Tanger Outlets(SKT) - 2021 Q3 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements Unaudited consolidated financial statements for Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership, detailing financial position, operations, and cash flows, with explanatory notes Financial Statements of Tanger Factory Outlet Centers, Inc. Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Assets | $2,149,161 | $2,189,531 | | Total Debt | $1,410,765 | $1,567,886 | | Total Equity | $480,160 | $358,883 | Consolidated Statement of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $112,465 | $103,213 | $314,432 | $278,836 | | Net (Loss) Income | $(11,071) | $13,719 | $(4,133) | $(38,290) | | Net (Loss) Income Attributable to Company | $(10,579) | $13,029 | $(3,968) | $(36,541) | Earnings Per Share (EPS) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $(0.11) | $0.14 | $(0.05) | $(0.40) | | Diluted EPS | $(0.11) | $0.14 | $(0.05) | $(0.40) | - Net cash provided by operating activities for the nine months ended September 30, 2021, was $143.95 million, a significant increase from $91.96 million in the same period of 2020. Net cash used in financing activities was $83.61 million, primarily due to debt repayments and dividends[39] Financial Statements of Tanger Properties Limited Partnership - The financial statements of the Operating Partnership are substantially similar to those of the Company, as it holds all the outlet centers and assets and conducts all business operations. The main difference lies in the equity section, which is presented as Partners' Equity instead of Shareholders' Equity[15][16] Operating Partnership Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Assets | $2,148,778 | $2,188,967 | | Total Debt | $1,410,765 | $1,567,886 | | Total Equity | $480,160 | $358,883 | Notes to Consolidated Financial Statements - As of September 30, 2021, the company owned and operated 30 consolidated outlet centers (11.5 million sq. ft.) and had partial ownership in 6 unconsolidated outlet centers (2.1 million sq. ft.)[58] - Due to the COVID-19 pandemic, the company offered tenants the option to defer 100% of April and May 2020 rents, payable in January and February 2021. Net accounts receivable decreased from $18.8 million at year-end 2020 to $6.5 million as of September 30, 2021, due to collections of these deferred rents[70][71] - In August 2021, the company issued $400.0 million of 2.750% senior notes due 2031. The proceeds were used to redeem all remaining 3.875% senior notes due 2023 ($100.0 million) and all 3.750% senior notes due 2024 ($250.0 million), resulting in a make-whole premium of $31.9 million in Q3 2021[101] - Under its At-the-Market (ATM) share offering program, the company sold 10.0 million common shares for aggregate net proceeds of $187.0 million during the first nine months of 2021[116][117] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2021 financial condition and operations, including pandemic impact, liquidity, non-GAAP measures, and economic outlook Results of Operations - For Q3 2021, net loss was $11.1 million compared to net income of $13.7 million in Q3 2020. The decrease was primarily driven by a $33.8 million loss on the early extinguishment of debt, partially offset by higher rental revenues as business recovered from the pandemic's impact in 2020[173][175] - For the nine months ended September 30, 2021, net loss decreased to $4.1 million from $38.3 million in the prior-year period. The improvement was mainly due to the absence of a $45.7 million impairment charge taken in 2020 and stronger rental revenues, despite a $47.9 million loss on debt extinguishment in 2021[185] Change in Rental Revenues (Q3 2021 vs Q3 2020, in thousands) | Component | 2021 (in thousands) | 2020 (in thousands) | Increase/(Decrease) (in thousands) | | :--- | :--- | :--- | :--- | | Existing Properties | $105,346 | $96,199 | $9,147 | | Properties Disposed | $145 | $1,527 | $(1,382) | | Straight-line rent | $383 | $(1,741) | $2,124 | | Total | $107,265 | $100,251 | $7,014 | Liquidity and Capital Resources - As of September 30, 2021, the company's total liquidity was approximately $663.1 million, consisting of cash and cash equivalents and the full undrawn capacity of its $520 million unsecured lines of credit[235] - During the first nine months of 2021, the company redeemed all of its 2023 and 2024 senior notes and paid down $50.0 million of its unsecured term loan. These actions were funded by a new $400.0 million senior notes offering due 2031 and proceeds from its ATM program[222][237][240] - In July 2021, the company amended and extended its unsecured lines of credit to July 2025, with options to extend further. The amendment also eliminated the LIBOR floor[242] - The company was in compliance with all debt covenants as of September 30, 2021. Key covenants include total consolidated debt to adjusted total assets (<60%, actual 42%) and EBITDA to Fixed Charges (>1.5, actual 4.1)[246][247] Non-GAAP Supplemental Measures FFO and Core FFO Reconciliation (in thousands) | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net (Loss) Income | $(11,071) | $13,719 | $(4,133) | $(38,290) | | FFO | $18,204 | $43,074 | $89,494 | $102,724 | | Core FFO | $51,821 | $42,613 | $138,746 | $101,381 | FFO and Core FFO Per Share - Diluted | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | FFO per share | $0.16 | $0.44 | $0.84 | $1.04 | | Core FFO per share | $0.47 | $0.44 | $1.32 | $1.04 | Same Center NOI (in thousands) | Period | 2021 (in thousands) | 2020 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $73,752 | $66,148 | +11.5% | | Nine Months Ended Sep 30 | $208,216 | $173,885 | +19.7% | Economic Conditions and Outlook - Traffic and sales for the portfolio have returned to near or above pre-pandemic levels in the first nine months of 2021, leading to increased rental revenues[286] - Consolidated portfolio occupancy was 94.3% as of September 30, 2021, an increase from 92.9% as of September 30, 2020[291] - For the twelve months ended September 30, 2021, the company completed renewals and re-tenanted 1.6 million square feet with a blended 0.6% decrease in average base rental rates[288] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks are interest rate risk and foreign currency risk, with only 4% of consolidated debt having variable interest rates not covered by swaps, impacting annual interest expense by approximately $514,000 for a 100 basis point LIBOR change, and foreign currency risk from Canadian investments - The company is exposed to interest rate risk, with 4% of its consolidated debt subject to variable rates as of September 30, 2021. A 100 basis point change in the LIBOR index would change annual interest expense by approximately $514,000[294] - The company uses interest rate swap agreements to fix rates on debt with notional amounts totaling $300.0 million[293] - Foreign currency risk exposure is concentrated in the Canadian Dollar from investments in Canadian outlet centers[298] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures for both Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership, concluding they were effective as of September 30, 2021, with no material changes to internal controls over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures for both the Company and the Operating Partnership were effective as of September 30, 2021[299][300] - No changes were made to internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[299][300] Part II. Other Information Item 1. Legal Proceedings The company is engaged in various legal proceedings arising from the normal course of business, with management not expecting a material adverse effect on its financial condition or results of operations - The company is involved in routine legal proceedings but does not expect them to have a material adverse effect on its financial results[302] Item 1A. Risk Factors No material changes were reported from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes were reported from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[303] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section discusses the company's share repurchase program, with the Board authorizing a new program for up to $80.0 million of outstanding shares through May 2023, though no shares were repurchased during Q3 2021 - In May 2021, the Board of Directors authorized a share repurchase program of up to $80.0 million through May 31, 2023[305] - The company did not repurchase any of its common shares during the three months ended September 30, 2021. The full $80.0 million remains authorized for repurchase[306](index=3