0000085388-95-000006.txt : 19950815
0000085388-95-000006.hdr.sgml : 19950815
ACCESSION NUMBER: 0000085388-95-000006
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950814
SROS: NASD
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ROUSE COMPANY
CENTRAL INDEX KEY: 0000085388
STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512]
IRS NUMBER: 520735512
STATE OF INCORPORATION: MD
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-01743
FILM NUMBER: 95562946
BUSINESS ADDRESS:
STREET 1: 10275 LITTLE PATUXENT PKWY
CITY: COLUMBIA
STATE: MD
ZIP: 21044-3456
BUSINESS PHONE: 4109926000
MAIL ADDRESS:
STREET 1: 10275 LITTLE PATUXENT PARKWAY
CITY: COLUMBIA
STATE: MD
ZIP: 21044
FORMER COMPANY:
FORMER CONFORMED NAME: COMMUNITY RESEARCH & DEVELOPMENT INC
DATE OF NAME CHANGE: 19660913
10-Q
1
Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-1743
The Rouse Company
(Exact name of registrant as specified in its charter)
Maryland 52-0735512
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10275 Little Patuxent Parkway
Columbia, Maryland 21044-3456
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 992-6000
Indicate by check mark whether the registrant (1) 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of the issuer's common stock as
of July 28, 1995:
Common Stock, $0.01 par value 47,849,667
Title of Class Number of Shares
Part I. Financial Information
Item 1. Financial Statements:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1995 and 1994
(Unaudited, in thousands except per share amounts, note 1)
Three months Six months
ended June 30, ended June 30,
1995 1994 1995 1994
Revenues:
Operating properties:
Retail centers $121,537 $117,606 $237,300 $233,446
Office, mixed-use and other 37,298 37,162 72,473 72,017
158,835 154,768 309,773 305,463
Land sales 4,240 8,336 15,031 19,504
Corporate interest income 561 558 1,347 1,229
163,636 163,662 326,151 326,196
Operating expenses, exclusive of
provision for bad debts,
depreciation and amortization:
Operating properties:
Retail centers 61,168 62,170 120,586 124,922
Office, mixed-use and other 17,492 18,352 34,846 36,224
78,660 80,522 155,432 161,146
Land sales 2,553 5,006 8,031 11,195
Development 1,601 1,384 3,505 2,877
Corporate 2,422 2,141 4,520 3,891
85,236 89,053 171,488 179,109
Interest expense:
Operating properties:
Retail centers 31,563 31,652 62,463 62,708
Office, mixed-use and other 17,162 17,119 34,473 33,161
48,725 48,771 96,936 95,869
Land sales 1,249 1,120 2,535 2,553
Development 89 124 183 248
Corporate 2,837 2,864 5,543 5,552
52,900 52,879 105,197 104,222
Provision for bad debts 705 379 1,465 1,197
Depreciation and amortization 18,296 19,498 36,848 37,645
157,137 161,809 314,998 322,173
Gain (loss) on dispositions of
assets and other provisions,
net (note 5) (3,624) (126) (8,480) (5,406)
The accompanying notes are an integral part of these statements.
1
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations, continued
Three and Six Months Ended June 30, 1995 and 1994
(Unaudited, in thousands except per share amounts, note 1)
Three months Six months
ended June 30, ended June 30,
1995 1994 1995 1994
Earnings (loss) before income
taxes and extraordinary losses $ 2,875 $ 1,727 $ 2,673 $ (1,383)
Income tax provision:
Current - state 132 130 245 261
Deferred 1,340 1,021 1,658 347
1,472 1,151 1,903 608
Earnings (loss) before
extraordinary losses 1,403 576 770 (1,991)
Extraordinary losses from
extinguishments of debt, net
of related income tax benefits -- (2,606) (7,217) (2,763)
Net earnings (loss) $ 1,403 $(2,030) $ (6,447) $ (4,754)
Net loss applicable to common
shareholders $(2,258) $(5,301) $(13,768) $(11,295)
LOSS PER SHARE OF COMMON STOCK
AFTER PROVISION FOR DIVIDENDS
ON PREFERRED STOCK:
Loss before extraordinary losses $ (.05) $ (.06) $ (.14) $ (.18)
Extraordinary losses -- (.05) (.15) (.06)
$ (.05) $ (.11) $ (.29) $ (.24)
DIVIDENDS PER SHARE:
Common stock $ .20 $ .17 $ .40 $ .34
Preferred stock $ .81 $ .81 $ 1.62 $ 1.62
The accompanying notes are an integral part of these statements.
2
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994
(Unaudited, in thousands, note 1)
June 30, December 31,
1995 1994
Assets:
Property (note 2):
Operating properties:
Property and deferred costs of projects $2,818,313 $2,937,565
Less accumulated depreciation
and amortization 477,542 490,158
2,340,771 2,447,407
Properties in development 40,853 65,348
Properties held for development and sale 232,048 141,102
Total property 2,613,672 2,653,857
Prepaid expenses, deferred charges
and other assets 95,621 104,254
Accounts and notes receivable 73,829 78,202
Investments in marketable securities 7,709 30,149
Cash and cash equivalents 39,984 49,398
Total $2,830,815 $2,915,860
The accompanying notes are an integral part of these statements.
3
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets, continued
June 30, 1995 and December 31, 1994
(Unaudited, in thousands, note 1)
June 30, December 31,
1995 1994
Liabilities:
Debt (note 3):
Property debt not carrying a Parent
Company guarantee of repayment $1,919,536 $1,998,445
Parent Company debt and debt carrying a
Parent Company guarantee of repayment:
Property debt 172,925 223,731
Convertible subordinated debentures 130,000 130,000
Other debt 221,000 120,700
523,925 474,431
Total debt 2,443,461 2,472,876
Obligations under capital leases 58,528 60,044
Accounts payable, accrued expenses
and other liabilities 185,129 205,317
Deferred income taxes 80,369 82,597
Shareholders' equity:
Series A Convertible Preferred stock
with a liquidation preference of
$225,250,700 in 1995 and $225,252,050
in 1994 (note 4) 45 45
Common stock of 1 cent par value per share;
250,000,000 shares authorized; 47,827,071
shares issued in 1995 and 47,571,046
shares issued in 1994 478 476
Additional paid-in capital 307,867 306,674
Accumulated deficit (245,062) (212,169)
Total shareholders' equity 63,328 95,026
Total $2,830,815 $2,915,860
The accompanying notes are an integral part of these statements.
4
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994
(Unaudited, in thousands, note 1)
1995 1994
Cash flows from operating activities:
Rents and other revenues received $310,162 $301,044
Proceeds from land sales 15,137 17,963
Interest received 5,273 5,498
Land development expenditures (7,000) (6,574)
Operating expenditures:
Operating properties (147,013) (153,267)
Land sales, development and corporate (13,788) (6,754)
Interest paid:
Operating properties (104,497) (102,623)
Land sales, development and corporate (4,797) (5,852)
Net cash provided by operating activities 53,477 49,435
Cash flows from investing activities:
Expenditures for properties in development
and improvements to existing properties
funded by debt (31,405) (31,553)
Expenditures for property acquisitions -- (93,786)
Expenditures for improvements to
existing properties funded by cash
provided by operating activities:
Tenant leasing and remerchandising (3,612) (3,921)
Building and equipment (2,078) (2,122)
Purchases of marketable securities (2,838) (48,247)
Proceeds from redemptions or sales of
marketable securities 25,278 51,712
Other (2,054) (997)
Net cash used in investing activities (16,709) (128,914)
Cash flows from financing activities:
Proceeds from issuance of property debt 119,030 316,938
Repayments of property debt:
Scheduled principal payments (17,900) (20,721)
Other payments (212,222) (196,548)
Proceeds from issuance of other debt 99,582 --
Repayments of other debt (8,955) (11,543)
Proceeds from exercise of stock options 727 8
Dividends paid (26,444) (22,715)
Net cash used in financing activities (46,182) 65,419
Net decrease in cash and cash equivalents (9,414) (14,060)
Cash and cash equivalents at beginning of period 49,398 73,556
Cash and cash equivalents at end of period $ 39,984 $ 59,496
The accompanying notes are an integral part of these statements.
5
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Six Months Ended June 30, 1995 and 1994
(Unaudited, in thousands, note 1)
1995 1994
Reconciliation of net loss to net cash
provided by operating activities:
Net loss $ (6,447) $ (4,754)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 36,848 37,645
(Gain) loss on dispositions of assets
and other provisions, net 8,480 5,406
Deferred income tax provision 1,658 347
Extraordinary losses, net of related income
tax benefits 7,217 2,763
Additions to pre-construction reserve 1,800 1,400
Provision for bad debts 1,465 1,197
Decrease in operating assets and liabilities,
net 2,736 5,431
Net cash provided by operating activities $ 53,757 $ 49,435
Schedule of Non-Cash Investing and Financing
Activities:
Mortgage debt extinguished on dispositions
of interests in properties $(20,779) $(15,681)
The accompanying notes are an integral part of these statements.
6
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1995
(1) Principles of statement presentation
The unaudited consolidated financial statements include all
adjustments which are necessary, in the opinion of management, to
fairly reflect the Company's financial position and results of
operations. All such adjustments are of a normal recurring nature.
The statements have been prepared using the accounting policies
described in the 1994 Annual Report to Shareholders.
In its annual reports, the Company has included certain supplementary
current value basis financial information with the historical cost
basis financial statements. The current value basis presentation has
been and will continue to be an integral part of the Company's
formal, year-end reporting, but will not be included in quarterly
reports to shareholders. Therefore, all of the financial information
contained herein is based on the historical cost basis as required by
generally accepted accounting principles.
(2) Property
Properties in development include construction and development in
progress and pre-construction costs, net. The construction and
development in progress accounts include land and land improvements
of $12,310,000 at June 30, 1995.
Changes in pre-construction costs, net, for the six months ended
June 30, 1995 are summarized as follows (in thousands):
Balance at beginning of period, before
pre-construction reserve $ 20,633
Costs incurred 6,553
Costs transferred to construction and development
in progress (13)
Costs transferred to operating properties (1,202)
Costs of unsuccessful projects written off (64)
25,907
Less pre-construction reserve (15,845)
Balance at end of period, net $ 10,062
At June 30, 1995 properties held for development and sale include net
investments of $98,199,000 in several retail center and other
properties that are being marketed for sale.
7
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), continued
(3) Debt
Debt at June 30, 1995 and December 31, 1994 is summarized as follows
(in thousands):
June 30, 1995 December 31, 1994
Due in Due in
Total one year Total one year
Mortgages and bonds $1,980,956 $111,525 $2,063,978 $117,511
Convertible sub-
ordinated debentures 130,000 -- 130,000 --
Other loans 332,505 8,148 278,898 10,744
Total $2,443,461 $119,673 $2,472,876 $128,255
In February 1995, the Company registered $150,000,000 of unsecured
notes for issuance to the public from time to time through February
1997. As of June 30, 1995, the Company had issued $100,300,000 of
these unsecured notes with a weighted average interest rate of 7.67%
and a weighted average maturity of 7 years.
The amounts due in one year reflect the terms of existing loan
agreements except where refinancing commitments from outside lenders
have been obtained. In these instances, maturities are determined
based on the terms of the refinancing commitments.
Approximately $71,765,000 of the debt maturing in one year at June 30,
1995 relates to a retail center mortgage due in February 1996. The
Company expects to refinance this mortgage on a long-term basis at or
prior to its scheduled maturity.
(4) Series A Convertible Preferred Stock
The Company has authorized issuance of 50,000,000 shares of Preferred
stock of 1 cent par value per share of which 4,505,168 shares have
been classified as Series A Convertible Preferred. At June 30, 1995
and December 31, 1994, there were 4,505,014 and 4,505,041 shares
outstanding, respectively.
(5) Gain (loss) on dispositions of assets and other provisions, net
The loss in 1995 relates primarily to provisions for losses on several
retail center properties the Company has decided to sell and is
actively marketing ($10,420,000). These provisions for losses were
recognized based on the estimated fair values of the individual
properties less costs to sell. These losses were partially offset by
a gain related to the disposition of an interest in a retail center
property ($1,940,000).
8
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, (Unaudited), continued
(5) Gain (loss) on dispositions of assets and other provisions, net
(continued)
The loss in 1994 relates primarily to provisions for losses on
investments in two operating properties ($7,728,000) and damages to a
retail property as a result of an earthquake ($446,000). The
provisions for losses were recognized based on management's
determination that the Company would not continue to support the
projects under the existing arrangements with lenders and/or partners
and that it was unlikely that the Company would recover all of its
investments in these projects based on forecasts of future cash
flows. These losses were partially offset by a gain related to the
disposition of an interest in a property the Company continues to
manage ($2,768,000).
(6) Contingencies
On November 6, 1990, Robert P. Guastella Equities, Inc. ("Plaintiff"),
a former tenant at the Riverwalk Shopping Center in New Orleans,
Louisiana ("Riverwalk"), which is owned and operated by New Orleans
Riverwalk Associates, an affiliate of the Company ("NORA"), filed
suit in the Civil District Court of Orleans Parish, Louisiana against
NORA, the Company, two Company affiliates, and a partner of NORA
(collectively, "Defendants"). Plaintiff alleges that Defendants
breached Plaintiff's lease agreement with NORA for the operation of a
restaurant at Riverwalk and that as a result of these breaches it
suffered losses and could not pay the rentals due under the lease
agreement, as a result of which the lease and its tenancy were
terminated by NORA. Plaintiff sought damages of approximately
$600,000 for these alleged breaches and $33,000,000 for alleged lost
future profits which it claimed it would have earned had its lease
not been terminated. The Defendants filed answers denying the claims
of Plaintiff asserting other defenses and raising a counterclaim.
The case was tried before a jury and, on October 28, 1993, the jury
returned a verdict against Defendants upon which judgment was entered
by the trial court on January 7, 1994, in the total net amount of
approximately $9,128,000 (which included a net award for lost future
profits of approximately $8,640,000) plus interest from the date the
suit was filed and attorneys' fees in an amount to be determined. On
May 6, 1994, the trial court denied all post-trial motions of both
Plaintiff and Defendants and entered an amended judgment in which it
awarded Plaintiff $450,000 in attorneys' fees and awarded Defendants
$25,000 in attorneys' fees. Defendants believe that the verdict and
judgment as entered to date are contrary to the facts and applicable
law. On May 23, 1994, Defendants appealed this judgment to the
Louisiana Court of Appeals, Fourth Circuit. Briefs have been filed,
and oral argument was held on March 8, 1995. A decision is expected
in the third or fourth quarter of 1995. Defendants intend to
vigorously pursue their rights of appeal. An estimate of the
9
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, (Unaudited), continued
(6) Contingencies (continued)
ultimate possible loss in the case cannot be made at this time,
although a reasonably possible range of loss could be as high as the
full amount of the damages awarded in the case, together with
interest accrued and attorneys' fees awarded.
The Company and certain of its subsidiaries are defendants in various
other litigation matters arising in the ordinary course of business,
some of which involve claims for damages that are substantial in
amount. Some of these litigation matters are covered by insurance.
In the opinion of management, adequate provisions (less than
$1,500,000 in the aggregate) have been made for losses with respect
to all litigation matters (including with respect to the above-
described suit), where appropriate, and the ultimate resolution of
all such litigation matters is not likely to have a material effect
on the consolidated financial position of the Company. Due to the
Company's modest and fluctuating net earnings (loss), it is not
possible to predict whether the resolution of these matters is likely
to have a material effect on the Company's consolidated net earnings
(loss), and it is, therefore, possible that the resolution of these
matters could have such a material effect in any future quarter or
annual fiscal period.
10
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
The following discussion and analysis covers any material changes in
financial condition since December 31, 1994 and any material changes in
the results of operations for the three and six months ended June 30,
1995 as compared to the same periods in 1994. This discussion and
analysis should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in
the 1994 Annual Report to Shareholders.
Operating Results:
Operating properties:
Revenues from retail centers increased $3,931,000 and $3,854,000 while
total operating and interest expenses decreased $1,984,000 and $5,022,000
for the three and six months ended June 30, 1995 as compared to the same
periods in 1994. The increases in revenues are attributable to the
operations of expansions opened in August 1994 and March 1995, increased
tenant lease cancellation payments, and higher effective rents on re-
leased space. These increases have been partially offset by lower
recoveries of operating expenses, as discussed below, and the
dispositions of properties in the first quarter of 1994 and second
quarter of 1995. The decreases in expenses are attributable to these
dispositions, lower recoverable expenses as a result of operating expense
reduction efforts and milder winter conditions experienced in the
Northeast and lower interest expense due to debt restructurings and
refinancings completed in 1994. These decreases were partially offset by
an increase in expenses associated with the operations of the expansions
referred to above.
Revenues from office, mixed-use and other properties increased $136,000 and
$456,000 and total operating and interest expenses decreased $800,000 and
$154,000 for the three and six months ended June 30, 1995 as compared to
the same periods in 1994. The increases in revenues are attributable
primarily to higher occupancy at certain hotel and office properties in
Columbia and tenant lease cancellation payments. These increases have
been partially offset by increased vacancy at a mixed-use project. The
decreases in total operating and interest expenses are attributable
primarily to lower depreciation expense as the Company discontinued
depreciating an industrial building it intends to sell. These decreases
are partially offset by expenses at two industrial buildings in Columbia
which opened in the second quarter of 1994 and higher interest expense on
a mixed-use project. Interest on the project loan was lower in the first
quarter of 1994 because the Company exercised an option in the loan
agreement to make a specified payment and reduce the effective interest
rate on the loan retroactive to the beginning of its term. The payment
was less than the interest previously accrued, and the difference was
recorded as a reduction to interest expense in the quarter.
Land sales:
Revenues from land sales decreased $4,096,000 and $4,473,000 and total
costs and expenses decreased $2,324,000 and $3,182,000 for the three and
six months ended June 30, 1995, as compared to the same periods in 1994.
11
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
The decreases in revenues relate to lower sales of land for commercial/
other uses in Columbia. The decreases in costs and expenses is
attributable primarily to decreased costs of sales due to lower sales
revenues.
Development:
These costs consist primarily of additions to the pre-construction reserve
and new business costs. The pre-construction reserve is maintained to
provide for costs of projects which may not go forward to completion.
New business costs relate primarily to the initial evaluation of
acquisition and development opportunities. These costs increased in 1995
when compared to 1994 due to the Company's more aggressive pursuit of new
development and acquisition opportunities.
Corporate:
Corporate operating expenses increased $279,000 and $629,000 for the three
and six months ended June 30, 1995 when compared to the same periods in
1994. These increases are due primarily to costs of increased executive
management focus on corporate matters.
Corporate interest costs were $3,624,000 and $3,420,000 for the three and
six months ended June 30, 1995 and 1994, respectively, and $7,204,000 and
$6,568,000 for the six months ended June 30, 1995 and 1994, respectively.
Of such amounts, $785,000 and $556,000 were capitalized during the three
months ended June 30, 1995 and 1994, respectively, and $1,661,000 and
$1,016,000 were capitalized during the six months ended June 30, 1995 and
1994, respectively, on funds invested in development projects. The
increases in corporate interest costs are attributable primarily to
additional debt used for corporate purposes.
Gain (loss) on dispositions of assets and other provisions, net
The loss in 1995 relates primarily to provisions for losses on several
retail center properties the Company has decided to sell and is actively
marketing ($10,420,000). These provisions for losses were recognized
based on the estimated fair values of the individual properties less
costs to sell. These losses were partially offset by a gain related to
the disposition of an interest in a retail center property ($1,940,000).
The loss in 1994 relates primarily to provisions for losses on investments
in two operating properties ($7,728,000) and damages to a retail property
as a result of an earthquake ($446,000). The provisions for losses were
recognized based on management's determination that the Company would not
continue to support the projects under the existing arrangements with
lenders and/or partners and that it was unlikely that the Company would
recover all of its investments in these projects based on forecasts of
future cash flows. These losses were partially offset by a gain related
to the disposition of an interest in a property the Company continues to
manage ($2,768,000).
12
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
Financial Condition and Liquidity:
Shareholders' equity decreased $31,698,000 from $95,026,000 at
December 31, 1994 to $63,328,000 at June 30, 1995. The decrease was due
principally to the payment of regular quarterly dividends on the
Company's common and Preferred stocks, and to a lesser extent, the
Company's net loss for the six months ended June 30, 1995.
The Company had cash and cash equivalents and investments in marketable
securities totaling $47,693,000 and $79,547,000 at June 30, 1995 and
December 31, 1994, respectively, including $626,000 and $2,001,000,
respectively, restricted for use in the development of certain
properties.
In February 1995, the Company registered $150,000,000 of unsecured notes
for issuance to the public from time to time through February 1997. The
notes can be issued, subject to market conditions, for varying terms of
nine months or longer at fixed or floating rates based upon market
indices at the time of issuance. Proceeds of these notes have been or
will be used to repay higher rate or recourse indebtedness of the
Company. As of June 30, 1995, the Company had issued $100,300,000 of
notes, the proceeds of which were used to repay higher rate and/or
recourse indebtedness.
The Company has lines of credit available for up to $154,220,000 which may
be used to provide corporate liquidity, fund property acquisition costs
and finance other corporate needs, subject to lenders' approvals. They
may also be utilized to pay some portion of existing debt, including
maturities in 1995 and 1996. As of June 30, 1995, debt due in one year
was $119,673,000. Approximately $71,765,000 of this debt relates to a
retail center mortgage due in February 1996. The Company expects to
refinance this mortgage on a long-term basis at or prior to its scheduled
maturity. The Company continues to actively evaluate new sources of
capital and is confident that it will be able to make these payments,
arrange to refinance these maturities prior to their scheduled repayment
dates, or take advantage of new sources of capital without necessitating
property sales.
Net cash provided by operating activities was $53,477,000 and $49,435,000
for the six months ended June 30, 1995 and 1994, respectively. The
factors discussed previously under the operating results of the four
major business segments affected the level of net cash provided by
operating activities.
Net cash used in investing activities was $16,709,000 and $128,914,000 for
the six months ended June 30, 1995 and 1994, respectively. The decrease
in net cash used of $112,205,000 occurred because property acquisition
expenditures were incurred in 1994 ($93,786,000) and because net sales
and redemptions of marketable securities (primarily short-term U. S.
Treasury securities) increased $18,975,000 in 1995. The property
acquisitions in 1994 consisted primarily of the purchase of land
underlying a retail center together with the related equity interest of
the former lessor.
13
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued:
Net cash used in financing activities was $46,182,000 for the six months
ended June 30, 1995 while net cash provided by financing activities was
$65,419,000 for the six months ended June 30, 1994. Net cash used in
financing activities in 1995 is attributable primarily to scheduled
principal payments on property debt and the payment of dividends. Cash
flows provided by financing activities in 1994 was attributable primarily
to the issuance of property debt to fund the property acquisition
described above partially offset by scheduled principal payments on
property debt and the payment of dividends.
New Accounting Standards:
Statement of Financial Accounting Standards No. 116, "Accounting for the
Contributions Received and Contributions Made" (SFAS No. 116), was issued
by the Financial Accounting Standards Board in June 1993. SFAS No. 116
was adopted by the Company effective January 1, 1995, and adoption has
not had a material effect on the financial position or results of
operations of the Company.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" (SFAS No. 121), was issued by the Financial Accounting Standards
Board in March 1995. SFAS No. 121 will be effective with respect to the
Company in 1996, and adoption is not expected to have a material effect
on the financial position or results of operations of the Company.
14
Part II. Other Information
Item 1. Legal Proceedings
On November 6, 1990, Robert P. Guastella Equities, Inc. ("Plaintiff"), a
former tenant at the Riverwalk Shopping Center in New Orleans, Louisiana
("Riverwalk"), which is owned and operated by New Orleans Riverwalk
Associates, an affiliate of the Company ("NORA"), filed suit in the Civil
District Court of Orleans Parish, Louisiana against NORA, the Company,
two Company affiliates - Rouse-New Orleans, Inc. and New Orleans
Riverwalk Limited Partnership - and Connecticut General Life Insurance
Company, which is a general partner of NORA (collectively, "Defendants").
Plaintiff alleges that Defendants breached Plaintiff's lease agreement
with NORA for the operation of a restaurant at Riverwalk by (i) failing
to prevent the leased premises from flooding, (ii) refusing to permit
entertainment on the leased premises, (iii) interfering with the
operation of air conditioning equipment on the leased premises and (iv)
failing to provide adequate security. Plaintiff claims that as a result
of these breaches it suffered losses and could not pay the rentals due
under the lease agreement, as a result of which the lease and its tenancy
were terminated by NORA. Plaintiff seeks damages of approximately
$600,000 for these alleged breaches. In addition, on September 3, 1992,
Plaintiff claimed $33,000,000 for alleged lost future profits which it
claimed it would have earned had its lease not been terminated. All
Defendants filed answers denying the claims of Plaintiff and asserting
other defenses. NORA also asserted a counterclaim against Plaintiff and
its guarantors, Robert Guastella and Charles Kovacs, for past due rentals
and other charges in the approximate amount of $300,000 plus interest and
attorneys' fees as provided for in the lease agreement. The case was
tried before a jury and, on October 28, 1993, the jury returned a verdict
against Defendants upon which judgment was entered by the trial court on
January 7, 1994, in the total net amount of approximately $9,128,000
(which included a net award for lost future profits of approximately
$8,640,000) plus interest from the date the suit was filed and attorneys'
fees in an amount to be determined. On May 6, 1994, the trial court
denied all post-trial motions of both Plaintiff and Defendants, including
Defendants' Motions for Judgment Notwithstanding the Verdict, Remittitur
and/or New Trial. The trial court also entered an amended judgment in
which it awarded Plaintiff $450,000 in attorneys' fees and awarded
Defendants $25,000 in attorneys' fees. Defendants believe that the
verdict and judgment as entered to date are contrary to the facts and
applicable law. On May 23, 1994, Defendants appealed this judgment to
the Louisiana Court of Appeals, Fourth Circuit. Briefs have been filed,
and oral argument was held on March 8, 1995. Defendants intend to
vigorously pursue their rights of appeal. For additional information
about this suit, see Note 6 - Contingencies to the Consolidated Financial
Statements (unaudited).
15
Part II. Other Information
The following items have been omitted as inapplicable or not required under
the applicable instructions:
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Reference is made to the Exhibit Index.
(b) Reports on Form 8-K
None.
16
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.
THE ROUSE COMPANY
Principal Financial Officer:
Date: August 14, 1995 By /s/Jeffrey H. Donahue
Jeffrey H. Donahue
Senior Vice President and
Chief Financial Officer
Principal Accounting Officer:
Date: August 14, 1995 By /s/George L. Yungmann
George L. Yungmann
Senior Vice President and
Controller
17
Exhibit Index
Exhibit Number Description
11 Statement re Computation of per
share earnings (loss)
18
Exhibit 11
THE ROUSE COMPANY AND SUBSIDIARIES
Computation of Fully Diluted Earnings (Loss) Per Share
(Unaudited, in thousands except per share amounts)
Three months Six months
ended June 30, ended June 30,
1995 1994 1995 1994
Earnings (loss) before
extraordinary losses $ 1,403 $ 576 $ 770 $(1,991)
Add after-tax interest expense
applicable to convertible
subordinated debentures 1,215 1,215 2,430 2,430
Earnings (loss) before extra-
ordinary losses, as adjusted 2,618 1,791 3,200 439
Extraordinary losses -- (2,606) (7,217) (2,763)
Net earnings (loss), as adjusted $ 2,618 $ (815) $(4,017) $(2,324)
Shares:
Weighted average number of
common shares outstanding 47,804 47,563 47,734 47,563
Assuming conversion of
convertible Preferred stock 10,560 9,470 10,560 9,470
Assuming conversion of convertible
subordinated debentures 4,541 4,541 4,541 4,541
Assuming exercise of options and
warrants reduced by the number
of shares which could have been
purchased with the proceeds
from the exercise of such
options 153 152 156 152
Weighted average number of shares
outstanding, as adjusted 63,058 61,726 62,991 61,726
Earnings (loss) per common share
assuming full dilution:
Earnings (loss) before
extraordinary losses, as adjusted $ .04 $ .03 $ .05 $ .01
Extraordinary losses -- (.04) (.12) (.05)
Net earnings (loss), adjusted $ .04 $ (.01) $ (.07) $ (.01)
This calculation is submitted in accordance with Regulation S-K item 601
(b) (11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
19
14
EX-27
2
5
1,000
6-MOS
DEC-31-1995
JUN-30-1995
$ 39,984
$ 7,709
$ 97,522
$ (23,693)
0
$ 85,962
$ 3,091,214
$ (477,542)
$ 2,830,815
$ 304,802
$ 2,563,134
$ 478
0
$ 45
$ 62,805
$ 2,830,815
$ 326,151
$ 326,151
0
$ 208,336
$ 8,480
$ 1,465
$ 105,197
$ 2,673
$ 1,903
$ 770
0
$ (7,217)
0
$ (6,447)
$ (.29)
$ (.07)
Current assets include cash, unrestricted marketable securities, current
portion of accounts and notes receivable and prepaid expenses and deposits.
Current liabilities include the current portion of long-term debt and accounts
payable, accrued expenses and other liabilities.