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, 1996
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 May 10, 1996:
Common Stock, $0.01 par value 48,247,756
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, 1996 and 1995
(Unaudited, in thousands except per share amounts, note 1)
Three months
ended March 31,
1996 1995
Revenues:
Operating properties:
Retail centers $118,790 $115,763
Office, mixed-use and other 35,868 35,175
154,658 150,938
Land sales 17,661 10,791
Corporate interest income 829 786
173,148 162,515
Operating expenses, exclusive of
provision for bad debts, depreciation
and amortization:
Operating properties:
Retail centers 60,882 59,418
Office, mixed-use and other 17,267 17,354
78,149 76,772
Land sales 9,444 5,478
Development 1,215 1,904
Corporate 2,026 2,098
90,834 86,252
Interest expense:
Operating properties:
Retail centers 31,232 30,900
Office, mixed-use and other 17,071 17,311
48,303 48,211
Land sales 250 1,286
Development 75 94
Corporate 3,623 2,706
52,251 52,297
Provision for bad debts 621 760
Depreciation and amortization 18,284 18,552
161,990 157,861
Gain (loss) on dispositions of assets and
other provisions, net (note 5) -- (4,856)
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, 1996 and 1995
(Unaudited, in thousands except per share amounts, note 1)
Three months
ended March 31,
1996 1995
Earnings (loss) before income taxes and
extraordinary losses $ 11,158 $ (202)
Income taxes
Current - primarily state 179 113
Deferred 4,236 318
4,415 431
Earnings (loss) before extraordinary losses 6,743 (633)
Extraordinary losses from early extinguishments
of debt, net of related income tax benefits
(note 6) (1,315) (7,217)
Net earnings (loss) $ 5,428 $ (7,850)
Net earnings (loss) applicable
to common shareholders $ 1,768 $(11,510)
EARNINGS (LOSS) PER SHARE OF COMMON STOCK AFTER
PROVISION FOR DIVIDENDS ON PREFERRED STOCK:
Earnings (loss) before extraordinary losses $ .06 $ (.09)
Extraordinary losses (.02) (.15)
$ .04 $ (.24)
DIVIDENDS PER SHARE:
Common stock $ .22 $ .20
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, 1996 and December 31, 1995
(Unaudited, in thousands, note 1)
March 31, December 31,
1996 1995
Assets:
Property (note 2):
Operating properties:
Property and deferred costs
of projects $3,004,748 $3,006,356
Less accumulated depreciation
and amortization 533,566 519,319
2,471,182 2,487,037
Properties in development 66,234 56,151
Properties held for sale 16,743 22,602
Land held for development and sale 129,132 134,168
Total property 2,683,291 2,699,958
Prepaid expenses, deferred charges
and other assets 148,985 151,068
Accounts and notes receivable 29,805 36,751
Investments in marketable securities 18,100 2,910
Cash and cash equivalents 34,779 94,922
Total $2,914,960 $2,985,609
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, 1996 and December 31, 1995
(Unaudited, in thousands, note 1)
March 31, December 31,
1996 1995
Liabilities:
Debt (note 3):
Property debt not carrying a Parent
Company guarantee of repayment $1,935,185 $1,990,041
Parent Company debt and debt carrying a
Parent Company guarantee of repayment:
Property debt 148,305 138,488
Convertible subordinated debentures 130,000 130,000
Other debt 216,000 221,000
494,305 489,488
Total debt 2,429,490 2,479,529
Obligations under capital leases 58,245 58,786
Accounts payable, accrued expenses
and other liabilities 169,613 185,561
Deferred income taxes 85,177 81,649
Company-obligated mandatorily redeemable
preferred securities of a trust holding
solely Parent Company subordinated debt
securities 137,500 137,500
Shareholders' equity:
Series A Convertible Preferred stock
with a liquidation preference of
$225,250 in 1996 and 1995 (note 4) 45 45
Common stock of 1 cent par value per share;
250,000,000 shares authorized; 48,257,756
shares issued in 1996 and 47,922,749
shares issued in 1995 482 479
Additional paid-in capital 311,138 309,943
Accumulated deficit (276,730) (267,883)
Total shareholders' equity 34,935 42,584
Total $2,914,960 $2,985,609
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, 1996 and 1995
(Unaudited, in thousands, note 1)
1996 1995
Cash flows from operating activities:
Rents and other revenues received $ 157,970 $ 155,469
Proceeds from land sales 17,509 10,897
Interest received 2,996 2,731
Land development expenditures (2,424) (3,590)
Operating expenditures:
Operating properties (78,138) (76,463)
Land sales, development and corporate (6,692) (8,814)
Interest paid:
Operating properties (50,887) (54,198)
Land sales, development and corporate (4,036) (4,279)
Net cash provided by operating activities 36,298 21,753
Cash flows from investing activities:
Expenditures for properties in development
and improvements to existing properties
funded by debt (19,188) (14,046)
Expenditures for improvements to
existing properties funded by cash
provided by operating activities:
Tenant leasing and remerchandising (2,842) (2,252)
Building and equipment (1,190) (1,032)
Proceeds from sales of operating properties 4,728 --
Purchases of marketable securities (1,459) (1,088)
Proceeds from redemptions or sales of
marketable securities 1,269 10,121
Other (10,283) (98)
Net cash used in investing activities (28,965) (8,395)
Cash flows from financing activities:
Proceeds from issuance of property debt 71,560 115,301
Repayments of property debt:
Scheduled principal payments (8,476) (8,913)
Other payments (110,264) (157,305)
Proceeds from issuance of other debt -- 45,000
Repayments of other debt (5,522) (5,538)
Proceeds from exercise of stock options -- 390
Dividends paid (14,275) (13,220)
Other (499) --
Net cash used in financing activities (67,476) (24,285)
Net decrease in cash and cash equivalents (60,143) (10,927)
Cash and cash equivalents at beginning of period 94,922 49,398
Cash and cash equivalents at end of period $ 34,779 $ 38,471
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, 1996 and 1995
(Unaudited, in thousands, note 1)
1996 1995
Reconciliation of net earnings (loss) to net cash
provided by operating activities:
Net earnings (loss) $ 5,428 $(7,850)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 18,284 18,552
(Gain) loss on dispositions of assets
and other provisions, net -- 4,856
Deferred income taxes 4,236 318
Extraordinary losses, net of related income
tax benefits 1,315 7,217
Additions to pre-construction reserve 1,000 1,000
Provision for bad debts 621 760
Decrease (increase) in operating assets and
liabilities, net 5,414 (3,100)
Net cash provided by operating activities $36,298 $21,753
Schedule of Non-Cash Investing and Financing
Activities:
Note received from sale of an operating property $ 1,440 $ --
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, 1996
(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 1995 Annual Report to Shareholders,
except that effective January 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of". Statement No. 121 establishes new standards
for measurement and recognition of impairment of long-lived
assets. Initial adoption had no effect on the financial position
or results of operations reported by the Company.
In its annual reports, the Company has included certain supplementary
current value basis financial statements with the historical cost
basis financial statements. The current value basis financial
statements have been and will continue to be an integral part of the
Company's formal, year-end reporting, but they are not 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) Property
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 $17,823,000 at March 31, 1996.
Changes in pre-construction costs, net, for the three months ended
March 31, 1996 are summarized as follows (in thousands):
Balance at beginning of period, before
pre-construction reserve $ 21,463
Costs incurred 3,246
Costs transferred to construction and development
in progress --
Costs transferred to operating properties (333)
Costs of unsuccessful projects written off (33)
24,343
Less pre-construction reserve 16,346
Balance at end of period, net $ 7,997
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, 1996 and December 31, 1995 is summarized as
follows (in thousands):
March 31, 1996 December 31, 1995
Due in Due in
Total one year Total one year
Mortgages and bonds $1,951,453 $ 37,608 $1,997,998 $102,428
Convertible sub-
ordinated debentures 130,000 - 130,000 -
Medium-term notes 95,300 5,000 100,300 5,000
Other loans 252,737 3,602 251,231 3,001
Total $2,429,490 $ 46,210 $2,479,529 $110,429
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) 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,
1996 and December 31, 1995, there were 4,505,006 and 4,505,009
shares outstanding, respectively.
(5) Gain (loss) on dispositions of assets and other provisions, net
The loss in 1995 relates to a retail center the Company decided to
sell. This loss was recognized based on the estimated fair value of
the property less costs to sell.
(6) Extraordinary losses, net of related income tax benefits
During the three months ended March 31, 1996 and 1995, the Company
incurred extraordinary losses related to extinguishments of debt
prior to scheduled maturity of $2,023,000 and $11,103,000,
respectively, net of related income tax benefits of $708,000 and
$3,886,000, respectively.
8
Part I. Financial Information, continued
Item 1. Financial Statements, continued:
THE ROUSE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, (Unaudited), continued
(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. 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 asserted 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 (including a net award
for lost future profits of approximately $8,640,000) plus interest
and attorneys' fees. On May 6, 1994, the trial court denied all
post-trial motions of both Plaintiff and Defendants. The trial
court also entered an amended judgment in which it awarded the
Plaintiff $450,000 in attorneys' fees and awarded Defendants $25,000
in attorneys' fees.
On May 23, 1994, Defendants appealed this judgment to the Louisiana
Court of Appeal, Fourth Circuit. On November 16, 1995, the
Louisiana Court of Appeal reduced the judgment by $240,000, but
otherwise affirmed the damage award to Plaintiff. Defendants
subsequently filed a motion for reconsideration with the Louisiana
Court of Appeal, which was denied on December 19, 1995. On January
18, 1996, Defendants filed a petition requesting the Louisiana
Supreme Court to consider a further appeal of this judgment. On
April 8, 1996, the Louisiana Supreme Court granted Defendants'
petition and it is expected that the appeal will be heard in the
third quarter of 1996.
The Company recorded in the fourth quarter of 1995 a pre-tax provision
of $12,321,000, representing the full amount of the modified award
(including attorneys' fees) plus interest, less pre-tax provisions
previously recorded totaling $1,150,000.
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)
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 provision has been made for
losses with respect to all litigation matters, where appropriate,
and the ultimate resolution of all such litigation matters is not
likely to have a material effect on the consolidated financial
position of the Company. Due to the Company's modest and
fluctuating net earnings (loss), it is not possible to predict
whether the resolution of these matters is likely to have a material
effect on the Company's consolidated net earnings (loss), and it is,
therefore, possible that the resolution of these matters could have
such a material effect in any future quarter or year.
(8) Possible acquisition of The Hughes Corporation and related matters
On February 22, 1996, the Company's Board of Directors approved the
terms of agreements to acquire all of the issued and outstanding
shares of common stock of The Hughes Corporation and the ownership
interests of stockholders of The Hughes Corporation in an affiliated
partnership (together "Hughes"). The agreements were executed on
February 27, 1996 and the Company has filed a Form S-4 Registration
Statement with the Securities and Exchange Commision to register the
shares of the Company stock that may be issued at closing of the
acquisition or subsequently. The acquisition will be accounted for
using the purchase method and is expected to close in the second
quarter of 1996. However, the transactions are conditional upon
certain closing conditions including approval by the requisite vote
of the holders of the common stock of The Hughes Corporation at a
meeting to be held in June 1996. Accordingly, there can be no
assurance that the transactions will be consummated.
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, 1995 and any material changes in
the results of operations for the three months ended March 31, 1996 as
compared to the same periods in 1995. 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 1995
Annual Report to Shareholders.
Operating Results:
Operating properties:
Revenues from retail centers increased $3,027,000 and total operating and
interest expenses increased $2,014,000 for the three months ended March
31, 1996 as compared to the same period in 1995. The increases in
revenues are attributable primarily to the operations of two properties
that the Company acquired interests in during the third quarter of 1995
and higher rents on re-leased space. These increases have been partially
offset by slightly lower average occupancy levels (89.2% in 1996 compared
to 90.6% in 1995). The increase in expenses for the three months ended
March 31, 1996 is attributable to the operations of the acquired
properties referred to above partially offset by lower interest expense
due to refinancings of certain properties.
Revenues from office, mixed-use and other properties increased $693,000 and
total operating and interest expenses decreased $952,000 for the three
months ended March 31, 1996 as compared to the same period in 1995. The
increase in revenues is attributable to higher occupancy levels at
certain office properties, primarily in Columbia, and higher lease
termination payments due to tenant restructurings. These increases have
been partially offset by lower revenues at a hotel property about to
undergo a renovation. The decrease in expenses for the three months
ended March 31, 1996 is attributable to lower bad debt expense due to the
recovery of amounts previously reserved, lower operating expenses at the
hotel property referred to above and lower interest expense due to debt
repayments made in 1995. These decreases were partially offset by
increased operating expenses associated with the higher occupancy levels
referred to above.
Land sales:
Revenues from land sales increased $6,870,000 and total costs and expenses
increased $2,930,000 for the three months ended March 31, 1996. The
increase in revenues is attributable to higher levels of land sales in
Columbia, particularly for commercial/other uses. The increase in costs
and expenses is attributable to increased costs of sales due to higher
sales revenues.
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 decreased
$708,000 for the three months ended March 31, 1996 as compared to the
same period in 1995. The decrease is due primarily to reduced new
business costs as the Company's focus on the acquisition of Hughes has
preempted evaluation of other new opportunities.
Corporate:
Corporate interest costs were $4,338,000 and $3,581,000 for the three
months ended March 31, 1996 and 1995, respectively. Of such amounts,
$715,000 and $875,000 were capitalized during the three months ended
March 31, 1996 and 1995, respectively on funds invested in development
projects. The increase in corporate interest costs for the three month
period is due to a higher level of debt used for corporate purposes.
Gain (loss) on dispositions of assets and other provisions, net
The loss in 1995 relates to a retail center the Company decided to sell.
The loss was recognized based on the estimated fair value of the property
less costs to sell.
Extraordinary losses, net of related income tax benefits
During the three months ended March 31, 1996 and 1995, the Company incurred
extraordinary losses related to extinguishments of debt prior to
scheduled maturity of $2,023,000 and $11,103,000, respectively, net of
related income tax benefits of $708,000 and $3,886,000, respectively.
12
Part I. Financial Information, continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
Financial Condition and Liquidity:
Shareholders' equity decreased by $7,649,000 from $42,584,000 at December
31, 1995 to $34,935,000 at March 31, 1996. The decrease was due
principally to the payment of regular quarterly dividends on the
Company's common and Preferred stocks partially offset by the Company's
net earnings for the three months ended March 31, 1996.
The Company had cash and cash equivalents and investments in marketable
securities totaling $52,879,000 and $97,832,000 at March 31, 1996 and
December 31, 1995, respectively, including $18,100,000 and $2,910,000,
respectively, held for restricted uses.
The Company has lines of credit of $158,920,000 of which $150,220,000 was
available at March 31, 1996. These lines of credit 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
1996 and 1997. As of March 31, 1996, debt due in one year was
$46,210,000. 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 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 $36,298,000 and $21,753,000
for the three months ended March 31, 1996 and 1995, respectively. The
factors discussed previously under the operating results of the four
major business segments, particularly higher land sale revenues, affected
the level of net cash provided by operating activities.
Net cash used in investing activities was $28,965,000 and $8,395,000 for
the three months ended March 31, 1996 and 1995, respectively. The
increase in net cash used of $20,570,000 was due primarily to higher
development expenditures and an escrow deposit of $15,000,000 related to
the acquisition of Hughes.
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 $67,476,000 and $24,285,000
for the three months ended March 31, 1996 and 1995, respectively. The
increase in net cash used of $43,191,000 is attributable primarily to
the use of financing proceeds received in 1995 to repay certain higher
rate property debt.
Information relating to forward-looking statements:
This report on Form 10-Q of the Company includes forward-looking statements
which reflect the Company's current views with respect to future events
and financial performance. These forward-looking statements are subject
to certain risks and uncertainties, including those identified below,
which could cause actual results to differ materially from historical
results or those anticipated. The words "believe", "expect",
"anticipate" and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of their dates. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. The following factors could cause actual results to differ
materially from historical results or those anticipated: (1) real estate
investment risks; (2) development risks; (3) illiquidity of real estate
investments; (4) dependence on rental income from real property; (5)
effect of uninsured loss; (6) lack of geographical diversification; (7)
possible environmental liabilities; (8) difficulties of compliance with
the Americans with Disabilities Act; (9) competition; (10) changes in the
economic climate; and (11) factors relating to the proposed Hughes
acquisition. For a more detailed discussion of these factors, see
Exhibit 99.2 of the Company's Form 10-K for the fiscal year ended
December 31, 1995.
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 alleged 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 claimed 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. All
Defendants filed answers denying the claims of Plaintiff and asserted
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. The
trial court also entered an amended judgment in which it awarded the
Plaintiff $450,000 in attorneys' fees and awarded Defendants $25,000 in
attorneys' fees.
On May 23, 1994, Defendants appealed this judgment to the Louisiana Court
of Appeal, Fourth Circuit. On November 16, 1995, the Louisiana Court of
Appeal in a 2 to 1 decision reduced the judgment by $240,000, but
otherwise affirmed the damage award to Plaintiff. Defendants
subsequently filed a motion for reconsideration with the Louisiana Court
of Appeal, which was denied on December 19, 1995, again in a 2 to 1
decision. On January 18, 1996, Defendants filed a petition requesting
the Louisiana Supreme Court to consider a further appeal of this
judgment. On April 8, 1996, the Louisiana Supreme Court granted
Defendants' petition, and it is expected that the appeal will be heard in
the third quarter of 1996. For additional information about this suit,
see Note 7 - Contingencies - to the consolidated financial statements.
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, 1996 By /s/Jeffrey H. Donahue
Jeffrey H. Donahue
Senior Vice President and
Chief Financial Officer
Principal Accounting Officer:
Date: May 15, 1996 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,
1996 1995
Earnings (loss) before extraordinary losses $ 6,743 $ (633)
Add after-tax interest expense applicable
to convertible subordinated debentures 1,215 1,215
Earnings before extraordinary losses,
as adjusted 7,958 582
Extraordinary losses (1,315) (7,217)
Net earnings (loss), as adjusted $ 6,643 $(6,635)
Shares:
Weighted average number of common shares
outstanding 48,058 47,664
Assuming conversion ofconvertible Preferred stock 10,600 10,600
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 412 216
Weighted average number of shares outstanding,
as adjusted 63,612 63,022
Earnings (loss) per common share assuming
full dilution:
Earnings before extraordinary losses, as adjusted $ .12 $ .01
Extraordinary losses (.02) (.12)
Net earnings (loss), adjusted $ .10 $ (.11)
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.
19
<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
March 31, 1996 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-31-1996
<PERIOD-END> MAR-31-1996
<CASH> $ 34,779
<SECURITIES> $ 18,100
<RECEIVABLES> $ 55,019
<ALLOWANCES> $ (25,214)
<INVENTORY> 0
<CURRENT-ASSETS> $ 92,425<F1>
<PP&E> $ 3,216,857
<DEPRECIATION> $ (533,566)
<TOTAL-ASSETS> $ 2,914,960
<CURRENT-LIABILITIES> $ 100,171<F2>
<BONDS> $ 2,383,280
<COMMON> $ 482
0
$ 45
<OTHER-SE> $ 34,408
<TOTAL-LIABILITY-AND-EQUITY> $ 2,914,960
<SALES> $ 173,148
<TOTAL-REVENUES> $ 173,148
<CGS> 0
<TOTAL-COSTS> $ 161,990
<OTHER-EXPENSES> $ 0
<LOSS-PROVISION> $ 621
<INTEREST-EXPENSE> $ 52,251
<INCOME-PRETAX> $ 11,158
<INCOME-TAX> $ 4,415
<INCOME-CONTINUING> $ 6,743
<DISCONTINUED> 0
<EXTRAORDINARY> $ (1,315)
<CHANGES> 0
<NET-INCOME> $ 5,428
<EPS-PRIMARY> $ .04
<EPS-DILUTED> $ .10
<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>
