-----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, IrkcvJpt9EOGcTN/Ut5eIfRRpJ82NkP+CfkJRaeBL+4+Ex69pCYG4jR11ab25kH5 pvRxheXoZeEFUMF9+oqOSw== 0000025232-98-000020.txt : 19980814 0000025232-98-000020.hdr.sgml : 19980814 ACCESSION NUMBER: 0000025232-98-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: SEC FILE NUMBER: 000-03576 FILM NUMBER: 98686343 BUSINESS ADDRESS: STREET 1: 2500 WINDY RIDGE PKWY STE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 BUSINESS PHONE: 7709552200 MAIL ADDRESS: STREET 1: 2500 WINDY RIDGE PARKWAY STREET 2: SUITE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1998 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, 1998, 31,578,117 shares of common stock of the Registrant were outstanding.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED BALANCE SHEETS ($ in thousands, except per share amounts) June 30, December 31, 1998 1997 ----------- ------------ (Unaudited) ASSETS - ------ PROPERTIES: Operating properties, net of accumulated depreciation of $40,259 as of June 30, 1998 and $33,369 as of December 31, 1997 $360,240 $318,901 Land held for investment or future development 15,917 27,948 Projects under construction 114,343 54,778 Residential lots under development 11,251 14,942 -------- -------- Total properties 501,751 416,569 CASH AND CASH EQUIVALENTS, at cost which approximates market 1,782 32,694 NOTES AND OTHER RECEIVABLES 44,542 38,464 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 110,196 120,198 OTHER ASSETS 8,122 9,814 -------- -------- TOTAL ASSETS $666,393 $617,739 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- NOTES PAYABLE $269,426 $226,348 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 22,229 20,332 DEPOSITS AND DEFERRED INCOME 895 385 -------- -------- TOTAL LIABILITIES 292,550 247,065 -------- -------- COMMITMENTS AND CONTINGENT LIABILITIES STOCKHOLDERS' INVESTMENT: Common stock, $1 par value, authorized 50,000 shares; issued 31,572,217 shares at June 30, 1998 and 31,472,178 shares at December 31, 1997 31,572 31,472 Additional paid-in capital 236,916 234,237 Cumulative undistributed net income 105,355 104,965 -------- -------- TOTAL STOCKHOLDERS' INVESTMENT 373,843 370,674 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $666,393 $617,739 ======== ======== 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, 1998 AND 1997 (UNAUDITED) (In thousands, except per share amounts) Three Months Six Months Ended June 30, Ended June 30, -------------- -------------- 1998 1997 1998 1997 ---- ---- ---- ---- REVENUES: Rental property revenues $16,832 $15,749 $32,966 $31,004 Development income 732 480 1,524 1,454 Management fees 928 855 1,818 1,689 Leasing and other fees 480 53 1,014 190 Residential lot and outparcel sales 4,317 3,151 8,774 5,412 Interest and other 925 853 1,972 1,683 ------- ------- ------- ------- 24,214 21,141 48,068 41,432 ------- ------- ------- ------- INCOME FROM UNCONSOLIDATED JOINT VENTURES 4,547 3,467 9,128 7,049 COSTS AND EXPENSES: Rental property operating expenses 4,308 3,797 8,142 7,506 General and administrative expenses 2,893 3,088 5,965 6,347 Depreciation and amortization 3,765 3,639 7,363 7,068 Stock appreciation right expense (credit) (118) 127 80 (4) Residential lot and outparcel cost of sales 4,059 2,980 8,238 4,926 Interest expense 2,731 3,619 5,543 7,275 Property taxes on undeveloped land 227 (46) 449 213 Other 94 593 109 1,072 ------- ------- ------- ------- 17,959 17,797 35,889 34,403 ------- ------- ------- ------- INCOME FROM OPERATIONS BEFORE INCOME TAXES 10,802 6,811 21,307 14,078 BENEFIT FOR INCOME TAXES FROM OPERATIONS (89) (644) (107) (605) ------- ------- ------- ------- INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 10,891 7,455 21,414 14,683 GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION 886 -- 1,657 2,396 ------- ------- ------- ------- NET INCOME $11,777 $ 7,455 $23,071 $17,079 ======= ======= ======= ======= WEIGHTED AVERAGE SHARES 31,545 29,189 31,520 29,093 ======= ======= ======= ======= BASIC NET INCOME PER SHARE $ .37 $ .26 $ .73 $ .59 ======= ======= ======= ======= ADJUSTED WEIGHTED AVERAGE SHARES 32,029 29,609 31,996 29,499 ======= ======= ======= ======= DILUTED NET INCOME PER SHARE $ .37 $ .25 $ .72 $ .58 ======= ======= ======= ======= CASH DIVIDENDS DECLARED PER SHARE $ .36 $ .31 $ .72 $ .62 ======= ======= ======= ======= 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, 1998 AND 1997 (UNAUDITED) ($ in thousands) 1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties $21,414 $14,683 Adjustments to reconcile income before gain on sale of investment properties to net cash provided by operating activities: Depreciation and amortization 7,363 7,068 Stock appreciation right expense (credit) 80 (4) Cash charges to expense accrual for stock appreciation rights (39) (684) Effect of recognizing rental revenues on a straight-line basis (155) (238) Income from unconsolidated joint ventures (9,128) (7,049) Operating distributions from unconsolidated joint ventures 14,609 13,463 Residential lot and outparcel cost of sales 7,965 4,422 Changes in other operating assets and liabilities: Change in other receivables (1,335) 1,353 Change in accounts payable and accrued liabilities 3,961 (4,727) ------- ------- Net cash provided by operating activities 44,735 28,287 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision 1,657 2,396 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales 1,200 287 Property acquisition and development expenditures (92,263) (33,221) Non-operating distributions from unconsolidated joint ventures 22,617 14,600 Investment in unconsolidated joint ventures, including interest capitalized to equity investments (18,096) (145) Investment in notes receivable (5,969) (5,564) Change in other assets, net 1,374 (315) Collection of notes receivable 1,267 829 ------- ------- Net cash used in investing activities (88,213) (21,133) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit 85,062 68,177 Repayment of line of credit (49,087) (55,477) Dividends paid (22,681) (18,012) Repayment of other notes payable (3,507) (3,577) Common stock sold, net of expenses 2,779 5,003 ------- ------- Net cash provided by (used in) financing activities 12,566 (3,886) ------- ------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (30,912) 3,268 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 32,694 1,598 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,782 $ 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, 1998 (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, 1998, and results of operations for the three and six month periods ended June 30, 1998 and 1997. Results of operations for the interim 1998 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/A for the year ended December 31, 1997. The accounting policies employed are the same as those shown in Note 1 to the Consolidated Financial Statements included in such Form 10-K/A. 2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS Interest (net of $3,335,000 and $1,270,000 capitalized in 1998 and 1997, respectively) and income taxes paid were as follows for the six months ended June 30, 1998 and 1997 ($ in thousands): 1998 1997 ---- ---- Interest paid $ 5,458 $7,190 Income taxes paid $ 110 $ -- During the six months ended June 30, 1998, approximately $17,163,000 was transferred from Projects Under Construction to Operating Properties and approximately $14,115,000 was transferred from Land Held for Investment or Future Development to Projects Under Construction. In June 1998, in conjunction with the acquisition of Northside/Alpharetta I, a mortgage note payable of approximately $10,610,000 was assumed (see Notes 3 and 5). At June 30, 1998, cash and cash equivalents included approximately $1,060,000 which is restricted under a municipal bond indenture. 3. NOTES PAYABLE AND INTEREST EXPENSE At June 30, 1998 and December 31, 1997, notes payable included the following ($ in thousands):
June 30, 1998 December 31, 1997 ---------------------------------- ------------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ----- ------- -------------- ----- Floating Rate Lines of Credit $ 35,975 $ -- $ 35,975 $ -- $ -- $ -- Other Debt (primarily non-recourse fixed rate mortgages) 233,451 157,033 390,484 226,348 133,446 359,794 -------- -------- -------- -------- -------- -------- $269,426 $157,033 $426,459 $226,348 $133,446 $359,794 ======== ======== ======== ======== ======== ========
Cousins LORET Venture, L.L.C. completed the $70 million non-recourse financing of The Pinnacle in May 1998 which is expected to be fully funded by December 1998. This non-recourse mortgage note payable has an interest rate of 7.11% and a term of twelve years. In June 1998, Wildwood Associates completed the financing of the 4200 Wildwood Parkway Building with a $44 million non-recourse mortgage note payable at an interest rate of 6.78% and a term of fifteen and three-quarters years. Also in June 1998, the Company assumed a $10.6 million non-recourse mortgage note payable pursuant to the acquisition of the Northside/Alpharetta I medical office building (see Note 5). This mortgage note payable has an interest rate of 7.7% and a remaining term of eight years. For the three and six months ended June 30, 1998, interest expense was recorded as follows ($ in thousands):
Three Months Ended Six Months Ended June 30, 1998 June 30, 1998 ------------------------------------ ------------------------------------ Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ----- ------- -------------- ----- Interest Expensed $2,731 $2,047 $4,778 $5,543 $4,163 $ 9,706 Interest Capitalized 1,864 570 2,434 3,335 1,056 4,391 ------ ------ ------ ------ ------ ------- $4,595 $2,617 $7,212 $8,878 $5,219 $14,097 ====== ====== ====== ====== ====== =======
During the second quarter of 1998, 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 $132 million. 4. EARNINGS PER SHARE DATA Weighted average shares and adjusted weighted average shares are as follows (in thousands):
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 1998 1997 1998 1997 ---- ---- ---- ---- Weighted average shares 31,545 29,189 31,520 29,093 Dilutive potential common shares 484 420 476 406 ------ ------ ------ ------ Adjusted weighted average shares 32,029 29,609 31,996 29,499 ====== ====== ====== ====== Anit-dilutive options not included -- -- 585 -- ====== ====== ====== ======
5. NORTHSIDE/ALPHARETTA I AND II In June 1998, the Company acquired Northside/Alpharetta I, an approximately 100,000 rentable square foot medical office building, located in suburban Atlanta, which is 100% leased. The purchase price was approximately $16 million including the assumption of a $10.6 million non-recourse mortgage note payable (see Note 3). Construction also commenced in June 1998 on Phase II, which consists of an approximately 198,000 rentable square foot medical office building which is 41% pre-leased. The building is expected to be completed in the second quarter of 1999 at a total cost of approximately $21 million. 6. LAKESHORE PARK PLAZA In June 1998, the Company acquired Lakeshore Park Plaza, an approximately 193,000 rentable square foot office building, located in Birmingham, Alabama, which is 100% leased. The purchase price was approximately $15 million. 7. 2500 UNIVERSITY PARK In June 1998, the Company purchased the land for, and commenced construction of, 2500 University Park, an approximately 123,000 rentable square foot office building in Birmingham, Alabama. The Company purchased the approximately 10 acre site for approximately $1.9 million. The office building is expected to be completed in the third quarter of 1999 at a total cost of approximately $19 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, 1998 and 1997. Results of Operations: - ---------------------- Rental Property Revenues and Operating Expenses. Rental property revenues were approximately $1,083,000 and $1,962,000 higher in the three and six month 1998 periods, respectively. Rental property revenues from the Company's office portfolio increased approximately $555,000 and $498,000 in the three and six month 1998 periods, respectively. This increase was partially due to an increase of approximately $191,000 for both the three and six month 1998 periods from 333 North Point Center East, which became partially operational in June 1998. Additionally, rental property revenues increased approximately $85,000 and $216,000 for the three and six month 1998 periods, respectively, from 200 North Point Center East, which became partially operational for financial reporting purposes in November 1996 and therefore was in the lease-up phase in the first half of 1997. The increase in the six month 1998 period was partially offset by a decrease in rental property revenues of $129,000 for 101 Independence Center caused by a decrease in the average economic occupancy of this office building to 93% in 1998 from 97% in 1997. 101 Independence Center was 96% leased as of June 30, 1998. Rental property revenues from the Company's retail portfolio increased approximately $97,000 and $708,000 for the three and six month 1998 periods, respectively. The increase in the six month 1998 period is partially due to increases in Greenbrier MarketCenter ($259,000) and Los Altos MarketCenter ($265,000), as these centers, which became partially operational for financial reporting purposes in October 1996 and November 1996, respectively, were in the lease-up phase in the first half of 1997. Rental property revenues also increased approximately $300,000 due to an expansion in April 1997 of Presidential MarketCenter, approximately $136,000 due to the completion in May 1997 of Mansell Crossing Phase II, and approximately $592,000 from Abbotts Bridge Station which became partially operational for financial reporting purposes in February 1998. The overall increase in rental property revenues was partially offset by a decrease in rental property revenues of approximately $224,000 and $450,000 for the three and six month 1998 periods, respectively, from Lovejoy Station and $413,000 and $654,000 for the three and six month 1998 periods, respectively, from Rivermont Station, both of which were sold in July 1997. Rental property revenues from the Company's medical office portfolio increased approximately $427,000 and $756,000 for the three and six month 1998 periods, respectively, primarily due to Presbyterian Medical Plaza at University, which became partially operational for financial reporting purposes in July 1997 and was 100% leased and occupied as of January 1, 1998. Rental property operating expenses increased approximately $511,000 and $636,000 for the three and six month 1998 periods, respectively, which increase was primarily related to the aforementioned increased occupancy and expansion of certain of the retail centers and Presbyterian Medical Plaza at University becoming operational. Development Income. Development income increased approximately $252,000 and $70,000 for the three and six month 1998 periods, respectively. The increase in the three month 1998 period is partially due to development fees recognized from two unconsolidated joint ventures; $245,000 from the Cousins LORET Venture, L.L.C. ("Cousins LORET") (see Note 5 of "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10-K/A for the year ended December 31, 1997) and $182,000 from the Brad Cous Golf Venture, Ltd. (See Note 6 of "Notes to Consolidated Financial Statements" in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1998). Also contributing to the increase was an increase of approximately $103,000 in development fees recognized from the fee development of Total Systems' corporate headquarters in Columbus, Georgia. The increase was partially offset by approximately $169,000 of development income recognized in the three month 1997 period from a retail center in Cuyahoga Falls, Ohio. No similar income was recognized in 1998. Management Fees. Management fees increased $73,000 and $129,000 for the three and six month 1998 periods, respectively. This increase is mainly due to the management fees recognized from Cousins LORET related to the Two Live Oak office building (see Note 5 of "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10K/A for the year ended December 31, 1997). Leasing and Other Fees. Leasing and other fees increased approximately $427,000 and $824,000 for the three and six month 1998 periods, respectively. The increase in both the three and six month 1998 periods was due to approximately $432,000 in leasing fees related to the lease-up of the 4200 Wildwood Parkway Building. The increase in the six month 1998 period was also due to leasing fees recognized related to the lease-up of NationsBank Plaza (approximately $243,000), and The Pinnacle and Two Live Oak (approximately $219,000). Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales increased approximately $1,166,000 and $3,362,000 for the three and six month 1998 periods, respectively. The increase in the three month 1998 period is due to residential lot sales increasing from 65 lots for the three month 1997 period to 92 lots for the three month 1998 period, which increased residential lot sales recognized by approximately $1,576,000. Partially offsetting this increase was one outparcel sale in the three month 1997 period for $410,000. No such outparcel sale occurred in the three month 1998 period. The increase in the six month 1998 period was primarily due to an increase in residential lot sales from 104 lots for the six month 1997 period to 176 lots for the six month 1998 period, which increased residential lot sales recognized by approximately $4,057,000. Partially offsetting the aforementioned increase was a decrease in outparcel sales recognized by CREC and one of its subsidiaries to $800,000 in the six month 1998 period from $1,494,000 in the six month 1997 period; there were two outparcel sales in 1998 and three outparcel sales in 1997. Residential lot and outparcel cost of sales increased approximately $1,079,000 and $3,312,000 for the three and six month 1998 periods, respectively, mainly due to increases in residential lot sales. This increase was partially offset by one less outparcel sale in 1998 as compared to 1997, as discussed above. Interest and Other Income. Interest and other income increased approximately $72,000 and $289,000 for the three and six month 1998 periods, respectively. The increase in the six month 1998 period was primarily due to an increase in interest income recognized from temporary investments. In the six months ended June 30, 1998, the Company recognized interest income on temporary investments made with the remaining proceeds from the December 1997 common stock offering of 2,150,000 shares (see Note 6 of "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10-K/A for the year ended December 31, 1997). No similar amounts were invested in the six months ended June 30, 1997. Income from Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased approximately $1,080,000 and $2,079,000 for the three and six month 1998 periods, respectively. Income from CSC Associates, L.P. increased approximately $362,000 and $744,000 for the three and six month 1998 periods, respectively, primarily due to the increase in rental income at NationsBank Plaza from a tenant whose increase in rental rate did not require straight-lining under Statement of Financial Accounting Standards No. 13, and the continued lease-up of the building. Income from Haywood Mall Associates increased approximately $162,000 and $420,000 for the three and six month 1998 periods, respectively, due to continued lease-up of the expansion of Haywood Mall. Income from Wildwood Associates increased approximately $295,000 and $515,000 in the three and six month 1998 periods, respectively. Income before depreciation, amortization and interest expense was favorably impacted by approximately $262,000 and $509,000 for the three and six month 1998 periods, respectively, due to the continued lease-up of the 2300 Windy Ridge Parkway, 2500 Windy Ridge Parkway and 3200 Windy Hill Road Buildings. Additionally, the 4200 Wildwood Parkway Building became operational in June 1998, which generated $69,000 of income before depreciation, amortization and interest expense in both the three and six month 1998 periods. An increase in interest capitalized to projects under development of approximately $117,000 also favorably impacted the results in the six month 1998 period. Partially offsetting the increase in income from Wildwood Associates in the six month 1998 period was an increase in interest expense before interest capitalization of approximately $174,000 primarily due to the completion of the financing of the 4100 and 4300 Wildwood Parkway Buildings on March 20, 1997. Income from Cousins LORET increased approximately $240,000 and $363,000 for the three and six month 1998 periods, respectively. Two Live Oak, a 278,000 rentable square foot office building owned by Cousins LORET, became partially operational for financial reporting purposes in October 1997 (see Note 5 of "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10-K/A for the year ended December 31, 1997). General and Administrative Expenses. General and administrative expenses decreased approximately $195,000 and $382,000 for the three and six month 1998 periods, respectively. The decrease was primarily due to an increase in salaries and overhead being capitalized to a higher level of projects under development in 1998. Depreciation and Amortization. Depreciation and amortization increased approximately $126,000 and $295,000 for the three and six month 1998 periods, respectively. The increase was partially due to Presbyterian Medical Plaza at University becoming operational, as previously discussed, which contributed $78,000 and $155,000 of the increase for the three and six month 1998 periods, respectively. The increase is also partially due to increased depreciation and amortization of $106,000 and $110,000 for the three and six month 1998 periods, respectively, from 101 Independence Center due to increased depreciation and amortization upon completion of certain upgrades to the building. Partially offsetting the aforementioned increases was a decrease of approximately $142,000 and $270,000 for the three and six month 1998 periods, respectively, due to the sale of Lovejoy Station and Rivermont Station in July 1997. Stock Appreciation Right Expense (Credit). The stock appreciation right expense decreased approximately $245,000 to a credit of $118,000 for the three month 1998 period. The credit to stock appreciation right expense decreased approximately $84,000 to an expense of $80,000 for the six month 1998 period. This non-cash item is primarily related to the Company's stock price, which was $29.3125, $30.875 and $29.875 at December 31, 1997, March 31, 1998 and June 30, 1998, respectively, and $28.125, $27.25 and $27.75 at December 31, 1996, March 31, 1997 and June 30, 1997, respectively. Interest Expense. Interest expense decreased approximately $888,000 and $1,732,000 for the three and six month 1998 periods, respectively. Interest expense before capitalization increased to approximately $4,595,000 and $8,878,000 in 1998 from $4,299,000 and $8,545,000 in 1997 for the three and six month periods, respectively, due to higher debt levels. Offsetting this increase was an increase in interest capitalized to projects under development (a reduction of interest expense) to $1,864,000 and $3,335,000 in 1998 from $680,000 and $1,270,000 in 1997 for the three and six month periods, respectively. Property Taxes on Undeveloped Land. Property taxes on undeveloped land increased $273,000 and $236,000 for the three and six month 1998 periods, respectively. The increase in both periods is due to the favorable settlement of property tax appeals in the second quarter of 1997 on the Company's North Point land related to 1994, 1995 and 1996 tax years. Other Expenses. Other expenses decreased approximately $499,000 and $963,000 in the three and six month 1998 periods, respectively, due to a decrease in predevelopment expense. Benefit for Income Taxes from Operations. Benefit for income taxes from operations decreased $555,000 and $498,000 for the three and six month 1998 periods, respectively. The decrease in both periods was due to decreases in CREC and its subsidiaries' loss before provision for income taxes and gain on sale of investment properties of $1,649,000 and $1,147,000 for the three and six month 1998 periods, respectively. CREC and its subsidiaries' loss before income taxes and gain on sale of investment properties decreased due to the aforementioned decrease in predevelopment expense and increase in development fees in the three and six months 1998 periods. Certain development 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 increased in both the three and six month 1998 periods. Gain on Sale of Investment Properties. Gain on sale of investment properties increased approximately $886,000 for the three month 1998 period and decreased approximately $739,000 for the six month 1998 period. The 1998 gain was from two parcels sold at the Company's North Point development: the March 1998 sale of 6 acres of land ($.6 million gain) and the April 1998 sale of approximately 23 acres ($1.0 million gain). The 1997 gain was from the January 1997 sale of 28 acres of land at the Company's North Point development ($2.4 million gain). 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, 1998. The Company has development and acquisition projects in various planning stages. The Company currently intends to finance these projects, as well as the completion of projects currently under construction, using its existing lines of credit (increasing those lines of credit as required), long-term non-recourse financing on the Company's unleveraged projects, other financings, and the sale of common stock, warrants to purchase common stock and debt securities under a $200 million shelf registration statement the Company filed with the Securities and Exchange Commission in September 1996, of which approximately $132 million remains available at June 30, 1998. Also, two of the Company's unconsolidated joint ventures completed financings with two non-recourse mortgage note payables of $44 million and $70 million, respectively (Company's share $22 million and $35 million, respectively) (see Note 3). The Company also assumed a $10.6 million non-recourse mortgage note payable in connection with the acquisition of a medical office building (see Note 5). 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 shareholders. 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 the Company's Common Stock. Cash Flows. Net cash provided by operating activities increased approximately $16.4 million in 1998. An increase of approximately $6.7 million in income before gain on sale of investment properties favorably impacted net cash provided by operating activities. Operating distributions from unconsolidated joint ventures increased approximately $1.1 million due primarily to an increase in distributions of $1.2 million from Haywood Mall and a $.4 million distribution received from Cousins LORET, partially offset by a decrease in distributions of approximately $.5 million from CSC Associates, L.P. Residential lot and outparcel cost of sales increased approximately $3.5 million due to increases in the number of residential lots sales in 1998. Cash flows from operating activities were also positively impacted by changes in other operating assets and liabilities, an increase of approximately $6 million. Net cash used in investing activities increased approximately $67.1 million in 1998 primarily due to an increase of approximately $59 million in property acquisition and development expenditures, as a result of the Company acquiring two properties in the six month 1998 period (see Notes 5 and 6) and having a higher level of projects under development. Investment in unconsolidated joint ventures increased approximately $18.0 million primarily due to contributions to Cousins LORET of approximately $16.5 million and to Brad Cous Golf Ventures, Ltd. of approximately $1.6 million, which are being used to fund the development of The Pinnacle and The Shops at World Golf Village, respectively. An increase in non-operating distributions from unconsolidated joint ventures of approximately $8 million partially offset the increase in net cash used in investing activities. The increase in non-operating distributions from unconsolidated joint ventures was due to an increase in distributions received from Wildwood Associates in 1998 of approximately $10.1 million, primarily due to the completion of financing of the 4200 Wildwood Parkway building (see Note 3), partially offset by a decrease of approximately $2.1 million in distributions from Norfolk Hotel Associates in 1998; all remaining assets of Norfolk Hotel Associates were distributed in 1997, and the venture was then liquidated. The change in other assets decreased approximately $1.7 million in 1998. Net cash provided by financing activities increased approximately $27.1 million in 1998, which was primarily attributable to an increase of approximately $23.2 million in the net amount drawn on the Company's line of credit. Partially offsetting the increase was a decrease of approximately $2.2 million in the proceeds received from common stock sold, net of expenses. An increase in the dividends paid per share to $.72 in 1998 from $.62 in 1997 and an increase in the number of shares outstanding also partially offset the increase in net cash provided by financing activities, as dividends paid increased approximately $4.7 million. Supplemental Financial Information: - ----------------------------------- Depreciation and amortization expense included the following components for the three and six months ended June 30, 1998 ($ in thousands):
Three Months Ended Six Months Ended June 30, 1998 June 30, 1998 -------------------------------- --------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ----- ------- -------------- ----- Furniture, fixtures and equipment $ 118 $ 1 $ 119 $ 238 $ 1 $ 239 Deferred financing costs -- 3 3 -- 6 6 Goodwill and related business acquisition costs 76 27 103 153 37 190 Real estate related: Building (including tenant first generation) 3,276 2,706 5,982 6,470 5,221 11,691 Tenant second generation 295 225 520 502 440 942 ------ ------ ------ ------ ------ ------- $3,765 $2,962 $6,727 $7,363 $5,705 $13,068 ====== ====== ====== ====== ====== =======
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures during the three and six months ended June 30, 1998, including its share of unconsolidated joint ventures ($ in thousands):
Three Months Ended Six Months Ended June 30, 1998 June 30, 1998 ------------------------ ----------------------- Office Retail Total Office Retail Total ------ ------ ----- ------ ------ ----- Second generation related costs $375 $ -- $375 $473 $ -- $473 Building improvements -- -- -- -- -- -- ---- ---- ---- ---- ---- ---- $375 $ -- $375 $473 $ -- $473 ==== ==== ==== ==== ==== ====
PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Financial Data Schedule (aa) Reports on Form 8-K There were no reports on Form 8-K filed by the Registrant during the second quarter ended June 30, 1998. 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 13, 1998 EX-27 2
5 6-MOS DEC-31-1998 JUN-30-1998 1,782 0 44,542 0 0 0 542,010 40,259 666,393 23,124 269,426 0 0 31,572 0 666,393 0 57,196 0 35,889 0 0 5,543 21,307 21,414 0 0 0 0 23,071 .73 .72
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