SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 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 October 31, 1997, 29,242,396 shares of common stock of the Registrant
were outstanding.
<PAGE>
Explanatory note: The registrant is filing this Quarterly Report on Form 10-Q/A
to correct a typographical error in the registrant's original Report on Form
10-Q for the quarter ended September 30, 1997. The cost of sales reflected on
the Consolidated Statements of Cash Flows for the nine months ended September
30, 1997 should be $15,675 rather than $5,675.
<PAGE>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
------------ -------------
(Unaudited)
ASSETS
- ------
<S> <C> <C>
PROPERTIES:
Operating properties $252,699 $350,961
Land held for investment or future development 21,213 16,989
Projects under construction 88,568 42,532
Residential lots under development 15,183 15,905
Less: accumulated depreciation (20,339) (30,254)
-------- --------
Total properties 357,324 396,133
-------- --------
CASH AND CASH EQUIVALENTS, at cost which
approximates market 1,598 1,405
NOTES AND OTHER RECEIVABLES 56,497 41,815
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 132,262 114,247
OTHER ASSETS 8,963 8,915
-------- --------
TOTAL ASSETS $556,644 $562,515
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
NOTES PAYABLE $231,831 $230,210
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 25,302 25,998
DEPOSITS AND DEFERRED INCOME 327 362
-------- --------
TOTAL LIABILITIES 257,460 256,570
-------- --------
STOCKHOLDERS' INVESTMENT
Common stock, $1 par value, authorized
50,000,000 shares; issued 28,920,122
shares at December 31, 1996 and
29,242,396 shares at September 30, 1997 28,920 29,242
Additional paid-in capital 164,970 170,523
Cumulative undistributed net income 105,294 106,180
-------- --------
TOTAL STOCKHOLDERS' INVESTMENT 299,184 305,945
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $556,644 $562,515
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(UNAUDITED)
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1996 1997 1996 1997
---- ---- ---- ----
REVENUES:
<S> <C> <C> <C> <C>
Rental property revenues $ 8,457 $15,386 $21,827 $46,390
Development income 55 1,081 1,380 2,535
Management fees 787 863 1,959 2,552
Leasing and other fees 110 197 1,362 387
Residential lot and outparcel sales 2,218 3,737 9,688 9,149
Interest and other 1,185 969 3,974 2,652
------- ------- ------- -------
12,812 22,233 40,190 63,665
------- ------- ------- -------
INCOME FROM UNCONSOLIDATED JOINT
VENTURES 4,362 3,737 12,926 10,786
COSTS AND EXPENSES:
Rental property operating expenses 1,784 3,685 4,946 11,191
General and administrative expenses 2,315 3,403 6,622 9,750
Depreciation and amortization 1,835 3,509 4,729 10,577
Stock appreciation right expense 752 274 440 270
Residential lot and outparcel cost of
sales 2,489 3,489 9,522 8,415
Interest expense 1,583 3,426 3,959 10,701
Property taxes on undeveloped land 408 245 901 458
Other 174 353 992 1,425
------- ------- ------- -------
11,340 18,384 32,111 52,787
------- ------- ------- -------
INCOME FROM OPERATIONS BEFORE INCOME
TAXES 5,834 7,596 21,005 21,664
BENEFIT FOR INCOME TAXES FROM OPERATIONS (808) (314) (864) (919)
INCOME BEFORE GAIN ON SALE OF
INVESTMENT PROPERTIES 6,642 7,900 21,869 22,583
GAIN ON SALE OF INVESTMENT PROPERTIES,
NET OF APPLICABLE INCOME TAX PROVISION 397 2,974 1,017 5,370
------- ------- ------- -------
NET INCOME $ 7,039 $10,874 $22,886 $27,953
======= ======= ======= =======
NET INCOME PER SHARE $ .25 $ .37 $ .80 $ .96
======= ======= ======= =======
CASH DIVIDENDS DECLARED PER SHARE $ .27 $ .31 $ .81 $ .93
======= ======= ======= =======
WEIGHTED AVERAGE COMMON EQUIVALENT
SHARES 28,610 29,223 28,431 29,137
======= ======= ======= =======
</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, 1996 AND 1997
(UNAUDITED)
($ in thousands)
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before gain on sale of investment properties $ 21,869 $ 22,583
Adjustments to reconcile income before gain on
sale of investment properties to net cash provided
by operating activities:
Depreciation and amortization 4,729 10,577
Stock appreciation right expense 440 270
Cash charges to expense accrual for stock
appreciation rights (959) (778)
Effect of recognizing rental revenues on a
straight-line basis 32 (347)
Income from unconsolidated joint ventures (12,926) (10,786)
Operating distributions from unconsolidated
joint ventures 13,098 17,397
Residential lot and outparcel cost of sales 9,145 7,918
Changes in other operating assets and liabilities:
Change in other receivables (1,026) 1,656
Change in accounts payable and accrued
liabilities 4,152 153
-------- --------
Net cash provided by operating activities 38,554 48,643
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Gain on sale of investment properties 1,017 5,370
Adjustments to reconcile gain on sale of investment
properties to net cash provided by sales activities:
Cost of sales 2,174 15,675
Property acquisition and development expenditures (102,404) (53,219)
Non-operating distributions from unconsolidated joint
ventures 1,408 14,670
Investment in notes receivable (26,031) (5,587)
Investment in unconsolidated joint ventures,
including interest capitalized to equity investments (268) (3,266)
Collection of notes receivable 27,596 883
Change in other assets, net (3,701) (525)
Cash portion of exchange transaction 1,092 --
-------- --------
Net cash used in investing activities (99,117) (25,999)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of lines of credit (53,651) (109,257)
Proceeds from lines of credit 48,965 87,957
Proceeds from other notes payable 81,048 25,000
Dividends paid (22,991) (27,067)
Common stock sold, net of expenses 9,108 5,851
Repayment of other notes payable (3,336) (5,321)
-------- --------
Net cash provided by (used in) financing activities 59,143 (22,837)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,420) (193)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,552 1,598
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 132 $ 1,405
======== ========
</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, 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
September 30, 1997, and results of operations for the three and nine month
periods ended September 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 $4,642,000 and $2,111,000 capitalized in 1996 and
1997, respectively) and income taxes paid were as follows for the nine months
ended September 30, 1996 and 1997 ($ in thousands):
1996 1997
---- ----
Interest paid $3,765 $10,720
Income taxes paid $ 53 $ 46
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 nine months ended
September 30, 1997, approximately $87,658,000 was transferred from Projects
Under Construction to Operating Properties.
At September 30, 1997, cash and cash equivalents included $1,050,000
which is restricted under a municipal bond indenture.
3. COSTS CAPITALIZED AND FEES ELIMINATED IN CONSOLIDATION
- -----------------------------------------------------------
Development, construction, and leasing fees received by CREC and its
subsidiaries from Cousins and Cousins' majority owned affiliates are eliminated
in consolidation. Costs related to planning, development, leasing and
construction of properties (including related general and administrative
expenses) are capitalized. The table below shows the fees eliminated, the
internal costs capitalized related to these fees, and the additional internal
costs capitalized by CREC to its own residential developments for the nine
months ended September 30, 1996 and 1997 ($ in thousands):
1996 1997
---- ----
Fees eliminated in consolidation $2,995 $1,129
Internal costs capitalized in consolidation
to projects on which fees were eliminated 1,717 1,347
Internal costs capitalized to CREC
residential developments 376 389
4. NOTES PAYABLE AND INTEREST EXPENSE
- ---------------------------------------
At December 31, 1996 and September 30, 1997, the composition of
notes payable was as follows ($ in thousands):
<TABLE>
<CAPTION>
December 31, 1996 September 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 $ 2,500 $ -- $ 2,500
Other Debt (primarily
non-recourse fixed
rate mortgages) 206,731 105,487 312,218 227,710 131,492 359,202
-------- -------- -------- -------- -------- --------
$231,831 $107,512 $339,343 $230,210 $131,492 $361,702
======== ======== ======== ======== ======== ========
</TABLE>
Effective as of 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 September
30, 1997, the outstanding balance under the line of credit was $2.5 million.
On July 31, 1997, the Company completed the financing of the 100 and
200 North Point Center East office buildings with a $25 million non-recourse
mortgage note payable at a 7.86% interest rate and a term of ten years. On
September 30, 1997, Cousins LORET Venture, L.L.C. completed the financing of the
Two Live Oak office building (see Note 6).
For the three and nine months ended September 30, 1997, interest
expense was recorded as follows ($ in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
----------------------------------- -----------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
------- -------------- ----- ------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Expensed $3,426 $2,061 $5,487 $10,701 $6,111 $16,812
Interest Capitalized 841 281 1,122 2,111 710 2,821
------ ------ ------ ------- ------ -------
$4,267 $2,342 $6,609 $12,812 $6,821 $19,633
====== ====== ====== ======= ====== =======
</TABLE>
During the third 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 $55 million.
5. 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 $4.0 million over the
cost of the centers. Including depreciation recapture of $.5 million and net of
an income tax provision of approximately $1.5 million, the net gain on the sale
was approximately $3.0 million.
6. COUSINS LORET VENTURE, L.L.C.
- ----------------------------------
Effective July 31, 1997, Cousins LORET Venture, L.L.C. ("the Venture")
was formed between the Company and LORET Holdings, L.L.C. ("LORET"), each as 50%
members. LORET contributed Two Live Oak, a 278,000 square foot office building
located in Atlanta, Georgia which was recently renovated and is in the process
of being leased up. LORET also contributed an adjacent 4 acre site on which
construction commenced in August 1997 on a 415,000 square foot office building.
The Two Live Oak office building was contributed subject to a 7.90% $30 million
non-recourse ten year mortgage note payable, of which $25 million was funded on
September 30, 1997, with the remaining $5 million to be funded upon additional
occupancy. The Company is obligated to contribute $25 million of cash to the
Venture to match the value of LORET's agreed upon equity, which cash is to be
contributed as needed for the development of the new 415,000 square foot office
building. As of September 30, 1997, the Company had contributed $2.9 million of
its $25 million obligation.
7. LAGUNA NIGUEL PROMENADE
- ----------------------------
In August 1997, the Company purchased approximately 13 acres of land on
which construction commenced on a 155,000 square foot retail center in Laguna
Niguel, California. The total cost of the center is anticipated to be
approximately $19.5 million, and the center is expected to be completed in the
second quarter of 1998.
<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, 1996 and 1997.
Results of Operations:
- ----------------------
Rental Property Revenues and Operating Expenses. Rental property
revenues were approximately $6,929,000 and $24,563,000 higher in the three and
nine month 1997 periods, respectively. Rental revenues from the Company's office
portfolio increased approximately $4,834,000 and $16,044,000 in the three and
nine 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 $2,908,000 and $283,000, respectively, in the three month 1997
period and $8,814,000 and $1,651,000, respectively, in the nine 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 $103,000 and $701,000,
respectively, in the three month 1997 period and $1,133,000 and $1,922,000,
respectively, in the nine 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 an owned property
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 $835,000 and $2,447,000
in the three and nine month periods, respectively.
Rental revenues from the Company's retail portfolio increased
approximately $1,926,000 and $8,463,000 in the three and nine 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 ($640,000 and $2,719,000 in the three and nine month 1997 periods,
respectively), Greenbrier MarketCenter in October 1996 ($1,241,000 and
$3,581,000 in the three and nine month 1997 periods, respectively), Los Altos
MarketCenter in November 1996 ($821,000 and $2,215,000 in the three and nine
month 1997 periods, respectively), the expansion of Presidential MarketCenter in
June 1996 ($159,000 and $675,000 in the three and nine month 1997 periods,
respectively), the expansion of North Point MarketCenter in December 1996
($63,000 and $412,000 in the three and nine month 1997 periods, respectively)
and Mansell Crossing Phase II in March 1996 ($164,000 and $488,000 in the three
and nine month 1997 periods, respectively). (The Company does not own Mansell
Crossing Phase I.)
The tax-deferred exchange of Lawrenceville MarketCenter in November
1996 partially offset the foregoing increases in rental revenues by
approximately $869,000 and $2,407,000 in the three and nine month 1997 periods,
respectively. Also, the sale of Rivermont Station and Lovejoy Station on July 1,
1997 (see Note 5) negatively impacted rental revenues by $199,000 and $1,093,000
in the three and nine month 1997 periods, respectively.
Rental property operating expenses increased approximately $1,901,000
and $6,245,000 in the three and nine 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 increased approximately
$1,026,000 and $1,155,000 in the three and nine month 1997 periods,
respectively. The increase in the three month 1997 period was partially due to
the additional development income received from the Dusseldorf project
(approximately $193,000). Development income recognized by the Company's retail
division from third party retail developments also increased $614,000 and
$1,468,000 in the three and nine month 1997 periods, respectively. Development
income was also favorably impacted by $151,000 and $396,000 in the three and
nine month 1997 periods, respectively, from the fee development of Total
Systems' corporate headquarters in Columbus, Georgia. Partially offsetting the
foregoing increases in development income in the nine month 1997 period was a
decrease of $542,000 in development income received from the Dusseldorf project.
Management Fees. Management fees increased approximately $76,000 and
$593,000 in the three and nine 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 increased management fees approximately
$35,000 and $482,000 in the three and nine 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 increased approximately
$87,000 in the three month 1997 period and decreased approximately $975,000 in
the nine month 1997 period. The increase in the three month 1997 period was due
primarily to the recognition of approximately $122,000 of leasing fees from the
Company's newly formed venture, Cousins LORET Venture, L.L.C., as discussed in
Note 6.
The decrease in the nine month 1997 period was due in part to a
decrease of approximately $707,000 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 $255,000 in
the nine month 1997 period. The decrease in the nine month 1997 period was
partially offset by the aforementioned recognition of $122,000 of leasing fees
from Cousins LORET Venture, L.L.C.
Residential Lot and Outparcel Sales and Cost of Sales. Residential lot
and outparcel sales increased approximately $1,519,000 in the three month 1997
period and decreased approximately $539,000 in the nine month 1997 period. The
increase in the three month 1997 period was due primarily to an increase in
residential lot sales from 30 lots ($1,638,000) in the three month 1996 period
to 68 lots ($2,612,000) in the three month 1997 period. CREC and one of its
subsidiaries also recognized one outparcel sale ($580,000) in the three month
1996 period and two outparcel sales ($1,125,000) in the three month 1997 period.
The decrease in the nine month 1997 period was due primarily to a
decrease in residential lot sales from $6,947,000 in 1996 to $6,530,000 in 1997;
however, the number of lots sold actually increased from 153 lots in 1996 to 170
lots in 1997 due to an increase in lot sales in one of the residential
developments with lower prices per lot. CREC and one of its subsidiaries also
recognized five outparcel sales ($2,741,000) in the nine month 1996 period and
five outparcel sales ($2,619,000) in the nine month 1997 period.
Residential lot and outparcel cost of sales increased approximately
$1,000,000 in the three month 1997 period and decreased approximately $1,107,000
in the nine month 1997 period. The increase in the three month 1997 period and
decrease in the nine month 1997 period are due to the aforementioned increases
and decreases in sales.
Interest and Other Income. Interest and other income decreased
approximately $216,000 and $1,322,000 in the three and nine month 1997 periods,
respectively. The decrease was due primarily to the reclassification of the
Wildwood Training Facility Mortgage Note Receivable to Operating Properties. No
interest income from this mortgage note was recognized in 1997 which caused
decreases of approximately $397,000 and $1,197,000 in interest income in the
three and nine month 1997 periods, respectively. Also contributing to the
decrease in the nine month 1997 period was a decrease of approximately $345,000
in interest income recognized from temporary investments. In the nine month 1996
period 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 nine month 1997 periods. Partially offsetting the aforementioned decreases
was an increase in interest income of approximately $173,000 and $267,000
recognized from the Daniel Realty Note Receivable (see Note 3 of "Notes to
Consolidated Financial Statements" in the Company's annual report on Form 10-K
for the year ended December 31, 1996).
Income from Unconsolidated Joint Ventures. (All amounts reflect the
Company's share of joint venture income.) Income from unconsolidated joint
ventures decreased approximately $625,000 and $2,140,000 in the three and nine
month 1997 periods, respectively.
Income from Temco Associates decreased approximately $402,000 in the
nine 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 nine months
ended September 30, 1997.
Income from Wildwood Associates decreased approximately $814,000 and
$2,033,000 in the three and nine month 1997 periods, respectively. Results were
negatively impacted by an increase in interest expense (approximately $438,000
and $1,286,000 in the three and nine month 1997 periods, respectively). This
increase was due primarily to the financing of the 3200 Windy Hill Road Building
which contributed approximately $722,000 and $2,172,000 to the increase in
interest expense in the three and nine 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 a 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 $303,000 and $783,000 in the three
and nine month 1997 periods, respectively. Interest expense also increased due
to the financing of the 4100 and 4300 Wildwood Parkway Buildings which increased
interest expense $289,000 and $613,000 in the three and nine 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 is using the remaining loan
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 $129,000 and $389,000 in the three and nine 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 $124,000 and $303,000 in the three and nine month 1997
periods, respectively.
Income before depreciation, amortization and interest expense from the
4100 and 4300 Wildwood Parkway Buildings favorably impacted results by
approximately $141,000 and $796,000 in the three and nine 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 $41,000 and $112,000 in the
three month 1997 period, respectively, and $153,000 and $257,000 in the nine
month 1997 period, respectively. Income before depreciation, amortization and
interest expense from the 3200 Windy Hill Road Building decreased approximately
$484,000 and $1,252,000 in the three and nine 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 $496,000 and $1,373,000 in the three
and nine month 1997 periods, respectively. The disposition of the Summit Green
Building, as discussed above, decreased income before depreciation, amortization
and interest expense by approximately $258,000 and $794,000 in the three and
nine month 1997 periods, respectively.
Income from CSC Associates, L.P. increased approximately $205,000
and $295,000 in the three and nine month 1997 periods, respectively due to
lease-up of NationsBank Plaza.
General and Administrative Expenses. General and administrative
expenses increased approximately $1,088,000 and $3,128,000 in the three and nine
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 $1,674,000 and $5,848,000 in the three and nine 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, 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 Mortgage Note Receivable to
Operating Properties. The increases in depreciation and amortization in the
three and nine month 1997 periods were partially offset by the sale of Rivermont
Station and Lovejoy Station on July 1, 1997 (decreases of $51,000 and $135,000
in the three and nine month 1997 periods, respectively).
Stock Appreciation Right Expense. Stock appreciation right expense
decreased approximately $478,000 and $170,000 in the three and nine month 1997
periods, respectively. This non-cash item is primarily related to the number of
stock appreciation rights outstanding and the Company's stock price. A reduction
in the number of stock appreciation rights outstanding due to exercises which
occurred since the first quarter of 1996 contributed to the decrease in the
stock appreciation right expense. The Company's stock price was $20.25, $19.625,
and $22.00 at December 31, 1995, June 30, 1996 and September 30, 1996,
respectively; and $28.125, $28.00 and $29.9375 at December 31, 1996, June 30,
1997 and September 30, 1997, respectively.
Interest Expense. Interest expense increased approximately $1,843,000
and $6,742,000 in the three and nine month 1997 periods, respectively. Interest
expense before capitalization increased to $4,266,000 and $12,811,000 in the
three and nine month 1997 periods, respectively, from $3,081,000 and $8,600,000
in the three and nine 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 $840,000 and $2,111,000 in the three and nine
month 1997 periods, respectively, from $1,498,000 and $4,642,000 in the three
and nine month 1996 periods, respectively.
Property Taxes on Undeveloped Land. Property taxes on undeveloped land
decreased approximately $163,000 and $443,000 in the three and nine 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 increased approximately $179,000 and
$433,000 in the three and nine month 1997 periods, respectively, due to
increases in predevelopment expense in the three and nine month 1997 periods,
respectively.
Benefit for Income Taxes from Operations. Benefit for income taxes from
operations decreased approximately $494,000 in the three month 1997 period and
increased approximately $55,000 in the nine month 1997 period. The decrease in
the benefit for income taxes from operations in the three month 1997 period was
due to a decrease of $1,146,000 in CREC and its subsidiaries' loss before income
taxes and gain on sale of investment properties, which decrease was due to the
aforementioned increases in development income recognized by CREC and its
subsidiaries.
The increase in the nine month 1997 period was due to an increase of
approximately $144,000 in CREC and its subsidiaries' loss before income taxes
and gain on sale of investment properties. In the three month 1997 period, CREC
and its subsidiaries' loss before income taxes and gain on sale of investment
properties decreased due to decreases in leasing fees related to third party
retail developments received by CREC and its subsidiaries 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 increased approximately $2,577,000 and $4,353,000 in the three and
nine month 1997 periods, respectively. The 1997 gain includes the sale of
certain acres of land at the Company's North Point development in January 1997
for net proceeds of $2,683,000 and the sale of Rivermont Station and Lovejoy
Station in July 1997 (see Note 5) for net proceeds (before an income tax
provision) of $20,100,000. 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 and the sale of the Company's
50% interest in the Norfolk parking agreement in July 1996. The net proceeds
from the two sales in 1996 were $1,205,000 and $1,986,000, respectively.
Liquidity and Capital Resources:
Financial Condition. The Company's debt (including its pro rata share
of unconsolidated joint venture debt) was 29% of total market capitalization at
September 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 and the $30 million financing of the Two Live Oak office buildings
(see Note 6). As discussed in Note 5, a $20.1 million sale was completed on July
1, 1997. As a result of these transactions, the outstanding balance as of
September 30, 1997 under the Company's $100 million line of credit was $2.5
million.
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 statement
the Company filed with the Securities and Exchange Commission in September 1996.
Cash Flows. Net cash provided by operating activities increased $10.1
million in 1997. Income from unconsolidated joint ventures decreased $2.1
million primarily due to decreases in income from Wildwood Associates
(approximately $2.0 million) and Temco Associates (approximately $.4 million).
Operating distributions from unconsolidated joint ventures increased $4.3
million due primarily to increases of $2.5 million in distributions from
Wildwood Associates and $2.5 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 $5.8 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 $1.2 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 $1.3 million.
Net cash used in investing activities decreased $73.1 million in 1997
due to a decrease of $49.2 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 investment in
notes receivable of approximately $20.4 million in 1997. 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. The decrease in
collection of notes receivable of approximately $26.7 million partially offset
the above decreases in net cash used in investing activities. Non-operating
distributions from unconsolidated joint ventures increased $13.3 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 $2.2 million of distributions 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 $17.9 million due to a land sale in January 1997
and the sale of Rivermont Station and Lovejoy Station in July 1997 (see Note 5).
Net cash provided by financing activities decreased $82.0 million in
1997, which was primarily attributable to a decrease of $56.0 million in
proceeds from other notes payable. The Company completed the $80 million CSC
Associates, L.P. financing in February 1996. In July 1997, the Company completed
the $25 million financing of the 100 and 200 North Point Center East Buildings
(see Note 4). The repayment of lines of credit increased $55.6 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 in net cash provided by
financing activities as dividends paid increased in $4.1 million in 1997.
Partially offsetting the above decreases was an increase in proceeds from lines
of credit of approximately $39 million.
<PAGE>
Supplemental Financial Information:
- -----------------------------------
Depreciation and amortization expense included the following components
for the three and nine months ended September 30, 1997 ($ in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1997 September 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 $ 109 $ 2 $ 111 $ 303 $ 5 $ 308
Deferred financing costs -- 3 3 -- 8 8
Goodwill and related business
acquisition costs 129 7 136 389 23 412
Real estate related:
Building (including tenant
first generation) 3,089 2,152 5,241 9,325 6,647 15,972
Tenant second generation 182 318 500 560 936 1,496
------ ------ ------ ------- ------ -------
$3,509 $2,482 $5,991 $10,577 $7,619 $18,196
====== ====== ====== ======= ====== =======
</TABLE>
Exclusive of new developments and purchases of furniture, fixtures and
equipment, the Company had the following capital expenditures during the three
and nine months ended September 30, 1997, including its share of unconsolidated
joint ventures ($ in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
----------------------- -----------------------
Office Retail Total Office Retail Total
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Second generation related costs $118 $ -- $118 $493 $ -- $493
Building improvements -- -- -- 15 -- 15
---- ---- ---- ---- ---- ----
$118 $ -- $118 $508 $ -- $508
==== ==== ==== ==== ==== ====
</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, 1997.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
COUSINS PROPERTIES INCORPORATED
Registrant
/s/ Kelly H. Barrett________________________
Kelly H. Barrett
Senior Vice President - Finance
(Authorized Officer)
(Principal Accounting Officer)
November 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,405
<SECURITIES> 0
<RECEIVABLES> 41,815
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 426,387
<DEPRECIATION> 30,254
<TOTAL-ASSETS> 562,515
<CURRENT-LIABILITIES> 256,570
<BONDS> 0
0
0
<COMMON> 29,242
<OTHER-SE> 276,703
<TOTAL-LIABILITY-AND-EQUITY> 562,515
<SALES> 0
<TOTAL-REVENUES> 63,665
<CGS> 0
<TOTAL-COSTS> 52,787
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,701
<INCOME-PRETAX> 21,664
<INCOME-TAX> (919)
<INCOME-CONTINUING> 22,583
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,953
<EPS-PRIMARY> .96
<EPS-DILUTED> .96
</TABLE>
