Capital Automotive Exceeds Earnings Guidance for Fourth Quarter and Year-End 2002 and Increases 2003 Guidance
2002 Highlights:
-- $352 million in Acquisitions, 28% Growth in Portfolio
-- 21% Revenue Increase
-- 19% Increase in Net Income Per Share
-- 13% Growth of Adjusted FFO ("AFFO") Per Share
-- 24% Return of Capital for 2002 Dividends Paid
MCLEAN, Va., Feb. 4 -- Capital Automotive REIT
, the nation's leading specialty finance company for automotive
retail real estate, today announced financial results for the fourth quarter
and year ended December 31, 2002. The Company reported record fourth quarter
and year-end 2002 revenues, net income, FFO and AFFO (FFO excluding straight-
lined rents).
Total revenues were $39.5 million for the quarter, a 26% increase from
revenues of $31.3 million in the fourth quarter of 2001. Total revenues for
the year ended December 31, 2002 were $142.4 million compared to $117.5
million for the same period in 2001, an increase of 21%.
Net income for the quarter increased 15% to $11.1 million as compared to
$9.7 million in the same quarter last year. Net income on a diluted per share
basis increased 11% to $0.39 per share from $0.35 per share in the same
quarter last year. Net income for the year ended December 31, 2002 increased
40% to $43.8 million as compared to $31.4 million for the same period last
year. Net income on a diluted per share basis increased 19% to $1.55 per
share from $1.30 per share for the same period last year.
FFO for the quarter increased 19% to $21.9 million as compared to $18.4
million for the same quarter last year. FFO on a diluted per share basis
increased 13% to $0.58 per share from $0.52 per share for the same quarter
last year. FFO for the year ended December 31, 2002 increased 30% to $83.4
million as compared to $64.3 million for the same period last year. FFO on a
diluted per share basis increased 14% to $2.25 per share from $1.97 per share
for the same period last year.
AFFO for the quarter increased 19% to $20.7 million as compared to $17.5
million for the same quarter last year. AFFO on a diluted per share basis
increased 12% to $0.55 per share from $0.49 per share for the same quarter
last year. AFFO for the year ended December 31, 2002 increased 29% to $78.3
million as compared to $60.9 million for the same period last year. AFFO on a
diluted per share basis increased 13% to $2.11 per share from $1.86 per share
for the same period last year.
As previously announced, the Company's Board of Trustees declared a cash
dividend of $0.4065 per share for the fourth quarter. The dividend is payable
on February 20, 2003 to shareholders of record as of February 10, 2003. The
fourth quarter dividend is the 20th consecutive increase in the quarterly
dividend and represents an annualized rate of $1.626 per share and a 6.9%
yield based on Monday's closing stock price. For 2002, approximately 24% of
the dividends paid were a return of capital and therefore not included in the
recipient's taxable income. The Company's dividend payout ratio for 2002 was
approximately 75% of AFFO. The Company reaffirms its 2003 annual dividend
guidance of $1.65 per share, of which approximately 15% is estimated to be a
return of capital which is not taxed as ordinary income to its shareholders.
Acquisitions Recap
The Company completed approximately $52.6 million of acquisitions during
the fourth quarter, bringing total acquisitions for the year to approximately
$352 million. The fourth quarter acquisitions included five properties and
several facility improvements and construction fundings, containing six
automotive franchises located in four states. The average initial lease term
for these acquisitions is 18.4 years, with multiple renewal options
exercisable at the option of the tenant. Substantially all of the
acquisitions were funded from draws on the Company's short-term credit
facilities and the remainder with cash on hand.
A summary of the acquisitions is as follows:
-- Three properties totaling $31.4 million subject to fixed rate leases
with subsidiaries of UnitedAuto Group, Inc. located in
Florida, Michigan and Texas. One Honda and two Toyota franchises are
operated on these properties. UnitedAuto Group is the second largest
automotive specialty retailer currently operating 129 franchises in the
United States and 71 franchises internationally, primarily in the
United Kingdom. As of December 31, 2002, we leased eight properties to
subsidiaries of UnitedAuto Group, Inc., representing approximately 8%
of our total annualized rental revenue.
-- One property totaling $8.6 million leased under a variable rate lease
to an affiliate of Sonic Automotive, Inc. , located in
Texas. A Toyota franchise is operated on the property. Sonic
Automotive, a Fortune 300 company and a member of the Russell 2000
Index, is one of the nation's largest automotive retailers. Sonic
operates 187 dealership franchises and 44 collision repair centers. As
of December 31, 2002, we leased 83 properties to affiliates of Sonic
Automotive, Inc., representing approximately 25% of our total
annualized rental revenue.
-- One property totaling $6.2 million leased under a variable rate lease
on real estate operated by Motorcars of Clear Lake, L.P. located in
Texas. A Volkswagen franchise is operated on the property. Motorcars
of Clear Lake, L.P. is an affiliate of the Momentum Group of Companies
("The Group"). The Group is one of the premier, franchised, luxury,
automotive dealer groups in the United States and operates 13
dealership franchises, including Audi, BMW, Jaguar, Land Rover, MINI,
Nissan, Porsche, Volkswagen and Volvo. Momentum Motorcars is one of
the largest BMW retailers in the country. As of December 31, 2002,
affiliates of The Group were tenants of 12 of our properties,
representing approximately 4% of our total annualized rental revenue.
-- Facility improvements and construction fundings, totaling approximately
$6.4 million, all of which were transacted with existing tenants.
Commenting on today's news, Thomas D. Eckert, President and Chief
Executive Officer, stated, "Our fourth quarter was a great finish to an
outstanding year. Our portfolio grew by 28% this year, which greatly
surpassed our initial expectations. Most importantly though, the high credit
quality of our tenants remains the cornerstone of our Company. We continue to
partner with the premier dealer groups in the country and as always, we remain
focused on our core business. We believe our conservative, straightforward
approach will continue to deliver shareholder value over the long-term.
Increasing our dividend each quarter, coupled with our 24% return of capital
for 2002, is tangible proof of our ability to create value for our
shareholders."
Risk Management
As of December 31, 2002, Capital Automotive's portfolio was 100% occupied
and, since our inception, there has never been a rental payment default. On a
quarterly basis, the Company performs a credit review, utilizing the financial
statements, of virtually all tenants in its portfolio. The Company's rent
coverage ratio, which is one of the primary metrics that the Company uses to
define the stability of its cash flows, has remained extremely high. As of
September 30, 2002, the most recent quarter of analysis, the weighted average
operating cash flow of the Company's tenants exceeded 3.75 times the amount of
their rental payments. At the end of the fourth quarter, the Company held
lease security deposits and letters of credit totaling approximately $13
million. Additionally, as of December 31, 2002, the Company had accumulated
depreciation of approximately $85.5 million representing approximately 5% of
its real estate asset portfolio. The weighted average remaining lease term of
the portfolio is 11.7 years as of December 31, 2002 and the earliest
meaningful lease expirations do not occur until 2008.
The Company's debt to assets (total assets plus accumulated depreciation)
ratio was approximately 62% and debt to total market capitalization was
approximately 53.6% as of December 31, 2002. Of the debt outstanding at
December 31, 2002, approximately 75% was substantially match-funded, non-
recourse debt. Virtually all of the Company's long-term debt is secured
financing which has a weighted average remaining term of 10.7 years. The
Company's earliest significant long-term debt maturity is not until 2011. For
the three months ended December 31, 2002, the Company's interest coverage and
debt service coverage ratios were 2.4 and 1.7, respectively. For the trailing
12 months, the Company's interest coverage and debt service coverage ratios
were 2.7 and 1.8, respectively.
Earnings Guidance
In light of the fourth quarter results, the Company's strong acquisition
pace, and the current interest rate environment, the Company has raised its
AFFO per diluted share guidance for 2003 to $2.20. The Company's 2003
estimate assumes property acquisitions of approximately $100 to $150 million,
depending on the timing of closings.
David S. Kay, Senior Vice President and Chief Financial Officer added, "We
are very pleased with our fourth quarter and 2002 operating results and are
raising our 2003 earnings guidance. Currently, our balance sheet has capacity
that could enable us to grow our portfolio by approximately $200 million
without accessing the equity markets. Our strategy of match-funding our fixed
and variable rate leases with long-term debt, as well as the credit worthiness
of our tenants, provides excellent earnings visibility. Additionally, because
of significant CPI based escalations built into our lease portfolio, we
believe we can grow AFFO per share 3% to 5% during 2004 through 2007, without
any acquisitions."
About Capital Automotive
Capital Automotive, headquartered in McLean, Virginia, is a self-
administered, self-managed real estate investment trust that acquires real
property and improvements used by operators of multi-site, multi-franchised
automotive dealerships and related businesses. Additional information on
Capital Automotive is available on the Company's Web site at
http://www.capitalautomotive.com .
As of December 31, 2002, the Company had invested nearly $1.6 billion in
292 properties, consisting of 412 automotive franchises in 28 states.
Approximately 77% of the Company's total real estate investments are located
in the top 50 metropolitan areas in the U.S. in terms of population.
Approximately 70% of the Company's portfolio is invested in properties leased
to the "Top 100" dealer groups as published by Automotive News. The
properties are leased under long-term, triple-net leases with a weighted
average initial lease term of 14.3 years.
Certain matters discussed within this press release are forward-looking
statements within the meaning of the federal securities laws. Although the
Company believes that the expectations reflected in the forward-looking
statements are based upon reasonable assumptions, the Company's future
operations will depend on a number of factors that may differ, some
materially, from the Company's assumptions. These factors, which could cause
the Company's actual results to differ materially from those set forth in the
forward-looking statements, include risks that our tenants will not pay rent;
risks that our growth will be limited if we cannot obtain additional capital;
risks of financing, such as our ability to consummate planned and additional
financings on terms which are acceptable to us and our ability to meet
existing financial covenants; risks that planned and additional acquisitions
may not be consummated; risks that our operating costs will be higher than
expected; risks related to the automotive industry, such as the ability of our
tenants to compete effectively in the automotive retail industry and the
ability of our tenants to perform their lease obligations as a result of
changes in any manufacturer's production, inventory, marketing or other
practices; environmental and other risks associated with the acquisition and
leasing of automotive properties; risks related to our status as a REIT for
federal income tax purposes, such as the existence of complex regulations
relating to our status as a REIT, the effect of future changes in REIT
requirements as a result of new legislation and the adverse consequences of
the failure to qualify as a REIT; and those risks detailed from time to time
in the Company's SEC reports, including its annual report on Form 10-K and its
quarterly reports on Form 10-Q. The Company makes no promise to update any of
the forward-looking statements, or to publicly release the results if the
Company revises any of them.
CAPITAL AUTOMOTIVE REIT
SUPPLEMENTAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
(unaudited)
Statements of Operations:
Revenue:
Rental $39,242 $31,089 $141,632 $117,002
Interest and other 298 204 803 479
Total revenue 39,540 31,293 142,435 117,481
Expenses:
Depreciation and amortization 7,372 5,872 26,329 21,392
General and administrative 2,339 1,879 8,475 7,114
Modification of debt - - 265 -
Interest 15,286 10,958 50,427 46,091
Total expenses 24,997 18,709 85,496 74,597
Income from continuing operations
before minority interest and
extraordinary item 14,543 12,584 56,939 42,884
Minority interest (3,406) (2,948) (13,442) (11,122)
Income from continuing operations
before extraordinary item 11,137 9,636 43,497 31,762
Income from discontinued operations - 37 110 141
Gain on sale of real estate - - 222 -
Total discontinued operations - 37 332 141
Income before extraordinary item 11,137 9,673 43,829 31,903
Extraordinary item - extinguishment
of debt - - - (526)
Net income $11,137 $9,673 $43,829 $31,377
Basic earning per share:
Income from continuing operations
before extraordinary item $0.40 $0.37 $1.58 $1.36
Income before extraordinary item $0.40 $0.37 $1.60 $1.36
Net income $0.40 $0.37 $1.60 $1.34
Diluted earnings per share:
Income from continuing operations
before extraordinary item $0.39 $0.35 $1.54 $1.31
Income before extraordinary item $0.39 $0.35 $1.55 $1.32
Net income $0.39 $0.35 $1.55 $1.30
Weighted average number of common
shares - basic 28,015 26,218 27,473 23,432
Weighted average number of common
shares - diluted 28,990 27,684 28,589 24,450
Funds From Operations (FFO):
Income from continuing operations
before minority interest and
extraordinary item $14,543 $12,584 $56,939 $42,884
Adjustments:
Add: Real estate depreciation and
amortization 7,352 5,896 26,344 21,477
Add: Income from discontinued
operations, net of minority
interest - 37 110 141
Add: Minority interest related to
income from discontinued operations - 11 34 49
Less: Gain on sale of real estate - (93) - (218)
FFO (A) $21,895 $18,435 $83,427 $64,333
Basic FFO per share $0.60 $0.54 $2.32 $2.03
Diluted FFO per share $0.58 $0.52 $2.25 $1.97
Adjusted Funds From Operations
(AFFO):
FFO $21,895 $18,435 $83,427 $64,333
Less: straight-lined rents (1,209) (980) (5,084) (3,427)
AFFO (A) $20,686 $17,455 $78,343 $60,906
Basic AFFO per share $0.57 $0.51 $2.18 $1.92
Diluted AFFO per share $0.55 $0.49 $2.11 $1.86
Weighted average number of common
shares and units - basic 36,590 34,263 35,980 31,708
Weighted average number of common
shares and units - diluted 37,565 35,730 37,096 32,726
(A) Prior to 2002, FFO was defined under the revised definition adopted
in October 1999 by the National Association of Real Estate Investment Trusts
(NAREIT) as net income (loss) before minority interest and extraordinary item
(computed in accordance with generally accepted accounting principles (GAAP))
excluding gains (or losses) from sales of property, plus depreciation and
amortization of assets unique to the real estate industry, and after
adjustments for unconsolidated partnerships and joint ventures. In April
2002, NAREIT revised its FFO definition as income (loss) from continuing
operations before minority interest and extraordinary item (computed in
accordance with GAAP) plus income from discontinued operations (including
minority interest) and excluding gains (or losses) from sales of property
reported as income (loss) from continuing operations, plus depreciation and
amortization of assets unique to the real estate industry, and after
adjustments for unconsolidated partnerships and joint ventures. AFFO is
calculated as FFO less straight-lined rents.
NAREIT developed FFO as a relative measure of performance and liquidity of
an equity REIT in order to recognize that income-producing real estate
historically has not depreciated on the basis determined under GAAP. FFO does
not represent cash flows from operating activities in accordance with GAAP
(which, unlike FFO, generally reflects all cash effects of transactions and
other events in the determination of net income) and should not be considered
an alternative to net income as an indication of our performance or to cash
flow as a measure of liquidity or ability to make distributions. We consider
FFO and AFFO meaningful, additional measures of operating performance because
they primarily exclude the assumption that the value of the real estate assets
diminishes predictably over time, and because industry analysts have accepted
them as performance measures.
December 31, December 31,
2002 2001
Selected Balance Sheet Data
(in thousands)
Real estate before
accumulated depreciation $1,574,153 $1,229,694
Cash and cash equivalents 7,442 9,490
Other assets 46,398 20,305
Total assets 1,542,470 1,199,700
Mortgage debt 898,733 637,656
Borrowings under credit facilities 111,096 63,508
Total other liabilities 35,970 21,630
Minority Interest 116,048 110,885
Total shareholders' equity 380,623 366,021
Total shares outstanding 28,321 26,653
Total shares and units outstanding 36,881 34,660
December 31, December 31,
Selected Portfolio Data (unaudited) 2002 2001
Properties 292 260
States 28 27
Land acres 2,076 1,799
Square footage of buildings
(in millions) 11.9 9.9
Weighted average initial lease term
(in years) 14.3 13.9
Franchises 412 365
Contact Information:
David S. Kay
Senior Vice President and Chief Financial Officer
Capital Automotive REIT
703-0394-1302