EX-99 3 pr-110403.htm FINANCIAL STATEMENTS AND EXHIBITS

NEWS RELEASE

For information contact:
Kevin B. Habicht
Chief Financial Officer

For Immediate Release
November 4, 2003

THIRD QUARTER OPERATING RESULTS ANNOUNCED BY
COMMERCIAL NET LEASE REALTY, INC.

Orlando, Florida, November 4, 2003 — Commercial Net Lease Realty, Inc. (NYSE:NNN), an equity real estate investment trust, reported funds from operations (“FFO”) for the third quarter ended September 30, 2003 were $17,002,000 or 37 cents per share compared to $14,450,000 or 36 cents per share for the same period last year. For the nine months ended September 30, 2003, FFO was $45,730,000 or $1.08 per share compared to $43,123,000 or $1.06 for the same period last year.

Net earnings available to common stockholders for the quarter ended September 30, 2003 was $14,382,000 or 32 cents per share compared to $7,573,000 or 19 cents per share for the same period last year. Revenues for the third quarter increased to $27,022,000 compared to $23,317,000 for last year’s third quarter. Net earnings available to common stockholders for the nine months ended September 30, 2003 was $34,877,000 or 83 cents per share from $31,829,000 or 78 cents per share for the same period last year. Revenues for the nine months increased to $74,010,000 compared to $68,508,000 for the same period last year.

During the third quarter of 2003, the Company and its affiliated subsidiaries invested $170,513,000 in additional properties and construction in progress including $148.6 million invested in the previously announced acquisition of two office buildings leased to the United States of America located in the Pentagon City submarket of the Washington, D.C. metropolitan area. The property portfolio totaled 7,336,000 square feet of gross leasable area and occupancy increased slightly to 97.2% as of September 30, 2003. Only 10 properties with 203,000 square feet of gross leasable area are available for lease. Based on the current annual base rent in place as of September 30, 2003, 83% of the Company’s base rent was derived from retail properties and 17% from office properties.

Gary M. Ralston, President and Chief Operating Officer, commented, “We are pleased with this quarter’s improved operating results and were particularly happy to recently declare our fourth quarter common dividend which marks the 14th consecutive annual increase in our dividends per share.”

Commercial Net Lease Realty invests in high quality, single-tenant retail, office and industrial properties subject to long-term, net leases with established tenants, such as Barnes & Noble, Best Buy, Eckerd, OfficeMax, Wal-Mart and the United States of America. The Company currently

owns, either directly or through investment interests, 348 properties in 39 states with agross leasable area of approximately 7.4 million square feet. These properties are leased to 128 corporations in 47 industrial classifications.

Management will hold a conference call on November 4, 2003 at 10:30 am EST to review the Company’s results. The call can be accessed on the Company’s web site live at http://www.cnlreit.com. For those unable to listen to the live broadcast, a replay will be available on the Company’s web site. In addition, the Company will post a summary of any earnings guidance given on the call to the Company’s website.

Statements in this press release, which are not strictly historical, are “forward-looking” statements. Forward-looking statements involve known and unknown risks, which may cause the Company’s actual future results to differ materially from expected results. These risks include, among others, general economic conditions, local real estate conditions, changes in interest rates, increases in operating costs, the availability of capital, and the profitability of the Company’s taxable subsidiary. Additional information concerning these and other factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s report on Form 10-K. Copies of each filing may be obtained from the Company or the SEC. Consequently, such forward-looking statements should be regarded solely as reflections of the Company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

Funds From Operations, commonly referred to as FFO, is a non-GAAP financial measure of operating performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. The Company defines FFO as net earnings excluding depreciation, gains and losses on the disposition of real estate and extraordinary items of income and expense of the Company, and the Company’s share of these items from the Company’s unconsolidated partnerships.

FFO is generally considered by industry analysts to be the most appropriate measure of performance. FFO does not necessarily represent cash provided by operating activities in accordance with accounting principles generally accepted in the United States of America and should not be considered an alternative to net income as an indication of the Company’s performance or to cash flow as a measure of liquidity or ability to make distributions. Management considers FFO an appropriate measure of performance of an equity REIT because it primarily excludes the assumption that the value of the real estate assets diminishes predictably over time, and because industry analysts have accepted it as a performance measure. The Company’s computation of FFO may differ from the methodology for calculating FFO used by other equity REITs, and therefore, may not be comparable to such other REITs.

Commercial Net Lease Realty, Inc.
 (in thousands, except per share data)
 
Quarter Ended
September 30,		 Nine Months Ended
September 30,
2003
 2002
 2003
 2002
Income Statement Summary                    
 
Income:  
    Rental and earned income   $ 25,987   $ 21,391   $ 69,593   $ 61,906  
    Interest and other income    1,035    1,926    4,417    6,602  
     27,022    23,317    74,010    68,508  
Expenses:  
    General and administrative    2,561    2,128    7,799    7,118  
    Real estate    913    247    1,470    1,068  
    Interest    6,771    6,860    20,118    19,833  
    Depreciation and amortization    3,496    2,836    9,418    8,286  
    Provision for loss on impairment of real estate    -    2,256    -    2,256  
    Dissenting stockholders' settlement    -    -    2,413    -  
     13,741    14,327    41,218    38,561  
Earnings from continuing operations before equity in  
   earnings of unconsolidated affiliates

    13,281    8,990    32,792    29,947  
Equity in earnings of unconsolidated affiliates    1,025    257    2,980    2,034  
Earnings from continuing operations

    14,306    9,247    35,772    31,981  
Earnings (loss) from discontinued operations    1,078    (672 )  2,110    2,855  
Net earnings    15,384    8,575    37,882    34,836  
Series A Preferred Stock dividends       (1,002 )   (1,002 )   (3,005 )   (3,007 )
Series B Preferred Stock dividends       (84 )   -   (84 )   -
Net earnings available to common stockholders - basic   14,298   7,573   34,793   31,829  
Series B Preferred Stock dividends       84   -   84   -
Net earnings available to common stockholders - diluted   $ 14,382   $ 7,573   $ 34,877   $ 31,829  
Weighted average number of common shares outstanding:  
    Basic    44,368,735    40,304,531    41,755,975    40,400,577  
    Diluted    45,403,830    40,592,453    42,259,338    40,582,695  
Net earnings per share available to common stockholders:  
    Basic:  
        Continuing operations   $ 0.30   $ 0.21   $ 0.79   $ 0.72  
        Discontinued operations    0.02    (0.02 )  0.05    0.07  
        Net earnings   $ 0.32   $ 0.19   $ 0.84   $ 0.79  
    Diluted:  
       Continuing operations   $ 0.30   $ 0.21   $ 0.78   $ 0.71  
       Discontinued operations    0.02    (0.02 )  0.05    0.07  
       Net earnings   $ 0.32   $ 0.19   $ 0.83   $ 0.78  
Commercial Net Lease Realty, Inc.
 (in thousands, except per share data)
 
Quarter Ended
September 30,		 Nine Months Ended
September 30,
2003
 2002
 2003
 2002
Reconciliation of funds from operations:                    
    Net earnings available to common stockholders - diluted   $ 14,382   $ 7,573   $ 34,877   $ 31,829  
      Real estate depreciation and amortization:  
         Continuing operations    3,002    2,459    8,120    7,247  
         Discontinued operations    17    117    101    517  
      Partnership real estate depreciation    171    197    506    285  
      Loss (gain) on disposition and impairment of real estate:  
         Continuing operations    -    2,256    -    2,256  
         Discontinued operations    (570 )  1,848    (287 )  989  
      Dissenting stockholders' settlement    -    -    2,413    -  
    Funds from operations   $ 17,002   $ 14,450   $ 45,730   $ 43,123  
 
Funds from operations per diluted share:   $ 0.37   $ 0.36   $ 1.08   $ 1.06  

In accordance with Financial Accounting Standard Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets, ” the Company has classified the operations of the 14 and 19 properties sold during 2003 and 2002, respectively, as discontinued operations. Accordingly, the results of operations related to these properties have been reclassified to earnings from discontinued operations. The following is a summary of earnings from discontinued operations.

Quarter Ended
September 30,		 Nine Months Ended
September 30,
2003
 2002
 2003
 2002
Revenues:                    
    Rental and earned income   $ 502   $ 1,354   $ 1,833   $ 4,575  
    Other income    27    1    118    5  
     529    1,355    1,951    4,580  
Expenses:  
    General and administrative    3    16    15    17  
    Real estate    1    46    12    202  
    Depreciation and amortization    17    117    101    517  
    Provision for loss on impairment of real estate    -    1,029    -    1,029  
     21    1,208    128    1,765  
Earnings before gain (loss) on disposition of real estate    508    147    1,823    2,815  
 
Gain (loss) on disposition of real estate    570    (819 )  287    40  
Earnings (loss) from discontinued operations   $ 1,078   $ (672 ) $ 2,110   $ 2,855  
Commercial Net Lease Realty, Inc.
 (in thousands)
 
September 30,
2003
 December 31,
2002
Balance Sheet Summary

            
Assets:  
    Cash and cash equivalents   $ 4,120   $ 1,737  
    Receivables, net of allowance    3,296    1,227  
    Mortgages, notes and accrued interest receivable    13,377    11,253  
    Investments in, mortgages and other receivables from  
        unconsolidated affiliates    128,395    102,633  
    Real estate:  
        Accounted for using the operating method    863,429    703,465  
        Accounted for using the direct financing method    103,569    108,308  
    Other assets    34,053    25,485  
    Total assets   $ 1,150,239   $ 954,108  
Liabilities and stockholders' equity:  
    Current liabilities   $ 13,157   $ 20,378  
    Line of credit    127,700    38,900  
    Mortgages payable    53,328    55,481  
    Notes payable    289,872    290,208  
    Stockholders' equity    666,182    549,141  
    Total liabilities and stockholders' equity   $ 1,150,239   $ 954,108  
Shares outstanding    46,227    40,404  
Commercial Net Lease Realty, Inc.

Top 20 Tenants
(based on current annual base rent as of September 30, 2003)

Tenant % of Total Tenant % of Total
  1. United States of America 16.8% 11. Bed Bath & Beyond 1.6%
  2. Eckerd 10.5% 12. Food 4 Less 1.4%
  3. Best Buy 5.4% 13. The Good Guys 1.4%
  4. OfficeMax 5.0% 14. Dick's Sporting Goods 1.3%
  5. Barnes & Noble 4.4% 15. Target 1.2%
  6. Academy 3.3% 16. Winn-Dixie 1.1%
  7. Borders Books 3.2% 17. Lowe's 1.1%
  8. The Sports Authority 2.4% 18. Office Depot 1.1%
  9. Bennigan's 1.7% 19. Havertys Furniture 1.1%
10. Jared Jewelers 1.6% 20. SuperValu 1.1%


Top 10 States
(based on current annual base rent as of September 30, 2003)

State % of Total State % of Total
1. VA 21.4% 6. NJ 3.0%
2. FL 13.4% 7. OH 3.0%
3. TX 13.2% 8. MD 2.9%
4. CA 7.7% 9. TN 2.9%
5. GA 5.0% 10. PA 2.6%


Lease Expirations
(based on current annual base rent as of September 30, 2003)

# of Properties % of Total # of Properties % of Total
2003 2  0.1% 2009 11  3.0%
2004 8  1.4% 2010 8  4.3%
2005 2  0.1% 2011 8  3.1%
2006 4  1.5% 2012 14  5.2%
2007 17  2.4% 2013 21  7.0%
2008 18  2.9% Therefter 193  68.9%