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, 1996 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 October 31, 1996, 28,771,189 shares of common stock of the Registrant
were outstanding.
<PAGE>
<TABLE>
<CAPTION>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
December 31, September 30,
1995 1996
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
PROPERTIES:
Operating properties $109,354 $171,842
Land held for investment or future
development 27,035 24,284
Projects under construction 87,503 104,470
Residential lots under development 11,452 15,120
Less: accumulated depreciation (15,483) (19,134)
-------- --------
Total properties 219,861 296,582
-------- --------
CASH AND CASH EQUIVALENTS, at cost which
approximates market 1,552 132
NOTES AND OTHER RECEIVABLES 53,868 53,027
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 137,260 134,268
OTHER ASSETS 5,465 8,789
-------- --------
TOTAL ASSETS $418,006 $492,798
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
NOTES PAYABLE $113,434 $186,460
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 22,681 19,008
MINORITY INTERESTS IN CONSOLIDATED ENTITIES 3,837 9
DEPOSITS AND DEFERRED INCOME 376 333
-------- --------
TOTAL LIABILITIES 140,328 205,810
-------- --------
STOCKHOLDERS' INVESTMENT
Common stock, $1 par value, authorized
50,000,000 shares; issued 28,222,639
shares at December 31, 1995 and
28,771,189 shares at September 30, 1996 28,223 28,771
Additional paid-in capital 153,265 162,132
Cumulative undistributed net income 96,190 96,085
-------- --------
TOTAL STOCKHOLDERS' INVESTMENT 277,678 286,988
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
INVESTMENT $418,006 $492,798
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
<TABLE>
<CAPTION>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)
($ in thousands, except per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------- ----------------
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Rental property revenues $ 4,844 $ 8,457 $13,867 $21,827
Development and construction fees 2,804 55 3,305 1,380
Management fees 547 787 1,648 1,959
Leasing and other fees 421 110 1,743 1,362
Residential lot and outparcel sales 5,469 2,218 7,595 9,688
Interest and other 1,245 1,185 3,581 3,974
------- ------- ------- -------
15,330 12,812 31,739 40,190
------- ------- ------- -------
INCOME FROM UNCONSOLIDATED JOINT VENTURES 3,467 4,362 10,336 12,926
------- ------- ------- -------
COSTS AND EXPENSES:
Rental property operating expenses 1,119 1,784 3,227 4,946
General and administrative expenses 1,801 2,286 5,819 6,581
Depreciation and amortization 1,088 1,835 3,208 4,729
Leasing and other commissions 13 29 18 41
Stock appreciation right expense 308 752 493 440
Residential lot and outparcel cost of sales 5,142 2,489 7,085 9,522
Interest expense 123 1,583 377 3,959
Property taxes on undeveloped land 286 408 740 901
Other 502 174 1,138 992
------- ------- ------- -------
10,382 11,340 22,105 32,111
------- ------- ------- -------
INCOME FROM OPERATIONS BEFORE INCOME TAXES
AND GAIN ON SALE OF INVESTMENT PROPERTIES 8,415 5,834 19,970 21,005
PROVISION (BENEFIT) FOR INCOME TAXES FROM
OPERATIONS 562 (808) 803 (864)
------- ------- ------- -------
INCOME FROM OPERATIONS BEFORE GAIN ON SALE
OF INVESTMENT PROPERTIES 7,853 6,642 19,167 21,869
GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF
APPLICABLE INCOME TAX PROVISION 1,746 397 1,746 1,017
------- ------- ------- -------
NET INCOME $ 9,599 $ 7,039 $20,913 $22,886
======= ======= ======= =======
NET INCOME PER SHARE $ .34 $ .25 $ .75 $ .80
======= ======= ======= =======
CASH DIVIDENDS DECLARED PER SHARE $ .24 $ .27 $ .72 $ .81
======= ======= ======= =======
WEIGHTED AVERAGE COMMON EQUIVALENT SHARES 28,027 28,610 27,941 28,431
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
<TABLE>
<CAPTION>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)
($ in thousands)
1995 1996
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from operations before gain on
sale of investment properties $19,167 $ 21,869
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization, net of
minority interests' share 3,099 4,729
Stock appreciation right expense 493 440
Cash charges to expense accrual for stock
appreciation rights (103) (959)
Effect of recognizing rental revenues on
a straight-line basis (90) 32
Deferred income received 1,673 --
Deferred income recognized (2,800) --
Income from unconsolidated joint ventures (10,336) (12,926)
Operating distributions from unconsolidated
joint ventures 11,220 13,098
Residential lot and outparcel cost of sales 6,832 9,145
Changes in other operating assets and liabilities:
Change in other receivables 60 (1,026)
Change in accounts payable and accrued liabilities 1,040 4,152
------- --------
Net cash provided by operating activities 30,255 38,554
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisition and development expenditures (63,925) (102,404)
Collection of notes receivable 744 27,596
Investment in notes receivable -- (26,031)
Change in other assets, net 1,213 (3,701)
Investment properties cost of sales 1,051 2,174
Non-operating distributions from unconsolidated
joint ventures 1,226 1,408
Cash portion of exchange transaction -- 1,092
Gain on sale of investment properties, net of
applicable income tax provision 1,746 1,017
Investment in unconsolidated joint ventures (8,671) (268)
------- --------
Net cash used in investing activities (66,616) (99,117)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from other notes payable 51,500 81,048
Repayment of line of credit (58,373) (53,651)
Proceeds from line of credit 57,241 48,965
Dividends paid (20,100) (22,991)
Common stock sold, net of expenses 3,581 9,108
Repayment of other notes payable (238) (3,336)
------- --------
Net cash provided by financing activities 33,611 59,143
------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,750) (1,420)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,407 1,552
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 657 $ 132
======= ========
</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, 1996
(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, 1996, and results of operations for the nine month periods ended
September 30, 1995 and 1996. Results of operations for the interim 1996 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, 1995. The
accounting policies employed are the same as those shown in Note 1 to the
Consolidated Financial Statements included in the Form 10-K.
2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS
- ---------------------------------------------------
Interest (net of $3,469,000 and $4,642,000 capitalized in 1995 and
1996, respectively) and income taxes paid were as follows for the nine months
ended September 30, 1995 and 1996 ($ in thousands):
1995 1996
---- ----
Interest paid $568 $3,765
Income taxes paid $201 $ 53
In January 1996, in conjunction with the exchange of certain
partnership interests, approximately $3,825,000 was transferred from Minority
Interests in Consolidated Entities to Operating Properties ($3,283,000) and
Projects Under Construction ($542,000); and approximately $1,688,000 was
transferred from Investment in Unconsolidated Joint Ventures to Operating
Properties.
3. COSTS CAPITALIZED AND FEES ELIMINATED IN CONSOLIDATION
- -----------------------------------------------------------
Development, construction, and leasing fees received by CREC and its
subsidiaries from Cousins and Cousins' majority owned joint ventures are
eliminated in consolidation. Costs related to planning, development, leasing and
construction of properties (including related general and administrative
expenses) are capitalized. The table below shows the fees eliminated, the
internal costs capitalized related to these fees, and the additional internal
costs capitalized by CREC to its own residential developments for the nine
months ended September 30, 1995 and 1996 ($ in thousands):
1995 1996
------ ------
Intercompany fees eliminated in consolidation $3,775 $2,995
Internal costs capitalized in consolidation
related to intercompany fees $1,919 $1,717
Internal costs capitalized to CREC
residential developments $ 355 $ 376
4. NOTES PAYABLE AND INTEREST EXPENSE
- ---------------------------------------
At December 31, 1995 and September 30, 1996, the composition of notes
payable was as follows ($ in thousands):
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1996
------------------------------ --------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
------- -------------- -------- ------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Fixed Rate Mortgages
(non-recourse) $ 80,564 $64,759 $145,323 $158,276 $76,099 $234,375
Floating Rate Lines
of Credit 32,870 23,153 56,023 28,184 22,081 50,265
-------- ------- -------- -------- ------- --------
$113,434 $87,912 $201,346 $186,460 $98,180 $284,640
======== ======= ======== ======== ======= ========
</TABLE>
Effective July 1, 1996, the Company amended and extended its existing
line of credit. The line amount is $50 million initially and increases to $100
million on January 1, 1997. The line is unsecured, bears interest tied to the
Federal Funds rate and matures June 30, 1997.
For the three and nine months ended September 30, 1996, interest expense
was recorded as follows ($ in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
--------------------------------- -------------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
------- -------------- ----- ------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Expensed $1,583 $1,669 $3,252 $3,959 $4,854 $ 8,813
Interest Capitalized 1,498 155 1,653 4,642 436 5,078
------ ------ ------ ------ ------ -------
$3,081 $1,824 $4,905 $8,601 $5,290 $13,891
====== ====== ====== ====== ====== =======
</TABLE>
During the third quarter of 1996, 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 $91 million.
5. ACQUISITIONS
- -----------------
The Lea Richmond Company And The Richmond Development Company
-------------------------------------------------------------
On July 16, 1996, Cousins acquired the medical office building
development and management operations of The Lea Richmond Company and The
Richmond Development Company. The purchase price for the acquisition was $1.8
million plus contingent future payments of up to an additional $1 million (of
which $200,000 was paid through September 30, 1996), subject to commencement of
development of certain medical office building projects.
615 Peachtree Street
--------------------
On August 16, 1996, Cousins acquired 615 Peachtree Street, a 147,000
square foot downtown Atlanta office building, located at the intersection of
Peachtree Street and North Avenue across from NationsBank Plaza. The 12-story
office building was purchased for $11.1 million plus a contingent future payment
of up to an additional $1 million.
One Independence Center
-----------------------
Cousins has contracted to acquire the One Independence Center project,
a 521,000 rentable square foot office building located at the intersection of
Trade and Tryon in the central business district of Charlotte, North Carolina.
The purchase price is approximately $69.3 million and closing is expected to
occur in the fourth quarter of 1996. The acquisition includes the 20-story
office building, a 330 car underground parking deck, and an adjacent development
parcel.
<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, 1995 and 1996.
Results of Operations:
- ----------------------
Rental Property Revenues and Operating Expenses. Rental property
revenues were approximately $3,613,000 and $7,960,000 higher in the three and
nine month 1996 periods, respectively. The increase was due in part to rental
property revenues from four retail centers, Lawrenceville MarketCenter ($869,000
and $2,407,000, in the three and nine month 1996 periods, respectively), Lovejoy
Station ($199,000 and $529,000, in the three and nine month 1996 periods,
respectively), Colonial Plaza MarketCenter ($973,000 and $2,114,000, in the
three and nine month 1996 periods, respectively) and Mansell Crossing Phase II
($181,000 and $382,000, in the three and nine month 1996 periods, respectively),
which became partially operational in October 1995, December 1995, March 1996
and March 1996, respectively. Two other retail centers also favorably impacted
results: North Point MarketCenter rental property revenues increased $167,000
and $516,000 in the three and nine month 1996 periods, respectively, due to
increases from Phase II which became partially operational in July 1995, and
Presidential MarketCenter rental property revenues increased $234,000 and
$566,000 in the three and nine month 1996 periods, respectively, due to the
lease-up of Phase I and from Phase II as it became partially operational in June
1996. Rental property revenues were negatively impacted by approximately $86,000
and $254,000 in the three and nine month 1996 periods, respectively, due
primarily to the termination of one tenant at Perimeter Expo in February 1996
which was replaced by a better credit tenant whose lease commenced in August
1996.
In addition, $72,000 and $297,000 of the increase in rental property
revenues for the three and nine month 1996 periods, respectively, was due to
revenue from 24 acres of the Georgia Highway 400 land being ground leased to
freestanding users. During the nine month 1995 period, revenue was being
recognized from only 18 acres of the Georgia Highway 400 land. The acquisition
of the 615 Peachtree Street office building in July 1996 also favorably impacted
rental property revenues by approximately $369,000 in both 1996 periods (see
Note 5). Further contributing to the increase in rental property revenues was
the lease-up of the First Union Tower (increases of approximately $69,000 and
$242,000, in the three and nine month 1996 periods, respectively) and 100 North
Point Center East which became partially operational in April 1996 (increases of
approximately $578,000 and $912,000, in the three and nine month 1996 periods,
respectively).
Rental property operating expenses increased approximately $665,000 and
$1,719,000 in the three and nine month 1996 periods, respectively, which
increases were primarily related to the occupancy of the retail centers
discussed above and 100 North Point Center East, as well as the acquisition of
the 615 Peachtree Street office building.
Development and Construction Fees. Development and construction fees
decreased $2,749,000 and $1,925,000 in the three and nine month 1996 periods,
respectively. The decrease in both periods was due primarily to the recognition
of development income from the Dusseldorf joint venture's office building
project in 1995. Due to the release of certain completion guarantees related to
the building, approximately $2,604,000 of previously deferred development income
was recognized in September 1995. Also contributing to the decrease in the three
month 1996 period was a decrease in development and construction fees received
from Wildwood Associates (approximately $128,000) primarily related to the 4100
and 4300 Wildwood Parkway office buildings which were substantially complete in
the second quarter of 1996. The development and construction fees received from
Wildwood Associates also partially offset the decrease in the nine month 1996
period by approximately $148,000 which also was due primarily to the fees
related to the 4100 and 4300 Wildwood Parkway office buildings. These decreases
were partially offset by additional development income received from the
Dusseldorf project discussed above (approximately $43,000 and $777,000 in the
three and nine month 1996 periods, respectively).
Management Fees. Management fees increased approximately $240,000 and
$311,000 in the three and nine month 1996 periods, respectively. The increase in
both periods was primarily due to the acquisition of the management contracts of
The Lea Richmond Company in July 1996 (see Note 5), which contributed
approximately $180,000 of management fees in both periods.
Leasing and Other Fees. Leasing and other fees decreased approximately
$311,000 and $381,000 in the three and nine month 1996 periods, respectively.
The decrease in both periods was primarily due to decreases of approximately
$162,000 and $354,000 in leasing fees recognized by the Company's retail
division from third party developments in the three and nine month 1996 periods,
respectively. Also contributing to the decrease in the nine month 1996 period
was a decrease of approximately $311,000 in leasing fee income from NationsBank
Plaza. The decrease in the nine month 1996 period was partially offset by an
increase of approximately $447,000 in leasing fee income from Wildwood
Associates. In the three month 1996 period, leasing fee income from Wildwood
Associates decreased by approximately $79,000.
Residential Lot and Outparcel Sales and Cost of Sales. Residential lot
and outparcel sales decreased approximately $3,251,000 in the three month 1996
period and increased approximately $2,093,000 in the nine month 1996 period. The
decrease in the three month 1996 period was primarily due to a decrease in
residential lot sales from 114 lots sold in the three month 1995 period to 30
lots sold in the three month 1996 period. The 1995 periods were favorably
impacted by the higher than normal level of lot sales which occurred when one of
the residential developments opened during this period. The decrease was
partially offset by an increase in outparcel sales (approximately $580,000). The
number of outparcels sold increased from none in the three month 1995 period to
one in the three month 1996 period.
The increase in the nine month 1996 period was primarily due to an
increase in outparcel sales (approximately $2,216,000). The number of outparcels
sold increased from one in the nine month 1995 period to five in the nine month
1996 period. The increase in the nine month 1996 period was partially offset by
a decrease in residential lot sales from 152 lots sold in the nine month 1995
period to 151 lots sold in the nine month 1996 period.
Residential lot and outparcel cost of sales decreased approximately
$2,653,000 in the three month 1996 period and increased approximately $2,437,000
in the nine month 1996 period due to the decreases and increases in sales
discussed above. Both 1996 periods were also impacted by a $500,000 writedown of
one residential development because of changes in lot sales price assumptions.
Interest and Other Income. Interest and other income decreased
approximately $60,000 in the three month 1996 period and increased approximately
$393,000 in the nine month 1996 period. The decrease in the three month 1996
period was due to interest of $71,000 on tax refunds received in the three month
1995 period. No similar interest was received in the three month 1996 period.
The increase in the nine month 1996 period was due to an increase in interest
income received from temporary investments made with proceeds received from the
$80 million CSC Associates, L.P. financing completed in February 1996.
Income from Unconsolidated Joint Ventures. (All amounts reflect the
Company's share of joint venture income.) Income from unconsolidated joint
ventures increased approximately $895,000 and $2,590,000 in the three and nine
month 1996 periods, respectively.
Income from Wildwood Associates increased approximately $511,000 and
$1,286,000 in the three and nine month 1996 periods, respectively. Results in
1996 were favorably impacted by decreases in interest expense (approximately
$236,000 and $852,000 in the three and nine month 1996 periods, respectively)
which were due primarily to the refinancings of two mortgage notes in December
1995.
In March 1996, the 4100 and 4300 Wildwood Parkway Buildings became
partially operational for financial reporting purposes which increased income
before depreciation, amortization and interest expense by approximately $289,000
and $489,000 in the three and nine month 1996 periods, respectively. The income
before depreciation, amortization and interest expense of the 2500 Windy Ridge
Parkway Building decreased approximately $187,000 and $537,000 in the three and
nine month 1996 periods, respectively, primarily due to the expiration of a
tenant's lease which was replaced with another tenant with less square footage
at a lower rate. Additionally, increases in income before depreciation,
amortization and interest expense from the 2300 Windy Ridge Parkway and 3200
Windy Hill Road Buildings contributed to the increases by $250,000 and $438,000
in the three and nine month 1996 periods, respectively.
Income from CSC Associates, L.P. increased approximately $129,000 and
$509,000 in the three and nine month 1996 periods, respectively, due to the
continued lease-up of NationsBank Plaza (increases of $172,000 and $685,000 in
income before depreciation, amortization and interest expense in the three and
nine month 1996 periods, respectively). These increases were partially offset by
increases in depreciation and amortization of approximately $43,000 and $140,000
in the three and nine month 1996 periods, respectively, which were also due to
an increase in the lease-up.
Income from Haywood Mall Associates increased approximately $329,000
and $502,000 in the three and nine month 1996 periods, respectively, due to
increases in income before depreciation, amortization and interest expense
resulting from the completion and lease-up of the expansion of Haywood Mall
(increases of approximately $331,000 and $702,000 in the three and nine month
1996 periods, respectively). The increases in income before depreciation,
amortization and interest expense were partially offset by increases in
depreciation and amortization of approximately $2,000 and $200,000 in the three
and nine month 1996 periods, respectively, which were also due to the expansion
of Haywood Mall.
Income from Temco Associates increased approximately $10,000 and
$440,000 in the three and nine month 1996 periods, respectively. In March 1996,
Temco Associates exercised an option to purchase 240 acres of land which it
simultaneously sold. CREC's share of the gain on the sale was $430,000.
Income from Hickory Hollow Associates decreased $111,000 and $258,000
in the three and nine month 1996 periods, respectively, due to two outparcel
sales in April and September 1995. No similar outparcel sales occurred in 1996.
Income from CC-JM II Associates increased approximately $23,000 and
$118,000 in the three and nine month 1996 periods, respectively. These increases
were due to the John Marshall II office building becoming fully operational for
financial reporting purposes in late January 1996.
General and Administrative Expenses. General and administrative
expenses increased approximately $485,000 and $762,000 in the three and nine
month 1996 periods, respectively. The increases were primarily related to
inflationary cost increases, the Company's expansion and the acquisition of The
Lea Richmond Company and The Richmond Development Company in July 1996 (see Note
5).
Depreciation and Amortization. Depreciation and amortization increased
approximately $747,000 and $1,521,000 in the three and nine month 1996 periods,
respectively. The increases were due to the retail centers and 100 North Point
Center East becoming operational as discussed above and the acquisition of the
615 Peachtree Street office building (see Note 5).
Stock Appreciation Right Expense. Stock appreciation right expense
increased approximately $444,000 in the three month 1996 period and decreased
approximately $53,000 in the nine month 1996 period. This non-cash item is
primarily related to vesting of stock appreciation rights and to the Company's
stock price, which was $17.375, $17.75, and $18.25 at December 31, 1994, June
30, 1995 and September 30, 1995, respectively; and $20.25, $19.625 and $22.00 at
December 31, 1995, June 30, 1996 and September 30, 1996, respectively.
Interest Expense. Interest expense increased approximately $1,460,000
and $3,582,000 in the three and nine month 1996 periods, respectively. Interest
expense before capitalization increased to $3,081,000 and $8,601,000 in the
three and nine month 1996 periods, respectively, from $1,687,000 and $3,846,000
in the three and nine month 1995 periods, respectively, due to higher debt
levels. Also, during the third quarter of 1995, $50 million of floating rate
debt was replaced with long term fixed rate debt at higher interest rates. The
overall increase in interest expense in the nine month 1996 period was partially
offset by increased interest capitalization because of a higher level of
projects under development. The amount of interest capitalized to projects under
development (a reduction of interest expense) increased to $4,642,000 from
$3,469,000 in the nine month 1996 period and decreased to $1,498,000 from
$1,564,000 in the three month 1996 period.
Other Expenses. Other expenses decreased approximately $328,000 and
$146,000 in the three and nine month 1996 periods, respectively. The decreases
were due to decreases in predevelopment expense.
Provision (Benefit) For Income Taxes From Operations. The provision
(benefit) for income taxes from operations decreased approximately $1,370,000
and $1,667,000 in the three and nine month 1996 periods, respectively. The
provision (benefit) for income taxes from operations decreased in both periods
due primarily to a decrease in CREC and its subsidiaries' income before income
taxes and gain on sale of investment properties of $4,094,000 and $4,936,000 in
the three and nine month 1996 periods, respectively, resulting in a net loss for
CREC and its subsidiaries (and hence an income tax benefit) in both periods. The
decrease in CREC and its subsidiaries' income before income taxes and gain on
sale of investment properties was due primarily to a decrease in development and
leasing fees received by CREC and its subsidiaries including a decrease in
development income from the Dusseldorf project as discussed above. Certain
development and leasing fees recorded on CREC and its subsidiaries' books is
intercompany fee income which is eliminated in consolidation, but the tax effect
is not, and such intercompany fees also decreased in both 1996 periods. The
decrease in the provision (benefit) for income taxes from operations was
partially offset by state income tax refunds received in 1995 related to a
successful judicial appeal by Cousins of an assessment paid in 1992. No similar
refunds were received in 1996.
Gain on Sale of Investment Properties. Gain on sale of investment
properties decreased approximately $1,349,000 and $729,000 in the three and nine
month 1996 periods, respectively, which was due to a decrease in the number of
sales in both periods. The $1,017,000 gain in the nine month 1996 period was
from the sale of a 2.7 acre site at North Point in May 1996 and the sale of the
Company's 50% interest in the Norfolk parking agreement in July 1996. The
$1,746,000 gain on sale of investment properties in the nine month 1995 period
included the following: the August 1995 sale of the approximately 1 acre parcel
proximate to the CNN Center in downtown Atlanta, the September 1995 sale of a
6.2 acre parcel in West Cobb County, Georgia and the September 1995 simultaneous
purchase and sale of a 78 acre parcel adjacent to the Company's Bradshaw Farm
residential development in suburban Atlanta.
Liquidity and Capital Resources:
Financial Condition. The Company's debt (including its pro rata share
of unconsolidated joint venture debt) was 31% of total market capitalization at
September 30, 1996. As discussed in Note 4, the Company amended and extended the
maturity date of its line of credit in July 1996.
The Company has development and acquisition projects in various stages.
The Company currently intends to finance these projects, as well as the
completion of projects currently under construction, using its existing line of
credit, long-term non-recourse financing on the Company's unleveraged projects
and other financings as market conditions warrant. In September 1996, the
Company filed a shelf registration statement with the Securities and Exchange
Commission ("SEC") for the offering from time to time of up to $200 million of
common stock, warrants to purchase common stock and debt securities. The SEC
declared the registration statement effective on October 4, 1996.
Cash Flows. Net cash provided by operating activities for the nine
month 1996 period was $38.6 million, an increase of $8.3 million from $30.3
million in the nine month 1995 period. The increase resulted primarily from an
improvement in net income of $2.7 million. Additionally, non-cash charges
consisting of depreciation and amortization and residential lot and outparcel
cost of sales included in net income for the nine month 1996 period increased
$3.9 million from the nine month 1995 period. Operating distributions from
unconsolidated joint ventures also favorably impacted the nine month 1996 period
by an increase of $1.9 million from the nine month 1995 period.
Net cash used in investing activities for the nine month 1996 period
was $99.1 million, an increase of $32.5 million from $66.6 million in the nine
month 1995 period. The increase in net cash used in investing activities
resulted primarily from an increase in property acquisition and development
expenditures (approximately $38.5 million) which included the acquisitions
discussed in Note 5 and the completion of projects currently under construction.
The increase in net cash used in investing activities was partially offset by a
decrease of $8.4 million in investment in unconsolidated joint ventures. In the
nine month 1995 period, the Company contributed $5.3 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, 1995) and $2.6 to CC-JM II Associates to fund
its share of the equity in the partnership. No similar contributions were made
in the nine month 1996 period. Also offsetting the increase in net cash used in
investing activities in the nine month 1996 period was the $1.1 million cash
portion of an exchange transaction (see Note 2).
Net cash provided by financing activities for the nine month 1996
period was $59.1 million, an increase of $25.5 million from $33.6 million in the
nine month 1995 period. The increase is attributable to an increase in proceeds
from other notes payable of approximately $29.5 million. In the nine month 1995
period, the Company completed two financings for approximately $51.5 million as
compared to one financing in the nine month 1996 period for approximately $80
million. The proceeds from line of credit decreased $8.3 million and the
repayment of line of credit increased $4.7 million in the nine month 1996 period
due to the use of the proceeds from the $80 million financing instead of the
line of credit. Common stock sold increased $5.5 million and dividends paid
increased $2.9 million in the nine month 1996 period which are both due to an
increase in the number of shares outstanding and an increase in the cash
dividends per share from $.72 per share in the nine month 1995 period to $.81
per share in the nine month 1996 period. The common stock sold was from
reinvestment of dividends by stockholders through the Company's Dividend
Reinvestment Plan and stock option exercises.
<PAGE>
Supplemental Financial Information:
Depreciation and amortization expense, net of minority interests'
share, included the following components for the three and nine months ended
September 30, 1996 ($ in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
-------------------------------- --------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
------- -------------- ------ ------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Furniture, fixtures and equipment $ 82 $ 2 $ 84 $ 209 $ 36 $ 245
Deferred financing costs -- 3 3 -- 8 8
Goodwill and related business
acquisition costs 103 10 113 232 36 268
Real estate related:
Building (including tenant
first generation) 1,605 2,283 3,888 4,164 6,677 10,841
Tenant second generation 45 250 295 124 729 853
------ ------ ------ ------ ------ -------
$1,835 $2,548 $4,383 $4,729 $7,486 $12,215
====== ====== ====== ====== ====== =======
</TABLE>
Exclusive of new developments and purchases of furniture, fixtures and
equipment, the Company had the following capital expenditures during the three
and nine months ended September 30, 1996, including its share of unconsolidated
joint ventures ($ in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
--------------------- --------------------
Office Retail Total Office Retail Total
------ ------ ----- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Second generation related costs $285 $-- $285 $749 $-- $749
Building improvements -- -- -- -- -- --
---- --- ---- ---- --- ----
$285 $-- $285 $749 $-- $749
==== === ==== ==== === ====
</TABLE>
<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, 1996.
<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/ Kelly H. Barrett
----------------------------------
Kelly H. Barrett
Vice President and Controller
(Authorized Officer)
(Principal Accounting Officer)
November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 132
<SECURITIES> 0
<RECEIVABLES> 53,027
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 315,716
<DEPRECIATION> 19,134
<TOTAL-ASSETS> 492,798
<CURRENT-LIABILITIES> 0
<BONDS> 186,460
28,771
0
<COMMON> 0
<OTHER-SE> 258,217
<TOTAL-LIABILITY-AND-EQUITY> 492,798
<SALES> 0
<TOTAL-REVENUES> 40,190
<CGS> 0
<TOTAL-COSTS> 32,111
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,959
<INCOME-PRETAX> 21,005
<INCOME-TAX> (864)
<INCOME-CONTINUING> 21,869
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,886
<EPS-PRIMARY> 80
<EPS-DILUTED> 0
</TABLE>
