-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HrZbOshshfiAYVrMFZ+HNOJAPgET422nH11NOHATDdbUFRUixHFrpyw1M4YSMS5g xluuDQet/+ufhf2Hm9opIQ== 0000025232-00-000009.txt : 20000516 0000025232-00-000009.hdr.sgml : 20000516 ACCESSION NUMBER: 0000025232-00-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUSINS PROPERTIES INC CENTRAL INDEX KEY: 0000025232 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 580869052 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-03576 FILM NUMBER: 633096 BUSINESS ADDRESS: STREET 1: 2500 WINDY RIDGE PKWY STE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 BUSINESS PHONE: 7709552200 MAIL ADDRESS: STREET 1: 2500 WINDY RIDGE PARKWAY STREET 2: SUITE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2000 Commission file number 0-3576 COUSINS PROPERTIES INCORPORATED A GEORGIA CORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 58-0869052 2500 WINDY RIDGE PARKWAY ATLANTA, GEORGIA 30339-5683 TELEPHONE: 770-955-2200 Registrant 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, and has been subject to such filing requirements for the past 90 days. At April 30, 2000, 32,483,043 shares of common stock of the Registrant were outstanding.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED BALANCE SHEETS ($ in thousands, except share amounts) March 31, December 31, 2000 1999 ---------- ------------ (Unaudited) ASSETS - ------ PROPERTIES: Operating properties, net of accumulated depreciation of $41,694 as of March 31, 2000 and $35,929 as of December 31, 1999 $398,586 $365,976 Land held for investment or future development 15,365 14,126 Projects under construction 324,238 348,065 Residential lots under development 5,675 4,687 -------- -------- Total properties 743,864 732,854 CASH AND CASH EQUIVALENTS, at cost which approximates market 27,786 1,473 NOTES AND OTHER RECEIVABLES 39,035 37,303 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 153,655 151,737 OTHER ASSETS 11,019 9,558 -------- -------- TOTAL ASSETS $975,359 $932,925 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- NOTES PAYABLE $355,638 $312,257 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 23,793 34,820 DEPOSITS AND DEFERRED INCOME 1,174 861 -------- -------- TOTAL LIABILITIES 380,605 347,938 -------- -------- DEFERRED GAIN 114,548 115,576 -------- -------- MINORITY INTERESTS 31,618 31,689 -------- -------- COMMITMENTS AND CONTINGENT LIABILITIES STOCKHOLDERS' INVESTMENT: Common stock, $1 par value, authorized 50,000,000 shares; issued 32,482,843 shares at March 31, 2000 and 32,328,135 shares at December 31, 1999 32,483 32,328 Additional paid-in capital 261,242 256,988 Treasury stock at cost, 153,600 shares in 2000 and 1999 (4,990) (4,990) Cumulative undistributed net income 159,853 153,396 -------- -------- TOTAL STOCKHOLDERS' INVESTMENT 448,588 437,722 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $975,359 $932,925 ======== ======== The accompanying notes are an integral part of these consolidated balance sheets.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) ($ in thousands, except per share amounts) 2000 1999 ------- ------- REVENUES: Rental property revenues $22,718 $11,665 Development income 1,164 1,760 Management fees 1,214 1,106 Leasing and other fees 321 611 Residential lot and outparcel sales 1,978 2,677 Interest and other 1,258 865 ------- ------- 28,653 18,684 ------- ------- INCOME FROM UNCONSOLIDATED JOINT VENTURES 3,877 4,107 ------- ------- COSTS AND EXPENSES: Rental property operating expenses 6,646 3,201 General and administrative expenses 4,544 3,586 Depreciation and amortization 6,432 2,807 Stock appreciation right expense (credit) 237 (324) Residential lot and outparcel cost of sales 1,554 2,289 Interest expense 497 365 Property taxes on undeveloped land (268) 218 Other 246 290 ------- ------- 19,888 12,432 ------- ------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND GAIN ON SALE OF INVESTMENT PROPERTIES 12,642 10,359 (BENEFIT) PROVISION FOR INCOME TAXES FROM OPERATIONS (7) 865 ------- ------- INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 12,649 9,494 GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION 8,292 5,508 ------- ------- NET INCOME $20,941 $15,002 ======= ======= WEIGHTED AVERAGE SHARES 32,239 31,950 ======= ======= BASIC NET INCOME PER SHARE $ .65 $ .47 ======= ======= ADJUSTED WEIGHTED AVERAGE SHARES 32,931 32,396 ======= ======= DILUTED NET INCOME PER SHARE $ .64 $ .46 ======= ======= CASH DIVIDENDS DECLARED PER SHARE $ .45 $ .41 ======= ======= The accompanying notes are an integral part of these consolidated statements.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) ($ in thousands) 2000 1999 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties $12,649 $ 9,494 Adjustments to reconcile income before gain on sale of investment properties to net cash provided by operating activities: Depreciation and amortization, net of minority interest's share 6,139 2,807 Stock appreciation right expense (credit) 237 (324) Cash charges to expense accrual for stock appreciation rights (201) (63) Effect of recognizing rental revenues on a straight-line basis (1,068) (103) Income from unconsolidated joint ventures (3,877) (4,107) Operating distributions from unconsolidated joint ventures 7,687 9,989 Residential lot and outparcel cost of sales 1,377 2,185 Changes in other operating assets and liabilities: Change in other receivables (948) (445) Change in accounts payable and accrued liabilities (8,094) (5,084) ------- ------- Net cash provided by operating activities 13,901 14,349 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision 8,292 5,508 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales 17,419 10,161 Deferred income recognized (1,028) (1,035) Property acquisition and development expenditures (38,414) (52,920) Investment in unconsolidated joint ventures, including interest capitalized to equity investments (5,728) (11,356) Non-operating distributions from unconsolidated joint ventures - 2,000 Collection of notes receivable, net 275 4,620 Net cash received in formation of venture - 50,000 Change in other assets, net (1,713) (2,869) ------- ------- Net cash (used in) provided by investing activities (20,897) 4,109 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit 69,796 85,178 Repayment of line of credit (25,099) (91,963) Dividends paid (14,480) (13,075) Common stock sold, net of expenses 4,408 4,161 Repayment of other notes payable (1,316) (1,277) ------- ------- Net cash provided by (used in) financing activities 33,309 (16,976) ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 26,313 1,482 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,473 1,347 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $27,786 $ 2,829 ======= ======= The accompanying notes are an integral part of these consolidated statements.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 (UNAUDITED) 1. BASIS OF PRESENTATION - -------------------------- The Consolidated Financial Statements include the accounts of Cousins Properties Incorporated ("Cousins"), its majority owned partnerships and wholly owned subsidiaries, Cousins Real Estate Corporation ("CREC") and its subsidiaries and CREC II Inc. ("CREC II") and its subsidiaries. All of the entities included in the Consolidated Financial Statements are hereinafter referred to collectively as the "Company." Cousins has elected to be taxed as a real estate investment trust ("REIT"), and intends to distribute 100% of its federal taxable income to stockholders, thereby eliminating any liability for future corporate federal income taxes. Therefore, the results included herein do not include a federal income tax provision for Cousins. However, CREC and its subsidiaries and CREC II and its subsidiaries are taxed separately from Cousins as regular corporations. Accordingly, the Consolidated Statements of Income include a (benefit) provision for CREC and CREC II's income taxes. The Consolidated Financial Statements were prepared by the Company without audit, but in the opinion of management reflect all adjustments necessary for the fair presentation of the Company's financial position as of March 31, 2000 and results of operations for the three month periods ended March 31, 2000 and 1999. Results of operations for the interim 2000 period are not necessarily indicative of results expected for the full year. While certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, the Company believes that the disclosures herein are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999. The accounting policies employed are the same as those shown in Note 1 to the Consolidated Financial Statements included in such Form 10-K. Certain 1999 amounts have been reclassified to conform with the 2000 presentation. 2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS - --------------------------------------------------- Interest (net of $5,883,000 and $3,425,000 capitalized in 2000 and 1999, respectively) and income taxes paid were as follows for the three months ended March 31, 2000 and 1999 ($ in thousands): 2000 1999 ------ ------ Interest paid $ 495 $1,043 Income taxes paid $1,719 $ 266 During the three months ended March 31, 2000, approximately $51,250,000 was transferred from Projects Under Construction to Operating Properties and approximately $1,066,000 was transferred from Land Held for Investment or Future Development to Residential Lots Under Development. At March 31, 2000, cash and cash equivalents included approximately $25,383,000 from a property sale held in escrow pending reinvestment in a tax-deferred exchange and approximately $383,000 which is restricted under a municipal bond indenture. 3. NOTES PAYABLE AND INTEREST EXPENSE - ---------------------------------------
At March 31, 2000 and December 31, 1999, notes payable included the following ($ in thousands): March 31, 2000 December 31, 1999 -------------------------------------- -------------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total -------- -------------- -------- -------- -------------- -------- Floating Rate Lines of Credit and Construction Loans $175,349 $ 42,007 $217,356 $130,651 $ 28,504 $159,155 Other Debt (primarily non-recourse fixed rate mortgages) 180,289 189,222 369,511 181,606 190,235 371,841 -------- -------- -------- -------- -------- -------- $355,638 $231,229 $586,867 $312,257 $218,739 $530,996 ======== ======== ======== ======== ======== ========
For the three months ended March 31, 2000, interest expense was recorded as follows ($ in thousands): Share of Unconsolidated Company Joint Ventures Total ------- -------------- ------- Interest Expensed $ 497 $3,603 $ 4,100 Interest Capitalized 5,883 565 6,448 ------- ------ ------- $ 6,380 $4,168 $10,548 ======= ====== =======
During the first quarter of 2000, interest was capitalized related to the Company's and the Company's share of unconsolidated joint venture projects under construction which had an average balance of approximately $436 million. 4. EARNINGS PER SHARE DATA - ---------------------------
Weighted average shares and adjusted weighted average shares are as follows (in thousands): March 31, March 31, 2000 1999 --------- --------- Weighted average shares 32,239 31,950 Dilutive potential common shares 692 446 ------ ------ Adjusted weighted average shares 32,931 32,396 ====== ====== Anti-dilutive options not included 24 1,191 ====== ======
5. REPORTABLE SEGMENTS - ----------------------- The Company has four reportable segments: Office Division, Retail Division, Medical Office Division and Land Division. The Office Division, Retail Division and Medical Office Division develop, lease and manage office buildings, retail centers and medical office buildings, respectively. The Land Division owns various tracts of strategically located land which are being held for future development. The Land Division also develops single-family residential communities which are parceled into lots and sold to various home builders. The management of the Company evaluates performance of its reportable segments based on Funds From Operations ("FFO"). The Company calculates its FFO using the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO adjusted to (i) eliminate the recognition of rental revenues on a straight-line basis, (ii) reflect stock appreciation right expense on a cash basis and (iii) recognize certain fee income as cash is received rather than when recognized in the financial statements. The Company believes its FFO presentation more properly reflects its operating results. The Company's reportable segments are broken down based on what type of product the division provides. The divisions are managed separately because each product they provide has separate and distinct development issues, leasing and/or sales strategies and management issues. The notations (100%) and (JV) used in the following tables indicate wholly owned and unconsolidated joint ventures, respectively, and all amounts are in thousands.
Three Months Ended Office Retail Medical Land Unallocated March 31, 2000 Division Division Office Division Division and Other Total - -------------- -------- -------- --------------- -------- ----------- -------- Rental property revenues (100%) $ 13,193 $ 5,875 $ 2,558 $ -- $ 24 $ 21,650 Rental property revenues (JV) 15,764 559 39 -- -- 16,362 Development income, management fees and leasing and other fees (100%) 2,001 99 564 35 -- 2,699 Development income, management fees and leasing and other fees (JV) 411 -- -- -- -- 411 Other income (100%) -- 650 -- 1,328 1,258 3,236 Other income (JV) -- -- -- 43 27 70 -------- -------- ------- ------- ------- -------- Total revenues 31,369 7,183 3,161 1,406 1,309 44,428 -------- -------- ------- ------- ------- -------- Rental property operating expenses (100%) 4,862 1,338 686 -- (7) 6,879 Rental property operating expenses (JV) 4,275 133 13 -- -- 4,421 Other expenses (100%) 2,035 1,786 1,016 1,085 1,166 7,088 Other expenses (JV) 294 -- -- 11 4,047 4,352 -------- -------- ------- ------- ------- -------- Total expenses 11,466 3,257 1,715 1,096 5,206 22,740 -------- -------- ------- ------- ------- -------- Consolidated funds from operations 19,903 3,926 1,446 310 (3,897) 21,688 -------- -------- ------- ------- ------- -------- Depreciation and amortization (100%) (3,860) (1,361) (656) -- (1) (5,878) Depreciation and amortization (JV) (3,740) (191) (12) -- -- (3,943) Effect of the recognition of rental revenues on a straight-line basis (100%) 1,068 -- -- -- -- 1,068 Effect of the recognition of rental revenues on a straight-line basis (JV) (250) -- -- -- -- (250) Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- -- (36) (36) Gain on sale of investment properties, net of applicable income tax provision -- -- -- -- 8,292 8,292 -------- -------- ------- ------- ------- -------- Net income 13,121 2,374 778 310 4,358 20,941 Benefit for income taxes from operations -- -- -- -- (7) (7) -------- -------- ------- ------- ------- -------- Income from operations before taxes $ 13,121 $ 2,374 $ 778 $ 310 $ 4,351 $ 20,934 ======== ======== ======= ======= ======= ======== Total assets $571,989 $253,541 $64,803 $11,711 $73,315 $975,359 ======== ======== ======= ======= ======= ======== Investment in unconsolidated joint ventures $128,472 $ 17,036 $ 1,379 $ 6,765 $ 2 $153,655 ======== ======== ======= ======= ======= ========
Three Months Ended Office Retail Medical Land Unallocated March 31, 1999 Division Division Office Division Division and Other Total - -------------- -------- -------- --------------- -------- ----------- -------- Rental property revenues (100%) $ 6,013 $ 4,744 $ 718 $ -- $ 88 $ 11,563 Rental property revenues (JV) 15,344 4,454 199 -- -- 19,997 Development income, management fees and leasing and other fees 2,610 536 271 60 -- 3,477 Other income (100%) -- -- -- 2,677 865 3,542 Other income (JV) -- -- -- 6 28 34 -------- -------- ------- ------- ------- -------- Total revenues 23,967 9,734 1,188 2,743 981 38,613 -------- -------- ------- ------- ------- -------- Rental property operating expenses (100%) 1,961 999 210 -- 31 3,201 Rental property operating expenses (JV) 4,568 1,074 65 -- -- 5,707 Other expenses (100%) -- -- -- 2,507 5,315 7,822 Other expenses (JV) -- -- -- 11 3,563 3,574 -------- -------- ------- ------- ------- -------- Total expenses 6,529 2,073 275 2,518 8,909 20,304 -------- -------- ------- ------- ------- -------- Consolidated funds from operations 17,438 7,661 913 225 (7,928) 18,309 -------- -------- ------- ------- ------- -------- Depreciation and amortization (100%) (1,460) (801) (318) -- (82) (2,664) Depreciation and amortization (JV) (5,019) (1,470) (62) -- -- (6,548) Effect of the recognition of rental revenues on a straight-line basis (100%) 102 -- -- -- -- 102 Effect of the recognition of rental revenues on a straight-line basis (JV) (107) 15 -- -- -- (92) Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- -- 387 387 Gain on sale of investment properties, net of applicable income tax provision -- -- -- -- 5,508 5,508 -------- -------- ------- ------- ------- -------- Net income 10,954 5,405 533 225 (2,115) 15,002 Provision for income taxes from operations -- -- -- -- 865 865 -------- -------- ------- ------- ------- -------- Income from operations before taxes $ 10,954 $ 5,405 $ 533 $ 225 $(1,250) $ 15,867 ======== ======== ======= ======= ======= ======== Total assets $404,421 $231,877 $55,537 $ 9,859 $46,571 $748,265 ======== ======== ======= ======= ======= ======== Investment in unconsolidated joint ventures $142,151 $ 76,286 $ 3,606 $ 1,812 $ 17 $223,872 ======== ======== ======= ======= ======= ========
Reconciliation to Consolidated Revenues - --------------------------------------- Three Months Ended ---------------------- March 31, March 31, 2000 1999 --------- --------- Rental property revenues (100%) $21,650 $11,563 Effect of the recognition of rental revenues on a straight-line basis (100%) 1,068 102 Development income, management fees and leasing and other fees 2,699 3,477 Residential lot and outparcel sales 1,978 2,677 Interest and other 1,258 865 ------- ------- Total consolidated revenues $28,653 $18,684 ======= =======
6. LAGUNA NIGUEL PROMENADE - ---------------------------- On March 28, 2000, the Company sold Laguna Niguel Promenade, an approximately 154,000 square foot retail center located in Laguna Niguel, California for $26.7 million, which was approximately $6.4 million over the cost of the center. Including depreciation recapture of approximately $.8 million, the net gain on the sale was approximately $7.2 million. The net proceeds from the sale were placed in escrow pending a tax-deferred exchange to be identified by the Company. Subsequent to March 31, 2000, the net proceeds from the sale were released from escrow as no properties into which to exchange were identified. 7. WARRANTS TO PURCHASE COMMON STOCK OF CYPRESS COMMUNICATIONS, INC. - ---------------------------------------------------------------------- In December 1999, the Company executed an Amended and Restated Master Communications License Transaction Agreement (the "Master Agreement") with Cypress Communications, Inc. ("Cypress") that provides for Cypress and the owner of each building subject to the Master Agreement to enter into a Communications License Agreement (an "Agreement") pursuant to which Cypress will have the non-exclusive right to access the risers and certain areas of certain of the Company's and its joint ventures' office and medical office buildings. Each Agreement allows Cypress to install equipment and wiring, at Cypress' sole cost and expense, and to offer a variety of telecommunication services to tenants of each of the applicable buildings. Each Agreement has a term of 5 years with an automatic renewal for another 5 years unless Cypress elects not to renew or Cypress fails to equip the applicable building with a server within 18 months of the execution of the Agreement. Pursuant to each Agreement, the Company will receive a percentage of the revenue earned by Cypress from tenants and third parties who use the telecommunication services. In addition, the Company has entered into a Stock Warrant Agreement with Cypress which provides that Cypress issue to the Company 54,000 warrants per one million gross leasable square feet in the buildings subject to the Master Agreement or approximately 345,329 warrants (of which 150,909 warrants relate to wholly owned buildings and 194,420 warrants relate to joint venture owned buildings), each warrant entitling the owner to purchase one share of Cypress' common stock at an exercise price of $4.22 per share. Certain provisions of the Stock Warrant Agreement can result in the return of said warrants, stock or gain proceeds from disposition of the stock upon the sale of the buildings. On February 10, 2000, Cypress completed its initial public offering of 10 million shares of common stock. The warrants have not been exercised, and the underlying common stock has not been registered and is not required to be registered until 18 months after completion of the initial public offering. The value of the warrants are included in both Other Assets and Deferred Income in the accompanying Consolidated Balance Sheet and were recorded on the date Cypress completed its initial public offering. The value of the warrants of $344,000 was determined based on the difference between management's estimate of the fair market value of the warrants less the exercise price times the number of warrants granted related to properties wholly owned by the Company. The Deferred Income will be amortized into Rental Property Revenues over the life of each Agreement after the aforementioned provisions, which could result in the return of the warrants, stock or gain proceeds, are no longer in effect. Pursuant to Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities," the asset will be adjusted to fair market value based on the current trading value of the Cypress common stock beginning within one year of the date at which the warrants are required to be registered, with such adjustment resulting in unrealized gains or losses which will be recognized as a separate component of Stockholders' Investment in the Consolidated Balance Sheet. On May 15, 2000, the Company received notice from Cypress that it would waive its rights regarding the provisions which could result in the return of the warrants, stock or gain proceeds from disposition of the stock upon the sale of the buildings. PART I. FINANCIAL INFORMATION - ------------------------------ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three Months Ended March 31, 2000 and 1999 Results of Operations: - ---------------------- Rental Property Revenues and Operating Expenses. Rental property revenues increased approximately $11,053,000 in 2000. Rental property revenues from the Company's office portfolio increased approximately $8,146,000. The June 1999 acquisition of Inforum increased rental property revenues by approximately $4,482,000 in 2000. Three office buildings, AT&T Wireless Services Headquarters, 333 John Carlyle and 555 North Point Center East, which became partially operational for financial reporting purposes in September 1999, May 1999 and February 2000, respectively, contributed approximately $1,959,000, $938,000 and $278,000, respectively, to the increase. Rental property revenues from 101 Independence Center also increased approximately $348,000 in 2000. Additionally, rental property revenues from 615 Peachtree Street increased approximately $133,000 in 2000 as the average economic occupancy increased to 80% in 2000 from 60% in 1999. Rental property revenues from the Company's retail portfolio increased approximately $1,131,000 in 2000. Rental property revenues increased approximately $1,360,000 from The Avenue East Cobb, which became partially operational for financial reporting purposes in September 1999. The increase was partially offset by the sale of Abbotts Bridge Station in February 1999, which decreased rental property revenues by approximately $157,000. Rental property revenues from the Company's medical office portfolio increased approximately $1,840,000 in 2000. Meridian Mark Plaza became partially operational for financial reporting purposes in April 1999, which contributed $1,012,000 to the increase. AtheroGenics and Northside/Alpharetta II became partially operational for financial reporting purposes in March 1999 and September 1999, respectively, which contributed $211,000 and $611,000, respectively, to the increase. Rental property operating expenses increased approximately $3,445,000 due to the aforementioned office buildings, retail centers and medical office buildings becoming partially operational, as well as the acquisition of Inforum in June 1999. Development Income. Development income decreased approximately $596,000 in 2000. Development income decreased approximately $450,000 in 2000 from the build-to-suit for Walgreens on an outparcel at Colonial Plaza MarketCenter. Development income also decreased approximately $320,000 from Cousins LORET Venture, L.L.C. ("Cousins LORET") related to the development of The Pinnacle and approximately $285,000 from the third party development of Total System Services, Inc.'s corporate headquarters. The decrease was partially offset by an increase of approximately $343,000 in development income from the Crawford Long Hospital campus redevelopment and the joint venture medical office building. The decrease in development income was also partially offset by approximately $158,000 from the development of 1155 Perimeter Center West and approximately $122,000 from the third party development of Cox Enterprises' corporate headquarters. Leasing and Other Fees. Leasing and other fees decreased approximately $290,000 in 2000. Leasing fees from Cousins LORET decreased approximately $415,000 in 2000 primarily related to the lease-up of The Pinnacle. This decrease was partially offset by an increase of leasing fees of approximately $147,000 from Wildwood Associates, mainly due to lease-up of the 2300 Windy Ridge Parkway Building in 2000. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales decreased approximately $699,000 in 2000. The decrease was partially due to a decrease in residential lot sales from 61 lots in 1999 to 29 lots in 2000, which decreased residential lot sales recognized approximately $1,349,000. Partially offsetting the decrease was an outparcel sale recognized by a subsidiary of CREC in 2000 totaling approximately $650,000, as compared to no outparcel sales in 1999. Residential lot and outparcel cost of sales decreased approximately $735,000 in 2000. Residential lot cost of sales decreased approximately $1,137,000 due to the aforementioned decrease in the number of lots sold. The decrease in cost of sales was less than the corresponding decrease in sales due to an increase in 2000 of the gross profit percentages used to calculate the cost of sales on residential lot sales in certain of the residential developments. The decrease was partially offset by an increase in outparcel cost of sales in 2000 of approximately $402,000 due to the aforementioned outparcel sale. Interest and Other Income. Interest and other income increased approximately $393,000 in 2000, mainly due to interest income recognized in 2000 from the $18.6 million note receivable from Charlotte Gateway Village, LLC. Income from Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures decreased approximately $230,000 in 2000. Income from Wildwood Associates increased approximately $528,000 in 2000. The increase is partially due to an increase in income before depreciation, amortization and interest expense from the 3200 Windy Hill Road Building of approximately $206,000 due to an increase in the average economic occupancy to 100% in 2000 from 91% in 1999. The increase is also partially due to an increase in income before depreciation, amortization and interest expense from the 4200 Wildwood Parkway Building of approximately $237,000 due to an increase in average economic occupancy to 100% in 2000 from 61% in 1999. Income from Haywood Mall Associates decreased approximately $1,137,000 in 2000 due to the June 1999 sale of the Company's 50% interest in Haywood Mall. Income from CP Venture LLC increased approximately $214,000 in 2000 due to a decrease in amortization expense. Income from Cousins LORET decreased approximately $183,000. Depreciation and amortization expense increased approximately $417,000 due to The Pinnacle becoming partially operational, which contributed to the decrease in income from Cousins LORET. Additionally, capitalized interest decreased by approximately $495,000 in 2000 due to The Pinnacle becoming fully operational for financial reporting purposes in December 1999. Income before depreciation, amortization and interest expense from The Pinnacle increased approximately $736,000 due to an increase in the average economic occupancy to 88% in 2000 from 72% in 1999, which partially offset the decrease. Income from 285 Venture, LLC increased approximately $142,000 in 2000 as 1155 Perimeter Center West became partially operational in January 2000. Income from Cousins Stone LP increased approximately $117,000 in 2000. This venture was formed in June 1999 when the Company purchased Faison's 50% interest in Faison-Stone. General and Administrative Expenses. General and administrative expenses increased approximately $958,000 in 2000. The increase was primarily due to the Company's continued expansion. Depreciation and Amortization. Depreciation and amortization increased approximately $3,625,000 in 2000 due to the aforementioned acquisition of Inforum in June 1999 and the aforementioned office buildings, retail centers and medical office buildings becoming partially operational. Stock Appreciation Right Expense (Credit). The stock appreciation right expense increased approximately $561,000 from a credit of $324,000 in 1999 to an expense of $237,000 in 2000. This non-cash item is primarily related to the Company's stock price, which was $33.9375 and $36.8125 at December 31, 1999 and March 31, 2000, respectively; and $32.25 and $28.9375 at December 31, 1998 and March 31, 1999, respectively. Interest Expense. Interest expense increased approximately $132,000 in 2000. Interest expense before capitalization increased approximately $2,590,000 to $6,380,000 in 2000 from $3,790,000 in 1999 due to higher debt levels. Partially offsetting this increase was an increase of approximately $2,458,000 in interest capitalized to projects under development (a reduction of interest expense) to $5,883,000 in 2000 from $3,425,000 in 1999. Property Taxes on Undeveloped Land. Property taxes on undeveloped land decreased approximately $486,000 in 2000 due to the reversal of estimated amounts accrued for anticipated reassessments of the Company's North Point and Wildwood land holdings. The final reassessments, after appeal, were lower than the anticipated reassessments and the accrual was reduced. Gain on Sale of Investment Properties. Gain on sale of investment properties increased approximately $2,784,000 in 2000. The 2000 gain included the following: the March 2000 sale of Laguna Niguel Promenade ($7.2 million) and the amortization of deferred gain from CP Venture LLC ($1.0 million). The 1999 gain included the following: the January 1999 sale of 3 acres of McMurray land ($.1 million gain), the February 1999 sale of Abbotts Bridge Station, a neighborhood retail center ($3.5 million gain), the March 1999 sale of Kennesaw Crossings neighborhood retail center ($.9 million gain) and the amortization of deferred gain from CP Venture LLC ($1.0 million). Liquidity and Capital Resources: - -------------------------------- Financial Condition. The Company's adjusted debt (including its pro rata share of unconsolidated joint venture debt) was 31% of total market capitalization at March 31, 2000. Adjusted debt is defined as the Company's debt and the Company's pro rata share of unconsolidated joint venture debt as disclosed in Note 4 of "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10-K for the year ended December 31, 1999, excluding the Charlotte Gateway Village, LLC debt as it is fully exculpated debt which is supported by a long-term lease to Bank of America Corporation. The Company has development and acquisition projects in various planning stages. The Company currently intends to finance these projects, as well as the completion of projects currently under construction, using its existing lines of credit (increasing those lines of credit as required), long-term non-recourse financing on the Company's unleveraged projects, joint ventures, project sales and other financings as market conditions warrant. In September 1996, the Company filed a shelf registration statement with the Securities and Exchange Commission ("SEC") for the offering from time to time of up to $200 million of common stock, warrants to purchase common stock and debt securities, of which approximately $132 million remains available at March 31, 2000. The Company from time to time evaluates opportunities and strategic alternatives, including but not limited to joint ventures, mergers and acquisitions and new private or publicly-owned entities created to hold existing assets and acquire new assets. These alternatives may also include sales of single or multiple assets when the Company perceives opportunities to capture value and redeploy proceeds or distribute proceeds to stockholders. The Company's consideration of these alternatives is part of its ongoing strategic planning process. There can be no assurance that any such alternative, if undertaken and consummated, would not materially adversely affect the Company or the market price of Cousins' Common Stock. Cash Flows. Net cash provided by operating activities decreased approximately $.4 million in 2000. Changes in other operating assets and liabilities increased approximately $3.5 million which contributed to the decrease. Residential lot and outparcel cost of sales decreased approximately $.8 million due to the aforementioned decrease in the number of residential lots sold in 2000, partially offset by an increase in outparcel sales. Operating distributions from unconsolidated joint ventures decreased approximately $2.3 million, primarily due to approximately $2.0 million of operating distributions from Cousins LORET in 1999 and none in 2000. Income from unconsolidated joint ventures decreased approximately $.2 million, as previously discussed, which further contributed to the decrease in net cash provided by operating activities. Additionally, the effect of recognizing rental revenues on a straight-line basis decreased net cash provided by operating activities by approximately $1.0 million. Partially offsetting the increase in net cash provided by operating activities was an increase in income before gain on sale of investment properties of approximately $3.2 million. Also, depreciation and amortization increased $3.3 million. Stock appreciation right expense also increased approximately $.6 million. Net cash used in investing activities increased approximately $25.0 million in 2000 from net cash provided by investing activities in 1999. Net cash received in formation of venture (see Note 5 of "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10-K for the year ended December 31, 1999) decreased approximately $50.0 million in 2000 which primarily caused the increase in the net cash used in investing activities. The collection of notes receivable also decreased approximately $4.4 million due to the repayment of the Cousins LORET note receivable in 1999. Non-operating distributions from unconsolidated joint ventures decreased approximately $2.0 million, which also partially contributed to the increase in net cash used in investing activities. In 1999, Cousins LORET distributed approximately $2.0 million, which represented a portion of the proceeds from the $70 million financing of The Pinnacle in December 1998. The increase in net cash used in investing activities from net cash provided by investing activities was partially offset by a decrease of approximately $14.5 million in property acquisition and development expenditures, as a result of the Company having a higher level of expenditures for projects under development in 1999. Net cash provided by sales activities increased approximately $10.0 million also partially offsetting the increase in net cash used in investing activities due primarily to the sale of Laguna Niguel Promenade in 2000. Investment in unconsolidated joint ventures also decreased approximately $5.6 million primarily due to a contribution of approximately $4.8 million in 1999 to Charlotte Gateway Village, LLC. Additionally, contributions to 285 Venture, LLC decreased approximately $1.6 million in 2000. Change in other assets, net, also decreased approximately $1.1 million, which further offset the aforementioned increases. Net cash provided by financing activities increased approximately $50.3 million in 2000 from net cash used in financing activities in 1999, which was primarily attributable to an increase of approximately $51.5 million in the net amount drawn on the Company's line of credit. An increase in the dividends paid per share to $.45 in 2000 from $.41 in 1999 and an increase in the number of shares outstanding partially offset the decrease as dividends paid increased approximately $1.4 million. Quantitative and Qualitative Disclosure About Market Risk: - ---------------------------------------------------------- There have been no significant changes in the Company's market risk related to its notes payable and notes receivable from that disclosed in the Company's annual report on Form 10-K for the year ended December 31, 1999. Year 2000: - ---------- The "Year 2000 issue" is the result of certain computer systems, software, electronic equipment or embedded chips (collectively known as "computer systems") being written using two digits rather than four to define the applicable year. Therefore, certain computer systems may not distinguish between a year that begins with a "20" rather than a "19." This could have resulted in system failures which could have disrupted operations. No significant delays in processing or interruption of business have occurred to date due to the start of the Year 2000. The Company assessed the impact of the Year 2000 issue on its business and operations and attempted to identify the areas which rely on computer systems and could have been potentially impacted, which mainly included the systems utilized in the operations of its real estate properties and in the processing of its accounting data. The Company completed an inventory of the material computer systems being utilized in its existing operating real estate properties which could have been adversely affected by the Year 2000 issue. Such systems included, but not limited to, building control systems, heating and air conditioning controls, elevator controls, fire alarms and security devices. Certain of these systems were replaced, upgraded or modified as deemed necessary, the cost of which was not material. The Company upgraded its accounting software to a version that its software vendor has represented to be Year 2000 compliant, as they define it. The hardware and operating system used to run the accounting software has been represented to be Year 2000 compliant. The Company has also assessed its non-financial computer systems, and replaced, upgraded or modified such systems as needed. The cost of the upgrades to the accounting software and non-financial computer systems was not material. The Company completed its survey of all material third party vendors to determine their Year 2000 compliance status and has received certificates, where possible, as to their compliancy. No estimates can be made as to any potential adverse impact resulting from the failure of any third party vendor or service provider to be Year 2000 compliant. To the extent the Year 2000 issue has a material adverse effect on the business operations or financial condition of third parties with which the Company has material relationships, such as vendors, suppliers, tenants and financial institutions, the Year 2000 issue could also have a material adverse effect on the Company's business, results of operations and financial condition. To date, there have been no significant issues or interruptions of business and, based upon an assessment of the current compliance by third parties, there appears to be no material business risk posed by any such non-compliance as a result of a vendor not being Year 2000 compliant. To date, the cost to analyze and prepare for the Year 2000 issue has not been material. The Company does not expect to incur any additional costs to address the Year 2000 issue. There can be no assurance that the Company will be able to identify and correct all aspects of the effect of the Year 2000 issue on the Company. However, the Company does not currently expect the Year 2000 issue will have a material impact on the Company's business, operations or financial condition. Supplemental Financial Information: - -----------------------------------
Depreciation and amortization expense included the following components for the three months ended March 31, 2000 ($ in thousands): Share of Unconsolidated Company Joint Ventures Total ------- -------------- ------- Furniture, fixtures and equipment $ 194 $ 45 $ 239 Deferred financing costs -- 4 4 Goodwill and related business acquisition costs 75 -- 75 Real estate related: Building (including tenant first generation) 5,576 3,693 9,269 Tenant second generation 294 183 477 ------ ------ ------- $6,139 $3,925 $10,064 ====== ====== =======
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures during the three months ended March 31, 2000, including its share of unconsolidated joint ventures ($ in thousands): Office Retail Medical Total ------ ------ ------- ----- Second generation related costs $483 $ 91 $ 43 $617 Building improvements 47 23 30 100 ---- ---- ---- ---- $530 $114 $ 73 $717 ==== ==== ==== ====
PART II. OTHER INFORMATION - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The Company's Annual Meeting of Stockholders was held on May 2, 2000. (b) Not applicable. (c) The following proposals were adopted by the stockholders of the Company: (i) The election of seven Directors. The vote on the above was: For Against Abstained ---------- ------- --------- Richard W. Courts, II 28,760,486 -- 91,930 Thomas G. Cousins 28,762,485 -- 89,931 Lillian C. Giornelli 28,760,986 -- 91,430 Terence C. Golden 28,760,257 -- 92,159 Boone A. Knox 28,762,486 -- 89,930 William Porter Payne 28,762,186 -- 90,230 Richard E. Salomon 28,760,386 -- 92,030 Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K ------------------- There have been no reports on Form 8-K filed by the Registrant during the quarter ended March 31, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COUSINS PROPERTIES INCORPORATED Registrant /s/ Kelly H. Barrett________________________ -------------------- Kelly H. Barrett Senior Vice President - Finance (Authorized Officer) (Principal Accounting Officer) May 15, 2000 EX-27 2
5 3-MOS DEC-31-2000 MAR-31-2000 27,786 0 39,035 0 0 0 785,558 41,694 975,359 24,967 355,638 0 0 32,483 416,105 975,359 0 32,530 0 19,888 0 0 497 12,642 (7) 12,649 0 8,292 0 20,941 .65 .64
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