-----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, Hk4MXNAmQSg0abNXwZerKzXd8pbKN2oSrq1zcVyXU6fMgpLhTL+ub34p7Y+e1gkL wKE/Vd+p2rfqVMfsSWBzUw== 0000025232-97-000016.txt : 19970813 0000025232-97-000016.hdr.sgml : 19970813 ACCESSION NUMBER: 0000025232-97-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 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: 97656388 BUSINESS ADDRESS: STREET 1: 2500 WINDY RIDGE PKWY STE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 BUSINESS PHONE: 7709552200 MAIL ADDRESS: STREET 1: 2500 WINDY RIDGE PARKWAY STREET 2: SUITE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 10-Q 1 SECURITIES AND EXCHANGE COMMISSION FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1997 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, 1997, 29,208,506 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, June 30, 1996 1997 ------------ ----------- (Unaudited) ASSETS - ------ PROPERTIES: Operating properties $252,699 $363,522 Land held for investment or future development 21,213 19,144 Projects under construction 88,568 25,313 Residential lots under development 15,183 16,736 Less: accumulated depreciation (20,339) (27,538) -------- -------- Total properties 357,324 397,177 -------- -------- CASH AND CASH EQUIVALENTS, at cost which approximates market 1,598 4,866 NOTES AND OTHER RECEIVABLES 56,497 42,309 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 132,262 111,393 OTHER ASSETS 8,963 8,908 -------- -------- TOTAL ASSETS $556,644 $564,653 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- NOTES PAYABLE $231,831 $240,954 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 25,302 20,095 DEPOSITS AND DEFERRED INCOME 327 326 -------- -------- TOTAL LIABILITIES 257,460 261,375 -------- -------- STOCKHOLDERS' INVESTMENT Common stock, $1 par value, authorized 50,000,000 shares; issued 28,920,122 shares at December 31, 1996 and 29,208,506 shares at June 30, 1997 28,920 29,209 Additional paid-in capital 164,970 169,708 Cumulative undistributed net income 105,294 104,361 -------- -------- TOTAL STOCKHOLDERS' INVESTMENT 299,184 303,278 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $556,644 $564,653 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1997 (UNAUDITED) ($ in thousands, except per share amounts)
Three Months Six Months Ended June 30, Ended June 30, ----------------- ----------------- 1996 1997 1996 1997 ------- ------- ------- ------- REVENUES: Rental property revenues $ 7,532 $15,749 $13,370 $31,004 Development income 1,052 480 1,325 1,454 Management fees 602 855 1,172 1,689 Leasing and other fees 525 53 1,252 190 Residential lot and outparcel sales 3,090 3,151 7,470 5,412 Interest and other 1,354 853 2,789 1,683 ------- ------- ------- ------- 14,155 21,141 27,378 41,432 ------- ------- ------- ------- INCOME FROM UNCONSOLIDATED JOINT VENTURES 4,170 3,467 8,564 7,049 COSTS AND EXPENSES: Rental property operating expenses 1,768 3,797 3,162 7,506 General and administrative expenses 2,108 3,088 4,307 6,347 Depreciation and amortization 1,600 3,639 2,894 7,068 Stock appreciation right expense (credit) 47 127 (312) (4) Residential lot and outparcel cost of sales 2,868 2,980 7,033 4,926 Interest expense 1,362 3,619 2,376 7,275 Property taxes on undeveloped land 250 (46) 493 213 Other 615 593 818 1,072 ------- ------- ------- ------- 10,618 17,797 20,771 34,403 ------- ------- ------- ------- INCOME FROM OPERATIONS BEFORE INCOME TAXES 7,707 6,811 15,171 14,078 BENEFIT FOR INCOME TAXES FROM OPERATIONS (222) (644) (56) (605) ------- ------- ------- ------- INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 7,929 7,455 15,227 14,683 GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION 620 -- 620 2,396 ------- ------- ------- ------- NET INCOME $ 8,549 $ 7,455 $15,847 $17,079 ======= ======= ======= ======= NET INCOME PER SHARE $ .30 $ .26 $ .56 $ .59 ======= ======= ======= ======= CASH DIVIDENDS DECLARED PER SHARE $ .27 $ .31 $ .54 $ .62 ======= ======= ======= ======= WEIGHTED AVERAGE COMMON EQUIVALENT SHARES 28,405 29,189 28,342 29,093 ======= ======= ======= =======
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, 1996 AND 1997 (UNAUDITED) ($ in thousands)
1996 1997 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties $15,227 $14,683 Adjustments to reconcile income before gain on sale of investment properties to net cash provided by operating activities: Depreciation and amortization 2,894 7,068 Stock appreciation right expense (credit) (312) (4) Cash charges to expense accrual for stock appreciation rights (415) (684) Effect of recognizing rental revenues on a straight-line basis 20 (238) Income from unconsolidated joint ventures (8,564) (7,049) Operating distributions from unconsolidated joint ventures 9,272 13,463 Residential lot and outparcel cost of sales 6,679 4,422 Changes in other operating assets and liabilities: Change in other receivables (646) 1,353 Change in accounts payable and accrued liabilities 2,244 (4,727) -------- ------- Net cash provided by operating activities 26,399 28,287 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties 620 2,396 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales 585 287 Property acquisition and development expenditures (62,387) (33,221) Non-operating distributions from unconsolidated joint ventures 1,408 14,600 Investment in notes receivable (25,451) (5,564) Collection of notes receivable 24,936 829 Change in other assets, net (2,045) (315) Investment in unconsolidated joint ventures, including interest capitalized to equity investments (251) (145) Cash portion of exchange transaction 1,092 -- -------- ------- Net cash used in investing activities (61,493) (21,133) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of lines of credit (37,427) (55,477) Proceeds from lines of credit 4,558 68,177 Dividends paid (15,277) (18,012) Common stock sold, net of expenses 4,734 5,003 Repayment of other notes payable (2,192) (3,577) Proceeds from other notes payable 80,000 -- -------- ------- Net cash provided by (used in) financing activities 34,396 (3,886) -------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (698) 3,268 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,552 1,598 -------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 854 $ 4,866 ======== =======
The accompanying notes are an integral part of these consolidated statements. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (UNAUDITED) 1. BASIS OF PRESENTATION - -------------------------- The Consolidated Financial Statements include the accounts of Cousins Properties Incorporated ("Cousins") and its majority and wholly-owned affiliates, 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 June 30, 1997, and results of operations for the three month periods ended June 30, 1996 and 1997. Results of operations for the interim 1997 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, 1996. The accounting policies employed are the same as those shown in Note 1 to the Consolidated Financial Statements included in such Form 10-K. Certain 1996 amounts have been reclassified to conform to the 1997 presentation. 2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS - --------------------------------------------------- Interest (net of $3,144,000 and $1,270,000 capitalized in 1996 and 1997, respectively) and income taxes paid were as follows for the six months ended June 30, 1996 and 1997 ($ in thousands): 1996 1997 ---- ---- Interest paid $2,278 $7,190 Income taxes paid $ 39 $ -- In January 1997, approximately $17,005,000 was transferred from Notes and Other Receivables to Operating Properties (see Note 5 of "Notes to Consolidated Financial Statements" in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1997). During the six months ended June 30, 1997, approximately $87,658,000 was transferred from Projects Under Construction to Operating Properties. At June 30, 1997, cash and cash equivalents included $3,383,000 from property sales held in escrow pending reinvestment in a tax-deferred exchange and $1,041,000 which is restricted under a municipal bond indenture. 3. COSTS CAPITALIZED AND FEES ELIMINATED IN CONSOLIDATION - ----------------------------------------------------------- Development, construction, and leasing fees received by CREC and its subsidiaries from Cousins and Cousins' majority owned affiliates are eliminated in consolidation. Costs related to planning, development, leasing and construction of properties (including related general and administrative expenses) are capitalized. The table below shows the fees eliminated, the internal costs capitalized related to these fees, and the additional internal costs capitalized by CREC to its own residential developments for the six months ended June 30, 1996 and 1997 ($ in thousands): 1996 1997 ------ ---- Fees eliminated in consolidation $2,249 $722 Internal costs capitalized in consolidation to projects on which fees were eliminated 1,176 963 Internal costs capitalized to CREC residential developments 257 125 4. NOTES PAYABLE AND INTEREST EXPENSE - --------------------------------------- At December 31, 1996 and June 30, 1997, the composition of notes payable was as follows ($ in thousands):
December 31, 1996 June 30, 1997 ----------------------------------- ------------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total -------- -------------- -------- -------- -------------- -------- Floating Rate Lines of Credit $ 25,100 $ 2,025 $ 27,125 $ 36,500 $ -- $ 36,500 Other Debt (primarily non-recourse fixed rate mortgages) 206,731 105,487 312,218 204,454 119,522 323,976 -------- -------- -------- -------- -------- -------- $231,831 $107,512 $339,343 $240,954 $119,522 $360,476 ======== ======== ======== ======== ======== ========
During the three months ended June 30, 1997, the Company extended the maturity of its $100 million line of credit from June 30, 1997 to June 29, 1998. As of June 30, 1997, the outstanding balance under the line of credit was $36.5 million. Subsequent to June 30, 1997, the Company completed the financing of the 100 and 200 North Point Center East Buildings with a $25 million non-recourse mortgage note payable at a 7.86% interest rate and a term of ten years. For the three and six months ended June 30, 1997, interest expense was recorded as follows ($ in thousands):
Three Months Ended Six Months Ended June 30, 1997 June 30, 1997 ----------------------------------- ------------------------------------ Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total -------- -------------- -------- -------- -------------- -------- Floating Rate Lines Interest Expensed $3,619 $2,104 $5,723 $7,275 $4,050 $11,325 Interest Capitalized 680 241 921 1,270 429 1,699 ------ ------ ------ ------ ------ ------- $4,299 $2,345 $6,644 $8,545 $4,479 $13,024 ====== ====== ====== ====== ====== =======
During the second quarter of 1997, 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 $47 million. 5. GRANDVIEW OFFICE BUILDING - ------------------------------ On April 1, 1997, Cousins/Daniel, LLC purchased approximately 8 acres of land on which construction commenced on a 150,000 square foot office building in Birmingham, Alabama. The total cost of the office building is anticipated to be approximately $18 million, and the building is expected to be completed in mid 1998. 6. SUBSEQUENT EVENT - SALE OF RIVERMONT STATION AND LOVEJOY STATION - --------------------------------------------------------------------- On July 1, 1997, CREC sold Rivermont Station and Lovejoy Station, two Atlanta neighborhood retail centers with 90,000 and 77,000 square feet, respectively, for $20.1 million, which was approximately $4.1 million over the cost of the centers. Including depreciation recapture of $.5 million and net of an income tax provision of approximately $1.7 million, the net gain on the sale was approximately $2.9 million. 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, 1996 and 1997. Results of Operations: - ---------------------- Rental Property Revenues and Operating Expenses. Rental property revenues were approximately $8,217,000 and $17,634,000 higher in the three and six month 1997 periods, respectively. Rental revenues from the Company's office portfolio increased approximately $5,319,000 and $11,210,000 in the three and six month 1997 periods, respectively, due primarily to the acquisition of two office buildings and the addition of two new office buildings which became operational for financial reporting purposes during 1996. Rental revenues from One Independence Center and 615 Peachtree Street, two office buildings which were acquired in December 1996 and August 1996, respectively, contributed to the increase by $2,800,000 and $669,000 respectively, in the three month 1997 period and $5,905,000 and $1,367,000, respectively in the six month 1997 period. Two office buildings, 100 and 200 North Point Center East, which became operational for financial reporting purposes in April 1996 and November 1996, respectively, increased rental revenues approximately $355,000 and $647,000, respectively, in the three month 1997 period and $1,030,000 and $1,221,000, respectively, in the six month 1997 period. The Wildwood Training Facility also favorably impacted the rental revenues recognized from the Company's office portfolio. Effective January 1, 1997, the Wildwood Training Facility is being accounted for as if it were owned by the Company (see Note 5 of "Notes to Consolidated Financial Statements" in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1997). Thus, rental revenues were favorably impacted by the rental revenues from the Wildwood Training Facility which were approximately $803,000 and $1,612,000 in the three and six month periods, respectively. Rental revenues from the Company's retail portfolio increased approximately $2,951,000 and $6,538,000 in the three and six month 1997 periods, respectively. The increase was due primarily to new retail centers or expansions of existing retail centers which became operational for financial reporting purposes during 1996 as follows: Colonial Plaza MarketCenter in March 1996 ($744,000 and $2,079,000 in the three and six month 1997 periods, respectively), Greenbrier MarketCenter in October 1996 ($1,234,000 and $2,340,000 in the three and six month 1997 periods, respectively), Los Altos MarketCenter in November 1996 ($738,000 and $1,394,000 in the three and six month 1997 periods, respectively), the expansion of Presidential MarketCenter in June 1996 ($296,000 and $516,000 in the three and six month 1997 periods, respectively), the expansion of North Point MarketCenter in December 1996 ($170,000 and $474,000 in the three and six month 1997 periods, respectively) and Mansell Crossing Phase II in March 1996 ($123,000 and $324,000 in the three and six month 1997 periods, respectively) (the Company does not own Mansell Crossing Phase I). Rivermont Station which became operational in February 1997 also increased rental revenues by $413,000 and $654,000 in the three and six month 1997 periods, respectively. The tax-deferred exchange of Lawrenceville MarketCenter in November 1996 partially offset the foregoing increases in rental revenues by approximately $939,000 and $1,538,000 in the three and six month 1997 periods, respectively. Rental property operating expenses increased approximately $2,029,000 and $4,344,000 in the three and six month 1997 periods, respectively, which increases were primarily related to the occupancy of the retail centers and the 100 and 200 North Point Center East office buildings, as well as the acquisitions of the 615 Peachtree Street and One Independence Center office buildings and the reclassification of the Wildwood Training Facility as discussed above. Development Income. Development income decreased approximately $572,000 in the three month 1997 period and increased $129,000 in the six month 1997 period. The decrease in the three month 1997 period was due primarily to the additional development income received from the Dusseldorf project (approximately $735,000) in the three month 1996 period. No similar income was recognized in the three month 1997 period. Development fees recognized by the Company's retail division from third party retail developments also decreased $100,000 in the three month 1997 period. Partially offsetting these two decreases in the three month 1997 period was approximately $169,000 of development income recognized from a center in Cuyahoga Falls, Ohio, and $123,000 recognized from the fee development of Total Systems' corporate headquarters in Columbus, Georgia. The increase in the six month 1997 period was due primarily to approximately $885,000 of development income recognized from a center in Cuyahoga Falls, Ohio and approximately $245,000 of income recognized from the fee development of Total Systems' corporate headquarters. These increases were partially offset by additional development income received from the Dusseldorf project in 1996 (approximately $735,000) and a decrease in development fees of $146,000 recognized by the Company's retail division from third party retail developments in the six month 1997 period. Management Fees. Management fees increased approximately $253,000 and $517,000 in the three and six month 1997 periods, respectively. The increases were primarily due to the acquisition of the management contracts of The Lea Richmond Company in July 1996, which contributed approximately $228,000 and $447,000 of management fees in the three and six month 1997 periods, respectively, (see Note 8 of "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10-K for the year ended December 31, 1996). Leasing and Other Fees. Leasing and other fees decreased approximately $472,000 and $1,062,000 in the three and six month 1997 periods, respectively. The decreases were due in part to a decrease of approximately $437,000 and $679,000 in the three and six month 1997 periods, respectively, from leasing fees related to Wildwood Office Park, primarily related to fees received from the leasing of the 4100 and 4300 Wildwood Parkway Buildings. Leasing fees recognized by the Company's retail division from third party developments also decreased approximately $26,000 and $255,000 in the three and six month 1997 periods, respectively. Also contributing to the decrease in the six month 1997 period was a decrease of approximately $76,000 in leasing fee income from NationsBank Plaza. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales increased approximately $61,000 in the three month 1997 period and decreased approximately $2,058,000 in the six month 1997 period. The decrease in the six month 1997 period was due primarily to a decrease in residential lot sales from 121 lots in 1996 to 104 lots in 1997. CREC and one of its subsidiaries also recognized $2,161,000 and $1,494,000 in outparcel sales in the six month 1996 and 1997 periods, respectively, from four and three outparcel sales in the six month 1996 and 1997 periods, respectively. Residential lot and outparcel cost of sales increased approximately $112,000 in the three month 1997 period and decreased approximately $2,107,000 in the six month 1997 period. The decrease in the six month 1997 period is due to the decreases in sales discussed above. Interest and Other Income. Interest and other income decreased approximately $501,000 and $1,106,000 in the three and six month 1997 periods, respectively. The decrease was due primarily to the reclassification of the Wildwood Training Facility Mortgage Note to Operating Properties. No interest income from this mortgage note was recognized in 1997 which caused decreases of approximately $399,000 and $800,000 in interest income in the three and six month 1997 periods, respectively. Also contributing to the decrease was a decrease of approximately $208,000 and $493,000 in the three and six month 1997 periods, respectively, in interest income recognized from temporary investments. In the three and six month 1996 periods, the Company recognized interest income on temporary investments made with proceeds received from the CSC Associates, L.P. financing (see Note 4 of "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10-K for the year ended December 31, 1996). No similar amounts were invested in the three and six month 1997 periods. Income from Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures decreased approximately $703,000 and $1,515,000 in the three and six month 1997 periods, respectively. Income from Temco Associates decreased approximately $404,000 in the six month 1997 period. 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. There was no similar sale in the six months ended June 30, 1997. Income from Wildwood Associates decreased approximately $755,000 and $1,219,000 in the three and six month 1997 periods, respectively. Results were negatively impacted by an increase in interest expense (approximately $484,000 and $848,000 in the three and six month 1997 periods, respectively). This increase was due primarily to the financing of the 3200 Windy Hill Road Building which contributed approximately $724,000 and $1,450,000 to the increase in interest expense in the three and six month 1997 periods, respectively. On December 16, 1996, Wildwood Associates completed the financing of this building with a $70 million non-recourse mortgage note payable at an 8.23% interest rate and maturity of January 1, 2007. Concurrent with the financing, Wildwood Associates paid down its line of credit to $0 which partially offset the increase in interest expense by approximately $276,000 and $480,000 in the three and six month 1997 periods, respectively. Interest expense also increased due to the financing of the 4100 and 4300 Wildwood Parkway Buildings which increased interest expense $287,000 and $325,000 in the three and six month 1997 periods, respectively. On March 20, 1997, Wildwood Associates completed the financing of these two buildings with a $30 million non-recourse mortgage note payable at a 7.65% interest rate and a term of fifteen years. In conjunction with this financing and a portion of a $70 million financing of the 3200 Windy Hill Building completed in December 1996, in the three month period ended March 31, 1997, Wildwood Associates made non-operating cash distributions of $12.5 million to each partner and paid the entire calendar year 1997 operating distribution of $4.5 million to each partner. Wildwood Associates will use the approximately $10 million of remaining proceeds and the operating cash flow for the balance of 1997 to complete the 4200 Wildwood Parkway Building. Partially offsetting the increase in interest expense was a decrease of approximately $130,000 and $260,000 in the three and six month 1997 periods, respectively, in interest expense related to the Summit Green Building. Effective December 1, 1996, Wildwood Associates disposed of its interest in this building in exchange for cancellation of the related mortgage debt. In addition, an increase in interest capitalization also partially offset the increase in interest expense by $109,000 and $179,000 in the three and six month 1997 periods, respectively. Income before depreciation, amortization and interest expense from the 4100 and 4300 Wildwood Parkway Buildings favorably impacted results by approximately $248,000 and $656,000 in the three and six month 1997 periods, respectively. The 4100 and 4300 Wildwood Parkway Buildings became partially operational for financial reporting purposes in March 1996. Lease-up of the 2300 and 2500 Windy Ridge Parkway Buildings also increased income before depreciation, amortization and interest expense by $63,000 and $88,000 in the three month 1997 periods, respectively, and $112,000 and $145,000 in the six month 1997 periods, respectively. Income before depreciation, amortization and interest expense from the 3200 Windy Hill Road Building decreased approximately $449,000 and $768,000 in the three and six month 1997 periods, respectively, due primarily to the effect of the straight-lining of rental revenues in accordance with Statement of Financial Accounting Standards No. 13, which decreased rental revenues by approximately $444,000 and $877,000 in the three and six month 1997 periods, respectively. The disposition of the Summit Green Building, as discussed above, decreased income before depreciation, amortization and interest expense by approximately $328,000 and $610,000 in the three and six month 1997 periods, respectively. General and Administrative Expenses. General and administrative expenses increased approximately $980,000 and $2,040,000 in the three and six month 1997 periods, respectively. The increases were primarily due to the Company's expansion and acquisition of The Lea Richmond Company and The Richmond Development Company in July 1996 (see Note 8 of "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10-K for the year ended December 31, 1996). Additionally, approximately $397,000 of additional expense in 1997 was accrued in the three month period ended March 31, 1997 for higher than anticipated estimates of runoff and other expenses associated with the termination of the Company's partially self-insured medical plan in December 1996. Depreciation and Amortization. Depreciation and amortization increased approximately $2,039,000 and $4,174,000 in the three and six month 1997 periods, respectively. The increases were partially due to the retail centers becoming operational as discussed above. The increases were also due to the 100 and 200 North Point Center East office buildings becoming operational and the acquisitions of the One Independence Center and 615 Peachtree Street office buildings in December 1996 and August 1996, respectively, and the reclassification of the Wildwood Training Facility to Operating Properties. Stock Appreciation Right Expense (Credit). Stock appreciation right expense increased $80,000 in the three month 1997 period and stock appreciation right credit decreased $308,000 in the six month 1997 period. This non-cash item is primarily related to the Company's stock price, which was $20.25, $19.50, and $19.625 at December 31, 1995, March 31, 1996 and June 30, 1996, respectively; and $28.125, $27.25 and $28.00 at December 31, 1996, March 31, 1997 and June 30, 1997, respectively. The increases in the stock appreciation right expense were partially offset by decreases due to a reduction in the number of stock appreciation rights outstanding due to exercises which occurred since the first quarter of 1996. Interest Expense. Interest expense increased approximately $2,257,000 and $4,899,000 in the three and six month 1997 periods, respectively. Interest expense before capitalization increased to $4,299,000 and $8,545,000 in the three and six month 1997 periods, respectively, from $2,873,000 and $5,519,000 in the three and six month 1996 periods, respectively, due to higher debt levels. Also contributing to the increase was a decrease in interest capitalization because of a lower level of projects under development. The amount of interest capitalized to projects under development (a reduction of interest expense) decreased to $680,000 and $1,270,000 in the three and six month 1997 periods, respectively, from $1,510,000 and $3,144,000 in the three and six month 1996 periods, respectively. Property Taxes on Undeveloped Land. Property taxes on undeveloped land decreased approximately $296,000 and $280,000 in the three and six month 1997 periods, respectively. The decreases were primarily due to favorable settlement of property taxes on the Company's North Point land related to 1994, 1995 and 1996 tax years, which had been under appeal. Other Expenses. Other expenses decreased approximately $22,000 in the three month 1997 period and increased $254,000 in the six month 1997 period due to decreases and increases in predevelopment expense in the three and six month 1997 periods, respectively. Benefit for Income Taxes from Operations. Benefit for income taxes from operations increased approximately $422,000 and $549,000 in the three and six month 1997 periods, respectively. The increases were due to increases in CREC and its subsidiaries' loss before income taxes and gain on sale of investment properties of $1,110,000 and $1,384,000 in the three and six month 1997 periods, respectively. CREC and its subsidiaries' loss before income taxes and gain on sale of investment properties increased due to increases in the stock appreciation right expense in both 1997 periods and a decrease in development and leasing fees received by CREC and its subsidiaries in the three month 1997 period as discussed above. Certain development and leasing fees recorded on CREC and its subsidiaries' books are intercompany fee income which is eliminated in consolidation, but the tax effect is not, and such intercompany fees decreased in both 1997 periods. Gain on Sale of Investment Properties. Gain on sale of investment properties decreased $620,000 in the three month 1997 period and increased $1,776,000 in the six month 1997 period. The 1997 gain is due to a sale of certain acres of land at the Company's North Point development in January 1997 for net proceeds of $2,683,000. The 1996 gain was primarily related to the sale of a 2.7 acre site at North Point in May 1996 with a portion of the proceeds being reinvested pursuant to a tax free exchange in the purchase of additional land adjacent to Presidential MarketCenter in June 1996. The net proceeds from the sale were $1,205,000. 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 June 30, 1997. As discussed in Note 4, the Company extended the maturity of its $100 million line of credit to June 29, 1998, and completed the $25 million non-recourse financing of the 100 and 200 North Point Center East Office Buildings. As discussed in Note 6, a $20.1 million sale was completed on July 1, 1997. As a result of these transactions, the Company had no outstanding borrowings under its line of credit as of July 31, 1997. The Company has development 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 lines of credit (increasing those lines of credit as required); long-term non-recourse financing on the Company's unleveraged projects; sale of assets as market conditions warrant; and sale of common stock, warrants to purchase common stock, or debt securities from time to time under a $200 million shelf registration the Company filed with the Securities and Exchange Commission in September 1996. Cash Flows. Net cash provided by operating activities increased $1.9 million in 1997. Income from unconsolidated joint ventures decreased $1.5 million primarily due to decreases in income from Wildwood Associates (approximately $1.2 million) and Temco Associates (approximately $.4 million). Operating distributions from unconsolidated joint ventures increased $4.2 million due primarily to increases of $3.5 million in distributions from Wildwood Associates and $1.45 million from CSC Associates, L.P. The increase in the distributions from Wildwood Associates was due to a portion of the proceeds from the $30 million financing of the 4100 and 4300 Wildwood Parkway Buildings in March 1997 being distributed to each partner ($4.5 million). Depreciation and amortization increased $4.2 million due to several retail and office projects becoming operational during 1996 and 1997 and the acquisitions of One Independence Center and 615 Peachtree Street during 1996. Residential lot and outparcel cost of sales decreased $2.3 million due to decreases in the number of lots and outparcels sold in 1997. Cash flows from operating activities were negatively impacted by changes in other operating assets and liabilities, a decrease of $5.0 million. Net cash used in investing activities decreased $40.4 million in 1997 due to a decrease of $29.2 million in property acquisition and development expenditures, as a result of the Company having a lower level of projects under development. Also contributing to the decrease was a decrease in collection of notes receivable of $24.1 million. Investment in notes receivable decreased $19.9 million in 1997 which partially offset the above decreases in net cash used in investing activities. The Company temporarily invested approximately $18 million of proceeds from the $80 million CSC Associates, L.P. financing completed in 1996 in a note receivable due from Wildwood Associates. No similar investment occurred in 1997. Non-operating distributions from unconsolidated joint ventures increased $13.2 million due primarily to distributions from Wildwood Associates of $10 million in January 1997 from the proceeds of the financing of the 3200 Wildwood Plaza Building completed in December 1996 and $2.5 million from the proceeds of the financing of the 4100 and 4300 Wildwood Parkway Buildings in March 1997. The Company also received a $2.1 million distribution from Norfolk Hotel Associates (see Note 7 of "Notes to Consolidated Financial Statements" in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1997). A decrease of $1.4 million in distributions from CC-JM II Associates partially offset the above increases in non-operating distributions from joint ventures. Net cash provided by sales activities increased $1.5 million due to a land sale in January 1997. Net cash provided by financing activities decreased $38.3 million in 1997, which was primarily attributable to a decrease of $80 million in proceeds from other notes payable. The Company completed the $80 million CSC Associates, L.P. financing in February 1996. No similar financing occurred in the six months ended June 30, 1997. The repayment of lines of credit increased $18.1 million, therefore decreasing the cash flows from financing activities. An increase in the dividends paid per share from $.27 to $.31 and an increase in the number of shares outstanding also contributed to the decrease as dividends paid increased $2.7 million. Partially offsetting the above decreases was an increase in proceeds from lines of credit ($63.6 million). Supplemental Financial Information: - ----------------------------------- Depreciation and amortization expense included the following components for the three and six months ended June 30, 1997 ($ in thousands):
Three Months Ended Six Months Ended June 30, 1997 June 30, 1997 --------------------------------- ---------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ------ ------- -------------- ------- Furniture, fixtures and equipment $ 99 $ 1 $ 100 $ 194 $ 3 $ 197 Deferred financing costs -- 2 2 -- 5 5 Goodwill and related business acquisition costs 130 8 138 260 16 276 Real estate related: Building (including tenant first generation) 3,216 2,227 5,443 6,236 4,495 10,731 Tenant second generation 194 305 499 378 618 996 ------ ------ ------ ------ ------ ------- $3,639 $2,543 $6,182 $7,068 $5,137 $12,205 ====== ====== ====== ====== ====== =======
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures during the three and six months ended June 30, 1997, including its share of unconsolidated joint ventures ($ in thousands):
Three Months Ended Six Months Ended June 30, 1997 June 30, 1997 --------------------- --------------------- Office Retail Total Office Retail Total ------ ------ ----- ------ ------ ----- Second generation related costs $162 $ -- $162 $375 $ -- $375 Building improvements 5 -- 5 15 -- 15 ---- ---- ---- ---- ---- ---- $167 $ -- $167 $390 $ -- $390 ==== ==== ==== ==== ==== ====
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 June 30, 1997. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COUSINS PROPERTIES INCORPORATED Registrant /s/ Kelly H. Barrett________________________ Kelly H. Barrett Senior Vice President - Finance (Authorized Officer) (Principal Accounting Officer) August 12, 1997 EX-27 2
5 6-MOS DEC-31-1997 JUN-30-1997 4,866 0 42,309 0 0 0 424,715 27,538 564,653 261,375 0 0 0 29,209 274,069 564,653 0 41,432 0 34,403 0 0 7,275 14,078 (605) 14,683 0 0 0 17,079 .59 .59
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