American Realty Reports 2002 Fourth Quarter Net Income of $.66 vs. $.21 in Fourth Quarter 2001, Twelve Months 2002 Net Loss of $.96 vs. $1.07 Net Income in 2001


DALLAS, April 15, 2003 (PRIMEZONE) -- American Realty Investors, Inc. (NYSE:ARL) announced Tuesday that the company reported fourth quarter net income of $7.61 million, or $.66 per share, on revenue of $43.26 million, for the three months ended Dec. 31, 2002, compared to net income of $2.46 million, or $.21 per share, on revenue of $39.48 million in the fourth quarter of 2001.

For the twelve months ended Dec. 31, 2002, ARI reported a net loss of $10.87 million, or $(.96) per share, on revenue of $159.09 million, compared to net income of $12.58 million, or $1.07 per share, on revenue of $174.82 million, in the twelve months of 2001.

Income, sales and related expenses and costs for the fourth quarter and twelve months of 2002 resulted in increased income from operations of $16.32 million and $45.32 million, compared to $3.97 million and $37.19 million in the 2001 periods, and included:

- Income from rents that decreased to $21.78 million and $89.54 million, compared to $23.13 million and $101.93 million in the 2001 periods, due to the sale of 17 apartments in 2001.

- Property operations expense that decreased to $17.79 million and $67.70 million, compared to $18.21 million and $76.62 million in the 2001 periods, due to decreased expenses at the hotels, apartments and land, partially offset by increased subleasing costs at three commercial properties.

- Pizza parlor sales that increased to $9.19 million and $36.74 million, compared to $8.93 million and $34.21 million in the 2001 periods, due to a 7.9 percent increase in same-store sales. Cost of sales increased to $7.60 million and $29.99 million, compared to $7.22 million and $27.93 million in the 2001 periods. Gross margins decreased to $1.59 million in the fourth quarter and increased in the twelve months of 2002 to $6.75 million, compared to $1.71 million and $6.28 million in the 2001 periods.

- Land sales, cost of sales and gain on land sales that increased to $88.37 million, $53.35 million and $10.75 million in fourth quarter 2002, compared to $10.04 million, $12.70 million and a loss of $2.66 million in fourth quarter 2001. Land sales, cost of sales and gain on land sales that increased to $127.75 million, $75.72 million and $16.73 million in the twelve months of 2002, compared to $51.84 million, $45.35 million and $5.60 million in 2001. The 2002 land sales included deferred gains of $36.14 million and recognition of $830,000 of previously deferred gains, compared to $895,000 in deferred gains in 2001.

Other income (loss) decreased to losses of $478,000 and $12.61 million in the fourth quarter and twelve months of 2002, compared to income of $23.26 million and $89.07 million in the 2001 periods. Other income in 2001 included gains on the sale of real estate $23.22 million and $77.82 million and equity in gains on real estate sales by equity investees of $4.57 million and $22.54 million. For 2002, the gains were included in Discontinued Operations. Other income (loss) included:

- Equity in the loss of investees that increased to $6.89 million and $20.91 million in the fourth quarter and twelve months of 2002, compared to losses of $4.93 million and $13.35 million in the 2001 periods, due to increased losses by affiliates. Loss on sale of investments in equity investees was $286,000 in the twelve months of 2002, compared to $387,000 in 2001.

- Other income that increased to $4.93 million and $5.45 million in the fourth quarter and twelve months of 2002, compared to a loss of $427,000 and $369,000 in the 2001 periods, due to receipt of a payment and a partial payment from settlements arising from two lawsuits.

Other expenses (excluding property operations expenses and costs of sales for pizza and land) increased in the fourth quarter and decreased in the twelve months of 2002 to $24.28 million and $92.73 million, compared to $22.86 million and $103.83 million in the 2001 periods, and included:

- Interest expense that decreased in the fourth quarter to $14.44 million due to lower amortization of deferred borrowing costs, and $57.69 million in the twelve months due to property sales, compared to $17.46 million and $65.05 million in the 2001 periods.

- Advisory, net income and incentive fees that increased to a total of $1.07 million in the three months and decreased to $5.90 million in the twelve months of 2002, compared to $(2.38) million and $10.71 million in the 2001 periods, due to a reduction in total assets and 2002 net income not meeting the threshold of 10 percent of annualized net income in excess of a 10 percent return on shareholders' equity. No income or incentive fees are paid unless net income has met the 10 percent threshold.

- Write-down of assets held for sale that increased to $3.73 million and $4.17 million for the three and twelve months of 2002, due to the reduction of carrying values of a shopping center sold in 2002 and a land parcel sold in 2003 to their net realizable values when sold. In 2001, a $2.5 million impairment of an asset was recognized.

Net income from discontinued operations (non-land properties sold after 2001) in the fourth quarter and twelve months of 2002 increased to $16.65 million and $51.56 million, compared to losses of $1.29 million and $7.35 million in the 2001 periods, due to 23 properties and leasehold interests in oil and gas properties sold in 2002 and eight properties sold in 2003. Included in the 2002 net income from discontinued operations were:

- Gains on real estate sales of $8.57 million in the three months and $31.71 million in the twelve months of 2002. In 2001, these gains were included in Other Income.

- Equity in gains on real estate sales by investees of $9.17 million and $24.07 million in the fourth quarter and twelve months of 2002. In 2001, these gains were included in Other Income.

American Realty Investors, Inc., a Dallas-based real estate investment company, holds a diverse portfolio of equity real estate located across the U.S., including office buildings, apartments, hotels, shopping centers and developed and undeveloped land. For more information, go to ARI's web site at www.amrealtytrust.com .


                         FINANCIAL HIGHLIGHTS
        (dollars in thousands, except share and per share data)

                        Three months ended       Twelve months ended
                            December 31,             December 31,
                         2002          2001       2002         2001
                     ------------------------  ----------------------
 Income from rents   $    21,772  $    23,134  $   89,543  $  101,927
 Expense from
  operations              17,789       18,209      67,701      76,617
                     -----------  -----------  ----------  ----------
  Operating income         3,983        4,925      21,842      25,310

 Land sales               88,368       10,035     127,750      51,841
 Cost of sales            53,349       12,697      75,718      45,348
 Deferred gains           24,273         --        36,135         895
 Recognition of
  previously
  deferred gains            --           --           830        --   
                     -----------  -----------  ----------  ----------
 Gain on land sales       10,746       (2,662)     16,727       5,598

 Pizza sales               9,191        8,929      36,741      34,211
 Cost of sales             7,599        7,219      29,991      27,934
                     -----------  -----------  ----------  ----------
   Gross margin            1,592        1,710       6,750       6,277

 Income from
  operations         $    16,321  $     3,973  $   45,319  $   37,185

 Interest and
  other income             6,168          393       8,590       2,448
 Equity in loss
  of investees            (6,891)      (4,927)    (20,914)    (13,352)
 Gain (loss) on
  sale of investments
  in equity investees        245         --          (286)       (387)
 Gain on the sale
  of real estate            --         23,216        --        77,816
 Equity in gain on
  real estate sales
  by investees              --          4,573        --        22,542
 Other expense            24,283       22,860      92,734     103,829
                     -----------  -----------  ----------  ----------
 Net income (loss)
  from continuing
  operations              (8,440)       4,368     (60,025)     22,423

 Loss from
  discontinued
  operations              (1,086)      (1,288)     (4,214)     (7,354)
 Gain on sale of
  real estate              8,566         --        31,706        --
 Equity in gain on
  real estate sales
  by investees             9,173         --        24,069        --   
                     -----------  -----------  ----------  ----------

 Net income (loss)
  from discontinued
  operations              16,653       (1,288)     51,561      (7,354)

 Net income (loss)   $     8,213  $     3,080  $   (8,464) $   15,069
 Preferred dividend
  requirement               (600)        (617)     (2,401)     (2,485)
                     -----------  -----------  ----------  ----------

 Net income (loss)
  applicable to
  Common shares      $     7,613  $     2,463  $  (10,865) $   12,584
                     ===========  ===========  ==========  ==========

 Earnings Per Share
  Net loss from
   continuing
   operations        $      (.80) $       .32  $    (5.49) $     1.70
                                                           ==========
  Discontinued
   operations               1.46         (.11)       4.53        (.63)
                     -----------  -----------  ----------- ----------
 Net income (loss)
  applicable to
  Common shares      $       .66  $       .21  $     (.96) $     1.07
                     ===========  ===========  =========== ==========
 Weighted average
  common shares
  used to compute
  earnings per
  share              11,375,127   11,714,374   11,375,127  11,714,374

            

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