-----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, MbW2A8RDRrxxIW9ecyUoBwz+Pf8y+yk1W+lFJZtvwT1dGVGb37qV4Jj/KsCvSQ9y l3elrc9MKS+PTy18eL2HqA== 0000025232-01-500013.txt : 20010815 0000025232-01-500013.hdr.sgml : 20010815 ACCESSION NUMBER: 0000025232-01-500013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 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: 1934 Act SEC FILE NUMBER: 000-03576 FILM NUMBER: 1711980 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 form10q_063001.txt 6-30-01 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 June 30, 2001 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 July 31, 2001, 49,737,288 shares of common stock of the Registrant were outstanding. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED BALANCE SHEETS ($ in thousands, except share amounts) June 30, December 31, 2001 2000 ----------- ------------ (Unaudited) ASSETS PROPERTIES: Operating properties, net of accumulated depreciation of $84,343 as of June 30, 2001 and $70,032 as of December 31, 2000 ......... $ 766,276 $ 772,359 Land held for investment or future development 30,090 15,218 Projects under construction ................... 102,959 93,870 Residential lots under development ............ 7,124 3,001 ----------- ----------- Total properties ............................ 906,449 884,448 CASH AND CASH EQUIVALENTS, at cost which approximates market ........................... 4,729 1,696 NOTES AND OTHER RECEIVABLES ...................... 41,809 40,640 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES ...... 178,775 175,471 OTHER ASSETS ..................................... 31,332 13,497 ----------- ----------- TOTAL ASSETS .............................. $ 1,163,094 $ 1,115,752 =========== =========== LIABILITIES AND STOCKHOLDERS' INVESTMENT NOTES PAYABLE .................................... $ 518,882 $ 485,085 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES ......... 32,576 31,185 DEPOSITS AND DEFERRED INCOME ..................... 2,131 2,538 ----------- ----------- TOTAL LIABILITIES ......................... 553,589 518,808 ----------- ----------- DEFERRED GAIN .................................... 109,813 111,858 ----------- ----------- MINORITY INTERESTS ............................... 26,512 30,619 ----------- ----------- COMMITMENTS AND CONTINGENT LIABILITIES STOCKHOLDERS' INVESTMENT: Common stock, $1 par value, authorized 150,000,000 shares; issued 49,705,788 shares at June 30, 2001 and 49,364,477 shares at December 31, 2000 ................. 49,706 49,364 Additional paid-in capital .................... 266,971 259,659 Treasury stock at cost, 153,600 shares in 2001 and 2000 ............................... (4,990) (4,990) Unearned compensation ......................... (4,043) (4,690) Cumulative undistributed net income ........... 165,536 155,124 ----------- ----------- TOTAL STOCKHOLDERS' INVESTMENT ............ 473,180 454,467 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT ............................. $ 1,163,094 $ 1,115,752 =========== =========== 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 AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED) (In thousands, except per share amounts) Three Months Six Months Ended June 30, Ended June 30, ----------------- ----------------- 2001 2000 2001 2000 ------- ------- ------- ------- REVENUES: Rental property revenues .......... $35,979 $27,531 $71,635 $50,249 Development income ................ 1,636 1,009 3,262 2,173 Management fees ................... 1,974 1,237 3,445 2,451 Leasing and other fees ............ 1,669 794 2,290 1,115 Residential lot and outparcel sales 1,519 3,932 3,907 5,910 Interest and other ................ 1,498 1,339 3,093 2,597 ------- ------- ------- ------- 44,275 35,842 87,632 64,495 ------- ------- ------- ------- INCOME FROM UNCONSOLIDATED JOINT VENTURES .......................... 5,640 4,407 11,145 8,284 ------- ------- ------- ------- COSTS AND EXPENSES: Rental property operating expenses 10,480 7,962 21,094 14,608 General and administrative expenses 6,841 4,916 12,942 9,460 Depreciation and amortization ..... 11,039 8,009 21,622 14,441 Stock appreciation right expense (credit) ........................ 122 129 (136) 366 Residential lot and outparcel cost of sales ........................ 1,354 3,613 3,353 5,167 Interest expense .................. 6,550 2,998 13,721 3,495 Property taxes on undeveloped land 173 191 341 (77) Other ............................. 1,648 984 2,050 1,230 ------- ------- ------- ------- 38,207 28,802 74,987 48,690 ------- ------- ------- ------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND GAIN ON SALE OF INVESTMENT PROPERTIES ............. 11,708 11,447 23,790 24,089 PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS ................... 227 (117) (713) (124) ------- ------- ------- ------- INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES ............. 11,481 11,564 24,503 24,213 GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION ......................... 1,077 1,575 19,422 9,867 ------- ------- ------- ------- NET INCOME ........................... $12,558 $13,139 $43,925 $34,080 ======= ======= ======= ======= WEIGHTED AVERAGE SHARES .............. 49,256 48,538 49,178 48,448 ======= ======= ======= ======= BASIC NET INCOME PER SHARE ........... $ .25 $ .27 $ .89 $ .70 ======= ======= ======= ======= DILUTED WEIGHTED AVERAGE SHARES ...... 50,395 49,823 50,301 49,614 ======= ======= ======= ======= DILUTED NET INCOME PER SHARE ......... $ .25 $ .27 $ .87 $ .69 ======= ======= ======= ======= CASH DIVIDENDS DECLARED PER SHARE .... $ .34 $ .30 $ .68 $ .60 ======= ======= ======= ======= The accompanying notes are an integral part of these consolidated statements. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED) ($ in thousands) 2001 2000 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties .................................. $ 24,503 $ 24,213 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 ............... 21,526 13,846 Amortization of unearned compensation ..... 556 -- Stock appreciation right expense (credit) . (136) 366 Cash charges to expense accrual for stock appreciation rights ..................... (373) (299) Effect of recognizing rental revenues on a straight-line basis ................... (1,597) (1,432) Income from unconsolidated joint ventures . (11,145) (8,284) Operating distributions from unconsolidated joint ventures .......................... 14,777 18,369 Residential lot and outparcel cost of sales 2,684 4,803 Changes in other operating assets and liabilities: Change in other receivables ........... 402 (3,152) Change in accounts payable and accrued liabilities ......................... (2,608) 413 -------- -------- Net cash provided by operating activities ....... 48,589 48,843 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision .......... 19,422 9,867 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales ............................. 35,674 17,510 Deferred income recognized ................ (2,023) (2,056) Non-cash gain on disposition of leasehold interests ..................... (236) -- Property acquisition and development expenditures ................................ (82,443) (87,564) Investment in unconsolidated joint ventures, including interest capitalized to equity investments ................................. (18,723) (10,348) Collection of notes receivable, net ........... 869 1,778 Net cash paid in acquisition of business ...... (2,126) -- Change in other assets, net ................... (3,999) (2,299) -------- -------- Net cash used in investing activities ........... (53,585) (73,112) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from credit facility ................. 137,324 126,488 Repayment of credit facility .................. (131,781) (164,893) Proceeds from other notes payable ............. 31,000 89,944 Dividends paid ................................ (33,513) (29,029) Common stock sold, net of expenses ............ 7,745 6,719 Repayment of other notes payable .............. (2,746) (4,116) -------- -------- Net cash provided by financing activities ....... 8,029 25,113 -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS ....... 3,033 844 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,696 1,473 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ...... $ 4,729 $ 2,317 ======== ======== The accompanying notes are an integral part of these consolidated statements. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001 (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 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 provision (benefit) 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 (which adjustments are of a normal and recurring nature) for the fair presentation of the Company's financial position as of June 30, 2001 and results of operations for the three and six month periods ended June 30, 2001 and 2000. Results of operations for the interim 2001 periods 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 accounting principles generally accepted in the United States 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, 2000. The accounting policies employed are the same as those shown in Note 1 to the Consolidated Financial Statements included in such Form 10-K. On October 2, 2000, a 3-for-2 stock split effected in the form of a 50% stock dividend was awarded to stockholders of record on September 15, 2000. All prior period shares outstanding and per share amounts have been restated for the effect of the stock dividend. Certain 2000 amounts have been reclassified to conform with the 2001 presentation. 2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS - --------------------------------------------------- Interest (net of $4,730,000 and $9,657,000 capitalized in 2001 and 2000, respectively) and income taxes paid were as follows for the six months ended June 30, 2001 and 2000 ($ in thousands): 2001 2000 ---- ---- Interest paid $14,242 $2,075 Income taxes paid $ 200 $2,841 During the six months ended June 30, 2001, approximately $37,326,000 was transferred from Projects Under Construction to Operating Properties. 3. NOTES PAYABLE AND INTEREST EXPENSE - ---------------------------------------
At June 30, 2001 and December 31, 2000, notes payable included the following ($ in thousands): June 30, 2001 December 31, 2000 -------------------------------------- --------------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total -------- -------------- -------- -------- ---------------- -------- Floating Rate Line of Credit and Construction Loans $179,839 $ 79,817 $259,656 $174,296 $ 70,309 $244,605 Other Debt (primarily non-recourse fixed rate mortgages) 339,043 183,694 522,737 310,789 185,983 496,772 -------- -------- -------- -------- -------- -------- $518,882 $263,511 $782,393 $485,085 $256,292 $741,377 ======== ======== ======== ======== ======== ========
For the three and six months ended June 30, 2001, interest expense was recorded as follows ($ in thousands): Three Months Ended Six Months Ended June 30, 2001 June 30, 2001 ------------------------------------ ------------------------------------ Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ------- ------- -------------- ------ Interest Expensed $6,550 $4,190 $10,740 $13,721 $8,472 $22,193 Interest Capitalized 2,416 464 2,880 4,730 952 5,682 ------ ------ ------- ------- ------ ------- $8,966 $4,654 $13,620 $18,451 $9,424 $27,875 ====== ====== ======= ======= ====== =======
In May 2001, the Company completed the financing of Presidential MarketCenter. This $28 million non-recourse mortgage note payable has an interest rate of 7.65% and a maturity of May 2, 2011. Subsequent to June 30, 2001, the Company completed the financing of 600 University Park Place. This $14 million non-recourse mortgage note payable has an interest rate of 7.38% and a maturity of August 10, 2011. During the first six months of 2001, 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 $209 million. 4. EARNINGS PER SHARE DATA - --------------------------- Weighted average shares and diluted weighted average shares are as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2001 2000 2001 2000 ------ ------ ------ ------ Weighted average shares 49,256 48,538 49,178 48,448 Dilutive potential common shares 1,139 1,285 1,123 1,166 ------ ------ ------ ------ Diluted weighted average shares 50,395 49,823 50,301 49,614 ====== ====== ====== ====== Anti-dilutive options not included 901 4 901 4 ====== ====== ====== ====== 5. RECENT ACCOUNTING PRONOUNCEMENTS - ------------------------------------ In July 2001, the Financial Accounting Standards Board issued Statement No. 141, "Business Combinations" ("SFAS 141") and Statement No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 eliminates pooling of interest accounting and requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. SFAS 142 eliminates the amortization of goodwill and certain other intangible assets and requires that goodwill be evaluated for impairment by applying a fair value-based test. The Company will adopt the standard effective January 1, 2002 for previous acquisitions and June 30, 2001 for prospective acquisitions. Amortization of goodwill was approximately $180,000 and $291,000 in the three and six month 2001 periods, respectively. 6. REPORTABLE SEGMENTS - ----------------------- The Company has three reportable segments: Office Division, Retail Division and Land Division. The Office Division and Retail Division develop, lease and manage office buildings and retail centers, 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 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 Land Unallocated June 30, 2001 Division Division Division and Other Total - ------------------ -------- -------- -------- ----------- ------- Rental property revenues (100%) $27,578 $7,976 $ -- $ 90 $35,644 Rental property revenues (JV) 16,899 604 -- -- 17,503 Development income, management fees and leasing and other fees (100%) 4,896 275 108 -- 5,279 Development income, management fees and leasing and other fees (JV) -- -- -- -- - Other income (100%) -- -- 1,519 1,498 3,017 Other income (JV) -- -- 624 - 624 -------------------------------------------------------- Total revenues 49,373 8,855 2,251 1,588 62,067 -------------------------------------------------------- Rental property operating expenses (100%) 8,603 2,396 -- 49 11,048 Rental property operating expenses (JV) 4,992 173 -- -- 5,165 Other expenses (100%) 3,954 1,696 1,697 9,569 16,916 Other expenses (JV) 3,399 65 1 - 3,465 -------------------------------------------------------- Total expenses 20,948 4,330 1,698 9,618 36,594 -------------------------------------------------------- Gain on sale of undepreciated investment properties -- -- -- -- -- -------------------------------------------------------- Consolidated funds from operations 28,425 4,525 553 (8,030) 25,473 -------------------------------------------------------- Depreciation and amortization (100%) (8,367) (2,349) -- (2) (10,718) Depreciation and amortization (JV) (3,793) (216) -- -- (4,009) Effect of the recognition of rental revenues on a straight-line basis (100%) 335 -- -- -- 335 Effect of the recognition of rental revenues on a straight-line basis (JV) 152 -- -- -- 152 Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- 248 248 Gain on sale of investment properties, net of applicable income tax provision 475 593 9 -- 1,077 -------------------------------------------------------- Net income 17,227 2,553 562 (7,784) 12,558 -------------------------------------------------------- Provision for income taxes from operations -- -- -- 227 227 -------------------------------------------------------- Income from operations before taxes $17,227 $2,553 $ 562 $(7,557) $12,785 ========================================================
Six Months Ended Office Retail Land Unallocated June 30, 2001 Division Division Division and Other Total - ---------------- -------- -------- -------- ----------- ---------- Rental property revenues (100%) $ 53,124 $ 16,765 $ -- $ 165 $ 70,054 Rental property revenues (JV) 35,783 1,202 -- -- 36,985 Development income, management fees and leasing and other fees (100%) 8,092 731 174 -- 8,997 Development income, management fees and leasing and other fees (JV) 1,050 -- -- -- 1,050 Other income (100%) -- -- 3,907 3,093 7,000 Other income (JV) -- -- 892 25 917 ---------------------------------------------------------- Total revenues 98,049 18,698 4,973 3,283 125,003 ---------------------------------------------------------- Rental property operating expenses (100%) 16,924 4,690 -- 50 21,664 Rental property operating expenses (JV) 10,601 329 -- -- 10,930 Other expenses (100%) 5,405 3,235 4,096 19,528 32,264 Other expenses (JV) 9,021 140 24 21 9,206 ---------------------------------------------------------- Total expenses 41,951 8,394 4,120 19,599 74,064 ---------------------------------------------------------- Gain on sale of undepreciated investment properties -- -- -- -- -- ---------------------------------------------------------- Consolidated funds from operations 56,098 10,304 853 (16,316) 50,939 ---------------------------------------------------------- Depreciation and amortization (100%) (16,073) (4,779) -- (3) (20,855) Depreciation and amortization (JV) (7,677) (426) -- -- (8,103) Effect of the recognition of rental revenues on a straight-line basis (100%) 1,581 -- -- -- 1,581 Effect of the recognition of rental revenues on a straight-line basis (JV) 432 -- -- -- 432 Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- 509 509 Gain on sale of investment properties, net of applicable income tax provision 1,185 18,228 9 -- 19,422 ---------------------------------------------------------- Net income 35,546 23,327 862 (15,810) 43,925 ---------------------------------------------------------- Benefit for income taxes from operations -- -- -- (713) (713) ---------------------------------------------------------- Income from operations before taxes $ 35,546 $ 23,327 $ 862 $(16,523) $ 43,212 ========================================================== Total assets $815,197 $260,934 $16,640 $70,323 $1,163,094 ========================================================== Investment in unconsolidated joint ventures $152,502 $ 16,988 $ 9,285 $ - $ 178,775 ==========================================================
Reconciliation to Consolidated Revenues - --------------------------------------- Three Months Ended Six Months Ended June 30, June 30, ---------------------- --------------------- 2001 2000 2001 2000 ------- ------- ------- ------- Rental property revenues (100%) $35,644 $27,168 $70,054 $48,818 Effect of the recognition of rental revenues on a straight-line basis (100%) 335 363 1,581 1,431 Development income, management fees and leasing and other fees 5,279 3,040 8,997 5,739 Residential lot and outparcel sales 1,519 3,932 3,907 5,910 Interest and other 1,498 1,339 3,093 2,597 ---------------------- --------------------- Total consolidated revenues $44,275 $35,842 $87,632 $64,495 ====================== =====================
Three Months Ended Office Retail Land Unallocated June 30, 2000 Division Division Division and Other Total - ------------------ -------- -------- -------- ----------- ------- Rental property revenues (100%) $20,459 $6,693 $ -- $ 16 $27,168 Rental property revenues (JV) 16,097 582 -- -- 16,679 Development income, management fees and leasing and other fees (100%) 2,844 125 71 -- 3,040 Development income, management fees and leasing and other fees (JV) 1,240 -- -- -- 1,240 Other income (100%) -- 425 3,507 1,339 5,271 Other income (JV) -- -- 23 5 28 -------------------------------------------------------- Total revenues 40,640 7,825 3,601 1,360 53,426 -------------------------------------------------------- Rental property operating expenses (100%) 6,624 1,758 -- 6 8,388 Rental property operating expenses (JV) 4,561 154 -- -- 4,715 Other expenses (100%) 3,324 2,127 3,642 3,716 12,809 Other expenses (JV) 770 -- 20 4,035 4,825 -------------------------------------------------------- Total expenses 15,279 4,039 3,662 7,757 30,737 -------------------------------------------------------- Gain on sale of undepreciated investment properties -- -- 542 -- 542 -------------------------------------------------------- Consolidated funds from operations 25,361 3,786 481 (6,397) 23,231 -------------------------------------------------------- Depreciation and amortization (100%) (5,742) (1,714) -- -- (7,456) Depreciation and amortization (JV) (3,671) (201) -- -- (3,872) Effect of the recognition of rental revenues on a straight-line basis (100%) 363 -- -- -- 363 Effect of the recognition of rental revenues on a straight-line basis (JV) (128) -- -- -- (128) Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- (32) (32) Gain on sale of investment properties, net of applicable income tax provision 455 578 -- -- 1,033 -------------------------------------------------------- Net income 16,638 2,449 481 (6,429) 13,139 -------------------------------------------------------- Benefit for income taxes from operations -- -- - (117) (117) -------------------------------------------------------- Income from operations before taxes $16,638 $2,449 $ 481 $(6,546) $13,022 ========================================================
Six Months Ended Office Retail Land Unallocated June 30, 2000 Division Division Division and Other Total - ---------------- -------- -------- -------- ----------- -------- Rental property revenues (100%) $ 36,210 $ 12,568 $ -- $ 40 $ 48,818 Rental property revenues (JV) 31,900 1,141 -- -- 33,041 Development income, management fees and leasing and other fees (100%) 5,409 224 106 -- 5,739 Development income, management fees and leasing and other fees (JV) 1,651 -- -- -- 1,651 Other income (100%) -- 1,075 4,835 2,597 8,507 Other income (JV) -- -- 66 32 98 ---------------------------------------------------------- Total revenues 75,170 15,008 5,007 2,669 97,854 ---------------------------------------------------------- Rental property operating expenses (100%) 12,172 3,096 -- (1) 15,267 Rental property operating expenses (JV) 8,849 287 -- -- 9,136 Other expenses (100%) 6,575 4,318 4,727 4,277 19,897 Other expenses (JV) 1,064 -- 31 8,082 9,177 ---------------------------------------------------------- Total expenses 28,660 7,701 4,758 12,358 53,477 ---------------------------------------------------------- Gain on sale of undepreciated investment properties -- -- 564 -- 564 ---------------------------------------------------------- Consolidated funds from operations 46,510 7,307 813 (9,689) 44,941 ---------------------------------------------------------- Depreciation and amortization (100%) (10,258) (3,076) -- - (13,334) Depreciation and amortization (JV) (7,423) (392) -- -- (7,815) Effect of the recognition of rental revenues on a straight-line basis (100%) 1,431 -- -- -- 1,431 Effect of the recognition of rental revenues on a straight-line basis (JV) (378) -- -- -- (378) Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- (68) (68) Gain on sale of investment properties, net of applicable income tax provision 905 8,398 -- -- 9,303 ---------------------------------------------------------- Net income 30,787 12,237 813 (9,757) 34,080 ---------------------------------------------------------- Benefit for income taxes from operations -- -- -- (124) (124) ---------------------------------------------------------- Income from operations before taxes $ 30,787 $ 12,237 $ 813 $(9,881) $ 33,956 ========================================================== Total assets $657,243 $271,750 $ 9,371 $48,372 $986,736 ========================================================== Investment in unconsolidated joint ventures $130,033 $ 16,885 $ 5,082 $ - $152,000 ==========================================================
PART I. FINANCIAL INFORMATION - ------------------------------ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months Ended June 30, 2001 and 2000 Results of Operations: - ---------------------- Rental Property Revenues and Operating Expenses. Rental property revenues increased approximately $8,448,000 and $21,386,000 in the three and six month 2001 periods, respectively. Rental property revenues from the Company's office portfolio increased approximately $7,091,000 and $17,064,000 in the three and six month 2001 periods, respectively. The December 2000 acquisitions of One Georgia Center and The Points at Waterview increased rental property revenues by approximately $1,730,000 and $1,015,000, respectively, in the three month 2001 period and $3,514,000 and $2,115,000, respectively, in the six month 2001 period. Four office buildings, 101 Second Street, 1900 Duke Street, 555 North Point Center East and 600 University Park, which became partially operational in April 2000, October 2000, February 2000 and June 2000, respectively, contributed approximately $486,000, $823,000, $291,000 and $507,000, respectively, to the increase in the three month 2001 period and approximately $4,759,000, $1,401,000, $868,000 and $1,054,000, respectively, to the increase in the six month 2001 period. Additionally, rental property revenues from Inforum increased approximately $832,000 and $1,271,000 in the three and six month 2001 periods, respectively, as the average economic occupancy increased from 84% for the six month 2000 period to 98% for the six month 2001 period. Rental property revenues increased approximately $481,000 and $541,000 in the three and six month 2001 periods, respectively, from AT&T Wireless Services Headquarters. Furthermore, rental property revenues increased approximately $192,000 in both the three and six month 2001 periods from Cerritos Corporate Center - Phase II, which became fully operational for financial reporting purposes in June 2001. Rental property revenues from 615 Peachtree Street increased approximately $302,000 in the six month 2001 period as the average economic occupancy increased from 78% in 2000 to 94% in 2001, and rental property revenues from Northside/Alpharetta II increased approximately $287,000 in the six month 2001 period as the average economic occupancy increased from 56% in 2000 to 68% in 2001. Rental property revenues from the Company's retail portfolio increased approximately $1,283,000 and $4,197,000 in the three and six month 2001 periods, respectively. Rental property revenues increased approximately $1,274,000 and $3,048,000 in the three and six month 2001 periods, respectively, from Mira Mesa MarketCenter, and approximately $829,000 and $2,549,000 in the three and six month 2001 periods, respectively, from The Avenue of the Peninsula, both of which became partially operational for financial reporting purposes in May 2000. Rental property revenues increased approximately $422,000 in both the three and six month 2001 periods from The Avenue Peachtree City, which became partially operational for financial reporting purposes in April 2001. Rental property revenues increased approximately $201,000 and $470,000 in the three and six month 2001 periods, respectively, from The Avenue East Cobb, and approximately $186,000 and $370,000 in the three and six month 2001 periods, respectively, from Salem Road Station, which properties became partially operational for financial reporting purposes in September 1999 and October 2000, respectively. Rental property revenues also increased approximately $303,000 in the six month 2001 period from Presidential MarketCenter as an additional phase of the center became partially operational in October 2000, and as the average economic occupancy of the original center increased from 89% in 2000 to 92% in 2001. The increase in rental property revenues was partially offset by the sale of Colonial Plaza MarketCenter in February 2001, which decreased rental property revenues by approximately $1,773,000 and $2,400,000 in the three and six month 2001 periods, respectively. Additionally, the sale of Laguna Niguel Promenade in March 2000 decreased rental property revenues by approximately $595,000 in the six month 2001 period. Rental property operating expenses increased approximately $2,518,000 and $6,486,000 in the three and six month periods, respectively, due to the aforementioned office buildings and retail centers becoming partially operational for financial reporting purposes and the aforementioned acquisitions of One Georgia Center and The Points at Waterview. Development Income. Development income increased approximately $627,000 and $1,089,000 in the three and six month 2001 periods, respectively. Development income increased approximately $82,000 and $409,000 in the three and six month 2001 periods, respectively, from the third party development of the Turner Tower and approximately $88,000 and $204,000 in the three and six month 2001 periods, respectively, from the third party development of The Arboretum. Additionally, development income increased approximately $697,000 and $921,000 in the three and six month 2001 periods, respectively, from Cousins Properties Services LP ("CPS," formerly Cousins Stone LP until name was changed effective August 6, 2001). Effective March 1, 2001, the Company purchased the remaining 25% interest in CPS, at which point the Company consolidated the operations of CPS, which had previously been accounted for using the equity method of accounting and therefore recognized as joint venture income. Tenant construction fees of approximately $75,000 and $225,000 in the three and six month 2001 periods, respectively, from the Crawford Long joint venture medical office building also contributed to the increase in development income. The increase was partially offset by a decrease in development income of approximately $183,000 and $392,000 in the three and six month 2001 periods, respectively, from Charlotte Gateway Village, LLC, as construction of Gateway Village has been substantially completed, and a decrease of approximately $82,000 and $238,000 in the three and six month 2001 periods, respectively, from 285 Venture, LLC, as construction of 1155 Perimeter Center West has been substantially completed. Management Fees. Management fees increased approximately $737,000 and $994,000 in the three and six month 2001 periods, respectively. The increase in management fees was mainly due to the aforementioned consolidation of CPS, which contributed approximately $786,000 and $1,090,000 to the increase in the three and six month 2001 periods, respectively. The increase was partially offset by a decrease in management fees of approximately $189,000 and $354,000 in the three and six month 2001 periods, respectively, due to the disposition of the medical office third party management division in October 2000. Leasing and Other Fees. Leasing and other fees increased approximately $875,000 and $1,175,000 in the three and six month 2001 periods, respectively. Leasing and other fees increased approximately $1,146,000 and $1,367,000 in the three and six month 2001 periods, respectively, due to the aforementioned consolidation of CPS. The increase was partially offset by a decrease of approximately $367,000 and $405,000 in the three and six month 2001 periods, respectively, from the aforementioned disposition of the medical office third party management division in October 2000. This division recognized a fee of approximately $330,000 in the second quarter of 2000 for representing the owners of a third party managed property in the sale of that property. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales decreased approximately $2,413,000 and $2,003,000 in the three and six month 2001 periods, respectively. The decrease in the three month 2001 period was partially due to a decrease in residential lots sold from 86 lots in 2000 to 30 lots in 2001, which decreased residential lot sales by approximately $1,988,000. A subsidiary of CREC recognized one outparcel sale of approximately $425,000 in the second quarter of 2000, as compared to none in 2001, which further contributed to the decrease in residential lot and outparcel sales. The decrease in the six month 2001 period was also partially due to a decrease in residential lots sold from 115 lots in 2000 to 75 lots in 2001, which decreased residential lot sales by approximately $928,000. Also contributing to the decrease were two outparcel sales recognized by a subsidiary of CREC in 2000 totaling approximately $1,075,000, as compared to no outparcel sales in 2001. Residential lot and outparcel cost of sales decreased approximately $2,259,000 and $1,814,000 in the three and six month 2001 periods, respectively. Residential lot cost of sales decreased approximately $1,933,000 and $1,082,000 in the three and six month 2001 periods, respectively, due to the aforementioned decrease in the number of lots sold. The decrease in cost of sales was greater than the corresponding decrease in sales in the six month 2001 period due to an increase in the gross profit percentages used to calculate the cost of sales on residential lot sales in certain of the residential developments. The decrease in residential lot and outparcel cost of sales was also due to a decrease in outparcel cost of sales of approximately $326,000 and $732,000 in the three and six month 2001 periods, respectively, due to the aforementioned outparcel sales in 2000. Interest and Other Income. Interest and other income increased approximately $159,000 and $496,000 in the three and six month 2001 periods, respectively. Approximately $327,000 and $654,000 of the increase in the three and six month 2001 periods, respectively, was due to interest income recognized in 2001 from the additional interest income on the 650 Massachusetts Avenue mortgage notes (see Note 3 of "Notes to Consolidated Financial Statements" in the Company's Annual Report on Form 10-K for the year ended December 31, 2000). The increase was partially offset by a decrease of approximately $122,000 in both the three and six month 2001 periods due primarily to interest income recognized on the proceeds from the sale of Laguna Niguel Promenade in March 2000, which were placed in escrow pending reinvestment. Income from Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased approximately $1,233,000 and $2,861,000 in the three and six month 2001 periods, respectively. Income from Wildwood Associates increased approximately $398,000 and $783,000 in the three and six month 2001 periods, respectively. Income before depreciation, amortization and interest expense from the 3200 Windy Hill Road Building increased approximately $176,000 and $352,000 in the three and six month 2001 periods, respectively, due to the renewal at a higher rate of a significant tenant's lease. Additionally, income before depreciation, amortization and interest expense from the 2300 Windy Ridge Parkway Building increased by approximately $106,000 in the six month 2001 period, as average economic occupancy increased from 99% in 2000 to 100% in 2001. Interest expense decreased approximately $107,000 in the six month 2001 period due to reduced mortgage note payable balances. Income from 285 Venture, LLC increased approximately $378,000 and $899,000 in the three and six month 2001 periods, respectively, as the average economic occupancy at 1155 Perimeter Center West increased from 18% for the six month 2000 period to 87% for the six month 2001 period. Income from Cousins LORET, L.L.C. increased approximately $101,000 and $268,000 in the three and six month 2001 periods, respectively. The increase was mainly due to an increase in average economic occupancy at The Pinnacle from 89% for the six month 2000 period to 98% for the six month 2001 period. Income from Temco Associates increased approximately $620,000 and $833,000 in the three and six month 2001 periods, respectively, partially due to profits recognized from 130 lot sales at the Bentwater residential development. The first quarter of 2001 was the first period in which profits from lot sales were recognized. Additionally, approximately 85 acres of land were sold for a gross profit of approximately $360,000 in the three month 2001 period as compared to no land sales in the same period of 2000. Income from Charlotte Gateway Village, LLC increased approximately $97,000 and $188,000 in the three and six month 2001 periods, respectively, due to the Company recognizing its 11.46% preferred return on its equity beginning in the third quarter of 2000. Income from CPS decreased approximately $470,000 and $434,000 in the three and six month 2001 periods, respectively, due to the aforementioned consolidation of Cousins Stone LP on March 1, 2001. General and Administrative Expenses. General and administrative expenses increased approximately $1,925,000 and $3,482,000 in the three and six month 2001 periods, respectively. The increase was partially attributable to the aforementioned consolidation of CPS. Also partially contributing to the increase in general and administrative expenses was a decrease in general and administrative expenses capitalized to projects under development due to a lower level of projects under development in 2001. Depreciation and Amortization. Depreciation and amortization increased approximately $3,030,000 and $7,181,000 in the three and six month 2001 periods, respectively, due to the aforementioned office buildings and retail centers becoming partially operational for financial reporting purposes and the aforementioned acquisitions of One Georgia Center and The Points at Waterview. Stock Appreciation Right Expense (Credit). Stock appreciation right expense decreased approximately $502,000 from an expense of $366,000 in the six month 2000 period to a credit of $136,000 in the six month 2001 period. This non-cash item is primarily related to the Company's stock price, which was $27.9375, $25.01 and $26.85 at December 31, 2000, March 31, 2001 and June 30, 2001, respectively; and $22.625, $24.5417 and $25.667 at December 31, 1999, March 31, 2000 and June 30, 2000, respectively. Interest Expense. Interest expense increased approximately $3,552,000 and $10,226,000 in the three and six month 2001 periods, respectively. Interest expense before capitalization increased to approximately $8,966,000 and $18,451,000 in the three and six month 2001 periods, respectively, from approximately $6,772,000 and $13,152,000 in the three and six month 2000 periods, respectively, due to higher average debt levels. Also contributing to this increase in interest expense was a decrease of approximately $1,358,000 and $4,927,000 in the three and six month periods, respectively, in interest capitalized to projects under development (a reduction of interest expense) to approximately $2,416,000 and $4,730,000 in the three and six month 2001 periods, respectively, from approximately $3,774,000 and $9,657,000 in the three and six month 2000 periods, respectively, due to a lower level of projects under development in 2001. Property Taxes on Undeveloped Land. Property taxes on undeveloped land increased approximately $418,000 in the six month 2001 period due to the reversal in 2000 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. Other Expense. Other expense increased approximately $664,000 and $820,000 in the three and six month 2001 periods, respectively. The increase was partially due to increased minority interest expense of approximately $447,000 and $431,000 in the three and six month 2001 periods, respectively, mainly due to the minority interest's current cash flow participation in 101 Second Street, which became partially operational for financial reporting purposes in April 2000. Additionally, predevelopment expense increased approximately $217,000 and $389,000 in the three and six month 2001 periods, respectively. Gain on Sale of Investment Properties. Gain on sale of investment properties decreased approximately $498,000 in the three month 2001 period and increased approximately $9,555,000 in the six month 2001 period. The 2001 gain included the following: the February 2001 sale of Colonial Plaza MarketCenter ($17.0 million), the February 2001 disposition of leasehold interests in Summit Green ($.2 million) and the amortization of deferred gain from CP Venture LLC ($2.2 million). The 2000 gain included the following: the March 2000 sale of Laguna Niguel Promenade ($7.2 million), the April 2000 sale of a tract of land at North Point ($.6 million) and the amortization of deferred gain from CP Venture LLC ($2.1 million). Liquidity and Capital Resources: - -------------------------------- Financial Condition. The Company's adjusted debt (including its pro rata share of unconsolidated joint venture debt) was 35% of total market capitalization at June 30, 2001. 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, 2000, 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 temporarily increased its $150 million credit facility to $225 million, which increase expires August 31, 2001. The Company had $179.8 million drawn on this credit facility as of June 30, 2001. 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 credit facility (increasing the credit facility 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 June 30, 2001. 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 $.3 million in 2001. Operating distributions from unconsolidated joint ventures decreased approximately $3.6 million, which contributed to the decrease in net cash provided by operating activities. Operating distributions decreased approximately $2.9 million from Wildwood Associates, $1.8 million from Temco Associates and $1.4 million from CPS. Partially offsetting the decrease in operating distributions was an increase in operating distributions from 285 Venture, LLC of approximately $1.2 million and CSC Associates, L.P. of approximately $.9 million. Income from unconsolidated joint ventures increased approximately $2.9 million, which also contributed to the decrease in net cash provided by operating activities. Further contributing to the decrease in net cash provided by operating activities was a decrease in residential lot and outparcel cost of sales of approximately $2.1 million. Depreciation and amortization increased approximately $7.7 million due to the aforementioned office buildings and retail centers becoming operational, as well as the acquisitions of One Georgia Center and The Points at Waterview, which partially offset the decrease in net cash provided by operating activities. Net cash used in investing activities decreased approximately $19.5 million in 2001. Net cash provided by sales activities increased approximately $27.5 million, which contributed to the decrease in net cash used in investing activities, due primarily to the sale of Colonial Plaza MarketCenter in February 2001. The decrease in net cash used in investing activities was also partially due to a decrease of approximately $5.1 million in property acquisition and development expenditures, as a result of the Company having a lower level of projects under development. Investment in unconsolidated joint ventures increased approximately $8.4 million, which partially offset the decrease in net cash used in investing activities. Contributions to CPI/FSP I, L.P. increased approximately $9.3 million and contributions to Crawford Long - CPI, LLC increased approximately $6.0 million in 2001. The increase in investment in unconsolidated joint ventures was partially offset by a decrease in contributions to 285 Venture, LLC of approximately $6.9 million. Change in other assets, net, also increased approximately $1.7 million, which further offset the aforementioned decrease in net cash used in investing activities. Net cash paid in acquisition of business, which resulted from the acquisition of the remaining 25% interest in CPS, further offset the decrease in net cash used in investing activities by approximately $2.1 million. Net cash provided by financing activities decreased approximately $17.1 million in 2001, which was primarily attributable to a decrease of approximately $58.9 million in proceeds from other notes payable. The Company completed the $90 million financing of 101 Second Street in April 2000, as compared to the $28 million financing of Presidential MarketCenter completed in May 2001. An increase in the dividends paid per share to $.34 in 2001 from $.30 in 2000 and an increase in the number of shares outstanding also contributed to the decrease in net cash provided by financing activities, as dividends paid increased approximately $4.5 million. Partially offsetting the decrease was an increase of approximately $43.9 million in the net amount drawn on the Company's credit facility. Common stock sold, net of expenses, increased by approximately $1.0 million and repayment of other notes payable decreased by approximately $1.4 million, both of which further partially offset the decrease in net cash provided by financing activities. Quantitative and Qualitative Disclosure About Market Risk: - ---------------------------------------------------------- There have been no significant changes in the Company's market risk related to its notes payable and notes receivable from that disclosed in the Company's annual report on Form 10-K for the year ended December 31, 2000. Supplemental Financial Information: - ----------------------------------- Depreciation and amortization expense included the following components for the three and six months ended June 30, 2001 ($ in thousands):
Three Months Ended Six Months Ended June 30, 2001 June 30, 2001 ----------------------------------- ----------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ------- ------- -------------- ------- Furniture, fixtures and equipment $ 323 $ -- $ 323 $ 673 $ 48 $ 721 Deferred financing costs -- 1 1 -- 1 1 Goodwill and related business acquisition costs 197 -- 197 308 -- 308 Real estate related: Building (including tenant first generation) 9,673 3,756 13,429 18,895 7,597 26,492 Tenant second generation 915 186 1,101 1,783 375 2,158 ------- ------ ------- ------- ------ ------- $11,108 $3,943 $15,051 $21,659 $8,021 $29,680 ======= ====== ======= ======= ====== =======
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures during the three and six months ended June 30, 2001, including its share of unconsolidated joint ventures ($ in thousands):
Three Months Ended Six Months Ended June 30, 2001 June 30, 2001 ---------------------------- ----------------------------- Office Retail Total Office Retail Total ------ ------ ------ ------ ------ ----- Second generation related costs $ 591 $96 $ 687 $1,048 $233 $1,281 Building improvements 999 1 1,000 1,226 1 1,227 ------ --- ------ ------ ---- ------ $1,590 $97 $1,687 $2,274 $234 $2,508 ====== === ====== ====== ==== ======
PART II. OTHER INFORMATION Item 6. Reports on Form 8-K (b) Reports on Form 8-K There have been no reports on Form 8-K filed by the Registrant during the quarter ended June 30, 2001. 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 and Chief Financial Officer (Authorized Officer) (Principal Financial and Accounting Officer) August 14, 2001 -----END PRIVACY-ENHANCED MESSAGE-----