FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
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 No. 1-11986
TANGER FACTORY OUTLET CENTERS, INC.
(Exact name of Registrant as specified in its Charter)
NORTH CAROLINA 56-1815473
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3200 Northline Avenue, Suite 360, Greensboro, North Carolina 27408
(Address of principal executive offices)
(Zip code)
(336) 292-3010
(Registrant's telephone number, including area code)
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 Securities and Exchange Act of 1934). Yes X No -
27,611,416 shares of Common Stock,
$.01 par value, outstanding as of April 29, 2005
1
TANGER FACTORY OUTLET CENTERS, INC.
Index
Part I. Financial Information
Page Number
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations
For the three months ended March 31, 2005 and 2004 3
Consolidated Balance Sheets
As of March 31, 2005 and December 31, 2004 4
Consolidated Statements of Cash Flows
For the three months ended March 31, 2005 and 2004 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
Item 4. Controls and Procedures 22
Part II. Other Information
Item 1. Legal proceedings 23
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
2
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
March 31,
2005 2004
- ----------------------------------------------------------------------------------------------------------
(unaudited)
REVENUES
Base rentals $ 31,861 $ 31,460
Percentage rentals 886 711
Expense reimbursements 14,297 11,886
Other income 947 850
- ----------------------------------------------------------------------------------------------------------
Total revenues 47,991 44,907
- ----------------------------------------------------------------------------------------------------------
EXPENSES
Property operating 16,240 13,423
General and administrative 3,044 3,157
Depreciation and amortization 12,930 12,157
- ----------------------------------------------------------------------------------------------------------
Total expenses 32,214 28,737
- ----------------------------------------------------------------------------------------------------------
Operating income 15,777 16,170
Interest expense 8,228 8,864
- ----------------------------------------------------------------------------------------------------------
Income before equity in earnings of unconsolidated
joint ventures, minority interests, discontinued operations
and loss on sale of real estate 7,549 7,306
Equity in earnings of unconsolidated joint ventures 191 165
Minority interests
Consolidated joint venture (6,624) (6,593)
Operating partnership (202) (159)
- ----------------------------------------------------------------------------------------------------------
Income from continuing operations 914 719
Discontinued operations, net of minority interest --- 293
- ----------------------------------------------------------------------------------------------------------
Income before loss on sale of real estate 914 1,012
Loss on sale of real estate, net of minority interest (3,843) ---
- ----------------------------------------------------------------------------------------------------------
Net income (loss) $ (2,929) $ 1,012
- ----------------------------------------------------------------------------------------------------------
Basic earnings per common share:
Income (loss) from continuing operations $ (.11) $ .03
Net income (loss) $ (.11) $ .04
- ----------------------------------------------------------------------------------------------------------
Diluted earnings per common share:
Income (loss) from continuing operations $ (.11) $ .03
Net income (loss) $ (.11) $ .04
- ----------------------------------------------------------------------------------------------------------
Dividends paid per common share $ .3125 $ .3075
- ----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
3
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
2005 2004
- --------------------------------------------------------------------------------------------------------------
(unaudited)
ASSETS
Rental Property
Land $113,355 $ 113,830
Buildings, improvements and fixtures 955,931 963,563
- --------------------------------------------------------------------------------------------------------------
1,069,286 1,077,393
Accumulated depreciation (228,252) (224,622)
- --------------------------------------------------------------------------------------------------------------
Rental property, net 841,034 852,771
Cash and cash equivalents 6,531 4,103
Deferred charges, net 55,611 58,851
Other assets 21,536 20,653
- --------------------------------------------------------------------------------------------------------------
Total assets $924,712 $ 936,378
- --------------------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY
Liabilities
Debt
Senior, unsecured notes $100,000 $ 100,000
Mortgages payable (including a debt premium
of $8,558 and $9,346, respectively) 305,983 308,342
Unsecured note 53,500 53,500
Unsecured lines of credit 33,455 26,165
- --------------------------------------------------------------------------------------------------------------
492,938 488,007
Construction trade payables 9,781 11,918
Accounts payable and accrued expenses 25,753 17,026
- --------------------------------------------------------------------------------------------------------------
Total liabilities 528,472 516,951
- --------------------------------------------------------------------------------------------------------------
Commitments
Minority interests
Consolidated joint venture 223,895 222,673
Operating partnership 31,045 35,621
- --------------------------------------------------------------------------------------------------------------
Total minority interests 254,940 258,294
Shareholders' equity
Common shares, $.01 par value, 50,000,000 shares authorized,
27,611,416 and 27,443,016 shares issued and outstanding
at March 31, 2005 and December 31, 2004, respectively 276 274
Paid in capital 277,857 274,340
Distributions in excess of net income (129,917) (109,506)
Deferred compensation (6,844) (3,975)
Accumulated other comprehensive loss (72) ---
- --------------------------------------------------------------------------------------------------------------
Total shareholders' equity 141,300 161,133
- --------------------------------------------------------------------------------------------------------------
Total liabilities, minority interests and shareholders' equity $924,712 $ 936,378
- --------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
4
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
March 31,
2005 2004
- -------------------------------------------------------------------------------------------------------------------------
(unaudited)
OPERATING ACTIVITIES
Net income (loss) $ (2,929) $ 1,012
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization (including discontinued operations) 12,930 12,376
Amortization of deferred financing costs 353 363
Equity in earnings of unconsolidated joint ventures (191) (165)
Consolidated joint venture minority interest 6,624 6,593
Operating partnership minority interest
(including discontinued operations) (645) 230
Compensation expense related to restricted shares
and share options granted 242 14
Amortization of premium on assumed indebtedness (787) (610)
Loss on sale of real estate 4,690 ---
Distributions received from unconsolidated joint ventures 450 375
Net accretion of market rent rate adjustment (46) (60)
Straight-line base rent adjustment (112) (84)
Increase (decrease) due to changes in:
Other assets (550) (80)
Accounts payable and accrued expenses (2,222) 508
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activites 17,807 20,472
- -------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to rental property (6,353) (2,517)
Additions to investments in unconsolidated joint ventures (600) ---
Additions to deferred lease costs (573) (239)
Net proceeds from sale of real estate 1,959 ---
- -------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (5,567) (2,756)
- -------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Cash dividends paid (8,577) (8,191)
Distributions to consolidated joint venture minority interest (5,402) (4,404)
Distributions to operating partnership minority interest (1,896) (1,866)
Net proceeds from sale of common shares --- 13,173
Proceeds from issuance of debt 41,440 26,075
Repayments of debt (35,722) (45,363)
Additions to deferred financing costs --- (3)
Proceeds from exercise of share and unit options 345 3,808
- -------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (9,812) (16,771)
- -------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 2,428 945
Cash and cash equivalents, beginning of period 4,103 9,836
- -------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 6,531 $ 10,781
- -------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
5
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited)
1. Business
Tanger Factory Outlet Centers, Inc., a fully-integrated, self-administered,
self-managed real estate investment trust ("REIT"), develops, owns and operates
factory outlet centers. We are recognized as one of the largest owners and
operators of factory outlet centers in the United States of America with
ownership interests in or management responsibilities for 33 centers in 22
states totaling 8.7 million square feet of gross leasble area ("GLA") as of
March 31, 2005. We provide all development, leasing and management services for
our centers. The factory outlet centers and other assets of the Company's
business are held by, and all of its operations are conducted by, Tanger
Properties Limited Partnership. Unless the context indicates otherwise, the term
the "Company" refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and
the term "Operating Partnership" refers to Tanger Properties Limited Partnership
and subsidiaries. The terms "we", "our" and "us" refer to the Company or the
Company and the Operating Partnership together, as the context requires.
2. Basis of Presentation
Our unaudited consolidated financial statements have been prepared pursuant to
accounting principles generally accepted in the United States of America and
should be read in conjunction with the consolidated financial statements and
notes thereto of our Annual Report on Form 10-K for the year ended December 31,
2004. Certain information and note disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to the
Securities and Exchange Commission's ("SEC") rules and regulations, although
management believes that the disclosures are adequate to make the information
presented not misleading.
The accompanying unaudited consolidated financial statements include our
accounts, our wholly-owned subsidiaries, as well as the Operating Partnership
and its subsidiaries including accounts of joint ventures required to be
consolidated under the provisions of Financial Accounting Standards Board
Interpretation No. 46 (Revised 2003): "Consolidation of Variable Interest
Entities: An Interpretation of ARB No. 51 ("FIN 46R") and reflect, in the
opinion of management, all adjustments necessary for a fair presentation of the
interim consolidated financial statements. All such adjustments are of a normal
and recurring nature. Intercompany balances and transactions have been
eliminated in consolidation.
Investments in real estate joint ventures that represent non-controlling
ownership interests are accounted for using the equity method of accounting.
These investments are recorded initially at cost and subsequently adjusted for
our net equity in the venture's income (loss) and cash contributions and
distributions. Our investments are included in other assets in our consolidated
balance sheets.
Certain amounts in the 2004 consolidated financial statements have been
reclassified to conform to the 2005 presentation. See Footnote 5.
6
3. Development of Rental Properties
We are currently underway with construction of a 46,400 square foot expansion at
our center located in Locust Grove, Georgia. The estimated cost of the expansion
is $6.6 million. We currently expect to complete the expansion with stores
commencing operations during the summer of 2005. Tenants will include Polo/Ralph
Lauren, Sketchers, Children's Place and others. Upon completion of the
expansion, our Locust Grove center will total approximately 294,000 square feet.
4. Investments in Unconsolidated Real Estate Joint Ventures
Our investment in unconsolidated real estate joint ventures as of March 31, 2005
and December 31, 2004 was $7.0 million and $6.7 million, respectively. These
investments are recorded initially at cost and subsequently adjusted for our net
equity in the venture's income(loss) and cash contributions and distributions.
Our investments in real estate joint ventures are included in other assets and
are also reduced by 50% of the profits earned for leasing and development
services we provide to TWMB. The following management, leasing and development
fees were recognized from services provided to TWMB during the quarter ended
March 31, 2005 and 2004 (in thousands):
Three months
Ended March 31,
2005 2004
---------------------------------------- ------------ ----------------
Fee:
Management $ 78 $ 68
Leasing 5 61
Development -- 5
---------------------------------------- ------------ ----------------
Total Fees $ 83 $134
---------------------------------------- ------------ ----------------
Our carrying value of investments in unconsolidated joint ventures differs from
our share of the assets reported in the "Summary Balance Sheets - Unconsolidated
Joint Ventures" shown below due to adjustments to the book basis, including
intercompany profits on sales of services that are capitalized by the
unconsolidated joint ventures. The differences in basis are amortized over the
various useful lives of the related assets.
TWMB Associates, LLC
During March 2005, TWMB Associates, LLC ("TWMB"), a joint venture in which we
have a 50% ownership interest, entered into an interest rate swap agreement with
Bank of America for a notional amount of $35 million for five years. Under this
agreement, TWMB receives a floating interest rate based on the 30 day LIBOR
index and pays a fixed interest rate of 4.59%. This swap effectively changes the
payment of interest on $35 million of variable rate mortgage debt to fixed rate
debt for the contract period at a rate of 5.99%.
In April 2005, TWMB obtained permanent financing to replace the construction
loan debt that was utilized to build the outlet center in Myrtle Beach, South
Carolina. The new mortgage amount is $35.8 million with a rate of LIBOR + 1.40%.
The note is for a term of five years with payments of interest only. In April
2010, TWMB has the option to extend the maturity date of the loan two more years
until 2012. All debt incurred by this unconsolidated joint venture is
collateralized by its property.
7
Deer Park Enterprise, LLC
In October 2003, Deer Park Enterprise, LLC ("Deer Park"), a joint venture in
which we have a one-third ownership interest, entered into a sale-leaseback
transaction for the location on which it ultimately will develop a shopping
center that will contain both outlet and big box retail tenants in Deer Park,
New York. The agreement consisted of the sale of the property to Deer Park for
$29 million which was being leased back to the seller under an operating lease
agreement. In November 2004, the tenant gave notice (within the terms of the
lease) that they intended to, and subsequently did, vacate the facility in May
2005. Annual rents received from the tenant were $3.4 million. During the first
quarter of 2005, we made an equity contribution of $600,000 to Deer Park
Enterprise, LLC ("Deer Park"). Both of the other members made equity
contributions equal to ours during the quarter.
Tanger Wisconsin Dells, LLC
In March 2005, we established Tanger Wisconsin Dells, LLC ("Wisconsin Dells"), a
joint venture in which we have a 50% ownership interest with Tall Pines
Development of Wisconsin Dells, LLC ("Tall Pines") as our venture partner, to
construct and operate a Tanger Outlet center in Wisconsin Dells, Wisconsin. As
of March 31, 2005, no capital contributions had been made by either member. We
have begun the early development and leasing of the site. We currently expect
the center to be approximately 250,000 square feet upon total build out with the
initial phase scheduled to open in 2006.
Condensed combined summary unaudited financial information of joint ventures
accounted for using the equity method is as follows (in thousands):
As of As of
Summary Balance Sheets March 31, December 31,
- Unconsolidated Joint Ventures: 2005 2004
- ---------------------------------------------- ------------- -------------------
Assets:
Investment properties at cost, net $67,399 $69,865
Cash and cash equivalents 4,319 2,449
Deferred charges, net 1,305 1,973
Other assets 3,869 2,826
- ---------------------------------------------- ------------- -------------------
Total assets $76,892 $77,113
- ---------------------------------------------- ------------- -------------------
Liabilities and Owners' Equity:
Mortgages payable $60,254 $59,708
Construction trade payables 426 578
Accounts payable and other liabilities 828 702
- ---------------------------------------------- ------------- -------------------
Total liabilities 61,508 60,988
Owners' equity 15,384 16,125
- ---------------------------------------------- ------------- -------------------
Total liabilities and owners' equity $76,892 $77,113
- ---------------------------------------------- ------------- -------------------
8
Summary Statement of Operations Three months ended
- Unconsolidated Joint Ventures: March 31,
2005 2004
----------------------------------------- ----------------------------------
Revenues $2,511 $2,075
----------------------------------------- --------------- ------------------
Expenses:
Property operating 974 775
General and administrative -- 1
Depreciation and amortization 767 623
----------------------------------------- --------------- ------------------
Total expenses 1,741 1,399
----------------------------------------- --------------- ------------------
Operating income 770 676
Interest expense 417 380
----------------------------------------- --------------- ------------------
Net income $ 353 $ 296
----------------------------------------- --------------- ------------------
Tanger's share of:
----------------------------------------- --------------- ------------------
Net income $ 191 $ 165
Depreciation (real estate related) $ 369 $ 300
----------------------------------------- --------------- ------------------
5. Disposition of Properties
In February 2005, we completed the sale of the outlet center on our property
located in Seymour, Indiana and recognized a loss of $3.8 million, net of
minority interest of $847,000. Net proceeds received from the sale of the center
were approximately $2.0 million. We continue to have a significant interest in
the property by retaining several outparcels and significant excess land. As
such, the results of operations from the property continue to be recorded as a
component of income from continuing operations and the loss on sale of real
estate is reflected outside the caption discontinued operations under the
guidance of Regulation S-X 210.3-15.
Below is a summary of the results of operations for the North Conway, New
Hampshire and Dalton, Georgia properties sold during the second and third
quarters of 2004, which are accounted for under the provisions of FAS 144 (in
thousands):
Three
Months Ended
March 31, 2004
- --------------------------------------------------------- -------------------
Revenues
Base rentals $ 601
Expense reimbursements 262
Other income 9
- --------------------------------------------------------- -------------------
Total revenues 872
- --------------------------------------------------------- -------------------
Expenses:
Property operating 288
General and administrative 2
Depreciation and amortization 218
- --------------------------------------------------------- -------------------
Total expenses 508
- --------------------------------------------------------- -------------------
Discontinued operations before minority interest 364
Minority interest (71)
- --------------------------------------------------------- -------------------
Discontinued operations $ 293
- --------------------------------------------------------- -------------------
9
6. Other Comprehensive Income - Derivative Financial Instruments
During the first quarter of 2005, TWMB entered into an interest rate swap.
TWMB's interest rate swap agreement has been designated as a cash flow hedge and
is carried on TWMB's balance sheet at fair value. At March 31, 2005, our portion
of the fair value of TWMB's hedge is recorded as a reduction to investment in
joint ventures of approximately $88,000.
Three Months Ended
March 31,
2005 2004
- ----------------------------------------------------- ------------- ------------
Net income (loss) $ (2,929) $1,012
- ----------------------------------------------------- ------------- ------------
Other comprehensive income (loss):
Change in fair value of our portion of
TWMB cash flow hedge,
net of minority interest of $(16) and $5 (72) 21
- ----------------------------------------------------- ------------- ------------
Other comprehensive income (loss) (72) 21
- ----------------------------------------------------- ------------- ------------
Total comprehensive income (loss) $ (3,001) $ 1,033
- ----------------------------------------------------- ------------- ------------
7. Earnings Per Share
The following table sets forth a reconciliation of the numerators and
denominators in computing earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, Earnings Per Share (in thousands, except
per share amounts):
Three Months Ended
March 31,
2005 2004
- --------------------------------------------------- ----------- -------------
Numerator:
Income from continuing operations
- basic and diluted $ 914 $ 719
Loss on sale of real estate (3,843) ---
- --------------------------------------------------- ----------- -------------
Adjusted income (loss) from continuing operations (2,929) 719
Discontinued operations --- 293
- --------------------------------------------------- ----------- -------------
Net income (loss) - basic and diluted $ (2,929) $1,012
- --------------------------------------------------- ----------- -------------
Denominator:
Basic weighted average common shares 27,304 26,674
Effect of outstanding share and unit options 180 301
Effect of unvested restricted share awards 32 ---
- --------------------------------------------------- ----------- -------------
Diluted weighted average common shares 27,516 26,975
- --------------------------------------------------- ----------- -------------
Basic earnings per common share:
Income (loss) from continuing operations $ (.11) $ .03
Discontinued operations --- .01
- --------------------------------------------------- ----------- -------------
Net income (loss) $ (.11) $ .04
- --------------------------------------------------- ----------- -------------
Diluted earnings per common share:
Income (loss) from continuing operations $ (.11) $ .03
Discontinued operations --- .01
- --------------------------------------------------- ----------- -------------
Net income (loss) $ (.11) $ .04
- --------------------------------------------------- ----------- -------------
10
The computation of diluted earnings per share excludes options to purchase
common shares when the exercise price is greater than the average market price
of the common shares for the period. Options excluded from the computation of
diluted earnings per share for the three months ended March 31, 2005 were 6,000.
No options were excluded from the March 31, 2004 calculation. The assumed
conversion of the partnership units held by the minority interest limited
partner as of the beginning of the year, which would result in the elimination
of earnings allocated to the minority interest in the Operating Partnership,
would have no impact on earnings per share since the allocation of earnings to a
partnership unit is equivalent to earnings allocated to a common share.
8. Deferred Compensation
In March 2005, the Board of Directors approved the grant of 138,000 restricted
common shares to the independent directors and certain executive officers. As a
result of the granting of the restricted common shares, we recorded a charge to
deferred compensation of $3.1 million in the shareholders' equity section of the
consolidated balance sheet. Compensation expense related to the amortization of
the deferred compensation amount is being recognized in accordance with the
vesting schedule of the restricted shares. The independent directors' restricted
common shares vest ratably over a three year period. The executive officer's
restricted common shares vest over a five year period with 50% of the award
vesting ratably over that period and 50% vesting based on the attainment of
certain performance criteria.
9. Non-Cash Investing and Financing Activities
We purchase capital equipment and incur costs relating to construction of
facilities, including tenant finishing allowances. Expenditures included in
construction trade payables as of March 31, 2005 and 2004 amounted to $9.8
million and $5.8 million, respectively. We recognized charges to deferred
compensation related to the issuance of restricted common shares in the 2005
period of $3.1 million. Also on March 1, 2005, our Board of Directors declared a
$.3225 cash dividend per common share payable on May 16, 2005 to each
shareholder of record on April 29, 2005, and caused a $.6450 per Operating
Partnership unit cash distribution to be paid to the Operating Partnership's
minority interest. Since the dividend was declared prior to the quarter end
date, we recorded the dividend of $10.9 million in accounts payable and accrued
expenses as of March 31, 2005.
10. Subsequent Events
On April 10, 2005 we paid in full at maturity a $13.7 million, 9.77% mortgage
with New York Life with amounts available under our unsecured lines of credit.
The collateral securing the mortgage, our Lancaster, Pennsylvania property, was
released upon satisfaction of the loan.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion should be read in conjunction with the unaudited
consolidated financial statements appearing elsewhere in this report. Historical
results and percentage relationships set forth in the unaudited, consolidated
statements of operations, including trends which might appear, are not
necessarily indicative of future operations. Unless the context indicates
otherwise, the term "Company" refers to Tanger Factory Outlet Centers, Inc. and
subsidiaries and the term "Operating Partnership" refers to Tanger Properties
Limited Partnership and subsidiaries. The terms "we", "our" and "us" refer to
the Company or the Company and the Operating Partnership together, as the text
requires.
The discussion of our results of operations reported in the unaudited,
consolidated statements of operations compares the three months ended March 31,
2005 with the three months ended March 31, 2004. Certain comparisons between the
periods are made on a percentage basis as well as on a weighted average gross
leasable area ("GLA") basis, a technique which adjusts for certain increases or
decreases in the number of centers and corresponding square feet related to the
development, acquisition, expansion or disposition of rental properties. The
computation of weighted average GLA, however, does not adjust for fluctuations
in occupancy which may occur subsequent to the original opening date.
Cautionary Statements
Certain statements made below are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We intend for such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Reform Act of 1995 and included
this statement for purposes of complying with these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words "believe", "expect", "intend", "anticipate", "estimate", "project",
or similar expressions. You should not rely on forward-looking statements since
they involve known and unknown risks, uncertainties and other factors which are,
in some cases, beyond our control and which could materially affect our actual
results, performance or achievements. Factors which may cause actual results to
differ materially from current expectations include, but are not limited to, the
following:
- - national and local general economic and market conditions;
- - demographic changes; our ability to sustain, manage or forecast our growth;
existing government regulations and changes in, or the failure to comply
with, government regulations;
- - adverse publicity; liability and other claims asserted against us;
- - competition;
- - the risk that we may not be able to finance our planned development
activities;
- - risks related to the retail real estate industry in which we compete,
including the potential adverse impact of external factors such as
inflation, tenant demand for space, consumer confidence, unemployment rates
and consumer tastes and preferences;
12
- - risks associated with our development activities, such as the potential for
cost overruns, delays and lack of predictability with respect to the
financial returns associated with these development activities;
- - risks associated with real estate ownership, such as the potential adverse
impact of changes in the local economic climate on the revenues and the
value of our properties;
- - risks that we incur a material, uninsurable loss of our capital investment
and anticipated profits from one of our properties, such as those results
from wars, earthquakes or hurricanes;
- - risks that a significant number of tenants may become unable to meet their
lease obligations or that we may be unable to renew or re-lease a
significant amount of available space on economically favorable terms;
- - fluctuations and difficulty in forecasting operating results; changes in
business strategy or development plans;
- - business disruptions;
- - the ability to attract and retain qualified personnel;
- - the ability to realize planned costs savings in acquisitions; and
- - retention of earnings.
General Overview
At March 31, 2005, we had ownership interests in or management responsibilities
for 33 centers in 22 states totaling 8.7 million square feet compared to 40
centers in 23 states totaling 9.3 million square feet at March 31, 2004. The
activity in our portfolio of properties since March 31, 2004 is summarized
below:
No. of GLA
Centers (000's) States
- ------------------------------------------------- ---------- --------- ---------
As of March 31, 2004 40 9,333 23
Acquisitions/Expansions:
Myrtle Beach Hwy 17, South Carolina - --- 78 ---
(unconsolidated joint venture)
Dispositions:
North Conway, New Hampshire (wholly-owned) (2) (62) ---
Dalton, Georgia (wholly-owned) (1) (173) ---
Vero Beach, Florida (managed) (1) (329) ---
Seymour, Indiana (wholly-owned) (1) (141) (1)
North Conway, New Hampshire (managed) (2) (40) ---
Other --- (3) ---
- ------------------------------------------------- ---------- --------- ---------
As of March 31, 2005 33 8,663 22
- ------------------------------------------------- ---------- --------- ---------
13
A summary of the operating results for the three months ended March 31, 2005 and
2004 is presented in the following table, expressed in amounts calculated on a
weighted average GLA basis.
Three Months Ended
March 31,
2005 2004
- ---------------------------------------------------------------- ---------------
GLA at end of period (000's)
Wholly owned 4,925 5,302
Partially owned (consolidated) (1) 3,271 3,273
Partially owned (unconsolidated) (2) 402 324
Managed 65 434
- ---------------------------------------------------------------- ---------------
Total GLA at end of period (000's) 8,663 9,333
Weighted average GLA (000's) (1) (3) 8,281 8,339
Occupancy percentage at end of period (4) 95% 94%
Per square foot for wholly owned and partially owned (consolidated) properties
- --------------------------------------------------------------------------------
Revenues
Base rentals $ 3.85 $ 3.77
Percentage rentals .11 .09
Expense reimbursements 1.73 1.43
Other income .11 .10
- --------------------------------------------------------------- ----------------
Total revenues 5.80 5.39
- --------------------------------------------------------------- ----------------
Expenses
Property operating 1.96 1.61
General and administrative .37 .38
Depreciation and amortization 1.56 1.46
- --------------------------------------------------------------- ----------------
Total expenses 3.89 3.45
- --------------------------------------------------------------- ----------------
Operating income 1.91 1.94
Interest expense .99 1.06
- --------------------------------------------------------------- ----------------
Income before equity in earnings of unconsolidated
joint ventures, minority interests, discontinued
operations and loss on sale of real estate $ .92 $ .88
- --------------------------------------------------------------- ----------------
(1) Represents properties that are currently held through a consolidated joint
venture in which we own a one-third interest.
(2) Represents property that is currently held through an unconsolidated joint
venture in which we own a 50% interest
(3) Represents GLA of wholly-owned and partially owned consolidated operating
properties weighted by months of operation. GLA is not adjusted for fluctuations
in occupancy that may occur subsequent to the original opening date. Excludes
GLA of properties for which their results are included in discontinued
operations.
(4) Represents occupancy only at centers in which we have an ownership interest.
14
The table set forth below summarizes certain information with respect to our
existing centers in which we have an ownership interest as of March 31, 2005.
GLA %
Location (sq. ft.) Occupied
------------------------------------------- --------------- --------------
Riverhead, NY (1) 729,378 99
Rehoboth, DE (1) (2) 568,873 99
Foley, AL (2) 535,514 95
San Marcos, TX 442,510 98
Myrtle Beach Hwy 501, SC (2) 427,388 92
Sevierville, TN (1) 419,038 99
Myrtle Beach Hwy 17, SC (1) (3) 401,992 97
Hilton Head, SC (2) 393,094 89
Commerce II, GA 342,556 96
Howell, MI 324,631 96
Park City, UT (2) 300,602 98
Westbrook, CT (2) 291,051 92
Branson, MO 277,883 100
Williamsburg, IA 277,230 96
Lincoln City, OR (2) 270,280 91
Tuscola, IL (2) 256,514 75
Lancaster, PA 255,152 99
Locust Grove, GA 247,454 97
Gonzales, LA 245,199 100
Tilton, NH (2) 227,998 91
Fort Meyers, FL 198,924 92
Commerce I, GA 185,750 76
Terrell, TX 177,490 100
North Branch, MN 134,480 98
West Branch, MI 112,420 98
Barstow, CA 108,950 100
Blowing Rock, NC 105,332 100
Pigeon Forge, TN (1) 94,694 93
Nags Head, NC 82,178 100
Boaz, AL 79,575 95
Kittery I, ME 59,694 100
Kittery II, ME 24,619 100
------------------------------------------- ---------------- ------------
8,598,443 95
------------------------------------------- ---------------- ------------
(1) These properties or a portion thereof are subject to a ground lease.
(2) Represents properties that are currently held through a consolidated joint
venture in which we own a one-third interest.
(3) Represents property that is currently held through an unconsolidated joint
venture in which we own a 50% interest.
15
The table set forth below summarizes certain information as of March 31, 2005
related to GLA and debt with respect to our existing centers in which we have an
ownership interest and which serve as collateral for existing mortgage loans.
Mortgage Debt
(000's) as of
GLA March 31, Interest Maturity
Location (sq. ft.) 2005 Rate Date
------------------------- ---------------- ----------------- ----------- ---------------
Lancaster, PA 255,152 $13,709 9.770% 4/10/2005
Commerce I, GA 185,750 7,153 9.125% 9/10/2005
Williamsburg, IA 277,230
San Marcos I, TX 221,073
West Branch, MI 112,420
Kittery I, ME 59,694
------------------------- ---------------- ----------------- ----------- ---------------
670,417 60,073 7.875% 4/01/2009
San Marcos II, TX 221,437 18,350 7.980% 4/01/2009
Blowing Rock, NC 105,332 9,326 8.860% 9/01/2010
Nags Head, NC 82,178 6,329 8.860% 9/01/2010
Rehoboth Beach, DE 568,873
Foley, AL 535,514
Myrtle Beach Hwy 501, SC 427,388
Hilton Head, SC 393,094
Park City, UT 300,602
Westbrook, CT 291,051
Lincoln City, OR 270,280
Tuscola, IL 256,514
Tilton, NH 227,998
------------------------- ---------------- ----------------- ----------- ---------------
3,271,314 182,485 6.590% 7/10/2008
Debt premium 8,558
------------------------------------------ ----------------- ----------- ---------------
Totals 4,791,580 $305,983
========================= ================ ================= =========== ===============
16
RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 2005 to the three months ended
March 31, 2004
Base rentals increased $401,000, or 1%, in the 2005 period when compared to the
same period in 2004. The increase is primarily due to an increase in the overall
occupancy rate and increasing rental rates on renewals. Base rent per weighted
average GLA increased by $.08 per square foot from $3.77 per square foot in the
2004 period to $3.85 per square foot in the 2005 period. The overall portfolio
occupancy at March 31, 2005 increased 1% compared to March 31, 2004 from 94% to
95%, while the average increase in base rental rates on lease renewals and
re-tenanting of vacant space during calendar year 2004 was 5.5%.
Percentage rentals, which represent revenues based on a percentage of tenants'
sales volume above predetermined levels (the "breakpoint"), increased $175,000
or 25%, and on a weighted average GLA basis, increased $.02 per square foot in
2005 compared to 2004. The percentage rents in 2004 were reduced by an
allocation to the previous owner of the COROC portfolio for their pro-rata share
of percentage rents associated with tenants whose sales lease year began prior
to December 19, 2003, the date of COROC's acquisition of the portfolio. Reported
same-space sales per square foot for the rolling twelve months ended March 31,
2005 were $315 per square foot. This represents a 3% increase compared to the
same period in 2004. Same-space sales is defined as the weighted average sales
per square foot reported in space open for the full duration of each comparison
period.
Expense reimbursements, which represent the contractual recovery from tenants of
certain common area maintenance, insurance, property tax, promotional,
advertising and management expenses generally fluctuates consistently with the
reimbursable property operating expenses to which it relates. Expense
reimbursements, expressed as a percentage of property operating expenses, were
88% and 89% in the 2005 and 2004 periods, respectively.
Other income increased $97,000, or 11%, in 2005 compared to 2004 and on a
weighted average GLA basis, increased $.01 per square foot from $.10 to $.11.
The overall increase is due primarily to increases in vending income offset by
decreases in fees from management activities. We have had a decrease of 369,000
square feet of GLA that we manage from the 2004 period to the 2005 period.
Property operating expenses increased by $2.8 million, or 21%, in the 2005
period as compared to the 2004 period and, on a weighted average GLA basis,
increased $.35 per square foot from $1.61 to $1.96. The increase is due
primarily to higher advertising and marketing expenses as the Easter holiday
occurred in the first quarter in 2005 versus the second quarter in 2004. Also,
we experienced much higher snow removal costs in our northeastern properties in
2005 versus 2004.
General and administrative expenses decreased $113,000, or 4%, in the 2005
period as compared to the 2004 period. The decrease is primarily due to reduced
travel expenses in 2005 offset by an increase in compensation expense related to
employee share options and restricted shares issued in the second quarter of
2004 and accounted for under SFAS 123. As a percentage of total revenues,
general and administrative expenses decreased from 7% in the 2004 to 6% in 2005
and, on a weighted average GLA basis, decreased from $.38 per square foot in the
2004 period to $.37 per square foot in the 2005 period.
17
Interest expense decreased $636,000, or 7%, during the 2005 period as compared
to 2004 period due primarily to the decrease in overall debt outstanding in the
2005 period versus the 2004 period. Outstanding debt has been reduced through
proceeds from property sales during 2004 and 2005 and proceeds from the exercise
of employee share options.
Depreciation and amortization per weighted average GLA increased from $1.46 per
square foot in the 2004 period to $1.56 per square foot in the 2005 period. This
was due principally to the accelerated depreciation and amortization of certain
assets in the acquisition of the COROC properties in December 2003 accounted for
under SFAS 141 "Business Combinations" ("FAS 141") for tenants that terminated
their leases during the 2005 period.
During the first quarter of 2005 we sold our center in Seymour, Indiana.
However, under the provisions of FAS 144, the sale did not qualify for treatment
as discontinued operations. During the second and third quarters of 2004, we
sold properties in North Conway, New Hampshire and Dalton, Georgia that did
qualify for treatment as discontinued operations based on the guidance of FAS
144. For these properties, the results of operations from the first quarter of
2004 are recorded in discontinued operations.
We recorded a loss on sale of real estate of $3.8 million, net of minority
interest of $847,000, for the sale of the outlet center at our property in
Seymour, Indiana in February 2005. Net proceeds received for the center were
$2.0 million.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $17.8 million and $20.5 million
for the three months ended March 31, 2005 and 2004, respectively. The decrease
in cash provided by operating activities is due primarily to a decrease in
accounts payable and accrued expenses during the 2005 period. Net cash used in
investing activities was $5.6 million and $2.8 million during the first three
months of 2005 and 2004, respectively. The increase was due primarily to cash
used in the 2005 period for the expansion at our Locust Grove, Georgia center
and significant tenant allowances paid, offset by the proceeds from the sale of
our center in Seymour, Indiana. Net cash used in financing activities was $9.8
million and $16.8 million during the first three months of 2005 and 2004,
respectively. Cash used was lower in 2005 due to a change of $25 million in cash
provided by net proceeds from debt from 2004 to 2005, offset by the sale of
common shares for net proceeds of $13.2 million in 2004.
Developments, Dispositions and Joint Ventures
Any developments or expansions that we, or a joint venture that we are involved
in, have planned or anticipated may not be started or completed as scheduled, or
may not result in accretive net income or funds from operations. In addition, we
regularly evaluate acquisition or disposition proposals and engage from time to
time in negotiations for acquisitions or dispositions of properties. We may also
enter into letters of intent for the purchase or sale of properties. Any
prospective acquisition or disposition that is being evaluated or which is
subject to a letter of intent may not be consummated, or if consummated, may not
result in an increase in net income or funds from operations.
DEVELOPMENTS
We are currently underway with the construction of a 46,400 square foot
expansion at our center located in Locust Grove, Georgia. The estimated cost of
the expansion is $6.6 million. We currently expect to complete the expansion
with stores commencing operations during the summer of 2005. Tenants will
include Polo/Ralph Lauren, Sketchers, Children's Place and others. Upon
completion of the expansion, our Locust Grove center will total approximately
294,000 square feet.
18
We have an option to purchase land and have begun the early development and
leasing of a site located approximately 30 miles south of Pittsburgh,
Pennsylvania. We currently expect the center to be approximately 420,000 square
feet upon total build out with the initial phase scheduled to open in 2007.
We have an option to purchase land and have begun the early development and
leasing of a site located near Charleston, South Carolina. We currently expect
the center to be approximately 350,000 square feet upon total build out with the
initial phase scheduled to open in 2006.
DISPOSITIONS
In February 2005, we completed the sale of the outlet center on our property
located in Seymour, Indiana. Net proceeds received from the sale of the center
were approximately $2.0 million. We recorded a loss on sale of real estate of
$3.8 million, net of minority interest of $847,000, during the first quarter of
2005. We continue to have a significant interest in the property by retaining
several outparcels and significant excess land. Management is considering
various alternatives, including the potential sale of the remaining property.
JOINT VENTURES
TWMB Associates, LLC
During March 2005, TWMB Associates, LLC ("TWMB"), a joint venture in which we
have a 50% ownership interest, entered into an interest rate swap agreement with
Bank of America for a notional amount of $35 million for five years. Under this
agreement, TWMB receives a floating interest rate based on the 30 day LIBOR
index and pays a fixed interest rate of 4.59%. This swap effectively changes the
payment of interest on $35 million of variable rate mortgage debt to fixed rate
debt for the contract period at a rate of 5.99%.
In April 2005, TWMB obtained permanent financing to replace the construction
loan debt that was utilized to build the outlet center in Myrtle Beach, South
Carolina. The new mortgage amount is $35.8 million with a rate of LIBOR + 1.40%.
The note is for a term of five years with payments of interest only. In April
2010, TWMB has the option to extend the maturity date of the loan two more years
until 2012. All debt incurred by this unconsolidated joint venture is
collateralized by its property.
Either member in TWMB has the right to initiate the sale or purchase of the
other party's interest at certain times. If such action is initiated, one member
would determine the fair market value purchase price of the venture and the
other would determine whether they would take the role of seller or purchaser.
The members' roles in this transaction would be determined by the tossing of a
coin, commonly known as a Russian roulette provision. If either partner enacts
this provision and depending on our role in the transaction as either seller or
purchaser, we could potentially incur a cash outflow for the purchase of our
member's interest. However, we do not expect this event to occur in the near
future based on the positive results and expectations of developing and
operating an outlet center in the Myrtle Beach, South Carolina area.
19
Deer Park Enterprise, LLC
In October 2003, Deer Park Enterprise, LLC ("Deer Park"), a joint venture in
which we have a one-third ownership interest, entered into a sale-leaseback
transaction for the location on which it ultimately will develop a shopping
center that will contain both outlet and big box retail tenants in Deer Park,
New York. The agreement consisted of the sale of the property to Deer Park for
$29 million which was being leased back to the seller under an operating lease
agreement. In November 2004, the tenant gave notice (within the terms of the
lease) that they intended to, and subsequently did, vacate the facility in May
2005. Annual rents received from the tenant were $3.4 million. During the first
quarter of 2005, we made an equity contribution of $600,000 to Deer Park
Enterprise, LLC ("Deer Park"). Both of the other members made equity
contributions equal to ours during the quarter.
Tanger Wisconsin Dells, LLC
In March 2005, we established Tanger Wisconsin Dells, LLC ("Wisconsin Dells"), a
joint venture in which we have a 50% ownership interest with Tall Pines
Development of Wisconsin Dells, LLC ("Tall Pines") as our venture partner, to
construct and operate a Tanger Outlet center in Wisconsin Dells, Wisconsin. As
of March 31, 2005, no capital contributions had been made by either member. We
have begun the early development and leasing of the site. We currently expect
the center to be approximately 250,000 square feet upon total build out with the
initial phase scheduled to open in 2006.
Financing Arrangements
At March 31, 2005, approximately 39% of our outstanding long-term debt,
excluding debt premium, represented unsecured borrowings and approximately 41%
of the gross book value of our real estate portfolio was unencumbered. The
average interest rate, including loan cost amortization, on average debt
outstanding for the three months ended March 31, 2005 and 2004 was 7.37% and
7.30%, respectively.
We intend to retain the ability to raise additional capital, including public
debt or equity, to pursue attractive investment opportunities that may arise and
to otherwise act in a manner that we believe to be in our shareholders' best
interests. Prior to the common share offerings in 2002, 2003 and 2004, we had
established a shelf registration to allow us to issue up to $400 million in
either all debt or all equity or any combination thereof. We intend to restock
this shelf up to its $400 million level during 2005. To generate capital to
reinvest into other attractive investment opportunities, we may also consider
the use of additional operational and developmental joint ventures, selling
certain properties that do not meet our long-term investment criteria as well as
outparcels on existing properties.
We maintain unsecured, revolving lines of credit that provided for unsecured
borrowings of up to $125 million at March 31, 2005. All of our lines of credit
have maturity dates of June 30, 2007. Based on cash provided by operations,
existing credit facilities, ongoing negotiations with certain financial
institutions and our ability to sell debt or equity subject to market
conditions, we believe that we have access to the necessary financing to fund
the planned capital expenditures during 2005.
We anticipate that adequate cash will be available to fund our operating and
administrative expenses, regular debt service obligations, and the payment of
dividends in accordance with Real Estate Investment Trust ("REIT") requirements
in both the short and long term. Although we receive most of our rental payments
on a monthly basis, distributions to shareholders are made quarterly and
interest payments on the senior, unsecured notes are made semi-annually. Amounts
accumulated for such payments will be used in the interim to reduce the
outstanding borrowings under the existing lines of credit or invested in
short-term money market or other suitable instruments.
20
On March 1, 2005, our Board of Directors declared a $.3225 cash dividend per
common share payable on May 16, 2005 to each shareholder of record on April 29,
2005, and caused a $.6450 per Operating Partnership unit cash distribution to be
paid to the Operating Partnership's minority interest.
Off-Balance Sheet Arrangements
As of April 2005, upon attaining permanent financing, we are no longer a party
to a joint and several guarantee with respect to the original $36.2 million
construction loan of the TWMB property. We are a party to a joint and several
guarantee with respect to the $19 million loan obtained by Deer Park related to
its potential site in Deer Park, New York.
Critical Accounting Policies and Estimates
Refer to our 2004 Annual Report on Form 10-K for a discussion of our critical
accounting policies which include principles of consolidation, acquisition of
real estate, cost capitalization, impairment of long-lived assets and revenue
recognition. There have been no material changes to these policies in 2005.
Economic Conditions and Outlook
The majority of our leases contain provisions designed to mitigate the impact of
inflation. Such provisions include clauses for the escalation of base rent and
clauses enabling us to receive percentage rentals based on tenants' gross sales
(above predetermined levels, which we believe often are lower than traditional
retail industry standards) that generally increase as prices rise. Most of the
leases require the tenant to pay their share of property operating expenses,
including common area maintenance, real estate taxes, insurance and advertising
and promotion, thereby reducing exposure to increases in costs and operating
expenses resulting from inflation.
While factory outlet stores continue to be a profitable and fundamental
distribution channel for brand name manufacturers, some retail formats are more
successful than others. As typical in the retail industry, certain tenants have
closed, or will close certain stores by terminating their lease prior to its
natural expiration or as a result of filing for protection under bankruptcy
laws.
During 2005, we have approximately 1,821,000 square feet, or 21% of our
portfolio, coming up for renewal. If we were unable to successfully renew or
re-lease a significant amount of this space on favorable economic terms, the
loss in rent could have a material adverse effect on our results of operations.
As of March 31, 2005, we have renewed approximately 739,000 square feet, or 41%
of the square feet scheduled to expire in 2005. The existing tenants have
renewed at an average base rental rate approximately 9% higher than the expiring
rate. We also re-tenanted approximately 205,000 square feet of vacant space
during the first three months of 2005 at an 4% increase in the average base
rental rate from that which was previously charged. Our factory outlet centers
typically include well-known, national, brand name companies. By maintaining a
broad base of creditworthy tenants and a geographically diverse portfolio of
properties located across the United States, we reduce our operating and leasing
risks. No one tenant (including affiliates) accounted for more than 6.2% of our
combined base and percentage rental revenues for the three months ended March
31, 2005. Accordingly, we do not expect any material adverse impact on our
results of operations and financial condition as a result of leases to be
renewed or stores to be re-leased.
21
As of March 31, 2005 and 2004, our centers were 95% and 94% occupied,
respectively. Consistent with our long-term strategy of re-merchandising
centers, we will continue to hold space off the market until an appropriate
tenant is identified. While we believe this strategy will add value to our
centers in the long-term, it may reduce our average occupancy rates in the near
term.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to various market risks, including changes in interest rates.
Market risk is the potential loss arising from adverse changes in market rates
and prices, such as interest rates. We do not enter into derivatives or other
financial instruments for trading or speculative purposes.
We negotiate long-term fixed rate debt instruments and enter into interest rate
swap agreements to manage our exposure to interest rate changes. The swaps
involve the exchange of fixed and variable interest rate payments based on a
contractual principal amount and time period. Payments or receipts on the
agreements are recorded as adjustments to interest expense. At March 31, 2005,
TWMB had an interest rate swap agreement effective through March 2010 with a
notional amount of $35 million. Under this agreement, TWMB receives a floating
interest rate based on the 30 day LIBOR index and pays a fixed interest rate of
4.59%. This swap effectively changes the payment of interest on $35 million of
variable rate construction debt to fixed rate debt for the contract period at a
rate of 5.99%.
The fair value of the interest rate swap agreement represents the estimated
receipts or payments that would be made to terminate the agreement. At March 31,
2005, TWMB would have paid approximately $176,000 to terminate the agreement. A
1% decrease in the 30 day LIBOR index would increase the amount paid by TWMB by
$160,000 to approximately $336,000. The fair value is based on dealer quotes,
considering current interest rates and remaining term to maturity. TWMB does not
intend to terminate the interest rate swap agreement prior to its maturity. The
fair value of this derivative is currently recorded as a liability in TWMB's
balance sheet; however, if held to maturity, the value of the swap will be zero
at that time.
The fair market value of long-term fixed interest rate debt is subject to market
risk. Generally, the fair market value of fixed interest rate debt will increase
as interest rates fall and decrease as interest rates rise. The estimated fair
value of our total long-term debt at March 31, 2005 was $512.7 million and its
recorded value was $492.9 million. A 1% increase from prevailing interest rates
at March 31, 2005 would result in a decrease in fair value of total long-term
debt by approximately $9.2 million. Fair values were determined from quoted
market prices, where available, using current interest rates considering credit
ratings and the remaining terms to maturity.
Item 4. Controls and Procedures
The Chief Executive Officer, Stanley K. Tanger, and Chief Financial Officer,
Frank C. Marchisello, Jr., evaluated the effectiveness of the registrant's
disclosure controls and procedures on March 31, 2005 (Evaluation Date), and
concluded that, as of the Evaluation Date, the registrant's disclosure controls
and procedures were effective to ensure that information the registrant is
required to disclose in its filings with the Securities and Exchange Commission
under the Securities and Exchange Act of 1934 is recorded, processed, summarized
and reported, within the time periods specified in the Commission's rules and
forms, and to ensure that information required to be disclosed by the registrant
in the reports that it files under the Exchange Act is accumulated and
communicated to the registrant's management, including its principal executive
officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
There were no significant changes in the registrant's internal controls or in
other factors that could significantly affect these controls subsequent to the
Evaluation Date.
22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Company nor the Operating Partnership is presently involved in any
material litigation nor, to their knowledge, is any material litigation
threatened against the Company or the Operating Partnership or its properties,
other than routine litigation arising in the ordinary course of business and
which is expected to be covered by liability insurance.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.8 Amended and Restated Employment Agreement of Wilard A. Chafin.
10.18 Form of Restricted Share Agreement between the Company and certain
Officers.
10.19 Form of Restricted Share Agreement between the Company and certain
Officers with certain performance criteria vesting.
10.20 Form of Restricted Share Agreement between the Company and certain
Directors.
31.1 Principal Executive Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes -
Oxley Act of 2002.
31.2 Principal Financial Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes -
Oxley Act of 2002.
32.1 Principal Executive Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes -
Oxley Act of 2002.
32.2 Principal Financial Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes -
Oxley Act of 2002.
(b) Reports on Form 8-K
March 1, 2005 - We furnished a Current Report on Form 8-K containing under
Item 2.02, Results of Operations and Financial Condition, our press release
for the quarter ended December 31, 2004 and under Item 7.01, Regulation FD
Disclosure, the December 31, 2004 Supplemental Operating and Financial
Data.
March 30, 2005 - We furnished a Current Report on Form 8-K, containing
under Item 1.01, Entry into a material agreement, the actions from the
meeting of the Compensation Committee of the Company's Board of Directors.
23
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TANGER FACTORY OUTLET CENTERS, INC.
By: /s/ Frank C. Marchisello, Jr.
-------------------------------
Frank C. Marchisello, Jr.
Executive Vice President, Chief Financial Officer
DATE: May 10, 2005
24
Exhibit Index
Exhibit No. Description
- --------------------------------------------------------------------------------
10.8 Amended and Restated Employment Agreement of Willard A. Chafin.
10.18 Form of Restricted Share Agreement between the Company and certain
Officers.
10.19 Form of Restricted Share Agreement between the Company and certain
Officers with certain performance criteria vesting.
10.20 Form of Restricted Share Agreement between the Company and certain
Directors.
31.1 Principal Executive Officer Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 302 of the Sarbanes - Oxley Act of
2002.
31.2 Principal Financial Officer Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 302 of the Sarbanes - Oxley Act of
2002.
32.1 Principal Executive Officer Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of
2002.
32.2 Principal Financial Officer Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of
2002.
25