-----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, QSaAOBtXIilDNloxjV9sPGJ6KTyTvPPhZblM4iiE2GLX+7Ms7LhXPnEDB9TbXHSb GPhn00yRUcC6uuCa3Bez1Q== 0000025232-99-000017.txt : 19991117 0000025232-99-000017.hdr.sgml : 19991117 ACCESSION NUMBER: 0000025232-99-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99751526 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 September 30, 1999 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 November 2, 1999, 32,157,133 shares of common stock of the Registrant were outstanding.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED BALANCE SHEETS ($ in thousands, except per share amounts) September 30, December 31, 1999 1998 ------------- ------------ (Unaudited) ASSETS - ------ PROPERTIES: Operating properties, net of accumulated depreciation of $30,979 as of September 30, 1999 and $23,421 as of December 31, 1998 $318,616 $235,588 Land held for investment or future development 15,299 15,530 Projects under construction 318,553 178,736 Residential lots under development 6,073 8,771 -------- -------- Total properties 658,541 438,625 CASH AND CASH EQUIVALENTS, at cost which approximates market 641 1,349 NOTES AND OTHER RECEIVABLES 34,151 39,470 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 150,018 264,648 OTHER ASSETS 8,961 8,766 -------- -------- TOTAL ASSETS $852,312 $752,858 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- NOTES PAYABLE $226,771 $198,858 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 35,258 36,104 DEPOSITS AND DEFERRED INCOME 899 928 -------- -------- TOTAL LIABILITIES 262,928 235,890 -------- -------- DEFERRED GAIN 116,631 120,038 -------- -------- MINORITY INTERESTS 31,621 17,065 -------- -------- COMMITMENTS AND CONTINGENT LIABILITIES STOCKHOLDERS' INVESTMENT: Common stock, $1 par value, authorized 150,000,000 shares; issued 32,197,533 shares at September 30, 1999 and 31,887,298 shares at December 31, 1998 32,197 31,887 Additional paid-in capital 253,675 244,778 Cumulative undistributed net income 155,260 103,200 -------- -------- TOTAL STOCKHOLDERS' INVESTMENT 441,132 379,865 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $852,312 $752,858 ======== ======== 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, 1999 AND 1998 (UNAUDITED) (In thousands, except per share amounts) Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1999 1998 1999 1998 ------- ------- ------- ------- REVENUES: Rental property revenues $16,389 $19,168 $41,021 $52,134 Development income 1,392 803 4,526 2,327 Management fees 1,181 917 3,542 2,735 Leasing and other fees 399 538 2,698 1,552 Residential lot and outparcel sales 6,032 5,198 13,683 13,972 Interest and other 1,044 1,039 2,738 3,011 ------- ------- ------- ------- 26,437 27,663 68,208 75,731 ------- ------- ------- ------- INCOME FROM UNCONSOLIDATED JOINT VENTURES 4,647 4,406 14,146 13,534 ------- ------- ------- ------- COSTS AND EXPENSES: Rental property operating expenses 5,203 5,039 12,231 13,181 General and administrative expenses 3,176 3,495 10,209 9,460 Depreciation and amortization 5,003 4,380 10,829 11,743 Stock appreciation right expense (credit) 19 (183) 155 (103) Residential lot and outparcel cost of sales 5,299 4,941 11,447 13,179 Interest expense 3,369 430 8,912 Property taxes on undeveloped land 213 221 655 670 Other 133 4 1,243 113 ------- ------- ------- ------- 19,046 21,266 47,199 57,155 ------- ------- ------- ------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND GAIN ON SALE OF INVESTMENT PROPERTIES 12,038 10,803 35,155 32,110 PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS 180 66 1,435 (41) ------- ------- ------- ------- INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 11,858 10,737 33,720 32,151 GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION 1,029 -- 57,735 1,657 ------- ------- ------- ------- NET INCOME $12,887 $10,737 $91,455 $33,808 ======= ======= ======= ======= WEIGHTED AVERAGE SHARES 32,157 31,628 32,063 31,556 ======= ======= ======= ======= BASIC NET INCOME PER SHARE $ .40 $ .34 $ 2.85 $ 1.07 ======= ======= ======= ======= ADJUSTED WEIGHTED AVERAGE SHARES 32,871 32,070 32,680 32,016 ======= ======= ======= ======= DILUTED NET INCOME PER SHARE $ .39 $ .33 $ 2.80 $ 1.06 ======= ======= ======= ======= CASH DIVIDENDS DECLARED PER SHARE $ .41 $ .36 $ 1.23 $ 1.08 ======= ======= ======= ======= 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, 1999 AND 1998 (UNAUDITED) ($ in thousands) 1999 1998 -------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties $ 33,720 $ 32,151 Adjustments to reconcile income before gain on sale of investment properties to net cash provided by operating activities: Depreciation and amortization, net of minority interest's share 10,792 11,743 Stock appreciation right expense (credit) 155 (103) Cash charges to expense accrual for stock appreciation rights (170) (201) Effect of recognizing rental revenues on a straight-line basis (300) (250) Income from unconsolidated joint ventures (14,146) (13,534) Operating distributions from unconsolidated joint ventures 27,417 18,739 Residential lot and outparcel cost of sales 10,531 12,740 Changes in other operating assets and liabilities: Change in other receivables (461) (951) Change in accounts payable and accrued liabilities 2,528 6,213 -------- -------- Net cash provided by operating activities 70,066 66,547 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision 57,735 1,657 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales 28,178 1,200 Deferred income recognized (3,095) -- Property acquisition and development expenditures (252,833) (125,259) Non-operating distributions from unconsolidated joint ventures 2,000 22,617 Investment in unconsolidated joint ventures, including interest capitalized to equity investments (29,698) (19,481) Investment in notes receivable (4) (18,834) Net cash received in formation of venture 125,469 -- Collection of notes receivable 6,070 1,428 Change in other assets, net (2,323) 370 -------- -------- Net cash used in investing activities (68,501) (136,302) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit 245,208 139,578 Repayment of line of credit (212,996) (68,705) Dividends paid (39,392) (34,051) Common stock sold, net of expenses 9,206 6,545 Repayment of other notes payable (4,299) (5,248) -------- -------- Net cash (used in) provided by financing activities (2,273) 38,119 -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (708) (31,636) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,349 32,694 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 641 $ 1,058 ======== ======== The accompanying notes are an integral part of these consolidated statements.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (UNAUDITED) 1. BASIS OF PRESENTATION - -------------------------- The Consolidated Financial Statements include the accounts of Cousins Properties Incorporated ("Cousins") and its majority and wholly-owned affiliates, Cousins Real Estate Corporation ("CREC") and its subsidiaries, and CREC II Inc. ("CREC II") and its subsidiaries. All of the entities included in the Consolidated Financial Statements are hereinafter referred to collectively as the "Company." Cousins has elected to be taxed as a real estate investment trust ("REIT"), and intends to distribute 100% of its federal taxable income to stockholders, thereby eliminating any liability for future corporate federal income taxes. Therefore, the results included herein do not include a federal income tax provision for Cousins. However, CREC and its subsidiaries and CREC II and its subsidiaries are taxed separately from Cousins as regular corporations. Accordingly, the Consolidated Statements of Income include a provision (benefit) for CREC's and CREC II's income taxes. The Consolidated Financial Statements were prepared by the Company without audit, but in the opinion of management reflect all adjustments necessary for the fair presentation of the Company's financial position as of September 30, 1999, and results of operations for the three and nine month periods ended September 30, 1999 and 1998. Results of operations for the interim 1999 periods are not necessarily indicative of results expected for the full year. While certain information and footnote disclosures normally included in financial statements prepared in accordance with 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, 1998. 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 1998 amounts have been reclassified to conform with the 1999 presentation. 2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS - --------------------------------------------------- Interest (net of $11,227,000 and $5,259,000 capitalized in 1999 and 1998, respectively) and income taxes paid were as follows for the nine months ended September 30, 1999 and 1998 ($ in thousands): 1999 1998 ------ ------ Interest paid $1,170 $8,927 Income taxes paid $1,338 $ 110 During the nine months ended September 30, 1999, approximately $23,236,000 was transferred from Projects Under Construction to Operating Properties. In November 1998, the Company entered into a venture arrangement (the "Prudential Venture") with The Prudential Insurance Company of America ("Prudential"), whereby the Company contributed nine properties and Prudential contributed a total of $230,469,000 of cash on agreed-upon dates through September 29, 1999 (see Note 5 of "Notes to Consolidated Financial Statements" in the Company's Form 10-K for the year ended December 31, 1998). Prudential contributed $125,469,000 in the nine months ended September 30, 1999. The effect of this contribution on the Consolidated Balance Sheet as of September 30, 1999 was a decrease of $111,040,000 in Investment in Unconsolidated Joint Ventures and an increase of $14,429,000 in Minority Interests. At September 30, 1999, cash and cash equivalents included approximatel $374,000 which is restricted under a municipal bond indenture. 3. NOTES PAYABLE AND INTEREST EXPENSE - ---------------------------------------
At September 30, 1999 and December 31, 1998, notes payable included the following ($ in thousands): September 30, 1999 December 31, 1998 ------------------------------------ -------------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ----- ------- -------------- ----- Floating Rate Lines of Credit and Construction Loans $ 43,332 $ 12,089 $ 55,421 $ 11,120 $ -- $ 11,120 Other Debt (primarily non-recourse fixed rate mortgages) 183,439 191,144 374,583 187,738 221,498 409,236 -------- -------- -------- -------- -------- -------- $226,771 $203,233 $430,004 $198,858 $221,498 $420,356 ======== ======== ======== ======== ======== ========
For the three and nine months ended September 30, 1999, interest expense was recorded as follows ($ in thousands): Three Months Ended Nine Months Ended September 30, 1999 September 30, 1999 ------------------------------------ ------------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ----- ------- -------------- ----- Interest Expensed $ -- $3,568 $3,568 $ 430 $10,965 $11,395 Interest Capitalized 4,018 238 4,256 11,227 1,014 12,241 ------ ------ ------ ------- ------- ------- $4,018 $3,806 $7,824 $11,657 $11,979 $23,636 ====== ====== ====== ======= ======= =======
During the third quarter of 1999, 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 $372 million. In August 1999, the Company modified and extended its $150 million line of credit. The line is unsecured, matures August 27, 2002 and bears interest tied to the London Interbank Offering Rate. 4. EARNINGS PER SHARE DATA - --------------------------- Weighted average shares and adjusted weighted average shares are as follows (in thousands):
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1999 1998 1999 1998 ------ ------ ------ ------ Weighted average shares 32,157 31,628 32,063 31,556 Dilutive potential common shares 714 442 617 460 ------ ------ ------ ------ Adjusted weighted average shares 32,871 32,070 32,680 32,016 ====== ====== ====== ====== Anti-dilutive options not included -- 570 -- 570
====== ====== ====== ====== 5. REPORTABLE SEGMENTS - ----------------------- The Company has four reportable segments: Office Division, Retail Division, Medical Office Division and Land Division. The Office Division, Retail Division and Medical Office Division develop, lease and manage office buildings, retail centers and medical office buildings, respectively. The Land Division owns various tracts of strategically located land which are being held for future development. The Land Division also develops single-family residential communities which are parceled into lots and sold to various home builders. The management of the Company evaluates performance of its reportable segments based on Funds From Operations ("FFO"). The Company calculates its FFO using the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO adjusted to (i) eliminate the recognition of rental revenues on a straight-line basis, (ii) reflect stock appreciation right expense on a cash basis and (iii) recognize certain fee income as cash is received rather than when recognized in the financial statements. The Company believes its FFO presentation more properly reflects its operating results. The Company's reportable segments are broken down based on what type of product the division provides. The divisions are managed separately because each product they provide has separate and distinct development issues, leasing and/or sales strategies and management issues. The notations (100%) and (JV) used in the following tables indicate wholly-owned and unconsolidated joint ventures, respectively, and all amounts are in thousands.
Three Months Ended Office Retail Medical Land Unallocated September 30, 1999 Division Division Office Division Division and Other Total - ------------------ -------- -------- --------------- -------- --------- ----- Rental property revenues (100%) $ 9,592 $ 4,831 $1,839 $ - $ 29 $ 16,291 Rental property revenues (JV) 15,437 939 71 - - 16,447 Development income, management fees and leasing and other fees (100%) 2,195 131 586 60 - 2,972 Development income, management fees and leasing and other fees (JV) 1,796 - - - - 1,796 Other income (100%) - 2,662 - 3,370 1,044 7,076 Other income (JV) - - - 6 361 367 ----------------------------------------------------------------------- Total revenues 29,020 8,563 2,496 3,436 1,434 44,949 ----------------------------------------------------------------------- Rental property operating expenses (100%) 3,726 999 536 - (58) 5,203 Rental property operating expenses (JV) 4,323 196 25 - - 4,544 Other expenses (100%) - 2,499 - 3,013 3,749 9,261 Other expenses (JV) 1,051 - - 19 4,017 5,087 ----------------------------------------------------------------------- Total expenses 9,100 3,694 561 3,032 7,708 24,095 ----------------------------------------------------------------------- Consolidated funds from operations 19,920 4,869 1,935 404 (6,274) 20,854 ----------------------------------------------------------------------- Depreciation and amortization (100%) (3,436) (904) (451) - - (4,791) Depreciation and amortization (JV) (3,869) (324) (22) - - (4,215) Effect of the recognition of rental revenues on a straight-line basis (100%) 98 - - - - 98 Effect of the recognition of rental revenues on a straight-line basis (JV) (117) - - - - (117) Adjustment to reflect stock appreciation right expense on an accrual basis - - - - 29 29 Gain on sale of investment properties, net of applicable income tax provision - - - - 1,029 1,029 ----------------------------------------------------------------------- Net income 12,596 3,641 1,462 404 (5,216) 12,887 Provision for income taxes from operations - - - - 180 180 ----------------------------------------------------------------------- Income from operations before income taxes $ 12,596 $ 3,641 $1,462 $ 404 $(5,036) $ 13,067 =======================================================================
Nine Months Ended Office Retail Medical Land Unallocated September 30, 1999 Division Division Office Division Division and Other Total - ------------------ -------- -------- --------------- -------- --------- ----- Rental property revenues (100%) $ 22,149 $ 14,264 $ 4,102 $ - $ 208 $ 40,723 Rental property revenues (JV) 46,500 9,442 405 - - 56,347 Development income, management fees and leasing and other fees (100%) 8,214 1,000 1,372 180 - 10,766 Development income, management fees and leasing and other fees (JV) 2,247 - - - - 2,247 Other income (100%) - 3,477 - 10,206 2,738 16,421 Other income (JV) - - - 255 436 691 ----------------------------------------------------------------------- Total revenues 79,110 28,183 5,879 10,641 3,382 127,195 ----------------------------------------------------------------------- Rental property operating expenses (100%) 7,870 3,133 1,255 - (27) 12,231 Rental property operating expenses (JV) 13,107 2,257 137 - - 15,501 Other expenses (100%) - 2,857 - 9,245 13,997 26,099 Other expenses (JV) 1,218 - - 91 11,737 13,046 ----------------------------------------------------------------------- Total expenses 22,195 8,247 1,392 9,336 25,707 66,877 ----------------------------------------------------------------------- Consolidated funds from operations 56,915 19,936 4,487 1,305 (22,325) 60,318 ----------------------------------------------------------------------- Depreciation and amortization (100%) (6,481) (2,582) (1,100) - (156) (10,319) Depreciation and amortization (JV) (13,336) (2,779) (125) - - (16,240) Effect of the recognition of rental revenues on a straight-line basis (100%) 298 - - - - 298 Effect of the recognition of rental revenues on a straight-line basis (JV) (291) (61) - - - (352) Adjustment to reflect stock appreciation right expense on an accrual basis - - - - 15 15 Gain on sale of investment properties, net of applicable income tax provision - - - - 57,735 57,735 ----------------------------------------------------------------------- Net income 37,105 14,514 3,262 1,305 35,269 91,455 ----------------------------------------------------------------------- Provision for income taxes from operations - - - - 1,435 1,435 ----------------------------------------------------------------------- Income from operations before income taxes $ 37,105 $ 14,514 $ 3,262 $ 1,305 $36,704 $ 92,890 ======================================================================= Total assets $501,260 $228,434 $61,099 $10,759 $50,760 $852,312 ======================================================================= Investment in unconsolidated joint ventures $126,925 $ 17,708 $ 836 $ 4,545 $ 4 $150,018 =======================================================================
Three Months Ended Office Retail Medical Land Unallocated September 30, 1998 Division Division Office Division Division and Other Total - ------------------ -------- -------- --------------- -------- --------- ----- Rental property revenues (100%) $ 9,380 $ 8,588 $1,021 $ - $ 91 $ 19,080 Rental property revenues (JV) 12,773 2,061 - - - 14,834 Development income, management fees and leasing and other fees (100%) 1,757 188 313 - - 2,258 Development income, management fees And leasing and other fees (JV) - - - - - - Other income (100%) - - - 5,198 1,039 6,237 Other income (JV) - - - 11 26 37 ----------------------------------------------------------------------- Total revenues 23,910 10,837 1,334 5,209 1,156 42,446 ----------------------------------------------------------------------- Rental property operating expenses (100%) 2,894 1,732 392 - 21 5,039 Rental property operating expenses (JV) 3,515 692 - - - 4,207 Other expenses (100%) - - - 5,162 7,235 12,397 Other expenses (JV) - - - - 2,953 2,953 ----------------------------------------------------------------------- Total expenses 6,409 2,424 392 5,162 10,209 24,596 ----------------------------------------------------------------------- Consolidated funds from operations 17,501 8,413 942 47 (9,053) 17,850 ----------------------------------------------------------------------- Depreciation and amortization (100%) (2,262) (1,696) (197) - (86) (4,241) Depreciation and amortization (JV) (2,603) (289) - - 3 (2,889) Effect of the recognition of rental revenues on a straight-line basis (100%) 88 - - - - 88 Effect of the recognition of rental revenues on a straight-line basis (JV) (416) - - - - (416) Adjustment to reflect stock appreciation right expense on an accrual basis - - - - 345 345 Gain on sale of investment properties, net of applicable income tax provision - - - - - - ----------------------------------------------------------------------- Net income 12,308 6,428 745 47 (8,791) 10,737 ----------------------------------------------------------------------- Provision for income taxes from operations - - - - 66 66 ----------------------------------------------------------------------- Income from operations before income taxes $ 12,308 $ 6,428 $ 745 $ 47 $(8,725) $ 10,803 =======================================================================
Nine Months Ended Office Retail Medical Land Unallocated September 30, 1998 Division Division Office Division Division and Other Total - ------------------ -------- -------- --------------- -------- --------- ----- Rental property revenues (100%) $ 25,031 $ 24,742 $ 1,778 $ - $ 340 $ 51,891 Rental property revenues (JV) 37,053 6,086 - - - 43,139 Development income, management fees and leasing and other fees 5,342 511 761 - - 6,614 Other income (100%) - 800 - 13,172 3,011 16,983 Other income (JV) - - - 155 80 235 ----------------------------------------------------------------------- Total revenues 67,426 32,139 2,539 13,327 3,431 118,862 ----------------------------------------------------------------------- Rental property operating expenses (100%) 7,548 4,903 649 - 81 13,181 Rental property operating expenses (JV) 10,053 1,921 - - - 11,974 Other expenses (100%) - 712 - 13,137 19,021 32,870 Other expenses (JV) - - - 54 7,965 8,019 ----------------------------------------------------------------------- Total expenses 17,601 7,536 649 13,191 27,067 66,044 ----------------------------------------------------------------------- Consolidated funds from operations 49,825 24,603 1,890 136 (23,636) 52,818 ----------------------------------------------------------------------- Depreciation and amortization (100%) (6,139) (4,583) (352) - (2,943) (11,367) Depreciation and amortization (JV) (7,621) (968) - - 3 (8,586) Effect of the recognition of rental revenues on a straight-line basis (100%) 243 - - - - 243 Effect of the recognition of rental revenues on a straight-line basis (JV) (1,238) (23) - - - (1,261) Adjustment to reflect stock appreciation right expense on an accrual basis - - - - 304 304 Gain on sale of investment properties, net of applicable income tax provision - - - - 1,657 1,657 ----------------------------------------------------------------------- Net income 35,070 19,029 1,538 136 (21,965) 33,808 ----------------------------------------------------------------------- Benefit for income taxes from operations - - - - (41) (41) ----------------------------------------------------------------------- Income from operations before income taxes $ 35,070 $ 19,029 $ 1,538 $ 136 ($22,006) $ 33,767 ======================================================================= Total assets $342,460 $253,232 $41,684 $9,910 $64,947 $712,233 ======================================================================= Investment in unconsolidated joint ventures $ 88,465 $ 22,307 $ - $1,082 $ 3 $111,857 =======================================================================
Reconciliation to Consolidated Revenues - --------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, --------------------- ---------------------- 1999 1998 1999 1998 ------- ------- ------- ------- Rental property revenues (100%) $16,291 $19,080 $40,723 $51,891 Effect of the recognition of rental revenues on a straight-line basis (100%) 98 88 298 243 Development income, management fees and leasing and other fees 2,972 2,258 10,766 6,614 Residential lot and outparcel sales 6,032 5,198 13,683 13,972 Interest and other 1,044 1,039 2,738 3,011 --------------------- ---------------------- Total consolidated revenues $26,437 $27,663 $68,208 $75,731 ===================== ======================
6. Common Stock Repurchase - --------------------------- Subsequent to September 30, 1999, the Company repurchased 40,400 of its outstanding common stock. The aggregate purchase price of these repurchases of common stock was approximately $1,271,000. 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, 1999 and 1998. Results of Operations: - ---------------------- Rental Property Revenues and Operating Expenses. Rental property revenues were approximately $2,779,000 and $11,113,000 lower in the three and nine month 1999 periods, respectively. Rental property revenues from the Company's office division increased approximately $222,000 and decreased approximately $2,827,000 in the three and nine month 1999 periods, respectively. Rental property revenues decreased approximately $1,594,000, $728,000, $748,000 and $285,000 in the three month 1999 period and $4,840,000, $2,142,000, $2,185,000 and $285,000 in the nine month 1999 period, from the contribution of four office properties, First Union Tower, 100 North Point Center East, 200 North Point Center East and Grandview II, respectively, in November 1998 to the Prudential Venture (see Note 2). 333 John Carlyle became partially operational for financial reporting purposes in May 1999 and increased rental property revenues by $859,000 and $1,279,000 in the three and nine month 1999 periods, respectively. The Company acquired the Inforum, an 876,000 square foot office building with an additional 111,000 of exhibition space located in downtown Atlanta, Georgia on June 30, 1999. The Inforum contributed $2,223,000 of rental property revenues to both the three and nine month 1999 periods. The AT&T Wireless Services Headquarters building became partially operational in September 1999, which contributed $242,000 to both the three and nine month 1999 periods. Rental property revenues from 101 Independence Center increased approximately $120,000 and $258,000 in the three and nine month 1999 periods, respectively, due to higher average economic occupancy. Average economic occupancy was 97% in the nine month 1999 period and 93% in the nine month 1998. Rental property revenues from 615 Peachtree Street decreased approximately $325,000 in the nine month 1999 period, which contributed to the nine month 1999 decrease, due partially to the receipt of two cancellation penalties in the first quarter 1998 and partially to lower average economic occupancy in 1999. Average economic occupancy was 63% in the nine month 1999 period and 75% in the nine month 1998 period. Rental property revenues increased by approximately $1,260,000 in the nine month 1999 period from the June 1998 acquisition of Lakeshore Park Plaza and by approximately $1,410,000 from 333 North Point Center East, which became partially operational for financial reporting purposes in June 1998. Additionally, the Wildwood Training Facility further offset the decrease in the nine month 1999 period by an increase of $251,000 in rental property revenues due to increased rental rates. Rental property revenues from the Company's retail division decreased approximately $3,757,000 and $10,478,000 in the three and nine month 1999 periods, respectively. Rental property revenues decreased approximately $1,398,000, $1,313,000, $866,000 and $378,000 in the three month 1999 period and $4,287,000, $3,912,000, $2,525,000 and $1,038,000 in the nine month 1999 period from the contribution of North Point MarketCenter, Greenbrier MarketCenter, Los Altos MarketCenter and Mansell Crossing II, respectively, to the aforementioned Prudential Venture in November 1998. The decreases were also due to the sale of Abbotts Bridge Station in February 1999, which contributed approximately $420,000 and $1,012,000 to the decrease in the three and nine month 1999 periods, respectively. The decreases were partially offset by an increase of approximately $266,000 and $1,505,000 in the three and nine month 1999 periods, respectively, from Laguna Niguel Promenade, which became partially operational in July 1998. The decreases were also partially offset by approximately $327,000 in both the three and nine month 1999 periods from The Avenue East Cobb, which became partially operational in September 1999. Perimeter Expo also partially offset the decrease in rental property revenues in the nine month 1999 period by approximately $238,000 due primarily to the addition of an outparcel site which became operational in February 1999. Rental property revenues from the Company's medical office division increased approximately $818,000 and $2,324,000 in the three and nine month 1999 periods, respectively. Meridian Mark Plaza became partially operational in April 1999, which contributed approximately $833,000 and $1,505,000 to the increase in the three and nine month 1999 periods, respectively. The AtheroGenics medical office building became fully operational in March 1999, which contributed approximately $236,000 and $513,000 to the increase in the three and nine month 1999 periods, respectively. The June 1998 acquisition of Northside/Alpharetta I contributed to the increase in rental property revenues by approximately $1,163,000 in the nine month 1999 period. These increases were partially offset by a decrease of approximately $328,000 and $986,000 in the three and nine month 1999 periods, respectively, due to the contribution of Presbyterian Medical Plaza at University to the aforementioned Prudential Venture in November 1998. Rental property operating expenses decreased approximately $950,000 in the nine month 1999 period. The decrease was primarily related to the contribution of the four office buildings, four retail centers and one medical office building to the Prudential Venture. The decrease was partially offset by the June 1999 acquisition of the Inforum and The Avenue East Cobb becoming partially operational in September 1999. Rental property operating expenses were also offset by the June 1998 acquisitions of Lakeshore Park Plaza and Northside/Alpharetta I, as well as 333 North Point Center East, Laguna Niguel Promenade, AtheroGenics and Meridian Mark Plaza becoming fully or partially operational in June 1998, July 1998, March 1999 and April 1999, respectively. Development Income. Development income increased approximately $589,000 and $2,199,000 in the three and nine month 1999 periods, respectively. The increase in development income was partially due to development fees recognized from three of the Company's ventures which are developing Gateway Village ($245,000 and $734,000 in the three and nine month periods, respectively), 1155 Perimeter Center West ($260,000 and $552,000 in the three and nine month periods, respectively) and the Bentwater residential development ($60,000 and $180,000 in the three and nine month periods, respectively). Development income of approximately $706,000 in the nine month 1999 period was also recognized from a build-to-suit for Walgreens on an outparcel at Colonial Plaza MarketCenter. Additionally, development income increased approximately $343,000 and $565,000 in the three and nine month 1999 periods, respectively, from the Crawford Long Hospital campus redevelopment and increased $204,000 in both the three and nine month 1999 periods from the third party fee development for Cox Enterprises. Partially offsetting the aforementioned increases in development income was a decrease in development income of approximately $182,000 and $484,000 in the three and nine month periods, respectively, from the Brad Cous Golf Venture, Ltd., for which the Company developed World Golf Village, and by a decrease of approximately $115,000 from the Dusseldorf project in the nine month 1999 period. Development fees from the Cousins LORET Venture L.L.C. ("Cousins LORET") also decreased by approximately $235,000, which partially offset the increase in the three month 1999 period. Management Fees. Management fees increased approximately $264,000 and $807,000 in the three and nine month 1999 periods, respectively, partially due to approximately $214,000 and $568,000 of management fees recognized in the three and nine month 1999 periods, respectively, from the aforementioned Prudential Venture for the management of the nine contributed properties. Also contributing to the increase in the nine month 1999 period was an increase of approximately $149,000 of management fees from Cousins LORET. Leasing and Other Fees. Leasing and other fees were approximately $1,146,000 higher in the nine month 1999 period. The increase was primarily due to a leasing fee of approximately $987,000 recognized by CREC for a lease at the Inforum office building earned prior to the Company's acquisition. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales increased approximately $834,000 in the three month 1999 period and decreased approximately $289,000 in the nine month 1999 period. The increase in the three month 1999 period was due to one outparcel sale in the three month 1999 period of approximately $2,662,000. There were no outparcel sales in the three month 1998 period. The increase in the three month 1999 period was partially offset by a decrease in residential lot sales from 111 lots in the three month 1998 period to 69 lots in the three month 1999 period, which decreased residential lot sales by approximately $1,828,000. The decrease in the nine month 1999 period was due to a decrease in the number of residential lot sales from 287 in the nine month 1998 period to 220 in the nine month 1999 period, which decreased residential lot sales by approximately $2,967,000. Partially offsetting the decrease in the nine month 1999 period was an increase in outparcel sales of $2,678,000 due to the aforementioned outparcel sale in the three month 1999 period. Residential lot and outparcel cost of sales increased approximately $358,000 and decreased approximately $1,732,000 in the three and nine month 1999 periods, respectively. The increase in the three month 1999 period was due to the aforementioned outparcel sale which increased cost of sales by approximately $2,499,000. The increase in the three month 1999 period was partially offset by a decrease in residential lot cost of sales by approximately $2,141,000. The decrease in the nine month 1999 period was due to a decrease in residential lot cost of sales of approximately $3,877,000. The decrease in the nine month 1999 period was partially offset by an increase in outparcel cost of sales of $2,145,000 due to the aforementioned outparcel sale. The decrease in residential lot cost of sales in both the three and nine month periods was greater than the corresponding decrease in residential lot sales due to an increase in 1999 of gross profit percentages used to calculate the cost of sales on residential lot sales in certain of the residential developments. The decreases were also due to lower outparcel cost of sales for the outparcel sales that occurred in the first half of 1999 as compared to the outparcel sales that occurred in the first half of 1998, with the outparcel sales between these same two periods being approximately the same. Interest and Other Income. Interest and other income decreased approximately $273,000 in the nine month 1999 period. The decrease was mainly due to interest income recognized from a note receivable from Cousins LORET in the nine month 1999 period. The Company lent funds to Cousins LORET at a slightly higher rate than its borrowing costs, until December 1998 when Cousins LORET drew down funds from the $70 million financing of The Pinnacle. Income from Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased approximately $241,000 and $612,000 in the three and nine month 1999 periods, respectively. Income from CSC Associates, L.P. increased approximately $361,000 in the nine month 1999 period, primarily due to the continued lease-up of Bank of America Plaza. Average economic occupancy of Bank of America Plaza increased to 98% in the nine month 1999 period from 93% in the nine month 1998 period. Income from Wildwood Associates increased approximately $334,000 and decreased approximately $108,000 in the three and nine month 1999 periods, respectively. The changes were due partially to a decrease in interest capitalization of $186,000 and $731,000 in the three and nine month 1999 periods, respectively, and an increase in depreciation and amortization of approximately $145,000 and $473,000 in the three and nine month 1999 periods, respectively, as the 4200 Wildwood Parkway Building became partially operational in June 1998. Additionally, interest expense increased approximately $621,000 in the nine month 1999 period mainly due to the $44 million non-recourse financing of the 4200 Wildwood Parkway Building which was completed in June 1998. An increase in income before depreciation, amortization and interest expense of $385,000 and $1,280,000 in the three and nine month 1999 periods, respectively, from the 4200 Wildwood Parkway Building also contributed to the changes between periods. Income before depreciation, amortization and interest expense also favorably impacted results by an increase of approximately $88,000 and $278,000 for the three and nine month 1999 periods, respectively, due to the continued lease-up of the 2300 and the 2500 Windy Ridge Parkway buildings. Income from Cousins LORET decreased approximately $235,000 and $553,000 in the three and nine month 1999 periods, respectively. The decreases were partially due to increases in interest expense before capitalization of approximately $503,000 and $1,728,000 for the three and nine month 1999 periods, respectively, due to the funding of the $70 million non-recourse financing of The Pinnacle, which was completed on December 30, 1998. Depreciation and amortization increased approximately $432,000 and $1,055,000 in the three and nine month 1999 periods, respectively, mainly due to The Pinnacle becoming partially operational for financial reporting purposes in March 1999. Also contributing to the decrease for the three month 1999 period was a decrease of approximately $226,000 in interest capitalized to The Pinnacle. Income before depreciation, amortization and interest expense from The Pinnacle partially offset the decreases by approximately $738,000 and $1,513,000 in the three and nine month 1999 periods, respectively, and by approximately $231,000 for the nine month 1999 period from the lease-up of Two Live Oak. Also partially offsetting the decreases in income from Cousins LORET were increases in interest income of approximately $108,000 and $426,000 in the three and nine month 1999 periods, respectively. Income from Haywood Mall Associates decreased approximately $1,092,000 and $776,000 in the three and nine month 1999 periods, respectively, due to the sale of the Company's interest in Haywood Mall on June 28, 1999. Income from Cousins Stone LP increased $748,000 and $1,031,000 in the three and nine month 1999 periods. Cousins Stone LP was formed June 1, 1999 when Cousins acquired Faison's 50% interest in Faison-Stone. Income from Hickory Hollow Associates increased $331,000 in both the three and nine month 1999 periods due to the sale of the remaining outparcel sites owned by this venture in the three month 1999 period. There were no similar outparcel sales in 1998. This venture will be dissolved by December 31, 1999. General and Administrative Expenses. General and administrative expenses decreased approximately $319,000 and increased approximately $749,000 in the three and nine month 1999 periods, respectively. The decrease in the three month 1999 period was due to an increased level of salaries and overhead being capitalized to a higher level of projects under development. The increase in the nine month 1999 period was primarily due to the Company's continued expansion, partially offset by an increased level of salaries and overhead being capitalized to a higher level of projects under development. Depreciation and Amortization. Depreciation and amortization increased approximately $623,000 and decreased approximately $914,000 in the three and nine month 1999 periods, respectively. The increase in the three month 1999 period was due mainly to the June 1999 acquisition of the Inforum office building and The Avenue East Cobb becoming partially operational in September 1999. The increase in the three month 1999 period was also due to 333 North Point Center East, Laguna Niguel Promenade, AtheroGenics, Meridian Mark Plaza and 333 John Carlyle becoming fully or partially operational in June 1998, July 1998, March 1999, April 1999 and May 1999, respectively. Partially offsetting the increase in the three month 1999 period was a decrease due to the aforementioned contribution of nine properties to the Prudential Venture. The decrease in the nine month 1999 period was due to the contribution of nine properties to the Prudential Venture, partially offset by the acquisitions of the Inforum in June 1999 and Lakeshore Park Plaza and Northside/Alpharetta I in June 1998, and the properties becoming fully or partially operational as discussed above. Stock Appreciation Right Expense (Credit). The credit to stock appreciation right expense increased approximately $202,000 from a credit of $183,000 in the three month 1998 period to an expense of $19,000 in the three month 1999 period. The credit to stock appreciation right expense increased approximately $258,000 from a credit of $103,000 in the nine month 1998 period to an expense of $155,000 in the nine month 1999 period. This non-cash item is primarily related to the Company's stock price, which was $32.25, $33.8125 and $33.9375 at December 31, 1998, June 30, 1999 and September 30, 1999, respectively; and $29.3125, $29.875 and $28.0625 at December 31, 1997, June 30, 1998 and September 30, 1998, respectively. Interest Expense. Interest expense decreased approximately $3,369,000 and $8,482,000 in the three and nine month 1999 periods, respectively. Interest expense before capitalization decreased to approximately $4,018,000 and $11,657,000 in 1999 from $5,293,000 and $14,171,000 in 1998 for the three and nine month periods, respectively, due to lower debt levels. Further contributing to this decrease was an increase of approximately $2,094,000 and $5,968,000 in interest capitalized to projects under development (a reduction of interest expense) to $4,018,000 and $11,227,000 in 1999 from $1,924,000 and $5,259,000 in 1998 for the three and nine month periods, respectively. Other Expenses. Other expenses increased approximately $1,130,000 in the nine month 1999 period due primarily to the recognition of Prudential's minority interest in the aforementioned Prudential Venture. Provision (Benefit) for Income Taxes from Operations. Provision (benefit) for income taxes from operations increased $1,476,000 in the nine month 1999 period from a benefit of $41,000 in 1998 to a provision of $1,435,000 in 1999. The increase was due to an increase in CREC and its subsidiaries' and CREC II and its subsidiaries' income from operations before income taxes of approximately $3,771,000 in the nine month 1999 period. CREC and its subsidiaries' income from operations before income taxes increased mainly due to the aforementioned increase in development and leasing fees. 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 increased in the nine month 1999 period. Additionally, CREC II and its subsidiaries, which were formed in June 1999, and together have a 50% interest in Cousins Stone LP, contributed income from operations before income taxes of approximately $1,031,000 in the nine month 1999 period. Gain on Sale of Investment Properties. Gain on sale of investment properties increased approximately $1,029,000 and $56,078,000 in the three and nine month 1999 periods, respectively. The 1999 gain included the following: the January 1999 sale of 3 acres of McMurray land ($.1 million gain), the February 1999 sale of Abbotts Bridge Station, a neighborhood retail center ($3.5 million gain), the March 1999 sale of Kennesaw Crossings neighborhood retail center ($.9 million gain), the May 1999 sale of 2 acres of Hidden Hills land ($.1 million gain), the June 1999 sale of the Company's 50% interest in Haywood Mall ($50.1 million gain), and amortization of deferred gain from the aforementioned formation of the Prudential Venture ($3.0 million). The 1998 gain included the following: the March 1998 sale of 6 acres of land ($.6 million gain) and the April 1998 sale of approximately 23 acres of land ($1.0 million gain), both at the Company's North Point development. Liquidity and Capital Resources: - -------------------------------- Financial Condition. The Company's debt (including its pro rata share of unconsolidated joint venture debt) was 28% of total market capitalization at September 30, 1999. 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) (see Note 3), 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 September 30, 1999. 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 $3.5 million in 1999. Changes in other operating assets and liabilities decreased approximately $3.2 million. Residential lot and outparcel cost of sales decreased approximately $2.2 million due to a decrease in the number of residential lots sold in 1999 offset by a higher profit percentage recognized from to lots sold in 1999 which reduces cost of sales. The decrease in residential lot and outparcel cost of sales was partially offset by an increase in outparcel cost of sales of $1.0 million. Depreciation and amortization decreased approximately $1.0 million due mainly to the aforementioned contribution of the properties to the Prudential Venture. Operating distributions from unconsolidated joint ventures increased approximately $8.7 million, which partially offset the aforementioned decreases, primarily due to approximately $7.9 million of operating distributions from the Prudential Venture, approximately $2.0 million of operating distributions from Cousins LORET and an increase of approximately $.9 million in operating distributions from CSC Associates, L.P. There were no operating distributions from the Prudential Venture or Cousins LORET in 1998. A decrease of approximately $1.6 million in operating distributions from Wildwood Associates partially offset the increase in operating distributions. Net cash used in investing activities decreased approximately $67.8 million in 1999. Net cash received from the Prudential Venture increased approximately $125.5 million in 1999 (see Note 2) which primarily caused the decrease in the net cash used in investing activities. Also contributing to the decrease in net cash used in investing activities was an increase in net cash provided by sales activities of approximately $83.1 million. This increase was due mainly to four sales in the first half of 1999: Abbotts Bridge Station, Kennesaw Crossings, McMurray land and the Company's 50% interest in Haywood Mall. The decrease in net cash used in investing activities was partially offset by an increase of approximately $127.6 million in property acquisition and development expenditures, as a result of the Company having a higher level of projects under development in 1999 and the June 1999 acquisition of the Inforum office building. Non-operating distributions from unconsolidated joint ventures decreased $20.6 million, which also partially offset the decrease in net cash used in investing activities. In the nine month 1999 period, Cousins LORET made non-operating distributions of approximately $2.0 million, which represented a portion of the proceeds from the aforementioned $70 million financing of The Pinnacle in December 1998. No such distribution occurred in 1998. In 1998, the Company received a distribution from Wildwood Associates of $22.6 million, primarily due to the completion of the $44 million financing of the 4200 Wildwood Parkway Building. No such distribution occurred in 1999. Investment in unconsolidated joint ventures increased $10.2 million. The Company contributed $11.0 million to the 285 Venture, LLC for the construction of 1155 Perimeter Center West and $9.3 million to Charlotte Gateway Village, LLC for the construction of Gateway Village in 1999. Additionally, the Company contributed $5.2 million for the formation of Cousins Stone LP on June 1, 1999 and $3.3 million to Temco Associates for the development of the Bentwater residential community. No contributions were made to these ventures in 1998. The Company contributed $16.6 million to Cousins LORET in 1998 for the construction of The Pinnacle. No amounts were contributed in 1999. The Company also contributed $2.7 million more in 1998 as compared to 1999 to Brad Cous Golf Venture, Ltd. for the construction of World Golf Village. Investment in notes receivable decreased approximately $18.8 million related to the note receivable from Cousins LORET which was completed during the nine month 1998 period. No similar note receivable was completed in 1999. Collection of notes receivable also increased $4.6 million due primarily to the proceeds from the repayment of the Cousins LORET note receivable in the first quarter of 1999, which also partially offset the decrease in net cash used in investing activities. Deferred income recognized increased approximately $3.1 million which related to the Prudential Venture which also partially offset the aforementioned decreases. Change in other assets, net, also decreased $2.7 million, which further offset the aforementioned decreases. Net cash used in financing activities increased approximately $40.4 million in 1999 from net cash provided by financing activities, which was primarily attributable to a decrease of $38.7 million in the net amount drawn on the Company's line of credit. An increase in the dividends paid per share to $.41 in 1999 from $.36 in 1998 and an increase in the number of shares outstanding also contributed to the increase in net cash used in financing activities, as dividends paid increased approximately $5.3 million. Partially offsetting the increase in net cash used in financing activities was an increase of approximately $2.7 million in the proceeds received from common stock sold, net of expenses. Quantitative and Qualitative Disclosure About Market Risk: - ---------------------------------------------------------- There have been no significant changes in the Company's market risk related to its notes payable and notes receivable from that disclosed in the Company's annual report on Form 10-K for the year ended December 31, 1998. Year 2000: - ---------- The "Year 2000 issue" is the result of certain computer systems, software, electronic equipment or embedded chips (collectively known as "computer systems") being written using two digits rather than four to define the applicable year. Therefore, certain computer systems may not distinguish between a year that begins with a "20" rather than a "19." This could result in system failures which could cause disruptions of operations. The Company has completed its assessment of the impact of the Year 2000 issue on its business and operations and has identified the areas which rely on computer systems and may be potentially impacted, which mainly include the systems utilized in the operations of its real estate properties and in the processing of its accounting data. The Company has substantially completed an inventory of the material computer systems being utilized in its existing operating real estate properties which may be adversely affected by the Year 2000 issue. Such systems include, but are not limited to, building control systems, heating and air conditioning controls, elevator controls, fire alarms and security devices. Certain of these systems have been replaced, upgraded or modified as deemed necessary, the cost of which has not been material. The Company is currently in the process of upgrading its accounting software to a version that its software vendor has represented to be Year 2000 compliant, as they define it. The Company expects to have the installation of the upgrade completed by the fourth quarter of 1999. The hardware and operating system used to run the accounting software has been represented to be Year 2000 compliant. The Company has also assessed its non-financial computer systems, and has replaced, upgraded or modified such systems as needed. The cost of the upgrades to the accounting software and non-financial computer systems has not been material. The Company has significantly completed its survey of all material third party vendors to determine their Year 2000 compliance status and has received certificates, where possible, as to their compliancy. No estimates can be made as to any potential adverse impact resulting from the failure of any third party vendor or service provider to be Year 2000 compliant. To the extent the Year 2000 issue has a material adverse effect on the business operations or financial condition of third parties with which the Company has material relationships, such as vendors, suppliers, tenants and financial institutions, the Year 2000 issue could also have a material adverse effect on the Company's business, results of operations and financial condition. To date, the cost to analyze and prepare for the Year 2000 issue has not been material. There can be no assurance that the Company will be able to identify and correct all aspects of the effect of the Year 2000 issue on the Company. However, the Company does not currently expect the Year 2000 issue will have a material impact on the Company's business, operations or financial condition. The Company is currently developing contingency plans on a property by property basis. This involves assessing critical tenants, systems and vendors. Certain servicing arrangements have been contracted with particular vendors to provide immediate response if the need arises, and the Company is arranging for specific employees to staff certain properties in case of need. The preceding "Year 2000" discussion contains various forward-looking statements, within the meaning of the federal securities laws, which represent the Company's beliefs or expectations regarding future events. When used in this discussion, the words "expects" and "anticipates" and similar expressions are intended to identify forward-looking statements. Forward-looking statements include, without limitation, the Company's expectations as to when it will complete its Year 2000 evaluation, the estimated costs of achieving Year 2000 readiness and the Company's expectation that Year 2000 issues will not have a material impact on the Company's business, operations or financial condition. All forward-looking statements involve a number of risks and uncertainties that could cause the actual results to differ materially from the projected results. Factors that may cause these differences include, but are not limited to, the availability of qualified personnel, technology resources, any actions of third parties with respect to Year 2000 problems and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. Supplemental Financial Information: - -----------------------------------
Depreciation and amortization expense included the following components for the three and nine months ended September 30, 1999 ($ in thousands): Three Months Ended Nine Months Ended September 30, 1999 September 30, 1999 -------------------------------- ---------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ----- ------- -------------- ----- Furniture, fixtures and equipment $ 169 $ 41 $ 210 $ 467 $ 57 $ 524 Deferred financing costs - 4 4 - 12 12 Goodwill and related business acquisition costs 75 5 80 225 15 240 Real estate related: Building (including tenant first generation) 4,461 4,002 8,463 9,320 15,594 24,914 Tenant second generation 261 202 463 780 625 1,405 ------ ------ ------ ------- ------- ------- $4,966 $4,254 $9,220 $10,792 $16,303 $27,095 ====== ====== ====== ======= ======= =======
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures for the three and nine months ended September 30, 1999, including its share of unconsolidated joint ventures ($ in thousands): Three Months Ended Nine Months Ended September 30, 1999 September 30, 1999 --------------------------------- --------------------------------- Office Retail Medical Total Office Retail Medical Total ------ ------ ------- ----- ------ ------ ------- ----- Second generation related costs $459 $168 $ - $627 $894 $186 $ - $1,080 Building improvements 73 - - 73 73 - - 73 ---- ---- ---- ---- ---- ---- ---- ------ $532 $168 $ - $700 $967 $186 $ - $1,153 ==== ==== ==== ==== ==== ==== ==== ======
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 have been no reports on Form 8-K filed by the Registrant during the quarter September 30, 1999. 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) November 15, 1999 EX-27 2
5 9-MOS DEC-31-1999 SEP-30-1999 641 0 34,151 0 0 0 689,520 30,979 852,312 36,157 262,928 0 0 32,197 0 852,312 0 82,354 0 47,199 0 0 430 35,155 33,720 0 0 0 0 91,455 2.85 2.80
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