Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-1743
The Rouse Company
(Exact name of registrant as specified in its charter)
Maryland 52-0735512
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10275 Little Patuxent Parkway
Columbia, Maryland 21044-3456
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 992-6000
Indicate by check mark whether the registrant (1) 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of the issuer's common stock as
of July 29, 1994:
Common Stock, $0.01 par value 47,563,472
Title of Class Number of Shares
Part I. Financial Information
Item 1. Financial Statements:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1994 and 1993
(Unaudited, in thousands except per share amounts, note 1)
Three months Six months
ended June 30, ended June 30,
1994 1993 1994 1993
Revenues:
Operating properties:
Retail centers $117,606 $112,005 $233,446 $219,311
Office, mixed-use and other 37,162 36,924 72,017 71,478
154,768 148,929 305,463 290,789
Land sales 8,336 4,132 19,504 13,801
Corporate interest income 558 1,280 1,229 2,493
163,662 154,341 326,196 307,083
Operating expenses, exclusive of
provision for bad debts,
depreciation and amortization:
Operating properties:
Retail centers 62,170 61,730 124,922 120,327
Office, mixed-use and other 18,352 17,888 36,224 34,863
80,522 79,618 161,146 155,190
Land sales 5,006 2,976 11,195 8,275
Development 1,384 772 2,877 1,207
Corporate 2,141 1,454 3,891 2,819
89,053 84,820 179,109 167,491
Interest expense:
Operating properties:
Retail centers 31,652 30,189 62,708 60,188
Office, mixed-use and other 17,119 16,824 33,161 33,337
48,771 47,013 95,869 93,525
Land sales 1,120 828 2,553 1,618
Development 124 124 248 248
Corporate 2,864 4,425 5,552 10,041
52,879 52,390 104,222 105,432
Provision for bad debts 379 214 1,197 1,321
Depreciation and amortization 19,498 15,942 37,645 33,169
161,809 153,366 322,173 307,413
Gain (loss) on dispositions of
assets and other provisions,
net (note 4) (167) 93 (4,960) (351)
The accompanying notes are an integral part of these statements.
1
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations, continued
Three and Six Months Ended June 30, 1994 and 1993
(Unaudited, in thousands except per share amounts, note 1)
Three months Six months
ended June 30, ended June 30,
1994 1993 1994 1993
Earnings (loss) before income
taxes and extraordinary losses $ 1,686 $ 1,068 $ (937) $ (681)
Income tax provision:
Current - state 130 104 261 197
Deferred 1,007 528 503 229
1,137 632 764 426
Earnings (loss) before
extraordinary losses 549 436 (1,701) (1,107)
Extraordinary losses, net of
related income tax benefits
(note 5) (2,579) (2,348) (3,053) (3,306)
Net loss $(2,030) $(1,912) $(4,754) $(4,413)
LOSS PER SHARE OF COMMON STOCK
AFTER PROVISION FOR DIVIDENDS
ON PREFERRED STOCK:
Loss before extraordinary losses $ (.06) $ (.06) $ (.18) $ (.13)
Extraordinary losses (.05) (.05) (.06) (.07)
$ (.11) $ (.11) $ (.24) $ (.20)
DIVIDENDS PER SHARE:
Common Stock $ .17 $ .15 $ .34 $ .30
Preferred Stock $ .81 $ .81 $ 1.62 $ 1.20
The accompanying notes are an integral part of these statements.
2
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1994 and December 31, 1993
(Unaudited, in thousands, note 1)
June 30, December 31,
1994 1993
Assets:
Property:
Operating properties:
Property and deferred costs of projects $2,899,491 $2,821,303
Less accumulated depreciation
and amortization 457,074 429,070
2,442,417 2,392,233
Properties in development (note 2) 73,816 57,065
Properties held for development and sale 129,429 131,827
Total property 2,645,662 2,581,125
Prepaid expenses, deferred charges
and other assets 93,212 107,972
Accounts and notes receivable 83,377 77,926
Investments in marketable securities 30,938 34,403
Cash and cash equivalents 59,496 73,556
Total $2,912,685 $2,874,982
The accompanying notes are an integral part of these statements.
3
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets, continued
June 30, 1994 and December 31, 1993
(Unaudited, in thousands, note 1)
June 30, December 31,
1994 1993
Liabilities:
Debt (note 3):
Property debt not carrying a Parent
Company guarantee of repayment $1,955,039 $1,886,257
Parent Company debt and debt carrying a
Parent Company guarantee of repayment:
Property debt 293,217 273,540
Convertible subordinated debentures 130,000 130,000
Other debt 120,700 120,700
543,917 524,240
Total debt 2,498,956 2,410,497
Obligations under capital leases 61,404 63,099
Accounts payable, accrued expenses
and other liabilities 186,571 209,256
Deferred income taxes 77,839 78,979
Shareholders' equity:
Series A Convertible Preferred stock of
1 cent par value per share; 4,025,000
shares authorized; 4,024,905 shares
issued in 1994 with a liquidation
preference of $201,205,000 and 4,025,000
shares issued in 1993 with a liquidation
preference of $201,250,000 40 40
Common stock of 1 cent par value per share;
250,000,000 shares authorized; 47,563,049
shares issued in 1994 and 47,562,226
shares issued in 1993 476 476
Additional paid-in capital 283,762 281,533
Accumulated deficit (196,363) (168,898)
Total shareholders' equity 87,915 113,151
Total $2,912,685 $2,874,982
The accompanying notes are an integral part of these statements.
4
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1994 and 1993
(Unaudited, in thousands, note 1)
1994 1993
Cash flows from operating activities:
Rents and other revenues received $301,044 $288,684
Proceeds from land sales 17,963 12,564
Interest received 5,498 5,300
Land development expenditures (6,574) (8,244)
Operating expenditures:
Operating properties (153,267) (149,860)
Land sales, development and corporate (6,754) (7,236)
Interest paid:
Operating properties (102,623) (91,883)
Land sales, development and corporate (5,852) (10,013)
Net cash provided by operating activities 49,435 39,312
Cash flows from investing activities:
Expenditures for properties in development
and improvements to existing properties
funded by debt (31,553) (38,362)
Expenditures for property acquisitions (93,786) (31,661)
Expenditures for improvements to
existing properties funded by cash
provided by operating activities:
Tenant leasing and remerchandising (3,921) (4,440)
Building and equipment (2,122) (2,300)
Purchases of marketable securities (48,247) (53,304)
Proceeds from redemptions or sales of
marketable securities 51,712 12,531
Other (997) (1,470)
Net cash used in investing activities (128,914) (119,006)
Cash flows from financing activities:
Proceeds from issuance of property debt 316,938 125,552
Repayments of property debt:
Scheduled principal payments (20,721) (9,530)
Other payments (196,548) (184,225)
Proceeds from issuance of other debt - 118,720
Repayments of other debt (11,543) (158,600)
Proceeds from issuance of Preferred stock - 196,006
Proceeds from exercise of stock options 8 184
Dividends paid (22,715) (14,201)
Net cash provided by financing activities 65,419 73,906
Net decrease in cash and cash equivalents $(14,060) $ (5,788)
The accompanying notes are an integral part of these statements.
5
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Six Months Ended June 30, 1994 and 1993
(Unaudited, in thousands, note 1)
1994 1993
Reconciliation of net loss to net cash
provided by operating activities:
Net loss $(4,754) $(4,413)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 37,645 33,169
(Gain) loss on dispositions of assets
and other provisions, net 4,960 351
Deferred income tax provision 503 229
Extraordinary losses, net of related income
tax benefits 3,053 3,306
Additions to pre-construction reserve 1,400 900
Provision for bad debts 1,197 1,321
Decrease in operating assets and
liabilities, net 5,431 4,449
Net cash provided by operating activities $49,435 $39,312
Schedule of Non-Cash Investing and Financing
Activities:
Mortgages assumed (extinguished) in
connection with acquisitions (dispositions)
of interests in properties $(15,681) $70,335
Value of non-cash consideration given in
connection with acquisitions of
interests in properties - 13,416
The accompanying notes are an integral part of these statements.
6
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1994
(1) Principles of statement presentation
The unaudited consolidated financial statements include all
adjustments which are necessary, in the opinion of management, to
fairly reflect the Company's financial position and results of
operations. All such adjustments are of a normal recurring nature.
The statements have been prepared using the accounting policies
described in the 1993 Annual Report to Shareholders.
In its annual reports, the Company has included certain supplementary
current value basis financial information with the historical cost
basis financial statements. The current value basis presentation has
been and will continue to be an integral part of the Company's
formal, year-end reporting, but will not be included in quarterly
reports to shareholders. Therefore, all of the financial information
contained herein is based on the historical cost basis as required by
generally accepted accounting principles.
(2) Properties in development
Properties in development include construction and development in
progress and pre-construction costs, net. The construction and
development in progress accounts include land and land improvements
of $13,285,000 at June 30, 1994.
Changes in pre-construction costs, net, for the six months ended
June 30, 1994 are summarized as follows (in thousands):
Balance at beginning of period, before
pre-construction reserve $18,473
Costs incurred 4,088
Costs transferred to construction and
development in progress (3,391)
Costs transferred to operating properties (200)
Costs of unsuccessful projects written-off (640)
18,330
Less pre-construction reserve (13,582)
Balance at end of period, net $ 4,748
7
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), continued
(3) Debt
Debt at June 30, 1994 and December 31, 1993 is summarized as follows
(in thousands):
June 30, 1994 December 31, 1993
Due in Due in
Total one year Total one year
Mortgages and bonds $2,080,020 $39,191 $1,923,791 $30,485
Convertible sub-
ordinated debentures 130,000 - 130,000 -
Other loans 288,936 25,764 356,706 26,003
Total $2,498,956 $64,955 $2,410,497 $56,488
The amounts due in one year reflect the terms of existing loan
agreements except where refinancing commitments from outside lenders
have been obtained. In these instances, maturities are determined
based on the terms of the refinancing commitments.
(4) Gain (loss) on dispositions of assets and other provisions, net
The gain (loss) on dispositions of assets and other provisions, net,
in 1994 relates primarily to provisions for losses on investments in
two operating properties ($7,728,000). These provisions were
recognized based on management's determination that the Company would
not continue to support the projects under the existing arrangements
with lenders and/or partners and that it was unlikely that the
Company would recover all of its investments in these projects based
on forecasts of future cash flows. These losses were partially
offset by a gain related to the disposition of an interest in a
property the Company continues to manage ($2,768,000).
The loss in 1993 relates primarily to the disposition of an interest
in a property the Company continues to manage.
(5) Extraordinary losses, net of related income tax benefits
The extraordinary losses in 1994 result from early extinguishments of
debt and damages to a retail property as a result of an earthquake.
The extraordinary losses in 1993 result from early extinguishments of
debt.
8
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, (Unaudited), continued
(6) Contingencies
On November 6, 1990, Robert P. Guastella Equities, Inc. ("Plaintiff"), a
former tenant at the Riverwalk Shopping Center in New Orleans, Louisiana
("Riverwalk"), which is owned and operated by New Orleans Riverwalk
Associates, an affiliate of the Company ("NORA"), filed suit in the Civil
District Court of Orleans Parish, Louisiana against NORA, the Company,
two Company affiliates, and a partner of NORA (collectively,
"Defendants"). Plaintiff alleges that Defendants breached Plaintiff's
lease agreement with NORA for the operation of a restaurant at Riverwalk
and that as a result of these breaches it suffered losses and could not
pay the rentals due under the lease agreement, as a result of which the
lease and its tenancy were terminated by NORA. Plaintiff sought damages
of approximately $600,000 for these alleged breaches. In addition, on
September 3, 1992, Plaintiff claimed $33,000,000 for alleged lost future
profits which it claimed it would have earned had its lease not been
terminated. The Defendants filed answers denying the claims of Plaintiff
and asserting other defenses. NORA also asserted a counterclaim against
Plaintiff and its individual guarantors for past due rentals and other
charges in the approximate amount of $300,000 plus interest and
attorneys' fees as provided for in the lease agreement. The case was
tried before a jury and, on October 28, 1993, the jury returned a verdict
against Defendants upon which judgment was entered by the trial court on
January 7, 1994, in the total net amount of approximately $9,128,000
(which included a net award for lost future profits of approximately
$8,640,000) plus interest and attorneys' fees in an amount to be
determined. On May 6, 1994, the trial court denied all post-trial
motions of both Plaintiff and Defendants, including Defendants' Motions
for Judgment Notwithstanding the Verdict, Remittitur and/or New Trial.
The trial court also entered an amended judgment in which it awarded
Plaintiff $450,000 in attorneys' fees and awarded Defendants $25,000 in
attorneys' fees. Defendants believe that the verdict and judgment as
entered to date are contrary to the facts and applicable law. On May 23,
1994, Defendants appealed this judgment to the Louisiana Court of Appeal,
Fourth District. Defendants intend to vigorously pursue their rights of
appeal.
In addition, the Company and certain of its subsidiaries and affiliates are
defendants in various litigation matters arising in the ordinary course
of business, some of which involve claims for damages that are
substantial in amount. Some of these litigation matters are covered by
insurance. In the opinion of management, adequate provision has been
made for losses with respect to all litigation matters, where
appropriate, and the ultimate resolution of all such litigation matters
is not likely to have a material effect on the consolidated financial
position of the Company. Due to the Company's modest and fluctuating net
earnings (loss), it is not possible to predict whether the resolution of
these matters is likely to have a material effect on the Company's
consolidated net earnings (loss), and it is, therefore, possible that the
resolution of these matters could have such a material effect in any
future quarter or annual fiscal period.
9
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
The following discussion and analysis covers any material changes in
financial condition since December 31, 1993 and any material changes in
the results of operations for the three and six months ended June 30,
1994 as compared to the same periods in 1993. This discussion and
analysis should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in
the 1993 Annual Report to Shareholders.
Operating Results:
Operating properties:
Revenues from retail centers increased $5,601,000 and $14,135,000 while
total operating and interest expenses for retail centers increased
$4,965,000 and $9,940,000 for the three and six months ended June 30,
1994 as compared to the same periods in 1993. The comparisons of
revenues and expenses for the periods are affected by changes in the
composition of the Company's portfolio of retail centers, including the
acquisition of an interest in a retail center in the second quarter of
1993 and the openings of expansions in 1993. The effect of these changes
was to increase revenues and expenses as compared to the same periods in
1993. Increases in effective rents due to re-leasing efforts and
increases in occupancy rates and recoveries of operating expenses from
tenants at certain centers also contributed to the increases in revenues.
The increases in total operating and interest expenses are net of
reductions in interest expense due to debt repayments, refinancings and
modifications of terms on certain loan arrangements.
Revenues from office, mixed-use and other properties increased $238,000 and
$539,000 while total operating and interest expenses increased $1,418,000
and $2,712,000 for the three and six months ended June 30, 1994 as
compared to the same periods in 1993. The increases in revenues are
attributable to the openings of two industrial buildings in Columbia in
1993 and leasing of vacant space, partially offset by lower recoveries of
operating expenses from tenants at certain projects. The increases in
expenses are due primarily to operating and depreciation expenses related
to the Columbia industrial buildings and were mitigated by a reduction in
interest expense due to debt reductions, refinancings, the expiration of
certain interest rate exchange agreements in 1993 and the exercise of an
option to reduce the effective interest rate on a mortgage in 1994.
Land sales:
Revenues from land sales increased $4,204,000 and $5,703,000 and total
costs and expenses increased $2,322,000 and $3,855,000 for the three and
six months ended June 30, 1994, when compared to the same periods in
1993. The increases in revenues relate to higher sales of land for
residential and commercial uses in Columbia. The increases in costs and
expenses are attributable primarily to increased costs of sales related
to higher sales revenues and higher interest expenses due to lower levels
of land development activity on projects other than Columbia.
10
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued:
Development:
These costs consist primarily of additions to the pre-construction reserve
and new business costs. The pre-construction reserve is maintained to
provide for costs of projects which may not go forward to completion.
New business costs relate primarily to the initial evaluation of
acquisition and development opportunities. These costs increased in 1994
when compared to 1993 due to the Company's more aggressive pursuit of new
development and acquisition opportunities.
Corporate:
Corporate interest income decreased $722,000 and $1,264,000 for the three
and six months ended June 30, 1994 when compared to the same periods in
1993. The decreases are primarily attributable to lower investment
balances due to the use of the proceeds from the offerings of the 8.5%
unsecured notes and Preferred stock completed in the first quarter of
1993 and, to a lesser extent, lower investment rates.
Corporate operating expenses increased $687,000 and $1,072,000 for the
three and six months ended June 30, 1994 when compared to the same
periods in 1993. These increases are due primarily to costs of increased
senior management focus on corporate matters as a result of reassignments
of senior management responsibilities in the third quarter of 1993.
Corporate interest costs were $3,420,000 and $5,001,000 for the three
months ended June 30, 1994 and 1993, respectively, and $6,568,000 and
$11,158,000 for the six months ended June 30, 1994 and 1993,
respectively. Of such amounts, $556,000 and $576,000 were capitalized
during the three months ended June 30, 1994 and 1993, respectively, and
$1,016,000 and $1,117,000 for the six months ended June 30, 1994 and
1993, respectively, on funds invested in development projects. The
decrease in corporate interest costs is primarily attributable to the
redemption of a $100,000,000 issue of convertible subordinated debentures
in May 1993. This decrease was partially offset by issuance of the 8.5%
unsecured notes; however, a portion of the proceeds of the notes and
proceeds from refinancings of certain retail properties completed prior
to 1993 were used to refinance certain land and operating property debt
and to finance improvements to a number of operating properties during
1993. The interest costs on loan proceeds used for other segments are
included in the operating results of those segments.
Gain (loss) on dispositions of assets and other provisions, net
The gain (loss) on dispositions of assets and other provisions, net, in
1994 relates primarily to provisions for losses on investments in two
operating properties ($7,728,000). These provisions were recognized
based on management's determination that the Company would not continue
to support the projects under the existing arrangements with lenders
and/or partners and that it was unlikely that the Company would recover
all of its investments in these projects based on forecasts of future
cash flows. These losses were partially offset by a gain related to the
disposition of an interest in a property the Company continues to manage
($2,768,000).
11
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued:
Gain (loss) on dispositions of assets and other provisions, net (continued)
The loss in 1993 relates primarily to the disposition of an interest in a
property the Company continues to manage.
Financial Condition and Liquidity:
Shareholders' equity decreased $25,236,000 from $113,151,000 at December
31, 1993 to $87,915,000 at June 30, 1994. The decrease was principally
due to the payment of regular quarterly dividends on the Company's common
and Preferred stocks and, to a lesser extent, the net loss for the
period.
The Company had cash and cash equivalents and investments in marketable
securities totaling $90,434,000 and $107,959,000 at June 30, 1994 and
December 31, 1993, respectively, including $11,522,000 and $4,422,000,
respectively, restricted for use in the development of certain
properties.
The Company has lines of credit available for up to $145,000,000 which may
be used to provide corporate liquidity, fund property acquisition costs
and finance other corporate needs, subject to lenders' approvals. They
may also be utilized to pay some portion of existing debt, including
maturities in 1994. As of June 30, 1994, debt due in one year was
$64,955,000. The Company is confident that it will be able to make these
payments or arrange to refinance or extend these maturities prior to
their scheduled repayment dates without necessitating property sales.
Net cash provided by operating activities was $49,435,000 and $39,312,000
for the six months ended June 30, 1994 and 1993, respectively. The
increase in 1994 is due primarily to the timing of receipt of revenues
(including land sales proceeds) and the payment of operating and interest
expenses and land development costs. The factors discussed previously
under the operating results of the four major business segments also
affected the level of net cash provided by operating activities.
Net cash used in investing activities was $128,914,000 and $119,006,000 for
the six months ended June 30, 1994 and 1993, respectively. The increase
of $9,908,000 is attributable primarily to higher expenditures for
property acquisitions partially offset by lower net purchases of
marketable securities (primarily short-term U. S. Treasury securities)
and lower development expenditures. The property acquisitions in 1994
consist primarily of the purchase of land underlying a retail center
together with the participation interest of the former lessor. The 1993
acquisitions consist of purchases of partners' interests in retail
properties.
12
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued:
Net cash provided by financing activities was $65,419,000 and $73,906,000
for the six months ended June 30, 1994 and 1993, respectively. Cash
flows from financing activities in 1994 included the issuance of debt to
fund the property acquisition described above partially reduced by net
debt repayments and Preferred stock dividends. Cash flows from financing
activities for 1993 included the proceeds from public offerings of
unsecured debt and Preferred stock, portions of which were used to repay
property and other debt during the period. There were no similar
transactions in 1994.
Scheduled principal payments on property debt were $20,721,000 and
$9,530,000 for the six months ended June 30, 1994 and 1993, respectively,
including $18,975,000 and $9,221,000, respectively, relating to operating
properties debt.
13
Part II. Other Information
Item 1. Legal Proceedings
On November 6, 1990, Robert P. Guastella Equities, Inc. ("Plaintiff"), a
former tenant at the Riverwalk Shopping Center in New Orleans, Louisiana
("Riverwalk"), which is owned and operated by New Orleans Riverwalk
Associates, an affiliate of the Company ("NORA"), filed suit in the Civil
District Court of Orleans Parish, Louisiana against NORA, the Company,
two Company affiliates - Rouse-New Orleans, Inc. and New Orleans
Riverwalk Limited Partnership - and Connecticut General Life Insurance
Company, which is a general partner of NORA (collectively, "Defendants").
Plaintiff alleges that Defendants breached Plaintiff's lease agreement
with NORA for the operation of a restaurant at Riverwalk by (i) failing
to prevent the leased premises from flooding, (ii) refusing to permit
entertainment on the leased premises, (iii) interfering with the
operation of air conditioning equipment on the leased premises and (iv)
failing to provide adequate security. Plaintiff claims that as a result
of these breaches it suffered losses and could not pay the rentals due
under the lease agreement, as a result of which the lease and its tenancy
were terminated by NORA. Plaintiff seeks damages of approximately
$600,000 for these alleged breaches. In addition, on September 3, 1992,
Plaintiff claimed $33,000,000 for alleged lost future profits which it
claimed it would have earned had its lease not been terminated. All
Defendants filed answers denying the claims of Plaintiff and asserting
other defenses. NORA also asserted a counterclaim against Plaintiff and
its guarantors, Robert Guastella and Charles Kovacs, for past due rentals
and other charges in the approximate amount of $300,000 plus interest and
attorneys' fees as provided for in the lease agreement. The case was
tried before a jury and, on October 28, 1993, the jury returned a verdict
against Defendants upon which judgment was entered by the trial court on
January 7, 1994, in the total net amount of approximately $9,128,000
(which included a net award for lost future profits of approximately
$8,640,000) plus interest and attorneys' fees in an amount to be
determined. On May 6, 1994, the trial court denied all post-trial
motions of both Plaintiff and Defendants, including Defendants' Motions
for Judgment Notwithstanding the Verdict, Remittitur and/or New Trial.
The trial court also entered an amended judgment in which it awarded
Plaintiff $450,000 in attorneys' fees and awarded Defendants $25,000 in
attorneys' fees. Defendants believe that the verdict and judgment as
entered to date are contrary to the facts and applicable law. On May 23,
1994, Defendants appealed this judgment to the Louisiana Court of Appeal,
Fourth District. Defendants intend to vigorously pursue their rights of
appeal.
14
Part II. Other Information
The following items have been omitted as inapplicable or not required under
the applicable instructions:
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Reference is made to the Exhibit Index.
(b) Reports on Form 8-K
None.
15
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.
THE ROUSE COMPANY
Principal Financial Officer:
Date August 15, 1994 By /s/Jeffrey H. Donahue
Jeffrey H. Donahue
Senior Vice President and
Chief Financial Officer
Principal Accounting Officer:
Date August 15, 1994 By /s/George L. Yungmann
George L. Yungmann
Senior Vice President and
Controller
16
Exhibit Index
Exhibit Number Description
11 Statement re Computation of
per share earnings (loss)
17
Exhibit 11
THE ROUSE COMPANY AND SUBSIDIARIES
Computation of Fully Diluted Earnings (Loss) Per Share
(Unaudited, in thousands except per share amounts)
Three months Six months
ended June 30, ended June 30,
1994 1993 1994 1993
Earnings (loss) before
extraordinary losses $ 549 $ 436 $(1,701) $(1,107)
Add after-tax interest expense
applicable to convertible
subordinated debentures 1,215 1,664 2,430 3,866
Earnings before extraordinary
losses, as adjusted 1,764 2,100 729 2,759
Extraordinary losses (2,579) (2,348) (3,053) (3,306)
Net loss, as adjusted $ (815) $ (248) $(2,324) $ (547)
Shares:
Weighted average number of
common shares outstanding 47,563 47,375 47,563 47,348
Assuming conversion of
convertible Preferred stock 9,470 9,470 9,470 7,011
Assuming conversion of convertible
subordinated debentures 4,541 4,977 4,541 5,917
Assuming exercise of options and
warrants reduced by the number
of shares which could have been
purchased with the proceeds
from the exercise of such
options 152 60 152 60
Weighted average number of shares
outstanding, as adjusted 61,726 61,882 61,726 60,336
Loss per common share assuming
full dilution:
Earnings before extraordinary
losses, as adjusted $ .03 $ .04 $ .01 $ .05
Extraordinary losses (.04) (.04) (.05) (.06)
Net loss, adjusted $ (.01) $ - $ (.04) $ (.01)
This calculation is submitted in accordance with Regulation S-K item 601
(b) (11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
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