<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1998 COMMISSION FILE NUMBER 0-18694
CATELLUS DEVELOPMENT
CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2953477
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(415) 974-4500
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
--- ---
As of November 6, 1998, there were 106,753,226 issued and outstanding
shares of the registrant's common stock, $.01 par value per share.
================================================================================
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet as of September 30, 1998 and December 31, 1997.. 2
Consolidated Statement of Operations for the three months and nine months
ended September 30, 1998 and 1997......................................... 3
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1998 and 1997............................................... 4
Notes to Consolidated Financial Statements................................. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................... 11
PART II. OTHER INFORMATION.......................................................... 25
SIGNATURES.......................................................................... 26
EXHIBIT INDEX....................................................................... 27
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Properties........................................................... $ 1,607,178 $ 1,358,807
Less accumulated depreciation........................................ (257,779) (235,832)
----------- -----------
1,349,399 1,122,975
Other assets and deferred charges, net............................... 57,103 50,138
Notes receivable, less allowance..................................... 20,639 30,971
Accounts receivable, less allowance.................................. 35,604 19,641
Restricted cash...................................................... 31,235 --
Cash and cash equivalents............................................ 30,156 17,294
----------- -----------
Total................................................. $ 1,524,136 $ 1,241,019
=========== ===========
Liabilities and stockholders' equity
Mortgage and other debt.............................................. $ 774,262 $ 568,699
Accounts payable and accrued expenses................................ 83,516 62,681
Deferred credits and other liabilities .............................. 48,081 40,035
Deferred income taxes ............................................... 132,334 117,705
----------- -----------
Total liabilities ......................................... 1,038,193 789,120
----------- -----------
Commitments and contingencies (Note 8)
Stockholders' equity
Preferred stock ............................................... -- --
Common stock - 106,749 and 106,503 shares issued at
September 30, 1998 and December 31, 1997, respectively ... 1,067 1,065
Paid-in capital ............................................... 479,038 476,047
Accumulated earnings (deficit) ................................ 5,838 (25,213)
----------- -----------
Total stockholders' equity ............................... 485,943 451,899
----------- -----------
Total ............................................... $ 1,524,136 $ 1,241,019
=========== ===========
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- --------------------
1998 1997 1998 1997
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income producing properties
Rental revenue .......................................... $ 37,145 $ 32,901 $110,425 $95,127
Property operating costs ................................ (10,910) (9,747) (30,983) (28,848)
Equity in earnings of joint ventures, net ............... 1,674 1,096 7,354 5,963
-------- -------- -------- -------
27,909 24,250 86,796 72,242
-------- -------- -------- -------
Development activities and fee services
Gain on property sales .................................. 10,144 3,368 20,240 7,006
Development and management fee income, net .............. 2,602 2,223 5,745 4,377
Equity in earnings of joint ventures, net ............... 1,489 282 1,605 1,507
Land holding costs, net ................................. (432) (492) (1,537) (834)
-------- -------- -------- -------
13,803 5,381 26,053 12,056
-------- -------- -------- -------
Interest expense ........................................... (9,043) (10,035) (29,052) (30,034)
Depreciation and amortization .............................. (8,230) (7,839) (25,001) (23,038)
General and administrative expense ......................... (3,214) (2,926) (9,577) (8,242)
Gain on non-strategic land and other asset sales ........... 2,858 570 7,228 4,628
Litigation and environmental costs, net .................... -- 1,100 -- 1,142
Other, net ................................................. 550 90 979 45
-------- -------- -------- -------
Income before income taxes and extraordinary expense ....... 24,633 10,591 57,426 28,799
Income tax expense
Current ............................................... (3,002) (661) (6,592) (1,797)
Deferred .............................................. (6,929) (3,652) (16,476) (9,930)
-------- -------- -------- -------
(9,931) (4,313) (23,068) (11,727)
-------- -------- -------- -------
Income before extraordinary expense ..................... 14,702 6,278 34,358 17,072
Extraordinary expense related to early retirement of debt,
net of income tax benefit ............................... (3,307) -- (3,307) --
-------- -------- -------- -------
Net income .............................................. 11,395 6,278 31,051 17,072
Preferred stock dividends .................................. -- -- -- (1,353)
-------- -------- -------- -------
Net income applicable to common stockholders ............ $ 11,395 $ 6,278 $ 31,051 $15,719
-------- -------- -------- -------
Net income per share before extraordinary expense
Basic ............................................. $ 0.14 $ 0.06 $ 0.32 $ 0.17
======== ======== ======== =======
Assuming dilution ................................. $ 0.13 $ 0.06 $ 0.31 $ 0.16
-------- -------- -------- -------
Net loss per share - extraordinary expense
Basic ............................................. $ (0.03) $ -- $ (0.03) $ --
-------- -------- -------- -------
Assuming dilution ................................. $ (0.03) $ -- $ (0.03) $ --
======== ======== ======== =======
Net income per share after extraordinary expense
Basic ............................................. $ 0.11 $ 0.06 $ 0.29 $ 0.17
-------- -------- -------- -------
Assuming dilution ................................. $ 0.10 $ 0.06 $ 0.28 $ 0.16
======== ======== ======== =======
Average number of common shares outstanding - basic ..... $106,747 $106,424 $106,660 $94,603
======== ======== ======== =======
Average number of common shares outstanding - diluted ... $109,190 $109,924 $109,570 $97,702
======== ======== ======== =======
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1998 1997
--------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................. $ 31,051 $ 17,072
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Extraordinary expense related to early retirement of
debt, before income tax benefit...................... 5,484 --
Depreciation and amortization .......................... 25,001 23,038
Deferred income taxes .................................. 15,681 9,930
Amortization of deferred loan fees and other costs ..... 2,223 2,218
Equity in earnings of joint ventures ................... (8,959) (7,470)
Operating distributions from joint ventures ............ 8,528 8,177
Cost of properties and non-strategic land sold ......... 72,592 43,855
Gain on sales of other assets........................... (4,529) (1,600)
Expenditures for development properties ................ (106,129) (48,619)
Contributions to residential joint ventures ............ (33,226) (11,309)
Other property acquisitions ............................ (10,467) --
Other, net ............................................. (1,527) 1,834
Change in operating assets and liabilities ............. (4,175) (4,140)
-------- --------
Net cash (used in) provided by operating activities .............. (8,452) 32,986
-------- --------
Cash flows from investing activities:
Property acquisitions ....................................... (33,230) (14,428)
Capital expenditures ........................................ (68,424) (80,353)
Tenant improvements ......................................... (2,001) (4,631)
Net proceeds from sale of other assets ...................... 4,886 2,623
Contributions to joint ventures.............................. (6,434) (4,601)
Restricted cash for future investment........................ (31,235) (2,181)
-------- --------
Net cash used in investing activities ............................ (136,438) (103,571)
-------- --------
Cash flows from financing activities:
Borrowings .................................................. 401,777 117,588
Repayment of borrowings ..................................... (236,147) (48,393)
Redemption premium on early retirement of debt .............. (4,610) --
Dividends paid .............................................. -- (5,975)
Redemption of preferred stock ............................... -- (471)
Distributions to minority partners .......................... (5,202) (3,976)
Proceeds from issuance of common stock ...................... 1,934 3,365
-------- --------
Net cash provided by financing activities ........................ 157,752 62,138
-------- --------
Net increase (decrease) in cash and cash equivalents ............. 12,862 (8,447)
Cash and cash equivalents at beginning of period ................. 17,294 23,580
-------- --------
Cash and cash equivalents at end of period ....................... $ 30,156 $ 15,133
-------- --------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) ................... $ 25,608 $ 27,490
Income taxes............................................ $ 6,137 $ 699
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 1. DESCRIPTION OF BUSINESS
Catellus Development Corporation (the "Company") is a diversified real
estate operating company, with a large portfolio of income-producing properties
and developable land, that manages and develops real estate for its own account
and others. The Company's development portfolio of industrial, residential,
retail, office and joint venture projects are primarily located in major markets
in California and seven other states. The Company's income-producing properties
consist primarily of industrial facilities, along with a number of office and
retail buildings located in California, Arizona, Illinois, Texas, Colorado, and
Oregon. The Company also has substantial undeveloped land holdings primarily in
these same states.
NOTE 2. INTERIM FINANCIAL DATA
The accompanying consolidated financial statements should be read in
conjunction with the Company's 1997 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission. In the opinion of management, the
accompanying financial information includes all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position, results of operations, and cash flows for the interim periods
presented. Certain prior period financial data has been reclassified to conform
with the current period presentation.
NOTE 3. NEW ACCOUNTING STANDARDS
In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share", which changed the method of
calculation and presentation of earnings per share. This change did not have
any impact on previously reported income per share amounts for the three and
nine months ended September 30, l997.
During June 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", and No. 131, "Segment Reporting". Both standards are
effective for fiscal years beginning after December 15, 1997. SFAS No. 130
establishes the disclosure requirements for reporting comprehensive income in an
entity's annual and interim financial statements and is effective for the
Company for the year ending December 31, 1998. Comprehensive income represents
changes in stockholders' equity except those resulting from investments by and
distributions to owners. As of September 30, 1998, the Company has no other
comprehensive income; accordingly no such disclosure is made in the consolidated
statement of operations. SFAS No. 131 establishes standards for determining an
entity's operating segments and the type and level of financial information to
be disclosed. This statement need not be applied and will not be applied to
interim financial statements during the year ending December 31, 1998. However,
this statement will be applied to the Company's annual financial statements for
the year ending December 31, 1998.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 is effective for years beginning after June 15, 1999.
The statement requires all derivatives to be recorded on the balance sheet at
fair value and establishes new accounting treatment for the different types of
transactions qualifying for hedge accounting. The Company plans to adopt this
statement in the first quarter of 2000. Management does not believe this new
standard will significantly impact the financial position, results of
operations, or cash flows of the Company.
In September 1998, the FASB's Emerging Issues Task Force issued EITF
No. 98-9, "Accounting for Contingent Rents in Interim Financial Statements"
which states that subsequent to May 22, 1998, a lessor should not recognize
contingent rental revenue during interim reporting periods until specified
targets that trigger the contingent rent are met. As of September 30, 1998, this
new pronouncement presented no impact to the Company's financial position,
results of operations, or cash flows.
5
<PAGE>
NOTE 4. RESTRICTED CASH
At September 30, 1998, proceeds of $31.2 million from development property
sales are being held in separate cash accounts at various trust companies in
order to preserve the Company's options of reinvesting the proceeds on a tax-
deferred basis.
NOTE 5. INCOME PER SHARE
Income per share of common stock applicable to common stockholders is
computed by dividing income before extraordinary expense, after reduction for
preferred stock dividends, by the weighted average number of shares of common
stock and equivalents outstanding during the period (see table below for effect
of dilutive securities).
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998
------------------------------------------------------------------
1998 1997
--------------------------- -----------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
-------- ------- --------- ------- -------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary expense ............... $14,702 $ 6,278
Less preferred stock dividends .................... -- --
------- --------
Income applicable to common stockholders........... 14,702 106,747 $0.14 6,278 106,424 $0.06
Effect of dilutive securities: stock options ...... -- 2,443 ===== -- 3,500 =====
------- ------- -------- -------
Income applicable to common stockholders
assuming dilution ............................ $14,702 109,190 $0.13 $ 6,278 109,924 $0.06
======= ======= ===== ======== ======= =====
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
------------------------------------------------------------------
1998 1997
--------------------------- -----------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
-------- ------- --------- ------- -------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary expense .............. $34,358 $17,072
Less preferred stock dividends ................... -- (1,353)
------- -------
Income applicable to common stockholders.......... 34,358 106,660 $0.32 15,719 94,603 $0.17
Effect of dilutive securities: stock options ..... -- 2,910 ===== -- 3,099 =====
------- ------- ------- ------
Income applicable to common stockholders
assuming dilution ........................... $34,358 109,570 $0.31 $15,719 97,702 $0.16
======= ======= ===== ======= ====== =====
</TABLE>
6
<PAGE>
NOTE 6. MORTGAGE AND OTHER DEBT
Mortgage and other debt at September 30, 1998 and December 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- ------------
(in thousands)
<S> <C> <C>
First mortgage loans ....................................... $377,471 $317,432
Secured revolving credit line .............................. 185,194 192,100
Acquisition secured promissory notes ....................... 37,716 --
Unsecured revolving credit lines ........................... 105,920 --
Residential construction loans ............................. 15,518 6,453
Assessment district bonds .................................. 18,743 17,825
Term loan - secured ........................................ 12,817 12,929
Secured promissory notes ................................... 20,634 21,570
Other loans ................................................ 249 390
-------- --------
Total mortgage and other debt ......................... $774,262 $568,699
======== ========
Due in one year ............................................ $278,094 $218,933
======== ========
</TABLE>
The first mortgage loans consist of $210.8 million from Prudential
Insurance Company of America, bearing interest at 8.65% to 8.93%, maturing at
various dates through March 2004; $116.8 million from Teachers Insurance and
Annuity Association College Retirement Equities Fund ("TIAA"), bearing
interest at 6.65%, maturing in September 2006; $22.3 million from Teachers
Insurance and Annuity Association of America, bearing interest at 9.75%,
maturing October 2002; and $27.6 million from various lenders bearing interest
at 7.625% to 9.5%, maturing at various dates from October 2002 through March
2009.
In September 1998, the Company signed separate commitment letters with
Prudential Mortgage Capital Inc. ("Prudential") for $373 million and TIAA for
$153.5 million for a total of $526.5 million in long-term non-recourse fixed
rate financing.
On October 26, 1998, the $373 million Prudential loan closed; the loan
bears interest at 6.01% and is amortized over 30 years with a maturity term of
10 years. The proceeds were used to repay $207.6 million of the existing
Prudential first mortgage loan and $100.0 million on the secured revolving
credit line. The Company expects to recognize a $22.0 million extraordinary
charge, net of tax benefit, related to the closing of this loan. In connection
with the Prudential loan, the Company executed several Treasury-lock contracts
with a notional amount totaling approximately $232.0 million. Such contracts
were executed for purposes of fixing the interest rate on this new loan. The
net payment upon liquidation of the Treasury-lock contracts is approximately
$16.7 million, which, considered as part of the finance costs, resulted in an
effective interest rate of 6.46% on the Prudential loan. The payment will be
capitalized and amortized to interest expense over the life of the mortgage
financing.
Between September and October 1998, The Company closed $148.9 million of
the TIAA loans; the loans bear interest at 6.65% and is amortized over 30
years with a maturity term of 8 years. The proceeds were used to repay $39.2
million of the existing Prudential loan, $54.0 million on the secured
revolving credit line and $16.5 million of other indebtedness. As of September
30, 1998, the prepayment resulted in recognition of a $3.3 million
extraordinary charge, net of tax benefit of $2.2 million. The remaining $4.6
million of TIAA loans is expected to close during the 4th quarter.
The Company's $265 million secured revolving credit line was extended and
modified on October 30, 1998. The secured revolving credit line's maturity was
extended for two years to November 1, 2000, at an initial amount of $213
million, with the capacity to go up to $265 million provided that additional
lender participation is obtained.
7
<PAGE>
In connection with acquisitions of approximately 13,100 acres of land,
which includes 1,970 land leases, and 2.6 million linear feet of revenue-
generating easements, subsidiaries of the Company issued a total of $39.9
million of secured promissory notes. These notes bear interest at 7.23% and
are due at various dates through December 1, 2005. The Company intends to sell
these assets. Accordingly, these acquisition secured promissory notes are paid-
down on a pro-rata basis upon the sales of these assets.
The unsecured revolving credit lines consist of two credit lines with
capacity up to $95 million and $60 million, respectively. On October 30, 1998,
the $95 million credit line was partially paid down and its maturity was
extended in tiers due from November 1, 1998 to December 1, 1998. It is
anticipated that this line will be fully repaid before December 1, 1998. At
September 30, 1998, $68.5 million was drawn on this unsecured credit line.
On September 25, 1998, the Company's residential subsidiary closed a $60
million unsecured credit line. This credit line bears interest at LIBOR + 1 5/8
which was 6.88% at September 30, 1998 and matures on October 1, 2000. At
September 30, 1998, $37.4 million was drawn on this credit line.
Interest costs relating to mortgage and other debt for three-and nine-month
periods ended September 30, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
1998 1997 1998 1997
----------- --------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Total interest incurred ....... $ 15,104 $ 11,749 $ 41,161 $ 34,354
Interest capitalized ........... (6,061) (1,714) (12,109) (4,320)
-------- -------- -------- --------
Interest expensed ......... $ 9,043 $ 10,035 $ 29,052 $ 30,034
======== ======== ======== ========
</TABLE>
8
<PAGE>
NOTE 7. PROPERTIES
Book value by property type at September 30, 1998 and December 31, 1997
consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(in thousands)
<S> <C> <C>
Income-producing properties:
Industrial buildings ......................... $ 483,032 $ 458,963
Office buildings.............................. 195,036 193,654
Retail buildings ............................. 95,461 97,483
Land development/(1)/......................... 333,799 341,821
Land leases/(2)/.............................. 53,609 8,036
Investment in joint ventures ................. (47,146) (48,513)
---------- ----------
1,113,791 1,051,444
---------- ----------
Developable Properties:
Industrial ................................... 122,152 79,658
Residential .................................. 83,053 66,069
Retail, office and other ..................... 23,456 37,401
Natural resources ............................ 6,652 4,975
Properties held for sale ..................... 40,124 29,588
Investment in joint ventures ................. 58,914 22,049
---------- ----------
334,351 239,740
---------- ----------
Work-in-process:
Industrial ................................... 85,636 39,264
Residential .................................. 51,016 7,411
---------- ----------
136,652 46,675
---------- ----------
Other ............................................. 22,384 20,948
---------- ----------
Gross book value .................................. 1,607,178 1,358,807
Accumulated depreciation .......................... (257,779) (235,832)
---------- ----------
Net book value .................................... $1,349,399 $1,122,975
========== ==========
</TABLE>
/(1)/ This category represents interim income-producing uses of properties
intended for mixed-use development.
/(2)/ This category includes $48.2 million of land which the Company intends to
sell.
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Company is a party to a number of legal actions arising in the ordinary
course of business. While the Company cannot predict with certainty the final
outcome of these proceedings, considering current insurance coverages and the
substantial legal defenses available, management believes that none of these
actions, when finally resolved, will have a material adverse effect on the
consolidated financial position, results of operations, or cash flows of the
Company.
Inherent in the operations of the real estate business is the possibility
that environmental liability may arise from the current or past ownership or
current or past operation of real properties. The Company may be required in the
future to take action to correct or reduce the environmental effects of prior
disposal or release of hazardous substances by third parties, the Company, or
its corporate predecessors. Future environmental costs are difficult to estimate
because of such factors as the unknown magnitude of possible contamination, the
unknown timing and extent of the corrective actions that may be required, the
determination of the Company's liability in proportion to that of other
responsible parties, and the extent to which such costs are recoverable from
insurance.
9
<PAGE>
At September 30, 1998, management estimates that future costs for
remediation of identified or suspected environmental contamination on operating
properties and properties previously sold approximate $10.8 million, and has
provided a reserve for that amount. It is anticipated that such costs will be
incurred over the next ten years with a substantial portion incurred over the
next five years. Management also estimates that similar costs relating to the
Company's properties to be developed or sold may range from $11.8 million to $37
million. These amounts will be capitalized as components of development costs
when incurred, which is anticipated to be over a period of twenty years, or will
be deferred and charged to cost of sales when the properties are sold. The
Company's estimates were developed based on reviews which took place over
several years based upon then prevailing law and identified site conditions.
Because of the breadth of its portfolio, and past sales, the Company is unable
to review each property extensively on a regular basis. Such estimates are not
precise and are always subject to the availability of further information about
the prevailing conditions at the site, the future requirements of regulatory
agencies, and the availability of other parties to pay some or all of such
costs.
As of September 30, 1998, the Company has outstanding standby letters
of credit and surety bonds in the amount of $92.4 million in favor of local
municipalities or financial institutions to guarantee performance on real
property improvements or financial obligations.
NOTE 9. PREFERRED STOCK CONVERSION/REDEMPTION
In December 1996, the Company called for redemption of approximately $25
million of its $3.75 Series A Cumulative Convertible Preferred Stock (Series A
Preferred Stock). In January 1997, of the 475,000 preferred shares called,
471,730 shares were converted into 2,603,168 common shares and 3,270 shares were
redeemed at $52.625 per share plus accrued and unpaid dividends at a cost of
approximately $175,000.
On February 5, 1997, the Company called for redemption of approximately $90
million of its Series A Preferred Stock. On March 24, 1997, of the 1,720,000
preferred shares called, 1,715,837 shares were converted into 9,469,015 common
shares and the remaining shares were redeemed at $52.25 per share plus accrued
and unpaid dividends at a cost of approximately $220,000.
On March 24, 1997, the Company called for redemption of the remaining
outstanding 250,000 shares, or approximately $13 million, of its Series A
Preferred Stock and 1,470,000 shares, or approximately $75 million, of its
$3.625 Series B Cumulative Convertible Exchangeable Preferred Stock (Series B
Preferred Stock). In May 1997, 99.7% of the Series A Preferred Stock shares
were converted into 1,376,742 shares of common stock and the remaining shares
were redeemed at $52.25 per share plus accrued and unpaid dividends at a cost of
approximately $45,000; additionally, the Series B Preferred Stock shares were
converted into approximately 7,500,000 shares of common stock.
On May 1, 1997, the Company called for redemption of the remaining
outstanding 1,521,000 shares, or approximately $80 million, of its Series B
Preferred Stock. In June 1997, all of the remaining Series B Preferred Stock
shares were converted into 7,758,201 shares of common stock.
With the completion of the May 1, 1997 call, the Company has no remaining
outstanding preferred stock.
10
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations.
The following discussion and analysis should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Company's 1997 Form 10-K.
RESULTS OF OPERATIONS
Comparison of the nine-month periods ended September 30, 1998 and 1997
Income-Producing Properties. Rental revenue and property operating costs for
the Company's income-producing properties for the nine-month periods ended
September 30, 1998 and 1997 are summarized below:
<TABLE>
<CAPTION>
Rental Revenue Property Operating Costs
--------------------------------- ------------------------------------
Nine Months Ended September 30, Nine Months Ended September 30,
1998 1997 Difference 1998 1997 Difference
--------- -------- ---------- -------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Industrial buildings.......... $ 57,655 $ 49,010 $ 8,645 $ 11,932 $ 10,586 $ 1,346
Office buildings.............. 23,945 21,830 2,115 9,840 9,419 421
Retail buildings.............. 10,058 10,029 29 3,007 2,942 65
Land development/(1)/......... 8,765 8,441 324 5,578 5,226 352
Land leases................... 10,002 5,817 4,185 626 675 (49)
--------- -------- -------- -------- -------- -------
$ 110,425 $ 95,127 $ 15,298 $ 30,983 $ 28,848 $ 2,135
========= ======== ======== ======== ======== =======
</TABLE>
Building square footage owned, square footage leased and occupancy are as
follows:
<TABLE>
<CAPTION>
September 30,
------------------------------------------------------------
1998 1997
---------------------------- -----------------------------
(in thousands, except percentages)
Owned Leased % Owned Leased %
--------- -------- ------ ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Industrial buildings.......... 15,105 14,370 95.1% 13,963 13,675 97.9%
Office buildings.............. 1,620 1,528 94.3% 1,620 1,542 95.2%
Retail buildings.............. 928 827 89.1% 928 862 92.9%
Land development/(1)/......... 1,220 1,054 86.4% 1,231 1,135 92.2%
------ ------ ------ ------
18,873 17,779 94.2% 17,742 17,214 97.0%
====== ====== ====== ======
</TABLE>
/(1)/ This category represents interim income-producing uses of properties
intended for mixed-use development.
The increase in revenue from industrial buildings is primarily attributable
to eleven newly constructed buildings totaling approximately 2.6 million square
feet that have been added to the portfolio since January 1, 1997, offset by a
decrease in revenues resulting from sales in 1997 and 1998 of four buildings
totaling approximately 0.7 million square feet. Approximately $8.4 million of
the increase is attributable to base rents and tenant pass-through for the new
properties, partially offset by a decrease of $1.6 million attributable to
properties sold. Approximately $1.8 million of the increase in revenue is
attributable to higher base rental rates and tenant pass-through charges from
properties which were owned and operated for all of 1997 and year-to-date 1998
("Same Space"). The increase in operational costs is primarily attributable to
approximately $1.1 million from Same Space and $0.6 million from the new
buildings, offset by a decrease of $0.4 million attributable to properties sold.
11
<PAGE>
Rental revenue for the Company's office portfolio increased by $2.1 million
for the nine months ended September 30, 1998, compared to the same period in
1997, primarily because of higher rental rates for Same Space. Operating costs
for office buildings increased by $0.4 million, primarily as a result of higher
utility costs and property taxes.
The $4.2 million increase in revenues from the Company's land lease
portfolio for the nine months ended September 30, 1998 as compared to the same
period in 1997 is primarily attributable to the 1998 acquisitions of 13,100
acres of land, which includes 1,970 land leases, and 2.6 million linear feet of
revenue-generating easements. The increase attributable to these acquisitions is
not of a long-term nature, as the Company intends to sell these assets to
qualified buyers (see Other Sales below).
In total, property operating costs were higher for the nine months ended
September 30, 1998, as compared to the same period in 1997, because of property
taxes associated with the new buildings, operating and maintenance costs
attributable to Same Space, and higher overhead.
Income-producing joint venture earnings, net, increased by $1.4 million for
the nine months ended September 30, 1998 as compared to the same period in 1997,
primarily because of higher occupancies and room rates in certain hotel joint
ventures.
Development Activities and Fee Services. Gain on property sales was $20.2
million for the nine months ended September 30, 1998 compared to $7.0 million
for the same period in 1997, summarized as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997 Difference
----------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Commercial Sales:
Sales............................................. $ 67,253 $ 24,607 $ 42,646
Cost of sales .................................... 51,968 18,703 33,265
-------- -------- --------
Gain.................................. 15,285 5,904 9,381
-------- -------- --------
Residential Sales:
Sales............................................. 28,937 23,645 5,292
Cost of sales..................................... 25,381 22,543 2,838
-------- -------- --------
Gain.................................. 3,556 1,102 2,454
-------- -------- --------
Other Sales:
Sales............................................. 3,506 -- 3,506
Cost of sales..................................... 2,107 -- 2,107
-------- -------- --------
Gain.................................. 1,399 -- 1,399
-------- -------- --------
Total gain on property sales...................... $ 20,240 $ 7,006 $ 13,234
======== ======== ========
</TABLE>
The 1998 results include a $5.3 million gain from the sale of a commercial
development joint venture in Texas and a $3.3 million gain from the sale of a
commercial development in Illinois. The 1997 results include a $2.2 million gain
from the sale of a 279,000-square-foot industrial building in La Mirada,
California. In addition, the Company closed the sale of 96 homes and 836 lots in
the nine months ended September 30, 1998 compared to 108 homes and zero lots
during the same period in 1997.
The 1998 results from other sales represent the sales of land and related
land leases associated with the acquisitions in the land lease portfolio during
1998.
12
<PAGE>
The Company expects there will be significant variability in income
generated from its development activities (see Variability in Results section).
Following is a summary of sales of development property under contract but
not closed as of September 30, 1998 and 1997:
<TABLE>
<CAPTION>
As of September 30,
1998 1997
--------- ----------
(in thousands)
<S> <C> <C>
Commercial development ...................................... $ 45,574 $ 13,924
======== ========
Residential development
Owned projects
Units .................................................. $ 59,256 $ --
Lots ................................................... 10,326 --
-------- --------
$ 69,582 $ --
======== ========
Joint venture projects - Units/(1)/.......................... $ 30,629 $ 45,720
======== ========
</TABLE>
(1) The amounts shown are 100% of the gross sales price; the Company is
entitled to receive 25%-50% of the net profits from these joint ventures.
Development and management fee income, net, increased by $1.4 million for
the nine months ended September 30, 1998 compared to the same period in 1997.
The increase is primarily attributable to increases in management fees from
management contracts and related services to railroad company clients.
The $0.7 million increase in land holding costs, net, for the nine months
ended September 30, 1998 compared to the same period in 1997 is primarily
because the land holding costs in 1997 included an offset for interim ground
lease income. This lease was terminated in October 1997.
Interest Expense. Interest expense decreased approximately $1.0 million for the
nine months ended September 30, 1998 compared to the same period in 1997;
however, total interest incurred increased $6.8 million. Interest costs increase
attributable to additions to the portfolio were offset by the increase in
capitalized interest related to higher development activity.
Following is a summary of interest incurred for the nine months ended
September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997 Difference
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Total interest costs ............................ $ 41,161 $ 34,354 $ 6,807
Interest capitalized ............................ (12,109) (4,320) (7,789)
-------- -------- --------
Interest expensed .......................... $ 29,052 $ 30,034 $ (982)
======== ======== ========
</TABLE>
General and Administrative Expenses. General and administrative expense
increased by $1.3 million for the nine months ended September 30, 1998, compared
to the same period in 1997 primarily because of the increase in the Company's
overall activities.
13
<PAGE>
Gain on Sales of Non-Strategic Land and Other Asset Sales. The increase in gain
on sales of non-strategic land and other property from the nine months ended
September 30, 1998 as compared to the same period in 1997 is summarized as
follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997 Difference
----------- --------- ------------
(in thousands)
<S> <C> <C> <C>
Sales ........................................... $ 11,299 $ 19,122 $ (7,823)
Cost of sales ................................... 4,071 14,494 (10,423)
-------- -------- --------
Gain ....................................... $ 7,228 $ 4,628 $ 2,600
======== ======== ========
</TABLE>
In 1995, the Company began an accelerated program of selling non-strategic
assets, with the proceeds intended to pay down a portion of existing debt and
fund new development. From 1995 through September 30, 1998, the Company sold
$190.3 million of non-strategic assets. In addition, at September 30, 1998,
$62.6 million of such assets were under contract or option for sale. Because of
the diminishing amount of such assets in the Company's portfolio, the Company
expects future sales of non-strategic assets to be substantially lower than the
levels in the recent past, with the exception of two significant sales expected
to close in the next three to six months.
Litigation and Environmental Costs, Net. The Company received environmental
recoveries of $1.1 million for the nine months ended September 30, 1997. There
were no such recoveries for the same period in 1998.
Extraordinary Expense. As of September 30, 1998, the Company closed $116.8
million of the total $526.5 million long-term non-recourse fixed rate financing.
The closing in the 3rd Quarter resulted in recognition of a $3.3 million
extraordinary charge, net of tax benefit of $2.2 million, related to yield
maintenance payments and a write-off of unamortized loan issuance costs. The
Company expects to recognize an additional $22 million extraordinary expense,
net of tax benefit, related to the remaining long-term non-recourse fixed rate
financing in the 4th Quarter (See Cash balances, available borrowings and
capital resources section for further discussion).
Preferred Stock Dividends. Preferred stock dividends declined by $1.4 million
from the nine-months ended September 30, 1997 compared to the same period in
1998 as a result of preferred stock calls in 1997. With the completion of the
preferred stock calls in June 1997, the Company has no remaining outstanding
preferred stock.
Comparison of the three-month periods ended September 30, 1998 and 1997.
Income-Producing Properties. Rental revenue and property operating costs for
the Company's income-producing properties for the three-month periods ended
September 30, 1998 and 1997 are summarized below:
<TABLE>
<CAPTION>
Rental Revenues Property Operating Costs
--------------------------------- --------------------------------
Three Months Ended September 30, Three Months Ended September 30,
1998 1997 Difference 1998 1997 Difference
-------- -------- ------------- --------- -------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Industrial buildings....... $19,004 $17,169 $ 1,835 $ 4,021 $ 3,567 $ 454
Office buildings........... 7,974 7,688 286 3,606 3,280 326
Retail buildings........... 3,278 3,373 (95) 1,121 1,017 104
Land development/(1)/...... 3,049 2,811 238 1,979 1,668 311
Land leases................ 3,840 1,860 1,980 183 215 (32)
------- ------- ------- ------- ------- -------
$37,145 $32,901 $ 4,244 $10,910 $ 9,747 $ 1,163
======= ======= ======= ======= ======= =======
</TABLE>
/(1)/ This category represents interim income-producing uses of properties
intended for mixed-use development.
14
<PAGE>
The increase in revenue from industrial buildings is primarily attributable
to the addition of seven newly constructed buildings totaling approximately 1.8
million square feet that have been added to the portfolio since July 1, 1997,
offset by a decrease in revenues resulting from sales in 1997 of three buildings
totaling 0.6 million square feet. Approximately $1.9 million of the increase was
attributable to base rents and tenant pass-through for the new properties,
offset by a decrease of $0.3 million attributable to properties sold.
Approximately $0.2 million of the increase in revenues was attributable to base
rents and higher tenant pass-through charges associated with Same Space. The
increase in operational costs is primarily attributable to approximately $0.4
million from Same Space.
Rental revenue for the Company's office portfolio increased by $0.3 million
for the three months ended September 30, 1998, compared to the same period in
1997, primarily because of higher rental rates and occupancy for Same Space.
Operating costs for office buildings increased by $0.3 million, primarily as a
result of higher maintenance and overhead costs.
The $2.0 million increase in revenues from land lease portfolio for the
three months ended September 30, 1998 as compared to the same period in 1997 is
primarily attributable to the 1998 acquisitions of 13,100 acres of land and 2.6
million linear square feet of revenue generating longitudinal easements. The
increase attributable to these acquisitions is not of a long-term nature, as the
Company intends to sell these assets to qualified buyers (see Other Sales
below).
In total, property operating costs were higher for the three months ended
September 30, 1998 as compared to the same period in 1997 because of property
taxes associated with the new buildings, operating and maintenance costs
attributable to Same Space, and higher overhead costs.
Development Activities and Fee Services. Gain on property sales was $10.1
million in the three months ended September 30, 1998 compared to $3.4 million
for the same period in 1997 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30,
1998 1997 Difference
--------- -------- -----------
(in thousands)
<S> <C> <C> <C>
Commercial Sales:
Sales ............................................ $50,441 $9,091 $41,350
Cost of sales .................................... 42,427 5,693 36,734
------- ------ -------
Gain ................................. 8,014 3,398 4,616
------- ------ -------
Residential Sales:
Sales ............................................ 10,052 5,228 4,824
Cost of sales .................................... 8,372 5,258 3,114
------- ------ -------
Gain ................................. 1,680 (30) 1,710
------- ------ -------
Other Sales:
Sales ............................................ 1,610 -- 1,610
Cost of sales .................................... 1,160 -- 1,160
------- ------ -------
Gain ................................. 450 -- 450
------- ------ -------
Total gain on property sales ..................... $10,144 $3,368 $ 6,776
======= ====== =======
</TABLE>
The 1998 results include a $3.3 million gain on the sale of a 353,000
square foot industrial building in Woodridge, Illinois and a $1.0 million gain
on the sale of a 209,000 square foot industrial building in Ontario, California.
In addition, the Company closed the sale of 23 homes and 19 lots in the three
months ended September 30, 1998, compared to 43 homes and zero lots during the
same period in 1997.
The 1998 results from other sales represent the sales of land and related
land leases associated with the acquisitions in the land lease portfolio during
1998.
15
<PAGE>
The Company expects there will be significant variability in income
generated from its development activities (see Variability in Results section).
Development and management fee income, net, increased by $0.4 million for
the three months ended September 30, 1998, compared to the same period in 1997.
The increase is primarily attributable to increases in development and
management services.
Equity in earnings of development joint ventures increased by $1.2 million
for the three months ended September 30, 1998 compared to the same period in
1997. The increase is primarily attributable to a property sale by a land
development joint venture.
Other Items on the Statement of Operations. Interest expense for the three
months ended September 30, 1998 was $1.0 million lower than the same period in
1997; however, total interest incurred increased $3.4 million. Interest costs
increase attributable to additions to the portfolio were offset by the increase
in capitalized interest related to higher development activity.
Following is a summary of interest incurred for the three months ended
September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended September 30,
1998 1997 Difference
--------- --------- ----------
(in thousands)
<S> <C> <C> <C>
Total interest costs............................. $ 15,104 $ 11,749 $ 3,355
Interest capitalized............................. (6,061) (1,714) (4,347)
-------- -------- --------
Interest expensed ............................... $ 9,043 $ 10,035 $ (992)
======== ======== ========
</TABLE>
General and administrative expense increased by $0.3 million for the three
months ended September 30, 1998, compared to the same period in 1997 primarily
because of the increase in the Company's overall activities.
The increase in gain on sales of non-strategic land and other property from
the three months ended September 30, 1998 as compared to the same period in 1997
is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30,
1998 1997 Difference
--------- -------- ----------
(in thousands)
<S> <C> <C> <C>
Sales ........................................... $ 5,678 $ 9,857 $ (4,179)
Cost of sales ................................... 2,820 9,287 (6,467)
------- ------- --------
Gain .................................. $ 2,858 $ 570 $ 2,288
======= ======= ========
</TABLE>
Because of the diminishing amount of such assets in the Company's
portfolio, the Company expects future sales of non-strategic assets to be
substantially lower than the levels in the recent past, with the exception of
two significant sales expected to close in the next three to six months.
Litigation and Environmental Costs, Net. The Company received environmental
recoveries of $1.1 million for the three months ended September 30, 1997. There
were no such recoveries for the same period in 1998.
Extraordinary Expense. As of September 30, 1998, the Company closed $116.8
million of the total $526.5 million long-term non-recourse fixed rate financing.
This closing resulted in recognition of a $3.3 million extraordinary charge, net
of tax benefit of $2.2 million, related to yield maintenance payments and a
write-off of unamortized loan issuance costs. The Company expects to recognize
an additional $22 million extraordinary expense, net of tax benefit, related to
the remaining long-term non-recourse fixed rate financing in the 4th Quarter
(See Cash balances, available borrowings and capital resources section for
further discussion).
16
<PAGE>
Variability in Results. Although the Company has a large portfolio of income-
producing properties that provides relatively constant operating results, the
Company's earnings from period to period will be affected by the nature and
timing of sales of property and non-strategic assets. Many of the Company's
projects require a lengthy process to complete the development cycle before they
are sold. Additionally, sales of non-strategic assets are difficult to predict
and are generally subject to lengthy negotiations and contingencies that need to
be resolved prior to closing. These factors tend to "bunch" income in the
particular periods rather than producing a more even pattern throughout the
year. In addition, gross margins may vary significantly as the mix of property
varies. The cost basis of the properties sold varies because (i) a number of
properties have been owned for many decades, (ii) some properties were acquired
within the last ten to fifteen years; (iii) properties are owned in various
geographical locations; and, (iv) development projects have varying
infrastructure costs and build-out periods.
Earnings Before Depreciation and Deferred Taxes
The Company uses a supplemental performance measure called Earnings Before
Depreciation and Deferred Taxes (EBDDT) along with net income to report its
operating results. EBDDT is not a measure of operating results or cash flows
from operating activities as defined by generally accepted accounting
principles. Additionally, EBDDT is not necessarily indicative of cash available
to fund cash needs and should not be considered as an alternative to cash flows
as a measure of liquidity. However, the Company believes that EBDDT provides
relevant information about its operations and is necessary, along with net
income, for an understanding of its operating results.
EBDDT is calculated by taking net income and making various adjustments.
Depreciation, amortization and deferred income taxes are excluded from EBDDT as
they represent non-cash charges. In addition, gains on the sale of non-strategic
land and other assets and extraordinary expenses represent unusual and/or
nonrecurring items and are excluded from the EBDDT calculation. Net income is
reconciled to EBDDT as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ----------------------
(in thousands)
1998 1997 1998 1997
---------- --------- --------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income applicable to common stockholders ............... $ 11,395 $ 6,278 $ 31,051 $ 15,719
Depreciation and amortization ........................ 8,230 7,839 25,001 23,038
Deferred income taxes ................................. 6,929 3,652 16,476 9,930
Gain on non-strategic land and other asset sales ...... (2,858) (570) (7,228) (4,628)
Extraordinary expense ................................. 3,307 -- 3,307 --
-------- -------- -------- --------
Earnings before depreciation and deferred taxes ........... $ 27,003 $ 17,199 $ 68,607 $ 44,059
======== ======== ======== ========
Average number of common
shares outstanding - basic ........................... 106,747 106,424 106,660 94,603
======== ======== ======== ========
Average number of common
shares outstanding - diluted ......................... 109,190 109,924 109,570 97,702
======== ======== ======== ========
</TABLE>
The $24.5 million increase in EBDDT for the nine-month period ended
September 30, 1998 compared to the same period in 1997 is primarily because of
improved results from income-producing assets and higher gains on property
sales.
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities
Cash (used in)/provided by operating activities reflected in the statement
of cash flows for the nine-month periods ended September 30, 1998 and 1997 was
($8.5) million and $33 million, respectively. The change is primarily
attributable to cash generated from sales of development properties of $93.6
million and $42.3 million for the nine-month periods ended September 30, 1998
and 1997, respectively, and cash from sales of other properties was $3.5 million
for the nine-month period ended September 30, 1998, compared to zero for the
same period in 1997. Cash generated from sales of non-strategic land was $6.4
million and $7.8 million for the nine-month periods ended September 30, 1998 and
1997, respectively. These increases are offset by an increase of approximately
$57.5 million used for capital expenditures for residential and industrial
development properties, a $21.9 million increase in joint venture contributions
primarily because of a $32.1 million investment in a residential development,
and an increase of approximately $10.5 million used for the acquisitions of
other properties that the Company intends to sell.
Capital expenditures for development properties for the nine months ended
September 30, 1998 and 1997 are included in the schedule of capital expenditures
in the following discussion of cash flows from investing activities.
Cash flow from investing activities
Net cash used in investing activities reflected in the statement of cash
flows for the nine-month periods ended September 30, 1998 and 1997 was $136.4
million and $103.6 million, respectively, primarily because of an increase of
$18.8 million in property acquisitions, a $29.1 million increase in restricted
cash held for future investments, and the increase of $1.8 million in joint
venture contributions offset by a decrease of $11.9 million in capital
expenditures for commercial development properties that the Company intends to
hold for its own account.
Capital expenditures reflected in the statement of cash flows include the
following:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
---------- ----------
(in thousands)
<S> <C> <C>
Capital Expenditures included in Cash Flow From Operating Activities/(1)/
Capital expenditures for residential and industrial development properties .... $ 80,466 $ 29,641
Other property acquisitions ................................................... 10,467 --
Residential property acquisitions ............................................. 18,709 18,336
Capitalized interest and property tax ......................................... 6,954 642
-------- --------
116,596 48,619
-------- --------
Capital Expenditures included in Cash Flow From Investing Activities/(2)/
Construction and building improvements......................................... 47,643 56,281
Property acquisitions ......................................................... 33,230 14,428
Predevelopment ................................................................ 12,710 10,372
Infrastructure and other ...................................................... 2,485 10,000
Capitalized interest and property tax ......................................... 5,586 3,700
Tenant improvements ........................................................... 2,001 4,631
-------- --------
103,655 99,412
-------- --------
Total Capital Expenditures/(3)/ ............................................... $220,251 $148,031
======== ========
</TABLE>
/(1)/ This category includes capital expenditures for properties the Company
intends to sell.
/(2)/ This category includes capital expenditures for properties the Company
intends to hold for its own account.
/(3)/ Excludes $32.1 million in 1998 and $15.2 million in 1997 invested in
joint ventures to acquire residential property.
18
<PAGE>
Capital expenditures for residential and industrial development properties
- -- relates to the development of residential and for-sale industrial development
properties. The increase for the nine months ended September 30, 1998, as
compared to the same period in 1997, is primarily because of the increase in
both residential and for-sale industrial development activity.
For the nine months ended September 30, 1998, the Company started
construction on 340 residential units and completed 72 units compared to 79
starts and 64 completions for the same period in 1997.
Construction and building improvements -- relates primarily to development
of new industrial properties held for lease and improvements to existing
buildings. Commercial development activity is summarized below:
<TABLE>
<CAPTION>
As of Nine Months Ended
September 30,
1998 1997
------------- -------------
(in square feet)
<S> <C> <C>
Under construction, beginning of period ...... 3,774,000 2,286,961
Construction starts........................... 2,613,000 1,252,000
Completed - Retained in portfolio ............ (240,000) (1,727,961)
Completed - Design/Build or Sold ............. (1,227,000) --
---------- ----------
Under construction, end of period ...... 4,920,000 1,811,000
========== ==========
</TABLE>
As of September 30, 1998, the Company had 4.9 million square feet under
construction, of which 1.9 million square feet are build-to-suit and 1.2 million
square feet are speculative development space, both of which will be added to
the Company's portfolio.
Property acquisitions--The Company invested approximately $94.5 million in
the nine-month period ended September 30, 1998 and $48 million for the same
period in 1997, in the acquisition of new property, either directly or through
joint ventures.
. Residential acquisitions--For the nine months ended September 30, 1998, the
Company invested approximately $50.8 million in the acquisition of
residential development property directly or through joint ventures. These
acquisitions will support up to 4,213 homes and included the following
significant acquisitions: (1) a two-thirds interest in a 3,500-acre, 4,000-
lot masterplanned community in El Dorado Hills, California, (2) a 20-acre,
94-lot site in Martinez, California, and (3) a 38-acre, 119-lot site in La
Quinta, California. Entitlements and approvals for these lots have been
received, and construction or development of these sites has commenced or
is scheduled to commence during 1998.
. Industrial acquisitions--For the nine months ended September 30, 1998, the
Company invested approximately $33.2 million in the acquisition of
industrial development property. These acquisitions added 0.6 million
square feet of 100% occupied income producing property, approximately 4.5
million square feet of potential industrial development, and included a
280-acre entitled land site in Portland, Oregon, and a 69.9-acre land site
in Woodridge, Illinois.
. Other property acquisitions--For the nine months ended September 30, 1998,
the Company invested a total of $10.5 million acquiring 13,100 acres of
land, which includes 1,970 land leases, and 2.6 million linear square feet
of revenue-generating easements. These acquisitions occurred in three
closings, one in February 1998 for a net amount of $6.6 million, a second
in June 1998 for $2.8 million, and a third in September 1998 for $1.1
million. The Company intends to sell these assets.
Predevelopment--relates primarily to amounts incurred in obtaining
entitlements for the Company's major mixed-use projects. The increase in
predevelopment costs primarily relate to activity at the Mission Bay project in
San Francisco, California and the Pacific Commons project in Fremont,
California.
19
<PAGE>
Infrastructure and other--primarily represents infrastructure costs
incurred in connection with the Company's major mixed-use and development
projects. The decrease in 1998 compared to 1997 primarily relates to the
Woodridge, Illinois project.
Capitalized interest and property taxes--represents development period
interest and property taxes capitalized to the Company's development projects.
The increase for the nine-month period ended September 30, 1998, compared to the
same period in 1997 is due to the significant increase in development activity,
as noted above.
Cash flow from financing activities
Net cash provided by financing activities for the nine-month periods ended
September 30, 1998 and 1997 was $157.8 million and $62.1 million, respectively.
This increase is primarily attributable to the $96.4 million increase in net
borrowings used to finance acquisitions and development projects offset by the
prepayment penalty on the early retirement of debt and a $6.0 million decrease
in preferred stock dividends paid.
Capital commitments
As of September 30, 1998, the Company has outstanding standby letters
of credit and surety bonds in the amount of $92.4 million in favor of local
municipalities or financial institutions to guarantee performance on real
property improvements or financial obligations.
As of September 30, 1998, the Company had approximately $51.6 million in
total commitments for capital expenditures. These commitments are primarily to
fund the construction of industrial development projects, predevelopment costs
and re-leasing costs.
Cash balances, available borrowings and capital resources
As of September 30, 1998, the Company had $30.2 million in cash and cash
equivalents. In addition, the Company had available $79.8 million under its
secured revolving credit facility, $49.1 million under unsecured lines of
credit, and $23.5 million under its residential construction facilities.
The Company's short- and long-term liquidity and capital resources
requirements will essentially be provided from four sources: (1) ongoing
operating income from rental properties, (2) proceeds from development, non-
strategic and other asset sales, (3) fee services income, and (4) additional
debt. As noted above, a secured revolving line of credit and residential
construction loan facilities are available to the Company for meeting
liquidity requirements. The ability of the Company to meet its mid- and long-
term capital requirements is dependent upon the ability to obtain additional
financing for new construction, acquisitions and currently unencumbered
properties. There is no assurance that this financing can be obtained at this
time.
On October 30, 1998, the Company modified and extended the maturity of the
$265 million secured revolving credit line and the $95 million unsecured
revolving credit line. The secured credit line maturity was extended for two
years to November 1, 2000, at an initial amount of $213 million, with the
capacity to go up to $265 million provided that additional lender
participation is obtained. The unsecured credit line was partially paid down
and its maturity was extended in tiers due from November 1, 1998 to December
1, 1998. It is anticipated that this unsecured line will be fully
repaid before December 1, 1998.
20
<PAGE>
Between September 22, 1998 and November 13, 1998, the Company also
substantially completed a $586.5 million major debt restructure. The debt
restructure accomplished the following:
. Refinanced and repaid approximately $247.6 million of existing mortgage debt
at a significantly lower interest rate. A new loan from Prudential in the
amount of $373.0 million bears an effective interest at 6.46% as compared to
the pre-refinance debt which had interest rates between 8.65% to 8.93%. The
new loans from TIAA totaling $153.5 million bear interest at 6.65%.
. Paid down the existing $265 million secured revolving credit line by
approximately $154 million.
. Repaid an existing $16.5 million of other mortgage debt.
. Established an unsecured line of credit of $60 million, by a subsidiary, at
a variable interest rate of LIBOR + 1 5/8%.
. Paid down the existing $95 million unsecured revolving line of credit by
approximately $45 million, and the Company anticipates to repay this
remaining unsecured revolving line of credit prior to its maturity date of
December 1, 1998.
. Approximately $36.0 million of the refinancing proceeds were used to pay
prepayment penalties related to the various repayments of debt and
approximately $16.7 million was used to liquidate the Treasury-lock contracts
which were entered to fix the interest rate related to the Prudential loan.
Debt covenants-Certain loan agreements contain restrictive financial
covenants, the most restrictive of which require the leverage ratio not to
exceed 0.70:1, require stockholders' equity to be no less than $407 million,
and require that the Company maintain certain other specified financial
ratios. The Company was in compliance with all such covenants at September 30,
1998.
ENVIRONMENTAL MATTERS
Many of the Company's properties are in urban and industrial areas and may
have been leased to or previously owned by commercial and industrial tenants
that may have discharged hazardous materials. The Company incurs on-going
environmental remediation costs, and legal costs relating to clean-up, defense
of litigation and the pursuit of responsible third parties. Costs incurred in
connection with operating properties and with properties previously sold are
expensed. As of September 30, 1998, management has provided a reserve of $10.8
million for such costs. These costs are expected to be incurred over an
estimated ten-year period, with a substantial portion incurred over the next few
years.
Costs incurred for properties to be sold are deferred and will be charged
to cost of sales when the properties are sold. Costs relating to undeveloped
properties are capitalized as part of development costs. At September 30, 1998,
the Company's estimate of its potential liability for identified environmental
costs relating to properties to be developed or sold ranged from $11.8 million
to $37 million. These costs generally will be capitalized as they are incurred
over the course of the estimated development period of approximately 20 years.
Environmental costs capitalized during the nine-month period ended September 30,
1998 totaled $1.6 million.
While the Company or outside consultants have evaluated the environmental
liabilities associated with most of the Company's properties, any evaluation
necessarily is based upon then-prevailing law, identified site conditions and
the use of sampling methodologies. The Company monitors its exposure to
environmental costs on a regular basis. Although an unexpected event could have
a material impact on the results of operations for any period, the Company does
not believe that such costs for identified liabilities will have a material
adverse effect on its financial position, results of operations or cash flows.
21
<PAGE>
YEAR 2000 READINESS
OVERVIEW. To address the potential effects of the Year 2000 problem (the
inability of some hardware and software to distinguish the year 2000 from the
year 1900), the Company has adopted a program (the "Program") that examines
three areas:
. The Company's information systems, including hardware and software
("I.S.");
. The Company's non-I.S. systems that use date-sensitive technology
("Embedded Technology"); and
. Third parties with whom the Company does business ("Third Parties").
For each area, the Program will include the following phases:
. Phase I, Inventory: Develop a list of potentially affected functions;
. Phase II, Assessment and planning: Assess the nature and severity of the
problem in each area and determine necessary corrective action; and
. Phase III, Remediation and testing: Implement any necessary corrective
action and test the results.
INFORMATION SYSTEMS. A failure of systems such as the Company's telephones
or computer network could materially impair the Company's ability to perform
essential business functions, such as the collection of revenue, payment of
debts, and communications generally.
The Company has completed Phases I and II of the Program for I.S., and
Phase III is currently underway. Since January 1997, the Company has ensured
that all regularly scheduled I.S. replacements and upgrades are Year 2000
compliant. From January 1, 1997, through September 30, 1998, the Company spent
approximately $670,000 on I.S. improvements, upgrades and replacements. For the
period from January 1, 1997, to December 31, 1999, the Company may spend up to
approximately $3.0 million on I.S. improvements, upgrades and replacements.
Substantially all of these expenditures are primarily for business purposes
other than addressing Year 2000 issues and a significant portions of these
expenditures will be financed through capital leases. The Company does not
expect to incur significant incremental costs to correct Year 2000 problems with
I.S. No planned I.S. projects have been deferred because of the Program.
The Company believes that, with these upgrades and replacements, the Year
2000 problem will not significantly affect its I.S. If planned upgrades and
replacements are not timely completed (for example, because of a scarcity of
Year 2000 compliant products), the Year 2000 problem could have a material
impact on the Company. Nonetheless, the Company believes that its plans for
resolving the Year 2000 problem with respect to I.S. are adequate and that it
will not need to develop contingency plans.
EMBEDDED TECHNOLOGY. Electronic monitoring and control systems may have
date-sensitive coding embedded within their circuitry that is susceptible to
failure if it is not Year 2000 compliant. Year 2000 noncompliance could affect
the functioning of elevators and escalators, heating, ventilation and air
conditioning systems, security systems, fire-life safety systems, and other
automated building systems, which could affect access to buildings and emergency
response capabilities.
In October 1998, the Company began an inventory of Embedded Technology in
those systems for which the Company is responsible in its approximately 225
buildings. The Company expects to complete this phase of the Program in
December 1998. Phases II and III will be performed as affected systems are
identified, and the Company expects to complete this work in the first quarter
of 1999. If necessary, contingency planning is scheduled for the second and
third quarters of 1999. Meanwhile, the Company has incorporated Year 2000
compliance in its due diligence for any acquisition of property.
Because the Company is in Phase I of the Program for Embedded Technology,
it is currently unable to estimate the costs of correcting any Year 2000
problems that are identified, although the Company is currently unaware of any
likely material costs.
22
<PAGE>
THIRD PARTIES. The Company depends on a wide variety of Third Parties. To
the extent that Third Parties are unable to perform because of their own Year
2000 problems, the Company may be adversely affected. Because of the
speculative nature of these risks, it is not possible to estimate their
financial impact on the Company. Third Parties on whom the Company depends
include:
. Customers;
. Suppliers of goods, services or capital; and
. Regulatory bodies, such as government agencies from whom the Company
must obtain permits in order to proceed with its projects.
In the third quarter of 1998, the Company began identifying and
prioritizing Third Parties and communicating with them about their approach to
the Year 2000 problem. This phase is expected to be substantially complete by
the end of 1998. Beginning in the fourth quarter of 1998, the Company will
initiate more detailed evaluations of the most critical Third Parties. If
necessary, these evaluations will be followed, where possible, by the
development of contingency plans, scheduled for the first and second quarters of
1999. In most cases, the Company must rely primarily on statements from Third
Parties as to their Year 2000 readiness and will not attempt any independent
verification. Because the systems of Third Parties are outside the Company's
control, the remediation and testing phase of the Program is not applicable to
Third Parties.
This area of the Program is being undertaken by the Company's employees and
is not expected to involve significant additional expenditures or to delay any
other work of the Company significantly.
SUMMARY. The Program schedule is subject to change depending on future
developments, including delays by Third Parties. A failure to correct
significant Year 2000 problems could impair the Company's ability to conduct its
business and could affect its financial performance. Because of the general
uncertainty inherent in the Year 2000 problem and the uncertainty about the Year
2000 readiness of Third Parties, the Company cannot determine whether there will
be a material impact on its results of operations, liquidity, or financial
condition. The Company believes that the Program will significantly reduce the
risk of interruption of the Company's business operations.
RISK FACTORS
This quarterly report on Form 10-Q contains "forward-looking statements"
concerning results of operations, sales of non-strategic assets, liabilities,
the Year 2000 problem, financings, capital needs and uses and variability of
results. All forward-looking statements involve risks and uncertainties. Any
forward-looking statements in this document are intended to be subject to the
safe harbor protection provided by Section 27A of the Securities Act of 1933 and
Section 21E of the Securities and Exchange Act of 1934. Factors that may affect
the Company's operating results and financial condition include (i) changes in
general economic conditions in regions in which the Company's projects are
located, (ii) supply and demand for office, industrial, and residential space,
(iii) the delay in receipt of or the denial of government approvals and
entitlements for development projects, (iv) other public and private development
activity in the areas in which the Company owns property, (v) the ability to
recruit and retain or replace key personnel, (vi) land and building material
costs, (vii) the availability and cost of project financing, (viii) competition
from other property owners, (ix) limitations on or challenges to title to the
Company's properties, (x) the Company's ability to increase development fees,
(xi) liability for environmental remediation at properties owned or formerly
owned by the Company or its predecessors, (xii) the Company's ability to sell
non-strategic assets, (xiii) the Company's ability to meet its debt service
obligations, (xiv) changes in the capital markets affecting the ability of the
Company to minimize its interest costs or to use its collateral to secure loans,
(xv) the Company's ability to control the timing of the recognition of deferred
tax liability, (xvi) the impact of discretionary government actions, (xvii) the
exposure of the Company's assets to natural occurrences, such as earthquakes,
tornadoes, and similar events, (xviii) changes in the legal and regulatory
environment, including the tax treatment of the Company's activities and assets,
(xix) strength of competition in the areas in which the Company operates, and
(xx) risks related to the performance, interests, and financial strength of the
Company's joint venture partners.
23
<PAGE>
For discussions identifying other important factors that could cause actual
results to differ materially from those anticipated in the forward-looking
statements, see the Company's filings with the Securities and Exchange
Commission filings, "Management's Discussion and Analysis of Financial Condition
and Results of Operations' of Financial Statements" included in this Form 10-Q
and Note 15 to the Consolidated Financial Statements included in the Company's
Form 10-K for the year ended December 31, 1997. The Company cautions that the
foregoing list of risk factors is not exclusive. Further, the Company does not
undertake to update any forward-looking statements that may be made from time to
time by or on behalf of the Company.
24
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
An Exhibit Index follows the Signatures below.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Catellus Development Corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CATELLUS DEVELOPMENT CORPORATION
Date: November 13, 1998 By: /s/ Jacques C. Lazard
-------------------------- ---------------------------
Jacques C. Lazard
Senior Vice President and
Chief Financial Officer
Date: November 13, 1998 By: /s/ Paul A. Lockie
-------------------------- ---------------------------
Paul A. Lockie
Vice President and Controller
26
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<C> <S>
3.1 Form of Restated Certificate of Incorporation of the Registrant(1)
3.1A Amendment to Restated Certificate of Incorporation of the Registrant(6)
3.2 Form of Certificate of Designations, Preferences and Rights of $3.25
Series A Cumulative Convertible Preferred Stock(2)
3.3 By-Laws, as amended*
3.4 Form of Certificate of Designations, Preferences and Rights of $3.625
Series B Cumulative Convertible Exchangeable Preferred Stock(6)
4.1 Form of stock certificate representing Common Stock(1)
4.2 Loan Agreement dated as of February 16, 1994 between the Registrant and
The Prudential Insurance Company of America(7)
4.3 Loan Agreement dated as of October 28, 1996 between the Registrant and
Bank of America National Trust and Savings Association(10)
10.1 Exploration Agreement and Option to Lease dated December 28, 1989
between the Registrant and Santa Fe Pacific Minerals Corporation(1)
10.2 Registration Rights Agreement dated as of December 29, 1989 among the
Registrant, BAREIA, O&Y and Itel(1)
10.2A Letter Agreement dated November 14, 1995 between the Registrant and
California Public Employees' Retirement System(9)
10.3 Restated Tax Allocation and Indemnity Agreement dated December 29, 1989
among the Registrant and certain of its subsidiaries and Santa Fe
Pacific Corporation ("SFP")(1)
10.4 State Tax Allocation and Indemnity Agreement dated December 29, 1989
among the Registrant and certain of its subsidiaries and SFP(1)
10.5 Registrant's Incentive Stock Compensation Plan(3)
10.6 Termination, Substitution and Guarantee Agreement between ATSF and the
Registrant dated December 21, 1990(4)
10.7 Registrant's Amended and Restated 1991 Stock Option Plan(11)
10.8 Registrant's amended and Restated Executive Stock Option Plan(11)
10.9 Form of First Amendment to Registration Rights Agreement among the
Registrant, BAREIA, O&Y and Itel(5)
10.10 Amended and Restated Executive Employment Agreement dated as of
November 29, 1995 between the Registrant and Nelson C. Rising(9)
10.11 Executive Employment Agreement dated February 10, 1995 between the
Registrant and Timothy J. Beaudin(8)
</TABLE>
27
<PAGE>
<TABLE>
<C> <S>
10.12 Employment Agreement dated July 24, 1996 between the Registrant and
Stephen P. Wallace(9)
10.13 Registrant's Amended and Restated 1995 Stock Option Plan(11)
10.14 Registrant's Amended and Restated 1996 Performance Award Plan(11)
10.15 Employment Agreement dated February 1, 1996 between the Registrant and
Ira Yellin(10)
10.16 Letter Agreement dated February 1, 1996 between the Registrant and Ira
Yellin(10)
10.17 Amended and Restated Employment Agreement dated September 16, 1997
between the Registrant and Kathleen Smalley(11)
10.18 Letter Agreement dated November 16, 1996 between the Registrant and
Steve Wallace(10)
10.19 Letter Agreement dated November 16, 1996 between the Registrant and
Timothy Beaudin(10)
10.20 Office lease dated November 22, 1996 between Bradbury Associates, L.P.
and the Registrant(10)
10.21 Registrant's Deferred Compensation Plan(11)
21.1 Subsidiaries of the Registrant(11)
27 Financial Data Schedule*
99.1 Report of the Independent Real Estate Appraisers dated March 12,
1996(9)
</TABLE>
The Registrant has omitted instruments with respect to long-term debt where
the total amount of the securities authorized thereunder does not exceed 10
percent of the assets of the Registrant and its subsidiaries on a consolidated
basis. The Registrant agrees to furnish a copy of such instrument to the
Commission upon request.
*Filed with this report on Form 10-Q.
(1) Incorporated by reference to the Registration Statement on Form 10
(Commission File No. 0-18694) as filed with the Commission on July 18, 1990
("Form 10").
(2) Incorporated by reference to the Form 8 constituting a Post-Effective
Amendment No. 1 to the Form 8-A as filed with the Commission on February
19, 1993.
(3) Incorporated by reference to the Form 8 constituting Post-Effective
Amendment No. 1 to the Form 10 as filed with the Commission on November 20,
1990.
(4) Incorporated by reference to the Form 10-K for the year ended December 31,
1990.
(5) Incorporated by reference to Amendment No. 2 to Form S-3 as filed with the
Commission on February 4, 1993.
(6) Incorporated by reference to the Form 10-K for the year ended December 31,
1993.
(7) Incorporated by reference to Amendment No. 1 to the Form 10-K for the year
ended December 31, 1993.
(8) Incorporated by reference to the Form 10-K for the year ended December 31,
1994.
(9) Incorporated by reference to the Form 10-K for the year ended December 31,
1995.
(10) Incorporated by reference to the Form 10-K for the year ended December 31,
1996.
(11) Incorporated by reference to the Form10-K for the year ended December 31,
1997.
(b) No reports on Form 8-K were filed during the quarter for which the
report is filed.
28
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED BY-LAWS
OF
CATELLUS DEVELOPMENT CORPORATION
1. MEETINGS OF STOCKHOLDERS.
------------------------
1.1. ANNUAL MEETING. The annual meeting of stockholders shall be
--------------
held during the month of May in each year, or as soon thereafter as practicable,
and shall be held at a place and time determined by the board of directors (the
"Board").
1.2. SPECIAL MEETINGS. Special meetings of the stockholders may be
----------------
called by resolution of the Board or by the chairman of the board or the
president and shall be called by the president or secretary upon the written
request (stating the purpose or purposes of the meeting) of the holder or
holders of 10% or more of the then outstanding voting capital stock of the
corporation or a majority of the directors then in office. Only business
related to the purposes set forth in the notice of the meeting may be transacted
at a special meeting.
1.3. PLACE AND TIME OF MEETINGS. Meetings of the stockholders may be
--------------------------
held in or outside Delaware at the place and time specified by the Board or the
directors or stockholders requesting the meeting.
1.4. NOTICE OF MEETINGS; WAIVER OF NOTICE. Written notice of each
------------------------------------
meeting of stockholders shall be given to each stockholder entitled to vote at
the meeting, except that (a) it shall not be necessary to give notice to any
stockholder who submits a signed waiver of notice before or after the meeting,
and (b) no notice of an adjourned meeting need be given except when required
under Section 1.5 of these by-laws or by law. Each notice of a meeting shall be
given, in writing, personally, via facsimile or by mail, not less than 10 nor
more than 60 days before the meeting and shall state the time and place of the
meeting, and unless it is the annual meeting, shall state at whose direction or
request the meeting is called and the purposes for which it is called. Notice
shall be deemed duly given when (i) delivered personally, (ii) sent via
facsimile (with receipt confirmed) or (iii) mailed to a stockholder at his
address on the a records. The attendance of any stockholder at a
meeting, without protesting at the beginning of the meeting that the meeting is
not lawfully called or convened, shall constitute a waiver of notice by him.
1.5. QUORUM. At any meeting of stockholders, the presence in person
------
or by proxy of the holders of a majority of the shares entitled to vote shall
constitute a quorum for the transaction of any business. In the absence of a
quorum a majority in
<PAGE>
voting interest of those present or, if no stockholders are present, any
officer entitled to preside at or to act as secretary of the meeting, may
adjourn the meeting until a quorum is present. At any adjourned meeting at
which a quorum is present any action may be taken which might have been taken
at the meeting as originally called. No notice of an adjourned meeting need be
given if the time and place are announced at the meeting at which the
adjournment is taken except that, if adjournment is for more than thirty days
or if, after the adjournment, a new record date is fixed for the meeting,
notice of the adjourned meeting shall be given pursuant to Section 1.4.
1.6. VOTING; PROXIES. Each stockholder of record shall be entitled
---------------
to one vote for every share registered in his name. Corporate action to be
taken by stockholder vote, other than the election of directors, shall be
authorized by a majority of the votes cast at a meeting of stockholders, except
as otherwise provided by the corporation's Restated Certificate of Incorporation
or by law or by Section 1.8 of these by-laws. Directors shall be elected in
the manner provided in Section 2.1 of these by-laws. Voting, including
election of directors, need not be by written ballot unless requested by a
stockholder at the meeting or ordered by the chairman of the meeting. Each
stockholder entitled to vote at any meeting of stockholders or to express
consent or to dissent from corporate action in writing without a meeting may
authorize another person to act for him by proxy. Every proxy must be signed by
the stockholder or his attorney-in-fact. No proxy shall be valid after three
years from its date unless it provides otherwise.
1.7. LIST OF STOCKHOLDERS. Not less than 10 days prior to the date
--------------------
of any meeting of stockholders, the secretary of the corporation shall prepare a
complete list of stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in his name. For a period of not less than 10 days prior to
the meeting, the list shall be available during ordinary business hours for
inspection by any stockholder for any purpose germane to the meeting. During
this period, the list shall be kept either (a) at a place within the city where
the meeting is to be held, if that place shall have been specified in the notice
of the meeting, or (b) if not so specified, at the place where the meeting is to
be held. The list shall also be available for inspection by stockholders at the
time and place of the meeting.
1.8. ACTION BY CONSENT WITHOUT A MEETING.
-----------------------------------
(a) Subject to compliance with the procedures set forth in Section
1.8(b) of these by-laws, if required, any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voting.
Prompt notice of the taking of any such action shall be given to those
stockholders who did not consent in writing.
(b) So long as any of the corporation's securities are listed on the
New
<PAGE>
York Stock Exchange, action by the holders of any class of security so listed
may not be taken by consent in writing pursuant to this Section 1.8 except
with the prior approval of the New York Stock Exchange, and otherwise in
accordance with this Section 1.8(b). A record date for the determination of
stockholders entitled to express consent to or dissent from the action to be
taken shall be established in accordance with Section 5.3 of these by-laws,
and material soliciting the written consent of stockholders shall be sent to
each stockholder who would be entitled to vote on the action to be taken if
such action were being considered at a meeting of stockholders. Such
solicitation materials shall include the form of written consent, which shall
set forth the action to be taken, and shall otherwise comply with the proxy
statement disclosure standards then applicable to the corporation. The
solicitation materials shall be deemed duly given when (i) delivered
personally, (ii) sent via facsimile (with receipt confirmed) or (iii) mailed
to a stockholder at his address on the corporation's records. The solicitation
period, from the date the solicitation materials are first given to
stockholders until and including the date by which stockholders must return
such written consent, shall be not less than 30 days. Notwithstanding anything
to the contrary contained in these by-laws, no action to be taken by written
consent may be taken until the expiration of the solicitation period, whether
or not the requisite consents have been signed prior to such expiration.
1.9. STOCKHOLDER NOMINATIONS AND PROPOSALS.
-------------------------------------
(a) At an annual meeting of the stockholders, only such business will
be conducted or considered as is properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified in the
notice of meeting (or any supplement to the notice) given by or at the direction
of the Board in accordance with these Bylaws and presented at the meeting by a
shareholder, officer, or director, (ii) otherwise properly brought before the
meeting by the presiding officer or by or at the direction of a majority of the
Board, or (iii) otherwise properly requested to be brought before the meeting by
a stockholder of the Company in accordance with Section 1.9(b) below.
(b) For business to be properly requested by a stockholder to be
brought before an annual meeting, the stockholder must (i) be a stockholder of
the corporation of record at the time of the giving of notice for the annual
meeting provided for in these bylaws, (ii) be entitled to vote at the annual
meeting, (iii) have given timely notice of the business in writing to the
secretary of the corporation and (iv) present the matter at the meeting unless
it is presented on the stockholder's behalf by or at the direction of the Board.
A stockholder's notice to the secretary of the corporation must set forth as to
each matter the stockholder proposes to bring before the annual meeting: (A) a
description in reasonable detail of the business desired to be brought before
the annual meeting and the reasons for conducting the business at the annual
meeting, (B) the name and address, as they appear on the corporation's books, of
the stockholder proposing the business and of the beneficial owner, if any on
whose behalf the proposal is made, (C) the class and number of shares of the
corporation that are owned beneficially and of record by the stockholder
proposing the business and by the beneficial owner, if any, on whose behalf
<PAGE>
the proposal is made, and (D) any material interest of the stockholder
proposing the business and of the beneficial owner, if any, on whose behalf
the proposal is made in the business. Notwithstanding the foregoing
provisions, a stockholder must also comply with all applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this bylaw. Nothing in
this bylaw will be deemed to expand or diminish any rights of stockholders to
request inclusion of proposals in the Company's proxy statement pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934, as amended.
(c) Nominations of persons for election as directors of the
corporation may be made only at an annual meeting of stockholders (i) by or at
the direction of the Board or (ii) by any stockholder who is a stockholder of
record at the time of giving of notice provided for in these bylaws, who is
entitled to vote for the election of directors at the meeting, and who a
with the procedures set forth in this bylaw. All nominations by stockholders
must be made pursuant to timely notice in proper written form to the secretary
of the corporation.
(d) To be in proper written form, a stockholder's notice of
nomination must set forth (i) the name and address, as they appear on the
corporation's books, of the stockholder giving the notice and of the beneficial
owner, if any, on whose behalf the nomination is made; (ii) a representation
that the stockholder giving the notice is a holder of record of stock of the
corporation entitled to vote at the annual meeting and intends to appear in
person or by proxy at the annual meeting to nominate the person or persons
specified in the notice; (iii) the class and number of shares of stock of the
corporation owned beneficially and of record by the stockholder giving the
notice and by the beneficial owner, if any, on whose behalf the nomination is
made; (iv) a description of all arrangements or understandings between or among
any of (A) the stockholder giving the notice, (B) the beneficial owner on whose
behalf the notice is given, (C) each nominee, and (D) any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder giving the notice; (v) such other
information regarding each nominee proposed by the stockholder giving the notice
as would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission under the Securities
Exchange Act of 1934 had the nominee been nominated, or intended to be
nominated, by the Board; and (vi) the signed consent of each nominee to serve as
a director of the corporation if so elected. The presiding officer of any
annual meeting will, if the facts warrant, determine that a nomination was not
made in accordance with the procedures prescribed by this bylaw, and if he or
she should so determine, he or she will so declare to the meeting, and the
defective nomination will be disregarded. Notwithstanding the foregoing
provisions, a stockholder must also comply with all applicable requirement of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this bylaw.
(e) To be timely, a stockholder's notice under paragraphs (b) or (d)
above must be delivered to or mailed and received at the principal executive
offices of the
<PAGE>
corporation not less than 60 calendar days before the annual meeting;
provided, however, that in the event public announcement of the date of the
- -----------------
annual meeting is not made at least 75 calendar days before the date of the
annual meeting, notice by the stockholder to be timely must be received not
later than the close of business on the 10th calendar day following the day on
which public announcement is first made of the date of the annual meeting. For
purposes of this bylaw, "public announcement" means disclosure in a press
release reported by the Dow Jones News Service, Associated Press, or comparable
national news service or in a document publicly filed by the corporation with
the Securities Exchange Commission pursuant to Section 13, 14, or 15(d) of the
Securities Exchange Act of 1934, as amended, or furnished to stockholders.
2. BOARD OF DIRECTORS.
------------------
2.1. NUMBER, QUALIFICATION, ELECTION AND TERM OF DIRECTORS. The
-----------------------------------------------------
business of the corporation shall be managed by the Board, which shall consist
of eleven directors. The number of directors may be changed by resolution of a
majority of the entire Board or by the stockholders, but no decrease may shorten
the term of any incumbent director. Directors shall be elected at each annual
meeting of stockholders by a plurality of the votes cast and shall hold office
until the next annual meeting of stockholders and until the election and
qualification of their respective successors, subject to the provisions of
Section 2.9. As used in these by-laws, the term "entire Board" means the total
number of directors which the corporation would have if there were no vacancies
on the Board.
2.2. QUORUM AND MANNER OF ACTING. A majority of the entire Board
---------------------------
shall constitute a quorum for the transaction of business at any meeting, except
as provided in Section 2.10 of these by-laws. Action of the Board shall be
authorized by the vote of a majority of the directors present at the time of the
vote if there is a quorum, unless otherwise provided by law or these by-laws.
In the absence of a quorum a majority of the directors present may adjourn any
meeting from time to time until a quorum is present.
2.3. PLACE OF MEETINGS. Meetings of the Board may be held in or
-----------------
outside Delaware.
2.4. ANNUAL AND REGULAR MEETINGS. Annual meetings of the Board, for
---------------------------
the election of officers and consideration of other matters, shall be held
either (a) without notice immediately after the annual meeting of stockholders
and at the same place, or (b) as soon as practicable after the annual meeting of
stockholders, on notice as provided in Section 2.6 of these by-laws. Regular
meetings of the Board may be held without notice at such times and places as the
Board determines. If the day fixed for a regular meeting is a legal holiday,
the meeting shall be held on the next business day.
2.5. SPECIAL MEETINGS. Special meetings of the Board may be called
----------------
by the chairman of the board, the president or by a majority of the directors.
Only business
<PAGE>
related to the purposes set forth in the notice of meeting may be transacted
at a special meeting.
2.6. NOTICE OF MEETINGS; WAIVER OF NOTICE. Notice of the time and
------------------------------------
place of each special meeting of the Board, and of each annual meeting not held
immediately after the annual meeting of stockholders and at the same place,
shall be given to each director by mailing it to the director at his or her
residence or usual place of business at least three days before the meeting or
by delivering notice to the director personally (including by telephone) or by
e-mail or facsimile at least one day before the meeting. Notice shall be deemed
duly given when (a) delivered personally, (b) sent by e-mail or facsimile (with
receipt confirmed) or (c) mailed to a director's residence or usual place of
business. Notice of a special meeting shall also state the purpose or purposes
for which the meeting is called. Notice need not be given to any director who
submits a signed waiver of notice before or after the meeting or who attends the
meeting without protesting at the beginning of the meeting the transaction of
any business because the meeting was not lawfully called or convened. Notice of
any adjourned meeting need not be given, other than by announcement at the
meeting at which the adjournment is taken.
2.7. BOARD OR COMMITTEE ACTION WITHOUT A MEETING. Any action
-------------------------------------------
required or permitted to be taken by the Board or by any committee of the Board
may be taken without a meeting if all of the members of the Board or of the
committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents by the members of the Board or
the committee shall be filed with the minutes of the proceedings of the Board or
of the committee.
2.8. PARTICIPATION IN BOARD OR COMMITTEE MEETINGS BY CONFERENCE
----------------------------------------------------------
TELEPHONE. Any or all members of the Board or of any committee of the Board may
- ---------
participate in a meeting of the Board or of the committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other. Participation by such means
shall constitute presence in person at the meeting.
2.9. RESIGNATION AND REMOVAL OF DIRECTORS. Any director may resign
------------------------------------
at any time by delivering his resignation in writing to the president or
secretary of the corporation, to take effect at the time specified in the
resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. Any or all of the directors may be
removed at any time, either with or without cause, by vote of the stockholders.
2.10. VACANCIES. Any vacancy in the Board, including one created by
---------
an increase in the number of directors, may be filled for the a term by
a majority vote of the remaining directors, though less than a quorum.
2.11. COMPENSATION. Directors shall receive such compensation as the
------------
Board determines, together with reimbursement of their reasonable expenses in
<PAGE>
connection with the performance of their duties. A director may also be paid
for serving the corporation, its affiliates or subsidiaries in other capacities.
2.12. CHAIRMAN OF THE BOARD. The chairman of the board shall be
---------------------
elected by the Board at the annual meeting of the Board. The chairman of the
board shall preside at all meetings of the Board and of the stockholders and
shall have such powers and duties as the Board assigns to the chairman. The
chairman shall hold office until the next annual meeting of the Board and until
the election of his successor; provided, however, that the chairman may resign
at anytime by delivering his resignation in writing to the president or
secretary of the Corporation, to take effect at the time specified in the
resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. The chairman may be removed by the
Board either with or without cause.
3. COMMITTEES.
----------
3.1. COMMITTEES OF THE BOARD. The Board, by resolution adopted by a
-----------------------
majority of the entire Board, may designate committees of one or more directors,
which shall serve at the Board's pleasure and have such powers and duties as the
Board determines. No director who is also an officer of the Corporation shall
be eligible to serve as a member of the Audit, Compensation and Benefits or
Corporate Governance Committee of the Board, or any committee performing a
similar function.
3.2. RULES APPLICABLE TO COMMITTEES. The Board may designate one or
------------------------------
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of any member of a committee, the member or members present at
a meeting of the committee and not disqualified, whether or not a quorum, may
unanimously appoint another director to act at the meeting in place of the
absent or disqualified member. All action of a committee shall be reported to
the Board at its next meeting. Each committee may adopt rules of procedure and
shall meet as provided by those rules or by resolutions of the Board.
4. OFFICERS.
--------
4.1. NUMBER; SECURITY. The executive officers of the corporation
----------------
shall be the president, one or more vice presidents (which may include one or
more executive or senior vice presidents, if the Board so determines), a
secretary and a treasurer. Any two or more offices may be held by the same
person. Unless otherwise required by law, the Board shall not be required to
fill a vacancy in an executive office. The Board may require any officer, agent
or employee to give security for the faithful performance of his duties.
4.2. ELECTION; TERM OF OFFICE. The executive officers of the
------------------------
corporation shall be elected annually by the Board and each such officer shall
hold office until the
<PAGE>
next annual meeting of the Board and until the election of his successor,
subject to the provisions of Section 4.4.
4.3. SUBORDINATE OFFICERS. The Board or the president may appoint
--------------------
subordinate officers (including assistant secretaries and assistant treasurers),
agents or employees, each of whom shall hold office for such period and have
such powers and duties as the Board or the president determines. The Board may
delegate to any other executive officer or to any committee the power to appoint
and define the powers and duties of any subordinate officers, agents or
employees. The president or the chief financial officer may designate in
writing any employee with the position of "Director" to execute and deliver, and
any other employee to attest, agreements, certificates and other documents on
behalf of the corporation in connection with any transaction authorized by the
Board of Directors, whether by specific resolution or pursuant to a delegation
of authority.
4.4. RESIGNATION AND REMOVAL OF OFFICERS. Any officer may resign at
-----------------------------------
any time by delivering his resignation in writing to the president or secretary
of the corporation, to take effect at the time specified in the resignation; the
acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. Any officer appointed by the Board or appointed
by an executive officer or by a committee may be removed by the Board either
with or without cause, and in the case of an officer appointed by an executive
officer or by a committee, by the officer or committee who appointed him or by
the president.
4.5. VACANCIES. A vacancy in any office may be filled for the
---------
a term in the manner prescribed in Sections 4.2 and 4.3 of these by-laws
for election or appointment to the office.
4.6. PRESIDENT. The president shall be the chief executive officer
---------
of the corporation and shall, in the absence of the chairman of the board,
preside at all meetings of the Board and of the stockholders. Subject to the
control of the Board, he shall have general supervision over the business of the
corporation and shall have such other powers and duties as presidents of
corporations usually have or as the Board assigns to him.
4.7. CHIEF OPERATING OFFICER. The chief operating officer shall have
-----------------------
such powers and duties as the Board or the president may assign.
4.8. VICE PRESIDENT. Each vice president shall have such powers and
--------------
duties as the Board or the president assigns to him.
4.9. TREASURER. The treasurer shall be in charge of the
---------
corporation's books and accounts. Subject to the control of the Board, he shall
have such other powers and duties as the Board or the president assigns to him.
The Board may designate the treasurer or any other officer as the chief
financial officer of the corporation.
<PAGE>
4.10. SECRETARY. The secretary shall be the secretary of, and keep
---------
the minutes of, all meetings of the Board and of the stockholders, shall be
responsible for giving notice of all meetings of stockholders and of the Board,
and shall keep the seal and apply it to any instrument requiring it. Subject to
the control of the Board, he shall have such powers and duties as the Board or
the president assigns to him. In the absence of the secretary from any meeting,
the minutes shall be kept by the person appointed for that purpose by the
presiding officer.
4.11. SALARIES. The Board may fix the officers' salaries, if any, or
--------
it may authorize the president to fix the salary of any other officer.
5. SHARES.
------
5.1. CERTIFICATES. The corporation's shares shall be represented by
------------
certificates in the form approved by the Board. Each certificate shall be
signed by the chairman of the board, the president or a vice president and by
the secretary or an assistant secretary, or the treasurer (or chief financial
officer) or an assistant treasurer, and shall be sealed with the corporation's
seal or a facsimile of the seal. Any or all of the signatures on the
certificate may be a facsimile.
5.2. TRANSFERS. Shares shall be transferable only on the
---------
corporation's books, upon surrender of the certificate for the shares, properly
endorsed. The Board may require satisfactory surety before issuing a new
certificate to replace a certificate claimed to have been lost or destroyed.
5.3. DETERMINATION OF STOCKHOLDERS OF RECORD. The Board may fix, in
---------------------------------------
advance, a date as the record date for the determination of stockholders
entitled to notice of or to vote at any meeting of the stockholders, or to
express consent to or dissent from any proposal without a meeting, or to receive
payment of any dividend or the allotment of any rights, or for the purpose of
any other action. The record date may not be more than 60 or less than 10 days
before the date of the meeting or more than 60 days before any other action.
6. INDEMNIFICATION AND INSURANCE.
-----------------------------
6.1 RIGHT TO INDEMNIFICATION. Each person who was or is a party
-------------------------
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
or inaction in an official capacity or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the
<PAGE>
fullest extent permitted by the laws of Delaware, as the same exist or may
hereafter be amended, against all costs, charges, expenses, liabilities and
losses (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and such indemnification
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that the corporation shall
------------------
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board. The right to indemnification
conferred in this Article shall be a contract right and shall include the right
to be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
--------- --------
Delaware General Corporation Law requires, the payment of such expenses incurred
by a director or officer in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of proceeding, shall
be made only upon delivery to the corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The corporation may, by action of
the Board, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
6.2 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 6.1 of
--------------------------------
this Article is not paid in full by the corporation within thirty days after a
written claim has been received by the corporation, the claimant may at any time
thereafter bring suit against the corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to corporation)
that the claimant has failed to meet a standard of conduct which makes it
permissible under Delaware law for corporation to indemnify the claimant for the
amount claimed. Neither the failure of the corporation (including its Board,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
permissible in the circumstances because he or she has met such standard of
conduct, nor an actual determination by the corporation (including its Board,
independent legal counsel, or its stockholders) that the claimant has not met
such standard of conduct, shall be a defense to the action or create a
presumption that the claimant has failed to meet such standard of conduct.
6.3 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
--------------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of
<PAGE>
Incorporation, bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
6.4 INSURANCE. The corporation may maintain insurance, at its
----------
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under Delaware law.
6.5 EXPENSES AS A WITNESS. To the extent that any director, officer,
----------------------
employee or agent of the corporation is by reason of such position, or a
position with another entity at the request of the corporation, a witness in any
action, suit or proceeding, he or she shall be indemnified against all costs and
expenses actually and reasonably incurred by him or her or on his or her behalf
in connection therewith.
6.6 INDEMNITY AGREEMENTS. The corporation may enter into agreements
---------------------
with any director, officer, employee or agent of the corporation providing for
indemnification to the full extent permitted by Delaware law.
7. MISCELLANEOUS.
-------------
7.1. SEAL. The Board shall adopt a corporate seal, which shall be in
----
the form of a circle and shall bear the corporation's name and the year and
state in which it was incorporated.
7.2. FISCAL YEAR. The Board may determine the corporation's fiscal
-----------
year. Until changed by the Board, the corporation's fiscal year shall be the
calendar year.
7.3. VOTING OF SHARES IN OTHER CORPORATIONS. Shares in other
--------------------------------------
corporations which are held by the corporation may be represented and voted by
the president or a vice president of this corporation or by proxy or proxies
appointed by one of them. The Board may, however, appoint some other person to
vote the shares.
7.4. AMENDMENTS. By-laws may be amended, repealed or adopted by the
----------
stockholders or by a majority of the entire Board, but any by-law adopted by the
Board may be amended or repealed by the stockholders.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and the Consolidated Statement of Operations 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 30,156
<SECURITIES> 0
<RECEIVABLES> 57,897
<ALLOWANCES> 1,654
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,349,399
<DEPRECIATION> 257,779
<TOTAL-ASSETS> 1,524,136
<CURRENT-LIABILITIES> 0
<BONDS> 774,262
0
0
<COMMON> 1,067
<OTHER-SE> 484,876
<TOTAL-LIABILITY-AND-EQUITY> 1,524,136
<SALES> 110,995
<TOTAL-REVENUES> 239,429
<CGS> 83,527
<TOTAL-COSTS> 152,951
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,052
<INCOME-PRETAX> 57,426
<INCOME-TAX> 23,068
<INCOME-CONTINUING> 34,358
<DISCONTINUED> 0
<EXTRAORDINARY> (3,307)
<CHANGES> 0
<NET-INCOME> 31,051
<EPS-PRIMARY> .29
<EPS-DILUTED> .28
</TABLE>
