SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1994 Commission file number 0-3576
COUSINS PROPERTIES INCORPORATED
A GEORGIA CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 58-086952
2500 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339-5683
TELEPHONE: 404-955-2200
Registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months, and has
been subject to such filing requirements for the past 90 days.
At October 31, 1994, 27,842,991 shares of common stock of the Registrant were
outstanding.
<PAGE>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1993 1994
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
PROPERTIES:
Operating properties $ 68,779 $ 93,863
Land held for investment or future development 23,877 20,389
Projects under construction 14,556 11,637
Residential lots under development 1,040 6,561
Less: accumulated depreciation (9,418) (11,293)
------- --------
Total properties 98,834 121,157
------- --------
CASH AND CASH EQUIVALENTS, at cost which
approximates market 31,684 3,106
INVESTMENT IN GOVERNMENT AGENCY
SECURITIES, at cost which approximates market 1,269 651
NOTES AND OTHER RECEIVABLES 68,186 51,856
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 115,252 125,937
OTHER ASSETS 4,477 5,189
-------- --------
TOTAL ASSETS $319,702 $307,896
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
NOTES PAYABLE $ 35,151 $ 20,145
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 9,925 11,967
MINORITY INTERESTS IN CONSOLIDATED ENTITIES 3,648 3,561
DEPOSITS AND DEFERRED INCOME 421 873
-------- --------
TOTAL LIABILITIES 49,145 36,546
-------- --------
STOCKHOLDERS' INVESTMENT
Common stock, $1 par value, authorized
50,000,000 shares; issued 27,830,631
shares at December 31, 1993 and 27,842,991
shares at September 30, 1994 27,831 27,843
Additional paid-in capital 147,018 147,187
Cumulative undistributed net income 95,708 96,320
-------- --------
TOTAL STOCKHOLDERS' INVESTMENT 270,557 271,350
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
INVESTMENT $319,702 $307,896
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1993 AND 1994
(UNAUDITED)
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1993 1994 1993 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES:
Rental property revenues $1,715 $ 3,507 $ 4,810 $ 8,957
Development and construction fees 195 148 611 564
Management fees 504 522 1,487 1,539
Leasing and other fees 1,065 425 2,134 1,422
Residential lot and outparcel sales -- 2,389 -- 2,959
Interest and other 1,507 1,156 4,955 4,964
------ ------ ------- -------
4,986 8,147 13,997 20,405
------ ------ ------- -------
INCOME FROM UNCONSOLIDATED JOINT
VENTURES 494 3,335 2,080 9,350
------ ------ ------- -------
COSTS AND EXPENSES:
Rental property operating expenses 541 798 1,651 2,293
General and administrative expenses 1,750 1,825 5,275 5,924
Depreciation and amortization 1,018 1,065 2,370 2,770
Leasing and other commissions 94 3 156 61
Stock appreciation right expense 236 380 806 184
Residential lot and outparcel cost
of sales -- 2,172 -- 2,657
Interest expense -- 10 -- 348
Property taxes on undeveloped land 129 554 374 860
Other 442 383 724 701
------ ------ ------- -------
4,210 7,190 11,356 15,798
------ ------ ------- -------
INCOME FROM OPERATIONS BEFORE INCOME
TAXES AND GAIN ON SALE OF INVESTMENT
PROPERTIES 1,270 4,292 4,721 13,957
PROVISION (BENEFIT) FOR INCOME TAXES
FROM OPERATIONS (442) (165) (885) (112)
------ ------ ------- -------
INCOME BEFORE GAIN ON SALE OF
INVESTMENT PROPERTIES 1,712 4,457 5,606 14,069
GAIN ON SALE OF INVESTMENT PROPERTIES,
NET OF APPLICABLE INCOME TAX PROVISION 1,201 1,677 1,927 4,919
------ ------ ------- -------
NET INCOME $2,913 $6,134 $ 7,533 $18,988
====== ====== ======= =======
INCOME PER SHARE:
From operations before gain on sale
of investment properties $ .08 $ .16 $ .26 $ .50
From gain on sale of investment
properties, net of applicable
income tax provision .05 .06 .09 .18
------ ------ ------- -------
NET INCOME PER SHARE $ .13 $ .22 $ .35 $ .68
====== ====== ======= =======
CASH DIVIDENDS DECLARED PER SHARE $ .17 $ .22 $ .51 $ .66
====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993 AND 1994
(UNAUDITED)
($ in thousands)
<TABLE>
<CAPTION>
1993 1994
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from operations before gain on
sale of investment properties $ 5,606 $14,069
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization, net of minority
interests' share 2,370 2,723
Stock appreciation right expense 806 184
Cash charges to expense accrual for stock
appreciation rights (138) (48)
Rental revenue recognized on straight-line basis
in excess of rental revenue specified in
lease agreements (309) (164)
Other non-cash charges 310 --
Deferred income received 297 691
Deferred income recognized (186) (301)
Income from unconsolidated joint ventures (2,080) (9,350)
Operating distributions from unconsolidated joint
ventures 4,719 12,592
Residential lot and outparcel cost of sales -- 2,629
Changes in other operating assets and liabilities:
Change in other receivables 186 (281)
Change in accounts payable and accrued liabilities 2,019 2,160
------- -------
Net cash provided by operating activities 13,600 24,904
CASH FLOWS FROM INVESTING ACTIVITIES:
Gain on sale of investment properties, net of
applicable income tax provision 1,927 4,919
Adjustments to reconcile gain on sale of investment
properties to net cash provided by sales activities:
Cost of sales 1,444 2,844
Deposits and deferred income received -- --
Deposits and deferred income applied (3,370) --
Investment in unconsolidated joint ventures (486) (16,100)
Non-operating distributions from unconsolidated joint
ventures -- 586
Property acquisition and development expenditures (19,026) (28,541)
Principal payments received on government agency
securities 510 618
Investment in notes receivable (718) (28,043)
Collection of notes receivable 264 44,926
Change in other assets, net (926) (1,386)
------- -------
Net cash used in investing activities (20,381) (20,177)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (11,081) (18,376)
Proceeds from lines of credit -- 47,486
Repayment of lines of credit -- (46,369)
Common stock issued 47 77
Proceeds from other notes payable 15 841
Repayment of other notes payable (30) (16,964)
------- -------
Net cash used in financing activities (11,049) (33,305)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (17,830) (28,578)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 31,033 31,684
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $13,203 $ 3,106
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
(UNAUDITED)
1. BASIS OF PRESENTATION
The Consolidated Financial Statements include the accounts of Cousins
Properties Incorporated ("Cousins") and its majority owned partnerships, as well
as Cousins Real Estate Corporation ("CREC") and its subsidiaries. All of the
entities included in the Consolidated Financial Statements are hereinafter
referred to collectively as the "Company."
Cousins has elected to be taxed as a real estate investment trust ("REIT"),
and intends to distribute 100% of its federal taxable income to stockholders,
thereby eliminating any liability for future corporate federal income taxes.
Therefore, the results included herein do not include a federal income tax
provision for Cousins. However, CREC and its subsidiaries are taxed separately
from Cousins as a regular corporation. Accordingly, the Consolidated Statements
of Income include a provision (benefit) for CREC's income taxes.
The Consolidated Financial Statements were prepared by the Company without
audit, but in the opinion of management reflect all adjustments necessary for
the fair presentation of the Company's financial position as of September 30,
1994, and results of operations for the nine month periods ended September 30,
1993 and 1994. Results of operations for the interim 1994 period are not
necessarily indicative of results expected for the full year. While certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, the Company believes that the disclosures herein are
adequate to make the information presented not misleading. These condensed
financial statements should be read in conjunction with the Consolidated
Financial Statements and the notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1993. The accounting
policies employed are the same as those shown in Note 1 to the Consolidated
Financial Statements on Form 10-K.
2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS
Interest (net of $245,000 and $741,000 capitalized in 1993 and 1994,
respectively) and income taxes paid were as follows for the nine months ended
September 30, 1993 and 1994 ($ in thousands):
1993 1994
---- ----
Interest paid $ -- $294
Income taxes paid $ 68 $ 29
Significant non-cash investing activities included the transfer in May 1994
of Phase I of North Point Market (approximately $18,641,000) from Projects Under
Construction to Operating Properties; the transfer in August 1994 of Phase II of
North Point Market (approximately $941,000) from Land Held for Investment or
Future Development to Projects Under Construction (see Note 5); and the
distribution from Norfolk Hotel Associates of a 50% interest (approximately
$1,589,000) in a long-term parking agreement with an adjacent building owner
(see Note 4).
3. LINE OF CREDIT
In July 1994, the Company entered into a line of credit with two commercial
banks. The initial line was for $60 million, which increased to $75 million on
October 1, 1994 and will increase to $100 million on January 1, 1995. The line
bears interest tied to the Federal Funds rate, matures September 30, 1996, and
is secured by the Company's partnership interest in CSC Associates, L.P. The
Company paid off its First Union Tower line of credit with borrowings under the
new line. Borrowings under the line at September 30, 1994, were $18.6 million.
4. NORFOLK HOTEL ASSOCIATES
In July 1994, Norfolk Hotel Associates ("NHA") distributed to each partner
a 50% interest in a parking agreement held by NHA (see Note 5 of "Notes to
Consolidated Financial Statements" in the Company's annual report on Form 10-K
for the year ended December 31, 1993). The Company has entered into an
agreement to sell its 50% interest in the parking agreement for $2 million in
July 1996, which would result in a profit to the Company of approximately
$411,000. Additionally, in July 1994, each partner contributed $2 million to
NHA to pay down $4 million in debt.
5. DEVELOPMENT ACTIVITIES
CC-JM II ASSOCIATES
In September 1994, the Company entered into a joint venture, CC-JM II
Associates, with Carr Realty Corporation, each as 50% partners, to develop and
own a 224,000 square foot office building in suburban Washington, D.C. The
building will be 100% leased for 15 years to Booz-Allen & Hamilton, an
international consulting firm, as a part of its corporate headquarters campus,
and is scheduled to be completed in the first quarter of 1996. Each partner
contributed $1.3 million to the venture during the third quarter.
LOVEJOY STATION
In September 1994, the Company purchased 12 acres of land located in
suburban Atlanta, Georgia for $1.4 million on which Lovejoy Station, a 75,000
square foot shopping center, is being developed. The center is scheduled to be
completed in mid-1995.
NORTH POINT MARKET - PHASE II
In August 1994, North Point Market Associates, L.P. ("NPMA") commenced
construction of North Point Market - Phase II (see Note 8 of "Notes to
Consolidated Financial Statements" in the Company's annual report on Form 10-K
for the year ended December 31, 1993). In connection with the commencement of
construction, NPMA sold 10.8 acres of land in Phase II to Dayton Hudson
Corporation, which is developing a Target store on the site. The Company's
share of the gain on the sale was $1.7 million. This sale is being treated as a
tax free exchange and as a result, the proceeds ($3.0 million) from the sale
have been funded into a third party agent's escrow account pending reinvestment
within six months. North Point Market - Phase II will contain approximately
176,000 square feet, of which approximately 60,000 square feet will be owned by
NPMA, and is scheduled to be completed in mid-1995.
<PAGE>
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, 1993 and
1994.
RESULTS OF OPERATIONS:
RENTAL PROPERTY REVENUES AND OPERATING EXPENSES, AND DEPRECIATION AND
AMORTIZATION. Rental property revenues were approximately $1,792,000 and
$4,147,000 higher in the three and nine month 1994 periods, respectively. The
increases were primarily due to rental revenues from Perimeter Expo ($880,000
and $2,289,000 in the three and nine month 1994 periods, respectively), a retail
power center which became operational in December 1993, and North Point Market
Phase I ($653,000 and $891,000 in the three and nine month 1994 periods,
respectively), a retail power center that became operational in May 1994. Also,
$124,000 and $304,000 of the increase in the three and nine month 1994 periods,
respectively, was due to rental revenue from 11 acres of the Georgia Highway 400
land being ground leased to free standing users. Approximately 6 acres of
leases began generating income during the fourth quarter of 1993, with the
remaining 5 acres of leases beginning throughout the nine month 1994 period. In
addition, $201,000 and $633,000 of rental revenue in the three and nine month
1994 periods, respectively, was received from a tenant which occupies 60% of the
3301 Windy Ridge Parkway Building, a Company wholly owned building in Wildwood
Office Park; this building was not occupied in the nine month 1993 period. The
lease for this building has options permitting the tenant to expand its
occupancy to the remainder of the building over the next several years, and the
first such option for an additional 10% of the space has been exercised for
occupancy in the fourth quarter of 1994. The increased rental property
operating expenses and depreciation and amortization in the three and nine month
1994 periods were primarily related to the occupancy of these projects in 1994.
LEASING AND OTHER FEES. Leasing and other fees were $640,000 and $712,000
lower in the three and nine month 1994 periods, respectively, primarily due to
decreases of $647,000 and $675,000 in the three and nine month 1994 periods,
respectively, in retail leasing fees received from third party development. In
addition, leasing fee income from NationsBank Plaza decreased $168,000 in the
nine month 1994 period. These decreases were partially offset by increases of
$25,000 and $145,000 in the three and nine month 1994 periods, respectively, in
leasing fee income related to Wildwood Office Park.
RESIDENTIAL LOT AND OUTPARCEL SALES AND COST OF SALES. CREC began
developing residential lots in its Brown's Farm development in the fourth
quarter of 1993, and has sold 55 out of 73 lots in Phase I (of which 42 were
sold during the third quarter of 1994). Brown's Farm is located in suburban
Atlanta, Georgia. CREC has also commenced development of three other
residential lot development projects in suburban Atlanta, Georgia.
Additionally, in July 1994, a CREC subsidiary sold a .9 acre outparcel site
in Presidential Market (see Note 8 of "Notes to Consolidated Financial
Statements" in the Company's annual report on Form 10-K for the year ended
December 31, 1993).
INTEREST AND OTHER REVENUE. Interest and other revenue was $351,000 lower
in the three month 1994 period. The decrease was primarily due to the 9.1%
mortgage notes guaranteed by the AT&T Master Pension Trust totaling $39.9
million being repaid to the Company upon their maturity in June 1994. Interest
income of $916,000 was recognized from these notes in the three month 1993
period. Additionally, interest income decreased due to lower cash balances in
1994. These two decreases were partially offset by $235,000 of interest income
recognized on the 650 Massachusetts Avenue mortgage notes acquired in March 1994
(see Note 11 of "Notes to Consolidated Financial Statements" in the Company's
annual report on Form 10-K for the year ended December 31, 1993).
INCOME FROM UNCONSOLIDATED JOINT VENTURES. (All amounts reflect the
Company's share of joint venture income.) Income from unconsolidated joint
ventures increased $2,841,000 and $7,270,000 in the three and nine month 1994
periods, respectively. These increases were primarily due to $2,442,000 and
$6,707,000 increased income from CSC Associates, L.P., in the three and nine
month periods, respectively, which resulted primarily from the repayment of the
debt on NationsBank Plaza in October 1993. Income from Wildwood Associates
increased $142,000 and $439,000 in the three and nine month 1994 periods,
respectively, due to leaseup of the Wildwood 3200 office building and increased
rental revenue from certain ground lease sites which began generating rental
revenue during the fourth quarter of 1993 and second quarter of 1994. Income
from Haywood Mall Associates increased $265,000 and $203,000 in the three and
nine month 1994 periods, respectively, primarily due to the elimination of
interest expense upon prepayment of its mortgage debt with $10 million of equity
contributed by each partner. The increase in income from Haywood Mall
Associates in the nine month 1994 period was partially offset by a $340,000
charge incurred related to the prepayment of its mortgage debt. Also, joint
venture income in the second quarter of 1993 was favorably impacted by a
$460,000 gain recognized upon the sale of the Omni Norfolk Hotel by Norfolk
Hotel Associates.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $75,000 and $649,000 in the three and nine month 1994 periods,
respectively, primarily because of personnel increases related to the Company's
expansion.
STOCK APPRECIATION RIGHT EXPENSE. This non-cash item is primarily related
to the Company's stock price, which was $14.50, $16.375, and $17.375 at December
31, 1992, June 30, 1993, and September 30, 1993, respectively; and $16.50,
$15.50, and $16.75 at December 31, 1993, June 30, 1994, and September 30, 1994,
respectively.
INTEREST EXPENSE. All interest expense was capitalized in the three and
nine month periods of 1993 ($58,000 and $245,000, respectively). In the 1994
periods, interest expense before capitalization increased to $192,000 and
$1,089,000 in the three and nine month periods, respectively, due to higher debt
levels. While most of the interest expense in the first quarter of 1994 was
capitalized, the amount of interest capitalized decreased in the second quarter
of 1994 as North Point Market Phase I, which had been under construction, became
operational in May 1994. Interest expense capitalized increased in the third
quarter as work progressed on several other developments under construction.
PROPERTY TAXES ON UNDEVELOPED LAND. Property taxes on undeveloped land
increased $425,000 and $486,000 in the three and nine month 1994 periods,
respectively due primarily to a $409,000 property tax accrual adjustment in the
third quarter of 1994 related to the Company's Georgia Highway 400 land (of
which $150,000 related to a 1993 property tax reassessment).
OTHER EXPENSES. Other expenses decreased $104,000 and $23,000 in the three
and nine month 1994 periods, respectively. Other expenses were negatively
impacted in the three and nine month 1993 periods by a reserve established for
the $310,000 present value of an indemnification an insurance company in
rehabilitation had made to the Company in 1974 but defaulted on in the third
quarter of 1993. This obligation is due in monthly installments of $3,208
through December 2009. This decrease was partially offset by higher
predevelopment and preacquisition costs in the three and nine month 1994
periods.
INCOME TAXES. The income tax benefit decreased $277,000 and $773,000 in
the three and nine month 1994 periods, respectively, primarily because of higher
intercompany fee income in 1994. Intercompany fee income is eliminated in
consolidation, but the tax effect is not. Additionally, the income tax benefit
decreased in the nine month 1994 period due to the decrease in CREC stock
appreciation right expense.
GAIN ON SALE OF INVESTMENT PROPERTIES. The gain on sale of investment
properties in 1993 was from profits recognized on the North Point Mall sale.
(See Note 8 of "Notes to Consolidated Financial Statements" in the Company's
annual report on Form 10-K for the year ended December 31, 1993.) The Company
recognized profits based on percentage of completion accounting as certain
infrastructure work required by the sales contract was completed during 1992 and
1993. The $4,919,000 gain on sale of investment properties in 1994 was from the
June 1994 sale of the Company's 9 acre Peachtree Road property for $4,914,000
net cash proceeds and the August 1994 sale of the 10.8 acre site in North Point
Market - Phase II for $3,000,000 net cash proceeds (see Note 5 of "Notes to
Consolidated Financial Statements").
FINANCIAL CONDITION:
Major investment activity during the third quarter of 1994 included $11.4
million of property acquisition and development investments, primarily in
projects under construction (See Note 5 of "Notes to Consolidated Financial
Statements"). The Company also made $4.3 million of contributions during the
third quarter of 1994 to certain of its joint ventures including $.9 million to
Haywood Mall Associates to fund the expansion of the mall (see Note 5 of "Notes
to Consolidated Financial Statements" in the Company's annual report on Form 10-
K for the year ended December 31, 1993), $1.3 million to CC-JM II Associates
(see Note 5 of "Notes to Consolidated Financial Statements") and $2 million to
Norfolk Hotel Associates (see Note 4 of "Notes to Consolidated Financial
Statements"). Additionally, the Company paid off the First Union Tower Line of
Credit ($10.8 million) in July 1994. The source of cash for these investments
was primarily the Company's line of credit which was entered into in July 1994
(see Note 3 of "Notes to Consolidated Financial Statements").
The Company has additional acquisition and development projects in various
stages. The Company currently intends to finance these projects, as well as the
completion of projects currently under construction, primarily using its line of
credit.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Registrant during
the fiscal quarter ended September 30, 1994.
<PAGE>
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/ Peter A. Tartikoff________________________
Peter A. Tartikoff
Senior Vice president - Finance
(Authorized Officer)
(Principal Financial Officer)
November 10, 1994
