in this report are
unaudited, however, amounts presented in the balance sheet as of December
31, 2001 are derived from the audited financial statements of the Company
at that date. In the opinion of WRI, all adjustments necessary for a fair
presentation of such financial statements have been included. Such
adjustments consisted of normal recurring items. Interim results are not
necessarily indicative of results for a full year.
The consolidated financial statements and notes are presented as permitted
by Form 10-Q, and do not contain certain information included in WRI's
annual financial statements and notes.
Certain reclassifications of prior year's amounts have been made to conform
to the current year presentation.
2. NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS
On January 1, 2002, WRI adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses
accounting and reporting for the impairment or disposal of a segment of a
business. More specifically, this Statement broadens the presentation of
discontinued operations to include a component of an entity whose
operations and cash flows can be clearly distinguished, operationally and
for financial reporting purposes, from the rest of the entity.
In 2002, we sold four retail projects located in Houston (2), Grand Prairie
and San Antonio, Texas; one industrial building located in Houston, Texas
and the River Pointe Apartments located in Conroe, Texas. Accordingly, the
operating results of the disposed properties have been reclassified and
reported as discontinued operations in the Statements of Consolidated
Income and Comprehensive Income. Included in the December 31, 2001
Consolidated Balance Sheet was $28.8 million of Property and $6.1 million
of Accumulated Depreciation associated with the four shopping centers, the
industrial building and the multi-family residential project that were
sold.
In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations", which is effective for fiscal years beginning after June 15,
2002. SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets
and the associated asset retirement costs. The adoption of SFAS No. 143
will not have a material impact on our financial position, results of
operations, or cash flows.
In April 2002, FASB issued SFAS No. 145, "Rescission of SFAS Statements No.
4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections." The
purpose of this statement is to update, clarify and simplify existing
accounting standards. We adopted this statement effective April 30, 2002
and determined that the adoption of this statement did not have a material
impact on our financial position, results of operations, or cash flows.
PAGE 5
3. DERIVATIVES AND HEDGING
On January 1, 2001, WRI adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments.
Specifically, SFAS No. 133 requires an entity to recognize all derivatives
as either assets or liabilities in the statement of financial position and
to measure those instruments at fair value. Additionally, the fair value
adjustments will affect either shareholders' equity or net income depending
on whether the derivative instrument qualifies as a hedge for accounting
purposes and, if so, the nature of the hedging activity.
WRI hedges the future cash flows of debt transactions principally through
interest rate swaps with major financial institutions. WRI has three
interest rate swap contracts with an aggregate notional amount of $45
million, which are designated as cash flow hedges, and eleven interest rate
swap contracts with an aggregate notional amount of $107.5 million, which
are designated as fair value hedges. In July 2002, one interest rate swap
with a notional amount of $25 million matured.
On September 30, 2002, the derivative instruments designated as cash flow
hedges were reported at their fair values as Other Liabilities, net of
accrued interest, of $2.9 million. The derivative instruments designated as
fair value hedges on September 30, 2002 were reported at their fair values
as Other Assets and Fixed-Rate Debt, net of accrued interest, of $7.7
million.
Within the next twelve months, the Company expects to reclassify to
earnings as interest expense approximately $1.9 million of the current
balance held in accumulated other comprehensive loss. As of September 30,
2002, the balance in accumulated other comprehensive loss relating to the
derivatives was $1.4 million. With respect to fair value hedges, both
changes in fair market value of the derivative hedging instrument and
changes in the fair value of the hedged item will be recorded in earnings
each reporting period. These amounts should completely offset with no
impact to earnings, except for the portion of the hedge that proves to be
ineffective, if any.
4. PER SHARE DATA
Net income per common share - basic is computed using net income available
to common shareholders and the weighted average shares outstanding that
have been adjusted for the three-for-two share split described in Note 9.
Net income per common share - diluted includes the effect of potentially
dilutive securities for the periods indicated, as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Numerator:
Net income available to common shareholders - basic . . . . $ 34,486 $ 22,379 $ 85,359 $ 63,742
Income attributable to operating partnership units. . . . . 764 10 1,640 75
--------- --------- --------- ---------
Net income available to common shareholders - diluted . . . $ 35,250 $ 22,389 $ 86,999 $ 63,817
========= ========= ========= =========
Denominator:
Weighted average shares outstanding - basic . . . . . . . . 51,993 48,665 51,869 47,334
Effect of dilutive securities:
Share options and awards. . . . . . . . . . . . . . . 369 237 326 163
Operating partnership units . . . . . . . . . . . . . 1,479 77 1,001 77
--------- --------- --------- ---------
Weighted average shares outstanding - diluted . . . . . . . 53,841 48,979 53,196 47,574
========= ========= ========= =========
PAGE 6
Options to purchase 800 and 150 common shares for the third quarter ended
September 30, 2002 and 2001, respectively, and 1,050 and 1,800 common
shares for the nine months ended September 30, 2002 and 2001, respectively,
were not included in the calculation of net income per common share -
diluted as the exercise prices were greater than the average market price.
5. DEBT
WRI's debt consists of the following (in thousands):
September 30, December 31,
2002 2001
------------ ------------
Fixed-rate debt payable to 2030 at 5.14% to 8.75%. . . . . . . . $ 1,001,585 $ 796,900
Variable-rate unsecured notes payable. . . . . . . . . . . . . . 75,000 100,000
Unsecured notes payable under revolving credit agreements. . . . 167,880 134,500
Obligations under capital leases . . . . . . . . . . . . . . . . 33,462 33,554
Industrial revenue bonds payable to 2015 at 1.8% to 3.6% . . . . 5,760 5,868
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 13
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,283,700 $ 1,070,835
============ ============
At September 30, 2002, the variable interest rate for notes payable under
the $50 million term loan agreement was 2.33%, and the $350 million
revolving credit agreement was 2.38%. At September 30, 2002, $14.9 million
was outstanding under the $20 million revolving credit agreement at 2.28%.
In January 2002, WRI issued $35 million of twelve-year 6.7% fixed-rate,
unsecured medium term notes. An additional $30 million of twelve-year
6.525% fixed-rate, unsecured medium term notes were issued in February
2002.
In the third quarter of 2002, the Company issued a total of $82 million of
unsecured fixed-rate medium term notes at a weighted average fixed rate of
5.7% and weighted average term of 8.8 years. On July 1, 2002, WRI issued
$10 million of five-year 5.29% fixed-rate medium term notes. An additional
$42 million was issued on July 15, 2002 consisting of $15 million five-year
and $27 million eleven-year fixed-rate medium term notes at 5.14% and
6.11%, respectively. On July 18, 2002, WRI issued an additional $10 million
of ten-year 5.99% fixed-rate medium term notes. On August 20, 2002, WRI
issued at a discount $10 million of ten-year 3% fixed-rate medium term
notes with an effective rate of 5.66%. On September 18 and 24, 2002, WRI
issued two additional ten-year fixed-rate medium term notes of $5 million
each at 5.5% and 5.4%, respectively. Proceeds received were used to pay
down amounts outstanding under our $350 million revolving credit facility.
In March 2001, we filed a $500 million shelf registration statement, of
which $316.9 million is currently available. Also, we have a $400 million
shelf registration statement, of which $18 million is currently available.
PAGE 7
WRI's debt can be summarized as follows (in thousands):
September 30, December 31,
2002 2001
------------- -------------
As to interest rate (including the effects of
interest rate swaps):
Fixed-rate debt . . . . . . . . . . . . . . $ 960,100 $ 780,500
Variable-rate debt. . . . . . . . . . . . . 323,600 290,335
------------- -------------
Total . . . . . . . . . . . . . . . . . . . $ 1,283,700 $ 1,070,835
============= =============
As to collateralization:
Unsecured debt. . . . . . . . . . . . . . . $ 933,589 $ 798,524
Secured debt. . . . . . . . . . . . . . . . 350,111 272,311
------------- -------------
Total . . . . . . . . . . . . . . . . . . . $ 1,283,700 $ 1,070,835
============= =============
In July 2001, we sold $200 million of unsecured notes with a coupon of 7%.
Net proceeds from the offering totaled $198.3 million and were used to pay
down amounts outstanding under our $350 million revolving credit facility.
Concurrent with the sale of the 7% notes, we settled our $188.7 million
forward-starting interest rate swap contracts, resulting in a gain of $1.6
million that was recorded in the caption Accumulated Other Comprehensive
Loss. This gain is being amortized to earnings over the life of the 7%
notes.
Also, in July 2001, we entered into eleven interest rate swaps with an
aggregate notional amount of $107.5 million that convert fixed interest
payments to variable interest payments. These interest rate swaps have been
designated as fair value hedges. We have determined that these contracts
will be highly effective in limiting our risk of changes in the fair value
of the fixed-rate notes attributable to changes in variable interest rates.
WRI has two interest rate swap contracts with an aggregate notional amount
of $20 million that serve as a hedge against changes in interest rates on a
like amount of our $350 million variable-rate revolving credit facility.
Such contracts, which expire in 2004, have been outstanding since their
purchase in 1992 and fix the interest rate at 7.7%. We also have an
additional interest rate swap for a notional amount of $25 million which
serves as a hedge against changes in interest rates on a $25 million
variable-rate medium term note. This swap fixes the interest rate on the
medium term note at 6.8% and matures in July 2003. In July 2002, an
interest rate swap with a notional amount of $25 million matured.
PAGE 8
6. PROPERTY
WRI's property consists of the following (in thousands):
September 30, December 31,
2002 2001
------------- -------------
Land . . . . . . . . . . . . . . $ 483,368 $ 439,332
Land held for development. . . . 23,491 24,131
Land under development . . . . . 48,824 56,414
Buildings and improvements . . . 1,952,604 1,750,059
Construction in-progress . . . . 115,396 82,457
------------- -------------
Total. . . . . . . . . . . . . . $ 2,623,683 $ 2,352,393
============= =============
Interest and ad valorem taxes capitalized to land under development or
buildings under construction was $2.2 million and $2.9 million for the
quarters ended September 30, 2002 and 2001, respectively, and $7.3 million
and $7.4 million for the nine months ended September 30, 2002 and 2001,
respectively.
7. INVESTMENTS IN REAL ESTATE JOINT VENTURES
WRI owns interests in 16 joint ventures or limited partnerships where we do
not exercise financial and operating control. These partnerships are
accounted for under the equity method since WRI exercises significant
influence. Our interests in these joint ventures and limited partnerships
range from 20% to 75% and, with the exception of one partnership, which
owns seven industrial properties, each venture owns a single real estate
asset. Combined condensed financial information of these ventures (at 100%)
is summarized as follows (in thousands):
September 30, December 31,
2002 2001
------------- -------------
Combined Balance Sheets
Property. . . . . . . . . . . . $ 176,059 $ 171,344
Accumulated Depreciation. . . . (22,895) (24,941)
------------- -------------
Property - net . . . . . . 153,164 146,403
Other Assets. . . . . . . . . . 10,935 11,373
------------- -------------
Total. . . . . . . . . $ 164,099 $ 157,776
============= =============
Debt. . . . . . . . . . . . . . $ 72,137 $ 76,635
Amounts Payable to WRI. . . . . 13,978 9,270
Other Liabilities . . . . . . . 3,725 4,705
Accumulated Equity. . . . . . . 74,259 67,166
------------- -------------
Total. . . . . . . . . $ 164,099 $ 157,776
============= =============
PAGE 9
Combined Statements of Income
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Revenues. . . . . . . . . . . . . . . $ 6,129 $ 6,435 $ 18,831 $ 19,198
--------- --------- --------- ---------
Expenses:
Depreciation and amortization . . . 1,175 1,061 3,658 3,307
Operating . . . . . . . . . . . . . 846 870 2,554 2,663
Interest. . . . . . . . . . . . . . 1,550 1,758 4,813 5,437
Ad valorem taxes. . . . . . . . . . 798 845 2,391 2,437
General and administrative. . . . . 9 37 44
--------- --------- --------- ---------
Total. . . . . . . . . . . . . 4,378 4,534 13,453 13,888
--------- --------- --------- ---------
Gain on Sale of Properties. . . . . . 2,855 2,855
--------- --------- --------- ---------
Net Income. . . . . . . . . . . . . . $ 1,751 $ 4,756 $ 5,378 $ 8,165
========= ========= ========= =========
Our investment in real estate joint ventures, as reported on the balance
sheets, differs from our proportionate share of the joint ventures'
underlying net assets due to basis differentials, which arose upon the
transfer of assets from WRI to the joint ventures. This basis differential,
which totaled $4.8 million and $5.0 million at September 30, 2002 and
December 31, 2001, respectively, is depreciated over the useful lives of
the related assets.
Fees earned by WRI for the management of these joint ventures totaled: $.1
million for the quarters ended September 30, 2002 and 2001, respectively,
and $.4 million for the nine months ended September 30, 2002 and 2001,
respectively.
In August of 2001, WRI sold its interest in two joint ventures which owned
mini-storage warehouses resulting in a gain of $2.9 million.
In May of 2002, a 50%-owned joint venture commenced construction on
Tropicana Beltway Center, a 660,000 square foot center in Las Vegas,
Nevada, which will include a corporate-owned WalMart of 224,000 square feet
and a corporate-owned Lowe's of 170,000 square feet.
In August of 2002, a 33%-owned limited partnership commenced construction
on Alpine Valley Center, a 240,000 square foot center in American Fork,
Utah, which will include a corporate-owned Target of 147,000 square feet.
Also, in August of 2002, WRI acquired a joint venture partner's 50%
interest in a shopping center in Lewiston, Maine.
PAGE 10
8. SEGMENT INFORMATION
The operating segments presented are the segments of WRI for which separate
financial information is available, and operating performance is evaluated
regularly by senior management in deciding how to allocate resources and in
assessing performance. WRI evaluates the performance of its operating
segments based on net operating income that is defined as total revenues
less operating expenses and ad valorem taxes.
The shopping center segment is engaged in the acquisition, development and
management of real estate, primarily anchored neighborhood and community
shopping centers located in Texas, California, Louisiana, Arizona, Nevada,
Arkansas, New Mexico, Oklahoma, Tennessee, Kansas, Colorado, Missouri,
Illinois, Florida, Mississippi, North Carolina and Maine. The customer base
includes supermarkets, discount retailers, drugstores and other retailers
who generally sell basic necessity-type commodities. The industrial segment
is engaged in the acquisition, development and management of bulk
warehouses and office/service centers. Its properties are located in Texas,
Nevada, Georgia, Florida and Tennessee, and the customer base is diverse.
Included in "Other" are corporate-related items, insignificant operations
and costs that are not allocated to the reportable segments.
Information concerning WRI's reportable segments is as follows (in
thousands):
SHOPPING
CENTER INDUSTRIAL OTHER TOTAL
------------ ---------- ----------- -------------
Three Months Ended
September 30, 2002:
Revenues . . . . . . . . . . . . . . . . . . $ 84,094 $ 9,175 $ 550 $ 93,819
Net operating income . . . . . . . . . . . . 60,131 6,303 592 67,026
Equity in earnings of joint ventures . . . . 913 84 (8) 989
Investment in real estate joint ventures . . 29,083 678 29,761
Total assets . . . . . . . . . . . . . . . . 2,008,031 212,215 142,694 2,362,940
Three Months Ended
September 30, 2001:
Revenues . . . . . . . . . . . . . . . . . . $ 73,300 $ 7,710 $ 245 $ 81,255
Net operating income . . . . . . . . . . . . 53,172 5,285 427 58,884
Equity in earnings of joint ventures . . . . 971 1,562 (21) 2,512
Investment in real estate joint ventures . . 25,391 1,220 26,611
Total assets . . . . . . . . . . . . . . . . 1,695,904 184,634 108,712 1,989,250
Nine Months Ended
September 30, 2002:
Revenues . . . . . . . . . . . . . . . . . . $ 241,006 $ 27,199 $ 1,483 $ 269,688
Net operating income . . . . . . . . . . . . 175,567 18,726 1,718 196,011
Equity in earnings of joint ventures . . . . 2,821 239 (32) 3,028
Nine Months Ended
September 30, 2001:
Revenues . . . . . . . . . . . . . . . . . . $ 200,652 $ 23,066 $ 1,743 $ 225,461
Net operating income . . . . . . . . . . . . 146,463 16,136 2,178 164,777
Equity in earnings of joint ventures . . . . 2,818 1,822 (81) 4,559
PAGE 11
Net operating income reconciles to income before discontinued operations as
shown on the Statements of Consolidated Income and Comprehensive Income as
follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
2002 2001 2002 2001
--------- --------- ---------- ----------
Total segment net operating income . . . . . . . . . . $ 67,026 $ 58,884 $ 196,011 $ 164,777
Less:
Depreciation and amortization . . . . . . . . . . 19,390 16,812 56,380 48,732
Interest. . . . . . . . . . . . . . . . . . . . . 17,062 14,677 48,590 40,072
General and administrative. . . . . . . . . . . . 2,576 2,385 8,650 7,489
Minority interest in income of partnerships . . . 578 141 1,637 323
Equity in earnings of joint ventures. . . . . . . (989) (2,512) (3,028) (4,559)
Gain (loss) on sale of properties . . . . . . . . 517 (4,467)
--------- --------- ---------- ----------
Income Before Discontinued Operations. . . . . . . . . $ 28,409 $ 26,864 $ 83,782 $ 77,187
========= ========= ========== ==========
9. COMMON SHARES OF BENEFICIAL INTEREST
In February 2002, a three-for-two share split, affected in the form of a
50% share dividend, was declared for shareholders of record on April 1,
2002, payable April 15, 2002. We issued 17.3 million common shares of
beneficial interest as a result of the share split. All references to the
number of shares and per share amounts have been restated to reflect the
share split, and an amount equal to the par value of the number of common
shares issued have been reclassified to common stock from retained
earnings.
In February 2002, we completed the sale of .3 million common shares of
beneficial interest. Net proceeds to WRI totaled $9.5 million based on a
price of $33.65 per share and were used to pay down amounts outstanding
under our $350 million revolving credit facility.
On January 29, 2001, we issued 6.8 million common shares of beneficial
interest in a secondary public offering. In February 2001, the underwriters
exercised their over-allotment option and purchased an additional 300,000
shares. Net proceeds to WRI totaled $188.1 million based on a price of
$28.13 per share. In May 2001, we issued 1.0 million common shares of
beneficial interest in a secondary public offering. Net proceeds of $27.9
million were based on a price of $28.57 per share. In November 2001, we
issued 2.7 million common shares of beneficial interest in a secondary
public offering. Net proceeds of $86.0 million were based on a price of
$33.47 per share. Proceeds from these offerings were used to pay down
amounts outstanding under our $350 million revolving credit facility.
10. BANKRUPTCY REMOTE PROPERTIES
On April 2, 2001, we purchased 19 supermarket-anchored shopping centers,
aggregating 2.5 million square feet, in California. The purchase price for
the properties was $277.5 million, including the assumption of
approximately $132 million in debt secured by all 19 properties.
PAGE 12
These 19 properties, having a net book value of approximately $271.6
million at September 30, 2002 (collectively the "Bankruptcy Remote
Properties", and each a "Bankruptcy Remote Property"), are wholly owned by
various "Bankruptcy Remote Entities". Each Bankruptcy Remote Entity is an
indirect subsidiary of the Company. The assets of each Bankruptcy Remote
Entity, including the respective Bankruptcy Remote Property or Properties
owned by each, are owned by that Bankruptcy Remote Entity alone and are not
available to satisfy claims that any creditor may have against the Company,
its affiliates, or any other person or entity. No Bankruptcy Remote Entity
has agreed to pay or make its assets available to pay creditors of the
Company, any of its affiliates, or any other person or entity. Neither the
Company nor any of its affiliates has agreed to pay or make its assets
available to pay creditors of any Bankruptcy Remote Entity (other than any
agreement by a Bankruptcy Remote Entity to pay its own creditors). No
affiliate of any Bankruptcy Remote Entity has agreed to pay or make its
assets available to pay creditors of any Bankruptcy Remote Entity.
The accounts of the Bankruptcy Remote Entities are included in WRI's
consolidated financial statements, as WRI owns, indirectly, 100% of each of
the entities. Additionally, WRI, through its wholly owned subsidiaries,
makes all day to day operating and financial decisions with respect to
these properties, subject to approval by the loan servicing agent for the
certain significant transactions. WRI has the right to prepay the loan at
any time, which would eliminate all encumbrances and restrictions.
PAGE 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto and the comparative summary of selected
financial data appearing elsewhere in this report. Historical results and
trends which might appear should not be taken as indicative of future
operations.
Weingarten Realty Investors owned and operated 242 anchored shopping centers, 56
industrial properties and one office building at September 30, 2002. Of WRI's
299 developed properties, 176 are located in Texas (including 91 in Houston and
Harris County). Our remaining properties are located in California (20),
Louisiana (17), Arizona (14), Florida (11), Nevada (10), Tennessee (8), Colorado
(8), North Carolina (8), Arkansas (6), New Mexico (6), Kansas (5), Oklahoma (4),
Missouri (2), Illinois (1), Mississippi (1), Georgia (1) and Maine (1). WRI has
5,800 leases and 4,500 different tenants. Leases for our properties range from
less than a year for smaller spaces to over 25 years for larger tenants; leases
generally include minimum lease payments and contingent rentals for payment of
taxes, insurance and maintenance and for an amount based on a percentage of the
tenants' sales. The majority of our anchor tenants are supermarkets,
value-oriented apparel and discount stores and other retailers, which generally
sell basic necessity-type items.
CAPITAL RESOURCES AND LIQUIDITY
WRI anticipates that cash flows from operating activities will continue to
provide adequate capital for all dividend payments in accordance with REIT
requirements. Cash on hand, borrowings under our existing credit facilities,
issuance of unsecured debt and the use of project financing, as well as other
debt and equity alternatives, will provide the necessary capital to achieve
growth. Cash flow from operating activities as reported in the Statements of
Consolidated Cash Flows was $119.0 million for the first nine months of 2002 as
compared to $87.3 million for the same period of 2001. The increase was due
primarily to WRI's acquisition and new development programs and improvements in
the performance of its existing portfolio of properties.
Our Board of Trust Managers approved a quarterly dividend of $.555 per common
share for the third quarter of 2002. Our dividend payout ratio on common equity
for the third quarter of 2002 and 2001, respectively, was 67% based on funds
from operations for the applicable period.
WRI invested $39.1 million for the acquisition of one shopping center and our
joint venture partner's 50% interest in a shopping center in Lewiston, Maine
during the third quarter.
In August 2002, the Company acquired Chino Hills Shopping Center, a 320,000
square foot supermarket-anchored center located in Chino Hills, California (Los
Angeles metropolitan area). This property is anchored by Von's (Safeway),
Rite-Aid and Kmart, and is 94% occupied.
In August 2002, a 33%-owned limited partnership commenced construction on Alpine
Valley Center, a 240,000 square foot center in American Fork, Utah, which will
include a corporate-owned Target of 147,000 square feet. This limited
partnership will be accounted for using the equity method of accounting, as WRI
has the ability to exercise significant influence, but does not have financial
or operating control.
PAGE 14
With respect to new development, we had 18 projects at various stages of
construction. These projects, upon completion, will represent an investment of
approximately $244 million and will add 1.8 million square feet to the
portfolio. We expect to invest approximately $68.4 million in these properties
during 2002. These projects will continue to come on-line during the remainder
of 2002 throughout 2003.
In January 2002, WRI issued $35 million of twelve-year 6.7% fixed-rate,
unsecured medium term notes. An additional $30 million of twelve-year 6.525%
fixed-rate, unsecured medium term notes were issued in February 2002.
In the third quarter 2002, the Company issued a total of $82 million of
unsecured fixed-rate medium term notes at a weighted average fixed rate of 5.7%
and weighted average term of 8.8 years. On July 1, 2002, WRI issued $10 million
of five-year 5.29% fixed-rate medium term notes. An additional $42 million was
issued on July 15, 2002 consisting of $15 million five-year and $27 million
eleven-year fixed-rate medium term notes at 5.14% and 6.11%, respectively. On
July 18, 2002, WRI issued an additional $10 million of ten-year 5.99% fixed-rate
medium term notes. On August 20, 2002, WRI issued at a discount $10 million of
ten-year 3% fixed-rate medium term notes with an effective rate of 5.66%. On
September 18 and 24, 2002, WRI issued two additional ten-year fixed-rate medium
term notes of $5 million each at 5.5% and 5.4%, respectively. Proceeds received
were used to pay down amounts outstanding under our $350 million revolving
credit facility.
Total debt outstanding increased $212.9 million to $1.3 billion at September 30,
2002. This increase was primarily due to the funding of the Company's
acquisitions and ongoing development and redevelopment efforts. Included in
total debt outstanding of $1.3 billion at September 30, 2002 is variable-rate
debt of $323.6 million, after recognizing the net effect of $152.5 million of
interest rate swaps.
In March 2001, we filed a $500 million shelf registration statement, of which
$316.9 million is currently available. Also, we have a $400 million shelf
registration statement, of which $18 million is currently available.
In February 2002, a three-for-two share split, affected in the form of a 50%
share dividend, was declared for shareholders of record on April 1, 2002,
payable April 15, 2002. We issued 17.3 million common shares of beneficial
interest as a result of the share split.
In February 2002, we completed the sale of .3 million common shares of
beneficial interest. Net proceeds to WRI totaled $9.5 million based on a price
of $33.65 per share and were used to pay down amounts outstanding under our $350
million revolving credit facility.
FUNDS FROM OPERATIONS
The Board of Governors of the National Association of Real Estate Investment
Trusts defines funds from operations (FFO) as net income (loss) computed in
accordance with generally accepted accounting principles, excluding gains or
losses from sales of property, plus real estate related depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. In addition, NAREIT recommends that extraordinary items not be
considered in arriving at FFO. We calculate FFO in a manner consistent with the
NAREIT definition. Most industry analysts and equity REITS, including
Weingarten, believe FFO is an appropriate alternative measurement of performance
relative to other REITs. FFO provides investors with additional information to
better understand our ability to incur and service debt, make capital
expenditures and pay common share dividends. There can be no assurance that FFO
presented by Weingarten is comparable to similarly titled measures of other
REITs. FFO should not be considered as an alternative to net income or other
measurements under GAAP as an indicator of our operating performance or to cash
flows from operating, investing, or financing activities as a measure of
liquidity. FFO does not reflect working capital changes, cash expenditures for
capital improvements, or principal payments on indebtedness.
PAGE 15
Funds from operations - diluted for the three and nine months ended September
30, 2002 and 2001 is calculated as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
2002 2001 2002 2001
--------- --------- ---------- ----------
Net income available to common shareholders . . . . . . . . $ 34,486 $ 22,379 $ 85,359 $ 63,742
Depreciation and amortization . . . . . . . . . . . . . . . 18,691 16,451 54,921 47,897
Depreciation and amortization of unconsolidated
joint ventures. . . . . . . . . . . . . . . . . . . . . . 476 435 1,494 1,376
(Gain) loss on sale of properties . . . . . . . . . . . . . (10,818) 517 (15,158) (4,467)
Gain on sale of properties of unconsolidated
joint ventures. . . . . . . . . . . . . . . . . . . . . . (1,427) (1,427)
--------- --------- ---------- ----------
Funds from operations . . . . . . . . . . . . 42,835 38,355 126,616 107,121
Funds from operations attributable to operating
partnership units . . . . . . . . . . . . . . . . . . . . 1,089 35 2,288 147
--------- --------- ---------- ----------
Funds from operations assuming
conversion of OP units. . . . . . . . . . . $ 43,924 $ 38,390 $ 128,904 $ 107,268
========= ========= ========== ==========
Weighted average shares outstanding - basic . . . . . . . . 51,993 48,665 51,869 47,334
Effect of dilutive securities:
Share options and awards. . . . . . . . . . . . . . . 369 237 326 163
Operating partnership units . . . . . . . . . . . . . 1,479 77 1,001 77
--------- --------- ---------- ----------
Weighted average shares outstanding - diluted . . . . . . . 53,841 48,979 53,196 47,574
========= ========= ========== ==========
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
Net income available to common shareholders increased to $34.5 million, or $.65
per diluted share, from $22.4 million, or $.46 per diluted share for the third
quarter of 2002 as compared with the same quarter of 2001. The increase in net
income available to common shareholders is due primarily from growth in the
portfolio from acquisitions and new development, and the $10.8 million gain from
the sale of certain non-core assets, whereas the third quarter of 2001 only
contains $.9 million of such gains (including a $1.4 million gain from our
unconsolidated joint ventures).
Rental revenues were $91.3 million in 2002, as compared to $80.3 million in
2001, representing an increase of approximately $11.1 million or 13.8%.
Property acquisitions and new development contributed $11.8 million to this
increase, with an offsetting decrease of $.7 million attributable to our
existing properties. This decrease in rental revenues at our existing
properties is due primarily to the sale of non-core assets in 2001. Occupancy
of the total portfolio was 91.4% at September 30, 2002 as compared to 92.4% last
year. The occupancy of the retail portfolio was down slightly at 92.3% as
compared to 92.4% at September 30, 2001, while the occupancy of the industrial
portfolio decreased to 88.0% from 92.4% in the prior year. The decrease in the
industrial portfolio is due to vacancies in the Memphis properties, totaling
307,000 square feet. During the first nine months of 2002, WRI completed 933
renewals or new leases comprising 3.8 million square feet at an average rental
rate increase of 8.3%. Net of the amortized portion of capital costs for tenant
improvements, the increase averaged 6.2%.
Other income increased by $1.5 million to $2.2 million in the third quarter of
2002 from $.7 million for the same quarter of 2001. This increase is due
primarily to an increase in lease cancellation income from various tenants.
PAGE 16
Gross interest costs, before capitalization of interest, increased by $1.9
million from $17.4 million in the third quarter of 2001 to $19.3 million for the
third quarter of 2002. The increase is due primarily to an increase in the
average debt outstanding between periods of $1.0 billion in 2001 to $1.2 billion
in 2002. The average interest rate decreased from 6.98% in 2001 to 6.2% in
2002. The amount of interest capitalized during the period was $2.2 million and
$2.7 million in 2002 and 2001, respectively.
General and administrative expenses increased by $.2 million to $2.6 million in
the third quarter of 2002 from $2.4 million for the same quarter of 2001. The
increase is due primarily to an increase in staffing necessitated by the growth
in the portfolio from acquisitions and new development.
The increases in depreciation and amortization, operating expenses and ad
valorem taxes were primarily the result of WRI's acquisitions and new
development programs.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
Net income available to common shareholders increased to $85.4 million, or $1.64
per diluted share, from $63.7 million, or $1.34 per diluted share for the nine
months of 2002 as compared with the same period of 2001. The increase in net
income available to common shareholders is due primarily from growth in the
portfolio from acquisitions and new development, and the $15.2 million gain from
the sale of certain non-core assets, whereas the nine months of 2001 only
contains $5.9 million of such gains (including $1.4 million gain from our
unconsolidated joint ventures).
Rental revenues were $264.8 million in 2002, as compared to $221.5 million in
2001, representing an increase of approximately $43.3 million or 19.5%.
Property acquisitions and new development contributed $42.5 million to the
increase with the remaining increase of $.8 million attributable to our existing
properties.
Gross interest costs, before capitalization of interest, increased by $8.4
million from $47.1 million for the nine months of 2001 to $55.5 million for the
nine months of 2002. The increase is due primarily to an increase in the
average debt outstanding between periods of $891.9 million in 2001 to $1.2
billion in 2002. The average interest rate decreased from 7.0% in 2001 to 6.3%
in 2002. The amount of interest capitalized during the period was $6.9 million
and $7.0 million in 2002 and 2001, respectively.
General and administrative expenses increased by $1.2 million to $8.7 million
for the nine months of 2002 from $7.5 million for the same period of 2001. The
increase is due primarily to an increase in staffing necessitated by the growth
in the portfolio from acquisitions and new development.
The increases in depreciation and amortization, operating expenses and ad
valorem taxes were primarily the result of WRI's acquisitions and new
development programs.
NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS
On January 1, 2002, WRI adopted SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 addresses accounting and reporting
for the impairment or disposal of a segment of a business. More specifically,
this Statement broadens the presentation of discontinued operations to include a
component of an entity whose operations and cash flows can be clearly
distinguished, operationally and for financial reporting purposes, from the rest
of the entity.
PAGE 17
In 2002, we sold four retail projects located in Houston (2), Grand Prairie and
San Antonio, Texas; one industrial building located in Houston Texas and the
River Pointe Apartments located in Conroe, Texas. Accordingly, the operating
results of the disposed properties have been reclassified and reported as
discontinued operations in the Statements of Consolidated Income and
Comprehensive Income. Included in the December 31, 2001 Consolidated Balance
Sheet was $28.8 million of Property and $6.1 million of Accumulated Depreciation
associated with the four shopping centers, the industrial building and the
multi-family residential project that were sold.
In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations", which is effective for fiscal years beginning after June 15, 2002.
SFAS No. 143 addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The adoption of SFAS No. 143 will not have a material
impact on our financial position, results of operations, or cash flows.
In April 2002, FASB issued SFAS No. 145, "Rescission of SFAS Statements No. 4,
44, and 64, Amendment of SFAS No. 13, and Technical Corrections." The purpose
of this statement is to update, clarify and simplify existing accounting
standards. We adopted this statement effective April 30, 2002 and determined
that the adoption of this statement did not have a material impact on our
financial position, results of operations, or cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
WRI uses fixed and floating-rate debt to finance its capital requirements.
These transactions expose WRI to market risk related to changes in interest
rates. Derivative financial instruments are used to manage a portion of this
risk, primarily interest rate swap agreements with major financial institutions.
These swap agreements expose WRI to credit risk in the event of non-performance
by the counter-parties to the swaps. We do not engage in the trading of
derivative financial instruments in the normal course of business. At September
30, 2002, WRI had fixed-rate debt of $960.1 million and variable-rate debt of
$323.6 million, after adjusting for the net effect of $152.5 million of interest
rate swaps.
ITEM 4. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer have evaluated
the disclosure controls and procedures as of a date within 90 days before the
filing date of this quarterly report. Based on this evaluation, the principal
executive officer and principal financial officer have concluded that the
disclosure controls and procedures effectively ensure that information required
to be disclosed in the Company's filings and submissions with the Securities and
Exchange Commission under the Exchange Act, is recorded, processed, summarized
and reported within the time periods specified by the Securities and Exchange
Commission. In addition, the Company has reviewed its internal controls and
there have been no significant changes in its internal controls or in other
factors that could significantly affect those controls subsequent to the date of
its last evaluation.
PAGE 18
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
(12) A statement of computation of ratios of earnings and
funds from operations to combined fixed charges and
preferred dividends.
(99.1) Certification certificate for Chief Executive Officer.
(99.2) Certification certificate for Chief Financial Officer.
(b) Reports on Form 8-K
A Form 8-K, dated July 29, 2002, was filed in response
to Item 5., Other Events and Item 7., Financial
Statements, Pro Forma Financial Information and Exhibits.
PAGE 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEINGARTEN REALTY INVESTORS
-----------------------------
(Registrant)
BY: /s/ Andrew M. Alexander
--------------------------
Andrew M. Alexander
President/Chief Executive Officer
(Principal Executive Officer)
BY: /s/ Joe D. Shafer
--------------------------
Joe D. Shafer
Vice President/Controller
(Principal Accounting Officer)
DATE: November 14, 2002
-------------------
PAGE 20
CERTIFICATION
I, Andrew M. Alexander, Chief Executive Officer of Weingarten Realty Investors
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Weingarten Realty
Investors;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
BY: /s/ Andrew M. Alexander
-----------------------------------
Andrew M. Alexander
President/Chief Executive Officer
November 14, 2002
PAGE 21
CERTIFICATION
I, Stephen C. Richter, Sr. Vice President/Chief Financial Officer of Weingarten
Realty Investors certify that:
1. I have reviewed this quarterly report on Form 10-Q of Weingarten Realty
Investors;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
BY: /s/ Stephen C. Richter
------------------------------------------
Stephen C. Richter
Sr. Vice President/Chief Financial Officer
November 14, 2002
PAGE 22