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 September 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
incorporation or organization) Identification No.)
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 October 28, 1994:
Common Stock, $0.01 par value 47,568,023
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 Nine Months Ended September 30, 1994 and 1993
(Unaudited, in thousands except per share amounts, note 1)
Three months Nine months
ended September 30, ended September 30,
1994 1993 1994 1993
Revenues:
Operating properties:
Retail centers $123,108 $119,220 $356,554 $338,531
Office, mixed-use and other 37,561 36,877 109,578 108,355
160,669 156,097 466,132 446,886
Land sales 11,273 9,070 30,777 22,871
Corporate interest income 708 713 1,937 3,206
172,650 165,880 498,846 472,963
Operating expenses, exclusive
of provision for bad debts,
depreciation and amortization:
Operating properties:
Retail centers 63,110 63,749 188,032 184,076
Office, mixed-use and other 18,148 20,074 54,372 54,937
81,258 83,823 242,404 239,013
Land sales 5,683 4,335 16,878 12,610
Development 2,211 1,300 5,088 2,507
Corporate 1,705 1,449 5,596 4,268
90,857 90,907 269,966 258,398
Interest expense:
Operating properties:
Retail centers 33,012 32,083 95,720 92,271
Office, mixed-use and other 17,245 16,070 50,406 49,407
50,257 48,153 146,126 141,678
Land sales 1,131 1,031 3,684 2,649
Development 123 123 371 371
Corporate 3,020 3,244 8,572 13,285
54,531 52,551 158,753 157,983
Provision for bad debts 1,507 1,888 2,704 3,209
Depreciation and amortization 18,441 18,416 56,086 51,585
165,336 163,762 487,509 471,175
Gain (loss) on dispositions of
assets and other provisions,
net (note 4) - - (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 Nine Months Ended September 30, 1994 and 1993
(Unaudited, in thousands except per share amounts, note 1)
Three months Nine months
ended September 30, ended September 30,
1994 1993 1994 1993
Earnings before income
taxes and extraordinary losses $ 7,314 $ 2,118 $ 6,377 $ 1,437
Income tax provision:
Current - state 47 110 308 307
Deferred 3,121 2,932 3,624 3,161
3,168 3,042 3,932 3,468
Earnings (loss) before
extraordinary losses 4,146 (924) 2,445 (2,031)
Extraordinary losses, net of
related income tax benefits
(note 5) - (3,490) (3,053) (6,796)
Net earnings (loss) $ 4,146 $(4,414) $ (608) $ (8,827)
Net earnings (loss) applicable
to common shareholders $ 876 $(7,684) $(10,419) $(16,937)
EARNINGS (LOSS) PER SHARE OF COMMON
STOCK AFTER PROVISION FOR
DIVIDENDS ON PREFERRED STOCK:
Earnings (loss) before
extraordinary losses $ .02 $ (.09) $ (.16) $ (.22)
Extraordinary losses - (.07) (.06) (.14)
$ .02 $ (.16) $ (.22) $ (.36)
DIVIDENDS PER SHARE:
Common Stock $ .17 $ .15 $ .51 $ .45
Preferred Stock $ .81 $ .81 $ 2.43 $ 2.01
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
September 30, 1994 and December 31, 1993
(Unaudited, in thousands, note 1)
September 30, December 31,
1994 1993
Assets:
Property:
Operating properties:
Property and deferred costs
of projects $2,939,996 $2,821,303
Less accumulated depreciation
and amortization 476,461 429,070
2,463,535 2,392,233
Properties in development (note 2) 52,295 57,065
Properties held for development
and sale 130,251 131,827
Total property 2,646,081 2,581,125
Prepaid expenses, deferred charges
and other assets 96,762 107,972
Accounts and notes receivable 79,724 77,926
Investments in marketable securities 24,977 34,403
Cash and cash equivalents 50,378 73,556
Total $2,897,922 $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
September 30, 1994 and December 31, 1993
(Unaudited, in thousands, note 1)
September 30, December 31,
1994 1993
Liabilities:
Debt (note 3):
Property debt not carrying a Parent
Company guarantee of repayment $1,949,030 $1,886,257
Parent Company debt and debt carrying a
Parent Company guarantee of repayment:
Property debt 290,058 273,540
Convertible subordinated debentures 130,000 130,000
Other debt 120,700 120,700
540,758 524,240
Total debt 2,489,788 2,410,497
Obligations under capital leases 60,665 63,099
Accounts payable, accrued expenses
and other liabilities 185,747 209,256
Deferred income taxes 80,959 78,979
Shareholders' equity:
Series A Convertible Preferred stock of
1 cent par value per share; 4,025,000
shares authorized; 4,024,883 shares
outstanding in 1994 with a liquidation
preference of $201,244,150 and 4,025,000
shares outstanding 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; 47,568,023
shares issued in 1994 and 47,562,226
shares issued in 1993 476 476
Additional paid-in capital 283,820 281,533
Accumulated deficit (203,573) (168,898)
Total shareholders' equity 80,763 113,151
Total $2,897,922 $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
Nine Months Ended September 30, 1994 and 1993
(Unaudited, in thousands, note 1)
1994 1993
Cash flows from operating activities:
Rents and other revenues received $459,941 $439,760
Proceeds from land sales 31,391 21,794
Interest received 7,844 7,561
Land development expenditures (13,054) (16,681)
Operating expenditures:
Operating properties (231,899) (238,155)
Land sales, development and corporate (8,797) (7,576)
Interest paid:
Operating properties (151,774) (139,829)
Land sales, development and corporate (14,644) (17,629)
Net cash provided by operating activities 79,008 49,245
Cash flows from investing activities:
Expenditures for properties in development
and improvements to existing properties
funded by debt (51,489) (61,469)
Expenditures for property acquisitions (93,885) (32,318)
Expenditures for improvements to
existing properties funded by cash
provided by operating activities:
Tenant leasing and remerchandising (6,277) (6,317)
Building and equipment (3,954) (4,036)
Purchases of marketable securities (54,917) (57,688)
Proceeds from redemptions or sales of
marketable securities 64,343 41,552
Other 2,907 (2,995)
Net cash used in investing activities (143,272) (123,271)
Cash flows from financing activities:
Proceeds from issuance of property debt 338,227 181,444
Repayments of property debt:
Scheduled principal payments (31,961) (14,351)
Other payments (216,548) (236,792)
Proceeds from issuance of other debt - 118,042
Repayments of other debt (14,629) (161,508)
Proceeds from issuance of Preferred stock - 195,864
Proceeds from exercise of stock options 67 199
Dividends paid (34,070) (24,683)
Net cash provided by financing activities 41,086 58,215
Net decrease in cash and cash equivalents (23,178) (15,811)
Cash and cash equivalents at beginning of period 73,556 79,785
Cash and cash equivalents at end of period $ 50,378 $ 63,974
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
Nine Months Ended September 30, 1994 and 1993
(Unaudited, in thousands, note 1)
1994 1993
Reconciliation of net loss to net cash
provided by operating activities:
Net loss $ (608) $ (8,827)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 56,086 51,585
(Gain) loss on dispositions of assets
and other provisions, net 4,960 351
Deferred income tax provision 3,624 3,161
Extraordinary losses, net of related income
tax benefits 3,053 6,796
Additions to pre-construction reserve 2,800 2,000
Provision for bad debts 2,704 3,209
Decrease (increase) in operating assets and
liabilities, net 6,389 (9,030)
Net cash provided by operating activities $ 79,008 $ 49,245
Schedule of Non-Cash Investing and Financing
Activities:
Mortgages assumed (extinguished) in
connection with acquisitions (dispositions)
of interests in properties, net $(14,988) $ 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)
September 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 $11,211,000 at September 30, 1994.
Changes in pre-construction costs, net, for the nine months ended
September 30, 1994 are summarized as follows (in thousands):
Balance at beginning of period, before
pre-construction reserve $18,473
Costs incurred 6,423
Costs transferred to construction and
development in progress (3,391)
Costs transferred to operating properties (877)
Costs of unsuccessful projects written-off (2,110)
18,518
Less pre-construction reserve 13,512
Balance at end of period, net $ 5,006
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 September 30, 1994 and December 31, 1993 is summarized as
follows (in thousands):
September 30, December 31,
1994 1993
Due in Due in
Total one year Total one year
Mortgages and bonds $2,074,322 $ 59,267 $1,923,791 $ 30,485
Convertible subordinated
debentures 130,000 - 130,000 -
Other loans 285,466 20,331 356,706 26,003
Total $2,489,788 $ 79,598 $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 ($4,251,000) and damages to a retail property as a result of an
earthquake ($446,000) net of deferred tax benefits aggregating
$1,644,000.
The extraordinary losses in 1993 result from early extinguishments of
debt ($10,390,000) less deferred tax benefits ($3,594,000).
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 from the date the suit was filed 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. An estimate of the ultimate
possible loss in the case cannot be made at this time, although a
reasonably possible range of loss could be as high as the full amount of
damages awarded in the case, together with interest accrued and
attorneys' fees awarded.
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 provisions (less than
$1,000,000 in the aggregate) have been made for losses with respect to
all litigation matters (including with respect to the above-described
suit), 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
9
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, (Unaudited), continued
(6) Contingencies, continued
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.
10
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 nine months ended
September 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 $3,888,000 and $18,023,000 while
total operating and interest expenses for retail centers increased
$784,000 and $10,794,000 for the three and nine months ended
September 30, 1994 as compared to the same periods in 1993. The
increases in revenues and expenses for the nine months ended
September 30, 1994 are primarily attributable to changes in the Company's
portfolio of retail centers, including the acquisition of an interest in
a retail center in the second quarter of 1993, openings of expansions in
1993 and the disposition of an interest in a retail center the Company
continues to manage in the first quarter of 1994. Increases in effective
rents due to re-leasing efforts, particularly at the Company's larger,
major market retail centers, and tenant lease cancellation payments
due to tenant restructurings also contributed to the increase in
revenues. The increase in revenues for the three months ended
September 30, 1994 was primarily attributable to higher effective rents
due to re-leasing efforts, particularly at the Company's larger, major
market retail centers, and an increase in tenant lease cancellation
payments. The effect of the disposition of an interest in a retail
center and lower interest expense due to debt repayments and refinancings
mitigated the increase in expenses for the three months ended September
30, 1994 caused by the openings of the expansions and higher occupancy
levels at the Company's larger, major market centers.
Revenues from office, mixed-use and other properties increased $684,000 and
$1,223,000 while total operating and interest expenses decreased
$1,600,000 for the three months ended September 30, 1994 and increased
$1,042,000 for the nine months ended September 30, 1994 as compared to
the same periods in 1993. The increases in revenues are primarily
attributable to higher occupancy levels at office and hotel properties
partially offset by lower recoveries of operating expenses at two office
projects as the tenants began paying certain operating expenses directly
in 1994. The increase for the nine months ended September 30, 1994 is
also due to the opening of two industrial buildings in Columbia in the
first half of 1993. The decrease in operating and interest expenses for
the three months ended September 30, 1994 is primarily attributable to
the disposition of the Company's interest in a mixed-use project and
lower operating expenses at the two office projects referred to above.
These decreases were partially offset by higher interest expense at
certain office projects due to the refinancing of floating rate debt with
fixed rate debt. The increase in operating and interest expenses for the
nine months ended September 30, 1994 is primarily attributable to the
opening of two industrial buildings in Columbia referred to above and the
effects of higher occupancy levels, partially offset by lower operating
11
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
expenses at the two office projects. Lower interest expense due to debt
reductions, refinancings and the exercise, in the second quarter of 1994,
of an option in a loan agreement to reduce the effective interest rate on
that loan mitigated the overall increase in operating and interest
expenses.
Land sales:
Revenues from land sales increased $2,203,000 and $7,906,000 and total
costs and expenses increased $1,448,000 and $5,303,000 for the three and
nine months ended September 30, 1994, when compared to the same periods
in 1993. The increases in revenues relate to higher sales of land for
residential and commercial/other uses in Columbia. The increases in
costs and expenses are attributable primarily to increased costs of sales
related to higher sales revenues and higher operating and interest
expenses due to lower levels of land development activity on projects
other than Columbia.
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 $5,000 and $1,269,000 for the three and
nine months ended September 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 $256,000 and $1,328,000 for the
three and nine months ended September 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 $3,754,000 and $3,796,000 for the three
months ended September 30, 1994 and 1993, respectively, and $10,322,000
and $14,954,000 for the nine months ended September 30, 1994 and 1993,
respectively. Of such amounts, $734,000 and $552,000 were capitalized
during the three months ended September 30, 1994 and 1993, respectively,
and $1,750,000 and $1,669,000 for the nine months ended September 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
12
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued:
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
and 1994. 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).
The loss in 1993 relates primarily to the disposition of an interest in a
property the Company continues to manage.
Extraordinary losses, net of related income tax benefits
The extraordinary losses in 1994 result from early extinguishment of debt
($4,251,000) and damages to a retail property as a result of an
earthquake ($446,000), net of deferred tax benefits aggregating
$1,644,000.
The extraordinary losses in 1993 result from early extinguishments of debt
($10,390,000) less deferred tax benefits ($3,594,000).
Financial Condition and Liquidity:
Shareholders' equity decreased $32,388,000 from $113,151,000 at
December 31, 1993 to $80,763,000 at September 30, 1994. The decrease was
principally due to the payment of regular quarterly dividends on the
Company's common and Preferred stocks.
The Company had cash and cash equivalents and investments in marketable
securities totaling $75,355,000 and $107,959,000 at September 30, 1994
and December 31, 1993, respectively, including $6,124,000 and $4,422,000,
respectively, restricted for use in the development of certain
properties.
The Company has lines of credit available for up to $155,000,000 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 and 1995. As of September 30, 1994, debt due in one
year was $79,598,000. The Company continues to actively evaluate new
sources of capital and is confident that it will be able to make these
payments, arrange to refinance or extend these maturities prior to their
scheduled repayment dates or take advantage of new sources of capital
without necessitating property sales.
13
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued:
Net cash provided by operating activities was $79,008,000 and $49,245,000
for the nine months ended September 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 $143,272,000 and $123,271,000 for
the nine months ended September 30, 1994 and 1993, respectively. The
increase of $20,001,000 is attributable primarily to higher expenditures
for property acquisitions partially offset by lower development
expenditures and a change in net marketable securities transactions
(primarily short-term U. S. Treasury securities) from net purchases of
$16,136,000 in 1993 to net sales of $9,426,000 in 1994. 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.
Net cash provided by financing activities was $41,086,000 and $58,215,000
for the nine months ended September 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 $31,961,000 and
$14,351,000 for the nine months ended September 30, 1994 and 1993,
respectively, including $29,381,000 and $13,888,000, respectively,
relating to operating properties debt.
14
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 from the date the suit was filed 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. For additional information
about this suit, see Note 6 - Contingencies to the Consolidated Financial
Statements (Unaudited).
15
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.
16
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: November 14, 1994 By /s/Jeffrey H. Donahue
Jeffrey H. Donahue
Senior Vice President and
Chief Financial Officer
Principal Accounting Officer:
Date: November 14, 1994 By /s/George L. Yungmann
George L. Yungmann
Senior Vice President and
Controller
17
Exhibit Index
Exhibit Number Description
3 Articles of Incorporation and
By-laws
11 Statement re Computation of per
share earnings (loss)
27 Financial Data Schedule
18
Exhibit 3. Articles of Incorporation and Bylaws.
The Bylaws of The Rouse Company as amended September 22, 1994
are attached.
19
Exhibit 3
As Revised 9/22/94
BYLAWS
OF
THE ROUSE COMPANY
ARTICLE I
STOCKHOLDERS
SECTION 1.01. Annual Meeting. The Company shall hold an
annual meeting of its stockholders to elect directors and
transact any other business within its powers in each year on
such date during the month of May as shall be set by the Board of
Directors. Except as the Charter or a statute provides
otherwise, any business may be considered at an annual meeting
without the purpose of the meeting having been specified in the
notice. Failure to hold an annual meeting does not invalidate
the Company's existence or affect any otherwise valid corporate
act.
SECTION 1.02. Special Meeting. At any time in the interval
between annual meetings, a special meeting of the stockholders
may be called by the Chairman of the Board or, if he or she is
unavailable due to disability or other reason, by the Chief
Executive Officer or the President, or by a majority of the Board
of Directors by vote at a meeting or in writing (addressed to the
Secretary of the Company) with or without a meeting. Special
meetings of the stockholders shall be called at the request of
the stockholders if and as required by law; in such case, the
Board of Directors or the Chief Executive Officer shall establish
the date of the special meeting, which shall not be more than 90
days after the requesting stockholders have (i) established that
the Company is required by law to hold the special meeting and
(ii) paid to the Company any costs of the meeting required by law
to be paid by them. No business shall be transacted at any
special meeting except that named in the notice.
SECTION 1.03. Place of Meetings. Meetings of stockholders
shall be held at such place in the United States as is set from
time to time by the Board of Directors.
SECTION 1.04. Notice of Meetings; Waiver of Notice. Not
less than 10 nor more than 90 days before each stockholders
meeting, the Chief Executive Officer or the Secretary shall give
written notice of the meeting to each stockholder entitled to
vote at the meeting and each other stockholder entitled to notice
of the meeting. The notice shall state the time and place of the
meeting and, if the meeting is a special meeting or notice of the
purpose is required by statute, the purpose of the meeting.
20
Exhibit 3, continued
Notice is given to a stockholder when it is personally delivered
to him or her, left at his or her residence or usual place of
business, or mailed to him or her at his or her address as it
appears on the records of the Company. Notwithstanding the
foregoing provisions, each person who is entitled to notice
waives notice if before or after the meeting he or she signs a
waiver of the notice which is filed with the records of the
stockholders' meeting or if he or she is present at the meeting
in person or by proxy.
SECTION 1.05. Quorum; Voting. Unless a statute or the
Charter provides otherwise, (i) at a meeting of stockholders the
presence in person or by proxy of stockholders entitled to cast a
majority of all the votes entitled to be cast at the meeting
constitutes a quorum, and (ii) a majority of all the votes cast
at a meeting at which a quorum is present is sufficient to
approve any matter that properly comes before the meeting, except
that a plurality of all the votes cast at a meeting at which a
quorum is present is sufficient to elect a director.
SECTION 1.06. Adjournments. Whether or not a quorum is
present, a meeting of stockholders convened on the date for which
it was called may be adjourned from time to time without further
notice by a majority vote of the stockholders present in person
or by proxy to a date not more than 120 days after the original
record date. Any business which might have been transacted at
the meeting as originally notified may be deferred and transacted
at any such adjourned meeting at which a quorum is present.
SECTION 1.07. General Right to Vote; Proxies. Unless the
Charter provides for a greater or lesser number of votes per
share or limits or denies voting rights, each outstanding share
of stock, regardless of class, is entitled to one vote on each
matter submitted to a vote at a meeting of stockholders. In all
elections for directors, each share of stock may be voted for as
many individuals as there are directors to be elected and for
whose election the share is entitled to be voted. A stockholder
may vote the stock he or she owns of record either in person or
by written proxy signed by the stockholder or by his or her duly
authorized attorney in fact. Unless a proxy provides otherwise,
it is not valid more than 11 months after its date.
SECTION 1.08. Conduct of Business and Voting. At all
meetings of stockholders, unless the voting is conducted by
inspectors, the proxies and ballots shall be received, and all
questions relating to the qualification of voters and the
validity of proxies, the acceptance or rejection of votes and
procedures for the conduct of business not otherwise specified by
these Bylaws, the Charter or law, shall be decided or determined
21
Exhibit 3, continued
by the chairman of the meeting. If demanded by stockholders,
present in person or by proxy, entitled to cast 25% in number of
votes entitled to be cast, or if ordered by the chairman of the
meeting, the vote upon any election or question shall be taken by
ballot and, upon like demand or order, the voting shall be
conducted by two inspectors, in which event the proxies and
ballots shall be received, and all questions relating to the
qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by such
inspectors. Unless so demanded or ordered, no vote need be by
ballot, and voting need not be conducted by inspectors. The
chairman of the meeting may choose an inspector or inspectors to
act at such meeting and, in default of such election, the
stockholders at the meeting may appoint an inspector or
inspectors. No candidate for election as a director at a meeting
shall serve as an inspector.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. Function of Directors. The business and
affairs of the Company shall be managed under the direction of
its Board of Directors. All powers of the Company may be
exercised by or under authority of the Board of Directors, except
as conferred on or reserved to the stockholders by statute or by
the Charter or Bylaws.
SECTION 2.02. Number of Directors. The Company shall have
10 directors until the number of directors is changed as herein
provided. A majority of the entire Board of Directors may alter
the number of directors to not exceeding 25 nor less than the
minimum number required by law, but such action may not affect
the tenure of office of any director.
SECTION 2.03. Election and Tenure of Directors. At each
annual meeting, the stockholders shall elect directors to hold
office until the next annual meeting and until their successors
are elected and qualify.
SECTION 2.04. Vacancy on the Board; Removal of Director.
(a) A majority of the directors, whether or not
sufficient to constitute a quorum, may fill a vacancy on the
Board of Directors. A director elected by the Board of Directors
to fill a vacancy serves until the next annual meeting of
stockholders and until his or her successor is elected and
qualifies.
22
Exhibit 3, continued
(b) At any special or annual meeting of the
stockholders called in the manner provided for by this Article,
any director or directors may be removed from office by a vote of
a majority of all the votes that are entitled to be cast by all
shares of stock outstanding and entitled to vote for the election
of directors, and, another or other directors may be elected as
provided in Section 2.04(c) of these Bylaws.
(c) The stockholders may elect a successor to fill a
vacancy on the Board of Directors that results from the removal
of a director, subject to Section 2.05 of these Bylaws. A
director elected by the stockholders to fill a vacancy that
results from the removal of a director shall serve for the
balance of the term of the removed director.
SECTION 2.05. Nomination of Directors.
(a) Nominations of persons for election to the Board
of Directors may be made at an annual meeting or special meeting
of stockholders called for the purpose of electing directors only
(i) by or at the direction of the Board of Directors or (ii) by
any stockholder who is entitled to vote for the election of
directors at the meeting and who complies with the notice
procedures set forth in this Section 2.05.
(b) Any nominations not made by or at the direction of
the Board of Directors shall be made pursuant to a timely written
notice delivered to or mailed and received by the Secretary at
the principal executive offices of the Company not later than 60
nor more than 90 days prior to the scheduled date of the meeting,
regardless of any postponements or adjournments of the meeting to
a later date; provided, however, that if notice of the meeting is
mailed to stockholders less than 70 days prior to the date of the
meeting, notice by the stockholder to the Secretary must be so
delivered or received within 10 days after the earlier of (i) the
date on which the notice of the date of the meeting was mailed to
the stockholder or (ii) the date on which the Company publicly
disclosed the date of the meeting. A stockholder's notice to the
Secretary shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or re-election as a
director: (a) the name, age, business address and residence
address of the person, (b) the principal occupation or employment
of the person, (c) the class and number of shares of the Company
that are beneficially owned by the person on the date of the
stockholder's notice and (d) any other information relating to
the person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities
23
Exhibit 3, continued
Exchange Act of 1934, as amended; (ii) as to the stockholder
giving the notice: (a) the name and address, as they appear on
the Company's books, of the stockholder and any other
stockholders known by the stockholder to be supporting the
nominee(s), and (b) the class and number of shares of the Company
that are beneficially owned by the stockholder on the date of the
stockholder's notice and by any other stockholders known by the
stockholders to be supporting the nominee(s) on the date of the
stockholder's notice; and (iii) a description of all arrangements
or understandings between the stockholder and each nominee and
other person or persons (naming and providing the business
address of such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder.
(c) The chairman of the annual or special stockholders
meeting shall, if the facts warrant, determine and declare to the
meeting that (i) a nomination was not made in accordance with the
procedures prescribed by these Bylaws and (ii) the defective
nomination shall be disregarded.
SECTION 2.06. Regular Meetings. Any regular meeting of the
Board of Directors shall be held on such date and at any place as
may be designated from time to time by the Chairman of the Board
or the Board of Directors.
SECTION 2.07. Special Meetings. Special meetings of the
Board of Directors may be called at any time by the Chairman of
the Board or, if he or she is unavailable due to disability or
other reason, by the Chief Executive Officer or the President, or
by a majority of the Board of Directors by vote at a meeting or
in writing with or without a meeting. A special meeting of the
Board of Directors shall be held on such date and at any place as
may be designated from time to time by the Chairman of the Board
or, if he or she is unavailable due to disability or other
reason, by the Chief Executive Officer or the President, or by a
majority of the Board of Directors.
SECTION 2.08. Notice of Meeting. The Secretary or such
other person as shall be designated by the Chairman of the Board
or, if he or she is unavailable due to disability or other
reason, by the Chief Executive Officer or the President, or by a
majority of the Board of Directors shall give notice to each
director of each regular and special meeting of the Board of
Directors. The notice shall state the time and place of the
meeting. Notice is given to a director when it is delivered
personally to him or her, left at his or her residence or usual
place of business, or sent or communicated by telegraph,
facsimile transmission or telephone, at least 24 hours before the
time of the meeting or, in the alternative, by mail to his or her
24
Exhibit 3, continued
address as it shall appear on the records of the Company, at
least 72 hours before the time of the meeting. Unless the Bylaws
or a resolution of the Board of Directors provides otherwise, the
notice need not state the business to be transacted at or the
purposes of any regular or special meeting of the Board of
Directors. No notice of any meeting of the Board of Directors
need be given to any director who attends, except when a director
attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully
called or convened, or to any director who, in writing executed
and filed with the records of the meeting either before or after
the holding thereof, waives such notice. Any regular or special
meeting of the Board of Directors may adjourn from time to time
to reconvene at the same or some other place, and no notice need
be given of any such adjourned meeting other than by announcement
at the meeting.
SECTION 2.09. Action by Directors. Unless a statute or the
Charter or Bylaws requires a greater proportion, the action of a
majority of the directors present at a meeting at which a quorum
is present is the action of the Board of Directors. A majority
of the entire Board of Directors shall constitute a quorum for
the transaction of business. In the absence of a quorum, the
directors present, by majority vote and without notice other than
by announcement at the meeting, may adjourn the meeting from time
to time until a quorum shall attend. At any such adjourned
meeting at which a quorum shall be present, any business may be
transacted that might have been transacted at the meeting as
originally notified. Any action required or permitted to be
taken at a meeting of the Board of Directors may be taken without
a meeting if a unanimous written consent that sets forth the
action is signed by each member of the Board and filed with the
minutes of proceedings of the Board.
SECTION 2.10. Meeting by Conference Telephone. Members of
the Board of Directors may participate in a meeting by means of a
conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes
presence in person at a meeting.
SECTION 2.11. Compensation. By resolution of the Board of
Directors, a fixed sum and expenses, if any, for attendance at
each regular or special meeting of the Board of Directors or of
committees thereof, and other compensation for their services as
directors or on committees of the Board of Directors, may be paid
to directors. Directors who are full-time employees of the
Company need not be paid for attendance at meetings of the Board
or committees thereof for which fees are paid to other directors.
A director who serves the Company in any other capacity also may
receive compensation for such other services.
25
Exhibit 3, continued
ARTICLE III
COMMITTEES
SECTION 3.01. Committees. The Board of Directors may
appoint from among its members an Executive Committee, an Audit
Committee, a Personnel Committee, and other committees composed
of two or more directors and delegate to these committees any of
the powers of the Board of Directors, except the power to declare
dividends or other distributions on stock, elect directors, issue
stock other than as provided in the next sentence, recommend to
the stockholders any action which requires stockholder approval,
amend the Bylaws, or approve any merger or share exchange which
does not require stockholder approval. If the Board of Directors
has given general authorization for the issuance of stock, a
committee of the Board, in accordance with a general formula or
method specified by the Board by resolution or by adoption of a
stock option or other plan, may fix the terms of stock subject to
classification or reclassification and the terms on which any
stock may be issued, including all terms and conditions required
or permitted to be established or authorized by the Board of
Directors.
SECTION 3.02. Committee Procedure. Each committee may fix
rules of procedure for its business, and shall meet at the call
of the Chairman of the Board or the chairman of the committee. A
majority of the members of a committee shall constitute a quorum
for the transaction of business and the act of a majority of
those present at a meeting at which a quorum is present shall be
the act of the committee. The members of a committee present at
any meeting, whether or not they constitute a quorum, may appoint
a director to act in the place of an absent member. Any action
required or permitted to be taken at a meeting of a committee may
be taken without a meeting, if a unanimous written consent which
sets forth the action is signed by each member of the committee
and filed with the minutes of the committee. The members of a
committee may conduct any meeting thereof by conference telephone
in accordance with the provisions of Section 2.10.
26
Exhibit 3, continued
ARTICLE IV
OFFICERS
SECTION 4.01. Executive and Other Officers. Unless
otherwise determined by the Board of Directors or as required by
law, the officers of the Company shall consist of a President, a
Chief Executive Officer, a Secretary, a Treasurer and whenever
deemed advisable by the Board, one or more Vice-Presidents,
Assistant Secretaries, Assistant Treasurers and such other
officers as shall be elected from time to time by the Board of
Directors. All such officers shall be chosen by the Board of
Directors, shall have such duties and responsibilities as the
Board of Directors may direct and shall hold office only during
the pleasure of the Board of Directors or until their successors
are chosen and qualified. Any two or more offices except those
of President and Vice-President may be held by the same person,
but no officer shall execute, acknowledge or verify any
instrument in more than one capacity when such instrument is
required to be executed, acknowledged or verified by any two or
more officers. The Board of Directors may from time to time
appoint such other agents and employees, with such powers and
duties as it may deem proper. Election or appointment of an
officer, employee or agent shall not of itself create contract
rights. The Board of Directors may remove an officer at any
time. The removal of an officer does not prejudice any of his or
her contract rights. The Board of Directors may fill a vacancy
that occurs in any office.
SECTION 4.02. Chairman of the Board. The Chairman of the
Board shall be chosen from among the directors. The Chairman of
the Board shall, unless otherwise provided by the Board of
Directors, preside at all meetings of the Board of Directors and
all annual and special meetings of stockholders and shall perform
such other duties as the Board of Directors may direct from time
to time. The Chairman of the Board may but need not be the
President.
SECTION 4.03. Chief Executive Officer. The Chief
Executive Officer shall have general responsibility for the
management and direction of the Company's business and shall
perform such other duties as the Board of Directors may direct
from time to time. The Chief Executive Officer shall be either
the Chairman of the Board or the President, as may be specified
by the Board of Directors.
SECTION 4.04. President. The President shall, if the
Chairman of the Board is unavailable due to disability or other
reason, preside at meetings of the Board of Directors and at
27
Exhibit 3, continued
annual and special meetings of stockholders, and shall perform
such other duties as the Chief Executive Officer or the Board of
Directors may direct from time to time. The office of President
may but need not be held by the Chairman of the Board.
SECTION 4.05. Vice-Presidents. The Vice-Presidents shall
perform such duties as the Chief Executive Officer or the Board
of Directors may direct.
SECTION 4.06. Treasurer. The Treasurer shall have charge
of and be responsible for all funds, securities, receipts and
disbursements of the Company, and shall deposit, or cause to be
deposited, in the name of the Company, all moneys or other
valuable effects in such banks, trust companies or other
depositories as he or she shall, from time to time, select; he or
she shall render to the Chief Executive Officer, the President
and to the Board of Directors, whenever requested, an account of
the financial condition of the Company; and, in general, he or
she shall perform all the duties incident to the office of a
treasurer of a corporation, and such other duties as are from
time to time assigned by the Board of Directors or the Chief
Executive Officer.
SECTION 4.07. Secretary. The Secretary shall keep the
minutes of the meetings of the stockholders, of the Board of
Directors and of any committees, in books provided for the
purpose; shall see that all notices are duly given in accordance
with the provisions of the Bylaws or as required by law; shall be
the custodian of the records of the Company; may witness any
document on behalf of the Company, the execution of which is duly
authorized, see that the corporate seal is affixed where such
document is required or desired to be under its seal, and, when
so affixed, may attest the same; and, in general, shall perform
all duties incident to the office of a secretary of a
corporation, and such other duties as are from time to time
assigned by the Board of Directors or the Chief Executive
Officer.
SECTION 4.08. Assistant and Subordinate Officers. The
assistant and subordinate officers of the Company are all
officers below the office of Vice-President, Secretary or
Treasurer. The Assistant Treasurers and Assistant Secretaries
and any other assistant or subordinate officers of the Company
shall perform such duties as may from time to time be assigned to
them by the Board of Directors, the Chief Executive Officer or
the President.
28
Exhibit 3, continued
SECTION 4.09. Additional Signature Authority. The Board of
Directors may, from time to time, designate any other person or
persons, on behalf of the Company, to sign any contracts, deeds,
notes, or other instruments in the place or stead of any
officers; and any instruments so signed in accordance with a
resolution of the Board shall be the valid act of this Company as
fully as if executed by any regular officer.
ARTICLE V
RESIGNATION
Any director or officer may resign his or her office at
any time; such resignation shall be made in writing and shall
take effect from the time of its receipt by the Company, unless
some time be fixed in the resignation, and then from that time.
The acceptance of a resignation shall not be required to make it
effective.
ARTICLE VI
FINANCE
SECTION 6.01. Checks, Drafts, Etc. All checks, drafts and
orders for the payment of money, notes and other evidences of
indebtedness, issued in the name of the Company, shall, unless
otherwise provided by resolution of the Board of Directors, be
signed by the Chief Executive Officer, the President, a Vice-
President or an Assistant Vice-President and countersigned by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary.
SECTION 6.02. Annual Statement of Affairs. The Chief
Executive Officer, the President or the chief accounting officer
shall prepare annually a full and correct statement of the
affairs of the Company, to include a balance sheet and a
financial statement of operations for the preceding fiscal year.
The statement of affairs shall be submitted at the annual meeting
of the stockholders and, within 20 days after the meeting, placed
on file at the Company's principal office.
SECTION 6.03. Fiscal Year. Unless otherwise provided by
resolution of the Board of Directors, the fiscal year of the
Company shall be the twelve calendar month period ending December
31 in each year.
29
Exhibit 3, continued
ARTICLE VII
STOCK
SECTION 7.01. Certificates for Stock. Each stockholder is
entitled to certificates that represent and certify the shares of
stock he or she holds in the Company. Each stock certificate
shall include on its face the name of the Company, the name of
the stockholder or other person to whom it is issued, and the
class of stock and number of shares it represents. It shall be
in such form, not inconsistent with law or with the Charter, as
shall be approved by the Board of Directors or any officer or
officers designated for such purpose by resolution of the Board
of Directors. Each stock certificate shall be signed by the
Chairman of the Board, the President or a Vice-President, and
countersigned by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer. Each certificate may be
sealed with the actual corporate seal or a facsimile of it or in
any other form and the signatures may be either manual or
facsimile signatures. A certificate is valid and may be issued
whether or not an officer who signed it is still an officer when
it is issued.
SECTION 7.02. Transfers. The Board of Directors shall have
power and authority to make such rules and regulations as it may
deem expedient concerning the issue, transfer and registration of
certificates of stock; and may appoint transfer agents and
registrars thereof. The duties of transfer agent and registrar
may be combined.
SECTION 7.03. Record Dates and Closing of Transfer Books.
The Board of Directors may set a record date or direct that the
stock transfer books be closed for a stated period for the
purpose of making any proper determination with respect to
stockholders, including which stockholders are entitled to notice
of a meeting, to vote at a meeting, to receive a dividend, or to
be allotted other rights. The record date may not be prior to
the close of business on the day the record date is fixed nor,
subject to Section 1.06, more than 90 days before the date on
which the action requiring the determination will be taken. The
transfer books may not be closed for a period longer than 20 days
and, in the case of a meeting of stockholders, the record date or
the closing of the transfer books shall be at least ten days
before the date of the meeting.
30
Exhibit 3, continued
SECTION 7.04. Stock Ledger. The Company shall maintain a
stock ledger which contains the name and address of each
stockholder and the number of shares of stock of each class which
the stockholder holds. The stock ledger may be in written form
or in any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a
duplicate of the stock ledger shall be kept at the offices of a
transfer agent for the particular class of stock, or, if none, at
the principal office in the State of Maryland or the principal
executive offices of the Company.
SECTION 7.05. Lost Stock Certificates. The Board of
Directors of the Company may determine the conditions for issuing
a new stock certificate in place of one that is alleged to have
been lost, stolen, or destroyed, or the Board of Directors may
delegate such power to any officer or officers of the Company.
In their discretion, the Board of Directors or such officer or
officers may refuse to issue such new certificate save upon the
order of a court having jurisdiction in the premises.
ARTICLE VIII
AMENDMENTS
Except as otherwise provided by law or by the Charter,
these Bylaws may be altered, amended, or added to by the Board of
Directors at any regular or special meeting of the Board of
Directors.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Provision of Indemnification. The Company
shall provide indemnification as follows:
(a) Persons who are or were directors or officers of
the Company shall be indemnified by the Company to the fullest
extent permitted by the general laws of the State of Maryland, as
now or hereafter in force, including the advance of expenses
under the procedures provided by such laws, in respect to matters
arising out of service in their capacities as directors or
officers of the Company or arising out of service at the request
of the Company in any capacity (including, but not limited to, as
directors, officers, partners, trustees, agents or employees) of
any other organization (including, but not limited to a direct or
indirect subsidiary or affiliate of the Company, another foreign
or domestic corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan).
31
Exhibit 3, continued
(b) In the sole discretion of the Company, persons who
are or were employees or agents of the Company may be indemnified
by the Company to any extent permitted by the general laws of the
State of Maryland, as now or hereafter in force, including the
advance of expenses, in respect to matters arising out of service
in their capacities as employees or agents of the Company or
arising out of service at the request of the Company in any
capacity (including, but not limited to, as directors, officers,
partners, trustees, agents or employees) of any other
organization (including, but not limited to, a direct or indirect
subsidiary or affiliate of the Company, another foreign or
domestic corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan).
SECTION 9.02. Procedure.
(A) With respect to persons who are or were directors
or officers of the Company, to the extent that any determination
is required under applicable law as to whether such person is
entitled to indemnification under Section 9.01(a) above,
including the advance of expenses, such determination shall be
made by independent legal counsel retained by the Company and
appointed by either the Board of Directors or the Chief Executive
Officer. Any determination by such independent legal counsel to
deny indemnification, including the advance of expenses, shall be
subject at the request of the person who is denied indemnifica-
tion, including the advance of expenses, to de novo review to the
fullest extent obtainable in any court that is appropriate under
the general of laws of the State of Maryland or other applicable
statutory or decisional law, as now or hereafter in force.
(B) With respect to persons who are or were employees
or agents of the Company, any determination by the Company under
Section 9.01(b) above shall be made by:
(i) the Board of Directors or any committee
designated by the Board of Directors;
(ii) the Chief Executive Officer; or
(iii) at the request of the Board of
Directors, any committee designated by the Board of Directors or
the Chief Executive Officer, by independent legal counsel
retained by the Company and appointed by the Board of Directors,
any committee designated by the Board of Directors or the Chief
Executive Officer.
32
Exhibit 3, continued
(C) Any indemnification or payment of expenses in
advance of the final disposition of any proceeding shall be made
promptly, and in any event within 60 days, upon the written
request of the director or officer entitled to seek
indemnification (the "Indemnified Party"). The right to
indemnification and advances hereunder shall be enforceable by
the Indemnified Party in any court of competent jurisdiction, if
(i) the Company denies such request, in whole or in part, or (ii)
no disposition thereof is made within 60 days. The Indemnified
Party's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in
whole or in part, in any such action shall also be reimbursed by
the Company.
SECTION 9.03. Exclusivity, Contract Rights. The indemnifi-
cation and advance of expenses provided by the Charter and these
Bylaws shall not be deemed exclusive of any other rights to which
a person seeking indemnification or advance of expenses may be
entitled under any law (common or statutory), or any agreement,
vote of stockholders or disinterested directors or other
provision that is consistent with law, both as to action in his
or her official capacity and as to action in another capacity
while holding office or while employed by or acting as agent for
the Company, shall continue in respect of all events occurring
while a person was a director or officer after such person has
ceased to be a director or officer, and shall inure to the
benefit of the estate, heirs, executors and administrators of
such person. All rights to indemnification and advance of
expenses under the Charter of the Company and hereunder shall be
deemed to be a contract between the Company and each director or
officer of the Company who serves or served in such capacity at
any time while this Bylaw is in effect.
SECTION 9.04. Insurance and Similar Protection. The
Company may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of
the Company, or who, while a director, officer, employee or agent
of the Company, is or was serving at the request of the Company
in any capacity (including, but not limited to, as a director,
officer, partner, trustee, employee or agent) of any other
organization (including, but not limited to, a direct or indirect
subsidiary or affiliate of the Company, another foreign or
domestic corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan) against any liability
asserted against or incurred by such person in any such capacity
or arising out of such person's position, whether or not the
Company would have the power to indemnify such person under the
general laws of the State of Maryland or other applicable
statutory or decisional law, as now or hereafter in force. The
Company may provide similar protection, including a trust fund,
letter of credit or surety bond, not inconsistent with the
33
Exhibit 3, continued
general laws of the State of Maryland or other applicable
statutory or decisional law, as now or hereafter in force.
SECTION 9.05. No Retroactivity. No amendment of the Bylaws
of the Company or repeal of any of its provisions shall limit or
eliminate the benefits provided to directors, officers, employees
or agents of the Company under this Article IX with respect to
any act or omission that occurred prior to such amendment or
repeal.
SECTION 9.06. Severability; Definitions. The invalidity or
unenforceability of any provision of this Article IX shall not
affect the validity or enforceability of any other provision
hereof. The phrase "this Bylaw" in this Article IX means this
Article IX in its entirety.
ARTICLE X
SUNDRY PROVISIONS
SECTION 10.01. Corporate Seal. The Board of Directors shall
provide a suitable seal, bearing the name of the Company, which
shall be in the charge of the Secretary. The Board of Directors
may authorize one or more duplicate seals and provide for the
custody thereof. If the Company is required to place its
corporate seal to a document, it is sufficient to meet the
requirement of any law, rule, or regulation relating to a
corporate seal to place the word "Seal" adjacent to the signature
of the person authorized to sign the document on behalf of the
Company.
SECTION 10.02. Voting Upon Shares in Other Corporations.
Stock of other corporations or associations, registered in the
name of the Company, may be voted by the Chief Executive Officer,
the President, a Vice-President or a proxy appointed by either of
them. The Board of Directors, however, may by resolution appoint
some other person to vote such shares, in which case such person
shall be entitled to vote such shares upon the production of a
certified copy of such resolution.
ARTICLE XI
APPLICABILITY OF MARYLAND BUSINESS COMBINATION PROVISIONS
The provisions of Section 3-602, as amended from time
to time, of the Corporations and Associations Article of the
Annotated Code of Maryland (the "Code") shall apply to any
"business combination" (as the term is defined in Section 3-601,
as amended from time to time, of the Code) with the Company.
34
Exhibit 3, continued
ARTICLE XII
APPLICABILITY OF MARYLAND CONTROL
SHARE ACQUISITION PROVISION
The provisions of Section 3-701 et seq., as amended
from time to time, of the Corporations and Associations Article
of the Annotated Code of Maryland (the "Code") shall not apply to
any "control-share acquisition" (as the term is defined in
Section 3-701, as amended from time to time, of the Code) of
shares of the Company.
35
Exhibit 11
THE ROUSE COMPANY AND SUBSIDIARIES
Computation of Fully Diluted Earnings (Loss) Per Share
(Unaudited, in thousands except per share amounts)
Three months Nine months
ended September 30, ended September 30,
1994 1993 1994 1993
Earnings (loss) before
extraordinary losses $ 4,146 $ (924) $ 2,445 $(2,031)
Add after-tax interest expense
applicable to convertible
subordinated debentures 1,215 1,215 3,644 5,021
Earnings before extraordinary
losses, as adjusted 5,361 291 6,089 2,990
Extraordinary losses - (3,490) (3,053) (6,796)
Net earnings (loss), as adjusted $ 5,361 $(3,199) $ 3,036 $(3,806)
Shares:
Weighted average number of
common shares outstanding 47,565 47,392 47,563 47,363
Assuming conversion of
convertible Preferred stock 9,470 9,470 9,470 7,840
Assuming conversion of
convertible subordinated
debentures 4,542 4,542 4,542 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 186 240 173 240
Weighted average number of shares
outstanding, as adjusted 61,763 61,644 61,748 61,360
36
Exhibit 11, continued
THE ROUSE COMPANY AND SUBSIDIARIES
Computation of Fully Diluted Earnings (Loss) Per Share, continued
(Unaudited, in thousands except per share amounts)
Three months Nine months
ended September 30, ended September 30,
1994 1993 1994 1993
Earnings (loss) per common
share assuming full dilution:
Earnings before extraordinary
losses, as adjusted $ .09 $ .04 $ .10 $ .05
Extraordinary losses - (.04) (.05) (.06)
Net earnings (loss), adjusted $ (.09) $ - $ (.05) $ (.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.
37
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This financial data schedule is included to comply with the requirements of
Item 601 (c) (2) of Regulations S-K and S-B. This schedule contains summary
financial information extracted from Form 10-Q for the quarterly period ended
September 30, 1994 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> $ 50,378
<SECURITIES> $ 24,977
<RECEIVABLES> $ 104,672
<ALLOWANCES> $ (24,948)
<INVENTORY> 0
<CURRENT-ASSETS> $ 183,738<F1>
<PP&E> $ 2,939,996
<DEPRECIATION> $ (476,461)
<TOTAL-ASSETS> $ 2,897,922
<CURRENT-LIABILITIES> $ 265,345<F2>
<BONDS> $ 2,489,788
<COMMON> $ 476
0
$ 40
<OTHER-SE> $ 80,247
<TOTAL-LIABILITY-AND-EQUITY> $ 2,897,922
<SALES> $ 498,846
<TOTAL-REVENUES> $ 498,846
<CGS> 0
<TOTAL-COSTS> $ 326,052
<OTHER-EXPENSES> $ 4,960
<LOSS-PROVISION> $ 2,704
<INTEREST-EXPENSE> $ 158,753
<INCOME-PRETAX> $ 6,377
<INCOME-TAX> $ 3,932
<INCOME-CONTINUING> $ 2,445
<DISCONTINUED> 0
<EXTRAORDINARY> $ (3,053)
<CHANGES> 0
<NET-INCOME> $ (608)
<EPS-PRIMARY> $ (.22)
<EPS-DILUTED> $ (.05)
<FN>
<F1>Current assets include cash, unrestricted marketable securities, current
portion of accounts and notes receivable and prepaid expenses and deposits.
<F2>Cuurent liabilities include the current portion of long-term debt and accounts
payable, accrued expenses and other liabilities.
</FN>
</TABLE>
