<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended June 30, 2000 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 (I.R.S. 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 August 7, 2000, there were 105,946,221 issued and outstanding shares
of the Registrant's Common Stock.
===============================================================================
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet as of June 30, 2000, and December 31, 1999................. 2
Consolidated Statement of Operations for the three months and six months ended
June 30, 2000 and 1999 ........................................................... 3
Consolidated Statement of Cash Flows for the six months ended
June 30, 2000 and 1999............................................................ 4
Notes to Consolidated Financial Statements............................................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................... 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk............................ 29
PART II. OTHER INFORMATION............................................................................. 30
SIGNATURES.............................................................................................. 31
EXHIBIT INDEX........................................................................................... 32
</TABLE>
<PAGE>
PART I
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
(Unaudited)
<S> <C> <C>
Assets
Properties....................................................................... $2,038,700 $1,944,017
Less accumulated depreciation.................................................... (304,539) (294,846)
---------- ----------
1,734,161 1,649,171
Other assets and deferred charges, net........................................... 101,329 93,021
Notes receivable, less allowance................................................. 23,410 32,890
Accounts receivable, less allowance.............................................. 13,534 24,820
Restricted cash and investments.................................................. 105,276 19,565
Cash and cash equivalents........................................................ 21,837 35,410
---------- ----------
Total.................................................................... $1,999,547 $1,854,877
========== ==========
Liabilities and stockholders' equity
Mortgage and other debt.......................................................... $ 952,554 $ 875,564
Accounts payable and accrued expenses............................................ 92,559 92,791
Deferred credits and other liabilities........................................... 47,851 58,751
Deferred income taxes............................................................ 214,768 185,592
---------- ----------
Total liabilities........................................................... 1,307,732 1,212,698
---------- ----------
Commitments and contingencies (Note 8)
Minority interests............................................................... 51,839 51,207
---------- ----------
Stockholders' equity
Common stock, 107,872 and 107,185 shares issued and 106,461 and 107,185
shares outstanding at June 30, 2000 and December 31, 1999, respectively...... 1,079 1,072
Paid-in capital................................................................ 490,559 483,503
Treasury stock, at cost (1,411 shares at June 30, 2000)........................ (18,864) --
Accumulated earnings........................................................... 167,202 106,397
---------- ----------
Total stockholders' equity.................................................. 639,976 590,972
---------- ----------
Total.................................................................... $1,999,547 $1,854,877
========== ==========
</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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Rental properties
Rental revenue.......................................................... $ 50,738 $ 41,291 $ 100,656 $ 82,770
Property operating costs................................................ (13,731) (11,250) (26,389) (22,758)
Equity in earnings of operating joint ventures, net..................... 2,951 3,153 6,589 6,589
-------- -------- --------- ---------
39,958 33,194 80,856 66,601
-------- -------- --------- ---------
Property sales and fee services
Sales revenue........................................................... 106,978 70,455 182,999 144,094
Cost of sales........................................................... (64,244) (56,495) (120,382) (112,217)
-------- -------- --------- ---------
Gain on property sales............................................... 42,734 13,960 62,617 31,877
Management and development fees......................................... 3,324 3,839 6,593 6,675
Equity in earnings of development joint ventures, net................... 1,715 4,287 2,846 4,419
Selling, general and administrative expenses............................ (9,409) (5,914) (19,332) (11,474)
Other, net.............................................................. (6,323) 1,749 (4,920) 1,847
-------- -------- --------- ---------
32,041 17,921 47,804 33,344
-------- -------- --------- ---------
Interest expense.......................................................... (10,753) (9,640) (20,572) (19,046)
Depreciation and amortization............................................. (11,379) (9,422) (22,249) (18,584)
Corporate administrative costs............................................ (3,460) (3,750) (7,720) (7,594)
Gain (loss) on non-strategic asset sales.................................. (198) 2,904 27,469 3,890
Other, net................................................................ (888) (1,379) (752) (1,345)
-------- -------- --------- ---------
Income before minority interests and income taxes....................... 45,321 29,828 104,836 57,266
Minority interests........................................................ (1,871) -- (3,474) 9
-------- -------- --------- ---------
Income before income taxes.............................................. 43,450 29,828 101,362 57,275
-------- -------- --------- ---------
Income tax expense
Current................................................................. (3,353) (4,313) (9,877) (9,210)
Deferred................................................................ (14,030) (7,708) (30,680) (13,878)
-------- -------- --------- ---------
(17,383) (12,021) (40,557) (23,088)
-------- -------- --------- ---------
Net income.............................................................. $ 26,067 $ 17,807 $ 60,805 $ 34,187
======== ======== ========= =========
Net income per share
Basic................................................................ $0.24 $0.17 $0.57 $0.32
======== ======== ========= =========
Assuming dilution.................................................... $0.24 $0.16 $0.56 $0.31
======== ======== ========= =========
Average number of common shares outstanding - basic..................... 106,837 106,974 107,068 106,903
======== ======== ========= =========
Average number of common shares outstanding - diluted................... 108,713 109,350 108,794 109,264
======== ======== ========= =========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income....................................................................... $ 60,805 $ 34,187
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................................. 22,249 18,584
Deferred income taxes.......................................................... 30,680 13,878
Amortization of deferred loan fees and other costs............................. 2,887 2,184
Equity in earnings of joint ventures........................................... (9,435) (11,008)
Operating distributions from joint ventures.................................... 6,518 26,905
Gain on sale of investment property............................................ (20,614) (10,270)
Cost of development properties and non-strategic assets sold................... 90,729 81,473
Capital expenditures for development properties................................ (99,413) (136,464)
Other property acquisitions.................................................... -- (289)
Other, net..................................................................... 1,634 351
Change in operating assets and liabilities...................................... 10,084 (1,343)
--------- ---------
Net cash provided by operating activities......................................... 96,124 18,188
--------- ---------
Cash flows from investing activities:
Proceeds from sale of investment property....................................... 34,680 13,926
Property acquisitions........................................................... (9,724) (17,709)
Capital expenditures for investment properties.................................. (98,927) (73,067)
Tenant improvements............................................................. (3,977) (1,140)
Contributions to joint ventures................................................. (5,179) (9,627)
Restricted cash................................................................. (85,711) (54,838)
--------- ---------
Net cash used in investing activities............................................. (168,838) (142,455)
--------- ---------
Cash flows from financing activities:
Borrowings...................................................................... 156,442 156,460
Repayment of borrowings......................................................... (81,154) (110,208)
Contributions from (distributions to) minority partners, net.................... (2,842) 46,890
Repurchase of common stock...................................................... (18,864) --
Proceeds from issuance of common stock.......................................... 5,559 1,948
--------- ---------
Net cash provided by financing activities......................................... 59,141 95,090
--------- ---------
Net decrease in cash and cash equivalents......................................... (13,573) (29,177)
Cash and cash equivalents at beginning of period.................................. 35,410 52,975
--------- ---------
Cash and cash equivalents at end of period........................................ $ 21,837 $ 23,798
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized)........................................... $ 16,599 $ 16,910
Income taxes................................................................... $ 16,693 $ 6,670
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS
Catellus Development Corporation, together with its consolidated subsidiaries
(the "Company"), is a diversified real estate operating company with a large
portfolio of rental properties and developable land that manages and develops
real estate for its own account and that of others. Interests of third parties
are separately reflected as minority interests in the accompanying balance
sheet. The Company's development portfolio of industrial, residential, retail,
office, and other projects (owned directly or through joint ventures) is located
mainly in major markets in California, Illinois, Texas, Colorado, and Oregon.
Additional projects are located in Arizona and Oklahoma. The Company's rental
properties consist primarily of industrial facilities, along with a number of
office and retail buildings, located primarily in the same states plus Ohio and
Kentucky.
These consolidated statements include the assets and liabilities of Catellus
Development Corporation and its consolidated subsidiaries, whether wholly or
partially owned, and whether directly or indirectly owned, by Catellus
Development Corporation, each of which is a separate legal entity. In the
absence of specific contractual arrangements, none of the assets of any of the
subsidiary entities would be available to satisfy the liabilities of Catellus
Development Corporation or any other of these entities.
NOTE 2. INTERIM FINANCIAL DATA
The accompanying consolidated financial statements should be read in
conjunction with the Company's 1999 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 have been reclassified to
conform with the current period presentation.
In October, 1999, the Company's Board of Directors authorized a share
repurchase program for up to $50 million of the outstanding common stock. The
timing of additional purchases under the program, if any, will be at the
discretion of the Company. Share purchases under the program may be made on the
open market or in privately negotiated transactions. The program has been
authorized for a period of one year. As of June 30, 2000, the Company had
repurchased 1,410,700 shares at a cost of $18.9 million. The Company's
repurchases are reflected as treasury stock utilizing the cost method of
accounting and are presented as a reduction to consolidated stockholders'
equity.
NOTE 3. RESTRICTED CASH AND INVESTMENTS
Of the total restricted cash and investments of $105.3 million at June 30,
2000, $98.1 million represents proceeds from property sales being held in
separate cash accounts at trust companies in order to preserve the Company's
options of reinvesting the proceeds on a tax-deferred basis. In addition,
restricted investments of $7.2 million at June 30, 2000 represent certificates
of deposits used to guarantee lease performance for certain properties that
secure debt.
5
<PAGE>
NOTE 4. INCOME PER SHARE
Net income per share of common stock is computed by dividing net income 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 June 30,
-------------------------------------------------------------
2000 1999
------------------------------ -----------------------------
Per Per
Share Share
Income Shares Amount Income Shares Amount
------- ------- ------ ------- ------- ------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income........................................... $26,067 106,837 $0.24 $17,807 106,974 $0.17
===== =====
Net effect of dilutive securities: stock options..... -- 1,876 -- 2,376
------- ------- ------- -------
Net income assuming dilution......................... $26,067 108,713 $0.24 $17,807 109,350 $0.16
======= ======= ===== ======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------
2000 1999
------------------------------ -----------------------------
Per Per
Share Share
Income Shares Amount Income Shares Amount
------- ------- ------ ------- ------- ------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income........................................... $60,805 107,068 $0.57 $34,187 106,903 $0.32
===== =====
Net effect of dilutive securities: stock options..... -- 1,726 -- 2,361
------- ------- ------- -------
Net income assuming dilution......................... $60,805 108,794 $0.56 $34,187 109,264 $0.31
======= ======= ===== ======= ======= =====
</TABLE>
NOTE 5. MORTGAGE AND OTHER DEBT
Mortgage and other debt at June 30, 2000, and December 31, 1999, are
summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- --------
(In thousands)
<S> <C> <C>
First mortgage loans.................................................... $625,937 $589,056
Secured revolving credit line........................................... 68,135 48,135
Acquisition secured promissory notes.................................... 44,583 44,022
Unsecured revolving credit lines(1)..................................... 48,000 36,000
Construction and acquisition loans-secured(1)........................... 82,786 83,266
Assessment district bonds............................................... 25,251 24,845
Term loan-secured....................................................... 12,523 12,612
Secured promissory notes................................................ 21,360 21,360
Industrial capital lease................................................ 14,703 6,852
Other loans............................................................. 9,276 9,416
-------- --------
Total mortgage and other debt.......................................... $952,554 $875,564
======== ========
Due within one year..................................................... $118,670 $132,317
======== ========
</TABLE>
In April 2000, the Company closed three first mortgage loans in the
aggregate amount of $30.7 million bearing interest at 7.29% (approximately
7.35% effective rate when considering financing costs), maturing from January
2008 to May 2010.
------------------
(1) In July, 2000, a total of approximately $77 million of debt and closing
costs was paid from the initial cash proceeds from the sale of the home
building assets of the Company, including $66.3 million of debt outstanding
at June 30, 2000 (see Note 9).
6
<PAGE>
In May 2000, the Company closed a variable rate (LIBOR plus 2.0%) secured
construction loan with a total capacity of $10.9 million, maturing in March
2002. This loan had an outstanding balance of $10.3 million at June 30, 2000.
In June 2000, the Company's residential subsidiary closed three variable
rate (prime plus 0.375%) secured construction loans with an aggregate capacity
of $16.9 million. The loans had a total outstanding balance of $8.0 million at
June 30, 2000 and mature in June 2001.
Interest costs relating to mortgage and other debt for the three-month and
six-month periods ended June 30, 2000 and 1999, are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------- ------- -------- --------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Total interest incurred.................................. $16,514 $16,099 $ 32,321 $ 31,399
Interest capitalized..................................... (5,761) (6,459) (11,749) (12,353)
------- ------- -------- --------
Interest expensed...................................... $10,753 $ 9,640 $ 20,572 $ 19,046
======= ======= ======== ========
</TABLE>
7
<PAGE>
NOTE 6. PROPERTIES
Book value by property type at June 30, 2000 and December 31, 1999,
consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
(In thousands)
<S> <C> <C>
Rental properties:
Industrial buildings.................................................... $ 786,629 $ 739,158
Office buildings........................................................ 202,594 200,760
Retail buildings........................................................ 93,363 92,946
Land and land leases(1)................................................. 61,084 64,071
Investment in operating joint ventures.................................. (821) (2,916)
---------- ----------
1,142,849 1,094,019
---------- ----------
Developable properties:
Commercial.............................................................. 189,819 193,520
Residential............................................................. 90,194 116,118
Urban development....................................................... 336,314 323,859
Investment in development joint ventures................................ 62,914 47,925
---------- ----------
679,241 681,422
---------- ----------
Work-in-process:
Commercial.............................................................. 28,212 52,207
Commercial--capital lease............................................... 54,259 13,038
Residential............................................................. 95,495 65,154
---------- ----------
177,966 130,399
---------- ----------
Resources.................................................................. 4,054 4,952
Other...................................................................... 34,590 33,225
---------- ----------
Gross book value........................................................... 2,038,700 1,944,017
Accumulated depreciation................................................... (304,539) (294,846)
---------- ----------
Net book value............................................................. $1,734,161 $1,649,171
========== ==========
</TABLE>
----------
(1) This category includes $27 million of land which the Company intends to
sell.
8
<PAGE>
NOTE 7. SEGMENT REPORTING
The Company has determined that its reportable segments are those that are
based on the Company's method of internal reporting which disaggregates its
business by type. The Company has four reportable segments: Commercial,
Residential, Urban Development, and Corporate. The Commercial segment leases and
manages the Company-owned commercial buildings and land leases, develops real
estate for the Company's own account or for third parties, and acquires and
sells developable land and commercial buildings. The Residential segment is
involved in home building, community development and project management
activities (see additional discussion regarding the sale of the home building
assets at Note 9, Subsequent Event). The Urban Development segment entitles and
develops major mixed-use development sites, which include development for
residential, office, retail, and entertainment purposes. The Corporate segment
consists of administrative and other services.
Inter-segment gains and losses are not recognized. Debt and interest-bearing
assets are allocated to segments based upon the grouping of the underlying
assets. All other assets and liabilities are specifically identified.
The Company uses a supplemental performance measure, Earnings Before
Depreciation and Deferred Taxes ("EBDDT"), along with net income, to report
operating results. EBDDT is not a measure of operating results or cash flows
from operating activities as defined by generally accepted accounting
principles. Further, 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. The Company believes that EBDDT provides relevant
information about operations and is useful, along with net income, for an
understanding of the Company's operating results.
EBDDT is calculated by making various adjustments to net income. Depreciation,
amortization, and deferred income taxes are added back to net income as they
represent non-cash charges. Since depreciation expense is added back to net
income in arriving at EBDDT, the portion of gain on property sales attributable
to depreciation recapture is excluded from EBDDT. In addition, gains on the sale
of non-strategic assets and extraordinary items, including their current tax
effect, represent unusual and/or non-recurring items and are excluded from the
EBDDT calculation. A reconciliation from EBDDT to net income is also provided.
9
<PAGE>
Financial data by reportable segment is as follows:
<TABLE>
<CAPTION>
Urban
Commercial Residential Development Corporate Total
----------- ----------- ----------- --------- -------
(In thousands)
Three Months Ended June 30, 2000
<S> <C> <C> <C> <C> <C>
Rental properties:
Rental revenue....................................... $ 47,182 $ (58) $ 3,614 $ -- $ 50,738
Property operating costs............................. (11,886) (5) (1,840) -- (13,731)
Equity in earnings of operating joint ventures,
net................................................. 2,951 -- -- -- 2,951
-------- -------- ------- ------- --------
38,247 (63) 1,774 -- 39,958
-------- -------- ------- ------- --------
Property sales and fee services:
Sales revenue........................................ 59,291 47,687 -- -- 106,978
Cost of sales........................................ (30,161) (34,083) -- -- (64,244)
-------- -------- ------- ------- --------
Gain on property sales............................. 29,130 13,604 -- -- 42,734
Management and development fees...................... 2,771 228 325 -- 3,324
Equity in earnings of development joint
ventures, net....................................... (5) 1,720 -- -- 1,715
Selling, general and administrative expenses......... (3,806) (5,045) (558) -- (9,409)
Other................................................ 909 (7,232) -- -- (6,323)
-------- -------- ------- ------- --------
28,999 3,275 (233) -- 32,041
-------- -------- ------- ------- --------
Interest expense..................................... (11,201) (6) (498) 952 (10,753)
Corporate administrative costs....................... -- -- -- (3,460) (3,460)
Minority interests................................... (1,550) (321) -- -- (1,871)
Other................................................ -- -- -- (888) (888)
Depreciation recapture............................... (10,005) -- -- -- (10,005)
-------- -------- ------- ------- --------
Pre-tax EBDDT...................................... $ 44,490 $ 2,885 $ 1,043 $(3,396) 45,022
======== ======== ======= =======
Current taxes........................................ (3,353)
--------
EBDDT................................................ 41,669
Depreciation and amortization........................ (11,379)
Deferred taxes....................................... (14,030)
Loss on non-strategic asset sales.................... (198)
Depreciation recapture............................... 10,005
--------
Net Income......................................... $ 26,067
========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Urban
Commercial Residential Development Corporate Total
----------- ----------- ----------- --------- --------
(In thousands)
Three Months Ended June 30, 1999
<S> <C> <C> <C> <C> <C>
Rental properties:
Rental revenue....................................... $ 38,387 $ 84 $ 2,820 $ -- $ 41,291
Property operating costs............................. (9,703) -- (1,547) -- (11,250)
Equity in earnings of operating joint ventures,
net................................................. 3,153 -- -- -- 3,153
-------- ------- ------- ------- --------
31,837 84 1,273 -- 33,194
-------- ------- ------- ------- --------
Property sales and fee services:
Sales revenue........................................ 58,900 11,555 -- -- 70,455
Cost of sales........................................ (49,101) (7,394) -- -- (56,495)
-------- ------- ------- ------- --------
Gain on property sales............................. 9,799 4,161 -- -- 13,960
Management and development fees...................... 2,725 562 552 -- 3,839
Equity in earnings of development joint
ventures, net....................................... -- 4,287 -- -- 4,287
Selling, general and administrative expenses......... (2,211) (3,703) -- -- (5,914)
Other................................................ 1,532 279 (62) -- 1,749
-------- ------- ------- ------- --------
11,845 5,586 490 -- 17,921
-------- ------- ------- ------- --------
Interest expense..................................... (10,911) (47) (205) 1,523 (9,640)
Corporate administrative costs....................... -- -- -- (3,750) (3,750)
Minority interests................................... -- -- -- -- --
Other................................................ -- -- -- (1,379) (1,379)
-------- ------- ------- ------- --------
Pre-tax EBDDT...................................... $ 32,771 $ 5,623 $ 1,558 $(3,606) 36,346
======== ======= ======= =======
Current taxes........................................ (4,313)
--------
EBDDT................................................ 32,033
Depreciation and amortization........................ (9,422)
Deferred taxes....................................... (7,708)
Gain on non-strategic asset sales.................... 2,904
--------
Net Income......................................... $ 17,807
========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Urban
Commercial Residential Development Corporate Total
----------- ----------- ----------- --------- ---------
(In thousands)
Six Months Ended June 30, 2000
<S> <C> <C> <C> <C> <C>
Rental properties:
Rental revenue....................................... $ 93,065 $ 187 $ 7,404 $ -- $ 100,656
Property operating costs............................. (22,893) (5) (3,491) -- (26,389)
Equity in earnings of operating joint ventures,
net................................................. 6,589 -- -- -- 6,589
-------- -------- ------- ------- ---------
76,761 182 3,913 -- 80,856
-------- -------- ------- ------- ---------
Property sales and fee services:
Sales revenue........................................ 90,502 92,497 -- -- 182,999
Cost of sales........................................ (49,713) (70,669) -- -- (120,382)
-------- -------- ------- ------- ---------
Gain on property sales............................. 40,789 21,828 -- -- 62,617
Management and development fees...................... 5,507 468 618 -- 6,593
Equity in earnings of development joint
ventures, net....................................... 14 2,832 -- -- 2,846
Selling, general and administrative expenses......... (7,711) (10,574) (1,047) -- (19,332)
Other................................................ 1,856 (6,733) (43) -- (4,920)
-------- -------- ------- ------- ---------
40,455 7,821 (472) -- 47,804
-------- -------- ------- ------- ---------
Interest expense..................................... (21,778) (22) (754) 1,982 (20,572)
Corporate administrative costs....................... -- -- -- (7,720) (7,720)
Minority interests................................... (3,104) (370) -- -- (3,474)
Other................................................ -- -- -- (752) (752)
Depreciation recapture............................... (10,197) -- -- -- (10,197)
-------- -------- ------- ------- ---------
Pre-tax EBDDT...................................... $ 82,137 $ 7,611 $ 2,687 $(6,490) 85,945
======== ======== ======= =======
Current taxes........................................ (9,877)
---------
EBDDT................................................ 76,068
Depreciation and amortization........................ (22,249)
Deferred taxes....................................... (30,680)
Gain on non-strategic asset sales.................... 27,469
Depreciation recapture............................... 10,197
---------
Net Income......................................... $ 60,805
=========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Urban
Commercial Residential Development Corporate Total
----------- ----------- ----------- --------- ---------
(In thousands)
Six Months Ended June 30, 1999
<S> <C> <C> <C> <C> <C>
Rental properties:
Rental revenue....................................... $ 76,809 $ 165 $ 5,796 $ -- $ 82,770
Property operating costs............................. (19,546) -- (3,212) -- (22,758)
Equity in earnings of operating joint ventures,
net................................................. 6,589 -- -- -- 6,589
-------- -------- ------- ------- ---------
63,852 165 2,584 -- 66,601
-------- -------- ------- ------- ---------
Property sales and fee services:
Sales revenue........................................ 117,073 27,021 -- -- 144,094
Cost of sales........................................ (94,329) (17,888) -- -- (112,217)
-------- -------- ------- ------- ---------
Gain on property sales............................. 22,744 9,133 -- -- 31,877
Management and development fees...................... 5,387 688 600 -- 6,675
Equity in earnings of development joint
ventures, net....................................... (23) 4,442 -- -- 4,419
Selling, general and administrative expenses......... (4,477) (6,854) (143) -- (11,474)
Other................................................ 1,485 469 (107) -- 1,847
-------- -------- ------- ------- ---------
25,116 7,878 350 -- 33,344
-------- -------- ------- ------- ---------
Interest expense..................................... (21,775) (48) (382) 3,159 (19,046)
Corporate administrative costs....................... -- -- -- (7,594) (7,594)
Minority interests................................... -- 9 -- -- 9
Other................................................ -- -- -- (1,345) (1,345)
-------- -------- ------- ------- ---------
Pre-tax EBDDT...................................... $ 67,193 $ 8,004 $ 2,552 $(5,780) 71,969
======== ======== ======= =======
Current taxes........................................ (9,210)
---------
EBDDT................................................ 62,759
Depreciation and amortization........................ (18,584)
Deferred taxes....................................... (13,878)
Gain on non-strategic asset sales.................... 3,890
---------
Net Income......................................... $ 34,187
=========
</TABLE>
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Company is a party to a number of legal actions arising in the ordinary
course of business. The Company cannot predict with certainty the final outcome
of these proceedings. Considering current insurance coverages and the
substantial legal defenses available, however, 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. Where appropriate, the Company has established reserves for potential
liabilities related to legal actions or threatened legal actions. These reserves
are necessarily based on estimates and probabilities of the occurrence of events
and therefore are subject to revision from time to time.
Some of the legal actions to which the Company is a party seek to restrain
actions related to the development process. Typically, such actions, if
successful, would not result in significant financial liability for the Company
but might instead prevent the completion of the development process or the
completion of the development process as originally planned.
13
<PAGE>
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 which may
be required, the determination of the Company's liability in proportion to that
of other potentially responsible parties, and the extent to which such costs are
recoverable from insurance. Also, the Company does not generally have access to
properties sold in the past that could create environmental liabilities.
At June 30, 2000, management estimates that future costs for remediation of
identified or suspected environmental contamination on operating properties and
properties previously sold approximate $9.6 million and has provided a reserve
for that amount. It is anticipated that such costs will be incurred over the
next several years with a substantial portion incurred over the next few years.
Management also estimates that similar costs relating to the Company's
properties to be developed or sold may range from $10.6 million to $24.7
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 and ability of other parties to pay some or all
of such costs.
As of June 30, 2000, the Company has outstanding standby letters of credit
and surety bonds in the amount of $137.8 million in favor of local
municipalities or financial institutions to guarantee performance on
construction of real property improvements or financial obligations.
Additionally, the Company guarantees 50% of a secured loan associated with a
joint venture investment; the outstanding balance of the loan was $33 million as
of June 30, 2000.
NOTE 9. SUBSEQUENT EVENT
In July, 2000, the Company's residential subsidiary sold approximately 700
lots, with a book value of $120 million, to a newly formed limited liability
company managed by Brookfield Homes of California, Inc., for $139 million in
cash and a retained interest in the new company valued at $22.5 million.
Approximately $77 million of the initial cash proceeds are being used for debt
repayment, closing costs and other expenses related to the sale of the
home building operations. The remaining proceeds will be added to the Company's
working capital to be used for general corporate purposes. Under the agreement,
the Company's residential subsidiary will receive 55% of its retained interest
in early 2001 and anticipates receiving the balance plus 35% of the associated
profits in cash over the next 24 to 36 months as homes are built and sold.
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis of financial condition and EBDDT, as
defined, should be read in conjunction with the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Form 10-Q. This
discussion and analysis covers each of our four business segments: commercial,
residential, urban development, and corporate. This EBDDT "by segment" analysis
is used in internal reporting to management and, we believe, provides the most
effective means of understanding the business. (For definition of EBDDT and
reconciliation from EBDDT to net income, see Note 7 of the accompanying
Consolidated Financial Statements.)
Summary EBDDT for the three months and six months ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Commercial $44,490 $32,771 $82,137 $67,193
Residential 2,885 5,623 7,611 8,004
Urban Development 1,043 1,558 2,687 2,552
Corporate (3,396) (3,606) (6,490) (5,780)
------- ------- ------- -------
Pre-tax EBDDT 45,022 36,346 85,945 71,969
Current taxes (3,353) (4,313) (9,877) (9,210)
------- ------- ------- -------
Total $41,669 $32,033 $76,068 $62,759
======= ======= ======= =======
</TABLE>
Commercial:
The Commercial segment acquires and develops suburban commercial business
parks for our own account and the account of others. EBDDT primarily consists of
rental income for buildings owned and sales gains from properties sold.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 Difference 2000 1999 Difference
-------- -------- ---------- -------- -------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental properties:
Rental revenue....................................... $ 47,182 $ 38,387 $ 8,795 $ 93,065 $ 76,809 $ 16,256
Property operating costs............................. (11,886) (9,703) (2,183) (22,893) (19,546) (3,347)
Equity in earnings of operating joint ventures,
net................................................. 2,951 3,153 (202) 6,589 6,589 --
-------- -------- ------- -------- -------- --------
38,247 31,837 6,410 76,761 63,852 12,909
-------- -------- ------- -------- -------- --------
Property sales and fee services:
Sales revenue........................................ 59,291 58,900 391 90,502 117,073 (26,571)
Cost of property sold(1)............................. (40,166) (49,101) 8,935 (59,910) (94,329) 34,419
-------- -------- ------- -------- -------- --------
Gain on property sales............................. 19,125 9,799 9,326 30,592 22,744 7,848
Management and development fees...................... 2,771 2,725 46 5,507 5,387 120
Equity in earnings of development joint ventures,
net................................................. (5) -- (5) 14 (23) 37
Selling, general and administrative expenses......... (3,806) (2,211) (1,595) (7,711) (4,477) (3,234)
Other................................................ 909 1,532 (623) 1,856 1,485 371
-------- -------- ------- -------- -------- --------
18,994 11,845 7,149 30,258 25,116 5,142
-------- -------- ------- -------- -------- --------
Interest expense..................................... (11,201) (10,911) (290) (21,778) (21,775) (3)
Minority interests................................... (1,550) -- (1,550) (3,104) -- (3,104)
-------- -------- ------- -------- -------- --------
Pre-tax EBDDT................................... $ 44,490 $ 32,771 $11,719 $ 82,137 $ 67,193 $ 14,944
======== ======== ======= ======== ======== ========
Rental Building Occupancy: June 30,
(In thousands and square feet, except percentages) 2000 1999
-------- --------
Owned................................................ 26,127 20,500
Occupied............................................. 24,981 18,813
Occupancy percentage................................. 95.6% 91.8%
</TABLE>
------------------
(1) Included in 2000 cost of property sold for the three and six months ended
June 30, 2000, is $10.0 million and $10.2 million, respectively, of
depreciation recapture, which is included in net income, but not EBDDT.
15
<PAGE>
Rental Revenue Less Property Operating Costs
Rental revenue less operating costs has increased $6.6 million and $12.9
million for the three and six months ended June 30, 2000, respectively, as
compared to the same periods in 1999, mainly because of additions of buildings
and rental increases on Same Space, partially offset by properties sold. We
added a net 5.6 million square feet to our rental portfolio from July 1999 to
June 2000. Properties that were owned and operated for the entire current period
and the immediate preceding year are referred to as "Same Space." The change in
rental revenue less operating costs for the three and six months ended June 30,
2000 and 1999, is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 Difference 2000 1999 Difference
------- ------- ---------- ------- ------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental revenue less operating costs:
Same Space.......................................... $23,375 $22,881 $ 494 $48,097 $45,504 $ 2,593
Properties added to portfolio....................... 7,382 543 6,839 12,678 1,370 11,308
Properties sold from portfolio...................... 779 1,606 (827) 2,133 3,116 (983)
Land and land leases................................ 3,760 3,654 106 7,264 7,273 (9)
------- ------- ------ ------- ------- -------
$35,296 $28,684 $6,612 $70,172 $57,263 $12,909
======= ======= ====== ======= ======= =======
</TABLE>
Generally, because of the long-term nature of our leases, the historically low
growth in rental rates for our product, and the straight-line treatment of
contractual increases over the life of a lease, we do not expect substantial
increases in rental income from our existing rental portfolio. Rather, we expect
growth in overall portfolio rental income as new properties are added to our
rental portfolio over time.
Sales Revenue
Our commercial development business has increased gain from property sales for
the three and six months ended June 30, 2000, over the same periods in 1999 (see
construction activity chart for 2000 and 1999 at page 24). Gains on property
sales were $19.1 million and $30.6 million for the three and six months ended
June 30, 2000, respectively, as compared to $9.8 million and $22.7 million,
respectively, for the three and six months ended 1999 (see discussion of
Variability in Results at Page 22).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 Difference 2000 1999 Difference
-------- -------- ---------- -------- -------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial sales:
Building sales:
Sales proceeds..................................... $ 49,216 $ 41,422 $ 7,794 $ 59,193 $ 53,125 $ 6,068
Cost of sales...................................... (32,859) (37,157) 4,298 (40,890) (47,742) 6,852
-------- -------- ------- -------- -------- --------
Gain.............................................. 16,357 4,265 12,092 18,303 5,383 12,920
-------- -------- ------- -------- -------- --------
Land sales:
Sales proceeds..................................... 8,891 14,754 (5,863) 28,904 19,151 9,753
Cost of sales...................................... (6,415) (9,889) 3,474 (17,255) (12,184) (5,071)
-------- -------- ------- -------- -------- --------
Gain.............................................. 2,476 4,865 (2,389) 11,649 6,967 4,682
-------- -------- ------- -------- -------- --------
Other sales:
Sales proceeds..................................... 1,184 2,724 (1,540) 2,405 44,797 (42,392)
Cost of sales...................................... (892) (2,055) 1,163 (1,765) (34,403) 32,638
-------- -------- ------- -------- -------- --------
Gain.............................................. 292 669 (377) 640 10,394 (9,754)
-------- -------- ------- -------- -------- --------
Total gain on property sales.................... $ 19,125 $ 9,799 $ 9,326 $ 30,592 $ 22,744 $ 7,848
======== ======== ======= ======== ======== ========
</TABLE>
16
<PAGE>
The commercial property sales for the three months ended June 30, 2000 and
1999, include the closings of the sale of 836,000 square feet and 808,000 square
feet, respectively, of industrial building space and associated land plus 27.2
and 83.4 acres, respectively, of improved land capable of supporting 0.5 and 1.6
million square feet of commercial development. For the six months ended June
30, 2000 and 1999, commercial property sales include the sale closings of
1,103,000 and 908,000 square feet, respectively, of industrial building space
plus 69.1 and 108 acres, respectively, of improved land capable of supporting
1.4 and 2.1 million square feet of commercial development.
"Other sales" in the table above includes a sale by one of our joint ventures
of an apartment project in San Diego, California, in 1999; there were no
property sales from our operating joint ventures in 2000. The 2000 "Other sales"
includes the sale of 541 acres of leased land that we had acquired during 1998.
Following is a summary of property sales under contract but not closed:
<TABLE>
<CAPTION>
June 30,
2000 1999
------- -------
(In thousands)
<S> <C> <C>
Sales under contract, but not closed................................. $55,827 $53,615
======= =======
</TABLE>
Management and Development Fees
In past years, a major source of fee income was a contract to manage and sell
the non-railroad real estate assets of a major railroad company. As anticipated,
most of the railroad's inventory of managed assets has been sold in accordance
with the customer's goals. Additionally, we have decided not to pursue renewal
of this contract when it expires on December 31, 2000. Consequently, we expect
that management fees and the related selling, general and administrative
expenses will decline in 2001.
Selling, General and Administrative Expenses
The increase in selling, general and administrative expenses of $1.6 million
and $3.2 million for the three and six months ended June 30, 2000, respectively,
as compared to the same periods in 1999, is primarily from the additional
staffing required to pursue new development activities, increased sales
activity, and financing activities.
Interest
Interest expense for the three and six months ended June 30, 2000,
approximated that of the same periods in 1999.
Following is a summary of interest incurred:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 Difference 2000 1999 Difference
------- ------- ---------- ------- ------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Total interest incurred................................. $14,117 $14,128 $ (11) $27,708 $28,425 $ (717)
Interest capitalized.................................... (2,916) (3,217) 301 (5,930) (6,650) 720
------- ------- ------- ------- ------- -------
Interest expensed....................................... $11,201 $10,911 $ 290 $21,778 $21,775 $ 3
======= ======= ======= ======= ======= =======
Previously capitalized interest included in
cost of sales......................................... $ 1,740 $ 2,750 $(1,010) $ 2,211 $ 3,282 $(1,071)
======= ======= ======= ======= ======= =======
</TABLE>
17
<PAGE>
Minority Interests
In June 1999, we formed a consolidated venture comprised of a group of
operating properties and sold 10% of this consolidated venture's stock to a
minority investor.
Residential:
The Residential segment acquires and develops mainly single-family residential
property. EBDDT primarily consists of gains from sales of lots and completed
homes.
<TABLE>
<CAPTION>
Three Months Six Months Ended
Ended June 30, June 30,
2000 1999 Difference 2000 1999 Difference
-------- ------- ----------- -------- -------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental properties income (loss)....................... $ (63) $ 84 $ (147) $ 182 $ 165 $ 17
-------- ------- -------- -------- -------- --------
Property sales and fee services:
Sales revenue......................................... 47,687 11,555 36,132 92,497 27,021 65,476
Cost of property sold................................. (34,083) (7,394) (26,689) (70,669) (17,888) (52,781)
-------- ------- -------- -------- -------- --------
Gain on property sales............................. 13,604 4,161 9,443 21,828 9,133 12,695
Management and development fees....................... 228 562 (334) 468 688 (220)
Equity in earnings of development joint
ventures, net....................................... 1,720 4,287 (2,567) 2,832 4,442 (1,610)
Selling, general and administrative expenses.......... (5,045) (3,705) (1,340) (10,574) (6,854) (3,720)
Other................................................. (7,232) 281 (7,513) (6,733) 469 (7,202)
-------- ------- -------- -------- -------- --------
3,275 5,586 (2,311) 7,821 7,878 (57)
-------- ------- -------- -------- -------- --------
Interest expense...................................... (6) (47) 41 (22) (48) 26
Minority interests.................................... (321) -- (321) (370) 9 (379)
-------- ------- -------- -------- -------- --------
Pre-tax EBDDT................................... $ 2,885 $ 5,623 $ (2,738) $ 7,611 $ 8,004 $ (393)
======== ======= ======== ======== ======== ========
</TABLE>
Our Residential segment has increased gain from property sales for the
three and six months ended June 30, 2000, as compared to the same periods in
1999. Gain on residential property sales for the three months ended June 30,
2000 resulted from the closings of 128 homes and 20 lots, compared to the
closings of 19 homes and 9 lots in 1999. For the six months ended June 30, 2000
gain on residential property sales resulted from the closings of 279 homes and
38 lots, compared to the closings of 61 homes and 9 lots for the same period in
1999.
In July, we sold a majority of its home building assets to a newly formed
limited liability company managed by Brookfield Homes of California, Inc. for
$139 million in cash and a retained interest in the new company valued at $22.5
million. Under the agreement, we will receive 55% of our retained interest in
early 2001 and anticipate receiving the balance plus 35% of the associated
profits in cash over the next 24 to 36 months as homes are built and sold.
Consequently, no further earnings from home building activities are expected
beyond the third quarter of 2000, except those related to the new joint venture
as noted here.
Equity in earnings of development joint ventures, net, decreased $2.6 million
and $1.6 million for the three and six months ended June 30, 2000, respectively,
as compared to the same periods in 1999. The decreases were primarily due to a
decreased sales volume at Serrano and Ridgemoor. The joint ventures closed 108
lots and 411 lots for the periods three months ended and six months ended June
30, 2000, respectively, as compared to 364 lots and 14 homes for the three
months ended June 30, 1999 and 383 lots and 20 homes for the six months ended
June 30, 1999.
18
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
PROPERTY SALES: 2000 1999 Difference 2000 1999 Difference
-------- ------- ---------- -------- -------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Wholly Owned
Homes:
Sales proceeds.......................................... $ 22,557 $ 9,000 $ 13,557 $ 54,768 $ 24,254 $ 30,514
Cost of sales........................................... (17,874) (6,266) (11,608) (44,245) (16,760) (27,485)
-------- ------- --------- -------- -------- --------
Gain................................................... 4,683 2,734 1,949 10,523 7,494 3,029
-------- ------- --------- -------- -------- --------
Lots:
Sales proceeds.......................................... 11,860 2,555 9,305 13,997 2,767 11,230
Cost of sales........................................... (4,775) (1,128) (3,647) (5,350) (1,128) (4,222)
-------- ------- --------- -------- -------- --------
Gain................................................... 7,085 1,427 5,658 8,647 1,639 7,008
-------- ------- --------- -------- -------- --------
Joint Ventures--Consolidated
Homes:
Sales proceeds.......................................... 13,270 -- 13,270 23,732 -- 23,732
Cost of sales........................................... (11,434) -- (11,434) (21,074) -- (21,074)
-------- ------- --------- -------- -------- --------
Gain................................................... 1,836 -- 1,836 2,658 -- 2,658
-------- ------- --------- -------- -------- --------
Total gain on property sales............................. $ 13,604 $ 4,161 $ 9,443 $ 21,828 $ 9,133 $ 12,695
======== ======= ========= ======== ======== ========
EQUITY IN EARNINGS OF DEVELOPMENT JOINT VENTURES:
Homes:
Sales proceeds.......................................... $ -- $ 8,449 $ (8,449) $ -- $ 11,777 $(11,777)
Cost of sales........................................... -- (6,268) 6,268 -- (8,855) 8,855
-------- ------- -------- -------- -------- --------
Gain................................................... -- 2,181 (2,181) -- 2,922 (2,922)
Lots:
Sales proceeds.......................................... 20,936 27,355 (6,419) 48,977 47,711 1,266
Cost of sales........................................... (15,906) (18,973) 3,067 (36,667) (33,877) (2,790)
Gain................................................... 5,030 8,382 (3,352) 12,310 13,834 (1,524)
Gain from development joint ventures..................... 5,030 10,563 (5,533) 12,310 16,756 (4,446)
Less: ventures partners' interest........................ (3,310) (6,276) 2,966 (9,478) (12,314) 2,836
Total equity in earnings of development joint
ventures................................................ $ 1,720 $ 4,287 $ (2,567) $ 2,832 $ 4,442 $ (1,610)
</TABLE>
Following is a summary of property sales under contract but not closed:
<TABLE>
<CAPTION>
June 30,
2000 1999
------- -------
(In thousands)
<S> <C> <C>
Owned projects and consolidated joint ventures:
Units(1) ............................................. $ 653 $74,419
======= =======
Lots ................................................. $12,584 $ 6,371
======= =======
Unconsolidated joint venture projects(2)
Units ................................................ $ -- $12,991
======= =======
Lots ................................................. $18,444 $17,920
======= =======
</TABLE>
------------------
(1) Does not reflect sales backlog of $114.9 million included in the sale of
home building assets (see Note 9).
(2) The amounts shown are 100% of the gross sales price; we are entitled to
receive 25%-67% of the net profits from these joint ventures.
19
<PAGE>
Selling, General and Administrative Expenses
The increases in selling, general and administrative of $1.3 million and $3.7
million for the periods three and six months ended June 30, 2000, respectively,
as compared to the same periods in 1999, are primarily attributable to increases
in selling activity. We expect selling, general and administrative expenses to
increase in the next quarter, but decrease thereafter, because of the sale of
the home building assets (see Note 9).
Interest
Following is a summary of interest incurred:
<TABLE>
<CAPTION>
Three Months Six Months Ended
Ended June 30, June 30,
2000 1999 Difference 2000 1999 Difference
------- ------- ------------ ------- ------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Total interest incurred................................ $ 2,851 $ 1,595 $ 1,256 $ 5,726 $ 2,339 $ 3,387
Interest capitalized................................... (2,845) (1,548) (1,297) (5,704) (2,291) (3,413)
------- ------- ------- ------- ------- -------
Interest expensed...................................... $ 6 $ 47 $ (41) $ 22 $ 48 $ (26)
======= ======= ======= ======= ======= =======
Previously capitalized interest included
In cost of sales..................................... $ 1,681 $ (311) $ 1,992 $ 3,765 $ 830 $ 2,935
======= ======= ======= ======= ======= =======
</TABLE>
The increase in interest incurred was offset by an increase in capitalized
interest related to higher development activity. For the six months ended June
30, 2000, the Residential segment started construction on 387 residential units,
as compared to 268 units during the same period in 1999 from its owned and
consolidated joint venture projects. We expect a decline in interest cost
relating to the home building business as the result of the sale of the home
building assets (see Note 9).
Other
"Other" increased for the three and six months ended June 30, 2000, as
compared to the same periods in 1999, due to a $7.0 million reserve provided for
certain estimated losses related to cost overruns on a fixed price contract for
a development project. Because performance of the contract is not yet complete,
the estimate of losses is subject to revision as we complete performance. The
factors listed in the Forward-Looking Information and Risk Factors Section,
including particularly costs of materials and labor, construction conditions,
performance or nonperformance of obligations by third parties, labor strikes,
and construction delays, could affect the estimate.
20
<PAGE>
Urban Development:
The Urban Development segment entitles and develops urban mixed-use sites
in San Francisco, Los Angeles, and San Diego.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 Difference 2000 1999 Difference
------- -------- ---------- ------- ------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental properties:
Rental revenue.......................................... $ 3,614 $ 2,820 $ 794 $ 7,404 $ 5,796 $1,608
Property operating costs................................ (1,840) (1,547) (293) (3,491) (3,212) (279)
------- ------- ----- ------- ------- ------
1,774 1,273 501 3,913 2,584 1,329
------- ------- ----- ------- ------- ------
Property sales and fee services:
Management and development fees......................... 325 552 (227) 618 600 18
Selling, general and administrative expenses............ (558) -- (558) (1,047) (143) (904)
Other................................................... -- (62) 62 (43) (107) 64
------- ------- ----- ------- ------- ------
(233) 490 (723) (472) 350 (822)
------- ------- ----- ------- ------- ------
Interest expense.......................................... (498) (205) (293) (754) (382) (372)
------- ------- ----- ------- ------- ------
Pre-tax EBDDT.......................................... $ 1,043 $ 1,558 $(515) $ 2,687 $ 2,552 $ 135
======= ======= ===== ======= ======= ======
Rental Building Occupancy: June 30,
(In thousands and square feet, except percentages) 2000 1999
------- -------
Owned..................................................... 1,003 1,205
Occupied.................................................. 953 1,111
Occupancy percentage...................................... 95.0% 92.2%
</TABLE>
Rental Revenue less Property Operating Costs
The increases in rental revenue less property operating costs for the three
and six months ended June 30, 2000, as compared to the same periods in 1999 are
primarily because of higher parking related revenue at Mission Bay in San
Francisco and lower property taxes. Rental revenue less property operating costs
from this segment is primarily generated from interim income-producing uses of
properties intended for mixed-use development. Income provided from this pool of
interim rental uses will decrease as development occurs on these sites. Future
income from the Urban Development segment will be generated from development
activities and will include rental income and sales gains. We expect such income
to commence in late 2000 or early 2001.
Selling, General and Administrative Expenses
The increases of $561,000 and $904,000 for the three and six month periods
ended June 30, 2000, respectively, as compared to the same periods in 1999, are
primarily attributable to changes in overall staffing and employee related
expenses.
Corporate:
Corporate items consist of certain interest and administrative costs
reduced by costs capitalized to other business segments.
21
<PAGE>
Interest
Corporate interest consists primarily of contra-interest expense resulting
from the fact that the Residential segment had qualifying assets which provided
for the capitalization of more interest than directly incurred by that segment.
This resulted in the capitalization of interest incurred by other segments.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 Difference 2000 1999 Difference
------- ------- ---------- ------- -------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest................................................ $ 952 $ 1,523 $(571) $ 1,982 $ 3,159 $(1,177)
Corporate administrative costs.......................... (3,460) (3,750) 290 (7,720) (7,594) (126)
Other................................................... (888) (1,379) 491 (752) (1,345) 593
------- ------- ----- ------- ------- -------
Pre-tax EBDDT........................................ $(3,396) $(3,606) $ 210 $(6,490) $(5,780) $ (710)
======= ======= ===== ======= ======= =======
</TABLE>
Corporate Administrative Costs
Corporate administrative costs consist primarily of general and
administrative expenses. General and administrative expenses for the three
months ended June 30, 2000, approximated those of 1999.
Items Not Included in EBDDT by Segment
Gain (Loss) on Sales of Non-Strategic Assets
Gain (loss) on sales of non-strategic assets was ($0.2) million and $2.9
million for the three months ended June 30, 2000 and 1999, respectively and
$27.5 million and $3.9 million for the six months ended June 30, 2000 and 1999.
The increase for the six months ended June 30, 2000 as compared to 1999 is
because of the closing of the first phase of a major desert land sale. The first
phase of the desert land sale generated $25 million in sales proceeds in the
three months ended March 31, 2000. The second phase of the desert land sale
closed in July 2000, and generated additional sales proceeds of $20 million,
which will be included in the results of operations for the nine months ending
September 30, 2000.
From 1995 through June 30, 2000, we sold almost $300 million of
non-strategic assets as part of a program of selling non-strategic assets, with
the proceeds used to pay down a portion of existing debt and fund new
development. With the closing of the second phase in July, this program is
substantially complete. At quarter end, the most significant remaining non-
strategic asset is our desert portfolio of approximately 543,000 acres.
Variability in Results
We expect the variability of our quarterly and annual EBDDT and net income
to continue. The timing of development sales and sales of non-strategic assets
have resulted in significant variability in our historic operating results,
particularly on a quarterly basis. Many of our projects require a lengthy
process to complete the development cycle before they are sold. Sales of real
estate assets are generally subject to lengthy negotiations and contingencies
that need to be resolved before closing. These factors tend to "bunch" income in
particular periods rather than producing a more even pattern throughout a year.
In addition, gross margins vary significantly as the mix of properties varies.
The cost basis of the properties sold varies because a number of properties have
been owned for many years while some properties were acquired within the last
few years; because properties are owned in various geographical locations; and
because development projects have varying infrastructure and build-out periods.
22
<PAGE>
Liquidity and Capital Resources
Cash flows from operating activities
Cash provided by operating activities reflected in the statement of cash
flows for the six months ended June 30, 2000 and 1999, was $96.1 million and
$18.2 million, respectively. The increase in 2000 consists primarily of an
increase of $42.9 million in proceeds from sales of development, non-strategic,
and other properties, a $14.3 million increase in rental properties results, a
$37.1 million decrease in expenditures for development properties, and $12.7
million change in operating assets and liabilities and other operating
activities. These were partially offset by $20.4 million lower operating
distributions from joint ventures and $10.0 million higher income tax payments.
Cash flows from investing activities
Net cash used in investing activities reflected in the statement of cash
flows for the six months ended June 30, 2000 and 1999, was $168.8 million and
$142.5 million, respectively. The increase in 2000 consists primarily of an
increase of $30.9 million in short-term investments and restricted cash, an
increase of $25.9 million in capital expenditures for investment properties, and
an increase of $20.8 million in net proceeds from sales of other assets. These
were offset by a decrease of $8.0 million in property acquisitions and a
decrease of $1.6 million in other investing activities.
23
<PAGE>
Capital expenditures reflected in the statement of cash flows include the
following:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
-------- --------
(In thousands)
<S> <C> <C>
Capital Expenditures from Operating Activities(1)
Capital expenditures for residential and commercial development
properties.......................................................... $ 71,544 $ 90,207
Residential property acquisitions..................................... 21,579 39,363
Capitalized interest and property tax................................. 6,290 6,894
-------- --------
Capital expenditures for development properties..................... 99,413 136,464
Other property acquisition.......................................... -- 289
-------- --------
Capital expenditures in cash flows for operating activities......... 99,413 136,753
Seller-financed acquisitions.......................................... -- 1,155
-------- --------
Total capital expenditures in operating activities.................. 99,413 137,908
-------- --------
Capital Expenditures from Investing Activities(2)
Construction and building improvements................................ 49,928 21,036
Capital lease construction and building improvements.................. 14,530 16,237
Predevelopment........................................................ 3,449 5,425
Infrastructure and other.............................................. 23,341 22,067
Capitalized interest and property tax................................. 7,679 8,302
-------- --------
Capital expenditures for investment properties...................... 98,927 73,067
Commercial property acquisitions...................................... 9,724 17,709
Tenant improvements................................................... 3,977 1,140
-------- --------
Capital expenditures in investing activities........................ 112,628 91,916
Seller-financed acquisitions.......................................... 1,702 --
-------- --------
Total capital expenditures in investing activities.................... 114,330 91,916
-------- --------
Total capital expenditures......................................... $213,743 $229,824
======== ========
</TABLE>
------------------
(1) This category includes capital expenditures for properties we intend to
build to sell.
(2) This category includes capital expenditures for properties we intend to
hold for our own account.
Capital expenditures for development properties--This item relates to the
development of residential and commercial for-sale development properties.
The decrease from 1999 to 2000 is primarily because of the decrease in both
residential and commercial for-sale development activity; however, we
increased the development activity on properties we intend to hold for our
own account.
For the six-month period ended June 30, 2000, we started construction on 387
residential units and completed 209 units, compared to 268 starts and 68
completions during the same period in 1999.
Construction, capital lease construction and building improvements--This item
relates primarily to the development of new commercial properties held for lease
and improvements to existing buildings. This development activity is summarized
below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
(In square feet) (In square feet)
<S> <C> <C> <C> <C>
Under construction, beginning of period 4,371,000 4,385,000 4,641,000 5,037,000
Construction starts 1,970,000 1,225,000 2,658,000 1,566,000
Completed--retained in portfolio (1,379,000) (311,000) (2,337,000) (951,000)
Completed--design/build or sold -- (655,000) -- (1,008,000)
----------- --------- ----------- ----------
Under construction, end of period 4,962,000(1) 4,644,000 4,962,000(1) 4,644,000
=========== ========= =========== ==========
</TABLE>
------------------
(1) This includes 1,025,000 square feet of development that we expect to sell
upon completion and 3,937,000 square feet that we expect to add to our
portfolio upon completion.
24
<PAGE>
Property Acquisitions--For the six months ended June 30, 2000 and 1999, we
invested approximately $33.0 million and $58.5 million, respectively, in the
acquisition of new property, either directly or through joint ventures.
. Residential Acquisitions--In 2000, we invested approximately $21.6 million
in the acquisition of residential development property in California,
directly or through joint ventures. These acquisitions will support up to
432 homes/lots.
. Commercial Acquisitions--During the 2nd quarter of 2000, we invested
approximately $6.5 million in the acquisition of commercial development
land. This acquisition added approximately 1.7 million square feet of
potential industrial development in Grand Prairie, Texas.
Infrastructure and other--These represent infrastructure costs incurred in
connection with our urban development and commercial development projects. These
costs primarily relate to projects at Woodridge, Illinois; Denver, Colorado;
Portland and Gresham, Oregon; Rancho Cucamonga, California; and Mission Bay, San
Francisco, California.
Cash flows from financing activities
Net cash provided by financing activities reflected in the statement of cash
flows for the six months ended June 30, 2000, as compared to the same period in
1999, were $59.1 million and $95.1 million, respectively. The decrease in 2000
is primarily attributable to a decrease of $49.7 million in contributions from
minority partners, offset by an increase in net borrowing of $29.0 million; also
contributing to the decrease is $18.9 million expended for the purchase of
1,410,700 shares of our stock through June, 2000. In October 1999, the Board of
Directors authorized a share repurchase program for up to $50 million of the
outstanding common stock. The program has been authorized for a period of one
year.
Capital commitments
As of June 30, 2000, we had outstanding standby letters of credit and surety
bonds in the amount of $137.8 million in favor of local municipalities or
financial institutions to guarantee performance on real property improvements or
financial obligations.
As of June 30, 2000, we had approximately $124.3 million in total commitments
for capital expenditures. These commitments are primarily for the construction
of industrial development projects, predevelopment costs, and re-leasing costs.
Cash balances, available borrowings, and capital resources
As of June 30, 2000, we had a total liquidity of $307.2 million, of which
$105.3 million is restricted cash. The non-restricted liquidity of $201.9
million consists of $21.8 million in cash and cash equivalents, $174.0 million
under our credit facilities, and $6.1 million under our commercial construction
facilities.
Our short- and long-term liquidity and capital resources requirements will be
provided from three main sources: (1) ongoing income from rental properties, (2)
proceeds from sales of developed properties and land, and (3) additional debt.
As noted above, credit and construction loan facilities are available for
meeting liquidity requirements. Our ability to meet our mid- and long-term
capital requirements is dependent upon the ability to obtain additional
financing for new construction, acquisitions, and currently unencumbered
properties. Financing on favorable terms may not always be available.
Debt covenants--Certain loan agreements contain restrictive financial
covenants, the most restrictive of which require our debt coverage ratio to be
at least 1.60:1, require stockholders' equity to be no less than $489.2 million,
and require that we maintain certain other specified financial ratios. We were
in compliance with all such covenants at June 30, 2000.
25
<PAGE>
Environmental Matters
Many of our properties are in urban and industrial areas and may have been
leased to or previously owned by commercial and industrial companies that
discharged hazardous materials. We incur ongoing environmental remediation costs
and legal costs relating to cleanup, 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 June 30,
2000, management has provided a reserve of $9.6 million for environmental costs
relating to such properties. These costs are expected to be incurred over the
next several years, with a substantial portion incurred over the next few years
(see Note 8 of the accompanying consolidated financial statements for further
discussion).
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 June 30, 2000, our
estimate of potential liability for identified environmental costs relating to
properties to be developed or sold ranged from $10.6 million to $24.7 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 for the six months ended June 30, 2000, totaled $0.3 million.
We or outside consultants have evaluated the environmental liabilities
associated with most of the properties we currently own; however, any evaluation
necessarily is based upon then-prevailing law, identified site conditions, and
the use of sampling methodologies. Also, we do not generally have access to
properties sold in the past which could create environmental liabilities. We
monitor our 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, we do not believe that such costs for identified liabilities will
have a material adverse effect on our financial position, results of operations,
or cash flows.
Forward-Looking Information and Risk Factors
Except for historical matters, the matters discussed in this Form 10-Q are
forward-looking statements that involve risks and uncertainties. We have tried,
wherever practical, to identify these forward-looking statements by using words
like "anticipate," "believe," "estimate," "project," "expect," and similar
expressions. Forward-looking statements include, but are not limited to,
statements about plans; opportunities; negotiations; markets and economic
conditions; development, construction, and sales activities; availability of
financing; and property values.
We caution our readers not to place undue reliance on these forward-looking
statements, which reflect our current beliefs and are based on information
currently available to us. We do not undertake any obligation to publicly
revise these forward-looking statements to reflect future events or changes in
circumstances.
These forward-looking statements are subject to risks and uncertainties that
could cause our actual results, performance, or achievements to differ
materially from those expressed in or implied by these statements. In
particular, among the factors that could cause actual results to differ
materially are:
. Changes in the real estate market or in general economic conditions in the
areas in which we own property. The real estate industry is by nature
cyclical, and while recent years have seen strong growth in real estate
values, occupancy rates, and transaction activity, a downturn in the industry
may occur. Moreover, we expect that a significant portion of our Commercial
Group's construction starts will be for speculative development, which puts
more of our development revenue at risk in a downturn in general economic
conditions. The Commercial Group also anticipates greater emphasis on
suburban office development this year than in previous years, a product type
that is more complex than our industrial product.
26
<PAGE>
. Product and geographical concentration. Our portfolio is largely concentrated
in industrial properties and may be vulnerable to a downturn in that sector
of the real estate industry. In addition, our business is concentrated in the
major metropolitan areas of California. For example, a downturn in the
technology industry or in stock market values of that industry, or in the San
Francisco or Silicon Valley real estate markets, could adversely affect our
business in the affected areas.
. Competition in the real estate industry. There is the potential for
overbuilding in the major metropolitan areas in which our properties are
concentrated, which could, in the long term, adversely affect the value of
our projects such as, for example, Mission Bay. The build-out of these
projects and the period of time in which tenants' options to purchase are
exercisable is likely to occur over a period of time that exceeds the
historically typical length of the real estate cycle. Consequently, at the
time of an economic downturn those projects may still include significant
undeveloped land, which may be more severely affected by a downturn.
. Availability of financing to meet our capital needs, the variability of
interest rates, and our ability to use our collateral to secure loans. The
success of our large land development projects (such as Mission Bay, Pacific
Commons, and Stapleton Business Center) depends in part on completing and
financing their infrastructure in a timely and cost-effective manner.
Similarly, our ongoing development and land acquisition activities will
require significant capital. In addition, although much of our financing is
currently at favorable interest rates, we expect to make substantial
borrowings in 2000 and beyond at rates that may be substantially higher than
our current financings. Also, we expect to seek substantial construction
financing, which may be more difficult to obtain than permanent financing
because it is more difficult for the lender to underwrite without an income
stream in place. We may attempt to hedge our exposure to interest rate
change; nevertheless, it may not be possible to implement hedging strategies,
or the strategies, once implemented, might not be successful.
. Delay in receipt of or denial of government approvals and entitlements for
development projects, other political and discretionary government decisions
affecting the use of or access to land, or legal challenges to the issuance
of approvals or entitlements. For example, our development projects need
project-specific approvals such as use permits, subdivision maps, and natural
resource permits. In some cases, the law permits private parties to challenge
the grant of those approvals. We may therefore be subject to litigation that
seeks to delay or prevent development of our projects, and this litigation
could be successful.
. Changes in tax laws and other circumstances that affect our ability to
control the timing and recognition of deferred tax liability. Changes in the
tax laws could affect the tax treatment of our subsidiaries and joint
ventures. In addition, the government could challenge the treatment of
transactions for tax purposes, and the result could increase our tax
liability, including interest and penalties, and could affect our liquidity.
. Exposure of our assets to damage from natural occurrences such as
earthquakes, and weather conditions that affect the progress of construction.
For example, our projects at Mission Bay, Pacific Commons, and Los Angeles
Union Station are all near major earthquake fault lines. In addition, some
projects are situated wholly or in part on filled land, which may be
particularly vulnerable to ground movement in an earthquake.
. Liability for environmental remediation at properties owned, managed, or
formerly owned or managed by us or our predecessors, and changes in
environmental laws and regulations. Many of our properties are in urban or
industrial areas or near existing or former rail lines and may have been
exposed to environmental contamination in the past. We could have liability
for remediation of environmental conditions on these properties, even after
we have sold them.
27
<PAGE>
. Failure to reach agreement with third parties on definitive terms or failure
to close transactions. Our pursuit of new projects may involve significant
expenditures before definitive agreements are signed or the transaction
closes. Moreover, transactions that are the subject of definitive agreements
generally include a variety of contingencies and conditions to the closing.
The failure of any of these contingencies and conditions may result in the
failure to close the transaction. If we do not sign a definitive agreement
for a project, or if the transaction does not close, our expenditures may not
be recoverable.
. Increases in the cost of land and building materials. Rising real estate
prices and increasing levels of construction activity may lead to an increase
in our acquisition and construction costs, which may narrow or eliminate our
profit margins.
. Tight labor markets. Labor markets have grown increasingly tight with
unemployment at historically low levels, especially in California, and this
detracts from our ability to find, attract, retain, and replace skilled
professionals, and increases the cost of labor. As our level of activity
continues to grow, the success of those activities is dependent on retaining
key personnel and hiring new employees with appropriate skills and
experience. If we are unable to compete successfully to hire and retain
personnel, our plans could be affected.
. Limitations on or challenges to title to our properties.
. Risks related to the performance and financial strength of the co-owners of
our joint venture projects.
. Changes in policies and practices of organized labor groups who may work on
our projects.
28
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our primary market risk exposure is interest rate risk. The majority of our
financial instruments are not considered market risk sensitive instruments, as
they are not subject to foreign exchange rate risk or commodity price risk. At
June 30, 2000, we did not have any outstanding interest-protection contracts. We
intend continuously to monitor and actively to manage interest costs on our
variable rate debt and may enter into interest-protection contracts based on
market fluctuations.
At June 30, 2000, approximately 72.5% of our debt bore interest at fixed rates
with a weighted average maturity of approximately 8.0 years and a weighted
average effective interest of approximately 6.89%, which is below market.
Therefore, unless there were a drastic decrease in interest rates, the fair
value of our fixed-rate debt would not be adversely affected. The remainder of
our debt bears interest at variable rates with a weighted average maturity of
approximately 1.4 years and a weighted average effective interest rate of
approximately 9.57% at June 30, 2000. To the extent that we incur additional
variable rate indebtedness, our exposure to increases in interest rates in an
inflationary period would increase. If effective interest rates increased 100
basis points, the annual effect on our financial position and cash flow would be
approximately $2.6 million, based on the outstanding balance of our debt at June
30, 2000. We believe, however, that in no event would increases in interest
expense as a result of inflation significantly affect our financial position,
results of operations, or cash flow.
29
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on May 2, 2000,
stockholders voted as follows with respect to the election of directors:
<TABLE>
<CAPTION>
Nominees Votes For Votes Withheld
<S> <C> <C>
Joseph F. Alibrandi 98,853,488 332,895
Stephen F. Bollenbach 84,678,387 14,507,996
Daryl J. Carter 98,856,284 330,099
Richard D. Farman 98,853,564 332,819
Christine Garvey 98,855,622 330,761
William M. Kahane 98,852,036 334,347
Leslie D. Michelson 98,852,155 334,228
Nelson C. Rising 98,858,175 328,208
Jacqueline R. Slater 98,857,303 329,080
Thomas M. Steinberg 98,858,036 328,347
Beverly Benedict Thomas 98,855,421 330,962
</TABLE>
In addition, the Company's stockholders approved the 2000 Performance Award
Plan, which, among other things, authorizes the issuance of up to 5.75
million shares of the Company's common stock for stock options and other
share-based awards and also provides for cash-based awards. There were
87,127,530 shares voted for this proposal and 2,869,169 shares voted
against it, with 212,152 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
An Exhibit Index follows the signatures below.
(b) No reports on Form 8-K were filed during the quarter for which the
report is filed.
30
<PAGE>
SIGNATURES
Pursuant to the requirements Section 13 or 15(d) 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: August 11, 2000 By: /s/ C. William Hosler
-----------------------
C. William Hosler
Senior Vice President
Chief Financial Officer
Principal Financial Officer
Date: August 11, 2000 By: /s/ Paul A. Lockie
------------------------
Paul A. Lockie
Vice President and Controller
Principal Accounting Officer
31
<PAGE>
EXHIBIT INDEX
3.1A Restated Certificate of Incorporation of the Registrant effective December
4, 1990, is incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form 10 (Commission File No. 0-18694) as filed with the
Commission on July 18, 1990.
3.1B Amendment to Restated Certificate of Incorporation of the Registrant
effective July 13, 1993, is incorporated by reference to Exhibit 3.1B to
the Form 10-K for the year ended December 31, 1999.
3.2 Amended and Restated Bylaws of the Registrant is incorporated by reference
to Exhibit 3.2 to the Form 10-K for the year ended December 31, 1999.
4.1 Form of Certificate of Designations of Series A Junior Participating
Preferred Stock is incorporated by reference to Exhibit 4.1 to the Form 8-
K as filed with the Commission on December 28, 1999.
4.2 Amended and Restated Line of Credit Loan Agreement among Catellus
Development Corporation, Bank of America National Trust and Savings
Association as Arranger and Administrative Agent, The First National Bank
of Chicago as Documentation Agent, and The Other Financial Institutions
Party Hereto, dated as of October 28, 1998, is incorporated by reference
to Exhibit 4.2 to the Form 10-K for the year ended December 31, 1998.
4.3 Loan Agreement by and between Catellus Finance 1, L.L.C. and Prudential
Mortgage Capital Company, Inc. dated as of October 26, 1998, is
incorporated by reference to Exhibit 4.3 to the Form 10-K for the year
ended December 31, 1998.
10.1 Restated Tax Allocation and Indemnity Agreement dated December 29, 1989,
among the Registrant and certain of its subsidiaries and Santa Fe Pacific
Corporation is incorporated by reference to Exhibit 10.6 to the
Registration Statement on Form 10 (Commission File No. 0-18694) as filed
with the Commission on July 18, 1990.
10.2 State Tax Allocation and Indemnity Agreement dated December 29, 1989,
among the Registrant and certain of its subsidiaries and Santa Fe Pacific
Corporation is incorporated by reference to Exhibit 10.7 to the
Registration Statement on Form 10 (Commission File No. 0-18694) as filed
with the Commission on July 18, 1990.
10.3A Registration Rights Agreement dated as of December 29, 1989, among the
Registrant, BAREIA, O&Y and Itel is incorporated by reference to Exhibit
10.4 to the Registration Statement on Form 10 (Commission File No. 0-
18694) as filed with the Commission on July 18, 1990.
10.3B First Amendment to Registration Rights Agreement among the Registrant,
BAREIA, O&Y and Itel is incorporated by reference to Exhibit 10.26 to
Amendment No. 2 to Form S-3 as filed with the Commission on February 4,
1993.
10.3C Letter Agreement dated November 14, 1995, between the Registrant and
California Public Employees' Retirement System is incorporated by
reference to Exhibit 10.4A to the Form 10-K for the year ended December
31, 1995.
10.4 Registrant's Amended and Restated Executive Stock Option Plan is
incorporated by reference to Exhibit 10.8 to the Form 10-K for the year
ended December 31, 1997.
10.5 Registrant's Amended and Restated 1996 Performance Award Plan is
incorporated by reference to Exhibit 10.14 to the Form 10-Q for the
quarter ended March 31, 1999.
32
<PAGE>
10.6 Registrant's 2000 Performance Award Plan is incorporated by reference to
Appendix A to the Proxy Statement for the Registrant's 2000 Annual meeting
dated March 16, 2000.
10.7 Registrant's Deferred Compensation Plan is incorporated by reference to
Exhibit 10.21 to the Form 10-K for the year ended December 31, 1997.
10.8A Second Amended and Restated Employment Agreement dated as of October 1,
1999, between the Registrant and Nelson C. Rising is incorporated by
reference to Exhibit 10.7 to the Form 10-K for the year ended December 31,
1999.
10.8B Employment Agreement dated July 24, 1995, between the Registrant and
Stephen P. Wallace is incorporated by reference to Exhibit 10.37 to the
Form 10-K for the year ended December 31, 1995.
10.9 Letter Agreement dated November 16, 1996, between the Registrant and Steve
Wallace is incorporated by reference to Exhibit 10.49 to the Form 10-K for
the year ended December 31, 1996.
10.10 Amended and Restated Employment Agreement dated September 16, 1997,
between the Registrant and Kathleen Smalley is incorporated by reference
to Exhibit 10.17 to the Form 10-K for the year ended December 31, 1997.
10.11 Rights Agreement dated as of December 16, 1999, between the Registrant and
American Stock Transfer and Trust Company is incorporated by reference to
Exhibit 4.1 to the Form 8-K as filed with the Commission on December 28,
1999.
27 Financial Data Schedule is attached.
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.
33
