-----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, CkxPjw/Nsg5MZ5XTfgMzuvt5DFGIYNR9u6khj6Xcbp+yA0vOj96Ge/dxYrXPfUCM BPG+WV7RCqNxocuZJSHSQg== 0000025232-96-000031.txt : 19961113 0000025232-96-000031.hdr.sgml : 19961113 ACCESSION NUMBER: 0000025232-96-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NYSE 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: 96658728 BUSINESS ADDRESS: STREET 1: 2500 WINDY RIDGE PKWY STE 1600 CITY: MARIETTA STATE: GA ZIP: 30067 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 September 30, 1996 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 October 31, 1996, 28,771,189 shares of common stock of the Registrant were outstanding.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED BALANCE SHEETS ($ in thousands, except per share amounts) December 31, September 30, 1995 1996 ------------ ------------- (Unaudited) ASSETS - ------ PROPERTIES: Operating properties $109,354 $171,842 Land held for investment or future development 27,035 24,284 Projects under construction 87,503 104,470 Residential lots under development 11,452 15,120 Less: accumulated depreciation (15,483) (19,134) -------- -------- Total properties 219,861 296,582 -------- -------- CASH AND CASH EQUIVALENTS, at cost which approximates market 1,552 132 NOTES AND OTHER RECEIVABLES 53,868 53,027 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 137,260 134,268 OTHER ASSETS 5,465 8,789 -------- -------- TOTAL ASSETS $418,006 $492,798 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- NOTES PAYABLE $113,434 $186,460 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 22,681 19,008 MINORITY INTERESTS IN CONSOLIDATED ENTITIES 3,837 9 DEPOSITS AND DEFERRED INCOME 376 333 -------- -------- TOTAL LIABILITIES 140,328 205,810 -------- -------- STOCKHOLDERS' INVESTMENT Common stock, $1 par value, authorized 50,000,000 shares; issued 28,222,639 shares at December 31, 1995 and 28,771,189 shares at September 30, 1996 28,223 28,771 Additional paid-in capital 153,265 162,132 Cumulative undistributed net income 96,190 96,085 -------- -------- TOTAL STOCKHOLDERS' INVESTMENT 277,678 286,988 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $418,006 $492,798 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED) ($ in thousands, except per share amounts) Three Months Nine Months Ended Ended September 30, September 30, ---------------- ---------------- 1995 1996 1995 1996 ------- ------- ------- ------- REVENUES: Rental property revenues $ 4,844 $ 8,457 $13,867 $21,827 Development and construction fees 2,804 55 3,305 1,380 Management fees 547 787 1,648 1,959 Leasing and other fees 421 110 1,743 1,362 Residential lot and outparcel sales 5,469 2,218 7,595 9,688 Interest and other 1,245 1,185 3,581 3,974 ------- ------- ------- ------- 15,330 12,812 31,739 40,190 ------- ------- ------- ------- INCOME FROM UNCONSOLIDATED JOINT VENTURES 3,467 4,362 10,336 12,926 ------- ------- ------- ------- COSTS AND EXPENSES: Rental property operating expenses 1,119 1,784 3,227 4,946 General and administrative expenses 1,801 2,286 5,819 6,581 Depreciation and amortization 1,088 1,835 3,208 4,729 Leasing and other commissions 13 29 18 41 Stock appreciation right expense 308 752 493 440 Residential lot and outparcel cost of sales 5,142 2,489 7,085 9,522 Interest expense 123 1,583 377 3,959 Property taxes on undeveloped land 286 408 740 901 Other 502 174 1,138 992 ------- ------- ------- ------- 10,382 11,340 22,105 32,111 ------- ------- ------- ------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND GAIN ON SALE OF INVESTMENT PROPERTIES 8,415 5,834 19,970 21,005 PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS 562 (808) 803 (864) ------- ------- ------- ------- INCOME FROM OPERATIONS BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 7,853 6,642 19,167 21,869 GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION 1,746 397 1,746 1,017 ------- ------- ------- ------- NET INCOME $ 9,599 $ 7,039 $20,913 $22,886 ======= ======= ======= ======= NET INCOME PER SHARE $ .34 $ .25 $ .75 $ .80 ======= ======= ======= ======= CASH DIVIDENDS DECLARED PER SHARE $ .24 $ .27 $ .72 $ .81 ======= ======= ======= ======= WEIGHTED AVERAGE COMMON EQUIVALENT SHARES 28,027 28,610 27,941 28,431 ======= ======= ======= =======
The accompanying notes are an integral part of these consolidated statements.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED) ($ in thousands) 1995 1996 ------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Income from operations before gain on sale of investment properties $19,167 $ 21,869 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, net of minority interests' share 3,099 4,729 Stock appreciation right expense 493 440 Cash charges to expense accrual for stock appreciation rights (103) (959) Effect of recognizing rental revenues on a straight-line basis (90) 32 Deferred income received 1,673 -- Deferred income recognized (2,800) -- Income from unconsolidated joint ventures (10,336) (12,926) Operating distributions from unconsolidated joint ventures 11,220 13,098 Residential lot and outparcel cost of sales 6,832 9,145 Changes in other operating assets and liabilities: Change in other receivables 60 (1,026) Change in accounts payable and accrued liabilities 1,040 4,152 ------- -------- Net cash provided by operating activities 30,255 38,554 ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property acquisition and development expenditures (63,925) (102,404) Collection of notes receivable 744 27,596 Investment in notes receivable -- (26,031) Change in other assets, net 1,213 (3,701) Investment properties cost of sales 1,051 2,174 Non-operating distributions from unconsolidated joint ventures 1,226 1,408 Cash portion of exchange transaction -- 1,092 Gain on sale of investment properties, net of applicable income tax provision 1,746 1,017 Investment in unconsolidated joint ventures (8,671) (268) ------- -------- Net cash used in investing activities (66,616) (99,117) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from other notes payable 51,500 81,048 Repayment of line of credit (58,373) (53,651) Proceeds from line of credit 57,241 48,965 Dividends paid (20,100) (22,991) Common stock sold, net of expenses 3,581 9,108 Repayment of other notes payable (238) (3,336) ------- -------- Net cash provided by financing activities 33,611 59,143 ------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (2,750) (1,420) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,407 1,552 ------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 657 $ 132 ======= ========
The accompanying notes are an integral part of these consolidated statements. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED) 1. BASIS OF PRESENTATION - -------------------------- The Consolidated Financial Statements include the accounts of Cousins Properties Incorporated ("Cousins") and its majority owned partnerships, as well as Cousins Real Estate Corporation ("CREC") 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 are taxed separately from Cousins as a regular corporation. Accordingly, the Consolidated Statements of Income include a provision (benefit) for CREC'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 September 30, 1996, and results of operations for the nine month periods ended September 30, 1995 and 1996. Results of operations for the interim 1996 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, 1995. The accounting policies employed are the same as those shown in Note 1 to the Consolidated Financial Statements included in the Form 10-K. 2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS - --------------------------------------------------- Interest (net of $3,469,000 and $4,642,000 capitalized in 1995 and 1996, respectively) and income taxes paid were as follows for the nine months ended September 30, 1995 and 1996 ($ in thousands): 1995 1996 ---- ---- Interest paid $568 $3,765 Income taxes paid $201 $ 53 In January 1996, in conjunction with the exchange of certain partnership interests, approximately $3,825,000 was transferred from Minority Interests in Consolidated Entities to Operating Properties ($3,283,000) and Projects Under Construction ($542,000); and approximately $1,688,000 was transferred from Investment in Unconsolidated Joint Ventures to Operating Properties. 3. COSTS CAPITALIZED AND FEES ELIMINATED IN CONSOLIDATION - ----------------------------------------------------------- Development, construction, and leasing fees received by CREC and its subsidiaries from Cousins and Cousins' majority owned joint ventures are eliminated in consolidation. Costs related to planning, development, leasing and construction of properties (including related general and administrative expenses) are capitalized. The table below shows the fees eliminated, the internal costs capitalized related to these fees, and the additional internal costs capitalized by CREC to its own residential developments for the nine months ended September 30, 1995 and 1996 ($ in thousands): 1995 1996 ------ ------ Intercompany fees eliminated in consolidation $3,775 $2,995 Internal costs capitalized in consolidation related to intercompany fees $1,919 $1,717 Internal costs capitalized to CREC residential developments $ 355 $ 376 4. NOTES PAYABLE AND INTEREST EXPENSE - --------------------------------------- At December 31, 1995 and September 30, 1996, the composition of notes payable was as follows ($ in thousands):
December 31, 1995 September 30, 1996 ------------------------------ -------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- -------- ------- -------------- ------- Fixed Rate Mortgages (non-recourse) $ 80,564 $64,759 $145,323 $158,276 $76,099 $234,375 Floating Rate Lines of Credit 32,870 23,153 56,023 28,184 22,081 50,265 -------- ------- -------- -------- ------- -------- $113,434 $87,912 $201,346 $186,460 $98,180 $284,640 ======== ======= ======== ======== ======= ========
Effective July 1, 1996, the Company amended and extended its existing line of credit. The line amount is $50 million initially and increases to $100 million on January 1, 1997. The line is unsecured, bears interest tied to the Federal Funds rate and matures June 30, 1997. For the three and nine months ended September 30, 1996, interest expense was recorded as follows ($ in thousands):
Three Months Ended Nine Months Ended September 30, 1996 September 30, 1996 --------------------------------- ------------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ----- ------- -------------- ----- Interest Expensed $1,583 $1,669 $3,252 $3,959 $4,854 $ 8,813 Interest Capitalized 1,498 155 1,653 4,642 436 5,078 ------ ------ ------ ------ ------ ------- $3,081 $1,824 $4,905 $8,601 $5,290 $13,891 ====== ====== ====== ====== ====== =======
During the third quarter of 1996, 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 $91 million. 5. ACQUISITIONS - ----------------- The Lea Richmond Company And The Richmond Development Company ------------------------------------------------------------- On July 16, 1996, Cousins acquired the medical office building development and management operations of The Lea Richmond Company and The Richmond Development Company. The purchase price for the acquisition was $1.8 million plus contingent future payments of up to an additional $1 million (of which $200,000 was paid through September 30, 1996), subject to commencement of development of certain medical office building projects. 615 Peachtree Street -------------------- On August 16, 1996, Cousins acquired 615 Peachtree Street, a 147,000 square foot downtown Atlanta office building, located at the intersection of Peachtree Street and North Avenue across from NationsBank Plaza. The 12-story office building was purchased for $11.1 million plus a contingent future payment of up to an additional $1 million. One Independence Center ----------------------- Cousins has contracted to acquire the One Independence Center project, a 521,000 rentable square foot office building located at the intersection of Trade and Tryon in the central business district of Charlotte, North Carolina. The purchase price is approximately $69.3 million and closing is expected to occur in the fourth quarter of 1996. The acquisition includes the 20-story office building, a 330 car underground parking deck, and an adjacent development parcel. PART I. FINANCIAL INFORMATION - ------------------------------ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three and Nine Months Ended September 30, 1995 and 1996. Results of Operations: - ---------------------- Rental Property Revenues and Operating Expenses. Rental property revenues were approximately $3,613,000 and $7,960,000 higher in the three and nine month 1996 periods, respectively. The increase was due in part to rental property revenues from four retail centers, Lawrenceville MarketCenter ($869,000 and $2,407,000, in the three and nine month 1996 periods, respectively), Lovejoy Station ($199,000 and $529,000, in the three and nine month 1996 periods, respectively), Colonial Plaza MarketCenter ($973,000 and $2,114,000, in the three and nine month 1996 periods, respectively) and Mansell Crossing Phase II ($181,000 and $382,000, in the three and nine month 1996 periods, respectively), which became partially operational in October 1995, December 1995, March 1996 and March 1996, respectively. Two other retail centers also favorably impacted results: North Point MarketCenter rental property revenues increased $167,000 and $516,000 in the three and nine month 1996 periods, respectively, due to increases from Phase II which became partially operational in July 1995, and Presidential MarketCenter rental property revenues increased $234,000 and $566,000 in the three and nine month 1996 periods, respectively, due to the lease-up of Phase I and from Phase II as it became partially operational in June 1996. Rental property revenues were negatively impacted by approximately $86,000 and $254,000 in the three and nine month 1996 periods, respectively, due primarily to the termination of one tenant at Perimeter Expo in February 1996 which was replaced by a better credit tenant whose lease commenced in August 1996. In addition, $72,000 and $297,000 of the increase in rental property revenues for the three and nine month 1996 periods, respectively, was due to revenue from 24 acres of the Georgia Highway 400 land being ground leased to freestanding users. During the nine month 1995 period, revenue was being recognized from only 18 acres of the Georgia Highway 400 land. The acquisition of the 615 Peachtree Street office building in July 1996 also favorably impacted rental property revenues by approximately $369,000 in both 1996 periods (see Note 5). Further contributing to the increase in rental property revenues was the lease-up of the First Union Tower (increases of approximately $69,000 and $242,000, in the three and nine month 1996 periods, respectively) and 100 North Point Center East which became partially operational in April 1996 (increases of approximately $578,000 and $912,000, in the three and nine month 1996 periods, respectively). Rental property operating expenses increased approximately $665,000 and $1,719,000 in the three and nine month 1996 periods, respectively, which increases were primarily related to the occupancy of the retail centers discussed above and 100 North Point Center East, as well as the acquisition of the 615 Peachtree Street office building. Development and Construction Fees. Development and construction fees decreased $2,749,000 and $1,925,000 in the three and nine month 1996 periods, respectively. The decrease in both periods was due primarily to the recognition of development income from the Dusseldorf joint venture's office building project in 1995. Due to the release of certain completion guarantees related to the building, approximately $2,604,000 of previously deferred development income was recognized in September 1995. Also contributing to the decrease in the three month 1996 period was a decrease in development and construction fees received from Wildwood Associates (approximately $128,000) primarily related to the 4100 and 4300 Wildwood Parkway office buildings which were substantially complete in the second quarter of 1996. The development and construction fees received from Wildwood Associates also partially offset the decrease in the nine month 1996 period by approximately $148,000 which also was due primarily to the fees related to the 4100 and 4300 Wildwood Parkway office buildings. These decreases were partially offset by additional development income received from the Dusseldorf project discussed above (approximately $43,000 and $777,000 in the three and nine month 1996 periods, respectively). Management Fees. Management fees increased approximately $240,000 and $311,000 in the three and nine month 1996 periods, respectively. The increase in both periods was primarily due to the acquisition of the management contracts of The Lea Richmond Company in July 1996 (see Note 5), which contributed approximately $180,000 of management fees in both periods. Leasing and Other Fees. Leasing and other fees decreased approximately $311,000 and $381,000 in the three and nine month 1996 periods, respectively. The decrease in both periods was primarily due to decreases of approximately $162,000 and $354,000 in leasing fees recognized by the Company's retail division from third party developments in the three and nine month 1996 periods, respectively. Also contributing to the decrease in the nine month 1996 period was a decrease of approximately $311,000 in leasing fee income from NationsBank Plaza. The decrease in the nine month 1996 period was partially offset by an increase of approximately $447,000 in leasing fee income from Wildwood Associates. In the three month 1996 period, leasing fee income from Wildwood Associates decreased by approximately $79,000. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales decreased approximately $3,251,000 in the three month 1996 period and increased approximately $2,093,000 in the nine month 1996 period. The decrease in the three month 1996 period was primarily due to a decrease in residential lot sales from 114 lots sold in the three month 1995 period to 30 lots sold in the three month 1996 period. The 1995 periods were favorably impacted by the higher than normal level of lot sales which occurred when one of the residential developments opened during this period. The decrease was partially offset by an increase in outparcel sales (approximately $580,000). The number of outparcels sold increased from none in the three month 1995 period to one in the three month 1996 period. The increase in the nine month 1996 period was primarily due to an increase in outparcel sales (approximately $2,216,000). The number of outparcels sold increased from one in the nine month 1995 period to five in the nine month 1996 period. The increase in the nine month 1996 period was partially offset by a decrease in residential lot sales from 152 lots sold in the nine month 1995 period to 151 lots sold in the nine month 1996 period. Residential lot and outparcel cost of sales decreased approximately $2,653,000 in the three month 1996 period and increased approximately $2,437,000 in the nine month 1996 period due to the decreases and increases in sales discussed above. Both 1996 periods were also impacted by a $500,000 writedown of one residential development because of changes in lot sales price assumptions. Interest and Other Income. Interest and other income decreased approximately $60,000 in the three month 1996 period and increased approximately $393,000 in the nine month 1996 period. The decrease in the three month 1996 period was due to interest of $71,000 on tax refunds received in the three month 1995 period. No similar interest was received in the three month 1996 period. The increase in the nine month 1996 period was due to an increase in interest income received from temporary investments made with proceeds received from the $80 million CSC Associates, L.P. financing completed in February 1996. Income from Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased approximately $895,000 and $2,590,000 in the three and nine month 1996 periods, respectively. Income from Wildwood Associates increased approximately $511,000 and $1,286,000 in the three and nine month 1996 periods, respectively. Results in 1996 were favorably impacted by decreases in interest expense (approximately $236,000 and $852,000 in the three and nine month 1996 periods, respectively) which were due primarily to the refinancings of two mortgage notes in December 1995. In March 1996, the 4100 and 4300 Wildwood Parkway Buildings became partially operational for financial reporting purposes which increased income before depreciation, amortization and interest expense by approximately $289,000 and $489,000 in the three and nine month 1996 periods, respectively. The income before depreciation, amortization and interest expense of the 2500 Windy Ridge Parkway Building decreased approximately $187,000 and $537,000 in the three and nine month 1996 periods, respectively, primarily due to the expiration of a tenant's lease which was replaced with another tenant with less square footage at a lower rate. Additionally, increases in income before depreciation, amortization and interest expense from the 2300 Windy Ridge Parkway and 3200 Windy Hill Road Buildings contributed to the increases by $250,000 and $438,000 in the three and nine month 1996 periods, respectively. Income from CSC Associates, L.P. increased approximately $129,000 and $509,000 in the three and nine month 1996 periods, respectively, due to the continued lease-up of NationsBank Plaza (increases of $172,000 and $685,000 in income before depreciation, amortization and interest expense in the three and nine month 1996 periods, respectively). These increases were partially offset by increases in depreciation and amortization of approximately $43,000 and $140,000 in the three and nine month 1996 periods, respectively, which were also due to an increase in the lease-up. Income from Haywood Mall Associates increased approximately $329,000 and $502,000 in the three and nine month 1996 periods, respectively, due to increases in income before depreciation, amortization and interest expense resulting from the completion and lease-up of the expansion of Haywood Mall (increases of approximately $331,000 and $702,000 in the three and nine month 1996 periods, respectively). The increases in income before depreciation, amortization and interest expense were partially offset by increases in depreciation and amortization of approximately $2,000 and $200,000 in the three and nine month 1996 periods, respectively, which were also due to the expansion of Haywood Mall. Income from Temco Associates increased approximately $10,000 and $440,000 in the three and nine month 1996 periods, respectively. In March 1996, Temco Associates exercised an option to purchase 240 acres of land which it simultaneously sold. CREC's share of the gain on the sale was $430,000. Income from Hickory Hollow Associates decreased $111,000 and $258,000 in the three and nine month 1996 periods, respectively, due to two outparcel sales in April and September 1995. No similar outparcel sales occurred in 1996. Income from CC-JM II Associates increased approximately $23,000 and $118,000 in the three and nine month 1996 periods, respectively. These increases were due to the John Marshall II office building becoming fully operational for financial reporting purposes in late January 1996. General and Administrative Expenses. General and administrative expenses increased approximately $485,000 and $762,000 in the three and nine month 1996 periods, respectively. The increases were primarily related to inflationary cost increases, the Company's expansion and the acquisition of The Lea Richmond Company and The Richmond Development Company in July 1996 (see Note 5). Depreciation and Amortization. Depreciation and amortization increased approximately $747,000 and $1,521,000 in the three and nine month 1996 periods, respectively. The increases were due to the retail centers and 100 North Point Center East becoming operational as discussed above and the acquisition of the 615 Peachtree Street office building (see Note 5). Stock Appreciation Right Expense. Stock appreciation right expense increased approximately $444,000 in the three month 1996 period and decreased approximately $53,000 in the nine month 1996 period. This non-cash item is primarily related to vesting of stock appreciation rights and to the Company's stock price, which was $17.375, $17.75, and $18.25 at December 31, 1994, June 30, 1995 and September 30, 1995, respectively; and $20.25, $19.625 and $22.00 at December 31, 1995, June 30, 1996 and September 30, 1996, respectively. Interest Expense. Interest expense increased approximately $1,460,000 and $3,582,000 in the three and nine month 1996 periods, respectively. Interest expense before capitalization increased to $3,081,000 and $8,601,000 in the three and nine month 1996 periods, respectively, from $1,687,000 and $3,846,000 in the three and nine month 1995 periods, respectively, due to higher debt levels. Also, during the third quarter of 1995, $50 million of floating rate debt was replaced with long term fixed rate debt at higher interest rates. The overall increase in interest expense in the nine month 1996 period was partially offset by increased interest capitalization because of a higher level of projects under development. The amount of interest capitalized to projects under development (a reduction of interest expense) increased to $4,642,000 from $3,469,000 in the nine month 1996 period and decreased to $1,498,000 from $1,564,000 in the three month 1996 period. Other Expenses. Other expenses decreased approximately $328,000 and $146,000 in the three and nine month 1996 periods, respectively. The decreases were due to decreases in predevelopment expense. Provision (Benefit) For Income Taxes From Operations. The provision (benefit) for income taxes from operations decreased approximately $1,370,000 and $1,667,000 in the three and nine month 1996 periods, respectively. The provision (benefit) for income taxes from operations decreased in both periods due primarily to a decrease in CREC and its subsidiaries' income before income taxes and gain on sale of investment properties of $4,094,000 and $4,936,000 in the three and nine month 1996 periods, respectively, resulting in a net loss for CREC and its subsidiaries (and hence an income tax benefit) in both periods. The decrease in CREC and its subsidiaries' income before income taxes and gain on sale of investment properties was due primarily to a decrease in development and leasing fees received by CREC and its subsidiaries including a decrease in development income from the Dusseldorf project as discussed above. Certain development and leasing fees recorded on CREC and its subsidiaries' books is intercompany fee income which is eliminated in consolidation, but the tax effect is not, and such intercompany fees also decreased in both 1996 periods. The decrease in the provision (benefit) for income taxes from operations was partially offset by state income tax refunds received in 1995 related to a successful judicial appeal by Cousins of an assessment paid in 1992. No similar refunds were received in 1996. Gain on Sale of Investment Properties. Gain on sale of investment properties decreased approximately $1,349,000 and $729,000 in the three and nine month 1996 periods, respectively, which was due to a decrease in the number of sales in both periods. The $1,017,000 gain in the nine month 1996 period was from the sale of a 2.7 acre site at North Point in May 1996 and the sale of the Company's 50% interest in the Norfolk parking agreement in July 1996. The $1,746,000 gain on sale of investment properties in the nine month 1995 period included the following: the August 1995 sale of the approximately 1 acre parcel proximate to the CNN Center in downtown Atlanta, the September 1995 sale of a 6.2 acre parcel in West Cobb County, Georgia and the September 1995 simultaneous purchase and sale of a 78 acre parcel adjacent to the Company's Bradshaw Farm residential development in suburban Atlanta. Liquidity and Capital Resources: Financial Condition. The Company's debt (including its pro rata share of unconsolidated joint venture debt) was 31% of total market capitalization at September 30, 1996. As discussed in Note 4, the Company amended and extended the maturity date of its line of credit in July 1996. The Company has development and acquisition projects in various stages. The Company currently intends to finance these projects, as well as the completion of projects currently under construction, using its existing line of credit, long-term non-recourse financing on the Company's unleveraged projects 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. The SEC declared the registration statement effective on October 4, 1996. Cash Flows. Net cash provided by operating activities for the nine month 1996 period was $38.6 million, an increase of $8.3 million from $30.3 million in the nine month 1995 period. The increase resulted primarily from an improvement in net income of $2.7 million. Additionally, non-cash charges consisting of depreciation and amortization and residential lot and outparcel cost of sales included in net income for the nine month 1996 period increased $3.9 million from the nine month 1995 period. Operating distributions from unconsolidated joint ventures also favorably impacted the nine month 1996 period by an increase of $1.9 million from the nine month 1995 period. Net cash used in investing activities for the nine month 1996 period was $99.1 million, an increase of $32.5 million from $66.6 million in the nine month 1995 period. The increase in net cash used in investing activities resulted primarily from an increase in property acquisition and development expenditures (approximately $38.5 million) which included the acquisitions discussed in Note 5 and the completion of projects currently under construction. The increase in net cash used in investing activities was partially offset by a decrease of $8.4 million in investment in unconsolidated joint ventures. In the nine month 1995 period, the Company contributed $5.3 million to Haywood Mall Associates to fund the expansion of the mall (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, 1995) and $2.6 to CC-JM II Associates to fund its share of the equity in the partnership. No similar contributions were made in the nine month 1996 period. Also offsetting the increase in net cash used in investing activities in the nine month 1996 period was the $1.1 million cash portion of an exchange transaction (see Note 2). Net cash provided by financing activities for the nine month 1996 period was $59.1 million, an increase of $25.5 million from $33.6 million in the nine month 1995 period. The increase is attributable to an increase in proceeds from other notes payable of approximately $29.5 million. In the nine month 1995 period, the Company completed two financings for approximately $51.5 million as compared to one financing in the nine month 1996 period for approximately $80 million. The proceeds from line of credit decreased $8.3 million and the repayment of line of credit increased $4.7 million in the nine month 1996 period due to the use of the proceeds from the $80 million financing instead of the line of credit. Common stock sold increased $5.5 million and dividends paid increased $2.9 million in the nine month 1996 period which are both due to an increase in the number of shares outstanding and an increase in the cash dividends per share from $.72 per share in the nine month 1995 period to $.81 per share in the nine month 1996 period. The common stock sold was from reinvestment of dividends by stockholders through the Company's Dividend Reinvestment Plan and stock option exercises. Supplemental Financial Information: Depreciation and amortization expense, net of minority interests' share, included the following components for the three and nine months ended September 30, 1996 ($ in thousands):
Three Months Ended Nine Months Ended September 30, 1996 September 30, 1996 -------------------------------- -------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ------ ------- -------------- ------ Furniture, fixtures and equipment $ 82 $ 2 $ 84 $ 209 $ 36 $ 245 Deferred financing costs -- 3 3 -- 8 8 Goodwill and related business acquisition costs 103 10 113 232 36 268 Real estate related: Building (including tenant first generation) 1,605 2,283 3,888 4,164 6,677 10,841 Tenant second generation 45 250 295 124 729 853 ------ ------ ------ ------ ------ ------- $1,835 $2,548 $4,383 $4,729 $7,486 $12,215 ====== ====== ====== ====== ====== =======
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures during the three and nine months ended September 30, 1996, including its share of unconsolidated joint ventures ($ in thousands):
Three Months Ended Nine Months Ended September 30, 1996 September 30, 1996 --------------------- -------------------- Office Retail Total Office Retail Total ------ ------ ----- ------ ------------ Second generation related costs $285 $-- $285 $749 $-- $749 Building improvements -- -- -- -- -- -- ---- --- ---- ---- --- ---- $285 $-- $285 $749 $-- $749 ==== === ==== ==== === ====
PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K filed by the Registrant during the fiscal quarter ended September 30, 1996. 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 Vice President and Controller (Authorized Officer) (Principal Accounting Officer) November 12, 1996 EX-27 2
5 3-MOS DEC-31-1996 SEP-30-1996 132 0 53,027 0 0 0 315,716 19,134 492,798 0 186,460 28,771 0 0 258,217 492,798 0 40,190 0 32,111 0 0 3,959 21,005 (864) 21,869 0 0 0 22,886 80 0
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