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 March 31, 1995
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 April 28, 1995:
Common Stock, $0.01 par value 47,797,671
Title of Class Number of Shares
Part I. Financial Information
Item 1. Financial Statements:
THE ROUSE COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended March 31, 1995 and 1994
(Unaudited, in thousands except per share amounts, note 1)
Three months
ended March 31,
1995 1994
Revenues:
Operating properties:
Retail centers $115,763 $115,840
Office, mixed-use and other 35,175 34,855
150,938 150,695
Land sales 10,791 11,168
Corporate interest income 786 671
162,515 162,534
Operating expenses, exclusive of
provision for bad debts, depreciation
and amortization:
Operating properties:
Retail centers 59,418 62,752
Office, mixed-use and other 17,354 17,872
76,772 80,624
Land sales 5,478 6,189
Development 1,904 1,493
Corporate 2,098 1,750
86,252 90,056
Interest expense:
Operating properties:
Retail centers 30,900 31,056
Office, mixed-use and other 17,311 16,042
48,211 47,098
Land sales 1,286 1,433
Development 94 124
Corporate 2,706 2,688
52,297 51,343
Provision for bad debts 760 818
Depreciation and amortization 18,552 18,147
157,861 160,364
Gain (loss) on dispositions of assets and
other provisions, net (note 5) (4,856) (5,280)
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 Months Ended March 31, 1995 and 1994
(Unaudited, in thousands except per share amounts, note 1)
Three months
ended March 31,
1995 1994
Loss before income taxes and
extraordinary losses $ (202) $(3,110)
Income tax (provision) benefit:
Current - state (113) (131)
Deferred (318) 674
(431) 543
Loss before extraordinary losses (633) (2,567)
Extraordinary losses from extinguishments of
debt, net of related income tax benefits
(note 6) (7,217) (157)
Net loss $ (7,850) $(2,724)
Net loss applicable to common shareholders $(11,510) $(5,994)
L0SS PER SHARE OF COMMON STOCK AFTER
PROVISION FOR DIVIDENDS ON PREFERRED STOCK:
Loss before extraordinary losses $ (.09) $ (.12)
Extraordinary losses $ (.15) $ (.01)
$ (.24) $ (.13)
DIVIDENDS PER SHARE:
Common Stock $ .20 $ .17
Preferred Stock $ .81 $ .81
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
March 31, 1995 and December 31, 1994
(Unaudited, in thousands, note 1)
March 31, December 31,
1995 1994
Assets:
Property:
Operating properties:
Property and deferred costs
of projects $2,918,822 $2,937,565
Less accumulated depreciation
and amortization 498,751 490,158
2,420,071 2,447,407
Properties in development (note 2) 73,644 65,348
Properties held for development and sale 148,552 141,102
Total property 2,642,267 2,653,857
Prepaid expenses, deferred charges
and other assets 96,341 104,254
Accounts and notes receivable 73,408 78,202
Investments in marketable securities 21,115 30,149
Cash and cash equivalents 38,471 49,398
Total $2,871,602 $2,915,860
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
March 31, 1995 and December 31, 1994
(Unaudited, in thousands, note 1)
March 31, December 31,
1995 1994
Liabilities:
Debt (note 3):
Property debt not carrying a Parent
Company guarantee of repayment $1,942,914 $1,998,445
Parent Company debt and debt carrying a
Parent Company guarantee of repayment:
Property debt 240,784 223,731
Convertible subordinated debentures 130,000 130,000
Other debt 165,700 120,700
536,484 474,431
Total debt 2,479,398 2,472,876
Obligations under capital leases 59,286 60,044
Accounts payable, accrued expenses
and other liabilities 179,122 205,317
Deferred income taxes 79,029 82,597
Shareholders' equity:
Series A Convertible Preferred stock
with a liquidation preference of
$225,252,050 in 1995 and 1994 (note 4) 45 45
Common stock of 1 cent par value per share;
250,000,000 shares authorized; 47,797,608
shares issued in 1995 and 47,571,046
shares issued in 1994 478 476
Additional paid-in capital 307,484 306,674
Accumulated deficit (233,240) (212,169)
Total shareholders' equity 74,767 95,026
Total $2,871,602 $2,915,860
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
Three Months Ended March 31, 1995 and 1994
(Unaudited, in thousands, note 1)
1995 1994
Cash flows from operating activities:
Rents and other revenues received $155,469 $148,055
Proceeds from land sales 10,897 9,627
Interest received 2,731 1,685
Land development expenditures (3,590) (3,614)
Operating expenditures:
Operating properties (76,463) (74,740)
Land sales, development and corporate (8,814) (4,981)
Interest paid:
Operating properties (54,198) (50,893)
Land sales, development and corporate (4,279) (2,950)
Net cash provided by operating activities 21,753 22,189
Cash flows from investing activities:
Expenditures for properties in development
and improvements to existing properties
funded by debt (14,046) (14,284)
Expenditures for improvements to
existing properties funded by cash
provided by operating activities:
Tenant leasing and remerchandising (2,252) (2,385)
Building and equipment (1,032) (99)
Purchases of marketable securities (1,088) (39,846)
Proceeds from redemptions or sales of
marketable securities 10,121 35,565
Other (98) 379
Net cash used in investing activities (8,395) (20,670)
Cash flows from financing activities:
Proceeds from issuance of property debt 115,301 23,786
Repayments of property debt:
Scheduled principal payments (8,913) (9,527)
Other payments (157,305) (2,117)
Proceeds from issuance of other debt 45,000 -
Repayments of other debt (5,538) (7,333)
Proceeds from exercise of stock options 390 2
Dividends paid (13,220) (11,358)
Net cash used in financing activities (24,285) (6,547)
Net decrease in cash and cash equivalents (10,927) (5,028)
Cash and cash equivalents at beginning of period 49,398 73,556
Cash and cash equivalents at end of period $ 38,471 $ 68,528
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
Three Months Ended March 31, 1995 and 1994
(Unaudited, in thousands, note 1)
1995 1994
Reconciliation of net loss to net cash
provided by operating activities:
Net loss $(7,850) $(2,724)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 18,552 18,147
(Gain) loss on dispositions of assets
and other provisions, net 4,856 5,280
Deferred income tax (benefit) provision 318 (674)
Extraordinary losses, net of related income
tax benefits 7,217 157
Additions to pre-construction reserve 1,000 900
Provision for bad debts 760 818
Decrease (increase) in operating assets and
liabilities, net (3,100) 285
Net cash provided by operating activities $ 21,753 $22,189
Schedule of Non-Cash Investing and Financing
Activities:
Mortgage debt extinguished on disposition
of an interest in a property $ - $15,681
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)
March 31, 1995
(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 1994 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 $11,219,000 at March 31, 1995.
Changes in pre-construction costs, net, for the three months ended
March 31, 1995 are summarized as follows (in thousands):
Balance at beginning of period, before
pre-construction reserve $ 20,633
Costs incurred 3,032
Costs transferred to operating properties (248)
23,417
Less pre-construction reserve (15,109)
Balance at end of period, net $ 8,308
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 March 31, 1995 and December 31, 1994 is summarized as
follows (in thousands):
March 31, 1995 December 31, 1994
Due in Due in
Total one year Total one year
Mortgages and bonds $2,043,542 $209,222 $2,063,978 $117,511
Convertible sub-
ordinated debentures 130,000 - 130,000 -
Other loans 305,856 13,663 278,898 10,744
Total $2,479,398 $222,885 $2,472,876 $128,255
In February 1995, the Company registered $150,000,000 of unsecured
notes for issuance to the public from time to time through February
1997. As of March 31, 1995, the Company had issued $45,000,000 of
these unsecured notes with a weighted average interest rate of 7.72%
and a weighted average maturity of 6.38 years.
Subsequent to March 31, 1995, the Company issued $12,500,000 of
unsecured notes to partially repay certain recourse indebtedness.
In conjunction with this payment, the lender released the Company of
its guarantee obligation on an additional $15,082,000 of
indebtedness.
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.
Approximately $141,010,000 of the debt maturing in one year at March
31, 1995 relates to two retail center mortgages due in December 1995
and February 1996. The Company expects to refinance these mortgages
on a long-term basis at or prior to their scheduled maturities.
(4) Series A Convertible Preferred Stock
The Company has authorized issuance of 50,000,000 shares of Preferred
stock of 1 cent par value per share of which 4,505,168 shares have
been classified as Series A Convertible Preferred. At March 31,
1995 and December 31, 1994, there were 4,505,041 shares outstanding.
(5) Gain (loss) on dispositions of assets and other provisions, net
The loss in 1995 relates to a retail center property the Company has
decided to sell and is actively marketing. This loss was recognized
based on the estimated fair value of the property less costs to
sell.
8
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, (Unaudited), continued
(5) Gain (loss) on dispositions of assets and other provisions, net
(continued)
The loss in 1994 relates primarily to provisions for losses on
investments in two operating properties ($7,728,000) and damages to
a retail property as a result of an earthquake ($487,000). The
provisions for losses 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 ($2,935,000).
(6) Extraordinary losses from extinguishment of debt, net of related
income tax benefits
During the three months ended March 31, 1995 and 1994, the Company
incurred extraordinary losses related to extinguishments of debt
prior to scheduled maturity of $11,103,000 and $242,000,
respectively, net of related income tax benefits of $3,886,000 and
$85,000, respectively.
(7) 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 and $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 asserting other defenses and raising a
counterclaim. 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 and entered an
amended judgment in which it awarded Plaintiff $450,000 in
9
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, (Unaudited), continued
(7) Contingencies (continued)
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 Appeals,
Fourth Circuit. Briefs have been filed, and oral argument was held
on March 8, 1995. A decision is expected in the second or third
quarter of 1995. 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 the damages
awarded in the case, together with interest accrued and attorneys'
fees awarded.
The Company and certain of its subsidiaries are defendants in various
other 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
$1,500,000 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 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, 1994 and any material changes in
the results of operations for the three months ended March 31, 1995 as
compared to the same periods in 1994. 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 1994
Annual Report to Shareholders.
Operating Results:
Operating properties:
Revenues from retail centers decreased $77,000 and total operating and
interest expenses decreased $3,038,000 for the three months ended March
31, 1995 as compared to the same period in 1994. The decrease in
revenues is attributable to lower recoveries of operating expenses, as
discussed below, and the disposition of an interest in a property in the
first quarter of 1994. These decreases have been partially offset by
increases in revenues due to the opening of an expansion in August 1994
and increases in tenant lease cancellation payments due to tenant
restructurings. The decrease in expenses for the three months ended
March 31, 1995 is attributable to lower recoverable expenses as a result
of operating expense reduction efforts, milder winter conditions
experienced in the Northeast and lower interest expense due to debt
restructurings and refinancings completed in 1994. These decreases were
partially offset by an increase in expenses associated with the opening
of the expansion referred to above.
Revenues from office, mixed-use and other properties increased $320,000 and
total operating and interest expenses increased $646,000 for the three
months ended March 31, 1995 as compared to the same period in 1994. The
increase in revenues is attributable primarily to higher occupancy at
certain hotel and office properties in Columbia. The increase in total
operating and interest expenses is attributable primarily to expenses at
two industrial buildings in Columbia which opened in the second quarter
of 1994 and higher interest expense on a mixed-use project. Interest on
the project loan was lower in the first quarter of 1994 because the
Company exercised an option in the loan agreement to make a specified
payment and reduce the effective interest rate on the loan retroactive to
the beginning of its term. The payment was less than the interest
previously accrued, and the difference was recorded as a reduction to
interest expense in the quarter.
Land sales:
Revenues from land sales decreased $377,000 and total costs and expenses
decreased $858,000 for the three months ended March 31, 1995, as compared
to the same period in 1994. The decrease in revenues relates to lower
sales of land for commercial/other uses in Columbia, partially offset by
increases in land sales for residential uses. The decrease in costs and
expenses is attributable primarily to decreased costs of sales due to
lower sales revenues and lower average costs on land sold.
11
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
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 1995
when compared to 1994 due to the Company's more aggressive pursuit of new
development and acquisition opportunities.
Corporate:
Corporate interest income increased $115,000 for the three months ended
March 31, 1995 when compared to the same period in 1994. The increase is
primarily attributable to higher investment rates.
Corporate operating expenses increased $348,000 for the three months ended
March 31, 1995 when compared to the same period in 1994. These increases
are due primarily to costs of increased executive management focus on
corporate matters.
Corporate interest costs were $3,581,000 and $3,148,000 for the three
months ended March 31, 1995 and 1994, respectively. Of such amounts,
$875,000 and $460,000 were capitalized, respectively, on funds invested
in development projects. The increase in corporate interest costs is
attributable primarily to additional debt used for corporate purposes.
Gain (loss) on dispositions of assets and other provisions, net
The loss in 1995 relates to a retail center property the Company has
decided to sell and is actively marketing. This loss was recognized
based on the estimated fair value of the property less costs to sell.
The loss in 1994 relates primarily to provisions for losses on investments
in two operating properties ($7,728,000) and damages to a retail property
as a result of an earthquake ($487,000). The provisions for losses 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 ($2,935,000).
Extraordinary losses, net of related income tax benefits
During the three months ended March 31, 1995 and 1994, the Company incurred
extraordinary losses related to extinguishments of debt prior to
scheduled maturity of $11,103,000 and $242,000, respectively, net of
related income tax benefits of $3,886,000 and $85,000, respectively.
12
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued:
Financial Condition and Liquidity:
Shareholders' equity decreased $20,259,000 from $95,026,000 at
December 31, 1994 to $74,767,000 at March 31, 1995. The decrease was due
principally to the payment of regular quarterly dividends on the
Company's common and Preferred stocks, and to a lesser extent, the
Company's net loss for the three months ended March 31, 1995.
The Company had cash and cash equivalents and investments in marketable
securities totaling $59,586,000 and $79,547,000 at March 31, 1995 and
December 31, 1994, respectively, including $1,776,000 and $2,001,000,
respectively, restricted for use in the development of certain
properties.
In February 1995, the Company registered $150,000,000 of unsecured notes
for issuance to the public from time to time through February 1997. The
notes can be issued, subject to market conditions, for varying terms of
nine months or longer at fixed or floating rates based upon market
indices at the time of issuance. Proceeds of these notes have been or
will be used to repay higher rate or recourse indebtedness of the
Company. As of March 31, 1995, the Company had issued $45,000,000 of
notes, the proceeds of which were used to repay higher rate and/or
recourse indebtedness.
The Company has lines of credit available for up to $154,220,000 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 1995 and 1996. As of March 31, 1995, debt due in one year
was $222,885,000. Approximately $141,010,000 of this debt relates to two
retail center mortgages due in December 1995 and February 1996. The
Company expects to refinance these mortgages on a long-term basis at or
prior to their scheduled maturities. 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 these maturities prior to their
scheduled repayment dates, or take advantage of new sources of capital
without necessitating property sales.
Net cash provided by operating activities was $21,753,000 and $22,189,000
for the three months ended March 31, 1995 and 1994, respectively. The
decrease in 1995 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 $8,395,000 and $20,670,000 for
the three months ended March 31, 1995 and 1994, respectively. The
decrease in net cash used of $12,275,000 is attributable primarily to a
change in net marketable securities transactions (primarily short-term
U. S. Treasury securities) from net purchases of $4,281,000 in 1994 to
net sales of $9,033,000 in 1995.
13
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued:
Net cash used in financing activities was $24,285,000 and $6,547,000 for
the three months ended March 31, 1995 and 1994, respectively. The
increase in net cash used of $17,738,000 is attributable primarily to the
use of financing proceeds received prior to 1995 to repay certain higher
rate debt.
New Accounting Standards:
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" (SFAS No. 121), was issued by the Financial Accounting Standards
Board in March 1995. SFAS No. 121 will be effective with respect to the
Company in 1996, and adoption is not expected to have a material effect
on the financial position or results of operations of the Company.
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 Appeals, Fourth Circuit. Briefs have been filed,
and oral argument was held on March 8, 1995. Defendants intend to
vigorously pursue their rights of appeal. For additional information
about this suit, see Note 7 - 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: May 15, 1995 By /s/Jeffrey H. Donahue
Jeffrey H. Donahue
Senior Vice President and
Chief Financial Officer
Principal Accounting Officer:
Date: May 15, 1995 By /s/George L. Yungmann
George L. Yungmann
Senior Vice President and
Controller
17
Exhibit Index
Exhibit Number Description
11 Statement re Computation of per
share earnings (loss)
18
Exhibit 11
THE ROUSE COMPANY AND SUBSIDIARIES
Computation of Fully Diluted Earnings (Loss) Per Share
(Unaudited, in thousands except per share amounts)
Three months
ended March 31,
1995 1994
Loss before extraordinary losses $ (633) $(2,567)
Add after-tax interest expense applicable
to convertible subordinated debentures 1,215 1,215
Earnings (loss) before extraordinary losses,
as adjusted 582 (1,352)
Extraordinary losses (7,217) (157)
Net, as adjusted $(6,635) $(1,509)
Shares:
Weighted average number of common shares
outstanding 47,664 47,562
Assuming conversion of convertible
Preferred stock 10,600 9,470
Assuming conversion of convertible
subordinated debentures 4,542 4,542
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 216 131
Weighted average number of shares outstanding,
as adjusted 63,022 61,705
19
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
ended March 31,
1995 1994
Loss per common share assuming
full dilution:
Earnings (loss) before extraordinary losses,
as adjusted $ .01 $ (.02)
Extraordinary losses (.12) (.01)
Net loss, adjusted $ (.11) $ (.03)
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.
20
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> $ 38,471
<SECURITIES> $ 21,115
<RECEIVABLES> $ 98,532
<ALLOWANCES> $ (25,124)
<INVENTORY> 0
<CURRENT-ASSETS> $ 164,952<F1>
<PP&E> $ 2,918,822
<DEPRECIATION> $ (498,751)
<TOTAL-ASSETS> $ 2,871,602
<CURRENT-LIABILITIES> $ 402,007<F2>
<BONDS> $ 2,479,398
<COMMON> $ 478
0
$ 45
<OTHER-SE> $ 74,244
<TOTAL-LIABILITY-AND-EQUITY> $ 2,871,602
<SALES> $ 162,515
<TOTAL-REVENUES> $ 162,515
<CGS> 0
<TOTAL-COSTS> $ 104,804
<OTHER-EXPENSES> $ 4,856
<LOSS-PROVISION> $ 760
<INTEREST-EXPENSE> $ 52,297
<INCOME-PRETAX> $ (202)
<INCOME-TAX> $ 431
<INCOME-CONTINUING> $ (633)
<DISCONTINUED> 0
<EXTRAORDINARY> $ (7,217)
<CHANGES> 0
<NET-INCOME> $(7,850)
<EPS-PRIMARY> $ (.24)
<EPS-DILUTED> $ (.11)
<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>
