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 June 30, 1997 Commission file number 0-3576
COUSINS PROPERTIES INCORPORATED
A GEORGIA CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 58-0869052
2500 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339-5683
TELEPHONE: 770-955-2200
Registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
has been subject to such filing requirements for the past 90 days.
At July 31, 1997, 29,208,506 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, June 30,
1996 1997
------------ -----------
(Unaudited)
ASSETS
- ------
PROPERTIES:
<S> <C> <C>
Operating properties $252,699 $363,522
Land held for investment or future
development 21,213 19,144
Projects under construction 88,568 25,313
Residential lots under development 15,183 16,736
Less: accumulated depreciation (20,339) (27,538)
-------- --------
Total properties 357,324 397,177
-------- --------
CASH AND CASH EQUIVALENTS, at cost which
approximates market 1,598 4,866
NOTES AND OTHER RECEIVABLES 56,497 42,309
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 132,262 111,393
OTHER ASSETS 8,963 8,908
-------- --------
TOTAL ASSETS $556,644 $564,653
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
NOTES PAYABLE $231,831 $240,954
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 25,302 20,095
DEPOSITS AND DEFERRED INCOME 327 326
-------- --------
TOTAL LIABILITIES 257,460 261,375
-------- --------
STOCKHOLDERS' INVESTMENT
Common stock, $1 par value, authorized
50,000,000 shares; issued 28,920,122
shares at December 31, 1996 and
29,208,506 shares at June 30, 1997 28,920 29,209
Additional paid-in capital 164,970 169,708
Cumulative undistributed net income 105,294 104,361
-------- --------
TOTAL STOCKHOLDERS' INVESTMENT 299,184 303,278
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
INVESTMENT $556,644 $564,653
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(UNAUDITED)
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------- -----------------
1996 1997 1996 1997
------- ------- ------- -------
REVENUES:
<S> <C> <C> <C> <C>
Rental property revenues $ 7,532 $15,749 $13,370 $31,004
Development income 1,052 480 1,325 1,454
Management fees 602 855 1,172 1,689
Leasing and other fees 525 53 1,252 190
Residential lot and outparcel sales 3,090 3,151 7,470 5,412
Interest and other 1,354 853 2,789 1,683
------- ------- ------- -------
14,155 21,141 27,378 41,432
------- ------- ------- -------
INCOME FROM UNCONSOLIDATED JOINT VENTURES 4,170 3,467 8,564 7,049
COSTS AND EXPENSES:
Rental property operating expenses 1,768 3,797 3,162 7,506
General and administrative expenses 2,108 3,088 4,307 6,347
Depreciation and amortization 1,600 3,639 2,894 7,068
Stock appreciation right expense
(credit) 47 127 (312) (4)
Residential lot and outparcel cost
of sales 2,868 2,980 7,033 4,926
Interest expense 1,362 3,619 2,376 7,275
Property taxes on undeveloped land 250 (46) 493 213
Other 615 593 818 1,072
------- ------- ------- -------
10,618 17,797 20,771 34,403
------- ------- ------- -------
INCOME FROM OPERATIONS BEFORE INCOME
TAXES 7,707 6,811 15,171 14,078
BENEFIT FOR INCOME TAXES FROM OPERATIONS (222) (644) (56) (605)
------- ------- ------- -------
INCOME BEFORE GAIN ON SALE OF
INVESTMENT PROPERTIES 7,929 7,455 15,227 14,683
GAIN ON SALE OF INVESTMENT PROPERTIES,
NET OF APPLICABLE INCOME TAX
PROVISION 620 -- 620 2,396
------- ------- ------- -------
NET INCOME $ 8,549 $ 7,455 $15,847 $17,079
======= ======= ======= =======
NET INCOME PER SHARE $ .30 $ .26 $ .56 $ .59
======= ======= ======= =======
CASH DIVIDENDS DECLARED PER SHARE $ .27 $ .31 $ .54 $ .62
======= ======= ======= =======
WEIGHTED AVERAGE COMMON EQUIVALENT
SHARES 28,405 29,189 28,342 29,093
======= ======= ======= =======
</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 SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(UNAUDITED)
($ in thousands)
<TABLE>
<CAPTION>
1996 1997
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Income before gain on sale of investment properties $15,227 $14,683
Adjustments to reconcile income before gain on sale
of investment properties to net cash provided by
operating activities:
Depreciation and amortization 2,894 7,068
Stock appreciation right expense (credit) (312) (4)
Cash charges to expense accrual for stock
appreciation rights (415) (684)
Effect of recognizing rental revenues on a
straight-line basis 20 (238)
Income from unconsolidated joint ventures (8,564) (7,049)
Operating distributions from unconsolidated joint
ventures 9,272 13,463
Residential lot and outparcel cost of sales 6,679 4,422
Changes in other operating assets and liabilities:
Change in other receivables (646) 1,353
Change in accounts payable and accrued liabilities 2,244 (4,727)
-------- -------
Net cash provided by operating activities 26,399 28,287
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Gain on sale of investment properties 620 2,396
Adjustments to reconcile gain on sale of investment
properties to net cash provided by sales activities:
Cost of sales 585 287
Property acquisition and development expenditures (62,387) (33,221)
Non-operating distributions from unconsolidated joint
ventures 1,408 14,600
Investment in notes receivable (25,451) (5,564)
Collection of notes receivable 24,936 829
Change in other assets, net (2,045) (315)
Investment in unconsolidated joint ventures, including
interest capitalized to equity investments (251) (145)
Cash portion of exchange transaction 1,092 --
-------- -------
Net cash used in investing activities (61,493) (21,133)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of lines of credit (37,427) (55,477)
Proceeds from lines of credit 4,558 68,177
Dividends paid (15,277) (18,012)
Common stock sold, net of expenses 4,734 5,003
Repayment of other notes payable (2,192) (3,577)
Proceeds from other notes payable 80,000 --
-------- -------
Net cash provided by (used in) financing activities 34,396 (3,886)
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (698) 3,268
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,552 1,598
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 854 $ 4,866
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
- --------------------------
The Consolidated Financial Statements include the accounts of Cousins
Properties Incorporated ("Cousins") and its majority and wholly-owned
affiliates, as well as Cousins Real Estate Corporation ("CREC") and its
subsidiaries. All of the entities included in the Consolidated Financial
Statements are hereinafter referred to collectively as the "Company."
Cousins has elected to be taxed as a real estate investment trust
("REIT"), and intends to distribute 100% of its federal taxable income to
stockholders, thereby eliminating any liability for future corporate federal
income taxes. Therefore, the results included herein do not include a federal
income tax provision for Cousins. However, CREC and its subsidiaries are taxed
separately from Cousins as a regular corporation. Accordingly, the Consolidated
Statements of Income include a provision (benefit) for CREC's income taxes.
The Consolidated Financial Statements were prepared by the Company
without audit, but in the opinion of management reflect all adjustments
necessary for the fair presentation of the Company's financial position as of
June 30, 1997, and results of operations for the three month periods ended June
30, 1996 and 1997. Results of operations for the interim 1997 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, 1996. The accounting
policies employed are the same as those shown in Note 1 to the Consolidated
Financial Statements included in such Form 10-K.
Certain 1996 amounts have been reclassified to conform to the 1997
presentation.
2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS
- ---------------------------------------------------
Interest (net of $3,144,000 and $1,270,000 capitalized in 1996 and
1997, respectively) and income taxes paid were as follows for the six months
ended June 30, 1996 and 1997 ($ in thousands):
1996 1997
---- ----
Interest paid $2,278 $7,190
Income taxes paid $ 39 $ --
In January 1997, approximately $17,005,000 was transferred from Notes
and Other Receivables to Operating Properties (see Note 5 of "Notes to
Consolidated Financial Statements" in the Company's quarterly report on Form
10-Q for the quarter ended March 31, 1997). During the six months ended June 30,
1997, approximately $87,658,000 was transferred from Projects Under Construction
to Operating Properties.
At June 30, 1997, cash and cash equivalents included $3,383,000 from
property sales held in escrow pending reinvestment in a tax-deferred exchange
and $1,041,000 which is restricted under a municipal bond indenture.
3. COSTS CAPITALIZED AND FEES ELIMINATED IN CONSOLIDATION
- -----------------------------------------------------------
Development, construction, and leasing fees received by CREC and its
subsidiaries from Cousins and Cousins' majority owned affiliates are eliminated
in consolidation. Costs related to planning, development, leasing and
construction of properties (including related general and administrative
expenses) are capitalized. The table below shows the fees eliminated, the
internal costs capitalized related to these fees, and the additional internal
costs capitalized by CREC to its own residential developments for the six months
ended June 30, 1996 and 1997 ($ in thousands):
1996 1997
------ ----
Fees eliminated in consolidation $2,249 $722
Internal costs capitalized in consolidation
to projects on which fees were eliminated 1,176 963
Internal costs capitalized to CREC
residential developments 257 125
4. NOTES PAYABLE AND INTEREST EXPENSE
- ---------------------------------------
At December 31, 1996 and June 30, 1997, the composition of notes
payable was as follows ($ in thousands):
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
----------------------------------- -------------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
-------- -------------- -------- -------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Floating Rate Lines
of Credit $ 25,100 $ 2,025 $ 27,125 $ 36,500 $ -- $ 36,500
Other Debt (primarily
non-recourse fixed
rate mortgages) 206,731 105,487 312,218 204,454 119,522 323,976
-------- -------- -------- -------- -------- --------
$231,831 $107,512 $339,343 $240,954 $119,522 $360,476
======== ======== ======== ======== ======== ========
</TABLE>
During the three months ended June 30, 1997, the Company extended the
maturity of its $100 million line of credit from June 30, 1997 to June 29, 1998.
As of June 30, 1997, the outstanding balance under the line of credit was $36.5
million.
Subsequent to June 30, 1997, the Company completed the financing of the
100 and 200 North Point Center East Buildings with a $25 million non-recourse
mortgage note payable at a 7.86% interest rate and a term of ten years.
For the three and six months ended June 30, 1997, interest expense
was recorded as follows ($ in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
----------------------------------- ------------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
-------- -------------- -------- -------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Floating Rate Lines
Interest Expensed $3,619 $2,104 $5,723 $7,275 $4,050 $11,325
Interest Capitalized 680 241 921 1,270 429 1,699
------ ------ ------ ------ ------ -------
$4,299 $2,345 $6,644 $8,545 $4,479 $13,024
====== ====== ====== ====== ====== =======
</TABLE>
During the second quarter of 1997, 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 $47 million.
5. GRANDVIEW OFFICE BUILDING
- ------------------------------
On April 1, 1997, Cousins/Daniel, LLC purchased approximately 8 acres
of land on which construction commenced on a 150,000 square foot office building
in Birmingham, Alabama. The total cost of the office building is anticipated to
be approximately $18 million, and the building is expected to be completed in
mid 1998.
6. SUBSEQUENT EVENT - SALE OF RIVERMONT STATION AND LOVEJOY STATION
- ---------------------------------------------------------------------
On July 1, 1997, CREC sold Rivermont Station and Lovejoy Station, two
Atlanta neighborhood retail centers with 90,000 and 77,000 square feet,
respectively, for $20.1 million, which was approximately $4.1 million over the
cost of the centers. Including depreciation recapture of $.5 million and net of
an income tax provision of approximately $1.7 million, the net gain on the sale
was approximately $2.9 million.
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations for the Three and Six Months Ended June 30,
1996 and 1997.
Results of Operations:
- ----------------------
Rental Property Revenues and Operating Expenses. Rental property
revenues were approximately $8,217,000 and $17,634,000 higher in the three and
six month 1997 periods, respectively. Rental revenues from the Company's office
portfolio increased approximately $5,319,000 and $11,210,000 in the three and
six month 1997 periods, respectively, due primarily to the acquisition of two
office buildings and the addition of two new office buildings which became
operational for financial reporting purposes during 1996. Rental revenues from
One Independence Center and 615 Peachtree Street, two office buildings which
were acquired in December 1996 and August 1996, respectively, contributed to the
increase by $2,800,000 and $669,000 respectively, in the three month 1997 period
and $5,905,000 and $1,367,000, respectively in the six month 1997 period. Two
office buildings, 100 and 200 North Point Center East, which became operational
for financial reporting purposes in April 1996 and November 1996, respectively,
increased rental revenues approximately $355,000 and $647,000, respectively, in
the three month 1997 period and $1,030,000 and $1,221,000, respectively, in the
six month 1997 period.
The Wildwood Training Facility also favorably impacted the rental
revenues recognized from the Company's office portfolio. Effective January 1,
1997, the Wildwood Training Facility is being accounted for as if it were owned
by the Company (see Note 5 of "Notes to Consolidated Financial Statements" in
the Company's quarterly report on Form 10-Q for the quarter ended March 31,
1997). Thus, rental revenues were favorably impacted by the rental revenues from
the Wildwood Training Facility which were approximately $803,000 and $1,612,000
in the three and six month periods, respectively.
Rental revenues from the Company's retail portfolio increased
approximately $2,951,000 and $6,538,000 in the three and six month 1997 periods,
respectively. The increase was due primarily to new retail centers or expansions
of existing retail centers which became operational for financial reporting
purposes during 1996 as follows: Colonial Plaza MarketCenter in March 1996
($744,000 and $2,079,000 in the three and six month 1997 periods, respectively),
Greenbrier MarketCenter in October 1996 ($1,234,000 and $2,340,000 in the three
and six month 1997 periods, respectively), Los Altos MarketCenter in November
1996 ($738,000 and $1,394,000 in the three and six month 1997 periods,
respectively), the expansion of Presidential MarketCenter in June 1996 ($296,000
and $516,000 in the three and six month 1997 periods, respectively), the
expansion of North Point MarketCenter in December 1996 ($170,000 and $474,000 in
the three and six month 1997 periods, respectively) and Mansell Crossing Phase
II in March 1996 ($123,000 and $324,000 in the three and six month 1997 periods,
respectively) (the Company does not own Mansell Crossing Phase I). Rivermont
Station which became operational in February 1997 also increased rental revenues
by $413,000 and $654,000 in the three and six month 1997 periods, respectively.
The tax-deferred exchange of Lawrenceville MarketCenter in November
1996 partially offset the foregoing increases in rental revenues by
approximately $939,000 and $1,538,000 in the three and six month 1997 periods,
respectively.
Rental property operating expenses increased approximately $2,029,000
and $4,344,000 in the three and six month 1997 periods, respectively, which
increases were primarily related to the occupancy of the retail centers and the
100 and 200 North Point Center East office buildings, as well as the
acquisitions of the 615 Peachtree Street and One Independence Center office
buildings and the reclassification of the Wildwood Training Facility as
discussed above.
Development Income. Development income decreased approximately $572,000
in the three month 1997 period and increased $129,000 in the six month 1997
period. The decrease in the three month 1997 period was due primarily to the
additional development income received from the Dusseldorf project
(approximately $735,000) in the three month 1996 period. No similar income was
recognized in the three month 1997 period. Development fees recognized by the
Company's retail division from third party retail developments also decreased
$100,000 in the three month 1997 period. Partially offsetting these two
decreases in the three month 1997 period was approximately $169,000 of
development income recognized from a center in Cuyahoga Falls, Ohio, and
$123,000 recognized from the fee development of Total Systems' corporate
headquarters in Columbus, Georgia.
The increase in the six month 1997 period was due primarily to
approximately $885,000 of development income recognized from a center in
Cuyahoga Falls, Ohio and approximately $245,000 of income recognized from the
fee development of Total Systems' corporate headquarters. These increases were
partially offset by additional development income received from the Dusseldorf
project in 1996 (approximately $735,000) and a decrease in development fees of
$146,000 recognized by the Company's retail division from third party retail
developments in the six month 1997 period.
Management Fees. Management fees increased approximately $253,000 and
$517,000 in the three and six month 1997 periods, respectively. The increases
were primarily due to the acquisition of the management contracts of The Lea
Richmond Company in July 1996, which contributed approximately $228,000 and
$447,000 of management fees in the three and six month 1997 periods,
respectively, (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, 1996).
Leasing and Other Fees. Leasing and other fees decreased approximately
$472,000 and $1,062,000 in the three and six month 1997 periods, respectively.
The decreases were due in part to a decrease of approximately $437,000 and
$679,000 in the three and six month 1997 periods, respectively, from leasing
fees related to Wildwood Office Park, primarily related to fees received from
the leasing of the 4100 and 4300 Wildwood Parkway Buildings. Leasing fees
recognized by the Company's retail division from third party developments also
decreased approximately $26,000 and $255,000 in the three and six month 1997
periods, respectively. Also contributing to the decrease in the six month 1997
period was a decrease of approximately $76,000 in leasing fee income from
NationsBank Plaza.
Residential Lot and Outparcel Sales and Cost of Sales. Residential lot
and outparcel sales increased approximately $61,000 in the three month 1997
period and decreased approximately $2,058,000 in the six month 1997 period. The
decrease in the six month 1997 period was due primarily to a decrease in
residential lot sales from 121 lots in 1996 to 104 lots in 1997. CREC and one of
its subsidiaries also recognized $2,161,000 and $1,494,000 in outparcel sales in
the six month 1996 and 1997 periods, respectively, from four and three outparcel
sales in the six month 1996 and 1997 periods, respectively.
Residential lot and outparcel cost of sales increased approximately
$112,000 in the three month 1997 period and decreased approximately $2,107,000
in the six month 1997 period. The decrease in the six month 1997 period is due
to the decreases in sales discussed above.
Interest and Other Income. Interest and other income decreased
approximately $501,000 and $1,106,000 in the three and six month 1997 periods,
respectively. The decrease was due primarily to the reclassification of the
Wildwood Training Facility Mortgage Note to Operating Properties. No interest
income from this mortgage note was recognized in 1997 which caused decreases of
approximately $399,000 and $800,000 in interest income in the three and six
month 1997 periods, respectively. Also contributing to the decrease was a
decrease of approximately $208,000 and $493,000 in the three and six month 1997
periods, respectively, in interest income recognized from temporary investments.
In the three and six month 1996 periods, the Company recognized interest income
on temporary investments made with proceeds received from the CSC Associates,
L.P. financing (see Note 4 of "Notes to Consolidated Financial Statements" in
the Company's annual report on Form 10-K for the year ended December 31, 1996).
No similar amounts were invested in the three and six month 1997 periods.
Income from Unconsolidated Joint Ventures. (All amounts reflect the
Company's share of joint venture income.) Income from unconsolidated joint
ventures decreased approximately $703,000 and $1,515,000 in the three and six
month 1997 periods, respectively.
Income from Temco Associates decreased approximately $404,000 in the
six month 1997 period. 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. There was no similar sale in the six months ended
June 30, 1997.
Income from Wildwood Associates decreased approximately $755,000 and
$1,219,000 in the three and six month 1997 periods, respectively. Results were
negatively impacted by an increase in interest expense (approximately $484,000
and $848,000 in the three and six month 1997 periods, respectively). This
increase was due primarily to the financing of the 3200 Windy Hill Road Building
which contributed approximately $724,000 and $1,450,000 to the increase in
interest expense in the three and six month 1997 periods, respectively. On
December 16, 1996, Wildwood Associates completed the financing of this building
with a $70 million non-recourse mortgage note payable at an 8.23% interest rate
and maturity of January 1, 2007. Concurrent with the financing, Wildwood
Associates paid down its line of credit to $0 which partially offset the
increase in interest expense by approximately $276,000 and $480,000 in the three
and six month 1997 periods, respectively. Interest expense also increased due to
the financing of the 4100 and 4300 Wildwood Parkway Buildings which increased
interest expense $287,000 and $325,000 in the three and six month 1997 periods,
respectively. On March 20, 1997, Wildwood Associates completed the financing of
these two buildings with a $30 million non-recourse mortgage note payable at a
7.65% interest rate and a term of fifteen years. In conjunction with this
financing and a portion of a $70 million financing of the 3200 Windy Hill
Building completed in December 1996, in the three month period ended March 31,
1997, Wildwood Associates made non-operating cash distributions of $12.5 million
to each partner and paid the entire calendar year 1997 operating distribution of
$4.5 million to each partner. Wildwood Associates will use the approximately $10
million of remaining proceeds and the operating cash flow for the balance of
1997 to complete the 4200 Wildwood Parkway Building.
Partially offsetting the increase in interest expense was a decrease of
approximately $130,000 and $260,000 in the three and six month 1997 periods,
respectively, in interest expense related to the Summit Green Building.
Effective December 1, 1996, Wildwood Associates disposed of its interest in this
building in exchange for cancellation of the related mortgage debt. In addition,
an increase in interest capitalization also partially offset the increase in
interest expense by $109,000 and $179,000 in the three and six month 1997
periods, respectively.
Income before depreciation, amortization and interest expense from the
4100 and 4300 Wildwood Parkway Buildings favorably impacted results by
approximately $248,000 and $656,000 in the three and six month 1997 periods,
respectively. The 4100 and 4300 Wildwood Parkway Buildings became partially
operational for financial reporting purposes in March 1996. Lease-up of the 2300
and 2500 Windy Ridge Parkway Buildings also increased income before
depreciation, amortization and interest expense by $63,000 and $88,000 in the
three month 1997 periods, respectively, and $112,000 and $145,000 in the six
month 1997 periods, respectively. Income before depreciation, amortization and
interest expense from the 3200 Windy Hill Road Building decreased approximately
$449,000 and $768,000 in the three and six month 1997 periods, respectively, due
primarily to the effect of the straight-lining of rental revenues in accordance
with Statement of Financial Accounting Standards No. 13, which decreased rental
revenues by approximately $444,000 and $877,000 in the three and six month 1997
periods, respectively. The disposition of the Summit Green Building, as
discussed above, decreased income before depreciation, amortization and interest
expense by approximately $328,000 and $610,000 in the three and six month 1997
periods, respectively.
General and Administrative Expenses. General and administrative
expenses increased approximately $980,000 and $2,040,000 in the three and six
month 1997 periods, respectively. The increases were primarily due to the
Company's expansion and acquisition of The Lea Richmond Company and The Richmond
Development Company in July 1996 (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, 1996). Additionally, approximately $397,000 of additional expense
in 1997 was accrued in the three month period ended March 31, 1997 for higher
than anticipated estimates of runoff and other expenses associated with the
termination of the Company's partially self-insured medical plan in December
1996.
Depreciation and Amortization. Depreciation and amortization increased
approximately $2,039,000 and $4,174,000 in the three and six month 1997 periods,
respectively. The increases were partially due to the retail centers becoming
operational as discussed above. The increases were also due to the 100 and 200
North Point Center East office buildings becoming operational and the
acquisitions of the One Independence Center and 615 Peachtree Street office
buildings in December 1996 and August 1996, respectively, and the
reclassification of the Wildwood Training Facility to Operating Properties.
Stock Appreciation Right Expense (Credit). Stock appreciation right
expense increased $80,000 in the three month 1997 period and stock appreciation
right credit decreased $308,000 in the six month 1997 period. This non-cash item
is primarily related to the Company's stock price, which was $20.25, $19.50, and
$19.625 at December 31, 1995, March 31, 1996 and June 30, 1996, respectively;
and $28.125, $27.25 and $28.00 at December 31, 1996, March 31, 1997 and June 30,
1997, respectively. The increases in the stock appreciation right expense were
partially offset by decreases due to a reduction in the number of stock
appreciation rights outstanding due to exercises which occurred since the first
quarter of 1996.
Interest Expense. Interest expense increased approximately $2,257,000
and $4,899,000 in the three and six month 1997 periods, respectively. Interest
expense before capitalization increased to $4,299,000 and $8,545,000 in the
three and six month 1997 periods, respectively, from $2,873,000 and $5,519,000
in the three and six month 1996 periods, respectively, due to higher debt
levels. Also contributing to the increase was a decrease in interest
capitalization because of a lower level of projects under development. The
amount of interest capitalized to projects under development (a reduction of
interest expense) decreased to $680,000 and $1,270,000 in the three and six
month 1997 periods, respectively, from $1,510,000 and $3,144,000 in the three
and six month 1996 periods, respectively.
Property Taxes on Undeveloped Land. Property taxes on undeveloped land
decreased approximately $296,000 and $280,000 in the three and six month 1997
periods, respectively. The decreases were primarily due to favorable settlement
of property taxes on the Company's North Point land related to 1994, 1995 and
1996 tax years, which had been under appeal.
Other Expenses. Other expenses decreased approximately $22,000 in the
three month 1997 period and increased $254,000 in the six month 1997 period due
to decreases and increases in predevelopment expense in the three and six month
1997 periods, respectively.
Benefit for Income Taxes from Operations. Benefit for income taxes from
operations increased approximately $422,000 and $549,000 in the three and six
month 1997 periods, respectively. The increases were due to increases in CREC
and its subsidiaries' loss before income taxes and gain on sale of investment
properties of $1,110,000 and $1,384,000 in the three and six month 1997 periods,
respectively. CREC and its subsidiaries' loss before income taxes and gain on
sale of investment properties increased due to increases in the stock
appreciation right expense in both 1997 periods and a decrease in development
and leasing fees received by CREC and its subsidiaries in the three month 1997
period as discussed above. Certain development and leasing fees recorded on CREC
and its subsidiaries' books are intercompany fee income which is eliminated in
consolidation, but the tax effect is not, and such intercompany fees decreased
in both 1997 periods.
Gain on Sale of Investment Properties. Gain on sale of investment
properties decreased $620,000 in the three month 1997 period and increased
$1,776,000 in the six month 1997 period. The 1997 gain is due to a sale of
certain acres of land at the Company's North Point development in January 1997
for net proceeds of $2,683,000. The 1996 gain was primarily related to the sale
of a 2.7 acre site at North Point in May 1996 with a portion of the proceeds
being reinvested pursuant to a tax free exchange in the purchase of additional
land adjacent to Presidential MarketCenter in June 1996. The net proceeds from
the sale were $1,205,000.
Liquidity and Capital Resources:
- --------------------------------
Financial Condition. The Company's debt (including its pro rata share
of unconsolidated joint venture debt) was 31% of total market capitalization at
June 30, 1997. As discussed in Note 4, the Company extended the maturity of its
$100 million line of credit to June 29, 1998, and completed the $25 million
non-recourse financing of the 100 and 200 North Point Center East Office
Buildings. As discussed in Note 6, a $20.1 million sale was completed on July 1,
1997. As a result of these transactions, the Company had no outstanding
borrowings under its line of credit as of July 31, 1997.
The Company has development 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 lines of credit
(increasing those lines of credit as required); long-term non-recourse financing
on the Company's unleveraged projects; sale of assets as market conditions
warrant; and sale of common stock, warrants to purchase common stock, or debt
securities from time to time under a $200 million shelf registration the Company
filed with the Securities and Exchange Commission in September 1996.
Cash Flows. Net cash provided by operating activities increased $1.9
million in 1997. Income from unconsolidated joint ventures decreased $1.5
million primarily due to decreases in income from Wildwood Associates
(approximately $1.2 million) and Temco Associates (approximately $.4 million).
Operating distributions from unconsolidated joint ventures increased $4.2
million due primarily to increases of $3.5 million in distributions from
Wildwood Associates and $1.45 million from CSC Associates, L.P. The increase in
the distributions from Wildwood Associates was due to a portion of the proceeds
from the $30 million financing of the 4100 and 4300 Wildwood Parkway Buildings
in March 1997 being distributed to each partner ($4.5 million). Depreciation and
amortization increased $4.2 million due to several retail and office projects
becoming operational during 1996 and 1997 and the acquisitions of One
Independence Center and 615 Peachtree Street during 1996. Residential lot and
outparcel cost of sales decreased $2.3 million due to decreases in the number of
lots and outparcels sold in 1997. Cash flows from operating activities were
negatively impacted by changes in other operating assets and liabilities, a
decrease of $5.0 million.
Net cash used in investing activities decreased $40.4 million in 1997
due to a decrease of $29.2 million in property acquisition and development
expenditures, as a result of the Company having a lower level of projects under
development. Also contributing to the decrease was a decrease in collection of
notes receivable of $24.1 million. Investment in notes receivable decreased
$19.9 million in 1997 which partially offset the above decreases in net cash
used in investing activities. The Company temporarily invested approximately $18
million of proceeds from the $80 million CSC Associates, L.P. financing
completed in 1996 in a note receivable due from Wildwood Associates. No similar
investment occurred in 1997. Non-operating distributions from unconsolidated
joint ventures increased $13.2 million due primarily to distributions from
Wildwood Associates of $10 million in January 1997 from the proceeds of the
financing of the 3200 Wildwood Plaza Building completed in December 1996 and
$2.5 million from the proceeds of the financing of the 4100 and 4300 Wildwood
Parkway Buildings in March 1997. The Company also received a $2.1 million
distribution from Norfolk Hotel Associates (see Note 7 of "Notes to Consolidated
Financial Statements" in the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1997). A decrease of $1.4 million in distributions from
CC-JM II Associates partially offset the above increases in non-operating
distributions from joint ventures. Net cash provided by sales activities
increased $1.5 million due to a land sale in January 1997.
Net cash provided by financing activities decreased $38.3 million in
1997, which was primarily attributable to a decrease of $80 million in proceeds
from other notes payable. The Company completed the $80 million CSC Associates,
L.P. financing in February 1996. No similar financing occurred in the six months
ended June 30, 1997. The repayment of lines of credit increased $18.1 million,
therefore decreasing the cash flows from financing activities. An increase in
the dividends paid per share from $.27 to $.31 and an increase in the number of
shares outstanding also contributed to the decrease as dividends paid increased
$2.7 million. Partially offsetting the above decreases was an increase in
proceeds from lines of credit ($63.6 million).
Supplemental Financial Information:
- -----------------------------------
Depreciation and amortization expense included the following components
for the three and six months ended June 30, 1997 ($ in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
--------------------------------- ----------------------------------
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 $ 99 $ 1 $ 100 $ 194 $ 3 $ 197
Deferred financing costs -- 2 2 -- 5 5
Goodwill and related business
acquisition costs 130 8 138 260 16 276
Real estate related:
Building (including tenant
first generation) 3,216 2,227 5,443 6,236 4,495 10,731
Tenant second generation 194 305 499 378 618 996
------ ------ ------ ------ ------ -------
$3,639 $2,543 $6,182 $7,068 $5,137 $12,205
====== ====== ====== ====== ====== =======
</TABLE>
Exclusive of new developments and purchases of furniture, fixtures and
equipment, the Company had the following capital expenditures during the three
and six months ended June 30, 1997, including its share of unconsolidated joint
ventures ($ in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
--------------------- ---------------------
Office Retail Total Office Retail Total
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Second generation related costs $162 $ -- $162 $375 $ -- $375
Building improvements 5 -- 5 15 -- 15
---- ---- ---- ---- ---- ----
$167 $ -- $167 $390 $ -- $390
==== ==== ==== ==== ==== ====
</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 June 30,
1997.
<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
Senior Vice President - Finance
(Authorized Officer)
(Principal Accounting Officer)
August 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,866
<SECURITIES> 0
<RECEIVABLES> 42,309
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 424,715
<DEPRECIATION> 27,538
<TOTAL-ASSETS> 564,653
<CURRENT-LIABILITIES> 261,375
<BONDS> 0
0
0
<COMMON> 29,209
<OTHER-SE> 274,069
<TOTAL-LIABILITY-AND-EQUITY> 564,653
<SALES> 0
<TOTAL-REVENUES> 41,432
<CGS> 0
<TOTAL-COSTS> 34,403
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,275
<INCOME-PRETAX> 14,078
<INCOME-TAX> (605)
<INCOME-CONTINUING> 14,683
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,079
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
</TABLE>
