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 June 30, 2000 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, 2000, 32,566,298 shares of common stock of the Registrant were
outstanding.
<PAGE>
<TABLE>
<CAPTION>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share amounts)
June 30, December 31,
2000 1999
---------- ------------
(Unaudited)
ASSETS
------
PROPERTIES:
<S> <C> <C>
Operating properties, net of accumulated
depreciation of $50,926 as of June 30, 2000
and $35,929 as of December 31, 1999 $543,317 $365,976
Land held for investment or future development 15,032 14,126
Projects under construction 218,421 348,065
Residential lots under development 4,207 4,687
-------- --------
Total properties 780,977 732,854
CASH AND CASH EQUIVALENTS, at cost which
approximates market 2,317 1,473
NOTES AND OTHER RECEIVABLES 40,097 37,303
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 152,000 151,737
OTHER ASSETS 11,345 9,558
-------- --------
TOTAL ASSETS $986,736 $932,925
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
----------------------------------------
NOTES PAYABLE $359,680 $312,257
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 31,244 34,820
DEPOSITS AND DEFERRED INCOME 1,662 861
-------- --------
TOTAL LIABILITIES 392,586 347,938
-------- --------
DEFERRED GAIN 113,503 115,576
-------- --------
MINORITY INTERESTS 31,158 31,689
-------- --------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' INVESTMENT:
Common stock, $1 par value, authorized
50,000,000 shares; issued 32,566,298
shares at June 30, 2000 and 32,328,135
shares at December 31, 1999 32,566 32,328
Additional paid-in capital 263,469 256,988
Treasury stock at cost, 153,600 shares
in 2000 and 1999 (4,990) (4,990)
Cumulative undistributed net income 158,444 153,396
-------- --------
TOTAL STOCKHOLDERS' INVESTMENT 449,489 437,722
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $986,736 $932,925
======== ========
The accompanying notes are an integral part of these consolidated balance
sheets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(In thousands, except per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
2000 1999 2000 1999
------- ------- ------- -------
REVENUES:
<S> <C> <C> <C> <C>
Rental property revenues $27,531 $12,967 $50,249 $24,632
Development income 1,009 1,374 2,173 3,134
Management fees 1,237 1,255 2,451 2,361
Leasing and other fees 794 1,688 1,115 2,299
Residential lot and outparcel sales 3,932 4,974 5,910 7,651
Interest and other 1,339 829 2,597 1,694
------- ------- ------- -------
35,842 23,087 64,495 41,771
------- ------- ------- -------
INCOME FROM UNCONSOLIDATED JOINT
VENTURES 4,407 5,392 8,284 9,499
------- ------- ------- -------
COSTS AND EXPENSES:
Rental property operating expenses 7,962 3,827 14,608 7,028
General and administrative expenses 4,916 3,447 9,460 7,033
Depreciation and amortization 8,009 3,019 14,441 5,826
Stock appreciation right expense 129 460 366 136
Residential lot and outparcel cost
of sales 3,613 3,859 5,167 6,148
Interest expense 2,998 65 3,495 430
Property taxes on undeveloped land 191 224 (77) 442
Other 984 820 1,230 1,110
------- ------- ------- -------
28,802 15,721 48,690 28,153
------- ------- ------- -------
INCOME FROM OPERATIONS BEFORE
INCOME TAXES 11,447 12,758 24,089 23,117
(BENEFIT) PROVISION FOR INCOME TAXES
FROM OPERATIONS (117) 390 (124) 1,255
INCOME BEFORE GAIN ON SALE OF
INVESTMENT PROPERTIES 11,564 12,368 24,213 21,862
GAIN ON SALE OF INVESTMENT PROPERTIES,
NET OF APPLICABLE INCOME TAX
PROVISION 1,575 51,198 9,867 56,706
------- ------- ------- -------
NET INCOME $13,139 $63,566 $34,080 $78,568
======= ======= ======= =======
WEIGHTED AVERAGE SHARES 32,359 32,079 32,299 32,015
======= ======= ======= =======
BASIC NET INCOME PER SHARE $ .41 $ 1.98 $ 1.06 $ 2.45
======= ======= ======= =======
ADJUSTED WEIGHTED AVERAGE SHARES 33,215 32,749 33,076 32,578
======= ======= ======= =======
DILUTED NET INCOME PER SHARE $ .40 $ 1.94 $ 1.03 $ 2.41
======= ======= ======= =======
CASH DIVIDENDS DECLARED PER SHARE $ .45 $ .41 $ .90 $ .82
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
($ in thousands)
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Income before gain on sale of investment properties $ 24,213 $ 21,862
Adjustments to reconcile income before gain on sale
of investment properties to net cash provided by
operating activities:
Depreciation and amortization, net of minority
interest's share 13,846 5,826
Stock appreciation right expense 366 136
Cash charges to expense accrual for stock
appreciation rights (299) (122)
Effect of recognizing rental revenues on a
straight-line basis (1,432) (202)
Income from unconsolidated joint ventures (8,284) (9,499)
Operating distributions from unconsolidated
joint ventures 18,369 24,192
Residential lot and outparcel cost of sales 4,803 6,019
Changes in other operating assets and liabilities:
Change in other receivables (3,152) (1,447)
Change in accounts payable and accrued liabilities 413 2,189
-------- --------
Net cash provided by operating activities 48,843 48,954
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Gain on sale of investment properties, net of
applicable income tax provision 9,867 56,706
Adjustments to reconcile gain on sale of investment
properties to net cash provided by sales activities:
Cost of sales 17,510 28,178
Deferred income recognized (2,056) (2,066)
Property acquisition and development expenditures (87,564) (195,572)
Investment in unconsolidated joint ventures, including
interest capitalized to equity investments (10,348) (23,189)
Non-operating distributions from unconsolidated
joint ventures - 2,000
Collection of notes receivable 1,778 5,521
Net cash received in formation of venture - 100,000
Investment in notes receivable - (4)
Change in other assets, net (2,299) (1,399)
-------- --------
Net cash used in investing activities (73,112) (29,825)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 126,488 170,672
Repayment of line of credit (164,893) (163,969)
Proceeds from other notes payable 89,944 -
Dividends paid (29,029) (26,219)
Common stock sold, net of expenses 6,719 6,998
Repayment of other notes payable (4,116) (2,582)
-------- --------
Net cash provided by (used in) financing activities 25,113 (15,100)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 844 4,029
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,473 1,349
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,317 $ 5,378
======== ========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
1. BASIS OF PRESENTATION
--------------------------
The Consolidated Financial Statements include the accounts of Cousins
Properties Incorporated ("Cousins"), its majority owned partnerships and wholly
owned subsidiaries, Cousins Real Estate Corporation ("CREC") and its
subsidiaries and CREC II Inc. ("CREC II") 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 and CREC II
and its subsidiaries are taxed separately from Cousins as regular corporations.
Accordingly, the Consolidated Statements of Income include a (benefit) provision
for CREC and CREC II'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, 2000 and results of operations for the three and six month periods
ended June 30, 2000 and 1999. Results of operations for the interim 2000 periods
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, 1999. 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 1999 amounts have been reclassified to conform with the 2000
presentation.
2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS
---------------------------------------------------
Interest (net of $9,657,000 and $7,209,000 capitalized in 2000 and
1999, respectively) and income taxes paid (net of refunds of $27,000 in 2000)
were as follows for the six months ended June 30, 2000 and 1999 ($ in
thousands):
2000 1999
------ ------
Interest paid $2,075 $1,137
Income taxes paid $2,841 $1,336
During the six months ended June 30, 2000, approximately $197,827,000
was transferred from Projects Under Construction to Operating Properties and
approximately $1,066,000 was transferred from Land Held for Investment or Future
Development to Residential Lots Under Development.
At June 30, 2000, cash and cash equivalents included approximately
$630,000 from a property sale held in escrow pending reinvestment in a
tax-deferred exchange and approximately $389,000 which is restricted under a
municipal bond indenture.
<PAGE>
3. NOTES PAYABLE AND INTEREST EXPENSE
---------------------------------------
<TABLE>
<CAPTION>
At June 30, 2000 and December 31, 1999, notes payable included the
following ($ in thousands):
June 30, 2000 December 31, 1999
------------------------------------ --------------------------------------
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 and Construction
Loans $ 92,247 $ 53,615 $145,862 $130,651 $ 28,504 $159,155
Other Debt
(primarily non-recourse
fixed rate mortgages) 267,433 188,174 455,607 181,606 190,235 371,841
-------- -------- -------- -------- -------- --------
$359,680 $241,789 $601,469 $312,257 $218,739 $530,996
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
For the three and six months ended June 30, 2000, interest expense was
recorded as follows ($ in thousands):
Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000
------------------------------------ -----------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
------- -------------- ------- ------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest Expensed $2,998 $3,584 $ 6,582 $ 3,495 $7,187 $10,682
Interest Capitalized 3,774 837 4,611 9,657 1,402 11,059
------ ------ ------- ------- ------ -------
$6,772 $4,421 $11,193 $13,152 $8,589 $21,741
====== ====== ======= ======= ====== =======
</TABLE>
In April 2000, the Company completed the $90 million financing of 101
Second Street. This non-recourse mortgage note payable has an interest rate of
8.33% and a maturity of April 27, 2010. In June 2000, the Company received a
commitment for the financing of Meridian Mark Plaza which is expected to be
completed in August 2000. This $25.5 million non-recourse mortgage note payable
has an interest rate of 8.27% and term of 10 years. Subsequent to June 30, 2000,
the Company completed the $39 million financing of The Avenue East Cobb. This
non-recourse mortgage note payable has an interest rate of 8.39% and a maturity
of August 1, 2010.
During the first half of 2000, 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 approximately $424 million.
4. EARNINGS PER SHARE DATA
---------------------------
<TABLE>
<CAPTION>
Weighted average shares and adjusted weighted average shares are as
follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average shares 32,359 32,079 32,299 32,015
Dilutive potential common shares 856 670 777 563
------ ------ ------ ------
Adjusted weighted average shares 33,215 32,749 33,076 32,578
====== ====== ====== ======
Anti-dilutive options not included 3 - 3 -
====== ====== ====== ======
</TABLE>
5. REPORTABLE SEGMENTS
-----------------------
The Company has four reportable segments: Office Division, Retail
Division, Medical Office Division and Land Division. The Office Division, Retail
Division and Medical Office Division develop, lease and manage office buildings,
retail centers and medical office buildings, respectively. The Land Division
owns various tracts of strategically located land which are being held for
future development. The Land Division also develops single-family residential
communities which are parceled into lots and sold to various home builders.
The management of the Company evaluates performance of its reportable
segments based on Funds From Operations ("FFO"). The Company calculates its FFO
using the National Association of Real Estate Investment Trusts ("NAREIT")
definition of FFO adjusted to (i) eliminate the recognition of rental revenues
on a straight-line basis, (ii) reflect stock appreciation right expense on a
cash basis and (iii) recognize certain fee income as cash is received rather
than when recognized in the financial statements. The Company believes its FFO
presentation more properly reflects its operating results. The Company's
reportable segments are broken down based on what type of product the division
provides. The divisions are managed separately because each product they provide
has separate and distinct development issues, leasing and/or sales strategies
and management issues. The notations (100%) and (JV) used in the following
tables indicate wholly owned and unconsolidated joint ventures, respectively,
and all amounts are in thousands.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Office Retail Medical Land Unallocated
June 30, 2000 Division Division Office Division Division and Other Total
------------------ --------- -------- --------------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Rental property revenues (100%) $ 17,693 $ 6,693 $2,766 $ - $ 16 $ 27,168
Rental property revenues (JV) 16,057 582 40 - - 16,679
Development income, management
fees and leasing and other fees (100%) 1,855 125 989 71 - 3,040
Development income, management
fees and leasing and other fees (JV) 1,240 - - - - 1,240
Other income (100%) - 425 - 3,507 1,339 5,271
Other income (JV) - - - 23 5 28
------------------------------------------------------------------------
Total revenues 36,845 7,825 3,795 3,601 1,360 53,426
------------------------------------------------------------------------
Rental property operating expenses (100%) 5,869 1,758 755 - 6 8,388
Rental property operating expenses (JV) 4,547 154 14 - - 4,715
Other expenses (100%) 2,168 2,127 1,156 3,642 3,716 12,809
Other expenses (JV) 770 - - 20 4,035 4,825
------------------------------------------------------------------------
Total expenses 13,354 4,039 1,925 3,662 7,757 30,737
------------------------------------------------------------------------
Gain on sale of undepreciated investment
properties - - - 542 - 542
------------------------------------------------------------------------
Consolidated funds from operations 23,491 3,786 1,870 481 (6,397) 23,231
------------------------------------------------------------------------
Depreciation and amortization (100%) (4,987) (1,714) (755) - - (7,456)
Depreciation and amortization (JV) (3,659) (201) (12) - - (3,872)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 363 - - - - 363
Effect of the recognition of rental
revenues on a straight-line basis (JV) (128) - - - - (128)
Adjustment to reflect stock appreciation
right expense on an accrual basis - - - - (32) (32)
Gain on sale of investment properties, net
of applicable income tax provision - - - - 1,033 1,033
------------------------------------------------------------------------
Net income 15,080 1,871 1,103 481 (5,396) 13,139
------------------------------------------------------------------------
Benefit for income taxes from operations - - - - (117) (117)
------------------------------------------------------------------------
Income from operations before taxes $ 15,080 $ 1,871 $1,103 $ 481 $(5,513) $ 13,022
========================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Office Retail Medical Land Unallocated
June 30, 2000 Division Division Office Division Division and Other Total
----------------- --------- -------- --------------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Rental property revenues (100%) $ 30,886 $ 12,568 $5,324 $ - $ 40 $ 48,818
Rental property revenues (JV) 31,821 1,141 79 - - 33,041
Development income, management
fees and leasing and other fees (100%) 3,856 224 1,553 106 - 5,739
Development income, management
fees and leasing and other fees (JV) 1,651 - - - - 1,651
Other income (100%) - 1,075 - 4,835 2,597 8,507
Other income (JV) - - - 66 32 98
------------------------------------------------------------------------
Total revenues 68,214 15,008 6,956 5,007 2,669 97,854
------------------------------------------------------------------------
Rental property operating expenses (100%) 10,731 3,096 1,441 - (1) 15,267
Rental property operating expenses (JV) 8,822 287 27 - - 9,136
Other expenses (100%) 4,303 4,318 2,272 4,727 4,277 19,897
Other expenses (JV) 1,064 - - 31 8,082 9,177
------------------------------------------------------------------------
Total expenses 24,920 7,701 3,740 4,758 12,358 53,477
------------------------------------------------------------------------
Gain on sale of undepreciated investment
properties - - - 564 - 564
------------------------------------------------------------------------
Consolidated funds from operations 43,294 7,307 3,216 813 (9,689) 44,941
------------------------------------------------------------------------
Depreciation and amortization (100%) (8,847) (3,076) (1,411) - - (13,334)
Depreciation and amortization (JV) (7,399) (392) (24) - - (7,815)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 1,431 - - - - 1,431
Effect of the recognition of rental
revenues on a straight-line basis (JV) (378) - - - - (378)
Adjustment to reflect stock appreciation
right expense on an accrual basis - - - - (68) (68)
Gain on sale of investment properties, net
of applicable income tax provision - 7,247 - - 2,056 9,303
------------------------------------------------------------------------
Net income 28,101 11,086 1,781 813 (7,701) 34,080
------------------------------------------------------------------------
Benefit for income taxes from operations - - - - (124) (124)
------------------------------------------------------------------------
Income from operations before taxes $ 28,101 $ 11,086 $ 1,781 $ 813 $(7,825) $ 33,956
========================================================================
Total assets $591,981 $271,750 $65,262 $9,371 $48,372 $986,736
========================================================================
Investment in unconsolidated joint
ventures $128,369 $ 16,885 $ 1,664 $5,082 $ - $152,000
========================================================================
</TABLE>
<TABLE>
<CAPTION>
Reconciliation to Consolidated Revenues
---------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2000 1999 2000 1999
------- ------- ------ ------
<S> <C> <C> <C> <C>
Rental property revenues (100%) $27,168 $12,869 $48,818 $24,430
Effect of the recognition of rental
revenues on a straight-line basis (100%) 363 98 1,431 202
Development income, management fees
and leasing and other fees 3,040 4,317 5,739 7,794
Residential lot and outparcel sales 3,932 4,974 5,910 7,651
Interest and other 1,339 829 2,597 1,694
--------------------- ---------------------
Total consolidated revenues $35,842 $23,087 $64,495 $41,771
===================== =====================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Office Retail Medical Land Unallocated
June 30, 1999 Division Division Office Division Division and Other Total
----------------- --------- -------- --------------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Rental property revenues (100%) $ 6,544 $ 4,687 $1,545 $ - $ 93 $ 12,869
Rental property revenues (JV) 15,719 4,049 135 - - 19,903
Development income, management
fees and leasing and other fees (100%) 3,409 333 515 60 - 4,317
Development income, management fees
and leasing and other fees (JV) 451 - - - - 451
Other income (100%) - 815 - 4,159 829 5,803
Other income (JV) - - - 243 47 290
------------------------------------------------------------------------
Total revenues 26,123 9,884 2,195 4,462 969 43,633
------------------------------------------------------------------------
Rental property operating expenses (100%) 2,183 1,135 509 - - 3,827
Rental property operating expenses (JV) 4,210 987 47 - - 5,244
Other expenses (100%) - 358 - 3,725 4,939 9,022
Other expenses (JV) 167 242 - 61 3,915 4,385
------------------------------------------------------------------------
Total expenses 6,560 2,722 556 3,786 8,854 22,478
------------------------------------------------------------------------
Gain on sale of undepreciated investment
properties - - - 104 - 104
------------------------------------------------------------------------
Consolidated funds from operations 19,563 7,162 1,639 780 (7,885) 21,259
------------------------------------------------------------------------
Depreciation and amortization (100%) (1,582) (877) (331) - (74) (2,864)
Depreciation and amortization (JV) (4,451) (985) (41) - - (5,477)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 98 - - - - 98
Effect of the recognition of rental
revenues on a straight-line basis (JV) (67) (76) - - - (143)
Adjustment to reflect stock appreciation
right expense on an accrual basis - - - - (401) (401)
Gain on sale of investment properties, net
of applicable income tax provision - 50,063 - - 1,031 51,094
------------------------------------------------------------------------
Net income 13,561 55,287 1,267 780 (7,329) 63,566
------------------------------------------------------------------------
Provision for income taxes from operations - - - - 390 390
------------------------------------------------------------------------
Income from operations before income taxes $ 13,561 $ 55,287 $1,267 $ 780 $(6,939) $ 63,956
========================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Office Retail Medical Land Unallocated
June 30, 1999 Division Division Office Division Division and Other Total
----------------- --------- -------- --------------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Rental property revenues (100%) $ 12,557 $ 9,431 $2,263 $ - $ 179 $ 24,430
Rental property revenues (JV) 31,063 8,503 334 - - 39,900
Development income, management
fees and leasing and other fees (100%) 6,019 869 786 120 - 7,794
Development income, management fees
And leasing and other fees (JV) 451 - - - - 451
Other income (100%) - 815 - 6,836 1,694 9,345
Other income (JV) - - - 249 75 324
------------------------------------------------------------------------
Total revenues 50,090 19,618 3,383 7,205 1,948 82,244
------------------------------------------------------------------------
Rental property operating expenses (100%) 4,144 2,134 719 - 31 7,028
Rental property operating expenses (JV) 8,777 2,061 111 - - 10,949
Other expenses (100%) - 358 - 6,232 10,254 16,844
Other expenses (JV) 167 242 - 72 7,478 7,959
------------------------------------------------------------------------
Total expenses 13,088 4,795 830 6,304 17,763 42,780
------------------------------------------------------------------------
Gain on sale of undepreciated investment
properties - - - 222 - 222
------------------------------------------------------------------------
Consolidated funds from operations 37,002 14,823 2,553 1,123 (15,815) 39,686
------------------------------------------------------------------------
Depreciation and amortization (100%) (3,045) (1,678) (649) - (156) (5,528)
Depreciation and amortization (JV) (9,467) (2,455) (103) - - (12,025)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 202 - - - - 202
Effect of the recognition of rental
revenues on a straight-line basis (JV) (176) (61) - - - (237)
Adjustment to reflect stock appreciation
right expense on an accrual basis - - - - (14) (14)
Gain on sale of investment properties, net
of applicable income tax provision - 54,418 - - 2,066 56,484
------------------------------------------------------------------------
Net income 24,516 65,047 1,801 1,123 (13,919) 78,568
------------------------------------------------------------------------
Provision for income taxes from operations - - - - 1,255 1,255
------------------------------------------------------------------------
Income from operations before income taxes $ 24,516 $ 65,047 $ 1,801 $ 1,123 $(12,664) $ 79,823
========================================================================
Total assets $484,350 $220,351 $56,212 $10,456 $ 53,250 $824,619
========================================================================
Investment in unconsolidated joint
ventures $124,217 $ 29,786 $ 1,699 $ 3,408 $ 5,517 $164,627
========================================================================
</TABLE>
6. WARRANTS TO PURCHASE COMMON STOCK OF CYPRESS COMMUNICATIONS, INC.
---------------------------------------------------------------------
In December 1999, the Company executed an Amended and Restated Master
Communications License Transaction Agreement (the "Master Agreement") with
Cypress Communications, Inc. ("Cypress") that provides for Cypress and the owner
of each building subject to the Master Agreement to enter into a Communications
License Agreement (an "Agreement") pursuant to which Cypress will have the
non-exclusive right to access the risers and certain areas of certain of the
Company's and its joint ventures' office and medical office buildings. Each
Agreement allows Cypress to install equipment and wiring, at Cypress' sole cost
and expense, and to offer a variety of telecommunication services to tenants of
each of the applicable buildings. Each Agreement has a term of 5 years with an
automatic renewal for another 5 years unless Cypress elects not to renew or
Cypress fails to equip the applicable building with a server within 18 months of
the execution of the Agreement.
Pursuant to each Agreement, the Company will receive a percentage of
the revenue earned by Cypress from tenants and third parties who use the
telecommunication services. In addition, the Company has entered into a Stock
Warrant Agreement with Cypress which provides that Cypress issue to the Company
54,000 warrants per one million gross leasable square feet in the buildings
subject to the Master Agreement or approximately 345,329 warrants (of which
150,996 warrants relate to wholly owned buildings and 194,333 warrants relate to
joint venture owned buildings), each warrant entitling the owner to purchase one
share of Cypress' common stock at an exercise price of $4.22 per share. On
February 10, 2000, Cypress completed its initial public offering of 10 million
shares of common stock. The warrants have not been exercised, and the underlying
common stock has not been registered under the Securities Act of 1933, as
amended and is not required to be registered until 18 months after completion of
the initial public offering.
The value of the warrants are included in both Other Assets and
Deferred Income in the accompanying Consolidated Balance Sheet and were recorded
on the date Cypress completed its initial public offering. The value of the
warrants of $344,000 was determined based on the difference between management's
estimate of the fair market value of the warrants less the exercise price times
the number of warrants granted related to properties wholly owned by the
Company.
The Deferred Income is being amortized into Rental Property Revenues
over the life of each Agreement. Pursuant to Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and Equity
Securities," the asset will be adjusted to fair market value based on the
current trading value of the Cypress common stock beginning within one year of
the date at which the warrants are required to be registered, with such
adjustment resulting in unrealized gains or losses which will be recognized as a
separate component of Stockholders' Investment in the Consolidated Balance
Sheet.
<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,
2000 and 1999
Results of Operations:
----------------------
Rental Property Revenues and Operating Expenses. Rental property
revenues increased approximately $14,564,000 and $25,617,000 in the three and
six month 2000 periods, respectively. Rental property revenues from the
Company's office portfolio increased approximately $11,414,000 and $19,558,000
in the three and six month 2000 periods, respectively. The June 1999 acquisition
of Inforum increased rental property revenues approximately $4,222,000 and
$8,705,000 in the three and six month 2000 periods, respectively. Rental
property revenues increased approximately $3,958,000 for both the three and six
month 2000 periods from 101 Second Street which became partially operational for
financial reporting purposes in April 2000. Three office buildings, AT&T
Wireless Services Headquarters, 333 John Carlyle and 555 North Point Center
East, which became partially operational for financial reporting purposes in
September 1999, May 1999 and February 2000, respectively, contributed to the
increase by approximately $1,710,000, $577,000 and $625,000, respectively, in
the three month 2000 period and approximately $3,669,000, $1,514,000 and
$902,000, respectively, in the six month 2000 period to the increase.
Additionally, rental property revenues from 615 Peachtree Street increased
approximately $168,000 and $301,000 in the three and six month 2000 periods,
respectively, as the six month average economic occupancy increased to 81% in
2000 from 68% in 1999.
Rental property revenues from the Company's retail portfolio increased
approximately $2,006,000 and $3,137,000 in the three and six month 2000 periods,
respectively. Rental property revenues increased approximately $1,475,000 and
$2,835,000 in the three and six month 2000 periods, respectively, from The
Avenue East Cobb, which became partially operational for financial reporting
purposes in September 1999. Two retail centers, The Avenue of the Peninsula and
Mira Mesa MarketCenter, became partially operational in May 2000, which
contributed approximately $429,000 and $692,000, respectively, to the increase
in both the three and six month 2000 periods. The increase was partially offset
by a decrease of approximately $644,000 in both the three and six month 2000
periods from the sale of Laguna Niguel Promenade in March 2000 and by
approximately $157,000 in the six month 2000 period from the sale of Abbotts
Bridge Station in February 1999.
Rental property revenues from the Company's medical office portfolio
increased approximately $1,221,000 and $3,061,000 in the three and six month
2000 periods, respectively. Meridian Mark Plaza became partially operational for
financial reporting purposes in April 1999 which contributed approximately
$478,000 and $1,491,000 to the increase in the three and six month 2000 periods,
respectively. Northside/Alpharetta II became partially operational for financial
reporting purposes in September 1999 which contributed approximately $697,000
and $1,309,000 to the increase in the three and six month 2000 periods,
respectively. AtheroGenics became partially operational in March 1999 which
contributed approximately $270,000 to the increase for the six month 2000
period.
Rental property operating expenses increased approximately $4,135,000
and $7,580,000 in the three and six month 2000 periods, respectively, due to the
aforementioned office buildings, retail centers and medical office buildings
becoming partially operational, as well as the acquisition of Inforum in June
1999.
Development Income. Development income decreased approximately $365,000
and $961,000 in the three and six month 2000 periods, respectively. Development
income decreased approximately $225,000 and $675,000 in the three and six month
2000 periods, respectively, due to development income recognized in 1999 from
the build-to-suit for Walgreens on an outparcel at Colonial Plaza MarketCenter.
Development income also decreased approximately $194,000 and $515,000 in the
three and six month 2000 periods, respectively, from Cousins LORET Venture,
L.L.C. ("Cousins LORET") related to the development of The Pinnacle and
approximately $173,000 and $458,000 in the three and six month 2000 periods,
respectively, from the third party development of Total System Services, Inc.'s
corporate headquarters. This decrease was partially offset by an increase of
approximately $120,000 and $462,000 in the three and six month 2000 periods,
respectively, in development income from the Crawford Long Hospital campus
redevelopment and the joint venture medical office building. The decrease in
development income was also partially offset by approximately $122,000 and
$244,000 in the three and six month 2000 periods, respectively, from the third
party development of Cox Enterprises' corporate headquarters and by
approximately $155,000 in the six month 2000 period from the development of 1155
Perimeter Center West, owned by 285 Venture, LLC.
Leasing and Other Fees. Leasing and other fees decreased approximately
$894,000 and $1,184,000 in the three and six month 2000 periods, respectively.
Leasing fees decreased approximately $987,000 in both the three and six month
2000 periods due to a lease signed by CREC at The Inforum office building
executed prior to the Company's acquisition of the building in 1999. Leasing
fees also decreased $243,000 in both the three and six month 2000 periods from
285 Venture, LLC as a higher amount of leasing fees from the lease-up of 1155
Perimeter Center West were recognized in 1999. Leasing fees from Cousins LORET
decreased approximately $126,000 and $541,000 in the three and six month 2000
periods, respectively, primarily related to the lease-up of The Pinnacle. The
decrease in leasing and other fees was partially offset by an increase of
$330,000 in both the three and six month 2000 periods, due to a fee recognized
by the medical office division for representing the owners of a third-party
managed property in the sale of that property. The decrease was also partially
offset by an increase of leasing fees of approximately $127,000 in the six month
2000 period from Wildwood Associates, mainly due to lease-up of the 2300 Windy
Ridge Parkway Building in 2000.
Residential Lot and Outparcel Sales and Cost of Sales. Residential lot
and outparcel sales decreased approximately $1,042,000 and $1,741,000 in the
three and six month 2000 periods, respectively. The decrease in the three month
2000 period was partially due to a decrease in residential lot sales of
approximately $652,000, although the number of residential lot sales increased
from 77 lots in the three month 1999 period to 85 lots in the three month 2000
period. The decrease in the sales amount was due to a difference in sales price
points of the various residential developments. Also contributing to the
decrease was one outparcel sale recognized by CREC for $425,000 in the three
month 2000 period compared to one outparcel sale for $815,000 in the three month
1999 period. The decrease in the six month 2000 period was partially due to a
decrease in residential lot sales from 138 lots in 1999 to 114 lots in 2000,
which decreased residential lot sales by approximately $2,001,000. Partially
offsetting the decrease were two outparcel sales recognized by CREC or a
subsidiary of CREC totaling approximately $1,075,000 in the six month 2000
period, as compared to one outparcel sale for $815,000 in the six month 1999
period.
Residential lot and outparcel cost of sales decreased approximately
$246,000 and $981,000 in the three and six month 2000 periods, respectively.
Residential lot cost of sales decreased approximately $213,000 and $1,350,000 in
the three and six month 2000 periods, respectively, due to the aforementioned
explanation of the decrease in residential lots and outparcel sales. The
decrease in cost of sales was less than the corresponding decrease in sales due
to a decrease during 2000 in the gross profit percentages used to calculate the
cost of sales on residential lot sales in certain of the residential
developments. The decrease was partially offset by an increase in outparcel cost
of sales in the six month 2000 period of approximately $369,000 due to the
aforementioned two outparcel sales in 2000, as compared to one sale in 1999.
Interest and Other Income. Interest and other income increased
approximately $510,000 and $903,000 in the three and six month 2000 periods,
respectively, mainly due to interest income recognized in 2000 from the $18.6
million note receivable from Charlotte Gateway Village, LLC.
Income from Unconsolidated Joint Ventures. (All amounts reflect the
Company's share of joint venture income.) Income from unconsolidated joint
ventures decreased approximately $985,000 and $1,215,000 in the three and six
month 2000 periods, respectively.
Income from Wildwood Associates increased approximately $324,000 and
$851,000 in the three and six month 2000 periods, respectively. The increase was
partially due to an increase in income before depreciation, amortization and
interest expense from the 3200 Windy Hill Road Building of approximately
$224,000 and $430,000 in the three and six month 2000 periods, respectively, due
to an increase in the six month average economic occupancy to 100% in 2000 from
88% in 1999. The increase was also partially due to an increase in income before
depreciation, amortization and interest expense from the 4200 Wildwood Parkway
Building of approximately $233,000 in the six month 2000 period due to an
increase in average economic occupancy to 100% in 2000 from 81% in 1999.
Income from Haywood Mall Associates decreased approximately $1,296,000
and $2,433,000 in the three and six month 2000 periods, respectively, due to the
June 1999 sale of the Company's 50% interest in Haywood Mall.
Income from CP Venture LLC increased approximately $302,000 in the six
month 2000 period due mainly to a decrease in amortization expense.
Income from Cousins LORET decreased approximately $205,000 and $387,000
in the three and six month 2000 periods, respectively. Depreciation and
amortization expense increased approximately $249,000 and $666,000 in the three
and six month 2000 periods, respectively, due to The Pinnacle becoming partially
operational, which contributed to the decrease in income from Cousins LORET.
Additionally, capitalized interest decreased approximately $268,000 and $763,000
in the three and six month 2000 periods, respectively, due to The Pinnacle
becoming fully operational for financial reporting purposes in December 1999.
Income before depreciation, amortization and interest expense from The Pinnacle
increased approximately $282,000 and $1,012,000 in the three and six month 2000
periods, respectively, due to an increase in the average economic occupancy to
89% in 2000 from 76% in 1999, which partially offset the decrease.
Income from 285 Venture, LLC increased approximately $138,000 and
$281,000 in the three and six month 2000 periods, respectively, as 1155
Perimeter Center West became partially operational in January 2000.
Income from Cousins Stone LP increased approximately $187,000 and
$303,000 in the three and six month 2000 periods, respectively. This venture was
formed in June 1999 when the Company purchased Faison's 50% interest in
Faison-Stone.
Income from Temco Associates decreased $179,000 and $141,000 in the
three and six month 2000 periods, respectively, due to land sales in 1999. There
were no land sales in 2000.
General and Administrative Expenses. General and administrative
expenses increased approximately $1,469,000 and $2,427,000 in the three and six
month 2000 periods, respectively. The increase in both periods was primarily due
to the Company's continued expansion.
Depreciation and Amortization. Depreciation and amortization increased
approximately $4,990,000 and $8,615,000 in the three and six month 2000 periods,
respectively, due to the aforementioned acquisition of Inforum in June 1999 and
the aforementioned office buildings, retail centers and medical office buildings
becoming partially operational.
Stock Appreciation Right Expense. The stock appreciation right expense
decreased approximately $331,000 in the three month 2000 period and increased
$230,000 in the six month 2000 period. This non-cash item is primarily related
to the Company's stock price, which was $33.9375, $36.8125 and $38.50 at
December 31, 1999, March 31, 2000 and June 30, 2000, respectively; and $32.25,
$28.9375 and $33.8125 at December 31, 1998 and March 31, 1999 and June 30, 1999,
respectively.
Interest Expense. Interest expense increased approximately $2,933,000
and $3,065,000 in the three and six month 2000 periods, respectively. Interest
expense before capitalization increased to approximately $6,772,000 and
$13,152,000 in the three and six month 2000 periods, respectively, from
$3,849,000 and $7,639,000 in the three and six month 1999 periods, respectively,
due to higher debt levels. Partially offsetting the increase in the six month
2000 period was an increase of approximately $2,448,000 in interest capitalized
to projects under development (a reduction of interest expense) to $9,657,000 in
2000 from $7,209,000 in 1999.
Property Taxes on Undeveloped Land. Property taxes on undeveloped land
decreased approximately $519,000 in the six month 2000 period due to the
reversal in the three months ended March 31, 2000 of estimated amounts accrued
for anticipated reassessments of the Company's North Point and Wildwood land
holdings. The final reassessments, after appeal, were lower than the anticipated
reassessments and the accrual was reduced.
(Benefit) Provision for Income Taxes from Operations. (Benefit)
provision for income taxes from operations decreased $507,000 in the three month
2000 period from a provision of $390,000 in 1999 to a benefit of $117,000 in
2000. (Benefit) provision for income taxes from operations decreased $1,379,000
in the six month 2000 period from a provision of $1,255,000 in 1999 to a benefit
of $124,000 in 2000. The decrease in both periods was due to a decrease in CREC
and its subsidiaries' income from operations before income taxes from $707,000
and $6,554,000 in the three and six month 1999 periods, respectively, to a loss
from operations before income taxes of $773,000 and $1,069,000 in the three and
six month 2000 periods, respectively. The decrease in both periods was mainly
due to the aforementioned decrease in net profit from residential lot sales and
a decrease in third-party leasing and other fees earned by CREC. The decrease in
CREC's income from operations before income taxes was partially offset by an
increase in third-party development fees recognized in 2000.
Gain on Sale of Investment Properties. Gain on sale of investment
properties decreased approximately $49,623,000 and $46,839,000 in the three and
six month 2000 periods, respectively. The 2000 gain included the following: the
March 2000 sale of Laguna Niguel Promenade ($7.2 million gain), the April 2000
sale of 2 acres of North Point land ($.6 million gain) and the amortization of
deferred gain from CP Venture LLC ($2.1 million gain). The 1999 gain included
the following: the January 1999 sale of 3 acres of McMurray land ($.1 million
gain), the February 1999 sale of Abbotts Bridge Station, a neighborhood retail
center ($3.5 million gain), the March 1999 sale of Kennesaw Crossings
neighborhood retail center ($.9 million gain), the May 1999 sale of 2 acres of
Hidden Hills land ($.1 million gain), the June 1999 sale of the Company's 50%
interest in Haywood Mall ($50.1 million gain) and the amortization of deferred
gain from CP Venture LLC ($2.0 million gain).
Liquidity and Capital Resources:
--------------------------------
Financial Condition. The Company's adjusted debt (including its pro
rata share of unconsolidated joint venture debt) was 31% of total market
capitalization at June 30, 2000. Adjusted debt is defined as the Company's debt
and the Company's pro rata share of unconsolidated joint venture debt as
disclosed in Note 4 of "Notes to Consolidated Financial Statements" in the
Company's annual report on Form 10-K for the year ended December 31, 1999,
excluding the Charlotte Gateway Village, LLC debt as it is fully exculpated debt
which is supported by a long-term lease to Bank of America Corporation.
The Company has development and acquisition projects in various
planning 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, joint
ventures, project sales 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, of which approximately $132 million remains available at June 30,
2000.
The Company from time to time evaluates opportunities and strategic
alternatives, including but not limited to joint ventures, mergers and
acquisitions and new private or publicly-owned entities created to hold existing
assets and acquire new assets. These alternatives may also include sales of
single or multiple assets when the Company perceives opportunities to capture
value and redeploy proceeds or distribute proceeds to stockholders. The
Company's consideration of these alternatives is part of its ongoing strategic
planning process. There can be no assurance that any such alternative, if
undertaken and consummated, would not materially adversely affect the Company or
the market price of Cousins' Common Stock.
Cash Flows. Net cash provided by operating activities decreased
approximately $.1 million in 2000. Changes in other operating assets and
liabilities decreased approximately $3.5 million which contributed to the
decrease in net cash provided by operating activities. Residential lot and
outparcel cost of sales also decreased approximately $1.2 million. Operating
distributions from unconsolidated joint ventures decreased approximately $5.8
million, partially due to approximately $4.0 million of operating distributions
from Cousins LORET in 1999, as compared to approximately $1.0 million of
distributions in 2000. Additionally, distributions from CP Venture LLC decreased
approximately $5.7 million in 2000. The final distribution of $4.1 million was
made in 1999 from Haywood Mall Associates due to the sale of the Company's 50%
interest in Haywood Mall in June 1999, further contributing to the decrease in
operating distributions from unconsolidated joint ventures. Partially offsetting
the decrease in operating distributions from unconsolidated joint ventures was
an increase of $3.4 million of operating distributions from Wildwood Associates,
an increase of $1.8 million of operating distributions from Temco Associates and
an increase of $1.5 million of operating distributions from Cousins Stone LP,
which was formed in June 1999. Additionally, the effect of recognizing rental
revenues on a straight-line basis decreased net cash provided by operating
activities by approximately $1.2 million. Partially offsetting the increase in
net cash provided by operating activities was an increase in income before gain
on sale of investment properties of approximately $2.4 million. Also,
depreciation and amortization increased $8.0 million. Income from unconsolidated
joint ventures decreased approximately $1.2 million which also partially offset
the decrease in net cash provided by operating activities.
Net cash used in investing activities increased approximately $43.3
million in 2000. Net cash received in formation of venture (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, 1999) decreased approximately $100.0
million in 2000 which primarily caused the increase in net cash used in
investing activities. The collection of notes receivable decreased approximately
$3.7 million due to the repayment of the Cousins LORET note receivable in 1999,
which also contributed to the increase in net cash used in investing activities.
Change in other assets, net, also increased approximately $.9 million, which
further contributed to the increase in net cash used in investing activities.
Non-operating distributions from unconsolidated joint ventures also decreased
approximately $2.0 million, which contributed to the increase in net cash used
in investing activities. In 1999, Cousins LORET distributed approximately $2.0
million, which represented a portion of the proceeds from the $70 million
financing of The Pinnacle in December 1998. Net cash provided by sales
activities decreased approximately $57.5 million also partially contributing to
the increase in net cash used in investing activities due to a higher gain
recognized from the sale of the Company's 50% interest in Haywood Mall in 1999,
as compared to the sale of Laguna Niguel Promenade in 2000, which further offset
the increase in net cash used in investing activities. Property acquisition and
development expenditures decreased $108.0 million in 2000 as a result of the
Company having a higher level of projects under development in 1999. Investment
in unconsolidated joint ventures also decreased approximately $12.8 million,
which partially offset the increase in net cash used in investing activities,
partially due to contributions of approximately $10.1 million in 1999 to
Charlotte Gateway Village, LLC. Additionally, contributions of approximately
$5.2 million were made in 1999 to Cousins Stone LP, as compared to approximately
$1.0 million of contributions in 2000. Partially offsetting the decrease in
contributions was an increase in contributions to 285 Venture, LLC of
approximately $1.8 million in 2000.
Net cash provided by financing activities increased approximately $40.2
million in 2000 from net cash used in financing activities in 1999. The increase
in 2000 was mainly attributable to proceeds from other notes payable of $89.9
million from the completion of the $90 million non-recourse mortgage of 101
Second Street in April 2000. The increase was partially offset by a decrease of
approximately $45.1 million in the net amount drawn on the Company's line of
credit in 2000. An increase in the dividends paid per share to $.45 in 2000 from
$.41 in 1999 and an increase in the number of shares outstanding also partially
offset the increase as dividends paid increased approximately $2.8 million.
Repayment of other notes payable increased approximately $1.5 million in 2000
and common stock sold decreased approximately $.3 million in 2000, both of which
partially offset the increase in net cash provided by financing activities.
Quantitative and Qualitative Disclosure About Market Risk:
----------------------------------------------------------
There have been no significant changes in the Company's market risk
related to its notes payable and notes receivable from that disclosed in the
Company's annual report on Form 10-K for the year ended December 31, 1999.
Year 2000:
----------
The "Year 2000 issue" is the result of certain computer systems,
software, electronic equipment or embedded chips (collectively known as
"computer systems") being written using two digits rather than four to define
the applicable year. Therefore, certain computer systems may not distinguish
between a year that begins with a "20" rather than a "19." This could have
resulted in system failures which could have disrupted operations. No
significant delays in processing or interruption of business have occurred to
date due to the start of the Year 2000.
The Company assessed the impact of the Year 2000 issue on its business
and operations and attempted to identify the areas which rely on computer
systems that could have been potentially impacted, which mainly included the
systems utilized in the operations of its real estate properties and in the
processing of its accounting data.
The Company completed an inventory of the material computer systems
being utilized in its existing operating real estate properties which could have
been adversely affected by the Year 2000 issue. Such systems included, but are
not limited to, building control systems, heating and air conditioning controls,
elevator controls, fire alarms and security devices. Certain of these systems
were replaced, upgraded or modified as deemed necessary, the cost of which was
not material.
The Company upgraded its accounting software to a version that its
software vendor has represented to be Year 2000 compliant, as they define it.
The hardware and operating system used to run the accounting software has been
represented to be Year 2000 compliant. The Company has also assessed its
non-financial computer systems, and replaced, upgraded or modified such systems
as needed. The cost of the upgrades to the accounting software and non-financial
computer systems was not material.
The Company completed its survey of all material third party vendors to
determine their Year 2000 compliance status and has received certificates, where
possible, as to their compliancy. To date, there have been no significant issues
or interruptions of business and, based upon an assessment of the current
compliance by third parties, there appears to be no material business risk posed
by any such non-compliance as a result of a vendor not being Year 2000
compliant.
To date, the cost to analyze and prepare for the Year 2000 issue has
not been material. The Company does not expect to incur any additional costs to
address the Year 2000 issue. There can be no assurance that the Company will be
able to identify and correct all aspects of the effect of the Year 2000 issue on
the Company. However, the Company does not currently expect the Year 2000 issue
will have a material impact on the Company's business, operations or financial
condition.
Supplemental Financial Information:
-----------------------------------
<TABLE>
<CAPTION>
Depreciation and amortization expense included the following components
for the three and six months ended June 30, 2000 ($ in thousands):
Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000
------------------------------------ ------------------------------------
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 $ 197 $ 47 $ 244 $ 391 $ 92 $ 483
Deferred financing costs -- 4 4 -- 8 8
Goodwill and related business
acquisition costs 75 -- 75 150 -- 150
Real estate related:
Building (including tenant
first generation) 7,143 3,644 10,787 12,719 7,337 20,056
Tenant second generation 292 174 466 586 357 943
------ ------ ------- ------- ------ -------
$7,707 $3,869 $11,576 $13,846 $7,794 $21,640
====== ====== ======= ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
Exclusive of new developments and purchases of furniture, fixtures and
equipment, the Company had the following capital expenditures during the three
and six months ended June 30, 2000, including its share of unconsolidated joint
ventures ($ in thousands):
Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000
--------------------------------- ---------------------------------
Office Retail Medical Total Office Retail Medical Total
------ ------ ------- ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Second generation related costs $1,019 $166 $ - $1,185 $1,502 $244 $43 $1,789
Building improvements 139 - - 139 186 23 30 239
------ ---- ---- ------ -- --- ---- --- ------
$1,158 $166 $ - $1,324 $1,688 $267 $73 $2,028
====== ==== ==== ====== ====== ==== === ======
</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 have been no reports on Form 8-K filed by the
Registrant during the quarter ended June 30, 2000.
<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 14, 2000
